Mobile network equipment maker LM Ericsson Telephone Co. (ERIC) reported profit for the second quarter that declined 19 percent from last year, reflecting significantly higher restructuring charges and lower margins. However, quarterly net sales improved 11 percent from last year.
The Stockholm, Sweden-based company reported net income attributable to shareholders of the parent of 2.09 billion Swedish kronor or $244.60 million, for the second quarter, lower than 2.58 billion kronor in the prior-year quarter. Earnings per share declined 76 percent to 0.64 krona from 0.79 krona last year.
Results for the latest quarter included 2.7 billion kronor of restructuring charges.
During the quarter, cut 2,100 positions in Sweden, resulting in higher than normal restructuring charges. The company said savings related to the activities will start to impact results towards the end of this year.
Excluding items, adjusted earnings for the quarter were 1.45 kronor per share, compared to last year's 1.07 kronor per share.
Operating income for the quarter decreased year-over-year due to higher restructuring charges of 2.7 billion kronor, compared to last year's 200 million kronor.
Operating income, excluding restructuring charges, improved in all segments year-over-year to 6.3 billion kronor from 4.2 billion kronor, driven by higher sales and positive currency hedge effects, partly offset by a lower gross margin.
Gross margin for the quarter also contracted to 33.2 percent from last year's 36.4 percent, due to lower capacity business in North America and 4G coverage deployments in Mainland China, lower IPR revenues and higher share of services sales.
Net sales for the quarter, however, grew 11 percent to 60.67 billion kronor from 54.85 billion kronor in the same quarter last year.
Sales for comparable units, adjusted for currency, decreased 6 percent from last year, mainly impacted by less capacity business in North America.
The mobile broadband business in North America stabilized in the quarter, but remained at a lower level than a year ago.
In the quarter, networks segment's sales grew 8 percent to 31.16 billion kronor and global services revenues improved 14 percent to 26.39 billion kronor from last year. Support Solutions revenues grew 9 percent to 3.09 billion kronor from a year ago.
The company noted that the global cost and efficiency program is progressing according to plan. The company says it is on target to achieve savings of about 9 billion kronor during 2017 relative to 2014.
In Stockholm, Ericsson shares are gaining 5.25 kronor or 6.14 percent, and now trading at 90.75 kronor on a volume of 9.33 million shares.
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