Half year report
29 July 2021 at 08:00 EET
Nokia Corporation Financial Report for Q2 and Half Year 2021
Strong first half, 2021 Outlook revised upwards
This is a summary of the Nokia Corporation Financial Report for Q2 and Half Year 2021 published today. Nokia only publishes a summary of its financial reports in stock exchange releases. The summary focuses on Nokia Group's financial information as well as on Nokia's outlook. The detailed, segment-level discussion will be available in the complete financial report hosted at www.nokia.com/financials. Investors should not solely rely on summaries of Nokia's financial reports, but should also review the complete reports with tables.
PEKKA LUNDMARK, PRESIDENT AND CEO, ON Q2 2021 RESULTS
I am delighted that our strong start to 2021 continued in the second quarter. Our constant currency sales growth of 9%, combined with good cost control, enabled us to deliver a comparable operating margin of 12.8%. Even excluding a one-time software deal in Mobile Networks, we saw good underlying progress in operating margin. We are already seeing the benefits of our new operating model which helped us to deliver such a strong financial performance.
The highlight of the second quarter was the Mobile Networks launch of our new AirScale baseband and radio products with up to 75% better power efficiency helping to reduce our environmental footprint and the lightest 32TRX massive MIMO active antenna in the market. In Network Infrastructure we sustained double-digit growth and have a series of product launches ahead in the second half to further strengthen our differentiation. Cloud and Network Services is making good progress on its portfolio rebalancing and Nokia Technologies continues to scale with two licensing agreements with automotive manufacturers including Daimler.
Considering our robust start to 2021, we are revising upwards our full year Outlook. We now expect a comparable operating margin between 10-12% for full year 2021, compared to our previous range of 7-10%. We have executed faster than planned on our strategy in the first half which provides us with a good foundation for the full year. We still however expect to face the earlier communicated headwinds in the second half, particularly with market share loss and price erosion in North America. Therefore, we still expect our typical quarterly earnings seasonality to be less pronounced in 2021. In addition, we continue to accelerate R&D investments and monitor risks around component availability, considering the strong demand for our products.
Overall, I am very happy with the progress made in the first half. I want to thank our entire team for their hard work and commitment.
|EUR million (except for EPS in EUR)||Q2'21||Q2'20||YoY change||Constant currency YoY change||Q1–Q2'21||Q1–Q2'20||YoY change||Constant currency YoY change|
|Net sales||5 313||5 092||4%||9%||10 389||10 005||4%||9%|
|Gross margin %1||41.0%||38.1%||290bps||39.5%||36.8%||270bps|
|Research and development expenses1||(1 063)||(1 013)||5%||(2 060)||(2 019)||2%|
|Selling, general and administrative expenses1||(712)||(709)||0%||(1 360)||(1 489)||(9)%|
|Operating margin %||9.1%||3.3%||580bps||8.8%||0.9%||790bps|
|Profit/(loss) for the period||351||99||255%||614||(17)|
|Net cash and current financial investments||3 688||1 550||138%||3 688||1 550||138%|
|Net sales||5 313||5 093||4%||9%||10 389||10 007||4%||9%|
|Gross margin %||42.3%||39.6%||270bps||40.3%||38.0%||230bps|
|Research and development expenses||(1 011)||(953)||6%||(1 985)||(1 928)||3%|
|Selling, general and administrative expenses||(585)||(590)||(1)%||(1 137)||(1 262)||(10)%|
|Operating profit||682||423||61%||1 234||539||129%|
|Operating margin %||12.8%||8.3%||450bps||11.9%||5.4%||650bps|
|Profit for the period||539||316||71%||914||348||163%|
| 1In Q4 2020, Nokia reclassified certain items of income and expenses from other operating income and expenses to the functions. The comparative reported results for Q2’20 and Q1-Q2'20 have been recast accordingly. Refer to Note 1, Basis of preparation, in the Financial statement information section included in Nokia Corporation Financial Report for Q2 and Half Year 2021 for details.|
2Comparable ROIC = Comparable operating profit after tax, last four quarters / invested capital, average of last five quarters’ ending balances. Refer to Note 10, Performance measures, in the Financial statement information section included in Nokia Corporation Financial Report for Q2 and Half Year 2021 for details.
|Reconciliation of reported operating profit to comparable operating profit|
|EUR million||Q2'21||Q2'20||YoY change||Q1–Q2'21||Q1–Q2'20||YoY change|
|Reported operating profit||484||170||185%||916||94||874%|
|Restructuring and associated charges||141||130||177||217|
|Amortization of acquired intangible assets||97||106||194||207|
|Settlement of legal disputes||(80)||0||(80)||0|
|Impairment of assets, net of impairment reversals||32||19||33||20|
|Comparable operating profit||682||423||61%||1 234||539||129%|
|Full year 2021||Full year 2023|
|Net sales1|| EUR 21.7 billion to EUR 22.7 billion |
(adjusted from EUR 20.6 to 21.8bn)
|Grow faster than the market|
|Comparable operating margin2||10 to 12% (adjusted from 7 to 10%)||10–13%|
|Free cash flow3||Clearly positive (adjusted from positive)||Clearly positive|
|Comparable ROIC2,4||17 to 21% (adjusted from 10 to 15%)||15–20%|
| 1 Assuming actual currency rates for first half 2021 and end of June EUR/USD rate of 1.19 continues in the second half 2021 (this is adjusted from our previous guidance based on the year-end 2020 EUR/USD rate of 1.23).|
2 Comparable measures exclude intangible asset amortization and other purchase price fair value adjustments, goodwill impairments, restructuring related charges and certain other items affecting comparability. Refer to Note 10, Performance measures, in the Financial statement information section included in Nokia Corporation Financial Report for Q2 and Half Year 2021 for details.
3 Free cash flow = net cash from/(used in) operating activities - capital expenditures + proceeds from sale of property, plant and equipment and intangible assets – purchase of non-current financial investments + proceeds from sale of non-current financial investments..
4 Comparable ROIC = comparable operating profit after tax, last four quarters / invested capital, average of last five quarters’ ending balances. Refer to Note 10, Performance measures, in the Financial statement information section included in Nokia Corporation Financial Report for Q2 and Half Year 2021 for details.
|Full year 2021||Full year 2023|
|Mobile Networks||4 to 7%||5 to 8%|
|Network Infrastructure||8 to 11%||9 to 12%|
|Cloud and Network Services||3 to 6%||8 to 11%|
Nokia and its business are exposed to a number of risks and uncertainties which include but are not limited to:
as well as the risk factors specified under Forward-looking Statements of this release, and our 2020 annual report on Form 20-F published on March 4, 2021 under Operating and financial review and prospects-Risk factors.
Certain statements herein that are not historical facts are forward-looking statements. These forward-looking statements reflect Nokia's current expectations and views of future developments and include statements regarding: A) expectations, plans, benefits or outlook related to our strategies, product launches, growth management and operational key performance indicators; B) expectations, plans or benefits related to future performance of our businesses (including the expected impact, timing and duration of that impact of COVID-19 on our businesses, our supply chain and our customers’ businesses) and any future dividends; C) expectations and targets regarding financial performance, cash generation, results, the timing of receivables, operating expenses, taxes, currency exchange rates, hedging, cost savings, product cost reductions and competitiveness, as well as results of operations including targeted synergies, better commercial management and those results related to market share, prices, net sales, income and margins; D) ability to execute, expectations, plans or benefits related to changes in organizational and operational structure and cash or cost savings arrangements; and (E) any statements preceded by or including "continue", “believe”, “commit”, “estimate”, “expect”, “aim”, “influence”, "will” or similar expressions. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control, which could cause our actual results to differ materially from such statements. These statements are based on management’s best assumptions and beliefs in light of the information currently available to them. These forward-looking statements are only predictions based upon our current expectations and views of future events and developments and are subject to risks and uncertainties that are difficult to predict because they relate to events and depend on circumstances that will occur in the future. Factors, including risks and uncertainties that could cause these differences, include those risks and uncertainties identified in the Risk Factors above.
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