Telefonaktiebolaget LM Ericsson (ERIC-B.ST, ERIC-A.ST) shares fell sharply on Tuesday morning after the telecommunications equipment maker reported lower first-half net income and sales, while warning that rising component costs will pressure margins in its networks business.
Ericsson's attributable net income for the six months ended June 30 dropped to 4.93 billion kronor from 8.72 billion kronor a year earlier, with EPS decreasing to 1.48 kronor from 2.61 kronor. Net sales amounted to 102.02 billion kronor, compared with 111.16 billion kronor a year ago.
The company's A and B shares were both down more than 7% in early morning trading in Stockholm.
The Swedish company's key networks business posted a 4% year-over-year decline in second-quarter sales, primarily due to lower intellectual property rights revenue, which fell to 3.4 billion kronor from 4.9 billion kronor.
Chief Executive and President Börje Ekholm cautioned that the adjusted gross margin in the networks segment will see some pressure in the third quarter due to a higher volume of network rollout projects.
"In Q2, we took action to mitigate component cost inflation. As the impact builds in the coming quarters, we will continue to pursue internal measures and pricing actions to help offset the effect," Ekholm also said.
On a regional basis, organic sales grew in North East Asia, South East Asia, Oceania, India, and Europe, the Middle East and Africa in the second quarter, while sales in the Americas declined 1% from a year earlier.
