Ericsson improves underlying margins in Q2, sales up 11%

Ericsson reported a strong increase in second-quarter results, helped by currency effects and a pick-up in its main Networks business. Sales increased by 11 percent year-on-year to SEK 60.7 billion. Adjusted for comparable units and currency rates, sales decreased by 6 percent, mainly due to less capacity business in North America. The mobile broadband business in North America stabilized in the quarter, but remained at a lower level than a year ago. The annual decline in North America was partly offset by an increased pace of 4G deployments in China, and sales growth was strong in the Middle East, India and South East Asia. Ericsson also reported strong demand in all regions for professional services, and favourable developments in its OSS and BSS business. 

Operating profit, excluding restructuring charges, jumped by almost 50 percent from a year ago to SEK 6.3 billion. After the weak first quarter, profitability at the Networks division recovered recovered, driven by increased sales and a positive currency hedge effect. Including SEK 2.7 billion in restructuring charges, mainly for job cuts in Sweden, operating profit fell 11 percent to SEK 3.6 billion, and net profit was down 20 percent to SEK 2.1 billion. Ericsson said it remains on track to achieve SEK 9 billion in cost savings in 2017 compared to 2014. It expects the savings to start showing up in results later this year. 

The company also noted the consolidation underway in the industry, both among vendors and customers, saying this creates "opportunities and challenges". In response Ericsson in the first half "accelerated our transformation journey towards becoming a true ICT company". This appears to reject possible major acquisitions, with Ericsson saying it will continue its focus on excellence in its core business and developing leading market positions in targeted growth areas.