In Q1 2023, Ericsson NT recorded a revenue decrease of 0.6% YoY, an EBITDA growth of 0.6%, and a net profit of EUR 7.8m, a 1.2% decrease YoY.
In total, the Company’s sales revenue amounted to EUR 69.4m, representing a decrease of 0.63% 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 investment.
Breaking the sales down further, the domestic market accounted for 37.6% of the total revenue, or EUR 26.1m, and recorded a decrease of 7.3% YoY. In this segment, Ericsson NT notes that they continued cooperation with the leading operators on the modernization of telecom networks, with a particular focus on the 5G and fiber networks. They also note that the infrastructure they provided has allowed their strategic partners, HT and A1 Hrvatska, to achieve a high-performance network. In the Digital Society segment, they also pointed out the contract with the City of Split for the project “Introduction of Intelligent Transport Systems in the Functional Traffic Area of the City of Split”, more of which you can read here.
Next up, looking at the most prominent segment, i.e. services to Ericsson, which accounted for 53.8% of the total revenue (or EUR 37.3m), and recorded a 9.1% increase YoY. In this segment, they noted that their R&D Center has recorded solid results and contributed significantly to the Company’s results. At the regular half-year meeting (R&D Management Business Review), the representatives of all development units proclaimed the aforementioned Center the best-performing partner. Furthermore, Ericsson highlighted the role that their experts from other expert centers had in the modernization of the telecom networks for the Company’s customers in the EU, but also worldwide.
The last revenue segment, export markets, which accounts for 8.6% of the total revenue (or EUR 6m) decreased by 19.7% YoY. Ericsson noted that they continued cooperation with HT Mostar, Crnogorski Telekom, and IPKO on the expansion and modernization of their telecommunication networks. They especially emphasized the cooperation with Crnogorski Telekom on software upgrades and modernization of mobile networks. Activities with the operator Telekom Kosovo have also increased after the implementation of a contract that was signed at the end of 2022. This contract includes the modernization and virtualization of the entire core network, among other things. Finally, the continued cooperation with the operator Ucom in Armenia on network modernization and the introduction of new functionalities.
Ericsson NT sales revenue breakdown (Q1 2017 – Q1 2023, EURm*)
Source: Ericsson NT, InterCapital Research
*Converted using CNB’s EUR/HRK average exchange rate for the quarters in question
Gross profit amounted to EUR 11.5m, an increase of 5% YoY as a result of the business mix and operational and cost efficiency. This would also imply a gross profit margin of 16.6%, an increase of 0.8 p.p. YoY. Moving on to EBITDA, it amounted to EUR 11m, representing a slight increase of 0.58%. This would also mean that the EBITDA margin amounted to 15.9%, an increase of 0.2 p.p. YoY. In terms of OPEX, it amounted to EUR 60.9m, which is a decrease of 1.3% YoY. This was achieved despite the fact that material expenses increased by 8.3% YoY, and amounted to EUR 31.5m, while staff costs increased by 8.1% YoY, and amounted to EUR 33.6m. This was offset by the higher value of inventory and finished products, which increased by 215% YoY to EUR 8.4m.
Meanwhile, the op. profit amounted to EUR 9.5m, an increase of 3.3% YoY, implying an EBIT margin of 13.75%, an increase of 0.5 p.p. YoY. The net financial result was a small, but positive EUR 2k, which means that the EBT amounted to EUR 9.5m, an increase of 1.2% YoY. Finally, the net profit of the company amounted to EUR 7.8m, a 1.2% decrease YoY.
Ericsson NT key financials (Q1 2017 – Q1 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 stable net profit levels meant that return on sales (ROS) remained unchanged YoY, and amounted to 11.3%.
Taking a quick look at the balance sheet, the total assets amounted to EUR 165.8m, decreasing by only 0.5% YoY compared to YE 2022, as a result of the lower level of cash and customer receivables. Cash and cash equivalents, which include short-term financial assets, amounted to EUR 66.2m at the end of Q1 2023, representing 39.9% of the total assets. They have recorded a decrease of 10.5% during this quarter, which Ericsson notes is in line with regular activities, including the payment of the larger part of the annual bonus.
