Nokia Corporation Interim Report for Q2 2013 and January-June 2013
(Thomson Reuters ONE) -
Nokia Corporation
Interim report
July 18, 2013 at 13.00 (CET+1)
This is a summary of the second quarter 2013 and January - June 2013 interim
report published today. The complete second quarter 2013 and January - June
2013 interim report with tables is available at
http://www.results.nokia.com/results/Nokia_results2013Q2e.pdf. Investors should
not rely on summaries of our interim reports only, but should review the
complete interim reports with tables.
FINANCIAL AND OPERATING HIGHLIGHTS
Second quarter 2013 highlights:
Nokia Group non-IFRS EPS in Q2 2013 was EUR 0.00; reported EPS was EUR -0.06.
* Nokia Group achieved underlying operating profitability for the fourth
consecutive quarter, with a Q2 non-IFRS operating margin of 5.3%, driven by
strong performance of Nokia Siemens Networks.
* Nokia Group ended Q2 with a strong balance sheet and solid cash position,
with gross cash of EUR 9.5 billion and net cash of EUR 4.1 billion. Nokia
Siemens Networks' contribution to Nokia Group gross and net cash was EUR
2.5 billion and EUR 1.4 billion respectively.
* Nokia Siemens Networks achieved underlying profitability for the fifth
consecutive quarter, with a Q2 non-IFRS operating margin of 11.8%,
reflecting record non-IFRS gross margin and continued progress relative to
its strategy. This exceeded the earlier expectation for Nokia Siemens
Networks non-IFRS operating margin to be approximately 5%, plus or minus
four percentage points.
* Devices & Services achieved Q2 non-IFRS operating margin of negative 1.2%,
which was consistent with the earlier expectation for approximately negative
2%, plus or minus four percentage points.
* HERE achieved Q2 non-IFRS operating margin of 3.4%. This exceeded the
earlier expectation for a negative non-IFRS operating margin.
Nokia Group net sales in Q2 2013 were EUR 5.7 billion, down 3% quarter-on-
quarter
* Nokia Siemens Networks Q2 net sales decreased 1% quarter-on-quarter to EUR
2.8 billion, reflecting Nokia Siemens Networks' focused strategy.
* Devices & Services Q2 net sales decreased 6% quarter-on-quarter to EUR 2.7
billion.
* Lumia Q2 volumes increased 32% quarter-on-quarter to 7.4 million units,
reflecting strong demand from customers for a broadened Lumia product
range.
* Mobile Phones Q2 volumes decreased 4% quarter-on-quarter to 53.7 million
units, but demonstrated some signs of recovery in the latter part of the
quarter.
* HERE Q2 net sales increased 8% quarter-on-quarter to EUR 0.2 billion.
January-June 2013 highlights:
Nokia Group net sales in January-June 2013 were EUR 11.5 billion
* Nokia Group net sales for the first half 2013 decreased 22% year-on-year.
* Reported EPS for the first half 2013 was EUR -0.13, compared to EUR -0.63 in
the first half 2012.
Commenting on the second quarter results, Stephen Elop, Nokia CEO, said:
"We're pleased to report an underlying operating profit for the fourth
consecutive quarter on a group level. We benefited from another strong
performance at Nokia Siemens Networks, which continued to deliver well against
its focused strategy. With our recent announcement to purchase Siemens' 50%
stake in Nokia Siemens Networks, we believe we will create value for Nokia
shareholders and look forward to strengthening Nokia Siemens Networks as a more
independent entity.
In Devices & Services, our Mobile Phones business unit started to demonstrate
some signs of recovery in the latter part of the second quarter following a
difficult start to the year. Also, towards the end of the second quarter, we
started to ship the Asha 501, which brings a new design and user experience to
the highly competitive sub-100 USD market. While we are very encouraged by the
consumer response to our innovations in this price category, our Mobile Phones
business unit is planning to take actions to focus its product offering and
improve product competitiveness.
In our Smart Devices business unit, we continue to focus on delivering
meaningful differentiation to consumers around the world. We are very proud of
the recent creations by our Lumia team, from the Lumia 520 - our most affordable
Windows Phone 8 product which has enjoyed a strong start in markets like China,
France, India, Thailand, the UK, the US and Vietnam - to the Lumia 1020, our
star imaging product which we unveiled to the world last week. Overall, Lumia
volumes grew to 7.4 million in the second quarter, the highest for any quarter
so far and showing increasing momentum for the ecosystem. During the third
quarter, we expect that our new Lumia products will drive a significant part of
our Smart Devices revenue."
SUMMARY FINANCIAL INFORMATION
+-------------+------------------------------------+-+-------------------------+
| | | | Reported and Non-IFRS |
| |Reported and Non-IFRS second quarter| | January-June 2013 |
| | 2013 results(1,2,3) | | results(1,2,3,4) |
| +------+------+------+------+--------+-+--------+--------+-------+
| | | | YoY | | QoQ | |Q1-Q2/13|Q1-Q2/12| YoY |
|EUR million |Q2/13 |Q2/12 |Change|Q1/13 | Change | | | |Change |
+-------------+------+------+------+------+--------+-+--------+--------+-------+
|Nokia | | | | | | | | | |
| | | | | | | | | | |
| Net sales | 5 695| 7 542| -24%| 5 852| -3%| | 11 547| 14 896| -22%|
| | | | | | | | | | |
| Operating | | | | | | | | | |
|profit | -115| -824| | -150| | | -265| -2 162| |
| | | | | | | | | | |
| Operating | | | | | | | | | |
|profit (non- | | | | | | | | | |
|IFRS) | 303| -325| | 181| 67%| | 484| -583| |
| | | | | | | | | | |
| EPS, EUR | | | | | | | | | |
|diluted | -0.06| -0.38| | -0.07| | | -0.13| -0.63| |
| | | | | | | | | | |
| EPS, EUR | | | | | | | | | |
|diluted (non-| | | | | | | | | |
|IFRS)(5) | 0.00| -0.08| | -0.02| | | -0.01| -0.16| |
| | | | | | | | | | |
| Net cash | -196| 102| | 206| | | 10| -488| |
|from | | | | | | | | | |
|operating | | | | | | | | | |
|activities | | | | | | | | | |
| | | | | | | | | | |
| Net cash and| 4 067| 4 197| -3%| 4 480| -9%| | 4 067| 4 197| -3%|
|other liquid | | | | | | | | | |
|assets(6) | | | | | | | | | |
+-------------+------+------+------+------+--------+-+--------+--------+-------+
|Devices & | | | | | | | | | |
|Services(7) | | | | | | | | | |
| | | | | | | | | | |
| Net sales | 2 724| 4 023| -32%| 2 888| -6%| | 5 612| 8 269| -32%|
| | | | | | | | | | |
| Smart | | | | | | | | | |
|Devices net | | | | | | | | | |
|sales | 1 164| 1 541| -24%| 1 164| 0%| | 2 328| 3 245| -28%|
| | | | | | | | | | |
| Mobile | | | | | | | | | |
|Phones net | | | | | | | | | |
|sales | 1 405| 2 291| -39%| 1 590| -12%| | 2 995| 4 602| -35%|
| | | | | | | | | | |
| Mobile | | | | | | | | | |
|device volume| | | | | | | | | |
|(mn units) | 61.1| 83.7| -27%| 61.9| -1%| | 123.0| 166.4| -26%|
| | | | | | | | | | |
| Smart | | | | | | | | | |
|Devices | | | | | | | | | |
|volume (mn | | | | | | | | | |
|units) | 7.4| 10.2| -27%| 6.1| 21%| | 13.5| 22.1| -39%|
| | | | | | | | | | |
| Mobile | | | | | | | | | |
|Phones volume| | | | | | | | | |
|(mn units) | 53.7| 73.5| -27%| 55.8| -4%| | 109.5| 144.3| -24%|
| | | | | | | | | | |
| Mobile | | | | | | | | | |
|device ASP(8)| 45| 48| -6%| 47| -4%| | 46| 50| -8%|
| | | | | | | | | | |
| Smart | | | | | | | | | |
|Devices | | | | | | | | | |
|ASP(8) | 157| 151| 4%| 191| -18%| | 172| 147| 17%|
| | | | | | | | | | |
| Mobile | | | | | | | | | |
|Phones ASP(8)| 26| 31| -16%| 28| -7%| | 27| 32| -16%|
| | | | | | | | | | |
| Operating | | | | | | | | | |
|profit | -33| -473| | -42| | | -75| -691| |
| | | | | | | | | | |
| Operating | | | | | | | | | |
|profit (non- | | | | | | | | | |
|IFRS) | -32| -364| | 4| | | -28| -490| |
| | | | | | | | | | |
| Operating | | | | | | | | | |
|margin % | -1.2%|-11.8%| | -1.5%| | | -1.3%| -8.4%| |
| | | | | | | | | | |
| Operating | | | | | | | | | |
|margin % | | | | | | | | | |
|(non-IFRS) | -1.2%| -9.0%| | 0.1%| | | -0.5%| -5.9%| |
+-------------+------+------+------+------+--------+-+--------+--------+-------+
|HERE(7) | | | | | | | | | |
| | | | | | | | | | |
| Net sales | 233| 283| -18%| 216| 8%| | 449| 560| -20%|
| | | | | | | | | | |
| Operating | | | | | | | | | |
|profit | -89| -95| | -97| | | -186| -189| |
| | | | | | | | | | |
| Operating | | | | | | | | | |
|profit (non- | | | | | | | | | |
|IFRS) | 8| 41| -80%| -5| | | 3| 77| -96%|
| | | | | | | | | | |
| Operating | | | | | | | | | |
|margin % |-38.2%|-33.6%| |-44.9%| | | -41.4%| -33.8%| |
| | | | | | | | | | |
| Operating | | | | | | | | | |
|margin % | | | | | | | | | |
|(non-IFRS) | 3.4%| 14.5%| | -2.3%| | | 0.7%| 13.7%| |
+-------------+------+------+------+------+--------+-+--------+--------+-------+
|Nokia Siemens| | | | | | | | | |
|Networks(7) | | | | | | | | | |
| | | | | | | | | | |
| Net sales | 2 781| 3 343| -17%| 2 804| -1%| | 5 585| 6 290| -11%|
| | | | | | | | | | |
| Operating | | | | | | | | | |
|profit | 8| -226| | 3| 167%| | 11| -1 230| |
| | | | | | | | | | |
| Operating | | | | | | | | | |
|profit (non- | | | | | | | | | |
|IFRS) | 328| 28| | 196| 67%| | 524| -118| |
| | | | | | | | | | |
| Operating | | | | | | | | | |
|margin % | 0.3%| -6.8%| | 0.1%| | | 0.2%| -19.6%| |
| | | | | | | | | | |
| Operating | | | | | | | | | |
|margin % | | | | | | | | | |
|(non-IFRS) | 11.8%| 0.8%| | 7.0%| | | 9.4%| -1.9%| |
+-------------+------+------+------+------+--------+-+--------+--------+-------+
Note 1 relating to non-IFRS (also referred to as "underlying") results: In
addition to information on our reported IFRS results, we provide certain
information on a non-IFRS, or underlying business performance, basis. Non-IFRS
results exclude all material special items for all periods. In addition, non-
IFRS results exclude intangible asset amortization, other purchase price
accounting related items and inventory value adjustments arising from (i) the
formation of Nokia Siemens Networks and (ii) all business acquisitions completed
after June 30, 2008. Nokia believes that our non-IFRS results provide
meaningful supplemental information to both management and investors regarding
Nokia's underlying business performance by excluding the above-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. See note 2 below
for information about the exclusions from our non-IFRS results. More
information, including a reconciliation of our Q2 2013 and Q2 2012 non-IFRS
results to our reported results, can be found in our complete Q2 2013 and
January-June 2013 interim report with tables on pages 20 and 23-28. A
reconciliation of our Q1 2013 non-IFRS results to our reported results can be
found in our complete Q1 interim report with tables on pages 19 and 21-25
published on April 18, 2013.
Note 2 relating to non-IFRS exclusions:
Q2 2013 - EUR 418 million (net) consisting of:
* EUR 157 million restructuring charge and other associated items in Nokia
Siemens Networks.
* EUR 151 million losses related to divestments of businesses in Nokia Siemens
Networks.
* EUR 10 million restructuring charge in HERE
* EUR 12 million of intangible asset amortization and other purchase price
accounting related items arising from the acquisition of Motorola Solutions'
networks assets
* EUR 87 million of intangible asset amortization and other purchase price
accounting related items arising from the acquisition of NAVTEQ
* EUR 1 million of intangible assets amortization and other purchase price
accounting related items arising from the acquisition of Novarra, MetaCarta
and Motally in Devices & Services
Q1 2013 - EUR 331 million (net) consisting of:
* EUR 129 million restructuring charge and other associated items in Nokia
Siemens Networks, including EUR 53 million of net charges related to country
and contract exits based on the strategy that focuses on key markets and
product segments.
* EUR 5 million restructuring charge in HERE
* EUR 72 million restructuring charge in Devices & Services
* EUR 27 million positive item from a cartel claim settlement in Devices &
Services
* EUR 64 million of intangible asset amortization and other purchase price
accounting related items arising from the formation of Nokia Siemens
Networks and the acquisition of Motorola Solutions' networks assets
* EUR 87 million of intangible asset amortization and other purchase price
accounting related items arising from the acquisition of NAVTEQ
* EUR 1 million of intangible assets amortization and other purchase price
accounting related items arising from the acquisition of Novarra, MetaCarta
and Motally in Devices & Services
Q2 2012 - EUR 499 million (net) consisting of:
* EUR 190 million restructuring charge and other associated items in Nokia
Siemens Networks, including EUR 70 million of charges related to country and
contract exits based on new strategy that focuses on key markets and product
segments.
* EUR 10 million restructuring charge in HERE
* EUR 80 million restructuring charge and associated impairments of EUR 28
million in Devices & Services
* EUR 64 million of intangible asset amortization and other purchase price
accounting related items arising from the formation of Nokia Siemens
Networks and the acquisition of Motorola Solutions' networks assets
* EUR 126 million of intangible asset amortization and other purchase price
accounting related items arising from the acquisition of NAVTEQ
* EUR 1 million of intangible assets amortization and other purchase price
accounting related items arising from the acquisition of Novarra, MetaCarta
and Motally in Devices & Services
Q2 2012 taxes - EUR 800 million valuation allowance for deferred tax assets
impacting Nokia taxes
Q1 2012 - EUR 1 080 million (net) consisting of:
* EUR 772 million restructuring charge and other associated items in Nokia
Siemens Networks
* EUR 10 million restructuring charge in HERE
* EUR 91 million restructuring charge in Devices & Services
* EUR 86 million of intangible asset amortization and other purchase price
accounting related items arising from the formation of Nokia Siemens
Networks and the acquisition of Motorola Solutions' networks assets
* EUR 120 million of intangible asset amortization and other purchase price
accounting related items arising from the acquisition of NAVTEQ
* EUR 1 million of intangible assets amortization and other purchase price
accounting related items arising from the acquisition of Novarra, MetaCarta
and Motally in Devices & Services
Q1 2012 taxes - EUR 135 million valuation allowance for Nokia Siemens Networks
deferred tax assets impacting Nokia taxes.
Note 3 relating to changes to historical comparative financials due to revised
IFRS accounting standard, IAS19 Employee Benefits: The historical comparative
financials presented in the interim report include certain changes to previously
reported information. These changes result from the retrospective application of
a revised IFRS accounting standard IAS19, Employee Benefits and mainly relate to
consolidated statements of comprehensive income and financial position. For more
information on the adjustments between the previously reported information and
the adjusted information, please see the related disclosure starting on page 39
of the complete Q1 2013 interim report with tables published on April 18, 2013.
Note 4 relating to January-June 2013 results: Further information about the
results for the period from January 1 to June 30, 2013 can be found on pages
18-19, 21, 29, 30, 32 and 34 of the complete Q2 2013 and January-June 2013
interim report with tables.
Note 5 relating to non-IFRS Nokia EPS: Nokia taxes were unfavorably impacted by
Devices & Services taxes as no tax benefits are recognized for certain Devices &
Services deferred tax items. If Nokia's earlier estimated long-term tax rate of
26% had been applied, non-IFRS Nokia EPS would have been approximately 1.5 Euro
cent higher in Q2 2013. Going forward on a non-IFRS basis, until a pattern of
tax profitability is reestablished in Finland, Nokia expects to record quarterly
tax expense of approximately EUR 50 million related to its Devices & Services
business and approximately EUR 50 million related to its Nokia Siemens Networks
business. Nokia expects to continue to record taxes related to its HERE business
at a 26% rate.
Note 6 relating to Nokia net cash and other liquid assets: Calculated as total
cash and other liquid assets less interest-bearing liabilities. For selected
information on Nokia Group interest-bearing liabilities, please see the table on
page 40 of the complete Q2 2013 and January-June 2013 interim report with
tables.
Note 7 relating to operational and reporting structure: We have three
businesses: Devices & Services, HERE and Nokia Siemens Networks and four
operating and reportable segments: Smart Devices and Mobile Phones within
Devices & Services, HERE and Nokia Siemens Networks. Smart Devices focuses on
smartphones and Mobile Phones focuses on mass market mobile devices, including
Asha full-touch smartphones. Devices & Services also contains Devices & Services
Other, which includes net sales of our luxury phone business Vertu through
October 12, 2012, spare parts and related cost of sales and operating expenses,
as well as intellectual property (IPR) income and common research and
development expenses. In October 2012, we completed the divestment of Vertu to
EQT VI, a European private equity firm. HERE focuses on the development of
location-based services and local commerce. We introduced HERE as the new brand
for our location and mapping service in November 2012. As of January 1, 2013,
our Location & Commerce business and reportable segment was renamed HERE. Nokia
Siemens Networks is one of the leading global providers of telecommunications
infrastructure hardware, software and services, with the focus on the mobile
broadband market. Nokia Siemens Networks operational organization is based on
two business units: Mobile Broadband and Global Services. The Mobile Broadband
business unit provides mobile operators with radio and core network software
together with the hardware needed to deliver mobile voice and data services. The
Global Services business unit provides mobile operators with a broad range of
services, including professional services, network implementation and customer
care services.
Note 8 relating to average selling prices (ASP): Mobile device ASP represents
total Devices & Services net sales (Smart Devices net sales, Mobile Phones net
sales, and Devices & Services Other net sales) divided by total Devices &
Services volumes. Devices & Services Other net sales includes net sales of
Nokia's luxury phone business Vertu through October 12, 2012, spare parts, as
well as intellectual property income. Smart Devices ASP represents Smart Devices
net sales divided by Smart Devices volumes. Mobile Phones ASP represents Mobile
Phones net sales divided by Mobile Phones volumes. As IPR income is included in
Devices & Services Other net sales, we provide our total mobile device ASP both
including and excluding IPR income. The mobile device ASP excluding IPR income
in the second quarter 2013 was EUR 42, down 11% from EUR 47 in the second
quarter 2012 and down 7% from EUR 45 in the first quarter 2013.
NOKIA OUTLOOK
* Nokia expects its Devices & Services non-IFRS operating margin in the third
quarter 2013 to be approximately negative 2 percent, plus or minus four
percentage points. This outlook is based on Nokia's expectations regarding a
number of factors, including:
* competitive industry dynamics continuing to negatively affect Devices &
Services;
* consumer demand for our products;
* ramp-up for our high-end Lumia smartphones and new Mobile Phones
devices;
* expected increases in Devices & Services' operating expenses; and
* the macroeconomic environment.
* In the third quarter 2013, supported by the wider availability of recently
announced Lumia products as well as recently announced Mobile Phones
products, Nokia expects higher Devices & Services net sales, compared to the
second quarter 2013.
* Nokia continues to target to reduce its Devices & Services non-IFRS
operating expenses to an annualized run rate of approximately EUR 3.0
billion by the end of 2013.
* Nokia and Nokia Siemens Networks expect Nokia Siemens Networks non-IFRS
operating margin in the third quarter 2013 to be approximately positive 7
percent, plus or minus four percentage points. This outlook is based on
Nokia Siemens Networks' expectations regarding a number of factors,
including:
* competitive industry dynamics;
* product and regional mix;
* expected continued improvement under Nokia Siemens Networks
restructuring program; and
* the macroeconomic environment.
* Nokia and Nokia Siemens Networks now target to reduce Nokia Siemens
Networks' non-IFRS annualized operating expenses and production overheads by
more than EUR 1.5 billion by the end of 2013, compared to the end of 2011.
Nokia and Nokia Siemens Networks previous target was to reduce Nokia Siemens
Networks' non-IFRS annualized operating expenses and production overheads by
more than EUR 1 billion by the end of 2013, compared to the end of 2011.
NOKIA TO FULLY ACQUIRE SIEMENS' STAKE IN NOKIA SIEMENS NETWORKS
On July 1, 2013, Nokia Corporation and Siemens AG announced that they have
entered into a definitive agreement pursuant to which Nokia acquires Siemens'
entire 50% stake in their joint venture, Nokia Siemens Networks. The acquisition
has been approved by the Board of Directors of Nokia as well as the Managing and
Supervisory Boards of Siemens, and is subject to the customary regulatory
approval process.
The purchase price for Siemens' stake is EUR 1.7 billion and the transaction is
expected to close during the third calendar quarter of 2013. Upon closing of the
planned acquisition, Nokia Siemens Networks will become a wholly owned
subsidiary of Nokia. Of the purchase price, EUR 1.2 billion will be paid in cash
at the closing of the transaction. The balance of EUR 0.5 billion will be paid
in the form of a secured loan from Siemens due one year from closing. Nokia has
obtained committed bank financing for the EUR 1.2 billion cash portion.
Nokia will continue to consolidate Nokia Siemens Networks for financial
reporting purposes as well as continue to strengthen the company as a more
independent entity.
SECOND QUARTER 2013 FINANCIAL AND OPERATING DISCUSSION
NOKIA GROUP
See note 7 to our Summary Financial Information table above concerning our
current operational and reporting
structure and note 3 concerning certain changes to historical comparative
financials due to a revised IFRS accounting
standard, IAS19 Employee Benefits. The following discussion includes information
on a non-IFRS, or underlying business performance, basis. See notes 1 and 2 to
our Summary Financial Information table above for information about our
underlying non-IFRS results and the non-IFRS exclusions for the periods
discussed below.
The following table sets forth the year-on-year and sequential growth rates in
our net sales on a reported basis and at constant currency for the periods
indicated.
+---------------------------------------------------------------------------+
| SECOND QUARTER 2013 NET SALES, REPORTED & CONSTANT CURRENCY(1) |
+---------------------------------------------------------+--------+--------+
| | YoY | QoQ |
| | Change | Change |
+---------------------------------------------------------+--------+--------+
| Group net sales - reported | -24% | -3% |
| | | |
| Group net sales - constant currency(1) | -25% | -3% |
| | | |
| Devices & Services net sales - reported | -32% | -6% |
| | | |
| Devices & Services net sales - constant currency(1) | -33% | -6% |
| | | |
| Nokia Siemens Networks net sales - reported | -17% | -1% |
| | | |
| Nokia Siemens Networks net sales - constant currency(1) | -17% | -1% |
+---------------------------------------------------------+--------+--------+
Note 1: Change in net sales at constant currency excludes the impact of changes
in exchange rates in comparison to the Euro, our reporting currency.
At constant currency Nokia Group's net sales would have decreased 25% year-on-
year and 3% sequentially.
The following table sets forth Nokia Group's reported cash flow for the periods
indicated and financial position at the end of the periods indicated, as well as
the year-on-year and sequential growth rates.
+------------------------------------------------------------------------------+
|NOKIA GROUP CASH FLOW AND FINANCIAL POSITION |
+--------------------------------+-------+-------+----------+-------+----------+
|EUR million |Q2/2013|Q2/2012|YoY Change|Q1/2013|QoQ Change|
+--------------------------------+-------+-------+----------+-------+----------+
|Net cash from operating | -196| 102| | 206| |
|activities | | | | | |
+--------------------------------+-------+-------+----------+-------+----------+
|NSN contribution (approximate) | 90| 160| -44%| 270| -67%|
+--------------------------------+-------+-------+----------+-------+----------+
|Total cash and other liquid | 9 453| 9 418| 0%| 10 102| -6%|
|assets | | | | | |
+--------------------------------+-------+-------+----------+-------+----------+
|NSN contribution | 2 519| 1 846| 36%| 2 753| -8%|
+--------------------------------+-------+-------+----------+-------+----------+
|Net cash and other liquid | 4 067| 4 197| -3%| 4 480| -9%|
|assets(1) | | | | | |
+--------------------------------+-------+-------+----------+-------+----------+
|NSN contribution | 1 446| 383| 278%| 1 484| -3%|
+--------------------------------+-------+-------+----------+-------+----------+
Note 1: Total cash and other liquid assets minus interest-bearing liabilities.
In the second quarter 2013, Nokia Group total cash and other liquid assets
decreased sequentially by EUR 649 million and Nokia Group net cash and other
liquid assets decreased by EUR 413 million.
The items below are the primary drivers of the decrease in Nokia Group net cash
and other liquid assets in the second quarter 2013 of EUR 413 million:
* Nokia Group level net profit adjusted for non-cash items of positive EUR
382 million;
* Nokia Group level net working capital-related cash outflows of approximately
EUR 500 million, which included approximately EUR 230 million of
restructuring related cash outflows;
* Nokia Group excluding Nokia Siemens Networks level net working capital-
related outflows of approximately EUR 270 million, which included
approximately EUR 40 million of restructuring-related outflows. The net
working capital change in Nokia Group excluding Nokia Siemens Networks
is primarily due to a reduction of interest free short-term liabilities,
partially offset by a reduction of receivables;
* Nokia Siemens Networks level net working capital-related outflows of
approximately EUR 230 million, which included approximately EUR 190
million of restructuring-related outflows. The net working capital
change in Nokia Siemens Networks is primarily due to a reduction of
interest free short-term liabilities, partially offset by a reduction of
receivables;
* Nokia Group level net financial income and expense-related cash outflow of
approximately EUR 10 million,
* Nokia Group level cash tax net outflows of approximately EUR 70 million;
* Nokia Group level capital expenditure of approximately EUR 140 million;
* Nokia Group level proceeds from the sale of fixed assets of approximately
EUR 60 million;
* Nokia Group level outflow related to business divestments of approximately
EUR 60 million; and
* Nokia Group level negative foreign exchange impact from translation of net
cash of approximately EUR 70 million.
In the second quarter 2013, we received a quarterly platform support payment of
USD 250 million (approximately EUR 192 million) from Microsoft. Our agreement
with Microsoft includes platform support payments from Microsoft to us as well
as software royalty payments from us to Microsoft. Under the terms of the
agreement governing the platform support payments, the amount of each quarterly
platform support payment is USD 250 million. We have a competitive software
royalty structure, which includes annual minimum software royalty commitments
that vary over the life of the agreement. Software royalty payments, with
minimum commitments are paid quarterly. Over the life of the agreement, both the
platform support payments and the minimum software royalty commitments are
expected to measure in the billions of US dollars. Over the life of the
agreement the total amount of the platform support payments is expected to
slightly exceed the total amount of the minimum software royalty commitment
payments. In accordance with the terms of the agreement, the platform support
payments and annual minimum software royalty commitment payments continue for a
corresponding period of time.
DEVICES AND SERVICES
The following table sets forth a summary of the results for our Devices &
Services business for the periods indicated, as well as the year-on-year and
sequential growth rates.
+------------------------------------------------------------------------------+
|DEVICES & SERVICES RESULTS SUMMARY |
+--------------------------------+-------+-------+----------+-------+----------+
| |Q2/2013|Q2/2012|YoY Change|Q1/2013|QoQ Change|
+--------------------------------+-------+-------+----------+-------+----------+
|Net sales (EUR million)(1) | 2 724| 4 023| -32%| 2 888| -6%|
+--------------------------------+-------+-------+----------+-------+----------+
|Mobile device volume (million | 61.1| 83.7| -27%| 61.9| -1%|
|units) | | | | | |
+--------------------------------+-------+-------+----------+-------+----------+
|Mobile device ASP (EUR) | 45| 48| -6%| 47| -4%|
+--------------------------------+-------+-------+----------+-------+----------+
|Non-IFRS gross margin (%) | 24.4%| 18.1%| | 25.1%| |
+--------------------------------+-------+-------+----------+-------+----------+
|Non-IFRS operating expenses (EUR| 696| 1 089| -36%| 711| -2%|
|million) | | | | | |
+--------------------------------+-------+-------+----------+-------+----------+
|Non-IFRS operating margin (%) | -1.2%| -9.0%| | 0.1%| |
+--------------------------------+-------+-------+----------+-------+----------+
|Operating margin (%) | -1.2%| -11.8%| | -1.5%| |
+--------------------------------+-------+-------+----------+-------+----------+
Note 1: Includes IPR income recognized in Devices & Services Other net sales.
The year-on-year and sequential changes in our Devices & Services net sales,
volumes, average selling prices and gross margin are discussed below under our
Smart Devices and Mobile Phones business units.
Smartphone Volumes
In the second quarter 2013, Devices & Services total smartphone volumes
increased sequentially to 11.7 million units, compared to 11.1 million units in
the first quarter 2013, composed of:
* 7.4 million Lumia smartphones in Smart Devices
* 4.3 million Asha full-touch smartphones in Mobile Phones
Devices & Services Other
Year-on-year Devices & Services Other net sales of EUR 155 million were lower in
the second quarter 2013, compared to EUR 191 million in the second quarter
2012, due to the divestment of Vertu. The sequential Devices & Services Other
net sales were higher in the second quarter 2013, compared to EUR 134 million in
the first quarter 2013, due to higher IPR income.
Within Devices & Services Other, we estimate that our current annual IPR income
run-rate is approximately EUR 0.5 billion.
Channel Inventory
We ended the second quarter 2013 within our normal 4 to 6 week channel inventory
range. On an absolute unit basis, channel inventories decreased sequentially.
Net Sales and Volumes by Geographic Area
The following table sets forth the net sales for our Devices & Services business
for the periods indicated, as well as the year-on-year and sequential growth
rates, by geographic area. IPR income is allocated to the geographic areas
contained in this chart.
+------------------------------------------------------------------------------+
| DEVICES & SERVICES NET SALES BY GEOGRAPHIC AREA |
+----------------------+---------+---------+------------+---------+------------+
| EUR million | Q2/2013 | Q2/2012 | YoY Change | Q1/2013 | QoQ Change |
+----------------------+---------+---------+------------+---------+------------+
| Europe | 818 | 1 096 | -25% | 895 | -9% |
| | | | | | |
| Middle East & Africa | 420 | 663 | -37% | 501 | -16% |
| | | | | | |
| Greater China | 232 | 542 | -57% | 256 | -9% |
| | | | | | |
| Asia-Pacific | 683 | 948 | -28% | 724 | -6% |
| | | | | | |
| North America | 123 | 128 | -4% | 101 | 22% |
| | | | | | |
| Latin America | 448 | 646 | -31% | 411 | 9% |
+----------------------+---------+---------+------------+---------+------------+
| Total | 2 724 | 4 023 | -32% | 2 888 | -6% |
+----------------------+---------+---------+------------+---------+------------+
The following table sets forth the mobile device volumes for our Devices &
Services business for the periods indicated, as well as the year-on-year and
sequential growth rates, by geographic area.
+------------------------------------------------------------------------------+
| DEVICES & SERVICES MOBILE DEVICE VOLUMES BY GEOGRAPHIC AREA |
+----------------------+---------+---------+------------+---------+------------+
| million units | Q2/2013 | Q2/2012 | YoY Change | Q1/2013 | QoQ Change |
+----------------------+---------+---------+------------+---------+------------+
| Europe | 11.3 | 15.3 | -26% | 11.8 | -4% |
| | | | | | |
| Middle East & Africa | 16.6 | 19.4 | -14% | 15.5 | 7% |
| | | | | | |
| Greater China | 4.1 | 7.9 | -48% | 3.4 | 21% |
| | | | | | |
| Asia-Pacific | 20.2 | 28.6 | -29% | 23.1 | -13% |
| | | | | | |
| North America | 0.5 | 0.6 | -17% | 0.4 | 25% |
| | | | | | |
| Latin America | 8.4 | 11.9 | -29% | 7.7 | 9% |
+----------------------+---------+---------+------------+---------+------------+
| Total | 61.1 | 83.7 | -27% | 61.9 | -1% |
+----------------------+---------+---------+------------+---------+------------+
On a year-on-year basis, net sales decreased in all regions primarily due to
lower sales in our Mobile Phones business unit. The largest year-on-year decline
in net sales was in Greater China followed by Asia Pacific, Middle East & Africa
and Latin America. In Greater China and Europe the net sales declines were
primarily due to lower sales in our Smart Devices business unit whereas in Asia
Pacific, Middle East & Africa and Latin America the net sales declines were
primarily due to lower sales in our Mobile Phones business unit.
On a sequential basis, net sales decreased in all regions except North America
and Latin America. The net sales increases in North America and Latin America
were primarily due to higher sales in our Smart Devices business unit. The
largest relative sequential decline in net sales was in Middle East & Africa
which was primarily due to lower sales in our Smart Devices business unit.
At constant currency Devices & Services' net sales would have decreased 33%
year-on-year and 6% sequentially.
Non-IFRS Operating Expenses
Devices & Services non-IFRS operating expenses decreased 36% year-on-year and
2% sequentially in the second quarter 2013. On a year-on-year basis, operating
expenses related to Mobile Phones and Smart Devices decreased 41% and 25%,
respectively, in the second quarter 2013. On a sequential basis, operating
expenses related to Mobile Phones was approximately flat, while Smart Devices
operating expenses decreased 3% in the second quarter 2013. In addition to the
factors described below, the year-on-year change was affected by the
proportionate allocation of operating expenses being affected by the relative
mix of sales and gross profit performance between Mobile Phones and Smart
Devices. This resulted in higher and lower relative allocations to Smart Devices
and Mobile Phones, respectively.
Devices & Services non-IFRS research and development expenses decreased 37%
year-on-year in the second quarter 2013. On a sequential basis, Devices &
Services non-IFRS research and development expenses decreased 8% in the second
quarter 2013. The year-on-year decline was primarily due to reductions in
certain Mobile Phones-related activities, ramping down Symbian and MeeGo
research and development efforts and overall cost controls. On a sequential
basis, the decline was primarily due to lower accrued incentive expenses
consistent with Devices & Services business performance as well as overall cost
controls.
Devices & Services non-IFRS sales and marketing expenses decreased 38% year-on-
year in the second quarter 2013. On a year-on-year basis, sales and marketing
expenses declined primarily due to overall cost control, a lower cost base as a
result of business divestments, headcount reductions and lower product-specific
marketing. On a sequential basis, Devices & Services non-IFRS sales and
marketing expenses increased 5% in the second quarter 2013. Sequentially, sales
and marketing expenses increased primarily due to higher marketing spending in
support of newly launched Lumia and Asha products, partially offset by lower
accrued incentive expenses consistent with Devices & Services business
performance.
Devices & Services non-IFRS administrative and general expenses decreased 10%
year-on-year in the second quarter 2013 and decreased 7% sequentially in the
second quarter 2013. The year-on-year decrease was primarily related to overall
cost control and business divestments, partially offset by shared function cost
categorization. The sequential decrease was primarily due to lower accrued
incentive expenses consistent with Devices & Services business performance as
well as overall cost controls.
In the second quarter 2013, Devices & Services non-IFRS other income and expense
had both year-on-year and sequentially a positive impact on profitability.
In the second quarter 2013, Devices & Services reported other income and expense
had both year-on-year and sequentially a positive impact on profitability. Both
on a year-on-year and sequential basis the less negative other income and
expense was due to the absence of restructuring-related charges and associated
items.
Non-IFRS Operating Margin
The higher year-on-year Devices & Services non-IFRS operating margin in the
second quarter 2013 was primarily due to higher gross margin and lower operating
expenses as a percentage of net sales.
The sequentially lower Devices & Services non-IFRS operating margin in the
second quarter 2013 was primarily due to a lower gross margin and higher
operating expenses as a percentage of net sales.
Operating Margin
The higher year-on-year Devices & Services operating margin in the second
quarter 2013 was primarily due to higher gross margin, lower operating expenses
as a percentage of net sales. The other income and expenses was an expense of
EUR 2 million, compared to an expense of EUR 112 million in the second quarter
2012.
The sequentially higher Devices & Services operating margin in the second
quarter 2013 was primarily due to lower other expenses as a percentage of net
sales compared to the first quarter 2013, partially offset by lower gross margin
and higher operating expenses as a percentage of net sales. In the second
quarter 2013, other income and expense was an expense of EUR 2 million, compared
to an expense of EUR 54 million in the first quarter 2013.
Cost Reduction Activities and Planned Operational Adjustments
The following table sets forth a summary of our Devices & Services cost
reduction activities and planned operational adjustments.
+---------------------------------------------------------------------------------+
|DEVICES & SERVICES RESTRUCTURING SUMMARY |
+--------------+-------------+-------------+------------+------------+------------+
| | |Cumulative up| Q3/2013| 2013 | Total|
| EUR (million)| Q2/2013| to Q2/2013|(approximate|(approximate|(approximate|
| |(approximate)|(approximate)| estimate)| estimate)| estimate)|
+--------------+-------------+-------------+------------+------------+------------+
|Restructuring-| | | | | |
|related | | | | | |
|charges | -| 1 450|Not provided|Not provided| 1 500|
+--------------+-------------+-------------+------------+------------+------------+
|Restructuring-| | | | | |
|related cash | | | | | |
|outflows | 40| 1 250| 50| 250| 1 350|
+--------------+-------------+-------------+------------+------------+------------+
Nokia continues to target to reduce its Devices & Services non-IFRS operating
expenses to an annualized run rate of approximately EUR 3.0 billion by the end
of 2013.
At the end of the second quarter 2013, Devices & Services and Corporate Common
had approximately 31 400 employees, a reduction of approximately 12 200 compared
to the end of the second quarter 2012, and approximately 200 compared to the end
of the first quarter 2013.
By the end of the second quarter 2013, we had recorded cumulative Devices &
Services restructuring-related charges and other associated items of
approximately EUR 1.45 billion. In total, we expect now cumulative Devices &
Services restructuring-related charges of approximately EUR 1.5 billion before
the end of 2013. This is approximately EUR 100 million less than what we
estimated earlier.
By the end of the second quarter 2013, Devices & Services had cumulative
restructuring-related cash outflows of approximately EUR 1.25 billion. Of the
total expected charges relating to restructuring activities of approximately EUR
1.5 billion, we expect Devices & Services non-cash charges to be approximately
EUR 150 million. This means that we also now expect total restructuring-related
cash outflows to be approximately EUR 50 million less than what we estimated
earlier.
SMART DEVICES
The following table sets forth a summary of the results for our Smart Devices
business unit for the periods indicated, as well as the year-on-year and
sequential growth rates.
+------------------------------------------------------------------------------+
|SMART DEVICES RESULTS SUMMARY |
+--------------------------------+-------+-------+----------+-------+----------+
| |Q2/2013|Q2/2012|YoY Change|Q1/2013|QoQ Change|
+--------------------------------+-------+-------+----------+-------+----------+
|Net sales (EUR million)(1) | 1 164| 1 541| -24%| 1 164| 0%|
+--------------------------------+-------+-------+----------+-------+----------+
|Smart Devices volume (million | 7.4| 10.2| -27%| 6.1| 21%|
|units) | | | | | |
+--------------------------------+-------+-------+----------+-------+----------+
|Smart Devices ASP (EUR) | 157| 151| 4%| 191| -18%|
+--------------------------------+-------+-------+----------+-------+----------+
|Gross margin (%) | 21.1%| 1.7%| | 20.7%| |
+--------------------------------+-------+-------+----------+-------+----------+
|Operating expenses (EUR | 406| 540| -25%| 420| -3%|
|million)(2) | | | | | |
+--------------------------------+-------+-------+----------+-------+----------+
|Contribution margin (%)(2) | -14.1%| -32.9%| | -16.2%| |
+--------------------------------+-------+-------+----------+-------+----------+
Note 1: Does not include IPR income. IPR income is recognized in Devices &
Services Other net sales.
Note 2: The year-on-year changes in operating expenses were affected by the
proportionate allocation of operating expenses being affected by the relative
mix of sales and gross profit performance between Mobile Phones and Smart
Devices, resulting in higher relative allocations to Smart Devices in the first
and second quarters 2013. Accordingly, second quarter 2013 operating expenses
are not directly comparable to second quarter 2012 operating expenses.
Net Sales
On a year-on-year basis, the decline in our Smart Devices net sales in the
second quarter 2013 was due to lower volumes, partially offset by higher ASPs.
On a sequential basis, Smart Devices net sales were flat with higher volumes
offset by lower ASPs.
Volume
The year-on-year decline in our Smart Devices volumes in the second quarter
2013 continued to be driven by the strong momentum of competing smartphone
platforms and our portfolio transition from Symbian products to Lumia products.
The decline was primarily due to lower Symbian volumes, partially offset by
higher Lumia volumes. Our Symbian volumes decreased from 6 million units in the
second quarter 2012 to approximately zero in the second quarter 2013. Our Lumia
volumes increased from 4.0 million in the second quarter 2012 to 7.4 million in
the second quarter 2013.
On a sequential basis, the increase in our Smart Devices volumes in the second
quarter 2013 was due to higher Lumia volumes, as we started shipping the Lumia
520 and 720 in significant volumes. In the second quarter 2013, the vast
majority of Smart Devices volumes were from Windows Phone 8-based Lumia
products.
Average Selling Price
The year-on-year increase in our Smart Devices ASP in the second quarter 2013
was primarily due to a positive mix shift towards sales of our Lumia products
which carry a higher ASP than our Symbian products, partially offset by our
pricing actions.
Sequentially, the decrease in our Smart Devices ASP in the second quarter 2013
was primarily due to a negative mix shift towards sales of our lower priced
Windows Phone 8-based Lumia products as well as our pricing actions.
Gross Margin
The significant year-on-year increase in our Smart Devices gross margin in the
second quarter 2013 was primarily due to inventory-related allowances.
Specifically, in the second quarter 2013 Smart Devices gross margin benefited
from the reversal of approximately EUR 20 million of previously recognized
inventory-related allowances related to our Lumia devices. In contrast, in the
second quarter 2012, Smart Devices gross margin was negatively impacted by
approximately EUR 220 million of allowances related to excess component
inventory, future purchase commitments and an inventory revaluation. In
addition, the year-on-year gross margin increase was due to lower warranty
costs, reduction in certain fixed costs and the introduction of Windows Phone 8-
based Lumia products, partially offset by a net negative impact related to
foreign currency fluctuations.
On a sequential basis, the increase in our Smart Devices gross margin in the
second quarter 2013 was primarily due to a positive product mix shift towards
Windows Phone 8-based Lumia products, partially offset by lower reversals
related to inventory-related allowances. Specifically, in the second quarter
2013 Smart Devices gross margin benefited from the reversal of approximately EUR
20 million of previously recognized inventory-related allowances related to our
Lumia devices, compared to a EUR 50 million benefit in the first quarter 2013.
Increases or decreases to Smart Devices inventory-related allowances may be
required in the future depending on several factors, including consumer demand
and continued ramp-up, particularly related to our new Lumia products.
MOBILE PHONES
The following table sets forth a summary of the results for our Mobile Phones
business unit for the periods indicated, as well as the year-on-year and
sequential growth rates.
+------------------------------------------------------------------------------+
|MOBILE PHONES RESULTS SUMMARY |
+--------------------------------+-------+-------+----------+-------+----------+
| |Q2/2013|Q2/2012|YoY Change|Q1/2013|QoQ Change|
+--------------------------------+-------+-------+----------+-------+----------+
|Net sales (EUR million)(1) | 1 405| 2 291| -39%| 1 590| -12%|
+--------------------------------+-------+-------+----------+-------+----------+
|Mobile Phones volume (million | 53.7| 73.5| -27%| 55.8| -4%|
|units) | | | | | |
+--------------------------------+-------+-------+----------+-------+----------+
|Mobile Phones ASP (EUR) | 26| 31| -16%| 28| -7%|
+--------------------------------+-------+-------+----------+-------+----------+
|Gross margin (%) | 19.5%| 24.1%| | 22.9%| |
+--------------------------------+-------+-------+----------+-------+----------+
|Operating expenses (EUR | 266| 450| -41%| 267| 0%|
|million)(2) | | | | | |
+--------------------------------+-------+-------+----------+-------+----------+
|Contribution margin (%)(2) | 0.2%| 4.3%| | 5.5%| |
+--------------------------------+-------+-------+----------+-------+----------+
Note 1: Does not include IPR income. IPR income is recognized in Devices &
Services Other net sales.
Note 2: The year-on-year changes in operating expenses were affected by the
allocation of operating expenses being affected by the relative mix of sales and
gross profit performance between Mobile Phones and Smart Devices, resulting in
lower relative allocations to Mobile Phones in the first and second quarters
2013. Accordingly, second quarter 2013 operating expenses are not directly
comparable to second quarter 2012 operating expenses.
Net Sales
On a year-on-year basis, the decline in our Mobile Phones net sales in the
second quarter 2013 was due to lower volumes and lower ASP. On a sequential
basis, the decline in our Mobile Phones net sales in the second quarter 2013 was
due to lower ASP and lower volumes.
Volume
During the second quarter 2013 we shipped 53.7 million Mobile Phones units, of
which 4.3 million were Asha full-touch smartphones. During the second quarter
2013 we announced the new Asha 501 and started shipments in mid-June.
On a year-on-year basis, our Mobile Phones volumes in the second quarter 2013
were negatively affected by competitive industry dynamics, including intense
smartphone competition at increasingly lower price points and intense
competition at the low end of our product portfolio. Compared to the second
quarter 2012, our Mobile Phones volumes declined across our portfolio, most
notably for our non-full-touch devices that we sell to our customers for above
EUR 30, partially offset by higher sales volumes of Asha full-touch smartphones.
On a sequential basis, our Mobile Phones volumes in the second quarter 2013 were
negatively affected by competitive industry dynamics, including intense
competition at the low end of our product portfolio and smartphone competition
at increasingly lower price points affecting the rest
Unternehmensinformation / Kurzprofil:
Datum: 18.07.2013 - 12:01 Uhr
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News-ID 279752
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