Shares of LM Ericsson Telephone Co. (ERIC) increased around 9 percent in the early morning trading in Stockholm after the Mobile network equipment maker reported Friday a surge in second-quarter profit on lower charges and margin strength, even as net sales declined 1 percent.
In the quarter, the sales were benefited by growth in the Middle East, China and India, as well as continued capacity business in North America. However, the increase was more than offset by lower revenues from two large mobile broadband coverage projects in North America that peaked in the first half of 2013, as well as reduced activity in Japan.
For the second quarter, net income attributable to shareholders of the parent climbed to 2.58 billion Swedish kronor (about $377.40 million) from last year's 1.47 billion kronor. Earnings per share grew 76 percent to 0.79 krona from 0.45 krona last year.
The latest-quarter results included 200 million kronor restructuring charges, lower than last year's 900 million kronor charges.
Adjusted earnings per share, which excluded certain items, was 1.07 kronor, up 22 percent from 0.88 kronor a year ago.
Net sales for the quarter edged down 1 percent to 54.85 billion kronor from 55.33 billion kronor a year ago. Sales for comparable units, adjusted for currency, decreased 1 percent from last year. Sequentially, sales climbed 15 percent from the previous quarter.
Hans Vestberg, President and CEO of Ericsson, said, "Political unrest prevails in parts of the Middle East and Africa and is still impacting sales. There is also a continued political uncertainty in Russia and the Ukraine, but this had no negative impact on sales in the quarter."
In the quarter, Networks segment's sales grew 3 percent and Support Solutions' revenues climbed 21 percent, while Global Services' revenues declined 7 percent as sales in Network Rollout continued to decline.
Gross margin increased to 36.4 percent from last year's 32.4 percent, driven by strong development in capacity business, increased IPR revenues and lower restructuring charges. Operating margin improved to 7.3 percent from 4.5 percent last year, mainly driven by stronger performance in segment Networks, while Support Solutions was hurt by lower sales related to legacy portfolio.
Vestberg added that the company's modems business will start generating sales by the end of this year, as modem M7450 will be featured in smartphones and data devices. As previously communicated, success will be measured in an 18-24 months time frame after integration of the modems business, which was completed in August 2013.
In Stockholm, Ericsson shares are gaining 7.30 kronor or 9.18 percent, and trading at 86.80 kronor.
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