Nokia Posts Surprise Profit but Flags Tough Times Ahead

Cost cuts helped Nokia to a surprise rise in its October-December underlying profit on Thursday, although the Finnish telecom network equipment maker flagged tough times ahead and said it would not propose a dividend for 2019.

Nokia slashed its outlook in October and halted dividend payouts, blaming a need to step up investments in 5G and knocking more than a fifth from its value.

But on Thursday, Nokia said its underlying earnings for the quarter ending in December rose to EUR 0.15 per share from EUR 0.13 per share a year ago, above the EUR 0.13 consensus in a Refinitiv poll.

"Our Q4 was a strong end to a challenging year," Nokia Chief Executive Rajeev Suri told journalists.

In a statement, Nokia repeated its forecast for 2020 underlying earnings per share of EUR 0.20 to EUR 0.30, compared to EUR 0.22 in 2019.

"Our expectation for seasonality in 2020 (is) to be similar to 2019, with the majority of operating profit and free cash flow to be generated in the fourth quarter," Nokia said.

The firm said its board would not propose a dividend for 2019 as it would likely reach EUR 2 billion cash position it sees sufficient for profit distribution only during the fourth quarter. Analysts were expecting a dividend of EUR 0.11, according to a Refinitiv poll.

Nokia, which competes with Ericsson and Huawei for new 5G network deals, said it expects intense competition to continue in 2020, as some rivals seek to grab market share in the early stages of 5G.

Suri has been cautious on the Chinese market for several quarters and Nokia excluded China from its forecast.

"We have decided to exclude China, given that pursuing market share in China presents significant profitability challenges and the region has some unique market dynamics," Nokia said.

Sales in the Greater China region dropped 25 percent in the fourth quarter to EUR 469 million.

Group sales were flat at EUR 6.9 billion as declines in China and North America were balanced by growth in Asia-Pacific, a region where Nokia flagged new challenges.

"Customer demand could weaken and risk could increase further in India, after the country's Supreme Court upheld a ruling that telecoms companies must pay retroactive license and spectrum fees," Nokia said.

© Thomson Reuters 2020