Ericsson CEO slides, Q3 2011€¦ · in Korea. South East Asia and Oceania • Telstra LTE project...
Transcript of Ericsson CEO slides, Q3 2011€¦ · in Korea. South East Asia and Oceania • Telstra LTE project...
20 october
2011
Helena norrmanSENIOR VICE PRESIDENT COMMUNICATIONS
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 A BETTER UNDERSTANDING OF THESE RISKS AND UNCERTAINTIES.
HANS VESTBERGPRESIDENT AND CEO
JAN FRYKHAMMARCFO AND EXECUTIVE VICE PRESIDENT
© Telefonaktiebolaget LM Ericsson 2011 | THIRD QUARTER REPORT 2011 | October 20, 2011
Mobile broadband the market driverClose to 900 million mobile broadband subscriptions, +60% YoYSmartphones, new devices, tiered pricingSolid industry fundamentals
Outsourcing high on operators’ agendasOperator focus on outsourcing of operations to reduce opex
IPR’s in focusIndustry built on shared technologiesFRAND the driving principleEricsson largest portfolio in industry – 27,000 patents
Effects of economic environment uncertainWith economic uncertainties in parts of the world, we cannot exclude somewhat more cautious short-term operator spending
© Telefonaktiebolaget LM Ericsson 2011 | THIRD QUARTER REPORT 2011 | October 20, 2011
NET SALES
› Sales +17% YoY• Organic, FX adjusted +24%
› Continued strong demand for mobile broadband
• Networks +25% YoY
› Strong services development• Global Services +7% YoY
Comparable units and adj for net FX/hedge
Y/Y +24%
Net sales
Q311Y/YQ/Q
SEK 55.5 b+17%
+1%
SEK b
0
10
20
30
40
50
60
70
80
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q32007 2008 2009 2010 2011
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profitability
› Net income +6% YoY• Positive impact from higher volumes
› Net income +18% QoQ• Positive impact from improved
operating margin
• Less restructuring
› EPS, diluted +4% YoY
• SEK 1.18 (1.14)
› Non-IFRS EPS +1% YoY• SEK 1.44 (1.42)
Net income
EPS, diluted
Net income
3Q11Y/YQ/Q
SEK 3.8 b+6%
+18%
SEKSEK b
0.0
0.5
1.0
1.5
2.0
2.5
0
2
4
6
8
10
12
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2007 2008 2009 2010 2011
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3Q
joint ventures
SEK b Ericsson share in JV earnings SEK -0.6 (0.0) bSony Ericsson SEK 0.1 (0.3) b
ST-Ericsson SEK -0.7 (-0.3) bAll numbers except 2011 excludes restructuring charges
ST-EricssonSales up +7% QoQ
Revenues from new products continued to grow - offsetting the continuous decline in sale of legacy products
Financial performance continues to be challenging
New product portfolio represented >50% of Q3 sales
Sony EricssonSales up +33% QoQ
Average selling price up +8% YoY
Android-based smartphones represented >80% of Q3 sales
Sales EUR m
Sales USD m
0500
1,0001,5002,0002,5003,0003,5004,000
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2008 2009 2010 2011
0
200
400
600
800
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2009 2010 2011
-25-20-15-10
-505
1015202530
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2007 2008 2009 2010 2011
© Telefonaktiebolaget LM Ericsson 2011 | THIRD QUARTER REPORT 2011 | October 20, 2011
networks
› Continued high sales in mobile broadband • Incl. packet core, IP routers and microwave based
backhaul
• All effects from earthquake in Japan on supply chain have been eliminated - normal lead times
› +25% YoY• Negatively impacted by strong SEK
• Positively impacted by increased CDMA sales in North America
› -3% QoQ• Negatively impacted by decreased CDMA sales in North
America
› EBITA margin decreased to 16% (21%) YoY and was flat sequentially
› Can’t exclude somewhat more cautious short- term operator spending
• With economic uncertainties in parts of the world, we cannot exclude somewhat more cautious short-term operator spending
Numbers 2011 include restructuring charges, numbers 2007-2010 exclude restructuring charges
EBITA margin
3Q11 16%
3Q10 21%
2Q11 16%
Networks EBITA
Networks sales
Sales
3Q11Y/YQ/Q
SEK 32.5 b+25%
-3%
SEK b
0
10
20
30
40
50
0%
5%
10%
15%
20%
25%
30%
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2008 2009 2010 2011
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global
services
Numbers 2011 include restructuring charges, numbers 2007-2010 exclude restructuring charges Second quarter 2009 adjusted for divestment of TEMS
› Professional Services sales +13% YoY in local currencies
• Managed Services +8% YoY currency adjusted
• 14 new managed services contracts of which 6 expansions or extensions
• 4 significant systems integrations contracts in OSS/BSS, Service Delivery Platform and data center projects
› Network Rollout sales +7% YoY, +3% QoQ• Driven by continued high volumes of network
modernization
› EBITA margin increased +3%-points QoQ• Positively impacted by increased volumes and improved
Network Rollout margins
• Still loss in Network Rollout network modernization and finalization of 3G rollouts in India,
• Impact from restructuring charges 1%-point in the quarter
› 53,000 services professionals
Global Services EBITA margin
3Q11 9%3Q10 12%2Q11 6%
Network Rollout
Managed Services
Professional Services excl. Managed Services
Global Services EBITA
Professional Services EBITA
Global Services sales
3Q11Y/YQ/Q
SEK 20.4 b+7%+7%
SEK b
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
0
4
8
12
16
20
24
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q32008 2009 2010 2011
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multimedia
Numbers 2011 include restructuring charges, numbers 2008-2010 exclude restructuring charges and adjusted for divestment of mobile platforms and PBX business in 2008. Fourth quarter 2008 excl. capital gain of SEK 0.8 b for divestment of Symbian shares.
› Back to profit
› Revenue management developed favorably YoY
› TV solutions improved QoQ• Several IPTV contract wins in the quarter
› EBITA margin improved to +11% (0%) YoY
• Increased volumes and efficiency program resulted in lower operating expenses
Multimedia EBITA
Multimedia sales
Sales
3Q11Y/YQ/Q
SEK 2.6 b+11%
+8%
SEK b
EBITA margin
3Q11 11%
3Q10 0%
2Q11 -4%
-20%
-10%
0%
10%
20%
30%
0
1
2
3
4
5
6
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2009 2010 2011
© Telefonaktiebolaget LM Ericsson 2011 | THIRD QUARTER REPORT 2011 | October 20, 2011
Regional
sales
Latin America
• Growth across all segments • Broadband coverage expansions
North America
• Slower networks business after period of high operator investments
• CDMA declined QoQ• Good services and OSS/BSS development
Northern Europe & Central Asia
• Slower infrastructure and rollout sales sequentially, mainly Russia
Western and Central Europe
• Increased network modernization and managed services sales
• Momentum for managed services and network sharing
China and North East Asia
• Growth across all segments• Capacity investments in Japan• First phase of TD-LTE trials with China
Mobile finalized• 2G expansions in China• LTE deployment with several operators
in Korea
South East Asia and Oceania
• Telstra LTE project in deployment
Mediterranean
• Network modernization projects across the region
• Spain and Greece impacted by macro instability
Middle East
• Positive mobile broadband and managed services sales development
• Easy Y/Y comparison due to supply constraints in 2010
• Political unrest
Sub-SaharanAfrica
• Sales increase driven by 3G coverage rollouts and multimedia
India
• Slower 3G investments• First TD-LTE deal in India won
3Q11Y/YQ/Q
SEK 12.1b-6%-2%
3Q11Y/YQ/Q
SEK 6.0 b+64%+22%
3Q11Y/YQ/Q
SEK 3.5 b+49%-23%
3Q11Y/YQ/Q
SEK 4.6 b+7%+6%
3Q11Y/YQ/Q
SEK 5.2 b+4%-6%
3Q11Y/YQ/Q
SEK 3.7 b+34%
+3%
3Q11Y/YQ/Q
SEK 2.5 b+40%+14%
3Q11Y/YQ/Q
SEK 2.3 b+7%
-19%
3Q11Y/YQ/Q
SEK 9.7 b+39%
+7%
3Q11Y/YQ/Q
SEK 3.7 b-3%
+23%
JAN FRYKHAMMARCFO AND EXECUTIVE VICE PRESIDENT
© Telefonaktiebolaget LM Ericsson 2011 | THIRD QUARTER REPORT 2011 | October 20, 2011
Profitability 3q
› Gross margin 35.0% (39.0%)• Down sequentially from 37.8%
• Higher proportion of coverage projects
• Accelerating network modernization projects in Europe
• Increased share of services business
• Network modernization projects in Europe, with their lower margins, will continue to accelerate in the fourth quarter. Average project duration 18- 24 months
Numbers 2011 include restructuring charges, numbers 2006-2010 exclude restructuring charges
25%
30%
35%
40%
45%
50%
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q32007 2008 2009 2010 2011
© Telefonaktiebolaget LM Ericsson 2011 | THIRD QUARTER REPORT 2011 | October 20, 2011
business mix shift
Gross margin 37.8%2Q 2011
Gross margin 35.0%3Q 2011
Accelerating network modernization in Europe
Higher proportion coverage projects- Less capacity- More LTE coverage- HSPA coverage
Higher share services sales
Business Mix
Initial phase (coverage)› Break-in and green field› Open bidding› More HW and roll-out services› Higher capital tied up› Lower margins
Expansion phase› Upgrade, capacity increase and
expansion of installed base› Shorter order cycle and projects› More SW and integration services› Lower capital tied up› Higher margins
© Telefonaktiebolaget LM Ericsson 2011 | THIRD QUARTER REPORT 2011 | October 20, 2011
Profitability 3q
› Operating expenses SEK 13.5 (13.0) b
• R&D +8% YoY due to higher planned investments in radio such as TD-LTE and IP as well as the acquired LG-Ericsson operations
• SG&A flat YoY at SEK 5.7 (5.7) b
• SG&A is typically lower in the third quarter
• SG&A/sales down -2% points YoY to 10%
› Operating margin excl JVs 11.3% (13.0%)
• Flat sequentially excl. restructuring in 2Q 2011
R&D SG&A
SEK b
Numbers 2011 include restructuring charges, numbers 2006-2010 exclude restructuring charges
EBITA margin excl JVs
Operating margin excl JVsOperating income excl JVs
SEK b
02468
1012141618
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q32007 2008 2009 2010 2011
6%
13%
25%
50%
100%
0
2
4
6
8
10
12
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q32007 2008 2009 2010 2011
© Telefonaktiebolaget LM Ericsson 2011 | THIRD QUARTER REPORT 2011 | October 20, 2011
Balance sheet ratios› Trade receivables increased QoQ to SEK 65.6 (60.2) b
› DSO 106, up 7 days QoQ, negative impact from weaker SEK and higher share of projects
› Inventory increased also this quarter, SEK 38.6 (35.1) b. Good progress in normalizing supply chain, however, remaining effects from mitigating activities taken in conjunction to the events in Japan. Also impacted by weaker SEK and higher share of projects
Days
DSO Inventory days Payables days
DSO target <90 days
Inventory days target <65 days
Payable days target >60 days
106
124 121 118106
117
133
109
88101 99
106
68
83 78 7768
7581 82
7487 89 91
5565
59 57 57 59 61 62 6270 68 67
0
20
40
60
80
100
120
140
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q32009 2010 2011
© Telefonaktiebolaget LM Ericsson 2011 | THIRD QUARTER REPORT 2011 | October 20, 2011
Change in gross cash q3 2011
Gross cash is defined as cash, cash equivalents and short term investments. Cash, as presented in the balance sheet, includes cash, cash equivalents and short term investments of a maturity less than three months. Due to different treatment of cash in the above table and relating foreign currency impact, the investing cash flow amount in the above table differs from that in other presentations of cash flows.
Operating Cash Flow
1.6 b
Investing
(excl short term investments) -3.5 b
Financing
-0.3 b
FX on cash
0.3 b
Change in net cash SEK -7.2 b (from 42.6 to 35.4 b)
Adjusted cash flow 2.4 b78.76.9 -4,5 -0.7
-3,5 -0.3 0.3
76.9
40
50
60
70
80
90
Gross Cash 1106A Net Incomereconciled to cash
Change NetOperating Assets
Restructuring Investing Activities Financing activities FX on cash Gross Cash 1109A
Change in gross cash SEK -1.8 b
SEK
© Telefonaktiebolaget LM Ericsson 2011 | THIRD QUARTER REPORT 2011 | October 20, 2011
Long Term Ambition
GROW FASTER THAN THE MARKET
BEST IN CLASS MARGINS
STRONG CASH CONVERSION
GROWTH IN JV EARNINGS
Executive Performance Stock Plan
The board of Directors will consider the impact of larger acquisitions, divestitures, the creation of joint ventures and any other significant capital event on the three targets on a case by case basis
› Net sales growth in SEK • 4-10% CAGR 2010-2013
› Operating income growth, including JVs and restructuring • 5-15% CAGR 2010-2013
› Base year 2010, excl restructuring
› Cash conversion • Above 70%, annually
© Telefonaktiebolaget LM Ericsson 2011 | THIRD QUARTER REPORT 2011 | October 20, 2011
Growth leversContinue to invest in areas of portfolio momentum
Mobile broadband
Managed Services
OSS/BSS
Market share gainPerformance year-to-date reaffirms strengthened
global market share
Acquisitions & PartneringTelcordia
Proactively managing uncertaintiesTechnology shift coincides with macro economic
uncertainties
Important to stay close to customers
Carefully monitor leading indicators
Contingency plans in place
20 october
2011