Ericsson fourth quarter and full year 2012 report
Fourth quarter highlights
- Sales increased 5% YoY and 23% QoQ. Segment Networks sales increased 6% YoY driven mainly by North America. QoQ Networks sales grew 31%, primarily due to normal higher year-end business activity
- Operating margin excl. JVs improved to 7.1% (6.4%) YoY mainly driven by increased Networks sales, offset by continued efficiency measures generating restructuring charges with a negative impact on operating margin of close to -3%-points (-1%)
- Net income SEK -6.3 (1.5) b. negatively impacted by a non-cash charge related to ST-Ericsson of SEK -8.0 b. as previously communicated and a reduction of deferred tax assets of SEK -0.5 b. related to lowered corporate tax rate in Sweden
- EPS diluted SEK -1.99 (0.36). EPS Non-IFRS and excluding ST-Ericsson charge SEK 1.07 (0.81)
- Cash flow from operations increased to SEK 15.7 b. driven by reduced working capital.
Full year highlights
- Sales were flat YoY with growth in Global Services and Support Solutions, while Networks sales declined partly due to the 40% decline of CDMA equipment sales
- Operating margin, excluding JVs, was flat at 9.7% (9.6%). Excluding the gain related to the divestment of Sony Ericsson operating margin was 6.4%
- Net income SEK 5.9 (12.6) b. impacted positively by the Sony Ericsson gain of SEK 7.7 b. and negatively by the ST-Ericsson charge of SEK -8.0 b.
- EPS diluted SEK 1.78 (3.77). EPS Non-IFRS SEK 3.55 (5.54)
- Cash flow from operations SEK 22.0 b. Full year cash conversion of 116%, above the target >70%
- Dividend for 2012, proposed by board of Directors of SEK 2.75 (2.50) per share.
| SEK b. | Q4 2012 | Q4 2011 | YoY Change | Q3 2012 | QoQ Change | Full year 2012 | Full year 2011 | Full year Change |
| Net sales | 66.9 | 63.7 | 5% | 54.6 | 23% | 227.8 | 226.9 | 0% |
| Of which Networks | 35.3 | 33.3 | 6% | 26.9 | 31% | 117.3 | 132.4 | -11% |
| Of which Global Services | 28.0 | 27.0 | 4% | 24.3 | 15% | 97.0 | 83.9 | 16% |
| Of which Support Solutions | 3.6 | 3.4 | 6% | 3.3 | 9% | 13.5 | 10.6 | 26% |
| Gross margin | 31.1% | 30.2% | - | 30.4% | - | 31.6% | 35.1% | - |
| EBITA margin excl JVs and Sony Ericsson sale | 8.8% | 8.1% | - | 8.7% | - | 8.4% | 11.6% | - |
| Operating income excl JVs and Sony Ericsson sale | 4.8 | 4.1 | 17% | 3.7 | 30% | 14.5 | 21.7 | -33% |
| Operating margin excl JVs and Sony Ericsson sale | 7.1% | 6.4% | - | 6.7% | - | 6.4% | 9.6% | - |
| EBITA margin excl JVs | 8.8% | 8.1% | - | 8.7% | - | 11.7% | 11.6% | - |
| Operating income excl JVs | 4.8 | 4.1 | 17% | 3.7 | 30% | 22.2 | 21.7 | 2% |
| Operating margin excl JVs | 7.1% | 6.4% | - | 6.7% | - | 9.7% | 9.6% | - |
| Of which Networks | 8% | 8% | - | 5% | - | 6% | 13% | - |
| Of which Global Services | 6% | 6% | - | 8% | - | 6% | 7% | - |
| Of which Support Solutions | 8% | 0% | - | 14% | - | 9% | -5% | - |
| Operating income incl JVs | -3.8 | 2.2 | - | 3.1 | - | 10.5 | 17.9 | |
| Of which ST-Ericsson | -8.5 | -0.8 | - | -0.6 | - | -11.7 | -2.7 | - |
| Income after financial items | -3.9 | 1.8 | - | 3.2 | - | 10.2 | 18.1 | |
| Net income | -6.3 | 1.5 | - | 2.2 | - | 5.9 | 12.6 | |
| EPS diluted, SEK | -1.99 | 0.36 | - | 0.67 | - | 1.78 | 3.77 | -53% |
| EPS (Non-IFRS), SEK1) | -1.40 | 0.81 | - | 1.04 | - | 3.55 | 5.54 | -36% |
| Cash flow from operations | 15.7 | 5.5 | 187% | 7.0 | 125% | 22.0 | 10.0 | 121% |
| Cash conversion | 227% | 79% | - | 149% | - | 116% | 40% | - |
| Net cash, end of period | 38.5 | 39.5 | -2% | 29.0 | 33% | 38.5 | 39.5 | -2% |
| 1) EPS, diluted, excl. amortizations, write-downs of acquired intangible assets, restructuring Twelve months 2012 includes a gain from the divestment of Sony Ericsson of SEK 7.7 b. | ||||||||
Comments from Hans Vestberg, President and CEO
"Our segments showed mixed developments during the year with strong growth in Global Services and Support Solutions, while Networks had a more challenging year. Support Solutions went from losses in 2011 into profitability and together with Global Services represented close to 50% of Group sales in 2012, compared to 42% in 2011," says Hans Vestberg, President and CEO of Ericsson (NASDAQ:ERIC).
"During the year profitability was negatively impacted by operating losses in ST-Ericsson, the ongoing network modernization projects in Europe as well as the underlying business mix, with a higher share of coverage projects than capacity projects. With present visibility of customer demand, and with the current global economic development, underlying business mix is expected to gradually shift towards more capacity projects during the second half of 2013.
We ended the year with strong cash flow and a full-year cash conversion well above target. The Board of Directors proposes a dividend for 2012 of SEK 2.75 (2.50) per share, an increase by 10%.
Throughout 2012 North America was our strongest market, driven by continued mobile broadband investments and demand for services. However, regions such as South East Asia and Oceania and Sub-Saharan Africa gradually improved during the year.
In the fourth quarter Networks sales recovered, despite continued expected decline in CDMA. Profitability in Networks improved sequentially due to higher sales and a higher share of software sales. Sales and profitability for Global Services and Support Solutions remained stable.
The quarter was negatively impacted by a non-cash charge related to ST-Ericsson. Following the announcement of STMicroelectronics' intention to exit as a shareholder, Ericsson will explore various strategic options for ST-Ericsson assets. We believe that the modem technology, which we originally contributed to the JV, has a strategic value to the wireless industry.
The work to leverage our strength in the growth areas mobile broadband, managed services and operations and business support systems (OSS/BSS) has continued during the year, with both selective acquisitions and divestments. In addition, we completed the divestment of Sony Ericsson and introduced a new strategy for Support Solutions. Improving profitability, reducing costs and working capital remain high on the agenda also for 2013. While the macroeconomic and political uncertainty continues in certain regions the long-term fundamentals in the industry remain attractive and we are well positioned to continue to support our customers in a transforming ICT market," concludes Vestberg.
You find the complete report with tables in the attached PDF or by following this link:
www.ericsson.com/res/investors/docs/q-reports/2012/12month12-en.pdf
Editor's note
To read the complete report with tables, please go to:
www.ericsson.com/thecompany/investors/financial-reports/interim-reports/Q4-report-2012
Ericsson invites media, investors and analysts to a press conference at the Ericsson Studio, Grönlandsgången 4, Stockholm, at 09.00 (CET), January 31, 2013. An analysts, investors and media conference call will begin at 14.00 (CET).
Live webcast of the press conference and conference call as well as supporting slides will be available at www.ericsson.com/press and www.ericsson.com/investors
Video material will be published during the day on www.ericsson.com/broadcast_room
For further information, please contact
Helena Norrman, Senior Vice President, Communications
Phone: +46 10 719 3472
E-mail: investor.relations@ericsson.com or media.relations@ericsson.com
Investors
Åsa Konnbjer, Director, Investor Relations
Phone: +46 10 713 3928
+46 730 825 928
E-mail: investor.relations@ericsson.com
Stefan Jelvin, Director, Investor Relations
Phone: +46 10 714 2039
+46 709 860 227
E-mail: investor.relations@ericsson.com
Rikard Tunedal, Director, Investor Relations
Phone: +46 10 714 5400
+46 761 005 400
E-mail: investor.relations@ericsson.com
Media
Ola Rembe, Vice President,
Head of Corporate Communications & PR
Phone: +46 10 719 9727
+46 730 244 873
E-mail: media.relations@ericsson.com
Corporate Communications & PR
Phone: +46 10 719 69 92
E-mail: media.relations@ericsson.com
Ericsson discloses the information provided herein pursuant to the Securities Markets Act. The information was submitted for publication at 07.30 CET, on January 31, 2013.