2014-07-24 07:00:03 CEST
2014-07-24 07:01:08 CEST
REGULATED INFORMATION
Nokia - Interim report (Q1 and Q3)
Nokia Corporation Interim Report for Q2 2014 and January-June 2014
Nokia Corporation
Interim Report
July 24, 2014 at 08.00 (CET+1)
This is a summary of the Nokia Corporation Interim Report for Q2 2014 and
January-June 2014 published today. The complete Interim Report with tables for
Q2 2014 and January-June 2014 is available at
http://company.nokia.com/financials. Investors should not rely on summaries of
Nokia's interim reports only, but should review the full interim reports with
tables.
Nokia Corporation Interim Report for Q2 2014 and January-June 2014
FINANCIAL AND OPERATING HIGHLIGHTS
Second quarter 2014 highlights for continuing operations:
- Non-IFRS diluted EPS in Q2 2014 of EUR 0.06 (EUR 0.05 in Q2 2013); reported
diluted EPS of EUR -0.01 (EUR -0.02 in Q2 2013)
- Net sales in Q2 2014 of EUR 2.9 billion (EUR 3.2 billion in Q2 2013)
Nokia Networks
- In Q2 2014, Nokia Networks achieved strong underlying operating profitability
with non-IFRS operating profit of EUR 281 million, or 11.0% of net sales,
compared to EUR 328 million, or 11.8% of net sales, in Q2 2013. The strong
level of profitability for Nokia Networks in Q2 2014 and Q2 2013 was primarily
due to operational efficiency which benefitted both gross margin and operating
profit.
- Nokia Networks net sales in Q2 2014 were EUR 2.6 billion, compared to EUR 2.8
billion in Q2 2013.
- Excluding foreign currency fluctuations and the divestments of businesses not
consistent with its strategic focus, as well as the exiting of certain customer
contracts and countries, Nokia Networks net sales would have increased 1%
year-on-year.
HERE
- HERE net sales in Q2 2014 were approximately flat on a year-on-year basis.
Excluding foreign currency fluctuations, HERE net sales in Q2 2014 would have
increased 2% year-on-year.
- In Q2 2014, HERE sold map data licenses for the embedded navigation systems
of 3.3 million new vehicles globally, compared to 2.7 million vehicles in Q2
2013.
- HERE continued to focus on investing in longer term transformational growth
opportunities, and announced the acquisitions of Medio and Desti.
Nokia Technologies
- Nokia Technologies net sales increased sequentially in Q2 2014, primarily due
to Microsoft becoming a more significant intellectual property licensee in
conjunction with the sale of substantially all of the Devices & Services
business to Microsoft.
Balance sheet highlights:
- Nokia ended Q2 2014 with a strong balance sheet and solid cash position with
gross cash of EUR 9.0 billion and net cash of EUR 6.5 billion compared to EUR
6.9 billion and EUR 2.1 billion, respectively, at the end of Q1 2014.
- In Q2 2014, Nokia completed the sale of substantially all of the Devices &
Services business to Microsoft. Of the approximately EUR 5.0 billion of net
cash impact from the proceeds, approximately EUR 4.8 billion benefitted Q2 2014
with the balance expected to be received in the second half 2014. In connection
with the completion of the transaction the EUR 1.5 billion Microsoft
convertible bonds were repaid.
- During Q2 2014 we started the capital structure optimization program with the
redemption of approximately EUR 950 million of Nokia Networks debt. As a result
of this, Nokia no longer has material financial covenants.
January-June 2014 highlights for continuing operations:
Nokia continuing operations net sales in January-June 2014 were EUR 5.6 billion
- Nokia continuing operations net sales for the first half 2014 decreased 11%
year-on-year.
- Reported EPS for the first half 2014 was EUR 0.02, compared to EUR -0.04 in
the first half 2013.
Commenting on the second quarter results, Rajeev Suri, Nokia President and CEO,
said:
Nokia's second quarter performance shows the strength of the company today.
In Nokia Networks, our unique operating model has allowed us to deliver strong
profitability while improving our topline trend. Maintaining this balance will
remain a clear priority in the second half of the year, when we expect Networks
to return to year-on-year growth. Our expectations for the full year 2014 have
improved and we now expect full year underlying profitability for Networks to
be at or slightly above our long term target range of 5 to 10 percent.
HERE demonstrated good year-on-year growth in its automotive business, and we
continue to invest to expand in this area, as well as in the enterprise and
consumer markets. The licensing and innovation engine of Nokia Technologies
remains very much on track. We see opportunities to expand this business with
both new and existing licensees, and the Technologies team continues to
increase its industry-leading patent portfolio.
This performance, along with the many conversations I have had with customers,
partners, employees and others in my first quarter as CEO, gives me a high
degree of confidence about our future.
SUMMARY FINANCIAL INFORMATION
--------------------------------------------------------------------------------
Reported and Non-IFRS Reported and
second quarter 2014 Non-IFRS
results1 January - June
2014 results1
EUR million Q2/14 Q2/13 YoY Q1/14 QoQ Q1- Q1- YoY
Change Change Q2/ Q2/ Change
2014 2013
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Continuing
Operations
Net sales 2 942 3 155 -7 % 2 664 10 % 5 606 6 295 -11 %
Gross 44.0 % 43.6 % 45.7 % 44.8 % 41.4 %
margin %
(non-IFRS)
Operating -940 -1 009 -7 % - 925 2 % -1 865 -2 013 -7 %
expenses
(non-IFRS)
Operating 347 430 -19 % 304 14 % 651 684 -5 %
profit
(non-IFRS)
Non-IFRS 62 419 62 125 702
exclusions
Operating 284 12 242 17 % 526 -18
profit
EPS, EUR 0.06 0.05 20 % 0.04 50 % 0.10 0.06 67 %
diluted
(non-IFRS)
EPS, EUR -0.01 -0.02 0.03 0.02 -0.04
diluted
(reported)
Net cash 1 455 - - 198 1 653 -
from operating
activities
Net cash 6 497 4 067 60 % 2 075 213 % 6 497 4 067 60 %
and other
liquid assets
--------------------------------------------------------------------------------
Discontinued
Operations
Net sales 497 2 579 -81 % 1 929 -74 % 2 426 5 344 -55 %
Operating profit -110 -127 -306 -416 -200
(non-IFRS)
Operating profit 3 075 -126 -326 2 749 -246
Net cash from -664 - - 336 -1 001 -
operating
activities
--------------------------------------------------------------------------------
Nokia Group
(continuing and
discontinued
operations)
EPS, EUR 0.03 0.00 -0.04 -0.01 -0.01
diluted
(non-IFRS)
EPS, EUR 0.61 -0.06 -0.06 0.54 -0.13
diluted
(reported)
Net cash 790 -196 -138 652 10
from operating
activities
Net cash 6 497 4 067 60 % 2 075 213 % 6 497 4 067 60 %
and other
liquid assets
--------------------------------------------------------------------------------
Note 1 relating to results information and non-IFRS (also referred to as
“underlying”) results: The results information in this report is unaudited.
Percentages and figures presented herein may include rounding differences and
therefore may not add up precisely to the totals presented and may vary from
previously published financial information. In addition to information on our
reported IFRS results, we provide certain information on a non-IFRS, or
underlying business performance, basis. Non-IFRS results exclude all material
special items for all periods. In addition, non-IFRS results exclude intangible
asset amortization, other purchase price accounting related items and inventory
value adjustments arising from (i) the formation of Nokia Networks (formerly
NSN) and (ii) all business acquisitions completed after June 30, 2008. Nokia
believes that our non-IFRS results provide meaningful supplemental information
to both management and investors regarding Nokia's underlying business
performance by excluding the above-described items that may not be indicative
of Nokia's business operating results. These non-IFRS financial measures should
not be viewed in isolation or as substitutes to the equivalent IFRS measure(s),
but should be used in conjunction with the most directly comparable IFRS
measure(s) in the reported results. More information, including a
reconciliation of our Q2 2014 and Q2 2013 non-IFRS results to our reported
results, can be found in our complete Q2 2014 report with tables on pages
22-27. A reconciliation of our Q1 2014 non-IFRS results to our reported results
can be found in our complete Q1 2014 interim report with tables on pages 19-23
published on April 29, 2014.
RISKS AND FORWARD-LOOKING STATEMENTS
It should be noted that Nokia and its business 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)
expectations, plans or benefits related to Nokia's strategies; B) expectations,
plans or benefits related to future performance of Nokia's continuing
businesses Nokia Networks, HERE and Nokia Technologies; C) expectations, plans
or benefits related to changes in leadership and operational structure; D)
expectations regarding market developments, general economic conditions and
structural changes; E) expectations and targets regarding performance,
including those related to market share, prices, net sales and margins; F) the
timing of the deliveries of our products and services; G) expectations and
targets regarding our financial performance, cost savings and competitiveness,
as well as results of operations; H) expectations and targets regarding
collaboration and partnering arrangements; I) the outcome of pending and
threatened litigation, arbitration, disputes, regulatory proceedings or
investigations by authorities; J) 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, including any expectations, plans or benefits related to or
caused by the transaction announced on September 3, 2013 where Nokia sold
substantially all of the Devices & Services business to Microsoft on April 25,
2014 ("Sale of the D&S Business"); K) 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
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 these differences include,
but are not limited to: 1) our ability to execute our strategies successfully
and in a timely manner, and our ability to successfully adjust our operations;
2) our ability to sustain or improve the operational and financial performance
of our continuing businesses and correctly identify business opportunities or
successfully pursue new business opportunities; 3) our ability to execute Nokia
Networks' strategy and effectively, profitably and timely adapt its business
and operations to the increasingly diverse needs of its customers and
technological developments; 4) our ability within our Nokia Networks business
to effectively and profitably invest in and timely introduce new competitive
high-quality products, services, upgrades and technologies; 5) 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; 6) our ability to protect numerous patented standardized or
proprietary technologies from third-party infringement or actions to invalidate
the intellectual property rights of these technologies; 7) our ability within
our HERE business to maintain current sources of revenue, historically derived
mainly from the automotive industry, create new sources of revenue, establish a
successful location-based platform and extend our location-based services
across devices and operating systems; 8) effects of impairments or charges to
carrying values of assets, including goodwill, or liabilities; 9) our
dependence on the development of the mobile and communications industry in
numerous diverse markets, as well as on general economic conditions globally
and regionally; 10) Nokia Networks business' dependence on a limited number of
customers and large, multi-year contracts; 11) our ability to retain, motivate,
develop and recruit appropriately skilled employees; 12) the potential complex
tax issues and obligations we may face, including the obligation to pay
additional taxes in various jurisdictions and our actual or anticipated
performance, among other factors, could result in allowances related to
deferred tax assets; 13) our ability to manage our manufacturing, service
creation and delivery, and logistics efficiently and without interruption,
especially if the limited number of suppliers we depend on fail to deliver
sufficient quantities of fully functional products and components or deliver
timely services; 14) potential exposure to contingent liabilities due to the
Sale of the D&S Business and possibility that the agreements we have entered
into with Microsoft may have terms that prove to be unfavorable to us; 15) any
inefficiency, malfunction or disruption of a system or network that our
operations rely on or any impact of a possible cybersecurity breach; 16) our
ability to reach targeted results or improvements by managing and improving our
financial performance, cost savings and competitiveness; 17) management of
Nokia Networks' customer financing exposure; 18) the performance of the parties
we partner and collaborate with, and our ability to achieve successful
collaboration or partnering arrangements; 19) our ability to protect the
technologies, which we develop, license, use or intend to use from claims that
we have infringed third parties' intellectual property rights, as well as,
impact of possible licensing costs, restriction on our usage of certain
technologies, and litigation related to intellectual property rights; 20) the
impact of regulatory, political or other developments on our operations and
sales in those various countries or regions where we do business; 21) 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 other currencies; 22) our ability to successfully implement planned
transactions, such as acquisitions, divestments, mergers or joint ventures,
manage unexpected liabilities related thereto and achieve the targeted
benefits; 23) the impact of unfavorable outcome of litigation, arbitration,
contract related disputes or allegations of health hazards associated with our
business, as well as the risk factors specified on pages 12-35 of Nokia's
annual report on Form 20-F for the year ended December 31, 2013 under Item 3D."Risk Factors." 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.
Nokia, Helsinki - July 24, 2014
Media and Investor Contacts:
Corporate Communications, tel. +358 10 448 4900 email: press.services@nokia.com
Investor Relations Europe, tel. +358 4080 3 4080
Investor Relations US, tel. +1 408 663 5685
Planned publication dates for interim reports in 2014
- report for Q3 2014 and January-September 2014: October 23, 2014
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