Nokia has reported that Q3 net sales declined 8 per cent YoY to €4.33 billion as growth in Network Infrastructure and Nokia Technologies was offset by decline in Mobile Networks primarily in India and a divestment in Cloud and Network Services. Despite this, the company saw a 9 per cent rise in Q3 operating profit to €358 million.

Order intake remained strong in Network Infrastructure, while the sales recovery continues to be slower than expected, the Finnish company confirmed.

Pekka Lundmark, Nokia CEO, commented: “As I reflect on our performance in the third quarter, I am optimistic we are now turning the corner in many parts of our business, even if some continue to experience market weakness. Among the key highlights was a return to net sales growth in Network Infrastructure with Fixed Networks growing 9 per cent in constant currency and IP Networks growing 6 per cent. Order intake in Network Infrastructure continued to be robust with strong year-on-year growth and a growing order backlog. Additionally, we delivered a significant improvement in our gross margin at the group level and cash generation remained strong with €621 million free cash flow in the quarter.”

“There are reasons for optimism across our portfolio. We expect a significant acceleration in growth in Q4 in Network Infrastructure and see a number of structural demand trends supporting our future growth. In Mobile Networks, although market dynamics are more challenging, we have secured several important deals in the quarter, remain confident in our competitive position and are improving our gross margin. In Cloud and Network Services we are seeing excellent momentum in 5G Core along with strong progress in network automation, cloudification and enabling network APIs. Nokia Technologies continues to benefit from greater stability following the conclusion of its smart-phone renewal cycle and is making good progress expanding into the new growth areas.”

“Across Nokia we are investing to create new growth opportunities outside of our traditional communications service provider market. We see a significant opportunity to expand our presence in the data center market and are investing to broaden our product portfolio in IP Networks to better address this. Our pending acquisition of Infinera will also bolster our Optical Networks exposure to this market and accelerate our growth opportunities. Additionally, we see a compelling new long-term opportunity in bringing 5G technology to the defense market and we continue to invest in private wireless networks where we are the clear market leader.”

“Regarding our financial performance in Q3, our net sales declined by 7 per cent in the quarter in constant currency. Three quarters of the decline was driven by India due to a strong year-ago quarter. Importantly we delivered a significant improvement in comparable gross margin which expanded 490 basis points from the year-ago period to reach 45.7 per cent. This was driven by a combination of improved product mix, regional mix and actions to reduce product cost. Despite continued intense competition, we remain disciplined on price while still winning deals as we remain focused on improving the profitability of our business. We also progressed our cost reduction efforts contributing to a solid improvement of 160 basis points in our comparable operating margin on a year-on-year basis.”

“Regarding full year 2024, our comparable operating profit outlook remains €2.3 to 2.9 billion and we are currently tracking within the bottom-half of the range. The net sales recovery is happening slower than we expected previously, however, this is being partially offset by an improving gross margin and quick action on cost. We expect to be at the high end of our free cash flow target of 30 per cent to 60 per cent conversion from comparable operating profit.”

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Categories: Articles, Business, Results

Tags: Nokia, Pekka Lundmark