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Telcom company, Ericsson back on growth territory despite low sales and fears of threats from Chinese Huawei.

Thursday, 31 January 2013
Swedish telecom giant, Ericsson reported an enhanced profitability and delivered what has been considered as growth. According to analysts, the company has started growing again. Following a third quarter report, though with declining sales, the company saw increase fourth quarter sales by 5 percent to Skr66.9 billion. All three business areas grew, even the core network division.

Also on the stock market, so importantly watched gross margin increased from 30.4 percent in the third quarter to 31.3 percent. Expected was sale of Skr65.4 billion and a gross margin of 30.3 percent, according to analysts forecasts.

Profit before tax, which is burdened by the previously known impairment of more than Skr8 billion - largely from ST Ericsson - was minus Skr3.9 billion. Expectation was a loss of Skr4.3 billion, according to analysts consensuses.
According to radio Sweden, the sales and turnover figures are interesting to keep track of so as to determine if the Chinese company Huawei, is making major in routes into Ericsson's market share.

“Our segments showed mixed developments during the year with strong growth in Global Services and Support Solutions, while Networks had a more challenging year. Support Solutions went from losses in 2011 into profitability and together with Global Services represented close to 50% of Group sales in 2012, compared to 42% in 2011,” said Hans Vestberg, President, and CEO of Ericsson in a statement.

Fourth quarter highlights
•    Sales increased 5% YoY and 23% QoQ. Segment Networks sales increased 6% YoY driven mainly by North America. QoQ Networks sales grew 31%, primarily due to normal higher year-end business activity
•    Operating margin excl. JVs improved to 7.1% (6.4%) YoY mainly driven by increased Networks sales, offset by continued efficiency measures generating restructuring charges with a negative impact on operating margin of close to -3%-points (-1%)
•    Net income SEK -6.3 (1.5) b. negatively impacted by a non-cash charge related to ST-Ericsson of SEK -8.0 b. as previously communicated and a reduction of deferred tax assets of SEK -0.5 b. related to lowered corporate tax rate in Sweden
•    EPS diluted SEK -1.99 (0.36). EPS Non-IFRS and excluding ST-Ericsson charge SEK 1.07 (0.81)
•    Cash flow from operations increased to SEK 15.7 b. driven by reduced working capital.

Full year highlights
•    Sales were flat YoY with growth in Global Services and Support Solutions, while Networks sales declined partly due to the 40% decline of CDMA equipment sales
•    Operating margin, excluding JVs, was flat at 9.7% (9.6%). Excluding the gain related to the divestment of Sony Ericsson operating margin was 6.4%
•    Net income SEK 5.9 (12.6) b. impacted positively by the Sony Ericsson gain of SEK 7.7 b. and negatively by the ST-Ericsson charge of SEK -8.0 b.
•    EPS diluted SEK 1.78 (3.77). EPS Non-IFRS SEK 3.55 (5.54)
•    Cash flow from operations SEK 22.0 b. Full year cash conversion of 116%, above the target >70%
•    Dividend for 2012, proposed by board of Directors of SEK 2.75 (2.50) per share.
Full report here

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