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Ericsson fourth-quarter core profit hit by slowdown in U.S. business


STOCKHOLM (Reuters) - Swedish telecoms equipment group Ericsson (ERICb.ST) reported a smaller than expected rise in fourth-quarter core earnings on Friday and said the quarter, seasonally its best, had nevertheless been hit by a slowdown in its previously surging U.S. business and higher costs.

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FILE PHOTO: The Ericsson logo is seen at the Ericsson's headquarters in Stockholm, Sweden June 14, 2018. REUTERS/Olof Swahnberg

After a number of lean years, Ericsson has been boosted by the roll out of new, super-fast 5G networks, particularly in the United States over the last year.

The new networks are expected to host critical functions from driverless vehicles to smart electric grids and military communications and the United States - as well as South Korea - has been the earliest adopter.

However, sales in the high-margin U.S. dropped during the quarter and digitalization investments as well as costs related to the acquisition of Germany’s Kathrein rose.

“Due to the uncertainty related to an announced operator merger, we saw a slowdown in our North American business in Q4, resulting in North America having the lowest share of total sales for some time,” Chief Executive Borje Ekholm said in a statement.

“However, the underlying business fundamentals in North America remain strong.”

The company had previously flagged that a proposed merger between Sprint (S.N) and T-Mobile in the United States could impact their spending levels.

Ekholm said that sales growth in Asia and the Middle East has offset the topline dip in the U.S. but costs were higher and the overall gross margin fell from the previous quarter, dropping to 37.1% from 37.8% in the July-September period as acquisition and investment hit the margin in the key networks division.

The company said the acquisition of Kathrein’s antenna and filter business would weigh on margins through 2020.

Nevertheless, the company said it was on track to meet its operating margin and sales targets for 2020.

Adjusted quarterly operating earnings at the mobile network gear maker, a rival of China’s Huawei and Finland’s Nokia (NOKIA.HE), rose to 5.7 billion Swedish crowns ($600.19 million)from 2.6 billion a year earlier but were down from 7.4 billion the previous quarter.

Analysts in a poll by Refinitiv had forecast core profit of 6.9 billion Swedish crowns.

Reporting by Johannes Hellstrom; Editing by Simon Johnson


Source: Ericsson fourth-quarter core profit hit by slowdown in U.S. business

Ericsson fourth-quarter core profit hit by slowdown in US business, higher costs


An Ericsson AB employee works on 2G, 3G and 4G data networking devices during production at the company's factory in Tallinn, Estonia, on Wednesday, April 22, 2015

Peter Kollanyi | Bloomberg | Getty Images

Swedish telecoms equipment group Ericsson reported a smaller than expected rise in fourth-quarter core earnings on Friday and said the quarter, seasonally its best, had nevertheless been hit by a slowdown in its previously surging U.S. business and higher costs.

After a number of lean years, Ericsson has been boosted by the roll out of new, super-fast 5G networks, particularly in the United States over the last year.

The new networks are expected to host critical functions from driverless vehicles to smart electric grids and military communications and the United States — as well as South Korea —has been the earliest adopter.

However, sales in the high-margin U.S. dropped during the quarter and digitalization investments as well as costs related to the acquisition of Germany's Kathrein rose.

"Due to the uncertainty related to an announced operator merger, we saw a slowdown in our North American business in Q4, resulting in North America having the lowest share of total sales for some time," Chief Executive Borje Ekholm said in a statement.

"However, the underlying business fundamentals in North America remain strong."

The company had previously flagged that a proposed merger between Sprint and T-Mobile in the United States could impact their spending levels.

Ekholm said that sales growth in Asia and the Middle East has offset the topline dip in the U.S. but costs were higher and the overall gross margin fell from the previous quarter, dropping to 37.1% from 37.8% in the July-September period as acquisition and investment hit the margin in the key networks division.

The company said the acquisition of Kathrein's antenna and filter business would weigh on margins through 2020.

Nevertheless, the company said it was on track to meet its operating margin and sales targets for 2020.

Adjusted quarterly operating earnings at the mobile network gear maker, a rival of China's Huawei and Finland's Nokia, rose to 5.7 billion Swedish crowns ($600.19 million) from 2.6 billion a year earlier but were down from 7.4 billion the previous quarter.

Analysts in a poll by Refinitiv had forecast core profit of 6.9 billion Swedish crowns.


Source: Ericsson fourth-quarter core profit hit by slowdown in US business, higher costs

French business growth slows in January in wake of strikes: PMIs


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FILE PHOTO: An employee works on the automobile assembly line of Bluecar electric city cars at Renault car maker factory in Dieppe, western France, September 1, 2015. REUTERS/Philippe Wojazer

PARIS (Reuters) - French business activity expanded at a weaker pace in January than in December, a survey showed on Friday, as nationwide strikes weighed on the euro zone’s second-biggest economy.

Data compiler IHS Markit said its composite flash purchasing managers’ index (PMI) slipped to 51.5 points in January from 52.0 in December, marking a four-month low. Analysts polled by Reuters had forecast a reading of 52.0 for January.

The January reading for the dominant services sector fell to 51.7 points from 52.4 in December, reaching a four-month low, while the manufacturing PMI rose to 51.0 points from 50.4 in December.

The PMI readings remained above the 50-point level demarcating expansions in activity from contractions.

“While there were warnings of softer conditions in the service sector, linked to national railway strikes, manufacturing displayed mild signs of revival,” said IHS Markit’s principal economist Pollyanna De Lima.

“Encouragingly companies across both sectors are in buoyant mood regarding the year-ahead outlook for business activity, with optimism at a nine-month high. These upbeat growth projections continued to drive job creation and should ensure the private sector stays in expansion territory in the near-term,” added De Lima.

French trade unions have led a wave of nationwide strikes since December, in protest at plans by President Emmanuel Macron to simplify and streamline the country’s pension system.

Reporting by Sudip Kar-Gupta, Editing by Leigh Thomas


Source: French business growth slows in January in wake of strikes: PMIs



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