Nokia Corporation Interim Report for Q1

1:00 am ET April 30, 2020 (Thomson Reuters ONE) Print

Nokia Corporation

Interim report

April 30, 2020 at 08:00 (CET +1)

Nokia Corporation Interim Report for Q1

Improved margins as transformation and product cost reduction efforts take hold

- Confidence in resilient customer base and strong liquidity position

- 5G deal momentum continues, with 70 commercial deals and 21 live networks

- Strong growth in Nokia Software and Nokia Enterprise

- Within previously provided Outlook ranges for full year 2020, adjusted the non-IFRS mid-points for EPS to EUR 0.23 and operating margin to 9.0%

- Majority of COVID-19 impact expected in Q2; continue to expect a seasonally strong second half

This is a summary of the Nokia Corporation interim report for Q1 2020 published today. The complete interim report for Q1 2020 with tables is available at nokia.com/fi...cials. Investors should not rely on summaries of our financial reports only, but should review the complete financial reports with tables.

RAJEEV SURI, PRESIDENT AND CEO, ON Q1 RESULTS

Nokia's solid first quarter results showed broad year-on-year profitability improvements as our transformation and product cost reduction efforts started to take hold. On a year-on-year basis, group-level non-IFRS operating margin was up by 3.6 percentage points; Networks gross margin increased by 3.5 percentage points; Nokia Software had an excellent quarter with sharp margin improvements and strong momentum with customers in North America; and, Nokia Enterprise delivered double-digit sales growth.

As I noted last quarter, we continue to have a sharp focus on Mobile Access and cash generation and saw good progress in both areas in the first quarter. "5G powered by ReefShark" shipments continue to increase and product cost reductions are proceeding well. We also announced some leading new solutions in the quarter, including a unique approach to dynamic spectrum sharing that is in test mode with select major customers today, and is expected to be available in volume over the summer, in line with the availability of DSS-capable mobile devices. On the services side, ongoing execution improvements drove improved year-on-year profitability. We also enhanced our total cash position to EUR6.3 billion, while net cash showed an expected seasonal decline to EUR1.3 billion.

These improvements are, of course, coming at a time of unprecedented change, given the impact of COVID-19. Our top focus areas are protecting our employees, maintaining critical network infrastructure for customers, and ensuring we have a strong cash position. In Q1, we saw a top line impact from COVID-19 issues of approximately EUR200 million, largely the result of supply issues associated with disruptions in China.

We are adjusting the mid-points within our previously disclosed Outlook ranges for full-year 2020 to reflect the increased risks and uncertainty presented by the ongoing COVID-19 situation. We expect the majority of this COVID-19 impact to be in Q2 and believe that our industry is fairly resilient to the crisis, although not immune.

We did not see a decline in demand in the first quarter. As the COVID-19 situation develops, however, an increase in supply and delivery challenges in a number of countries is possible and some customers may reassess their spending plans. Pleasingly, despite the majority of our R&D employees working from home, we have not seen any impact on our roadmaps, and, in fact, some key software releases are proceeding ahead of schedule. Additionally, we saw a massive increase in network capacity demands.

In close, Nokia's vision of creating the technology to connect the world has never been more important than today. I want to thank our employees for their incredible resilience, ongoing support for each other whilst working from home, and their commitment to continued delivery of critical networks during this time. Equally, I want to thank our customers, suppliers, communities and the entire Nokia extended "family" for their ongoing support.