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Restructuring costs to be higher than expected in 2016.
Ericsson on Thursday said its redundancy programme is ahead of schedule, which will result in higher-than-forecast restructuring costs for 2016.
The kit maker is axing 3,000 employees in Sweden, through a combination of voluntary redundancies, closing down its remaining production plants, outsourcing, and natural attrition.
Ericsson said it has now completed the voluntary redundancy programme, and 1,600 employees will leave the company on 31 December 2016.
"This means that the reductions in Sweden are progressing ahead of plan, resulting in an increase in estimated restructuring costs for 2016 of 5.5 billion kronor-SEK6.5 billion (€565 million-€668 million), compared to the previously communicated estimate of SEK4 billion-SEK5 billion," Ericsson said, in a statement.
As a result, restructuring charges in 2017 are now expected to come in slightly lower than previously expected, provided the redundancy programme proceeds according to plan.
The jobs cuts are part of Ericsson’s plan to reduce annual operating expenses, excluding restructuring charges, to SEK53 billion by the second half of next year. Ericsson also hopes to improve its gross margin in the second half of 2017 by cutting the cost of sales.
The company has been hit by a slowdown in spending on network infrastructure, driven by the completion of initial 4G rollouts in mature markets, and economic headwinds in some emerging markets.
In November, Ericsson warned investors that revenue at its networks division is expected to see a CAGR of-2%-0% in 2016-2018.
The company expects the mobile infrastructure market to contract by 10%-15% in 2016, and by 2%-6% in 2017.
