Business results of Ericsson Nikola Tesla Group in Q1 2019

Gordana Kovačević, the President of Ericsson Nikola Tesla, commented: “Ericsson Nikola Tesla Group’s business results in Q1 2019 show a continuation of stable business performance. Sales revenue amounted to MHRK 388.2, up by 13.8 % year-over-year. Services to Ericsson increased as a result of business expansion and gaining new responsibilities, primarily in 4G/5G. Our experts are engaged worldwide in numerous projects related to 5G, and in addition, part of 5G development takes place in the Company’s R&D Center. The domestic market also recorded a significant growth in sales revenue.

Croatia’s leading operators remain focused on mobile networks modernization, the preparation for introduction of 5G, and digital transformation projects. The revenue growth on the domestic market was also significantly impacted by successful implementation of the State Border Control System of the Republic of Croatia. In the markets of the Commonwealth of Independent States (CIS) and Southeast Europe, sales revenue is slightly lower compared to Q1 2018. In these markets we remain focused on implementation of the contracted projects in the field of mobile networks modernization and healthcare informatization.

Compared to Q1 2018, gross profit decreased by 2.6%, due to investments in the development and growth of Research and Development Center, and a significant increase in engagement and working capital on projects with the Group’s key customers. Operating profit is 2.2% lower due to lower gross profit, while profit before tax increased by 3.4% as a result of positive foreign exchange differences. Net profit increased by 8.6% to MHRK 32.9. A positive cash flow from operating activities was realized, amounting to MHRK 26.8, primarily as a result of collection of customer receivables. At the end of Q1 2019, total cash and cash equivalents, including short-term financial assets, amounted to MHRK 242.5. Group’s Working Capital Efficiency, expressed in Working Capital Days (WCD), was 39 days, and if we exclude services to Ericsson, Working Capital Efficiency was 95 days. Cash conversion rate was 43%.

At MWC in Barcelona, the leading global event in the world of mobile communications, Ericsson presented many projects primarily focused on 5G and Internet of Things, as well as new possibilities offered to industry and end users. The main characteristics of 5G technology include high bandwidth per user (over 1Gbps), extremely fast network response of several milliseconds, and big capacity of simultaneously connected users and devices. This is extremely important considering that 5G enables a faster digital transformation, economic growth and better business performance for companies in various sectors. Ericsson solutions enable an efficient evolution towards 5G with lower operations costs by supporting the work of 5G with LTE and Massive IoT technologies on the same equipment and same frequencies. Special attention was dedicated to the efficiency of networks operations, which is supported by automation, machine learning, and artificial intelligence.

A Swisscom network optimization project, in which our Company’s experts played a key role, was also presented in Barcelona. According to P3 measurement this network is one of the best in the world. The Company’s experts also participated in the presentation of key aspects of mobile networks evolution towards 5G and IoT on the Ericsson City Model.

In line with our strategy, we are focused on development of solutions and sales in the field of mobile broadband Internet access (4G/5G mobile solutions), Industry & Society segment (healthcare, public safety, e-Business, etc.), solutions for digital transformation and networks management. As we have previously communicated, we have been working on strategic contracts and have been investing in 5G, which will impact margins short term, but will strengthen our market position in the long term. Furthermore, we are focused on strengthening our position in Ericsson market by focusing on maintaining high performance, quality, and cost efficiency. In line with the above, we continue hiring and investing in equipment and development of strategic knowledge and skills. 

We remain focused on cost and operating efficiency and strategic risk management.“

Communications Ericsson Nikola Tesla