Nokia has posted earnings for the second quarter of 2021 today. The highlights for the Q2 2021 are solid growth in sales, increase in operating margin and improvements in operating profit across all business groups.
In fact, both operating and gross margins registered higher growth in Q2 2021 on a quarter-on-quarter basis. This strong performance has made Nokia revise its full-year outlook upwards. Here are the earning highlights for Q2 2021.
- Top-line strength continued in Q2, with constant currency net sales up 9% year-on-year, driven by growth across all business groups, with particular strength in Network Infrastructure. Reported net sales increased 4%.
- Important progress on our three-phased strategy. Mobile Networks strengthening its competitiveness with major product launch, including some industry leading features. Network Infrastructure continued to gain share in the first half.
- Our new operating model is delivering clear accountability and financial discipline through the organization.
- Comparable gross margin of 42.3% (reported 41.0%) in Q2, reflecting broad improvements, particularly in Mobile Networks, which benefitted from a one-time software deal and 5G growth.
- Comparable operating margin of 12.8% (reported 9.1%) in Q2, with improvements across all business groups, also helped by the one-time software deal in Mobile Networks.
- Q2 comparable diluted EPS of EUR 0.09; reported diluted EPS of EUR 0.06.
- Generated positive free cash flow for the fifth quarter in a row; liquidity position remains solid with EUR 3.7bn net cash.
- Strong performance in first half 2021 with 9% constant currency sales growth (reported net sales +4%) and comparable operating margin of 11.9% (reported 8.8%), driving increase in our full year Outlook although headwinds remain for the second half.
- Considering our strong start to 2021, we revise our full year 2021 Outlook, including net sales expected to be EUR 21.7bn to 22.7bn (previously EUR 20.6bn to EUR 21.8bn) with comparable operating margin in the range of 10-12% (previously 7-10%).
I am delighted that our strong start to 2021 continued in the second quarter. Our constant currency sales growth of 9%, combined with good cost control, enabled us to deliver a comparable operating margin of 12.8%. Even excluding a one-time software deal in Mobile Networks, we saw good underlying progress in operating margin. We are already seeing the benefits of our new operating model which helped us to deliver such a strong financial performance.
The highlight of the second quarter was the Mobile Networks launch of our new AirScale baseband and radio products with up to 75% better power efficiency helping to reduce our environmental footprint and the lightest 32TRX massive MIMO active antenna in the market. In Network Infrastructure we sustained double-digit growth and have a series of product launches ahead in the second half to further strengthen our differentiation. Cloud and Network Services is making good progress on its portfolio rebalancing and Nokia Technologies continues to scale with two licensing agreements with automotive manufacturers including Daimler.
Considering our robust start to 2021, we are revising upwards our full year Outlook. We now expect a comparable operating margin between 10-12% for full year 2021, compared to our previous range of 7-10%. We have executed faster than planned on our strategy in the first half which provides us with a good foundation for the full year. We still however expect to face the earlier communicated headwinds in the second half, particularly with market share loss and price erosion in North America. Therefore, we still expect our typical quarterly earnings seasonality to be less pronounced in 2021. In addition, we continue to accelerate R&D investments and monitor risks around component availability, considering the strong demand for our products.
Overall, I am very happy with the progress made in the first half. I want to thank our entire team for their hard work and commitment.