Stockholm (Reuters) – Ericsson (BS: ERICAs), a Swedish company that makes telecoms equipment and is being investigated for bribery, reported higher core earnings for the second quarter on Thursday. However, the company missed expectations because margins were hurt by higher costs for parts and shipping.
The company’s costs went up because of rising inflation, a shortage of chips, and Russia’s invasion of Ukraine. As a result, the company’s gross margin went down from 43.4 percent to 42.1 percent. It was also hurt by patent disputes, such as one with Apple (NASDAQ: AAPL), which cost it 0.9 billion Swedish crowns ($85 million) in high-margin royalty income.
“The global supply chain situation remains difficult,” said Chief Executive Borje Ekholm in a statement. “This leads to cost increases, which we work hard to avoid as much as possible.” “We plan to change prices when contracts end.”
The company is also dealing with the fallout from a bribery scandal related to its work in Iraq. This scandal led the U.S. Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) to open investigations into the company.
Ericsson said it was working with the DOJ and the SEC and that it was too early to tell what would happen.
A U.S. security panel’s new investigation slowed down the closing of its $6.2 billion purchase of Vonage. Ericsson thinks it will end in July.
Even with these problems, Ericsson’s sales in North America and Europe went up as telecom companies rushed to update their networks. This aided Ericsson and its rival, Nokia (NYSE: NOK).
“Excluding China, we have a 39 percent share of the global market, which is up by a few percentage points from the last period,” Carl Mellander, Chief Financial Officer, told Reuters.
Ericsson’s quarterly sales went up from 54.9 billion crowns to 62.5 billion crowns. This was more than the expected 61.45 billion crowns.
According to data from Refinitiv, quarterly adjusted operating earnings rose from 5.8 billion crowns a year ago to 7.3 billion crowns. This was less than the average analyst prediction of 8.01 billion crowns.
($1 is worth 10.5908 Swedish crowns).
($1 is worth 10.5908 Swedish crowns).
