Nokia reports weak Q1, bets big on 5G deliveries for remaining year

Finnish telecommunication giant Nokia announced on Thursday its Q1 2019 earnings, reporting a weak quarter, and said the outcome has not changed its perspective on the full year. The company expects sharp growth in 5G revenues, particularly in H2, driven by its 36 commercial wins so far.

"The slow start to 2019 and expected weak overall first half puts significant pressure on execution in the second half. Due to the evolving readiness of the 5G ecosystem, in Q1 2019, we were unable to recognize approximately 200 million euros of net sales related to 5G deliveries mainly in North America, which we expect to recognize in full before the end of 2019," Nokia said.

Nokia Non-IFRS net sales in Q1 2019 were 5.1 billion euros, compared to 4.9 billion euros in Q1 2018. Reported net sales in Q1 2019 were 5.0 billion euros, compared to 4.9 billion euros in Q1 2018. On a constant currency basis, non-IFRS net sales decreased 1 per cent and reported net sales decreased 2 per cent.

Nokia attributes the decline in gross profit to Networks, which was negatively affected by broad-based gross margin erosion in Mobile Access. Non-IFRS diluted EPS decreased by 0.04 euros, primarily due to lower gross profit, partially offset by income tax benefits compared to income tax expenses in the year-ago quarter. Nokia's free cash flow in Q1 2019 was negative 913 million euros driven by continued cash outflows, seasonally weak profitability, seasonally lower cash collection, seasonally higher inventory levels.

During the first quarter 2019, Nokia's total cash and current financial investments decreased by 479 million euros and Nokia's net cash and current financial investments ("net cash") decreased by 1,062 million euros.

"We are confident that those issues that drove weakness in our results will ease over the remainder of the year. While overall risks have increased slightly, we continue to see positive developments and are maintaining our guidance for the full year," the company said.

In 2019, the telecom giant has strengthened its position across key markets and industries and has punctuated the period with a number of important 5G commercial deals.

(With inputs from Nokia)