Ericsson posts strong Q1 profit despite falling sales

April 23, 2014
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The Ericsson company/AFP
The Ericsson company/AFP
STOCKHOLM, Apr 23 – Swedish telecom equipment maker Ericsson announced Wednesday a sharp rise in its first quarter net profit despite falling sales.

Analysts have been forecasting stronger sales due to the expansion of high speed data networks by Asian and European mobile operators but Dow Jones newswires pointed to continuing flat sales in Western Europe in the first quarter.

The company partly attributed the sales drop to the tapering off of large North American projects.

“The main reason behind the decline in sales is … lower revenues from two large mobile broadband coverage projects in North America … and the impact from reduced activity in Japan,” chief executive Hans Vestberg said in a statement.

“This was partly offset by growth in China, Middle East and Latin America.”

Nonetheless, net profit leaped by 75 percent to 2.12 billion kronor (233 million euros, $323 million) compared to 1.2 billion kronor in the same period in 2013 when the company had large restructuring costs.

The rise was slightly under the expectations of analysts polled by Dow Jones Newswires, at 2.38 billion kronor.

Revenue dropped by 8.7 percent to 47.5 billion kronor compared to a year earlier.

The group reported a 5.5 percent operating margin up from 4.0 percent, thanks to “a large share of mobile broadband capacity projects with higher hardware margins” and lower restructuring charges, which weighed on the profit of the company a year ago.

The agreement Ericsson signed with South Korean electronics giant Samsung settling a global patent dispute had “positive effects” also weighed positively on first quarter figures.

“Through our technology and services leadership we are well positioned to continue to stay relevant as our customers move to capture new market opportunities,” Vestberg said.

Ericsson shares dropped by 4.75 percent in early afternoon trading on the Stockholm Stock Exchange in an overall market down 0.86 percent.

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