Ericsson Nikola Tesla Group business results for the first nine months of 2021

In the first nine months 2021, all Ericsson Nikola Tesla Group key performance indicators recorded growth and show a continuation of excellent business results.

Gordana Kovačević, the President of Ericsson Nikola Tesla, commented:

"We have closed another successful quarter, during which we have continued to achieve excellent business results and position ourselves as the market leader in new technologies. The most significant event of the third quarter that will impact on the overall telecom market of the Republic of Croatia, was a public auction of the frequency spectrum for 5G network (700 MHz, 3600 MHz, and 26 GHz), held in August. By allocating 5G spectrum, for the operators in Croatia a new chapter was opened in the implementation of 5G technology, which has the potential to transform our economy. We shall therefore, in cooperation with all the stakeholders of the ecosystem, which includes key operators, industry, public administration and education sector, in the best way possible, try to use 5G innovation potential to create new opportunities and revenues in various sectors. This is the only way in which we can secure sustainability and global competitiveness of our economy, in addition to creating new job opportunities.

Compared with the first nine months of 2020, sales revenue increased by 6.2%, and revenue growth was recorder in all market segments. With the export share of 52.4% in total sales results, the company is highly ranked on the list of Croatia’s largest exporters. Gross margin records a significant increase to 11.5% (first nine months of 2020: 8.7%), because of business mix, lower transition and transformation costs, and the effect of operating and cost efficiency programs. As a result of higher gross profit and retaining selling and administrative expenses at the approximately same level year-over-year, the operating profit increased by 73.3% to MHRK 132.2, while net profit increased by 70.9% to MHRK 114.7. A strong cash flow from operating activities was also realized, amounting to MHRK 235.3, and thus cash and cash equivalents, including the short-term financial assets, at the end of third quarter amounted to MHRK 400.9.

In the domestic market, our partners Hrvatski Telekom and A1 Hrvatska have continued to strongly focus on further 5G network development and the possibilities that 5G network implementation will offer to business sector and private users. The strategic cooperation with A1 Hrvatska on the implementation of 5G radio access network was expanded to the implementation of convergent 5G core solution, which is an important step towards the realization of full 5G user experience. With Hrvatski Telekom, we have continued a successful cooperation on the introduction of 5G technology and the development of fiber access network. Immediately after the allocation of radio-frequency spectrum for 5G, Hrvatski Telekom and A1 Hrvatska launched the full implementation of 5G across Croatia. Our company, as the provider of solutions, equipment, and services for 5G, provided an extensive support to operators in this demanding process. We are proud of the fact that we are recognized and valued as a reliable partner, who can provide the best user experience for the customer, on quality and safe infrastructure.

In ICT for Industry & Society, we have signed new contracts with the Croatian Ministry of Justice and Public Administration, State Geodetic Administration, and the Ministry of the Interior of the Republic of Croatia. We have been intensely working on innovative solutions in e-Health, e-Business, and public safety, thus strengthening our overall business results.

We have also made a step forward in e-Environment (Industry 4.0), which we have recognized as a strategically important segment in regard to new business opportunities, as well as our additional contribution to environmental protection. With the Ministry of Economy and Sustainable Development, and the Croatian Agency for SMEs, Innovations, and Investments, we have signed a contract for the grant from EU Structural and Investment Funds with the aim to implement WaterQ project (digital transformation of water quality monitoring).  The company “Elektroprivreda Hrvatske zajednice Herceg Bosne d.d. Mostar“ has chosed our ICT solution that will enable predictive analytics for the purpose of improving environmental protection and sustainable development.

The political and economic situation in certain export markets, such as the Belarussian market, remained unchanged since the last report. Respectively, we have been increasingly monitoring and estimating potential obstacles in business performance, as well as other business risks. We have given special attention also to disruptions in global supply chain and take certain measures to mitigate the negative impact on our contractual obligations on all markets. We expect that delivery issues will continue to represent a risk.  Our integrated system of business risk management - Enterprise Risk Management, that has been a part of our management system for many years, and that we are continuously improving, makes it easier for us to perceive and mitigate potential business risks. We believe that, in addition to knowledge and skills, it is precisely our organizational culture – professionalism, respect, perseverance and integrity in doing business –what allows us to achieve good business results, even in challenging times.

During Q3, we have continued a quality cooperation with our major customers in export markets, focusing on timely delivery of contracted business deals, and new business opportunities.

The delivery of services to Ericsson has been continuously growing, and all the activities are ongoing as planned. At the recently held regular semi-annual R&D Management Business Review (OSG) meeting, a high level of satisfaction of internal users/sponsors of our R&D Center was once again confirmed in all categories and all business segments. The maturity and excellence of R&D Center according to technology, operational, collaboration and other criteria determines the business future, retaining of the existing and gaining new business and responsibilities, as well as positioning within the global R&D community. Our goal is to be the first choice of our sponsors for the expansion and taking over new responsibilities in propulsive, highly valued areas, and we can achieve this through knowledge and innovation, and quality of deliveries. Considering that services to Ericsson, on which the experts from R&D and other experts center work on (Networks, Digital services, including Media and Operations, ICT for Industry & Society, IT&Test Environment Operations), in addition to strategic importance, also account for 40% of the company's total revenue, this R&D Centre’s accomplishment is especially important.

We have continued the activities of Ericsson Nikola Tesla Group’s digital transformation with the aim to simplify and further automate processes, as well as improve user experience, in order to be an even more efficient and quality partner for our customers.

When we talk about the business trends, it is clear that the impact of COVID-19 pandemic continues to strongly reflect on all spheres of life and work. In operator segment, globally and locally, great efforts and investments in mobile network development continue. State administration bodies, companies and individuals demand better connectivity and service availability at any time and from any location. Therefore, it is necessary to encourage investments in faster introduction of high-capacity infrastructure, such as 5G, with the simultaneous improvement of availability, which will create prerequisites for society’s digital transformation.

The challenges caused by the pandemic have once again showed that people are the strength of Ericsson Nikola Tesla Group. In addition to the prevention measures we have been undertaking with the aim to protect our employees’ health, such as organizing vaccination, we remain focused on the care of other employee work conditions and benefits. The program PrevENTion, that we initiated with the purpose of a comprehensive approach to employee health, has received a very positive feedback. We continue the program with a series of lectures on healthy lifestyle, exercising workshops, as well as group and individual discussions with the aim to strengthen employee mental health.

The results realized during the first nine months, in addition to strong leadership and the dedication and motivation of our employees, support our belief that the Group's 2021 targets will be achieved. We continue the activities to realize contracted business, with a strong focus on quality, risk management, profitability, and operating cash flow.  We have been continuously improving our ethics and compliance program, with the aim to further strengthen the company’s culture based on integrity, compliance governance, and fighting corruption.

Furthermore, to stay competitive, we have been investing in strategic areas, development of new solutions and products, as well as competence development, and have continued hiring. In 2021, we hired 347 experts, and I would like to use this opportunity and invite ICT experts who are interested in working on interesting jobs, especially in software development, to join us.

The role of ICT industry has been growing and will continue to grow as a platform that will enable development, connectivity and create new opportunities for industries and individuals. In addition to the recognized Ericsson technology leadership in 5G, innovative solutions and products developed in Ericsson Nikola Tesla and the quality of our experts, which has been additionally verified on numerous projects worldwide, Ericsson Nikola Tesla is, and will remain, an important factor in creating a comprehensive 5G ecosystem. Therefore, our focused strategy with a vision of a world where unlimited connectivity and innovative ICT solutions improve lives, redefine business and create a sustainable future, remains unchanged and gains additional momentum.“