Nokia 1st Quarter Results

Nokia Corporation 17 April 2003 PRESS RELEASE April 17, 2003 Nokia achieves excellent profitability in the first quarter and mobile phone volumes grow faster than market First quarter 2003 compared with the first quarter 2002: - Net sales were EUR 6 773 million (EUR 7 014 million in 1Q 2002), down by 3%. - Pro forma operating profit was EUR 1 187 million (EUR 1 286 million), down by 8%. This included a gain of EUR 56 million in 1Q 2003 from the sale of the remaining shares of Nokian Tyres. Pro forma operating margin was 17.5% (18.3%). - Pro forma adjustments for 1Q 2003 were EUR 183 million, including: - Goodwill amortization of EUR 43 million - Positive adjustment of EUR 226 million to 3Q 2002 customer finance impairment (MobilCom) - Pro forma net profit was EUR 860 million (EUR 915 million), down by 6%. - Pro forma earnings per share (diluted) were EUR 0.18 (EUR 0.19). The sale of the shares of Nokian Tyres contributed approximately EUR 0.01. - Reported operating profit increased by 11% to EUR 1 370 million (EUR 1 234 million). - Reported net profit increased by 13% to EUR 977 million (EUR 863 million) and reported earnings per share (diluted) increased to EUR 0.20 (EUR 0.18). - Operating cash flow in the first quarter continued strongly at EUR 1.4 billion. 1Q 2003 RESULTS PRO FORMA REPORTED (excludes goodwill amortization and non-recurring items) EUR (million) 1Q/2003 1Q/2002 Change (%) 1Q/2003 1Q/2002 Change (%) Net sales 6 773 7 014 -3 6 773 7 014 -3 Nokia Mobile 5 476 5 438 1 5 476 5 438 1 Phones Nokia 1 217 1 436 -15 1 217 1 436 -15 Networks Nokia Ventures 94 157 -40 94 157 -40 Organization Operating 1 187 1 286 -8 1 370 1 234 11 profit Nokia Mobile 1 311 1 208 9 1 288 1 185 9 Phones Nokia -127 146 85 122 -30 Networks Nokia Ventures -32 -30 -7 -32 -35 9 Organization Common Group 35 -38 29 -38 Expenses Operating 17.5 18.3 20.2 17.6 margin Nokia Mobile 23.9 22.2 23.5 21.8 Phones Nokia -10.4 10.2 7.0 8.5 Networks Nokia Ventures -34.0 -19.1 -34.0 -22.3 Organization Profit before 1 263 1 313 -4 1 446 1 261 15 tax and minority interests Net profit 860 915 -6 977 863 13 EPS, EUR Basic 0.18 0.19 -5 0.20 0.18 11 Diluted 0.18 0.19 -5 0.20 0.18 11 NB: All pro forma 1Q figures can be found in the tables on pages 7 and 8. A reconciliation of the pro forma figures to our reported results can be found in the tables on page 9. JORMA OLLILA, CHAIRMAN AND CEO: During the first quarter 2003, we were pleased to see mobile phone market volumes growing year on year for the fourth consecutive quarter, rising by 10% to approximately 98 million units. Nokia's own volumes grew by 13% to around 38 million units, marking faster-than-market growth. Again, profits in our mobile phone business exceeded our expectations, rising 9% on very healthy margins of 24%. With this strong performance from our mobile phones, we succeeded in substantially reducing the impact of difficult operating conditions in our network infrastructure business and were able to post solid overall first-quarter results. Mobility has a lot to offer, and together with our operator customers we are providing consumers and companies a growing range of products to enhance the already rich world of mobile communication. In early 2003, we began seeing an increased impact of color and multimedia on the mobile phone market. While the network market remains very difficult, we have announced strong abative measures in our network infrastructure business to bring down costs and improve operational efficiency and profitability. Reducing personnel is always difficult for our whole organization and particularly for the people directly involved. However, the actions we are taking are necessary in order to build a healthy and viable networks business going forward. In the second quarter, we plan to take a charge that is currently estimated to adversely impact our pro forma and reported operating profit by EUR 350 to 400 million. During the first quarter, we strengthened our product offering with the announcement of 17 new mobile phones. In the Americas, in particular, we launched seven new CDMA phones, most of which will begin shipping during the current quarter. We also announced our first TDMA color models as well as several new GSM models tailored for the Americas markets. The Nokia 3650 imaging smart phone, with its video recording and streaming video capability, began shipping globally and has met with a favorable response from operators and consumers in all key markets. As a high-volume imaging phone, it is of particular strategic importance for us as it brings the mobile multimedia experience to a broader base of consumers. We have also seen an enthusiastic response to our growing number of color screen phones, with the Nokia 3510i color model now becoming the second-best selling phone in our portfolio. This clearly indicates a definitive shift from black and white to color in the mobile communications experience. In February, we entered the games industry with the launch of our first mobile game deck, the Nokia N-Gage. This fan-shaped device, with large color screen and games optimized controls, is just one of many transformatory models in our product lineup. Nokia N-Gage and other new devices coming on stream, such as the Nokia 3300 music device and the Nokia 6800 messaging device, illustrate our innovative design strength as we lead the industry in reshaping people's understanding of what a mobile device should look like. BUSINESS DEVELOPMENT AND FORECASTS Nokia's first-quarter sales of EUR 6.8 billion declined by 3% compared with the first quarter 2002, reflecting continued weakness in the company's network infrastructure business. First-quarter pro forma operating profit for the Nokia group showed a slight year-on-year decline to EUR 1.2 billion. This included a gain of EUR 56 million in 1Q 2003 from the sale of the remaining shares of Nokian Tyres. Pro forma operating margins for the group in the first quarter continued solidly at 17.5%. Pro forma EPS (diluted) for the group reached EUR 0.18, slightly above guidance given in March, with the sale of the shares of Nokian Tyres contributing approximately EUR 0.01 to pro forma EPS (diluted). Nokia's cash position continued to improve, with total available cash reaching EUR 10.5 billion by the end of the quarter. At the Annual General Meeting, the Board received authorization to repurchase shares and subsequently made the decision to begin a share buy-back program. Mobile phones sales up 1% year on year, with excellent profitability Mobile phone sales rose by 1% year on year, within previously stated guidance, reaching EUR 5.5 billion. Strong sales growth in Europe was virtually offset by somewhat slower sales in Asia Pacific and substantially weaker sales in the Americas. The company's focus on operational efficiency continued to drive profitability at Nokia Mobile Phones, with pro forma operating profit in the first quarter rising 9% year on year to EUR 1.3 billion and mobile phone margins continuing at very healthy levels of 23.9%. Substantial first-quarter loss in networks, but decisive actions taken In Nokia Networks, first-quarter sales declined by 15% year on year to EUR 1.2 billion, reflecting lower sales in Europe and Asia Pacific only slightly offset by increased sales in the US. Nokia Networks operating profit decreased substantially to a pro forma operating loss of EUR 127 million, reflecting lower sales volumes and continuing high costs related to the first-phase implementation of 3G technologies. Against this backdrop, Nokia is taking actions to reduce costs and improve profitability, while at the same time maintaining its leading position in the network infrastructure business. In February, Nokia Networks announced plans to reduce the number of its R&D sites globally in a move to align its focus more closely with the current business environment. This will affect approximately 550 jobs. In April, Nokia Networks announced further reductions across all its functions, involving approximately 1 800 employees. Outlook for 2Q 2003 Backed by Nokia's broad and competitive product range, including a growing share of compelling color and multimedia models, second-quarter sales for Nokia Mobile Phones are expected to grow between 4% and 12% year on year, and by somewhat less for the group. Strong profitability at Nokia Mobile Phones is expected to continue. Due to the announced actions in Nokia Networks, the company plans to take a charge relating to restructuring and possible impairments in the range of EUR 350 million to EUR 400 million during the second quarter as part of normal operating expenses, adversely impacting the company's pro forma and reported operating profit. In connection with these actions, Nokia is assessing research and development projects to consider possible project closures or impairments. Taking into account the current estimated EPS impact of the charge of EUR 0.05 to EUR 0.06, pro forma EPS (diluted) for the second quarter is expected to be between EUR 0.13 and EUR 0.16, while reported EPS (diluted) is expected to be between EUR 0.12 and EUR 0.15. Faster-than-market growth in mobile phones Nokia's market share for the first quarter is estimated at 38%, representing a year-on-year increase. The company's market share for the second quarter 2003 is estimated to be higher than the first quarter. Overall mobile phone market volumes during the first quarter grew year on year for the fourth consecutive quarter, rising by 10% to approximately 98 million units, while Nokia's own volumes grew by 13% to around 38 million units, marking faster-than-market growth. In the second quarter, the overall global handset market is expected to grow year on year and be sequentially up. Full-year 2003 global handset volume is expected to grow by approximately 10%, compared with 405 million units in 2002. Nokia volume growth is expected to be stronger than market growth for the full year 2003. Developments in mobile networks In the network infrastructure business we do not expect market conditions to improve during the year. Operator investment has decreased to an exceptionally low level, and in some cases network rollouts have slowed. Nokia now expects the overall network infrastructure market and its own accessible market to decline by 15% or more in 2003. The third-quarter 2002 customer financing impairment charge for MobilCom was positively adjusted during the first quarter 2003 by EUR 226 million. This reflected an increase in the valuation of the former MobilCom receivables when they were exchanged for France Telecom securities on March 3, 2003. NOKIA MOBILE PHONES IN THE FIRST QUARTER During the first quarter, Nokia Mobile Phones continued renewing its industry-leading product portfolio, with shipments of eight new models, including the Nokia 3585i, the Nokia 5100, the Nokia 7250 and the Nokia 2100, which all met with good demand, particularly the Nokia 2100 in China. Nokia strengthens CDMA offering The company continued to multiply its CDMA offering during the quarter with the launch of seven new CDMA 1X products, all based on Nokia's own CDMA chipset design. Both the Nokia 3586i and the Nokia 6585 have high quality color displays while the Nokia 2270, Nokia 2280 and Nokia 2285 phones are designed to make the mobile voice experience as easy and enjoyable as possible. In February, the company also began shipments of the Nokia 3585i, the company's first CDMA 1X phone with GPS technology. During the quarter, Nokia announced plans to enter CDMA markets in India and China, pending government approval in the case of China. Clear transition to color and multimedia Nokia is the industry leader in bringing color and multimedia to the mobile communications experience. The company is already shipping more than 10 models with color displays, three of which have an integrated camera. During 2003, Nokia expects to ship 50 to 100 million phones with color and multimedia messaging (MMS) capability. The company started shipments in all major markets of the Nokia 3650, its strategically important mass-market imaging smart phone. With features such as integrated camera and video capture, video streaming and e-mail, the Nokia 3650 brings the mobile imaging experience to a wider base of consumers, including the North American market. The Nokia 3650 imaging phone was selected as an Innovations 2003 award winner at the International Consumer Electronics Show in Las Vegas. Mobility the next big thing in games - Nokia N-GageTM launched In February, Nokia launched its revolutionary mobile game deck, the Nokia N-Gage. Enabling new business models, the Nokia N-Gage is a unique platform that also provides opportunities for game developers and publishers, network operators and other service providers to generate new revenue streams as well as develop new games and service concepts. Nokia's entry into the games industry was supported by cooperation agreements with key games publishers, Activision, Eidos, Sega, Taito and THQ. In addition, the German operator T-Mobile International agreed with Nokia on the co-development of mobile services globally for the Nokia N-Gage. Other product launches address music and enterprise markets The Nokia 3300, launched during the quarter, is designed specifically for enjoying music, incorporating a portable digital music player, a stereo FM radio, and a digital recorder. The EDGE-enabled Nokia 6220, with its integrated camera, color screen, MMS, and mobile e-mail is designed for business professionals. Bringing the benefits of mobility to the enterprise segment, Nokia announced separate initiatives with IBM and Oracle to provide customers with mobile e-business and collaboration solutions. These include enabling wireless access and synchronization of e-mail, contacts and calendar as well as file management and search capabilities. Series 60 business system expands In mobile software, Nokia formed a product creation community around the Series 60 Platform. The community brings together semiconductor and software integration companies with optimized skill and expertise to assist Series 60 handset manufacturers in the creation of advanced smart phones. The Series 60 Product Creation Community will benefit manufacturers with reduced time-to-market and development costs while bringing rich, interoperable features and functionality to the software platform. During the quarter, Nokia also signed a resell agreement with Sun Micrososystems on digital content delivery for mobile applications and services. At the CeBIT trade show in March, the Series 60 platform became the first mobile communications software product to win the Silver iF design award for its innovative and intuitive design. NOKIA NETWORKS IN THE FIRST QUARTER During the first quarter, Nokia Networks introduced a number of important products and solutions. Intelligent Edge core network solution makes way for mass-market mobile data At the 3GSM World Congress in Cannes in February, Nokia launched its Intelligent Edge solution for IP mobility core networks, which will support the introduction of mass-market mobile data services. The solution is expected to popularize mobile data services by providing operators the possibility to deliver and charge subscribers differently for different types of mobile content. G-WCDMA to bring broadband to mobile networks in the US At the CTIA exhibition in New Orleans in March, Nokia announced an enhanced WCDMA solution for US wideband frequencies dubbed G-WCDMA, which will bring broadband capabilities to mobile networks in the US. Using HSDPA (High-Speed Downlink Packet Access) acceleration technology on WCDMA, the solution will bring unprecedented high-speed data transfer to mobile networks. It is expected to be available in 2005. Nokia WCDMA and EDGE networks on track for 2003 commercial launches Deployment of WCDMA and EDGE networks continued steadily, with the Nokia solutions well on track to support commercial launches in the coming quarters. Nokia signed a significant EDGE agreement with America Movil in Colombia and Ecuador. In 2G, a GSM expansion deal was signed with Beijing MCC in China. Nokia the leading MMS vendor with over 50 deals Mobile Multimedia Services (MMS) are rapidly becoming a mainstream application with the vast majority of mobile operators, and during the quarter Nokia signed an MMS deal with Orange Romania. This brought the company's total number of MMS deals to over 50, making Nokia the leading MMS vendor globally. Other deals included a breakthrough agreement with Beijing Just Top to build the Beijing government's shared TETRA network for use during the 2008 Olympics. Nokia also signed a TETRA deal with Tianjin Public Security in China, as well as a BBS deal with Manquehue NET in Chile, a DSL expansion agreement with the Heibei Communication Corporation in China and a delivery server solution for CHT in Thailand. NOKIA VENTURES ORGANIZATION IN THE FIRST QUARTER Nokia Internet Communications continued to execute well, despite ongoing weak market conditions. Sales for the first quarter were slightly lower compared with the same quarter last year, reflecting general weak IT spending and continued market uncertainty. The unit continues to enjoy healthy gross margins, which increased for the quarter both sequentially and year on year. Nokia Internet Communications also continued to improve operational efficiency, while maintaining substantial market share in its core Firewall/VPN appliance business, and deepening its product portfolio. Nokia Internet Communication's new Nokia Message Protector SC6600 antivirus appliance is being well received. Nokia Home Communications launched two new products, the Nokia Mediamaster 230 T and the Nokia Mediamaster 150 T, for the expanding digital terrestrial television markets. Nokia Venture Partners continued to make investments in early stage mobile technology companies and added EZchip Technologies to its portfolio during the quarter. NOKIA IN THE FIRST QUARTER 2003 (REPORTED) (International Accounting Standards (IAS) comparisons given to the first quarter 2002 results unless otherwise indicated) Nokia's net sales decreased by 3% to EUR 6 773 million (EUR 7 014 million). Sales of Nokia Mobile Phones increased by 1% to EUR 5 476 million (EUR 5 438 million). Sales of Nokia Networks decreased by 15% to EUR 1 217 million (EUR 1 436 million). Sales of Nokia Ventures Organization decreased by 40% and totaled EUR 94 million (EUR 157 million). Operating profit increased by 11% to EUR 1 370 million (EUR 1 234 million), representing an operating margin of 20.2% (17.6%). Operating profit in Nokia Mobile Phones increased by 9% to EUR 1 288 million (EUR 1 185 million), representing an operating margin of 23.5% (21.8%). Operating profit in Nokia Networks decreased to EUR 85 million (EUR 122 million), representing an operating margin of 7.0% (8.5%). Nokia Networks operating profit includes a positive adjustment of EUR 226 million to 3Q 2002 customer finance impairment (MobilCom). Nokia Ventures Organization reported an operating loss of EUR 32 million (operating loss of EUR 35 million). Common Group Expenses, which comprises Nokia Head Office and Nokia Research Center, totaled operating profit of EUR 29 million (operating loss EUR 38 million). This also includes the gain of EUR 56 million on the sale of the remaining shares of Nokian Tyres Ltd. Financial income totaled EUR 80 million (EUR 35 million). Profit before tax and minority interests was EUR 1 446 million (EUR 1 261 million). Net profit totaled EUR 977 million (EUR 863 million). Earnings per share increased to EUR 0.20 (basic) and to EUR 0.20 (diluted), compared with EUR 0.18 (basic) and EUR 0.18 (diluted) in the first quarter 2002. The average number of employees during the quarter was 51 659. At March 31, Nokia employed a total of 51 707 people (51 748 people at December 31, 2002). At March 31, 2003, net debt-to-equity ratio (gearing) was -71% (-61% at December 31, 2002). During the first quarter, 2003, capital expenditure amounted to EUR 100 million (EUR 158 million). On March 31, the Group companies owned 1 503 598 Nokia shares. The shares had an aggregate par value of EUR 90 215.88, representing 0.03% of the share capital of the company and the total voting rights. The number of issued shares on March 31 was 4 795 067 413 and the share capital was EUR 287 704 044.78. CONSOLIDATED PROFIT AND LOSS ACCOUNT, IAS, EUR million (unaudited) -------------------------------------------------------------------------------- Pro forma Pro forma Reported Reported 1-3/03 1-3/02 1-3/03 1-3/02 ------------------------------------------------------------------------------ Net sales 6 773 7 014 6 773 7 014 Cost of sales -4 157 -4 244 -4 157 -4 244 Research and development -774 -703 -774 -703 expenses Selling, general and -655 -781 -655 -781 administrative expenses Adjustment to customer - - 226 - finance impairment 1) Amortization of goodwill - - -43 -52 -------- -------- -------- -------- Operating profit 1 187 1 286 1 370 1 234 Share of results of -4 -8 -4 -8 associated companies Financial income and 80 35 80 35 expenses -------- -------- -------- -------- Profit before tax and 1 263 1 313 1 446 1 261 minority interests -------- -------- -------- -------- ------------------------------------------------------------------------------ Tax -399 -378 -465 -378 Minority interests -4 -20 -4 -20 -------- -------- -------- -------- Net profit 860 915 977 863 -------- -------- -------- -------- ------------------------------------------------------------------------------ Earnings per share, EUR Basic 0.18 0.19 0.20 0.18 Diluted 0.18 0.19 0.20 0.18 Average number of shares (1 000 shares) Basic 4 790 459 4 736 461 4 790 459 4 736 461 Diluted 4 793 078 4 802 327 4 793 078 4 802 327 ------------------------------------------------------------------------------ Depreciation and 310 313 amortization, total Non-recurring items 1) Positive adjustment to 3Q 2002 customer finance impairment charge related to MobilCom. CONSOLIDATED PROFIT AND LOSS ACCOUNT, EUR million (pro forma unaudited, reported audited) ----------------------------------------------------------------------------------------- ------------------------------------------------------------------------------- IAS Pro forma Reported 1-12/02 1-12/02 ------------------------------------------------------------------------------- Net sales 30 016 30 016 Cost of sales 1) -18 305 -18 278 Research and development expenses -3 052 -3 052 Selling, general and administrative expenses -3 239 -3 239 Customer finance impairment charges, net 2) - -279 Impairment of goodwill - -182 Amortization of goodwill - -206 -------------- ------------- Operating profit 5 420 4 780 Share of results of associated companies -19 -19 Financial income and expenses 156 156 -------------- ------------- Profit before tax and minority interests 5 557 4 917 -------------- ------------- ------------------------------------------------------------------------------ Tax -1 557 -1 484 Minority interests -52 -52 -------------- ------------- Net profit 3 948 3 381 -------------- ------------- ------------------------------------------------------------------------------ Earnings per share, EUR Basic 0.83 0.71 Diluted 0.82 0.71 Average number of shares (1 000 shares) Basic 4 751 110 4 751 110 Diluted 4 788 042 4 788 042 ------------------------------------------------------------------------------ Depreciation and amortization, total 1 311 ------------------------------------------------------------------------------ Non-recurring items 1) In 2002, non-recurring charges of EUR 14 million (MobilCom) in 3Q and positive adjustment of EUR 41 million related to MobilCom write-off in 4Q. 2) In 2002, customer finance impairment charges of EUR 292 million related to MobilCom in 3Q and a positive adjustment of EUR 13 million in 2Q related to the earlier Dolphin write-off in 3Q 2001. NET SALES BY BUSINESS GROUP, EUR million (unaudited) -------------------------------------------------------------------------------- 1-3/03 1-3/02 Change % 1-12/02 --------- -------- -------- -------- Nokia Mobile Phones 5 476 5 438 1 23 211 Nokia Networks 1 217 1 436 -15 6 539 Nokia Ventures 94 157 -40 459 Organization Inter-business group -14 -17 -193 eliminations ------------------------------------------------------------------------------- Nokia Group 6 773 7 014 -3 30 016 --------- -------- -------- -------- OPERATING PROFIT BY BUSINESS GROUP, IAS, EUR million (unaudited) -------------------------------------------------------------------------------- Pro forma 1-3/03 1-3/02 1-12/02 --------- -------- -------- -------- Nokia Mobile Phones 1 311 1 208 5 293 Nokia Networks -127 146 416 Nokia Ventures -32 -30 -59 Organization Common Group Expenses 35 -38 -230 --------- -------- -------- -------- Nokia Group 1 187 1 286 5 420 --------- -------- -------- -------- Goodwill amortization 1-3/03 1-3/02 1-12/02 --------- -------- -------- -------- Nokia Mobile Phones -23 -23 -92 Nokia Networks -14 -24 -92 Nokia Ventures - -5 -21 Organization Common Group Expenses -6 - -1 --------- -------- -------- -------- Nokia Group -43 -52 -206 --------- -------- -------- -------- Non-recurring items 1-3/03 1-3/02 1-12/02 --------- -------- -------- -------- Nokia Mobile Phones - - - Nokia Networks 226 - -373 Nokia Ventures - - -61 Organization Common Group Expenses - - - --------- -------- -------- -------- Nokia Group 226 - -434 --------- -------- -------- -------- Reported 1-3/03 1-3/02 1-12/02 --------- -------- -------- -------- Nokia Mobile Phones 1 288 1 185 5 201 Nokia Networks 85 122 -49 Nokia Ventures -32 -35 -141 Organization Common Group Expenses 29 -38 -231 --------- -------- -------- -------- Nokia Group 1 370 1 234 4 780 -------------------------------------------------------------------------------- CONSOLIDATED BALANCE SHEET, IAS, EUR million 31.3.03 31.3.02 31.12.02 (unaudited) ------------------------------------------------------------------------------ Fixed assets and other non-current assets Capitalized development costs 1 087 953 1 072 Goodwill 433 803 476 Other intangible assets 180 229 192 Property, plant and equipment 1 768 2 323 1 874 Investments in associated companies 41 71 49 Available-for-sale investments 1 011 371 238 Deferred tax assets 776 958 731 Long-term loans receivable 549 1 415 1 056 Other non-current assets 57 37 54 ----------- --------- --------- 5 902 7 160 5 742 ----------- --------- --------- Current assets Inventories 1 263 1 873 1 277 Accounts receivable 4 601 5 127 5 385 Prepaid expenses and accrued income 1 139 1 433 1 156 Other financial assets 444 242 416 Available-for-sale investments 9 146 5 070 7 855 Bank and cash 1 333 1 875 1 496 ----------- --------- --------- 17 926 15 620 17 585 ----------- --------- --------- Total assets 23 828 22 780 23 327 ----------- --------- --------- SHAREHOLDERS' EQUITY AND LIABILITIES Shareholders' equity Share capital 288 284 287 Share issue premium 2 247 2 054 2 225 Treasury shares -24 -27 -20 Translation differences 7 328 135 Fair value and other reserves -5 -17 -7 Retained earnings 1) 11 315 9 118 11 661 ----------- --------- --------- 13 828 11 740 14 281 ----------- --------- --------- Minority interests 183 224 173 ----------- --------- --------- Long-term liabilities Long-term interest-bearing liabilities 148 186 187 Deferred tax liabilities 239 225 207 Other long-term liabilities 66 72 67 ----------- --------- --------- 453 483 461 ----------- --------- --------- Current liabilities Short-term borrowings 333 974 377 Current portion of long-term debt 30 25 - Accounts payable 2 590 2 607 2 954 Accrued expenses1) 3 868 4 456 2 611 Provisions 2 543 2 271 2 470 ----------- --------- --------- 9 364 10 333 8 412 ----------- --------- --------- Total shareholders' equity and 23 828 22 780 23 327 liabilities ----------- --------- --------- Interest-bearing liabilities 511 1 185 564 Shareholders' equity per share, EUR 2.88 2.48 2.98 ----------- --------- --------- Number of shares (1 000 shares) 2) 4 793 564 4 736 652 4 786 762 --------------------------------------------------------------------------------- 1: Dividends to Nokia shareholders, EUR 1 340 million (EUR 1 279 million), were deducted from retained earnings and recorded within accrued expenses as a liability at the end of the first quarter in 2003 and 2002, respectively. Cash flow impact will be shown in 2Q. 2: Shares owned by Group companies are excluded CONSOLIDATED CASH FLOW STATEMENT, IAS, EUR million (unaudited) -------------------------------------------------------------------------------- 1-3/03 1-3/02 1-12/02 Cash flow from operating activities Net profit 977 863 3 381 Adjustments, total 441 746 3 151 ------ ------ ------- Net profit before change in net working capital 1 418 1 609 6 532 Change in net working capital 165 71 955 ------ ------ ------- Cash generated from operations 1 583 1 680 7 487 Interest received 64 53 229 Interest paid -8 -14 -94 Other financial income and expenses 62 -12 139 Income taxes paid -316 -799 -1 947 ------ ------ ------- Net cash from operating activities 1 385 908 5 814 Cash flow from investing activities Acquisition of Group companies, net of acquired - - -10 cash Purchase of non-current available-for-sale -193 -28 -99 investments Additions to capitalized development costs -89 -107 -418 Long-term loans made to customers -50 -287 -563 Proceeds from repayment and sale of long-term 107 - 314 loans receivable Proceeds from (+), payment of (-) other long-term -4 - -32 receivables Proceeds from (+), payment of (-) short-term 38 144 -85 loans receivable Capital expenditures -100 -158 -432 Proceeds from disposal of Group companies, net of disposed cash - 105 93 Proceeds from sale of non-current 96 1 162 available-for-sale investments Proceeds from sale of fixed assets 19 86 177 Dividends received - 8 25 ------ ------ ------- Net cash used in investing activities -176 -236 -868 Cash flow from financing activities Proceeds from stock options exercised 23 2 163 Purchase of treasury shares -4 -13 -17 Capital investment by minority shareholders - - 26 Proceeds from long-term borrowings 7 4 100 Repayment of long-term borrowings -11 -5 -98 Proceeds from (+), repayment of (-) short-term -22 133 -406 borrowings Dividends paid - - -1 348 ------ ------ ------- Net cash used in (-), provided by (+) financing -7 121 -1 580 activities Foreign exchange adjustment -72 29 -163 ------ ------ ------- Net increase in cash and cash equivalents 1 130 822 3 203 Cash and cash equivalents at beginning of 9 351 6 125 6 125 period ------ ------ ------- Cash and cash equivalents at end of period 10 481 6 947 9 328 ====== ====== ======= Change in net fair value of current available-for-sale Investments -2 -2 23 ------- ------- ------- As reported on balance sheet 10 479 6 945 9 351 ------------------------------------------------------------------------------ NB: The figures in the consolidated cash flow statement cannot be directly traced from the balance sheet without additional information as a result of acquisitions and disposals of subsidiaries and net foreign exchange differences arising on consolidation. CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY, EUR million (unaudited) ------------------------------------------------------------------------------------------------------------- Share Share Treasury Translation Fair value Retained Total capital issue shares differences and other earnings premium reserves ------------------------------------------------------------------------------------------------------------- Balance at December 284 2 060 -21 326 20 9 536 12 205 31, 2001 ------------------------------------------------------------------------------------------------------------- Stock options 2 2 exercised Acquisition of -13 -13 treasury shares Reissuance of 7 7 treasury shares Stock options exercised related to -8 -8 acquisitions Dividend -1 279 -1 279 Translation 11 11 differences Net investment -9 -9 hedge losses Cash flow hedges -21 -21 Available-for-sale -16 -16 investments Other decreases, -2 -2 net Net profit 863 863 ------------------------------------------------------------------------------------------------------------- Balance at March 284 2 054 -27 328 -17 9 118 11 740 31, 2002 ------------------------------------------------------------------------------------------------------------- Balance at December 287 2 225 -20 135 -7 11 661 14 281 31, 2002 ------------------------------------------------------------------------------------------------------------- Stock options 1 22 23 exercised Acquisition of -5 -5 treasury shares Reissuance of 1 1 treasury shares Dividend -1 340 -1 340 Translation -187 -187 differences Net investment 59 59 hedge gains Cash flow hedges 34 34 Available-for-sale -32 -32 investments Other increases, 17 17 net Net profit 977 977 ------------------------------------------------------------------------------------------------------------- Balance at March 288 2 247 -24 7 -5 11 315 13 828 31, 2003 ------------------------------------------------------------------------------------------------------------- COMMITMENTS AND CONTINGENCIES, EUR million GROUP (unaudited) ------------------------------------------------------------------------------------------------------------- 31.3.03 31.3.02 31.12.02 ------------------------------------------------------------------------------------------------------------- Collateral for our own commitments Property under mortgages 18 18 18 Assets pledged 13 4 13 Collateral given on behalf of other companies Securities pledged 32 33 34 Contingent liabilities on behalf of Group companies Other guarantees 261 485 339 Contingent liabilities on behalf of other companies Guarantees for loans 54 97 57 Leasing obligations 689 922 704 Financing commitments Customer financing 755 3 099 857 ------------------------------------------------------------------------------------------------------------- NOTIONAL AMOUNTS OF DERIVATIVE FINANCIAL INSTRUMENTS, EUR million 1) (unaudited) ------------------------------------------------------------------------------- 31.3.03 31.3.02 31.12.02 Foreign exchange forward contracts 2) 11 960 25 156 11 118 Currency options bought 2) 3 682 406 1 408 Currency options sold 2) 3 593 448 1 206 Interest rate FRAs and futures 280 - - Cash settled equity options 3) 209 - 209 Cash settled equity swaps 3) 189 156 12 ------------------------------------------------------------------------------- 1) Includes the gross amount of all notional values for contracts that have not yet been settled or cancelled. The amount of notional value outstanding is not necessarily a measure or indication of market risk, as the exposure of certain contracts may be offset by that of other contracts. 2) Notional amounts include contracts used to hedge the shareholders' equity of foreign subsidiaries. 3) Cash settled equity swaps and options can be used to hedge risks relating to incentive programs and investment activities. Closing rate, 1 EUR = 1.072 USD It should be noted that certain statements herein which are not historical facts, including, without limitation, those regarding A) the timing of product deliveries; B) our ability to develop and implement new products and technologies; C) expectations regarding market growth and developments; D) expectations for growth and profitability; and E) statements preceded by 'believe,' 'expect,' 'anticipate,' 'foresee' or similar expressions, are forward-looking statements. Because these statements involve risks and uncertainties, actual results may differ materially from the results that we currently expect. Factors that could cause these differences include, but are not limited to: 1) developments in the mobile communications market including the continued development of the mobile phone replacement market and the timing and success of the roll-out of new products and solutions based on 3G and subsequent new technologies; 2) demand for our products and solutions; 3) the development of the mobile software and services market in general; 4) the availability of new products and services by network operators; 5) market acceptance of new products and service introductions; 6) the intensity of competition in the mobile communications market and changes in the competitive landscape; 7) the impact of changes in technology; 8) general economic conditions globally and in our most important markets; 9) pricing pressures; 10) consolidation or other structural changes in the mobile communications market; 11) the success and financial condition of the Company's partners, suppliers and customers; 12) the management of the Company's customer financing exposure; 13) the success of our product development; 14) our success in maintaining efficient manufacturing and logistics as well as high product quality; 15) the ability of the Company to source quality components and research and development without interruption and at acceptable prices; 16) our ability to have access to the complex technology involving patents and other intellectual property rights included in our products and solutions; 17) inventory management risks resulting from shifts in market demand; 18) fluctuations in exchange rates, including, in particular, the fluctuations between the euro, which is our reporting currency, and the US dollar and the Japanese yen; 19) the impact of changes in government policies, laws or regulations; as well as 20) the risk factors specified on pages 11 to 18 of the Company's Form 20-F for the year ended December 31, 2002. NOKIA Helsinki - April 17, 2003 For more information: Lauri Kivinen, Corporate Communications, tel. +358 7180 34495 Ulla James, Investor Relations, tel. +1 972 894 4880 Antti RTM?ikkonen, Investor Relations, tel. +358 7180 34290 www.nokia.com - Nokia will report 2Q results on July 17, 2003 and plans a mid-quarter update on June 10, 2003. - Results announcements for 3Q and 4Q 2003 are planned for October 16, 2003 and January 22, 2004, respectively. This information is provided by RNS The company news service from the London Stock Exchange

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