Ericsson Q1 sales down 7%, but net profit up 41%

Ericsson has reported a sharp decline in its first quarter sales with reductions in North America and Japan although profits rose substantially.

The company recorded first quarter revenues of SEK47.5 billion (US$7.2 billion), down by seven per cent on the previous year. Sales declined year-on-year, primarily in North America and Japan but partly offset by China, Middle East and Latin America.

The decline in sales impacted the Networks segment as well as the Global Services network rollout business.

However, net profit rose by 41 per cent to reach SEK1.7 billion. All segments also showed improved operating margins.

Gross margin increased year-on-year, primarily due to a business mix with a large share of mobile broadband capacity projects with higher hardware margins. Lower restructuring charges, increased IPR revenues and lower Network Rollout sales also contributed positively to the gross margin.

With current visibility, Ericsson warned that key contracts awarded will gradually impact sales and business mix, mainly in the second half of the year.

Political unrest prevails in parts of the Middle East and Africa and is still impacting sales. There is also an increased political uncertainty in Russia and the Ukraine. In 2013 Ericsson had SEK 5.9 billion worth of sales in Russia and Ukraine. The current political uncertainty has not impacted sales in the first quarter.