• Orders booked 310,1 MHRK
• Sales revenue 280,4 MHRK
• Gross margin 26,7%,
• Operating revenue 47,4 MHRK
• Profit before tax 39,8 MHRK
• Net profit 31,8 MHRK
• Earnings per share 24 HRK
• Return on sales before taxes 14,2%
• Cash flow from operating activities 183 MHRK

The results achieved in the first quarter of 2005 do not differ considerably from our forecast. Business volume is lower compared to the same period last year, which is not suprising if we consider that the preceding year, and especially its first quarter was very good owing to the realization of contract in Belarus which was planned in the year before.

 

According to achieved net sales the top market is Croatia participating with 32% in total sales revenue. Compared with the same period last year an outstanding result was recorded in Sudan with achieved 34 MHRK. The gross margin increased due to a favorable product mix during the first quarter compared with the same period last year, however we cannot expect to retain this gross margin (level) till the end of the year.

 

The operating profit is smaller than last year due to lower business volume (net sales) and additional provisions for doubtful receivables in the markets of high-risk countries. At the same time the result from financial activities improved due to considerably smaller negative foreign exchange differences. Profit before tax rose (+10%), primarily owing to smaller foreign exchange differences and higher gross margin. Cash flow from business operations is positive and it amounts to 183 MHRK resulting from good performance both in the preceding and this year.

 

The company managed its assets equally efficiently as in the preceding periods. Inventory management was kept at level below 20 days, whereas the collection of receivables, if we exclude the financing program, was at the level of 44 days.

 

The list of prioritized investments includes further reconstruction and refurbishing of buildings, investment in new employees, customer financing to increase business volume and market share and investment in IS/IT.

The business results of Ericsson Nikola Tesla in the first quarter of 2005 are based on contracts concluded in domestic and foreign markets (Community of Independent States, Africa, Bosnia and Herzegovina) in the fixed and mobile telephony and enterprise communication systems.

 

In cooperation with VIPnet, the strategic partner of Ericsson Nikola Tesla in the Croatian mobile telephony market, we quickened the pace in further UMTS network development in Croatia; this network was put into commercial operation in January and it enabled the local users to use for the first time videotelephony and mobile broadband Internet access. Beside the maintenance contracts for systems delivered earlier, we obtained orders related to continued implementation of broadband approach (ADSL). Pursuant to them and with timely deliveries Ericsson Nikola Tesla supports T-HT in increasing considerably the number of ADSL users. The company also contracted a delivery of business system MD 110 for several hotel groups in Croatia.

 

In the traditionally largest export market of Ericsson Nikola Tesla, in the Community of Independent States (CIS), several contracts were signed totaling to more than 5 million USD. In Russia it is the extension contract for 10 transit exchanges AXE 10 for the operator MGTS, then the delivery of a number of Mini-Links for the mobile operator Bajkalvestkom and very important contract for the delivery of the first Mini Link BAS for the operator Petersburg Transit Telekom; the latter represents further penetration into the market of the Russian Federation with new technology. At the same time the company signed a contract with Beltekom, the state operator of Belarus, for the delivery of the newest, cutting-edge local exchange AXE810, Enabler application. In the same period in the CIS markets and in Uzbekistan business was concluded related to the delivery of business communication systems for several major customers.

 

In the market of Bosnia and Herzegovina the company signed a network extension contract with the GSM operator ERONET in Mostar, and also signed a network maintenance support contract with the fixed network operator Telekom Srpska.

 

When speaking of the markets in Africa, especially in Sudan, in the first quarter 2005 the company carried out the extension and modernization of 5 AXE exchanges for Sudatel, the local operator of fixed telephony.

 

Communication Ericsson Nikola Tesla