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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