Ericsson quarterly earnings miss forecasts

Quarterly earnings at Sweden’s Ericsson came in below forecasts on Thursday, after the telecoms equipment specialist was knocked by higher costs.

Net sales for the three months rose 21%, or 3% on a constant currency basis, to 68.0bn Swedish krona (£5.4bn), boosted by the performance of its networks division in North America and above analyst forecasts for around SKr66.3bn.

Earnings before interest and tax, however, fell 19% year-on-year, to SKr7.1bn, well below analyst expectations for around SKr8.7bn.

Ericsson said that the gross margin, which dipped to 41.4% from 44.0%, had been hit by supply chain costs and lower intellectual property right (IPR) revenues year-on-year. The EBIT margin fell to 10.5% from 15.7%.

Borje Ekholm, chief executive, said: "We see robust underlying performance and strong momentum in the business as we continue to executive on our strategy."

However, he also acknowledged: "In the current inflationary environment, we are making pricing adjustments and as well as leveraging product substitution to manage margins

"We are also simplifying operations across the company and will continue to be proactive in reviewing options to reduce costs, while continuing to develop best in class products and services.

"We are dedicated to our long-term target of EBITDA margin of 15%-18% no later than 2024 and we will take out costs to secure delivery of this target."

Ekholm said restructuring costs were likely to increase as a result, to be more in line with long-term guidance of 1% of net sales, "albeit varying by quarter".