2015-07-30 07:00:00 CEST
2015-07-30 07:02:16 CEST
REGULATED INFORMATION
Nokia - Interim report (Q1 and Q3)
Nokia Corporation Interim Report for Q2 2015 and January-June 2015
Nokia Corporation
Interim Report
July 30, 2015 at 08:00 (CET +1)
Nokia Corporation Interim Report for Q2 2015 and January-June 2015
Strong Q2 positions Nokia well to meet full year 2015 objectives
This is a summary of the Nokia Corporation interim report for second quarter
2015 and January-June 2015 published today. The complete interim report for
second quarter 2015 and January-June 2015 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
* Net sales in Q2 2015 of EUR 3.2 billion (EUR 2.9 billion in Q2 2014), up 9%
year-on-year (down 1% year-on-year on a constant currency basis)
* Non-IFRS diluted EPS in Q2 2015 of EUR 0.09 (EUR 0.06 in Q2 2014), an
increase of 50% year-on-year; reported diluted EPS in Q2 2015 of EUR 0.09
(loss of EUR 0.01 in Q2 2014)
Nokia Networks
* 6% year-on-year net sales growth (4% year-on-year decline on a constant
currency basis)
* 12% year-on-year growth in non-IFRS gross profit, with non-IFRS gross margin
increasing to 40.0% from 38.1%, primarily driven by an elevated level of
software sales within Mobile Broadband and strong performance across Global
Services
* 11% year-on-year growth in non-IFRS operating profit, with non-IFRS
operating margin increasing to 11.5% from 11.0%, supported by continued
focus on operational excellence
HERE
* 25% year-on-year growth in net sales, with 24% growth in new vehicle
licenses for embedded navigation systems
* Non-IFRS operating profit of EUR 27 million, with non-IFRS operating margin
increasing year-on-year to 9.3% from 0.0%
Nokia Technologies
* 31% year-on-year growth in net sales and 17% year-on-year growth in non-IFRS
operating profit, primarily due to higher intellectual property licensing
income from existing and new licensees and non-recurring net sales. In
addition, on a year-on-year basis, non-IFRS operating profit was negatively
affected by higher non-IFRS operating expenses
Group Common Functions
* Non-IFRS operating profit of EUR 69 million benefitted from a gain of
approximately EUR 110 million related to Nokia's investments made through
its venture funds
Reported second quarter 2015 Reported January-June
results(1) 2015 results(1)
-------------------------------------------------------------------------------
EUR million Q2'15 Q2'14 YoY Q1'15 QoQ Q1- Q1- YoY
change change Q2'15 Q2'14 change
-------------------------------------------------------------------------------
Net sales -
constant (1)% (1)% 5%
currency
Net sales 3 209 2 942 9% 3 196 0% 6 405 5 606 14%
Nokia 2 730 2 566 6% 2 673 2% 5 403 4 894 10%
Networks
HERE 290 232 25% 261 11% 551 441 25%
Nokia 193 147 31% 266 (27)% 459 278 65%
Technologies
Gross margin % 46.7% 44.0% 270bps 42.5% 420bps 44.6% 44.8% (20)bps
(non-IFRS)
Operating
profit (non- 521 346 51% 265 97% 786 651 21%
IFRS)
Nokia 313 281 11% 85 268% 398 497 (20)%
Networks
HERE 27 0 19 42% 46 10 360%
Nokia 112 96 17% 193 (42)% 305 182 68%
Technologies
Group Common 69 (31) (32) 37 (39)
Functions
Operating
margin % (non- 16.2% 11.8% 440bps 8.3% 790bps 12.3% 11.6% 70bps
IFRS)
Profit (non- 357 215 66% 200 79% 556 386 44%
IFRS)
Profit 352 (27) 181 94% 533 84 535%
EPS, EUR
diluted (non- 0.09 0.06 50% 0.05 80% 0.15 0.10 50%
IFRS)
EPS, EUR 0.09 (0.01) 0.05 80% 0.14 0.02 600%
diluted
-------------------------------------------------------------------------------
(
1) Results are as reported unless otherwise specified. The results information
in this report is unaudited. Please see "Notes to financial statements - Basis
of preparation" for more information. Non-IFRS results exclude transaction and
other related costs resulting from the sale of substantially all of Nokia's
Devices & Services business to Microsoft (the "Sale of the D&S Business"),
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 a detailed
discussion, please see the year to date discussion and the non-IFRS to reported
reconciliation note to the financial statements. A reconciliation of our Q1
2015 non-IFRS results to our reported results can be found in our complete Q1
2015 interim report with tables on page 29 published on April 30, 2015. A
reconciliation of our Q4 2014 non-IFRS results to our reported results can be
found in our complete Q4 2014 interim report with tables on pages 20-25
published on January 29, 2015. A reconciliation of our Q3 2014 non-IFRS results
to our reported results can be found in our complete Q3 2014 interim report with
tables on pages 22-27 published on October 23, 2014.
CEO statement
Nokia delivered strong results in the second quarter, with each of our three
businesses performing very well.
I am particularly pleased by Nokia Networks, which delivered improved
performance overall, despite a year-on-year decline in net sales on a constant
currency basis. Software sales were up significantly; core networking sales
improved; we saw a reduced impact of strategic entry deals; Global Services had
one of its best quarters in the history of the company; and costs remained well
under control.
While we expect the telecom infrastructure market to remain challenging, I
believe that our disciplined operating model and strong execution capabilities
will continue to differentiate us in this environment. Additionally, we remain
highly focused on reducing costs and improving efficiency in order to mitigate
the impact of market conditions.
Nokia Technologies not only continued its licensing momentum in the quarter with
a new agreement with LG, but also recently unveiled OZO, a truly game-changing
virtual reality camera. The team in "Tech" has shown both disciplined execution
in licensing and an entrepreneurial spirit in pursuing new growth opportunities.
HERE continued to deliver well, again showing year-on-year sales and
profitability growth. Our strategic review of that business is now in an
advanced stage, and I would like to reiterate that our focus is on what is in
the best interests of our shareholders and the long term future of HERE.
Overall, with these results, we are well positioned to deliver on our full-year
2015 commitments.
Rajeev Suri
President and CEO
Nokia in Q2 2015
Financial discussion
The following discussion is of Nokia's reported results for the second quarter
2015, which comprise the results of Nokia's three businesses - Nokia Networks,
HERE and Nokia Technologies, as well as Group Common Functions. Comparisons are
given to the second quarter 2014 and first quarter 2015 results, unless
otherwise indicated.
Net sales
Nokia's net sales increased 9% year-on-year and were approximately flat
sequentially. At constant currency, Nokia's net sales would have decreased 1%
both on a year-on-year and sequential basis.
Year-on-year discussion
The year-on-year increase in Nokia's net sales in the second quarter 2015 was
primarily due to higher net sales in Nokia Networks and, to a lesser extent, in
HERE and Nokia Technologies.
Sequential discussion
On a sequential basis, the approximately flat net sales in the second quarter
2015 were primarily due to slightly higher net sales in Nokia Networks and HERE,
partially offset by lower net sales in Nokia Technologies.
Non-IFRS Operating profit
Year-on-year discussion
Nokia's non-IFRS operating profit increased 51% year-on-year in the second
quarter 2015, primarily due to an increase in non-IFRS operating profit in Group
Common Functions and, to a lesser extent, in Nokia Networks, HERE and Nokia
Technologies.
Nokia's non-IFRS other income and expenses was an income of EUR 113 million in
the second quarter 2015, compared to an expense of EUR 9 million in the second
quarter 2014. On a year-on-year basis, the change in Nokia's non-IFRS other
income and expenses was primarily due to higher other income in Group Common
Functions, related to Nokia's investments made through its venture funds. During
the second quarter 2015, Nokia Growth Partners sold its holdings in Ganji.com, a
major online local services marketplace platform in China, to 58.com. BlueRun
Ventures also invested in Ganji.com and participated in the transaction, which
valued Nokia's total indirect holdings in Ganji.com at approximately EUR 200
million. Related to the transaction, Nokia recorded a gain of approximately EUR
110 million in the second quarter 2015. The final amount and timing of
additional income or expense will depend on the value and date at which the
venture funds liquidate the portion of the consideration that was received in
shares.
On a year-on-year basis, foreign exchange fluctuations had a significantly
positive impact on non-IFRS gross profit, and a significantly negative impact on
non-IFRS operating expenses, resulting in a slightly positive net impact on non-
IFRS operating profit in the second quarter 2015.
Sequential discussion
Nokia's non-IFRS operating profit increased 97% sequentially in the second
quarter 2015, primarily due to an increase in non-IFRS operating profit in Nokia
Networks and Group Common Functions, partially offset by a decrease in non-IFRS
operating profit in Nokia Technologies.
Nokia's non-IFRS other income and expenses was an income of EUR 113 million in
the second quarter 2015, compared to an expense of EUR 19 million in the first
quarter 2015. On a sequential basis, the change in Nokia's non-IFRS other income
and expenses was primarily due to higher other income in Group Common Functions,
related to Nokia's investments made through its venture funds. During the second
quarter 2015, Nokia Growth Partners sold its holdings in Ganji.com, a major
online local services marketplace platform in China, to 58.com. BlueRun Ventures
also invested in Ganji.com and participated in the transaction, which valued
Nokia's total indirect holdings in Ganji.com at approximately EUR 200 million.
Related to the transaction, Nokia recorded a gain of approximately EUR 110
million in the second quarter 2015. The final amount and timing of additional
income or expense will depend on the value and date at which the venture funds
liquidate the portion of the consideration that was received in shares.
On a sequential basis, foreign exchange fluctuations had a slightly negative
impact on non-IFRS gross profit, and a slightly negative impact on non-IFRS
operating expenses, resulting in a negative net impact on non-IFRS operating
profit in the second quarter 2015.
Non-IFRS Profit
Year-on-year discussion
Nokia's non-IFRS profit increased 66% on a year-on-year basis in the second
quarter 2015, primarily due to higher non-IFRS operating profit and, to a lesser
extent, a net positive fluctuation in non-IFRS financial income and expenses.
This was partially offset by higher non-IFRS tax expense. Nokia's non-IFRS tax
expense in the second quarter 2015 was based on a tax rate of approximately
27%, and this resulted in a higher non-IFRS tax expense than in the second
quarter 2014. However, the tax expenses in the second quarter of 2014 and 2015
are not directly comparable primarily due to Nokia's deferred tax assets in
Finland and Germany that were subject to valuation allowances until the third
quarter of 2014.
Sequential discussion
Sequentially, Nokia's non-IFRS profit increased 79% in the second quarter 2015,
primarily due to a higher non-IFRS operating profit, partially offset by higher
non-IFRS tax expenses and the absence of the approximately EUR 25 million out of
period adjustment to the share of results of associated companies that
benefitted the first quarter 2015.
OUTLOOK
Metric Guidance Commentary
-------------------------------------------------------------------------------
Nokia Networks FY15 Net sales Increase YoY
------------------------------------------------------------
FY15 Non-IFRS op. Around the Based on factors
margin midpoint of the including competitive
long-term range industry dynamics,
of 8% - 11% for product and regional
the full year mix, expected industry
seasonality in the
second half of 2015,
the timing of major
network deployments,
and expected continued
operational improvement.
-------------------------------------------------------------------------------
HERE FY15 Net sales Increase YoY
------------------------------------------------------------
FY15 Non-IFRS op. 9% - 12% Based on factors
margin including leading
market position,
positive industry
trends and improved
focus on cost
efficiency.
-------------------------------------------------------------------------------
Nokia Technologies FY15 Net sales Increase YoY Excludes potential
--------------------------------------amounts related to the
FY15 Non-IFRS op. Approx. in line expected resolution of
expense with Q2'15 level our arbitration with
(update) Samsung. Based on
factors including
higher investment in
licensing activities,
licensable
technologies and
business enablers,
including go-to-market
capabilities, which
target new and
significant long-term growth opportunities.
This an update to the
earlier FY15 non-IFRS
operating expense
outlook to be
approximately in line
with the Q4 2014
level.
-------------------------------------------------------------------------------
Nokia FY15 Capital Approx. EUR 250 Primarily attributable
expenditure million to Nokia Networks.
------------------------------------------------------------
FY15 Financial Expense of Subject to changes in
income and expense approx. EUR 160 FX rates and interest-
million bearing liabilities.
------------------------------------------------------------
FY15 Group Common Approx. EUR 120
Functions million
non-IFRS op.
expense
------------------------------------------------------------
Estimated long-term Approx. 25%
effective tax rate
------------------------------------------------------------
Annual cash tax Approx. EUR 250 May vary due to profit
obligation million per levels in different
annum until jurisdictions and
deferred tax amount of licence
assets fully income subject to utilized withholding tax.
-------------------------------------------------------------------------------
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) the outcome, transaction timeline and closing of the proposed combination of
Nokia and Alcatel-Lucent pursuant to a memorandum of understanding ("MoU") as
announced on April 15, 2015 ("Proposed transaction") and the ability of Nokia to
integrate Alcatel-Lucent into Nokia operations ("Combined company") and achieve
the targeted benefits; B) satisfaction of conditions precedent, including
closing conditions, related to the Proposed transaction in a timely manner, or
at all, including obtaining required regulatory approvals, the confirmation and
approval of our shareholders for the Proposed transaction and successfully
completing tenders for the Alcatel-Lucent shares; C) expectations, plans or
benefits related to Nokia's strategies, including the review of strategic
options for our HERE business; D) expectations, plans or benefits related to
future performance of Nokia's businesses Nokia Networks, HERE and Nokia
Technologies; E) expectations, plans or benefits related to changes in our
management and other leadership, operational structure and operating model,
including the expected characteristics, business and operations of the Combined
company; 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 and
margins; H) timing of the deliveries of our products and services; I)
expectations and targets regarding our financial performance, operating
expenses, taxes, cost savings and competitiveness, as well as results of
operations, including synergies related to the Proposed transaction, the target
annual run rate of cost synergies for the Combined company and expected
financial results of the Combined company; J) expectations and targets regarding
collaboration and partnering arrangements, including the expected customer reach
of the Combined company; 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, including any
expectations, plans or benefits related to or caused by the transaction where
Nokia sold substantially all of its Devices & Services business to Microsoft on
April 25, 2014; 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. We describe the risks and uncertainties that affect the Nokia
Group or are relevant to all Nokia businesses at the beginning of this section
and provide towards the end information on additional risks that are primarily
related to the individual Nokia businesses: Nokia Networks, HERE and Nokia
Technologies. Factors, including risks and uncertainties, that could cause such
differences include, but are not limited to: 1) the inability to close the
Proposed transaction in a timely manner, or at all, for instance due to the
inability or delays in obtaining the shareholder approval or necessary
regulatory approvals for the Proposed transaction, or the occurrence of any
event, change or other circumstance that could give rise to the termination of
the MoU and successfully completing tenders for the Alcatel-Lucent shares; 2)
the inability to achieve the targeted business and operational benefits from the
Proposed transaction or disruption caused by the Proposed transaction, including
inability to integrate Alcatel-Lucent into Nokia operations and any negative
effect from the implementation of the Proposed combination or the announcement
of the Proposed transaction, for instance due to the loss of customers, loss of
key executives or employees or reduced focus on day-to-day operations and
business; 3) 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; 4) our
ability to sustain or improve the operational and financial performance of our
businesses and correctly identify or successfully pursue new business
opportunities; 5) our dependence on general economic and market conditions,
including the capacity for growth in internet and technology usage; 6) our
exposure to regulatory, political or other developments in various countries or
regions; 7) 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; 8) 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, as well as increased
licensing costs and restrictions on our ability to use certain technologies, and
litigation related to IPR; 9) 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; 10) our
ability to retain, motivate, develop and recruit appropriately skilled
employees, for instance due to possible disruption caused by the Proposed
transaction; 11) 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 Proposed transaction in obtaining or maintaining the contractual
relationships; 12) 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; 13) the impact of unfavorable
outcome of litigation, arbitration, contract-related disputes or allegations of
health hazards associated with our businesses; 14) any inefficiency, malfunction
or disruption of a system or network that our operations rely on or any impact
of a possible cybersecurity breach; 15) 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; 16) 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; 17) our ability to optimize our capital structure as planned
and re-establish our investment grade credit rating; 18) Nokia Networks' 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 mobile broadband infrastructure and related services market or to such
technological developments; 19) Nokia Networks' 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; 20) Nokia
Networks' dependence on a limited number of customers and large multi-year
agreements and adverse effects as a result of further operator consolidation;
21) Nokia Networks' ability to manage its manufacturing, service creation and
delivery, as well as our logistics efficiently and without interruption; 22)
Nokia Networks' 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; 23) adverse developments
with respect to customer financing or extended payment terms Nokia Networks
provides to customers; 24) adverse developments resulting from or in connection
with the review of strategic options for our HERE business, including those
related to a potential divestment of the HERE business; 25) the intense
competition HERE faces and its ability to effectively and profitably invest in
new competitive high-quality services and data and bring these to market in a
timely manner or adjust its operations efficiently; 26) HERE's dependence on the
overall automotive market developments and customer business conditions; 27)
HERE's dependence, especially with respect to sales to the automotive industry,
on a limited number of customers and large multi-year agreements; 28) Nokia
Technologies' ability to maintain its existing sources of intellectual property
related revenue or establish new sources; 29) Nokia Technologies' dependence on
a limited number of key licensees that contribute proportionally significant
patent licensing income, including the outcome of the binding arbitration with
Samsung expected in 2015; 30) Nokia Technologies' dependence on adequate
regulatory protection for patented or other proprietary technologies; 31) Nokia
Technologies' ability to execute its plans through business areas such as
technology licensing, licensing the Nokia brand and other business ventures
including technology innovation and incubation; and 32) and the impact on the
Combined company (after giving effect to the Proposed transaction) of any of the
foregoing risks or forward-looking statements, 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". 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 management, Espoo - July 29, 2015
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 third quarter 2015 results on October 29, 2015.
[HUG#1942241]
© 2024 Nasdaq, Inc. All Rights Reserved |