By Anna Ringstrom and Supantha Mukherjee
STOCKHOLM (Reuters) -Swedish telecom equipment maker Ericsson reported on Tuesday a swing to a bigger second-quarter adjusted profit than expected, helped by sales growth in North America and cost cuts, but said U.S. tariffs dampened a rise in its profit margin.
Ericsson’s shares fell 3% 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.
U.S. tariffs hampered growth in its profit margins, the company said. President Donald Trump on Saturday threatened to impose a 30% 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% to 56.1 billion crowns against a mean forecast of 59.3 billion in the poll. Organic sales, however, grew 2%.
The company said sales growth was strongest in its largest market, North America, offsetting slowdowns in markets such as India.
Business in the U.S. 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 U.S. has helped Ericsson’s profit margin, which stood at 47.5%, a jump from 43.1% in the year-earlier period when sales were higher in low-margin markets such as India.
(Reporting by Anna Ringstrom and Supantha Mukherjee in Stockholm; Editing by Stine Jacobsen and Sonali Paul)
