Ericsson reported a strong finish to 2020, exceeding its margin targets as sales were boosted by demand for 5G networks. Quarterly revenues rose 5 percent to SEK 69.6 billion and were up 13 percent on an organic basis. Operating profit jumped 80 percent to SEK 11.0 billion, and the net profit rose 60 percent to SEK 7.2 billion. Ericsson increased its dividend to SEK 2.00 per share from SEK 1.50 last year.
The growth was driven by 5G deployments in North East Asia, North America and Europe, while sales declined in the Middle East & Africa and Latin America due to economic and currency pressures. The main Networks division posted sales up 11 percent to SEK 49.4 billion, with 20 percent growth on an organic basis.
The higher hardware volume and a reduction in operating costs thanks to fewer trial and pre-sales costs helped the Networks operating margin rise to 21.5 percent from 14.4 percent a year ago. The division exceeded its full-year target of 15-17 percent with a reported result of 18.6 percent.
Over the full year, Ericsson also met its group adjusted operating margin target two years ahead of schedule, with a result of 12.5 percent. Nevertheless, the company warned of pressure in 2021, from the earlier flagged drop in licensing revenues, the integration of Cradlepoint since November and continued investments to strengthen the business. The company also warned it may face repercussions in the Chinese market from the Swedish government's decision to ban Chinese suppliers from local 5G network.
Ericsson's long-term EBITA margin target remains 15-18 percent, with an interim target of 12-14 percent for adjusted EBIT in 2022. The company said the long-term outlook remains positive and it expects the global RAN market to grow by 3 percent this year.
