First quarter 2003 compared with the first quarter 2002:
- Net sales were EUR 6 773 million (EUR 7 014 million in 1Q 2002), down by 3%.
- Pro forma operating profit was EUR 1 187 million (EUR 1 286 million), down by 8%. This included a gain of EUR 56 million in 1Q 2003 from the sale of the remaining shares of Nokian Tyres. Pro forma operating margin was 17.5% (18.3%).
- Pro forma adjustments for 1Q 2003 were EUR 183 million, including:
- Goodwill amortization of EUR 43 million
- Positive adjustment of EUR 226 million to 3Q 2002 customer finance impairment (MobilCom)
- Pro forma net profit was EUR 860 million (EUR 915 million), down by 6%.
- Pro forma earnings per share (diluted) were EUR 0.18 (EUR 0.19). The sale of the shares of
Nokian Tyres contributed approximately EUR 0.01.
- Reported operating profit increased by 11% to EUR 1 370 million (EUR 1 234 million).
- Reported net profit increased by 13% to EUR 977 million (EUR 863 million) and reported earnings per - share (diluted) increased to EUR 0.20 (EUR 0.18).
- Operating cash flow in the first quarter continued strongly at EUR 1.4 billion.
|
1Q 2003 RESULTS |
PRO FORMA
(excludes goodwill amortization and non-recurring items) |
REPORTED | ||||
|
EUR (million) |
1Q/2003 |
1Q/2002 |
Change (%) |
1Q/2003 |
1Q/2002 |
Change (%) |
|
Net sales |
6 773 |
7 014 |
-3 |
6 773 |
7 014 |
-3 |
|
Nokia Mobile Phones |
5 476 |
5 438 |
1 |
5 476 |
5 438 |
1 |
|
Nokia Networks |
1 217 |
1 436 |
-15 |
1 217 |
1 436 |
-15 |
|
Nokia Ventures Organization |
94 |
157 |
-40 |
94 |
157 |
-40 |
|
Operating profit |
1 187 |
1 286 |
-8 |
1 370 |
1 234 |
11 |
|
Nokia Mobile Phones |
1 311 |
1 208 |
9 |
1 288 |
1 185 |
9 |
|
Nokia Networks |
-127 |
146 |
|
85 |
122 |
-30 |
|
Nokia Ventures Organization |
-32 |
-30 |
-7 |
-32 |
-35 |
9 |
|
Common Group Expenses |
35 |
-38 |
|
29 |
-38 |
|
|
Operating margin |
17.5 |
18.3 |
|
20.2 |
17.6 |
|
|
Nokia Mobile Phones |
23.9 |
22.2 |
|
23.5 |
21.8 |
|
|
Nokia Networks |
-10.4 |
10.2 |
|
7.0 |
8.5 |
|
|
Nokia Ventures Organization |
-34.0 |
-19.1 |
|
-34.0 |
-22.3 |
|
|
Profit before tax and minority interests |
1 263 |
1 313 |
-4 |
1 446 |
1 261 |
15 |
|
Net profit |
860 |
915 |
-6 |
977 |
863 |
13 |
|
EPS, EUR |
|
|
|
|
|
|
|
Basic |
0.18 |
0.19 |
-5 |
0.20 |
0.18 |
11 |
|
Diluted |
0.18 |
0.19 |
-5 |
0.20 |
0.18 |
11 |
NB: All pro forma 1Q figures can be found in the tables on pages 7 and 8. A reconciliation of the pro forma figures to our reported results can be found in the tables on page 9.
JORMA OLLILA, CHAIRMAN AND CEO:
During the first quarter 2003, we were pleased to see mobile phone market volumes growing year on year for the fourth consecutive quarter, rising by 10% to approximately 98 million units. Nokia's own volumes grew by 13% to around 38 million units, marking faster-than-market growth. Again, profits in our mobile phone business exceeded our expectations, rising 9% on very healthy margins of 24%. With this strong performance from our mobile phones, we succeeded in substantially reducing the impact of difficult operating conditions in our network infrastructure business and were able to post solid overall first-quarter results.
Mobility has a lot to offer, and together with our operator customers we are providing consumers and companies a growing range of products to enhance the already rich world of mobile communication. In early 2003, we began seeing an increased impact of color and multimedia on the mobile phone market. While the network market remains very difficult, we have announced strong abative measures in our network infrastructure business to bring down costs and improve operational efficiency and profitability.
Reducing personnel is always difficult for our whole organization and particularly for the people directly involved. However, the actions we are taking are necessary in order to build a healthy and viable networks business going forward. In the second quarter, we plan to take a charge that is currently estimated to adversely impact our pro forma and reported operating profit by EUR 350 to 400 million.
During the first quarter, we strengthened our product offering with the announcement of 17 new mobile phones. In the Americas, in particular, we launched seven new CDMA phones, most of which will begin shipping during the current quarter. We also announced our first TDMA color models as well as several new GSM models tailored for the Americas markets.
The Nokia 3650 imaging smart phone, with its video recording and streaming video capability, began shipping globally and has met with a favorable response from operators and consumers in all key markets. As a high-volume imaging phone, it is of particular strategic importance for us as it brings the mobile multimedia experience to a broader base of consumers.
We have also seen an enthusiastic response to our growing number of color screen phones, with the Nokia 3510i color model now becoming the second-best selling phone in our portfolio. This clearly indicates a definitive shift from black and white to color in the mobile communications experience.
In February, we entered the games industry with the launch of our first mobile game deck, the Nokia N-Gage. This fan-shaped device, with large color screen and games optimized controls, is just one of many transformatory models in our product lineup. Nokia N-Gage and other new devices coming on stream, such as the Nokia 3300 music device and the Nokia 6800 messaging device, illustrate our innovative design strength as we lead the industry in reshaping people's understanding of what a mobile device should look like.
BUSINESS DEVELOPMENT AND FORECASTS
Nokia's first-quarter sales of EUR 6.8 billion declined by 3% compared with the first quarter 2002, reflecting continued weakness in the company's network infrastructure business. First-quarter pro forma operating profit for the Nokia group showed a slight year-on-year decline to EUR 1.2 billion. This included a gain of EUR 56 million in 1Q 2003 from the sale of the remaining shares of Nokian Tyres. Pro forma operating margins for the group in the first quarter continued solidly at 17.5%. Pro forma EPS (diluted) for the group reached EUR 0.18, slightly above guidance given in March, with the sale of the shares of Nokian Tyres contributing approximately EUR 0.01 to pro forma EPS (diluted).
Nokia's cash position continued to improve, with total available cash reaching EUR 10.5 billion by the end of the quarter. At the Annual General Meeting, the Board received authorization to repurchase shares and subsequently made the decision to begin a share buy-back program.
Mobile phones sales up 1% year on year, with excellent profitability
Mobile phone sales rose by 1% year on year, within previously stated guidance, reaching EUR 5.5 billion. Strong sales growth in Europe was virtually offset by somewhat slower sales in Asia Pacific and substantially weaker sales in the Americas. The company's focus on operational efficiency continued to drive profitability at Nokia Mobile Phones, with pro forma operating profit in the first quarter rising 9% year on year to EUR 1.3 billion and mobile phone margins continuing at very healthy levels of 23.9%.
Substantial first-quarter loss in networks, but decisive actions taken
In Nokia Networks, first-quarter sales declined by 15% year on year to EUR 1.2 billion, reflecting lower sales in Europe and Asia Pacific only slightly offset by increased sales in the US. Nokia Networks operating profit decreased substantially to a pro forma operating loss of EUR 127 million, reflecting lower sales volumes and continuing high costs related to the first-phase implementation of 3G technologies.
Against this backdrop, Nokia is taking actions to reduce costs and improve profitability, while at the same time maintaining its leading position in the network infrastructure business. In February, Nokia Networks announced plans to reduce the number of its R&D sites globally in a move to align its focus more closely with the current business environment. This will affect approximately 550 jobs. In April, Nokia Networks announced further reductions across all its functions, involving approximately 1 800 employees.
Outlook for 2Q 2003
Backed by Nokia's broad and competitive product range, including a growing share of compelling color and multimedia models, second-quarter sales for Nokia Mobile Phones are expected to grow between 4% and 12% year on year, and by somewhat less for the group. Strong profitability at Nokia Mobile Phones is expected to continue.
Due to the announced actions in Nokia Networks, the company plans to take a charge relating to restructuring and possible impairments in the range of EUR 350 million to EUR 400 million during the second quarter as part of normal operating expenses, adversely impacting the company's pro forma and reported operating profit. In connection with these actions, Nokia is assessing research and development projects to consider possible project closures or impairments. Taking into account the current estimated EPS impact of the charge of EUR 0.05 to EUR 0.06, pro forma EPS (diluted) for the second quarter is expected to be between EUR 0.13 and EUR 0.16, while reported EPS (diluted) is expected to be between EUR 0.12 and EUR 0.15.
Faster-than-market growth in mobile phones
Nokia's market share for the first quarter is estimated at 38%, representing a year-on-year increase. The company's market share for the second quarter 2003 is estimated to be higher than the first quarter.
Overall mobile phone market volumes during the first quarter grew year on year for the fourth consecutive quarter, rising by 10% to approximately 98 million units, while Nokia's own volumes grew by 13% to around 38 million units, marking faster-than-market growth. In the second quarter, the overall global handset market is expected to grow year on year and be sequentially up. Full-year 2003 global handset volume is expected to grow by approximately 10%, compared with 405 million units in 2002. Nokia volume growth is expected to be stronger than market growth for the full year 2003.
Developments in mobile networks
In the network infrastructure business we do not expect market conditions to improve during the year. Operator investment has decreased to an exceptionally low level, and in some cases network rollouts have slowed. Nokia now expects the overall network infrastructure market and its own accessible market to decline by 15% or more in 2003.
The third-quarter 2002 customer financing impairment charge for MobilCom was positively adjusted during the first quarter 2003 by EUR 226 million. This reflected an increase in the valuation of the former MobilCom receivables when they were exchanged for France Telecom securities on March 3, 2003.
It should be noted that certain statements herein which are not historical facts, including, without limitation, those regarding A) the timing of product deliveries; B) our ability to develop and implement new products and technologies; C) expectations regarding market growth and developments; D) expectations for growth and profitability; and E) statements preceded by "believe," "expect," "anticipate," "foresee" or similar expressions, are forward-looking statements. Because these statements involve risks and uncertainties, actual results may differ materially from the results that we currently expect. Factors that could cause these differences include, but are not limited to: 1) developments in the mobile communications market including the continued development of the mobile phone replacement market and the timing and success of the roll-out of new products and solutions based on 3G and subsequent new technologies; 2) demand for our products and solutions; 3) the development of the mobile software and services market in general; 4) the availability of new products and services by network operators; 5) market acceptance of new products and service introductions; 6) the intensity of competition in the mobile communications market and changes in the competitive landscape; 7) the impact of changes in technology; 8) general economic conditions globally and in our most important markets; 9) pricing pressures; 10) consolidation or other structural changes in the mobile communications market; 11) the success and financial condition of the Company's partners, suppliers and customers; 12) the management of the Company's customer financing exposure; 13) the success of our product development; 14) our success in maintaining efficient manufacturing and logistics as well as high product quality; 15) the ability of the Company to source quality components and research and development without interruption and at acceptable prices; 16) our ability to have access to the complex technology involving patents and other intellectual property rights included in our products and solutions; 17) inventory management risks resulting from shifts in market demand; 18) fluctuations in exchange rates, including, in particular, the fluctuations between the euro, which is our reporting currency, and the US dollar and the Japanese yen; 19) the impact of changes in government policies, laws or regulations; as well as 20) the risk factors specified on pages 11 to 18 of the Company's Form 20-F for the year ended December 31, 2002.
NOKIA
Helsinki - April 17, 2003
For more information:
Lauri Kivinen, Corporate Communications, tel. +358 7180 34495
Ulla James, Investor Relations, tel. +1 972 894 4880
Antti Räikkönen, Investor Relations, tel. +358 7180 34290
www.nokia.com
The complete press release with tables is available at:
- Nokia will report 2Q results on July 17, 2003 and plans a mid-quarter update on June 10, 2003.
- Results announcements for 3Q and 4Q 2003 are planned for October 16, 2003 and January 22, 2004, respectively.