Telefonaktiebolaget LM Ericsson Class A · OMXSTO:ERIC_A
Telefonaktiebolaget LM Ericsson Class A — Ericsson — Q2 2011 Earnings Presentation
21 slides from Telefonaktiebolaget LM Ericsson Class A's earnings presentation, Jul 21, 2011
Slide 1: Second Quarter 2011, 21 July 2011
AN SECOND QUARTER 2011 21 JULY 2011
Slide 2: Helena Norrman, Senior Vice President Communications
Helena norrman SENIOR VICE PRESIDENT COMMUNICATIONS
Slide 3: Forward-looking statements
THIS PRESENTATION CONTAINS FORWARD-LOOKING STATEMENTS. SUCH STATEMENTS ARE BASED ON OUR CURRENT EXPECTATIONS AND ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES THAT COULD NEGATIVELY AFFECT OUR BUSINESS. PLEASE READ OUR EARNINGS REPORTS AND OUR MOST RECENT ANNUAL REPORT FOR A BETTER UNDERSTANDING OF
Slide 4: Hans Vestberg and Jan Frykhammar
HANS VESTBERG PRESIDENT AND CEO JAN FRYKHAMMAR CFO AND EXECUTIVE VICE PRESIDENT
Slide 5: Market trends: tiered pricing, mobile broadband, LTE, BSS/OSS, patents
Tiered pricing high on operators’ agendas Opportunity to grow service revenues - volume, time or speed based plans Mobile broadband driving the market 60% of world’s population remains to be covered by WCDMA/HSPA Steady progress for LTE LTE networks cover only few percentages so far Growing BSS/OSS
Slide 6: Net sales
NET SALES › Continued strong demand for mobile broadband SEK b › Strong SEK impacted sales 80 • Organic growth, currency adjusted +27% YoY 70 • Much less sequential currency impact 60 50 › Change in market mix 40 • Strong growth in Brazil, China, Germany, 30 Korea, and Russia 20 10 • High activity i
Slide 7: Profitability
profitability › Net income +59% YoY • Positive impact from higher sales SEK b SEK • Improved profitability in core Ericsson 12 2.5 • Increased loss in joint ventures 10 2.0 › Net income -21% QoQ 8 1.5 • One-off restructuring charges in Sweden 6 SEK 1.3 b 1.0 4 › Non-IFRS EPS, +42% YoY 0.5 2 • SEK 1.
Slide 8: 2Q joint ventures
2Q joint ventures 4,000 Sales 3,500 EUR m 3,000 2,500 Sony Ericsson 2,000 1,500 Good demand for Xperia smartphone portfolio 1,000 500 Impact from Japan on volumes approx 1.5 million units 0 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Android phones represented 70% of sales in 2Q 2008 2009 2010 2
Slide 9: Networks
networks › Good momentum in mobile broadband and SEK b IP network products 50 30% › Good development in China (GSM), Korea 40 25% (mobile broadband), CDMA in the US 20% 30 › +31% YoY 20 15% • Negatively impacted by strong SEK 10% 10 5% › Flat QoQ 0 0% • Geographical mix shift - growth in Latin Ameri
Slide 10: Global Services
global services › Professional Services sales +1% YoY in SEK b local currencies 24 20% 18% • Managed Services -5% YoY currency adjusted 20 16% • 24 new managed services contracts of which 9 16 14% extensions or expansions 12% 12 10% • 11 new systems integration contracts in 8% OSS/BSS, Service Deliv
Slide 11: Multimedia
multimedia › Revenue management developed SEK b favorably YoY 6 30% 5 › TV solutions continued to be weak 20% 4 • Compression weak after stronger 2010 10% 3 0% › EBITA margin amounted to -4% (-5%) 2 • YoY and QoQ improvement an effect of 1 -10% introduced efficiency measures 0 -20% Q3 Q4 Q1 Q2 Q3 Q4
Slide 12: Regional sales
Regional sales North America 2Q11 SEK 12.3 b Mediterranean 2Q11 SEK 5.5 b China and 2Q11 SEK 9.0 b Y/Y -6% Y/Y -2% Y/Y +96% North East Asia Q/Q -6% Q/Q +16% Q/Q +5% • Somewhat slower • Political unrest Networks business QoQ • Good development • Good services development for services • Mobile broadba
Slide 13: Jan Frykhammar, CFO and Executive Vice President
JAN FRYKHAMMAR CFO AND EXECUTIVE VICE PRESIDENT
Slide 14: Profitability 2Q: gross margin
Profitability 2q › Gross margin: 37.8% (39.0%) • 1Q11 positively impacted by one-off revenue 50% from the sale of patents SEK 0.3 b • Business mix in the quarter changed toward 45% more coverage and modernization • Network modernization projects in Europe, with 40% their lower margins, to accelerate
Slide 15: Profitability 2Q: operating expenses
Profitability 2q › Operating expenses SEK 15.8 (13.9) b • R&D +14% YoY due to higher planned SEK b investments in radio, such as TD-LTE and IP as well as the acquired LG-Ericsson 18 operations 16 • SG&A SEK 7.7 (6.8) b +15% YoY and 14% 14 of sales 12 • Excl. restructuring charge of SEK 1.2 b. 10 rel
Slide 16: Profitability 2Q: operating margin excl JVs
Profitability 2q › Operating margin excl JVs 9.2% (11.1%) SEK b • Negative impact from one-off restructuring 12 100% charge of SEK 1.3 b in Sweden › Higher than targeted outcome on 10 50% voluntary redundancies 8 › Larger share early retirements, 6 25% › Full impact 4Q11, pay back time 2.5 years 4 1
Slide 17: Balance sheet ratios
Balance sheet ratios › Trade receivables unchanged QoQ SEK 60.2 (60.6) b › Inventory days increased also this quarter, SEK 35.1 (32.1) b, higher level of work in progress in regions, › DSO 99 days, down 2 days QoQ continued ramp up of multistandard radio, impact from mitigating activities from event
Slide 18: Change in gross cash Q2 2011
Change in gross cash q2 2011 Operating Cash Flow Investing Financing FX on cash 5.8 b (excl short term investments) -2.0 b -8.3 b (of which -7.2 b dividend) 0.2 b 90 2.0 -1.2 -2.0 80 5.0 83.0 -8.3 0.2 Adjusted cash flow 7.0 b 78.7 70 60 Change in gross cash SEK -4.3 b 50 40 Gross Cash Net Income Cha
Slide 19: Performance targets
Performance targets Long Term Ambition Executive Performance Stock Plan GROW FASTER THAN THE MARKET › Net sales growth in SEK • 4-10% CAGR 2010-2013 › Operating income growth, BEST IN CLASS MARGINS including JVs and restructuring • 5-15% CAGR 2010-2013 › Base year 2010, excl STRONG CASH CONVERSION r
Slide 20: Second Quarter 2011, 21 July 2011
AN SECOND QUARTER 2011 21 JULY 2011
Slide 21: Ericsson
ERICSSON