Nokia’s Networks Business Drops 11% YoY

Nokia reported non-IFRS net sales in Q2 2016 of EUR 5.7 billion down from EUR 6.4 billion on a comparable combined company basis (Alcatel-Lucent + Nokia).

The company said it intends to accelerate its cost savings program as it works to integrate Alcatel-Lucent. Related to this, Nokia recorded approximately EUR 600 million of restructuring and associated charges in the second quarter 2016.

Some highlights from the report:

Nokia Networks

Nokia’s Networks business experienced an 11% year-on-year net sales decrease in Q2 2016, which the company said reflected its outlook for the wireless infrastructure market. Net sales were weak in Mobile Networks within Ultra Broadband Networks, and accounted for approximately 80% of the overall decrease in Nokia’s Networks business.

IP Networks and Applications also contributed to the decrease. This was partially offset by strong growth in Fixed Networks within Ultra Broadband Networks.

In Q2 2016, gross margin of 37.4% and operating margin of 6.0% were adversely affected by a customer in Latin America undergoing judicial recovery. Excluding this, gross margin would have been approximately 38% and operating margin would have been nearly 7%.

Nokia Technologies

This division also experienced an 11% year-on-year net sales decrease in Q2 2016. Excluding the impact of non-recurring items that benefitted the year ago quarter, Nokia Technologies net sales would have grown by approximately 10% year-on-year, primarily due to higher intellectual property licensing income from existing licensees.

Rajeev Suri, Nokia's President and CEO, commented:

"Nokia’s second quarter results were largely as expected and reflect solid execution in the midst of a challenging market and the ongoing integration of Alcatel-Lucent. When we announced our first quarter results, I said that we did not expect to see typical seasonal patterns in the first half of the year, and that prediction proved to be correct. Net sales were slightly up sequentially in Q2, while operating margin was slightly down, in part reflecting a meaningful negative impact from one of our major customers in Latin America."

"The decline of our topline remains a concern, and reflects challenging market conditions. While we do not expect those conditions to improve in the near term, we believe we are well-positioned given the scope of our portfolio, focus on operational discipline, strengthening sales execution, and opportunities in the evolution from 4G towards 5G."

http://company.nokia.com/en/system/files/download/investors/nokia_results_2016_q2b.pdf