Nokia reported higher fourth-quarter and full-year results for 2017, but said earnings will fall in 2018 due to extra costs for testing the first 5G services. For 2019-2020, the company expects a strong improvement in the network equipment market and said it's committed to growing its dividend, also in 2018.
For Q4, net sales were unchanged year-on-year at EUR 6.7 billion. On a constant currency basis, sales increased 5 percent, with 2 percent growth in Nokia's Networks business and 80 percent growth in the licensing business, Nokia Technologies.
The adjusted operating margin improved to 15.1 percent from 14.0 a year earlier, and adjusted EPS increased to EUR 0.13 from EUR 0.12. Reporting earnings fell to a loss of EUR 0.07 due to around 13 cents in writedowns of tax assets after the cut in the US corporate tax rate.
Nokia said it had a strong cash performance in Q4, with a EUR 1.8 billion sequential increase in net cash to EUR 4.5 billion, resulting from strong net working capital management. The company is increasing its dividend for the 2017 to EUR 0.19 per share from EUR 0.17 in 2016.
Looking ahead, Nokia said it still expects the market to contract this year, but not quite as much as previously forecast due to signs of recovery in North America. Net sales will fall in line with the addressable market, which is estimated down 2-4 percent, versus an earlier forecast of 2-5 percent. Forex and uncertainty about certain project completions will also put pressure on sales in H1 2018, the company said.
The accelerated roll-out of 5G will lead to around EUR 100 million in extra costs this year for the first customer trials and put pressure on the group's operating margin. This will be compensated in part by the EUR 1.2 billion in cost savings still targeted form the Alcatel merger and restructuring in 2018. The adjusted operating margin is expected to fall to 9-11 percent from 11.1 percent in 2017, and adjusted EPS is forecast to drop to EUR 0.23-27 from EUR 0.33 last year.
For 2019 and 2020, the company expects market conditions "to improve markedly", driven by full-scale roll-outs of 5G networks. This should lead to a recovery in earnings in 2020, to EUR 0.36-0.42 per share, and an adjusted operating margin of 12-16 percent. Despite the weaker interim performance, Nokia said it is "committed to proposing a growing dividend, including for 2018".
