FIRST QUARTER HIGHLIGHTS
* Sales in the quarter were SEK 47.5 (52.0) b. Sales for comparable units,
adjusted for currency, decreased -7% YoY and -28% QoQ
* Sales declined YoY, primarily in North America and Japan but partly offset
by China, Middle East and Latin America
* Business mix in the quarter was mainly driven by mobile broadband capacity
projects. With current visibility, key contracts awarded will gradually
impact sales and business mix, mainly in the second half of the year.
* Operating margin improved YoY in all segments to 5.5% (4.0%) mainly driven
by mobile broadband capacity sales and lower restructuring charges
* Operating income amounted to SEK 2.6 (2.1) b.
* Cash flow from operating activities was SEK 9.4 b. driven by the payment
from Samsung related to the new license agreement as well as reduced trade
receivables.
-------------------------------------------------------------------------------
Q1 Q1 YoY Q4 QoQ
SEK b. 2014 2013 change 2013 change
-------------------------------------------------------------------------------
Net sales 47.5 52.0 -9% 67.0 -29%
-------------------------------------------------------------------------------
Sales growth adj. for
comparable units and
currency - - -7% - -28%
-------------------------------------------------------------------------------
Gross margin 36.5% 32.0% - 37.1% -
-------------------------------------------------------------------------------
Operating income 2.6 2.1 25% 9.1 -71%
-------------------------------------------------------------------------------
Operating margin 5.5% 4.0% - 13.5% -
-------------------------------------------------------------------------------
Net income 1.7 1.2 41% 6.4 -74%
-------------------------------------------------------------------------------
EPS diluted, SEK 0.65 0.37 76% 1.97 -67%
-------------------------------------------------------------------------------
EPS (Non-IFRS), SEK (1)) 0.90 0.99 -9% 2.42 -63%
-------------------------------------------------------------------------------
Cash flow from operating
activities 9.4 -3.0 - 14.6 -36%
-------------------------------------------------------------------------------
Net cash, end of period 43.6 32.2 35% 37.8 15%
-------------------------------------------------------------------------------
(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 for comparable units, adjusted for currency, declined by -7% year-over-
year, with continued negative impact from North America and Japan. All segments
showed margin improvements.
The main reason behind the decline in sales is, as previously communicated,
lower revenues from two large mobile broadband coverage projects in North
America, which peaked in the first half of 2013, and the impact from reduced
activity in Japan. This was partly offset by growth in China, Middle East and
Latin America. The decline in sales impacted segment Networks as well as the
Global Services network rollout business.
Our focus on profitability is paying off with gross margin improvement YoY, both
including and excluding restructuring. All segments also showed improved
operating margins. The business mix in the quarter was predominantly driven by
mobile broadband capacity projects. In addition, some of our customers invested
more in software to improve network performance and user experience.
Operating cash flow amounted to SEK 9.4 b., compared to a negative operating
cash flow of SEK -3.0 b. in the first quarter last year. The payment from
Samsung, related to IPR licensing, as well as lower sales had a positive effect
on cash flow. Our continued efforts to reduce working capital through a better
order-to-cash process are progressing well.
North America is currently characterized by operator investments in capacity and
quality enhancements. At the same time we continue to strengthen our position in
strategic areas. We are pleased to have been named partner to AT&T for their
Domain 2.0 initiative which aims to simplify and scale their network utilizing
Network Function Virtualization (NFV) and Software-Defined Networking (SDN).
In region North East Asia we are executing on previously awarded 4G/LTE
contracts in mainland China. In addition, we have been awarded important 4G/LTE
contracts in Japan and Taiwan.
In Europe, we have been awarded a five-year contract as part of Vodafone's
Project Spring. It includes upgrades and expansions of Vodafone's 2G and 3G
networks, and build-out of 4G/LTE along with professional services.
There is continued demand for our services offering and in the quarter we have
won new managed services business in several regions.
With seven additional operators announcing trials of the Ericsson Radio Dot
System we see strong interest in the solution. The innovative small-cell indoor
solution will be commercially available later this year.
With current visibility, key contracts awarded will gradually impact sales and
business mix, mainly in the second half of the year.
Political unrest prevails in parts of the Middle East and Africa and is still
impacting sales. There is also an increased political uncertainty in Russia and
the Ukraine. In 2013 Ericsson had SEK 5.9 b. in sales in Russia and Ukraine. The
current political uncertainty has not impacted sales in the first quarter.
In a transforming ICT market, Ericsson continues to evolve through investments
both into its core business and in new and targeted areas. Through our
technology and services leadership we are well positioned to continue to stay
relevant as our customers move to capture new market opportunities.
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/2014/03month14-en.pdf or go to:
www.ericsson.com/investors
Ericsson invites media, investors and analysts to a press conference at the
Ericsson Studio, Grönlandsgången 4, Stockholm, at 09.00 (CET), April 23, 2014.
An analysts, investors and media conference call will begin at 14.00 (CET).
Live webcast of the press conference 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, Communications
Phone: +46 10 719 34 72
E-mail: media.relations@ericsson.com
Investors
Peter Nyquist, Head of Investor Relations
Phone: +46 10 714 64 49
E-mail: peter.nyquist@ericsson.com
Åsa Konnbjer, Director, Investor Relations
Phone: +46 10 713 39 28
E-mail: asa.konnbjer@ericsson.com
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Phone: +46 10 714 20 39
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Media
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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, 2014.
[HUG#1778886]
