Ericsson Pushed to Hefty Loss by Write-Downs, Restructuring Costs
April 25 2017 - 2:59AM
Dow Jones News
By Dominic Chopping
STOCKHOLM-- Ericsson AB fell to a hefty net loss in the first
quarter after booking provisions, write-downs and restructuring
costs of 13.4 billion Swedish kronor ($1.51 billion), but said a
more focused business strategy should see the company significantly
improve its profitability next year.
The supplier of wireless-communications gear reported a net loss
for the three months ended March 31 of 10.9 billion kronor compared
with a profit of 2.1 billion kronor a year earlier, missing
analysts' expectations for a loss of 8.29 billion kronor, according
to a FactSet poll. Revenue was down 11% at 46.4 billion kronor from
52.2 billion kronor.
The company said the first quarter was weighed down by 8.4
billion kronor in provisions for lower projected customer volumes,
a reassessment of the value of trade receivables and additional
project costs from IT & Cloud projects.
Write-downs were 3.3 billion kronor while restructuring costs in
the quarter were 1.7 billion kronor. It expects full-year
restructuring efforts to cost between 6 billion kronor and 8
billion kronor.
Chief Executive Börje Ekholm said: "We will intensify our
efforts to reduce cost with focus on structural changes to generate
lasting efficiency gains and increase cost competitiveness. Our
target is to surpass previous ambitions."
"However, we need to increase investment in certain core areas
to develop our product portfolio, which can temporarily increase
cost levels. The more focused business strategy is expected to
result in a significantly improved profitability already in 2018.
Beyond 2018, we believe that we can at least double the underlying
2016 operating margin."
Ericsson said its Networks business delivered a solid result
despite lower sales, while losses in IT & Cloud and Media
increased significantly in the quarter.
A decline in revenue from the licensing of intellectual property
rights and lower investment levels in certain markets hit group
sales, it said.
The company announced in March that it expected between 16
billion kronor and 18 billion kronor in write-downs, restructuring
costs and provisions to be booked in the first quarter.
Write to Dominic Chopping at dominic.chopping@wsj.com
(END) Dow Jones Newswires
April 25, 2017 02:44 ET (06:44 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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