Ericsson: Limited impact from Covid-19 on Q2 sales

Ericsson reported Q2 2020 sales of SEK 55.6 (54.8) billion (approximately US$6.12 billion) - flat YoY for comparable units and currency. The company said the Covid-19 pandemic had a limited impact on operating income and cash flow in the quarter. There was continued momentum for 5G, especially in North America and Northeast Asia.

Börje Ekholm, President and CEO of Ericsson, states:

"The human toll caused by Covid-19, directly and indirectly through a weak economy, is increasingly clear. We continue to put safety of our people as first priority, and more than 80% of our employees are currently working from home. Despite the difficult environment we delivered a solid result. Q2 organic[1] sales were flat and gross margin[2] improved to 38.2% (36.7%) YoY, including negative effects from strategic contracts. Free cash flow before M&A improved to SEK 3.2 (1.6) b. While the effects of Covid-19 create uncertainties, with current visibility we maintain the full-year targets for the Group."

"Networks grew by 4% organically[1] and the gross margin[2] was 40.5% (41.4%), absorbing a larger share of strategic contracts including 5G volumes in Mainland China where we also took an inventory write-down. The strengthened market position in Mainland China is strategically important as this market is expected to be a driver of critical future requirements and provide us with important scale. The Chinese 5G contracts are expected to be profitable over the life cycle, but had a negative contribution to gross margin in Q2."  

"Investments in R&D have established us as a leader in 5G, with proven performance and cost of ownership benefits for our customers. We have continued to increase our market share in several markets by leveraging our competitive product portfolio. Profitability in earlier awarded strategic contracts has improved according to plan. We consider strategic contracts to be a natural part of the business and we will stop our forward looking commentary unless there is an extraordinary impact. "