Ericsson issues profit warning

The Swedish telecoms company Ericsson has warned that its third-quarter profits will be “significantly lower” than expected following a sharp downturn in its mobile broadband business.

Ericsson said efforts to cut costs were not enough to offset falling sales and lower margins over the period, adding that the negative trends were likely to continue in the short term. The company said it had brought forward its preliminary results for the third quarter when it realised figures would fall short of expectations. The full report will be published on 21 October.

Sales fell 14% over the quarter to 51.1bn Swedish krona (£4.7bn), and operating income fell to 300m Swedish krona (£28m) from 1.5bn Swedish krona a year ago. Analysts were expecting sales of 53.6bn Swedish krona and income of 4.3bn Swedish krona.

Ericsson said the fall in sales had been driven mainly by markets where the economic backdrop was weak, including Brazil, Russia, and the Middle East. Sales in Europe were also affected following the completion of mobile broadband projects in 2015, the company said.

Jan Frykhammar, the president and chief executive, said: “Our result is significantly lower than we expected, with a particularly weak end of the quarter, and deviates from what we previously have communicated regarding market development.

“Continued progress in our cost reduction programmes did not offset the lower sales and gross margin. More in-depth analysis remains to be done but current trends are expected to continue short-term. We will continue to drive the ongoing cost programme and implement further reductions in cost of sales to meet the lower sales volumes.”

Ericsson ousted its chief executive officer Hans Vestberg in July following a weak performance and last week revealed plans to cut 3,000 jobs in Sweden, amounting to almost fifth of its workforce in its home market. Ericsson has about 115,000 employees worldwide.




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