Ericsson Slips To Q3 Loss, Warns On Uncertain FY24; Stock Down

Shares of LM Ericsson were losing around 9 percent in the morning trading in Stockholm after the Swedish telecom company reported Tuesday a hefty loss in its third quarter, compared to prior year’s profit, hit by one-time charge related to Vonage acquisition, as well as weak sales.

Looking ahead, the company expects the current macroeconomic uncertainty to persist into 2024, consistent with the rest of the industry.

For the fourth quarter, Ericsson expects similar market trends as in third quarter, while the cost-out impact will increase. It expects a group EBITA margin at around 10 percent for the quarter.

Citing the current uncertainty, it is not giving guidance beyond the fourth quarter.

Meanwhile, the firm maintained its long-term EBITA margin target of 15 percent-18 percent, expecting to reach it as soon as possible.

Borje Ekholm, President and CEO, said, “We expect the underlying uncertainty impacting our Mobile Networks business to persist into 2024…. Our cost-out actions are already impacting the P&L and we are now expecting to yield SEK 12 b. in runrate savings by year end, which is an increase of SEK 1 b. compared with previous indication. We will continue to take decisive cost-out actions…”

For the third quarter, net loss attributable to owners of the parent company was 30.67 billion Swedish kronor or 9.21 kronor per share, compared to net income of 5.21 billion kronor or 1.56 kronor per share last year.

The latest results were hurt by 31.9 billion kronor impairment of goodwill related to the acquisition of Vonage.

Net income, excluding impairment of goodwill, was 1.4 billion kronor compared to 5.4 billion kronor in the previous year.

Reported EBIT was negative 28.9 billion kronor, compared to prior year’s positive EBIT of 7.1 billion kronor.

Reported EBITA was 3.8 billion kronor, down from 7.6 billion kronor a year ago. The company noted that the goodwill impairment does not impact EBITA. EBITA excluding restructuring charges amounted to 4.7 billion kronor, compared to 7.7billion kronor last year.

Adjusted EBITA margin was 7.3 percent, down from 11.3 percent last year. Gross margin excluding restructuring charges was 39.2 percent, down from last year’s 41.4 percent, primarily impacted by changed business mix in Networks.

Group net sales for the third quarter decreased 5 percent to 64.47 billion kronor from the prior year’s 68 billion kronor. Organic sales, adjusted for comparable units and currency, declined 10 percent.

Segment Networks organic sales fell 16 percent, partly offset by 5 percent organic growth in Cloud Software and Services and 11 percent in Enterprise.

Networks organic sales in North America were down by 60 percent, due to customers’ inventory adjustments and a slower deployment pace. The decline was partly offset by growth in India as well as some early 5G markets resuming investments.

In Stockholm, Ericsson shares were trading at 49.31 kronor, down 8.57 percent.

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