Telefonaktiebolaget LM Ericsson Class A · OMXSTO:ERIC_A
Telefonaktiebolaget LM Ericsson Class A — Ericsson — Q1 2003 Earnings Presentation
26 slides from Telefonaktiebolaget LM Ericsson Class A's earnings presentation, Apr 29, 2003
Slide 1: First Quarter Financials Report 2003
FIRST QUARTER FINANCIALS REPORT 2 0 0 3 FIRST QUARTER REPORT APRIL 29 2 0 0 3
Slide 2: First Quarter Highlights
First Quarter Highlights • Book to Bill above one – Markets: Western Europe and Latin America – Products and Services: GSM/WCDMA track, Professional Services • Improved Gross Margin: up sequentially to 34.1% • Reduced Opex run-rate from SEK 68 b. to SEK 47 b. YoY • Positive cash flow before financin
Slide 3: Ericsson – Financial Summary
Ericsson – Financial Summary (SEK b.) Sequential Q1-02 Q4-02 Q1-03 % Change Orders, net 41,9 30,7 27,1 -12% Sales 37,0 36,7 25,9 -30% Adj. Gross margin % 31,7% 32,6% 34,1% Adj. Operating margin % -12,0% -6,3% -13,2% Adj. Income after Financial items -5,2 -2,1 -3,5 Excluding restructuring costs and c
Slide 4: Earnings per Share
Earnings per Share Q1-02 Q4-02 Q1-03 Net Income (SEK b.) -3,0 -8,3 -4,3 Average number of shares (million) 10 950 15 819 15 820 Earnings per Share, diluted (SEK) -0,27 -0,58 -0,27 • Unchanged year over year due to increased number of shares • Low in Q4 2002 largely due to restructuring costs and tax
Slide 5: Orders Evolution
Orders Evolution By Geography (SEK b.) 90 Asia Pacific 80 Latin America 70 North America 60 CEMA Western Europe 50 40 30 20 10 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 1999 2000 2001 2002 2003 Note: Year 2002 & 2003 are before cancellations Book to Bill ratio >1 FIRST QUARTER REPORT APRI
Slide 6: Orders by Segment
Orders by Segment (SEK b.) Sequential Q1-02 Q4-02 Q1-03 % Change Systems 37,7 28,5 25,0 -12% - Mobile Netw orks 29,3 20,9 17,5 -16% - Fixed Netw orks 2,7 1,9 2,0 4% Total Netw ork Equipm ent 32,0 22,8 19,5 -15% - Of w hich Netw ork Rollout 4,7 4,0 2,5 -37% Professional Services 5,7 5,7 5,5 -3% Other
Slide 7: Systems Orders by Geography
Systems Orders by Geography (SEK b.) YoY Sequential Orders, Systems Q1-02 Q4-02 Q1-03 % Change % Change Western Europe 7,1 8,6 8,4 18% -2% CEMA 9,5 8,1 3,8 -60% -53% North America 6,7 5,5 4,6 -32% -17% Latin America 4,4 0,0 2,5 -42% - Asia Pacific 9,8 6,1 5,4 -45% -12% Total 37,4 28,3 24,7 -34% -13%
Slide 8: Sales by Segment
Sales by Segment (SEK b.) Sequential Q1-02 Q4-02 Q1-03 % Change Systems 33,3 33,2 24,0 -28% - Mobile Netw orks 25,6 24,7 17,6 -28% - Fixed Netw orks 3,3 3,0 1,9 -38% Total Netw ork Equipm ent 28,8 27,7 19,5 -29% - Of w hich Netw ork Rollout 4,2 3,8 2,6 -33% Professional Services 4,5 5,5 4,4 -20% Oth
Slide 9: Systems
Systems (SEK b.) Sequential Q1-02 Q4-02 Q1-03 % Change Orders 37,7 28,5 25,0 -12% Sales 33,3 33,2 24,0 -28% Adj Operating Income -2,8 -0,3 -2,1 -of which provisions for Customer financing -0,6 -0,7 -0,1 Adj Oper Inc (excl. prov for customer financing) -2,2 0,4 -2,0 Sustained income YoY despite SEK 9
Slide 10: Sony Ericsson
Sony Ericsson Q102 Q402 Q103 Numbers of units shipped (million) 5,8 7,1 5,4 Sales (EUR m.) 1 122 1 235 805 Income before taxes (EUR m.) - -77 -113 Net Income (EUR m.) 3 -69 -104 • Ericsson’s share in earnings SEK –0.5 b. in Q1 2003 • GSM shipments up 30% YoY with new products • TDMA shipments fell >
Slide 11: Other Operations
Other Operations (SEK b.) YoY Sequential Q1-02 Q4-02 Q1-03 % Change % Change Orders 4,9 2,6 2,6 -47% 1% Orders less divestitures 3,8 2,5 2,6 -31% 5% Sales 4,3 3,9 2,4 -44% -45% -39% Sales less divestitures 2,9 3,8 2,4 -17% -38% Adj Operating income -1,3 -1,2 -0,5 - - Adj Operating income less divest
Slide 12: Other Operations
Other Operations (SEK b.) Sequential Q1-02 Q4-02 Q1-03 % Change Orders 4,9 2,6 2,6 1% Sales 4,3 3,9 2,4 -39% Adj Operating income -1,3 -1,2 -0,5 59% Incl divestitures Improved adj. income through operating efficencies, Microelectronics divestment and transfer of Chinese operations to SEMC FIRST QUAR
Slide 13: Cash flow 2003 Q1 SEK b.
Cash flow 2003 Q1 SEK b. Q1-02 Q4-02 Q1-03 Net income -3,0 -8,3 -4,3 Adj Income to cash -2,3 2,7 0,6 Income to cash -5,3 -5,6 -3,7 Inventory -0,2 6,9 -0,4 Receivables 4,8 -0,7 4,7 Payables, provisions and other working cap -3,1 2,8 1,9 Customer financing 2,0 -2,8 0,0 Working capital 3,5 6,2 6,2 Coll
Slide 14: Cash Flow Development
Cash Flow Development Impact of exceptional items (SEK b.) Q1 Q2 Q3 Q4 Q103 Cash flow before financing -4.1 -2.0 -2.7 1.6 0.7 Put back Mobilcom 4.1 Put back of other customer financing 2.3 1.2 Cash collateral customer financing -2.1 -1.2 Cash collateral for pensions 1.5 -1.5 Divestiture Microelectro
Slide 15: Swedish Pension Liability and Coverage
Swedish Pension Liability and Coverage (SEK b.) Q102 Q402 Q103 FPG insurance capacity 5.0 5.0 4.0 Bank guarantees 1.8 3.0 2.0 Reinsurances 1.0 0.0 0.0 Cash collateral 0.0 1.5 0.0 Other Collateral (1) 0.0 0.0 4.0 Coverage 7.8 9.5 10.0 1) Security over certain working capital assets (”Företagshypotek”
Slide 16: Capital Employed 2001-2003
Capital Employed 2001-2003 (SEK b.) 140 80,0% 120 100 60,0% 80 40,0% 60 40 20,0% 20 0 0,0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2001 2002 2003 Capital employed excl. deferred tax assets, capitalization of SW and cash Capital Employed as % of Sales Capital Employed/Annualized Sales reduced from 61% to 33% FIRS
Slide 17: Customer Financing Outstanding Exposure
Customer Financing Outstanding Exposure Q1 2003, (SEK 20.1 b.) Gross Exposure On Gross Exposure: Off By geography 26.4 27.8 21.8 20.1 Latin America 51% 20 W Europe 27% CEMA 12% 10 Asia & Pacific 8% 42% 41% 7% 8% North America 3% 0 Q4/01 Q2/02 Q4/02 Q1/03 • Gross Exposure reduced by SEK 1.7 b. during
Slide 18: Customer Financing Commitments
Customer Financing Commitments Q1 2003 (SEK 12.5 b.) 31.2 30 Commitments Commitments Q4 2002 14.0 25.3 development 20 Increases + 0.3 14.0 Reductions - 1.8 12.5 Net change during Q1 - 1.5 10 Commitments Q1 2003 12.5 0 Q4/01 Q2/02 Q4/02 Q1/03 • New commitments during Q1 relate to a few new short term
Slide 19: Cost Streamlining
Cost Streamlining Annualized Run-Rate Opex 100 88 83 80 77 73 68 60 57 52 51 47 38 40 33 20 0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 2001 2002 2003 2004 Reducing operating expense run rate by SEK 55 b. FIRST QUARTER REPORT APRIL 29 2 0 0 3
Slide 20: Indicative Annualised Opex Reductions
Indicative Annualised Opex Reductions Previously announced actions SEK b. 100 88 (25) 90 80 70 (19) 60 50 (6) 38 40 30 20 10 0 Starting SG&A R&D IS/IT Target Run Rate Run Rate Q1 2001 Q4 2003 FIRST QUARTER REPORT APRIL 29 2 0 0 3
Slide 21: Contributors to Gross Margin Improvement
Contributors to Gross Margin Improvement • Product redesign for fewer variants and lower procurement costs Primary contributors to • Elimination of excess capacity Q1 improvement • Better staff utilization rate • Product and Service ‘packaging’ • Concentration of Manufacturing and Supply • Outsourci
Slide 22: Number of Employees
Number of Employees Workforce 120 000 100 000 80 000 61 000 52 000 47 000 60 000 40 000 20 000 0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 2001 2002 2003 2004 About one third of employees in CoS and two thirds in Opex FIRST QUARTER REPORT APRIL 29 2 0 0 3
Slide 23: Restructuring costs and cash flow effects 2003-2004
Restructuring costs and cash flow effects 2003-2004 PROVISIONS/ CASH ITEMS ASSET WRITE-DOWN TOTAL COSTS OLD NEW TOTAL OLD NEW TOTAL OLD NEW TOTAL Q1 2,6 2,6 0,6 0,6 3,2 0,0 3,2 Q2 1,9 1,5 3,4 0,2 0,2 2,1 1,5 3,6 Q3 4,0 4,0 0,0 0,0 4,0 4,0 Q4 2,5 2,5 3,0 3,0 0,0 5,5 5,5 SUBTOTAL 4,5 8,0 12,5 0,8 3,0
Slide 24: Ample Liquidity to Meet Expected Needs
Ample Liquidity to Meet Expected Needs (SEK b.) Q1 2002 Q4 2002 Q1 2003 Actual Actual Actual Cash 55.9 66.2 67.2 Short Term Loans & LT Maturities (20.8) (14.3) (14.4) Net Cash 35.1 51.9 52.8 Back-up Facilities 16.6 14.1 13.6* Payment Readiness 51.7 65.9 66.4 Payment Readiness 35% 46% 64% Equity Rati
Slide 25: Long-Term Debt Maturity Profile
Long-Term Debt Maturity Profile March 31, 2003 (SEK b.) 18.6 20 15 11.0 10 8.3 4.4 5 3.0 1.5 0 2003 2004 2005 2006 2007 2008 2009 Other Long-Term Financial Loans Convertible Debenture Notes and Bonds • No utilized facilities are subject to repayment or cancellation at a certain credit rating • The U
Slide 26: Key Planning Assumptions 2003
Key Planning Assumptions 2003 • Return to profit during 2003 excl new restructuring charges • Sales development – At least maintain share of served markets – Full year sales negatively affected by USD currency impact – Sales up slightly sequentially Q203 vs. Q103 • Payment readiness ~SEK 40 b. at ye