29 slides from Telefonaktiebolaget Lm Ericsson Class A's earnings presentation, Jan 27, 2015
Slide 1: Fourth Quarter 2014
fourth QUARTER 2014 January 27, 2015
Slide 2: Helena Norrman, Senior Vice President Communications
HElena norrman Senior Vice President Communications
Slide 3: Note on sales adjusted for comparable units and currency
The line item “Sales adjusted for comparable units and currency” includes adjustments for full year 2013 by SEK 2.1 b., and for Q4 2013 by SEK 3.7 b. for the initial IPR payment from Samsung. The adjustments impact segments Networks and Support Solutions. Commentary made on gross margin and operatin
Slide 4: Fourth Quarter 2014 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
Slide 5: Hans Vestberg, President and CEO
HANS VESTBERg President and CEO
Slide 6: Key market developments 2014
key market developments 2014 › Consumer demand and mobile data traffic growth continue to be strong globally › Continued high operator focus on network performance as a differentiator – capacity enhancements, densification › Increased operator focus on network virtualization and cloud drives need fo
Slide 7: Ericsson in 2014
Ericsson in 2014 › Excel in core business – Increased capacity business – First commercial Ericsson Radio Dot system – Accelerating growth in Professional Services › Establish leadership in targeted areas – Good progress – sales grew >10% › Proactively implement efficiency measures – reduce cost by
Slide 8: Ericsson FY 2014
Ericsson FY 2014 › Organic FX adjusted sales -2% – Decline in North America of -8%, compensated by growth in the Middle East, Europe and Asia › Operating margin improved in core business – Higher share of capacity sales and efficiency enhancements – Partly offset by hedge losses, investments in targ
Slide 9: Ericsson Q4 2014
Ericsson Q4 2014 › Organic FX adjusted sales -2% YoY – Strong sales growth in the Middle East, Europe and Asia was offset by a continued decline in North America – North America slowed as operators remained focused on cash flow optimization to finance major acquisitions and spectrum auctions – 8 out
Slide 10: Regional sales Full year 2014
Regional sales Full year 2014 Decline in North America compensated by growth in other regions © Telefonaktiebolaget LM Ericsson 2015 | FOURTH QUARTER REPORT 2014 | JANUARY 27, 2015 | Page 10
Slide 11: Regional sales Q4 YoY
Regional sales Q4 YoY Growth in 8 out of 10 regions – supported by currency tailwind © Telefonaktiebolaget LM Ericsson 2015 | FOURTH QUARTER REPORT 2014 | JANUARY 27, 2015 | Page 11
Slide 12: Jan Frykhammar, CFO and Executive Vice President
JAN FRYKHAMMAR CFO and Executive Vice President
Slide 13: Fourth quarter
Fourth quarter › Gross margin improved YoY and QoQ – Driven by higher software sales and efficiency enhancements – Negative impact from increased LTE coverage projects – QoQ positively impacted by higher IPR revenues – Large share of project completions › Operating expenses increased YoY to SEK 17.8
Slide 14: Sales growth – FX impact
Sales growth – FX impact Major FX exposure: USD, EUR and JPY Strong FX tailwind on net sales in the quarter, driven by weakened SEK © Telefonaktiebolaget LM Ericsson 2015 | FOURTH QUARTER REPORT 2014 | JANUARY 27, 2015 | Page 14
Slide 15: Operating Income YoY
Operating Income YoY Strong development in software sales and efficiency enhancements © Telefonaktiebolaget LM Ericsson 2015 | FOURTH QUARTER REPORT 2014 | JANUARY 27, 2015 | Page 15
Slide 16: Currency hedge effect
Currency hedge effect › Contracts valued at SEK/USD closing rate December 31, SEK 7.79 (September 30, SEK 7.27) › Vast majority of hedging stock in USD › New hedge accounting policy since 2013 › SEK/USD closing rates published on home page Rule of thumb: SEK/USD +/- SEK 0.25 equals approximately -/+
Slide 17: Change in gross cash FY 2014
Change in gross cash FY 2014 Change in net cash SEK -10.2 b. (from SEK 37.8 to 27.6 b.) Net cash decreased – revaluation of post-employment benefits 1Excluding short-term investments © Telefonaktiebolaget LM Ericsson 2015 | FOURTH QUARTER REPORT 2014 | JANUARY 27, 2015 | Page 17
Slide 18: Hans Vestberg, President and CEO
HANS VESTBERg President and CEO
Slide 19: Networks
Networks › Organic FX adjusted sales -7% YoY – Growth in 7 out of 10 regions – Slow mobile broadband business in North America › Organic FX adjusted sales increased 7% QoQ – North America declined -27% – Strong growth in Japan, Taiwan and mainland China › Operating income SEK 4.3 b. – Improvement dr
Slide 20: Global services
Global services › Organic FX adjusted sales increased 5% YoY – Growth in 9 out of 10 regions – Strong growth in Professional Services – Network rollout (NRO) sales were flat › Organic FX adjusted sales increased 20% QoQ – High project activity in NRO and strong growth in Professional Services › Oper
Slide 21: Support solutions
Support solutions › Organic FX adjusted sales -5% YoY – Transition of business models continues › Organic FX adjusted sales increased 25% QoQ – Good development across the product portfolio › Operating income SEK 0.4 b. – Operating income recovered › 2014 full year – Organic FX adjusted sales -2% –
Slide 22: Modems
modems › All development of new modems discontinued – End-of-life agreements were signed in the quarter › Good progress was made in the quarter and activities are ahead of plan › Operating loss of SEK -0.1 b. in the quarter © Telefonaktiebolaget LM Ericsson 2015 | FOURTH QUARTER REPORT 2014 | JANUAR
Slide 23: Proposed dividend by board of directors
Proposed dividend by board of directors › SEK 3.40 (3.00) – Growth of 13% › In total ~SEK 11.2 (9.7) b. › Record date: April 16, 2015 The proposed dividend reflects the earnings and balance sheet structure in 2014, as well as coming years’ business plans and expected economic development – in line w
Slide 24: Transformation
transformation High pace of Networked Society strategy implementation © Telefonaktiebolaget LM Ericsson 2015 | FOURTH QUARTER REPORT 2014 | JANUARY 27, 2015 | Page 24
Slide 25: Summary
summary › Global footprint, in 180 countries, gives scale and strength to manage regional variations › Improved profitability driven by software sales and efficiency enhancements › In mainland China the majority of the business in the quarter was related to the continued LTE deployments › With curre
Slide 26: Mobile World Congress
Mobile world congress March 2-5, Hall 2 Fira gran via, barcelona Our theme for this year: “We enable change-makers in the Networked Society”
Slide 27: Q&A
Q&A © Telefonaktiebolaget LM Ericsson 2015 | FOURTH QUARTER REPORT 2014 | JANUARY 27, 2015 | Page 27
Slide 28: Ericsson
ERICSSON
Slide 29: Fourth Quarter 2014 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