By Swedish telecom-equipment maker, Ericsson, released its second-quarter earnings on Friday. Here’s a summary of the key details:
Net Loss
Ericsson reported a net loss attributable to shareholders of 686 million Swedish kronor ($67.2 million), compared with a profit of SEK4.5 billion in the same period last year. This result was lower than the expected net loss of SEK1.27 billion, according to a FactSet poll.
Revenue
The company’s revenue for the quarter increased by 3% to SEK64.44 billion, slightly surpassing the expected SEK63.94 billion projected by FactSet.
Key Highlights
Networks
Sales in Ericsson’s key networks unit decreased by 8% compared to the previous year. While the company experienced strong sales in India, it faced a significant sales drop of 50% in North America. This decline can be attributed to reduced spending and inventory levels as customers scaled back after investing heavily in 2021 and 2022. Chief Executive Borje Ekholm expressed confidence in the market’s recovery, anticipating a gradual improvement in late 2023 and further progress in 2024.
Margins
Ericsson’s group earnings before interest, tax, and amortization (EBITA) margin, excluding restructuring, dropped to 5.7% from 12.0% in the previous year. This decline was anticipated, as the company had previously signaled a mid-single-digit level. Additionally, the gross margin in its networks business decreased from 45.1% to 38.4% year-on-year.
Outlook
For the third quarter, Ericsson expects market conditions to remain similar to the second quarter. The company foresees an adjusted EBITA margin in 3Q that is either on par or slightly higher than the 5.7% achieved in 2Q. Looking forward, they anticipate a seasonally stronger fourth quarter. It is worth noting that this outlook was lower than expected, with analysts predicting an EBITA margin around 9.9% in 3Q. Despite the challenges, Ericsson still aims to achieve the lower end of its targeted 15%-18% EBITA margin range by 2024.
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