Ericsson NT 9M 2022 Results

In 9M 2022, Ericsson NT reported a slight increase in sales revenue of 0.8% YoY, an EBITDA decrease of 20.2%, and a net profit of HRK 79.3m, a decrease of 30.9% YoY.

Ericsson NT’s sales revenue amounted to HRK 1.55bn in 9M 2022, representing an increase of 0.8% YoY, mainly driven by the increase in services to Ericsson. Out of the total sales, the domestic market accounted for 41.4%, or HRK 640.3m, a decrease of 12.3% YoY. Out of these, Ericsson notes continued cooperation with HT, on delivering 5G and fiber optic solutions, based on multi-year agreements. With A1 Hrvatska, they are also continuing their activities related to the expansion of the 5G network. Nevertheless, due to the negative global trends, such as rising energy prices, the operators had adjusted the investment dynamics, which directly influenced Ericsson’s sales revenue. Meanwhile, revenue from services to Ericsson amounted to HRK 740.8m, a 14.6% increase YoY. Finally, sales from other export markets amounted to HRK 164.7m, a 4.9% increase YoY.

Breaking the sales down by segments, the Networks segment increased by 11%, to HRK 745.2m, the Digital Services segment increased by 3.4%, to HRK 421.1m, while at the same time, Managed Services decreased by 16.1%, to HRK 376.9m. Gross profit amounted to HRK 138.6m, a decrease of 21.6% YoY, mainly as a result of higher costs of termination of the eHealth implementation project in Belarus, as well as the increase in salaries, prices of energy, raw materials, and materials. Gross margin also decreased to 9%, down 2.5 p.p. YoY. Selling and administrative expenses increased by 3.9% YoY, amounting to HRK 64.6m, with the share of these expenses in the sales revenue at 4.2%, a reduction of 0.1 p.p. YoY.

Sales breakdown by market (H1 2018 – H1 2022, HRKm)

As a result of the higher expenses, EBITDA decreased by 20.2% YoY and amounted to HRK 139.9m. In Q3 EBITDA amounted to HRK 37.6m, noting a YoY increase of 37.1%, with the EBITDA margin increasing by 2.5 p.p. to 7.8%. Nevertheless, the third quarter was relatively low compared to Q2 2021, so overall 9M EBITDA decreased by the mentioned 20.2% with EBITDA margins decreasing by 2.4 p.p. to 9.1%.

Moving further, financial income amounted to HRK 8.6m, while the financial expenses amounted to HRK 3.4m, leading to a net financial result of HRK 5.2m, a 61.5% increase YoY, mainly as a result of higher interest income and positive FX differences.

The positive net financial result did somewhat offset the negative impact of the higher expenses lowering the EBITDA, but EBT still recorded a notable decrease, lowered by 20.4% to HRK 107.8m. The income tax for the period amounted to HRK 28.5m. Finally, the net profit of the Company decreased by 30.9% and amounted to HRK 79.3m. On a Q3 2022 basis, the net profit decreased to HRK 10.9m, a decrease of 18% YoY. This would also mean that in 9M 2022, the net profit margin decreased by 2.4 p.p. and amounted to 5.1%, while in Q3 2022 it amounted to 2.3%, a decrease of 0.3 p.p. YoY.

Ericsson NT key financials (9M 2022 vs. 9M 2021, HRKm)

Looking over at the balance sheet, the total assets decreased by 4% YoY and amounted to HRK 1.16bn, as a result of both lower long-term & short-term assets. Cash and cash equivalents amounted to HRK 462.6m (including short-term fin. assets), a decrease of 5.7%, in line with the Company’s planned regular activities. Looking at the passive side of the balance sheet, the total equity amounted to HRK 400.6m, a decrease of 0.9% YoY, mainly as a result of lower retained earnings. Meanwhile, total liabilities increased to HRK 754.6m, a decrease of 5.6% YoY, mainly coming from lower long-term liabilities from banks and other financial institutions and short-term liabilities to the suppliers.

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