second QUARTER 2014 July 18, 2014

Transcription

1 second QUARTER 2014 July 18, 2014

2 HElena norrman Senior Vice President Communications

3 second QUARTER 2014 July 18, 2014 This presentation contains forward-looking statements. Such statements are based on our current expectations and are subject to certain risks and uncertainties that could negatively affect our business. Please read our earnings reports and our most recent annual report for a better understanding of these risks and uncertainties.

4 HANS VESTBERg President and CEO JAN FRYKHAMMAR CFO and Executive Vice President

5 HANS VESTBERg President and CEO

6 key developments Market Increased operator focus on network performance as a differentiator capacity enhancements, densification Rapid technology transformation to 4G/LTE in China Major operators evaluating how next generation virtualized networks impact business and operations Mobile data traffic grew 65% YoY Ericsson Mobility Report, June 2014 Ericsson Rising demand for managed services - 21 new contracts across nine regions Executing on previously awarded 4G/LTE contracts in Mainland China and Taiwan Multi-year BSS contract signed with T-Mobile US Acquisition of Red Bee Media completed, strengthened position in the transforming television and media industry Telefonaktiebolaget LM Ericsson 2014 SECOND QUARTER REPORT 2014 JULY 18, 2014 Page 6

7 The social world cup World Cup total: 26.7 TB data traffic, 48.5 million photos, 4.5 million calls Final game: Germany vs. Argentina, Maracanã, Rio de Janeiro 1.5 TB data traffic, 2.6 million photos, 35 photos per person 91% of mobile internet access was for social media usage Telefonaktiebolaget LM Ericsson 2014 SECOND QUARTER REPORT 2014 JULY 18, 2014 Page 7 Source: SindiTelebrasil, 4G Americas

8 Second quarter in numbers Organic FX adjusted sales -1% YoY Sales recovered compared to previous quarter driven by the Middle East, China and India Continued good capacity business in North America Lower coverage project activity in North America and Japan Organic FX adjusted sales 13% QoQ Strong sales in North America, China and Brazil Weak Q Gross margin improved YoY to 36.4% (32.4%) Operating income grew YoY to SEK 4.0 (2.5) b. Networks operating income improved substantially Support solution showed negative result Operating cash flow SEK 2.1 (4.3) b. Improved income with maintained working capital days SEK b SEK b % Net sales and sales development -2% 5% 2% 0% -3% 0% -9% Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 4% % -6% 4% 4% % 14% Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q Operating income and margin 6% % 7% Net sales Sales change, YoY Operating income Operating margin Telefonaktiebolaget LM Ericsson 2014 SECOND QUARTER REPORT 2014 JULY 18, 2014 Page 8

9 Regional overview Q2 sales YoY SEK 55.3.b. -29% -11% 23% SEK 54.8 b. -4% -3% -1% -3% 0% 1% 29% 13% SEK 52 b. Sales recovered in North America and North East Asia Telefonaktiebolaget LM Ericsson 2014 SECOND QUARTER REPORT 2014 JULY 18, 2014 Page 9

10 Regional overview Q2 sales qoq 24% SEK 54.8 b. 31% SEK 47.5.b. -3% 4% 3% 5% 6% 12% 15% 17% 15% SEK 44 b. Strong sequential sales development growth in 9 out of 10 regions Telefonaktiebolaget LM Ericsson 2014 SECOND QUARTER REPORT 2014 JULY 18, 2014 Page 10

11 JAN FRYKHAMMAR CFO and Executive Vice President

12 Second quarter Net sales SEK 54.8 (55.3) b. Gross income and margin improved YoY Good development in capacity business, increased IPR and lower restructuring Operating expenses increased YoY to SEK 15.6 b. Added modems and Mediaroom operations Gradual increase in organic R&D in line with strategy Reduction in SG&A Operating income SEK 4.0 (2.5) b. Net income almost doubled to SEK 2.7 (1.5) b. Operating cash flow SEK 2.1 (4.3) b. Driven by strong income Inventory increased in preparation for new projects Working capital days remained stable with continued efforts for improvement Gross margin 37.1% 36.5% 36.4% 32.0% 30.4% 31.1% 32.0% 32.4% 32.0% Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q SEK b. Operating expenses Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q Telefonaktiebolaget LM Ericsson 2014 SECOND QUARTER REPORT 2014 JULY 18, 2014 Page 12

13 Sales growth FX impact SEK b. Sales YoY change, Q % -6% -2% -4% 5% 5% 7% 7% 2% 0% 3% -3% 4% 0% -7% -9% -1% -1% Reported Organic FX adjusted Networks 3% 5% Global Services -7% -8% Support Solutions 21% 5% Group -1% -1% Major FX exposure: USD, EUR and JPY Negative revaluation of hedges SEK -0.5 b. mainly driven by USD 0 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q Net sales Sales growth (YoY) Sales growth (adj for FX & Hedge) Rule of thumb, with current USD exposure: SEK 0.25 change in SEK vs USD impacts revaluation of hedges by approx. SEK 0.5 b. Insignificant depreciation effects from emerging markets Telefonaktiebolaget LM Ericsson 2014 SECOND QUARTER REPORT 2014 JULY 18, 2014 Page 13

14 Operating Income and margin development Q2 YoY SEK b. 32.4% 36.4% Hedge revaluation % 4.5% % Mainly Modems and Mediaroom Costs related to divestment of ACS and exiting Cables Q One-time items Q adjusted Sales Gross margin Margin Restructuring Expenses Other Q Operating income improvement mainly driven by Gross margin Telefonaktiebolaget LM Ericsson 2014 SECOND QUARTER REPORT 2014 JULY 18, 2014 Page 14

15 Change in gross cash Q2 SEK b. Operating Cash flow +2.1 Investing Financing FX on cash +1.5 b Change in net cash SEK b. (from SEK 43.6 to 32.5 b.) Execution of order-to-cash initiative continues and shows good progress 1 Excluding Short term investments Telefonaktiebolaget LM Ericsson 2014 SECOND QUARTER REPORT 2014 JULY 18, 2014 Page 15

16 HANS VESTBERg President and CEO

17 Networks Business highlights Continued operator focus on network performance Continued momentum for SSR, 120 contracts since launch Organic FX adjusted sales +5% YoY Sales recovered, driven by the Middle East, China, US and India Growth in radio access, IP Edge and IMS Good capacity business in advanced LTE markets Sales increased 19% QoQ Operating income SEK 3.6 (1.3) b. Improved business mix Continued focus on commercial excellence and operational effectiveness Higher IPR revenues Operating margin 12% (5%) Higher sales Fourth consecutive quarter with double-digit margin Telefonaktiebolaget LM Ericsson 2014 SECOND QUARTER REPORT 2014 JULY 18, 2014 Page 17 SEK b % -17% SEK b % 3% 1% -1% -1% -13% Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q % 5% Net sales and sales development 8% 6% 5% % 17% 10% Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q Operating income and margin 3% % Net sales Sales change, YoY Operating income Operating margin

18 Global services Business highlights Red Bee Media acquisition finalized during the quarter 21 new Managed Services contracts in nine regions 12 new significant Consulting and Systems Integration contracts Organic FX adjusted sales -8% YoY Professional Services sales stable Network rollout (NRO) sales continue to decline, with reduced activities in North America and Japan Sales increased 13% QoQ Increased activities in North America High business activity in Managed Services Operating income SEK 1.5 (1.6) b. Reduced losses in NRO both YoY and QoQ Less negative impact from European modernization projects as well as lower temporary project costs in North America Operating margin 6% (6%) Good profitability maintained in Professional Services Global Services operating income Telefonaktiebolaget LM Ericsson 2014 SECOND QUARTER REPORT 2014 JULY 18, 2014 Page 18 SEK b Global Services sales SEK b. 2,5 2,0 1,5 1,0 0,5 0,0 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 13% 6% 2012 Net sales and sales development 8% 6% Global Services sales change, YoY 3% Operating income and margin 14% 15% 13% 14% 14% 6% Global Services operating margin 14% 8% 8% 30% 20% 10% 0% -10% Professional Services sales change, YoY 13% 13% 5% 6% Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q Professional Services operating margin

19 Support solutions SEK b. Net sales and sales development Business highlights Multi-year BSS contract signed with T-Mobile US Transition of business models continues Reported sales +21% YoY Growth from Mediaroom and OSS Partly offset by lower BSS sales Organic FX adjusted sales +5% YoY Sales increased 2% QoQ Strong growth in North America offset by weak sales in emerging markets Operating margin -13% (-12%) Lower sales from legacy portfolio Investments in next-generation TV solutions % SEK b. 2,0 1,5 1,0 0,5 0,0-0,5 29% 6% -19% -33% -29% 40% 13% 21% Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 12% % 8% -1% Operating income and margin -12% -5% 37% 0% -13% Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q Net sales Sales change, YoY Operating income Operating margin Telefonaktiebolaget LM Ericsson 2014 SECOND QUARTER REPORT 2014 JULY 18, 2014 Page 19

20 modems Business highlights Smartphones and data devices featuring M7450 will be on the market by the end of this year Global operator certification is progressing as planned Net sales are expected 2H 2014 Operating loss of SEK -0.5 b. in the quarter Mainly R&D expenses Operating expenses in 2014 are estimated at SEK 2.6 b. Success will be measured in an month timeframe after integration Q Telefonaktiebolaget LM Ericsson 2014 SECOND QUARTER REPORT 2014 JULY 18, 2014 Page 20

21 summary Continued good capacity business as operators focus on network performance Strong sequential sales growth Improved profitability driven by Networks Good profitability maintained in Professional Services Transition of business models in Support Solutions continues Continued investments in new and targeted areas Well positioned to continue to be a strategic partner to our customers in a transforming market With current visibility, key contracts awarded will gradually impact sales and business mix in 2H 2014 Telefonaktiebolaget LM Ericsson 2014 SECOND QUARTER REPORT 2014 JULY 18, 2014 Page 21

22 Telefonaktiebolaget LM Ericsson 2014 SECOND QUARTER REPORT 2014 JULY 18, 2014 Page 22 Q&A

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24 second QUARTER 2014 July 18, 2014 This presentation contains forward-looking statements. Such statements are based on our current expectations and are subject to certain risks and uncertainties that could negatively affect our business. Please read our earnings reports and our most recent annual report for a better understanding of these risks and uncertainties.