Nokia above expectations in Q2 2019, driven by 5G demand and improved operational execution
Nokia Corporation at 8am Finnish local time published their Q2 2019 financial report, that also includes the summed up data for the first half of 2019. Nokia’s financial results in Q2 exceeded the expectations of analysts, while Nokia’s CEO Rajeev Suri attributes the strong performance to 5G demand and improved operational execution.
Nokia posted €5.694 billion in net sales, which represents a 7% growth compared to Q2 2018. Net sales of all Nokia divisions – Networks, Software and Technologies improved YoY, while the decrease in revenue was posted by “Group Common and Other”, which is basically Alcatel Submarine Networks and Nokia Radio Frequency Systems, that are kept separate probably because of market regulations.
The posted non-IFRS operating profit, that excludes costs related to ALU acquisition and other costs, was €451 million, 35% higher than last year, and beating analyst average prediction of €282 million. Nokia posted an operating loss of €57 million, significantly lower than €221 million loss from Q2 2018.
If we take a look at the profitability of particular segments inside the Nokia group, only the “Group Common and Other” posted an operating loss (non-IFRS) of €129 million, while Networks, Software and Technologies were profitable.
By region, most of Nokia’s revenue comes from North America (€1.755 billion, 31%), then follows Europe (€1.611 billion, 28%), Asia-Pacific (€1.012 billion, 18%), Greater China (€515 million, 9%), Middle East & Africa (€441 million, 8%) and lastly Latin America (€359 million, 6%).
Nokia Technologies further improved its operating margin (profits divided by revenue) in Q2 2019 and the margin sits now at a high 84.6%. Technologies posted €383 million in net sales with €324 million of profit, which is an increase of 11% compared to Q2 2018. All revenue in Q2 2019 regarding Technologies comes from licensing, while in Q2 2018 €9 million was related to the sold Digital Health business.
“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, ” said Nokia’s CEO Rajeev Suri. Nokia saw good year-on-year growth, improvements in profitability and now has 45 commercial 5G deals and 9 live 5G networks.
We also have to mention the risks Nokia mentioned in the report and they include the uncertainty regarding the US-China trade war, as well as higher demand in second half of 2019.
