Ericsson Pushed to Hefty Loss by Write-Downs, Restructuring Costs

By Dominic Chopping Features Dow Jones Newswires

Ericsson AB fell to a hefty net loss in the first quarter after booking provisions, write-downs and restructuring costs of 13.4 billion Swedish kronor ($1.51 billion), but said a more focused business strategy should see the company significantly improve its profitability next year.

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The supplier of wireless-communications gear reported a net loss for the three months ended March 31 of 10.9 billion kronor compared with a profit of 2.1 billion kronor a year earlier, missing analysts' expectations for a loss of 8.29 billion kronor, according to a FactSet poll. Revenue was down 11% at 46.4 billion kronor from 52.2 billion kronor.

The company said the first quarter was weighed down by 8.4 billion kronor in provisions for lower projected customer volumes, a reassessment of the value of trade receivables and additional project costs from IT & Cloud projects.

Write-downs were 3.3 billion kronor while restructuring costs in the quarter were 1.7 billion kronor. It expects full-year restructuring efforts to cost between 6 billion kronor and 8 billion kronor.

Chief Executive Börje Ekholm said: "We will intensify our efforts to reduce cost with focus on structural changes to generate lasting efficiency gains and increase cost competitiveness. Our target is to surpass previous ambitions."

"However, we need to increase investment in certain core areas to develop our product portfolio, which can temporarily increase cost levels. The more focused business strategy is expected to result in a significantly improved profitability already in 2018. Beyond 2018, we believe that we can at least double the underlying 2016 operating margin."

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Ericsson said its Networks business delivered a solid result despite lower sales, while losses in IT & Cloud and Media increased significantly in the quarter.

A decline in revenue from the licensing of intellectual property rights and lower investment levels in certain markets hit group sales, it said.

The company announced in March that it expected between 16 billion kronor and 18 billion kronor in write-downs, restructuring costs and provisions to be booked in the first quarter.

Write to Dominic Chopping at dominic.chopping@wsj.com

(END) Dow Jones Newswires

April 25, 2017 02:44 ET (06:44 GMT)