THIRD QUARTER Oct 21, 2016

Transcription

1 THIRD QUARTER 2016 Oct 21, 2016

2 HElena norrman Senior Vice President Chief Marketing and Communications Officer

3 THird QUARTER 2016 Oct 21, 2016 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 Jan Frykhammar President and CEO

5 Third quarter 2016 Negative industry trends accelerated weaker demand for mobile broadband in some markets FX adjusted sales declined -14% YoY and -7% YoY in Q2 Networks FX adjusted sales declined -20% YoY and -11% YoY in Q2 Gross margin impacted by lower capacity sales Cost and efficiency program on track Targeting opex run rate of SEK 53 b. by 2H17 Reducing cost of sales further short-term actions to adapt operations to weaker mobile broadband demand SEK b. 16Q3 15Q3 16Q2 Sales Gross margin, % Operating income Operating cash flow EPS (Non-IFRS), SEK Current industry trends indicate a somewhat weaker than normal seasonal growth between Q3 and Q4 Current business mix of coverage and capacity sales is anticipated to prevail in the short term Telefonaktiebolaget LM Ericsson 2016 THIRD QUARTER REPORT 2016 OCT 21, 2016 Page 5

6 Regional sales Q3 YoY SEK 59.2 b. -25% -22% -8% -28% -21% -17% -25% -19% -8% -4% 6% SEK 51.1 b. Negative trend for mobile broadband demand accelerated further Telefonaktiebolaget LM Ericsson 2016 THIRD QUARTER REPORT 2016 OCT 21, 2016 Page 6

7 Net sales Q3 YoY SEK b. Regions Middle East, Latin America, Sub Saharan Africa + Russia 59.2 Delayed spectrum auctions Mainly Services 51.1 Q315 Regions impacted EU countries India North by macro-economics America North East Asia Other Q316 Major decline in countries impacted by weak macro Telefonaktiebolaget LM Ericsson 2016 THIRD QUARTER REPORT 2016 OCT 21, 2016 Page 7

8 Regional sales Q3 qoq SEK 54.1 b. -20% -16% -13% -13% -4% -2% -4% -2% 2% 1% 7% SEK 51.1 b. Lower capacity sales in Europe Telefonaktiebolaget LM Ericsson 2016 THIRD QUARTER REPORT 2016 OCT 21, 2016 Page 8

9 segment summary Networks Global Services Support Solutions SEK b. 16Q3 15Q3 16Q2 Sales Op Inc SEK b. 16Q3 15Q3 16Q2 Sales Op Inc SEK b. 16Q3 15Q3 16Q2 Sales Op Inc Sales down -19% Lower mobile broadband demand Op margin declined to -1% (10%) Lower sales, lower share of capacity sales Partly offset by lower opex Sales down -8% Lower PS and NRO sales Op margin declined QoQ PS stable at 10% excl restructuring NRO declined to -5% excl restructuring Sales down -11% Lower OSS and BSS sales Op margin declined to -12% (0%) Lower software sales Transition to recurrent license revenue contracts continues Lower mobile broadband demand PS margin stable QoQ Milestone-driven sales Telefonaktiebolaget LM Ericsson 2016 THIRD QUARTER REPORT 2016 OCT 21, 2016 Page 9

10 On customers agenda Increased focus on 5G and IoT Digital transformation Core network transformation Telefonaktiebolaget LM Ericsson 2016 THIRD QUARTER REPORT 2016 OCT 21, 2016 Page 10

11 Carl mellander Chief Financial Officer

12 Operating Income Q3 YoY SEK b. OM 8.6% Cost and efficiency program Gross margin excl restr YoY 34.5% 29.4% 5.1 Sales decline -14% Q315 Expenses Volume Gross margin Increased restructuring Restructuring OM 0.7% 0.3 Q316 Cost reductions did not offset lower sales and gross margin Telefonaktiebolaget LM Ericsson 2016 THIRD QUARTER REPORT 2016 OCT 21, 2016 Page 12

13 Gross Margin Q3 QoQ, ex restructuring Services share from 45% to 49% 33.2% Driven by lower share of capacity sales in regions impacted by macro-economics Mainly lower capacity sales in Europe 29.4% Q216 Q316 Current business mix anticipated to prevail short term Telefonaktiebolaget LM Ericsson 2016 THIRD QUARTER REPORT 2016 OCT 21, 2016 Page 13

14 Cost Savings Cost and efficiency program tracking towards opex target of SEK 53 b. Headcount reduction initiated in; Sweden, the US, Finland, Spain and the UK Operating expenses (excl restr) decreased YoY to SEK 13.4 (14.3) b. Mainly related to cost and efficiency program Cost of sales reductions Further short-term actions are being implemented to adapt to a weaker mobile broadband market SEK b Operating expenses, excl restructuring Restructuring charges Unchanged estimate for 2016 at SEK 4-5 b Full Year 2015 June rolling 4 quarters 2015 Full Year 2016 March rolling 4 quarters 2016 June rolling 4 quarters 2016 Sep rolling 4 quarters H annual runrate High pace of restructuring anticipated also in 2017 Underlying expenses Other* * Net of: capitalized and depreciated development expenses, and amortized intangible assets. Telefonaktiebolaget LM Ericsson 2016 THIRD QUARTER REPORT 2016 OCT 21, 2016 Page 14 This slide contains forward-looking statements. Actual result may be materially different.

15 Change in gross cash Q3 16Q3A SEK b. Operating Cash Flow -2.3 b Investing b Financing -1.5 b FX on cash +1.3 b b Change in gross cash SEK -5.2 b Gross Cash 1606A Net income reconciled to cash Change net operating assets Restructuring CAPEX Acquisitions, Other financing divestments & activities Other Dividend FX on cash Gross Cash 1609A Change in net cash SEK -4.6 b Operational and structural actions are being taken to improve cash flow Telefonaktiebolaget LM Ericsson 2016 THIRD QUARTER REPORT 2016 OCT 21, 2016 Page 15 1) Excluding Interest-bearing securities

16 Jan Frykhammar President and CEO

17 Planning assumptions extracted from the q3 report SHORT TERM The current industry trends indicate a somewhat weaker than normal seasonal sales growth between Q3 and Q4 A renewed managed services contract in North America, with reduced scope, will impact sales negatively Current business mix of coverage and capacity sales in mobile broadband is anticipated to prevail in the short term, 2-3 quarters MID TERM Annual opex run rate to be reduced to SEK 53 b. (ex restructuring) in 2H 2017, compared with SEK 63 b. in 2014 The estimate for total restructuring charges in 2016 remains at SEK 4-5 b. The high pace of restructuring activities is anticipated to remain in 2017 Based on current visibility, assessments and FX rates Telefonaktiebolaget LM Ericsson 2016 THIRD QUARTER REPORT 2016 OCT 21, 2016 Page 17 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.

18 Telefonaktiebolaget LM Ericsson 2016 THIRD QUARTER REPORT 2016 OCT 21, 2016 Page 18

19 Ericsson investor update November 10, New York Telefonaktiebolaget LM Ericsson 2016 THIRD QUARTER REPORT 2016 OCT 21, 2016 Page 19

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21 third QUARTER 2016 Oct 21, 2016 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.