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Nokia Corporation Nokia Corporation Financial Report For Q1 2021

TIDMNOKIA 
 
   Nokia Corporation 
 
   Interim report 
 
   29 April 2021 at 08:00 EET 
 
   Nokia Corporation Financial Report for Q1 2021 
 
   Sales growth in Q1 driving margin increase and strong cash generation 
 
 
   -- Strong start to the year with constant currency net sales up 9% 
      year-on-year, driven by strong growth in Network Infrastructure and solid 
      growth in Mobile Networks; reported net sales increased 3% 
 
   -- Enterprise constant currency net sales up 18% year-on-year, as we gained 
      63 new customers, more than doubling the number we added in Q1 2020; 
      reported net sales increased 14% 
 
   -- Comparable gross margin of 38.2% (reported 37.9%), reflecting 
      improvements in Mobile Networks, mainly driven by 5G growth and favorable 
      product and regional mix, and broad improvements across Network 
      Infrastructure 
 
   -- Comparable operating margin of 10.9% (reported 8.5%), with improvements 
      in comparable operating profit across all business groups 
 
   -- Comparable diluted EPS of EUR 0.07; reported diluted EPS of EUR 0.05 
 
   -- Strong cash flow performance, driven by operating profit and good 
      collection of receivables 
 
   -- Solid liquidity position, with net cash of EUR 3.7bn and total cash of 
      EUR 8.8bn 
 
   -- Executing well on three-phased approach to achieve sustainable, 
      profitable growth and technology leadership set out at Capital Markets 
      Day 
 
   -- Full year 2021 and 2023 outlook maintained 
 
 
   This is a summary of the Nokia Corporation financial report for Q1 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 Q1 2021 RESULTS 
 
   We have delivered a robust start to the year with strong net sales, 
operating margin and cash flow. Today's results demonstrate that we are 
on track to deliver on our three-phased plan to achieve sustainable, 
profitable growth and technology leadership as announced at our recent 
Capital Markets Day. 
 
   I was particularly pleased by strong sales growth across our Network 
Infrastructure business group driven by increasing demand for next 
generation connectivity; good progress in Mobile Networks in securing 
full portfolio competitiveness; continued double-digit sales growth with 
our Enterprise customers; double-digit sales growth in North America; 
and good net sales development for Nokia Technologies. 
 
   At this point we are maintaining our Outlook for the full year, as we 
want to see how 2021 continues to develop. The solid first quarter 
provides a good foundation for achieving the higher end of the 7 to 10% 
comparable operating margin range. We expect our typical quarterly 
earnings seasonality to be less pronounced in 2021, and we continue to 
monitor overall market developments including visibility for 
semiconductor availability. I am proud of how we have continued to 
successfully deliver to our customers during the global semiconductor 
shortage. 
 
   I want to recognize all the hard work that the Nokia team has put in and 
thank them for delivering such a strong first quarter. 
 
   FINANCIAL RESULTS 
 
 
 
 
                                                                             Constant 
                                                                   YoY        currency 
EUR million (except for EPS in EUR)         Q1'21      Q1'20     change      YoY change 
Reported results 
-----------------------------------------  --------  ---------  ---------  ------------- 
Net sales                                     5 076      4 913         3%             9% 
Gross margin %(1)                             37.9%      35.3%     260bps 
Research and development expenses(1)          (996)    (1 007)       (1)% 
Selling, general and administrative 
 expenses(1)                                  (649)      (780)      (17)% 
Operating profit/(loss)                         431       (76) 
Operating margin %                             8.5%     (1.5)% 
Profit/(loss) for the period                    263      (115) 
EPS, diluted                                   0.05     (0.02) 
Net cash and current financial 
 investments                                  3 689      1 320       179% 
Comparable results 
-----------------------------------------  --------  ---------  ---------  ------------- 
Net sales                                     5 076      4 914         3%             9% 
Gross margin %                                38.2%      36.4%     180bps 
Research and development expenses             (973)      (974) 
Selling, general and administrative 
 expenses                                     (552)      (672)      (18)% 
Operating profit                                551        116       375% 
Operating margin %                            10.9%       2.4%     850bps 
Profit for the period                           375         33     1 036% 
EPS, diluted                                   0.07       0.01       600% 
ROIC(2)                                       15.3%      11.5%     380bps 
                                           --------  ---------  --------- 
 
  1) In Q4 2020, Nokia reclassified certain items of income and expenses 
  from other operating income and expenses to the functions. The comparative 
  reported results for Q1'20 have been revised accordingly. Refer to Note 
  1, Basis of preparation, in the Financial statement information section 
  included in Nokia Corporation Financial Report for Q1 2021 for details. 
2) 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 Q1 2021 for 
 details. 
 
 
 
 
 
 
 
 
Reconciliation of reported operating profit/(loss) 
 to comparable operating profit 
EUR million                                  Q1'21  Q1'20  YoY change 
Reported operating profit/(loss)               431   (76) 
-------------------------------------------  -----  -----  ---------- 
Amortization of acquired intangible assets      97    101 
Restructuring and associated charges            36     87 
Gain on sale of fixed assets                  (15)      0 
Other                                            2      4 
                                             -----  ----- 
Comparable operating profit                    551    116        375% 
                                             -----  -----  ---------- 
 
 
   OUTLOOK 
 
 
 
 
                                      Full year 2021        Full year 2023 
---------------------------------  --------------------  --------------------- 
Net sales, adjusted for currency     EUR 20.6 billion    Grow faster than the 
 fluctuations(1)                    to EUR 21.8 billion         market 
---------------------------------  --------------------  --------------------- 
Comparable operating margin(2)                 7 to 10%              10 to 13% 
---------------------------------  --------------------  --------------------- 
Free cash flow(3)                              Positive       Clearly positive 
---------------------------------  --------------------  --------------------- 
Comparable ROIC(2,4)                          10 to 15%              15 to 20% 
---------------------------------  --------------------  --------------------- 
 
   (1) Assuming continuation of 2020 year-end 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 included in Nokia Corporation Financial Report for 
Q1 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 Q1 2021 for details. 
 
   OUTLOOK ASSUMPTIONS 
 
 
   -- Nokia's outlook assumptions for the comparable operating margin of its 
      four business groups in 2021 and 2023 are provided below: 
 
 
 
 
                             Full year 2021  Full year 2023 
---------------------------  --------------  -------------- 
Mobile Networks                  -1% to +2%         5 to 8% 
---------------------------  --------------  -------------- 
Network Infrastructure             7 to 10%        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. 
      Where possible, we have now embedded support function costs directly into 

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