TIDM61QS
RNS Number : 3948I
Telefonaktiebolaget Lm Ericsson
14 April 2022
Ericsson reports first quarter results 2022
First quarter highlights
Group organic sales grew by 3% YoY driven by Networks in North
America and in Europe and Latin America. Reported sales were SEK
55.1 (49.8) b.
Reported gross margin was 42.3% (42.8%) impacted by proactive
investments in supply chain resilience in Networks. Rolling four
quarter gross margin was 43.2%.
Due to the indefinite suspension of affected business in Russia,
a provision for impairment of assets and other extraordinary costs
of SEK -0.9 b. was booked in the quarter as other operating
expenses in segment Networks. Around one third of this amount will
impact cash flow.
EBIT amounted to SEK 5.9 b. with an EBIT margin of 10.7% when
excluding the provision and a revaluation of Ericsson Ventures
investments of SEK -0.3 b. Reported EBIT was SEK 4.7 (5.3) b.
EBITA amounted to SEK 6.1 b. with an EBITA margin of 11.0% when
excluding the provision and the revaluation of Ericsson Ventures
investments. Reported EBITA was SEK 4.9 (5.5) b.
Networks EBIT margin was 18.7% when excluding the provision
related to Russia. In addition, EBIT was negatively impacted by
timing of software sales in a large contract as well as by
increased R&D. Reported EBIT margin was 16.6% (20.0%).
Organic sales in Emerging Business and Other grew by 15% YoY
driven by Cradlepoint.
Reported net income was SEK 2.9 (3.2) b.
Free cash flow before M&A was SEK -1.7 (1.6) b. impacted
primarily by proactive inventory build-up for supply chain
resilience. Net cash on March 31, 2022, was SEK 65.2 b. compared
with SEK 43.0 b. on March 31, 2021.
Q1 Q1 YoY Q4 QoQ
SEK b. 2022 2021 change 2021 change
Net sales 55.1 49.8 11% 71.3 -23%
Sales growth adj. for comparable
units and currency[1] 3%
Gross margin[1] 42.3% 42.8% 43.2%
EBIT 4.7 5.3 -10% 11.9 -60%
EBIT margin[1] 8.6% 10.6% 16.6%
Net income 2.9 3.2 -8% 10.1 -71%
EPS diluted, SEK 0.88 0.96 -8% 3.02 -71%
Measures excl. restructuring charges[1]
Gross margin excluding restructuring
charges 42.3% 42.9% 43.5%
EBIT excluding restructuring
charges 4.8 5.3 -10% 12.3 -61%
EBIT margin excluding restructuring
charges 8.7% 10.7% 17.3%
Free cash flow before M&A -1.7 1.6 13.5
Net cash, end of period 65.2 43.0 52% 65.8 -1%
[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)
We continue to execute on our strategy to be a leading mobile
infrastructure provider and to establish a focused enterprise
business. We see strong business momentum and our investments in
technology and a resilient supply chain have allowed us to continue
to win market share and deliver on customer commitments in spite of
global supply chain challenges. In the quarter, we saw organic
sales[1] growth of 3%. Gross margin at 42.3% (42.8%) indicates
underlying stability while absorbing cost increases in the supply
chain. Our EBITA margin was 11.0%, adjusted for revaluation of
holdings and provision related to Russia.
Russia's invasion of Ukraine and the resulting humanitarian
disaster is a major setback for the world. While mobile
infrastructure is essential for communications in Russia, it has
been clear from the start of the invasion that business in Russia
would have to be reconsidered. Following current sanctions, we have
announced an indefinite suspension of our affected business in
Russia and recorded a provision for impairment of assets and other
extraordinary costs of SEK -0.9 b. in Q1. We will continue to
monitor and respond to the situation day by day, with priority on
the safety and well-being of our people.
In our core mobile infrastructure business, we foresee a longer
investment cycle compared with previous mobile generations as 5G's
broad application usage will drive a continued need to increase
capacity. Technology leadership is driving our competitiveness, and
in the quarter, we invested SEK -10.7 (-9.6) b. in R&D.
Networks sales[1] grew organically by 4% in Q1 reflecting our
continually strengthened market position. Gross margin was 44.7%
(46.1%). Software sales vary between quarters, and a certain SEK 1
b. annual software contract that is normally recorded in Q1, is
this year delayed into Q2. Gross margin was also negatively
impacted by proactive investments in supply chain resilience. Hard
work throughout the organization enabled us to deliver on customer
commitments despite global supply chain challenges. We also
continue to increase our R&D investments to extend our
leadership. R&D increased by SEK -1 b. YoY and was primarily
related to our Cloud RAN portfolio, which gives customers more
flexible deployment options, and to next generation ASICs that
provide industry-leading radio performance, energy savings and
footprint reduction. We foresee long-term attractive return on our
investments similar to the last few years.
Digital Services organic sales[1] were down by -2% YoY in the
quarter and EBIT was SEK -1.4 b. We are building a strong platform
for Digital Services and sales development in the cloud native 5G
core portfolio is encouraging with double digit growth, albeit from
a low base. However, the overall result in the quarter is not
satisfactory. The target of a limited loss for 2022 is challenging
especially in light of the increased investments in R&D in
service orchestration and 5G portfolio. We now increase focus on
accelerating sales growth and addressing efficiency to improve
profitability.
To capture opportunities in the rapidly growing enterprise
space, we are focusing on two specific areas. The first focus area
is wireless networks for enterprise where we already offer
easy-to-use pre-packaged solutions, with Cradlepoint showing strong
growth in the first quarter as 5G coverage increases on the US
C-band. We also see growing momentum for our 5G portfolio in
Dedicated Networks. In addition, we are increasing investments in
our enterprise go-to-market organization.
The other focus area is a Global Network Platform, which will be
built on global unified interfaces, so called APIs. Developers and
enterprises will be able to create new use cases and experiences,
like high quality video or XR on top of the 5G network, which
enable operators and the industry to monetize the network
investment in new ways. Ericsson intends to play a major role in
building the API platform. With our previously announced intention
to acquire Vonage - more than 1 million developers, 120,000
enterprise customers and a proven scaled API infrastructure - we
will have a strong position to deliver on this ambition.
Ericsson's IPR licensing revenues in Q1 were affected by several
expiring patent license agreements pending renewal and by 5G
license negotiations. We are confident in our strong 5G position
and leading patent portfolio, positioning us well to conclude
pending and future license renewals. Revenues from current IPR
licensing contracts are estimated to SEK 1.0-1.5 b. in Q2. The
actual revenue impact will depend on timing as well as terms and
conditions of new agreements.
We are currently engaging with the Department of Justice (DOJ)
regarding the breach notices it issued relating to the Deferred
Prosecution Agreement. The resolution of these matters could result
in a range of actions by DOJ, and may likely include additional
monetary payments, the magnitude of which cannot at this time be
reliably estimated. As this process is ongoing, we remain limited
in what we can say about the historical events covered in the Iraq
investigation and our ongoing engagement on the matter. We are
fully committed to co-operating with the DOJ and our work to
further strengthen our Ethics and Compliance program, controls and
our culture remains a top priority. It was actually our improved
compliance program that allowed us to identify the misconduct in
Iraq that started at least back in 2011.
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. In the quarter this had a material
impact on inventory levels and therefore Free cash flow before
M&A amounted to -1.7 (+1.6) b. We expect elevated inventory
levels to remain in the next few quarters.
We are well positioned to continue our strategic journey. The
mobile infrastructure business will remain our core and we will not
spare any effort to strengthen our position here. Our ambition is
to continue to grow and develop this business based on market
growth and market share gains. In the growing enterprise space, we
are seeing good traction for our established portfolio with
Cradlepoint and Dedicated Networks. We continue to work towards
closing the Vonage acquisition in the first half of 2022 and to
start developing the Global Network Platform.
With our investments in both our core and enterprise businesses,
as well as in our culture, we are determined to continue to make
Ericsson a stronger, more resilient company while at the same time
put it on a higher growth trajectory. Our key focus is to
accelerate the pace towards reaching our long-term target of an
EBITA margin of 15-18% and our ambition is to reach this target no
later than in 2-3 years.
Börje Ekholm
President and CEO
[1] Sales adjusted for comparable units and currency
NOTES TO EDITORS
You find the complete report with tables in the attached 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:
Sweden: +46 (0)8 566 426 51 (Toll-free Sweden: 0200 883 685)
International/UK: +44 (0)333 300 0804 (Toll-free UK: 0800 358
9473)
US: +1 631 913 1422 (Toll-free US: +1 855 85 70686)
PIN code: 57370869#
Please call in at least 15 minutes before the webcast
starts.
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
Stella Medlicott, Senior Vice 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
Stefan Jelvin, Director, Investor Relations
Phone: +46 709 86 02 27
E-mail: stefan.jelvin@ericsson.com
Media
Kristoffer Edshage, Director Corporate Media
Phone: +46 722 20 44 46
E-mail: media.relations@ericsson.com
Corporate Communications
Phone: +46 10 719 69 92
E-mail: media.relations@ericsson.com
This is information that Telefonaktiebolaget LM Ericsson is
obliged to make public pursuant to the EU Market Abuse Regulation.
The information was submitted for publication, through the agency
of the contact person set out above, at 07:00 AM CEST on April 14,
2022.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
QRFBKQBDABKKBQD
(END) Dow Jones Newswires
April 14, 2022 02:16 ET (06:16 GMT)
Telefonak. 24 (LSE:61QS)
Historical Stock Chart
From Dec 2024 to Jan 2025
Telefonak. 24 (LSE:61QS)
Historical Stock Chart
From Jan 2024 to Jan 2025
