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STOCKHOLM — Ericsson AB on Wednesday backed its guidance after feeling a limited impact from the new coronavirus, but cautioned that the general economic slowdown caused by the pandemic could lead some operators to delay investment programs.
“There is near-term uncertainty around sales volumes due to Covid-19 and the macroeconomic situation, but with current visibility we have no reason to change our financial targets for 2020 and 2022,” Chief Executive Borje Ekholm said.
The telecommunications equipment company ERIC, -4.00% ERIC.A, -4.99% ERIC.B, -5.70% eported a first-quarter net profit attributable to shareholders of 2.16 billion Swedish kronor ($214.2 million), from SEK2.32 billion in the year-earlier period.
Sales rose 1.7% to SEK49.75 billion, driven by its key networks unit.
Analysts polled by FactSet expected a net profit of SEK2.23 billion on sales of SEK52.92 billion.
Ericsson said that with growth in data, and working from home the new normal in many countries, the market is expected to grow by 4%. However, with uncertainties from the pandemic hitting short-term growth, it expects somewhat lower than normal sequential sales growth in the second quarter.
Actions taken by governments to slow down the spread are making Ericsson’s service delivery and supply harder due to lockdowns and travel restrictions, and while it hasn’t felt any material effects so far on demand, “it is prudent to believe that the slowdown in the general economy may lead some operators to delay investment programs,” the company said.
Ericsson’s networks unit grew strongly in North America, Japan and Saudi Arabia during the quarter, while Latin America, India and North East Asia had sales declines.
Gross margin at the unit rose to 44.4% from 43.2%, despite taking more lower-margin strategic contracts as it grew software sales.
In China, Ericsson said it has grown market share, but it expressed concern over the delayed investment in the technology in Europe, saying it risks falling behind the rest of the world and urged governments to restart their economies by investing in 5G.
In North America, the closing of the Sprint-T Mobile merger is expected to boost investments in the second half.
“We remain positive on the longer-term outlook, but the second quarter is likely to be a tad softer than normal due to timing of strategic contracts and uncertainty induced by Covid-19,” Mr. Ekholm said.
