NOKIA OYJ
TIDMNOKIA
Nokia Corporation
Interim report
29 October 2020 at 08:00 (CET +1)
Nokia Corporation Interim Report for Q3 and January-September 2020
Solid margin and free cash flow; net sales decline primarily due to
services
-- Continued improvements in our Mobile Access portfolio; reducing product
costs and improving product performance; commitment to invest in R&D to
drive product leadership
-- 7% year-on-year decrease in net sales, largely driven by lower services
within Mobile Access, consistent with our expectation for lower network
deployment services
-- Strong year-on-year growth in Nokia Enterprise
-- Continued margin expansion year-on-year, primarily driven by Mobile
Access and Optical Networks
-- Positive operating profit, on a reported basis, in Q3 and first nine
months of 2020
-- Solid free cash flow in Q3 and the first nine months of 2020
-- Adjusted 2020 outlook midpoints for non-IFRS EPS to EUR 0.23 (from EUR
0.25) and operating margin to 9.0% (from 9.5%), with the new midpoints
and ranges within the previously provided outlook ranges
-- Provided new outlook for 2021 non-IFRS operating margin of 7-10%
-- Long term outlook to be provided latest at the Capital Markets Day on
March 18, 2021
This is a summary of the Nokia Corporation Interim Report for Q3 and
January-September 2020 published today. The complete Interim Report for
Q3 and January-September 2020 with tables is available at
https://www.globenewswire.com/Tracker?data=XPamBNLwnKNl3BEKUNYJTX0CC4JMvJL021VFHQy5bfkzgDSwSbuAjicQt7Kg-Bj6PX3QaF48ID84mBhPlshAZdkj-RSoco_QNQuwFMryH2U=
www.nokia.com/financials. Investors should not rely on summaries of our
financial reports only, but should review the complete financial reports
with tables.
PEKKA LUNDMARK, PRESIDENT AND CEO, ON Q3 2020 RESULTS
In my first quarter as CEO of Nokia, I have seen both opportunities and
challenges. As our solid Q3 results demonstrate, we are making good
progress in many parts of our business. Profitability was up on a
year-on-year basis, we had the fifth consecutive quarter of solid free
cash flow, Nokia Enterprise maintained its double-digit growth, and we
continued to strengthen the competitiveness and cost position of our
mobile radio products.
When I look ahead, however, the good progress we have made is not
enough. Our financial performance in 2021 is expected to be challenging,
and more change is needed. We have lost share at one large North
American customer, see some margin pressure in that market, and believe
we need to further increase R&D investments to ensure leadership in 5G.
In fact, we have decided that we will invest whatever it takes to win in
5G. Our customers are counting on us and we will be there for them.
We announced separately today some important changes to our operating
model. The goal of this new model is to better align with the needs of
our customers, and through that improve our performance and create
shareholder value. The changes announced today mark a shift from
end-to-end as a strategic principle to a more focused approach with each
business group having a distinct role in our overall strategy.
Each of the four new business groups will have P&L responsibility and
ownership of creating a path to becoming one of the market leaders in
their respective sector. The changes optimize our operating model for
better accountability and transparency, increased simplicity and
cost-efficiency.
We plan to share more details about our strategy in December and at a
Capital Markets Day in March. A more rigorous approach to capital
allocation will be key to our strategic direction. As a technology
company we will invest to win in those segments where we choose to
compete.
Equally important is our view of the future, where we see an opportunity
to lead in "network-as-a-service" business models for telecom operators
and enterprise customers. This change offers a broad opportunity for
Nokia to provide a trusted, software-led and cloud-based network
capability that can be rapidly integrated, deployed, and self-managed as
a complete service, allowing us to move up the value chain and provide
additional "network plus" value-adding services. This vision will take
time to become a reality, but Nokia is well positioned to win given our
deep experience in delivering carrier-grade network performance and
extensive work with webscale companies and enterprises.
I have no doubt that the potential of Nokia is substantial, even if
delivering on that promise will take time. We expect to stabilize our
financial performance in 2021 and deliver progressive improvement
towards our long-term goal after that. We intend to provide an update on
long-term outlook at the latest on Capital Markets Day. I am confident
that with the right strategy, focus, and operating model we will be
successful. Today, we embark on that journey.
NOKIA FINANCIAL RESULTS
Constant Constant
EUR million (except YoY currency YoY currency
for EPS in EUR) Q3'20 Q3'19 change YoY change Q1-Q3'20 Q1-Q3'19 change YoY change
---------------------- ----- ----- ------ ----------- -------- -------- ------ -----------
Net sales 5 294 5 686 (7)% (3)% 15 299 16 412 (7)% (6)%
Networks 4 112 4 434 (7)% (3)% 11 825 12 770 (7)% (6)%
Nokia Software 585 677 (14)% (10)% 1 795 1 898 (5)% (4)%
Nokia Technologies 331 358 (8)% (8)% 1 020 1 112 (8)% (8)%
Group Common and
Other 275 236 17% 16% 691 720 (4)% (5)%
Non-IFRS
exclusions (1) (2) (2) (29)
Eliminations (9) (17) (29) (58)
Gross profit 1 976 1 969 0% 5 760 5 614 3%
Operating
profit/(loss) 350 264 33% 444 (318)
Networks 263 128 105% 431 (7)
Nokia Software 87 156 (44)% 246 286 (14)%
Nokia Technologies 274 294 (7)% 846 919 (8)%
Group Common and
Other (138) (100) (499) (329)
Non-IFRS
exclusions (136) (214) (581) (1 187)
Operating margin % 6.6% 4.6% 200bps 2.9% (1.9)% 480bps
Net sales (non-IFRS) 5 294 5 688 (7)% (3)% 15 301 16 441 (7)% (6)%
Gross profit
(non-IFRS) 1 981 2 006 (1)% 5 785 5 765 0%
Operating profit
(non-IFRS) 486 478 2% 1 025 869 18%
Operating margin %
(non-IFRS) 9.2% 8.4% 80bps 6.7% 5.3% 140bps
----- ----- ------ -------- -------- ------
Financial income and
expenses (73) (98) (26)% (134) (326) (59)%
Income taxes (74) (80) (124) 108
Profit/(loss) for the
period 203 87 133% 187 (545)
EPS, diluted 0.04 0.01 300% 0.03 (0.10)
Financial income and
expenses (non-IFRS) (78) (113) (31)% (172) (291) (41)%
Income taxes
(non-IFRS) (103) (101) 2% (202) (161) 25%
Profit for the period
(non-IFRS) 305 267 14% 653 409 60%
EPS, diluted
(non-IFRS) 0.05 0.05 0% 0.11 0.07 57%
----- ----- ------ -------- -------- ------
The financial information in this report is unaudited. Non-IFRS results
exclude costs related to the acquisition of Alcatel-Lucent and related
integration, goodwill impairment charges, intangible asset amortization
and other purchase price fair value adjustments, restructuring and
associated charges and certain other items that may not be indicative of
Nokia's underlying business performance. For details, please refer to
note 2, "Non-IFRS to reported reconciliation", in the notes to the
Financial statement information included in Nokia Corporation Interim
Report for Q3 and January-September 2020. Change in net sales at
constant currency excludes the effect of changes in exchange rates in
comparison to euro, our reporting currency. For more information on
currency exposures, please refer to note 1, "Basis of Preparation", in
the "Financial statement information" section included in Nokia
Corporation Interim Report for Q3 and January-September 2020.
-- Both non-IFRS and reported net sales in Q3 2020 were EUR 5.3bn, compared
to EUR 5.7bn in Q3 2019. On a constant currency basis, both non-IFRS and
reported net sales decreased 3%, primarily due to services within Mobile
Access. The services-related declines in Q3 2020 were primarily driven by
lower levels of network deployment services, consistent with our
expectation, as disclosed in our Outlook section of the Report for Q2 and
Half Year 2020. In Nokia Enterprise, we continued to make great progress
and delivered 15% year-on-year growth in net sales.
-- The impact of COVID-19 on Nokia's financial performance and financial
position was primarily related to factory closures, resulting in a net
sales impact of approximately EUR 200 million in the first nine months of (MORE TO FOLLOW) Dow Jones Newswires
10-29-20 0215ET
