SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C.
20549
FORM 6-K
Report of Foreign
Private Issuer
Pursuant to Rule 13a
-16 or 15d -16 of
the Securities Exchange
Act of 1934
Report on Form 6-K
dated April 20, 2023
(Commission File
No. 1-13202)
Nokia Corporation
Karakaari 7A
FI-02610 Espoo
Finland
(Name and address
of registrant’s principal executive office)
Indicate
by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
Form 20-F: x |
|
Form 40-F: ¨ |
Indicate
by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
Indicate
by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):
Indicate
by check mark whether the registrant by furnishing the information contained in this form is also thereby furnishing the information
to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Enclosures:
| · | Stock
Exchange Release: Nokia Corporation Financial Report for Q1 2023 |
| · | Enclosure:
Interim Report Q1 2023 |
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STOCK EXCHANGE RELEASE 20 April 2023 |
Nokia Corporation
Interim report
20 April 2023 at 08:00 EEST
Nokia Corporation Financial Report
for Q1 2023
Strong net sales growth; outlook
unchanged
| · | Net
sales grew 9% y-o-y in constant currency (10% reported). |
| · | Enterprise
net sales grew 62% y-o-y in constant currency (65% reported). |
| · | Comparable
gross margin declined 300bps y-o-y to 37,7% (reported -310bps to 37,5%), due to regional
mix and a lower contribution from Nokia Technologies partly related to a license option exercised
in Q4 2022. |
| · | Comparable
operating margin declined y-o-y by 270bps to 8,2%, due to the above mentioned factors impacting
gross margin along with a significant swing in venture fund contribution, somewhat offset
by disciplined cost control. |
| · | Reported
operating margin increased 70bps y-o-y to 7,3%. In addition to the above factors, the margin
increased due to a provision recognized in the prior year compared to a partial reversal
this year along with a divestment related gain. |
| · | Comparable
diluted EPS of EUR 0,06; reported diluted EPS of EUR 0,05. |
| · | Free
cash flow negative EUR 0,1bn, net cash balance
of EUR 4,3bn. |
| · | 2023
outlook unchanged in constant currency. Full year net sales outlook applying 31 March 2023
exchange rates is EUR 24.6bn to 26.2bn. Comparable operating margin guidance remains 11.5%
to 14.0%. |
This is a summary of the Nokia Corporation
Financial Report for Q1 2023 published today. Nokia only publishes a summary of its financial reports in stock exchange releases. The
summary focuses on Nokia Group's financial information as well as on Nokia's outlook. The detailed, segment-level discussion will be
available in the complete financial report hosted at www.nokia.com/financials. A video interview summarizing the key points of
our Q1 results will also be published on the website. Investors should not solely rely on summaries of Nokia's financial reports and
should also review the complete report with tables.
PEKKA LUNDMARK, PRESIDENT AND CEO,
ON Q1 2023 RESULTS
We started this year with the unveiling
of a renewed corporate strategy and refreshed brand. This reflects who we are today - a B2B technology innovation leader unleashing the
exponential potential of networks. Q1 also saw the launch of our new industry-leading optical networking platform PSE-6s and AirScale
Habrok, our latest 5G massive MIMO radios powered by a new generation of ReefShark chipsets. Both products are designed to help our customers
achieve more with lower power consumption, supporting our intent to develop ESG into a competitive advantage.
Financially we delivered a solid start
to 2023 with Q1 net sales growing 9% in constant currency. Our comparable operating margin was 8.2%, a decline of 270bps year-on-year,
which was primarily due to expected greater seasonality in Mobile Networks’ profitability, a lower contribution from Nokia Technologies
in the quarter and a negative impact from venture fund investments.
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STOCK EXCHANGE RELEASE 20 April 2023 |
Network Infrastructure had another great
quarter with 13% constant currency net sales growth and continued operating margin expansion. We saw particular strength in Optical Networks
and good growth in both IP Networks and Submarine Networks. Mobile Networks net sales grew 13% as 5G deployments in India ramped up,
more than offsetting a slowdown in North America spending. As we expected, we are seeing greater seasonality between the first and second
half of the year in terms of profitability for Mobile Networks.
Cloud and Network Services achieved
net sales growth of 3% in constant currency, but profitability was impacted by product mix. Nokia Technologies net sales declined 22%
in the quarter, which was largely due to a long-term license which is no longer contributing after an option was exercised in Q4 2022.
We remain confident Nokia Technologies will return to an annual run-rate of EUR 1.4-1.5bn of net sales.
We maintained our strong momentum in
Enterprise with 62% net sales growth in constant currency. We continue to make good progress in both webscale and private wireless and
we expect to see strong double-digit growth for the full year.
One of our strategic pillars is to actively
manage our portfolio to secure a leading position in all segments where we decide to compete. To support that goal, we have signed agreements
to divest part of our Radio Frequency Systems business and our VitalQIP business. In addition, we recently agreed to the sale of our
stake in the joint venture TD Tech, subject to closing conditions.
Looking forward, we are starting to
see some signs of the economic environment impacting customer spending. Given the ongoing need to invest in 5G and fiber, we see this
primarily as a question of timing; nevertheless we will maintain our cost discipline to ensure we can successfully navigate this uncertainty.
We remain on track to deliver another year of growth in 2023 so our outlook is unchanged with the expectation that profitability in the
second half of the year will be stronger than the first half.
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STOCK
EXCHANGE RELEASE 20 April 2023 |
FINANCIAL RESULTS
EUR million (except for EPS in EUR) | |
Q1'23 | | |
Q1'22 | | |
YoY change | | |
Constant
currency
YoY change | |
Reported results | |
| | | |
| | | |
| | | |
| | |
Net sales | |
| 5 859 | | |
| 5 348 | | |
| 10 | % | |
| 9 | % |
Gross margin % | |
| 37,5 | % | |
| 40,6 | % | |
| (310 | )bps | |
| | |
Research and development expenses | |
| (1 108 | ) | |
| (1 072 | ) | |
| 3 | % | |
| | |
Selling, general and administrative expenses | |
| (729 | ) | |
| (675 | ) | |
| 8 | % | |
| | |
Operating profit | |
| 426 | | |
| 354 | | |
| 20 | % | |
| | |
Operating margin % | |
| 7,3 | % | |
| 6,6 | % | |
| 70 | bps | |
| | |
Profit for the period | |
| 289 | | |
| 219 | | |
| 32 | % | |
| | |
EPS, diluted | |
| 0,05 | | |
| 0,04 | | |
| 25 | % | |
| | |
Net cash and interest-bearing financial
investments | |
| 4 304 | | |
| 4 904 | | |
| (12 | )% | |
| | |
Comparable results | |
| | | |
| | | |
| | | |
| | |
Net sales | |
| 5 859 | | |
| 5 348 | | |
| 10 | % | |
| 9 | % |
Gross margin % | |
| 37,7 | % | |
| 40,7 | % | |
| (300 | )bps | |
| | |
Research and development expenses | |
| (1 093 | ) | |
| (1 052 | ) | |
| 4 | % | |
| | |
Selling, general and administrative expenses | |
| (642 | ) | |
| (581 | ) | |
| 10 | % | |
| | |
Operating profit | |
| 479 | | |
| 583 | | |
| (18 | )% | |
| | |
Operating margin % | |
| 8,2 | % | |
| 10,9 | % | |
| (270 | )bps | |
| | |
Profit for the period | |
| 342 | | |
| 416 | | |
| (18 | )% | |
| | |
EPS, diluted | |
| 0,06 | | |
| 0,07 | | |
| (14 | )% | |
| | |
ROIC1 | |
| 15,8 | % | |
| 19,5 | % | |
| (370 | )bps | |
| | |
1 Comparable ROIC = Comparable operating profit after tax,
last four quarters / invested capital, average of last five quarters’ ending balances. Refer to the Performance measures section
in Nokia Corporation Financial Report for Q1 2023 for details.
Business group
results | |
Network Infrastructure | | |
Mobile Networks | | |
Cloud and Network
Services | | |
Nokia Technologies | | |
Group Common
and Other | |
EUR million | |
Q1'23 | | |
Q1'22 | | |
Q1'23 | | |
Q1'22 | | |
Q1'23 | | |
Q1'22 | | |
Q1'23 | | |
Q1'22 | | |
Q1'23 | | |
Q1'22 | |
Net sales | |
| 2 248 | | |
| 1 974 | | |
| 2 567 | | |
| 2 268 | | |
| 760 | | |
| 736 | | |
| 242 | | |
| 306 | | |
| 48 | | |
| 76 | |
YoY change | |
| 14 | % | |
| | | |
| 13 | % | |
| | | |
| 3 | % | |
| | | |
| (21 | )% | |
| | | |
| (37 | )% | |
| | |
Constant currency YoY change | |
| 13 | % | |
| | | |
| 13 | % | |
| | | |
| 3 | % | |
| | | |
| (22 | )% | |
| | | |
| (38 | )% | |
| | |
Gross margin % | |
| 38,0 | % | |
| 34,7 | % | |
| 33,8 | % | |
| 39,8 | % | |
| 32,8 | % | |
| 38,6 | % | |
| 100,0 | % | |
| 99,7 | % | |
| (12,5 | )% | |
| 2,6 | % |
Operating profit/(loss) | |
| 344 | | |
| 195 | | |
| 137 | | |
| 171 | | |
| (20 | ) | |
| 20 | | |
| 149 | | |
| 220 | | |
| (131 | ) | |
| (23 | ) |
Operating
margin % | |
| 15,3 | % | |
| 9,9 | % | |
| 5,3 | % | |
| 7,5 | % | |
| (2,6 | )% | |
| 2,7 | % | |
| 61,6 | % | |
| 71,9 | % | |
| (272,9 | )% | |
| (30,3 | )% |
SHAREHOLDER DISTRIBUTION
Dividend
Under the authorization by the Annual General Meeting held on 4 April 2023,
the Board of Directors may resolve on the distribution of an aggregate maximum of EUR 0.12 per share to be paid in respect of financial
year 2022. The authorization will be used to distribute dividend and/or assets from the reserve for invested unrestricted equity in four
installments during the authorization period, in connection with the quarterly results, unless the Board decides otherwise for a justified
reason.
On 20 April 2023, the Board resolved to distribute a dividend
of EUR 0.03 per share. The dividend record date is on 25 April 2023 and the dividend will be paid on 4 May 2023. The actual
dividend payment date outside Finland will be determined by the practices of the intermediary banks transferring the dividend payments.
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STOCK
EXCHANGE RELEASE 20 April 2023 |
Following this announced distribution, the Board’s remaining
distribution authorization is a maximum of EUR 0.09 per share.
Share buyback program
In February 2022, Nokia’s Board of Directors initiated
a share buyback program to repurchase shares to return up to EUR 600 million of cash to shareholders in tranches over a period of two
years. The second EUR 300 million phase of the share buyback program started in January 2023 and it will end at the latest by 21
December 2023. Under this phase, Nokia has by 31 March 2023 repurchased 19 019 000 of its own shares at an average price per
share of approximately EUR 4.41.
OUTLOOK
|
Full
Year 2023 |
Net
sales1 |
EUR
24.6 billion to EUR 26.2 billion1 (2
to 8% growth in constant currency) |
Comparable
operating margin2 |
11.5
to 14.0% |
Free
cash flow2 |
20
to 50% conversion from comparable operating profit |
1Assuming the rate 1 EUR = 1.09 USD as of 31 March 2023
continues for the remainder of 2023 along with actual Q1 foreign exchange rates (adjusted from prior 1.07 USD rate as of 31 December 2022).
Assuming the year-end 2022 exchange rate the net sales outlook would continue to be EUR 24.9bn to EUR 26.5bn.
2 Please refer to Performance measures section in Nokia
Corporation Financial Report for Q1 2023 for a full explanation of how these terms are defined.
The outlook, long-term targets and all of the underlying outlook assumptions
described below are forward-looking statements subject to a number of risks and uncertainties as described or referred to in the Risk
Factors section later in this release. Along with Nokia's official outlook targets provided above, below are outlook assumptions by business
group that support the group level outlook. The comments for relative growth by business group are provided to give a reference on how
we expect each to perform relative to the overall group.
|
2023
total addressable market (update) |
Nokia
business group assumptions |
|
Size
(EUR bn)1 |
Constant
currency
growth |
Net
sales growth |
Operating
margin |
Network
Infrastructure2 |
47
(update) |
4% |
In-line
to below group |
11.0
to 14.0% |
Mobile
Networks3 |
51
(update) |
4%
(update) |
Faster
than group |
7.0
to 10.0% |
Cloud
and Network Services |
28
(update) |
3%
(update) |
In-line
to below group |
5.5
to 8.5% |
1 Total addressable market forecasts assume the rate 1
EUR = 1.09 USD as of 31 March 2023 continues for the remainder of 2023 along with actual Q1 foreign exchange rates. The addressable
market is excluding Russia and Belarus.
2 Excluding Submarine Networks.
3 Excluding China.
Nokia provides the following approximate outlook assumptions for additional
items concerning 2023:
|
Full
year 2023 |
Comment |
Nokia
Technologies operating profit |
Largely
stable |
Assuming
closure of outstanding litigation / renewal discussions we expect largely stable operating profit in Nokia Technologies in 2023.
Nokia currently assumes free cash flow slightly greater than operating profit in Nokia Technologies. |
Group
Common and Other operating profit |
Negative
EUR 350-400
million (update) |
This
includes central function costs largely stable at below EUR 200 million and an increase in investment in long-term research now above
EUR 100 million. This line also accounts for Radio Frequency Systems (RFS) and could be impacted by any positive or negative revaluations
in Nokia's venture funds in 2023. |
Comparable
financial income and expenses |
EUR
0 million |
As
interest rates have increased we now expect financial income and expenses to be approximately balanced. |
Comparable
income tax rate |
~25% |
Following
the re-recognition of deferred tax assets at the end of 2022 we now provide an assumption based on a % tax rate instead of an absolute
amount. |
Cash
outflows related to income taxes |
EUR
700 million |
Cash
outflows related to income taxes are expected to increase due to mandatory capitalization of R&D costs under U.S. tax laws as
well as evolving regional mix. |
Capital
Expenditures |
EUR
700 million (update) |
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STOCK
EXCHANGE RELEASE 20 April 2023 |
LONG-TERM TARGETS
Nokia's long-term targets remain unchanged from those introduced with
its Q4 2021 financial results. The targets had an associated timeline of 3-5 years which remains unchanged and implies by 2024-2026.
These targets remain intended to show Nokia's ambition to deliver continuous improvement in the business over the time period.
Net
sales |
Grow
faster than the market |
Comparable
operating margin1 |
≥
14% |
Free
cash flow1 |
55
to 85% conversion from comparable operating profit |
|
|
1
Please refer to Performance measures section in Nokia Corporation Financial Report for Q1 2023 for a full explanation of how
these terms are defined. |
RISK FACTORS
Nokia and its businesses are exposed to a number of risks and uncertainties
which include but are not limited to:
| · | Competitive intensity, which is expected to continue at a high
level; |
| · | Our ability to ensure competitiveness of our product roadmaps
and costs through additional R&D investments; |
| · | Our ability to procure certain standard components and the costs
thereof, such as semiconductors; |
| · | Disturbance in the global supply chain; |
| · | Accelerating inflation, increased global macro-uncertainty, major
currency fluctuations and higher interest rates; |
| · | Potential economic impact and disruption of global pandemics; |
| · | War or other geopolitical conflicts, disruptions and potential
costs thereof; |
| · | Other macroeconomic, industry and competitive developments; |
| · | Timing and value of new, renewed and existing patent licensing
agreements with smartphone vendors, automotive companies, consumer electronics companies
and other licensees; |
| · | Results in brand and technology licensing; costs to protect and
enforce our intellectual property rights; on-going litigation with respect to licensing and
regulatory landscape for patent licensing; |
| · | The outcomes of on-going and potential disputes and litigation; |
| · | Timing of completions and acceptances of certain projects; |
| · | Our product and regional mix; |
| · | Uncertainty in forecasting income tax expenses and cash outflows,
over the long-term, as they are also subject to possible changes due to business mix, the
timing of patent licensing cash flow and changes in tax legislation, including potential
tax reforms in various countries and OECD initiatives; |
| · | Our ability to utilize our US and Finnish deferred tax assets
and their recognition on our balance sheet; |
| · | Our ability to meet our sustainability and other ESG targets,
including our targets relating to greenhouse gas emissions; as well the risk factors specified
under Forward-looking statements of this release,
and our 2022 annual report on Form 20-F published on 2 March 2023 under Operating
and financial review and prospects-Risk factors. |
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STOCK
EXCHANGE RELEASE 20 April 2023 |
FORWARD-LOOKING STATEMENTS
Certain statements herein that are not historical facts are forward-looking
statements. These forward-looking statements reflect Nokia's current expectations and views of future developments and include statements
regarding: A) expectations, plans, benefits or outlook related to our strategies, product launches, growth management, sustainability
and other ESG targets, operational key performance indicators and decisions on market exits; B) expectations, plans or benefits related
to future performance of our businesses (including the expected impact, timing and duration of potential global pandemics and the general
macroeconomic conditions on our businesses, our supply chain and our customers’ businesses) and any future dividends and other
distributions of profit; C) expectations and targets regarding financial performance and results of operations, including market share,
prices, net sales, income, margins, cash flows, the timing of receivables, operating expenses, provisions, impairments, taxes, currency
exchange rates, hedging, investment funds, inflation, product cost reductions, competitiveness, revenue generation in any specific region,
and licensing income and payments; D) ability to execute, expectations, plans or benefits related to changes in organizational structure
and operating model; E) impact on revenue with respect to litigation/renewal discussions; and F) any statements preceded by or including
"continue", “believe”, “commit”, “estimate”, “expect”, “aim”, “influence”,
"will” or similar expressions. These forward-looking statements are subject to a number of risks and uncertainties, many of
which are beyond our control, which could cause our actual results to differ materially from such statements. These statements are based
on management’s best assumptions and beliefs in light of the information currently available to them. These forward-looking statements
are only predictions based upon our current expectations and views of future events and developments and are subject to risks and uncertainties
that are difficult to predict because they relate to events and depend on circumstances that will occur in the future. Factors, including
risks and uncertainties that could cause these differences, include those risks and uncertainties identified in the Risk Factors above.
ANALYST WEBCAST
· | Nokia's webcast will begin on 20 April 2023 at 11.30
a.m. Finnish time (EEST). The webcast will last approximately 60 minutes. |
· | The webcast will be a presentation followed by a
Q&A session. Presentation slides will be available for download at www.nokia.com/financials. |
· | A link to the webcast will be available at www.nokia.com/financials. |
· | Media representatives can
listen in via the link, or alternatively call +1-412-317-5619. |
FINANCIAL CALENDAR 2023
· | Nokia plans to publish its second quarter and half year 2023 results
on 20 July 2023. |
· | Nokia plans to publish its third quarter and January-September 2023
results on 19 October 2023. |
About Nokia
At Nokia, we create technology that helps the world act together.
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STOCK
EXCHANGE RELEASE 20 April 2023 |
As a B2B technology innovation leader, we are pioneering networks
that sense, think and act by leveraging our work across mobile, fixed and cloud networks. In addition, we create value with intellectual
property and long-term research, led by the award-winning Nokia Bell Labs.
Service providers, enterprises and partners worldwide trust Nokia
to deliver secure, reliable and sustainable networks today – and work with us to create the digital services and applications of
the future.
Inquiries:
Nokia
Communications
Phone: +358 10 448 4900
Email: press.services@nokia.com
Kaisa Antikainen, Communications
Manager
Nokia
Investor Relations
Phone: +358 4080 3 4080
Email: investor.relations@nokia.com
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| Interim Report for Q1 2023
Strong net sales growth; outlook unchanged
▪ Net sales grew 9% y-o-y in constant currency (10% reported).
▪ Enterprise net sales grew 62% y-o-y in constant currency (65% reported).
▪ Comparable gross margin declined 300bps y-o-y to 37.7% (reported -310bps to 37.5%), due to regional mix and a lower
contribution from Nokia Technologies partly related to a license option exercised in Q4 2022.
▪ Comparable operating margin declined y-o-y by 270bps to 8.2%, due to the above mentioned factors impacting gross
margin along with a significant swing in venture fund contribution, somewhat offset by disciplined cost control.
▪ Reported operating margin increased 70bps y-o-y to 7.3%. In addition to the above factors, the margin increased due to
a provision recognized in the prior year compared to a partial reversal this year along with a divestment related gain.
▪ Comparable diluted EPS of EUR 0.06; reported diluted EPS of EUR 0.05.
▪ Free cash flow negative EUR 0.1bn, net cash balance of EUR 4.3bn.
▪ 2023 outlook unchanged in constant currency. Full year net sales outlook applying 31 March 2023 exchange rates is EUR
24.6bn to 26.2bn. Comparable operating margin guidance remains 11.5% to 14.0%.
EUR million (except for EPS in EUR) Q1'23 Q1'22 YoY change
Constant currency
YoY change
Reported results
Net sales 5 859 5 348 10% 9%
Gross margin % 37.5% 40.6% (310) bps
Research and development expenses (1 108) (1 072) 3%
Selling, general and administrative expenses (729) (675) 8%
Operating profit 426 354 20%
Operating margin % 7.3% 6.6% 70bps
Profit for the period 289 219 32%
EPS, diluted 0.05 0.04 25%
Net cash and interest-bearing financial investments 4 304 4 904 (12) %
Comparable results
Net sales 5 859 5 348 10% 9%
Gross margin % 37.7% 40.7% (300) bps
Research and development expenses (1 093) (1 052) 4%
Selling, general and administrative expenses (642) (581) 10%
Operating profit 479 583 (18) %
Operating margin % 8.2% 10.9% (270) bps
Profit for the period 342 416 (18) %
EPS, diluted 0.06 0.07 (14) %
ROIC1
15.8% 19.5% (370) bps
1
Comparable ROIC = Comparable operating profit after tax, last four quarters / invested capital, average of last five quarters’ ending balances. Refer to the Performance measures section in
this report for details.
Network
Infrastructure
Mobile
Networks
Cloud and Network
Services
Nokia
Technologies
Group Common and
Other
EUR million Q1'23 Q1'22 Q1'23 Q1'22 Q1'23 Q1'22 Q1'23 Q1'22 Q1'23 Q1'22
Net sales 2 248 1 974 2 567 2 268 760 736 242 306 48 76
YoY change 14% 13% 3% (21) % (37) %
Constant currency YoY change 13% 13% 3% (22) % (38) %
Gross margin % 38.0% 34.7% 33.8% 39.8% 32.8% 38.6% 100.0% 99.7% (12.5) % 2.6%
Operating profit/(loss) 344 195 137 171 (20) 20 149 220 (131) (23)
Operating margin % 15.3% 9.9% 5.3% 7.5% (2.6) % 2.7% 61.6% 71.9% (272.9) % (30.3) %
20 April 2023 1 |
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| We started this year with the unveiling of a renewed corporate
strategy and refreshed brand. This reflects who we are today -
a B2B technology innovation leader unleashing the exponential
potential of networks. Q1 also saw the launch of our new
industry-leading optical networking platform PSE-6s and
AirScale Habrok, our latest 5G massive MIMO radios powered by
a new generation of ReefShark chipsets. Both products are
designed to help our customers achieve more with lower power
consumption, supporting our intent to develop ESG into a
competitive advantage.
Financially we delivered a solid start to 2023 with Q1 net sales
growing 9% in constant currency. Our comparable operating
margin was 8.2%, a decline of 270bps year-on-year, which was
primarily due to expected greater seasonality in Mobile
Networks’ profitability, a lower contribution from Nokia
Technologies in the quarter and a negative impact from
venture fund investments.
Network Infrastructure had another great quarter with 13%
constant currency net sales growth and continued operating
margin expansion. We saw particular strength in Optical
Networks and good growth in both IP Networks and Submarine
Networks. Mobile Networks net sales grew 13% as 5G
deployments in India ramped up, more than offsetting a
slowdown in North America spending. As we expected, we are
seeing greater seasonality between the first and second half of
the year in terms of profitability for Mobile Networks.
Cloud and Network Services achieved net sales growth of 3% in
constant currency, but profitability was impacted by product
mix. Nokia Technologies net sales declined 22% in the quarter,
which was largely due to a long-term license which is no longer
contributing after an option was exercised in Q4 2022. We
remain confident Nokia Technologies will return to an annual
run-rate of EUR 1.4-1.5bn of net sales.
We maintained our strong momentum in Enterprise with 62%
net sales growth in constant currency. We continue to make
good progress in both webscale and private wireless and we
expect to see strong double-digit growth for the full year.
One of our strategic pillars is to actively manage our portfolio
to secure a leading position in all segments where we decide to
compete. To support that goal, we have signed agreements to
divest part of our Radio Frequency Systems business and our
VitalQIP business. In addition, we recently agreed to the sale of
our stake in the joint venture TD Tech, subject to closing
conditions.
Looking forward, we are starting to see some signs of the
economic environment impacting customer spending. Given
the ongoing need to invest in 5G and fiber, we see this
primarily as a question of timing; nevertheless we will maintain
our cost discipline to ensure we can successfully navigate this
uncertainty. We remain on track to deliver another year of
growth in 2023 so our outlook is unchanged with the
expectation that profitability in the second half of the year will
be stronger than the first half.
Shareholder distribution
Dividend
Under the authorization by the Annual General Meeting held on
4 April 2023, the Board of Directors may resolve on the
distribution of an aggregate maximum of EUR 0.12 per share to
be paid in respect of financial year 2022. The authorization will
be used to distribute dividend and/or assets from the reserve
for invested unrestricted equity in four installments during the
authorization period, in connection with the quarterly results,
unless the Board decides otherwise for a justified reason.
On 20 April 2023, the Board resolved to distribute a dividend
of EUR 0.03 per share. The dividend record date is on 25 April
2023 and the dividend will be paid on 4 May 2023. The actual
dividend payment date outside Finland will be determined by
the practices of the intermediary banks transferring the
dividend payments.
Following this announced distribution, the Board’s remaining
distribution authorization is a maximum of EUR 0.09 per share.
Share buyback program
In February 2022, Nokia’s Board of Directors initiated a share
buyback program to repurchase shares to return up to EUR
600 million of cash to shareholders in tranches over a period of
two years. The second EUR 300 million phase of the share
buyback program started in January 2023 and it will end at the
latest by 21 December 2023. Under this phase, Nokia has by 31
March 2023 repurchased 19 019 000 of its own shares at an
average price per share of approximately EUR 4.41.
Capital management policy
On 2 March 2023, Nokia updated its capital management policy
with a focus on sustaining investment grade rating and
improving shareholder returns consistent with the
performance of the business. Nokia now targets to maintain a
net cash position in the range of 10-15% of net sales to ensure
it can continue to invest in the necessary R&D to maintain and
further improve its technology leadership, fund working capital
requirements in support of the company’s growth ambitions
and to maintain some flexibility for bolt-on acquisitions. Nokia’s
previous target in terms of cash management was to maintain
a total cash position equivalent to at least 30% of net sales.
20 April 2023 2 |
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| Outlook
Full Year 2023
Net sales1
EUR 24.6 billion to EUR 26.2 billion1 (2 to 8% growth in constant currency)
Comparable operating margin2
11.5 to 14.0%
Free cash flow2
20 to 50% conversion from comparable operating profit
1
Assuming the rate 1 EUR = 1.09 USD as of 31 March 2023 continues for the remainder of 2023 along with actual Q1 foreign exchange rates (adjusted from prior 1.07 USD rate as of 31
December 2022). Assuming the year-end 2022 exchange rate the net sales outlook would continue to be EUR 24.9bn to EUR 26.5bn.
2
Please refer to Performance measures section in this report for a full explanation of how these terms are defined.
The outlook, long-term targets and all of the underlying outlook assumptions described below are forward-looking statements
subject to a number of risks and uncertainties as described or referred to in the Risk Factors section later in this report. Along
with Nokia's official outlook targets provided above, below are outlook assumptions by business group that support the group
level outlook. The comments for relative growth by business group are provided to give a reference on how we expect each to
perform relative to the overall group.
2023 total addressable market (update) Nokia business group assumptions
Size (EUR bn)1
Constant currency growth Net sales growth Operating margin
Network Infrastructure2
47 (update) 4% In-line to below group 11.0 to 14.0%
Mobile Networks3
51 (update) 4% (update) Faster than group 7.0 to 10.0%
Cloud and Network Services 28 (update) 3% (update) In-line to below group 5.5 to 8.5%
1
Total addressable market forecasts assume the rate 1 EUR = 1.09 USD as of 31 March 2023 continues for the remainder of 2023 along with actual Q1 foreign exchange rates. The addressable
market is excluding Russia and Belarus.
2
Excluding Submarine Networks.
3 Excluding China.
Nokia provides the following approximate outlook assumptions for additional items concerning 2023:
Full year 2023 Comment
Nokia Technologies operating profit Largely stable
Assuming closure of outstanding litigation / renewal discussions we expect largely
stable operating profit in Nokia Technologies in 2023. Nokia currently assumes free
cash flow slightly greater than operating profit in Nokia Technologies.
Group Common and Other operating profit
Negative
EUR 350-400 million
(update)
This includes central function costs largely stable at below EUR 200 million and an
increase in investment in long-term research now above EUR 100 million. This line
also accounts for Radio Frequency Systems (RFS) and could be impacted by any
positive or negative revaluations in Nokia's venture funds in 2023.
Comparable financial income and expenses EUR 0 million As interest rates have increased we now expect financial income and expenses to be
approximately balanced.
Comparable income tax rate ~25% Following the re-recognition of deferred tax assets at the end of 2022 we now
provide an assumption based on a % tax rate instead of an absolute amount.
Cash outflows related to income taxes EUR 700 million Cash outflows related to income taxes are expected to increase due to mandatory
capitalization of R&D costs under U.S. tax laws as well as evolving regional mix.
Capital Expenditures EUR 700 million
(update)
Long-term targets
Nokia's long-term targets remain unchanged from those introduced with its Q4 2021 financial results. The targets had an
associated timeline of 3-5 years which remains unchanged and implies by 2024-2026. These targets remain intended to show
Nokia's ambition to deliver continuous improvement in the business over the time period.
Net sales Grow faster than the market
Comparable operating margin1
≥ 14%
Free cash flow1
55 to 85% conversion from comparable operating profit
1
Please refer to Performance measures section in this report for a full explanation of how these terms are defined.
20 April 2023 3 |
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| Financial Results
Q1 2023 compared to Q1 2022
Net sales
In Q1 2023, reported net sales increased 10%, benefiting
slightly from foreign exchange rate fluctuations along with the
following drivers.
On a constant currency basis, Nokia's net sales increased 9%
with growth across all business groups except Nokia
Technologies. Network Infrastructure and Mobile Networks
both grew at double-digit rates, with Network Infrastructure
increasing 13%, led by Optical Networks and IP Networks, and
Mobile Networks increasing 13% reflecting the continued ramp
of 5G in India. Cloud and Network Services increased 3%, while
Nokia Technologies declined 22% due in part to the option
exercised in Q4 2022 by a long-term licensee.
Gross margin
Reported gross margin decreased 310 basis points to 37.5% in
Q1 2023 and comparable gross margin decreased 300 basis
points to 37.7%. Gross margin performance reflected the
negative impact of regional mix in Mobile Networks, as well as
lower net sales in Nokia Technologies and lower gross margin in
Cloud and Network Services. Network Infrastructure gross
margin increased strongly, in part due to positive mix shift
within businesses.
Operating profit and margin
Reported operating profit in Q1 2023 was EUR 426 million, or
7.3% of net sales, up from 6.6% in the year-ago quarter.
Comparable operating profit decreased to EUR 479 million,
while comparable operating margin was 8.2%, down from
10.9% in the year-ago quarter. Higher overall gross profit in Q1
2023 was more than offset by higher operating expenses and a
net negative fluctuation in other operating income and
expenses, related to the impact from Nokia's venture fund
investments partly offset by hedging. Operating expenses
increased at a slower rate than net sales, reflecting disciplined
cost control but with absolute operating expenses increasing
primarily due to inflation. Additionally, operating profit
benefited year-on-year from lower variable pay accruals.
Nokia's venture fund investments generated a loss of
approximately EUR 30 million in Q1 2023 compared to a
benefit of approximately EUR 40 million in Q1 2022. The
impact of hedging in Q1 2023 was positive EUR 10 million,
compared to a negative impact of EUR 5 million in Q1 2022.
In Q1 2023, the difference between reported and comparable
operating profit was primarily related to the amortization of
acquired intangible assets, the partial reversal of provision
associated with a country exit that was made in Q1 2022,
restructuring and associated charges and the divestment of a
business. In Q1 2022, the difference between reported and
comparable operating profit was primarily related to costs
associated with a country exit, the amortization of acquired
intangible assets, and restructuring and associated charges.
Profit for the period
Reported net profit in Q1 2023 was EUR 289 million, compared
to EUR 219 million in Q1 2022. Comparable net profit in Q1
2023 was EUR 342 million, compared to EUR 416 million in Q1
2022. The decline in comparable net profit reflects the lower
comparable operating profit and higher income tax expenses,
related to unrecognized deferred tax assets in Finland in Q1
2022. These were somewhat offset by a net positive
fluctuation in financial income and expenses which was
primarily driven by higher interest income related to higher
interest rates, as well as a net positive fluctuation in the share
of results of associates and joint ventures.
Apart from the items impacting comparability included in
operating profit (and their associated tax effects), there were
no significant items impacting comparability between reported
and comparable net profit in Q1 2023. In Q1 2022, the
difference between reported and comparable net profit was
related to a loss allowance on customer financing loan.
Earnings per share
Reported diluted EPS was EUR 0.05 in Q1 2023, compared to
EUR 0.04 in Q1 2022. Comparable diluted EPS was EUR 0.06 in
Q1 2023 compared to EUR 0.07 in Q1 2022.
Comparable return on Invested Capital (ROIC)
Q1 2023 comparable ROIC was 15.8%, compared to 19.5% in
Q1 2022. The decrease reflected higher average invested
capital for the rolling four quarters, partly offset by higher
operating profit after tax for the rolling four quarters. The
higher average invested capital reflected growth in average
total equity, partially offset by a decrease in average total
interest-bearing liabilities, while average total cash and
interest-bearing financial investments were flat.
Cash performance
During Q1 2023, net cash decreased EUR 463 million, resulting
in an end-of-quarter net cash balance of EUR 4.3 billion. Total
cash decreased EUR 630 million sequentially to EUR 8.6 billion.
Free cash flow was negative EUR 147 million in Q1 2023.
Additional topics
Portfolio Management
In December 2022, RFS and Amphenol entered into an
agreement for RFS to sell the North American cable and global
base station antenna business to Amphenol. The deal is
expected to close in Q2 2023, subject to satisfying certain
standard closing conditions. In addition, RFS is streamlining its
offering over the first half of 2023 to concentrate on providing
premium cable solutions to European and Asian cable markets
while also ramping down some other parts of its business.
As part of our portfolio rebalancing efforts within Cloud and
Network Services we have sold our VitalQIP business to Cygna
Labs. Financial terms of the transaction remain confidential.
Additionally, we are working on exiting TD Tech, a legacy joint
venture founded in 2004 to build 3G systems for the China
market. TD Tech’s business has pivoted into handsets,
modems, and other devices and there are no operational
linkages or activities between TD Tech and Nokia. TD Tech does
not fit Nokia’s strategic focus as a B2B technology innovation
leader. Therefore, Nokia has entered into an agreement to sell
its share in the company to New East New Materials. The
closing is subject to conditions including a pre-emption right of
the joint venture partner and the sale will only take place if and
when these conditions are met which could yet take some time.
20 April 2023 4 |
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| Segment Details
Network Infrastructure
EUR million Q1'23 Q1'22 YoY change
Constant currency YoY
change
Net sales 2 248 1 974 14% 13%
- IP Networks 781 678 15% 13%
- Optical Networks 533 363 47% 45%
- Fixed Networks 650 671 (3) % (5) %
- Submarine Networks 285 262 9% 11%
Gross profit 855 684 25%
Gross margin % 38.0% 34.7% 330bps
Operating profit 344 195 76%
Operating margin % 15.3% 9.9% 540bps
Network Infrastructure net sales grew strongly again in the first
quarter with 14% growth on a reported basis and 13% on a
constant currency basis. Growth rates are expected to slow in
the coming quarters as Q1 has benefited from some catch up
as supply chains normalized and comparisons become more
challenging.
IP Networks net sales grew 13% on a constant currency basis,
primarily reflecting strength in North America (with particular
strength in enterprise), Asia Pacific along with India. In Q1
2023, shipments of the new FP5-based IP Routing products
continued to ramp. We currently have 50 contracts and expect
a gradual transition to the new platform in the coming years.
Optical Networks net sales grew 45% on a constant currency
basis showing continued strong momentum and customer
engagement in our PSE-V solutions. In the quarter we also
launched our latest generation PSE-6s products which are due
to start shipping later in the year. Growth was driven primarily
by India, Europe and North America in the quarter.
Fixed Networks net sales declined 5% on a constant currency
basis against a tough year-ago comparison. Regionally, net
sales grew in India, Middle East & Africa, Asia Pacific and Europe.
Net sales in North America declined, as continued growth in
fiber deployments were offset by a slowdown in fixed wireless
access which remains sensitive to a small number of
customers.
Submarine Networks net sales grew 11% on a constant
currency basis, as webscale-driven project deployments
continued to drive growth.
Gross margin increased strongly year-on-year primarily due to
positive mix shift and lower indirect cost of sales such as
logistics costs compared to the year-ago period.
Operating profit and operating margin improved strongly year-on-year as the gross margin expansion was only partly offset
by higher operating expenses (which grew slower than sales).
Operating profit was also positively impacted by hedging and
the change in loss allowances on certain trade receivables, both
recorded in other operating income and expenses.
Mobile Networks
EUR million Q1'23 Q1'22 YoY change
Constant currency YoY
change
Net sales 2 567 2 268 13% 13%
Gross profit 867 902 (4) %
Gross margin % 33.8% 39.8% (600) bps
Operating profit 137 171 (20) %
Operating margin % 5.3% 7.5% (220) bps
In Q1 2023, Mobile Networks net sales grew 13% on a reported
and constant currency basis.
The quarter was driven by the continued ramp-up in 5G
deployments in India which grew substantially and we gained
meaningful market share. Mobile Networks also grew in Europe
where we continued to gain market share amidst a largely
stable spending environment, as well as in Middle East & Africa.
North America declined as customer spending returned to a
more normal pattern in 2023 (compared to first-half weighted
spending seen in 2022), combined with customer inventory
depletion in the quarter. We also saw some declines in Asia
Pacific and in Greater China related to the phasing of 5G
deployments.
The decline in gross margin in the first quarter was primarily
related to regional mix along with some small currency impact.
We expect gross margin will remain under pressure in the first
half of the year before then improving in the second half.
Operating margin declined year-on-year in Q1 2023 due to
regional mix impacting gross margin although was somewhat
offset by volume impact and disciplined cost control. On an
absolute basis, operating profit was impacted by lower gross
profit and a relatively small increase in operating expenses.
There was also a positive impact in the quarter from hedging.
Additionally, operating profit benefited year-on-year from
lower variable pay accruals.
20 April 2023 5 |
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| Cloud and Network Services
EUR million Q1'23 Q1'22 YoY change
Constant currency YoY
change
Net sales 760 736 3% 3%
Gross profit 249 284 (12) %
Gross margin % 32.8% 38.6% (580) bps
Operating profit/(loss) (20) 20 (200) %
Operating margin % (2.6) % 2.7% (530) bps
Cloud and Network Services net sales grew 3% on a reported
and constant currency basis. From a product perspective, there
was growth in Enterprise Solutions which was driven by ongoing
momentum in campus wireless. Core Networks also grew while
Business Applications and Cloud and Cognitive Services
declined.
From a regional perspective, on a constant currency basis
Cloud and Network Services saw strong growth in Europe,
North America and Middle East & Africa offsetting declines in
Asia Pacific along with some small movements in other regions.
Gross margin declined, as we saw a shift from software sales
towards lower margin hardware sales in the quarter, despite
the overall increase in net sales.
Operating margin declined year-on-year as the lower gross
profit combined with increased SG&A and R&D expenses, which
reflected inflation and continued investment to strengthen
leadership in campus wireless. As we progress with portfolio
rebalancing in Cloud and Network Services, we also remain
focused on carefully managing the cost base of the business.
Operating profit was helped by a small contribution from
hedging.
Nokia Technologies
EUR million Q1'23 Q1'22 YoY change
Constant currency YoY
change
Net sales 242 306 (21) % (22) %
Gross profit 242 305 (21) %
Gross margin % 100.0% 99.7% 30bps
Operating profit 149 220 (32) %
Operating margin % 61.6% 71.9% (1 030) bps
Nokia Technologies net sales declined 21% on a reported basis
and 22% on a constant currency basis. The decline was
attributable to three factors. First, a long-term licensee
exercised an option in Q4 2022 which led to all outstanding
revenue being recognized in the quarter and hence is no longer
benefiting net sales in 2023. Second, there was lower net sales
from a smartphone vendor whose market share has
meaningfully declined and finally a lower contribution from
brand licensing in the quarter. Beyond these three factors
licensing net sales were essentially stable also accounting for
the renewed agreement with Samsung.
Nokia remains in litigation/renewal situations regarding two
license agreements that ended during 2021. Nokia will continue
to prioritize protecting the value of its portfolio over achieving
specific timelines. Nokia continues to expect to return to an
annual run-rate of EUR 1.4-1.5bn of revenue as we work
through the smartphone license renewal cycle and continue to
grow in new focus areas such as automotive, consumer
electronics, IoT and multimedia.
Operating margin declined year-on-year reflecting the decline
in net sales and a small increase in operating expenses.
Group Common and Other
EUR million Q1'23 Q1'22 YoY change
Constant currency YoY
change
Net sales 48 76 (37) % (38) %
Gross profit/(loss) (6) 2
Gross margin % (12.5) % 2.6% (1 510) bps
Operating profit/(loss) (131) (23)
Operating margin % (272.9) % (30.3) % (24 260) bps
Group Common and Other net sales decreased 37% on a
reported basis and 38% on a constant currency basis related
to Radio Frequency Systems.
The decrease in operating result was primarily driven by losses
from Nokia's venture fund investments as well as higher
operating expenses. Venture fund losses were approximately
EUR 30 million in Q1 2023, balanced between foreign exchange
fluctuations and revaluations, compared to gains of
approximately EUR 40 million in Q1 2022.
20 April 2023 6 |
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| Net sales by region
EUR million Q1'23 Q1'22 YoY change
Constant currency YoY
change
Asia Pacific 578 634 (9) % (7) %
Europe 1 473 1 399 5% 5%
Greater China 336 392 (14) % (12) %
India 853 200 327% 325%
Latin America 232 226 3% 1%
Middle East & Africa 436 409 7% 7%
North America 1 666 1 826 (9) % (12) %
Submarine Networks1
285 262 9% 11%
Total 5 859 5 348 10% 9%
1Nokia provides net sales for the Submarine Networks business separately from the rest of the Group to improve the usefulness of disclosed information by removing volatility caused by the
specific nature of the Submarine Networks business.
Reported changes are disclosed in the table above. The
regional commentary below focuses on constant currency
results, to exclude the impact of foreign exchange rate
fluctuations. The commentary is based on regions excluding
Submarine Networks, given the nature of that business leads to
significant regional volatility between periods.
The net sales performance in Asia Pacific reflected declines in
both Mobile Networks and Cloud and Network Services,
particularly in Japan, partly offset by broader growth in
Network Infrastructure.
Europe net sales were negatively impacted by Nokia
Technologies (which is entirely reported in Europe), due in part
to the option exercised in Q4 2022 by a long-term licensee.
Excluding Nokia Technologies, net sales in Europe increased at
a double-digit rate driven by growth across all business groups.
Within Greater China, net sales decreased due to Mobile
Networks.
The strong growth in net sales in India was related to Mobile
Networks, as 5G deployments continued to ramp in Q1 2023.
Network Infrastructure also saw strong growth driven by
Optical Networks, IP Networks and Fixed Networks.
Net sales in Latin America were stable, as slight growth in
Network Infrastructure was mostly offset by Mobile Networks
and Cloud and Network Services.
Middle East & Africa growth was driven by all business groups.
The double-digit decline in North America reflected lower net
sales in Mobile Networks as customer spending returned to a
more normal pattern in 2023 (compared to first-half biased
spending in 2022), combined with some customer inventory
depletion seen in the quarter. This was somewhat offset by
growth in Cloud and Network Services and Network
Infrastructure.
Net sales by customer type
EUR million Q1'23 Q1'22 YoY change
Constant currency YoY
change
Communications service providers (CSP) 4 725 4 373 8% 7%
Enterprise 566 343 65% 62%
Licensees 242 306 (21) % (22) %
Other1
327 325 1% 2%
Total 5 859 5 348 10% 9%
1
Includes net sales of Submarine Networks which operates in a different market, and Radio Frequency Systems (RFS), which is being managed as a separate entity, and certain other items, such
as eliminations of inter-segment revenues. Submarine Networks and RFS net sales also include revenue from enterprise customers and communications service providers.
Continued strong demand from CSPs drove solid net sales
growth of 7% in constant currency in Q1 2023.
Growth in Enterprise net sales once again accelerated in Q1
2023, increasing 62% in constant currency, as we continued to
execute on our strong order book. Growth was particularly
strong in webscale where sales more than doubled in the
quarter. Private wireless continued to grow strongly double-digit and now has more than 595 customers. Customer
engagement also remains positive as we added 73 new
Enterprise customers in the quarter.
Refer to the Nokia Technologies section of this report for a
discussion on net sales to Licensees.
The growth in ‘Other’ net sales relates to growth in Submarine
Networks partially offset by RFS.
20 April 2023 7 |
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| Q1 2023 to Q1 2022 bridge for net sales and operating profit
EUR million Q1'23
Volume,
price, mix
and other
Foreign
exchange
impact
Items affecting
comparability Q1'22
Net sales 5 859 470 41 — 5 348
Operating profit 426 (112) 8 176 354
Operating margin % 7.3% 6.6%
The table above shows the change in net sales and operating
profit compared to the year-ago quarter. Net sales benefited
strongly from improvements from an operational standpoint,
and, to a lesser extent, foreign exchange rate fluctuations.
Operating profit saw a negative impact from an operational
standpoint, a slight positive impact from foreign exchange rate
fluctuations, as well as a positive impact from items affecting
comparability as further described below. The slight positive
impact to operating profit seen from foreign exchange rate
fluctuations is a combination of an underlying negative impact
to operating profit related to our mix of currency exposures,
which was more than offset by our hedging program.
Reconciliation of reported operating profit to comparable operating profit
EUR million Q1'23 Q1'22 YoY change
Reported operating profit 426 354 20%
Amortization of acquired intangible assets 89 100
Costs associated with country exit (35) 104
Restructuring and associated charges 28 30
Divestment of businesses (26) —
Impairment and write-off of assets, net of reversals (2) (5)
Comparable operating profit 479 583 (18) %
The comparable operating profit that Nokia discloses is
intended to provide meaningful supplemental information to
both management and investors regarding Nokia’s underlying
business performance by excluding certain items of income
and expenses that may not be indicative of Nokia’s business
operating results. Comparable operating profit is used also in
determining management remuneration.
In Q1 2023 the main adjustments related to the amortization
of acquired intangible assets which is primarily related to
purchase price allocation of the Alcatel-Lucent acquisition, the
partial reversal of a provision associated with a country exit
that was made in Q1 2022, restructuring charges mainly
related to the ongoing restructuring program (discussed later
in this interim report) and the divestment of a business.
20 April 2023 8 |
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| Cash and cash flow in Q1 2023
EUR billion
EUR million, at end of period Q1'23 Q4'22 QoQ change
Total cash and interest-bearing financial investments 8 614 9 244 (7) %
Net cash and interest-bearing financial investments1
4 304 4 767 (10) %
1Net cash and interest-bearing financial investments does not include lease liabilities. For details, please refer to the Performance measures section in this report.
Free cash flow
During Q1 2023, Nokia’s free cash flow was negative EUR 147
million, as operating profit was more than offset by cash
outflows related to net working capital, as well as capital
expenditures, restructuring and income taxes.
Net cash from operating activities
Net cash from operating activities was driven by:
▪ Nokia’s adjusted profit of EUR 745 million.
▪ Approximately EUR 100 million of restructuring and
associated cash outflows, related to our current and previous
cost savings programs.
▪ Excluding the restructuring and associated cash outflows, the
decrease in net cash related to net working capital was
approximately EUR 410 million, as follows:
◦ The decrease in receivables was approximately EUR 30
million.
◦ The increase in inventories was approximately EUR 70
million, as we continue to build inventory related to
ongoing 5G deployments in India.
◦ The decrease in liabilities was approximately EUR 370
million, primarily related to a decrease in accounts
payable, partly offset by an increase in contract liabilities
as well as an increase in accruals for 2023 performance-related employee variable pay.
▪ An outflow related to cash taxes of approximately EUR 140
million.
▪ An outflow related to net interest of approximately EUR 20
million.
Net cash used in investing activities
▪ Net cash used in investing activities was related primarily to
capital expenditures of approximately EUR 230 million and a
net cash outflow from other non-current financial
investments of approximately EUR 10 million, partly offset by
net cash inflows related to the disposal of businesses of
approximately EUR 20 million and related to the sale of
assets of approximately EUR 10 million.
Net cash used in financing activities
▪ Net cash used in financing activities was related primarily to
dividend payments of approximately EUR 110 million, the
acquisition of treasury shares of approximately EUR 80
million and lease payments of approximately EUR 70 million.
Change in total cash and net cash
In Q1 2023, the approximately EUR 170 million difference
between the change in total cash and net cash was primarily
due to the issuance and repurchase of debt in the quarter, as
well as changes in the carrying amounts of certain issued
bonds, as a result of interest and foreign exchange rate
fluctuations. In Q1 2023, Nokia issued approximately EUR 0.5
billion of new bonds, and purchased, through a tender offer,
approximately EUR 0.7 billion of certain bonds.
Foreign exchange rates had an approximately EUR 70 million
negative impact on net cash.
20 April 2023 9 |
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| Sustainability
Our strategy and focus areas
At Nokia, we create technology that helps the world act together. Connectivity and digitalization can play a critical role in helping to solve
many of the world’s greatest challenges. In February 2023 Nokia’s refreshed corporate strategy was presented at Mobile World Congress
(MWC). One of the six corporate strategy pillars is to develop ESG into a competitive advantage by leveraging our technology and portfolio
strengths to maximize our positive impact on other industries, society, and the world around us.
In March Nokia published its 2022 People and Planet sustainability report outlining its performance relating to the company’s
Environmental, Social and Governance (ESG) strategy. The ESG strategy consists of the following five focus areas: Environment, Industrial
digitalization, Security and privacy, Bridging the digital divide, and Responsible business.
Environment
The environment pillar of Nokia’s ESG strategy covers climate and
circularity activities. In the first quarter of 2023 we started to track
and quantify impacts affecting natural capital, including bio- and
geodiversity, across our value chain and published our first
Biodiversity / Geodiversity position paper.
Other Q1 2023 achievements in environment included recognition
as a member of the 2023 Clean200™ which lists the 200 publicly
quoted companies who are deemed at the forefront of the energy
transition and put sustainability at the heart of their products,
services, business models and investments. We were also included
in CDP’s Supplier Engagement Rating Leadership Board reserved for
companies with the highest rating for supplier engagement on
climate change.
During MWC, we announced the launch of Habrok, our latest
generation of cutting-edge AirScale massive MIMO radios for mobile
operator and enterprise networks. They are optimized to deliver
best-in-class capacity and network performance offering higher
energy efficiency by using 30 percent less energy.
Industrial Digitalization
The handprint impact of Nokia’s industrial digitalization technology
on many enterprise and industrial sectors in their decarbonization
and productivity journey is an important pillar of Nokia’s ESG
strategy. In March 2023, we announced that we will be providing
private wireless connectivity, network edge equipment and analytics
to support The Ocean Cleanup’s plastic harvesting operations in the
Great Pacific Garbage Patch. According to UNESCO, plastic waste
makes up 80% of all marine pollution and around 8 to 10 million
metric tons of plastic end up in the ocean each year. 5G, private
wireless, edge compute, sensors, AI-based analytics, drones and
other advanced technologies will play an increasingly critical role in
supporting the conservation and sustainability of our natural
environment by providing immediate up-to-date and constant
information on the status of the environment, whether on land or in
the sea. Working with The Ocean Cleanup provides the opportunity
to explore that role further.
At MWC we also announced advances to Mission-Critical Industrial
Edge (MXIE) capabilities. MXIE will leverage the high-performance
Dell PowerEdge server family to support the ever-growing industry
digitalization needs. MXIE will also be offered as a Hardware-as-a-Service model, reducing CAPEX requirements to allow enterprises to
digitalize operations and evolve towards asset-light ways to
productivity improvements and eventual decarbonization in their
operations.
Security and privacy
We continued the execution of our product security transformation
program with a focus on delivering on regulatory and customer
requirements, and supply chain security. Nokia’s end-to-end
security lab in Dallas is now fully operational and has hosted multiple
customer visits.
We celebrated the global Data Privacy Day 2023 on 28 January by
launching our “Privacy is Everyone’s Business” campaign to increase
internal awareness and understanding. We continue to work
towards having our Binding Corporate Rules application approved
by the regulator in Finland by year end.
Bridging the digital divide
In January 2023 Nokia announced a partnership with UNICEF to help
bridge the digital divide and provide a digital education and coding
program in Senegal. The principal targeted beneficiaries are more
than 100 teachers and 10 000 middle school students in
underserved areas. The scope of work includes specific training
sessions on digital skills, as well as upgrading equipment and
connectivity. The Senegal program is one component of our
partnership with UNICEF and is another step in our target to reach
1.5 million people using Nokia technology for social digitalization
projects, digital skills and connecting the unconnected.
Responsible business
In March 2023 we were awarded for the sixth time a Platinum
EcoVadis Medal. This places Nokia among the top one percent of
companies assessed by EcoVadis, with high scores for environment
and sustainable procurement. The EcoVadis score is an independent
review of our documented management systems across the ESG
portfolio and is requested by key customers. In March we were also
certified as a ‘Nasdaq ESG Transparency Partner’ for our
engagement in market transparency and in raising environmental
standards.
In March 2023 we were once again named by Ethisphere as one of
the World’s Most Ethical Companies® and were one of only two
winners in the telecommunications industry and the only Finnish
company to be honored. In 2023, 135 honorees were recognized
spanning 19 countries and 46 industries. In the 2023 Bloomberg
Gender Equality Index, Nokia achieved a Bloomberg GEI overall score
of 83.03 percent — the company’s highest score so far and
considerably higher than the technology industry’s average score of
72.36 percent. In March 2023 the Finnish Foundation for Share
Promotion — which recognizes Finnish companies that nurture and
advance inclusion and diversity in the workplace — awarded Nokia as
the 2023 Promotor of Diversity .
Other strategic ESG development
In early 2023, Nokia launched a Sustainable Finance Framework that
underscores the importance of ESG to its business and financing
structure. We successfully completed an inaugural 500 million Euro
sustainability-linked bond.
In February 2023 Nokia was included in Sustainalytics 2023 Top-Rated ESG Companies List. Morningstar Sustainalytics, is a leading
firm in ESG research and data serving institutional investors and
corporations.
20 April 2023 10 |
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| Additional information
Cost Savings Program
In Q1 2021, we announced plans to reset our cost base,
targeting a reduction of approximately EUR 600 million by the
end of 2023.
Given the strength in our end markets, the pace of
restructuring has been slower than we initially planned. The
overall size of the plan, however, remains unchanged and
continues to depend on the evolution of our end markets,
consistent with our commentary when we announced the plan.
We continue to expect these cost savings to result in
approximately EUR 500-600 million of restructuring and
associated charges by the end of 2023.
We continue to expect total restructuring and associated cash
outflows to be approximately EUR 1 050-1 150 million. This
total includes approximately EUR 500 million of cash outflows
related to our previous restructuring program.
In EUR million, rounded to the nearest EUR 50 million
Actual Expected amounts for
Total
2021 2022 2023 amount
Beyond
2023
Recurring gross cost savings 150 250 100 100 600
- cost of sales 50 100 50 50 250
- operating expenses 100 150 50 50 350
Restructuring and associated charges related to our most recent cost savings program 250 150 150 500-600
Restructuring and associated cash outflows1
350 300 300 150 1 050-1 150
1
Includes cash outflows related to the most recent cost savings program, as well as the remaining cash outflows related to our previous programs.
Restructuring and associated charges by business group
In EUR million, rounded to the nearest EUR 50 million
Mobile Networks 300-350
Network Infrastructure ~100
Cloud and Network Services 100-150
Total restructuring and associated charges 500-600
Significant events
January – March 2023
On 25 January 2023, Nokia announced it had appointed Esa
Niinimäki as Chief Legal Officer and member of the Group
Leadership Team. Niinimäki has worked at Nokia for more than
15 years where he has held multiple positions, most recently
Interim Chief Legal Officer.
On 9 February 2023, Nokia announced it commenced an offer
to purchase the outstanding EUR 750 million 2.00% notes due
15 March 2024 (the “2024 Notes”), EUR 500 million 2.375%
notes due 15 May 2025 (the “2025 Notes”) and EUR 750
million 2.00% notes due 11 March 2026 (the “2026 Notes”), up
to a maximum cash consideration of EUR 700 million (the
“Tender Offer”). The purpose of the Tender Offer is to manage
the overall indebtedness of Nokia and to extend Nokia’s debt
maturity profile in an efficient manner.
Nokia accepted tenders for EUR 372 million (49.66% of the
nominal amount) of the 2024 Notes, EUR 208 million (41.57%
of the nominal amount) of the 2025 Notes and EUR 120 million
(15.96% of the nominal amount) of the 2026 Notes. The
Tender Offer was settled on 21 February 2023.
On 21 February 2023, Nokia issued EUR 500 million 4.375%
sustainability-linked Notes due August 2031 under its 5 billion
Euro Medium-Term Note Programme. The proceeds of the new
notes are intended to fund the Tender Offer and for general
corporate purposes.
On 2 March 2023, Nokia informed it had updated its capital
management policy with a focus on sustaining investment
grade rating and improving shareholder returns consistent with
the performance of the business. Nokia now targets to
maintain a net cash position in the range of 10-15% of net
sales. Nokia intends to maintain a net cash position around this
level to ensure it can continue to invest in the necessary R&D
to maintain and further improve its technology leadership, fund
working capital requirements in support of the company’s
growth ambitions and to maintain some flexibility for bolt-on
acquisitions. Nokia’s previous target in terms of cash
management was to maintain a total cash position equivalent
to at least 30% of net sales.
After March 2023
On 4 April 2023, Nokia held its Annual General Meeting (AGM) in
Helsinki. Shareholders were also able to follow the AGM through
a webcast. Approximately 108 000 shareholders representing
approximately 3.2 billion shares and votes were represented at
the meeting. Among others, the following resolutions were
made:
▪ The financial statements were adopted, and the Board of
Directors and President and CEO were discharged from
liability for the financial year 2022.
▪ The AGM decided that no dividend is distributed by a
resolution of the AGM and authorized the Board to decide on
the distribution of an aggregate maximum of EUR 0.12 per
share as dividend from the retained earnings and/or as
assets from the reserve for invested unrestricted equity. The
Board will resolve separately on the amount and timing of
each distribution. The authorization is valid until the opening
of the next AGM.
▪ Sari Baldauf, Thomas Dannenfeldt, Lisa Hook, Jeanette
Horan, Thomas Saueressig, Søren Skou, Carla Smits-Nusteling and Kai Öistämö were re-elected as members of
the Board for a term ending at the close of the next AGM. In
addition, the AGM resolved to elect Timo Ahopelto and
Elizabeth Crain as new members of the Board for the same
20 April 2023 11 |
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| term. In its assembly meeting that took place after the AGM,
the Board re-elected Sari Baldauf as Chair of the Board and
Søren Skou as Vice Chair of the Board.
▪ The annual fees of the Board members were increased by
EUR 15 000 except for the Board Chair.
▪ The remuneration Report of the company's governing bodies
was supported in an advisory vote.
▪ Deloitte Oy was re-elected as the auditor for Nokia for the
financial year 2024 with Authorized Public Accountant Marika
Nevalainen as the auditor in charge.
▪ The Board was authorized to resolve to repurchase a
maximum of 550 million Nokia shares and to issue a
maximum of 550 million shares through issuance of shares
or special rights entitling to shares in one or more issues. The
authorizations are effective until 3 October 2024 and they
terminated the corresponding authorizations granted by the
AGM on 5 April 2022.
Shares
The total number of Nokia shares on 31 March 2023, equaled
5 632 297 576. On 31 March 2023, Nokia and its subsidiary
companies held 63 940 253 Nokia shares, representing
approximately 1.1% of the total number of Nokia shares and
voting rights.
Risk Factors
Nokia and its businesses are exposed to a number of risks and
uncertainties which include but are not limited to:
▪ Competitive intensity, which is expected to continue at a high
level;
▪ Our ability to ensure competitiveness of our product
roadmaps and costs through additional R&D investments;
▪ Our ability to procure certain standard components and the
costs thereof, such as semiconductors;
▪ Disturbance in the global supply chain;
▪ Accelerating inflation, increased global macro-uncertainty,
major currency fluctuations and higher interest rates;
▪ Potential economic impact and disruption of global
pandemics;
▪ War or other geopolitical conflicts, disruptions and potential
costs thereof;
▪ Other macroeconomic, industry and competitive
developments;
▪ Timing and value of new, renewed and existing patent
licensing agreements with smartphone vendors, automotive
companies, consumer electronics companies and other
licensees;
▪ Results in brand and technology licensing; costs to protect
and enforce our intellectual property rights; on-going
litigation with respect to licensing and regulatory landscape
for patent licensing;
▪ The outcomes of on-going and potential disputes and
litigation;
▪ Timing of completions and acceptances of certain projects;
▪ Our product and regional mix;
▪ Uncertainty in forecasting income tax expenses and cash
outflows, over the long-term, as they are also subject to
possible changes due to business mix, the timing of patent
licensing cash flow and changes in tax legislation, including
potential tax reforms in various countries and OECD
initiatives;
▪ Our ability to utilize our US and Finnish deferred tax assets
and their recognition on our balance sheet;
▪ Our ability to meet our sustainability and other ESG targets,
including our targets relating to greenhouse gas emissions;
as well the risk factors specified under Forward-looking
statements of this report, and our 2022 annual report on
Form 20-F published on 2 March 2023 under Operating and
financial review and prospects-Risk factors.
Forward-looking statements
Certain statements herein that are not historical facts are
forward-looking statements. These forward-looking
statements reflect Nokia's current expectations and views of
future developments and include statements regarding: A)
expectations, plans, benefits or outlook related to our
strategies, product launches, growth management,
sustainability and other ESG targets, operational key
performance indicators and decisions on market exits; B)
expectations, plans or benefits related to future performance
of our businesses (including the expected impact, timing and
duration of potential global pandemics and the general
macroeconomic conditions on our businesses, our supply chain
and our customers’ businesses) and any future dividends and
other distributions of profit; C) expectations and targets
regarding financial performance and results of operations,
including market share, prices, net sales, income, margins, cash
flows, the timing of receivables, operating expenses,
provisions, impairments, taxes, currency exchange rates,
hedging, investment funds, inflation, product cost reductions,
competitiveness, revenue generation in any specific region, and
licensing income and payments;
D) ability to execute, expectations, plans or benefits related to
changes in organizational structure and operating model; E)
impact on revenue with respect to litigation/renewal
discussions; and F) any statements preceded by or including
"continue", “believe”, “commit”, “estimate”, “expect”, “aim”,
“influence”, "will” or similar expressions. These forward-looking
statements are subject to a number of risks and uncertainties,
many of which are beyond our control, which could cause our
actual results to differ materially from such statements. These
statements are based on management’s best assumptions and
beliefs in light of the information currently available to them.
These forward-looking statements are only predictions based
upon our current expectations and views of future events and
developments and are subject to risks and uncertainties that
are difficult to predict because they relate to events and
depend on circumstances that will occur in the future. Factors,
including risks and uncertainties that could cause these
differences, include those risks and uncertainties identified in
the Risk Factors above.
20 April 2023 12 |
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| Financial statement information
Consolidated income statement (condensed)
EUR million
Reported Comparable
Note Q1'23 Q1'22 Q1'23 Q1'22
Net sales 2, 3 5 859 5 348 5 859 5 348
Cost of sales (3 664) (3 179) (3 653) (3 171)
Gross profit 2 2 196 2 169 2 207 2 176
Research and development expenses (1 108) (1 072) (1 093) (1 052)
Selling, general and administrative expenses (729) (675) (642) (581)
Other operating income and expenses 68 (68) 7 39
Operating profit 2 426 354 479 583
Share of results of associates and joint ventures (6) (26) (6) (26)
Financial income and expenses (19) (72) (9) (40)
Profit before tax 401 256 464 516
Income tax expense 5 (111) (79) (122) (101)
Profit from continuing operations 290 177 342 416
(Loss)/profit from discontinued operations (1) 42 — —
Profit for the period 289 219 342 416
Attributable to
Equity holders of the parent 279 212 332 409
Non-controlling interests 10 7 10 7
Earnings per share attributable to equity holders of the parent
Basic earnings per share, EUR
Continuing operations 0.05 0.03 0.06 0.07
Profit for the period 0.05 0.04 0.06 0.07
Average number of shares ('000 shares) 5 578 005 5 634 737 5 578 005 5 634 737
Diluted earnings per share, EUR
Continuing operations 0.05 0.03 0.06 0.07
Profit for the period 0.05 0.04 0.06 0.07
Average number of shares ('000 shares) 5 648 995 5 705 948 5 648 995 5 705 948
The above condensed consolidated income statement should be read in conjunction with accompanying notes.
20 April 2023 13 |
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| Consolidated statement of comprehensive income (condensed)
EUR million
Reported
Q1'23 Q1'22
Profit for the period 289 219
Other comprehensive income
Items that will not be reclassified to profit or loss
Remeasurements of defined benefit plans 79 263
Income tax related to items that will not be reclassified to profit or loss (19) (74)
Items that may be reclassified subsequently to profit or loss
Translation differences (281) 338
Net investment hedges 75 (72)
Cash flow and other hedges 1 18
Financial assets at fair value through other comprehensive income (23) (5)
Other changes, net (3) (1)
Income tax related to items that may be reclassified subsequently to profit or loss (14) —
Other comprehensive (loss)/income, net of tax (185) 467
Total comprehensive income for the period 104 686
Attributable to:
Equity holders of the parent 95 678
Non-controlling interests 9 8
The above condensed consolidated statement of comprehensive income should be read in conjunction with accompanying notes.
20 April 2023 14 |
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| Consolidated statement of financial position (condensed)
EUR million Note 31 March 2023 31 March 2022 31 December 2022
ASSETS
Goodwill 5 588 5 508 5 667
Other intangible assets 1 235 1 534 1 263
Property, plant and equipment 1 992 1 912 2 015
Right-of-use assets 926 950 929
Investments in associated companies and joint ventures 187 217 199
Non-current interest-bearing financial investments 6 898 493 697
Other non-current financial investments 6 794 852 828
Deferred tax assets 5 3 757 1 195 3 834
Other non-current financial assets 6 268 298 252
Defined benefit pension assets 4 6 816 7 818 6 754
Other non-current receivables 257 279 239
Non-current assets 22 718 21 055 22 677
Inventories 3 299 2 636 3 265
Trade receivables 6 5 298 4 855 5 549
Contract assets 1 229 1 123 1 203
Other current receivables 940 1 076 934
Current income tax assets 201 273 153
Other current financial and firm commitment assets 6 572 479 615
Current interest-bearing financial investments 6 2 889 2 685 3 080
Cash and cash equivalents 6 4 827 6 341 5 467
Current assets 19 255 19 470 20 266
Total assets 41 973 40 525 42 943
SHAREHOLDERS' EQUITY AND LIABILITIES
Share capital 246 246 246
Share premium 544 421 503
Treasury shares (433) (399) (352)
Translation differences (52) (132) 169
Fair value and other reserves 3 946 4 421 3 905
Reserve for invested unrestricted equity 15 486 15 742 15 487
Retained earnings/(accumulated deficit) 1 538 (2 327) 1 375
Total capital and reserves attributable to equity holders of the parent 21 275 17 973 21 333
Non-controlling interests 100 110 93
Total equity 21 375 18 083 21 426
Long-term interest-bearing liabilities 6, 7 3 704 4 489 4 249
Long-term lease liabilities 856 877 858
Deferred tax liabilities 338 288 332
Defined benefit pension and post-employment liabilities 4 2 465 3 106 2 459
Contract liabilities 131 294 120
Deferred revenue and other non-current liabilities 94 404 103
Provisions 8 578 625 622
Non-current liabilities 8 167 10 084 8 743
Short-term interest-bearing liabilities 6, 7 606 126 228
Short-term lease liabilities 176 195 184
Other financial and firm commitment liabilities 6 918 876 1 038
Current income tax liabilities 173 186 185
Trade payables 6 4 183 3 664 4 730
Contract liabilities 2 078 2 326 1 977
Deferred revenue and other current liabilities 6 3 622 4 036 3 619
Provisions 8 676 948 813
Current liabilities 12 431 12 357 12 774
Total shareholders' equity and liabilities 41 973 40 525 42 943
Shareholders' equity per share, EUR 3.82 3.19 3.82
Number of shares (1 000 shares, excluding treasury shares) 5 568 357 5 633 807 5 587 016
The above condensed consolidated statement of financial position should be read in conjunction with accompanying notes.
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| Consolidated statement of cash flows (condensed)
EUR million Q1'23 Q1'22
Cash flow from operating activities
Profit for the period 289 219
Adjustments 456 409
Depreciation and amortization 266 274
Restructuring charges 19 16
Financial income and expenses 18 62
Income tax expense 112 76
Loss/(gain) from other non-current financial investments 29 (49)
Other 12 30
Cash flows from operations before changes in net working capital 745 628
Change in net working capital (506) 80
Decrease in receivables 33 349
Increase in inventories (73) (212)
Decrease in non-interest-bearing liabilities (466) (57)
Cash flows from operations 239 708
Interest received 30 4
Interest paid (51) (56)
Income taxes paid, net (135) (97)
Net cash flows from operating activities 83 559
Cash flow from investing activities
Purchase of property, plant and equipment and intangible assets (232) (189)
Proceeds from sale of property, plant and equipment and intangible assets 14 1
Proceeds from disposal of businesses, net of disposed cash 22 —
Purchase of interest-bearing financial investments (1 015) (700)
Proceeds from maturities and sale of interest-bearing financial investments 1 013 98
Purchase of other non-current financial investments (16) (58)
Proceeds from sale of other non-current financial investments 4 13
Foreign exchange hedging of cash and cash equivalents (22) (25)
Other 5 (1)
Net cash flows used in investing activities (227) (861)
Cash flow from financing activities
Acquisition of treasury shares (81) (47)
Proceeds from long-term borrowings 495 5
Repayment of long-term borrowings (713) —
Proceeds from short-term borrowings 14 8
Payment of principal portion of lease liabilities (67) (57)
Dividends paid (112) —
Net cash flows used in financing activities (464) (91)
Translation differences (32) 43
Net decrease in cash and cash equivalents (640) (350)
Cash and cash equivalents at beginning of period 5 467 6 691
Cash and cash equivalents at end of period 4 827 6 341
Consolidated statement of cash flows combines cash flows from both the continuing and the discontinued operations.
The above condensed consolidated statement of cash flows should be read in conjunction with accompanying notes.
20 April 2023 16 |
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| Consolidated statement of changes in shareholders' equity (condensed)
EUR million
Share
capital
Share
premium
Treasury
shares
Translation
differences
Fair value
and other
reserves
Reserve for
invested
unrestricted
equity
Retained
earnings/
(accumulated
deficit)
Attributable
to equity
holders of
the parent
Non-controlling
interests
Total
equity
1 January 2022 246 454 (352) (396) 4 219 15 726 (2 537) 17 360 102 17 462
Profit for the period — — — — — — 212 212 7 219
Other comprehensive income — — — 265 202 — (1) 465 2 467
Total comprehensive income — — — 265 202 — 211 678 8 686
Share-based payments — 30 — — — — — 30 — 30
Acquisition of treasury shares1
— — (47) — — (25) — (72) — (72)
Settlement of share-based
payments — (63) — — — 41 — (22) — (22)
Total transactions with owners — (33) (47) — — 16 — (65) — (65)
31 March 2022 246 421 (399) (132) 4 421 15 742 (2 327) 17 973 110 18 083
1 January 2023 246 503 (352) 169 3 905 15 487 1 375 21 333 93 21 426
Profit for the period — — — — — — 279 279 10 289
Other comprehensive income — — — (221) 41 — (4) (184) (1) (185)
Total comprehensive income — — — (221) 41 — 275 95 9 104
Share-based payments — 43 — — — — — 43 — 43
Settlement of share-based
payments — (2) — — — 2 — — — —
Acquisition of treasury shares1
— — (81) — — (3) — (84) — (84)
Disposal of subsidiaries — — — — — — — — (2) (2)
Dividend — — — — — — (112) (112) — (112)
Total transactions with owners — 41 (81) — — (1) (112) (153) (2) (155)
31 March 2023 246 544 (433) (52) 3 946 15 486 1 538 21 275 100 21 375
1
Treasury shares are acquired as part of the share buyback program announced on 3 February 2022. Shares are repurchased using funds in the reserve for invested unrestricted
equity. The shares repurchased in the first phase of the program between 14 February and 11 November 2022 were canceled on 8 December 2022. The second phase of the
program started on 2 January 2023.
The above condensed consolidated statement of changes in shareholders' equity should be read in conjunction with accompanying notes.
20 April 2023 17 |
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| Notes to Financial statements
1. BASIS OF PREPARATION
This unaudited and condensed consolidated financial statement information of Nokia has been prepared in accordance with IAS 34, Interim Financial
Reporting, and it should be read in conjunction with the annual consolidated financial statements for 2022 prepared in accordance with IFRS as published by
the IASB and adopted by the EU. The same accounting policies, methods of computation and applications of judgment are followed in this financial
statement information as was followed in the annual consolidated financial statements for 2022. Percentages and figures presented herein may include
rounding differences and therefore may not add up precisely to the totals presented and may vary from previously published financial information. This
financial report was authorized for issue by the Board of Directors on 20 April 2023.
Net sales and operating profit of the Nokia Group, particularly in Network Infrastructure, Mobile Networks and Cloud and Network Services segments, are
subject to seasonal fluctuations being generally highest in the fourth quarter and lowest in the first quarter of the year. This is mainly due to the seasonality
in the spending cycles of communications service providers.
In 2017, Nokia and China Huaxin Post & Telecommunication Economy Development Center (China Huaxin) commenced operations of the joint venture Nokia
Shanghai Bell (NSB). The contractual arrangement provides China Huaxin with the right to fully transfer its ownership interest in NSB to Nokia and Nokia with
the right to purchase China Huaxin’s ownership interest in NSB in exchange for a future cash settlement. To reflect this, Nokia derecognized the non-controlling interest balance related to NSB and recognized a financial liability based on the estimated future cash settlement to acquire China Huaxin’s
ownership interest. Any changes in the estimated future cash settlement are recorded in financial income and expense. If the contractual arrangement
expires unexercised on 1 July 2023, Nokia will derecognize the financial liability and record non-controlling interest equal to its share of NSB’s net assets with
any difference recorded within shareholders’ equity.
Comparable and constant currency measures
Nokia presents financial information on a reported, comparable and constant currency basis. Comparable measures presented in this document exclude
intangible asset amortization and other purchase price fair value adjustments, goodwill impairments, restructuring related charges and certain other items
affecting comparability. In order to allow full visibility on determining comparable results, information on items affecting comparability is presented
separately for each of the components of profit or loss.
Constant currency reporting provides additional information on change in financial measures on a constant currency basis in order to better reflect the
underlying business performance. Therefore, change in financial measures at constant currency excludes the impact of changes in exchange rates in
comparison to euro, our reporting currency.
As comparable or constant currency financial measures are not defined in IFRS they may not be directly comparable with similarly titled measures used by
other companies, including those in the same industry. The primary rationale for presenting these measures is that the management uses these measures in
assessing the financial performance of Nokia and believes that these measures provide meaningful supplemental information on the underlying business
performance of Nokia. These financial measures should not be considered in isolation from, or as a substitute for, financial information presented in
compliance with IFRS. For further details on performance measures used by Nokia and reconciliations to the closest IFRS-defined measures, refer to the
Performance measures section accompanying this consolidated financial statement information.
Foreign exchange rates
Nokia’s net sales are derived from various countries and invoiced in various currencies. Therefore, our business and results from operations are exposed to
changes in foreign exchange rates between the euro, our reporting currency, and other currencies, such as the US dollar, the Indian rupee and the Chinese
yuan. To mitigate the impact of changes in exchange rates on our results, we hedge operative forecasted net foreign exchange exposures, typically within a
12-month horizon, and apply hedge accounting in the majority of cases.
The below table shows the exposure to different currencies for net sales and total costs.
Q1'23 Q1'22 Q4'22
Net sales Total costs Net sales Total costs Net sales Total costs
EUR ~25% ~25% ~25% ~30% ~25% ~25%
USD ~50% ~50% ~50% ~45% ~50% ~50%
INR ~5% ~5% ~0% ~5% ~5% ~5%
CNY ~5% ~5% ~5% ~5% ~5% ~5%
Other ~15% ~15% ~20% ~15% ~15% ~15%
Total 100% 100% 100% 100% 100% 100%
End of Q1'23 balance sheet rate 1 EUR = 1.09 USD, end of Q1'22 balance sheet rate 1 EUR = 1.11 USD and end of Q4'22 balance sheet rate 1 EUR = 1.07 USD
New and amended standards and interpretations
New standards and amendments to existing standards that became effective on 1 January 2023, did not have a material impact on Nokia's consolidated
financial statements, however, the amendments to IAS 1, Presentation of Financial Statements, and IFRS Practice Statement 2 related to disclosure of
accounting policies are expected to affect the accounting policy disclosures in Nokia’s annual consolidated financial statements for 2023. These amendments
aim to help entities provide accounting policy disclosures that are more useful by replacing the requirement to disclose ‘significant’ accounting policies with a
requirement to disclose ‘material’ accounting policies and adding guidance to help entities determine when accounting policy information is material and,
therefore, needs to be disclosed.
New standards and amendments to existing standards issued by the IASB that are not yet effective are not expected to have a material impact on Nokia's
consolidated financial statements when adopted.
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| 2. SEGMENT INFORMATION
Nokia has four operating and reportable segments for the financial reporting purposes: (1) Network Infrastructure, (2) Mobile Networks, (3) Cloud and Network
Services and (4) Nokia Technologies. Nokia also presents segment-level information for Group Common and Other. In addition, Nokia provides net sales
disclosure for the following businesses within the Network Infrastructure segment: (i) IP Networks, (ii) Optical Networks, (iii) Fixed Networks and (iv) Submarine
Networks. For detailed segment descriptions, please refer to Note 5, Segment Information, in the annual consolidated financial statements for 2022.
Accounting policies of the segments are the same as those described in Note 2, Significant accounting policies, in the annual consolidated financial
statements for 2022, except that items affecting comparability are not allocated to the segments. For more information on comparable measures and items
affecting comparability, refer to Note 1, Basis of preparation, and to the Performance Measures section accompanying this consolidated financial statement
information. Inter-segment revenues and transfers are accounted for as if the revenues were to third parties, that is, at current market prices.
Q1'23
Network
Infrastructure1
Mobile
Networks
Cloud and
Network
Services
Nokia
Technologies
Group Common
and Other
Eliminations
and unallocated
EUR million items Nokia Group
Net sales 2 248 2 567 760 242 48 (6) 5 859
of which to other segments 1 2 — 0 3 (6) —
Gross profit/(loss) 855 867 249 242 (6) (11) 2 196
Gross margin % 38.0% 33.8% 32.8% 100.0% (12.5) % 37.5%
Research and development expenses (318) (535) (151) (57) (32) (16) (1 108)
Selling, general and administrative expenses (206) (210) (130) (33) (63) (87) (729)
Other operating income and expenses 13 14 13 (3) (29) 61 68
Operating profit/(loss) 344 137 (20) 149 (131) (53) 426
Operating margin % 15.3% 5.3% (2.6) % 61.6% (272.9) % 7.3%
Share of results of associates and joint
ventures
— (18) 1 11 — — (6)
Financial income and expenses (19)
Profit before tax 401
Depreciation and amortization (55) (88) (23) (10) (1) (89) (266)
¹
Includes IP Networks net sales of EUR 781 million, Optical Networks net sales of EUR 533 million, Fixed Networks net sales of EUR 650 million and Submarine Networks net sales
of EUR 285 million.
Q1'22
Network
Infrastructure1
Mobile
Networks
Cloud and
Network
Services
Nokia
Technologies
Group Common
and Other
Eliminations
and unallocated
EUR million items Nokia Group
Net sales 1 974 2 268 736 306 76 (12) 5 348
of which to other segments 1 3 1 3 5 (12) —
Gross profit 684 902 284 305 2 (7) 2 169
Gross margin % 34.7% 39.8% 38.6% 99.7% 2.6% 40.6%
Research and development expenses (302) (530) (138) (54) (27) (20) (1 072)
Selling, general and administrative expenses (182) (199) (124) (30) (46) (94) (675)
Other operating income and expenses (4) (2) (1) (1) 48 (107) (68)
Operating profit/(loss) 195 171 20 220 (23) (228) 354
Operating margin % 9.9% 7.5% 2.7% 71.9% (30.3) % 6.6%
Share of results of associates and joint
ventures
— (27) 1 (1) — — (26)
Financial income and expenses (72)
Profit before tax 256
Depreciation and amortization (53) (85) (22) (8) (6) (100) (274)
¹
Includes IP Networks net sales of EUR 678 million, Optical Networks net sales of EUR 363 million, Fixed Networks net sales of EUR 671 million and Submarine Networks net sales
of EUR 262 million.
Material reconciling items between operating profit for the Group and total segment
operating profit
EUR million Q1'23 Q1'22
Operating profit for the Group 426 354
Amortization of acquired intangible assets 89 100
Costs associated with country exit (35) 104
Restructuring and associated charges 28 30
Divestment of businesses (26) —
Impairment and write-off of assets, net of reversals (2) (5)
Total segment operating profit 479 583
20 April 2023 19 |
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| 3. NET SALES
Management has determined that Nokia’s geographic areas are considered as the primary determinants to depict how the nature, amount, timing and
uncertainty of revenue and cash flows are affected by economic factors. Nokia’s primary customer base consists of companies that operate on a country-specific or a regional basis. Although Nokia’s technology cycle is similar around the world, different countries and regions are inherently in a different stage of
that cycle, often influenced by macroeconomic conditions specific to those countries and regions. In addition to net sales to external customers by region,
the chief operating decision maker also reviews net sales by customer type disclosed below.
Each reportable segment, as described in Note 2, Segment information, consists of customers that operate in all geographic areas. No reportable segment
has a specific revenue concentration in any geographic area other than Nokia Technologies, which is included within Europe.
Net sales by region
EUR million Q1'23 Q1'22 YoY change
Asia Pacific 578 634 (9) %
Europe 1 473 1 399 5%
Greater China 336 392 (14) %
India 853 200 327%
Latin America 232 226 3%
Middle East & Africa 436 409 7%
North America 1 666 1 826 (9) %
Submarine Networks1
285 262 9%
Total 5 859 5 348 10%
1Nokia provides net sales for the Submarine Networks business separately from the rest of the Group to improve the usefulness of disclosed information by removing volatility
caused by the specific nature of the Submarine Networks business.
Net sales by customer type
EUR million Q1'23 Q1'22 YoY change
Communications service providers (CSP) 4 725 4 373 8%
Enterprise 566 343 65%
Licensees 242 306 (21) %
Other1
327 325 1%
Total 5 859 5 348 10%
1
Includes net sales of Submarine Networks which operates in a different market, and Radio Frequency Systems (RFS), which is being managed as a separate entity, and certain
other items, such as eliminations of inter-segment revenues. Submarine Networks and RFS net sales also include revenue from communications service providers and enterprise
customers.
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| 4. PENSIONS AND OTHER POST-EMPLOYMENT BENEFITS
Nokia operates several post-employment plans in various countries including both defined contribution and defined benefit plans. Defined benefit plans
include pension plans and other post-employment benefit plans, providing retirement healthcare benefits and life insurance coverage. Nokia remeasured
96% of its defined benefit obligations and 98% of the plan assets at 31 March 2023. Nokia's pension and other post-employment plans in the United States
have been remeasured using updated valuations from an external actuary, and the main pension plans outside of the United States have been remeasured
based on updated asset valuations and changes in the discount rates during the reporting period. The impact of not remeasuring other pension and post-employment obligations is considered not material. At 31 March 2023, the weighted average discount rates used in remeasurement of the most significant
plans were as follows (comparatives at 31 December 2022): US Pension 4.58% (4.86%), US OPEB 4.60% (4.87%), Germany 3.58% (3.70%) and UK 4.72%
(4.76%).
The funded status of Nokia’s defined benefit plans (before the effect of the asset ceiling) increased from EUR 4 379 million, or 123.9%, at 31 December 2022
to EUR 4 441 million, or 124.6%, at 31 March 2023. During the quarter the global defined benefit plan asset portfolio was invested approximately 71% in fixed
income, 5% in equities and 24% in other asset classes, mainly private equity and real estate.
Changes in pension and post-employment net asset/(liability)
31 March 2023 31 March 2022 31 December 2022
EUR million Pensions1
US OPEB Total Pensions1
US OPEB Total Pensions1
US OPEB Total
Net asset/(liability) recognized 1
January
5 273 (978) 4 295 5 588 (1 256) 4 332 5 588 (1 256) 4 332
Recognized in income statement 18 (12) 6 (20) (8) (28) (69) (32) (101)
Recognized in other comprehensive
income
96 (17) 79 144 119 263 (694) 270 (424)
Contributions and benefits paid 60 3 63 53 (1) 52 177 9 186
Exchange differences and other
movements2
(108) 16 (92) 117 (24) 93 271 31 302
Net asset/(liability) recognized at the
end of the period
5 339 (988) 4 351 5 882 (1 170) 4 712 5 273 (978) 4 295
1
Includes pensions, retirement indemnities and other post-employment plans.
2
Includes Section 420 transfers, medicare subsidies, and other transfers.
Funded status
EUR million 31 March 2023 31 December 2022 30 September 2022 30 June 2022 31 March 2022
Defined benefit obligation (18 054) (18 312) (19 522) (20 029) (21 120)
Fair value of plan assets 22 495 22 691 24 681 25 127 25 921
Funded status 4 441 4 379 5 159 5 098 4 801
Effect of asset ceiling (90) (84) (121) (104) (89)
Net asset recognized at the end of the period 4 351 4 295 5 038 4 994 4 712
5. DEFERRED TAXES
Deferred tax assets are recognized to the extent it is probable that future taxable profit will be available against which the unused tax losses, unused tax
credits and deductible temporary differences can be utilized in the relevant jurisdictions. At 31 March 2023, Nokia has recognized deferred tax assets of EUR
3.8 billion (EUR 3.8 billion at 31 December 2022).
In addition, at 31 March 2023, Nokia has unrecognized deferred tax assets of approximately EUR 5 billion (EUR 5 billion at 31 December 2022), the majority of
which relate to France (approximately EUR 4 billion). These deferred tax assets have not been recognized due to uncertainty regarding their utilization. A
significant portion of the French unrecognized deferred tax assets are indefinite in nature and available against future French tax liabilities, subject to a
limitation of 50% of annual taxable profits.
Nokia continually evaluates the probability of utilizing its deferred tax assets and considers both positive and negative evidence in its assessment.
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| 6. FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial assets and liabilities recorded at fair value are categorized based on the amount of unobservable inputs used to measure their fair value. Three
hierarchical levels are based on an increasing amount of judgment associated with the inputs used to derive fair valuation for these assets and liabilities,
Level 1 being market values for exchange traded products, Level 2 being primarily based on publicly available market information and Level 3 requiring most
management judgment. At the end of each reporting period, Nokia categorizes its financial assets and liabilities to the appropriate level of fair value
hierarchy. Items carried at fair value in the following table are measured at fair value on a recurring basis. For more information about the valuation methods
and principles, refer to note 2, Significant accounting policies, and note 21, Fair value of financial instruments, in the annual consolidated financial statements
for 2022.
31 March 2023 Carrying amounts Fair value
Amortized cost Fair value through profit or loss
Fair value through other
comprehensive income1
EUR million Level 1 Level 2 Level 3 Level 2 Total Total
Other non-current financial investments — 5 — 789 — 794 794
Other non-current financial assets 190 — 93 — 35 318 318
Non-current interest-bearing financial investments 898 — — — — 898 866
Other current financial assets 288 — — — 35 323 323
Derivative assets — — 259 — — 259 259
Trade receivables — — — — 5 298 5 298 5 298
Current interest-bearing financial investments 1 657 — 1 232 — — 2 889 2 889
Cash and cash equivalents 3 665 — 1 162 — — 4 827 4 827
Total financial assets 6 698 5 2 746 789 5 368 15 606 15 574
Long-term interest-bearing liabilities 3 704 — — — — 3 704 3 683
Other long-term financial liabilities — — — 46 — 46 46
Short-term interest-bearing liabilities 606 — — — — 606 613
Other short-term financial liabilities 74 — — 504 — 578 578
Derivative liabilities — — 381 — — 381 381
Discounts without performance obligations 470 — — — — 470 470
Trade payables 4 183 — — — — 4 183 4 183
Total financial liabilities 9 037 — 381 550 — 9 968 9 954
31 December 2022 Carrying amounts Fair value
Amortized cost Fair value through profit or loss
Fair value through other
comprehensive income1
EUR million Level 1 Level 2 Level 3 Level 2 Total Total
Other non-current financial investments — 5 — 823 — 828 828
Other non-current financial assets 183 — 91 — 27 301 301
Non-current interest-bearing financial investments 697 — — — — 697 659
Other current financial assets 296 — — — 36 332 332
Derivative assets — — 239 — — 239 239
Trade receivables — — — — 5 549 5 549 5 549
Current interest-bearing financial investments 1 447 — 1 633 — — 3 080 3 080
Cash and cash equivalents 4 176 — 1 291 — — 5 467 5 467
Total financial assets 6 799 5 3 254 823 5 612 16 493 16 455
Long-term interest-bearing liabilities 4 249 — — — — 4 249 4 230
Other long-term financial liabilities — — — 48 — 48 48
Short-term interest-bearing liabilities 228 — — — — 228 228
Other short-term financial liabilities 75 — — 502 — 577 577
Derivative liabilities — — 496 — — 496 496
Discounts without performance obligations 539 — — — — 539 539
Trade payables 4 730 — — — — 4 730 4 730
Total financial liabilities 9 821 — 496 550 — 10 867 10 848
1No financial instruments measured at fair value through other comprehensive income are categorized in fair value hierarchy level 1 or level 3.
Lease liabilities are not included in the fair value of financial instruments.
Level 3 Financial assets include a large number of investments in unlisted equities and unlisted venture funds, including investments managed by NGP Capital
specializing in growth-stage investing. The fair value of level 3 investments is determined using one or more valuation techniques with unobservable inputs,
where the use of the market approach generally consists of using comparable market transactions, while the use of the income approach generally consists
of calculating the net present value of expected future cash flows.
Level 3 Financial liabilities consist primarily of a conditional obligation to China Huaxin related to Nokia Shanghai Bell.
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| Reconciliation of the opening and closing balances on level 3 financial assets and liabilities:
EUR million
Level 3 Financial
Assets
Level 3 Financial
Liabilities
Balance at 31 December 2022 823 (550)
Net (losses)/gains in income statement (36) 1
Additions 6 —
Deductions (3) —
Other movements (1) (1)
Balance at 31 March 2023 789 (550)
The gains and losses from venture fund and similar investments categorized in level 3 are included in other operating income and expenses. The gains and
losses from other level 3 financial assets and liabilities are recorded in financial income and expenses. A net loss of EUR 36 million (net gain of EUR 23 million
in 2022) related to level 3 financial instruments held at 31 March 2023 was included in the profit and loss during 2023.
7. INTEREST-BEARING LIABILITIES
Carrying amount (EUR million)
Issuer/borrower Instrument Currency
Nominal
(million) Final maturity 31 March 2023 31 March 2022 31 December 2022
Nokia Corporation 2.00% Senior Notes1
EUR 378 March 2024 366 752 736
Nokia Corporation EIB R&D Loan EUR 500 February 2025 500 500 500
Nokia Corporation NIB R&D Loan2
EUR 250 May 2025 250 250 250
Nokia Corporation 2.375% Senior Notes1
EUR 292 May 2025 286 494 478
Nokia Corporation 2.00% Senior Notes1
EUR 630 March 2026 599 753 716
Nokia Corporation 4.375% Senior Notes USD 500 June 2027 436 446 436
Nokia of America Corporation 6.50% Senior Notes USD 74 January 2028 68 67 70
Nokia Corporation 3.125% Senior Notes EUR 500 May 2028 463 498 457
Nokia of America Corporation 6.45% Senior Notes USD 206 March 2029 191 187 194
Nokia Corporation 4.375% Sustainability-linked Senior Notes3
EUR 500 August 2031 493 — —
Nokia Corporation 6.625% Senior Notes USD 500 May 2039 487 535 478
Nokia Corporation and various
subsidiaries
Other liabilities 171 133 162
Total 4 310 4 615 4 477
1
In February 2023 Nokia purchased in a tender offer EUR 372 million (49.66% of the nominal amount) of the notes due 15 March 2024, EUR 208 million (41.57% of the nominal
amount) of the notes due 15 May 2025 and EUR 120 million (15.96% of the nominal amount) of the notes due 11 March 2026.
2
The loan from the Nordic Investment Bank (NIB) is repayable in three equal annual installments in 2023, 2024 and 2025.
3
In February 2023 Nokia issued EUR 500 million 4.375% sustainability-linked Notes due August 2031 under its 5 billion Euro Medium Term Note Programme.
Significant credit facilities and funding programs
Utilized (million)
Financing arrangement
Committed/
uncommitted Currency Nominal (million) 31 March 2023 31 March 2022 31 December 2022
Revolving Credit Facility1
Committed EUR 1 500 — — —
Finnish Commercial Paper Programme Uncommitted EUR 750 — — —
Euro-Commercial Paper Programme Uncommitted EUR 1 500 — — —
Euro Medium Term Note Programme2
Uncommitted EUR 5000 2 300 2 500 2 500
1
The sustainability-linked facility has its maturity in June 2026, except for EUR 88 million having its maturity in June 2024.
2
All euro-denominated bonds have been issued under the Euro Medium Term Note Programme.
All borrowings and credit facilities presented in the tables above are senior unsecured and have no financial covenants.
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| 8. PROVISIONS
EUR million Restructuring Warranty
Litigation and
Environmental Project losses Other1
Total
At 1 January 2023 193 221 253 207 561 1 435
Charged to income statement
Additions 19 36 17 — 30 102
Reversals — (13) (6) — (58) (77)
Total charged to income statement 19 23 11 — (28) 25
Utilized during period2
(54) (30) (4) (81) (28) (197)
Translation differences and other (1) — (5) 1 (4) (9)
At 31 March 2023 157 214 255 127 501 1 254
Non-current 55 20 147 111 246 578
Current 102 194 108 16 255 676
1Other provisions include provisions for various obligations such as costs associated with exiting the Russian market, indirect tax provisions, employee-related provisions other
than restructuring provisions and asset retirement obligations.
2
The utilization of restructuring provision includes items transferred to accrued expenses, of which EUR 51 million remained in accrued expenses at 31 March 2023.
9. COMMITMENTS, CONTINGENCIES AND LEGAL PROCEEDINGS
EUR million 31 March 2023 31 March 2022 31 December 2022
Contingent liabilities on behalf of Group companies
Guarantees issued by financial institutions
Commercial guarantees 1 212 1 283 1 238
Non-commercial guarantees 531 484 538
Corporate guarantees
Commercial guarantees 497 463 504
Non-commercial guarantees 31 36 32
Financing commitments
Customer finance commitments 17 20 26
Venture fund commitments 419 452 433
The amounts in the table above represent the maximum principal amount of commitments and contingencies, and these amounts do not reflect
management's expected outcomes.
Litigations and proceedings
Significant changes to information about litigation and proceedings presented in Nokia's annual consolidated financial statements for 2022:
Continental
In 2019, Continental Automotive Systems (Continental) brought breach of FRAND (fair, reasonable and non-discriminatory terms) and antitrust claims against
Nokia and others. The antitrust claims were dismissed with prejudice. In 2022, this decision became final after Continental lost on appeal and reconsideration
requests. Continental also brought breach of contract and FRAND-related claims against Nokia in 2021. In the beginning of 2023, Nokia’s motion to dismiss
was granted in part and denied in part, and the action is proceeding on the remaining claims at this time.
Oppo
In 2021, Nokia commenced patent infringement proceedings against Oppo, OnePlus and Realme in several countries in Asia and Europe. Across these
actions, more than 30 patents are in suit, covering a mix of cellular standards and technologies such as connectivity, user interface and security. Oppo
responded by filing invalidation actions against certain Nokia patents, a number of patent infringement actions against Nokia equipment in Germany, China
and Finland and actions in China against Nokia relating to standard essential patent licensing issues. Nokia filed an additional case in Brazil and obtained a
preliminary injunction. Nokia has had multiple patents confirmed as valid and infringed including in Germany, the Netherlands and the UK.
Vivo
In 2022, Nokia commenced patent infringement proceedings against Vivo in Germany and several countries in Asia. Vivo responded by filing a number of
patent infringement actions against Nokia equipment in Germany and China. They also filed an action in China against Nokia relating to standard essential
patent licensing issues. Nokia has had patents confirmed as infringed in Germany.
10. SUBSEQUENT EVENTS
On 7 April 2023, Nokia signed an agreement to sell its 51% ownership interest in TD Tech Holding Limited (”TD Tech”), a Hong Kong based joint venture, to
New East New Materials for an estimated price of EUR 285 million. At 31 March 2023, the carrying value of TD Tech in the consolidated statement of financial
position was EUR 70 million. The estimated gain on sale of EUR 215 million will be recorded in other operating income. The closing is subject to conditions
including a pre-emption right of the joint venture partner and the sale will only take place if and when these conditions are met which could yet take some
time.
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| Performance measures
Certain financial measures presented in this interim report are not measures of financial performance, financial position or cash flows defined in IFRS, and
therefore may not be directly comparable with financial measures used by other companies, including those in the same industry. The primary rationale for
presenting these measures is that the management uses these measures in assessing the financial performance of Nokia and believes that these measures
provide meaningful supplemental information on the underlying business performance. These financial measures should not be considered in isolation from,
or as a substitute for, financial information presented in compliance with IFRS.
The below tables provide summarized information on the performance measures included in this interim report as well as reconciliations of the performance
measures to the amounts presented in the financial statements.
Performance measure Definition Purpose
Comparable measures Comparable measures exclude intangible asset amortization and other
purchase price fair value adjustments, goodwill impairments,
restructuring related charges and certain other items affecting
comparability. Reconciliation of reported and comparable consolidated
statement of income is presented below.
We believe that our comparable results provide meaningful
supplemental information to both management and investors regarding
Nokia’s underlying business performance by excluding certain items of
income and expenses that may not be indicative of Nokia’s business
operating results. Comparable operating profit is used also in
determining management remuneration.
Constant currency net
sales / Net sales
adjusted for currency
fluctuations
When net sales are reported on a constant currency basis / adjusted for
currency fluctuations, exchange rates used to translate the amounts in
local currencies to euro, our reporting currency, are the average actual
periodic exchange rates for the comparative financial period. Therefore,
the constant currency net sales / net sales adjusted for currency
fluctuations exclude the impact of changes in exchange rates during the
current period in comparison to euro.
We provide additional information on net sales on a constant currency
basis / adjusted for currency fluctuations in order to better reflect the
underlying business performance.
Comparable return on
invested capital (ROIC)
Comparable operating profit after tax, last four quarters / Invested
capital, average of last five quarters’ ending balances. Calculation of
comparable return on invested capital is presented below.
Comparable return on invested capital is used to measure how efficiently
Nokia uses its capital to generate profits from its operations.
Comparable operating
profit after tax
Comparable operating profit - (comparable operating profit x (-
comparable income tax expense / comparable profit before tax))
Comparable operating profit after tax indicates the profitability of
Nokia's underlying business operations after deducting the income tax
impact. We use comparable operating profit after tax to calculate
comparable return on invested capital.
Invested capital Total equity + total interest-bearing liabilities - total cash and interest-bearing financial investments
Invested capital indicates the book value of capital raised from equity
and debt instrument holders less cash and liquid assets held by Nokia.
We use invested capital to calculate comparable return on invested
capital.
Total cash and
interest-bearing
financial investments
("Total cash")
Total cash and interest-bearing financial investments consist of cash and
cash equivalents and current interest-bearing financial investments and
non-current interest-bearing financial investments.
Total cash and interest-bearing financial investments is used to indicate
funds available to Nokia to run its current and invest in future business
activities as well as provide return for security holders.
Net cash and interest-bearing financial
investments ("Net
cash")
Net cash and interest-bearing financial investments equals total cash
and interest-bearing financial investments less long-term and short-term interest-bearing liabilities. Lease liabilities are not included in
interest-bearing liabilities. Reconciliation of net cash and interest-bearing
financial investments to the amounts in the consolidated statement of
financial position is presented below.
Net cash and interest-bearing financial investments is used to indicate
Nokia's liquidity position after cash required to settle the interest-bearing liabilities.
Free cash flow Net cash flows from/(used in) operating activities - purchases of
property, plant and equipment and intangible assets (capital
expenditures) + proceeds from sale of property, plant and equipment
and intangible assets – purchase of other non-current financial
investments + proceeds from sale of other non-current financial
investments. Reconciliation of free cash flow to the amounts in the
consolidated statement of cash flows is presented below.
Free cash flow is the cash that Nokia generates after net investments to
tangible and intangible assets, as well as non-current financial
investments and it represents the cash available for distribution among
its security holders. It is a measure of cash generation, working capital
efficiency and capital discipline of the business.
Capital expenditure Purchases of property, plant and equipment and intangible assets
(excluding assets acquired under business combinations).
We use capital expenditure to describe investments in profit generating
activities in the future.
Recurring/One-time
measures
Recurring measures, such as recurring net sales, are based on revenues
that are likely to continue in the future. Recurring measures exclude e.g.
the impact of catch-up net sales relating to prior periods. One-time
measures, such as one-time net sales, reflect the revenues that are not
likely to continue in the future.
We use recurring/one-time measures to improve comparability between
financial periods.
Adjusted profit/(loss) Adjusted profit/(loss) equals the cash from operations before changes in
net working capital subtotal in the consolidated statement of cash flows.
We use adjusted profit/(loss) to provide a structured presentation when
describing the cash flows.
Recurring annual cost
savings
Reduction in cost of sales and operating expenses resulting from the
cost savings program and the impact of which is considered recurring in
nature.
We use recurring annual cost savings measure to monitor the progress
of our cost savings program established after the Alcatel-Lucent
transaction against plan.
Restructuring and
associated charges,
liabilities and cash
outflows
Charges, liabilities and cash outflows related to activities that either
meet the strict definition of restructuring under IFRS or are closely
associated with such activities.
We use restructuring and associated charges, liabilities and cash
outflows to measure the progress of our integration and transformation
activities.
20 April 2023 25 |
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| Comparable to reported reconciliation
Q1'23
Cost of
sales
Research
and
development
expenses
Selling,
general and
administrative
expenses
Other
operating
income
and
expenses
Operating
profit
Share of
results of
associates
and joint
ventures
Financial
income
and
expenses
Income
tax
(expense)/
benefit
Profit from
continuing
EUR million operations
Comparable (3 653) (1 093) (642) 7 479 (6) (9) (122) 342
Amortization of acquired intangible assets — (13) (76) — (89) — — 20 (69)
Costs associated with country exit — — — 35 35 — — (7) 28
Restructuring and associated charges (12) (4) (12) (1) (28) — — 4 (24)
Divestment of businesses — — — 26 26 — — (5) 21
Impairment and write-off of assets, net of
reversals 1 1 — — 2 — — — 2
Change in financial liability to acquire NSB non-controlling interest — — — — — — (10) — (10)
Items affecting comparability (11) (16) (87) 61 (53) — (10) 11 (52)
Reported (3 664) (1 108) (729) 68 426 (6) (19) (111) 290
Q1'22
Cost of
sales
Research
and
development
expenses
Selling,
general and
administrative
expenses
Other
operating
income
and
expenses
Operating
profit
Share of
results of
associates
and joint
ventures
Financial
income
and
expenses
Income
tax
(expense)/
benefit
Profit from
continuing
EUR million operations
Comparable (3 171) (1 052) (581) 39 583 (26) (40) (101) 416
Costs associated with country exit — — — (104) (104) — — — (104)
Amortization of acquired intangible assets — (15) (85) — (100) — — 21 (78)
Restructuring and associated charges (9) (8) (10) (2) (30) — — — (30)
Impairment and write-off of assets, net of
reversals 2 3 1 — 5 — — — 5
Loss allowance on customer financing loan — — — — — — (29) — (29)
Change in financial liability to acquire NSB non-controlling interest — — — — — — (3) — (3)
Items affecting comparability (7) (20) (94) (107) (228) — (32) 22 (239)
Reported (3 179) (1 072) (675) (68) 354 (26) (72) (79) 177
Net cash and interest-bearing financial investments
EUR million 31 March 2023 31 December 2022 30 September 2022 30 June 2022 31 March 2022
Non-current interest-bearing financial investments 898 697 715 473 493
Current interest-bearing financial investments 2 889 3 080 3 340 3 253 2 685
Cash and cash equivalents 4 827 5 467 5 196 5 457 6 341
Total cash and interest-bearing financial investments 8 614 9 244 9 251 9 183 9 519
Long-term interest-bearing liabilities1
3 704 4 249 4 364 4 424 4 489
Short-term interest-bearing liabilities1
606 228 232 213 126
Total interest-bearing liabilities 4 310 4 477 4 596 4 637 4 615
Net cash and interest-bearing financial investments 4 304 4 767 4 655 4 546 4 904
1
Lease liabilities are not included in interest-bearing liabilities.
Free cash flow
EUR million Q1'23 Q1'22
Net cash flows from operating activities 83 559
Purchase of property, plant and equipment and intangible assets (232) (189)
Proceeds from sale of property, plant and equipment and
intangible assets
14 1
Purchase of other non-current financial investments (16) (58)
Proceeds from sale of other non-current financial investments 4 13
Free cash flow (147) 326
20 April 2023 26 |
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| Comparable return on invested capital (ROIC)
Q1'23
EUR million
Rolling four
quarters Q1'23 Q4'22 Q3'22 Q2'22
Comparable operating profit 3 006 479 1 154 658 714
Comparable profit before tax 3 005 464 1 194 667 681
Comparable income tax expense (598) (122) (265) (116) (95)
Comparable operating profit after tax 2 411 354 899 544 614
EUR million Average 31 March 2023
31 December
2022
30 September
2022 30 June 2022 31 March 2022
Total equity 19 941 21 375 21 426 19 797 19 026 18 083
Total interest-bearing liabilities 4 527 4 310 4 477 4 596 4 637 4 615
Total cash and interest-bearing financial investments 9 162 8 614 9 244 9 251 9 183 9 519
Invested capital 15 306 17 071 16 659 15 143 14 480 13 179
Comparable ROIC 15.8%
Q4'22
EUR million
Rolling four
quarters Q4'22 Q3'22 Q2'22 Q1'22
Comparable operating profit 3 109 1 154 658 714 583
Comparable profit before tax 3 058 1 194 667 681 516
Comparable income tax expense (577) (265) (116) (95) (101)
Comparable operating profit after tax 2 526 899 544 614 469
EUR million Average
31 December
2022
30 September
2022 30 June 2022 31 March 2022
31 December
2021
Total equity 19 159 21 426 19 797 19 026 18 083 17 462
Total interest-bearing liabilities 4 596 4 477 4 596 4 637 4 615 4 653
Total cash and interest-bearing financial investments 9 293 9 244 9 251 9 183 9 519 9 268
Invested capital 14 462 16 659 15 143 14 480 13 179 12 847
Comparable ROIC 17.5%
Q1'22
EUR million
Rolling four
quarters Q1'22 Q4'21 Q3'21 Q2'21
Comparable operating profit 2 806 583 908 633 682
Comparable profit before tax 2 630 516 891 580 643
Comparable income tax expense (481) (101) (159) (117) (104)
Comparable operating profit after tax 2 293 469 746 505 572
EUR million Average 31 March 2022
31 December
2021
30 September
2021 30 June 2021 31 March 2021
Total equity 16 009 18 083 17 462 16 392 14 337 13 771
Total interest-bearing liabilities 4 913 4 615 4 653 5 080 5 063 5 153
Total cash and interest-bearing financial investments 9 152 9 519 9 268 9 381 8 751 8 842
Invested capital 11 770 13 179 12 847 12 091 10 649 10 082
Comparable ROIC 19.5%
20 April 2023 27 |
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| This financial report was approved by the Board of Directors on 20 April 2023.
Media and Investor Contacts:
Communications, tel. +358 10 448 4900 email: press.services@nokia.com
Investor Relations, tel. +358 4080 3 4080 email: investor.relations@nokia.com
• Nokia plans to publish its second quarter and half year 2023 results on 20 July 2023.
• Nokia plans to publish its third quarter and January-September 2023 results on 19 October 2023.
20 April 2023 28 |
SIGNATURE
Pursuant to the requirements
of the Securities Exchange Act of 1934, the registrant, Nokia Corporation, has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
Date: April 20, 2023 |
Nokia Corporation |
| By: |
/s/
Esa Niinimäki |
| |
Name: Esa Niinimäki |
| |
Title: Chief Legal Officer |
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