In 9m 2019, the company recorded an increase in sales of 16%, an increase in EBITDA of 26% and an increase in net profit of 30%.
In the first nine months of 2019, Ericsson Nikola Tesla recorded sales of HRK 1.25bn, representing an increase of 16% YoY. Of the total sales revenue, services to Ericsson account for 60.6% (of which 11.2% is related to Managed Services in Croatia), domestic market accounts for 24.4%, while other export markets account for 15%.
Ericsson market
In the Ericsson market, sales revenue amounted to HRK 759.6m, which represents an increase of 9.3% YoY. The contribution of Ericsson NT Servisi, a daughter company of Ericsson NT, to the revenue in this market segment amounted to HRK 140.5m, which is an increase of 8.7% YoY. The company reports that the projects of Research and Development Center are ongoing as planned in all domains.
Domestic market
In the domestic market, sales revenue amounted to HRK 306.3m, which is an increase of 32.1% YoY.
The company states that intensive activities on mobile network modernization, with strategic partner Hrvatski Telekom (HT), are ongoing. So far, more than 90% of the network was modernized, which enables significantly higher transfer speeds. Until the end of 2019, network modernization will be completed on the entire territory of Croatia, and the network will be fully ready for the implementation of 5G. Additionally, Ericsson NT and HT continue to cooperate in the fields of fixed telecommunication network and delivery of services of telecommunication infrastructure rollout and maintenance.
With the strategic partner A1 Hrvatska, the company continued long-term successful partnership by signing a frame agreement until the end of 2023 that encompasses radio network modernization and expansion. Further, with the mobile operator Tele2, the company contracted the delivery, implementation and support of solutions for data traffic shaping, which increases the average downlink speed per user.
Exports market (excluding Ericsson market)
In export markets, sales revenue amounted to HRK 187.4m, which is an increase of 22%.
The company has continued a successful cooperation with HT Eronet by signing a frame agreement on expanding the LTE network across Bosnia & Herzegovina. The contracted work relates to LTE network, services of project management and integration of new nodes in the network, as well as training for the employees. Further, cooperation with the operators Crnogorski Telekom (Montenegro), and IPKO (Kosovo) continues on the modernization and maintenance of telecommunication networks.
Ericsson NT Performance (9m 2019 vs 9m 2018) (HRK m)
Turning our attention to the operating expenses, in 9m 2019, the company recorded HRK 1.18bn, representing an increase of 16% YoY. The mentioned increase could be mostly attributed to an increase in material costs by HRK 52.6m (+11% YoY) and changes in inventories of work in progress and finished goods which amounted to HRK -76.4m compared to HRK -124.4m in 9m 2018. When observing solely Q3 2019 changes in inventories of work in progress and finished goods amounted to HRK 16.1m, compared to HRK -89.8m in Q3 2018.
Going further down the P&L, EBITDA amounted to HRK 136.5m (+26%), which could partially be attributed to the implementation of IFRS 16. Meanwhile operating profit amounted to HRK 89.9m (+10%). It is also important to note that the good performance throughout the P&L could partially be attributed to the low base effect, as Ericsson NT recorded a poor Q3 2018, which spilled over to the 9m results.
Further, net financial gain was HRK 3.6m (+60%), primarily as a result of positive foreign exchange differences.
In 9m 2019, net profit amounted to HRK 80.8m, representing an increase of 30% YoY. The mentioned increase could be attributed to mainly the increased operating profit and decrease in tax liability based on tax reliefs on employment according to Investment Promotion Act (HRK 12.78m in 9m 2019 compared to HRK 21.76m in 9m 2018).
On the balance sheet the company still maintains a strong cash position with total cash and cash equivalents, including short term financial assets, amounting to HRK 157.8m (16.9% of the total assets). The company’s cash position did observe a decrease of HRK 78.5 compared to the end of 2018, however one should note that the decrease could be attributed to the dividend payment of HRK 94m.
