Ericsson Backs Guidance After Limited Impact From Covid-19 on 2Q
17 Juli 2020 - 08:16AM
Dow Jones News
By Dominic Chopping
STOCKHOLM--Ericsson AB on Friday backed its full-year guidance
after experiencing limited impact from Covid-19 in the second
quarter, but cautioned that while some customers are accelerating
their investments, others are temporarily cautious.
"While the effects of Covid-19 create uncertainties, with
current visibility we maintain the full-year targets for the
group," said Chief Executive Borje Ekholm.
The telecommunications equipment company reported second-quarter
net profit attributable to shareholders of 2.45 billion Swedish
kronor ($269.6 million), up from SEK1.71 billion in the
year-earlier period.
Sales rose 1.4% to SEK55.58 billion, driven by its key networks
unit.
Analysts polled by FactSet expected a net profit of SEK1.67
billion on sales of SEK55.16 billion.
Ericsson's networks unit grew strongly in North America and
North East Asia while sales declined in Latin America and
India.
Gross margin at the unit slipped to 40.2% from 41.4% as it
booked a previously announced SEK900 million write-down on
inventory in China and took more lower-margin strategic contracts
in the country to build market position.
Momentum in North America remains strong and the market is
estimated to grow 4% in 2020, Ericsson said. Momentum is supported
by the closing of the Sprint-T Mobile merger, upcoming spectrum
auctions and an overall demand for 5G.
"As we prepare to exit the crisis caused by Covid-19, there is a
need to restart economies and make strategic, forward-looking
investments which we suggest must include the future digital
infrastructure," Mr. Ekholm said.
"We see many regions around the world increasing investments in
this space and as a European company we are concerned that Europe
will fall behind."
Ericsson said it still targets 2020 sales of between SEK230
billion and SEK240 billion with an operating margin excluding
restructuring charges at more than 10% of sales. The 2022 margin
target is 12%-14%, excluding restructuring charges.
It said that R&D investments in digital services are being
accelerated to capture additional business opportunities. Combined
with lower sales, this will likely cause a delay of some quarters
in reaching the 2020 target of low single-digit margin for the
segment. The 2022 operating margin target for digital services of
10-12% remains firm, Ericsson said.
Write to Dominic Chopping at dominic.chopping@wsj.com
(END) Dow Jones Newswires
July 17, 2020 02:01 ET (06:01 GMT)
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