(Reuters) -Telecom equipment maker Ericsson reported on Tuesday a first-quarter adjusted profit that beat expectations and said sales might stabilise in the second half of the year despite weak demand for 5G gear.
Operating profit excluding restructuring charges grew unexpectedly, to 4.3 billion crowns ($394.40 million) from a year-earlier 4.0 billion despite a 15% sales drop. Analysts polled by LSEG on average forecast a drop to 1.7 billion crowns.
The profit included a one-off gain of 1.9 billion crowns related to the resolution of a commercial dispute, Ericsson said.
The Swedish group said it expects the Radio Access Network (RAN) market to keep falling at least through the end of the year as customers hold back on investments, but added:
“If current trends persist, we expect our sales to stabilise during the second half of the year, benefiting from recent contract wins and the normalisation of customer inventory levels in North America.”
“In the second half, our margins should benefit from improved business mix,” it said.
The company already in January predicted markets outside China would keep weakening this year and announced new layoffs in March, having slashed costs and shed thousands of jobs in 2023 as sales slowed after years of high demand for 5G gear.
Ericsson on Tuesday forecast a gross margin excluding restructuring charges at the Networks division of 42%-44% for the second quarter of 2024. In the first quarter it stood at 44.3%.
($1 = 10.9026 Swedish crowns)
(Reporting by Olivier Sorgho in Gdansk, editing by Anna Ringstrom and Terje Solsvik)
