Ericsson posts sharp rise in net profit on stable revenues for Q2 2014

Sales recover quarter on quarter driven by growth in the Middle East, China and India, as well as continued capacity business in North America

Ericsson posts sharp rise in net profit on stable revenues for Q2 2014

Ericsson recorded a 76% rise in net profit to SEK 2.7bn (£231m) in the second quarter of 2014 compared with the same quarter a year ago - profit was up 57% on the previous quarter. Sales in the quarter were SEK 54.8bn (£4.6bn), a decrease of 1% year-on-year and an increase of 13% on the previous quarter.

Ericsson's results for the first six months of 2014 showed net sales of SEK102.4 (£8.7bn) - down 4% year-on-year, while net profit was SEK4.4bn (£376m) compared with SEK 2.7bn (£230m) for the first six months of 2013.

The quarter-on-quarter sales recovery was driven by growth in the Middle East, China and India, as well as continued capacity business in North America. Gross margin increased year-on-year to 36.4% (32.4%), driven by strong development in capacity business, increased IPR revenues and lower restructuring charges

Hans Vestberg, president and CEO of Ericsson (pictured), said: ‘Sales for comparable units, adjusted for currency, recovered compared to the previous quarter and were down by -1% year-on-year. Operating margin improved year-over-year, mainly driven by stronger performance in segment Networks.

‘The operating margin improved year-over-year, especially in segment Networks. This was due to a higher gross margin primarily from improved business mix with an increased share of mobile broadband capacity projects in advanced LTE markets, as well as higher recurring IPR revenues and efficiency improvements.’

Vestberg noted that after a slow start of the year, Ericsson is now executing on previously awarded 4G/LTE contracts in mainland China and Taiwan. He added that the investment climate in India is improving following the concluded spectrum auctions and government elections held in May.

He said that the political unrest prevailing in parts of the Middle East and Africa is still impacting sales, but the continued political uncertainty in Russia and the Ukraine had no negative impact on sales in the quarter.

‘In line with our strategic agenda, we have continued investing into new and targeted areas. The addition of the modems and Mediaroom businesses, as well as increased investments in IP, have resulted in increased R&D spending. At the same time, we continue to execute on profit improvement activities,’ said Vestberg.

See also:

Huawei announces 19% increase in sales revenue for first half of 2014

Nokia revenue falls 7% in Q2 2014, but expected to strengthen by year end

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