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Ericsson reports strong results for 2018

Ericsson has reported its 4Q and full-year results.

4Q highlights. Sales as reported increased by 10 percent year-on-year (YoY) and sales adjusted for comparable units and currency increased by 4 percent. Networks sales adjusted for comparable units and currency grew by 6 percent YoY. Digital services sales adjusted for comparable units and currency grew by 5 percent YoY. Costs related to revised business support systems (BSS) strategy of SEK -6.1 billion, of which SEK -3.1 billion were restructuring charges, impacted digital services operating income in 4Q. Gross margin was 25.7 percent (21.6 percent). Gross margin, excluding restructuring charges and other costs related to revised BSS strategy, improved to 36.3 percent supported by cost reductions, the ramp-up of Ericsson radio system (ERS) and the contract review in managed services. Operating margin was -2.9 percent (-33.3 percent). Operating margin, excluding restructuring charges and other costs related to revised BSS strategy, was 8.7 percent. Networks operating margin excluding restructuring charges was 17.5 percent (8.6 percent). The increase was driven by cost reductions, the ERS ramp-up and reversal of provisions for impairment losses on trade receivables, partly offset by increased investments in R&D. Digital services operating income, excluding restructuring charges and costs related to revised BSS strategy, was SEK -0.6 billion. Managed services operating margin excluding restructuring charges increased to 5.2 percent (-13.0 percent). The review of all 42 low-performing customer contracts has been completed.

Full-year highlights. Sales as reported increased by 3 percent and sales adjusted for comparable units and currency increased by 1 percent, with networks growing by 3 percent – the first year of organic growth for Ericsson since 2013. Gross margin was 32.3 percent (23.3 percent). Gross margin excluding restructuring charges improved to 35.2 percent (25.9 percent), supported by cost reductions, the ramp-up of ERS and the review of managed services contracts. Operating income was SEK 1.2 (-34.7) billion. Operating income excluding restructuring charges was SEK 9.3 (-26.2) billion driven by higher gross margin and sales as well as lower operating expenses. Cash flow from operating activities was SEK 9.3 (9.6) billion. Free cash flow excluding M&A amounted to SEK 4.3 (4.8) billion. Net cash at year-end was SEK 35.9 (34.7) billion.

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