Nokia Networks net sales in the second quarter 2014 buoy the company
Nokia has reported a healthier outlook for this year thanks to the strength of Nokia Networks in the second quarter 2014, which has achieved strong underlying operating profitability.
As the company continues to consolidate realign the company following the sales of substantially all of the Devices & Services business to Microsoft, net sales in the second quarter 2014 for Nokia stood at Euro 2.9 billion, compared toEuro3.2 billion in the same period 2013, down 7% year on year.Operating profit in the second quarter 2014 was Euro 284 million, against Euro 12 million in the same quarter last year.
Nokia Networks net sales in the second quarter 2014 wereEuro2.6 billion, compared toEuro2.8 billioninthe second quarter 2013, down 8% year on year, but up 10% from the first quarter 2014.
Non-IFRS operating profit for Nokia Networks stands atEuro281 million, or 11.0% of net sales, comparedtoEuro328 million, or 11.8% of net sales, in the second quarter 2013. The strong level ofprofitability for Nokia Networks in the second quarter 2014 and last year was primarily due to operational efficiency which benefitted both gross margin and operating profit.
HERE net sales in the quarter 2014 were approximately flat on a year on year basis. Excluding foreign currency fluctuations, HERE net sales in the quarter 2014 would have increased 2% year on year. However, in the quarter this year HERE sold map data licenses for the embedded navigation systems of 3.3 million new vehicles globally, compared to 2.7 million vehicles in the same period 2013.
Nokia Technologies net sales increased sequentially in the second quarter, primarily due to Microsoft becoming a more significant intellectual property licensee in conjunction with the sale of most of the Devices & Services business to Microsoft.
Nokia also completed the sale of substantially all of the Devices & Services business to Microsoft in the second quarter. Of the approximatelyEuro5 billion of net cash impact from the proceeds,approximatelyEuro4.8 billion benefitted the second quarter 2014 with the balance expected tobe received in the second half 2014. In connection with the completion of the transaction theEuro1.5 billion Microsoft convertible bonds were repaid.
Nokia ended the second quarter 2014 with a strong balance sheet and solid cash position with gross cash ofEuro9 billion and net cash ofEuro6.5 billion, compared toEuro6.9 billion andEuro2.1billion,respectively, at the end of the first quarter 2014.
Additionally Nokia started the capital structure optimisation programme in the second quarter, with the redemption of approximatelyEuro950 million of Nokia Networks debt. As a result of this, Nokia nolonger has material financial covenants.
Nokia continuing operations net sales in January to June 2014 wereEuro5.6 billion, a decrease of 11%year on year.
Commenting on the second quarter results, Rajeev Suri, Nokia President and CEO, said: 'Nokia's second quarter performance shows the strength of the company today. In Nokia Networks, our unique operating model has allowed us to deliver strong profitability while improving our topline trend. Maintaining this balance will remain a clear priority in the second half of the year, when we expect Networks to return to year on year growth. Our expectations for the full year 2014 have improved and we now expect full year underlying profitability for Networks to be at or slightly above our long term target range of 5% to 10%.'