Business results of Ericsson Nikola Tesla Group in Q1 2021

Considering the persistence of extraordinary circumstances in which we operate, Ericsson Nikola Tesla Group realized stable business results.

Gordana Kovačević, the President of Ericsson Nikola Tesla, commented:

„In Q1 2021, the life and business in Croatia and globally were strongly impacted by the continued spread of the COVID-19 pandemic. Considering the persistence of extraordinary circumstances in which we operate, Ericsson Nikola Tesla Group realized solid business results. Compared to Q1 2020, sales revenue is lower by 8.6% and amount to MHRK 445.9, as a result of cyclical investments of our main customers in the networks, while gross margin improved to 14.2% (10.2%), primarily due to lower transition and transformation costs and the effect of cost-efficiency program. With a share of 60.1% in the total revenue generated in export markets, the company remains one of the largest Croatian exporters.

In regard to investments/ plans for 2021, telecom operators on the domestic market announced continuation of investments in infrastructure, high-speed Internet coverage and 5G. By implementing these plans, the domestic telecom operators, as well as the overall telecommunication market, follow European and global trends that in spite of pandemic, but also because of it, show the direction of accelerated development of communication technologies and services. The beginning of the full implementation of 5G in Croatia is expected in Q3 2021, after HAKOM assigns the necessary radio frequency spectrum. Therefore, we are especially pleased that we have signed a new five-year agreement with A1 Hrvatska. Thus we have continued to be the supplier of the radio part of the mobile network of this operator and at the same time a strategic partner in the field of 5G technology. With the strategic partner Hrvatski Telekom, we continue to cooperate on all projects contracted during 2020. We would like to single out Management Services Agreement for the construction and maintenance of fixed and mobile telecommunications infrastructure which is carried out by our subsidiary Ericsson Nikola Tesla Servisi d.o.o., as well as the cooperation agreement in the field of radio access networks with emphasis on 5G. In the segment of ICT solutions for Industry and Society in the domestic market, we have signed new agreements with the Croatian Ministry of the Interior, the Croatian Ministry of Justice and Public Administration, and State Geodetic Administration.

In export markets, sales revenue is lower year-over-year due to the dynamics of operators’ investments in networks, and along with the challenges brought by COVID-19 pandemic, the realization of projects is aggravated by the political and economic situation in some markets. Our activities in these markets continue with a strong focus on risk mitigation. The implementation of the Central Software Platform for the Centralized e-Health System of the Republic of Belarus, which is financed by a loan from the International Bank for Reconstruction and Development within the World Bank project, is ongoing as planned.

The delivery of services to Ericsson is stable. At the regular semi-annual R&D Management Business Review meeting, our Research and Development Center (R&D) confirmed the position of highly evaluated center in the global organization, with a customer satisfaction level of more than 90%. The evaluations in all categories are very high, and represent an increase in comparison to a previous evaluation, which proves that even in extraordinary circumstances, Ericsson Nikola Tesla's R&D Center continues to build positive perception within global Ericsson and contribute to the results of our company.

The strength of Ericsson's 5G portfolio was recently confirmed by Gartner report, naming Ericsson a leader in 5G network infrastructure for communications service providers. With over 130 commercial 5G agreements with communication service providers and 85 live 5G networks worldwide, consulting firm Frost & Sullivan in its latest report Frost Radar™ also named Ericsson the leader in the global 5G network infrastructure market in 2020.

By creating innovative solutions, based on the capabilities provided by the modern information-communication technology, Ericsson Nikola Tesla Group enables digital transformation of other industries, but also society itself.  In this way, we create new opportunities for our customers and their end users, and through continuous internal transformation we secure the sustainability and competitiveness of our business. Through close cooperation with our customers we create solutions that speed up processes and contribute to a more quality work. As an example, the solution MOST (Managed Operations Support Tool) needs to be mentioned, which is our tool for monitoring the delivery of services to our strategic partner Hrvatski Telekom. By putting this tool into operation in this quarter, an important step was made in the realization of this complex project in which many experts from Ericsson Nikola Tesla and Ericsson Nikola Tesla Servisi have participated, as well as experts from Hrvatski Telekom. By integrating several previously used tools into one, which is also connected to the customer's relevant IT system, we simplify business and achieve a high level of quality.

A recent survey conducted on a sample of joint stock companies with over 500 employees verified the importance that these companies attach to the significance and risks of climate change. The results confirm the correctness of linking our goals in the field of sustainability and corporate responsibility with the strategic determinants of the company. Special emphasis was placed on the best practice that our company has in reporting on climate change at the highest management level; leadership in reporting about the risks of negative impact on the climate ; practice of reporting on business opportunities linked to climate, and leadership in reporting on climate change mitigation. Following our strategic orientation and concrete activities in a form of calculating our own carbon footprint, which comes mostly from energy consumption and transport, to a successful realization of the energy efficiency project at Ericsson Nikola Tesla, we are ready for new challenges. In this sense, a key goal in the field of positive impact on climate change has already been defined - to reduce our CO2 emissions by 50% by 2030.

In Q1 2021, intensive vaccinations against COVID-19 began in Croatia and worldwide. Unfortunately, the increase in the number of infected people in Croatia and globally, and the fact that the vaccination is progressing in a slower pace than expected, results in constant updating of local /global restrictive measures to limit the flow of people and goods, which affects business planning and requires great flexibility. Therefore, as main risks, we see the ramp-down of the existing contracts realization, decrease/postponement of investments, restrictions in travelling, delays in equipment delivery due to reduced production and logistics capacities as well as physical and mental health of employees. With the primary focus on the safety, health and well-being of our employees, customers, partners and suppliers, we remain focused on risk management, profitability, and operating cash flow.

The global pandemic has significantly increased the need for networking and communication resulting in strong data traffic growth and increased awareness of the need for faster digital transformation of society with an emphasis on the digitalization of public services. Therefore, in 2021 we will continue to invest in 5G and new technologies, digital transformation of the Group, retaining key people and attracting new talents and developing competencies, because only through technological leadership and with highly qualified experts we can create and implement modern ICT solutions that contribute to digital transformation with positive impact on industry, society and individuals."

Communications Ericsson Nikola Tesla