Interim report
Strong cash flow and improving orders despite market weakness
- As expected, a slow start to 2024 with net sales declining 19% y-o-y in constant currency (-20% reported) in Q1.
- Environment still challenging but order trends continue to improve year-on-year, particularly in Network Infrastructure.
- Comparable gross margin in Q1 increased by 1 090bps y-o-y to 48.6% (reported increased 1 040bps to 47.9%). Strong contribution from
Nokia Technologies which benefited from significant catch-up net sales, in addition to significant improvements in Mobile Networks due in part to regional and product mix. - Q1 comparable operating margin increased 460bps y-o-y to 12.8% (reported up 130bps to 8.6%), as licensing catch-up net sales more than made up for low net sales coverage of operating expenses impacting other business groups.
- Q1 comparable diluted EPS of
EUR 0.09 ; reported diluted EPS ofEUR 0.08 . - Q1 free cash flow almost
EUR 1bn , net cash balanceEUR 5.1bn . Nokia 's full year 2024 outlook is unchanged.Nokia currently expects comparable operating profit of betweenEUR 2.3 billion to 2.9 billion and free cash flow conversion from comparable operating profit of between 30% and 60%.
This is a summary of the
As expected, the ongoing market weakness drove a 19% year-on-year constant currency decline in net sales in the first quarter. However, we have seen continued improvement in order intake, meaning we remain confident in a stronger second half and achieving our full year outlook. Driven by the patent licensing deals signed in
I’m pleased that the improving order intake we started to see in Network Infrastructure at the end of last year continued in Q1 with year-on-year growth in order intake and drove a further increase in our backlog. The outlook for Fixed Networks for 2024 has improved which is an important signal as this market often recovers first. However, we believe the recovery in Optical Networks may take somewhat longer. While we are conscious of the broader economic environment, considering the on-going order intake strength, we expect Network Infrastructure will return to net sales growth for full year 2024 with a stronger second half performance.
Mobile Networks was impacted by particularly low levels of spending in
Cloud and Network Services saw a soft start to the year which was related to the challenging spending environment. However, we are seeing improving order intake and pipeline momentum. Importantly, we are also making good progress with our Network as Code platform. This platform enables operators to monetize their 5G investments, creating new revenue streams by offering developers advanced API access to the network. We now have a total of 11 operators signed up to the platform with many more in active discussions.
We have been executing quickly on the operating model changes we announced back in October along with our cost savings roadmap. These actions, combined with our expectation for improved net sales growth in the second half of the year, supported by our order backlog, mean we are solidly on track to achieve our full year comparable operating profit outlook of
FINANCIAL RESULTS
EUR million (except for EPS in EUR) | Q1'24 | Q1'23 | YoY change | Constant currency YoY change |
Reported results | ||||
Net sales | 4 667 | 5 859 | (20)% | (19)% |
Gross margin % | 47.9% | 37.5% | 1 040bps | |
Research and development expenses | (1 135) | (1 108) | 2% | |
Selling, general and administrative expenses | (708) | (729) | (3)% | |
Operating profit | 400 | 426 | (6)% | |
Operating margin % | 8.6% | 7.3% | 130bps | |
Profit for the period | 438 | 289 | 52% | |
EPS, diluted | 0.08 | 0.05 | 60% | |
Net cash and interest-bearing financial investments | 5 137 | 4 304 | 19% | |
Comparable results | ||||
Net sales | 4 667 | 5 859 | (20)% | (19)% |
Gross margin % | 48.6% | 37.7% | 1 090bps | |
Research and development expenses | (1 086) | (1 093) | (1)% | |
Selling, general and administrative expenses | (596) | (642) | (7)% | |
Operating profit | 597 | 479 | 25% | |
Operating margin % | 12.8% | 8.2% | 460bps | |
Profit for the period | 501 | 342 | 46% | |
EPS, diluted | 0.09 | 0.06 | 50% | |
ROIC(1) | 10.8% | 15.8% | (500)bps |
1 Comparable ROIC = Comparable operating profit after tax, last four quarters / invested capital, average of last five quarters ending balances. Refer to the Performance measures section in
Business group results | Network Infrastructure | Mobile Networks | Cloud and Network Services | Technologies | Group Common and Other | |||||
EUR million | Q1'24 | Q1'23 | Q1'24 | Q1'23 | Q1'24 | Q1'23 | Q1'24 | Q1'23 | Q1'24 | Q1'23 |
Net sales | 1 662 | 2 248 | 1 577 | 2 567 | 652 | 760 | 757 | 242 | 23 | 48 |
YoY change | (26)% | (39)% | (14)% | 213% | (52)% | |||||
Constant currency YoY change | (26)% | (37)% | (13)% | 216% | (53)% | |||||
Gross margin % | 36.8% | 38.0% | 42.4% | 33.8% | 35.9% | 32.8% | 100.0% | 100.0% | (4.3)% | (12.5)% |
Operating profit/(loss) | 82 | 344 | (42) | 137 | (27) | (20) | 658 | 149 | (75) | (131) |
Operating margin % | 4.9% | 15.3% | (2.7)% | 5.3% | (4.1)% | (2.6)% | 86.9% | 61.6% | (326.1)% | (272.9)% |
SHAREHOLDER DISTRIBUTION
Dividend
Under the authorization by the Annual General Meeting held on
On
Following this announced distribution, the Board’s remaining distribution authorization is a maximum of
Share buyback program
In
OUTLOOK
Full Year 2024 | |
Comparable operating profit(1) | |
Free cash flow(1) | 30% to 60% conversion from comparable operating profit |
1Please refer to Performance measures section in
The outlook, long-term targets and all of the underlying outlook assumptions described below are forward-looking statements subject to a number of risks and uncertainties as described or referred to in the Risk Factors section later in this release. Along with
Net sales growth (constant currency) | Operating margin | |
Network Infrastructure | +2% to +8% | 11.5% to 14.5% |
Mobile Networks | -15% to -10% | 1.0% to 4.0% |
Cloud and Network Services | -2% to +3% | 6.0% to 9.0% |
Full year 2024 | Comment | |
Seasonality | H2 weighted | |
at least | ||
Group Common and Other operating expenses | This includes central function costs which are expected to be largely stable at approximately | |
Comparable financial income and expenses | Reflecting improved cash generation in Q1 and interest rates remaining higher than previously expected (increasing interest income) we now expect an improved financial income and expense result. | |
Comparable income tax rate | ~25% | |
Cash outflows related to income taxes | ||
Capital Expenditures |
2026 TARGETS
Net sales | Grow faster than the market |
Comparable operating margin(1) | ≥ 13% |
Free cash flow(1) | 55% to 85% conversion from comparable operating profit |
1 Please refer to Performance measures section in
The comparable operating margin target for
Network Infrastructure | 12 - 15% operating margin |
Mobile Networks | 6 - 9% operating margin |
Cloud and Network Services | 7 - 10% operating margin |
Operating profit more than | |
Group common and other | Approximately |
RISK FACTORS
- Competitive intensity, which is expected to continue at a high level as some competitors seek to take share;
- Changes in customer network investments related to their ability to monetize the network;
- Our ability to ensure competitiveness of our product roadmaps and costs through additional R&D investments;
- Our ability to procure certain standard components and the costs thereof, such as semiconductors;
- Disturbance in the global supply chain;
- Impact of inflation, increased global macro-uncertainty, major currency fluctuations and higher interest rates;
- Potential economic impact and disruption of global pandemics;
- War or other geopolitical conflicts, disruptions and potential costs thereof;
- Other macroeconomic, industry and competitive developments;
- Timing and value of new, renewed and existing patent licensing agreements with licensees;
- Results in brand and technology licensing; costs to protect and enforce our intellectual property rights; on-going litigation with respect to licensing and regulatory landscape for patent licensing;
- The outcomes of on-going and potential disputes and litigation;
- Timing of completions and acceptances of certain projects;
- Our product and regional mix;
- Uncertainty in forecasting income tax expenses and cash outflows, over the long-term, as they are also subject to possible changes due to business mix, the timing of patent licensing cash flow and changes in tax legislation, including potential tax reforms in various countries and
OECD initiatives; - Our ability to utilize our Finnish deferred tax assets and their recognition on our balance sheet;
- Our ability to meet our sustainability and other ESG targets, including our targets relating to greenhouse gas emissions;
as well the risk factors specified under Forward-looking statements of this release, and our 2023 annual report on Form 20-F published on
FORWARD-LOOKING STATEMENTS
Certain statements herein that are not historical facts are forward-looking statements. These forward-looking statements reflect
ANALYST WEBCAST
Nokia 's webcast will begin on18 April 2024 at11.30 a.m. Finnish time (EEST). The webcast will last approximately 60 minutes.- The webcast will be a presentation followed by a Q&A session. Presentation slides will be available for download at www.nokia.com/financials.
- A link to the webcast will be available at www.nokia.com/financials.
- Media representatives can listen in via the link, or alternatively call +1-412-317-5619.
FINANCIAL CALENDAR 2024
Nokia plans to publish its second quarter and half year 2024 results on18 July 2024 .Nokia plans to publish its third quarter and January-September 2024 results on17 October 2024 .
About
At
As a B2B technology innovation leader, we are pioneering networks that sense, think and act by leveraging our work across mobile, fixed and cloud networks. In addition, we create value with intellectual property and long-term research, led by the award-winning
Service providers, enterprises and partners worldwide trust
Inquiries:
Communications
Phone: +358 10 448 4900
Email: press.services@nokia.com
Maria Vaismaa, Global Head of
Investor Relations
Phone: +358 4080 3 4080
Email: investor.relations@nokia.com
Attachment
- 2024_Q1_Nokia_ Earnings_release_English
Source:
2024 GlobeNewswire, Inc., source