Alcatel-Lucent improves operational performance in Q2 2014

Group revenues, excluding Managed Services, up 5.0% year-on-year driven by 4G rollouts in China and US, while adjusted operating income trebles to €136 million in Q2 2014

Alcatel-Lucent improves operational performance in Q2 2014

Alcatel-Lucent reported revenues of Euro (€) 3.2bn (£2.5bn) for the second quarter of 2014 compared with €3.4bn (£2.6bn) in Q2 2013. However, revenues for the Group excluding Managed Services, reflecting the termination or restructuring of loss-making contracts, grew 5.0% year-on-year.

This was largely driven by a very strong quarter in wireless infrastructure, notably LTE roll-outs in China and US. The Asia Pacific region posted a solid 25.2% year-over-year growth, thanks largely to the 4G deployments being undertaken by the Chinese mobile network operators.

The company continued to make good headway on its ‘Shift Plan’, which aims to cut €1bn of cost out of operations and raise €1bn from sales of assets. Fixed costs savings reached €94m (£74.5m) in Q2 2014, bringing the total to date to €572m (£453m).

Adjusted operating income reached €136m (£107m) in the quarter, or 4.1% of revenues, trebling compared to €45m (£35m) in Q2 2013, or 1.3% of revenues. The profitability of the Access segment continued to improve, reaching positive territory at €11m (£8.7m) in Q2 2014.

Alcatel-Lucent showed a net loss of €298m (£236m) in Q2 2014. The improvement of €587m (£465m) compared to the €885m (£703m) loss in Q2 2013 is mainly explained by a €552m (£437m) impairment charge in Q2 2013.

Gross margin reached 32.6% of revenues in the quarter, improving by 140 basis points year-on-year. This improvement was essentially driven by cost savings. The gross margin improved sequentially by 30 basis points, as improved profitability in several business lines and continuous improvement in fixed operation costs, more than offset the dilutive impact on gross margin of roll-outs in China.

IPO for Submarine Networks sought
Alcatel-Lucent also announced today (31 July 2014) its intent to explore the capital opening of its subsidiary Alcatel-Lucent Submarine Networks (ASN) through an IPO, in order to finance the reinforcement of its leadership in telecom submarine systems and its diversification into the Oil & Gas market, to increase its visibility and to optimise capital allocation.

Alcatel-Lucent will retain the majority of the ownership. Subject to market conditions, this capital opening is targeted to take place in the first half of 2015.

Commenting on the second quarter results, Michel Combes, CEO of Alcatel-Lucent (pictured above), said: “I am proud of the very significant improvement achieved in the second quarter which demonstrates the fourth consecutive quarter of consistent delivery under the Shift Plan. With the upcoming reimbursement of the secured loan and the subsequent recovery of the full ownership of its patents, Alcatel-Lucent recaptures the full control of its destiny and can close the first step of its transformation. The Group can now embark on the second chapter of its turnaround story: innovate, transform and grow while keeping intact the commitment of returning to positive free cash flow in 2015.”

2014 half year results
Alcatel-Lucent posted revenues of €6.2bn (£4.9bn) for the first half of 2014 compared with €6.5bn (£5.1bn) in the first six months of 2013. Operating income for the period was €169m (£134m) compared with a loss of €134m (£106m) in 2013.

Net income for the first half of 2014 showed a loss of €371m (£294m), a massive improvement on the €1.2bn (£951m) loss shown for the same period in 2013.

A comparison with its Tier 1 mobile infrastructure providers for first half year results saw the following:
•    Huawei posted sales revenues of CNY135.8 billion (£12.8bn), an increase of 19% year-on-year, but it did not reveal any profit figures
•    Ericsson 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)
•    Nokia’s net sales decreased by 11% to €5.6bn (£4.4bn) compared with €6.2bn (£4.9bn) in 2013, while operating profit was €651m (£516m), down 5% on the same six months in 2013.

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

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

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

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