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Nokia Q1 sales down 19%

April 18, 2024

Nokia has reported a slow start to 2024 with net sales declining 19 per cent year-on-year, in constant currency (-20 per cent reported) in Q1.

The company noted that the environment is still challenging, but order trends continue to improve year-on-year, particularly in Network Infrastructure.

Nokia’s full year 2024 outlook is unchanged. The company currently expects comparable operating profit of between €2.3 billion to €2.9 billion and free cash flow conversion from comparable operating profit of between 30 per cent and 60 per cent.

Pekka Lundmark, Nokia CEO, commented: “As expected, the ongoing market weakness drove a 19 per cent year-on-year constant currency decline in net sales in the first quarter. However, we have seen continued improvement in order intake, meaning we remain confident in a stronger second half and achieving our full year outlook. Driven by the patent licensing deals signed in Nokia Technologies, we achieved a comparable operating margin of 12.8 per cent in Q1, compared to 8.2 per cent the year before. We also generated almost €1 billion in free cash flow in the quarter, which is a very strong performance.”

“I’m pleased that the improving order intake we started to see in Network Infrastructure at the end of last year continued in Q1 with year-on-year growth in order intake and drove a further increase in our backlog. The outlook for Fixed Networks for 2024 has improved which is an important signal as this market often recovers first. However, we believe the recovery in Optical Networks may take somewhat longer. While we are conscious of the broader economic environment, considering the on-going order intake strength, we expect Network Infrastructure will return to net sales growth for full year 2024 with a stronger second half performance.”

“Mobile Networks was impacted by particularly low levels of spending in North America and India, which led to a Q1 net sales decline of 37 per cent in constant currency. A slower pace of spending in India was anticipated following the rapid 5G deployment seen in H1 2023, and our expectations for India for the full year remain unchanged. Globally, we expect Q1 to mark the low point in demand with activity then progressively picking up through the remainder of 2024 consistent with more normal seasonality. We saw significant strength in gross margin at 42 per cent in the quarter, which is a solid improvement from the 34 per cent in the year-ago quarter. Approximately half of this improvement was related to improving regional and product mix, while the remainder was due to exceptionally low indirect cost of sales.”

“Cloud and Network Services saw a soft start to the year which was related to the challenging spending environment. However, we are seeing improving order intake and pipeline momentum. Importantly, we are also making good progress with our Network as Code platform. This platform enables operators to monetise their 5G investments, creating new revenue streams by offering developers advanced API access to the network. We now have a total of 11 operators signed up to the platform with many more in active discussions.”

“Nokia Technologies had a very strong start to the year as we concluded a number of outstanding licensing deals in the quarter. This meant that our annual licensing net sales run-rate improved from the €0.9 to 1.0 billion we had in Q4 to approximately €1.3 billion in Q1. In addition to the run-rate increase, we benefited from more than €400 million of catch-up net sales in the quarter. We have now concluded our smartphone licensing renewal cycle with no major renewals due for a number of years. This means Nokia Technologies has entered a period of stability. The business will now focus its resources on expanding in new growth areas with the next goal to increase our annual licensing net sales run-rate to €1.4 to 1.5 billion in the mid-term.”

“We have been executing quickly on the operating model changes we announced back in October along with our cost savings roadmap. These actions, combined with our expectation for improved net sales growth in the second half of the year, supported by our order backlog, mean we are solidly on track to achieve our full year comparable operating profit outlook of €2.3 to 2.9 billion and free cash flow conversion of 30 per cent to 60 per cent.”

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