STOCKHOLM, July 16, 2021 /PRNewswire/ --
Second quarter highlights
- Group organic sales grew by 8% YoY, despite a sales decline in
Mainland China of SEK -2.5 b. YoY and
an IPR revenue decline of SEK -0.5 b.
YoY. Reported sales were SEK 54.9
(55.6) b.
- Gross margin excl. restructuring charges improved to 43.4%
(38.2%) driven mainly by operational leverage in Networks. Q2 2020
was negatively impacted by inventory write-down and initial 5G
deployments in Mainland China. Reported gross margin was 43.4%
(37.6%).
- EBIT excluding restructuring charges improved to SEK 5.8 b. (10.6%) from SEK 4.5 b. (8.2%) YoY driven by Networks.
Reported EBIT was SEK 5.8
(3.9) b.
- Organic sales in Networks grew by 11% YoY, driven by market
share gains. Sales in Mainland China were SEK -2.0 b. lower YoY. Reported EBIT margin was
21.7% (13.2%).
- Organic sales in Digital Services were stable YoY, despite a
sales decline in Mainland China of SEK -0.5
b. YoY. Reported EBIT (loss) was SEK
-1.6 (-0.7) b., impacted by a
write-down of SEK -0.3 b. for
pre-commercial product investments for the Chinese market.
- Reported net income was SEK 3.9
(2.6) b.
- Free cash flow before M&A was SEK
4.1 (3.2) b. supported by
higher incoming IPR payments. Net cash per June 30, 2021 was SEK
43.7 (37.5) b.
- The RAN market outlook for 2021 has been updated to 10% growth
YoY, compared with previously 3% growth. Source: Dell'Oro.
SEK b.
|
Q2
2021
|
Q2
2020
|
YoY
change
|
Q1
2021
|
QoQ
change
|
Jan-Jun
2021
|
Jan-Jun
2020
|
YoY
change
|
Net sales
|
54.9
|
55.6
|
-1%
|
49.8
|
10%
|
104.7
|
105.3
|
-1%
|
Sales growth adj. for comparable units and
currency[1]
|
-
|
-
|
8%
|
-
|
-
|
-
|
-
|
9%
|
Gross
margin[1]
|
43.4%
|
37.6%
|
-
|
42.8%
|
-
|
43.1%
|
38.6%
|
-
|
EBIT
|
5.8
|
3.9
|
51%
|
5.3
|
11%
|
11.1
|
8.2
|
36%
|
EBIT
margin[1]
|
10.6%
|
6.9%
|
-
|
10.6%
|
-
|
10.6%
|
7.7%
|
-
|
Net
income
|
3.9
|
2.6
|
51%
|
3.2
|
23%
|
7.1
|
4.9
|
45%
|
EPS diluted,
SEK
|
1.10
|
0.74
|
49%
|
0.96
|
15%
|
2.06
|
1.39
|
48%
|
Measures excl. restructuring charges[1]
|
Gross margin
excluding restructuring charges
|
43.4%
|
38.2%
|
-
|
42.9%
|
-
|
43.2%
|
39.3%
|
-
|
EBIT excluding
restructuring charges
|
5.8
|
4.5
|
29%
|
5.3
|
9%
|
11.2
|
9.1
|
22%
|
EBIT margin excluding
restructuring charges
|
10.6%
|
8.2%
|
-
|
10.7%
|
-
|
10.7%
|
8.7%
|
-
|
Free cash flow before
M&A
|
4.1
|
3.2
|
26%
|
1.6
|
161%
|
5.6
|
5.6
|
1%
|
Net cash, end of
period
|
43.7
|
37.5
|
16%
|
43.0
|
2%
|
43.7
|
37.5
|
16%
|
[1] Non-IFRS
financial measures are reconciled at the end of this report to the
most directly reconcilable line items in the financial
statements.
|
|
Comments from Börje Ekholm, President and CEO of Ericsson
(NASDAQ:ERIC)
Our strong business performance continued, with an organic
sales[1] growth of 8% in the quarter. This was despite a sales
decline of SEK -2.5 b. YoY in
Mainland China. Networks continued to grow market shares in the
quarter with some significant wins. Group gross margin[2] increased
to 43.4% (38.2%). We are well positioned to take advantage of
continued market momentum with our competitive 5G product portfolio
and cost structure. However, it is prudent to forecast a materially
lower market share in Mainland China for Networks and Digital
Services as the earlier decision to exclude Chinese vendors from
the Swedish 5G networks might influence market share awards.
Networks sales[1] grew organically by 11%, despite lower volumes
from delayed 5G deployment in Mainland China. This growth reflects
the continued high activity levels in most markets. The North East
Asia market outside Mainland China saw strong growth in 5G volumes.
Gross margin[2] improved to 47.9% (40.5%). Through proactive and
continuous measures for supply chain resilience we have accelerated
production to meet customer demand, and we are well prepared for
any challenges in the future. Our increased R&D investments
have accelerated product development. We strengthened our Cloud RAN
portfolio further with 5G mid-band and massive MIMO support for
increased network performance. Cloud RAN will enable service
providers to seamlessly evolve their networks towards cloud-native
technologies and open network architectures, meeting demand for
more deployment flexibility. We continue on the successful path of
5G wins in North America. We have
signed another 5-year contract, this one amounting to USD 8.3 b. (SEK 71
b.), with a leading customer. This is the single largest
deal in the history of Ericsson.
In Digital Services the strong momentum in 5G Core continued and
we are ramping up R&D investments in the cloud native 5G
portfolio. Organic sales were stable in the quarter. However,
excluding the reduced sales in Mainland China, sales[1] grew by 5%.
Gross margin[2] decreased to 37.9% (43.6%) YoY, mainly due to a
write-down of SEK -0.3 b. related to
pre-commercial product investments for the Chinese market. A
material loss of market share in Mainland China, which contributed
5.4% of Digital Services sales in 2020, would cause a delay in
reaching the EBIT margin target for 2022. A significantly reduced
volume would lead to a limited loss in 2022 in Digital Services.
Improvements are skewed towards the year end 2022, as we expect to
see a gradual increase in Core revenues. Based on our strong
portfolio, we expect to exceed our original EBIT margin target of
4-7%, as sales in other markets over time will compensate for the
reduction in Mainland China. We see strong demand for our OSS, BSS
and 5G core offerings, positioning us well for longer-term
profitability.
The new IPR agreement with Samsung reaffirms the significant
value of our patent portfolio and with this agreement in place we
are well positioned to conclude pending and future patent license
renewals. One additional agreement was signed in July. There is
currently high activity in renewal negotiations. As new contracts
are concluded, revenues will include retroactive payments for the
unlicensed period prior to signing.
Whilst many markets are returning to normal following the
COVID-19 pandemic, we continue to see rising numbers of cases in
South East Asia, which may result
in a slower recovery for impacted countries.
We continue to invest in compliance to fully embed our
commitments to ethical business practice, in all areas across the
organization. Ensuring all decisions are taken with integrity is a
driving force in our culture-change journey.
The opportunity from enterprise for 5G provides an exciting
growth path for Ericsson. Building on the strong foundations of our
core business we will continue to take a stepwise approach to
investing in growth in Dedicated Networks, IoT and the wireless
portfolio acquired with Cradlepoint. We foresee 20-30% annual
market growth in enterprise, with opportunities in automation,
remote operations and safety management across whole industry
sectors such as smart manufacturing, ports and airports, energy,
mining, health and agriculture. Enterprise use cases in 5G – and
the continuing growth in 4G – will drive the digital transformation
of business globally combining the high performance, low latency
and security benefits of wireless over traditional fixed networks.
We are confident that wireless will be the first-choice connection
for global business in the 5G era.
Stay healthy and well.
Börje Ekholm
President and CEO
[1] Sales adjusted for comparable units and currency
[2] Excluding restructuring charges
NOTES TO EDITORS
You find the complete report with tables in the attached PDF or
by following this
link https://www.ericsson.com/assets/local/investors/documents/financial-reports-and-filings/interim-reports-archive/2021/6month21-en.pdf
or on www.ericsson.com/investors
Video webcast for analysts, investors and journalists
President and CEO Börje Ekholm and CFO Carl Mellander will comment on the report and
take questions at a video webcast at 9:00 AM
CEST (8:00 AM BST London,
3:00 AM EDT New York).
To join the webcast, please go to www.ericsson.com/investors
To ask a question, please call:
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(0)8 566 426 51 (Toll-free Sweden: 0200 883 685)
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PIN code: 92278406#
Please call in at least 15 minutes before the webcast
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The webcast will be available on-demand after the event and can
be viewed at www.ericsson.com/investors.
FOR FURTHER INFORMATION, PLEASE CONTACT
Contact person
Peter Nyquist, Head of Investor
Relations
Phone: +46 705 75 29 06
E-mail: peter.nyquist@ericsson.com
Additional contacts
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President, Marketing and Corporate Relations
Phone: +46 730 95 65 39
E-mail: media.relations@ericsson.com
Investors
Lena Häggblom, Director, Investor Relations
Phone: +46 72 593 27 78
E-mail: lena.haggblom@ericsson.com
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Phone: +46 709 86 02 27
E-mail: stefan.jelvin@ericsson.com
Media
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Phone: +46 722 20 44 46
E-mail: media.relations@ericsson.com
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Phone: +46 10 719 69 92
E-mail: media.relations@ericsson.com
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obliged to make public pursuant to the EU Market Abuse Regulation
and the Swedish Securities Markets Act. The information was
submitted for publication, through the agency of the contact person
set out above, at 07:00 CEST on
July 16, 2021.
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|
Ericsson second
quarter report 2021
|
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SOURCE Ericsson