Highlights:

• Orders booked 985,6 MHRK
• Sales revenue 617 MHRK
• Gross margin 17,6%, 
• Operating profit 98,7 MHRK 
• Profit before tax 87,2 MHRK
• Net profit 69,7 MHRK 
• Earnings per share HRK 52,8 
• Return on sales before tax 14,1% 
• Cash flow from operating activities 77,2 MHRK

"The results achieved in the first two quarters indicate further growth of business activities. We have maintained a stable position in our markets, distinguished ourselves as a system integrator and solidified business partnerships with customers home and abroad. Despite strong competition and price demands we achieved business growth thanks to outstanding performance of all our employees and to investment into strategic projects and customer financing projects", says Gordana Kovačević, president of Ericsson Nikola Tesla.

Compared to the first two quarters of the last year, orders booked increased by 19%, whereas sales increased by 4%. Higher business volume results from a large number of contracts concluded in Croatia, in the internal Ericsson market, in Bosnia and Herzegovina and in CIS market. An outstanding example is the contract concluded with the mobile operator JV MDC Velcom from Belarus in June 2006 that exceeds 250 MHRK.

In domestic market the company achieved sales revenues amounting to 238,8 MHRK, an increase of 18, 8% compared to last year. Partnerships with VIPnet and Tele2, and continued cooperation with T-HT produced a number of new contracts, some of them of strategic value for the company. Business growth was recorded in enterprise systems as well.

The company strengthened its position through the sales of knowledge in the internal Ericsson market. A growth of business activities in the areas of R&D and in Global Service Delivery Center resulted in sales revenues of 175 MHRK, an increase of 31,4% compared to the same period last year. This accomplishment was possible owing to considerable investment into new workplaces, equipment and competence development.

The company once again performed well in CIS market, with a sales growth of 33,6% with the achieved amount of 137,3 MHRK.

In other export markets the sales revenues were considerably lower compared to the same period last year. However, considering new contracts signed in the second quarter a better financial performance is expected till the year's end in these markets as well.

As expected, the gross margin (level) was lower compared to last year, resulting from a stronger competition, price pressure and investments into new technology trial systems with our customers. The changes in the product mix also contributed to lower margin levels.

Despite the lower gross margin level, the operating profit increased to 98,7 MHRK. This positive influence is due to the income from insurance coverage compensating the losses in fire incident in September last year.

The financial net is lower, due to lower deposit rate and to lower yield on assets invested in investment funds. The exchange rate fluctuations, although lower than in the same period last year, resulted in the loss from financial activities.

Accordingly, the profit before tax is lower by 1,1% compared to the same period last year and it amounts to 87,2 MHRK.

The strong financial situation of the company is continued. Positive cash flow from operations amounts to 77, 2 MHRK which is due to excellent trade receivables collecting.

In the first half-year 2006 Ericsson Nikola Tesla maintained the highest professional standards and performed according to business expectations; the business situation in major company markets reflects this.

In domestic market the company signed a number of contracts during April, May and June 2006. The cooperation with the mobile operator Vipnet holds a prominent position: with Vipnet the company started the first HSDPA (High Speed Downlink Packet Access) network in Croatia. In collaboration with Ericsson Nikola Tesla, Vipnet stepped out towards the mobile broadband Internet access and being an innovative leader in the Croatian market it continues the 3G network evolution.

ETK also signed a new strategic contract with Tele2, the third mobile operator in Croatia, for Field Operation Service-Managed Services, the first contract of the kind in Croatia and in this part of Europe.

In domestic market another contract was concluded for the delivery of enterprise systems and solutions for the Hotels Group Sunčani Hvar (Orco Group), and the projects stipulated with the ministries and administrative bodies are successfully carried out.

Abroad, specifically in Bosnia and Herzegovina, Ericsson Nikola Tesla signed new significant and large contracts with the operators BH Telecom and HT Mobilne komunikacije (former Eronet). It is of utmost importance that a considerable share of recent contracts with BH Telecom, the major operator in Bosnia and Herzegovina, deals with the system integration work. It includes hardware/software delivery, implementation and integration, also testing and commissioning and leading the projects relating to Service Delivery Platform (SDP) and m-commerce platform (solution that enables collecting contents and services payment). In May 2006 Ericsson Nikola Tesla signed with BH Telecom a number of contracts that will contribute to the modernization of BH Telecom mobile network. Thus BH Telecom will be ready for future access technologies in mobile networks (UMTS/HSDPA) that permit higher access rates and new services.

With HT-Mobilne komunikacije ETK signed a contract for mobile network extension and for a delivery of new base stations and radio links, so that most recent mobile services will be available to end users.

In the CIS export market Ericsson Nikola Tesla successfully continued its sales of equipment and solutions for fixed and mobile telephony, and enterprise systems to its old and new customers. Beside the new contracts concluded in Russia and Moldova the company considerably extended its installed AXE infrastructure. Contracts of strategic importance were signed for enterprise systems with customers in Kazakhstan.

The most significant contract was concluded in Belarus with our major customer, the mobile operator JV MDC Velcom. The contract includes extending and upgrading the GSM core system so that the mobile network will serve 3 million end users. Specifically, the contract includes the introduction of new switching, radio and transmission equipment to enable the operator to provide a broad range of high quality services. This new contract in Belarus also includes delivering professional services. 

Company communication Ericsson Nikola Tesla