Ericsson reported continued losses for the fourth quarter and 2018, due to restructuring charges and writedowns, but maintained its dividend and said it returned to organic revenue growth for the first time since 2013. Quarterly revenues rose 10 percent to SEK 63.8 billion and were up 4 percent on an organic basis. Over the full year, sales increased 3 percent and were 1 percent higher excluding changes in currencies and scope.
The net result in Q4 was a loss of SEK 6.5 billion, smaller than the loss of SEK 18.5 billion a year ago. This was mainly due to the SEK 6.1 billion in writedowns and one-time costs for restructuring its BSS business, flagged earlier by the company. The operating loss narrowed to SEK 1.9 billion from SEK 19.3 billion a year ago, and Ericsson achieved a margin of 8.7 percent excluding one-time items in Q4.
Ericsson said sales gradually improved over the course of the year, thanks to better market conditions as well as market share gains at its Networks division. Organic sales at Networks grew 6 percent in Q4, driven by higher-than-expected activity in North America, mainly for 5G roll-outs, and growth in Northeast Asia. The Networks gross margin rose to 39.9 percent from 32.0 a year ago.
Ericsson also completed its review of all managed services contracts, resulting in an annualised profit improvement of SEK 0.9 billion, it said. Restructuring continues at the Digital Services business, after cost reductions of SEK 2.6 billion last year, as the focus shifts to turning around the BSS business. The aim is to "significantly reduce" losses there in 2019.
In the new year, Ericsson expects the market to remain positive, with estimated growth of 2 percent in the radio access network equipment segment. Offsetting this will be an estimated SEK 3-5 billion in additional restructuring charges and continued costs for 5G trials. However, the company expects it is on track to meet its growth targets for 2020 and 2022.
The planned sale of the Mediakind business was not completed by year-end as expected and is "ongoing", Ericsson said. The business continued an adjusted operating loss of SEK 0.5 billion in Q4 on revenues of SEK 0.7 billion, while restructuring in the past year is expected to lead to better results from H2 2019.
Ericsson's free cash flow for the year fell to SEK 3.0 billion from SEK 5.1 billion. The company maintained its dividend at SEK 1.00 per share.
