Currency headwinds wipe out Ericsson's sales gain
STOCKHOLM : Swedish telecommunications equipment manufacturer Ericsson said today that it swung into profit in the second quarter (Q2), but the strong krona wiped out sales gains.
The company, a pioneer in building the equipment that run mobile phone networks along with Finnish rival Nokia, said it earned a net profit of SEK4.6 billion (US$479 million) in Q2 compared to a US$1.0 billion loss in the same period last year due to writing down the value of a US investment.
However, net sales, which were converted into Swedish krona, slid 6% to SEK56.1 billion.
The SEK3.7 billion drop in revenue was less than the estimated SEK4.7 billion impact from the higher value of the krona relative to other currencies, in particular the US dollar.
While investors are looking at how companies are coping with the US tariffs, the drop in the value of the dollar versus most currencies is also putting pressure on firms.
'It is encouraging that Americas' growth continues, and that Europe has stabilised,' Ericsson chief executive Borje Ekholm said.
Sales in the Americas region – Ericsson's largest market – were flat in krona terms but rose 10% when correcting for currency effects and discontinued business.
European sales dipped 1% after stripping out currency fluctuations and other changes.
Meanwhile the company said its adjusted operating profit hit a three-year high due cost-cutting measures.
'We have structurally lowered our cost base and are strongly focused on delivering further efficiencies,' said Ekholm.
Ericsson shares shed more than 3% in morning trading in Stockholm, and are down more than 17% from the start of the year.
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