Eric­s­son steps up re­struc­tur­ing on new quar­terly loss

Kuwait Times - - BUSINESS -

Weaker than ex­pected sec­ond-quar­ter sales and prof­its in a poor growth cli­mate prompted Swedish tele­coms gi­ant Eric­s­son to an­nounce fresh cost­cut­ting mea­sures yes­ter­day, prompt­ing a plunge in its share price. Eric­s­son posted a fourth straight quar­terly loss in un­veil­ing April to June fig­ures of 1.0 bil­lion kro­nor (105 mil­lion eu­ros/$121 mil­lion) on sales drop­ping eight per­cent to 49.9 bil­lion kro­nor, dip­ping be­neath an­a­lysts’ fore­casts of 50.5 bil­lion.

The com­pany said it saw “in­creased risk of fur­ther mar­ket and cus­tomer project ad­just­ments with an es­ti­mated neg­a­tive im­pact on op­er­at­ing in­come of three to five bil­lion kro­nor for the com­ing 12 months.”

“We are not sat­is­fied with our un­der­ly­ing per­for­mance with con­tin­ued de­clin­ing sales and in­creas­ing losses in the quar­ter,” said CEO Borje Ekholm, as the share price dropped 10 per­cent in Stock­holm. Fol­low­ing those com­ments, shares in the firm dropped by 10.3 per­cent mid-morn­ing to 54.65 kro­nor in Stock­holm trad­ing.

“Ex­e­cu­tion of our fo­cused busi­ness strat­egy is gain­ing trac­tion. How­ever, in light of cur­rent mar­ket con­di­tions, we are ac­cel­er­at­ing the planned ac­tions to re­duce costs.” Those cost cuts, to in­clude notably un­prof­itable ser­vice con­tracts, will amount to at least an an­nual 10 bil­lion kro­nor by 2018 with the goal to dou­ble op­er­at­ing mar­gins of 2016, a year which saw net profit slump 86 per­cent.

Since then, Eric­s­son has seen a slow­ing of in­vest­ments in net­work­ing equip­ment, its core busi­ness, and now an­tic­i­pates a mar­ket con­trac­tion of be­tween five and nine per­cent across 2017 rather than an ini­tial fore­cast of a two-to-six per­cent drop. The group’s un­even per­for­mance so far this year saw rat­ings agency Moody’s down­grade it a notch to Ba1 in May, not­ing ris­ing re­struc­tur­ing charges and pro­vi­sions. — AFP

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