2016-02-11 07:00:52 CET
2016-02-11 07:00:52 CET
REGLAMENTUOJAMA INFORMACIJA
Nokia - Financial Statement Release
Nokia Corporation Report for Q4 2015 and Full Year 2015
Nokia Corporation
Financial Statement Release
February 11, 2016 at 08:00 (CET +1)
Nokia Corporation Report for Q4 2015 and Full Year 2015
Continuation of strong operational performance in Nokia Networks and solid
growth in Nokia Technologies
This is a summary of the Nokia Corporation report for fourth quarter 2015 and
full year 2015 published today. The complete fourth quarter 2015 and full year
2015 report with tables is available at http://company.nokia.com/en/financials.
Investors should not rely on summaries of our interim reports only, but should
review the complete interim reports with tables.
Financial highlights for Nokia's continuing operations
* Net sales of EUR 3.6 billion in Q4 2015 (EUR 3.5 billion in Q4 2014) and EUR
12.5 billion in full year 2015 (EUR 11.8 billion in full year 2014).
* Q4 2015 non-IFRS diluted EPS of EUR 0.15 (EUR 0.09 in Q4 2014), an increase
of 67% year-on-year. Q4 2015 diluted EPS of EUR 0.13 (EUR 0.08 in Q4 2014).
* Full year 2015 non-IFRS diluted EPS of EUR 0.36 (EUR 0.27 in full year
2014), an increase of 33% year-on-year. Full year 2015 diluted EPS of EUR
0.31 (EUR 0.67 in full year 2014, benefitting from the recognition of a
deferred tax asset).
* Nokia's Board of Directors will propose a dividend of EUR 0.16 per share for
2015 and a special dividend of EUR 0.10 per share (dividend of EUR 0.14 per
share for 2014). Proposed dividend is estimated to result in a maximum
payout of approximately EUR 960 million in dividend and EUR 600 million in
special dividend(1).
Nokia Networks
* 5% year-on-year net sales decrease in Q4 2015 and 3% net sales growth in
full year 2015. On a reported basis, Greater China and Middle East & Africa
were the strongest regions. On a constant currency basis, 12% year-on-year
net sales decrease in Q4 2015 and 6% net sales decrease in full year 2015.
* Strong non-IFRS gross margin of 39.6% in Q4 2015 primarily due to elevated
levels of software in Mobile Broadband, partially offset by the absence of
non-recurring intellectual property rights net sales which benefitted Q4
2014.
* Strong non-IFRS operating margin of 14.6% in Q4 2015. Nokia Networks
delivered full year financial results towards the high end of its original
2015 targets, with a non-IFRS operating margin of 10.9% in full year 2015,
through strong operational performance and continued focus on execution
excellence.
Nokia Technologies
* 170% year-on-year net sales growth in Q4 2015 and 77% net sales growth in
full year 2015. On a year-on-year basis, non-IFRS operating profit grew
318% in Q4 2015 and 102% in full year 2015, primarily related to the growth
in net sales resulting from a settled arbitration. This was partially offset
by higher non-IFRS operating expenses.
Reported fourth quarter 2015 Reported January-
results(2) December 2015
results(2)
-------------------------------------------------------------------------------
EUR million YoY QoQ Q1- Q1- YoY
(except for EPS Q4'15 Q4'14 change Q3'15 change Q4'15 Q4'14 change
in EUR)
-------------------------------------------------------------------------------
Continuing
operations
Net sales -
constant (3)% 18% (2)%
currency
Net sales 3 609 3 510 3% 3 036 19% 12 499 11 763 6%
Nokia 3 210 3 365 (5)% 2 877 12% 11 490 11 198 3%
Networks
Nokia 403 149 170% 162 149% 1 024 578 77%
Technologies
Gross margin % 46.4% 40.8% 560bps 42.7% 370bps 43.3% 41.7% 160bps
(non-IFRS)
Operating
profit (non- 734 503 46% 475 55% 1 949 1 600 22%
IFRS)
Nokia 468 470 0% 391 20% 1 257 1 364 (8)%
Networks
Nokia 322 77 318% 94 243% 720 357 102%
Technologies
Group Common (56) (43) (10) (28) (120)
Functions
Operating
margin % (non- 20.3% 14.3% 600bps 15.6% 470bps 15.6% 13.6% 200bps
IFRS)
Profit (non- 575 331 74% 297 94% 1 392 1 058 32%
IFRS)
Profit 499 325 54% 188 165% 1 194 2 718 (56)%
EPS, EUR
diluted (non- 0.15 0.09 67% 0.08 87% 0.36 0.27 33%
IFRS)
EPS, EUR 0.13 0.08 63% 0.05 160% 0.31 0.67 (54)%
diluted
-------------------------------------------------------------------------------
Discontinued
operations(2)
Net sales 242 298 (19)% 283 (14)% 1 075 3 427 (69)%
Profit 1 292 120 977% (37) (3 592)% 1 274 758 68%
EPS, EUR 0.33 0.03 1 000% (0.01) (3 400)% 0.32 0.18 78%
diluted
(1) Estimated total dividend amounts of EUR 960 million payable as dividend and
EUR 600 million payable as special dividend are calculated assuming full
ownership of all Alcatel-Lucent outstanding shares and conversion of all
Alcatel-Lucent convertible bonds, resulting in a total of approximately 6
billion Nokia shares.
(2) Results are as reported unless otherwise specified. The results information
in this report is unaudited. Nokia reports HERE as part of discontinued
operations from the third quarter 2015 until completion of the sale on December
4, 2015. Non-IFRS results exclude the gains from both the sale of substantially
all of Nokia's Devices & Services business to Microsoft ("Sale of the D&S
Business"), as well as the sale of the HERE business net of transaction and
other related costs resulting from these transactions. In addition, non-IFRS
results exclude costs related to the Alcatel-Lucent transaction. Furthermore,
non-IFRS results exclude goodwill impairment charges, intangible asset
amortization and purchase price related items, restructuring related costs, and
certain other items that may not be indicative of Nokia's underlying business
performance. For details, please refer to the year to date discussion and the
non-IFRS to reported reconciliation note to the financial statements. A
reconciliation of the Q3 2015 non-IFRS results to the reported results can be
found on page 31 in the complete Q3 2015 interim report with tables published on
October 29, 2015. A reconciliation of the Q4 2014 non-IFRS results to the
reported results can be found on pages 20-25 in the complete report for Q4 2014
and full year 2014 with tables published on January 29, 2015.
Nokia completes the sale of its HERE business in Q4 2015
Nokia completed on December 4, 2015 the sale of its HERE digital mapping and
location services business to a consortium of leading automotive companies,
comprising AUDI AG, BMW Group and Daimler AG.
The transaction, which was originally announced on August 3, 2015, valued HERE
at an enterprise value of EUR 2.8 billion, subject to certain purchase price
adjustments. Nokia received net proceeds of approximately EUR 2.55 billion from
the transaction, which is consistent with Nokia's earlier estimated net proceeds
of slightly above EUR 2.5 billion. In Q4 2015 Nokia booked a gain on the sale
and a related release of cumulative foreign exchange translation differences
totaling approximately EUR 1.1 billion as a result of the transaction. The gain
was reported as part of discontinued operations.
Subsequent event
On February 10, 2016, Nokia announced the results of its successful reopened
public exchange offer for Alcatel-Lucent securities. Nokia will hold 91.25% of
the share capital of Alcatel-Lucent, following the settlement of the securities
tendered into the reopened offer, which is expected to occur on February
12, 2016. This equates to Nokia holding 88.07% of the share capital of Alcatel-
Lucent on a fully diluted basis.
Nokia confirmed that it will issue approximately 321 million new shares as
consideration for the Alcatel-Lucent securities that have been tendered into the
reopened public exchange offer. Nokia expects to register these new shares with
the Finnish Trade Register on February 12, 2016. After the registration, the
total number of Nokia shares will equal approximately 5 769 million shares.
Assuming the conversion of all remaining outstanding Alcatel-Lucent shares and
convertible bonds into Nokia shares at the exchange ratio offered in the public
exchange offers, the total number of Nokia shares would equal approximately 6
billion shares.
As of the first quarter 2016, we expect to align our financial reporting under
two areas: the Networks business and Nokia Technologies. The Networks business
will be comprised of four business groups: Mobile Networks, Fixed Networks,
Applications & Analytics and IP/Optical Networks. Nokia Technologies will
continue to operate as a separate business group, with a clear focus on
licensing and the incubation of new technologies, and will include the licensing
and intellectual property portfolio management operations from Alcatel-Lucent.
In addition, Nokia expects to operate the undersea cables business, Alcatel-
Lucent Submarine Networks (ASN), and the antenna systems business, Radio
Frequency Systems (RFS), as separate entities and plans to report ASN and RFS as
part of Group Common Functions.
CEO STATEMENT
2015 was another year of dramatic transformation for Nokia and I am pleased that
in the midst of all this change we were able to close the year with solid
performances at both Nokia Networks and Nokia Technologies.
Nokia Networks delivered on its commitments for the full year, with a non-IFRS
operating margin at the high end of the original guidance range and net sales up
three percent on a reported currency basis. Pleasingly, both Mobile Networks and
Global Services capped off the year with good fourth quarter results.
Nokia Technologies saw its net sales and operating profit grow considerably,
based on strong licensing growth including a contribution from the arbitration
award related to our licensing agreement with Samsung.
We have said consistently that we believe that our portfolio of innovation and
intellectual property is second to none in the industry and that it has
significant value that can be monetized. We expect to have further discussions
with Samsung related to intellectual property and technology assets that were
not covered by the arbitration process and will continue to pursue new licensing
opportunities in a variety of sectors over the course of 2016 and beyond.
I was particularly pleased with our progress towards completing the Alcatel-
Lucent transaction in the fourth quarter, culminating with the start of combined
operations in early January. Our work as a combined company has gotten off to a
strong start. Teams are preparing joint bids, we are working closely with our
customers to ensure we can make fast and effective decisions about overlapping
areas of our portfolio, and we are on target to deliver on our previously
announced synergy savings.
While the competitive environment in Networks remained generally stable in the
fourth quarter, we do expect some market headwinds in 2016 as 4G/LTE rollouts in
China and some other markets start to slow. The first quarter, in particular,
looks quite challenging as customers assess their CAPEX plans in light of
increasing macro-economic uncertainty. In this environment, we will continue our
sharp focus on operational and commercial discipline, ensure we deliver
synergies as quickly as possible, and focus our energy on targeting the growth
segments within the overall telecom market.
Rajeev Suri
President and CEO
NOKIA'S CONTINUING OPERATIONS IN Q4 2015
FINANCIAL DISCUSSION
The following discussion is of Nokia's continuing operations reported results
for the fourth quarter 2015, which comprise the results of Nokia's two
continuing businesses - Nokia Networks and Nokia Technologies, as well as Group
Common Functions. Comparisons are given to the fourth quarter 2014 and third
quarter 2015 results, unless otherwise indicated.
Net sales
Nokia's continuing operations net sales increased 3% year-on-year and increased
19% sequentially. On a constant currency basis, Nokia's continuing operations
net sales would have decreased 3% year-on-year and would have increased 18%
sequentially.
Year-on-year discussion
The year-on-year increase in Nokia's continuing operations net sales in the
fourth quarter 2015 was primarily due to growth in Nokia Technologies, partially
offset by lower net sales in Nokia Networks.
Sequential discussion
The sequential increase in Nokia's continuing operations net sales in the fourth
quarter 2015 was primarily due to growth in both Nokia Networks and Nokia
Technologies.
Non-IFRS Operating profit
Year-on-year discussion
Nokia's continuing operations non-IFRS operating profit increased 46% year-on-
year in the fourth quarter 2015, primarily due to higher non-IFRS operating
profit in Nokia Technologies, partially offset by higher non-IFRS operating loss
in Group Common Functions. Please see the Nokia Networks and Nokia Technologies
sections for the non-IFRS operating profit discussions. The higher non-IFRS
operating loss in Group Common Functions was primarily due to a net negative
fluctuation in other income and expenses, partially offset by lower operating
expenses.
On a year-on-year basis Group Common Functions non-IFRS other income and
expenses was an expense of EUR 21 million in fourth quarter 2015, compared to an
expense of EUR 8 million in the fourth quarter 2014. Within Group Common
Functions, Nokia recorded a loss of approximately EUR 20 million in fourth
quarter 2015 related to the sale of certain of Nokia's investments made through
its venture funds.
On a year-on-year basis, foreign exchange fluctuations had a positive impact on
non-IFRS gross profit, and a negative impact on non-IFRS operating expenses,
resulting in a slightly positive net impact on non-IFRS operating profit in the
fourth quarter 2015.
Sequential discussion
Nokia's continuing operations non-IFRS operating profit increased 55%
sequentially in the fourth quarter 2015, primarily due to higher non-IFRS
operating profit in Nokia Technologies and Nokia Networks, partially offset by
higher non-IFRS operating loss in Group Common Functions. Please see the Nokia
Networks and Nokia Technologies sections for the non-IFRS operating profit
discussions. The higher non-IFRS operating loss in Group Common Functions was
primarily due to a net negative fluctuation in other income and expenses and, to
a lesser extent, higher operating expenses.
On a sequential basis Group Common Functions non-IFRS other income and expenses
was an expense of EUR 21 million in the fourth quarter 2015, compared to income
of EUR 17 million in the third quarter 2015. Within Group Common Functions,
Nokia recorded a loss of approximately EUR 20 million in the fourth quarter
2015 related to the sale of certain of Nokia's investments made through its
venture funds. This compares to a gain of approximately EUR 10 million in the
third quarter 2015.
On a sequential basis, foreign exchange fluctuations had a slightly positive
impact on non-IFRS gross profit, and a slightly negative impact on non-IFRS
operating expenses, resulting in a slightly negative net impact on non-IFRS
operating profit in the fourth quarter 2015.
Non-IFRS Profit
Year-on-year discussion
Nokia's continuing operations non-IFRS profit increased 74% on a year-on-year
basis in the fourth quarter 2015, primarily due to higher non-IFRS operating
profit.
Nokia's continuing operations non-IFRS tax rate in the fourth quarter 2015 was
approximately 19%, compared to a rate of approximately 27% in the fourth quarter
2014. In the fourth quarter 2015, non-IFRS tax expense benefitted from the
utilization of unrecognized deferred tax assets on previous losses related to
Nokia's ownership interests in certain unlisted technology-related funds.
Sequential discussion
Sequentially, Nokia's continuing operations non-IFRS profit increased 94% in the
fourth quarter 2015, primarily due to higher non-IFRS operating profit and a net
positive fluctuation in non-IFRS financial income and expenses.
The net positive fluctuation in non-IFRS financial income and expenses was
primarily due to lower foreign exchange related losses, receipt of higher
distributions from third party venture funds and lower net interest expenses.
Nokia's continuing operations non-IFRS tax rate in the fourth quarter 2015 was
approximately 19%, compared to a rate of approximately 24% in the third quarter
2015. In the fourth quarter 2015, non-IFRS tax expense benefitted from the
utilization of unrecognized deferred tax assets on previous losses related to
Nokia's ownership interests in certain unlisted technology-related funds.
OUTLOOK FOR THE COMBINED COMPANY
Metric Guidance Commentary
-------------------------------------------------------------------------------
Nokia Annual Approximately EUR Compared to the combined
operating cost 900 million of net non-IFRS operating costs
synergies operating cost of Nokia and Alcatel-
synergies to be Lucent for full year
achieved in full 2015.
year 2018 Expected to be derived
from a wide range of
initiatives related to
operating expenses and
cost of sales,
including:
* Streamlining of
overlapping products
and services,
particularly within
the Mobile Networks
business group;
* Rationalization of
regional and sales
organizations;
* Rationalization of
overhead,
particularly within
manufacturing,
supply-chain, real
estate and
information
technology;
* Reduction of central
function and public
company costs; and
* Procurement
efficiencies, given
the combined
company's expanded
purchasing power.
------------------------------------------------------------
Annual interest Approximately EUR Compared to the cost of
expense 200 million of debt run rate for the
reduction reductions in combined entity at year
interest expenses end 2014.
to be achieved on This is an update to the
a full year basis earlier annual interest
in 2016 (update) expense reduction target
of approximately EUR
200 million of
reductions in interest
expenses to be achieved
on a full year basis in
2017.
-------------------------------------------------------------------------------
Networks FY16 Net sales Not provided Due to the very recent
acquisition of Alcatel-
FY16 Non-IFRS Lucent, Nokia believes
operating it is not appropriate to
margin provide an annual
outlook for the new
combined Networks
business at the present
time, and intends to
provide its full year
outlook in conjunction
with its Q1 results
announcement. Q1 2016
net sales and non-IFRS
operating margin are
expected to be
influenced by factors
including:
* A flattish capex
environment in 2016
for our overall
addressable market;
* A declining wireless
infrastructure
market in 2016, with
a greater than
normal seasonal
decline in Q1 2016;
* Competitive industry
dynamics;
* Product and regional
mix;
* The timing of major
network deployments;
and
* Execution of
integration and
synergy plans.
-------------------------------------------------------------------------------
Nokia Technologies FY16 Net sales Not provided Due to risks and
uncertainties in
determining the timing
and value of significant
licensing agreements,
Nokia believes it is not
appropriate to provide
an annual outlook.
-------------------------------------------------------------------------------
RISKS AND FORWARD-LOOKING STATEMENTS
It should be noted that Nokia and its businesses are exposed to various risks
and uncertainties and certain statements herein that are not historical facts
are forward-looking statements, including, without limitation, those regarding:
A) Nokia's ability to integrate Alcatel-Lucent into its operations and achieve
the targeted business plans and benefits, including targeted synergies in
relation to the acquisition of Alcatel-Lucent announced on April 15, 2015 and
closed in early 2016 ("Acquisition"); B) Nokia's ability to squeeze out the
remaining Alcatel-Lucent shareholders in a timely manner or at all to achieve
full ownership of Alcatel-Lucent; C) expectations, plans or benefits related to
Nokia's strategies; D) expectations, plans or benefits related to future
performance of Nokia's businesses; E) expectations, plans or benefits related to
changes in our management and other leadership, operational structure and
operating model, including the expected characteristics, business,
organizational structure, management and operations following the Acquisition;
F) expectations regarding market developments, general economic conditions and
structural changes; G) expectations and targets regarding performance, including
those related to market share, prices, net sales, income and margins; H) timing
of the deliveries of our products and services; I) expectations and targets
regarding our financial performance, results, operating expenses, taxes, cost
savings and competitiveness, as well as results of operations, including
targeted synergies; J) expectations and targets regarding collaboration and
partnering arrangements, as well as the expected customer reach of Nokia
following the Acquisition; K) outcome of pending and threatened litigation,
arbitration, disputes, regulatory proceedings or investigations by authorities;
L) expectations regarding restructurings, investments, uses of proceeds from
transactions, acquisitions and divestments and our ability to achieve the
financial and operational targets set in connection with any such
restructurings, investments, divestments and acquisitions; and M) statements
preceded by or including "believe," "expect," "anticipate," "foresee," "sees,"
"target," "estimate," "designed," "aim," "plans," "intends," "focus,"
"continue," "project," "should," "will" or similar expressions. These statements
are based on the management's best assumptions and beliefs in light of the
information currently available to it. Because they involve risks and
uncertainties, actual results may differ materially from the results that we
currently expect. Factors, including risks and uncertainties, that could cause
such differences include, but are not limited to: 1) Nokia's inability to
achieve the targeted business and operational benefits and synergies or
disruption caused by the Alcatel-Lucent transaction, including inability to
integrate Alcatel-Lucent into Nokia operations and any negative effect from the
implementation of the combination, for instance due to the loss of customers,
loss of key executives or employees or reduced focus on day-to-day operations
and business, or negative effects caused by delays or inability to squeeze out
the remaining Alcatel-Lucent shareholders; 2) our ability to identify market
trends and business opportunities to select and execute strategies successfully
and in a timely manner, and our ability to successfully adjust our operations
and operating models; 3) our ability to sustain or improve the operational and
financial performance of our businesses and correctly identify or successfully
pursue new business opportunities; 4) our dependence on general economic and
market conditions, including the capacity for growth in internet and technology
usage; 5) our exposure to regulatory, political or other developments in various
countries or regions; 6) our ability to invent new relevant technologies,
products and services, to develop and maintain our intellectual property
portfolio and to maintain the existing sources of intellectual property related
revenue and establish new such sources; 7) our ability to protect our
intellectual property rights and defend against third-party infringements and
claims that we have infringed third parties' intellectual property rights
("IPR"), as well as increased licensing costs and restrictions on our ability to
use certain technologies, and litigation related to IPR; 8) the potential
complex tax issues, tax disputes and tax obligations we may face, including the
obligation to pay additional taxes in various jurisdictions and our actual or
anticipated performance, among other factors, which could reduce our ability to
utilize deferred tax assets; 9) our ability to retain, motivate, develop and
recruit appropriately skilled employees, for instance due to possible disruption
caused by the Acquisition and related operational and other changes; 10) the
performance of the parties we partner and collaborate with, as well as that of
our financial counterparties, and our ability to achieve successful
collaboration or partnering arrangements, including any disruption from the
transaction in obtaining or maintaining the contractual relationships; 11)
exchange rate fluctuations, particularly between the euro, which is our
reporting currency, and the US dollar, the Japanese yen and the Chinese yuan, as
well as certain currencies; 12) the impact of unfavorable outcome of litigation,
arbitration, contract-related disputes or allegations of health hazards
associated with our businesses; 13) any inefficiency, malfunction or disruption
of a system or network that our operations rely on or any impact of a possible
cybersecurity breach; 14 our ability to achieve targeted benefits from or
successfully implement planned transactions, such as acquisitions, divestments,
mergers or joint ventures, and manage unexpected liabilities related thereto;
15) our ability to manage our operating expenses and reach targeted results
through efforts aimed at improving our financial performance, for instance
through cost savings and other efforts aimed at increased competitiveness; 16)
Nokia's ability to optimize its capital structure as planned and re-establish
our investment grade credit rating; 17) Nokia's ability to execute its strategy
or to effectively and profitably adapt its business and operations in a timely
manner to the increasingly diverse needs of its customers in the information
technology and communications industries and related services market or to
appropriately adapt to related technological developments; 18) Nokia's ability
to effectively and profitably invest in new competitive high-quality products,
services, upgrades and technologies and bring them to market in a timely manner;
19) Nokia's dependence on a limited number of customers and large multi-year
agreements and adverse effects as a result of further operator consolidation;
20) Nokia's ability to manage its manufacturing, service creation and delivery,
as well as our logistics efficiently and without interruption; 21) Nokia's
dependence on a limited number of suppliers, who may fail to deliver sufficient
quantities of fully functional products and components or deliver timely
services meeting its customers' needs; 22) adverse developments with respect to
customer financing or extended payment terms Nokia provides to customers; 23)
Nokia Technologies' ability to maintain its existing sources of intellectual
property related revenue or establish new sources; 24) Nokia Technologies'
dependence on a limited number of key licensees that contribute proportionally
significant patent licensing income, including the outcome of any pending
arbitrations or negotiations; 25) Nokia Technologies' dependence on adequate
regulatory protection for patented or other proprietary technologies; 26) Nokia
Technologies' ability to execute its plans through business areas such as
licensing the Nokia brand and other business ventures, including benefits and
plans related to technology innovation and incubation; and 27) unexpected
liabilities or issues with respect to the Acquisition, including pension and
employee liabilities or higher than expected transaction costs, as well as the
risk factors specified on pages 74 to 89 of Nokia's latest annual report on Form
20-F under "Operating and Financial Review and Prospects-Risk factors" as well
as in Nokia's other filings with the U.S. Securities and Exchange Commission.
Other unknown or unpredictable factors or underlying assumptions subsequently
proven to be incorrect could cause actual results to differ materially from
those in the forward-looking statements. Nokia does not undertake any obligation
to publicly update or revise forward-looking statements, whether as a result of
new information, future events or otherwise, except to the extent legally
required.
The financial statements were authorized for issue by management on February
10, 2016.
Media and Investor Contacts:
Corporate Communications, tel. +358 10 448 4900, email: press.services@nokia.com
Investor Relations Europe, tel. +358 4080 3 4080 email:
investor.relations@nokia.com
* Nokia plans to publish its "Nokia in 2015" annual report, which includes the
review by the Board of Directors and the audited annual accounts, in week
13 of 2016. The annual report will be available at
http://company.nokia.com/financials.
* Nokia plans to publish its first quarter 2016 results on May 10, 2016.
* Nokia's Annual General Meeting 2016 is scheduled to be held on June
16, 2016.
[HUG#1985358]
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