Ericsson 1Q Net Profit Missed Views on Delayed Contract, Russia Provision -- Update
14 April 2022 - 6:00PM
Dow Jones News
By Dominic Chopping
STOCKHOLM--Ericsson AB's first-quarter net profit missed
expectations because of a delayed contract, expired licensing
deals, and the previously announced 900 million kronor ($95
million) provision after suspending its Russian business, the
company said Thursday.
However, the company won market share in the quarter after
having strong sales of 5G equipment in North America, Europe and
Latin America, as overall sales of network equipment grew
organically by 4%, it said.
The Swedish telecom-equipment company reported net profit
attributable to shareholders of SEK2.94 billion compared with
SEK3.17 billion a year earlier, as sales rose 11% to SEK55.06
billion.
Analysts polled by FactSet had expected net profit of SEK4.07
billion on sales of SEK54.14 billion.
The company earlier this week said it is suspending its business
in Russia indefinitely in light of recent events in Ukraine and the
subsequent sanctions imposed on Russia. Ericsson has around 600
employees in Russia spread across four locations in the country and
all personnel have been placed on paid leave.
Ericsson said the quarter was also weighed by a certain SEK1
billion annual software contract that is normally recorded in the
first quarter, but this year has been delayed into the second
quarter. Higher research-and-development costs, the expiration of
patent deals that are pending renewal, and investments in supply
chain also had an effect, the company said.
"In light of the global supply chain challenges, we decided to
create a buffer of vital components in order to secure that we meet
customer delivery commitments," Chief Executive Borje Ekholm
said.
Ericsson is facing scrutiny over previously disclosed corporate
governance issues in Iraq, where an internal investigation found
evidence of historical corruption, and the U.S. Department of
Justice has stated that the company's handling of the matter
breached a Deferred Prosecution Agreement.
"The resolution of these matters could result in a range of
actions by the DOJ, and may likely include additional monetary
payments, the magnitude of which cannot at this time be reliably
estimated," Mr. Ekholm said.
Ericsson still targets a group earnings before interest and tax
margin of 15%-18% within two to three years. The company now
forecasts the radio access network market growing by 5% this year
compared with 3% previously.
Write to Dominic Chopping at dominic.chopping@wsj.com
(END) Dow Jones Newswires
April 14, 2022 03:45 ET (07:45 GMT)
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