Nokia saw its sales turn lower again in the second quarter, but said it expects the networks business to improve in the second half, as 5G deployments start toward the end of the year. Second-quarter sales fell to EUR 5.3 billion from EUR 5.6 billion a year ago and were down 1 percent on a constant currency basis. The net loss narrowed to EUR 0.05 per share from EUR 0.07 a year earlier, while adjusted EPS dropped to EUR 0.03 from EUR 0.08.
Sales at the main Networks business were also down 6 percent year-on-year, at EUR 4.7 billion. The group's adjusted operating profit tumbled 42 percent to EUR 334 million, including an 83 percent fall at Networks, and the margin declined to 6.3 percent from 10.2 percent a year ago. An increase in taxes and interest also weighed on the bottom line.
CEO Rajeev Suri said the figures were in line with the company's expectations for a weak first half. The topline started to recover in the second quarter, with sales in constant currency roughly flat at both Group and Networks levels and year-on-year constant currency sales growth in three of the five Networks business groups and three out of six regions, he said. The company also made progress with efforts to expand in the enterprise market and secured more end-to-end deals in the pipeline.
The group's outlook for the 5G market remains the same, although results were affected by "a small number of large customers funding their 5G entry within their existing budget plans", Nokia said. Market conditions should improve as the roll-out starts, particularly from the fourth quarter in North America.
Overall, Nokia expects the networks market to contract 1-3 percent this year and then return to growth in 2019-20. This supports the company's outlook for an adjusted operating margin of 9-11 percent this year and 12-16 percent in 2020, compared to 5.6 percent in the first half of 2018. That includes plans for EUR 1.2 billion in cost savings this year and an extra EUR 100-200 million in spending to support the 5G roll-out, as announced in February.
