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Sony Ericsson reports first quarter results

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Q1 highlights:
  • Income before taxes was a loss of Euro 358 million (excl. restructuring charges)
  • Cost saving program progressing as planned and additional savings of Euro 400 million announced
  • Launch of 'Entertainment Unlimited' consumer proposition and new generation of products well received by operator partners
The consolidated financial summary for Sony Ericsson Mobile Communications AB (Sony Ericsson) for the first quarter ended March 31, 2009 is as follows:




 
  Q1 2008
  Q4 2008
  Q1 2009
Number of units shipped (million)
22.3
24.2
14.5
Sales (Euro m.)
2,702
2,914
1,736
Gross margin (%)
29%
15%
8%
Operating income (Euro m.) 
184
-262
-369
Operating margin (%)
7%
-9%
-21%
   Restructuring charges (Euro m.)
-
129
12
   Operating income excl. restructuring charges (Euro m.)
-
-133
-357
   Operating margin excl. restructuring charges (%)
-
-5%
-21%
Income before taxes (IBT) (Euro m.)
193
-261
-370
   IBT excl. restructuring charges (Euro m.)
-
-133
-358
Net income (Euro m.)
133
-187
-293
Average selling price (Euro)
121
121
120


Units shipped in the quarter were 14.5 million, a decrease of 35% compared to the same period of last year and in line with our March 20, 2009 interim announcement of approximately 14 million units. Sales for the quarter were Euro 1,736 million, a decrease of 36% from a year ago.  Sales decreased primarily as a result of continued weak consumer confidence and de-stocking in the retail and distribution channels.   


Gross margin declined both year-on-year and sequentially, reflecting a change in the product mix, material write-offs, and exchange rate volatility.


Income before taxes for the quarter excluding restructuring charges was a loss of Euro 358 million, within the range announced on March 20, 2009 (loss of Euro 340 - 390 million). 


"As expected, the first quarter of this year has been extremely challenging for Sony Ericsson due to continued weak global demand.  We are aligning our business to the new market reality with the aim of bringing the company back to profitability as quickly as possible," said Dick Komiyama, President, Sony Ericsson. "The management intends to pursue an additional cost saving program targeting a further annual operating expense reduction of Euro 400 million, to be completed by mid-2010."


The company's initial cost saving program targeting annual operating expense reductions of Euro 300 million by the end of the first half of 2009, including a workforce reduction of 2,000 headcount, has now been completed. A total of Euro 187 million restructuring charges have been recorded compared to the initial estimated costs of Euro 300 million.


In January 2009 an additional cost saving program was initiated to target annual operating expense reductions of Euro 180 million by the end of 2009.  The cost of this program will be covered by the initial Euro 300 million restructuring costs announced in July 2008.


The additional cost saving program announced today will include a further reduction in the global workforce of approximately 2,000 people.  It is estimated that new restructuring charges of Euro 200 million will be needed to complete this program.


As of March 31, 2009, Sony Ericsson retained a strong net cash position of Euro 1.1 billion.


Market share in the first quarter decreased and is now estimated to be around 6%, down two percentage points sequentially.


Sony Ericsson forecasts that the global handset market for 2009 will contract at least 10% from around 1,190 million units in 2008. 


At Mobile World Congress in February 2009, Sony Ericsson announced a new consumer proposition, called 'Entertainment Unlimited' (EU), to build on Sony Ericsson's leadership in music, imaging, gaming, content services, and applications to deliver unlimited opportunities for consumers.  The company also announced the first Entertainment Unlimited phone with the concept name 'Idou' to be launched in the second half of 2009. The next EU announcement will take place on 28 May.


Sony is a trademark or registered trademark of Sony Corporation. Ericsson is the trademark or registered trademark of Telefonaktiebolaget LM Ericsson.


Other product and company names mentioned herein may be the trademarks of their respective owners. Any rights not expressly granted herein are reserved. Subject to change without prior notice.
 
A live webcast of the conference call will be available on April 17, 2009 at 08:00 UK time, 09:00 Central European time (CET), 03:00 US Eastern time (EST) and 16:00 Japan time (JST).
See:

 


UK and Europe:
+44 20 7806 1951
Sweden:
+46 8 5352 6408
US:
+1 718 354 1387
Japan:
+81 3 3570 8227


A replay of the conference call will be available approximately two hours after the completion of the conference call until 23:00 UK time on April 23, 2009.




UK and Europe:
+44 20 7806 1970
Sweden:
+46 8 5876 9441
US:
+1 718 354 1112
Japan:
+81 3 3570 8212
Replay passcode:
4445896#


 
EDITOR'S NOTES:
 
Financial statements and additional information:


Financial statements:


Consolidated income statement
Consolidated income statement - isolated quarters
Consolidated balance sheet
Consolidated statement of cash flows
Consolidated statement of cash flows - isolated quarters


Additional information:


Net sales by market area by quarter


- ENDS -


Sony Ericsson is a top, global industry player with sales of around 97 million phones in 2008.  Diversity is one of the core strengths of the company, with operations in over 80 countries including manufacturing in China and R&D sites in China, Europe, India, Japan and North America.  Sony Ericsson was established as a 50:50 joint venture by Sony and Ericsson in October 2001, with global corporate functions located in London.  For more information about Sony Ericsson please visit www.sonyericsson.com
 


CONTACTS:


Investors / Analysts
Ericsson investor relations                                      
Gary Pinkham (Stockholm) +46 10 719 0858
Susanne Andersson (Stockholm) +46 10 719 4631
Andreas Hedemyr (Stockholm) +46 10 404 3748          
 
Sony investor relations                                                                              
Shinji Tomita (London) +44 20 7426 8696
Gen Tsuchikawa (Tokyo) +81 3 6748 2180   
 
Press / Media
Sony Ericsson global communications and PR
Aldo Liguori (London) +44 20 8762 5860
Merran Wrigley (London) +44 20 8762 5862
 
This press release contains forward-looking statements that involve inherent risks and uncertainties.  We have identified certain important factors that may cause actual results to differ materially from those contained in such forward-looking statements. For a detailed description of risk factors see Sony's and Ericsson's filings with the US Securities and Exchange Commission, particularly each company's latest published Annual Report on Form 20-F.



Sony Ericsson
CONSOLIDATED INCOME STATEMENT
 


Jan-Mar
EUR million
2009
2008
Change
Net sales
1,736
2,702
-36%
Cost of sales
-1,591
-1,914
-17%
Gross profit
145
788
-82%
Gross margin %
8.4%
29.2%
-21%
Research and development expenses
-303
-339
-11%
Selling and administrative expenses
-225
-270
-17%
Operating expenses
-528
-610
-13%
Other operating income, net
13
6
111%
Operating income
-369
184
-300%
Operating margin %
-21.3%
6.8%
-28%
Financial income
9
24
-62%
Financial expenses
-10
-15
-35%
Income after financial items
-370
193
-291%
Taxes
84
-57
-247%
Minority interest
-6
-3
89%
Net income
-293
133
-320%
 
 
 
 
 
Number of units shipped (million)
14.5
22.3
-35%
ASP (EUR)
120
121
-1%
 
EUR Million
Jan-Mar
Jan-Mar
Restructuring charges
2009
2008
 
  Cost of sales
7
0
  Research and development expenses
2
0
  Sales and administrative expenses
3
0
  Other operating income, net
0
0
Total
12
0
 

Sony Ericsson
CONSOLIDATED INCOME STATEMENT - ISOLATED QUARTERS
 


2009
 
2008
EUR million
Q1
 
Q4
Q3
Q2
Q1
 
Net sales
1,736
2,914
2,808
2,820
2,702
Cost of sales
-1,591
-2,476
-2,192
-2,168
-1,914
Gross profit
145
 
438
616
653
788
Gross margin %
8.4%
15.0%
21.9%
23.1%
29.2%
Research and development expenses
-303
-359
-337
-344
-339
Selling and administrative expenses
-225
-366
-303
-310
-270
Operating expenses
-528
 
-725
-640
-653
-610
Other operating income, net
13
24
-8
-2
6
Operating income
-369
 
-262
-33
-2
184
Operating margin %
-21.3%
-9.0%
-1.2%
-0.1%
6.8%
Financial income
9
28
25
25
24
Financial expenses
-10
-27
-15
-14
-15
Income after financial items
-370
 
-261
-23
8
193
Taxes
84
81
6
0
-57
Minority interest
-6
-7
-8
-3
-3
Net income
-293
 
-187
-25
6
133
Number of units shipped (million)
14.5
24.2
25.7
24.4
22.3
ASP (EUR)
120
121
109
116
121
 
 
EUR Million
2009
 
2008
Restructuring charges
Q1
Q4
Q3
Q2
 
  Cost of sales
7
67
0
8
  Research and development expenses
2
35
26
2
  Sales and administrative expenses
3
24
3
1
  Other operating income, net
0
3
6
0
Total
12
129
35
11
 
 
Sony Ericsson
CONSOLIDATED BALANCE SHEET
 


Mar 31
Dec 31
Mar 31
EUR million
2009
2008
2008
ASSETS
 
Total fixed and financial assets
658
590
594
Current assets
Inventories
477
531
484
Accounts receivables
1,193
1,629
1,710
Other assets
463
585
369
Other short-term cash investments
574
707
1,106
Cash and bank
542
418
605
Total current assets
3,249
3,870
4,274
 
Total assets
 
3,908
 
4,460
 
4,868
SHAREHOLDERS' EQUITY AND LIABILITIES
 
Shareholders' equity
930
1,217
1,665
Minority interest
65
57
69
Total equity
995
1,274
1,734
 
 
 
 
Total long-term liabilities
30
30
25
Accounts payable
965
990
1,228
Other current liabilities
1,918
2,166
1,880
Total current liabilities
2,882
3,156
3,108
 
Total shareholders' equity and liabilities
3,908
4,460
4,868
Net cash*
1,116
1,072
1,703
 


* Net cash is defined as cash and bank plus short-term cash investments less interest bearing liabilities.
 
 
Sony Ericsson
CONSOLIDATED STATEMENT OF CASH FLOWS
 


Jan-Mar
EUR million
2009
2008
OPERATIONS
Net income
-293
133
Adjustments to reconcile net income to cash
29
31
-263
164
Changes in operating net assets
321
-101
Cash flow from operating activities
58
64
INVESTMENTS
Investing activities
-19
-22
Cash flow from investing activities
-19
-22
 
 
 
FINANCING
 
 
Financing activities
-53
-462
Cash flow from financing activities
-53
-462
Net change in cash
-14
-421
Cash, beginning of period
1,125
2,155
Translation difference in Cash
5
-24
Cash, end of period
1,116
1,711
 

 
Sony Ericsson
CONSOLIDATED STATEMENT OF CASH FLOWS - ISOLATED QUARTERS
 


2009
2008
EUR million
Jan-Mar
Oct-Dec
Jul-Sep
Apr-Jun
Jan-Mar
OPERATIONS
Net income
-293
-187
-25
6
133
Adjustments to reconcile net income to cash
29
37
39
40
31
-263
-150
15
46
164
Changes in operating net assets
321
-168
88
-142
-101
Cash flow from operating activities
58
-318
102
-96
64
INVESTMENTS
Investing activities
-19
41
-55
-29
-22
Cash flow from investing activities
-19
41
-55
-29
-22
 
 
 
 
 
 
FINANCING
 
 
 
 
 
Financing activities
-53
-46
-238
-8
-462
Cash flow from financing activities
-53
-46
-238
-8
-462
Net change in cash
-14
-323
-191
-133
-421
Cash, beginning of period
1,125
1,473
1,591
1,711
2,155
Translation difference in Cash
5
-25
74
13
-24
Cash, end of period
1,116
1,125
1,473
1,591
1,711
 
 
Sony Ericsson
NET SALES BY MARKET AREA BY QUARTER
 


EUR million
 
 
 
2009
2008
Isolated quarters
 
Q1
 
Q4
Q3
Q2
Q1
Europe, Middle East & Africa *
977
1,642
1,427
1,386
1,494
Americas
200
636
703
740
486
Asia 
559
636
678
694
722
Total
 
1,736
 
2,914
2,808
2,820
2,702
* of which Western Europe
721
1,117
947
900
979
2009
2008
Sequential change (%)
 
Q1
 
Q4
Q3
Q2
Q1
Europe, Middle East & Africa *
-40%
15%
3%
-7%
-34%
Americas
-69%
-10%
-5%
52%
-24%
Asia 
-12%
-6%
-2%
-4%
-18%
Total
 
-40%
 
4%
0%
4%
-28%
* of which Western Europe
-35%
18%
5%
-8%
-38%
2009
2008
Year over year change (%)
 
Q1
 
Q4
Q3
Q2
Q1
Europe, Middle East & Africa *
-35%
-27%
-17%
-20%
-7%
Americas
-59%
0%
23%
48%
33%
Asia 
-23%
-28%
-17%
-21%
-25%
Total
 
-36%
 
-23%
-10%
-9%
-8%
* of which Western Europe
-26%
-29%
-14%
-18%
-9%
2009
2008
Year to date
 
0903
 
0812
0809
0806
0803
Europe, Middle East & Africa *
977
5,947
4,306
2,879
1,494
Americas
200
2,566
1,930
1,226
486
Asia 
559
2,731
2,094
1,416
722
Total
 
1,736
 
11,244
8,330
5,522
2,702
* of which Western Europe
721
3,943
2,826
1,879
979
 
 
 
2009
2008
YTD year over year change (%)
 
0903
 
0812
0809
0806
0803
Europe, Middle East & Africa *
-35%
-18%
-15%
-13%
-7%
Americas
-59%
24%
34%
42%
33%
Asia 
-23%
-23%
-21%
-23%
-25%
Total
 
-36%
 
-13%
-9%
-9%
-8%
* of which Western Europe
-26%
-19%
-14%
-14%
-9%


The full report (including tables) can be downloaded from the following link:

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