Telecom equipment maker Ericsson continues to suffer from a slump in its network business.
In addition, the tightened austerity measures are having a massive impact on the results. In the second quarter, the Swedes slipped into the red and made a loss of around 600 million Swedish crowns (52 million euros), as the company announced on Friday in Stockholm. A year earlier, the group had earned almost 4.7 billion crowns. However, analysts had expected an even weaker result. CEO Börje Ekholm does not expect things to improve until the end of the year.
Ericsson is particularly concerned about the reluctance of large mobile network operators, who had invested early in new technology for the 5G mobile standard and are now reducing their inventories. In the past quarter, sales in the network division from own resources – ie without acquisitions and sales as well as currency effects – fell by 13 percent. In the USA in particular, development was very weak. Good business in India, where Ericsson has meanwhile become the market leader, could not compensate for this. Thanks to a takeover, total group sales increased slightly by 3 percent to 64.4 billion crowns.
CEO Ekholm had ordered further savings in the billions for the group in the spring because of the long-sluggish development. Of this, more than three billion crowns were booked as charges in the past quarter. As a result, operating earnings before interest, taxes and goodwill amortization (EBITA) fell to 0.5 billion crowns, less than a tenth of the previous year’s value (7.5 billion). The corresponding margin fell from 12 percent in the previous year to 0.8 percent. And even without the special effect of the conversion, profitability fell significantly.
Ekholm reiterated the goal of coming out at the lower end of the long-term margin range of 15 to 18 percent in 2024. In the current quarter, however, profitability is likely to be at most slightly above the previous quarter. A gradual improvement can only be expected in the final quarter – also because the environment is likely to brighten up again as a result of increased customer investment.
The Ericsson share is temporarily in Stockholm from 10.35 percent to 52.5 SEK.
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