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2016-01-27

Ericsson: Ericsson reports fourth quarter and full year results 2015

Ericsson reports fourth quarter and full year results 2015

FOURTH QUARTER HIGHLIGHTS

* Reported sales increased by 8% YoY. Sales, adjusted for comparable units
and currency, decreased by -1%.
* In North America, mobile broadband investments remained stable, with
additional hardware sales in the quarter.
* 4G deployments in Mainland China recovered after a weak third quarter.
* A global patent license agreement was signed with Apple, contributing to
growth in IPR revenues both YoY and QoQ.
* A larger share of hardware sales with lower margin impacted gross margin
negatively QoQ. In addition, a one-time inventory write-down of SEK -0.4 b,
was made.
* The global cost and efficiency program is progressing according to plan,
contributing to lower operating expenses YoY.
* Operating margin increased to 15% (9%) YoY with improvements in all
segments.
* Cash flow from operating activities was SEK 21.9 (8.6) b.

FULL YEAR HIGHLIGHTS

* Reported sales increased by 8%. Sales growth in India, North America and
China as well as higher IPR licensing revenues were partly offset by lower
sales in Japan, Russia and Brazil. Sales, adjusted for comparable units and
currency, decreased by -5%.
* The IPR licensing revenues were SEK 14.4 (9.9) b. They were previously
estimated at SEK 13-14 b.
* Operating income, excluding restructuring charges, increased to SEK 26.8
(18.3) b. with improvements in all segments.
* Cash flow from operating activities was SEK 20.6 (18.7) b. Cash conversion
was 85%, above target of more than 70%.
* The Board of Directors will propose a dividend for 2015 of SEK 3.70 (3.40)
per share, an increase of 9% compared to last year.

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| SEK b. Q4 Q4 YoY Q3 QoQ Full year Full year |
| |
| 2015 2014 change 2015 change 2015 2014 |
| Net sales 73.6 68.0 8% 59.2 24% 246.9 228.0 |
| Sales growth adj. for comparable units and currency - - -1% - 26% - - |
| Gross margin 36.3% 36.6% - 33.9% - 34.8% 36.2% |
| Gross margin excluding restructuring charges 36.6% 37.6% - 34.5% - 35.7% 36.6% |
| Operating income 11.0 6.3 75% 5.1 117% 21.8 16.8 |
| Operating income excluding restructuring charges 11.7 7.1 65% 6.1 94% 26.8 18.3 |
| Operating margin 15.0% 9.3% - 8.6% - 8.8% 7.4% |
| Operating margin excluding restructuring charges 16.0% 10.5% - 10.2% - 10.9% 8.0% |
| Net income 7.0 4.2 68% 3.1 124% 13.7 11.1 |
| EPS diluted, SEK 2.15 1.29 67% 0.94 129% 4.13 3.54 |
| EPS (Non-IFRS), SEK1) 2.50 1.71 46% 1.34 87% 6.06 4.80 |
| Cash flow from operating activities 21.9 8.6 154% 1.6 - 20.6 18.7 |
| Net cash, end of period 18.5 27.6 -33% -0.2 - 18.5 27.6 |
| 1) EPS, diluted, excl. amortizations and write-downs of acquired intangible |
|assets, and restructuring. |
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Comments from Hans Vestberg, President and CEO of Ericsson (NASDAQ:ERIC)

Reported sales in the quarter increased by 8% YoY. Sales, adjusted for
comparable units and currency, decreased by -1%. Sales in North America grew
YoY as well as QoQ. Profitability improved YoY, with higher IPR licensing
revenues and lower operating expenses as main contributors. Network Rollout
continued on its path to sustainable profitability.

Business

We saw a recovery in segment Networks in the quarter. In North America, the
mobile broadband investments remained stable, with additional hardware sales
in the quarter. 4G deployments in Mainland China recovered after a weak third
quarter. Emerging markets such as India, Indonesia and Mexico remained strong
while markets such as Russia, Brazil and parts of the Middle East continued
to be weak, mainly due to macro-economic developments. Investments in Europe
were driven by the transition from 3G to 4G and capacity enhancements.
Operators increased their investments in telecom core networks, driven by
deployment of new service offerings such as VoLTE (Voice over LTE).

In the quarter, sales growth in segment Global Services was mainly driven by
growth in Systems Integration and Managed Services while Network Rollout
sales declined.

We ended the year with good YoY sales development in TV and Media which
contributed to growth in Segment Support Solutions.

IPR licensing

Our IPR strategy, to generate value from our investments in R&D, has been
successful and over the last five years we have more than tripled our IPR
licensing revenues. After the recent announcements of two important patent
license agreements, we now have agreements with the majority of handset
suppliers.

Targeted growth areas

In 2015, we had good progress in all our targeted growth areas and we
continued to invest in order to establish leadership. Sales grew by more than
20% YoY, reaching SEK 45 b., corresponding to 18% of group sales.

The strategic partnership with Cisco, announced in the quarter, will give us
strong end-to-end network solutions with a complete IP portfolio. As a result
of the partnership, we will extend our addressable market and expect to
generate USD 1 b. or more of additional sales by 2018. Additional sales are
expected to be accretive to operating income in 2016.

Profitability

Operating margin increased to 15% (9%) YoY with improvements in all segments.
The major contributors to the profit improvement were higher IPR licensing
revenues and lower operating expenses, mainly in segment Networks. The effort
to restore Network Rollout to a sustainable profitable business is
progressing well, with a break-even operating income, excluding restructuring
charges, for the second half of 2015.

Cost and efficiency program

The global cost and efficiency program is progressing according to plan, with
the target to achieve net annual savings of SEK 9 b. during 2017 compared
with 2014. Operating expenses, excluding restructuring charges, for the
second half of 2015, declined by almost 10% compared with same period last
year. We will continue to address operating expenses and increase efforts to
further reduce cost of sales in order to improve the gross margin.

Cash flow

After a strong cash flow from operating activities in the fourth quarter, we
delivered a full-year cash flow of SEK 20.6 b., exceeding the cash conversion
target of more than 70%.

Focus 2016

Although company performance improved in the quarter, there is still a need
for further improvements. Our focus in 2016 will be:

1. Core business - While market conditions are challenging in certain parts of
the world, we continue our work to capture business opportunities as more
markets shift to 4G. At the same time we will work to extend our technology
leadership also in the emerging 5G market.

2. Targeted growth areas - After a period of investing, in order to create
growth, we also need to improve earnings. This will involve stronger focus on
software sales and recurring business as a complement to the already strong
Professional Services business.

3. Cost and efficiency - We are confident in our ability to achieve our SEK 9
b. cost and efficiency program by 2017. We are closely monitoring market and
business development and will take all necessary actions to remain
competitive across the entire business.

As we deliver in these areas, in combination with our other ongoing strategic
initiatives, we are well positioned to create future shareholder value.
Consequently, the Board of Directors will propose a dividend of SEK 3.70
(3.40) per share for 2015, an increase of 9% compared with last year.

NOTES TO EDITORS

You find the complete report with tables in the attached PDF or by following
this
linkwww.ericsson.com/res/investors/docs/q-reports/2015/12month15-en.pdfor
onwww.ericsson.com/investors

Ericsson invites media, investors and analysts to a briefing at the Ericsson
Studio, Grönlandsgången 4, Stockholm, at 09.00 (CET), January 27, 2016.
A conference call for analysts, investors and media will begin at 14.00 (CET).

Live webcast of the briefing and conference call details, as well as
supporting slides, will be available
atwww.ericsson.com/pressandwww.ericsson.com/investors

FOR FURTHER INFORMATION, PLEASE CONTACT

Helena Norrman, Senior Vice President, Marketing and Communications
Phone: +46 10 719 34 72
E-mail:media.relations@ericsson.com

Investors

Peter Nyquist, Head of Investor Relations
Phone: +46 10 714 64 49
E-mail:peter.nyquist@ericsson.com

Åsa Konnbjer, Director, Investor Relations
Phone: +46 10 713 39 28
E-mail:asa.konnbjer@ericsson.com

Stefan Jelvin, Director, Investor Relations
Phone: +46 10 714 20 39
E-mail:stefan.jelvin@ericsson.com

Rikard Tunedal, Director, Investor Relations
Phone: +46 10 714 54 00
E-mail:rikard.tunedal@ericsson.com

Media

Ola Rembe, Vice President, Head of External Communications
Phone: +46 10 719 97 27
E-mail:media.relations@ericsson.com

Corporate Communications
Phone: +46 10 719 69 92
E-mail:media.relations@ericsson.com

Ericsson discloses the information provided herein pursuant to the Securities
Markets Act. The information was submitted for publication at 07.30 CET, on
January 27, 2016.

Ericsson fourth quarter and full year report 2015
http://hugin.info/1061/R/1981476/725976.pdf

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This announcement is distributed by NASDAQ OMX Corporate Solutions on behalf of NASDAQ OMX Corporate Solutions clients.
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: Ericsson via Globenewswire

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