28 October 2021 at 08:00 EEST
Nokia Corporation Financial Report for Q3 2021
Strong profitability and cash generation
All financial metrics above refer to Q3 2021
This is a summary of the Nokia Corporation Financial Report for Q3 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. A video interview summarizing the key points of our Q3 results will also be published on the website. Investors should not solely rely on summaries of Nokia's financial reports, but should also review the complete report with tables.
PEKKA LUNDMARK, PRESIDENT AND CEO, ON Q3 2021 RESULTS
We delivered another great quarter driven by our increased investments in technology leadership and strong market demand. The highlight of the quarter was the launch of our next generation FP5 IP routing silicon – delivering up to three times more capacity while reducing power consumption by up to 75% per bit compared to previous generation. This will help reduce the carbon footprint of both Nokia and our customers, while also helping customers to manage their operating expenses.
The third quarter saw us achieve 2% constant currency net sales growth despite the impact of earlier communicated headwinds in North America for Mobile Networks and global supply chain constraints. These headwinds were offset by strong growth in Network Infrastructure against a tough year-on-year comparison and by Cloud and Network Services achieving double-digit growth. Our comparable operating margin for the quarter was 11.7%, which is a further testament to the accountability and financial discipline that our new operating model is driving through the organization.
We now have over 380 private wireless customers and the business continues to grow strongly. We are further increasing our investment to ensure we maintain the lead we have built with the industry’s most complete offering.
Overall, I am pleased with our strong financial performance in 2021 so far. We continue to expect seasonality to be less pronounced this year than previously and are reiterating our full year 2021 outlook. Considering our continued strength, we now expect to be towards the upper-end of our comparable operating margin range. As we look ahead, we believe we are well positioned to capitalize on strong demand in our end markets through strengthened technology leadership and improved cost competitiveness. However, the uncertainty around the global semiconductor market limits our visibility into Q4 and 2022. We are working closely not only with our suppliers to ensure component availability but also with our customers to ensure we can meet their needs and mitigate the unprecedented component cost inflation our industry faces. Coupled with the one-offs we’ve benefited from this year, this may limit our margin expansion potential in 2022.
|EUR million (except for EPS in EUR)||Q3'21||Q3'20||YoY change||Constant currency YoY change||Q1–Q3'21||Q1–Q3'20||YoY change||Constant currency YoY change|
|Net sales||5 399||5 294||2%||2%||15 788||15 299||3%||6%|
|Gross margin %1||40.7%||37.1%||360bps||39.9%||36.9%||300bps|
|Research and development expenses1||(1 036)||(923)||12%||(3 096)||(2 942)||5%|
|Selling, general and administrative expenses1||(674)||(631)||7%||(2 034)||(2 121)||(4)%|
|Operating profit||502||350||43%||1 418||444||219%|
|Operating margin %||9.3%||6.6%||270bps||9.0%||2.9%||610bps|
|Profit for the period||351||197||78%||965||180||436%|
|Net cash and current financial investments||4 300||1 869||130%||4 300||1 869||130%|
|Net sales||5 399||5 294||2%||2%||15 788||15 301||3%||6%|
|Gross margin %||40.8%||37.4%||340bps||40.5%||37.8%||270bps|
|Research and development expenses||(1 007)||(880)||14%||(2 992)||(2 808)||7%|
|Selling, general and administrative expenses||(583)||(558)||4%||(1 719)||(1 820)||(6)%|
|Operating profit||633||486||30%||1 867||1 025||82%|
|Operating margin %||11.7%||9.2%||250bps||11.8%||6.7%||510bps|
|Profit for the period||463||305||52%||1 377||653||111%|
| 1 In Q4 2020, Nokia reclassified certain items of income and expenses from other operating income and expenses to the functions. The comparative reported results for Q3’20 and Q1–Q3'20 have been recast accordingly. Refer to Note 1, Basis of preparation, in the Financial statement information section included in Nokia Corporation Financial Report for Q3 2021 for details.|
2 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 Q3 2021 for details.
|Reconciliation of reported operating profit to comparable operating profit|
|EUR million||Q3'21||Q3'20||YoY change||Q1–Q3'21||Q1–Q3'20||YoY change|
|Reported operating profit||502||350||43%||1 418||444||219%|
|Amortization of acquired intangible assets||99||101||293||308|
|Restructuring and associated charges||34||120||211||337|
|Impairment of assets, net of impairment reversals||(1)||5||32||25|
|Settlement of legal disputes||0||0||(80)||0|
|Gain on defined benefit plan amendment||0||(90)||0||(90)|
|Comparable operating profit||633||486||30%||1 867||1 025||82%|
|Full year 2021||Full year 2023|
|Net sales1||EUR 21.7 billion to EUR 22.7 billion||Grow faster than the market|
|Comparable operating margin2||10 to 12%||10 to 13%|
|Free cash flow3||Clearly positive||Clearly positive|
|Comparable ROIC2,4||17 to 21%||15 to 20%|
1 Assuming actual currency rates until Sept 2021 and end of Sept EUR/USD rate of 1.16 continues in the remainder of 2021 (adjusted from actual until June and EUR/USD rate of 1.19 in the remainder of 2021).
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 Q3 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 Q3 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 4 March 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 the 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 and inflation, 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.
Nokia's video webcast will begin on 28 October 2021 at 11.30 a.m. Finnish time (EEST). A link to the webcast will be available at www.nokia.com/financials. Media representatives can follow the presentation via the link, or alternatively call +1-412-717-9224.
At Nokia, we create technology that helps the world act together.
As a trusted partner for critical networks, we are committed to innovation and technology leadership across mobile, fixed and cloud networks. We create value with intellectual property and long-term research, led by the award-winning Nokia Bell Labs.
Adhering to the highest standards of integrity and security, we help build the capabilities needed for a more productive, sustainable and inclusive world.
Phone: +358 10 448 4900
Katja Antila, Head of Media Relations
Phone: +358 40 803 4080