Ericsson boosted by margin growth as China 5G tensions mount
Ericsson today reported better-than-expected earnings for the third quarter as higher margins and the rollout of 5G in China helped boost trading.
Shares in the Swedish telecoms group were up more than seven per cent today as its strategy of improving profitability saw gross margins hit their highest level in 14 years.
Adjusted revenue grew seven per cent to 57.5bn Swedish krona (£5bn), largely driven by 5G sales in mainland China.
Ericsson has now won 112 5G contracts globally as global rollouts pick up pace and the firm cashes in on moves to block Huawei.
But Ericsson could now be facing a setback after the Swedish government this week banned Huawei and rival ZTE from the country’s 5G networks, citing national security concerns.
China’s foreign ministry has threatened to retaliate against Swedish companies operating in China unless authorities reverse the decision.
Nevertheless, the figures highlight the success of a three-year turnaround plan led by Ericsson’s chief executive Borje Ekholm.
The company’s gross margin improved from 37.8 per cent to 43.2 per cent, marking the highest level seen since 2006.
Operating margin for the first nine months of the year hit 11.1 per cent, ahead of its target of reaching 10 per cent for the full year.
“We continue to win footprint in several markets leveraging our competitive 5G portfolio,” Ekholm said in a statement.
“While the pandemic has hurt revenues for several of our customers, and in some cases this has led to a reduction of capex, we have not seen any negative impact on our business, largely due to footprint gains.”