Ericsson Q1 Net Income Declines; Organic Sales Flat

(RTTNews) - Ericsson (ERIC) reported that its first-quarter net income declined to 1.6 billion Swedish kronor from 2.9 billion kronor, prior year. EPS decreased to 0.45 kronor from 0.88 kronor. EBITA excluding restructuring charges amounted to 4.8 billion kronor compared to 5.0 billion kronor. EBITA margin excluding restructuring charges was 7.7% compared to 9.1%.

First quarter Group sales increased by 14% to 62.6 billion Swedish kronor from 55.1 billion kronor, last year. Sales adjusted for comparable units and currency were unchanged. Segment Networks organic sales declined by 2%, driven by lower operator capex and inventory optimization among multiple customers. The decline was offset by growth in other business segments.

For second quarter, Ericsson projects Group EBITA margin to reach mid-single-digit level. The company expects a gradual recovery in the second half of 2023. Ericsson noted that the Group is on track to reaching the lower end of the long term EBITA target range of 15-18% by 2024.

Ericsson has accelerated its cost-out execution and identified additional savings opportunities of 2 billion kronor. The company now plans to reduce cost run rate by 11 billion kronor by year-end. The company's early estimate indicates that restructuring charges may amount to around 7 billion kronor for the full year, of which more than half is likely to be booked in the second quarter.

Ericsson noted that cash flow was negative in the first quarter. Free cash flow before M&A was negative at 8.0 billion kronor. Cash flow was impacted by an increase in working capital. Net cash on March 31, 2023, was 13.6 billion kronor compared with 23.3 billion kronor on December 31, 2022.

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