Nokia lifts full-year forecast as turnaround takes root

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FILE PHOTO: Workers protest over job cuts at Nokia in France
FILE PHOTO: The logo of Nokia is seen at the Nokia Paris-Saclay campus in Nozay, near Paris, France, June 30, 2020. REUTERS/Benoit Tessier

July 29, 2021

By Essi Lehto

HELSINKI (Reuters) -Nokia on Thursday raised its full-year outlook as promised after reporting a stronger-than-expected second-quarter operating profit, as the telecom equipment maker benefits from a sharp turnaround in its business.

The company said it now expects full-year net sales of 21.7 billion euros to 22.7 billion euros, up from its prior estimate of 20.6 billion euros to 21.8 billion euros.

Shifting geopolitics and a sharp round of cost cutting have put Nokia firmly back in the global 5G rollout race just a year after CEO Pekka Lundmark took the reins, allowing it to gain ground on Swedish arch-rival Ericsson.

“We have executed faster than planned on our strategy in the first half which provides us with a good foundation for the full year,” Lundmark said in a statement on Thursday, but added that Nokia still expects typical seasonal effects to be less pronounced this year.

The Finnish company now expects full-year operating profit margin of 10% to 12%, instead of the 7% to 10% expected previously.

Nokia’s April-June comparable operating profit rose to 682 million euros ($808.51 million) from 423 million euros a year earlier, beating the 408-million euro mean estimate in a Refinitiv poll of analysts.

The company on July 19 won its first 5G radio contract in China, securing a share in one of China Mobile’s three new 5G contracts, while Ericsson lost market share after getting caught up in a political spat.

Ericsson had been expected to get a lower share of China’s 5G roll-out after Sweden decided to exclude Chinese vendors from its own networks.

Second-quarter net sales rose 4% to 5.31 billion euros, compared to a mean estimate of 5.15 billion by analysts.

Nokia’s mobile networks unit, which struggled in recent years as it bet on the wrong semiconductor type and lost clients, saw its comparable operating profit rise to 249 million euros from 183 million a year earlier.

The driver of the company’s strong first-quarter results, the network infrastructure unit, reported a surge in comparable operating profit to 162 million euros from 66 million euros.

Nokia had announced on July 13 that it would raise its outlook, but did not provide any details.

($1 = 0.8435 euros)

(Reporting by Essi Lehto; editing by Terje Solsvik and Sriraj Kalluvila)