Ericsson NT H1 2022 Results

In H1 2022, Ericsson NT reported a sales revenue increase of 4.7% YoY, an EBITDA decrease of 31%, and a net profit of HRK 68.4m, a decrease of 32.6% YoY.

Ericsson NT’s sales revenue amounted to HRK 1.06bn in H1 2022, representing an increase of 4.7% YoY, mainly driven by the increase in services to Ericsson. Out of the total sales, the domestic market accounted for 41.5%, or HRK 441m, a decrease of 1.3% 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. Meanwhile, revenue from services to Ericsson amounted to HRK 504.8m, a 10.8% increase YoY. Finally, sales from other export markets amounted to HRK 116.5m, a 4.5% increase YoY.

Breaking the sales down by segments, the Networks segment increased by 11.3%, to HRK 521.3m, the Digital Services segment increased by 1.52%, to HRK 286.6m, while at the same time, Managed Services decreased by 2.9%, to HRK 252.7m. Gross profit amounted to HRK 103.5m, a decrease of 32.9% 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 9.7%, down 5.5 p.p. YoY. Selling and administrative expenses increased by 3% YoY, amounting to HRK 44.3m, with the share of these expenses in the sales revenue at 4.17%, a reduction of 0.07 p.p. YoY.

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

As a result of the higher expenses, EBITDA decreased by 31% YoY and amounted to HRK 102.4m. This difference is even more profound if we look at Q2 2022 results only, with the EBITDA, in this case, decreasing by 78% YoY, and amounting to HRK 19.5m. The EBITDA margin also decreased, by 4.9 p.p. to 9.6% on the H1 basis, while on the Q2 2022 basis, it decreased even more, by 11.9 p.p. to 3.6%.

Moving further, financial income amounted to HRK 5.87m, while the financial expenses amounted to HRK 2.7m, leading to a net financial result of HRK 3.17m, a 107% 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 34% to HRK 80m. The income tax for the period amounted to HRK 11.7m, a reduction of 40%, mainly as a result of lower EBT. Finally, the net profit of the Company decreased by 33% and amounted to HRK 68.4m. On a Q2 2022 basis, the net profit decreased even more sharply, decreasing to HRK 8.7m, a decrease of 86% YoY. This would also mean that in H1 2022, the net profit margin decreased by 3.6 p.p. and amounted to 6.4%, while in Q2 2022 it amounted to 1.63%, a decrease of 9 p.p. YoY.

Ericsson NT key financials (H1 2022 vs. H1 2021, HRKm)

Looking over at the balance sheet, the total assets increased by 4.4% YoY and amounted to HRK 1.26bn, mainly as a result of an increase in receivables. Cash and cash equivalents amounted to HRK 515.1m (including short-term fin. assets), an increase of 1%, in line with the Company’s planned regular activities. Looking at the passive side of the balance sheet, the total equity amounted to HRK 387.9m, a decrease of 4% YoY, mainly as a result of lower retained earnings and a higher amount of treasury shares held. Meanwhile, total liabilities increased to HRK 868.2m, an increase of 8.6% YoY, mainly coming from higher trade and other payables, in which the HRK 84.6m of the dividend payable is included.

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