The Swedish manufacturer of telecommunications equipment, Ericsson, received a large loss due to write-offs and restructuring expenses.
According to the publication MarketWatch, referring to the financial statements of Ericsson, in the first quarter of 2017 the company received a net loss of 10.9 billion Swedish kronor (1.2 billion dollars), while a year earlier there was a profit of 2.1 billion crowns. Analysts polled by FactSet expected losses of 8.29 billion kroons.
Ericsson's sales declined 11%, from 52.2 billion kroons in January-March 2016 to 46.4 billion kronor (5.2 billion dollars) a year later.
The company noted that in the first quarter of 2017, 8.4 billion kronor ($ 953 million) was written off due to lower sales volumes than expected values, revaluation of trade receivables and additional expenses for projects in the field of information technology and cloud Calculations.
In addition, 3.3 billion kronor ($ 373 million) was additionally charged and 1.7 billion kronor ($ 193 million) was spent on restructuring. According to the company's forecasts, in 2017 the restructuring costs will be measured at 6-8 billion kroons (681-908 million dollars).
"We will increase our efforts to reduce costs by focusing on structural changes to achieve long-term efficiency gains and improve cost competitiveness. Our goal is to surpass our old ambitions, "says Ericsson CEO Borje Ekholm,. "Nevertheless, we need to increase investments in some key areas for the development of our product portfolio, which may temporarily increase costs.
A more focused business strategy is expected to lead to a significant increase in profitability as early as 2018 ".
Borye Ekholm leads Ericsson in early 2017. One of the first steps that the new CEO made was the reduction of dividends for the first time in eight years. Due to this, the company will receive an additional stock of funds necessary to restore sales in the face of strong competition and weakening demand in telecoms. In addition, Ekholm transformed the governance structure and reduced the number of geographical divisions from ten to five.