Ericsson Nikola Tesla d.d.
The business results of the joint stock company Ericsson Nikola Tesla in the first nine months 2006
Date: 24th October 2006
Highlights:
- Orders booked 1.252 MHRK
- Sales revenue 1.171,4 MHRK
- Gross margin 17,6%,
- Operating profit 170,9 MHRK
- Profit from financial activities 5,5 MHRK
- Profit before tax 176,4MHRK
- Net profit 141,1 MHRK
- Earnings per share 106,9 HRK
- Return on sales before tax 15,1%
- Cash flow from operating activities 113,9 MHRK
Business performance
„The results achieved in the first nine months indicate that we have continued to perform well and fully in line with our plans and expectations. All five business perspectives of Ericsson Nikola Tesla – finance, customers, competence, internal efficiency and employees – that we use to monitor the company operations show a satisfactory trend and satisfactory achievement levels.
To achieve such a good performance we have to put more effort and invest more knowledge because we operate in an environment characterized by strong competition, speedy development of new technologies, price demands and sophisticated customer requirements. I would like to emphasize innovativeness in everything we do as a key comparative advantage in the business success of the company.
We are fully aware of our obligations and responsibilities we have as a part of Ericsson corporation but we do not downplay our responsibility to all our stakeholders in terms of designing our strategic growth and development as a Croatian company. For that reason we permanently take steps that enable us to retain our good standing in the markets and create the possibility of entering new business segments. In other words, the repositioning to strong system integration, multimedia solutions, offering new products and services as well as a permanent focus on quality and cost efficiency are our priorities. In the first nine months this year we have considerablyextended our research and development activities in our R&D and other expert centers, we have employed 116 new associates and invested considerable funds into competence development, equipping new workplaces, purchase of plants and necessary tools for new, future-oriented work areas and new business segments,“says Gordana Kovačević, the president of Ericsson Nikola Tesla.
Compared to the same period last year the company achieved an 11% increase of sales revenue resulting from a larger business volume in all major markets. Orders booked are lower by 8%, but still in line with the plans and they represent a solid foundation for the realization of our objectives in the future.
The sales revenue in domestic market amounts to 336,9 MHRK,which is an increase of 15,8% compared to the same period last year.
Sales in the internal Ericsson market accomplished through the sales of knowledge of our specialists in the R&D and in the Global Service Deliver Center (GSDC) but also through the sales accomplished by units responsible for total communication solutions and services, account for an increasingly larger share in our business results. In the internalEricsson market the sales revenues are higher by as much as 24,3% compared to the same period last year and they amount to 250 MHRK.
In the Commonwealth of Independent States (CIS) market we record a sales growth of 9,4%, with achieved 396 MHRK. Impetuses for this growth are the results in Belarus market with the achieved sales revenue of 205 MHRK.
We performed well in Bosnia andHerzegovinaandinMontenegrowhere we recorded a 14% increase of sales revenue, with achieved total of 179 MHRK.
Financial indicators - profitability
As we have emphasized in previous reports, the gross margin is lower compared to last year, due to strong competition, price demand, investments into new projects and customers but also due to changes in product mix.
Despite the lower gross margin level, the operating profit considerably increased (45,4%), mainly due to lower provisions for doubtful receivables as well as income due to insurance coverage compensating for the losses in the fire incident last year. The share of selling, general and administrative expenses in total sales revenues is lower compared to the same period last year as a result of the cost-efficiency program that is carried out in the company.
The financial net is lower, due to lower interest rates and to lower yield on assets invested in investment funds.
The profit before tax is higher by 29,1% compared to the same period last year and it amounts to 176,4 MHRK.
Return on sales before tax is 15,1%.
We achieved positive cash flow from operations, amounting to 113,9 MHRK, primarily due to excellent collection of trade receivables. We expect a considerable decrease in cash flow from operations until the end of the year, when business contracts in export markets that also include customer financing, should be fulfilled.
Business situation in major markets
During summer we continued our collaboration with Vipnet, who is leader in innovations among Croatian mobile operators. Among other things we cooperate in extending the first HSDPA (High Speed Downlink Packet Access) network in Croatia. By working closely with Ericsson Nikola Tesla, Vipnet is building its leading position in broadband access to the Internet and also creates the prerequisites for further evolution of 3G network and for the introduction of multimedia services for end users. At the same time the company intensively collaborates with Tele 2, the third mobile operator, in building the GSM and UMTS network. The company's cooperation with T-HT includes upgrading the fixed network and building a network to enable a large-scale introduction of broadband services and Internet users (IP, ADSL-EDA). We also cooperate with Vodatel Croatia, a prominent domestic supplier of Internet services, in building a TriplePlay infrastructure.
In enterprise systems we concluded contracts for the delivery of solutions and equipment toFinancial Agency (FINA), Ministry of Internal Affairs (MUP), Croatian Electricity Company (HEP)and with oil company INA we concluded a Managed Services contract.
We entered the final phase of the implementation of the integrated national e-health network (for primary health care) based on a contract with the Ministry of Health of the Republic of Croatia.
In the markets of Bosnia and Herzegovina and Montenegro we signed several contracts with the operators BH Telecom, HT Mostar/HT Mobilne komunikacije, Telekom Srpska and Telekom Crna Gora. We have to emphasize the contract with HT Mostar for the modernization and extension of the fixed network. The contract includes the exchanges upgrading, Telephony soft switch and fixed-mobile convergence on a new platform with VPN service for mobile and fixed network. The significant contract with our traditional customer BH Telecom includes the extension of the mobile telecommunications network.
We performed well in the CIS market – in Russia, Belarus and Moldova. With the operator Beltelekom from Belarus we signed an agreement for the delivery of services and equipment for the fixed telecom network in Minsk. During the third quarter we also contracted large extensions of fixed telecom networks for several significant Russian customers, also the information center equipment for a customer in Moldova.
Services in the internal Ericsson market indicate an upward trend.Significant additional responsibilities received in R&D (integration-verification services and Cello packet platform) and in the GSDC (primary center for implementation servicesas well as extended responsibility in almost all segments) are a well-earned recognition confirming trust the global organization has in our company.
Company communication
Ericsson Nikola Tesla
Ericsson is shaping the future of Mobile and Broadband Internet communications through its continuous technology leadership. Providing innovative solutions in more than 140 countries, Ericsson is helping to create the most powerful communication companies in the world.
Ericsson Nikola Tesla,as an integral part of the Ericsson Group, supports the modern ways of communicating. The company’s activities include marketing and sales, research and development, design of the total communications solution, services in the multi-service and mobile networks area including the mobile Internet and complex system integration in all business areas.