Sales growth in Q1 driving margin increase and strong cash generation
- Strong start to the year with constant currency net sales up 9 percent year-on-year, driven by strong growth in Network Infrastructure and solid growth in Mobile Networks; reported net sales increased 3 percent
- Enterprise constant currency net sales up 18 percent year-on-year, as we gained 63 new customers, more than doubling the number we added in Q1 2020; reported net sales increased 14 percent
- Comparable gross margin of 38.2 percent (reported 37.9 percent), reflecting improvements in Mobile Networks, mainly driven by 5G growth and favorable product and regional mix, and broad improvements across Network Infrastructure
- Comparable operating margin of 10.9 percent (reported 8.5 percent), with improvements in comparable operating profit across all business groups
- Comparable diluted EPS of EUR 0.07; reported diluted EPS of EUR 0.05
- Strong cash flow performance, driven by operating profit and good collection of receivables
- Solid liquidity position, with net cash of EUR 3.7bn and total cash of EUR 8.8bn
- Executing well on three-phased approach to achieve sustainable, profitable growth and technology leadership set out at Capital Markets Day
- Full year 2021 and 2023 outlook maintained
This is a summary of the Nokia Corporation financial report for Q1 2021 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. Investors should not solely rely on summaries of Nokia’s financial reports but should also review the complete reports with tables.
PEKKA LUNDMARK, PRESIDENT AND CEO, ON Q1 2021 RESULTS
We have delivered a robust start to the year with strong net sales, operating margin and cash flow. Today’s results demonstrate that we are on track to deliver on our three-phased plan to achieve sustainable, profitable growth and technology leadership as announced at our recent Capital Markets Day.
I was particularly pleased by strong sales growth across our Network Infrastructure business group driven by increasing demand for next generation connectivity; good progress in Mobile Networks in securing full portfolio competitiveness; continued double-digit sales growth with our Enterprise customers; double-digit sales growth in North America; and good net sales development for Nokia Technologies.
At this point we are maintaining our Outlook for the full year, as we want to see how 2021 continues to develop. The solid first quarter provides a good foundation for achieving the higher end of the 7 to 10 percent comparable operating margin range. We expect our typical quarterly earnings seasonality to be less pronounced in 2021, and we continue to monitor overall market developments including visibility for semiconductor availability. I am proud of how we have continued to successfully deliver to our customers during the global semiconductor shortage.
I want to recognise all the hard work that the Nokia team has put in and thank them for delivering such a strong first quarter.
Nokia and its business are exposed to a number of risks and uncertainties which include but are not limited to:
- Competitive intensity, which is particularly impacting Mobile Networks and is expected to continue at a high level in full year 2021, as some competitors seek to take share in the early stages of 5G;
- Our ability to accelerate our product roadmaps and cost competitiveness through additional 5G investments in full year 2021, thereby enabling us to drive product cost reductions and maintain the necessary scale to be competitive;
- Some customers are reassessing their vendors in light of security concerns, creating near-term pressure to invest in order to secure long-term benefits;
- Developments in North America following the conclusion of the C-band auction, including the potential for temporary capital expenditure constraints or the acceleration of 5G deployments;
- The scope and duration of the COVID-19 impact, particularly in certain countries, including India, where the pandemic has worsened, and the pace and shape of the economic recovery following the pandemic;
- Our ability to procure certain standard components, such as semiconductors;
- The timing of completions and acceptances of certain projects;
- Our product and regional mix;
- Macroeconomic, industry and competitive dynamics;
- The timing and value of new and existing patent licensing agreements with smartphone vendors, automotive companies and consumer electronics companies;
- Results in brand and technology licensing; costs to protect and enforce our intellectual property rights; and the regulatory landscape for patent licensing;
- as well as the risk factors specified under Forward-looking Statements of this release, and our 2020 annual report on Form 20-F published on March 4, 2021 under Operating and financial review and prospects-Risk factors.
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, growth management and operational key performance indicators; B) expectations, plans or benefits related to future performance of our businesses (including the expected impact, timing and duration of that impact of COVID-19 on our businesses, our supply chain and our customers’ businesses) and any future dividends; C) expectations and targets regarding financial performance, cash generation, results, the timing of receivables, operating expenses, taxes, currency exchange rates, hedging, cost savings, product cost reductions and competitiveness, as well as results of operations including targeted synergies, better commercial management and those results related to market share, prices, net sales, income and margins; D) ability to execute, expectations, plans or benefits related to changes in organisational and operational structure and cash or cost savings arrangements; and (E) any statements preceded by or including “continue”, “believe”, “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.