Ericsson has announced that the business result for the third quarter 2016 will be significantly lower than company expectations. The negative industry trends from the first half of 2016 have further accelerated, impacting third quarter 2016 numbers primarily in segment networks.
The sales decline was mainly driven by markets with weak macro-economic environment such as Brazil, Russia and the Middle East, impacting both coverage and capacity sales in those markets. In addition, capacity sales in Europe were lower following completion of mobile broadband projects in 2015.
Jan Frykhammar, president and CEO said: "Our result is significantly lower than we expected, with a particularly weak end of the quarter, and deviates from what we previously have communicated regarding market development. The negative industry trends have further accelerated affecting primarily Segment Networks. Continued progress in our cost reduction programs did not offset the lower sales and gross margin. More in-depth analysis remains to be done but current trends are expected to continue short-term. We will continue to drive the ongoing cost program and implement further reductions in cost of sales to meet the lower sales volumes."
According to the preliminary, unaudited results for Q3, sales declined by -14% YoY to SEK 51.1 (59.2) billion, driven by slower development in segment networks where sales declined by -19%. Operating income declined to SEK 0.3 (5.1) billion, including restructuring charges of SEK 1.3 billion. Current trends are expected to continue short term.
Ericsson will announce its full report for the third quarter 2016 on October 21, at approximately 07.30 CEST.