Ericsson Reports Operating Profit Of 4.9 Bn SEK In Q1

Swedish telecom gear maker Ericsson reported a operating profit of 4.9 billion SEK in the first quarter of 2019, beating industry estimates. This is a significant improvement over the company's net  loss of 300 million for the same period a year ago.

As far as net sales is concerned, Ericsson reported a whooping 23% plunge in its net sales for Q1 as against Q4 of previous fiscal. The firm reported a net sales of 48.9 billion SEK in Q1 as against 63.8 billion SEK in Q4, 2018. However, on a year-on-year basis, the telecom equipment maker reported 13% growth as the firm's revenue in Q1, 2018 was 43.4 billion SEK.

Ericsson, however, expressed satisfaction over the sales result and said it showed organic sales growth for the third consecutive quarter, and this quarter by 7%. The growth was mainly driven by businesses in North America market.

"Our strategy, to work with lead customers in lead markets, is generating both 5G business and hands-on experience in 5G rollout and commercialization. To date we have publicly announced commercial 5G deals with 18 named operator customers, which, at the moment, is more than any other vendor," said Börje Ekholm, President and CEO of Ericsson.

The company said its gross margin improved to 38.5% YoY, driven by improvements in Networks and Managed Services segment, and also by the recently signed patent license agreement with OPPO.

The Networks business segment saw a strong quarter with an organic sales growth of 10% YoY, driven by increased investments in North America. Networks gross margin improved to 43.2% YoY, mainly due to higher hardware capacity sales and IPR revenues.

"In the quarter we announced our intent to acquire the German company Kathrein’s antenna and filters business. This will further expand our capabilities in the advanced active and passive antenna domains, which are growing in importance as 5G evolves," the CEO added.

In Managed Services segment, sales fell organically by -5% due to headwind from contract exits. In the quarter, gross margin improved to 17.7% YoY, supported by efficiency gains and customer contract reviews.

The company also reported that organic sales in Digital Services segment were stable YoY. The company's gross margin excluding restructuring charges and the BSS provision in Q4 2018 was stable QoQ and operating income improved YoY driven by reductions in operating expenses. Gross margin declined YoY as Q1 2018 was supported by a favorable business mix.

Organic sales growth in the Emerging Business and Other segment was 38% YoY driven by growth in iconectiv. Gross margin was stable YoY. In the quarter 51% of MediaKind was divested, generating a gain of SEK 0.7 b.