Nokia announced its financial results for Q2 and the first half of 2024, maintaining its full-year outlook despite challenging market conditions. The company reported an 18% year-on-year decline in net sales, primarily due to a strong prior year quarter in India. However, order intake trends improved, especially in Network Infrastructure, which is expected to drive sales growth in the second half of the year.
The company’s comparable gross margin in Q2 increased by 450 basis points to 44.7%, benefiting from a resolution of a significant contract negotiation within Mobile Networks. Despite this, the comparable operating margin decreased to 9.5%, mainly due to lower net sales coverage of operating expenses. Nokia’s Q2 free cash flow stood at EUR 0.4 billion, with a net cash balance of EUR 5.5 billion. The company also reported a non-cash impairment charge of EUR 514 million related to its Submarine Networks, treated as a discontinued operation.
CEO Pekka Lundmark highlighted the improved order intake momentum and significant strategic transactions in Network Infrastructure, including the sale of the Submarine Networks business and the planned acquisition of Infinera. These moves aim to strengthen Nokia’s focus on Fixed Networks, IP Networks, and Optical Networks, positioning the company for mid-single digit net sales growth and improved profitability over time.
Key Financial Metrics:
• Net Sales: EUR 4,466 million (Q2’24), down 18% year-on-year
• Gross Margin: 44.7% (comparable), up 450 basis points
• Operating Profit: EUR 423 million (comparable), down 32% year-on-year
• Operating Margin: 9.5% (comparable), down 190 basis points
• Free Cash Flow: EUR 0.4 billion
• Net Cash Balance: EUR 5.5 billion
• EPS (Diluted): EUR 0.06 (comparable), down 14%
• Research & Development Expenses: EUR 1,064 million, up 5%
Business Group Performance:
• Network Infrastructure: Net sales EUR 1,522 million, down 11%
• Mobile Networks: Net sales EUR 1,970 million, down 25%
• Cloud and Network Services: Net sales EUR 615 million, down 17%
• Nokia Technologies: Net sales EUR 356 million, up 7%
Outlook for Full Year 2024:
• Comparable Operating Profit: EUR 2.3 billion to EUR 2.9 billion
• Free Cash Flow Conversion: 30% to 60%
Nokia continues to make significant progress on its cost savings program, aiming to achieve EUR 800 million to EUR 1.2 billion in gross cost savings by 2026. The company also plans to accelerate its EUR 600 million share buyback program, with the intention of completing it by the end of this year.
