Business results of Ericsson Nikola Tesla Group in H1 2018

Gordana Kovačević, the President of Ericsson Nikola Tesla comments: “In H1 2018, Ericsson Nikola Tesla Group sales revenue amounted to MHRK 762.4, up by 7.5% year-over-year, mainly driven by higher sales revenue in the domestic market. In line with expectations, services to Ericsson record a growth, primarily due to new responsibilities in R&D as well as in the Services and Solutions Expert Centers. We have continued to invest in preparation for introducing 5G mobile communication systems, in competence development, and in testing systems. During H1, we hired 142 new experts, primarily in R&D in the field of 5G, and thus at the end of H1 Ericsson Nikola Tesla Group had 3,113 employees.

Sales revenue in the domestic market are growing since the operators have increased investments in the modernization of telecommunication networks, in order to respond to the demands of the exponential data traffic growth, while at the same time improving quality and reducing costs. At the beginning of the year, we started activities on modernization of Hrvatski Telekom’s radio access networks, which will enable the introduction of 5G technology after the necessary radio frequency spectrum is assigned. We continued to cooperate with Vipnet on the implementation of a multi-year framework agreement that also includes modernization and expansion of radio access network prepared for introduction of 5G. We have achieved good results in the Industry & Society segment as well.

The export markets showed somewhat lower sales revenue, affected primarily by the ramping down of network modernization projects and difficulties in the political and economic environment. In order to strengthen our market position, we continue with intense marketing and sales activities. During the International Economy Fair – Mostar 2018, we have presented our technology solutions for digital economy. Furthermore, with the University of Mostar we have signed an agreement on cooperation in the field of ICT, as well as in science and research activities. We have continued a successful cooperation with HT Mostar by signing further expansion and modernization of radio access network, and in order to provide an efficient support to HT Mostar, Ericsson Nikola Tesla has also opened an office in Mostar.

All key performance indicators show a positive trend. Gross profit increased by 23% year-over-year. Operating profit increased by 58.7% due to higher sales revenue, gross margin improvement, lower sales and administrative expenses and lower impact of currency development compared to previous year. Our focus on operational excellence has enabled further cost reduction and an even better utilization of resources. Net profit rose by 64.6% to MHRK 61.5. End of H1 was concluded with a lean balance sheet and an equity ratio of 36.2%. Working capital efficiency, expressed in Working Capital Days (WCD), was 24 days. A positive cash flow from operating activities was realized as a result of proactive collection of receivables from customers. At the end of H1, total cash, including short-term financial assets, amounted to MHRK 227.9.

The Company is using state aids, which are based on registering investment projects and the employment related to these projects, in line with the Investment Promotion and Development of Investment Climate Act from 2012, and the Investment Promotion Act from 2015. In parallel, the Company was granted the maximum amount of MHRK 20 for a project of energy renewal of our buildings and plants, in the framework of financing selected project proposals submitted under the invitation “The increase of energy efficiency and renewable energy sources in manufacturing industries”. The funds are to be used by the end of 2020. This project will enable annual savings of more than 4.6 million kWh and at the same time reduce CO2 emission by nearly 1400 tonnes. The project is worth more than MHRK 73 and will be completed within three years.

In line with our business strategy, we continue to strengthen our position in strategic areas:  4G/5G mobile solutions, OSS/BSS, Digital Transformation, Managed Services, IoT and Industry & Society segment. We work closely with our customers to define the optimal business models to enable them new sources of revenue and high quality of end user experience. 

Furthermore, our strategic focus is placed on gaining new responsibilities and projects as well as strengthening competitiveness on the global Ericsson market.

In order to respond to a challenging market environment, we adapt our organization and our ways of working, encourage innovativeness and invest in new technologies and the development of new knowledge and skills. We will continue to focus on strategic risk management, cost and operating efficiency.”

Communications Ericsson Nikola Tesla