Ericsson Nikola Tesla Business results for 2013 in public

The business results achieved in 2013 and the forecast for 2014 were published at the press conference. Information on the amount of the dividend proposal will be subsequently published.

Gordana Kovačević, the President of Ericsson Nikola Tesla, commented on the Company’s performance:

“Despite the challenging business environment in all markets, Ericsson Nikola Tesla in 2013 achieved excellent business results and strengthened its market position. During the year, we continued to work on numerous strategic projects and initiatives, relying on technological leadership, our employees’ skills and competences, as well as on partnership with our customers. The activities focused on the efficiency improvement and cost optimization contributed to good results, contributing to profitability increase.

Consequently, operating profit increased by 9.1%, while net profit increased by 13.7% YoY. Gross margin increased to 16.4%, primarily due to a more favorable product/service mix. Return on sales (ROS) increased to 10.7%. Total cash balances, including current financial assets, amounted to MHRK 521.2 as at December 31, 2013. The Company ended the year with a solid cash flow from operating activities, amounting to MHRK 141.2 and cash conversion of 98%. The Company has a stabile balance sheet with total assets of MHRK 1,048.1 and equity ratio of 64%.

A positive trend in sales revenues was recorded in almost all markets. In the domestic market, telecom operators continued to invest in electronic communication, primarily due to implementation of new technologies (IMS, 3G network expansion, LTE...). During 2013, we strengthened our market share in the Croatian market and achieved an increase in sales revenue, despite of an uncertain economic situation. A significant increase in sales revenue was also achieved in the neighboring countries, where, among other things, we signed a strategic contract in the area of the transformation systems for Operation Support (OSS) in Bosnia and Herzegovina market. We also worked on implementing 3G network in Kosovo and commissioned LTE in Montenegro. In CIS markets, the Company is repositioning itself, in order to adjust to the challenging and dynamic market environment. Sales revenues decreased YoY, as expected, considering the large deal with Rostelecom, which was signed and almost fully realized in 2012. The activities on modernization and building of mobile networks with the customers in Georgia and Russia, as well as on implementation of a pilot project of the healthcare information system in Armenia, are ongoing.

We continue to contribute to the vision of the networked society and Ericsson technological leadership with innovative e-Solutions such as e-Health, e-Call, e-Cadaster and land registry etc.
A significant part of our activities is related to research and development activities, and other expert activities within the Ericsson market. During the year, we have strengthened our position, which resulted in the increased business volume and new responsibilities. Sales revenue from research and development activities in the segments of advanced radio networks, platforms and fixed network servers, as well as from the other expert centers’ activities, account for 42% of total sales revenue.

In 2013, we solidified our core business, employed 160 professionals mainly on research and development activities, and marked the 60th anniversary of the collaboration with the Ericsson Corporation. We also took important steps to build a leadership position in new and targeted key areas (4G/LTE, OSS/BSS, TV and media distribution, services and cloud solutions). We are gradually increasing allocation of resources and continuously develop competencies in the specified key areas. Furthermore, we continue to stay more focused on profitable growth, higher efficiency, further working capital improvement and competitiveness.

Over time, we expect the telecommunication industry in our markets to recover. A further growth in demand for fast and ultra-fast Internet access, multimedia content and cloud services is expected.  The number of users of “smart” mobile user devices will significantly grow (smartphone and tablets). There will be a strong growth in fixed and mobile network data traffic. Mobile broadband access will continue its strong growth, by further implementing 3G and 3.5G mobile technologies, and in Croatia, by more intensive implementation of LTE Technology.
In edge and core networks, the transformation to “all IP” next generation convergent networks will continue. We also expect modernization of OSS (Operation Support System) and BSS (Business Support System), as well as the IPTV platforms.  All this will, in the end, enable the operators to provide a broad spectrum of convergent services with the emphasis on the greater end user experience.

The long term basis of our industry remains attractive and, with our strategic initiatives, we are well positioned for further supporting our customers in a transforming ICT market”.

Communications Ericsson Nikola Tesla