Nokia reports 32% drop in profit but sees recovery in 2nd half

4:32 am Thursday, July 18th, 2024

By Olivier Sorgho and Supantha Mukherjee

(Reuters) -Nokia reported a 32% drop in second-quarter operating profit, citing weak demand for 5G telecom equipment, but the Finnish telecoms group said sales should recover towards the end of 2024 with the help of orders from North America.

The profit, that excludes certain charges and asset revaluations to make it comparable with last year’s results, fell to 423 million euros ($462.38 million), from 619 million euros in the same quarter a year earlier.

Nokia and its rival Ericsson have been hit by customers buying less telecom equipment, and have announced thousands of lay-offs in response.

Net sales fell 18% year-on-year, as the pace of investment in 5G technology in India, a key market, slowed after rapid growth a year before.

Jefferies analysts said that both sales and earnings missed forecasts when one-offs were excluded. Nokia’s shares were down 8% by 0718 GMT.

CEO Pekka Lundmark said sales were taking more time to recover than earlier anticipated, but forecast that net sales would significantly accelerate in the second half of the year, echoing similar forecasts made last week by Ericsson.

The CEO pointed to an improving fibre market in the U.S and a $42 billion U.S government program to boost citizens’ access to high-speed broadband.

“That’s creating some interesting additional dynamics right now for us because we are clearly the first mover there with a product portfolio that is compatible with the ‘Buy America’ requirements,” Lundmark told Reuters. He said that the real boost would be felt next year.

In Europe, Nokia and Ericsson could see a boost from Chinese vendors losing market share after Germany decided to exclude Chinese companies like Huawei or ZTE from the nation’s 5G network products from 2029.

Lundmark said Nokia was still studying the impact of that decision.

The group kept its full-year guidance for comparable operating profit. Inderes analysts said that outlook would remain under pressure until the end of the year.

($1 = 0.9148 euros)

(Reporting by Olivier Sorgho and Supantha Mukherjee; Editing by Clarence Fernandez, Kim Coghill and Tomasz Janowski)