[Ericsson discloses the information provided herein pursuant to the Swedish Securities Exchange and Clearing Operations Act and/or the Swedish Financial Instruments Trading Act. The information was submitted for publication at 07.30 CET, on July 20, 2007.]
Net sales SEK 47.6 (44.0) b. in the quarter, up 8%, SEK 89.8 (83.2) b. first six months 1)
Operating income SEK 9.3 (8.3) b. in the quarter, up 12%, SEK 17.4 (14.9) b. first six months
Operating margin 19.4% (18.4%) in the quarter, 19.4% (17.6%) first six months
Cash flow from operations SEK 4.2 (0.2) b. in the quarter, SEK 8.8 (2.6) b. first six months
Net income SEK 6.4 (5.7) b. in the quarter, up 12%, SEK 12.2 (10.3) b. first six months 2)
Earnings per share SEK 0.40 (0.36) in the quarter, up 11%, SEK 0.77 (0.65) first six months 2)
CEO COMMENTS
"We continue to outpace the market," said Carl-Henric Svanberg, President and CEO of Ericsson (NASDAQ:ERIC). "Sales showed an encouraging year-over-year increase this quarter, primarily driven by Asia Pacific. Europe, Middle East and Africa were softer while we see improving trends in the Americas. Margins were stable with improved cash generation.
The total number of mobile subscriptions has now reached three billion, a milestone for our industry. GSM shipments reach new record levels every quarter and we continue to see growing demand for mobile and fixed broadband. We see dramatic data traffic increases in the HSPA networks that we monitor.
We have strengthened our position through the recent acquisitions, and the announced IP broadband agreement with AT&T was a breakthrough in the North American market, confirming our strong offering in next-generation networks.
Our services business continues to expand faster than the market and several managed services contracts will start to be revenue generating in coming quarters. We are in a start-up phase in multimedia, where sales and margins will vary. Tandberg Television is now part of our group and will add significant strength. On the handset side, Sony Ericsson had another quarter of strong performance and market share increase.
In the ongoing industry consolidation we are expanding our footprint in mobile as well as fixed communications. Our scale advantage from over 40% market share in GSM and WCDMA is obvious and enables technology leading and affordable solutions to an expanding and increasingly demanding market," concluded Carl-Henric Svanberg.
FINANCIAL HIGHLIGHTS
Income statement and cash flow
Second quarter First quarter Six months
SEK b. 2007 2006 1) Change 2007 Change 2007 2006 1) Change
Net sales,
excl. divested
operations 47.6 44.0 8% 42.2 13% 89.8 83.2 8%
Net sales 47.6 44.8 6% 42.2 13% 89.8 84.3 6%
Gross
margin 43.0% 42.6% - 43.0% - 43.0% 43.0% -
EBITDA
margin 23.9% 22,3% - 23.8% - 23.8% 22.0% -
Operating
income 9.3 8.3 12% 8.2 14% 17.4 14.9 17%
Operating
margin 19.4% 18.4% - 19.3% - 19.4% 17.6% -
Operating margin
ex Sony Ericsson 16.4% 16.3% - 15.5% - 16.0% 15.7% -
Income after
financial items 9.3 8.3 12% 8.3 12% 17.5 15.0 17%
Net income 2) 6.4 5.7 12% 5.8 10% 12.2 10.3 18%
Cash flow
from operations 4.2 0.2 - 4.6 - 8.8 2.6 -
EPS, SEK 2) 0.40 0.36 11% 0.37 8% 0.77 0.65 18%
1)Excludes sales from the in 2006 divested defense business, Ericsson Microwave systems.
2)Attributable to stockholders of the parent company, excluding minority interest.
The second quarter year-over-year sales increase of 8% was driven by organic growth and acquired sales. Organic growth amounted to 6%. The USD has continued to weaken and affected sales growth negatively.
Gross margin was stable sequentially and up 0.4%-points year-over-year. The operating margin increased sequentially, excluding Sony Ericsson, as a result of increased sales and continued focus on operational excellence, including a completed streamlining of the former Marconi operations. Sony Ericsson's pre-tax profit was down sequentially but was flat when adjusted for increased royalty fees to the parent companies.
Cash flow from operating activities reached SEK 4.2 (0.2) b., a year-over-year improvement.
Balance sheet and other performance indicators
Six months Three months Full year
SEK b. 2007 2007 2006
Net cash 16.1 29.1 40.7
Interest-bearing
provisions and liabilities 32.6 22.6 21.6
Trade receivables 55.3 52.4 51.1
Days sales outstanding 106 107 85
Inventory 24.6 24.1 21.5
Of which work in progress 14.1 14.9 14.2
Inventory turnover 4.4 4.2 5.2
Customer financing, net 3.7 3.8 3.7
Return on capital employed 24.2% 23.8% 27.4%
Equity ratio 54.4% 56.6% 56.2%
Deferred tax assets decreased in the quarter by SEK 1.4 b. to SEK 12.7 (14.1) b.
Working capital increased by SEK 7.8 b. in the quarter. This increase reflects the continued growth of turnkey projects in emerging markets.
During the quarter, approximately SEK 1.3 b. of provisions was utilized to cover costs incurred of which the majority was related to previously announced restructuring programs and ongoing product related commitments. New net provisions of SEK 0.1 b. have been made in the quarter.
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