Ericsson has announced financial results for the second quarter of 2021. The organic sales for the company grew by 8 per cent in spite of a decrease of SEK -2.5 billion in Mainland China, as well as a decline of SEK -0.5 billion in IPR revenue. Reported sales were SEK 54.9 (55.6) billion.
The gross margin excluding restructuring charges improved to 43.4 per cent driven mainly by operational leverage in Networks. In Q2 2020, inventory write-downs and initial 5G deployments in Mainland China negatively impacted the quarter. The gross margin was reported at 43.4 per cent.
EBIT excluding restructuring charges increased to SEK 5.8 billion (10.6 per cent), from SEK 4.5 billion (8.2 per cent) YoY. The reported EBIT was SEK 5.8 (3.9) billion. Organic sales in networks grew by 11 per cent YoY driven by market share gains. In Mainland China, sales were lower by SEK 2.0 billion YoY. The reported EBIT margins were 21.7 per cent (13.2 per cent).
The organic sales in digital services remained stable over the past year, despite a decline in sales in Mainland China of SEK -0.5 billion YoY.
The company’s reported EBIT decreased by SEK -1.6 (-0.7) billion due to a write-down of SEK -0.3 billion for pre-commercial product investments for the Chinese market. The reported net income was SEK 3.9 (2.6) billion. Free cash flow before M&A was SEK 4.1 (3.2) billion, supported by higher incoming IPR payments.
As of June 30, 2021, the company’s cash position was 43.7 (37.5) billion SEK.
Commenting on the results, Börje Ekholm, President and CEO of Ericsson, stated that,” Through proactive and continuous measures for supply chain resilience we have accelerated production to meet customer demand, and we are well prepared for any challenges in the future. Our increased R&D investments have accelerated product development. We strengthened our Cloud RAN portfolio further with 5G mid-band and massive MIMO support for increased network performance. Cloud RAN will enable service providers to seamlessly evolve their networks towards cloud-native technologies and open network architectures, meeting demand for more deployment flexibility. We continue on the successful path of 5G wins in North America”.
“The opportunity from enterprise for 5G provides an exciting growth path for Ericsson. Building on the strong foundations of our core business we will continue to take a stepwise approach to investing in growth in Dedicated Networks, IoT and the wireless portfolio acquired with Cradlepoint. We foresee 20-30% annual market growth in enterprise, with opportunities in automation, remote operations and safety management across whole industry sectors such as smart manufacturing, ports and airports, energy, mining, health and agriculture. Enterprise use cases in 5G – and the continuing growth in 4G – will drive the digital transformation of business globally combining the high performance, low latency and security benefits of wireless over traditional fixed networks. We are confident that wireless will be the first-choice connection for global business in the 5G era”, he added.