Ericsson announced a 50 percent increase in its dividend to SEK 1.50 per share, after reporting full-year results it says are on track to meet its medium and long-term targets. For the fourth quarter, the company posted sales up 4 percent to SEK 66.4 billion, and the adjusted operating margin more than doubled to 9.7 percent, close to its target of 10 percent for 2020.
Adjusted for comparable scope and currency effects, quarterly sales rose 1 percent and annual sales were up 4 percent.
Ericsson said a reduction in North America in Q4 due to uncertainty over the T-Mobile merger with Sprint was compensated by growth in other markets, primarily in the Middle East and North East Asia. The main Networks business posted an adjusted gross margin of 41.1 percent, similar to 41.0 percent a year ago, while the adjusted operating margin fell to 14.5 percent from 17.5 percent.
Higher operating costs, lower results at Kathrein business
Ericsson blamed the lower margin at Networks on increased operating costs after the takeover of Kathrein's antenna operations and investments in R&D, digitalization, compliance and security. Costs will rise again in 2020 on continued investment in digitisation to improve productivity, but this won't jeopardise financial targets, the group said.
The Kathrein operations saw "temporarily" lower production and sales in Q4, which had a negative impact on margins in the quarter. Ericsson expects a gradual improvement as the integration progresses and a new antenna portfolio is developed, however the business will have a negative contribution over the full-year 2020.
Ericsson said the Digital Services segment showed a positive result in Q4, excluding restructuring charges and despite a continued negative impact from the remaining critical projects (provisions of SEK 0.3 billion in Q4). It saw a strong
development in the market, driven by the momentum in 5G resulting in good sales growth in Packet Core and OSS.
Net profit improves strongly
Ericsson's bottom line returned to a net profit of SEK 4.5 billion for the full year compared to a loss of SEK 6.5 billion a year ago on restructuring charges. Over the full year 2019, the profit reached SEK 1.9 billion, after the provisions to settle the corruption probe in the US.
CEO Borje Ekholm said the resolution of the corruption case "highlights serious shortcomings in our otherwise proud history" and the company was fully focused on improving its compliance and ethics programme. "This work will not stop; our zero-tolerance policy requires constant oversight and renewal, and we are confident that we are on the right path," he said.
The increase in the dividend represents the management's confidence in the company delivering on its targets, Ekholm said. "Our focused strategy with increased investments in R&D combined with operational efficiency is paying off," the CEO said "We have regained technology leadership, recovered previously lost ground in several markets and improved the financial results." He added that Ericsson is a leader in 5G with 78 commercial 5G agreements with unique operators and 24 live 5G networks on four continents.
