SECOND QUARTER HIGHLIGHTS
* Sales in the quarter were SEK 54.8 (55.3) b. Sales for comparable units,
adjusted for currency, decreased -1% YoY and increased 13% QoQ
* Sales recovered compared to the previous quarter driven by growth in the
Middle East, China and India, as well as continued capacity business in
North America
* Gross margin increased YoY to 36.4% (32.4%), driven by strong development in
capacity business, increased IPR revenues and lower restructuring charges
* With current visibility, key contracts awarded will gradually impact sales
and business mix, in the second half of the year
* Operating margin improved YoY to 7.3% (4.5%), mainly driven by stronger
performance in segment Networks
* Operating income amounted to SEK 4.0 (2.5) b.
* Cash flow from operating activities was SEK 2.1 (4.3) b.
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Q2 Q2 YoY Q1 QoQ Six months Six months
SEK b. 2014 2013 change 2014 change 2014 2013
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Net sales 54.8 55.3 -1% 47.5 15% 102.4 107.4
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Sales growth adj. for
comparable units and
currency - - -1% - 13% -4% 7%
-------------------------------------------------------------------------------
Gross margin 36.4% 32.4% - 36.5% - 36.4% 32.2%
-------------------------------------------------------------------------------
Operating income 4.0 2.5 62% 2.6 52% 6.6 4.6
-------------------------------------------------------------------------------
Operating margin 7.3% 4.5% - 5.5% - 6.5% 4.3%
-------------------------------------------------------------------------------
Net income 2.7 1.5 76% 1.7 57% 4.4 2.7
-------------------------------------------------------------------------------
EPS diluted, SEK 0.79 0.45 76% 0.65 22% 1.44 0.82
-------------------------------------------------------------------------------
EPS (Non-IFRS), SEK (1)) 1.07 0.88 22% 0.90 19% 1.98 1.88
-------------------------------------------------------------------------------
Cash flow from operating
activities 2.1 4.3 -52% 9.4 -78% 11.5 1.3
-------------------------------------------------------------------------------
Net cash, end of period 32.5 27.4 18% 43.6 -26% 32.5 27.4
-------------------------------------------------------------------------------
(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, recovered compared to the
previous quarter and were down by -1% year-over-year. Operating margin improved
year-over-year, mainly driven by stronger performance in segment Networks.
Sales in the quarter year-over-year were driven by growth in the Middle East,
China and India, as well as continued capacity business in North America. This
was offset by, as previously communicated, lower revenues from two large mobile
broadband coverage projects in North America that peaked in the first half of
2013, and reduced activity in Japan.
The operating margin improved year-over-year, especially in segment Networks.
This was due to a higher gross margin primarily from improved business mix with
an increased share of mobile broadband capacity projects in advanced LTE
markets, as well as higher recurring IPR revenues and efficiency improvements.
After a slow start of the year, we are executing on previously awarded 4G/LTE
contracts in Mainland China and Taiwan. Furthermore, the investment climate in
India is improving following the concluded spectrum auctions and government
elections held in May.
Political unrest prevails in parts of the Middle East and Africa and is still
impacting sales. There is also a continued political uncertainty in Russia and
the Ukraine, but this had no negative impact on sales in the quarter.
As previously stated and with current visibility, key contracts awarded will
gradually impact sales and business mix in the second half of the year.
In line with our strategic agenda, we have continued investing into new and
targeted areas. The addition of the modems and Mediaroom businesses, as well as
increased investments in IP, have resulted in increased R&D spending. At the
same time, we continue to execute on profit improvement activities.
Our modems business will start generating sales by the end of this year, as our
modem M7450 will be featured in smartphones and data devices. During the first
half of 2014, we have invested SEK 1.2 b. primarily in R&D and we have a strong
technology platform. However, the performance of the business is linked to our
customers' success. As previously communicated, success will be measured in an
18-24 months timeframe after integration of the modems business, which was
completed in August 2013.
Support Solutions showed negative result in the quarter due to lower sales
related to legacy portfolio. However, the transition from traditional telecom
software license business models to recurrent license revenue deals continues.
Operating cash flow was positive in the quarter driven mainly by improved income
and maintained working capital days. The execution of the company-wide order-to-
cash initiative continues and shows good progress.
In a transforming ICT market, we continue to evolve through investments in both
our core business as well as in new and targeted areas. Through our technology
and services leadership we are well positioned to continue to be a strategic
partner to our customers as they 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/2014/06month14-en.pdf or go to:
www.ericsson.com/investors
Ericsson invites media, investors and analysts to a briefing at the Ericsson
Studio, Grönlandsgången 4, Stockholm, at 09.00 (CET), July 18, 2014. An
analysts, investors and media conference call 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, 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
Stefan Jelvin, Director, Investor Relations
Phone: +46 10 714 20 39
E-mail: stefan.jelvin@ericsson.com
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Phone: +46 10 714 54 00
E-mail: rikard.tunedal@ericsson.com
Media
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Phone: +46 10 719 97 27
E-mail: media.relations@ericsson.com
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E-mail: media.relations@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 July
18, 2014.
[HUG#1830258]
