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Ericsson announces 2022 financial results, organic sales growth of 3% – small tech news

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According to news from IT House on January 25, Ericsson recently announced its financial report for the fourth quarter of 2022 and the full year of 2022.Ericsson achieved net sales of SEK 86 billion in the quarter (currently about RMB 56.9 billion)organic sales (sales adjusted by comparable units and currency) increased by 1% year-on-year; in 2022, net sales of 271.5 billion Swedish kronor (currently about 179.7 billion yuan) were achieved, and organic sales increased by 3% year-on-year.

Highlights from the fourth quarter earnings report:

  • An IP agreement resulting in total Intellectual Property (IPR) revenue of SEK 6 billion (2021: SEK 2.4 billion) and previously announced SEK 4 billion charges (including DOJ provision, IoT business transfer and cloud software and services contracts and product portfolio exits) impacted the quarter.

  • Group organic sales increased by 1% year-on-year, with intellectual property (IPR) revenue contributing 5%. Reported sales were SEK 86.0 billion (HQ 2021: SEK 73.1 billion), of which Vonage contributed SEK 4.1 billion.

  • Total revenue increased to SEK 35.6 billion (Q1 2021: SEK 30.8 billion), while gross margin decreased to 41.4% (Q1 2021: 43.2%), mainly due to changes in network business mix, previously announced contract exit charges, and Cloud software and services portfolio realignment impact.

  • EBITA excluding restructuring charges of SEK 9.3 billion (Q1 2021: SEK 12.8 billion), EBITDA margin of 10.8% (Q1 2021: 17.9%) . Earnings before interest, taxes, depreciation, and amortization (EBITA) were impacted by previously announced charges.

  • Free cash flow before M&A was SEK 16.9 billion (Q1 2021: SEK 13.5 billion), driven by inventory reduction and high cash receipts including intellectual property receipts.

  • The return on capital employed was 15.4 percent (2021: 26.6 percent), driven by lower earnings before interest and taxes (EBIT).

2022 full-year financial report highlights:

  • Group organic sales rose 3 percent, driven by 4 percent growth in Networks and 16 percent growth in Enterprise. Reported sales of SEK 271.5 billion (Q2 2021: SEK 232.3 billion).

  • Total revenue increased to SEK 113.3 billion (Q1 2021: SEK 100.7 billion), driven by growth in Networks, Cloud Software and Services, and Enterprise.

  • Earnings before interest, taxes, depreciation, and amortization (EBITA) amounted to SEK 29.1 billion (Q1 2021: SEK 33.3 billion), resulting in an EBITDA margin of 10.7% (Q1 2021: 14.3%). Earnings before interest, taxes, depreciation, and amortization (EBITA) were impacted by a previously announced charge of SEK 5.5 billion, which was partially compensated by an increase in IP licensing revenue.

  • The EBIT margin excluding restructuring charges was 10.1 percent (13.9 percent in the same period in 2021). Excluding Vonage and previously announced charges, EBIT margin was 12.9%, meeting the 2022 target of 12-14%.

  • Net income was SEK 19.1 billion (2021: SEK 23.0 billion). Diluted earnings per share (EPS) was SEK 5.62 (Q2 2021: SEK 6.81).

  • Free cash flow before acquisitions was SEK 22.2 billion (Q1 2021: SEK 32.1 billion). End 2022 with net cash of SEK 23.3 billion (2021: SEK 65.8 billion).

  • The return on capital employed was 14.0 percent (18.4 percent in the same period in 2021), driven by higher capital employed and lower EBIT.

  • The Board of Directors will propose to the General Meeting of Shareholders a dividend of SEK 2.70 per share for 2022 (SEK 2.50 per share for the same period in 2021).

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Ericsson President and CEO Börje Ekholm said:

During the quarter, we signed a multi-year intellectual property patent license agreement with a major licensee. This positive result positions us to secure additional 5G patent licensing agreements with handset manufacturers, as well as new areas such as consumer electronics and the Internet of Things.We expect substantial IP revenue growth over the next 18-24 months.

While supply chain challenges eased during the quarter, an inflationary environment remains. We still need to focus on overcoming the recent recession through commercial actions and improving the company’s cost-effectiveness.Our SEK 9 billion cost-saving actions are expected to start to pay off in the second quarter of 2023, and the profit margin of the network business in the first half of 2023 will decline due to changes in business mix. Group earnings before interest, taxes, depreciation and amortization (EBITA) in the first quarter will be slightly lower than last year, but will improve during the year.

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