Yesterday, Ericsson Nikola Tesla held a conference for media and analysts regarding the Group’s FY 2023 results. In short, in 2023 Ericsson NT reported an increase in sales revenue of 2w.2% YoY, an EBITDA increase of 30.6%, and a net profit of EUR 22.2m, an increase of 40.3% YoY.
Ericsson NT’s sales revenue amounted to EUR 304.2m in FY 2023, representing an increase of 2.2% YoY, driven by higher sales revenue on the domestic market and service to the Ericsson market segment, while revenue on other export markets decreased YoY. Out of the total sales, the domestic market accounted for 42.8%, services to Ericsson accounted for 46.6%, while other export markets accounted for 10.6%. On the domestic market, sales increased by 1.2% and amounted to EUR 130.3m. Out of these, Ericsson notes the continuation of providing support to the leading operators Hrvatski Telekom and A1 Hrvatska in the modernization of their mobile networks. At the end of the year, a contract was signed with Hrvatski Telekom regarding cooperation on the implementation of Ericsson dual-mode 5G Core for the 4G/5G core network. The company strengthened its cooperation at the beginning of 2024 by signing a contract based on which Ericsson Nikola Tesla will be the exclusive supplier of the radio part of Hrvatski Telekom’s mobile network until the end of 2027. This contract is a continuation with regard to the implementation of Ericsson’s 5G network technology in Hrvatski Telekom’s network. Strategic cooperation with A1 continued successfully throughout 2023. Meanwhile, revenue from services to Ericsson amounted to EUR 135.9m, a 4.2% increase YoY. Finally, sales from other export markets amounted to EUR 32.2m, a 1.8% YoY decrease.
Breaking the sales down by segments, the Networks segment increased by 5.5%, to EUR 145.2m, the Digital Services segment decreased by 8.5%, to EUR 78.4m, while at the same time, Managed Services increased by 8.5%, to EUR 80.1m. Gross profit amounted to EUR 31.8m, increasing by 30.4% YoY, mainly as a low-base effect as the previous year was affected by higher costs of termination of the eHealth implementation project in Belarus, combined with this year’s successful risk mitigation and focus on operating efficiency. Gross margin also consequently increased to 10.5%, up 2.3 p.p. YoY. Selling and administrative expenses increased by 2.9% YoY, amounting to EUR 13m, with the share of these expenses in the sales revenue at the previous year’s level of 4.2%.
Sales breakdown by market (EURm)
As a result of the mentioned recovery in gross profit, EBITDA increased by 30.4% YoY and amounted to EUR 30.8m with EBITDA margin increasing by 2.2 p.p. YoY.
Moving further, financial income amounted to EUR 0.7m, while the financial expenses amounted to EUR 0.2m, leading to a net financial result of EUR 0.5m – overall remaining unchanged compared to 2022.
The positive net financial result further slightly amplified EBITDA growth, with EBT recording a notable increase of 43.8% to EUR 25.2m. The income tax for the period amounted to EUR 3m. Finally, the net profit of the Company increased by 40.3% and amounted to EUR 22.2m. Taking net profit into account, the achieved margin consequently increased by 2 p.p. to 7.3%.
Ericsson NT key financials (FY 2023 vs. FY 2022, EURm)
Looking over at the balance sheet, the total assets increased by 4.3% YoY and amounted to EUR 166.6m, as a result of higher short-term assets, which make up the majority of the Group’s total assets. Cash and cash equivalents amounted to EUR 74m (including short-term fin. assets), an increase of 9.2%, in line with the Company’s planned regular activities. Looking at the other side of the balance sheet, the total equity amounted to EUR 57.8m, an increase of 7.8% YoY, mainly as a result of higher retained earnings. Meanwhile, short-term liabilities increased to EUR 58.4m, an increase of 15.3% YoY, mainly coming from higher short-term liabilities to the suppliers.
In 2023, the Group expects the trend of growing demand for ICT solutions to continue. Therefore, the Company continues to implement its strategy, with an emphasis on investing in research, development and implementation of modern ICT solutions, the development of employees’ knowledge and skills, and its own digital transformation.
During 2023, Končar D&ST recorded sales revenue growth of 37% YoY, while during Q4, the increase amounted to 46% YoY. EBITDA growth was even more significant, and amounted to 168% YoY in 2023, and 217% YoY in Q4. Finally, net profit amounted to EUR 57.9m in 2023, a 1.5x increase YoY, while in Q4, it amounted to EUR 27.5m, an increase of 127% YoY.
Yesterday, Končar D&ST, the most important subsidiary of Končar Group, published its FY 2023 results. According to the report, in 2023, sales revenue grew by 37% YoY and amounted to EUR 349m, while in Q4, it amounted to EUR 105.9m, an increase of 46% YoY. Končar D&ST further noted that in 2023, all the signed contracts amounted to EUR 678m, an increase of 92% YoY. Furthermore, by the end of the year (on the date of 31 December 2023), the backlog (all the signed contracts) amounted to EUR 623m, an increase of 116% YoY.
We would like to note that Končar D&ST does not publish detailed explanation for its financial results, as this is done on the Group (Končar Group) level. Still, as Končar D&ST is the largest subsidiary of the Group, the increase in demand for transformers and the amount of signed new deals is surely one of the largest contributing factors.
In terms of operating expenses, in 2023 they amounted to EUR 282m, an increase of 19% YoY, while in Q4, they amounted to EUR 73.5m, a 9% increase YoY. The largest increase came from material costs, which grew by 21% YoY to EUR 247.5m during 2023, and 5% YoY to EUR 54.7m during Q4. This was to be expected, as many industrial companies were hit with significant material cost growth in between 2022 and 2023, as the inflation in those categories was far more significant than inflation in consumer prices. However, as we can see on the Q4 basis, this largely slowed down in the latter part of the year.
Staff costs also grew, by 36% YoY to EUR 35.9m during 2023, and by 54% YoY to EUR 10m during Q4. This was under the influence of several factors, firstly the inflation which drove wage growth, but also due to the increase in the number of employees. In fact, by the end of 2023, the no. employees amounted to 1,142, an increase of 40% YoY. This was not only due to organic growth, but also due to inorganic one, as the Company bought an additional 35% stake in Ferokotao d.o.o., becoming the majority owner at 51% on 20 December 2023.
Despite the cost increases, the strong growth in revenue resulted in significant improvements to EBITDA. In 2023, it amounted to EUR 73.5m, an increase of 168% YoY, while in Q4, it amounted to EUR 33.9m, an increase of 217% YoY. This would also mean that the EBITDA margin improved as well, growing by 10.27 p.p. to 21.06% in 2023, and by 17.33 p.p. to 32.07% in Q4.
In terms of the net financial result, it amounted to EUR 276k in 2023, a 75% decrease YoY, and EUR 341.9k in Q4 2023, a decrease of 74% YoY. This came as a result of higher financial expenses as losses from FX were recorded, while financial income was roughly the same.
All taken together, this led to a net income of EUR 57.9m in 2023, an increase of 150% YoY, and EUR 27.5m in Q4, an increase of 127% YoY. This would also mean that the net income margin amounted to 16.6% in 2023, a 7.48 p.p. increase YoY, and 25.97% in Q4, an increase of 9.30 p.p. YoY.
Končar D&ST key financials (2023 vs. 2022, EURm)
Source: Končar D&ST, InterCapital Research