(July 12): Ericsson AB earnings beat analysts’ expectations in the second quarter, helped by cost cutting measures to counter what the Swedish company called a “challenging market environment.”

Adjusted earnings before interest and taxes rose 14% from a year earlier to 3.23 billion kronor (US$307 million or RM1.4 billion), excluding impairments, the Stockholm-based company said in a statement on Friday. That compared to an average of 2.7 billion kronor forecast by analysts surveyed by Bloomberg.

“We are continuously taking further actions as we are still in a declining market,” chief financial officer Lars Sandstrom said in an interview. “A big portion of our cost base is connected to people. We need to look into that going forward.”

Ericsson and its Nordic competitor Nokia, which reports next week, have faced a dismal telecom equipment market for years as anticipated spending on 5G technology never materialised. There are some indications that sales will stabilise this year, and Ericsson expects its US$14 billion network deal with US operator AT&T Inc will begin to pay off in the second half.

The prolonged downturn led Ericsson last year to cut about 8% of its workforce, or 8,500 staff worldwide, as it sought to reduce expenses. It announced in March it would eliminate 1,200 jobs in Sweden.

“We expect market conditions to remain challenging this year,” chief executive officer Börje Ekholm said in the statement. “However our sales will benefit during the second half from contract deliveries in North America.”

Ericsson’s net sales fell 7% to 59.8 billion kronor in the period. That beat analyst expectations of 58.5 billion kronor.

The adjusted earnings did not include an impairment the company announced earlier this month on its Vonage business. Ericsson took an 11.4 billion kronor non-cash impairment after that unit’s performance deteriorated, resulting in a net loss for the period of 11 billion kronor. It was the second writedown on the asset, which it agreed to buy in 2021, since October.

Investor AB, the investment firm run by the Sweden’s powerful Wallenberg family and Ericsson’s largest shareholder, increased its share holdings in recent months, as a stamp of approval for Ekholm’s turnaround plan.

Ericsson shares rose 6.7% to 72.44 kronor at 9:08am in Stockholm. They are up 15% so far this year.

Uploaded by Magessan Varatharaja