- Ericsson ERIC shares are down Tuesday premarket following its first-quarter results. The company continues to see a choppy environment during 2023 with poor visibility.
- ERIC reported a first-quarter FY23 sales growth of 14% year-on-year to SEK 62.6 billion.
- Group organic sales remained intact Y/Y. Networks organic sales declined by -2%, driven by lower operator capex and inventory optimization among multiple customers.
- It reported an EPS of SEK 0.45 versus SEK 0.88 last year.
- Adjusted gross margin contracted 250 basis points to 39.8% due to business mix changes in Networks.
- Adjusted EBIT margin declined by 230 bps to 6.4% as the adjusted EBIT declined 16% Y/Y after some of its major customers for 5G networks pulled back on spending.
- Adjusted EBITA declined 3% Y/Y to SEK 4.8 billion.
- CEO Börje Ekholm said, "As expected, customers in early 5G markets have slowed the deployment pace somewhat. Our effect on sales is bigger as some customers have also lowered the elevated inventory levels built up in a tight supply environment. We expect this inventory adjustment to be mostly completed during Q2 but may spill into Q3. Significant growth from large roll-out projects did not fully offset the sales impact from early 5G markets."
- Outlook: Ericsson expects a gradual recovery in the second half of 2023, primarily as it expects the inventory adjustments to be over and cost reduction activities to start flowing through the P&L.
- For 2024, Ericsson expects restructuring charges to normalize to about 0.5% of sales.
- CFO Transition: CFO Carl Mellander will step down at the end of the first quarter of 2024. Mellander has been with Ericsson for over 25 years and has been a member of its Executive Team since 2016.
- Ericsson will launch a recruitment process to appoint a successor.
- Price Action: ERIC shares traded lower by 5.07% at $5.62 in premarket on the last check Tuesday.
- Photo Via Company
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