- Orders booked 828,2 MHRK
- Net sales 593,8 MHRK
- Gross margin 23,7%
- Operating profit 91 MHRK
- Profit before tax 88,1 MHRK
- Net profit 70,5 MHRK
- Earnings per share 54 HRK
- Return on sales before taxes 14,8%
- Cash flow from operating activities 206 MHRK

Ericsson Nikola Tesla key performance indicators in the first half of 2005 were in compliance with plans and expectations. The Company's focus on customer partnerships as well as continuous operational efficiency improvement contributed to further growth of profitability.

The company position on domestic market has been strenghtened so that net sales increased by 36% compared to the same period last year. As regards the internal Ericsson market (Sweden), net sales have been also significantly increased and amounted to 133 MHRK in this period. Major markets in the first six months of 2005 were Croatia, Sweden, Bosnia & Herzegovina and Russia.

Total net sales and orders booked were lower compared to the same period of the previous year due to recent business volume decrease in the Russian market. Svyazinvest, one of the major Ericsson Nikola Tesla's Russian customers, has decreased the level of investments. New contracts signed with the Belarus customers, mobile operator JV MDC Velcom and fixed operator Beltelecom in the value of more than 206 MHRK as well as realization of the contract signed with TelecomNet, the Kazakhstan operator, amounting to 287 MHRK, will positively affect the total financial result in the former Soviet Union countries.

As a result of further business efficiency increase and temporarily favourable product mix (gross margin increase), operating profit increased by 1,7% compared to the same period of the previous year. At the same time, result from financial activities improved significantly due to lower foreign exchange losses. Net profit increased by 12,6% and amounts to 70,5 MHRK.

The Company has maintained a high level of cash flow, which is necessary for making own business decisions. During the first six months of 2005 the Company achieved a positive cash flow of MHRK 206 generated by business operations, which was due primarily to excellent collection of accounts receivable based on the extraordinary results during last year.

In view of a number of contracts made between Ericsson Nikola Tesla and its new as well as traditional customers in domestic and foreign markets, the most important ones should be pointed out.

During 2005 Q2 a few contracts in the total value of approx. 350 MHRK were signed in the CIS market (former Soviet Union). In Russia, delivery of new AXE exchanges as well as extension of the existing ones were stipulated with Svyazinvest. A contract including supply, implementation and integration of the equipment for realization of the complex multi-network project was signed with Kazakhstan operator TelecomNet.

In Montenegro, a contract on GSM network upgrade was signed with Monet, the mobile operator.

In Croatia, the Company signed two important contracts: one with Tele2, the third mobile operator, on delivery of equipment and total communications solution for GSM network establishment, and the other with Vodatel, the new fixed telephony operator, on delivery of communications solutions and equipment. In addition to activities related to establishing partnerships with new operators, business co-operation with T-HT and VIPnet, the Company's main partners in domestic market, has been successfully continued. Intensive co-operation with VIPnet includes establishment of the third generation network. By continuous delivery of equipment for establishment of IP system backbone and implementation of broadband access (ADSL-EDA), Ericsson Nikola Tesla has continued to support T-HT in establishment of network which enables large-scale implementation of broadband services and significant increase in the number of Internet users.

In the first six month of 2005 Ericsson Nikola Tesla recorded expansion of the existing responsibilities as well as the new ones granted at the corporate level. Together with increase in job volume and complexity, the number of employees also increased so that, at the end of June, the Company reported 12,5% more employees compared to the same period last year.

Communication Ericsson Nikola Tesla