Telefonaktiebolaget LM Ericsson (NASDAQ:ERIC) reported that for Q2 2017 sales decreased by 6% YoY. Sales adjusted for currency and comparable units dropped by 3%. Networks sales dropped by 4% YoY. Gross margin came at 25.4%. Adjusted gross margin stood at 30 led by increased adjusted gross margin in networks.
Operating income came at SEK -4.8 (0.3) b. Higher amortization than capitalization of advancement expenses and higher recognition than delay of hardware costs had an adverse impact on operating income of SEK -1.5 (0.5) b. Telefonaktiebolaget LM Ericsson noted an increased risk of further customer and market project adjustments. In the quarter adjustments and provisions were made affecting operating income by SEK -2.3 b., with restricted effect on cash flow.
As an outcome of the ongoing cost declines, restructuring expenses of SEK -2.8 (-1.3) b. were noted in the quarter. This comprised a write-down of SEK -1.6 b. linked to the decision to conclude and divest the ICT facility in Canada. Cash flow from operating activities came at SEK 0.0 (-2.3) b. Free cash flow was SEK -0.5 (-5.0) b.
Börje Ekholm, the CEO and President of Ericsson, expressed that they continue to execute on their focused business plan. While more remains to be performed, they are beginning to see some promising improvements in their performance despite a continued tough market. Networks demonstrated a slight sales growth YoY, adjusted for the re-scoped managed services contract in North America and also for currency. Networks adjusted operating margin came at 11%. While losses were noted in IT & Cloud, they witness increased stability in projects and product roadmaps.
The general market conditions remain to be tough. Sales adjusted for currency and comparable units declined by 3% YoY. Sales in North America, adjusted for currency, comparable units and the re-scoped managed services deal were stable.