Nokia Corporation Report for Q4 2014 and Full Year 2014

nokiaNokia Corporation

Financial Statement Release

January 29, 2015 at 08:00 (CET +1)

This is a summary of the Nokia Corporation report for Q4 2014 and full year 2014 published today. The complete fourth quarter and full year 2014 report with tables is available at http://company.nokia.com/en/financials. Investors should not rely on summaries of our interim reports only, but should review the complete reports with tables.

FINANCIAL AND OPERATING HIGHLIGHTS

Fourth quarter 2014 highlights: 

  • Non-IFRS diluted EPS in Q4 2014 of EUR 0.09 (EUR 0.08 in Q4 2013); reported diluted EPS of EUR 0.08 (EUR 0.05 in Q4 2013)
  • Net sales in Q4 2014 of EUR 3.8 billion (EUR 3.5 billion in Q4 2013) 

Nokia Networks

  • Nokia Networks achieved 8% year-on-year growth in net sales, from EUR 3.1 billion in Q4 2013 to EUR 3.4 billion in Q4 2014, primarily due to strong performance in North America.
  • Nokia Networks achieved strong underlying operating profitability with non-IFRS operating profit of EUR 470 million, or 14.0% of net sales, compared to EUR 349 million, or 11.2% of net sales, in Q4 2013.
  • Mobile Broadband achieved 13% year-on-year increase in net sales, driven by strong growth in overall core networking technologies and modest growth in overall radio technologies. Within radio technologies, strong year-on-year growth in LTE was partially offset by a decline in mature radio technologies.
  • Global Services returned to year-on-year growth for the first time since Q4 2012, with net sales up by 3% and particularly strong growth in the strategically important systems integration business line.

HERE

  • HERE achieved 15% year-on-year growth in net sales, from EUR 255 million in Q4 2013 to EUR 292 million in Q4 2014, primarily due to HERE’s leading market position and positive trends in the automotive market.
  • In Q4 2014, HERE sold map data licenses for the embedded navigation systems of 3.9 million new vehicles, compared to 3.2 million vehicles in Q4 2013. 

Nokia Technologies

  • Nokia Technologies achieved 23% year-on-year growth in net sales, from EUR 121 million in Q4 2013 to EUR 149 million in Q4 2014, primarily due to Microsoft becoming a more significant intellectual property licensee in conjunction with the sale of substantially all of Nokia’s Devices & Services business to Microsoft, as well as higher intellectual property licensing income from certain other licensees.
  • In Q4 2014, Nokia Technologies non-IFRS operating expenses increased both year-on-year and sequentially primarily due to investments in business activities, which target new and significant long-term growth opportunities, as well as increased activities related to anticipated and ongoing patent licensing cases.

 Full year 2014 highlights:

  • Nokia’s full year 2014 non-IFRS diluted EPS grew by 40% to EUR 0.28 (EUR 0.20 in 2013); reported diluted EPS of EUR 0.30 (EUR 0.05 in 2013)
  • Nokia’s full year 2014 net sales of EUR 12.7 billion (EUR 12.7 billion in 2013)
  • Nokia Board of Directors will propose a dividend of EUR 0.14 per share for 2014 (EUR 0.11 per share for 2013, in addition to which a special dividend of EUR 0.26 per share was paid in 2014) 

Commenting on the fourth quarter and full year results, Rajeev Suri, Nokia President and CEO, said:

 

2014 was a time of significant change for Nokia and we ended the year in a renewed position of strength. I want to extend my thanks to our customers who have shown such strong support during our transformation and our employees who have worked so hard to make it happen.

 

The power of the new Nokia could be seen in our fourth quarter results. All of our businesses delivered strong year-on-year net sales growth. Profitability was excellent in Nokia Networks, and we were particularly pleased with our net sales growth in North America and core networks. HERE continued its momentum in the automotive segment, and the early reception to the Nokia N1 tablet has been remarkably favorable, showing the ongoing power of the Nokia brand and the long-term potential of our brand licensing business.

 

Looking ahead, while 2014 was a year of reinvention, we see 2015 as a year of execution. We are already moving fast, with HERE sharpening its strategic focus, Nokia Technologies accelerating its licensing and innovation activities, and Nokia Networks increasing its momentum in growth areas including virtualization and telco cloud.

 

As we pursue these opportunities, we will not shy away from investing where we need to invest. But, we plan to always combine that with disciplined cost control and a focus on delivering ongoing productivity and quality improvements across the company.

 

Overall, while we must remain focused on our execution, I believe that Nokia is well positioned to meet its goals for the year.

 

 

SUMMARY FINANCIAL INFORMATION

 

 

Reported and non-IFRS
fourth quarter 2014 results1

 

Reported and non-IFRS
full year 2014 results1

EUR million

Q4/14

Q4/13

YoY

Change

Q3/14

QoQ

Change

 

 

2014

 

2013

YoY

Change

Continuing Operations

Net sales

3 802

3 476

9%

3 324

14%

 

12 732

12 708

0%

Gross margin %
(non-IFRS)

43.5%

42.5%

 

44.5%

 

 

44.3%

42.1%

 

Operating expenses
(non-IFRS)

-1 129

-1 018

11%

-1 006

12%

 

-3 997

-3 994

0%

Operating profit
(non-IFRS)

524

409

28%

457

15%

 

1 632

1 437

14%

Non-IFRS exclusions
from operating profit

70

134

 

1 267

 

 

1 461

919

 

Operating profit

454

274

66%

-810

 

 

170

518

-67%

Profit (non-IFRS)

356

317

12%

353

1%

 

1 095

879

25%

Non-IFRS exclusions
from profit

29

133

 

-407

 

 

-76

838

 

Profit

327

183

79%

760

-57%

 

1 171

41

2 756%

EPS, EUR diluted
(non-IFRS)

0.09

0.08

13%

0.09

0%

 

0.28

0.20

40%

EPS, EUR diluted
(reported)

0.08

0.05

60%

0.19

-58%

 

0.30

0.05

500%

Net cash from
operating activities

270

–

 

406

-33%

 

2 330

1 134

105%

Net cash and
other liquid assets

5 023

2 309

118%

5 025

0%

 

5 023

2 309

118%


Note 1 relating to results information and non-IFRS (also referred to as “underlying”) results: The results information in this report is unaudited. Percentages and figures presented herein may include rounding differences and therefore may not add up precisely to the totals presented and may vary from previously published financial information. In addition to information on our reported IFRS results, we provide certain information on a non-IFRS, or underlying business performance, basis. Non-IFRS results exclude all material special items for all periods. In addition, non-IFRS results exclude intangible asset amortization and other purchase price accounting related items arising from business acquisitions. We believe that our non-IFRS results provide meaningful supplemental information to both management and investors regarding Nokia’s underlying business performance by excluding the above-described items that may not be indicative of Nokia’s business operating results. These non-IFRS financial measures should not be viewed in isolation or as substitutes to the equivalent IFRS measure(s), but should be used in conjunction with the most directly comparable IFRS measure(s) in the reported results. More information, including a reconciliation of our Q4 2014 and Q4 2013 non-IFRS results to our reported results, can be found in our complete Q4 2014 and full year 2014 report in tables 14-18. A reconciliation of our Q3 2014 non-IFRS results to our reported results can be found in our complete Q3 2014 interim report with tables on pages 22-27 published on October 23, 2014.

 

NOKIA’S OUTLOOK

  • Nokia continues to expect Nokia Networks’ net sales to grow on a year-on-year basis for the full year 2015.
  • Nokia continues to expect Nokia Networks’ non-IFRS operating margin for the full year 2015 to be in-line with Nokia Networks’ long-term non-IFRS operating margin range of 8% to 11%.
  • Nokia’s outlook for Nokia Networks net sales and non-IFRS operating margin is based on expectations regarding a number of factors, including:
    • competitive industry dynamics;
    • product and regional mix;
    • the timing of major network deployments; and
    • expected continued operational improvement.
  • Nokia expects Nokia Networks’ net sales and non-IFRS operating margin in the first quarter 2015 to decline seasonally compared to the fourth quarter 2014. Note that Nokia Networks non-IFRS operating margin benefited from a relatively high proportion of software sales in the first quarter 2014.
  • Nokia continues to expect HERE’s net sales to grow on a year-on-year basis for the full year 2015.
  • Nokia now expects HERE’s non-IFRS operating margin for the full year 2015 to be between 7% and 12%, based on HERE’s leading market position, positive industry trends and improved focus on cost efficiency. This compares to Nokia’s previous outlook for HERE’s non-IFRS operating margin for the full year 2015 to be between 5% and 10%.
  • Nokia continues to expect Nokia Technologies’ net sales to grow on a year-on-year basis for the full year 2015, excluding potential amounts related to the expected resolution of our ongoing arbitration with Samsung, which is expected to be concluded during 2015.
  • Nokia continues to expect Nokia Technologies’ non-IFRS operating expenses to increase meaningfully on a year-on-year basis for the full year 2015. More specifically, Nokia expects Nokia Technologies’ quarterly non-IFRS operating expenses in 2015 to be approximately in-line with the fourth quarter 2014 level. This is related to higher investments in licensing activities, licensable technologies, and business enablers including go-to-market capabilities, which target new and significant long-term growth opportunities.
  • Nokia continues to expect Nokia Group capital expenditures to be approximately EUR 200 million in 2015, primarily attributable to capital expenditures by Nokia Networks.
  • Nokia continues to expect Nokia Group financial income and expenses, including net interest expenses and the impact from changes in foreign exchange rates on certain balance sheet items, to amount to an expense of approximately EUR 160 million in 2015, subject to changes in foreign exchange rates and the level of interest-bearing liabilities.
  • Nokia continues to expect Group Common Functions non-IFRS operating expenses to be approximately EUR 120 million in 2015.
  • Nokia continues to target to record tax expenses in Nokia Group’s Consolidated Income Statements at a long-term effective tax rate of approximately 25%. However, Nokia targets Nokia Group’s cash tax obligations to continue at approximately EUR 250 million annually until Nokia Group’s deferred tax assets have been fully utilized. The cash tax amount may vary depending on profit levels in different jurisdictions and the amount of license income potentially subject to withholding tax. 
  • Nokia plans to publish its “Nokia in 2014” annual report, which includes the review by the Board of Directors and the audited annual accounts, in week 13 of 2015. The annual report will be available at company.nokia.com/financials.
  • Nokia plans to publish its first quarter 2015 results on April 30, 2015.
  • Nokia’s Annual General Meeting 2015 is scheduled to be held on May 5, 2015.

 

Nokia Corporation Q4 2014 and full year 2014 report

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