Nokia Corporation Financial Report for Q2 and Half Year 2018

Nokia Corporation

Half Year Financial Report

July 26, 2018 at 08:00 (CET 1)

Nokia Corporation Financial Report for Q2 and Half Year 2018

First half 2018 as expected; improvement expected in Nokias Networks business in second half 2018

Full year 2018 Nokia-level guidance reiterated

This is a summary of the Nokia Corporation financial report for Q2 and half year 2018 published today. The complete financial report for Q2 and half year 2018 with tables is available at www.nokia.com/financials. Investors should not rely on summaries of our financial reports only, but should review the complete financial reports with tables.

FINANCIAL HIGHLIGHTS

Net sales in Q2 2018 were EUR 5.3bn, compared to EUR 5.6bn in Q2 2017. On a constant currency basis, net sales would have been down 1%.

Non-IFRS diluted EPS in Q2 2018 was EUR 0.03, compared to EUR 0.08 in Q2 2017. Reported diluted EPS in Q2 2018 was negative EUR 0.05, compared to negative EUR 0.07 in Q2 2017.

In the second quarter, net cash and current financial investments decreased by approximately EUR 2.0 billion, primarily due to two expected items: the payment of the dividend of approximately EUR 940 million; and the payment of employee incentives related to Nokias business performance in 2017, which was the primary driver of the decrease in liabilities within net working capital of approximately EUR 600 million.

Nokias Networks business net sales were EUR 4.7bn, with operating profit of EUR 69mn

Our backlog was strong at the end of Q2, and we continue to expect commercial 5G network deployments to begin near the end of 2018.

Continued progress was made in Q2 with our strategy to diversify and grow by targeting attractive adjacent markets. Strong momentum continued with large enterprise vertical and webscale customers, with double-digit year-on-year growth in net sales.

Momentum in our end-to-end strategy continued, with approximately 40% of our sales pipeline now comprised of solutions, products and services from multiple business groups.

Nokia Technologies net sales were EUR 361mn, with operating profit of EUR 292mn

Strong track record maintained, with 23% year-on-year growth in recurring licensing net sales and 27% year-on-year operating profit increase in Q2, primarily related to license agreements entered into in 2017.

Nokia Technologies continued to make good progress on new licensing agreements; no major agreements were announced in Q2.

Outlook

Nokia reiterates full year 2018 Nokia-level guidance and remains on target to deliver EUR 1.2 billion of recurring annual cost savings in full year 2018.

In its Networks business, Nokia expects improving market conditions in the second half of 2018, with particular acceleration in the fourth quarter in North America. Results in 2018 and over the longer term are expected to be influenced by: a) our ability to scale our supply chain operations to meet increasing demand; b) recovery actions to address increased price pressure; and c) the timing of completions and acceptances of certain projects, particularly related to 5G.

Nokia continues to see opportunities to build on its track record in Nokia Licensing within Nokia Technologies and drive a compound annual growth rate of approximately 10% for recurring net sales over the 3-year period ending 2020.

Please refer to the full details and other targets in the Outlook section of this press release.

Second quarter and January-June 2018 non-IFRS results. Refer to note 1, Basis of Preparation and note 15, Performance measures, in the Financial statement information section for further details1

EUR million (except for EPS in EUR) Q218 Q217 YoY change Constant currency YoY change Q1-Q218 Q1-Q217 YoY change Constant currency YoY change

Net sales (non-IFRS) 5 318 5 629 (6)% (1)% 10 246 11 017 (7)% 0%

Nokias Networks business 4 693 4 971 (6)% 0% 9 018 9 873 (9)% (1)%

Nokia Technologies 361 369 (2)% (2)% 726 616 18% 19%

Group Common and Other 278 307 (9)% (4)% 530 562 (6)% (1)%

Gross profit (non-IFRS) 2 038 2 350 (13)% 3 979 4 546 (12)%

Gross margin % (non-IFRS) 38.3% 41.7% (340)bps 38.8% 41.3% (250)bps

Operating profit (non-IFRS) 334 574 (42)% 573 915 (37)%

Nokias Networks business 69 406 (83)% 112 730 (85)%

Nokia Technologies 292 230 27% 565 346 63%

Group Common and Other (27) (62) (56)% (105) (161) (35)%

Operating margin % (non-IFRS) 6.3% 10.2% (390)bps 5.6% 8.3% (270)bps

Financial income and expenses (non-IFRS) (84) (63) 33% (200) (144) 39%

Income taxes (non-IFRS) (106) (74) 43% (143) (122) 17%

Profit for the period (non-IFRS) 139 441 (68)% 223 644 (65)%

Profit attributable to the equity

holders of the parent (non-IFRS) 144 449 (68)% 230 646 (64)%

Non-controlling interests (non-IFRS) (4) (9) (7) (2)

EPS, EUR diluted (non-IFRS) 0.03 0.08 (63)% 0.04 0.11 (64)%

Second quarter and January-June 2018 reported results. Refer to note 1, Basis of Preparation and note 15, Performance measures, in the Financial statement information section for further details1

EUR million (except for EPS in EUR) Q218 Q217 YoY change Constant currency YoY change Q1-Q218 Q1-Q217 YoY change Constant currency YoY change

Net sales 5 313 5 619 (5)% (1)% 10 237 10 996 (7)% 0%

Nokias Networks business 4 693 4 971 (6)% 0% 9 018 9 873 (9)% (1)%

Nokia Technologies 361 369 (2)% (2)% 726 616 18% 19%

Group Common and Other 278 307 (9)% (4)% 530 562 (6)% (1)%

Non-IFRS exclusions (5) (11) (55)% (9) (21) (57)%

Gross profit 1 860 2 236 (17)% 3 666 4 361 (16)%

Gross margin % 35.0% 39.8% (480)bps 35.8% 39.7% (390)bps

Operating loss (221) (45) 391% (557) (173) 222%

Nokias Networks business 69 406 (83)% 112 730 (85)%

Nokia Technologies 292 230 27% 565 346 63%

Group Common and Other (27) (62) (56)% (105) (16

LINK:	https://www.nokia.com/en_int/news/releases/2018/07/26/nokia-corporatio...
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