22 slides from Telefonaktiebolaget Lm Ericsson Class A's earnings presentation, Jul 19, 2016
Slide 1: Second Quarter 2016
second QUARTER 2016 July 19, 2016
Slide 2: Helena Norrman
HELENA NORRMAN Senior Vice President Chief Marketing and Communications Officer
Slide 3: Second Quarter 2016
SECOND QUARTER 2016 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 July 1
Slide 4: Hans Vestberg
HANS VESTBERG President and CEO
Slide 5: Second quarter 2016
Second quarter 2016 › Negative industry trends intensified – impacting demand SEK b. 16Q2 15Q2 16Q1 for mobile broadband in some markets Sales 54.1 60.7 52.2 › Networks and Support Solutions had a challenging quarter Operating income 2.8 3.6 3.5 › Good progress on Global Services margin recovery Ope
Slide 6: Regional sales Q2 YoY
Regional sales Q2 YoY SEK 60.7 b. -24% -8% -13% -13% -20% -10% -18% -8% -13% -6% 8% SEK 54.1 b. Lower demand for mobile broadband, mainly driven by macro development in certain markets © Telefonaktiebolaget LM Ericsson 2016 | SECOND QUARTER REPORT 2016 | JULY 19, 2016 | Page 6
Slide 7: Net Sales Q2 YoY
Net Sales Q2 YoY Region Middle East, parts of Latin America and SEK b. Africa, as well as Russia Decline in Services. Networks stable Continued 4G sales in 60.7 China stable transition 3G4G 54.1 Q215 Countries impacted EU North North East Asia South East Asia Other Q216 by macro countries America N
Slide 8: Segment summary
segment summary Networks Global Services Support Solutions SEK b. 16Q2 15Q2 16Q1 SEK b. 16Q2 15Q2 16Q1 SEK b. 16Q2 15Q2 16Q1 Sales 26.8 31.2 25.8 Sales 24.5 26.4 23.0 Sales 2.9 3.1 3.4 Op Inc 1.6 2.4 2.7 Op Inc 1.5 1.6 0.6 Op Inc -0.4 -0.2 0.2 › Sales down -14% › Sales down -7%, impacted by FX › Sal
Slide 9: Actions to further reduce cost
Actions to further reduce cost The SEK 9 b. cost and efficiency program is on track. Additional actions - Reduced R&D investments in IP - Efficiency gains from new company structure - Intensified activities to reduce CoS – adapting to weaker mobile broadband market Opex SEK 53 b. in 2H 2017 Double t
Slide 10: Jan Frykhammar
JAN FRYKHAMMAR Executive Vice President and CFO
Slide 11: Operating Income Q2 YoY
Operating Income Q2 Yoy SEK b. Q2 2015 Sales Q2 2016 10.4% -11% Opex reduced by SEK 2.1 b. Capital gain Q215 of SEK 0.3 b. 7.0% 5.9% Negative 6.3 revaluation 5.1% effect 35.1% 33.2% Larger share of coverage 3.6 Higher services share 3.8 2.8 Q215 Reported Q215 excl Sales Gross Expenses Hedges Other
Slide 12: Gross margin Q2 QoQ
Gross margin Q2 QoQ Q1 2016 Q2 2016 Q116 SEK 3.8 b. Q216 SEK 2.2 b. Global Services share from 44% to 45% 33.9% 33.3% Gradual improvement 33.2% 32.3% 30% Q116 Q116 excl IPR Services Services margin Q216 excl Q216 Actuals restructuring revenues share restructuring Actuals © Telefonaktiebolaget LM Eri
Slide 13: Cost Savings
Cost Savings Operating expenses, SEK b. excluding restructuring › Cost and efficiency program on track 70 64.4 65 63.0 › Operating expenses, ex restr, decreased YoY to 61.4 59.8 SEK 14.0 (16.1) b. 60 57.7 – Savings related to cost and efficiency program 53.0 55 – Reduced amortizations of intangible
Slide 14: Change in gross cash Q2
Change in gross cash Q2 16Q2A Operating Cash Flow Investing1 Financing FX on cash -0.7 b -3.9 b -9.3 b +1.7 bb SEK b. 65 60 +1.3 -1.4 -0.6 -1.5 55 -2.4 +2.8 50 45 61.0 -12.1 +1.7 40 Change in gross cash SEK -12.2 b. 48.8 35 30 Gross Cash Net Income Change Net Restructuring CAPEX Acquisitions, Other
Slide 15: Currency exposure
Currency exposure Sales YoY change, Q2 2016 Reported Organic and FX adj. SEK/USD Networks -14% -11% 8.80 Global Services -7% -3% Support Solutions -7% -6% 8.60 Group -11% -7% 8.40 8.20 2015 2016 Sales net exposure, 2015 8.00 7.80 SEK and JPY, 2% other, 18% 7.60 GBP, 3% Jan Feb Mar Apr May Jun Jul Au
Slide 16: Planning assumptions
Planning assumptions extracted from the q2 report › Current sales trends and business mix are expected to prevail 2H 2016 › Annual opex run rate to be reduced to SEK 53 b. (ex restructuring), in 2H 2017, compared with SEK 63 b. in 2014. › The estimate for total restructuring charges in 2016 remains
Slide 17: Hans Vestberg
HANS VESTBERG President and CEO
Slide 18: Networked Society Strategy 2020
Continued strategy execution NETWORKED SOCIETY STRATEGY 2020 Leverage - Leverage leading technology and services positions in current core business installed base – - Drive competitiveness through efficiency and optimized end-to-end cost structures competitiveness and - Upsell in network capacity an
Slide 19: Closing remarks
CLOSING REMARKS › Negative industry trends intensified – impacting mobile broadband investments › Good progress on Global Services margin recovery › Delivering on on-going cost reduction activities › In light of market development – significant actions to further reduce cost Long-term strategy and p
Slide 20: © Telefonaktiebolaget LM Ericsson 2016 | SECOND QUARTER REPORT 2016 | JULY 19, 2016
© Telefonaktiebolaget LM Ericsson 2016 | SECOND QUARTER REPORT 2016 | JULY 19, 2016 | Page 20
Slide 21: Ericsson
ERICSSON
Slide 22: Second Quarter 2016
Second QUARTER 2016 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 July 1