Friday, 07 February 2020 02:20

Nokia boosts quarterly profits after ‘challenging’ year Featured

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Nokia’s net profits for the fourth quarter 2019 more than doubled to 563 million euros, up from 203 million euros in the previous year quarter.

Releasing its quarterly report on Thursday, Nokia said its fourth quarter results were achieved at the end of a “challenging year”.

The profit report followed net sales in Q4 2019 of 6.9 billion euro, described by Nokia as “approximately flat” compared to Q4 2018 - with net sales decreasing 1% on a constant currency basis.

“Nokia’s fourth quarter 2019 results were a strong end to a challenging year. We saw strength in many parts of our business in the quarter, delivered a slightly better operating profit than the same period in 2018, generated solid free cash flow, and increased our net cash balance to EUR 1.7 billion,” said Rajeev Suri, Nokia president and CEO.

“When I look at Nokia’s full-year 2019 performance, we saw good progress in our strategic focus areas of enterprise and software. Nokia Enterprise delivered exceedingly well on its target of double-digit sales growth, considerably outpacing the market.

“Nokia Software showed its long-term promise, with exceptional profitability expansion compared to 2018. In addition, IP Routing continued its remarkable momentum, gaining significant share and increasing profitability in a difficult market; and Nokia Technologies continued to generate robust profitability.”

Nokia’s fourth quarter report shows:

  • Full year 2019 results for non-IFRS diluted EPS, non-IFRS operating margin, and recurring free cash flow were in line with our guidance.
  • Net sales in Q4 2019 were EUR 6.9 billion, approximately flat compared to Q4 2018. On a constant currency basis, net sales decreased 1%. Excluding one-time licensing net sales in Q4 2019 and Q4 2018, net sales grew 1%, reflecting improved overall industry demand and particularly strong growth with enterprise customers, driven by increased demand for mission-critical networking solutions. In full year 2019, net sales were EUR 23.3 billion, compared to EUR 22.6 billion in full year 2018.
  • Non-IFRS diluted EPS in Q4 2019 was EUR 0.15, compared to EUR 0.13 in Q4 2018, primarily driven by continued progress related to our cost savings program, which resulted in lower operating expenses across Networks, Nokia Software and Nokia Technologies. This was partially offset by lower gross profit, particularly in Mobile Access within Networks. In full year 2019, Nokia’s non-IFRS diluted EPS was EUR 0.22, compared to EUR 0.23 in full year 2018.
  • Reported diluted EPS in Q4 2019 was EUR 0.10, compared to EUR 0.03 in Q4 2018, primarily driven by continued progress related to our cost savings program, lower transaction and integration costs, a net positive fluctuation in financial income and expenses, lower income taxes and a net positive fluctuation in other income and expenses. This was partially offset by lower gross profit, primarily due to our business performance. In full year 2019, on a reported basis, Nokia generated a profit of EUR 18 million and a diluted EPS of EUR 0.00, compared to a loss of EUR 549 million and a diluted EPS of negative EUR 0.10 in full year 2018.
  • In Q4 2019, net cash and current financial investments increased sequentially by approximately EUR 1.4 billion, resulting in a net cash balance of approximately EUR 1.7 billion.

Commenting further on the quarterly results, Rajeev Suri said Nokia recognised, that the company had faced “challenges in Mobile Access and in cash generation”.

“We will have a sharp focus on these two areas over the course of 2020, which we believe to be a year of progressive improvement as the actions we have underway start to deliver results,” he said.

“In Mobile Access, we expect improvements to be driven by increasing shipments of our ‘5G Powered by ReefShark’ portfolio; product cost reductions; better commercial management; and strengthened operational performance in services.

“In terms of cash generation, we have extensive operational actions underway to improve performance. As we noted in our third quarter announcement, our Board said it expects to resume dividend distributions after Nokia’s net cash position increases to approximately EUR 2 billion.

“Given typical cash seasonality, we would not expect to reach that level in the first three quarters of this year. Should we exceed the EUR 2 billion level after that point, the Board will assess the possibility of proposing a dividend distribution for financial year 2020.

“While I believe that 2020 will present its share of challenges, I am confident that we are taking the right steps to deliver progressive improvement over the course of this year and to position us for a stronger 2021,” Suri concluded.

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Peter Dinham is a co-founder of iTWire and a 35-year veteran journalist and corporate communications consultant. He has worked as a journalist in all forms of media – newspapers/magazines, radio, television, press agency and now, online – including with the Canberra Times, The Examiner (Tasmania), the ABC and AAP-Reuters. As a freelance journalist he also had articles published in Australian and overseas magazines. He worked in the corporate communications/public relations sector, in-house with an airline, and as a senior executive in Australia of the world’s largest communications consultancy, Burson-Marsteller. He also ran his own communications consultancy and was a co-founder in Australia of the global photographic agency, the Image Bank (now Getty Images).

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