Ericsson sees signs of improvement after fourth straight quarterly loss

Competition from China’s Huawei and Finland’s Nokia has hurt Ericsson. (Reuters)
Updated 20 October 2017
0

Ericsson sees signs of improvement after fourth straight quarterly loss

STOCKHOLM: Mobile network gear maker Ericsson said it had detected signs of improvement after posting a steeper than expected quarterly loss on Friday, helping send its languishing shares up as much as 5 percent.
Once the world’s top maker of mobile network equipment, Sweden’s Ericsson faces a declining market for older network 2G, 3G and 4G gear while needing to step up investments in next-generation 5G equipment to retain market share.
After replacing management in 2016, Ericsson has embarked on a restructuring program to exit unprofitable network services deals and reverse course after an ill-timed bid to diversify beyond core telecom markets.
“We see a stabilized performance in a challenging market. We also see signs of improvements in our performance,” Chief Executive Boerje Ekholm said on a conference call.
“Yes, there is still a long way to go ... but we are also seeing signs that we are stabilizing our performance and that we are getting control of our projects and products,” Ekholm said.
The Swedish company posted its fourth consecutive money-losing quarter, with an operating loss of 4.8 billion Swedish crowns ($588.7 million) that was 37 percent worse than the average loss estimated by analysts.
Third-quarter sales of 47.8 billion crowns were down 3 percent in constant currencies and the company warned its usual year-end sales bounce would not be as big as in previous years.
Competition from China’s Huawei and Finland’s Nokia , as well as weak emerging markets and falling spending by telecoms operators, has hurt Ericsson, while demand for next-generation 5G technology is still several years away.
While it cut 3,000 jobs during the third quarter, it added 1,100 recruits in research and development in order to be ready to meet eventual demand for 5G networks.
Sales were stable in North America while growing in Brazil and the Middle East, but these positive trends were offset by a decline in China, Ericsson said.
In the current quarter, it said network sales would not grow as fast because Chinese network operators are slashing spending on higher speed 4G mobile networks after a massive building spree in recent years.
Ericsson said it had increased its share of 4G networks in China, which was vital to ensure it wins repeat business in future 5G network there. China will put pressure on overall fourth-quarter margins in its network business, it said.
It is also renegotiating or exiting unprofitable service contracts in its networks unit as it aims to double its operating margin to 12 percent after 2018, a target analysts see as unlikely. It has exited or renegotiated 13 out of 42 contracts it considers problematic, improving profits.
Restructuring weighed on the quarter as the company repeated it aimed to reduce costs by at least 10 billion crowns, or around $1.2 billion, from the middle of next year.
Ericsson shares shot up just over 5 percent in early trade and were up 3.3 percent at 50.4 crowns by 0942 GMT, but remain some 4 percent lower for the year to date.


Kuwait Energy starts producing natural gas from field in southern Iraq

Updated 37 min 51 sec ago
0

Kuwait Energy starts producing natural gas from field in southern Iraq

BASRA: Kuwait Energy PLC started producing natural gas from Siba on Wednesday, the first gas field to be brought on stream in the south of Iraq, an Iraqi oil executive said.
Siba began producing gas at an initial rate of 25 million cubic feet a day (mcf/d), which should rise gradually to 100 mcf/d by the end of the year, said Kareem Abd Oda, the director general of the joint venture established by Iraq and Kuwait Energy to develop the field.
Siba, south of the city of Basra, is producing natural gas and gas condensates, he added.
The other hydrocarbon reservoirs of southern Iraq that are already in operation produce natural gas alongside crude oil.
The gas extracted in several of these fields is burnt off instead of being captured, as the country lacks the capacity to process it into fuel for local consumption or exports.
Energy-rich Iraq is looking to boost oil and gas production with joint ventures with Kuwaiti, Turkish and Egyptian firms, as it rebuilds its economy following years of turmoil, including the takeover of large parts of the country by Daesh in 2014.
The semi-autonomous Kurdistan Regional Government has started producing natural gas from fields in northern Iraq.
Iraq hopes by 2021 to end gas flaring, which costs nearly $2.5 billion in lost revenue for the government and would be sufficient to meet most of its unmet needs for gas-based power generation, according to the World Bank.
Iraq holds on Thursday an auction of oil and gas exploration contracts in 11 blocks alongside the border with Iran and Kuwait and in offshore Gulf waters. The new contracts set a time limit for companies to end gas flaring from oilfields they develop.
Iraq is the Organization of the Petroleum Exporting Countries’ second-largest producer after Saudi Arabia.
Companies including BP, Exxon Mobil, Eni , Total, Royal Dutch Shell and Lukoil helped Iraq expand production in the past decade by more than 2.5 million barrels per day (bpd) to about 4.7 million bpd.
Iraq’s crude exports from its southern region on the Gulf have averaged 3.5 million bpd so far in April, two oil executives told Reuters on Wednesday.
That is higher than the March average of 3.45 million bpd.