Nokia Corporation Financial Report for Q2 and Half Year 2019

Nokia Corporation Financial Report for Q2 and Half Year 2019

Nokia Corporation

Half Year Financial Report

July 25, 2019 at 08:00 (CET 1)

Nokia Corporation Financial Report for Q2 and Half Year 2019

Strong Q2 driven by end-to-end 5G demand and improved operational execution; Full year 2019 guidance maintained

This is a summary of the Nokia Corporation financial report for Q2 and half year 2019 published today. The complete financial report for Q2 and half year 2019 with tables is available at www.nokia.com/financials. Investors should not rely on summaries of our interim reports only, but should review the complete interim reports with tables.

RAJEEV SURI, PRESIDENT AND CEO, ON Q2 2019 RESULTS

Nokia delivered a strong second quarter, driven by 5G demand, a competitive end-to-end portfolio and strengthened operational execution. Given these compelling results, we are confirming our full-year 2019 guidance.

In the quarter, we saw good year-on-year growth, meaningful improvements in profitability, robust progress in our strategic expansion areas of Software and Enterprise and excellent momentum in our IP Routing business. We also continued to enhance our position in 5G, and now have 45 commercial 5G deals and 9 live networks.

Risks remain in the year, including execution demands in the second half, trade-related uncertainty and challenges in the China market. Given these risks, we will continue to focus on tight operational discipline, delivering on our EUR 700 million cost-savings program, improving working capital management and advancing the implementation of our strategy.

Overall, I am pleased with Nokia's performance in the second quarter and our continued progress in executing our strategy.

Q2 2019 and January-June 2019 reported and non-IFRS results. Refer to note 1, Basis of Preparation , note 2, Non-IFRS to reported reconciliation and note 13, Performance measures, in the Financial statement information section for details.

EUR million (except for EPS in EUR)

Q219

Q218

YoY change

Constant currency YoY change

Q1-Q219

Q1-Q218

YoY change

Constant currency YoY change

Net sales

5 694

5 313

7%

5%

10 726

10 237

5%

2%

Operating profit/(loss)

(57)

(221)

(581)

(557)

Operating margin %

(1.0)%

(4.2)%

320bps

(5.4)%

(5.4)%

0bps

EPS, diluted

(0.03)

(0.05)

(0.11)

(0.11)

Operating profit/(loss) (non-IFRS)

451

334

35%

391

573

(32)%

Operating margin % (non-IFRS)

7.9%

6.3%

160bps

3.6%

5.6%

(200)bps

EPS, diluted (non-IFRS)

0.05

0.03

67%

0.02

0.04

(50)%

Net cash and current financial investments1

502

2 146

(77)%

502

2 146

(77)%

1Net cash and current financial investments does not include lease liabilities.

Net sales in Q2 2019 were EUR 5.7bn, compared to EUR 5.3bn in Q2 2018. On a constant currency basis, net sales increased 5%. Our strong topline performance was driven by improved industry demand and the competitiveness of our end-to-end portfolio, with growth across four out of six regions and all customer types.

Non-IFRS diluted EPS in Q2 2019 was EUR 0.05, compared to EUR 0.03 in Q2 2018, primarily driven by solid operational execution, which yielded gross profit improvements across Networks, Nokia Software and Nokia Technologies.

Reported diluted EPS in Q2 2019 was negative EUR 0.03, compared to negative EUR 0.05 in Q2 2018, primarily driven by higher gross profit, partially offset by a net negative fluctuation in financial income and expenses.

In Q2 2019, net cash and current financial investments decreased sequentially by approximately EUR 1.5bn. This decrease was primarily due to anticipated cash outflows including the payment of 2018 performance-related incentives to employees, payment of the quarterly dividend, as well as restructuring and associated cash outflows, which together totaled approximately EUR 900 million. In addition, approximately EUR 350 million of the decline was temporary in nature and is expected to reverse in the second half of 2019.

Full year 2019 guidance maintained, with seasonality characterized by weaker first and third quarters and stronger second and fourth quarters, with a particularly weak Q1 and an expected particularly strong Q4.

DIVIDEND

Beginning with the distribution for the financial year 2018, Nokia has started paying dividends in quarterly instalments. Under the authorization by the Annual General Meeting held on May 21, 2019, the Board of Directors may resolve an aggregate maximum annual distribution of EUR 0.20 per share to be paid quarterly during the authorization period, unless the Board decides otherwise for a justified reason. On the same day, the Board resolved to distribute EUR 0.05 per share as the first instalment of the dividend.

On July 25, 2019, the Board resolved to distribute EUR 0.05 per share as the second instalment of the dividend. The dividend record date is on July 30, 2019 and the dividend is expected to be paid on or around August 8, 2019. The actual dividend payment date outside Finland will be determined by the practices of the intermediary banks transferring the dividend payments. Following this announced distribution, the Board's remaining distribution authorization for the financial year 2018 is a maximum of EUR 0.10 per share.

The payment of the second instalment of the dividend, as well as the payment of the withholding taxes related to the first instalment of the dividend, are expected to total approximately EUR 300 million in Q3 2019.

OUTLOOK

Metric

Full Year 2019

Full Year 2020

Non-IFRS diluted earnings per share

EUR 0.25 - 0.29

EUR 0.37 - 0.42

Non-IFRS operating margin

9 - 12%

12 - 16%

Recurring free cash flow1

Slightly positive

Clearly positive

Annual distribution to shareholders: Over the long term, Nokia targets to deliver an earnings-based growing dividend by distributing approximately 40% to 70% of non-IFRS di

LINK:	https://www.nokia.com/about-us/news/releases/2019/07/25/nokia-corporat...
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