NOKIA, despite drop in sales due to pandemic, claims to return to profits

Finnish telecommunications equipment provider Nokia said Friday it had returned to profit within the second quarter and hiked its 2020 forecasts, despite a drop by sales thanks to the coronavirus pandemic. Net profit came in at 94 million euros ($112 million) compared to a loss of 193 million euros during April-June last year. The result was still far below the analyst consensus of a profit of 142 million euros compiled by Fact-set. 

“Nokia delivered a powerful improvement in Q2, with better-than-expected profitability, significant improvement in cash generation, clear indications of a return to strength in mobile radio, and a year-on-year increase in earnings-per-share, despite the challenges of COVID-19,” outgoing CEO Rajeev Suri said in an exceeding statement.

Pekka Lundmark, who heretofore served as CEO of Finnish energy company Fortum, will take over from Suri. Sales fell by 10.6% to five billion euros, with Nokia estimating the impact from the coronavirus pandemic at 300 million euros for the second quarter. 

Rajeev Suri (CEO of Nokia)

“We expect that the bulk of sales missed within the quarter thanks to COVID-19 will shift to future periods,” said Suri.

The company managed to extend its operating margin to eight.3% from 7.9% one year ago, employing a method that’s not compliant with international accounting rules. For this year it now aims to extend this measure to 9.5%, “plus or minus 1.5 percentage points,” compared to an earlier forecast of 9%, with income now clearly positive.

In October 2018, the corporate announced a 700 million euros cost savings plan, which remains ongoing. Nokia has faced more difficulties than its competitors Huawei and Ericsson in establishing itself within the marketplace for 5G mobile network equipment. 

It reported signing 83 contracts for 5G network equipment. Sweden’s Ericsson said earlier this month it had signed a complete of 99 contracts for 5G network equipment.  Nokia’s shares were up over 13% in early afternoon trading in Helsinki, where the market was up 2.1% overall.

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