Nokia has announced better than expected earnings in the second quarter of 2022. Nokia reported net profit of EUR 585 million beating analysts’ expectations for the Q2 2022 profit. This compares with 539 million euros profit announced a year earlier.
Nokia also announced double-digit growth in its topline as sales grew by 11% Y-o-Y. Here are the earning highlights provided by Nokia for Q2 2022.
- Q2 net sales increased 3% y-o-y in constant currency (+11% reported).
- Network Infrastructure net sales grew 12% in constant currency, with growth across all four businesses while Mobile Networks returned to growth despite ongoing supply chain constraints.
- Cloud and Network Services net sales were flat in constant currency while Nokia Technologies declined 25% as it continued to be impacted by expired licenses that are in the process of being renewed.
- Comparable gross margin of 40.6% and operating margin of 12.2%. Underlying profitability improved but was offset by Nokia Technologies and a one-off software deal in Mobile Networks in the prior year meaning margins declined y-o-y.
- Reported gross margin declined 80bps y-o-y to 40.2% and operating margin expanded 50bps y-o-y to 9.6% as the above factors impacting comparable margins were offset primarily by lower restructuring charges.
- Comparable diluted EPS of EUR 0.10; reported diluted EPS of EUR 0.08.
- Free cash flow negative EUR 0.1bn, net cash balance of EUR 4.5bn.
- Solid first half performance with 2% constant currency net sales growth and comparable operating margin of 11.6% (reported 8.2%), down slightly as timing effects in Nokia Technologies offset underlying profitability improvements.
- Full year 2022 net sales outlook is unchanged in constant currency. Full year net sales outlook applying 30 June 2022 exchange rates is EUR 23.5bn to EUR 24.7bn. Comparable operating margin guidance remains 11% to 13.5%.
This is what Nokia CEO has to say about the Financial performance of the company.
I am pleased to say we continued to execute well in the second quarter. We improved net sales growth to 3% in constant currency despite ongoing supply chain constraints. We delivered another quarter of robust profitability with a 12.2% comparable operating margin, slightly down year-on-year due to timing effects of contract renewals in Nokia Technologies and a one-off software deal last year. Excluding these factors, we can see continued strong improvement in the underlying profitability of the business.
Network Infrastructure maintained its strong growth momentum with net sales up 12% in constant currency more than offsetting the decline in Nokia Technologies. I was pleased to see Mobile Networks returned to growth with a 1% increase in constant currency despite supply chain constraints, while Cloud and Network Services was stable year-on-year.
Momentum continues to build in Enterprise with growing order intake and returned to growth with an 8% increase in net sales in constant currency which are important for our long-term aspirations in the space. Since the start of this year we have been making further investments into private wireless both in R&D and go-to-market to capitalise on our early market leadership. We expect these investments will deliver strong financial returns for us in the mid-term as indicated by double-digit net sales growth in private wireless in the quarter.
While we recognize the increased global macroeconomic uncertainty and currency fluctuations impacting some emerging markets, I am confident we have the right strategy in place to navigate these challenges along with support from structural technology adoption trends in 5G and fiber. However, we will not become complacent; we remain focused on building technology leadership and improving cost-efficiency to deliver on our strategic goals for the years ahead.
We have had a strong first half and with our renewed competitiveness, we are well placed to deliver our full year 2022 guidance. There remain risks around timing of Nokia Technologies’ contract renewals, potential COVID-19 lockdowns and the supply chain which remains challenging but is showing signs of improvement. We are currently tracking towards the higher-end of our net sales guidance and towards the mid-point of our operating margin guidance as we manage ongoing inflation and currency headwinds.