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Ericsson hits profitability target early, shareholders press for more

Börje Ekholm 995x559.jpg

Ericsson has posted an operating margin on 12.5% in its latest financial results, confirming the attainment of its 2022 profitability target two years ahead of schedule.

Ericsson reported an operating margin of 12.5%, which it said, "exceeded our 2020 target and reached the 2022 group target range two years early".

However, one shareholder is pushing the firm to aim higher.

Speaking to Bloomberg this morning, Ericsson president and CEO Börje Ekholm (pictured) relayed that Cevian Capital, which holds 339,228 Ericsson shares according to the latest shareholder information online, said the targets are too low.

Ekholm responded: "Do you agree? They would never say it is too high. The reality is we are focused on executing on this plan, and the turnaround, and our strategy. That involves continued investment in R&D for technology leadership and with that coming increased market share which we see pay off in margins.

"We haven't spent a lot of time looking at the goals for 2022 … we remain committed to those and we don't intend to revise them."

In Q4, networks drove operating income to SEK11 billion, a margin of 15.8%, from SEK6.5 billion (9.7% operating margin).

Sales adjusted for comparable units and currency grew by 13% year on year, again driven by sales in North East Asia, along with Europe and North America. Gross margin excluding restructuring charges improved to 40.6% (37.1%) with margin improvements in all segments.

Looking at the full year, sales adjusted for comparable units and currency grew by 5%, with networks growing by 10%. Reported sales increased by 2% to reach SEK232.4 billion.

Free cash flow before M&A amounted to SEK22.3 billion and referenced the 2019 payment of SEK10.1 billion related to SEC and DOJ investigations in the US.

The board of directors will propose a dividend for 2020 of SEK 2.00 (1.50) per share to the AGM.

When asked about tensions between China and the west and how this could impact global 5G standards – a topic the CEO has been particularly vocal on – Ekholm warned: "I think there is with geopolitical tension a risk you can fragment that global standard. 

"Today you can travel with one device around the world and you can connect anywhere. Only a few years ago you needed multiple devices to travel the world…. I do believe this global standard has a lot of consumer benefits. But maybe more important is that global scale has driven down equipment and device prices to a level where almost every country in the world can afford to have connectivity, and that is a huge win for the world traveller.

"Anything that risks that global standard is a risk for the global economy."

 

 

 

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