October 18, 2018 / 6:18 AM / 9 months ago

UPDATE 1-Sweden's Ericsson Q3 sales, profits surge as savings kick in

(Adds detail, background)

STOCKHOLM, Oct 18 (Reuters) - Mobile telecom equipment maker Ericsson on Thursday posted operating profits well above forecasts, boosted by rising sales for next-generation 5G gear in North America, and said it was making solid progress towards its long-term financial goals.

Marking its third consecutive quarter of substantial progress toward hitting its 2020 financial goals, the company said its mainstay networks segment showed strong sales growth in North America, Europe and Latin America.

The Swedish firm cautioned that due to strong third-quarter sales in the networks business, it expects a lower-than-normal sales rise in the fourth quarter. A year ago, group sales rose 17 percent between the third and fourth quarters.

Ericsson has responded to an industry-wide downturn and severe losses since 4G network sales peaked mid-decade with a new strategy to focus on profitability over growth, replacing most of its management and making sweeping cost cuts.

It has pledged to deliver a gross margin of 37-39 percent by 2020. It nearly got there in the third quarter, with gross margin, excluding restructuring charges, of 36.9 percent, topping market expectations of 36.2 percent.

Operating profit swung to a profit of 3.2 billion crowns ($356.5 million) from a 3.7 billion loss a year earlier and outpaced a mean forecast for a 800 million crown profit seen in a Reuters poll of analysts.

"We remain confident in reaching our long-term target of at least 12 percent operating margin beyond 2020," Chief Executive Borje Ekholm said in a statement.

Shares in Ericsson have risen more than 40 percent this year, buoyed by the progress it is showing in reaching its financial targets, after three years of steep revenue declines.

$1 = 8.9772 Swedish crowns Reporting by Helena Soderpalm and Olof Swahnberg; editing by Jason Neely

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