Ericsson Jumps as Other Markets Offset Business Erosion in China

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Ericsson Jumps as Other Markets Offset Business Erosion in China
Credit: © Reuters.

By Dhirendra Tripathi – Ericsson ADRs (NASDAQ: ERIC ) traded 6.2% higher in Monday’s premarket as the adoption of 5G wireless technology gathered pace in global markets, helping it overcome the loss of market share in China.

Excluding a sales decline in mainland China, organic revenue rose 8%. The company met its 2022 EBIT margin target of 12%-14% a year earlier than scheduled, almost hitting the top end of it.

At a consolidated level, group reported sales rose 3% year-on-year to top 71 billion Swedish kronor (around $7.7 billion) as more countries adopted 5G and more clients issued orders for network deployment. Growth was primarily driven by 5G deployments in North America and Europe and Latin America as well as by growth in digital services in Middle East and Africa. The U.S.'s contribution to quarterly net sales rose to 32% from 29% in the same period a year ago.

On the other hand, China’s contribution halved to 4% for the full year as the company found itself in the crosshairs of a trade battle between Europe and China. China had retaliated in like fashion after Europe barred the likes of Huawei and ZTE (HK: 0763 ) from contracts to build 5G network infrastrucutre owing to security concerns. Ericsson (BS: ERICAs ) laid off people in China and took a restructuring charge of 500 million kronor.

Net profit rose 41% to exceed 10 billion kronor, helped by a lower tax rate.

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