Ericsson beats hopes due to margin boost

City A.M. Reporter
THE World’s largest mobile network gear maker Ericsson reported first-quarter core profit above expectations yesterday as it got a boost from higher margin network projects.

But it warned that operators remained cautious on spending due to the weak global economic outlook.

Earnings before interest and tax, excluding the company’s loss-making joint ventures, but including restructuring charges, were 2.8bn (£257m) Swedish crowns versus a mean forecast of 2.5bn.

The telecoms equipment market recovered strongly through most of 2011, but the final quarter saw renewed concern about global growth and, for Ericsson, a shift in business that cut deeply into margins.

The first quarter saw no change in the trends and sales in the company’s key networks unit were down 18 per cent year-on-year.

“In the quarter, business trends from H211 (the second half) prevailed with cautious operator spending in regions with macro-economic or political uncertainty,” the company said in a statement.

Total sales were 51bn crowns against a forecast of 52.9bn.

Ericsson’s gross margin did improve, however, to 33.3 per cent from 30.2 per cent, accounting for the positive profit surprise.

The company said the quarter-on-quarter rise in gross margin was due to seasonal effects, a greater share of higher margin capacity expansion projects and a lower share of services business.