Highlights:

  • Supply chain constraints from the Japan earthquake significantly impact Q2 results
  • Smartphones account for more than 70 percent of total sales 
  • Android-based Xperia(TM) volume up 150 percent  year-on-year

The consolidated financial summary for Sony Ericsson Mobile Communications AB (Sony Ericsson) for the second quarter ended June 30, 2011 is as follows:

    Q2 2010 Q1 2011 Q2 2011
Number of units shipped (million)
Average selling price (Euro)


11.0
160
8.1
141
7.6
156
Sales (Euro m.)   1,757 1,145 1,193
Gross margin (%)   28% 33% 31%
Operating income (Euro m.)    36 19 -37
Operating margin (%)   2% 2% -3%
   Restructuring charges (Euro m.)   -32  - -
   Operating income excl. restructuring charges (Euro m.)   68 19 -37
   Operating margin excl. restructuring charges (%)   4% 2% -3%
Income before taxes (IBT) (Euro m.)   31 15 -42
   IBT excl. restructuring charges (Euro m.)   63 15 -42
Net income (Euro m.)   12 11 -50

Bert Nordberg, President and CEO of Sony Ericsson commented, "Sony Ericsson's second quarter profitability was affected by the March 11 earthquake in Japan.  We estimate that the impact of earthquake-related supply chain constraints on our portfolio was close to 1.5 million units, with most of the effect in the early part of the quarter.  Our shift to Android-based smartphones continues with smartphone sales accounting for more than 70 percent of our total sales during the quarter.  We have shipped more than 16 million Xperia smartphones to date. We have introduced eight new Xperia smartphones this year and we continue to see strong consumer and operator demand across the Xperia  smartphone portfolio."

Units shipped during the quarter were 7.6 million, a 31% decrease year-on-year and a 6% decrease sequentially, due to a decrease in volume caused by constrained supply of critical components and an anticipated decline in the number of feature phones shipped. 

Average selling price (ASP) for the quarter was Euro 156, a 3% decrease year-on-year but an 11% increase sequentially. The year-on-year decrease is due to product and geographic mix and price erosion.  The sequential increase in ASP is attributed to favorable product and geographic mix, more than offsetting price erosion and unfavorable foreign exchange rates.

Sales for the quarter were Euro 1,193 million, a 32% decrease year-on-year and a 4% increase sequentially.  

The gross margin percentage for the quarter was 31% with an improvement of 3 percentage points year-on-year that included restructuring charges, and a decrease of 2 percentage points from the previous quarter, which included the benefit of some larger than normal items relating to royalty matters and warranty estimates. 

Loss before taxes for the quarter was Euro 42 million, compared to an income before taxes of Euro 31 million for the same quarter in the previous year, due to lower volume.  Income before taxes for the previous quarter was Euro 15 million.  The sequential change was reflective of lower gross margin and higher operating expenses.

The quarter ended in a net loss of Euro 50 million, compared to a net income of Euro 12 million in the same quarter in the previous year, and Euro 11 million in the last quarter.  Tax expenses in this quarter included the impact of tax adjustments and the distribution of profits and losses between various jurisdictions.

Cash flow from operating activities during the quarter was negative Euro 224 million, mainly due to increases in accounts receivables and inventories, negative net income and timing of certain payments. New external borrowings of Euro 165 million were made during the quarter to enhance liquidity and growth, resulting in total borrowings of Euro 769 million at the end of the quarter. Total cash balances at June 30, 2011 amounted to Euro 516 million.     

Sony Ericsson estimates that its share in the global Android-based smartphone market during the quarter was approximately 11% in volume and 11% in value. 

Sony Ericsson maintains its forecast for modest industry growth in total units in the global handset market for 2011.


The liquid identity is a registered trademark of Sony Ericsson Mobile Communications AB. Xperia(TM) is a trademark of Sony Ericsson Mobile Communications AB. Sony is a registered trademark of Sony Corporation. Ericsson is a registered trademark of Telefonaktiebolaget LM Ericsson. Any rights not expressly granted herein are reserved and subject to change without prior notice.


EDITOR'S NOTES:

Financial statements:
Consolidated income statement
Consolidated income statement - isolated quarters
Consolidated balance sheet
Consolidated statement of cash flows
Consolidated statement of cash flows - isolated quarters
Net sales by market area by quarter


About Sony Ericsson
Sony Ericsson celebrates its 10th year as a joint venture between Sony Corporation and Ericsson in October 2011. Over the years Sony Ericsson has brought together the best communication technologies with superior entertainment user experiences to create its Xperia(TM) line of the 'most entertaining smartphones' in the mobile handset industry. With its global corporate functions in London, Sony Ericsson has sales and marketing operations in all major regions of the world, as well as manufacturing operations in China, and product development sites in China, Japan, Sweden and Silicon Valley, California. For more information, please visit: www.sonyericsson.com/press.

- ENDS -


CONTACTS:

Ericsson investor relations
Susanne Andersson (Stockholm) +46 10 719 4631

Sony investor relations
Yoshinori Hashitani (Tokyo) +81 3 6748 2111
Yas Hasegawa (London) +44 20 7426 8696   

Press / Media
Sony Ericsson global communications and PR
Cathy Davies (London) +44 208 762 5879
Holly Rossetti (London) + 44 208 762 5851
Gustaf Brusewitz (London) +44 208 762 5805


This press release contains forward-looking statements that involve inherent risks and uncertainties.  Sony Ericsson has identified certain important factors that may cause actual results to differ materially from those contained in such forward-looking statements. For a detailed description of risk factors see Sony's and Ericsson's filings with the US Securities and Exchange Commission, particularly each company's latest published Annual Report on Form 20-F.

 

Sony Ericsson
CONSOLIDATED INCOME STATEMENT

  Apr-Jun   Jan-Jun
EUR million 2010 2011 Change   2010 2011 Change
               
               
Net sales 1,757 1,193 -32%   3,162 2,339 -26%
Cost of sales -1,266 -828 -35%   -2,241 -1,592 -29%
Gross profit 492 365 -26%   921 747 -19%
Gross margin % 28% 31% 3pp   29% 32% 3 pp
               
Research and development expenses -191 -184 -4%   -376 -357 -5%
Selling and administrative expenses -272 -224 -18%   -510 -423 -17%
Operating expenses -463 -408 -12%   -886 -780 -12%
               
Other operating income, net 7 6 -14%   21 16 -24%
Operating income 36 -37     57 -17  
Operating margin % 2% -3% -5pp   2% -1% -3pp
               
Financial income 2 5 150%   9 8 -11%
Financial expenses -7 -10 43%   -16 -18 13%
Income before taxes 31 -42     50 -27  
               
Taxes -16 -3 -81%   -10 -9 -10%
Minority interest -4 -5 25%   -7 -4 -43%
Net income 12 -50     33 -40  
               
Number of units shipped (million) 11.0 7.6 -31%   21.5 15.8 -27%
ASP (EUR) 160 156 -3%   147 148 1%
               
               
EUR million Apr-Jun     Jan-Jun  
Restructuring charges 2010 2011     2010 2011  
  Cost of sales -33 -        -31 -     
  Research and development expenses -1 -        -3 -     
  Selling and administrative expenses 2 -        -1 -     
Total -32 -        -35 -     

 

* Operating expenses in 2010 have been restated to reflect certain organizational changes.


Sony Ericsson
CONSOLIDATED INCOME STATEMENT - ISOLATED QUARTERS

  2010   2011
EUR million Q1 Q2 Q3 Q4   Q1 Q2
               
               
Net sales 1,405 1,757 1,603 1,528   1,145 1,193
Cost of sales -975 -1,266 -1,130 -1,069   -763 -828
Gross profit 429 492 473 459   382 365
Gross margin % 31% 28% 30% 30%   33% 31%
               
Research and development expenses -185 -191 -179 -191   -173 -184
Selling and administrative expenses -238 -272 -241 -236   -199 -224
Operating expenses -423 -463 -420 -427   -372 -408
               
Other operating income, net 14 7 10 7   10 6
Operating income 20 36 63 39   19 -37
Operating margin % 1% 2% 4% 3%   2% -3%
               
Financial income 7 2 7 2   3 5
Financial expenses -9 -7 -8 -6   -8 -10
Income before taxes 18 31 62 35   15 -42
               
Taxes 6 -16 -12 -27   -5 -3
Minority interest -3 -4 -2 0   1 -5
Net income 21 12 49 8   11 -50
               
Number of units shipped (million) 10.5 11.0 10.4 11.2   8.1 7.6
ASP (EUR) 134 160 154 136   141 156
               
               
EUR million 2010   2011
Restructuring charges Q1 Q2 Q3 Q4   Q1 Q2
  Cost of sales 2 -33 -3 2   -    -
  Research and development expenses -2 -1 5 0   -    -
  Selling and administrative expenses -3 2 -6 -5   -    -
Total -3 -32 -4 -3   -    -

 

* Operating expenses in 2010 have been restated to reflect certain organizational changes.

Sony Ericsson                
CONSOLIDATED BALANCE SHEET                
                 
    Jun 30   Dec 31   Mar 31   Jun 30
EUR million   2010   2010   2011   2011
                 
ASSETS                
                 
Total fixed and financial assets   836   803   791   819
                 
Current assets                
Inventories   467   460   510   570
Accounts receivable   1,063   836   755   872
Other assets   412   295   304   330
Other short-term cash investments   477   276   417   329
Cash and bank   562   329   182   188
Total current assets   2,981   2,196   2,168   2,289
                 
                 
Total assets   3, 817   2,999   2,959   3,108
                 
SHAREHOLDERS' EQUITY AND
LIABILITIES
               
                 
Shareholders' equity   510   532   496   451
Minority interest   66   42   38   43
Total equity   575   574   534   494
                 
Borrowing, Non Current   101   100   0   0
Other long-term liabilities   40   32   30   31
Total long-term liabilities   141   132   30   31
                 
Accounts payable   973   769   701   716
Borrowing, Current   329   130   604   769
Other current liabilities   1,798   1,394   1,090   1,098
Total current liabilities   3,101   2,293   2,394   2,583
                 
Total shareholders' equity and liabilities   3,817   2,999   2,959   3,108
                 
Net cash*   609   375   -5   -252
                 
* Net cash is defined as cash and bank deposit plus other short-term cash investments less interest-bearing liabilities.

 

Sony Ericsson
CONSOLIDATED STATEMENT OF CASH FLOWS

  Apr-Jun   Jan-Jun
EUR million 2010 2011   2010 2011
           
OPERATING          
Net income 12 -50   33 -40
Adjustments to reconcile net income to cash 4 -29   -40 -166
  16 -79   -6 -206
           
Changes in operating net assets 13 -145   -58 -371
Cash flow from operating activities 29 -224   -65 -577
           
INVESTING          
Investing activities -15 -21   12 -36
Cash flow from investing activities -15 -21   12 -36
           
FINANCING          
Financing activities  0  165    150  541
Cash flow from financing activities 0 165   150 541
           
Net change in cash 15 -80   97 -72
Cash, beginning of period 980 599   878 605
Translation difference in Cash 45 -3   64 -17
Cash, end of period 1,039 516   1,039 516

 

Sony Ericsson
CONSOLIDATED STATEMENT OF CASH FLOWS - ISOLATED QUARTERS

  2010   2011
EUR million Q1 Q2 Q3 Q4   Q1 Q2
               
OPERATING              
Net income 21 12 49 8   11 -50
Adjustments to reconcile net income to cash -44 4 -66 -50   -137 -29
  -23 16 -17 -42   -127 -79
               
Changes in operating net assets -72 13 -38 -86   -226 -145
Cash flow from operating activities -94 29 -54 -128   -353 -224
               
INVESTING              
Investing activities 27 -15 2 -18   -14 -21
Cash flow from investing activities 27 -15 2 -18   -14 -21
               
FINANCING              
Financing activities  150  0 -32 -178    375  165
Cash flow from financing activities 150 0 -32 -178   375 165
               
Net change in cash 83 15 -85 -324   8 -80
Cash, beginning of period 878 980 1,039 921   605 599
Translation difference in Cash 19 45 -33 7   -14 -3
Cash, end of period 980 1,039 921 605   599 516

 

Sony Ericsson
NET SALES BY MARKET AREA BY QUARTER

EUR million   2010   2011
Isolated quarters   Q1 Q2 Q3 Q4   Q1 Q2
Europe, Middle East & Africa *   711 876 837 795   485 435
Americas   201 223 222 205   151 193
Asia    493 659 544 528   509 565
Total   1,405 1,757 1,603 1,528   1,145 1,193
* of which Western Europe   525 668 632 569   307 323
                 
                 
    2010   2011
Sequential change (%)   Q1 Q2 Q3 Q4   Q1 Q2
Europe, Middle East & Africa *   -26% 23% -4% -5%   -39% -10%
Americas   -9% 11% 0% -8%   -26% 28%
Asia    -12% 34% -17% -3%   -4% 11%
Total   -20% 25% -9% -5%   -25% 4%
* of which Western Europe   -23% 27% -5% -10%   -46% 5%
                 
                 
    2010   2011
Year over year change (%)   Q1 Q2 Q3 Q4   Q1 Q2
Europe, Middle East & Africa *   -27% -6% -4% -18%   -32% -50%
Americas   1% 14% -4% -8%   -25% -13%
Asia    -12% 17% 6% -6%   3% -14%
Total   -19% 4% -1% -13%   -19% -32%
* of which Western Europe   -27% -1% -1% -16%   -42% -52%
                 
                 
    2010   2011
Year to date   1003 1006 1009 1012   1103 1106
Europe, Middle East & Africa *   711 1,587 2,424 3,219   485 919
Americas   201 424 646 851   151 345
Asia    493 1,152 1,695 2,224   509 1,075
Total   1,405 3,162 4,765 6,294   1,145 2,339
* of which Western Europe   525 1,193 1,825 2,393   307 630
                 
                 
    2010   2011
YTD year over year change (%)   1003 1006 1009 1012   1103 1106
Europe, Middle East & Africa *   -27% -17% -13% -14%   -32% -42%
Americas   1% 7% 3% 0%   -25% -19%
Asia    -12% 3% 4% 1%   3% -7%
Total   -19% -8% -5% -7%   -19% -26%
* of which Western Europe   -27% -15% -10% -12%   -42% -47%

 
The full report (including tables) can be downloaded from the following link: