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Nokia Corporation Financial Report for Q4 and full year 2022Nokia Corporation Nokia Corporation Financial Report for Q4 and full year 2022 A solid end to a year of acceleration
This is a summary of the Nokia Corporation Financial Report for Q4 and full year 2022 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 Q4 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 Q4 AND FULL YEAR 2022 RESULTS We said at the start of 2022 that it would be a year of acceleration and we delivered what we promised. The Nokia team did a great job navigating geopolitical, economic and supply challenges, successfully executed our strategy and delivered a strong full year performance. Our constant currency full year net sales growth accelerated to 6% and we maintained a stable comparable operating margin of 12.5% which is a good result considering one-off benefits we had in 2021. One of our strategic priorities is to broaden our customer base and grow in Enterprise and I’m delighted we achieved 21% net sales growth in constant currency for the full year with 49% growth in Q4. There were important webscale wins in 2022 with momentum also continuing to build in our private wireless business where we added 45 customers in Q4. The highlight of the fourth quarter was our stellar Network Infrastructure performance, which grew net sales 14% in constant currency with significant operating margin expansion. Notably, we saw a strong acceleration in both our Optical Networks and IP Networks businesses with net sales growing 21% and 11% respectively in constant currency. Mobile Networks delivered 3% constant currency growth in Q4 with operating margin declining year-on-year, as expected due to changes in regional mix. On a full year basis, Mobile Networks’ 3% net sales growth and 90bps higher operating margin is encouraging after a successful reset the previous year. We continue to see solid demand trends in Network Infrastructure and Mobile Networks as we look ahead into 2023. In Cloud and Network Services, we saw good Q4 net sales growth of 5% in constant currency and continued improvement in gross margin, which increased 200bps year-on-year. Increased investments into private wireless and Software-as-a-Service meant operating margin was largely stable. This is evidence that the ongoing optimization of our portfolio is bearing fruit and positioning us for continued profitable growth in the future. In Nokia Technologies, we remain in two litigation/renewal discussions. Several court rulings have validated our position giving us confidence in our approach to prioritize the value of our portfolio over achieving specific timelines. At the end of the year, a long-term licensee exercised an option to extend its license in effect into perpetuity. This meant we recognized all outstanding revenue for this license in the fourth quarter. More recently, I was pleased to see us enter into a new multi-year patent license agreement with Samsung, which underscores Nokia Technologies’ strong patent portfolio and supports its ability to deliver stable operating profit over the long-term. Looking forward to 2023, while we are mindful of the uncertain economic outlook, demand remains robust. We expect another year of growth and we are targeting full year net sales of between EUR 24.9bn and EUR 26.5bn which implies between 2% and 8% growth in constant currency. We are also targeting a comparable operating margin in the range of 11.5% to 14.0%. Whilst this growth means we have another year of working capital build constraining our free cash flow conversion from comparable operating profit to a range of 20% to 50%, we expect significantly stronger cash flow in 2024. Due to our confidence in our long-term outlook and strong balance sheet position the Board is proposing an increase in the dividend to EUR 0.12 per share. I would like to thank the whole Nokia team for delivering a really positive 2022 and for putting us on a strong foundation to keep delivering in 2023 and beyond. FINANCIAL RESULTS
SHAREHOLDER DISTRIBUTION Dividend The Board of Directors proposes that the Annual General Meeting 2023 authorizes the Board to 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 would 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. Nokia’s dividend policy is to target recurring, stable and over time growing ordinary dividend payments, taking into account the previous year’s earnings as well as the company’s financial position and business outlook. Under the authorization by the Annual General Meeting held on 5 April 2022, the Board of Directors may resolve an aggregate maximum distribution of EUR 0.08 per share. 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. Under the authorization, dividends of EUR 0.02 per share were paid in Q2 2022 totaling EUR 113 million; in Q3 2022 totaling EUR 112 million and in Q4 2022 totaling EUR 112 million. On 26 January 2023, the Board resolved to distribute a dividend of EUR 0.02 per share. The dividend record date is on 31 January 2023 and the dividend will be paid on 9 February 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 of the fourth installment and executed payments of the previous installments, the Board has no remaining distribution authorization. The payment of the fourth installment of the distribution is expected to total approximately EUR 112 million in Q1 2023. Share buyback program In 2020 and 2021, Nokia generated strong cash flow which has significantly improved the cash position of the company. To manage the company’s capital structure, Nokia’s Board of Directors initiated a share buyback program under the authorizations from the Annual General Meetings 2021 and 2022 to repurchase shares to return up to EUR 600 million of cash to shareholders in tranches over a period of two years. The first phase of the share buyback program with a maximum aggregate purchase price of EUR 300 million started in February 2022 and ended in November 2022. Under the first phase of the buyback program, Nokia repurchased 63 963 583 of its own shares at an average price per share of approximately EUR 4.69. The repurchases reduced the Company’s unrestricted equity by EUR 300 million and the repurchased shares were cancelled in December 2022. 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. OUTLOOK
1 Assuming the rate 1 EUR = 1.07 USD as of 31 December 2022 through 2023. 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.
Nokia provides the following approximate outlook assumptions for additional items concerning 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.
RISK FACTORS Nokia and its businesses are exposed to a number of risks and uncertainties which include but are not limited to:
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 COVID-19 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
FINANCIAL CALENDAR 2023
About Nokia At Nokia, we create technology that helps the world act together. As a trusted partner for critical networks, we are committed to innovation and technology leadership across mobile, fixed and cloud networks. We create value with intellectual property and long-term research, led by the award-winning Nokia Bell Labs. Adhering to high standards of integrity and security, we help build the capabilities needed for a more productive, sustainable and inclusive world. Inquiries: Nokia Nokia Attachment |