SECOND QUARTER REPORT 2008

Transcription

1 SECOND QUARTER REPORT 1

2 SECOND QUARTER REPORT HENRY STÉNSON Senior Vice President Communications 2

3 SECOND QUARTER REPORT 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. 3

4 SECOND QUARTER REPORT CARLHENRIC SVANBERG President and CEO 4

5 Q2 in summary Stable business activity with regional variations Strong demand for GSM and mobile broadband New network builds still high, continued margin pressure Positive cash flow development Unchanged planning assumptions Sony Ericsson breakeven 5

6 Market and business update Networks GSM expansions, HSPA rollouts, LTE early phase Winning technology track Ericsson s base stations upgradable 3.7 b mobile subscriptions, up 170 m in the quarter 236 m WCDMA, up 31 m in the quarter IP focus in network transformation Paves the way to convergence Redback technology key in Ericsson network development 352 m broadband connections, up 17 m per quarter Overall strong demand for broadband 6

7 Market and business update Services Continued strong interest in managed services 210 m subscribers under Ericsson management Over 50% in highgrowth markets Network sales increasingly driven by services Focus on migration and network modernization Consulting and systems integration key components Major efficiency potential Leveraging synergies between vendors and operators Expanding and leveraging global resources in low cost countries 7

8 Q2 numbers in short Sales SEK 48.5 (47.6) b, up 2% Organic sales growth in constant currencies 7% Operating income SEK 4.7 1) (9.3) b Operating margin 9.7% (19.4%) EBITDA of 14.9% (23.9%) Capital gain of SEK 0.2 b from enterprise PBX divestment Cash flow SEK 8.5 (4.2) b Good progress in cash flow related activities Lesser growth in turnkey markets, higher in US 1) Excluding restructuring charges of SEK 1.8 b. in second quarter 8

9 Regional Q2 comments Sales yearoveryear Western Europe, 3% SEK m Operator consolidation continues Strong traffic growth in HSPA networks Capacity still sufficient UK and Spain slow, Nordic countries strong Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 Q3 05 Q4 05 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 9

10 Regional Q2 comments Sales yearoveryear Central Europe, Middle East, Africa, 2% SEK m Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 Q3 05 Q4 05 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q4 07 Mobile penetration beyond expectations High business activity, 2G, 3G rollouts Africa strong, parts of Eastern Europe and Middle East slower Q1 08 Q

11 Regional Q2 comments Sales yearoveryear Asia Pacific, 5% SEK m Q1 04 Q2 04 High business activity High growth in India, Pakistan, Indonesia China tough yearoveryear comparison Japan down new major expansion order from Softbank Q3 04 Q4 04 Q1 05 Q2 05 Q3 05 Q4 05 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q

12 Regional Q2 comments Sales yearoveryear Latin America, +21% SEK m Growing demand for fixed and mobile broadband Brazil, Mexico, Chile strong Good momentum in services 0 Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 Q3 05 Q4 05 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q

13 Regional Q2 comments Sales yearoveryear North America, +47% SEK m Accelerating demand for broadband services HSPA coverage and capacity expansions Strong growth but easy yearoveryear comparison Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 Q3 05 Q4 05 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q

14 SECOND QUARTER REPORT HANS VESTBERG Executive Vice President and CFO 14

15 Q2 financial highlights Second quarter First quarter SEK b. Net sales Gross margin EBITDA margin Operating income Operating margin Operating margin ex Sony Ericsson 1) 1) 2007 Change % % 43.0% 38.6% 14.9% 23.9% 14.7% % % 19.4% 9.7% 9.7% 16.4% 7.7% Change 10% 10% Net sales up 2%, 7% organic growth in constant currencies Sequential gross margin decline More normal software and IPR sales, accelerating turnkey volumes to India Sequentially stable opex some impact from cost adjustments Sequentially improved operating margin, excl. Sony Ericsson 1) Including the capital gain of SEK 0.2 b. and excluding restructuring charges of SEK 1.8 b. in second quarter and SEK 0.8 b. in first quarter 15

16 Q2 financial highlights Second quarter First quarter 1) 1) SEK b Change Change Income after financial items % 4.5 5% Net income 3) 1.9 2) % 2.6 2) 28% EPS, SEK 3) 4) ) % ) 28% Cash flow from operating activities Positive cash flow development Good collections, stable working capital and increased current liabilities Overall slower growth in markets with turnkey projects Cash conversion of 193% (35%) Net income and EPS includes restructuring charges of SEK 1.8 b 1) Excluding restructuring charges of SEK 1.8 b. in second quarter and SEK 0.8 b. in first quarter. 2) Including restructuring charges. 3) Attributable to stockholders of the Parent Company, excluding minority interest. 4) Reverse split 1:5 was made June. Comparable figures restated accordingly 16

17 Networks 2007 SEK b. Q2 1) Q2 Change Q1 1) Change Net sales % % Of which network rollout % 4.5 6% EBITDA margin 15% 24% 15% Operating margin 10% 19% 9% Sequentially improved margins despite High proportion of new network buildouts puts pressure on margins India accelerates Continued USD effects on sales and margins More normal level of software and IPR sales 1) Excluding effects from restructuring. 17

18 Multimedia 2007 SEK b. Q2 1) Q2 Change Q1 1)2) Change Net sales % 4.2 2% EBITDA margin 13% 3) 5% 6% Operating margin 1% 0% 12% Good growth of 16% neutral impact from acquisitions and divestitures 10% sequential growth Capital gain of SEK 0.2 b from enterprise PBX operation divestment Underlying margin development positive Sales and margins may vary between quarters Encouraging progress for Tandberg Television and LHS 1) Excluding effects from restructuring. 2) First quarter is restated for the transfer of the IPX operation from Professional Services to Multimedia. 3) Affected by SEK 0.2 b due to changed allocation of capitalized development expenses. 18

19 Professional Services 2007 SEK b. Q2 1) Q2 Change Q1 1)2) Change Net sales % % Of which managed services % % EBITDA margin 16% 16% 16% Operating margin 14% 15% 14% Organic growth 11% in constant currencies IPX transfer to Multimedia impacting growth negatively by 2%points 6 new managed services deals signed Important wins with Telefónica and Telcel in Latin America Stable margins 1) Excluding effects from restructuring. 2) First quarter is restated for the transfer of the IPX operation from Professional Services to Multimedia. 19

20 Cost reductions on track Savings of SEK ~4 b with full effect in 2009 Charges of SEK ~4 b recognized as activities are decided Progress Project on plan with good progress in all areas Charges of SEK 1.8 b in Q2 Product and supply rationalization Consequences for capitalized development Lay off costs in Western Europe, including Sweden Charges of SEK 2.6 b yeartodate 20

21 Sony Ericsson Q2 Market slow down in Europe Sony Ericsson s key market Units shipped in the quarter 24.4 (24.9) m, down 2% Breakeven result in challenging market Actions to restore profitable growth EUR 300 m in savings A challenging year 21

22 Unchanged planning assumptions Planning for flattish mobile infrastructure market in Continued good growth for the professional services market Industry fundamentals and consumer behavior support more positive longerterm outlook This slide contains forward looking statements 22

23 Summary Challenging but stable business environment Business mix and declining dollar Good growth in constant currencies Strong demand for broadband Focus on operational excellence and execution SG&A, R&D, operations Fundamentals support more positive longerterm outlook 23

24 SECOND QUARTER REPORT Q & A 24

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