Alcatel-Lucent narrows Q2 net losses to €298 million

Alcatel-Lucent continues to reap operational benefits from its ‘Shift’ plan, while LTE rollouts in US and China helped strengthen the company’s top line in Q214.

The second quarter saw the company reducing fixed costs by €94 million (US$126 million). It takes cumulative fixed cost-savings, under the Shift plan, up to €572 million.

The plan, hatched by CEO Michel Combes last year, has the target of cutting costs by €1 billion and drumming up €1 billion in asset sales as it focuses on cloud computing, ultra-broadband and IP networking.

Cost-savings helped boost gross profit margin to 32.6 per cent, while adjusted operating income trebled to €136 million.

Significantly, Alcatel-Lucent’s access business, driven by 4G growth in the US and China – and which accounts for around 60 per cent of group turnover – moved into profitable territory (€11 million).

True, this is on an adjusted operating income basis, but it is still better than the previous quarter loss of €37 million, and much better than the Q213 loss of €75 million.

Operational improvements were not enough to prevent a sizeable net loss of €298 million for the period. Although this was much smaller than the €885 million net loss posted a year earlier.

On a like-for-like basis, Alcatel-Lucent said group sales were up 0.7 per cent, to €3.28 billion. If you take out the decline in managed services revenue – the company is in the process of terminating or restructuring loss-making contracts – then group revenue, year-on-year, would have increased by five per cent.

Sales from the Asia-Pacific region were up an eye-catching 25.2 per cent, to €667 million, driven by LTE network rollouts in China. The performance helped cushion a 10 per cent drop in core IP networking revenues, to €1.37 billion, on a group-wide basis.

Alcatel-Lucent said it would pay back a €1.6 billion loan next month, which was taken out in 2012 and secured against group patents.

To raise more money, an IPO of Alcatel-Lucent’s submarine networks division is planned for H115, although the company will maintain a majority stake.