Nokia reported a solid finish to 2018, with fourth-quarter revenues up 3 percent year-on-year on both a reported and organic basis to EUR 6.87 billion. The company forecast results to improve further in the course of 2019 as 5G roll-outs gather momentum, and increased its dividend by 5 percent to EUR 0.20 per share.
The network equipment maker said this was the second consecutive quarter of year-on-year sales growth across all five of its Networks business groups, as well as improved profitability in both Networks and Nokia Technologies. Adjusted operating profit rose 12 percent to EUR 1.12 billion in Q4, and the margin improved to 16.3 percent from 15.1 a year ago, as the company completed its three-year programme to reduce costs by EUR 1.2 billion. The net result returned to a profit of 3 cents a share from a loss of 7 cents in Q4 2017, helped by much lower taxes.
North America drives 7% growth in Networks revenue
At the main Networks division, quarterly revenues rose 7 percent to EUR 6.22 billion, led by a 21 percent increase in North America, and operating profit jumped 30 percent to EUR 841 million. The company said the order backlog was strong at the end of 2018, with strong customer engagement related to 5G across multiple parts of the portfolio, including radio, cloud core, transport, IP routing and network agnostic software. Higher operating expenses were due to customer trials related to 5G, as well as higher pre-sales expenses to drive future growth and higher returns, partially offset by the benefits from its cost savings program and lower incentive accruals.
Weak Q1, better H2 in 2019
For 2019, Nokia forecast a softer first half with a "particularly weak Q1", followed by a "much more robust" second half, due to the staggering of 5G contracts. The company aims to outperform its addressable market, after it lowered the outlook for the overall market to "flattish" compared to an earlier forecast for a return to growth in 2019. Market growth is now not expected until 2020.
The group targets an adjusted operating margin of 9-12 percent for the year 2019, compared to 9.7 percent in 2018, and adjusted EPS should improve to EUR 0.25-0.29 from 0.23 last year. The 2018 results were down year-on-year and at the low end of the group's previous forecasts. The company maintained its 2020 targets for a further improvement, to a margin of 12-16 percent and EPS of 37-42 cents, driven by another EUR 700 million in cost savings targeted over the next two years.
