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 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 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 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 |
|Q3/14|| QoQ |
| YoY |
|Net sales||3 802||3 476||9%||3 324||14%||12 732||12 708||0%|
| Gross margin % |
| Operating expenses |
|-1 129||-1 018||11%||-1 006||12%||-3 997||-3 994||0%|
| Operating profit |
|524||409||28%||457||15%||1 632||1 437||14%|
| Non-IFRS exclusions |
from operating profit
|70||134||1 267||1 461||919|
|Profit (non-IFRS)||356||317||12%||353||1%||1 095||879||25%|
| Non-IFRS exclusions |
|Profit||327||183||79%||760||-57%||1 171||41||2 756%|
| EPS, EUR diluted |
| EPS, EUR diluted |
| Net cash from |
|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 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.
RISKS AND FORWARD-LOOKING STATEMENTS
It should be noted that Nokia and its businesses are exposed to various risks and uncertainties and certain statements herein that are not historical facts are forward-looking statements, including, without limitation, those regarding: A) expectations, plans or benefits related to Nokia's strategies; B) expectations, plans or benefits related to future performance of Nokia's businesses Nokia Networks, HERE and Nokia Technologies; C) expectations, plans or benefits related to changes in our management and other leadership, operational structure and operating model; D) expectations regarding market developments, general economic conditions and structural changes; E) expectations and targets regarding performance, including those related to market share, prices, net sales and margins; F) timing of the deliveries of our products and services; G) expectations and targets regarding our financial performance, operating expenses, taxes, cost savings and competitiveness, as well as results of operations; H) expectations and targets regarding collaboration and partnering arrangements; I) outcome of pending and threatened litigation, arbitration, disputes, regulatory proceedings or investigations by authorities; J) expectations regarding restructurings, investments, uses of proceeds from transactions, acquisitions and divestments and our ability to achieve the financial and operational targets set in connection with any such restructurings, investments, divestments and acquisitions, including any expectations, plans or benefits related to or caused by the transaction where Nokia sold substantially all of its Devices & Services business to Microsoft on April 25, 2014; K) statements preceded by or including "believe", "expect", "anticipate", "foresee", "sees", "target", "estimate", "designed", "aim", "plans", "intends", "focus", "continue", "project", "should", "will" or similar expressions. These statements are based on the management's best assumptions and beliefs in light of the information currently available to it. Because they involve risks and uncertainties, actual results may differ materially from the results that we currently expect. Factors, including risks and uncertainties that could cause such differences include, but are not limited to: 1) our ability to execute our strategies successfully and in a timely manner, and our ability to successfully adjust our operations and operating models; 2) our ability to sustain or improve the operational and financial performance of our businesses and correctly identify business opportunities or successfully pursue new business opportunities; 3) our ability to execute Nokia Networks' strategy and effectively, profitably and timely adapt its business and operations to the increasingly diverse needs of its customers and technological developments; 4) our ability within our Nokia Networks business to effectively and profitably invest in and timely introduce new competitive high-quality products, services, upgrades and technologies; 5) our ability to invent new relevant technologies, products and services, to develop and maintain our intellectual property portfolio and to maintain the existing sources of intellectual property related revenue and establish new such sources; 6) our ability to protect numerous patented standardized or proprietary technologies from third-party infringement or actions to invalidate the intellectual property rights (IPR) of these technologies; 7) our ability within our HERE business to maintain current sources of revenue, historically derived mainly from the automotive industry, create new sources of revenue, for instance in the enterprise business, successfully recognize and pursue growth opportunities and extend the reach of our location services; 8) our dependence on the development of the mobile and communications industry in numerous diverse markets, as well as on general economic conditions globally and regionally; 9) Nokia Networks' dependence on a limited number of customers and large, multi-year contracts; 10) our ability to retain, motivate, develop and recruit appropriately skilled employees; 11) the potential complex tax issues and obligations we may face, including the obligation to pay additional taxes in various jurisdictions and our actual or anticipated performance, among other factors, which could result in allowances related to deferred tax assets; 12) our ability to manage our manufacturing, service creation and delivery, and logistics efficiently and without interruption, especially if the limited number of suppliers we depend on fail to deliver sufficient quantities of fully functional products and components or deliver timely services; 13) any inefficiency, malfunction or disruption of a system or network that our operations rely on or any impact of a possible cybersecurity breach; 14) our ability to reach targeted results or improvements by managing and improving our financial performance, cost savings and competitiveness; 15) management of Nokia Networks' customer financing exposure; 16) the performance of the parties we partner and collaborate with, as well as financial counterparties, and our ability to achieve successful collaboration or partnering arrangements; 17) our ability to protect the technologies, which we develop, license, use or intend to use, from claims that we have infringed third parties' IPR, as well as impact of possible licensing costs, restriction on our usage of certain technologies, and litigation related to IPR; 18) the impact of regulatory, political or other developments, including those caused by the impact of trade sanctions, natural disasters or disease outbreaks on our operations and sales in those various countries or regions where we conduct business; 19) exchange rate fluctuations, particularly between the euro, which is our reporting currency, and the US dollar, the Japanese yen and the Chinese yuan, as well as certain other currencies; 20) effects of impairments or charges to carrying values of assets, including goodwill, or liabilities; 21) our ability to successfully implement planned transactions, such as acquisitions, divestments, mergers or joint ventures, manage unexpected liabilities related thereto and achieve the targeted benefits; 22) the impact of unfavorable outcome of litigation, arbitration, contract related disputes or allegations of health hazards associated with our business; 23) potential exposure to contingent liabilities due to the sale of substantially all of our Devices & Services business to Microsoft and the possibility that the agreements we have entered into with Microsoft may have terms that prove to be unfavorable for us, as well as the risk factors specified on pages 12-35 of Nokia's annual report on Form 20-F for the year ended December 31, 2013 under Item 3D. "Risk Factors." Other unknown or unpredictable factors or underlying assumptions subsequently proven to be incorrect could cause actual results to differ materially from those in the forward-looking statements. Nokia does not undertake any obligation to publicly update or revise forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent legally required.
Nokia Management, Espoo - January 28, 2015
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- 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.