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Nokia Q3 2016 Results: EUR 556 Mi Profit, Technologies grows by 109%, CEO’s statement

Nokia has posted its Q3 2016 Financial results and the two continuing businesses Nokia Networks and Nokia Technologies have raked in EUR 556 Million operating profit. Net sales is EUR 6.0 billion in Q3 2016. Nokia Technologies registered 109% year-on-year net sales increase and 168% operating profit increase.

Read the report highlights, check the Earnings table and read the CEO Rajeev Suri’s statement below,

Overall Highlights:

  • Non-IFRS net sales in Q3 2016 of EUR 6.0 billion (reported: EUR 5.9 billion). In the year-ago quarter, non-IFRS net sales would have been EUR 6.4 billion on a comparable combined company basis (reported: EUR 3.0 billion on a Nokia stand-alone basis).
  • Non-IFRS diluted EPS in Q3 2016 of EUR 0.04 (reported: EUR negative 0.02).

Nokia’s Networks business

  • 12% year-on-year net sales decrease in Q3 2016. Consistent with our 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 growth in Fixed Networks within Ultra Broadband Networks.
  • In Q3 2016, solid gross margin of 37.2% and operating margin of 8.1%, supported by continued strong operational performance and cost controls.

Nokia Technologies

  • 109% year-on-year net sales increase and 168% operating profit increase in Q3 2016. Excluding the impact of non-recurring licensing income, Nokia Technologies net sales and operating profit both would have grown by approximately 50% year-on-year, primarily due to higher intellectual property licensing income and, to a lesser extent, increased net sales resulting from the acquisition of Withings.

Group Common and Other

  • 41% year-on-year net sales increase in Q3 2016, with particularly strong growth in Alcatel Submarine Networks.

Earnings Table:

Q3 and January-September 2016 non-IFRS results. Refer to note 1 to the interim financial statements for further details 1,2

 

 

Combined company histori-cals2

 

 

 

 

Combined company histori-cals2

 

EUR million

Q3’16

Q3’15

YoY change

Q2’16

QoQ change

Q1-
Q3’16

Q1-
Q3’15

YoY change

Net sales –
constant currency
(non-IFRS)

 

 

(6)%

 

4%

 

 

(8)%

Net sales
(non-IFRS)

5 950

6 395

(7)%

5 676

5%

17 230

18 887

(9)%

  Nokia’s Networks
business

5 322

6 020

(12)%

5 228

2%

15 730

17 578

(11)%

Ultra Broadband
Networks

3 903

4 469

(13)%

3 807

3%

11 438

12 999

(12)%

IP Networks and
Applications

1 419

1 552

(9)%

1 421

0%

4 292

4 579

(6)%

  Nokia Technologies

353

169

109%

194

82%

745

661

13%

  Group Common
and Other

298

211

41%

271

10%

805

668

21%

Gross profit
(non-IFRS)

2 365

2 410

(2)%

2 202

7%

6 771

7 170

(6)%

Gross margin %
(non-IFRS)

39.7%

37.7%

200bps

38.8%

90bps

39.3%

38.0%

130bps

Operating profit
(non-IFRS)

556

682

(18)%

332

67%

1 233

1 607

(23)%

  Nokia’s Networks
business

432

678

(36)%

312

38%

1 081

1 399

(23)%

Ultra Broadband
Networks

326

478

(32)%

228

43%

788

954

(17)%

IP Networks and
Applications

106

200

(47)%

84

26%

293

445

(34)%

  Nokia Technologies

225

84

168%

89

153%

420

381

10%

  Group Common
and Other

(101)

(80)

 

(68)

 

(268)

(173)

 

Operating margin %
(non-IFRS)

9.3%

10.7%

(140)bps

5.8%

350bps

7.2%

8.5%

(130)bps

CEO’s Statement:

Nokia delivered solid third quarter results. Nokia Technologies led the way, with a sharp year-on-year increase in net sales, largely driven by revenues related to the Samsung licensing agreement that was announced in Q3. The results also reflect another excellent quarter from Fixed Networks, which improved both net sales and profitability from one year ago.

When we announced our second quarter results in August, we said that we expected to see slight sequential improvement in both net sales and operating margin in the third quarter in our Networks business, and we delivered in both of those areas. I was particularly pleased with our operating margin performance in the quarter, which reflects the strong, focused execution across the organization.

We were able to deliver these solid results despite market conditions that are softer than expected, particularly in mobile infrastructure. As we look forward, we expect those conditions to stabilize somewhat in 2017, with the primary addressable market in which Nokia competes likely to decline in the low single digits for that year.

I believe that Nokia remains well-positioned for this environment. Our disciplined operating model of tight cost controls, prudent investment and focused innovation; our constant industrialization of best practices across the company; our structured approach to fast integration and synergy capture — all help give us a competitive advantage.

 In addition, the power of our broad portfolio was evident in the quarter. We have the unique scope necessary to be able to design and deliver end-to-end networks and thus anchor ourselves in the long-term purchasing strategies of our customers. We also have the capability to diversify into new areas where high-performance, end-to-end networks are increasingly required, such as for large Internet and enterprise vertical market companies. We are seeing good growth in these segments, and have plans to target them further as we move forward.

While the fourth quarter is expected to be soft from a topline perspective, I believe that we will meet our guidance for our Networks business of significant sequential sales and operating margin increase for Q4 and our full-year operating margin guidance of 7% to 9%. In short, we remain on track in our execution and focused on creating value for our customers and shareholders.

 Rajeev Suri

President and CEO

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Nayan

Nayan has more than 10 years of experience of covering Technology and innovations. He is a big Nokia fan and Tech disruptions aficionado. He loves to review new cool gadgets and writing about Android, iOS, Gadgets and general Technology stuff. He has been associated with other well-known Tech sites WinCentral and GadgetOx since long.

He currently sports a Lumia 950 XL and Nexus 5X. Other interests include listening to Nu-Metal Hits and Kick-Boxing.
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