Ericsson shares fell as much as 10 per cent on Thursday after the telecoms equipment maker missed second-quarter margin expectations.
The Swedish group reported a 1.3 percentage point drop in second-quarter gross margin to 42.1 per cent, which it blamed on high inflation and a shortage of chips caused by supply chain problems.
“The global supply chain situation remains challenging and inflationary pressures are strong,” said Börje Ekholm, Ericsson president and chief executive. “Combined, this results in cost increases which we work hard to mitigate.”
He said the geopolitical situation had required “proactive investments” to reduce risks to the supply chain, noting that the company would adjust its prices when contracts expired.
“The best way to compensate for cost increases is the continued investment in technology.”
Group organic sales rose 5 per cent year on year, driven primarily by 5G network rollouts and market share gains in North America and Europe. Net revenues surged 14 per cent year on year to SKr62.5bn ($5.9bn), beating analysts’ expectations of SKr61.5bn.
“With 5G, the world is experiencing the largest innovation platform to date, where anything that can go wireless, will go wireless. Ericsson is at the epicentre of this powerful trend,” Ekholm said.
However, the figures were dented by expiring licensing agreements as well as patent disputes. The group’s Stockholm-listed shares recovered slightly by midday to trade 8 per cent lower at SKr72.
Ericsson shares have lost more than a third of their value since February, when it conceded it could have made payments to terrorist group Isis in Iraq.
A 2019 internal investigation found breaches of compliance rules in Iraq, including payments for transport routes in areas that were under the control of terrorist groups, including Isis.
The company is being investigated by US regulators over the allegations, and on Thursday reiterated that it was “fully committed to co-operating with the US authorities”.
Ericsson has previously paid $1bn to settle US investigations into corruption in countries including China, Indonesia, Vietnam, Djibouti and Kuwait.
Source: Economy - ft.com
