Nokia 2Q results
Nokia Corporation
17 July 2003
PRESS RELEASE
July 17, 2003
Nokia continues to gain market share in phones
with excellent profitability
Second quarter 2003 compared with the second quarter 2002:
- Net sales were EUR 7 019 million (EUR 6 935 million in 2Q 2002), up
by 1%.
- Pro forma operating profit was EUR 858 million (EUR 1 260 million),
down by 32%. This included a charge of EUR 399 million related to
restructuring in Nokia Networks.
Pro forma operating margin was 12.2% (18.2%).
- Pro forma adjustments for the second quarter 2003 consisted of
goodwill amortization of EUR 40 million.
- Pro forma net profit was EUR 664 million (EUR 905 million), down by
27%.
- Pro forma earnings per share (diluted) were EUR 0.14 (EUR 0.19).
- Reported operating profit decreased by 33% to EUR 818 million (EUR 1
221 million). This also included the charge of EUR 399 million.
- Reported net profit decreased by 28% to EUR 624 million (EUR 862
million) and reported earnings per share (diluted) decreased to
EUR 0.13 (EUR 0.18).
- Operating cash flow in the second quarter continued strongly at EUR
1.3 billion.
JORMA OLLILA, CHAIRMAN AND CEO:
Continued excellent profitability and further positive market share developments
in mobile phones during the quarter were very reassuring. We gained in two
strategic focus areas: the US, our largest market, and the global CDMA market.
Nokia's market share in mobile phones is now estimated at 39%, marking both a
sequential and year-on-year increase for the second quarter. Overall, however,
our sales reflected general economic and US-dollar weakness.
Our 14% growth in mobile phone volumes during the quarter was supported with
shipments of 13 new models. Key to our success has been, and will continue to
be, our winning execution and strong competitive position in all major
technologies and segments. For the full year 2003, we are looking to enhance our
leadership with a record launch of more than 35 new models.
Further to the feature-rich, multimedia models already on the market with
current technologies, shipments of the Nokia 6650, our first 3G WCDMA phone,
marked the full-scale availability of this new technology through standard
distribution channels across the markets. I see this as strategically important
not only for us but the entire industry. And this was not just any product
launch - it was the culmination of our industry's largest ever field-testing
exercise, a prolonged and exhaustive project, using 20,000 phones in almost
every WCDMA network in the world.
With our growing portfolio, we are bringing the power of mobility into new areas
such as imaging, music, games and enterprise applications, as well as expanding
the mobile experience for the user. Nearly one-third of all Nokia phones sold
now have color screens and multimedia capability. The new Nokia 6600 camera
phone, launched in June, is a perfect example of a smart phone that combines
business functionality like secure e-mail with a personal multimedia experience.
We are now seeing increased signs of a consumer shift towards more feature-rich
devices in leading-edge markets such as the UK and Scandinavia.
In our network business, decisive restructuring actions now underway are on
track and will better position our business amid current challenging market
conditions. In WCDMA networks, we are satisfied with progress made during the
quarter. We now see our leading rollout capability and commercial readiness
putting us among the very few top-tier companies driving this industry forward.
Bringing the full power of mobility to enterprises represents a new wave in
business communication and a major opportunity for us. By integrating mobile
technologies into their infrastructure, enterprises can achieve massive gains in
productivity and efficiency. To address this, we are creating a new business
group, Nokia Enterprise Solutions, which will report directly to me. The group
will provide a diverse handset range as well as security and mobile connectivity
solutions specifically tailored for enterprise needs.
NOKIA SECOND QUARTER 2003 / FIRST HALF 2003 FINANCIAL RESULTS
2Q 2003 PRO FORMA REPORTED
(excludes goodwill amortization and
non-recurring items)
EUR (million) 2Q/2003 2Q/2002 Change (%) 2Q/2003 2Q/2002 Change (%)
Net sales 7 019 6 935 1 7 019 6 935 1
Nokia Mobile Phones 5 513 5 398 2 5 513 5 398 2
Nokia Networks 1 480 1 474 1 480 1 474
Nokia Ventures Organization 82 106 -23 82 106 -23
Operating profit 858 1 260 -32 818 1 221 -33
Nokia Mobile Phones 1 276 1 171 9 1 253 1 148 9
Nokia Networks -334 171 -349 161
Nokia Ventures Organization -36 -63 43 -36 -69 48
Common Group Expenses -48 -19 -50 -19
Operating Margin (%) 12.2 18.2 11.7 17.6
Nokia Mobile Phones (%) 23.1 21.7 22.7 21.3
Nokia Networks (%) -22.6 11.6 -23.6 10.9
Nokia Ventures Organization (%) -43.9 -59.4 -43.9 -65.1
Financial income and expenses 131 39 236 131 39 236
Profit before tax and 986 1 292 -24 946 1 253 -25
minority interests
Net profit 664 905 -27 624 862 -28
EPS, EUR
Basic 0.14 0.19 -26 0.13 0.18 -28
Diluted 0.14 0.19 -26 0.13 0.18 -28
NB: All pro forma 2Q figures can be found in the tables on page 8. A
reconciliation of the pro forma figures to our reported results can be found in
the tables on page 11.
1H 2003 PRO FORMA REPORTED
(excludes goodwill amortization and
non-recurring items)
EUR (million) 1H/2003 1H/2002 Change (%) 1H/2003 1H/2002 Change (%)
Net sales 13 792 13 949 -1 13 792 13 949 -1
Nokia Mobile Phones 10 989 10 836 1 10 989 10 836 1
Nokia Networks 2 697 2 910 -7 2 697 2 910 -7
Nokia Ventures Organization 176 263 -33 176 263 -33
Operating profit 2 045 2 546 -20 2 188 2 455 -11
Nokia Mobile Phones 2 587 2 379 9 2 541 2 333 9
Nokia Networks -461 317 -264 283
Nokia Ventures Organization -68 -93 27 -68 -104 35
Common Group Expenses -13 -57 -21 -57
Operating Margin (%) 14.8 18.3 15.9 17.6
Nokia Mobile Phones (%) 23.5 22.0 23.1 21.5
Nokia Networks (%) -17.1 10.9 -9.8 9.7
Nokia Ventures Organization (%) -38.6 -35.4 -38.6 -39.5
Financial income and expenses 211 74 185 211 74 185
Profit before tax and 2 249 2 605 -14 2 392 2 514 -5
minority interests
Net profit 1 524 1 820 -16 1 601 1 725 -7
EPS, EUR
Basic 0.32 0.38 -16 0.33 0.36 -8
Diluted 0.32 0.38 -16 0.33 0.36 -8
NB: All pro forma 1H figures can be found in the tables on page 9. A
reconciliation of the pro forma figures to our reported results can be found in
the tables on page 11.
BUSINESS DEVELOPMENT AND FORECASTS
Second-quarter sales
Nokia's second-quarter sales of EUR 7.0 billion rose by 1% compared with the
second quarter 2002.
Mobile phone sales rose by 2% year on year, broadly in line with previous
guidance, reaching EUR 5.5 billion. While mobile phone volumes grew by 14%,
sales were adversely affected by a weak US dollar and, to a lesser extent, an
increased proportion of lower-priced entry-level phone sales in emerging markets
such as India. Strong net sales growth in Europe was virtually offset by
somewhat lower sales in Asia Pacific and substantially lower sales in the
Americas.
Sales in Nokia Networks were flat at EUR 1.5 billion, at the upper end of
previously stated guidance. This reflected continued growth in the Americas,
flat sales in Europe and lower sales in Asia Pacific.
Second-quarter profitability
Second-quarter pro forma operating profit for the Nokia group declined 32% to
EUR 858 million. This included a charge of EUR 399 million related to
restructuring in Nokia Networks.
At Nokia Mobile Phones, continued broad product competitiveness and operational
efficiency drove profitability, with pro forma operating profit in the second
quarter rising 9% year on year to EUR 1.3 billion and pro forma mobile phone
margins continued at high levels of 23.1%. At Nokia Networks, pro forma
operating loss was EUR 334 million. If the restructuring charge of EUR 399
million were excluded, Nokia Networks would have shown a small pro forma
operating profit.
Pro forma EPS (diluted) for the Nokia group reached EUR 0.14, within the
previously guided range of EUR 0.13 and EUR 0.16.
Nokia's cash position remained healthy, with total available cash at EUR 9.9
billion by the end of the quarter.
Nokia Networks restructuring measures on track
In the second quarter, Nokia took a charge of EUR 399 million relating to
previously announced restructuring at Nokia Networks. This consisted of a
non-cash charge of EUR 304 million for impairments and project closures in
research and development, with the remainder relating to personnel reductions.
By the end of 2003, it is estimated that Nokia Networks will comprise
approximately 15,000 employees, compared with a total 17,361 at December 31,
2002.
Outlook for third quarter 2003
Nokia expects its third-quarter mobile phone volumes to grow by well over 10%,
representing faster-than-market growth, with strong profitability continuing.
However, sales of Nokia Mobile Phones in the third quarter are expected to be
flat or slightly down year on year, largely due to a major depreciation of the
US dollar, compared with the same period in 2002.
In Nokia Networks, operating conditions show no sign of improvement, and the
company is estimating a year-on-year sales decline of 15% to 20% for the third
quarter. Given this sales outlook, Nokia Networks is expected to show a small
pro forma operating loss in the third quarter.
Nokia expects third-quarter pro forma EPS (diluted) to be in the range of EUR
0.15 and EUR 0.17, while reported EPS (diluted) is expected to be in the range
of EUR 0.14 and EUR 0.16. Third-quarter 2002 pro forma EPS (diluted) was EUR
0.18 and reported EPS (diluted) was EUR 0.13.
Nokia mobile phone market share grows to 39%
Nokia's market share for the second quarter is estimated to have grown to 39%,
indicating both a sequential and a year-on-year increase. This was mainly driven
by market share gains in the US.
Total mobile phone market volumes for the second quarter were up year on year
for the fifth consecutive quarter, rising by 11% to 105 million, while Nokia's
own volumes grew by 14% to 41 million units.
Nokia continues to expect global handset volume for the full year 2003 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.
Company sees increase in CDMA share
In line with Nokia's long-term target to become a leading CDMA mobile device
manufacturer, the company started shipping four new CDMA phones in the second
quarter, including the launch of the Nokia 3586i, Nokia's first CDMA phone with
a color screen. The company also began shipments of CDMA phones in India, while
in China received the CDMA manufacturing licence, and will commence CDMA
production and sales there during the second half. The positive effects of this
expanding product range and customer base enabled Nokia to see a second-quarter
increase in its CDMA market share.
Mobile networks market remains slow
In the network infrastructure business, market conditions show no signs of
improving. Operator investment has decreased to an exceptionally low level, and
Nokia continues to expect the overall market to contract by 15% or more for the
full-year 2003.
New business group to focus on enterprise solutions
Nokia is creating Nokia Enterprise Solutions, a new business group targeting the
enterprise market.
Nokia Enterprise Solutions will bring together Nokia's various corporate
activities from Nokia Mobile Phones and Nokia Ventures Organization with the aim
of providing enterprises with a competitive, focused mobile device range and
platform as well as secure connectivity solutions. The new business group will
start financial reporting from the first quarter 2004.
NOKIA MOBILE PHONES IN THE SECOND QUARTER
Nokia started shipping 13 new mobile phone models during the quarter while
introducing four new models for shipment in the second half 2003. For the full
year 2003, Nokia expects to launch more than 35 new mobile phone models, marking
a new record.
Nokia in China - new product introductions and enhanced distribution
Nokia continued to show a solid performance in China despite challenging market
conditions. The SARS outbreak and abnormally high channel inventory levels had a
negative impact on Chinese handset market demand and the company's own demand.
However, Nokia continued to execute well, supported by new product introductions
and an enhanced distribution network in China.
The introduction of the Nokia 6108 messaging phone with pen input capability is
an important example of Nokia's continued focus on the Chinese handset market.
The Nokia 6108 will be commercially available in China and in Asia Pacific in
July.
CDMA technology milestone
An important milestone in the CDMA chipset market was reached in May when
wireless industry leaders, STMicroelectronics (ST), Texas Instruments (TI) and
Nokia, joined efforts to help stimulate an open environment for CDMA handsets.
Based on technology developed jointly with Nokia, TI and ST announced they would
offer integrated circuits that together compose standard CDMA chipsets. This
development will ensure that CDMA operators and handset manufacturers gain the
benefits of an open, flexible technology, which can only be achieved in a
multi-vendor environment.
Nokia drives camera phone market
Nokia continued to launch new imaging products, notably the introduction of the
Nokia 6600. This new camera phone combines advanced enterprise functionality
like secure e-mail with a personal multimedia experience, and features a large
colour screen, digital zoom and video recorder.
To further enhance the mobile imaging experience, Nokia and Kodak announced a
collaboration agreement that will offer Nokia mobile phone users convenient
solutions to store and print digital images. Users of Nokia imaging phones, such
as the Nokia 6600, will be able to upload, store, share and order prints of
pictures with their handsets using the Kodak Picture Center Online service.
Global availability of the Nokia 6650 marks start of commercial 3G WCDMA
services
The global availability of the Nokia 6650 marks the start of commercial 3G WCDMA
services. Following a prolonged and thorough testing and piloting program, the
second quarter brought full-scale availability of this landmark product. The
Nokia 6650 is now available in all markets and can be used in all GSM and WCDMA
networks.
Important agreements in mobile software to drive new applications
The company continued to be active in the mobile software field with a number of
key announcements and cooperation agreements. In June, Nokia was among the
leading consumer electronics, computer, and mobile companies that announced the
formation of the Digital Home Working Group. This new non-profit organization is
dedicated to the simplified sharing of digital content, such as digital music,
photos and video, among networked consumer electronics, mobile devices and PCs.
The initiative is an important element in Nokia's strategy to enable
interoperability among home consumer electronics and Nokia's advanced mobile
devices.
Other notable examples include the agreement with RealNetworks for expanded
mobile streaming media support for the Nokia Series 60 platform. In addition,
Nokia has developed the Series 60 Platform to support the Java Mobile
Information Device Profile 2.0, the latest specification for mobile application
downloading. Forum Nokia now has more than one million mobile application
developers for which the company is committed to providing new tools and
enhancements. As evidence of the growing business opportunities for mobile
application developers, the number of mobile application downloads globally has
now reached more than ten million per month.
Nokia design leadership recognized with industry award
The Nokia Design Team was chosen as this year's red dot: design team of the year
for 2003 at the 'red dot design award' international design competition. The
Nokia 6800 and Nokia 6200 mobile phones also received the label 'red dot' for
their high quality and intelligent design.
NOKIA NETWORKS IN THE SECOND QUARTER
Infrastructure deals during the second quarter included a GSM/GPRS network to
MegaFon in Russia, a GSM expansion to Globe Telecom, a GSM/EDGE expansion to
SMART in the Philippines and a GSM/GPRS network deal with Telefonica Moviles
Mexico. Nokia also supplied a GPRS network to AIS in Thailand and an MMS
solution to MTS in Russia.
Solid progress in WCDMA rollouts
The company gained a new 3G customer in April when Telestet in Greece chose
Nokia as its radio and core network supplier. Nokia and Telestet also
demonstrated Greece's first public 3G WCDMA call in a network ready for
commercial use. In WCDMA, Nokia has gained more than 30% of the market and
currently leads the industry in WCDMA deployment, with over 20,000 base stations
shipped globally.
In early June, 3 UK launched its Nokia-supplied WCDMA network in the northern
parts of the UK, making its commercial 3G service nationwide. The entire 3 UK
core network was also supplied by Nokia.
Nokia's 3G system compatibility has now been confirmed with nine GSM/GPRS/WCDMA
network suppliers in test labs and in more than 15 customer installations. In
addition, the functionality of more than 12 phone models from nine 3G
manufacturers has been verified against Nokia infrastructure.
Towards mass-market mobile data services
Deployment of MMS services is proceeding steadily, with over 140 operators
initiating MMS services to date. Nokia in April launched its MMSC
Interconnection Service to help ensure smooth interworking among different
operators' MMS systems. Improved interoperability among operators will support
the mass-market adoption of MMS services.
Nokia's core network solution provides operators with the business machinery for
profitable mobile data services. Nokia is trialing its Intelligent Content
Delivery and IP Multimedia Core solutions with leading operators. Commercial
deployments are expected to take place in the second half of the year and early
2004.
NOKIA VENTURES ORGANIZATION IN THE SECOND QUARTER
Nokia Internet Communications continues to execute well in a flat economy.
Revenues for the second quarter remained flat compared with the first quarter
2003 and decreased slightly from the same period last year. This reflected the
combined effects of a weaker US dollar and continuing general weakness in IT
spending. The unit again achieved healthy gross margins for the quarter, which
increased both sequentially and year on year.
Nokia Internet Communications further deepened its enterprise mobility solutions
offering with the launch of its Nokia Secure Access System, enabling enterprises
to customize and secure remote connectivity. During the quarter, the unit also
completed the acquisition of Eizel Technologies, a software vendor based in
Pittsburgh, US, that provides real-time interactive access to virtually any
content on small-screen, browser-enabled devices such as PDA's and mobile
phones.
Nokia Home Communications launched a digital television receiver for the UK
market, the Nokia Mediamaster 121 T. Nokia Venture Partners added several new
companies to its portfolio and participated in follow-on funding for an existing
portfolio company.
NOKIA IN THE SECOND QUARTER 2003 (REPORTED)
(International Accounting Standards (IAS) comparisons given to the second
quarter 2002 results unless otherwise indicated)
Nokia's net sales increased by 1% to EUR 7 019 million (EUR 6 935 million).
Sales of Nokia Mobile Phones increased by 2% to EUR 5 513 million (EUR 5 398
million). Sales of Nokia Networks increased to EUR 1 480 million (EUR 1 474
million). Sales of Nokia Ventures Organization decreased by 23% and totaled EUR
82 million (EUR 106 million).
Operating profit decreased by 33% to EUR 818 million (EUR 1 221 million),
representing an operating margin of 11.7% (17.6%). Operating profit includes a
charge of EUR 399 million related to restructuring at Nokia Networks. Operating
profit in Nokia Mobile Phones increased by 9% to EUR 1 253 million (EUR 1 148
million), representing an operating margin of 22.7% (21.3%). Operating results
in Nokia Networks decreased to an operating loss of EUR 349 million (operating
profit EUR 161 million), representing an operating margin of -23.6% (10.9%).
Nokia Networks operating profit includes restructuring charges of EUR 399
million. Nokia Ventures Organization reported an operating loss of EUR 36
million (operating loss of EUR 69 million). Common Group Expenses, which
comprises Nokia Head Office and Nokia Research Center, totaled EUR 50 million
(EUR 19 million).
Financial income totaled EUR 131 million (EUR 39 million). Profit before tax and
minority interests was EUR 946 million (EUR 1 253 million). Net profit totaled
EUR 624 million (EUR 862 million). Earnings per share decreased to EUR 0.13
(basic) and to EUR 0.13 (diluted), compared with EUR 0.18 (basic) and EUR 0.18
(diluted) in the second quarter 2002.
NOKIA IN THE FIRST HALF 2003 (REPORTED)
(IAS comparisons given to the first half 2002 results unless otherwise
indicated)
Nokia's net sales decreased by 1% to EUR 13 792 million (EUR 13 949 million).
Sales of Nokia Mobile Phones increased by 1% to EUR 10 989 million (EUR 10 836
million). Sales of Nokia Networks decreased by 7% to EUR 2 697 million (EUR 2
910 million). Sales of Nokia Ventures Organization decreased by 33% and totaled
EUR 176 million (EUR 263 million).
Operating profit decreased by 11% to EUR 2 188 million (EUR 2 455 million),
representing an operating margin of 15.9% (17.6%). Operating profit in Nokia
Mobile Phones increased by 9% to EUR 2 541 million (EUR 2 333 million),
representing an operating margin of 23.1% (21.5%). Operating results in Nokia
Networks decreased to an operating loss of EUR 264 million (operating profit EUR
283 million), representing an operating margin of -9.8% (9.7%). Nokia Ventures
Organization reported an operating loss of EUR 68 million (operating loss of EUR
104 million). Common Group Expenses, which comprises Nokia Head Office and
Nokia Research Center, totaled EUR 21 million (EUR 57 million).
Financial income totaled EUR 211 million (EUR 74 million). Profit before tax and
minority interests was EUR 2 392 million (EUR 2 514 million). Net profit totaled
EUR 1 601 million (EUR 1 725 million). Earnings per share decreased to EUR 0.33
(basic) and to EUR 0.33 (diluted), compared with EUR 0.36 (basic) and EUR 0.36
(diluted) in the first half 2002.
The average number of employees during the first half was 51 787. At June 30,
Nokia employed a total of 51 838 people (51 748 people at December 31, 2002).
At June 30, 2003, net debt-to-equity ratio (gearing) was -65% (-61% at December
31, 2002). During the first half, 2003, capital expenditure amounted to EUR 193
million (EUR 262 million).
Nokia repurchased a total of 20 000 000 shares over the Helsinki Exchanges at an
aggregate purchase price of EUR 301 140 966 during the period between April 22
and May 8. The shares were repurchased as part of the stock repurchase plan of
the company. The aggregate par value of the shares repurchased is EUR 1 200 000
and they represent 0.42% of the total number of shares and the total voting
rights. The repurchases did not have any significant effect on the relative
holdings of the other shareholders of the company or on the voting powers among
them.
At June 30, the Group companies owned 21 758 071 Nokia shares. The shares had an
aggregate par value of EUR 1 305 484.26, representing 0.45% of the share capital
of the company and the total voting rights. The number of issued shares at June
30 was 4 796 292 460 and the share capital was EUR 287 777 547.60.
CONSOLIDATED PROFIT AND LOSS ACCOUNT, IAS, EUR million (unaudited)
Pro forma Pro forma Reported Reported
4-6/03 4-6/02 4-6/03 4-6/02
Net sales 7 019 6 935 7 019 6 935
Cost of sales -4 032 -4 052 -4 032 -4 052
Research and development expenses -1 144 -779 -1 144 -779
Selling, general and administrative expenses -985 -844 -985 -844
Adjustment to customer finance impairment 1) - - - 13
Amortization of goodwill - - -40 -52
Operating profit 858 1 260 818 1 221
Share of results of associated companies -3 -7 -3 -7
Financial income and expenses 131 39 131 39
Profit before tax and minority interests 986 1 292 946 1 253
Tax -302 -377 -302 -381
Minority interests -20 -10 -20 -10
Net profit 664 905 624 862
Earnings per share, EUR
Basic 0.14 0.19 0.13 0.18
Diluted 0.14 0.19 0.13 0.18
Average number of shares (1,000 shares)
Basic 4 781 460 4 745 947 4 781 460 4 745 947
Diluted 4 781 493 4 784 745 4 781 493 4 784 745
Depreciation and amortization, total 280 322
Non-recurring items
1) In 2002, positive adjustment of EUR 13 million related to the earlier Dolphin write-off in 3Q 2001.
CONSOLIDATED PROFIT AND LOSS ACCOUNT, IAS, EUR million (unaudited)
Pro forma Pro forma Reported Reported
1-6/03 1-6/02 1-6/03 1-6/02
Net sales 13 792 13 949 13 792 13 949
Cost of sales -8 189 -8 296 -8 189 -8 296
Research and development expenses -1 918 -1 482 -1 918 -1 482
Selling, general and administrative expenses -1 640 -1 625 -1 640 -1 625
Adjustment to customer finance impairment 1) - - 226 13
Amortization of goodwill - - -83 -104
Operating profit 2 045 2 546 2 188 2 455
Share of results of associated companies -7 -15 -7 -15
Financial income and expenses 211 74 211 74
Profit before tax and minority interests 2 249 2 605 2 392 2 514
Tax -701 -755 -767 -759
Minority interests -24 -30 -24 -30
Net profit 1 524 1 820 1 601 1 725
Earnings per share, EUR
Basic 0.32 0.38 0.33 0.36
Diluted 0.32 0.38 0.33 0.36
Average number of shares (1,000 shares)
Basic 4 785 935 4 741 230 4 785 935 4 741 230
Diluted 4 788 611 4 793 896 4 788 611 4 793 896
Depreciation and amortization, total 590 635
Non-recurring items
1) In 2003, positive adjustment in 1Q to 3Q 2002 customer finance impairment charge related to MobilCom.
In 2Q 2002, positive adjustment of EUR 13 million related to the earlier Dolphin write-off in 3Q 2001.
CONSOLIDATED PROFIT AND LOSS ACCOUNT, EUR million (pro forma unaudited, reported audited)
Pro forma Reported, IAS
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)
4-6/2003 4-6/2002 1-6/2003 1-6/2002 1-12/2002
Nokia Mobile Phones 5 513 5 398 10 989 10 836 23 211
Nokia Networks 1 480 1 474 2 697 2 910 6 539
Nokia Ventures Organization 82 106 176 263 459
Inter-business group eliminations -56 -43 -70 -60 -193
Nokia Group 7 019 6 935 13 792 13 949 30 016
OPERATING PROFIT BY BUSINESS GROUP, IAS, EUR million (unaudited)
Pro forma 4-6/2003 4-6/2002 1-6/2003 1-6/2002 1-12/2002
Nokia Mobile Phones 1 276 1 171 2 587 2 379 5 293
Nokia Networks -334 171 -461 317 416
Nokia Ventures Organization -36 -63 -68 -93 -59
Common Group Expenses -48 -19 -13 -57 -230
Nokia Group 858 1 260 2 045 2 546 5 420
Goodwill amortization 4-6/2003 4-6/2002 1-6/2003 1-6/2002 1-12/2002
Nokia Mobile Phones -23 -23 -46 -46 -92
Nokia Networks -15 -23 -29 -47 -92
Nokia Ventures Organization - -6 - -11 -21
Common Group Expenses -2 - -8 - -1
Nokia Group -40 -52 -83 -104 -206
Non-recurring items 4-6/2003 4-6/2002 1-6/2003 1-6/2002 1-12/2002
Nokia Mobile Phones - - - - -
Nokia Networks - 13 226 13 -373
Nokia Ventures Organization - - - - -61
Common Group Expenses - - - - -
Nokia Group - 13 226 13 -434
Reported 4-6/2003 4-6/2002 1-6/2003 1-6/2002 1-12/2002
Nokia Mobile Phones 1 253 1 148 2 541 2 333 5 201
Nokia Networks -349 161 -264 283 -49
Nokia Ventures Organization -36 -69 -68 -104 -141
Common Group Expenses -50 -19 -21 -57 -231
Nokia Group 818 1 221 2 188 2 455 4 780
CONSOLIDATED BALANCE SHEET, IAS, EUR million (unaudited)
ASSETS 30.6.2003 30.6.2002 31.12.2002
Fixed assets and other non-current assets
Capitalized development costs 777 1 012 1 072
Goodwill 415 751 476
Other intangible assets 165 223 192
Property, plant and equipment 1 662 2 140 1 874
Investments in associated companies 34 67 49
Available-for-sale investments 867 356 238
Deferred tax assets 695 894 731
Long-term loans receivable 558 1 555 1 056
Other non-current assets 63 40 54
5 236 7 038 5 742
Current assets
Inventories 1 225 1 828 1 277
Accounts receivable 4 484 4 671 5 385
Prepaid expenses and accrued income 1 151 1 423 1 156
Other financial assets 643 554 416
Available-for-sale investments 8 719 5 026 7 855
Bank and cash 1 222 1 386 1 496
17 444 14 888 17 585
Total assets 22 680 21 926 23 327
SHAREHOLDERS' EQUITY AND LIABILITIES
Shareholders' equity
Share capital 288 285 287
Share issue premium 2 263 2 096 2 225
Treasury shares -328 -20 -20
Translation differences -31 251 135
Fair value and other reserves 25 44 -7
Retained earnings 11 935 9 987 11 661
14 152 12 643 14 281
Minority interests 149 218 173
Long-term liabilities
Long-term interest-bearing liabilities 129 176 187
Deferred tax liabilities 235 195 207
Other long-term liabilities 66 71 67
430 442 461
Current liabilities
Short-term borrowings 531 859 377
Current portion of long-term debt 27 25 -
Accounts payable 2 464 2 508 2 954
Accrued expenses 2 366 2 985 2 611
Provisions 2 561 2 246 2 470
7 949 8 623 8 412
Total shareholders' equity and liabilities 22 680 21 926 23 327
Interest-bearing liabilities 687 1 060 564
Shareholders' equity per share, EUR 2.96 2.66 2.98
Number of shares (1000 shares)* 4 774 534 4 752 149 4 786 762
NB: Dividends to Nokia's shareholders, EUR 1 340 million (EUR 1 279 million in 2002), were deducted from retained
earnings and recorded within accrued expenses as a liability at the end of the first quarter 2003 and 2002,
respectively.
Dividends were paid in April and had an impact on cash flow and gearing in the second quarter.
*Shares owned by group companies are excluded.
CONSOLIDATED CASH FLOW STATEMENT, IAS, EUR million (unaudited)
1-6/2003 1-6/2002 1-12/2002
Cash flow from operating activities
Net profit 1 601 1 725 3 381
Adjustments, total 1 223 1 371 3 151
Net profit before change in net working capital 2 824 3 096 6 532
Change in net working capital 359 226 955
Cash generated from operations 3 183 3 322 7 487
Interest received 139 126 229
Interest paid -15 -30 -94
Other financial income and expenses 80 21 139
Income taxes paid -657 -1 121 -1 947
Net cash from operating activities 2 730 2 318 5 814
Cash flow from investing activities
Acquisition of Group companies, net of acquired cash -2 - -10
Purchase of non-current available-for-sale investments -263 -80 -99
Additions in capitalized development costs -171 -221 -418
Long-term loans made to customers -95 -426 -563
Proceeds from repayment and sale of long-term loans receivable 107 - 314
Proceeds from (+), payment (-) of other long-term receivables -14 1 -32
Proceeds from (+), payment (-) of short-term loans receivable -284 -184 -85
Capital expenditures -193 -261 -432
Proceeds from disposal of Group companies,
net of disposed cash - 105 93
Proceeds from sale of non-current available-for-sale investments 326 3 162
Proceeds from sale of fixed assets 16 128 177
Dividends received 23 25 25
Net cash used in investing activities -550 -910 -868
Cash flow from financing activities
Proceeds from stock options exercised 23 51 163
Purchase of treasury shares -308 -13 -17
Capital investment by minority shareholders - 26 26
Proceeds from long-term borrowings 7 6 100
Repayment of long-term borrowings -27 -11 -98
Proceeds from (+), payment of (-) short-term borrowings 185 90 -406
Dividends paid -1 377 -1 308 -1 348
Net cash used in financing activities -1 497 -1 159 -1 580
Foreign exchange impact on cash -145 -50 -163
Net increase in cash and cash equivalents 538 199 3 203
Cash and cash equivalents at beginning of period 9 351 6 125 6 125
Cash and cash equivalents at end of period 9 889 6 324 9 328
Change in net fair value of current available-for-sale
investments 52 88 23
As reported on balance sheet 9 941 6 412 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 31, 284 2 060 -21 326 20 9 536 12 205
2001
Stock options exercised 1 49 50
Stock options exercised
related
to acquisitions -13 -13
Acquisition of treasury -13 -13
shares
Reissuance of treasury 14 14
shares
Dividend -1 279 -1 279
Translation differences -84 -84
Net investment hedge 9 9
gains
Cash flow hedges 87 87
Available-for-sale -63 -63
investments
Other increases, net 5 5
Net profit 1 725 1 725
Balance at June 30, 2002 285 2 096 -20 251 44 9 987 12 643
Balance at December 31, 287 2 225 -20 135 -7 11 661 14 281
2002
Share issue related to 18 18
acquisitions
Stock options exercised 1 23 24
Stock options exercised
related
to acquisitions -3 -3
Acquisition of treasury -312 -312
shares
Reissuance of treasury 4 4
shares
Dividend -1 340 -1 340
Translation differences -289 -289
Net investment hedge 123 123
gains
Cash flow hedges 25 25
Available-for-sale 7 7
investments
Other increases, net 13 13
Net profit 1 601 1 601
Balance at June 30, 2003 288 2 263 -328 -31 25 11 935 14 152
COMMITMENTS AND CONTINGENCIES, EUR million (unaudited)
GROUP
30.6.2003 30.6.2002 31.12.2002
Collateral for own
commitments
Property under mortgages 18 18 18
Assets pledged 13 13 13
Collateral given on behalf of other
companies
Securities pledged 29 37 34
Contingent liabilities on behalf of Group
companies
Other guarantees 212 389 339
Contingent liabilities on behalf of other
companies
Guarantees for loans 48 85 57
Leasing obligations 746 722 704
Financial commitments
Customer financing 703 2 542 857
NOTIONAL AMOUNTS OF DERIVATIVE FINANCIAL INSTRUMENTS, EUR million1) (unaudited)
30.6.2003 30.6.2002 31.12.2002
Foreign exchange forward contracts 2) 11 262 18 606 11 118
Currency options bought 2) 2 689 524 1 408
Currency options sold 2) 2 541 758 1 206
Cash settled equity options 3) 209 - 209
Cash settled equity swaps 3) - 122 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 = 1.1801 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 - July 17, 2003
Media and Investor Contacts:
Lauri Kivinen, Corporate Communications, tel. +358 7180 34495
Ulla James, Investor Relations, tel. +358 7180 34962
Bill Seymour, Investor Relations, tel. +1 972 894 4701
Antti Raikkonen, Investor Relations, tel. +358 7180 34290
www.nokia.com
- Nokia will report 3Q results on October 16, 2003 and plans a mid-quarter
update on September 9, 2003.
- A results announcement for 4Q 2003 is planned for January 22, 2004.
END
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