THIRD QUARTER October 23, 2015

Transcription

1 THIRD QUARTER 2015 October 23, 2015

2 HElena norrman Senior Vice President Communications

3 THIRD QUARTER 2015 October 23, 2015 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

5 key developments Market Strong focus on 5G and Internet of Things (IoT) Video continues to be the main driver of network traffic Continued currency movements and weaker macro in parts of the world impact customer investments Ericsson Slowdown of 4G deployments in Mainland China North America mobile broadband business remained stable Stable operating margin, 10% excl. restructuring Good momentum in Global Services, 46% of sales Network Rollout reached break-even Professional Services sales up 15% Company transformation continues Good growth in targeted areas Strengthened position in TV & Media Lower cost Cost and efficiency program progresses as planned Telefonaktiebolaget LM Ericsson 2015 THIRD QUARTER REPORT 2015 OCTOBER 23, 2015 Page 5

6 Ericsson q Reported sales up 3% YoY Organic FX adjusted sales down 9% YoY North America, Japan, Russia and Brazil at lower levels Growth in India and South East Asia SEK b Net sales and sales development 13% 11% 9% 0% 1% 3% -1% -3% -9% Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q Organic FX adjusted down 2% QoQ Networks sales down 6% North America stable, slowdown in Mainland China Russia, Brazil and parts of the Middle East impacted by weak macro development Operating income, excluding restructuring charges, improved to SEK 6.1 (4.2) b. Improved in all segments Operating margin 10% (7%) Lower cost and break-even in Network Rollout Telefonaktiebolaget LM Ericsson 2015 THIRD QUARTER REPORT 2015 OCTOBER 23, 2015 Page 6 Operating income and margin SEK b % 8 9% 8% 9% 6 7% 7% 6% 6% 4 4% 2 0 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q Net sales Sales change, YoY Operating income Operating margin

7 Regional sales Q3 YoY 81% SEK 59.2 b. SEK 57.6 b. -10% -20% -5% -5% -2% 4% 10% 5% 2% 25% Growth driven by currency adjusted sales down 9% Telefonaktiebolaget LM Ericsson 2015 THIRD QUARTER REPORT 2015 OCTOBER 23, 2015 Page 7

8 Regional sales Q3 qoq SEK 60.7 b. -12% -9% -12% -7% -2% -3% -1% 1% 4% 11% 19% SEK 59.2 b. Mainland China and the Middle East slowed down Telefonaktiebolaget LM Ericsson 2015 THIRD QUARTER REPORT 2015 OCTOBER 23, 2015 Page 8

9 JAN FRYKHAMMAR CFO and Executive Vice President

10 THIRD quarter Gross margin 37.1% 36.5% 36.4% 35.2% 36.6% 35.4% Gross margin 33.9% (35.2%) Higher share of Services, approx. 3% Higher restructuring charges 32.0% 33.2% 33.9% Gross margin increased QoQ Lower restructuring charges Partly offset by higher share of Services Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q Operating income improved YoY to SEK 5.1 (3.9) b. Operating margin 9% (7%) SEK b. Operating expenses Net FX positive, despite negative hedge effect Lower cost Break-even in Network Rollout Restructuring SEK 1.0 (0.3) b. Operating expenses, excluding restructuring, decreased YoY to SEK 14.3 (15.2) b. Global cost and efficiency program Cost adjustments following lower volumes FX a headwind Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q Telefonaktiebolaget LM Ericsson 2015 THIRD QUARTER REPORT 2015 OCTOBER 23, 2015 Page 10

11 Operating Income YoY SEK b. Q Q % % 6.7% 7.2% Q315 op margin excl restr. 12% 0.6 Global Services op. margin excl restr. 10% Op margin excl restr. 1% Exit Modems business Q314 Reported Excl restr. Networks Professional Services Network Rollout Support Solutions Modems + Other Excl restr. Q315 Reported Margin improvements in all segments Telefonaktiebolaget LM Ericsson 2015 THIRD QUARTER REPORT 2015 OCTOBER 23, 2015 Page 11

12 Sales growth FX impact SEK b. Sales YoY change, Q Reported Organic and FX adj % 11% 9% 4% 3% 3% 3% 1% 0% -1% -3% -2% -7% -6% -6% -9% -9% Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q Net sales Sales growth (YoY) Sales growth (adj for FX & Hedge) Networks -4% -15% Global Services 11% -2% Support Solutions 8% -8% Group 3% -9% Changed method for translating FX exposure into SEK for income statement items. For details on method and currency rates, see ericsson.com/thecompany/investors Currency still a tailwind, but to a lesser extent Telefonaktiebolaget LM Ericsson 2015 THIRD QUARTER REPORT 2015 OCTOBER 23, 2015 Page 12

13 Currency movements USD vs SEK USD vs basket of six currencies Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Brazilian Real Indonesian Rupiah Indian Rupee Mexican Peso Russian Ruble South African Rand USD strengthened vs SEK from Q USD weakened vs SEK in October compared to Q3 Brazilian Real and Russian Ruble have decreased >50% vs USD Impacting mobile broadband investments in USD Global Services, mainly local business Impacting when translated to SEK Telefonaktiebolaget LM Ericsson 2015 THIRD QUARTER REPORT 2015 OCTOBER 23, 2015 Page 13

14 Change in gross cash Q3 SEK b. Operating Cash Flow +1.6 b Investing b Financing -0.3 b FX on cash -0.2 b b Change in gross cash SEK -2.2 b Gross Cash 1506A Net Income reconciled to cash Change Net Operating Assets Restructuring CAPEX Acquisitions, divestments & Other Other financing activities Change in net cash SEK -3.7 b. (from SEK 3.5 to -0.2 b.) Dividend FX on cash Gross Cash 1509A Increased working capital driven by high share of coverage projects Telefonaktiebolaget LM Ericsson 2015 THIRD QUARTER REPORT 2015 OCTOBER 23, 2015 Page 14 1) Excluding Short Term investments

15 HANS VESTBERg President and CEO

16 Tusental Networks SEK b. Net sales and sales development Reported sales down 4% YoY Organic FX adjusted sales down 15% YoY Decline in all regions except India and South East Asia Organic FX adjusted sales down 6% QoQ North America stable, slowdown in Mainland China Somewhat slower pace in some countries with weak macro development Sales increased in India Operating margin, excluding restructuring, 12% (11%) Margin improved despite lower sales Double-digit margin in 8 out of 9 latest quarters Reduced currency hedge losses Lower expenses and restructuring Ericsson Radio Systems started to ship in the quarter First lead customer for Hyper scale cloud (HDS) 8000 Telefonaktiebolaget LM Ericsson 2015 THIRD QUARTER REPORT 2015 OCTOBER 23, 2015 Page % 8% 8% 30 3% -1% -1% -2% 20-4% 10-13% 0 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q SEK b. Operating income and margin % 4 10% 10% 12% 11% 13% 8% 10% 2 2% 0 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q Net sales Sales change, YoY Operating income Operating margin

17 Global services SEK b. Net sales and sales development 30 30% Reported sales up 11% YoY Organic FX adjusted down 2%, as Network Rollout declined % 10% 0% Professional Services momentum, sales up 15% YoY Double-digit growth in eight out of ten regions 0 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3-10% Strong performance across the portfolio 2013 Operating income, excluding restructuring, improved YoY to SEK 2.7 (1.7) b. Record earnings Operating margin was 10% (7%) Network Rollout break-even Improved earnings in Professional Services 75 Managed Services contract YTD (54) SEK b Global Services sales Operating income and margin Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q Global Services operating income Global Services sales change, YoY Global Services operating margin Professional Services sales change, YoY Professional Services operating margin 15% 10% 5% 0% Telefonaktiebolaget LM Ericsson 2015 THIRD QUARTER REPORT 2015 OCTOBER 23, 2015 Page 17

18 Support solutions SEK b. Net sales and sales development Reported sales up 8% YoY % 13% 21% 30% 11% 9% 8% Organic FX adjusted sales down 8% YoY Continued good development in OSS & BSS TV & Media declined % -29% Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q Organic FX adjusted sales up 7% QoQ Net sales Operating income and margin improved YoY Driven by sales growth in OSS & BSS Lower restructuring charges Acquire Envivio global leader in software-based video encoding Two key TV&Media customer announcements SEK b. Operating income and margin 37% % 0% 3% 0% 0.5-5% -4% -8% % Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q Sales change, YoY Operating income Operating margin Telefonaktiebolaget LM Ericsson 2015 THIRD QUARTER REPORT 2015 OCTOBER 23, 2015 Page 18

19 CLOSING REMARKS Slowdown of 4G deployments in Mainland China Mobile broadband business in North America remained stable, but at lower level than last year Emerging market impacted by weak macro development Global Services Strong demand for Professional Services Double-digit growth in 8 out of 10 regions Network Rollout break-even Fast pace in company transformation Global cost and efficiency program on track Contributing to lower cost levels in the quarter Full-year 2015 restructuring is expected to be ~SEK 5 b. Good traction in targeted growth areas Telefonaktiebolaget LM Ericsson 2015 THIRD QUARTER REPORT 2015 OCTOBER 23, 2015 Page 19

20 Telefonaktiebolaget LM Ericsson 2015 THIRD QUARTER REPORT 2015 OCTOBER 23, 2015 Page 20

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22 Ericsson Capital markets day November 10, Kista - Stockholm Latest update on our business and strategy

23 THIRD QUARTER 2015 October 23, 2015 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.