Nokia Announces Second-Quarter Financials
Thursday, July 25, 2019 | Comments

Nokia reported second-quarter financial results, with net sales in the quarter of €5.7 billion (US$6.4 billion) compared with €5.3 billion (US$5.9 billion) in the second quarter of 2018. On a constant currency basis, net sales increased 5%.

Topline performance was driven by improved industry demand and the competitiveness of the company’s end-to-end portfolio, with growth across four out of six regions and all customer types, a statement said.

In the second quarter, net cash and current financial investments decreased sequentially by about €1.5 billion (US$1.7 billion). This decrease was primarily because of anticipated cash outflows including the payment of 2018 performance-related incentives to employees and payment of the quarterly dividend, as well as restructuring and associated cash outflows, which together totaled about €900 million (US$1 billion). In addition, about €350 million (US$390.5 million) of the decline was temporary in nature and is expected to reverse in the second half of 2019.

Nokia maintained its full-year 2019 guidance, with seasonality characterized by weaker first and third quarters and stronger second and fourth quarters, with a particularly weak first quarter and an expected particularly strong fourth quarter. The growth in net sales to enterprise customers was primarily because of strong demand for the firm’s IP routing and optical networks portfolio and, to a lesser extent, strong percentage growth in private wireless networks for industrial and public sector applications.

“We continue to see strong momentum in industries like utilities, transportation, mining, manufacturing, as well as the public sector,” the company said. Nokia net sales grew 5% in the first six months of 2019 as our customers added network capacity in preparation for the continued rise in broadband traffic driven by 5G. On a constant currency basis, Nokia net sales grew 2% in the first six months of 2019.

The decrease in Nokia gross profit in the first six months of 2019 was driven by a particularly weak first quarter, partially offset by improved operational execution in the second quarter of 2019.

The slight increase in Nokia operating loss in the first six months of 2019 was driven by lower gross profit and higher restructuring and associated charges, partially offset by continued progress related to Nokia’s cost-savings program.

During the second quarter, Nokia’s free cash flow was negative €1.041 billion (US$1.2 billion) driven by cash outflows related to net working capital, primarily because of the payment of 2018 performance-related incentives to employees, continued cash outflows related to restructuring and network equipment swaps, and income taxes and capital expenditures.

Beginning with the distribution for the financial year 2018, Nokia started paying dividends in quarterly instalments.

“In the quarter, we saw good year-on-year growth, meaningful improvements in profitability, robust progress in our strategic expansion areas of software and enterprise and excellent momentum in our IP routing business,” said Rajeev Suri, president and CEO. “We also continued to enhance our position in 5G, and now have 45 commercial 5G deals and nine live networks.

“Risks remain in the year, including execution demands in the second half, trade-related uncertainty and challenges in the China market. Given these risks, we will continue to focus on tight operational discipline, delivering on our €700 million (US$781 million) cost-savings program, improving working capital management and advancing the implementation of our strategy.”

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