Telefonaktiebolaget LM Ericsson Class A · OMXSTO:ERIC_A

Telefonaktiebolaget LM Ericsson Class A — Ericsson — Q4 2002 Earnings Presentation

26 slides from Telefonaktiebolaget LM Ericsson Class A's earnings presentation, Feb 3, 2003

  1. Slide 1: Financials Fourth Quarter Report February 3, 2003

    FINANCIALS FOURTH QUARTER REPORT FEBRUARY 3, 2003 Long version External WEB Fourth Quarter Report | February 3 | 2003

  2. Slide 2: Sten Fornell, Executive Vice President and CFO

    STEN FORNELL Executive Vice President and Chief Financial Officer Fourth Quarter Report | February 3 | 2003

  3. Slide 3: Ericsson – Financial Summary

    Ericsson – Financial Summary (SEK b.) Q102 Q202 Q302 Q402 2002 Orders, net 41.9 35.3 20.5 30.7 128.4 Sales 37.0 38.5 33.5 36.7 145.8 Adj. Gross margin 31.7% 32.5% 32.6% 32.6% 32.3% Adj. Operating margin -12.0% -6.5% -9.6% -6.3% -8.6% Adj. Income before taxes -5.3 -3.3 -3.7 -2.2 -14.5 - Provisions fo

  4. Slide 4: Orders Evolution

    Orders Evolution By Geography (SEK b.) 90 Asia Pacific 80 Latin America 70 North America CEMA 60 Western Europe 50 40 30 20 10 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Note: Q1-Q4 2002 1999 2000 2001 2002 are before cancellations Orders up sequentially driven by Western Europe and CEMA Four

  5. Slide 5: Orders Specification

    Orders Specification (SEK b.) Q1 Q2 Q3 Q4 Orders reported, net 41.9 35.3 20.5 30.7 Cancellations 2.1 3.0 5.4 2.3 Order intake 44.0 38.3 25.9 33.0 FX-effects -2.8 3.1 3.0 3.2 Comparable orders 41.2 41.4 28.9 36.2 Change vs 2001 -41% -24% -24% -9% Fourth Quarter Report | February 3 | 2003

  6. Slide 6: Sales by Segment with Services disclosure

    Sales by Segment with Services disclosure (SEK b.) Q401 Q402 2001 2002 Systems* 50.1 33.2 188.7 132.0 of which Mobile systems 44.0 30.2 161.6 120.3 of which Multi-service networks 6.1 3.0 27.1 11.7 Other Operations 10.2 6.0 31.8 23.5 - Intersegment sales -1.8 -2.5 -9.6 -9.7 Total 58.5 36.7 210.8 145

  7. Slide 7: Systems

    Systems (SEK b.) Q1 Q2 Q3 Q4 2002 Orders 37.7 31.2 17.9 28.5 115.3 Sales 33.3 34.8 30.6 33.2 132.0 Adj Operating Income -2.8 -0.7 -1.1 -0.3 -4.9 - of which provisions for Customer financing -0.6 -0.5 -1.3 -0.7 -3.1 Adj Oper Inc (excl. prov for customer financing) -2.2 -0.2 0.2 0.4 -1.8 Continued pos

  8. Slide 8: Sony Ericsson

    Sony Ericsson Q401 Q402 2002 Numbers of units shipped (million) 6.8 7.1 22.9 Sales (EUR m.) 1 046 1 235 4 176 Income before taxes (EUR m.) -152 -77 -291 • Sales growth driven by a more complete product portfolio • T100 and P800 well received Capital injection to strengthen balance sheet and support

  9. Slide 9: Other Operations

    Other Operations (SEK b.) Q1 Q2 Q3 Q4 2002 Orders 6.3 6.3 5.5 4.7 22.8 Sales 5.7 6.0 5.8 6.0 23.5 Adj Operating income - 1.3 -1.0 -1.2 -1.2 -4.7 Continued investment activities for Mobile Platforms and Bluetooth; cost level impacted by seasonality Fourth Quarter Report | February 3 | 2003

  10. Slide 10: Cash Flow Development

    Cash Flow Development Impact of exceptional items (SEK b.) Q1 Q2 Q3 Q4 2002 Cash flow before financing -4.1 -2.0 -2.7 1.6 -7.1 Put back Mobilcom -4.1 -4.1 Put back of other customer financing -2.3 -1.2 -3.5 Cash collateral customer financing 2.1 1.2 3.3 Cash collateral for pensions -1.5 -1.5 Divesti

  11. Slide 11: Cash flow 2002 by quarter

    Cash flow 2002 by quarter (SEK b.) Q1 Q2 Q3 Q4 2002 Net income -3.0 -2.7 -5.0 -8.3 -19.0 Adj Income to cash -2.3 -2.1 -0.1 2.7 -1.8 • Income to cash -5.3 -4.8 -5.1 -5.6 -20.8 Inventory -0.2 -0.8 2.7 6.9 8.6 Receivables 4.8 1.8 3.9 -0.7 9.8 Payables, provisions and other working cap -3.1 -0.1 -5.3 2.

  12. Slide 12: Swedish Pension Liability and Coverage

    Swedish Pension Liability and Coverage (SEK b.) Q202 Q302 Q402 FPG insurance capacity 6.0 5.0 5.0 Bank guarantees 1.8 3.0 3.0 Reinsurances 0.7 0.0 0.0 Cash collateral 0.0 1.5 1.5 Coverage 8.5 9.5 9.5 • According to Swedish rules, pension liabilities may be retained in the company, subject to insuran

  13. Slide 13: Working Capital Development

    Working Capital Development Target Q401 Q102 Q202 Q302 Q402 2003 Accounts Receivable By year end – Days Sales Outstanding 88 108 101 103 91 <90 Inventory Turnover* 4.7 4.1 4.2 4.3 5.1 >5 Customer financing Continued outstanding exposure (SEK b.) 26.4 27.7 27.8 24.9 21.8 reduction * Quarters in 2001

  14. Slide 14: Decreasing Customer Financing

    Decreasing Customer Financing Q4 2002 (SEK 21.8 b.) Gross Exposure: By On Off Gross Exposure: By geography 27.7 27.8 26.4 24.9 21.8 Latin America 52% Western Europe 25% CEMA 13% Asia & Pacific 7% 42% 44% 41% 27% 7% North America 3% Q4/01 Q1/02 Q2/02 Q3/02 Q4/02 • Gross Exposure reduced by SEK 3.1 b.

  15. Slide 15: Decreasing Customer Financing

    Decreasing Customer Financing Q4 2002 (SEK 14.0 b.) Commitments development 31.2 28.1 Commitments Q3 2002 14.0 25.3 Increases + 2.6 Reductions - 2.6 14.0 14.0 Net change during Q4 0.0 Commitments Q4 2002 14.0 Q4/01 Q1/02 Q2/02 Q3/02 Q4/02 • New commitments during Q4 relate to commitments • During Q3

  16. Slide 16: Customer Financing

    Customer Financing Q4 2002 • Buy back Mobilcom credit of SEK 4.1 b. (of which SEK 3.5 b. previously in the Credit Portfolio 2001 with a put arrangement) • The buy back enables exchange for a France Telecom convertible bond • Credit Portfolio 2001 discontinued – no impact on cash flow and outstanding

  17. Slide 17: Cost Streamlining & Number of Employees

    Cost Streamlining & Number of Employees Annualized Run-Rate Opex Workforce SEK b. 107,000 100 88 82,000 80 76,000 68 72,000 65,000 57 <60,000 60 52 51 38 40 20 0 1Q01 1Q02 2Q02 3Q02 4Q02 4Q03 1Q01 1Q02 2Q02 3Q02 4Q02 4Q03 Targeting Opex run rate of SEK 38 b. with further streamlined organization Fou

  18. Slide 18: Areas addressed to meet our Gross Margin target

    Areas addressed to meet our Gross Margin target • Rationalization of products • Product and Service ‘packaging’ • Purchase agreements • Concentration of Manufacturing and Supply • Streamlining of IS/IT • Elimination of excess capacity • Target to improve gross margin by +2 to +4% points (from 32.5%

  19. Slide 19: Initiated and Further Cost Reductions

    Initiated and Further Cost Reductions Charges and cash outlay (SEK b.) 2001 2002 2003 2004 Total Restructuring charges -11.1 -12.2 -5.3 -28.6 - of which cash impact -10.1 -9.0 -4.5 -23.6 - of which non-cash -1.0 -3.2 -0.8 -5.0 timing of Cash Outlay -4.1 -8.3 -10.8 -0.4 -23.6 Cash outlay mostly for e

  20. Slide 20: Ample Liquidity to Meet Expected Needs

    Ample Liquidity to Meet Expected Needs (SEK b.) Q3 2002 Q4 2002 Actual Actual Cash 74.4 66.2 Short Term Loans & LT Maturities (21.2) (13.5) Net Cash 53.2 52.7 Back-up Facilities 14.8 14.1 Payment Readiness 68.0 66.8 Payment Readiness 47% 46% Equity Ratio 36% 37% Interest-bearing Liabilities and Prov

  21. Slide 21: Long-Term Debt Maturity Profile

    Long-Term Debt Maturity Profile December 31, 2002 (SEK b.) Undrawn Long-Term Back-up Facilities: * US$ 1,000 m. mature in September 2004 * US$ 600 m. mature in July 2006 20 18.4 15 11.1 8.6 10 4.5 5 3.2 1.3 0 2003 2004 2005 2006 2007 2008 2009 Other Long-Term Financial Loans Convertible Debenture No

  22. Slide 22: Key Planning Assumptions 2003

    Key Planning Assumptions 2003 • Mobile systems market may decline by as much as 10% • Return to profit at some point in 2003 by continued cost cutting • SEK 10.8 b. cash outlays for restructuring Fourth Quarter Report | February 3 | 2003 This outlook contains forward-looking statements. Actual resul

  23. Slide 23: Key Planning Assumptions 2003

    Key Planning Assumptions 2003 • Continued working capital improvements targeting > SEK 9 b. • Up to SEK 11 b. to be repaid (long-term maturities) • Expected outcome fourth quarter 2003: – Payment readiness > SEK 41 b. – Equity ratio >35% Fourth Quarter Report | February 3 | 2003 This outlook contain

  24. Slide 24: Key Planning Assumptions 2003

    Key Planning Assumptions 2003 Pursue opportunities to further strengthen our cash position by: • Reducing customer financing • Refinancing maturing debt • Divesting non-core operations Fourth Quarter Report | February 3 | 2003 This outlook contains forward-looking statements. Actual result may be ma

  25. Slide 25: R&D Capitalization in Primary Accounts

    Back-up R&D Capitalization in Primary Accounts (SEK m.) Q1 Q2 Q3 Q4 2002 Additions 1 050 947 662 783 3 442 Amortization -45 -37 -21 -139 -242 Net 1 005 910 641 644 3 200 The net amount is eliminated from adjusted operating income Fourth Quarter Report | February 3 | 2003

  26. Slide 26: Financials Fourth Quarter Report February 3, 2003

    FINANCIALS FOURTH QUARTER REPORT FEBRUARY 3, 2003 Long version External WEB Fourth Quarter Report | February 3 | 2003

Ericsson — Q4 2002 Earnings Presentation on 6ix