Nokia Corporation Financial Report for Q2 and Half Year 2021
29 Juli 2021 - 07:00AM
Nokia Corporation Financial Report for Q2 and Half Year 2021
Nokia Corporation Half year report29 July 2021 at 08:00
EET
Nokia Corporation Financial Report
for Q2 and Half Year
2021
Strong first half, 2021 Outlook revised
upwards
- Top-line strength continued in Q2,
with constant currency net sales up 9% year-on-year, driven by
growth across all business groups, with particular strength in
Network Infrastructure. Reported net sales increased 4%.
- Important progress on our
three-phased strategy. Mobile Networks strengthening its
competitiveness with major product launch, including some industry
leading features. Network Infrastructure continued to gain share in
the first half.
- Our new operating model is
delivering clear accountability and financial discipline through
the organization.
- Comparable gross margin of 42.3%
(reported 41.0%) in Q2, reflecting broad improvements, particularly
in Mobile Networks, which benefitted from a one-time software deal
and 5G growth.
- Comparable operating margin of 12.8%
(reported 9.1%) in Q2, with improvements across all business
groups, also helped by the one-time software deal in Mobile
Networks.
- Q2 comparable diluted EPS of EUR
0.09; reported diluted EPS of EUR 0.06.
- Generated positive free cash flow
for the fifth quarter in a row; liquidity position remains solid
with EUR 3.7bn net cash.
- Strong performance in first half
2021 with 9% constant currency sales growth (reported net sales
+4%) and comparable operating margin of 11.9% (reported 8.8%),
driving increase in our full year Outlook although headwinds remain
for the second half.
- Considering our strong start to
2021, we revise our full year 2021 Outlook, including net sales
expected to be EUR 21.7bn to 22.7bn (previously EUR 20.6bn to EUR
21.8bn) with comparable operating margin in the range of 10-12%
(previously 7-10%).
This is a summary of the Nokia Corporation Financial Report for
Q2 and Half Year 2021 published today. Nokia only publishes a
summary of its financial reports in stock exchange releases. The
summary focuses on Nokia Group's financial information as well as
on Nokia's outlook. The detailed, segment-level discussion will be
available in the complete financial report hosted at
www.nokia.com/financials. Investors should not solely rely on
summaries of Nokia's financial reports, but should also review the
complete reports with tables.
PEKKA LUNDMARK, PRESIDENT AND CEO, ON
Q2 2021 RESULTS
I am delighted that our strong start to 2021 continued in the
second quarter. Our constant currency sales growth of 9%, combined
with good cost control, enabled us to deliver a comparable
operating margin of 12.8%. Even excluding a one-time software deal
in Mobile Networks, we saw good underlying progress in operating
margin. We are already seeing the benefits of our new operating
model which helped us to deliver such a strong financial
performance.
The highlight of the second quarter was the Mobile Networks
launch of our new AirScale baseband and radio products with up to
75% better power efficiency helping to reduce our environmental
footprint and the lightest 32TRX massive MIMO active antenna in the
market. In Network Infrastructure we sustained double-digit growth
and have a series of product launches ahead in the second half to
further strengthen our differentiation. Cloud and Network Services
is making good progress on its portfolio rebalancing and Nokia
Technologies continues to scale with two licensing agreements with
automotive manufacturers including Daimler.
Considering our robust start to 2021, we are revising upwards
our full year Outlook. We now expect a comparable operating margin
between 10-12% for full year 2021, compared to our previous range
of 7-10%. We have executed faster than planned on our strategy in
the first half which provides us with a good foundation for the
full year. We still however expect to face the earlier communicated
headwinds in the second half, particularly with market share loss
and price erosion in North America. Therefore, we still expect our
typical quarterly earnings seasonality to be less pronounced in
2021. In addition, we continue to accelerate R&D investments
and monitor risks around component availability, considering the
strong demand for our products.
Overall, I am very happy with the progress made in the first
half. I want to thank our entire team for their hard work and
commitment.
FINANCIAL RESULTS
EUR million (except for EPS in EUR) |
Q2'21 |
Q2'20 |
YoY change |
Constant currency YoY change |
Q1–Q2'21 |
Q1–Q2'20 |
YoY change |
Constant currency YoY change |
Reported results |
|
|
|
|
|
|
|
|
Net sales |
5 313 |
5 092 |
4% |
9% |
10 389 |
10 005 |
4% |
9% |
Gross margin
%1 |
41.0% |
38.1% |
290bps |
|
39.5% |
36.8% |
270bps |
|
Research and
development expenses1 |
(1 063) |
(1 013) |
5% |
|
(2 060) |
(2 019) |
2% |
|
Selling,
general and administrative expenses1 |
(712) |
(709) |
0% |
|
(1 360) |
(1 489) |
(9)% |
|
Operating
profit |
484 |
170 |
185% |
|
916 |
94 |
874% |
|
Operating
margin % |
9.1% |
3.3% |
580bps |
|
8.8% |
0.9% |
790bps |
|
Profit/(loss)
for the period |
351 |
99 |
255% |
|
614 |
(17) |
|
|
EPS,
diluted |
0.06 |
0.02 |
200% |
|
0.11 |
0.00 |
|
|
Net cash and
current financial investments |
3 688 |
1 550 |
138% |
|
3 688 |
1 550 |
138% |
|
Comparable results |
|
|
|
|
|
|
|
|
Net sales |
5 313 |
5 093 |
4% |
9% |
10 389 |
10 007 |
4% |
9% |
Gross margin
% |
42.3% |
39.6% |
270bps |
|
40.3% |
38.0% |
230bps |
|
Research and
development expenses |
(1 011) |
(953) |
6% |
|
(1 985) |
(1 928) |
3% |
|
Selling,
general and administrative expenses |
(585) |
(590) |
(1)% |
|
(1 137) |
(1 262) |
(10)% |
|
Operating
profit |
682 |
423 |
61% |
|
1 234 |
539 |
129% |
|
Operating
margin % |
12.8% |
8.3% |
450bps |
|
11.9% |
5.4% |
650bps |
|
Profit for the
period |
539 |
316 |
71% |
|
914 |
348 |
163% |
|
EPS,
diluted |
0.09 |
0.06 |
50% |
|
0.16 |
0.06 |
167% |
|
ROIC2 |
18.4% |
11.4% |
700bps |
|
|
|
|
|
1In Q4 2020, Nokia reclassified certain items of income and
expenses from other operating income and expenses to the functions.
The comparative reported results for Q2’20 and Q1-Q2'20 have been
recast accordingly. Refer to Note 1, Basis of preparation, in the
Financial statement information section included in Nokia
Corporation Financial Report for Q2 and Half Year 2021 for
details.2Comparable ROIC = Comparable operating profit after tax,
last four quarters / invested capital, average of last five
quarters’ ending balances. Refer to Note 10, Performance measures,
in the Financial statement information section included in Nokia
Corporation Financial Report for Q2 and Half Year 2021 for details.
|
Reconciliation of reported operating profit to comparable
operating profit |
|
|
|
|
EUR million |
Q2'21 |
Q2'20 |
YoY change |
Q1–Q2'21 |
Q1–Q2'20 |
YoY change |
|
Reported operating profit |
484 |
170 |
185% |
916 |
94 |
874% |
|
Restructuring and associated charges |
141 |
130 |
|
177 |
217 |
|
|
Amortization of acquired intangible assets |
97 |
106 |
|
194 |
207 |
|
|
Settlement of legal disputes |
(80) |
0 |
|
(80) |
0 |
|
|
Impairment of assets, net of impairment reversals |
32 |
19 |
|
33 |
20 |
|
|
Other, net |
8 |
(2) |
|
(6) |
1 |
|
|
Comparable operating profit |
682 |
423 |
61% |
1 234 |
539 |
129% |
|
OUTLOOK
|
Full year 2021 |
Full year 2023 |
Net sales1 |
EUR 21.7 billion to EUR 22.7 billion (adjusted from EUR 20.6 to
21.8bn) |
Grow faster than the market |
Comparable operating margin2 |
10 to 12% (adjusted from 7 to 10%) |
10–13% |
Free cash flow3 |
Clearly positive (adjusted from positive) |
Clearly positive |
Comparable ROIC2,4 |
17 to 21% (adjusted from 10 to 15%) |
15–20% |
1 Assuming actual currency rates for first half 2021 and end of
June EUR/USD rate of 1.19 continues in the second half 2021 (this
is adjusted from our previous guidance based on the year-end 2020
EUR/USD rate of 1.23).2 Comparable measures exclude intangible
asset amortization and other purchase price fair value adjustments,
goodwill impairments, restructuring related charges and certain
other items affecting comparability. Refer to Note 10, Performance
measures, in the Financial statement information section included
in Nokia Corporation Financial Report for Q2 and Half Year 2021 for
details.3 Free cash flow = net cash from/(used in) operating
activities - capital expenditures + proceeds from sale of property,
plant and equipment and intangible assets – purchase of non-current
financial investments + proceeds from sale of non-current financial
investments..4 Comparable ROIC = comparable operating profit after
tax, last four quarters / invested capital, average of last five
quarters’ ending balances. Refer to Note 10, Performance measures,
in the Financial statement information section included in Nokia
Corporation Financial Report for Q2 and Half Year 2021 for
details. |
OUTLOOK ASSUMPTIONS
- Nokia’s outlook assumptions for the
comparable operating margin of each business group in 2021 and 2023
are provided below (updated):
|
Full year 2021 |
Full year 2023 |
Mobile Networks |
4 to 7% |
5 to 8% |
Network Infrastructure |
8 to 11% |
9 to 12% |
Cloud and Network Services |
3 to 6% |
8 to 11% |
Nokia Technologies |
>75% |
>75% |
- We continue to maintain our
expectation for Nokia Technologies to deliver a slight improvement
in comparable operating profit in full year 2021, relative to full
year 2020, and stable performance over the longer-term;
- Group Common and Other primarily
consists of support function costs. We expect the net negative
impact of Group Common and Other to be approximately EUR 200
million in 2021 and over the longer-term;
- In full year 2021, Nokia expects the
free cash flow performance of Nokia Technologies to be
approximately EUR 600 million lower than its operating profit,
primarily due to prepayments we received from certain
licensees;
- Comparable financial income and
expenses are expected to be an expense of approximately EUR 200
million in full year 2021 and EUR 250 million over the longer-term
(updated);
- Comparable income tax expenses are
expected to be approximately EUR 450 million in full year 2021 and
over the longer-term, subject to regional profit mix, net sales
subject to withholding tax and the timing of patent licensing cash
flow;
- Cash outflows related to income
taxes are expected to be approximately EUR 350 million in full year
2021 and over the longer-term until our US or Finnish deferred tax
assets are fully utilized;
- Capital expenditures are expected to
be approximately EUR 650 million in full year 2021 and EUR 600
million over the longer-term (updated); and
- Rule of thumb related to currency
fluctuations: Assuming our current mix of net sales and total costs
(refer to Note 1, Basis of Preparation, in the Financial statement
information section included in Nokia Corporation Financial Report
for Q2 and Half Year 2021 for details), we expect that a 10%
increase in the EUR/USD exchange rate would have an impact of
approximately negative 4 to 5% on net sales and an approximately
neutral impact on operating profit.
RISK FACTORS
Nokia and its business are exposed to a number of risks and
uncertainties which include but are not limited to:
- Competitive intensity, which is
particularly impacting Mobile Networks and is expected to continue
at a high level in full year 2021, as some competitors seek to take
share in the early stages of 5G;
- Our ability to accelerate our
product roadmaps and cost competitiveness through additional 5G
investments in full year 2021, thereby enabling us to drive product
cost reductions and maintain the necessary scale to be
competitive;
- Some customers are reassessing their
vendors in light of security concerns, creating near-term pressure
to invest in order to secure long-term benefits;
- Developments in North America
following the conclusion of the C-band auction, including the
potential for temporary capital expenditure constraints or the
acceleration of 5G deployments;
- The scope and duration of the
COVID-19 impact, particularly in certain countries, including
India, where the pandemic has worsened, and the pace and shape of
the economic recovery following the pandemic;
- Our ability to procure certain
standard components and the costs thereof, such as
semiconductors;
- The timing of completions and
acceptances of certain projects;
- Our product and regional mix;
- Macroeconomic, industry and
competitive dynamics;
- The timing and value of new and
existing patent licensing agreements with smartphone vendors,
automotive companies and consumer electronics companies;
- Results in brand and technology
licensing; costs to protect and enforce our intellectual property
rights; and the regulatory landscape for patent licensing;
as well as the risk factors specified under Forward-looking
Statements of this release, and our 2020 annual report on Form 20-F
published on March 4, 2021 under Operating and financial review and
prospects-Risk factors.
FORWARD-LOOKING STATEMENTS
Certain statements herein that are not historical facts are
forward-looking statements. These forward-looking statements
reflect Nokia's current expectations and views of future
developments and include statements regarding: A) expectations,
plans, benefits or outlook related to our strategies, product
launches, growth management and operational key performance
indicators; B) expectations, plans or benefits related to future
performance of our businesses (including the expected impact,
timing and duration of that impact of COVID-19 on our businesses,
our supply chain and our customers’ businesses) and any future
dividends; C) expectations and targets regarding financial
performance, cash generation, results, the timing of receivables,
operating expenses, taxes, currency exchange rates, hedging, cost
savings, product cost reductions and competitiveness, as well as
results of operations including targeted synergies, better
commercial management and those results related to market share,
prices, net sales, income and margins; D) ability to execute,
expectations, plans or benefits related to changes in
organizational and operational structure and cash or cost savings
arrangements; and (E) any statements preceded by or including
"continue", “believe”, “commit”, “estimate”, “expect”, “aim”,
“influence”, "will” or similar expressions. These forward-looking
statements are subject to a number of risks and uncertainties, many
of which are beyond our control, which could cause our actual
results to differ materially from such statements. These statements
are based on management’s best assumptions and beliefs in light of
the information currently available to them. These forward-looking
statements are only predictions based upon our current expectations
and views of future events and developments and are subject to
risks and uncertainties that are difficult to predict because they
relate to events and depend on circumstances that will occur in the
future. Factors, including risks and uncertainties that could cause
these differences, include those risks and uncertainties identified
in the Risk Factors above.
ANALYST WEBCAST
Nokia's video webcast will begin on 29 July 2021 at 11:30 a.m.
Finnish time. A link to the webcast will be available at
www.nokia.com/financials. Media representatives can follow the
presentation via the link, or alternatively call
+1-412-717-9224.
About Nokia
At Nokia, we create technology that helps the world act
together.
As a trusted partner for critical networks, we are committed to
innovation and technology leadership across mobile, fixed and cloud
networks. We create value with intellectual property and long-term
research, led by the award-winning Nokia Bell Labs.
Adhering to the highest standards of integrity and security, we
help build the capabilities needed for a more productive,
sustainable and inclusive world.
Inquiries:
Nokia CommunicationsPhone: +358 10 448 4900Email:
press.services@nokia.comKatja Antila, Head of Media Relations
Nokia Investor RelationsPhone: +358 40 803 4080Email:
investor.relations@nokia.com
Nokia (BIT:1NOKIA)
Historical Stock Chart
Von Feb 2024 bis Mär 2024
Nokia (BIT:1NOKIA)
Historical Stock Chart
Von Mär 2023 bis Mär 2024