In Q1, the company recorded an increase in sales of 26%, decrease in EBITDA of 18% and decrease in net profit of 10%.
In Q1 2020, Ericsson NT realized solid results with sales revenue increasing by 26% YoY to HRK 487.7m, primarily due to significant sales revenue growth in the operator segment in the domestic market. Of the total sales revenue, domestic market accounts for 41%, services to Ericsson account for 45.8%, while other export markets account for 13.2%.
In the domestic market, sales revenue went up by 118% YoY. The company has continued their cooperation with HT in the segment of radio access network, with a focus on additional increase of capacity and securing readiness for commercially introduction of 5G technology once the necessary radio frequency spectrum has been assigned for it and required conditions have been met.
In export markets (excluding Ericsson market), sales revenue went up by 47% YoY. In Q1 2020, the company signed new contracts in the operator’s segment in the markets of Bosnia and Herzegovina, Montenegro, Belarus and Moldova, worth approximately HRK 85m. The contracts encompass mobile networks expansions and maintenance in the upcoming period.
In Ericsson market, sales revenue was down by 12% YoY, due to change of business model regarding managed services of HT’s network in 2020.
When observing total operating expenses, they observed a sharp increase of 30% YoY, amounting to HRK 459m. In Q1 the company witnessed erosion of margins as a result of business mix due to taking over the full responsibility for managed services, restructuring charges, and the impact of COVID-19 during March. Selling and administrative expenses increased by 23% YoY, due to higher presales activities, related to 4G/5G radio access and core networks.
Going further down the P&L, operating profit amounted to HRK 33.5m, representing a decrease of 17.8%. Meanwhile, operating margin witnessed a decrease of 3.5 p.p. as a result of higher operating expenses and stood at 6.8%.
In 2019, Ericsson NT recorded a net profit of HRK 29.55m, representing a decrease of 10.3% YoY. Such a result puts the profit margin at 6% (-2.4 p.p. YoY).
Ericsson NT Performance (Q1 2019 vs Q1 2020) (HRK m)
Regarding the current Covid-19 situation, since the company operates globally, the company estimates that the situation could negatively impact a certain part of their business, slow down investments, realization of contracted projects and collection dynamics of customer receivables.