Economic|Interim reports
According to analysts, the company’s net sales would have increased by two percent and operating profit by nine percent in July – September.
Network devices Nokia’s manufacturing business has strengthened significantly more than expected this year.
Increased investment in fifth-generation (5g) mobile phone technology and simplification of the business model have begun to pay off.
This year the first two interim reports have been so strong that similar surprises are unlikely to come.
Nokia will publish its interim report on Thursday at 8 p.m.
Analysts Based on the forecast, the company’s net sales in July – September were EUR 5.4 billion and operating profit excluding non-recurring items was EUR 528 million.
If the forecast were correct, net sales would have increased by two percent and operating profit by nine percent from the same period last year.
The fact that the company has previously estimated that its market share in North America will decrease in July – December also speaks in favor of a softer earnings trend than in the previous two quarters. In addition, the problem there is fierce price competition.
Nokia and its Swedish competitor Ericsson have also benefited from the fact that in many countries, especially in Europe, the authorities have banned telecom operators from using Chinese Huaweil network equipment and software. The reason is allegations that Huawei’s products can be used for espionage.
By adding investment in product development Nokia aims to catch up with competitors in fifth-generation mobile technology.
In the summer, the company released new 5g base station products in which it utilizes system circuits. They have lower costs and better technical features than Nokia’s long-used fpga chips.
“In the past years, competitors beat us like a foreign pig because we had to use a separate fpga baseband card in 5g, but now we have the same system circuit boards for all radio technologies,” said the head of cellular networks Tommi Uitto in June.
Read more: Nokia has unveiled new 5g products that it believes will rise back to the top
Profitability better-than-expected developments this year speak specifically in favor of Nokia catching up with its competitors. At the end of next year, all 5g products are estimated by the company to have a system circuit.
Due to the strengthening of profitability, Nokia’s cash and cash equivalents have also increased significantly. In principle, it may be possible for the company to hint as early as Thursday to start paying dividends.
However, the Board of Directors has announced that it will assess the possibility of proposing a dividend for the current financial year only after the last quarter. The Annual General Meeting decides on the payment of the dividend.
Dividend payment was suspended in the fall of 2019 because it slowed cash depletion due to new 5g investments.
At the end of June, Nokia’s net cash and short-term investments were EUR 3.7 billion. At the end of June 2020, they were EUR 1.6 billion and at the end of June 2019, EUR 344 million.
In its previous interim report, Nokia also significantly improved its assessment of profitability development this year.
The company estimates that the operating profit margin, which measures profitability, will be 10–12 this year. At the end of April, the estimate was 7–10.
In 2023, the company estimates that the operating profit margin will be 10–13.
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