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Ericsson to book 6.1B Swedish kronor in provisions in Q4'18

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Ericsson to book 6.1B Swedish kronor in provisions in Q4'18

Telefonaktiebolaget LM Ericsson (publ) said it booked 6.1 billion Swedish kronor in provisions in the fourth quarter of 2018 as the information and communications technology solution provider targets additional measures to speed up the restructuring of the Business Support System business.

The planned measures, together with necessary contract loss provisions, will negatively impact the operating income, specifically gross margin, in the quarter. Of the total amount, 3.1 billion kronor relates to restructuring charges.

The company revised its strategy for the Business Support System, or BSS, unit, which had been jeopardizing Segment Digital Services' overall profitability target for 2020. As part of the revised strategy, the company will channel more funds to the established portfolio, Ericsson Digital BSS. The restructuring plan for Segment Digital Services is underway according to the plan.

Meanwhile, further restructuring charges for the planned measures, including head count reductions, are estimated at 1.5 billion kronor in 2019, the company said in a press release.

Provisions mainly relate to expected changes in project scopes including customer compensation payments, provisions for project delays, and write-down of intangible assets. The majority of the provision amount will impact cash flow, starting in 2019 and continuing for several years.

Ericsson expects the measures to "materially contribute" to cutting losses in the BSS unit in 2019 and help Segment Digital Services achieve the operating margin targets, excluding restructuring.

Ericsson's share price tumbled 4.30% as of 3:44 p.m. in Sweden on Jan. 10.

As of Jan. 9, US$1 was equivalent to 8.89 Swedish kronor.