Ericsson Says Targeting Restructuring After Q1 Net Sales Miss Mark

Swedish telecoms giant Ericsson on Thursday targeted greater efficiency after falling net sales brought lower than expected operating profit in the first quarter.

Net income rose 45 percent year on year to SEK 2.1 billion ($260 million or roughly Rs. 1,724 crores; EUR 229 million).

But net sales were down two percent year-on-year at SEK 52.2 billion, below market expectations of 54.4 billion as forecast by a Bloomberg poll of analysts, while like for like sales slipped one percent.

Operating profit also missed expectations at SEK 3.5 billion, albeit rising from 2.13 billion a year earlier.

While sales grew in North America and also mainland China on rapid 4G network rollout, sales declined overall, Ericsson said, "following weak development in Europe and a weak macro-economic environment in some emerging markets."

Ericsson added it would target structural changes by expanding an existing nine billion kronor global cost and efficiency programme to bolster efficiency and growth after a quarter-on-quarter fall in sales growth adjusted for comparable units and currency.

First quarter operating margin stood at 6.7 percent compared with 4.0 a year earlier driven by improvements in mobile networks.

Ericsson, the world's leading maker of telecoms equipment excluding handsets, said it would continue to seek efficiency savings beyond those of 500 million kronor achieved in Q1.

"We are confident in our ability to achieve net annual savings of nine billion kronor during 2017 compared with 2014," the group said in highlighting three focus areas for 2016 - core business, improved profitability in targeted growth areas and improved cost and efficiency.

Structural changes and greater efficiency would, the company concluded, create a "more fit for purpose" organisation ready to thrive on the challenges of 5G and cloud-based services.