Ericsson reports first quarter results 2015
(Thomson Reuters ONE) -
FIRST QUARTER HIGHLIGHTS
* Sales in the quarter increased by 13% reaching SEK 53.5 (47.5) b.
Significant currency movements impacted sales positively. Sales, adjusted
for comparable units and currency decreased by -6% YoY, driven by slower
mobile broadband activity in North America.
* With current visibility we anticipate the fast pace of 4G deployments in
Mainland China to continue and the North American mobile broadband business
to remain slow in the short term.
* Professional Services had a strong quarter.
* Gross margin decreased YoY to 35.4% (36.5%), due to lower capacity business
in North America and continued fast pace of 4G coverage deployments in
Mainland China, increased restructuring charges and a higher share of Global
Services sales.
* The cost and efficiency program, announced in November 2014, is progressing
according to plan. Savings of SEK 9 b. is expected, with full effect during
2017.
* Operating income was SEK 2.1 (2.6) b. Excluding restructuring charges of SEK
-0.6 (-0.1) b., the operating income was flat YoY.
* The net currency effect contributed positively to the operating income,
despite a negative currency hedge effect of SEK -1.4 (-0.1) b.
* Cash flow from operating activities was SEK -5.9 (9.4) b. mainly due to
increased working capital.
+--------------------------------+-------+-------+----------+-------+----------+
| SEK b. |Q1 2015|Q1 2014|YoY change|Q4 2014|QoQ change|
+--------------------------------+-------+-------+----------+-------+----------+
| Net sales | 53.5| 47.5| 13%| 68.0| -21%|
+--------------------------------+-------+-------+----------+-------+----------+
| Sales growth adj. for | | | | | |
|comparable units and currency | -| -| -6%| -| -28%|
+--------------------------------+-------+-------+----------+-------+----------+
| Gross margin | 35.4%| 36.5%| -| 36.6%| -|
+--------------------------------+-------+-------+----------+-------+----------+
| Operating income | 2.1| 2.6| -19%| 6.3| -66%|
+--------------------------------+-------+-------+----------+-------+----------+
| Operating margin | 4.0%| 5.5%| -| 9.3%| -|
+--------------------------------+-------+-------+----------+-------+----------+
| Net income | 1.5| 1.7| -14%| 4.2| -65%|
+--------------------------------+-------+-------+----------+-------+----------+
| EPS diluted, SEK | 0.40| 0.65| -38%| 1.29| -69%|
+--------------------------------+-------+-------+----------+-------+----------+
| EPS (Non-IFRS), SEK (1)) | 0.77| 0.90| -14%| 1.71| -55%|
+--------------------------------+-------+-------+----------+-------+----------+
| Cash flow from operating | | | | | |
|activities | -5.9| 9.4| -| 8.6| -|
+--------------------------------+-------+-------+----------+-------+----------+
| Net cash, end of period | 15.6| 43.6| -64%| 27.6| -44%|
+--------------------------------+-------+-------+----------+-------+----------+
1) EPS, diluted, excl. amortizations and write-downs of acquired intangible
assets, and restructuring.
Comments from Hans Vestberg, President and CEO of Ericsson (NASDAQ:ERIC)
Sales increased by 13% in the quarter. Significant currency movements impacted
sales positively and Professional Services had a strong quarter. Profitability
improved in segment Global Services while it declined in segment Networks due to
changed business mix.
Business
In the quarter, sales growth was strong in India and North East Asia.
Professional Services sales increased YoY with a continued good global demand
for our services offering. We signed 27 managed services contracts in the
quarter, including a major multi-country contract in Europe.
As anticipated, segment Networks mobile broadband business in North America
continued to be slow in the quarter as operators remained focused on cash flow
optimization in order to finance major acquisitions and spectrum auctions. The
decline in North America was partly offset by a continued fast pace of 4G
deployments in Mainland China. As a consequence, the business mix shifted to a
higher share of coverage projects in the quarter.
Consumer demand and mobile data traffic growth continued to be strong in North
America, creating further need for quality and capacity investments. However,
with current visibility, we anticipate the fast pace of 4G deployments in
Mainland China to continue and the North American mobile broadband business to
remain slow in the short term.
Profitability
Operating income declined YoY, primarily driven by lower profitability in
segment Networks due to the above mentioned change in business mix and increased
operating expenses. This was partly offset by significantly improved operating
income in segment Global Services, mainly driven by Network Rollout. There were
no losses related to the modems business in the quarter.
The underlying margin, excluding restructuring charges and hedge losses,
improved YoY. The net currency effect contributed positively to the operating
income, considering transaction and translation exposure as well as the negative
currency hedge effect.
IPR revenues
As a consequence of the ongoing dispute with a major customer, the IPR licensing
revenues declined in constant currencies. Reported IPR revenues were stable in
the quarter as a majority of these contracts are in USD.
Cost and efficiency program
As part of improving the profitability, we continue to proactively identify
efficiency opportunities. The cost and efficiency program is progressing
according to plan. The ambition is to achieve savings of approximately SEK 9 b.,
with full effect during 2017. The program primarily relates to five key areas:
portfolio streamlining and ways of working in R&D; structural enhancements in
IS/IT; accelerated service delivery transformation; supply chain efficiencies;
and structural efficiency gains in G&A.
In the quarter we announced, as part of the program, that 2,200 positions in
Sweden, are subject to notice. In addition we will reduce the number of
consultants in Sweden by 850.
Cash flow
We ended the quarter with a negative cash flow from operating activities of SEK
-5.9 b. mainly due to a change in business mix with less capacity business in
North America and a higher share of coverage business in Mainland China. This
impacted working capital negatively.
Targeted areas
In line with our strategy, we are investing in our targeted areas; IP networks,
Cloud, OSS & BSS, TV & Media and Industry & Society. Sales in targeted areas
continued to show good growth. At the Mobile World Congress (MWC) in Barcelona,
in February, we saw an increased interest from non-operator customers,
especially within the area of Industry & Society. Most of our key launches at
MWC were related to the targeted areas, including the new Router 6000 Series,
the Hyperscale Cloud Solution, Expert Analytics 15.0, a new Media Delivery
Network solution and Digital Telco Transformation.
In addition to the launches in the targeted areas we announced the new Ericsson
Radio System. The system has an innovative modular architecture, delivering
three times the capacity density with 50% improvement in energy efficiency. With
the launches at the MWC, we have further strengthened our leadership and ability
to deliver on our growth ambitions.
NOTES TO EDITORS
You find the complete report with tables in the attached PDF or by following
this link www.ericsson.com/res/investors/docs/q-reports/2015/03month15-en.pdf or
on www.ericsson.com/investors
Ericsson invites media, investors and analysts to a briefing at the Ericsson
Studio, Grönlandsgången 4, Stockholm, at 09.00 (CET), April 23, 2015.
A conference call for analysts, investors and media will begin at 14.00 (CET).
Live webcast of the briefing and conference call details, as well as supporting
slides, will be available at www.ericsson.com/press and
www.ericsson.com/investors
Video material will be published during the day on www.ericsson.com/press
FOR FURTHER INFORMATION, PLEASE CONTACT
Helena Norrman, Senior Vice President, Marketing and Communications
Phone: +46 10 719 34 72
E-mail: media.relations(at)ericsson.com
Investors
Peter Nyquist, Head of Investor Relations
Phone: +46 10 714 64 49
E-mail: peter.nyquist(at)ericsson.com
Åsa Konnbjer, Director, Investor Relations
Phone: +46 10 713 39 28
E-mail: asa.konnbjer(at)ericsson.com
Stefan Jelvin, Director, Investor Relations
Phone: +46 10 714 20 39
E-mail: stefan.jelvin(at)ericsson.com
Rikard Tunedal, Director, Investor Relations
Phone: +46 10 714 54 00
E-mail: rikard.tunedal(at)ericsson.com
Media
Ola Rembe, Vice President, Head of External Communications
Phone: +46 10 719 97 27
E-mail: media.relations(at)ericsson.com
Corporate Communications
Phone: +46 10 719 69 92
E-mail: media.relations(at)ericsson.com
Ericsson discloses the information provided herein pursuant to the Securities
Markets Act. The information was submitted for publication at 07.30 CET, on
April 23, 2015.
Ericsson first quarter report 2015:
http://hugin.info/1061/R/1913802/683649.pdf
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Source: Ericsson via GlobeNewswire
[HUG#1913802]
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Datum: 23.04.2015 - 07:30 Uhr
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News-ID 387936
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