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first QUARTER 2013
April 24, 2013
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.
© Telefonaktiebolaget LM Ericsson 2013 | FIRST QUARTER REPORT 2013 | April 24, 2013 | Page 5
key developments
› Industry trends
– Networked Society coming to life
– Data and video growth drives demand for mobile broadband and OSS & BSS
– SDN, Cloud, M2M
› Vendor selection processes for 4G/LTE in Russia and China initiated
› Fundamentals for longer term positive development in the industry remain attractive
© Telefonaktiebolaget LM Ericsson 2013 | FIRST QUARTER REPORT 2013 | April 24, 2013 | Page 6
0
10
20
30
40
50
60
70
80
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q12009 2010 2011 2012 2013
NET SALES
Net sales Q113 Y/Y Q/Q
SEK 52.0 b +2%
-22%
Organic and FX adjusted
Q113/Q112
+7%
› Sales +2% YoY – Organic FX-adjusted sales +7% YoY – Further strengthening of the SEK impacting sales especially
in JPY and USD – High project activity primarily in Europe and North America – CDMA continued to decline – North East Asia had a challenging quarter
› Sales -22% QoQ – Organic FX-adjusted sales -19% QoQ – High project activity in North America and South East Asia – Lower sales in North East Asia
SEK b
© Telefonaktiebolaget LM Ericsson 2013 | FIRST QUARTER REPORT 2013 | April 24, 2013 | Page 7
Profitability
Net income
Q113 Y/Y Q/Q
SEK 1.2 b -86%
- 1EPS, diluted, excl. amortizations, write-downs of acquired intangible assets and restructuring. Q112 excludes a gain from the divestment of Sony Ericsson of SEK 7.7 b.
› Underlying profitability improved YoY – Operating margin including JV, excluding restructuring
charges for reduction of operations in Sweden, 6.7%
› Net income SEK 1.2 (8.8) b. – Sony Ericsson gain Q112 SEK 7.7 b. – Restructuring charges SEK 1.8 (0.6) b., of which
reduction of operations in Sweden SEK 1.4 b. – No result from ST-Ericsson included in Ericsson’s result,
SEK 0.0 (-1.4) b. – Negative currency effect
› EPS diluted, SEK 0.37 (2.76)
› EPS Non-IFRS1, SEK 0.99 (0.77) Net income
EPS, diluted
Net income excl. ST-Ericsson charge
Net income incl. divestment of Sony Ericsson
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
-8
-6
-4
-2
0
2
4
6
8
10
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2009 2010 2011 2012 2013
SEK SEK b
© Telefonaktiebolaget LM Ericsson 2013 | FIRST QUARTER REPORT 2013 | April 24, 2013 | Page 8
0
10
20
30
40
50
0%
5%
10%
15%
20%
25%
30%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2009 2010 2011 2012 2013
0123456789
10
North America North E Asia S East Asia Oceania
Q112 Q412 Q113
Networks
Operating margin
Q113 +6% Q112 +6% Q412 +8%
SEK b
SEK b
› Organic FX-adjusted sales, 7% YoY – High mobile broadband deployment levels in the US and
Indonesia – Continued decline in CDMA -42% to SEK 1.3 b.
› Sales -20% QoQ – Continued structural decline of GSM sales in China – Declining sales in Japan – mainly currency effect – High business activity in North America
› Operating income, SEK 1.6 (1.6) b. – Significant restructuring charges of SEK 1.3 (0.1) b. – Lower underlying operating expenses – Gradually decreasing negative effects from network
modernization projects in Europe
› Operating margin flat YoY at 6%
Net sales
Numbers 2011-2012 include restructuring charges, numbers 2009-2010 exclude restructuring charges
Sales Q113 Y/Y Q/Q
SEK 28.1 b +3%
-20%
Networks sales
Networks Operating margin
© Telefonaktiebolaget LM Ericsson 2013 | FIRST QUARTER REPORT 2013 | April 24, 2013 | Page 9
Networks
› Good momentum for the SSR routing platform – 51 contracts signed since launch, of which 12 in Q1
› LTE Radio Access deployments drive demand for HSPA, packet core, and VoLTE
– >100 Evolved Packet Core (EPC) contracts won
› Higher adoption rate for software features
› Continued focus on profitability
Operating margin
Q113 +6% Q112 +6% Q412 +8%
SEK b
SEK b
Net sales
Numbers 2011-2012 include restructuring charges, numbers 2009-2010 exclude restructuring charges
Sales Q113 Y/Y Q/Q
SEK 28.1 b +3%
-20%
Networks sales
Networks Operating margin
0
10
20
30
40
50
0%
5%
10%
15%
20%
25%
30%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2009 2010 2011 2012 2013
0123456789
10
North America North E Asia S East Asia Oceania
Q112 Q412 Q113
© Telefonaktiebolaget LM Ericsson 2013 | FIRST QUARTER REPORT 2013 | April 24, 2013 | Page 10
0%
5%
10%
15%
20%
25%
0
6
12
18
24
30
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q12009 2010 2011 2012 2013
0
2
4
6
8
North America Latin America Mediterranean
Q112 Q412 Q113
Global services
› Sales up 4%, organic and FX adjusted, up 9% YoY
› Professional Services sales, -2% YoY – Negatively impacted by FX – IS/IT related business getting traction – Continued underlying good momentum
› Managed Services sales, 3% YoY – 21 (9) contracts signed in Q1 – Multi-country contract in Sub Saharan Africa – Major contracts in India and Russia
› Network rollout sales, 19% YoY – Network rollout activity high in Europe and North America
› Sales -24% QoQ – Lower activity in North East Asia and Latin America
Global Services Operating margin Q113 +3% Q112 +6% Q412 +6%
Sales Q113 Y/Y Q/Q
SEK 21.5 b +4%
-24%
Numbers 2011-2012 include restructuring charges, numbers 2009-2010 exclude restructuring charges
SEK b
Net sales SEK b
Network Rollout sales
Managed Services sales
Professional Services sales excl. Managed Services sales
Professional Services Operating margin
Global Services Operating margin
© Telefonaktiebolaget LM Ericsson 2013 | FIRST QUARTER REPORT 2013 | April 24, 2013 | Page 11
Global services
› Operating income, SEK 0.7 (1.3) b. – Increased losses in Network Rollout SEK -1.1 (-0.6) b.
› European network modernization projects › Additional project costs due to delayed LTE rollouts
in Latin America – Restructuring charges from ongoing service delivery
strategy execution SEK 0.4 (0.5) b.
› Operating Margin 3% (6%) – Professional Services operating margin 13% (13%)
› Stable development YoY – Network Rollout operating margin -16% (-11%)
Global Services Operating margin Q113 +3% Q112 +6% Q412 +6%
Sales Q113 Y/Y Q/Q
SEK 21.5 b +4%
-24%
Numbers 2011-2012 include restructuring charges, numbers 2009-2010 exclude restructuring charges
SEK b
Net sales SEK b
Network Rollout sales
Managed Services sales
Professional Services sales excl. Managed Services sales
Professional Services Operating margin
Global Services Operating margin
0%
5%
10%
15%
20%
25%
0
6
12
18
24
30
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q12009 2010 2011 2012 2013
0
2
4
6
8
North America Latin America Mediterranean
Q112 Q412 Q113
© Telefonaktiebolaget LM Ericsson 2013 | FIRST QUARTER REPORT 2013 | April 24, 2013 | Page 12
-20%
-10%
0%
10%
20%
30%
0
1
2
3
4
5
6
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2009 2010 2011 2012 2013
0.0
0.2
0.4
0.6
0.8
1.0
North America Latin America India
Q112 Q412 Q113
Support solutions
› Sales, organic and FX adjusted, -3% YoY – IPX divested Q312 – Media Management sales declined partly due to
technology shift in compression portfolio
› Sales -33% QoQ
› Operating Margin -1% (-1%) – Negatively impacted by lower sales volumes and
restructuring charges – Positive contributions from effciency improvements and
portfolio streamlining
› Strengthening portfolio – Intention to acquire Microsoft’s TV solution business
Mediaroom Operating margin
Q113 -1% Q112 -1% Q412 +8%
Sales Q113 Y/Y Q/Q
SEK 2.4 b -19% -33%
SEK b
SEK b
Numbers 2011-2012 include restructuring charges, numbers 2009-2010 exclude restructuring charges
Net sales
Support Solutions sales
Support Solutions Operating margin
© Telefonaktiebolaget LM Ericsson 2013 | FIRST QUARTER REPORT 2013 | April 24, 2013 | Page 13
Q1 Regional sales
Latin America › Negative impact from delays in LTE
rollouts caused by license issues
› Partly offset by growth in OSS and BSS
North East Asia › Lower business activity mainly due
to lower sales in South Korea, continued structural decline in GSM in China and FX effects in Japan
South East Asia and Oceania › Sales continued on a high level
› Simultaneous mobile broadband deployments in Indonesia, Australia and Thailand
Mediterranean › Network modernization projects and
high project activity in France and Northwest Africa
› Macroeconomic development remained weak in parts of region
Middle East › Initial LTE deployments ongoing
› Good Professional Services, OSS and BSS demand
› Political unrest prevails
Sub-Saharan Africa › Momentum for Managed Services,
a multi-country contract signed
› Mobile broadband charging developed well
India › Operator spending remains cautious
› Continued momentum for Managed Services, a major contract signed
Q113 Y/Y Q/Q
SEK 15.8 b +23%
-7%
Q113 Y/Y Q/Q
SEK 4.4 b -9%
-33%
Q113 Y/Y Q/Q
SEK 2.3 b 0%
-24%
Q113 Y/Y Q/Q
SEK 4.3 b +1%
-20%
Q113 Y/Y Q/Q
SEK 5.3 b +14% -25%
Q113 Y/Y Q/Q
SEK 3.2 b 0%
-38%
Q113 Y/Y Q/Q
SEK 2.1 b -3%
-40%
Q113 Y/Y Q/Q
SEK 1.6 b +13%
0%
Q113 Y/Y Q/Q
SEK 6.1 b -34% -41%
Q113 Y/Y Q/Q
SEK 4.1 b +22%
-9%
North America › Continued high activity levels with
peaking volumes in one of the large coverage projects
› CDMA sales continued to decline
Other › Licensing revenues continued to
show stable development
› IPX divested end of Q3 2012
Q113 Y/Y Q/Q
SEK 2.9 b +2% -3%
Northern Europe and Central Asia › LTE vendor selection process in
Russia initiated, likely leading to initial deployments towards the latter part of 2013 or early 2014
Western and Central Europe › Execution of network modernization
projects continued
› Several new Managed Services contracts signed
© Telefonaktiebolaget LM Ericsson 2013 | FIRST QUARTER REPORT 2013 | April 24, 2013 | Page 15
26%
28%
30%
32%
34%
36%
38%
40%
42%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q12009 2010 2011 2012 2013
P/L comments
Gross margin
Business mix – coverage/capacity
Modernization projects in Europe
Service share
Drivers
Numbers 2011-2012 include restructuring charges, numbers 2009-2010 exclude restructuring charges
Business mix key to gross margin dynamics
› Gross Margin declined YoY to 32.0% from 33.3% – Lower Network Rollout margin – Higher restructuring charges – Partly offset by gradually declining effects from European
network modernization projects
› Business mix – With present visibility of customer demand and current
global economic development, we continue to believe that the underlying business mix will start to gradually shift towards more capacity projects during the second half of 2013
– Negative impact from network modernization projects in Europe will continue to gradually decline during 2013
© Telefonaktiebolaget LM Ericsson 2013 | FIRST QUARTER REPORT 2013 | April 24, 2013 | Page 16
3%
6%
13%
25%
50%
100%
0
2
4
6
8
10
12
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q12009 2010 2011 2012 2013
02468
1012141618
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q12009 2010 2011 2012 2013
P/L comments
› Restructuring charges SEK 1.8 (0.6) b. – SEK 1.4 b. related to reduction of operations in Sweden – Continued move of service delivery local resources to Global Centers
› Operating expenses SEK 14.5 (14.2) b. – Excluding acquistions, divestments and restructuring charges down -
6%
› Negative impact from currency effects
› Operating income including JV, SEK 2.1 (9.1) b. – Underlying operating margin, excl. restructuring charges related to
reduction of operations in Sweden, was 6.7% – Sony Ericsson gain Q112 SEK 7.7 b. – New hedge accounting – separate briefing May 2
› Financial net, SEK -0.4 (0.0) b. – Negative currency revaluation effects – devaluation in Venezuela – Increased interest expenses on pension plans
R&D
SG&A
SEK b
SEK b
Operating margin excl JVs
Operating income excl JVs EBITA margin excl JVs
Numbers 2011-2012 include restructuring charges, numbers 2009-2010 exclude restructuring charges
© Telefonaktiebolaget LM Ericsson 2013 | FIRST QUARTER REPORT 2013 | April 24, 2013 | Page 17
St-ericsson q1 › Strategic way forward for ST-Ericsson decided
on March 18, 2013 – ST-Ericsson will be split between parent companies
› Ericsson to take design development and sales of LTE multi-mode thin modem business products
› ST-Microelectronics to take existing ST-Ericsson products and business, other than the multi-mode thin modems
› Remaining parts of ST-Ericsson will be closed down – Formal transfer to parents is expected during Q313 – From completion of integration of the thin modem business the
operation will be reported as a standalone business segment. › Current best estimate for Q413 is loss of approximately SEK
0.5 b., primarily related to R&D expenses
› No result from ST-Ericsson included in Ericsson’s result, SEK 0.0 (-1.4) b.
– Provision made in Q412 of SEK 3.3 b. to cover for costs related to implementation of strategic option
– Ericsson net liability SEK 2.8 b. – in line with plan
› Focus on continued execution and engagement with customer development teams during transition
© Telefonaktiebolaget LM Ericsson 2013 | FIRST QUARTER REPORT 2013 | April 24, 2013 | Page 18
117
133
109
88101 99
106
91104
111101
86
108
7581 82
7487 89 91
7888 84 82
73 76
59 61 62 6270 68 67 62 64 63 59 57 55
0
20
40
60
80
100
120
140
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q12010 2011 2012 2013
› Inventory increased to SEK 29.8 (28.8) b. – High business and project activity – ITO from 73 to 76 days
› Payable Days declined from 57 to 55 days – Following high volumes in Q412
› Provisions increased SEK 0.9 b. – Due to restructuring of operations in Sweden
› Trade receivables increased QoQ to SEK 65.1 (63.7) b. – High business and project activity – DSO increased from 86 to 108 days
› Customer financing decreased slightly to SEK 5.0 b. from 5.3 b.
Balance sheet comments
Days
DSO
Inventory days
Payables days
DSO target <90 days
Inventory days target <65 days
Payable days target >60 days
© Telefonaktiebolaget LM Ericsson 2013 | FIRST QUARTER REPORT 2013 | April 24, 2013 | Page 19
76.7 +1.6
-4.2 -0.3-1.5 +0.0 -0.2
72.1
60
65
70
75
80
85
Gross Cash 1212A Net Incomereconciled to cash
Change NetOperating Assets
Restructuring Investing Activities Financing activities FX on cash Gross Cash 1303A
Change in gross cash SEK -4.6 b
Change in gross cash Q113
Change in net cash -6.3 b SEK (from 38.5 to 32.2 b SEK)2
1 Excluding Short term investments 2 Net cash is affected by -1.8 b. SEK caused by change in accounting regulation (related to pension)
Investing1 -1.5 b
Financing +0.0 b
FX on cash -0.2 b
Operating Cash Flow -3.0 b
© Telefonaktiebolaget LM Ericsson 2013 | FIRST QUARTER REPORT 2013 | April 24, 2013 | Page 20
Focus going forward
Strategy execution – profitable growth
Cost and efficiency
Technology and services leadership
first QUARTER 2013
April 24, 2013
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.