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Ericsson Nikola Tesla Group - Q1 2022 business results

  Categories: Business Results Investors

In Q1 2022 almost all business performance indicators of Ericsson Nikola Tesla Group show a significant growth, however the war in Ukraine has a significant impact on the company's business performance in some export markets.

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

“Ericsson Nikola Tesla Group started 2022 with successful implementation of projects and plans to contract new business deals in the domestic and export markets. Although the results for Q1 2022 show a significant growth of almost all business performance indicators, it should be noted that the war in Ukraine has a significant impact on the realization of contracted activities, as well as new business opportunities in Belarus and surrounding markets. 

The activities of Ericsson Nikola Tesla Group in Belarus, where in Minsk our daughter company with 25 employees operates, include the expansion of LTE networks for local operators and the informatization of the central health system. In addition, signing of new contracts was also planned in this market. Due to sanctions imposed on Belarus, and consequently the expiration of validity of previously obtained export licenses, we have suspended all activities with the local customers and have submitted requests to Croatian authorities for issuing new export licenses. Their response, and the development of sanctions will significantly affect the future activities and the implementation of those projects. Depending on this, a longer disruption of our business in Belarus is also possible, which will reflect on our plans and results, especially on the planned sales revenue, operating margin and operating cash flow, however, we do not expect it to disrupt Ericsson Nikola Tesla Group’s business and financial stability. We have been continuously monitoring the development of the situation, and during Q2 we expect to have an assessment of the actual value impact on the Group’s results. 

In order to support the people of Ukraine, hit by this war and humanitarian crisis, the company has donated funds, and our employees have shown great empathy and are trying to help by donating money, collecting supplies and volunteering. 

Compared to Q1 2021, sales revenue increased by 18%, and all market segments (domestic, export, services to Ericsson) recorded growth. Profitability also recorded significant growth; gross margin increased to 15.8%, while operating profit increased by 53.7% and amounted to MHRK 69.6. Negative cash flow from operating activities is in line with our expectations for Q1, and given the quarterly volatility, cash flow should be observed at the annual level. We have concluded Q1 with a healthy balance sheet and an equity ratio of 37.5%. Cash and cash equivalents, including short-term financial assets, amounted to MHRK 439.8 or 35.7% of the total assets. Business results for Q1 2022 do not include the impact of sanctions on Belarus, however, it is expected that their impact could be seen in the results for Q2.

In the domestic market, in the operator segment, we continued the implementation of the previously contracted activities with strategic partners A1 Hrvatska and Hrvatski Telekom, primarily related to mobile networks modernization, focusing on the implementation of 5G technology. Intensive activities are also ongoing on the build and maintenance of fixed and mobile telecommunication infrastructure of Hrvatski Telekom. The focus is on introducing fiber for end-users, as well as the preparatory activities related to contracts co-financed by European Funds, the purpose of which is to design and build the passive part of FTTH (Fiber To The Home) network for remote, not as densely populated and not as developed areas of the Republic of Croatia. In the segment Digital Society (previously: Industry & Society) the activities continued on the projects regarding e-Health, e-Business and public safety, and new agreements were also signed with Hrvatske ceste, the Ministry of the Interior, and several hospitals. 
Despite the challenges in export markets, we have continued a quality cooperation with long-term customers in neighboring countries, operators HT Mostar and BH Telekom (Bosnia and Herzegovina), Ipko (Kosovo), and Crnogorski Telekom (Montenegro) on the modernization and expansion of their networks. I would like to highlight the activities on 5G technology with Crnogorski Telekom, the first operator in Montenegro to put 5G network into commercial operation.

The delivery of services to Ericsson has been continuously increasing. At the R&D Management Business Review meeting, held in March 2022, our Research & Development Center was again highly evaluated by all internal stakeholders, and was recognized as an organization that significantly contributes to the technology leadership of Ericsson Corporation. The possibility to gain new responsibilities was also expressed, which opens an opportunity for us to position even stronger within Ericsson market.

When we talk about global trends, the demand for digitalization of public services and solutions and services based on mobile technologies, which experienced strong growth during the pandemic, continues. Furthermore, there is a growing polarization of global politics and markets worldwide, which has an impact on the positioning of vendors of ICT solutions at the global level, and consequently requires our additional efforts and flexibility. Given the situation, our strong focus is on timely identification and mitigation of risks in order to better cope with the political crisis in certain markets, disruptions in global supply chains, significant increase in prices of energy, raw materials and services, as well as rising labor costs. In 2022, we will intensify investments in 5G and new technologies, Industry 4.0, new markets and customers, digital transformation of Ericsson Nikola Tesla Group and the retention of key people and attracting new talent. Considering the growing needs for experts in areas of new responsibilities we are focused on additional recruiting, and during Q1 our Group employed 78 experts. We are well positioned to continue the implementation of our strategy and I believe that with our technology leadership, strong leadership, motivation and commitment of employees, as well as the trust of customers and partners, we will mitigate the challenges ahead of us. Having all this in mind, the Management Board and the Supervisory Board proposed to the Annual General Meeting to adopt a dividend proposal of HRK 64 per share, thus showing that, even in this very demanding year, we are taking care of sustainable and responsible business in the interest of all stakeholders.“ 


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