Nokia, the Finnish telecom and consumer-electronic company, is set to release its second quarter financial results on Thursday. Here are the key details you should know:
Net Profit Expectations
Analysts predict that Nokia’s net profit for the second quarter will be around 408 million euros ($458.2 million), compared to 585 million euros in the same period last year. However, it should be noted that these figures are on a comparable basis. When reported, the net profit is estimated to be approximately 368 million euros, down from 460 million euros in the second quarter of the previous year. It’s worth mentioning that Nokia recently revised its full-year guidance, and the second quarter’s operating profit benefited from around 80 million euros related to catch-up sales in its technologies business.
Sales Performance
For the quarter, Nokia has already reported preliminary net sales of about 5.7 billion euros.
Points of Interest
Nokia’s Second-Quarter Margins
Nokia anticipates reporting a comparable operating margin of approximately 11% for the second quarter. Despite the mobile networks division’s impressive growth in recent quarters, Jefferies analysts noted that gross margins have been impacted by the significant growth in India, where margins are relatively low. Conversely, North America, known for its high margins, has experienced a decline, leading to a contraction in gross margins from 40.2% in the second quarter of 2022 to 33.8% in the first quarter of 2023.
Unfortunately, Jefferies does not foresee a substantial recovery in the United States within the next 2-3 quarters. Additionally, there are indications of a slowdown in other high-margin regions like North East Asia and Europe. They expect India’s robust volumes to continue at least until the end of 2023, resulting in ongoing margin pressure.
Revised Guidance for 2023
The company recently provided revised guidance for its net sales in 2023. Previously projected to be between EUR24.6 billion and EUR26.2 billion, the new estimate now ranges from EUR23.2 billion to EUR24.6 billion. Similarly, the comparable operating margin has been adjusted from 11.5% to 14% to a narrower range of 11.5% to 13%.
Reasons for Weaker Demand Outlook
Nokia attributes the weaker demand outlook for the second half of the year to two main factors. Firstly, the macroeconomic environment has had an impact, as customers’ spending plans are increasingly affected by high inflation and rising interest rates. Secondly, customers are currently engaged in inventory digestion, which has led to some projects being delayed until 2024, particularly in North America.
Inventory Normalization and Supply Chain Challenges
Additionally, Nokia is currently undergoing inventory normalization after facing supply chain challenges over the past two years.
These factors combined have prompted the company to revise its sales and operating margin projections for 2023. While adjusting its expectations, Nokia remains committed to providing high-quality products and services to its customers.
