Ericsson said sales continued to fall in the third quarter, with revenues declining 14 percent from the year before to SEK 51.1 million. Sales were particularly impacted at the Networks segments, down 19 percent, as well as from less demand for broadband, especially in markets with a weak macro-economic environment. Economic weakness in regions such as Latin America, the Middle East and Sub-Saharan Africa weighed. Sales in Europe, China and North America also went lower year-on-year. Only South East Asia and Oceania posted sales growth, on the transition from 3G to 4G. Ericsson said it expects the sales trend to continue into the fourth quarter. The quarter will also be affected a contract renewal in the US with a reduced scope.
Lower mobile broadband capacity sales, a higher share of service sales and lower sales in the Networks segment led to a fall in the gross margin to 28.3 percent from 33.9 percent the year before. The operating margin sank to 0.7 percent from 5.1 percent. Ericsson said the positive effect of its cost and efficiency programme was not able to offset the sharp decline in gross profit. The net results went to a loss of SEK 0.2 million from a profit of 3.1 million, a year-on-year decline of over 100 percent, while the operating cash flow was a negative SEK 2.3 billion, from a positive 1.6 million.
Ericsson said it will take further short-term actions to reduce costs, and is still on track to achieve its previously disclosed annual run rate of operating expenses, excluding restructuring charges, of SEK 53 billion in the second half of 2017, compared to SEK 63 billion in 2014. The estimate for total restructuring charges this year remains at SEK 4.5 billion. This high pace of restructuring activities is expected to continue next year.
