Ericsson Nikola Tesla business results achieved in 2016 and the forecast for 2017 were published at the press conference.
Gordana Kovačević, President of Ericsson Nikola Tesla, comments:
“In 2016 Ericsson Nikola Tesla Group continued with a series of its successful business years. Sales revenue increased by 16.7% year-over-year due to strong revenue growth in CIS market and continued growth of revenue in Ericsson market.
2016 will be remembered by signing of important contracts in export markets with three new customers: beCloud in Belarus, Ucom in Armenia and the Ministry of Healthcare in Kazakhstan. All three are very demanding projects regarding LTE technology and healthcare informatization. Furthermore, our Research and Development Center, Global and Regional Expert Centers for Services and Customer Solutions Centers received new responsibilities within the global corporation, which shows that the quality and added value that we deliver have been recognized by the corporation and among customers worldwide. In line with that, we continued to hire, employing 318 experts in 2016. We remain the largest Research and Development center in Croatia, currently employing more than 1200 people, while Ericsson Nikola Tesla Group has almost 3000 employees. We have kept our position of the largest Croatian ICT exporter, and the largest exporter of knowledge.
In Southeast Europe markets, sales revenue decreased due to negative economic trends and political turmoil, which slowed down operators’ investments. Competition and pervasive trends of consolidation and centralization of sourcing processes by global customers/operators are main challenges on domestic market.
We are pleased to have kept strong position and customers’ trust in Croatia and the region, above all by working with our traditional partners, such as: Vipnet, Hrvatski Telekom, HT Mostar, BH Telecom, Crnogorski Telekom and Ipko.
In the domestic market, I would like to highlight a surge in ICT Solutions for Industry & Society. Among key projects, we should mention continuing collaboration with the Ministry of Healthcare of the Republic of Croatia on implementing new functionalities, such as eHealth Record and Portal for Patients. We are proud of the Joint Information System of Land Registry and Cadaster project, which was fully realized at the end of the year, meaning that all land-registry and cadaster offices in Croatia have been connected in a single information system. One of the last signed projects in 2016 is a strategically important project in the field of public safety. It is the project of building the Republic of Croatia border control system, which was realized in record time in mid-January 2017. All these activities demonstrate that our Networked Society Strategy is not just a vision, but real projects changing the world we live in.
Our daughter company, Ericsson Nikola Tesla Servisi d.o.o., records solid business results. In the last two years, the company went through demanding transformation processes, whilst implementing complex network build and maintenance projects for Hrvatski Telekom.
Risk Management is very high on our list of priorities and is essential for sustainability of our business as a whole. In order to mitigate business, market and financial risks in the export business, we have successfully expanded cooperation with the Croatian Bank for Reconstruction and Development (HBOR) and commercial banks. In this way, we have met our customers' needs for financing and, at the same time, significantly reduced our exposure to long term receivables.
Financial performance continues to be very strong. Operating profit increased by 24.3% year-over-year while net profit increased by 21.2% year-over-year. Gross margin continues to be under pressure due to business mix, continuous price pressure and challenging projects on export markets. Our continuous focus on cost control through Cost Efficiency and Operational Excellence program has brought good savings. Sales and administrative costs decreased by 5.5% year-over-year. A solid cash flow of MHRK 187 was realized from operating activities, which allowed the total cash funds, including short term financial assets, to remain on the same level as the previous year, amounting to MHRK 287.7. The working capital efficiency, measured by the performance indicator Working Capital Days (WCD) further improved to 26 days. Cash conversion rate is at high 97%.
We achieved excellent business results, primarily due to professionalism and knowledge of our leaders and employees, which is increasingly being recognized as the key differentiator in the market. A high level of customer satisfaction was confirmed once again by annual survey of our largest customers/partners. The opening of innovation incubator “Ericsson Garage Croatia”, made ours one of the eight global sites for agile and quick customer oriented innovations.
Digital transformation is becoming our reality. Those who want to develop their business, irrespective of their business field, use ICT as the foundation to achieve their competitive advantages. Our numerous customers in Croatia and the region, as well as globally, are embarking on digital transformation projects. In the operator segment, these are primarily telecom network virtualization projects and implementation of Cloud solutions. Special emphasis here is on OSS and BSS transformation, which entails changes in their organizations, as well as in their market and end user approach.
We live in the digital revolution age, in which ICT fundamentally changes our way of working, living and doing business. Big transformation processes are happening in the entire corporation, including our company. I believe that the results we achieved in 2016, as well as our ongoing strategic transformation processes, represent a quality and sound foundation for the Company's future development. “
Communications Ericsson Nikola Tesla