Ericsson shares slump 12% after profit disappoints

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STOCKHOLM–Ericsson AB on Thursday posted a third-quarter net profit that missed expectations as lower licensing revenue and higher costs weighed on margins, though it continued to see strong 5G sales momentum primarily in North America.

The Swedish telecommunications-equipment company ERIC.A, -13.77% ERIC.B, -14.95% reported net profit attributable to shareholders of 5.21 billion Swedish kronor ($464.4 million), compared with SEK5.75 billion a year earlier, as sales rose 21% to SEK68.04 billion.

Analysts polled by FactSet had expected net profit of SEK5.7 billion on sales of SEK66.39 billion.

Overall sales of network equipment grew by 19% on the year, but margins were weighed by lower licensing revenue, with several expiring patent license agreements pending renewal, the company said. Increased component costs and investments in supply-chain resilience also negatively affected the margin, it said.

With current contracts, licensing revenue is seen at SEK1.0 billion-SEK1.5 billion in the fourth quarter, it said.

In the current inflationary environment, Ericsson said it is making pricing adjustments as well as leveraging product substitution to manage margins.

“We are dedicated to our long-term target of Ebita margin of 15%-18% no later than 2024 and we will take out costs to secure delivery of this target,” Chief Executive Borje Ekholm said.

Write to Dominic Chopping at dominic.chopping@wsj.com

This article was originally published by Marketwatch.com. Read the original article here.

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