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Ericsson hits new low

April 25, 2017

Ericsson’s net loss grew to SEK 10.9 billion (€1.13bn) for the first quarter, as the company took on restructuring charges. The result included SEK 8.4 billion in provisions on customer contracts, SEK 3.3 billion in asset writedowns and SEK 1.7 billion in restructuring charges. In the year-earlier period, Ericsson still had a net profit of SEK 2.1 billion.

Revenues stayed on the downward trajectory, dropping by 11 per cent year-on-year to SEK 46.4 billion. Adjusted operating profit declined to SEK 1.1 billion from SEK 4.1 billion a year ago due to lower sales and lower gross margin.

The main networks business had an adjusted operating margin of 12 per cent, better than Q4 thanks to an improved business mix and a more competitive portfolio, Ericsson said. However, the IT & Cloud business remained deeply in the red, with an operating loss of SEK 9 billion, and the media division also recorded a loss, at SEK 2.8 billion. Ericsson said it’s started work on trying to improve results at IT& Cloud and consider “strategic opportunities” for the media activities.

While Ericsson noted some of the Q1 charges in its restructuring plan announced in March, the contract provisions were new. The company said these were “triggered by negative developments late in the quarter related to certain customer contracts”.

Ericsson said the quarterly results were not satisfactory and reiterated its plans to lower costs and restructure in order to improve profitability already in 2018 and later double the underlying 2016 operating margin.

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