Nokia Corporation Financial Statement Release February 2,
2017 at 08:00 (CET +1)
Nokia Corporation Report for Q4 2016 and Full Year
2016
Operating margin for Nokia's Networks business at the high
end of our guidance range for full year 2016 This is a summary
of the Nokia Corporation report for fourth quarter 2016 and full
year 2016 published today. The complete fourth quarter 2016 and
full year 2016 report with tables is available at
www.nokia.com/financials. Investors should not rely on summaries of
our interim reports only, but should review the complete reports
with tables.
FINANCIAL HIGHLIGHTS
- Non-IFRS net sales in Q4 2016 of EUR 6.7bn (reported: EUR
6.6bn). In the year-ago quarter, non-IFRS net sales would have been
EUR 7.7bn on a comparable combined company basis (reported: EUR
3.6bn on a Nokia stand-alone basis).
- Non-IFRS diluted EPS in Q4 2016 of EUR 0.12 (reported: EUR
0.11) benefited by approximately EUR 0.02-0.03 due to the Q4 2016
non-IFRS tax rate coming in at 23% compared to our guidance.
- Non-IFRS diluted EPS in full year 2016 of EUR 0.22 (reported:
negative EUR 0.13).
- Nokia's Board of Directors will propose a dividend of EUR 0.17
per share for 2016 (EUR 0.16 per share for 2015).
Nokia's Networks business
- 14% year-on-year net sales decrease in Q4 2016, reflecting
challenging market conditions in Q4 2016 and the difficult
comparison against the strong performance by Alcatel-Lucent in Q4
2015.
- Strong Q4 2016 gross margin of 40.6% and operating margin of
14.1%, supported by continued focus on operational excellence and
cost controls.
- Operating margin of 8.9% in full year 2016, at the high end of
our guidance range of 7-9%.
Nokia Technologies
- 25% year-on-year net sales decrease and 49% operating profit
decrease in Q4 2016, primarily due to the absence of the Samsung
arbitration award, which benefited Q4 2015. The declines were
partially offset by the expanded intellectual property rights
("IPR") license agreement with Samsung announced in Q3 2016 and
divested IPR. In addition, the acquisition of Withings helped to
offset the decline in net sales.
Group Common and Other
- 34% year-on-year net sales increase in Q4 2016, with
particularly strong growth in Alcatel Submarine Networks.
Q4 and January-December 2016 non-IFRS results.
Refer to note 1 in the Financial statement information for further
details 1,2 |
|
|
Combined company histori-cals2 |
|
|
|
|
Combined company histori-cals2 |
|
EUR
million |
Q4'16 |
Q4'15 |
YoY change |
Q3'16 |
QoQ change |
Q1-Q4'16 |
Q1- Q4'15 |
YoY change |
Net sales - constant
currency (non-IFRS) |
|
|
(13 |
)% |
|
11 |
% |
|
|
(10 |
)% |
Net sales
(non-IFRS) |
6 715 |
|
7 719 |
|
(13 |
)% |
5 950 |
|
13 |
% |
23 945 |
|
26 606 |
|
(10 |
)% |
Nokia's Networks
business |
6 069 |
|
7 057 |
|
(14 |
)% |
5 322 |
|
14 |
% |
21 799 |
|
24 634 |
|
(12 |
)% |
Ultra Broadband Networks |
4 332 |
|
5 081 |
|
(15 |
)% |
3 903 |
|
11 |
% |
15 770 |
|
18 079 |
|
(13 |
)% |
IP
Networks and Applications |
1 737 |
|
1 976 |
|
(12 |
)% |
1 419 |
|
22 |
% |
6 029 |
|
6 555 |
|
(8 |
)% |
Nokia
Technologies |
309 |
|
413 |
|
(25 |
)% |
353 |
|
(12 |
)% |
1 053 |
|
1 074 |
|
(2 |
)% |
Group Common and
Other |
341 |
|
254 |
|
34 |
% |
298 |
|
14 |
% |
1 145 |
|
921 |
|
24 |
% |
Gross profit
(non-IFRS) |
2 818 |
|
3 272 |
|
(14 |
)% |
2 365 |
|
19 |
% |
9 589 |
|
10 441 |
|
(8 |
)% |
Gross margin %
(non-IFRS) |
42.0 |
% |
42.4 |
% |
(40)bps |
39.7 |
% |
230bps |
40.0 |
% |
39.2 |
% |
80bps |
Operating profit
(non-IFRS) |
940 |
|
1 279 |
|
(27 |
)% |
556 |
|
69 |
% |
2 172 |
|
2 887 |
|
(25 |
)% |
Nokia's Networks
business |
854 |
|
1 097 |
|
(22 |
)% |
432 |
|
98 |
% |
1 935 |
|
2 496 |
|
(22 |
)% |
Ultra Broadband Networks |
574 |
|
702 |
|
(18 |
)% |
326 |
|
76 |
% |
1 362 |
|
1 656 |
|
(18 |
)% |
IP
Networks and Applications |
280 |
|
396 |
|
(29 |
)% |
106 |
|
164 |
% |
573 |
|
840 |
|
(32 |
)% |
Nokia
Technologies |
158 |
|
311 |
|
(49 |
)% |
225 |
|
(30 |
)% |
579 |
|
692 |
|
(16 |
)% |
Group Common and
Other |
(73 |
) |
(129 |
) |
|
(101 |
) |
|
(341 |
) |
(301 |
) |
|
Operating
margin % (non-IFRS) |
14.0 |
% |
16.6 |
% |
(260)bps |
9.3 |
% |
470bps |
9.1 |
% |
10.9 |
% |
(180)bps |
Q4 and January-December 2016 reported results,
unless otherwise specified. Refer to note 1 in the Financial
statement information for further details 1,3 |
|
|
Nokia stand-alone histori-cals3 |
|
|
|
|
Nokia stand-alone histori-cals3 |
|
EUR
million (except for EPS in EUR) |
Q4'16 |
Q4'15 |
YoY change |
Q3'16 |
QoQ change |
Q1-Q4'16 |
Q1-Q4'15 |
YoY change |
Net Sales - constant
currency |
|
|
84 |
% |
|
10 |
% |
|
|
89 |
% |
Net sales |
6 641 |
|
3 609 |
|
84 |
% |
5 890 |
|
13 |
% |
23 614 |
|
12 499 |
|
89 |
% |
Nokia's Networks
business |
6 069 |
|
3 210 |
|
89 |
% |
5 322 |
|
14 |
% |
21 799 |
|
11 486 |
|
90 |
% |
Ultra Broadband Networks |
4 332 |
|
2 815 |
|
54 |
% |
3 903 |
|
11 |
% |
15 770 |
|
10 158 |
|
55 |
% |
IP
Networks and Applications |
1 737 |
|
395 |
|
340 |
% |
1 419 |
|
22 |
% |
6 029 |
|
1 328 |
|
354 |
% |
Nokia
Technologies |
309 |
|
403 |
|
(23 |
)% |
353 |
|
(12 |
)% |
1 053 |
|
1 027 |
|
3 |
% |
Group Common and
Other |
341 |
|
0 |
|
|
298 |
|
14 |
% |
1 145 |
|
0 |
|
|
Non-IFRS
exclusions |
(74 |
) |
0 |
|
|
(60 |
) |
23 |
% |
(331 |
) |
0 |
|
|
Gross profit |
2 659 |
|
1 693 |
|
57 |
% |
2 216 |
|
20 |
% |
8 456 |
|
5 536 |
|
53 |
% |
Gross margin % |
40.0 |
% |
46.9 |
% |
(690)bps |
37.6 |
% |
240bps |
35.8 |
% |
44.3 |
% |
(850)bps |
Operating profit |
317 |
|
643 |
|
(51 |
)% |
55 |
|
476 |
% |
(1 100 |
) |
1 697 |
|
|
Nokia's Networks
business |
854 |
|
495 |
|
73 |
% |
432 |
|
98 |
% |
1 935 |
|
1 349 |
|
43 |
% |
Ultra Broadband Networks |
574 |
|
405 |
|
42 |
% |
326 |
|
76 |
% |
1 362 |
|
1 210 |
|
13 |
% |
IP
Networks and Applications |
280 |
|
90 |
|
211 |
% |
106 |
|
164 |
% |
573 |
|
138 |
|
315 |
% |
Nokia
Technologies |
158 |
|
316 |
|
(50 |
)% |
225 |
|
(30 |
)% |
579 |
|
698 |
|
(17 |
)% |
Group Common and
Other |
(73 |
) |
(74 |
) |
|
(101 |
) |
|
(341 |
) |
(89 |
) |
|
Non-IFRS
exclusions |
(622 |
) |
(93 |
) |
569 |
% |
(501 |
) |
24 |
% |
(3 272 |
) |
(261 |
) |
1 154 |
% |
Operating margin % |
4.8 |
% |
17.8 |
% |
(1 300)bps |
0.9 |
% |
390bps |
(4.7 |
)% |
13.6 |
% |
(1 830)bps |
Profit (non-IFRS) |
676 |
|
575 |
|
18 |
% |
264 |
|
156 |
% |
1 250 |
|
1 392 |
|
(10 |
)% |
Profit/(Loss) 4 |
658 |
|
499 |
|
32 |
% |
(133 |
) |
(595 |
)% |
(912 |
) |
1 194 |
|
|
EPS, diluted
(non-IFRS) |
0.12 |
|
0.15 |
|
(20 |
)% |
0.04 |
|
200 |
% |
0.22 |
|
0.36 |
|
(39 |
)% |
EPS, diluted 4 |
0.11 |
|
0.13 |
|
(15 |
)% |
(0.02 |
) |
(650 |
)% |
(0.13 |
) |
0.31 |
|
|
Net cash
and other liquid assets |
5 299 |
|
7 775 |
|
(32 |
)% |
5 539 |
|
(4 |
)% |
5 299 |
|
7 775 |
|
(32 |
)% |
1Results
are as reported unless otherwise specified. The results information
in this report is unaudited. Non-IFRS results exclude costs related
to the Alcatel-Lucent transaction and related integration, goodwill
impairment charges, intangible asset amortization and purchase
price related items, restructuring and associated charges, and
certain other items that may not be indicative of Nokia's
underlying business performance. For details, please refer to the
Non-IFRS Exclusions section included in discussions of both the
quarterly and year to date performance and note 2, "Non-IFRS to
reported reconciliation", in the notes in the Financial statement
information in this report. A reconciliation of the Q4 2015
non-IFRS combined company results to the reported results can be
found in the "Nokia provides recast segment results for 2015
reflecting new financial reporting structure" stock exchange
release published on April 22, 2016. Change in net sales at
constant currency excludes the impact of changes in exchange rates
in comparison to Euro, our reporting currency. For more information
on currency exposures, please refer to note 1, "Basis of
Preparation", in the Financial statement information section in
this report. |
2Combined
company historicals reflect Nokia's new operating and financial
reporting structure, including Alcatel-Lucent, and are presented as
additional information as described in the stock exchange release
published on April 22, 2016. For more information on the combined
company historicals, please refer to note 1, "Basis of
Preparation", in the Financial statement information section in
this report. |
3Nokia
standalone historicals are the recasting of Nokia's historical
standalone financial results, reflecting Nokia's updated segment
reporting structure, excluding Alcatel-Lucent. Beginning from the
first quarter 2016, Nokia results include those of Alcatel-Lucent
on a consolidated basis. Accordingly, Nokia results beginning from
the first quarter 2016 are not directly comparable to prior period
Nokia standalone results. |
4Reported
Q1-Q4'16 result is not comparable to the reported results published
previously due to an update to the Alcatel-Lucent purchase price
allocation in Q3'16 which resulted in an adjustment to the reported
Q1'16 income tax benefit. Refer to note 6, "Acquisitions", in the
Financial statement information section in this report. |
Nokia and Apple patent license renewal
In December 2016, Nokia announced that it had begun filing
complaints against Apple, alleging that Apple products infringe
Nokia patents. As of today, in actions across 11 countries in Asia,
Europe and the US, there are now more than 50 Nokia patents in
suit, covering technologies such as display, user interface,
software, antenna, chipsets, video coding, as well as 3G & 4G
cellular standards. Apple has also filed certain complaints against
Nokia.
As one of the world's leading innovators, and following the
acquisition of full ownership of Nokia Siemens Networks in 2013 and
Alcatel-Lucent in 2016, Nokia now owns three valuable portfolios of
intellectual property. Built on more than EUR 115 billion invested
in research and development ("R&D") over the past twenty years,
the tens of thousands of patents cover many important technologies
used in smartphones, tablets, personal computers and similar
devices.
The previous license agreement between Nokia and Apple, covering
some patents from the Nokia Technologies portfolio, expired at the
end of 2016 and Apple currently has no license under Nokia patents.
Despite sustained efforts by Nokia, Apple has not accepted any
licensing offers Nokia has made for the previously licensed
patents, as well as for other patented inventions used by many of
Apple's products.
Non-IFRS results provide meaningful supplemental information
regarding underlying business performance
In addition to information on our reported IFRS results, we
provide certain information on a non-IFRS, or underlying business
performance, basis. 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 below-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.
Non-IFRS results exclude costs related to the Alcatel-Lucent
transaction and related integration, goodwill impairment charges,
intangible asset amortization and purchase price related items,
restructuring and associated charges, and certain other items that
may not be indicative of Nokia's underlying business performance.
The non-IFRS exclusions are not allocated to the segments, and
hence they are reported only at the Nokia consolidated level.
Financial discussion
The financial discussion included in this financial report of
Nokia's results comprises the results of Nokia's businesses -
Nokia's Networks business and Nokia Technologies, as well as Group
Common and Other. For more information on the changes to our
reportable segments, please refer to note 3, "Segment information
and eliminations", in the Financial statement information section
in this financial report.
In the discussion of Nokia's results in the fourth quarter 2016
comparisons are given to the fourth quarter 2015 and third quarter
2016 results on a combined company basis, unless otherwise
indicated. This data has been prepared to reflect the financial
results of the continuing operations of Nokia as if the new
financial reporting structure had been in operation for the full
year 2015. Certain accounting policy alignments, adjustments and
reclassifications have been necessary, and these are explained in
the "Basis of preparation" section of Nokia's stock exchange
release published on April 22, 2016. These adjustments also include
reallocation of items of costs and expenses based on their nature
and changes to the definition of the line items in the combined
company accounting policies, which also affect numbers presented in
this financial report for 2015.
In the discussion of Nokia's reported results for the fourth
quarter 2016 and full year 2016 comparisons are given to the fourth
quarter 2015 and full year 2015 Nokia standalone historical
results, which have been recast to reflect Nokia's updated segment
reporting structure excluding Alcatel-Lucent, unless otherwise
indicated. From the beginning of 2016, Nokia's results include
those of Alcatel-Lucent on a consolidated basis and, accordingly,
are not directly comparable to Nokia standalone historical
results.
CEO STATEMENT
2016 was a time of transition for Nokia, a year in which we
moved forward deliberately and successfully to execute our strategy
and broaden our scope.
At the start of the year, Nokia was focused primarily on mobile
networks. We ended the year as a company with a complete
portfolio spanning mobile, fixed, routing, optical, stand-alone
software and more; with solid opportunities to drive higher returns
through expansion into new customer segments; with emerging
businesses in digital health and digital media; and with greatly
expanded patent and brand licensing activities.
Pleasingly, we saw growing customer support for Nokia's
strategy. Our sales pipeline with customers beyond our traditional
communication service provider base accelerated over the course of
the year, we saw an increasing share of our Networks pipeline
coming from opportunities covering products and services from two
or more of our business groups, and the potential of cross-selling
started to become a reality.
We also ended the year having successfully concluded the
integration of Alcatel-Lucent faster than anticipated, allowing us
to shift our full focus to cost savings, continuous improvement
programs and the execution of our strategy. In terms of financial
performance, we were able to deliver solid results for the full
year, with profitability in our Networks business coming in at the
high end of our guidance range. Our ongoing intense focus on
execution, cost management and pricing discipline was critical to
offset the impact of challenging market conditions over the course
of the year. While I remain disappointed with our topline
development in 2016, we continue to expect our performance to
improve in 2017 and see the potential for margin expansion in 2017
and beyond, as market conditions improve and our sales
transformation programs gain further traction.
In short, we ended 2016 positioned well for the future, with
well-integrated operations, a powerful end-to-end portfolio and our
disciplined operating model still delivering robust results. In
addition, we remain in a position of financial strength, with a
strong balance sheet and the flexibility to invest in opportunities
that we believe will create shareholder value.
Rajeev SuriPresident and CEO
NOKIA IN Q4 2016 - NON-IFRS
Non-IFRS net sales and non-IFRS operating profit
Nokia non-IFRS net sales decreased 13% year-on-year and
increased 13% sequentially. On a constant currency basis, Nokia
non-IFRS net sales would have decreased 13% year-on-year and
increased 11% sequentially.
Year-on-year changes
EUR
million, non-IFRS |
Net Sales |
% change |
Gross profit |
(R&D) |
(SG&A) |
Other income and (expenses) |
Operating profit |
Change in operating margin % |
Networks business |
(988 |
) |
(14 |
)% |
(364 |
) |
79 |
72 |
|
(30 |
) |
(243 |
) |
(140)bps |
Nokia Technologies |
(104 |
) |
(25 |
)% |
(122 |
) |
3 |
(30 |
) |
(3 |
) |
(152 |
) |
(2
410)bps |
Group Common and
Other |
87 |
|
34 |
% |
33 |
|
4 |
0 |
|
19 |
|
56 |
|
2
940bps |
Eliminations |
1 |
|
|
0 |
|
0 |
0 |
|
0 |
|
0 |
|
|
Nokia |
(1 003 |
) |
(13 |
)% |
(454 |
) |
86 |
42 |
|
(14 |
) |
(340 |
) |
(260)bps |
Sequential changes
EUR
million, non-IFRS |
Net Sales |
% change |
Gross profit |
(R&D) |
(SG&A) |
Other income and (expenses) |
Operating profit |
Change in operating margin % |
Networks business |
747 |
|
14 |
% |
484 |
|
(50 |
) |
(19 |
) |
7 |
422 |
|
600bps |
Nokia Technologies |
(45 |
) |
(12 |
)% |
(54 |
) |
(4 |
) |
(13 |
) |
4 |
(67 |
) |
(1
260)bps |
Group Common and
Other |
43 |
|
14 |
% |
23 |
|
(3 |
) |
3 |
|
5 |
29 |
|
1
250bps |
Eliminations |
19 |
|
|
0 |
|
0 |
|
0 |
|
0 |
0 |
|
|
Nokia |
765 |
|
13 |
% |
453 |
|
(58 |
) |
(29 |
) |
16 |
384 |
|
470bps |
Non-IFRS financial income and expenses
In the fourth quarter 2016, non-IFRS financial income and
expenses was an expense of EUR 72 million. This includes an
impairment charge of EUR 63 million related to the performance of
certain private funds investing in IPR, which was largely offset by
foreign exchange gains mainly resulting from US dollar appreciation
against Chinese yuan, as well as gains from venture fund
distributions.
Non-IFRS taxes
In the fourth quarter 2016, non-IFRS income taxes were an
expense of EUR 204 million. In the fourth quarter 2016, Nokia's
non-IFRS tax rate of 23% was lower than the approximately 40%
outlook we previously provided. This was primarily related to two
factors. First, there was a favorable change in Nokia's regional
profitability mix, the majority of which was non-recurring in
nature and related to a change of estimate in Q4 2016. Second,
compared to the expected profitability underlying Nokia's non-IFRS
tax rate guidance, the level of realized profitability was higher,
resulting in a lower non-IFRS tax rate due to a relatively larger
portion of taxable profit being attributable to tax jurisdictions
with lower tax rates.
NOKIA IN Q4 2016 -
REPORTED
FINANCIAL DISCUSSION
Net sales
Nokia net sales increased 84% year-on-year, compared to Nokia
standalone net sales, and increased 13% sequentially. On a constant
currency basis, Nokia net sales would have increased 84%
year-on-year, compared to Nokia standalone net sales, and 10%
sequentially.
Year-on-year discussion
The year-on-year increase in Nokia net sales in the fourth
quarter 2016, compared to Nokia standalone net sales, was primarily
due to growth in Nokia's Networks business and Group Common and
Other, both of which primarily related to the acquisition of
Alcatel-Lucent. This was partially offset by Nokia Technologies and
a purchase price allocation adjustment related to a reduced
valuation of deferred revenue that existed on Alcatel-Lucent's
balance sheet at the time of the acquisition.
Sequential discussion
The sequential increase in Nokia net sales in the fourth quarter
2016 was primarily due to growth in Nokia's Networks business and
Group Common and Other. This was partially offset by Nokia
Technologies and the negative impact related to a purchase price
allocation adjustment associated with a reduced valuation of
deferred revenue that existed on Alcatel-Lucent's balance sheet at
the time of the acquisition.
Operating profit
Year-on-year discussion
The year-on-year decrease in Nokia operating profit, compared to
Nokia standalone operating profit, was primarily due to higher
research and development ("R&D") expenses, higher selling,
general and administrative ("SG&A") expenses and a net negative
fluctuation in other income and expenses, partially offset by
higher gross profit, all of which primarily related to the
acquisition of Alcatel-Lucent.
The increase in gross profit was primarily due to Nokia's
Networks business and, to a lesser extent, Group Common and Other,
partially offset by non-IFRS exclusions related to both product
portfolio integration costs and deferred revenue, as well as Nokia
Technologies.
The increase in R&D expenses was primarily due to Nokia's
Networks business, non-IFRS exclusions related to both amortization
of intangible assets and product portfolio integration costs and,
to a lesser extent, Group Common and Other and Nokia
Technologies.
The increase in SG&A expenses was primarily due to Nokia's
Networks business, non-IFRS exclusions related to both amortization
of intangible assets and transaction and integration related costs
and, to a lesser extent, Nokia Technologies and Group Common and
Other.
Nokia's other income and expenses was an expense of EUR 110
million in the fourth quarter 2016, compared to an expense of EUR 3
million in the year-ago period. The net negative fluctuation was
primarily related to non-IFRS exclusions attributable to higher
restructuring and associated charges, partially offset by the
absence of an approximately EUR 20 million loss recorded in the
fourth quarter 2015, which related to certain of Nokia's
investments made through its venture funds.
Sequential discussion
Nokia operating profit increased primarily due to higher gross
profit, partially offset by a net negative fluctuation in other
income and expenses, as well as higher R&D and SG&A
expenses.
The increase in gross profit was primarily due to Nokia's
Networks business and, to a lesser extent, Group Common and Other,
partially offset by Nokia Technologies and non-IFRS exclusions.
The increase in R&D expenses was primarily due to Nokia's
Networks business.
The increase in SG&A expenses was primarily due to Nokia's
Networks business, non-IFRS exclusions and Nokia Technologies.
Nokia's other income and expenses was an expense of EUR 110
million in the fourth quarter 2016, compared to an expense of EUR
39 million in the third quarter 2016. The net negative fluctuation
was primarily due to higher restructuring and associated
charges.
Description of non-IFRS exclusions in Q4 2016
Non-IFRS exclusions consist of costs related to the
Alcatel-Lucent transaction and related integration, goodwill
impairment charges, intangible asset amortization and purchase
price related items, restructuring and associated charges, and
certain other items that may not be indicative of Nokia's
underlying business performance. For additional details, please
refer to note 2, "Non-IFRS to reported reconciliation, Continuing
Operations (unaudited)", in the Financial statement information
section in this financial report.
|
|
Nokia standalone historicals1 |
|
|
|
EUR
million |
Q4'16 |
Q4'15 |
YoY change |
Q3'16 |
QoQ change |
Net sales |
(74 |
) |
0 |
|
|
(60 |
) |
23 |
% |
Gross profit |
(159 |
) |
0 |
|
|
(149 |
) |
7 |
% |
R&D |
(185 |
) |
(9 |
) |
1 956 |
% |
(179 |
) |
3 |
% |
SG&A |
(162 |
) |
(70 |
) |
131 |
% |
(145 |
) |
12 |
% |
Other income and
expenses |
(116 |
) |
(14 |
) |
729 |
% |
(29 |
) |
300 |
% |
Operating profit/(loss) |
(622 |
) |
(93 |
) |
569 |
% |
(501 |
) |
24 |
% |
Financial income and
expenses |
0 |
|
0 |
|
|
(1 |
) |
(100 |
)% |
Taxes |
605 |
|
17 |
|
3 459 |
% |
105 |
|
476 |
% |
Profit/(loss) |
(17 |
) |
(76 |
) |
(78 |
)% |
(397 |
) |
(96 |
)% |
Profit/(loss)
attributable to the shareholders of the parent |
(13 |
) |
(76 |
) |
(83 |
)% |
(378 |
) |
(97 |
)% |
Non-controlling
interests |
(5 |
) |
0 |
|
|
(20 |
) |
(75 |
)% |
1Nokia standalone historicals are the recasting of
Nokia's historical standalone financial results, reflecting Nokia's
updated segment reporting structure, excluding Alcatel-Lucent.
Beginning from the first quarter 2016, Nokia results include those
of Alcatel-Lucent on a consolidated basis. Accordingly, Nokia
results beginning from the first quarter 2016 are not directly
comparable to prior period Nokia standalone results. |
Non-IFRS exclusions in net sales
In the fourth quarter 2016, non-IFRS exclusions in net sales
amounted to EUR 74 million, and related to a purchase price
allocation adjustment related to a reduced valuation of deferred
revenue that existed on Alcatel-Lucent's balance sheet at the time
of the acquisition.
Non-IFRS exclusions in operating profit
In the fourth quarter 2016, non-IFRS exclusions in operating
profit amounted to EUR 622 million, and were primarily due to
non-IFRS exclusions that negatively affected gross profit, R&D,
SG&A and other income and expenses as follows:
In the fourth quarter 2016, non-IFRS exclusions in gross profit
amounted to EUR 159 million, and were primarily due to product
portfolio integration costs related to the acquisition of
Alcatel-Lucent, and the deferred revenue.
In the fourth quarter 2016, non-IFRS exclusions in R&D
expenses amounted to EUR 185 million, and were primarily due to the
amortization of intangible assets resulting from the acquisition of
Alcatel-Lucent and, to a lesser extent, product portfolio
integration costs related to the acquisition of Alcatel-Lucent.
In the fourth quarter 2016, non-IFRS exclusions in SG&A
expenses amounted to EUR 162 million, and were primarily due to the
amortization of intangible assets resulting from the acquisition of
Alcatel-Lucent, as well as integration and transaction related
costs.
In the fourth quarter 2016, non-IFRS exclusions in other income
and expenses amounted to EUR 116 million, and were primarily due to
EUR 107 million of restructuring and associated charges for Nokia's
cost reduction and efficiency improvement initiatives.
Financial income and expenses
In the fourth quarter 2016, financial income and expenses was an
expense of EUR 72 million. This includes an impairment charge of
EUR 63 million related to the performance of certain private funds
investing in IPR, which was largely offset by foreign exchange
gains mainly resulting from US dollar appreciation against Chinese
yuan, as well as gains from venture fund distributions.
Taxes
In the fourth quarter 2016, income taxes were a benefit of EUR
401 million. This was primarily related to two factors. First,
following the completion of the squeeze-out of the remaining
Alcatel-Lucent shares, Nokia has launched actions to integrate the
former Alcatel-Lucent and Nokia operating models. In the fourth
quarter 2016, in connection with these integration activities,
Nokia transferred certain intellectual property to its US
operations, recording a tax benefit and additional deferred tax
assets of EUR 348 million. Second, for US tax purposes Nokia
elected to treat the acquisition of Alcatel-Lucent's US operations
as an asset purchase. The impact of this election was to utilize or
forfeit existing deferred tax assets and record new deferred tax
assets with a longer amortization period than the life of those
forfeited assets. As a result of this, we recorded EUR 91 million
of additional deferred tax assets in the fourth quarter 2016. In
addition, there was a favorable change in Nokia's regional
profitability mix, the majority of which was non-recurring in
nature and related to a change of estimate in the fourth quarter
2016.
Nokia will continue to make changes in its operating model in
2017. Due to this, in full year 2017, Nokia expects to record a
reduction in deferred tax assets of approximately EUR 250 million,
which will have a negative non-recurring impact on tax expenses of
approximately EUR 250 million, partly offsetting the recorded
non-recurring tax benefit of EUR 348 million in the fourth quarter
2016. The operating model changes, including the transfers of
intellectual property and certain tax elections that Nokia has
made, resulted in non-recurring cash outflows of approximately EUR
90 million in the fourth quarter 2016 and are expected to result in
additional non-recurring cash outflows in 2017 of approximately EUR
150 million. The changes are expected to create more future cash
tax savings than the additional non-recurring cash tax outflows in
2016 and 2017.
Cost savings program
The following table summarizes the financial information related
to our cost savings program, as of the end of the fourth quarter
2016. Balances related to previous Nokia and Alcatel-Lucent
restructuring and cost savings programs have been included as part
of this overall cost savings program as of the second quarter
2016.
In
EUR million, approximately |
Q4'16 |
Opening balance of
restructuring and associated liabilities |
810 |
+ Charges in the
quarter |
110 |
- Cash outflows
in the quarter |
130 |
= Ending balance
of restructuring and associated liabilities |
790 |
of which
restructuring provisions |
710 |
of which other
associated liabilities |
80 |
|
|
Total expected
restructuring and associated charges |
1
700 |
- Cumulative
recorded |
750 |
= Charges
remaining to be recorded |
950 |
|
|
Total expected
restructuring and associated cash outflows |
2
150 |
- Cumulative
recorded |
410 |
= Cash outflows
remaining to be recorded |
1
740 |
The following table summarizes our full year 2016 results and
future expectations related to our cost savings program and network
equipment swaps.
In EUR million, approximately, rounded to the nearest
EUR 50 million |
2016 |
2017 |
2018 |
2019 |
Total |
|
|
|
Previ-ous expect-ation |
Actual |
Previ-ous expect-ation |
Cur-rent expect-ation |
Previ-ous expect-ation |
Cur-rent expect-ation |
Cur-rent expect-ation |
Cur-rent expect-ation |
|
Total cost savings |
400 |
550 |
400 |
250 |
400 |
400 |
0 |
1
200 |
|
- operating expenses |
250 |
350 |
200 |
100 |
350 |
350 |
0 |
800 |
|
- cost of sales |
150 |
200 |
200 |
150 |
50 |
50 |
0 |
400 |
|
Restructuring and associated charges |
700 |
750 |
800 |
750 |
200 |
200 |
0 |
1
700 |
|
Restructuring and associated cash outflows |
500 |
400 |
700 |
750 |
500 |
550 |
450 |
2
150 |
|
Charges and cash outflows related to network equipment swaps |
300 |
150 |
300 |
450 |
300 |
300 |
0 |
900 |
|
In full year 2016, the actual total cost savings benefitted from
lower incentive accruals, related to the financial performance in
full year 2016. Lower incentive accruals drove more than half of
the higher than previously expected decrease in total costs in
2016, and this is expected to reverse in 2017, assuming full year
2017 financial performance in-line with our expectations. On a
cumulative basis, Nokia continues to be well on track to achieve
the targeted EUR 1.2 billion of total cost savings in full year
2018. To the extent that our actual full year 2016 charges and cash
flows deviated from our previous expectations, future expectations
have been adjusted accordingly.
OUTLOOK
|
Metric |
Guidance |
Commentary |
Nokia |
Annual cost savings for Nokia, excluding Nokia Technologies |
Approximately EUR 1.2 billion of total annual cost savings to be
achieved in full year 20181 |
Compared to the combined non-IFRS operating costs of Nokia and
Alcatel-Lucent for full year 2015, excluding Nokia Technologies.
Nokia expects approximately EUR 800 million of the cost savings to
come from operating expenses and approximately EUR 400 million from
cost of sales. Restructuring and associated charges are
expected to total approximately EUR 1.7 billion. Restructuring and
associated cash outflows are expected to total approximately EUR
2.15 billion. |
|
Network equipment swaps |
Approximately EUR 900 million in total1 |
The charges related to network equipment swaps are being recorded
as non-IFRS exclusions, and therefore do not affect Nokia's
non-IFRS operating profit. |
|
Non-IFRS financial income and expenses |
Expense of approximately EUR 300 million in full year 2017 |
Primarily includes net interest expenses related to
interest-bearing liabilities, interest costs related to the defined
benefit pension and other post-employment benefit plans, as well as
the impact of foreign exchange rate fluctuations on certain balance
sheet items. Nokia expects cash outflows related to
financial income and expenses to be approximately EUR 200 million
in full year 2017. |
|
Non-IFRS tax rate |
Between 30% and 35% for full year 20172 |
Nokia expects its non-IFRS tax rate for full year 2017 to be around
the midpoint of the guidance range, with the non-IFRS tax rate for
Q1 2017 between 35% and 40%.(This is an update to earlier
commentary for the non-IFRS tax rate for full year 2017 to be at
the high end of the guidance range.) Nokia expects cash
outflows related to taxes to be approximately EUR 600 million for
full year 2017.(This is an update to earlier commentary for cash
outflows related to taxes to be approximately EUR 400 million for
full year 2017.) |
|
Capital expenditures |
Approximately EUR 500 million in full year 2017 |
Primarily attributable to Nokia's Networks business. |
Nokia's
Networks business |
Net sales |
Decline in line with the primary addressable market in full year
2017 |
Nokia's outlook for net sales and operating margin for
Nokia's Networks business in full year 2017 are expected to be
influenced by factors including: A low single digit percentage
decline in the primary addressable market for Nokia's Networks
business; Competitive industry dynamics; Product and regional mix;
The timing of major network deployments; and Execution of cost
savings and reinvestment plans, with operating expenses down on a
year-on-year basis. The 2017 outlook for Nokia's Networks business
was provided on November 15, 2016 assuming constant foreign
exchange rates. |
Operating margin |
8-10% in full year 2017 |
Nokia Technologies |
Net sales |
Not provided |
Due to risks and uncertainties in determining the timing and value
of significant licensing agreements, Nokia believes it is not
appropriate to provide an annual outlook for full year 2017. If no
new licensing agreements are signed, the annualized net sales run
rate for patent and brand licensing would be approximately EUR 800
million in 2017, representing approximately 30% of the global
smartphone market, by value, under license. Nokia expects
total net sales from Digital Health and Digital Media to grow
year-on-year in full year 2017, primarily influenced by increased
consumer adoption of our Digital Health and Digital Media
products. |
1 For further details related to the cost savings and network
equipment swaps guidance, please refer to the "Cost savings
program" section above.
2 For further details related to the tax guidance, please refer
to the "Taxes" section above.
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) our ability to
integrate Alcatel-Lucent into our operations and achieve the
targeted business plans and benefits, including targeted synergies
in relation to the acquisition of Alcatel-Lucent; B) expectations,
plans or benefits related to our strategies and growth management;
C) expectations, plans or benefits related to future performance of
our businesses; D) expectations, plans or benefits related to
changes in organizational and operational structure; E)
expectations regarding market developments, general economic
conditions and structural changes; F) expectations and targets
regarding financial performance, results, operating expenses,
taxes, currency exchange rates, hedging, cost savings and
competitiveness, as well as results of operations including
targeted synergies and those related to market share, prices, net
sales, income and margins; G) timing of the deliveries of our
products and services; H) expectations and targets regarding
collaboration and partnering arrangements, joint ventures or the
creation of joint ventures, as well as our expected customer reach;
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; and 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 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 these
differences include, but are not limited to: 1) our ability
to execute our strategy, sustain or improve the operational and
financial performance of our business and correctly identify and
successfully pursue business opportunities or growth; 2) our
ability to achieve the anticipated benefits, synergies, cost
savings and efficiencies of the Alcatel-Lucent acquisition, and our
ability to implement our organizational and operational structure
efficiently; 3) general economic and market conditions and other
developments in the economies where we operate; 4) competition and
our ability to effectively and profitably compete and invest in new
competitive high-quality products, services, upgrades and
technologies and bring them to market in a timely manner; 5) our
dependence on the development of the industries in which we
operate, including the cyclicality and variability of the
information technology and telecommunications industries; 6) our
global business and exposure to regulatory, political or other
developments in various countries or regions, including emerging
markets and the associated risks in relation to tax matters and
exchange controls, among others; 7) our ability to manage and
improve our financial and operating performance, cost savings,
competitiveness and synergies after the acquisition of
Alcatel-Lucent; 8) our dependence on a limited number of customers
and large multi-year agreements; 9) exchange rate fluctuations, as
well as hedging activities; 10) Nokia Technologies' ability protect
its IPR and to maintain and establish new sources of patent
licensing income and IPR-related revenues, particularly in the
smartphone market; 11) our dependence on IPR technologies,
including those that we have developed and those that are licensed
to us, and the risk of associated IPR-related legal claims,
licensing costs and restrictions on use; 12) our exposure to direct
and indirect regulation, including economic or trade policies, and
the reliability of our governance, internal controls and compliance
processes to prevent regulatory penalties in our business or in our
joint ventures; 13) our reliance on third-party solutions for data
storage and service distribution, which expose us to risks relating
to security, regulation and cybersecurity breaches; 14)
inefficiencies, breaches, malfunctions or disruptions of
information technology systems; 15) Nokia Technologies' ability to
generate net sales and profitability through licensing of the Nokia
brand, particularly in digital media and digital health, and the
development and sales of products and services, as well as other
business ventures which may not materialize as planned; 16) our
exposure to various legislative frameworks and jurisdictions that
regulate fraud and enforce economic trade sanctions and policies,
and the possibility of proceedings or investigation that result in
fines, penalties or sanctions; 17) adverse developments with
respect to customer financing or extended payment terms we provide
to customers; 18) the potential complex tax issues, tax disputes
and tax obligations we may face in various jurisdictions, including
the risk of obligations to pay additional taxes; 19) our actual or
anticipated performance, among other factors, which could reduce
our ability to utilize deferred tax assets; 20) our ability to
retain, motivate, develop and recruit appropriately skilled
employees; 21) disruptions to our manufacturing, service creation,
delivery, logistics and supply chain processes, and the risks
related to our geographically-concentrated production sites; 22)
the impact of litigation, arbitration, agreement-related disputes
or product liability allegations associated with our business; 23)
our ability to optimize our capital structure as planned and
re-establish our investment grade credit rating or otherwise
improve our credit ratings; 24) our ability to achieve targeted
benefits from or successfully implement planned transactions, as
well as the liabilities related thereto; 25) our involvement in
joint ventures and jointly-managed companies; 26) the carrying
amount of our goodwill may not be recoverable; 27) uncertainty
related to the amount of dividends and equity return we are able to
distribute to shareholders for each financial period; 28) pension
costs, employee fund-related costs, and healthcare costs; and 29)
risks related to undersea infrastructure, as well as the risk
factors specified on pages 69 to 87 of our annual report on Form
20-F filed on April 1, 2016 under "Operating and financial review
and prospects-Risk factors", and in Nokia's other filings with the
U.S. Securities and Exchange Commission. 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. We do 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.
The financial statements were authorized for issue by management
on February 1, 2017
Media and Investor Contacts:
Communications, tel. +358 10 448 4900 email:
press.services@nokia.com Investor Relations, tel. +358 4080 3 4080
email: investor.relations@nokia.com
- Nokia plans to publish its "Nokia in 2016" annual report, which
includes the review by the Board of Directors and the audited
annual accounts, in week 12 of 2017. The annual report will be
available at www.nokia.com/financials.
- Nokia plans to publish its first quarter 2017 results on April
27, 2017.
- Nokia's Annual General Meeting 2017 is planned to be held on
May 23, 2017.
- Nokia plans to publish its second quarter and half year 2017
results on July 27, 2017.
- Nokia plans to publish its third quarter 2017 results on
October 26, 2017.
Attachments:
http://www.globenewswire.com/NewsRoom/AttachmentNg/0fb58a22-a9fa-4de9-9356-be71020b2746
Nokia (NYSE:NOK)
Historical Stock Chart
From Aug 2024 to Sep 2024
Nokia (NYSE:NOK)
Historical Stock Chart
From Sep 2023 to Sep 2024