In 9M 2023, Ericsson NT recorded a revenue increase of 1% YoY, an EBITDA growth of 57.1%, and a net profit of EUR 20.5m, a 94.6% YoY increase.
In total, the Company’s sales revenue amounted to EUR 206m, representing an increase of 0.4% YoY. The Company noted that this development is positive in light of the current macroeconomic situation, as it shows the stable operations of the Company. They also noted that the delivery of services to Ericsson has continuously grown, and has offset lower sales revenue in the domestic and export market which was caused by reduced operators’ capital investments.
Breaking the sales down further, the domestic market accounted for 39.1% of the total revenue, or EUR 82.5m. In this segment, Ericsson NT noted that after a period of increased investments in network infrastructure, conditioned by the growth in demand for telecommunication services and the allocation of 5G spectrum, the operators are focusing on 5G network monetization and are slowing down capital investments. Ericsson NT as a leading regional telecommunication provider has continued to support HT and A1 Hrvatska in the further modernization of telecom networks with an emphasis on the implementation of 5G. Finally, with the next quarter starts the implementation of the existing contractual obligations with Hrvatski Telekom in the field of managed services and providing support in the transfer of the technological unit for the construction and maintenance of the HT’s network.
Next up, looking at the most prominent segment, i.e. services to Ericsson, which accounted for 50.8% of the total revenue (or EUR 107.2m). In this segment, the company noted at the regular half-year R&D Management Business Review meeting, a high-quality level of R&D Center was confirmed once again in all categories and all business segments. Ericsson also positioned itself in new & strategically important areas such as Cloud RAN, which provides an opportunity to further work on the latest technologies in the telco industry.
The last revenue segment, is export markets, which accounts for 10.1% of the total revenue (or EUR 21.3m). Ericsson emphasized that they continued strong cooperation with the operators HT Mostar, Crnogorski Telekom, Telekom Kosova and IPKO focusing on timely delivery of the contracted activities. Here, the company emphasized the finalization of the first phase of the modernization of the radio and transmission part of Telekom Kosova’s network, as well as the first phase of 5G base stations implementation in the network of operator IPKO, which enables IPKO to provide its users with the first 5G signal in all major cities in Kosovo!
Ericsson NT sales revenue breakdown (9M 2017 – 9M 2023, EURm*)
*Converted using CNB’s EUR/HRK average exchange rate for the quarters in question
Gross profit amounted to EUR 28.8m, an increase of 56.3% YoY as a result of the business mix and operational and cost efficiency (lower Cost of sales), but also due to the fact that the previous year was affected by one-off costs item of contract termination, as a result of geopolitical sanctions. This would also imply a gross profit margin of 14%, an increase of 5.4 p.p. YoY. However, if we were to compare the results with 9M of 2021, where no one-offs were reported (“normal year”), Ericsson still noted a growth in gross margin from 11.5% to the aforementioned 14% – actually representing an improvement in the Group’s profitability, as a result of better product mix.
Moving on to EBITDA, it amounted to EUR 29.2m, also representing a solid increase of 57.1%. This would also mean that the EBITDA margin amounted to 14.2%, an increase of 5.1 p.p. YoY. Meanwhile, the operating profit amounted to EUR 24.7m, an increase of 81.7% YoY, implying an EBIT margin of 12%, an increase of 5.4 p.p. YoY. The net financial result was non-material but positive at EUR 292k, which means that the EBT amounted to EUR 25m. Finally, the net profit of the company amounted to EUR 20.5m, a 94.6% YoY increase.
Ericsson NT key financials (9M 2017 – 9M 2023, EURm*)
Source: Ericsson NT, InterCapital Research
*Converted using CNB’s EUR/HRK average exchange rate for the quarters in question
Ericsson NT also noted that the improvement in net profit levels meant that return on sales (ROS), too, improved and amounted to 9.1% (9M 2022: 5.1%).
Taking a quick look at the balance sheet, the total assets amounted to EUR 182.8m, increasing by 9.7% YoY compared to YE 2022, as a result of the higher inventories & Right of use assets, partially offset by lower level of cash and customer receivables. Cash and cash equivalents, which include short-term financial assets, amounted to EUR 55.3m at the end of 9M 2023, representing 30.2% of the total assets. They have recorded a decrease during the first nine months of the year, which Ericsson notes is in line with regular activities.
