Telefonaktiebolaget LM Ericsson Class A · OMXSTO:ERIC_A
Telefonaktiebolaget LM Ericsson Class A — Ericsson — Q1 2002 Earnings Presentation
24 slides from Telefonaktiebolaget LM Ericsson Class A's earnings presentation, Apr 22, 2002
Slide 1: First Quarter Report
First Quarter Report April 22, 2002 1
Slide 2: First Quarter Report - Kurt Hellström, President and CEO
First Quarter Report April 22, 2002 Kurt Hellström President and CEO 2
Slide 3: First quarter performance
First quarter performance • Q1 results as expected • Expanding market share in systems and services – Sales in GSM / WCDMA declined less than market • Mobile Systems orders up 11% from Q4 2001 • Sony Ericsson reaches break-even First Quarter Report | April 22 | 2002 Good afternoon ladies and gentlem
Slide 4: Market view 2002
Market view 2002 • Many operators have recently lowered investment plans further • Mobile systems market down by more than 10% • Wireline circuit-switchin g market down by about 40% • Subscriber growth 18-23% + 175-215 million new subscribers • 400 - 420 million phones to be shipped First Quarter Re
Slide 5: Outlook
Outlook • Loss expected (income before taxes) for 2002 with revised market view • The above excludes restructuring costs and non-operational items • Plan to return to profits at some point in 2003 First Quarter Report | April 22 | 2002 This outlook contains forward-looking statements. Actual result
Slide 6: Realigning to drive profitability
Realigning to drive profitability • Stepping up cost cutting – Cost base end-2003 will be SEK 40 b. lower than beginning of 2001 • Merging wireless and wireline systems operations – Industry’s strongest next generation network solutions • Expanding Global Services offering – Solutions for outsourcin
Slide 7: Proposed rights offering
Proposed rights offering • Provide financial and strategic strength – Fully leverage our strong competitive advantage • Secure robust financial position – Increased security if poor market conditions continue or deteriorate further • Approximately SEK 30 billion – Exact terms to be communicated late
Slide 8: Financials
Financials First Quarter Report April 22, 2002 8
Slide 9: Financials - Sten Fornell, CFO
Financials First Quarter Report April 22, 2002 Sten Fornell Executive Vice President and Chief Financial Officer Thank you! Good morning & Good afternoon everybody! I will today, of course, give you some more background to the proposed rights offering. But first, just a brief wrap-up of our financia
Slide 10: Ericsson – total
Ericsson – total (SEK b.) Q1 01 Q4 01 Q1 02 Q102/Q101 Orders 69.3 39.9 41.9 -40% Sales 49.8 58.5 37.0 -26% Adj. Operating margin -8.5% -9.9% -12.2% Adj. Income before taxes -4.9 -5.1 -5.4 • Strengthened position in core areas including services • Substantial turnaround for mobile phones • The Effici
Slide 11: Ericsson total – Orders & Sales by quarter
Ericsson total – Orders & Sales by quarter 80 60 Orders 40 Sales 20 0 Q1 01 Q2 01 Q3 01 Q4 01 Q1 02 5% sequential growth of order-intake, but lower than anticipated! Financials | First Quarter Report | April 22 | 2002 Our total order-intake grew 5% sequentially. And systems were up 10%. The increase
Slide 12: Sony Ericsson
Sony Ericsson Q4 01 Q1 02 Unit volumes 7.4 million 5.8 million Still emphasis on the high-end Sales 9.7 SEK b. 10.3 SEK b. Higher average sales price Income before taxes -1.4 SEK b. – Break-even! Number of employees ~ 4,000 ~ 4,000 Lean organization and high flexibility • A very good start, also fin
Slide 13: Cash flow – First Quarter 2002
Cash flow – First Quarter 2002 Income items Net income -3.7 Adjustments to cash -2.6 -6.3 Working Capital Receivables 4.8 Customer Financing 2.0 Inventories -0.2 Other working capital -3.1 3.5 Investing activities -1.3 Cash flow before financing activities -4.1 Still a very high priority! Financials
Slide 14: Working capital
Working capital Q101 Q201 Q301 Q401 Q102 Accounts Receivable – Days Sales Outstanding 116 97 102 88 108 Inventory Turnover* 3.4 4.0 4.1 4.7 4.1 Customer financing outstanding exposure (SEK b) 20.6 23.1 21.9 26.4 27.7 *Adjusted for transferred activities to Sony-Ericsson for Q1 - Q4, 2001 Measures in
Slide 15: Outlook – Full year, 2002
Outlook – Full year, 2002 Our planning environment • Long-term growth market but... • Financial market’s sentiment declines • Operators announce reduced investment plans Challenging environment! Financials | First Quarter Report | April 22 | 2002 This outlook contains forward-looking statements. Act
Slide 16: Further adaptation of cost base to lower volumes
Further adaptation of cost base to lower volumes Financial impact 2002 2003 Run rate/year Saving Cost Net Saving Cost Net Efficiency Program 20.0 20.0 - 20.0 20.0 - 20.0 Continuous Improvements ~10.0 7.0 -2.5 4.5 10.0 - 10.0 Further adaptation ~10.0 1.2 -6.0 -4.8 8.0 -2.0 6.0 TOTAL ~40.0 28.2 -8.5 1
Slide 17: Outlook
Outlook • Loss expected (income before taxes) for 2002 with revised market view • The above excludes restructuring costs and non-operational items • Plan to return to profits at some point in 2003 Financials | First Quarter Report | April 22 | 2002 This outlook contains forward-looking statements. A
Slide 18: Proposed rights offering
Proposed rights offering • Provide financial and strategic strength – Fully leverage our strong competitive advantage • Secure robust financial position – Increased security if poor market conditions continue or deteriorate further • Approximately SEK 30 billion – Exact terms to be communicated late
Slide 19: New equity – for a financial position as strong as our market position
New equity – for a financial position as strong as our market position The amount of approximately SEK 30 b. has been determined by… – Equity ratio of 40% or above – A strong payment readiness Financials | First Quarter Report | April 22 | 2002 Then finally, some words about how we determined the si
Slide 20: Consolidation of finance companies
Appendix Consolidation of finance companies Background • Previously accounted for under the equity method, now consolidated as subsidiaries as per new Swedish GAAP, valid from 2002 • Balance sheets for previous periods are restated Financial impact • Customer financing risk exposure unchanged (inclu
Slide 21: Pro-forma reporting
Appendix Pro-forma reporting • Sony Ericsson (in Q4 2001 report) Results of operations transferred to JV reported in “Share in earnings of JVs and associated companies” • Capitalization of development (new) Opening balance of previously capitalized amounts amortized during 2002 net effect on margin
Slide 22: Effects of Efficiency Program
Appendix Effects of Efficiency Program (SEK b.) Q1 02 Q1 01 Total -16,7 -19,6 Remaining Phones 0,7 0,2 Risk provisions 0,7 Finance companies 0,1 Foreign currency LC 0,1 Foreign currency SE 0,2 Total -14,8 -19,4 Change -4,6 SEK -4.6 b. adjusted for Q1 seasonality = SEK -20 b. for full year 2002 Finan
Slide 23: Cost cutting measures
Appendix Cost cutting measures Continuous improvements (based on Efficiency Program) • Excess capacity costs • Low-cost supply & production • Stricter prioritization of products and activities • R&D sites, close down/reduction and shared resources • Market Units, reduction and shared resources • Adm
Slide 24: Rights issue – time plan 2002
Appendix Rights issue – time plan 2002 April 21 Decision by the Board to propose to an EGM to authorize the Board to resolve an issue of approximately SEK 30 b. April 22 Press release of Q1, intention of rights issue June 6 EGM of Shareholders July 19 Press release of Q2 By end Q3 Rights issue carri