Telefonaktiebolaget LM Ericsson Class A · OMXSTO:ERIC_A
Telefonaktiebolaget LM Ericsson Class A — Ericsson — Q4 2013 Earnings Presentation
32 slides from Telefonaktiebolaget LM Ericsson Class A's earnings presentation, Jan 30, 2014
Slide 1: Fourth Quarter 2013
fourth QUARTER 2013 January 30, 2014
Slide 2: Helena Norrman, SVP Communications
Helena norrman Senior Vice President Communications
Slide 3: Forward-looking statements
fourth QUARTER 2013 This presentation contains forward-looking statements. Such statements are based on our current expectations and are subject to certain risks and uncertainties that could negatively affect our business. Please read our earnings reports and our most recent annual report for Januar
Slide 4: Hans Vestberg and Jan Frykhammar
HANS VESTBERg President and CEO JAN FRYKHAMMAR CFO and Executive Vice President
Slide 5: Hans Vestberg
HANS VESTBERg President and CEO
Slide 6: Key developments 2013
key developments 2013 › Growth in mobile broadband puts focus on improved user experience › Operators seek differentiation through network performance and quality › Continued transformation of operator and vendor business models › Growing momentum for IT related services business Total mobile subscr
Slide 7: Ericsson in 2013
Ericsson in 2013 › Solidified core business – Redefined small cell market – Ericsson Radio Dot – Technology partner for LTE in China – Strengthened services footprint in North America › Steps to build a leadership position in new and targeted key areas. – TV&Media - Mediaroom, IP, Cloud, OSS and BSS
Slide 8: IPR agreement with Samsung
Ipr agreement with samsung › Illustrates Ericsson's commitment to Annual IPR revenues, SEK b. FRAND principles – Ends all ongoing patent related legal disputes – Includes global patent cross licensing of cellular technologies – Impacts on Q4 sales and operating income by 10.6 SEK 4.2 b. and net inco
Slide 9: Ericsson in 2013
Ericsson in 2013 Net sales SEK b. 226.9 227.8 227.4 › Organic FX adjusted sales +5% – Business mix started to shift towards more capacity 2011 2012 2013 – New IPR agreement with Samsung – Continued structural decline in GSM in China, circuit switched core and CDMA Operating income SEK b. 25 – Sales
Slide 10: Net sales Q4
NET SALES Q4 SEK b. › Organic FX adjusted sales +4% YoY 80 › Reported sales currently under some 70 60 pressure 50 – Negative currency impact 40 – Strong mobile broadband sales in China and 30 Russia 20 – Samsung agreement added to sales 10 – Lower project activity in North America and 0 Japan Q1 Q2
Slide 11: Profitability Q4
Profitability Q4 SEK b. SEK › Gross margin improved to 37.1% (31.1%) 10 3.0 – Excl Samsung 32.9% 8 2.0 – Negative impact from FX 6 4 1.0 › Operating margin including JV increased YoY 2 to 13.5% (-5.7%) 0.0 0 – Excluding Samsung 7.7% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 -2 -1.0
Slide 12: Networks
Networks SEK b. Net sales 10 9 Q412 Q313 Q413 8 7 › Organic FX adjusted sales +3% YoY 6 5 – Samsung added sales of SEK 2.9 b. 4 3 – Strong mobile broadband sales in China and 2 1 Russia did not fully offset lower sales in North 0 North America North E Asia Latin America Middle East America and Japan
Slide 13: Networks
Networks SEK b. Net sales 10 9 Q412 Q313 Q413 8 7 › Operating income SEK 5.9 b. (2.8) b. 6 5 – Samsung added SEK 2.9 b. 4 3 2 › Operating margin 17% (8%) 1 0 – Excl Samsung 9% North America North E Asia Latin America Middle East – Improved business mix SEK b. 50 30% – Cost adaptation and portfolio s
Slide 14: Global Services
Global services Net sales SEK b. Q412 Q313 Q413 8 › Organic FX adjusted sales +1% YoY 6 – Negative FX 4 – Professional Services sales declined -1% YoY 2 – Network Rollout sales declined -8% YoY 0 › Strong growth 1H North America North E Asia India › Sales increased +13% QoQ SEK b. 30 25% › 2013 Full
Slide 15: Global Services
Global services Net sales SEK b. Q412 Q313 Q413 8 6 › Operating income SEK 2.1 (1.8) b. 4 › Operating margin 8% (6%) 2 – Improved Network Rollout margins, despite 0 negative impact from European network North America North E Asia India modernization projects SEK b. – Restructuring charges from ongoi
Slide 16: Support Solutions
Support solutions SEK b. Net sales 1.2 Q412 Q313 Q413 1.0 › Organic FX adjusted sales +35% YoY 0.8 – Samsung added sales of SEK 1.3 b. 0.6 › Reported sales +117% QoQ 0.4 0.2 – Samsung impact 0.0 – Acquired Mediaroom business, strengthened North America Latin America Middle East position SEK b. – Hig
Slide 17: Modems
modems From ST-Ericsson to segment Modems › A focused thin-modem operation with industry-leading technology and intellectual property – A new segment was established as of October 1, 2013, and the modems business is now consolidated into Ericsson › Segment Modems generated an operating loss of SEK 0
Slide 18: Regional overview
regional overview (Sales growth 2013, Q4 YoY) W & C Europe N Europe & C Asia FY +6% FY +2% Q4 -4% Q4 +23% North America Mediterranean Middle East North East Asia FY +5% FY +4% FY +12% FY -24% Q4 -19% Q4 0% Q4 +17% Q4 -16% India FY -5% Q4 +23% Latin America Sub-Saharan Africa FY 0% FY -11% Other Q4 +
Slide 19: Jan Frykhammar
JAN FRYKHAMMAR CFO and Executive Vice President
Slide 20: Sales growth – FX impact
Sales growth – FX impact SEK b. Sales growth FY 2013 80 10% 8% Reported Organic FX adjusted 70 6% 60 Networks 0% 5% 4% 50 Global Services 0% 5% 2% 40 0% Support Solutions -9% 0% 30 -2% Group 0% 5% 20 -4% 10 -6% • Major FX impact from USD, EUR, JPY and BRL 0 -8% Q112 Q212 Q312 Q412 Q113 Q213 Q313 Q41
Slide 21: P/L comments
P/L comments Business mix key to gross margin dynamics › Gross margin increased YoY to 37.1% (31.1%) Drivers – Excl Samsung initial payment 32.9% – Reduced negative effect from network modernization Business mix – coverage/capacity projects in Europe Modernization projects in Europe – Improved busin
Slide 22: Gross margin development Full Year
Gross margin development Full Year -Business mix Samsung incl modernization initial payment contracts in Europe -Efficiencies Negative Higher F/X Increased Restructuring Service share Lower Sales Support Solutions and Core 25% › Negative impact from FX on operating income (mainly gross margin) › Eur
Slide 23: P/L comments
P/L comments SEK b. 18 16 › Operating expenses SEK 16.1 (16.4) b. 14 SG&A – Excl restructuring charges and acquisitions down -6% 12 10 › Excl restructuring charges and acquisitions R&D 8 R&D 6 expenses down -9% 4 › More efficient R&D 2 0 › One-time charge of SEK -0.4 b. related to Airvana Q1 Q2 Q3 Q
Slide 24: Operating Income Bridge Q4
Operating Income Bridge Q4 SEK b. 9.1 13.5% 4.7 5.3 7.0% 8.4% -3.8 OI impact: SEK +0.6 b. or +1.4% © Telefonaktiebolaget LM Ericsson 2013 | FOURTH QUARTER REPORT 2013 | JAN 30, 2014 | Page 24
Slide 25: Balance sheet comments
Balance sheet comments › Trade receivables increased QoQ to SEK 71.0 (64.9) b. › Inventory decreased QoQ to SEK 22.8 (28.1) b. – Samsung added SEK 4.2 b. – Improved business mix and efficiency measures – DSO decreased 12 days to 97 days – ITO improved from 72 days to 62 days › Customer financing › P
Slide 26: Change in gross cash Q413
Change in gross cash Q413 SEK b. Operating cash flow Investing1 Financing2 FX on cash 80 14.6 -1.9 3.5 0.2 75 -0.3 0.2 +2.4 -1.9 3.5 70 65 60 +12.5 55 60.7 Change in gross cash SEK +16.4 b 77.1 50 Gross cash 1309A Net Income Change Net Restructuring Investing activities Financing activities FX on ca
Slide 27: Proposed dividend by board of directors
Proposed dividend by board of directors SEK › SEK 3.00 (2.75) 3.00 2.75 › In total ~SEK 9.9 (8.9) b. 2.50 2.25 › April 16, 2014, record day for payment 2.00 1.85 › In accordance with Ericsson’s dividend policy the proposed dividend reflects 2013 year’s earnings and balance sheet structure, as well a
Slide 28: Focus going forward
Focus going forward Strategy execution – profitable growth Cost and efficiency Technology and services leadership © Telefonaktiebolaget LM Ericsson 2013 | FOURTH QUARTER REPORT 2013 | JAN 30, 2014 | Page 28
Slide 29: Media and analyst activities Mobile World Congress
Media and analyst activities Mobile World Congress Wednesday February 12 Monday February 24 Financial analyst & investor pre-briefing 3:00-4:00 pm CET Media & analyst conference 08:30-9:30 am CET Ericsson guides you through its focus areas and launches. Ericsson’s hall, Fira Gran Via, Hall 2 Phone b
Slide 30: Q&A
Q&A © Telefonaktiebolaget LM Ericsson 2013 | FOURTH QUARTER REPORT 2013 | JAN 30, 2014 | Page 30
Slide 31: Ericsson
ERICSSON
Slide 32: Forward-looking statements
fourth QUARTER 2014 This presentation contains forward-looking statements. Such statements are based on our current expectations and are subject to certain risks and uncertainties that could negatively affect our business. Please read our earnings reports and our most recent annual report for Januar