Good performance keeps a complete perspective of the years.
- Revenue in the second quarter increased by 3% (+11%) in constant currency compared to the prior year.
- Network infrastructure revenue increased 12% as a result of continued trading on four exchanges, while mobile network growth slowed despite continued supply chain profitability.
- Net revenue from cloud and network services in constant currency and Nokia Technologies decreased by 25% due to the impact of expiring licenses, which were continually renewed.
- The overall standard deviation was 40.6% and the operating margin was 12.2%. While net income increased, it was offset by Nokia Technologies and its specialized mobile network software suite last year, resulting in lower earnings for the year.
- The reported gross margin decreased 80 basis points yoy to 40.2% and the operating margin increased 50 basis points to 9.6%, with the former impact mainly due to a decrease in net costs relative to profit.
- Corresponding diluted earnings per share €0.10; The total cost of the EPS is 0.08 EUR.
- The net free cash flow of €100 million was a free cash flow of €4.5 billion.
- With continued revenue growth of 2% and an operating margin of 11.6% (assumed to be 8.2%), strong first-quarter results were slightly overshadowed by an improvement in Nokia’s core revenue driven by the results of the period.
- Projected net sales to 2022 do not change in constant currency. Sales for the year ended June 30, 2022, are expected to be $23.5 billion for $24.7 billion. A reasonable variance return estimate remains between 11% and 13.5%.
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Below is a summary of Nokia’s financial results for the second quarter of 2022. Nokia only makes brief financial results announcements to the market. An overview of Nokia Group’s financials and the Nokia mindset. Details of insurance coverage can be found in the full financial statement at www.nokia.com/financial. A video interview highlighting the highlights of the second quarter results will also be released. Investors should not only rely on Nokia’s financial statements but also read the full report, including the charts.
PEKKA LUNDMARK Chairman and CEO, Q2 2022 Results
I am pleased to report that we continued our good work in the second half. Despite continued supply constraints, we increased net sales growth to 3% in constant currency. We delivered other strong quarterly earnings with an operating margin of 12.2%. This is a slight decrease from last year due to the temporary effect of the Nokia Technology Innovation Contract and the Software Specialization Contract from last year. Trading profits for all of them continue to improve significantly.
Network infrastructure maintained strong growth, with fixed currency revenues up 12%, which was determined to support Nokia’s technology. We were pleased to see strong mobile revenue growth of 1% despite supply chain challenges, while cloud and network services held steady year-over-year.
The campaign continues to evolve, maintaining order and net sales growth of 8%, which is important for long-term ambitions in this area. Since the beginning of this year, we have made new investments in private wireless research and development, and our market is expected to be driven by our market leverage. We expect these investments to deliver strong financial results over the medium term, as evidenced by the doubling of personal wireless technology sales in the fourth quarter.
We know that some markets are affected by global economic uncertainty and currency fluctuations.
1 The exchange rate of EUR 1 = USD 1.04 on 06/30/2022 will be maintained until the end of 2022 with the actual exchange rate at the beginning of the year (a suitable comparison is EUR 1 = USD 1.11 on 3/31/2022) Assumption 2021 Assumptions from recent changes. The expected net income remains between 22.6 and 23.8 billion euros.
2 For a full explanation of the definitions of these terms, see the Performance Metrics section of Nokia’s Q2 and Q1 2022 financial statements.
- The assumption for Nokia’s outlook is that the total market size (excluding Chinese mobile networks and submarine network infrastructure) is expected to grow to 1.04 (updated). :
- Nokia Technologies expects to generate a roughly stable operating profit in 2022 and beyond.
- We expect Common and Other to have a net worth of €250 million in 2022 and beyond.
- For all of 2022, Nokia estimates that Nokia Technologies’ free cash flow will be about $450 million below operating income.
- Equivalent economic income and expenses should be between 150-200 million cash in 2022 and 100-150 million cash in the long term (rollover).
- The equivalent financial cost is expected to be around €450 million in 2022 and over the long term.
- Cash flow from sales in 2022 and the long term should be around 400 million euros. When
- The investment is expected to be about $650 million by 2022 and about $600 million in the long term.
Distribution of shareholders
Subject to approval by the Annual General Meeting on 5 April 2022, the Board of Directors may determine a maximum total distribution of EUR 0.08 per share. The permission to distribute dividends and/or dividends received from the free investment reserve is subject to four installments during the period of the permission, excluding quarterly results, unless the Board of Directors decides otherwise for good reasons.
As part of this financial contribution, a dividend of €0.02 was paid out of a total of €113 million in the second quarter of 2022.
At a meeting of the Board of Directors on July 21, 2022, a decision was made to distribute EUR 0.02 per share. The dividend registration date is July 26, 2022, and the dividend payment is August 4, 2022. The effective date for dividend payments outside of Finland is determined by the bank’s interim dividend payment procedure.
Following the announcement of the second period and the start of the first period in the second half of 2022, the Board of Directors approved another tranche of EUR 0.04 per share.
The second distribution of payouts is expected in the third quarter of 2022 for a total amount of approximately 112 million coins.
Share Buying Program
In 2020 and 2021, Nokia generated strong cash flow and significantly improved the company’s cash position. To control the capital structure of the company, the managers, with the approval of the general meeting, implement a share buyback program to buy back shares. Purchases began in February 2022. At the end of June 2022, Nokia had thirty shares to buy back. The total purchase price was about 144 million euros, with an average price per share of 4.73 euros. It is expected to pay shareholders 600 million euros over two years.
Nokia and its business are subject to risks and uncertainties, including;
- The intensity of competition must remain high.
- our ability to provide a product roadmap and cost competitiveness through additional investment in research and development;
- We purchase some standard components such as semiconductors and their cost.
- Disruption of the global supply chain;
- Accelerated growth, heightened global macroeconomic uncertainty, and significant currency fluctuations.
- The scale and duration of the COVID-19 pandemic and its economic impact.
The Nokia Report will begin on July 21, 2022, at 11:30 AM. Finnish Latin Time (EEST). You can find the offer link online at www.nokia.com/financial. Commentators can join the presentation by logging in or calling +1-412-717-9224.
Financial calendar 2022
- Nokia is expected to report its third quarter and January-September 2022 results on October 20, 2022.
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