Nokia’s Q2 2024 Financial Report show Challenges and some Opportunities
Nokia recently released its Q2 2024 financial report, showcasing a mixed bag of challenges and progress amidst a volatile market environment. Despite a significant year-over-year decline in net sales, Nokia remains optimistic about the future, reaffirming its full-year outlook and highlighting key strategic moves.
Key Highlights from Q2 2024
– Net Sales Decline: Nokia experienced an 18% decline in net sales year-over-year, primarily due to a particularly strong quarter in India last year which skewed comparisons. Despite this, the company sees positive signs of improving order intake trends, particularly in Network Infrastructure.
– Submarine Networks Update: The Submarine Networks division is now treated as a discontinued operation, impacting the overall financials but aligning with Nokia’s strategic focus.
– Gross Margin Improvement: A notable positive was the increase in the comparable gross margin by 450 basis points year-over-year to 44.7%. This was driven by improvements in Mobile Networks, aided by the resolution of an outstanding contract negotiation.
– Operating Margin Dynamics: Despite the increase in gross margin, the comparable operating margin decreased by 190 basis points to 9.5% due to low net sales coverage of operating expenses. However, the reported operating margin saw a slight increase to 9.7%.
– Earnings Per Share (EPS): The comparable diluted EPS stood at EUR 0.06, while the reported EPS was negative EUR 0.03, primarily due to a non-cash impairment charge related to Submarine Networks.
– Cash Flow and Balance: Free cash flow for Q2 was EUR 0.4 billion, with a net cash balance of EUR 5.5 billion. Nokia plans to accelerate its buyback program, reflecting confidence in its cash position.
– Cost Savings Progress: Significant strides were made in the gross cost savings program, with EUR 400 million in run-rate savings already actioned out of a targeted EUR 800 million to EUR 1.2 billion by 2026.
Strategic Moves and Market Position
Pekka Lundmark, President and CEO of Nokia, emphasized the company’s strategic progress and market positioning. He mentioned the announcement of two significant transactions aimed at strengthening its Network Infrastructure business. The sale of the Submarine Networks business to the French State and the acquisition of Infinera will enhance the company’s optical networks capabilities and scale.
Now, the market is currently not looking great. Despite the 18% decline in net sales, largely attributed to the challenging comparison with last year’s peak in India’s 5G deployment, Nokia is optimistic about a meaningful improvement in the second half of the year. The company has seen positive customer tendering activity and has secured several key deals, including with new customers like MEO in Portugal.
Nokia might search for innovations which might cause some growth. At least, that is what Nokia was good at. CEO states that Nokia continues to innovate, with advancements in Cloud and Network Services and new collaborations in its Network as Code initiative. The company is also making strides in Nokia Technologies, with new agreements mainly in multimedia technology.
https://x.com/nokia/status/1813803220608688603
Financial Outlook
For the financial outlook, Nokia has reiterated its full-year outlook for 2024, expecting a comparable operating profit between EUR 2.3 billion and EUR 2.9 billion, and free cash flow conversion from comparable operating profit between 30% and 60%. The company aims to complete its EUR 600 million share buyback program by the end of this year, ahead of the initial two-year timeframe.
While Nokia faces ongoing market challenges, the company is doing some strategic initiatives, cost savings, and a focus on innovation. The progress in Network Infrastructure and the resolution of key contracts signal a positive outlook for the latter half of the year. It might signal some layoffs also, but we’ll see about that. Hopefully, investors and stakeholders will be encouraged with the complete financial report to find some spots for their investments.
For more detailed insights and the complete financial report, visit Nokia’s Financials.
