© Reuters. FILE PHOTO: A logo of Ericsson is seen outside the company’s office in Kanata, Ontario, Canada April 17, 2023. REUTERS/Lars Hagberg
By Martin Coulter
LONDON (Reuters) -Sweden’s Ericsson (BS:) reported a 62% fall in second-quarter adjusted operating profit on Friday, slightly beating market expectations.
The Swedish telecom equipment maker’s operating profits, excluding restructuring charges, fell to 2.8 billion Swedish crowns ($271 million), compared with 7.4 billion the previous year.
“Building on our strong position and despite challenging market conditions we delivered a solid quarter – meeting expectations,” said Börje Ekholm, president and CEO of Ericsson. “We continue to execute with discipline and focus without losing sight of the long term.”
Citing increasing demand for 5G, Ekholm predicted the market would undergo a “gradual recovery” in late 2023, and improve in 2024.
Net sales rose 3% to 64.4 billion crowns and topped the 63.9 billion expected by analysts, Refinitiv Eikon data showed.
Ericsson’s reported gross margin for the second quarter fell to 37.4% from 38.6% the previous quarter.
In recent months, Ericsson has cut costs to mitigate lower spending among its telecom operator customers, announcing plans to layoff 8,500 employees in February. It expects to save another 2 billion crowns ($193 million) in costs.
On Friday, the company said the impact from such cost-cutting activities would be “increasingly visible” over coming quarters.
Richard Webb, analyst at CSS Insight, told Reuters the company’s quarterly earnings were “Okay, but not stellar”.
“It’s a little lukewarm,” said Webb, noting that Ericsson’s business strategy may take until the end of the year to show results.
“In a couple of quarters, we’ll be in a better position to judge how their strategy is working. I remain cautiously optimistic.”
($1 = 10.3374 Swedish crowns)