Ericsson 2Q Weighed On by Lower Licensing Revenue and Higher Costs

By Dominic Chopping

STOCKHOLM--Ericsson AB on Thursday posted a second-quarter net profit that missed expectations, but said it continued to see strong 5G sales momentum in North America and Europe.

The Swedish telecommunications-equipment company reported net profit attributable to shareholders of 4.5 billion Swedish kronor ($426.3 million), compared with SEK3.68 billion a year earlier, as sales rose 14% to SEK62.47 billion.

Analysts polled by FactSet had expected net profit of SEK5.27 billion on sales of SEK61.36 billion.

Overall sales of network equipment grew by 15% on the year, though margins were weighed on by lower licensing revenue, with several expiring patent license agreements pending renewal, the company said. Increased component and logistics costs and proactive investments in supply-chain resilience also negatively affected the margin, it said.

With current contracts, licensing revenue is seen at SEK1.0 billion-SEK1.5 billion in the third quarter, it said.

The global supply-chain situation remains challenging and inflationary pressures are strong, resulting in cost increases that the company is working to mitigate as far as possible, including adjusting pricing as contracts expire, it said.

"Fulfilling customer commitments under current challenging conditions, comes at a cost which dilutes gross margin," Chief Executive Borje Ekholm said.

"We expect a gradual reduction in inventory towards the end of the year."

Write to Dominic Chopping at [e-mail]

(END) Dow Jones Newswires

July 14, 2022 02:14 ET (06:14 GMT)

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