Alcatel-Lucent was able to reduce its net loss to €118 million in 2014 from €1.3 billion a year previously, as the equipment manufacturer continued to benefit from the effects of its transformation programme called the Shift Plan.
The company also reported improved profitability in the fourth quarter, when net income rose to €271 million from €134 million in the previous year, and said it is now confident it will reach its positive free cash flow target in 2015. The gross margin improved by 130 basis points over the year to 34.7% in the fourth quarter, to reach 33.4% for 2014 as a whole.
“Our fourth quarter and full year 2014 results underline the success of our turnaround. Through the execution of The Shift Plan, we have improved our underlying profitability and free cash flow profile while we have solidified the entire organisation,” said CEO Michel Combes.
The company is now entering the final year of the three-year Shift Plan, meaning that the CEO has just 11 months left to meet his target of making the company profitable and generate positive free cash flow.
Alexander Peterc, an analyst at Exane BNP Paribas, said in a note to clients that the numbers show “slackening restructuring momentum,” Bloomberg reported, indicating that the benefits of the restructuring plan have peaked.
In the full 2014 fiscal year, group revenue excluding managed services was flat compared to 2013, reaching just over €13 billion. Adjusted operating income totalled €623 million, or 4.7% of revenues, more than doubling compared to €278 million or 2% of revenues in the year-ago period.
In the fourth quarter alone, sales reached €3.68 billion, which Bloomberg noted was above expectations.
“There’s still room for improvement in our gross margin, even more than we were initially expecting,” Combes said during a conference call, Bloomberg reported. “Looking at 2015, we are in a perfect position to drive profitable growth.”
