Ericsson swings to profit but US tariffs hit margins

Swedish telecom equipment maker Ericsson (ERICb.ST) reported this week a swing to a bigger second-quarter adjusted profit than expected, helped by sales growth in North America and cost cuts, but said US tariffs dampened a rise in its profit margin.

Ericsson’s shares fell 3 per cent in early trading after the result.

Operating profit excluding restructuring charges was 7.0 billion crowns ($728.5 million) against a year-earlier loss of 11.9 billion and a mean forecast of 6.1 billion in an LSEG poll of analysts.

“We have structurally lowered our cost base and are strongly focused on delivering further efficiencies,” CEO Borje Ekholm said in a statement.

US tariffs hampered growth in its profit margins, the company said. President Donald Trump has threatened to impose a 30 per cent tariff on imports from the European Union starting on August 1.

“With production in many parts of the world, including in North America, we will try to balance production, given the development with tariffs,” Sandström said. “But of course, we cannot guarantee that we are immune to tariffs.”

Ericsson missed sales growth estimates, with quarterly group sales, which included a currency headwind of 4.7 billion crowns, falling 6 per cent to 56.1 billion crowns against a mean forecast of 59.3 billion in the poll. Organic sales, however, grew 2 per cent.

The company said sales growth was strongest in its largest market, North America, offsetting slowdowns in markets such as India.

Business in the US continues to benefit from a solid pace of investments by mobile operators, CFO Lars Sandström told Reuters.

He added that he expects the Indian market to pick up soon.

Growth in the US has helped Ericsson’s profit margin, which stood at 47.5 per cent, a jump from 43.1 per cent in the year-earlier period when sales were higher in low-margin markets such as India.