Trading Statement
Nokia Corporation
23 January 2003
PRESS RELEASE
January 23, 2003
Nokia achieves excellent profitability and continued high cash flow in 4Q and
2002
Mobile phone volumes and market share reach highest ever levels
Fourth quarter 2002 compared with fourth quarter 2001:
- Net sales increased 1% to EUR 8 843 million (EUR 8 788 million in 4Q
2001)
- Pro forma operating profit increased by 4% to EUR 1 655 million (EUR
1 589 million); pro forma operating margin was 18.7% (18.1%)
- Pro forma adjustments for 4Q 2002 were EUR 189 million, consisting
of:
- Goodwill impairments of EUR 182 million
- Goodwill amortization of EUR 48 million
- Recovery of MobilCom receivables of EUR 41 million
- Pro forma net profit increased by 8% to EUR 1 247 million (EUR 1 153
million)
- Pro forma earnings per share (diluted) increased to EUR 0.26 (EUR 0.24)
- Reported operating profit increased by 72% to EUR 1 466 million (EUR
853 million)
- Reported net profit increased by 132% to EUR 1 046 million (EUR 450
million) and reported earnings per share (diluted) increased to EUR 0.22 (EUR
0.09)
- Pro forma and Reported operating profit included a net gain of EUR 87
million from Nokia Venture Partners investments within Nokia Ventures
Organization.
Full year 2002 compared with full year 2001:
- Net sales decreased 4% to EUR 30 016 million (EUR 31 191 million in
2001)
- Pro forma operating profit increased by 3% to EUR 5 420 million (EUR
5 237 million); pro forma operating margin increased to 18.1% (16.8%)
- Pro forma adjustments for 2002 were EUR 640 million (EUR 1 875
million)
- Pro forma net profit increased by 4% to EUR 3 948 million (EUR 3 789
million)
- Pro forma earnings per share (diluted) increased to EUR 0.82 (EUR
0.79)
- Reported operating profit increased by 42% to EUR 4 780 million (EUR
3 362 million)
- Reported net profit increased by 54% to EUR 3 381 million (EUR 2 200
million) and reported earnings per share (diluted) increased to EUR 0.71 (EUR
0.46)
- At year-end, the net cash position increased to EUR 8.8 billion (EUR
5.1 billion) and the net debt-to-equity ratio (gearing) was -61% (-41%)
Nokia's Board of Directors will propose a dividend of EUR 0.28 per share in
respect of 2002.
JORMA OLLILA, CHAIRMAN AND CEO
During 2002, we again succeeded in translating our strong brand, product
offering, industry-leading execution and operational efficiency into highly
profitable results. While the world economy had an inevitable impact on Nokia's
topline growth, our overall profitability and market position were excellent and
we ended the year with our highest ever net cash position of EUR 8.8 billion.
In mobile phones, we saw record sales volumes of 46 million units in the fourth
quarter and our highest ever market share, an estimated 39%, as well as
continued high profitability. We also shipped a record number of 33 new products
for the full year. In 2002, I was very pleased with the uptake of the Series 60
platform, which has fast become the leading platform for smart phones.
As the mobile market moves further into this new phase of advanced features and
services, driven by color screens, imaging, messaging and mobile games, we see
Nokia at the forefront with its expanding product range and scope.
(Continued on page 3)
NOKIA 4Q and 2002 - PRO FORMA
(excludes goodwill amortization and non-recurring items)
EUR million 4Q/2002 4Q/2001 Change (%) 2002 2001 Change (%)
Net sales 8 843 8 788 1 30 016 31 191 -4
Nokia Mobile Phones 6 742 6 710 23 211 23 158
Nokia Networks 2 084 1 957 6 6 539 7 534 -13
Nokia Ventures Organization 107 142 -25 459 585 -22
Operating profit 1 655 1 589 4 5 420 5 237 3
Nokia Mobile Phones 1 665 1 479 12 5 293 4 648 14
Nokia Networks 19 254 -93 416 1 073 -61
Nokia Ventures Organization 59 -61 -59 -327
Common Group Expenses -88 -83 -230 -157
Operating margin (%) 18.7 18.1 18.1 16.8
Nokia Mobile Phones (%) 24.7 22.0 22.8 20.1
Nokia Networks (%) 0.9 13.0 6.4 14.2
Nokia Ventures Organization (%) 55.1 -43.0 -12.9 -55.9
Financial income and expenses 52 45 16 156 125 25
Profit before tax and minority interests 1 707 1 631 5 5 557 5 350 4
Net profit 1 247 1 153 8 3 948 3 789 4
EPS, EUR
Basic 0.26 0.24 8 0.83 0.81 2
Diluted 0.26 0.24 8 0.82 0.79 4
NB: All pro forma 4Q and 2002 figures can be found in the tables on pages 7-9
and 14-18. A reconciliation of the pro forma figures to our reported results can
be found in the tables on page 9.
NOKIA 4Q and 2002 - REPORTED
EUR million 4Q/2002 4Q/2001 Change (%) 2002 2001 Change (%)
(audited) (audited)
Net sales 8 843 8 788 1 30 016 31 191 -4
Nokia Mobile Phones 6 742 6 710 23 211 23 158
Nokia Networks 2 084 1 957 6 6 539 7 534 -13
Nokia Ventures Organization 107 142 -25 459 585 -22
Operating profit 1 466 853 72 4 780 3 362 42
Nokia Mobile Phones 1 642 1 457 13 5 201 4 521 15
Nokia Networks -82 -73 -12 -49 -73
Nokia Ventures Organization -6 -374 -141 -855
Common Group Expenses -88 -157 -231 -231
Operating margin (%) 16.6 9.7 15.9 10.8
Nokia Mobile Phones (%) 24.4 21.7 22.4 19.5
Nokia Networks (%) -3.9 -3.7 -0.7 -1.0
Nokia Ventures Organization (%) -5.6 -263.4 -30.7 -146.2
Financial income and expenses 52 45 16 156 125 25
Profit before tax and minority interests 1 518 895 70 4 917 3 475 41
Net profit 1 046 450 132 3 381 2 200 54
EPS, EUR
Basic 0.22 0.10 120 0.71 0.47 51
Diluted 0.22 0.09 144 0.71 0.46 54
NB: All reported 4Q and 2002 figures can be found in the tables on pages 7-9 and
14-18.
(Continued from page 1)
Implementation of the new organizational structure in Nokia Mobile Phones has
also been proceeding steadily throughout the year, bringing with it a fresh
entrepreneurial spirit and commitment to growth.
In the overall handset market for 2002, we were pleased to see a return to
volume growth, with Nokia's own share rising for the fifth consecutive year to
an estimated 38% for the full year. We intend to make further market share gains
during the current year.
For the fourth quarter, Nokia Networks reached the relevant milestones for its
dual-mode 3G systems. Furthermore, we were pleased to start operator shipments
of our first WCDMA imaging phone, the Nokia 6650, while the first
Nokia-delivered WCDMA network was successfully launched in Japan. This is clear
evidence that the industry is moving on track towards early commercial WCDMA
launches in the first half of 2003.
The Open Mobile Alliance expanded far beyond all industry expectations from
about 180 founding members in June to include more than 300 leading companies by
the year end.This unprecedented commitment to openness is accelerating the
mass-market take up of new data and value-added services for any device on any
network.
The strength of our full-year performance in a difficult environment speaks
highly for the commitment of the whole Nokia team. My special thanks go to
everyone at Nokia for their contribution and dedication during 2002.
BUSINESS DEVELOPMENTS AND FORECASTS
Nokia's fourth-quarter sales rose by 1% compared with the fourth quarter 2001,
reaching EUR 8.8 billion. Sales for Nokia Mobile Phones were flat year on year,
reaching EUR 6.7 billion, reflecting weaker sales in the Americas, offset by
strong growth in Europe followed by Asia Pacific. In Nokia Networks, sales grew
by 6% to EUR 2.1 billion, including EUR 370 million in 3G dual-mode revenue
recognition and reflecting strong growth in the US, partially offset by weaker
sales in China.
Fourth-quarter pro forma operating profit for the Nokia group reached EUR 1.7
billion, including a net gain of EUR 87 million from Nokia Venture Partners
investments within Nokia Ventures Organization. Fourth-quarter pro forma
operating profit for Nokia Mobile Phones rose by 13% year on year, backed by
Nokia's strong competitive product offering and operational excellence.
Excellent full-year profitability and cash flow on lower sales
Sales declined by 4% year on year for the full year 2002, reaching EUR 30.0
billion. This mainly reflected continuing difficult operating conditions in the
company's network infrastructure business. Full-year sales for Nokia Mobile
Phones remained flat compared with 2001, at EUR 23.2 billion, reflecting good
growth in Europe and Asia Pacific, offset by a sales decline in the Americas. In
addition, handset sales in the second half, while reaching very high volume
growth, tended towards the mass-market end of the product portfolio.
In 2002, Nokia's overall profitability and market position were excellent and
the company ended the year with its highest ever net cash position of EUR 8.8
billion.
Outlook for 1Q 2003
Nokia expects market conditions to remain challenging, and will continue to
build on its industry-leading position, seeking to achieve high profitability as
well as to grow market share in its two main businesses. First-quarter sales for
Nokia Mobile Phones in 2003 are estimated to grow by 0-9% year on year and by
slightly less for the whole group. Sales growth in the second quarter is
estimated to be higher than in the first quarter. Nokia's competitive position
remains strong, and first-quarter pro forma EPS (diluted) is expected to be in
the range of EUR 0.15 and EUR 0.19.
Overall mobile phone market volumes return to growth
According to Nokia's preliminary estimates, the mobile phone market returned to
growth in 2002 with overall market volumes reaching about 405 million units.
This represents growth of more than 5% compared with volumes in 2001 of around
380 million units. Market volume continued to grow year on year in Europe and
Asia Pacific, both rising by about 8%. Demand in the Americas is also estimated
to have grown, by approximately 4%, compared with the previous year. In the
fourth quarter 2002 overall mobile phone market volumes are estimated at about
117 million units. In 2003, the company expects to see total market volumes grow
by 10% or slightly more.
Nokia's own mobile phone volumes reach record levels
In 2002, Nokia volumes reached a record level of 152 million units, representing
faster than market growth of 9%, compared with 2001. Nokia also achieved its
highest ever quarterly volume of 46 million units in the fourth quarter. For the
full year 2002, backed by the company's ongoing product leadership and user
brand preference, Nokia increased its market share for the fifth consecutive
year reaching an estimated 38%, bringing it closer to its targeted 40%.
Mobile networks market contracts during 2002
The mobile communications industry saw significant developments in the
introduction of mobile data services during 2002. However, the combined effects
of a general economic slowdown and high 3G license costs induced most mobile
network operators to focus increasingly on cash flow while cutting back on their
level of capital investments. As a result, the size of the overall mobile
network infrastructure market decreased by approximately 20% compared with the
previous year.
Nokia Networks' accessible market contracted by around 15% during 2002, while
its sales declined by 13%. This resulted in a slight market share increase for
Nokia Networks in the mobile infrastructure market. Nokia does not expect
conditions in this industry to markedly improve during 2003, with its own
accessible market expected to decrease by 5-10%.
Customer financing reduced by more than half
At the end of 2002, outstanding long-term loans to customers totaled EUR 1 056
million (compared with EUR 1 128 in 2001), while guarantees given on behalf of
customers totaled EUR 91 million (EUR 127 million). In addition, Nokia had
financing commitments totaling EUR 857 million (EUR 2 955 million) at the end of
2002. Of the total outstanding and committed customer financing of EUR 2 004
million (EUR 4 210 million), EUR 1 573 million (EUR 3 607 million) related to 3G
networks.
In the fourth quarter, 2002 Nokia finalized the agreement with MobilCom's
shareholder France Telecom pursuant to which the MobilCom loans will be repaid
by France Telecom by issuing subordinated convertible perpetual bonds to be
subscribed by Nokia. The company expects the assignment and subscription to be
closed in March 2003 after MobilCom and France Telecom have received approval
from their supervisory board and shareholder meeting, respectively. The net
negative impact on Nokia of the MobilCom exposure was EUR 265 million. At the
same time the remaining financing commitment to MobilCom of approximately EUR
530 million was terminated.
Nokia sees the current environment as not requiring material increases in
customer financing. During 2002, Nokia reduced its total customer financing and
commitments by EUR 2 206 million.
Global subscriber number continues to grow
In 2002, the company estimates the global subscriber base to have grown to 1 125
million users and projects this number to exceed 1.5 billion users in 2005. In
addition to new subscribers, revenue growth will primarily be driven by MMS,
already launched by around 100 major operators, and other advanced services
based on openness, global roaming and interoperability.
NOKIA MOBILE PHONES IN THE FOURTH QUARTER
During the fourth quarter, Nokia Mobile Phones continued to renew its
industry-leading product portfolio, shipping eight new products incorporating
color, multimedia, e-mail and calendar, as well as polyphonic ring tones.
Stronger CDMA2000 1X offering
Nokia continued to strengthen its CDMA offering with shipments of the company's
second CDMA2000 1X phone, the Nokia 3585, in the US. Nokia also launched and
commenced shipments of the Nokia 8280, its newest CDMA 1X offering for the Latin
American market. In November, Nokia launched its first CDMA2000 1X GPS phone,
the Nokia 3585i, which is expected to start shipping in the US during the first
quarter 2003.
Nine new GSM products launched in 4Q
The company launched nine new GSM products including phones with high-quality
color displays, JavaTM technology and MMS support in the active, classic,
fashion and premium categories, as well as a mobile entry phone, a new messaging
device, and three new mobile enhancements. The Nokia 6800, with its full
keyboard for managing personal information, text input and messaging was a
highlight.
World's first GSM/EDGE phone
In November, Nokia launched the world's first GSM/EDGE mobile phone. With its
convenient high-speed data transfer, the EDGE-capable Nokia 6200 tri-band phone
brings third-generation speed and services to the user. It is expected to become
commercially available in the Americas during the first quarter 2003.
WCDMA 3G moves to commercial phase
During the quarter, Nokia announced it has passed all regulatory WCDMA and GSM
type approval tests for the Nokia 6650 WCDMA/GSM dual-mode mobile phone and
began deliveries for operator testing in both Europe and Japan. The Nokia 6650,
introduced on 26 September in Helsinki, is the world's first 3GPP compliant
WCDMA/GSM dual-mode phone.
Series 60 smart phone platform gains momentum
During the quarter, Sendo, a British mobile phone manufacturer, announced its
decision to license the Series 60 Platform from Nokia for its smart phone
category. Sendo joins as the newest member of the Series 60 licensing community
with Matsushita, Samsung, Siemens and Nokia, together representing approximately
60% of the total global mobile phone market. According to company estimates,
Nokia alone will ship 10 million Series 60 smart phones during 2003.
Nokia to enter games industry with Nokia N-GageTM
Nokia announced it would bring mobility to the games industry by offering
console quality games for its new mobile game deck device category. Under a
collaboration agreement with world leading games publisher, Sega, the two
companies will develop games for the new Nokia N-GageTM mobile game deck, which
will run on the Nokia Series 60 platform and the Symbian operating system.
Nokia Game attracts record number of players
The annual Nokia Game, an interactive adventure game for mobile phone users
across 25 countries, set a new record for the greatest number of player
registrations during the quarter. By the end of November 2002, one million
players had participated in the Nokia Game 2002.
NOKIA NETWORKS IN THE FOURTH QUARTER
In third-generation WCDMA networks, Nokia Networks signed an expansion contract
to the original agreement with J-Phone in Japan and new contracts with Chungwa
Telecom and Taiwan Cellular Corporation in Taiwan.
Nokia MMS customers rise to well over 40 operators
Operators continued to implement MMS services and Nokia won 11 new MMS contracts
during the fourth quarter, raising Nokia's total number of MMS customers to well
over 40 at year-end. By December 31, 2002, approximately 100 operators in the
industry overall had begun offering MMS, with millions of individuals taking it
into use.
Company signs new deals in GSM, GPRS and TETRA
During the fourth quarter, Nokia Networks signed GSM network expansion deals
with Gansu MCC and Henan MCC in China, with AIS in Thailand and with Cellular
One in the United States. The company also won a new customer when Telefonica
Movil in Chile chose Nokia as a supplier of its GSM and GPRS networks. In the
professional mobile radio (TETRA) markets, Nokia Networks won four new deals
with customers in Bulgaria, Morocco, Tunisia and Venezuela. Nokia also made
three broadband access deals in China.
NOKIA VENTURES ORGANIZATION IN THE FOURTH QUARTER
While industry-wide IT security spending remained flat during the fourth
quarter, Nokia Internet Communications' revenues increased both sequentially and
year on year due to market acceptance of earlier launched network security
appliances and solutions. During the period, Nokia introduced its end-to-end
mobile VPN solution, allowing enterprises to securely extend, provision and
manage network infrastructure for their mobile workforces. In addition, Nokia
complemented its product portfolio to encompass content security with the launch
of the Nokia Message Protector SC6600 in co-operation with newly-announced
strategic partner Trend Micro.
Nokia Home Communications also launched several new products in line with
increasing demand for terrestrial receiver products in key markets. Nokia
Ventures Organization's results were impacted favorably by a net gain of EUR 87
million from Nokia Venture Partners, mainly resulting from a successful
investment in PayPal.
NOKIA IN OCTOBER-DECEMBER 2002 REPORTED
(International Accounting Standards, IAS, comparisons given to the fourth
quarter 2001 results)
Nokia's net sales increased by 1% to EUR 8 843 million (EUR 8 788 million).
Sales of Nokia Mobile Phones were flat at EUR 6 742 million (EUR 6 710 million).
Sales of Nokia Networks increased by 6% to EUR 2 084 million (EUR 1 957
million). Sales of Nokia Ventures Organization decreased by 25% and totaled EUR
107 million (EUR 142 million).
Operating profit increased by 72% to EUR 1 466 million (EUR 853 million),
representing an operating margin of 16.6% (9.7%). Operating profit in Nokia
Mobile Phones increased by 13% to EUR 1 642 million (EUR 1 457 million),
representing an operating margin of 24.4% (21.7%). Operating loss in Nokia
Networks increased to EUR 82 million (operating loss EUR 73 million),
representing an operating margin of -3.9% (-3.7%). Nokia Ventures Organization
reported an operating loss of EUR 6 million (operating loss of EUR 374 million).
Common Group Expenses, which comprises Nokia Head Office and Nokia Research
Center, totaled EUR 88 million (EUR 157 million). Operating profit included a
net gain of EUR 87 million from Nokia Venture Partners investments within Nokia
Ventures Organization.
During the fourth quarter 2002, operating profit was negatively impacted by
non-recurring items totaling EUR 141 million, which consisted of goodwill
impairment of EUR 182 million relating to Nokia Networks' IP mobility networks
business and Nokia Internet Communications, and was partially offset by the
recovery of MobilCom receivables amounting to EUR 41 million. Goodwill
amortization for the fourth quarter 2002 was EUR 48 million.
Financial income totaled EUR 52 million (EUR 45 million). Profit before tax and
minority interests was EUR 1 518 million (EUR 895 million). Net profit totaled
EUR 1 046 million (EUR 450 million). Earnings per share increased to EUR 0.22
(basic) and to EUR 0.22 (diluted) compared with EUR 0.10 (basic) and EUR 0.09
(diluted) in the fourth quarter 2001.
At December 31, 2002, net debt-to-equity ratio (gearing) was -61% (-41% at the
end of 2001). During the October to December period 2002, capital expenditures
amounted to EUR 84 million (EUR 221 million).
At the end of 2002, outstanding long-term loans to customers totaled EUR 1 056
million (compared with EUR 1 128 in 2001), while guarantees given on behalf of
customers totaled EUR 91 million (EUR 127 million). In addition, Nokia had
financing commitments totaling EUR 857 million (EUR 2 955 million) at the end of
2002. Of the total outstanding and committed customer financing of EUR 2 004
million (EUR 4 210 million), EUR 1 573 million (EUR 3 607 million) related to 3G
networks.
CONSOLIDATED PROFIT AND LOSS ACCOUNT, IAS, EUR million (unaudited)
Pro forma Pro forma Reported Reported
10-12/02 10-12/01 10-12/02 10-12/01
Net sales 8,843 8,788 8,843 8,788
Cost of sales 1) -5,492 -5,536 -5,451 -5,559
Research and development expenses -852 -750 -852 -750
Selling, general and administrative expenses 2) -844 -913 -844 -1,075
Customer finance impairment charges - - - -
Adjustment to Dolphin write-off - - - -
Impairment of goodwill - - -182 -464
Amortization of goodwill - - -48 -87
Operating profit 1,655 1,589 1,466 853
Share of results of associated companies - -3 - -3
Financial income and expenses 52 45 52 45
Profit before tax and minority interests 1,707 1,631 1,518 895
Tax -448 -459 -460 -426
Minority interests -12 -19 -12 -19
Net profit 1,247 1,153 1,046 450
Earnings per share, EUR
Basic 0.26 0.24 0.22 0.10
Diluted 0.26 0.24 0.22 0.09
Average number of shares (1,000 shares)
Basic 4,767,504 4,721,431 4,767,504 4,721,431
Diluted 4,788,991 4,797,959 4,788,991 4,797,959
Depreciation and amortization, total 346 416
Non-recurring items
1) Recovery of MobilCom receivables of EUR 41 million in 2002 and non-recurring charges of
EUR 23 million in 2001.
2) Non-recurring charges of EUR 162 million in 2001.
CONSOLIDATED PROFIT AND LOSS ACCOUNT, IAS, EUR million
(pro forma unaudited, reported audited)
Pro forma Pro forma Reported Reported
1-12/02 1-12/01 1-12/02 1-12/01
Net sales 30,016 31,191 30,016 31,191
Cost of sales 1) -18,305 -19,693 -18,278 -19,787
Research and development expenses -3,052 -2,985 -3,052 -2,985
Selling, general and administrative expenses 2) -3,239 -3,276 -3,239 -3,523
Customer finance impairment charges 3) - - -292 -714
Adjustment to Dolphin write-off 4) - - 13 -
Impairment of goodwill - - -182 -518
Amortization of goodwill - - -206 -302
Operating profit 5,420 5,237 4,780 3,362
Share of results of associated companies -19 -12 -19 -12
Financial income and expenses 156 125 156 125
Profit before tax and minority interests 5,557 5,350 4,917 3,475
Tax -1,557 -1,478 -1,484 -1,192
Minority interests -52 -83 -52 -83
Net profit 3,948 3,789 3,381 2,200
Earnings per share, EUR
Basic 0.83 0.81 0.71 0.47
Diluted 0.82 0.79 0.71 0.46
Average number of shares (1,000 shares)
Basic 4,751,110 4,702,852 4,751,110 4,702,852
Diluted 4,788,042 4,787,219 4,788,042 4,787,219
Depreciation and amortization, total 1,311 1,430
Non-recurring items
1) In 2002, non-recurring charges of EUR 14 million (MobilCom) in 3Q and a positive adjustment of EUR 41
million related to the MobilCom write-off in 4Q. In 2001, EUR 71 million from 2Q and EUR 23 million from 4Q.
2) In 2001, non-recurring charges, total of EUR 85 million from 2Q, including a EUR 24 million gain from the
disposal of certain production operations, and a total of EUR 162 million from 4Q.
3) In 2002, customer finance impairment charges of EUR 292 million related to MobilCom in 3Q. In 2001,
customer finance impairment charges of EUR 714 million related to Telsim and Dolphin in 3Q.
4) In 2002, a positive adjustment of EUR 13 million related to the earlier Dolphin write-off in 3Q 2001.
NET SALES BY BUSINESS GROUP, EUR million
(quarterly reported unaudited, full-year reported audited)
10-12/2002 10-12/2001 1-12/2002 1-12/2001
Nokia Mobile Phones 6,742 6,710 23,211 23,158
Nokia Networks 2,084 1,957 6,539 7,534
Nokia Ventures Organization 107 142 459 585
Inter-business group eliminations -90 -21 -193 -86
Nokia Group 8,843 8,788 30,016 31,191
OPERATING PROFIT BY BUSINESS GROUP, IAS, EUR million
(pro forma unaudited, quarterly reported unaudited, full-year reported audited)
Pro forma 10-12/2002 10-12/2001 1-12/2002 1-12/2001
Nokia Mobile Phones 1,665 1,479 5,293 4,648
Nokia Networks 19 254 416 1,073
Nokia Ventures Organization 59 -61 -59 -327
Common Group Expenses -88 -83 -230 -157
Nokia Group 1,655 1,589 5,420 5,237
Goodwill amortization 10-12/2002 10-12/2001 1-12/2002 1-12/2001
Nokia Mobile Phones -23 -22 -92 -92
Nokia Networks -21 -41 -92 -105
Nokia Ventures Organization -4 -24 -21 -105
Common Group Expenses - - -1 -
Nokia Group -48 -87 -206 -302
Non-recurring items 10-12/2002 10-12/2001 1-12/2002 1-12/2001
Nokia Mobile Phones - - - -35
Nokia Networks -80 -286 -373 -1,041
Nokia Ventures Organization -61 -289 -61 -423
Common Group Expenses - -74 - -74
Nokia Group -141 -649 -434 -1,573
Reported 10-12/2002 10-12/2001 1-12/2002 1-12/2001
Nokia Mobile Phones 1,642 1,457 5,201 4,521
Nokia Networks -82 -73 -49 -73
Nokia Ventures Organization -6 -374 -141 -855
Common Group Expenses -88 -157 -231 -231
Nokia Group 1,466 853 4,780 3,362
Statutory Release of Annual Accounts 2002
REVIEW BY THE BOARD OF DIRECTORS
(The below review by the Board of Directors forms part of the financial
statements for 2002)
Nokia in 2002: IAS Reported
Nokia's net sales in 2002 decreased by 4% compared with 2001 and totaled EUR 30
016 million
(EUR 31 191 million in 2001). Sales in Nokia Mobile Phones were flat at EUR 23
211 million (EUR 23 158 million) and decreased in Nokia Networks by 13% to EUR 6
539 million (EUR 7 534 million). Sales decreased in Nokia Ventures Organization
by 22% to EUR 459 million (EUR 585 million).
Operating profit in 2002 increased by 42% and totaled EUR 4 780 million (EUR 3
362 million in 2001). Operating margin was 15.9% (10.8% in 2001). Operating
profit in Nokia Mobile Phones increased by 15% to EUR 5 201 million (EUR 4 521
million in 2001). Operating loss in Nokia Networks decreased to EUR 49 million
(operating loss of EUR 73 million in 2001). Operating margin in Nokia Mobile
Phones was 22.4% (19.5% in 2001), while the operating margin in Nokia Networks
was -0.7% (-1.0% in 2001). Nokia Ventures Organization showed an operating loss
of EUR 141 million (operating loss of EUR 855 million in 2001). Common Group
Expenses totaled EUR 231 million (EUR 231 million in 2001).
During 2002, operating profit was negatively impacted by goodwill impairments of
EUR 182 million and net customer financing impairment charges related to
MobilCom of EUR 265 million.
Financial income totaled EUR 156 million in 2002 (EUR 125 million in 2001).
Profit before tax and minority interests was EUR 4 917 million in 2002 (EUR 3
475 million in 2001). Net profit totaled EUR 3 381 million in 2002 (EUR 2 200
million in 2001). Earnings per share increased to EUR 0.71 (basic) and to EUR
0.71 (diluted) in 2002, compared with EUR 0.47 (basic) and EUR 0.46 (diluted) in
2001.
At December 31, 2002, net-debt-to-equity ratio (gearing) was -61% (-41% at the
end of 2001). Total capital expenditures in 2002 amounted to EUR 432 million
(EUR 1 041 million in 2001).
At the end of 2002, outstanding long-term loans to customers totaled EUR 1 056
million (compared with EUR 1 128 in 2001), while guarantees given on behalf of
customers totaled EUR 91 million (EUR 127 million). In addition, Nokia had
financing commitments totaling EUR 857 million (EUR 2 955 million) at the end of
2002. Of the total outstanding and committed customer financing of EUR 2 004
million (EUR 4 210 million), EUR 1 573 million (EUR 3 607 million) related to 3G
networks.
Global Reach
In 2002, Europe accounted for 54% of Nokia's net sales (49% in 2001), the
Americas 22% (25%) and Asia-Pacific 24% (26%). The 10 largest markets were US,
UK, China, Germany, Italy, France, UAE, Thailand, Brazil and Poland together
representing 60% of total sales.
Research and development
In 2002, Nokia continued to invest in its worldwide research and development
network and co-operation. At year-end, Nokia had 19 579 R&D employees,
approximately 38% of Nokia's total personnel. Nokia has R&D centers in 14
countries. Investments in R&D increased by 2% (16% in 2001) and totalled EUR 3
052 million (EUR 2 985 million in 2001), representing 10.2% of net sales (9.6%
of net sales in 2001).
Joint Initiatives
Open Mobile Alliance
As the mobile industry evolves into new applications and services, co-operation
among industry players has intensified, facilitating the faster adoption of
mobile services as well as market growth for the entire mobile industry. Nokia,
an active promoter of the Open Mobile Architecture initiative, launched in
November 2001, was a founding member of the Open Mobile Alliance, which
naturally evolved from this. Since its inception in June 2002, the Open Mobile
Alliance has rapidly expanded from around 180 members to include more than 300
companies, representing leading mobile operators, device and network suppliers,
IT companies and content providers.
People
The average number of personnel for 2002 was 52 714 (57 716 for 2001). At the
end of 2002, Nokia employed 51 748 people worldwide (53 849 at year-end 2001).
In 2002, Nokia's personnel decreased by a total of 2 101 employees (decrease of
6 440 in 2001).
Employee Value Proposition
In a move to further attract, engage and retain a skilled workforce, Nokia this
year developed an employee value proposition framework. The adaptation and
implementation of this has already started at country levels to reflect and
respond to local employee needs and expectations. The four fundamentals of the
proposition are (1) the Nokia Way and Values, (2) performance-based rewarding,
(3) professional and personal growth, and (4) work-life balance.
Corporate Responsibility
During 2002, Nokia made clear progress in the area of corporate responsibility.
Developments included the expansion of our global community involvement program
(Make a Connection) to 12 countries, reaching over one million people; the
introduction of a company-wide diversity program aimed at preventing
discrimination and increasing the productivity and innovation of teams; and
further development and increased transparency in our product life-cycle
management (related to our work in design for environment, supplier network
management, manufacturing and end-of-life practices).
Nokia is actively participating in a number of international initiatives, such
as those of Global Compact, UN ICT Task Force, International Youth Foundation,
World Business Council for Sustainable Development and WWF. As a result of our
performance in economic, environmental and social issues, and increased
transparency in reporting, Nokia was again included in Socially Responsible
Investment (SRI) benchmarks, such as Dow Jones Sustainability Indexes and the
FTSE4Good.
In 2002, Nokia was named as the top stock held by SRI funds in Europe, according
to an analysis of European SRI funds by the Sustainable Investment Research
International Group (SiRi), a coalition of 12 national SRI research bodies.
NOKIA MOBILE PHONES IN 2002
Nokia Mobile Phones continued to renew its industry-leading product line-up,
launching a record 34 new products during 2002, incorporating color, imaging,
multimedia, mobile games and polyphonic ring tones. Of the total new phones
launched, 14 had color screens and multimedia capability. This attests to the
growing share of feature-rich phones offering advanced mobile services in the
company's product portfolio.
During the year, Nokia launched its first WCDMA mobile phone, the Nokia 6650,
which began deliveries to operators for testing in October 2002. The company
also commenced shipments of its first CDMA2000 1X mobile phones in the
Americas. These included the Nokia 6370, the Nokia 6385, the Nokia 3585, and the
Nokia 8280.
In imaging, Nokia began shipping its iconic camera phone, the Nokia 7650,
expanding the scope of the mobile market from voice to visual communications.
Feedback from customers and users across the board has been extremely positive.
In the enterprise segment, the company expanded its product offering from the
Nokia Communicator 9200 series to include the Nokia 6800 messaging device, with
full QWERTY keypad optimized for personal and enterprise mobile e-mail.
In entertainment, Nokia announced it would bring mobility to gaming by offering
console quality games for its new mobile game deck device category. Under a
collaboration agreement with world leading games publisher, Sega, the two
companies will develop games for the new Nokia N-GageTM mobile game deck, which
will run on the Nokia Series 60 platform and the Symbian operating system.
For the full year 2002, Nokia volumes reached a record level of 152 million
units, representing faster than market growth of 9%, compared with 2001. Backed
by Nokia's ongoing product leadership and user brand preference, Nokia has again
increased its market share for the fifth consecutive year reaching about 38% for
the full year 2002, bringing the company closer to its target of 40%.
During the year, Nokia Mobile Phones took steps to accelerate growth and enhance
both agility and scale benefits with the introduction of a new operational
structure. From May 1, nine new business units were each made responsible for
product and business development within a defined market segment. This allowed
Nokia to optimize its activities in these vertically-focused areas, while
continuing to achieve broad economies of scale from horizontal functions such as
application software development and the company's market-leading demand-supply
network.
NOKIA NETWORKS IN 2002
During the year, Nokia Networks signed 20 GSM network deals in Asia, China,
Europe and the US, including three new customers.
Mobile Multimedia Messaging Services (MMS) became a reality in 2002, with its
rapid implementation into most GSM operator networks. By year-end, Nokia
Networks had delivered MMS solutions to well over 40 operators.
WCDMA 3G technology implementation moved to pre-commercial and commercial phase
towards the end of 2002. Nokia signed 10 new 3G deals in Austria, Belgium,
Germany, Ireland, Japan, the UK and Taiwan. In September, Nokia became the first
vendor to commence volume deliveries of EDGE hardware across all major GSM bands
and in all continents.
In broadband access, Nokia signed nine new contracts in 2002, and launched the
Nokia D500 next generation multiservice broadband access platform for the US and
ETSI markets.
The company also further strengthened its GSM/EDGE/WCDMA product family with
several new products and solutions. Key launches included a high-availability
server platform for use in All-IP mobility networks, and the Nokia LTX, a linear
transceiver product family of base station modules that support the definition
of Open IP Base Station Architecture.
During the year, Nokia took measures to align its operations to better reflect
current market capacity and conditions, reducing the number of employees in its
delivery and maintenance services as well as in production. Nokia also
streamlined its professional mobile radio unit to reflect the slower than
expected take-off of this market.
NOKIA VENTURES ORGANIZATION IN 2002
Despite overall flat IT spending and slow growth in the corporate network
security market throughout 2002, Nokia Internet Communications maintained the
same level of sales and market share in the enterprise firewall/VPN appliance
segment as the previous year, as well as significantly improving its operational
efficiency.
Highlights for the year include the introduction of a record number of new
products and solutions that both expand Nokia's network security appliance
portfolio and respond to emerging market opportunities. Extending mobility to
enterprise workforces, protecting corporate e-mail content and providing
firewall/VPN benefits to remote offices were promising growth areas addressed
with new product offerings from Nokia. To help foster the creation of new
security applications to complement Nokia's own solutions, the Nokia Security
Developers Alliance was launched in July. Looking forward to 2003, Nokia
Internet Communications remains committed to building a leading position in the
corporate network security market and extending mobility to enterprises.
For Nokia Home Communications, sales in 2002 clearly declined as the unit began
a migration towards emerging horizontal markets with the launch of new types of
terminals focused on horizontal terrestrial and satellite markets, providing
digital viewers access to a broad range of digital services. Products, such as
the Nokia Mediamaster 230 S, introduced Bluetooth-enabled interoperability to
the home environment in the second half of the year.
CHANGES IN SHARE CAPITAL
In 2002, Nokia's share capital increased by EUR 3 022 621.20 as a result of the
issue of 50 377 020 new shares upon exercise of warrants and stock options
issued to key personnel in 1997 and 1999.
On December 31, 2002, Nokia Group companies owned 1 145 621 Nokia shares. The
shares had an aggregate nominal value of EUR 68 737.26 representing 0.02% of the
share capital of the company and the total voting rights.
The total number of shares at December 31, 2002 was 4 787 907 141. As a result
of the new share issues, Nokia received a total of EUR 162 827 165.74 in
additional shareholders' equity in 2002. At December 31, 2002, Nokia's share
capital was EUR 287 274 428.46.
PARENT COMPANY
Effective July 1, Nextrom Holding S.A., a publicly listed corporation organized
under the laws of Switzerland, became a subsidiary of Nokia Corporation.
OUTLOOK
Nokia's objective is to take and maintain a leading role in creating
communications products and services that enrich the daily lives of people and
enable enterprises to prosper. The company strives to keep a clear focus on
human needs, managing risks and building reputation, integrating all stakeholder
expectations into its business decision making.
In 2002, Nokia confirmed its ability to perform well in a challenging
environment, translating core strengths of leading brand, excellence in
execution and continuous product renewal into strong profitability. Going into
2003, the company expects market conditions to remain challenging, but will
continue to build on Nokia's industry-leading position, seeking to achieve high
profitability as well as to grow market share in its two main businesses.
As market leader and a global company, Nokia takes its responsibilities
seriously. Sound company ethics makes business sense by helping minimize risk,
ensuring legal compliance, and building reputation amongst stakeholders. By
conducting business in a responsible way, Nokia can make a significant
contribution to sustainable development, at the same time building a strong
foundation for economic growth.
DIVIDEND
Nokia's Board of Directors will propose a dividend of EUR 0.28 per share in
respect of 2002.
CONSOLIDATED PROFIT AND LOSS ACCOUNT, IAS, EUR million (audited)
Reported Reported
1-12/02 1-12/01
Net sales 30,016 31,191
Cost of sales -18,278 -19,787
Research and development expenses -3,052 -2,985
Selling, general and administrative expenses -3,239 -3,523
Customer finance impairment charges -279 -714
Impairment of goodwill -182 -518
Amortization of goodwill -206 -302
Operating profit 4,780 3,362
Share of results of associated companies -19 -12
Financial income and expenses 156 125
Profit before tax and minority interests 4,917 3,475
Tax -1,484 -1,192
Minority interests -52 -83
Net profit 3,381 2,200
Earnings per share, EUR
Basic 0.71 0.47
Diluted 0.71 0.46
Average number of shares (1,000 shares)
Basic 4,751,110 4,702,852
Diluted 4,788,042 4,787,219
Depreciation and amortization, total 1,311 1,430
CONSOLIDATED BALANCE SHEET, IAS, EUR million (audited)
31.12.2002 31.12.2001
Fixed assets and other non-current assets
Capitalized development costs 1,072 893
Goodwill 476 854
Other intangible assets 192 237
Property, plant and equipment 1,874 2,514
Investments in associated companies 49 49
Available-for-sale investments 238 399
Deferred tax assets 731 832
Long-term loans receivable 1,056 1,128
Other non-current assets 54 6
5,742 6,912
Current assets
Inventories 1,277 1,788
Accounts receivable 5,385 5,719
Prepaid expenses and accrued income 1,156 1,480
Short-term loans receivable 416 403
Available-for-sale investments 7,855 4,271
Bank and cash 1,496 1,854
17,585 15,515
Total assets 23,327 22,427
SHAREHOLDERS' EQUITY AND LIABILITIES
Shareholders' equity
Share capital 287 284
Share issue premium 2,225 2,060
Treasury shares -20 -21
Translation differences 135 326
Fair value and other reserves -7 20
Retained earnings 11,661 9,536
14,281 12,205
Minority interests 173 196
Long-term liabilities
Long-term interest-bearing liabilities 187 207
Deferred tax liabilities 207 177
Other long-term liabilities 67 76
461 460
Current liabilities
Short-term borrowings 377 831
Current portion of long-term debt - -
Accounts payable 2,954 3,074
Accrued expenses 2,611 3,477
Provisions 2,470 2,184
8,412 9,566
Total shareholders' equity and liabilities 23,327 22,427
Interest-bearing liabilities 564 1,038
Shareholders' equity per share, EUR 2.98 2.58
Number of shares (1,000 shares) * 4,786,762 4,736,302
* Shares owned by Group companies are excluded
CONSOLIDATED CASH FLOW STATEMENT, IAS, EUR million (audited)
1-12/2002 1-12/2001
Cash flow from operating activities
Net profit 3,381 2,200
Adjustments, total 3,151 4,132
Net profit before change in net working capital 6,532 6,332
Change in net working capital 955 978
Cash generated from operations 7,487 7,310
Interest received 229 226
Interest paid -94 -155
Other financial income and expenses 139 99
Income taxes paid -1,947 -933
Net cash from operating activities 5,814 6,547
Cash flow from investing activities
Acquisition of Group companies, net of acquired cash -10 -131
Purchase of non-current available-for-sale investments -99 -323
Additions in capitalized development costs -418 -431
Long-term loans made to customers -563 -1,129
Long-term loans repaid by customers 314 -
Proceeds from (+), payment (-) of other long-term receivables -32 84
Proceeds from (+), payment (-) of short-term loan receivables -85 -114
Capital expenditures -432 -1,041
Proceeds from disposal of Group companies,
net of disposed cash 93 -
Proceeds from sale of non-current available-for-sale 162 204
investments
Proceeds from sale of fixed assets 177 175
Dividends received 25 27
Net cash used in investing activities -868 -2,679
Cash flow from financing activities
Proceeds from share issue 163 77
Purchase of treasury shares -17 -21
Capital investment by minority shareholders 26 4
Proceeds from long-term borrowings 100 102
Repayment of long-term borrowings -98 -59
Proceeds from (+), payment of (-) short-term borrowings -406 -602
Dividends paid -1,348 -1,396
Net cash used in financing activities -1,580 -1,895
Foreign exchange impact on cash -163 -43
Net increase in cash and cash equivalents 3,203 1,930
Cash and cash equivalents at beginning of period 6,125 4,183
Cash and cash equivalents at end of period 9,328 6,113
Change in net fair value of current available-for-sale
investments 23 12
As reported on balance sheet 9,351 6,125
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 (audited)
Share Share Treasury Translation Fair value Retained Total
capital issue shares differences and other earnings
premium reserves
Balance at December 31, 2000 282 1,695 -157 347 - 8,641 10,808
Effect of adopting IAS 39 -56 -56
Balance at January 1, 2001, 282 1,695 -157 347 -56 8,641 10,752
restated
Share issue 2 407 409
Acquisition of treasury shares -21 -21
Reissuance of treasury shares -52 157 105
Stock options issued on 20 20
acquisitions
Stock options exercised
related to acquisitions -10 -10
Dividend -1,314 -1,314
Translation differences 65 65
Net investment hedge gains/ -86 -86
(losses)
Cash flow hedges 76 76
Available-for-sale investments 0 0
Other increase/decrease, net 9 9
Net profit 2,200 2,200
Balance at December 31, 2001 284 2,060 -21 326 20 9,536 12,205
Share issue 3 160 163
Acquisition of treasury shares -17 -17
Reissuance of treasury shares 18 18
Stock options exercised
related to acquisitions -17 -17
Tax benefit on stock options 22 22
exercised
Dividend -1,279 -1,279
Translation differences -285 -285
Net investment hedge gains/ 94 94
(losses)
Cash flow hedges 60 60
Available-for-sale investments -87 -87
Other increase/decrease, net 23 23
Net profit 3,381 3,381
Balance at December 31, 2002 287 2,225 -20 135 -7 11,661 14,281
COMMITMENTS AND CONTINGENCIES, EUR million (audited)
GROUP
31.12.2002 31.12.2001
Collateral for own commitments
Property under mortgages 91 18
Assets pledged 13 4
Collateral given on behalf of other
companies
Securities pledged 34 33
Contingent liabilities on behalf of Group companies
Other guarantees 339 505
Contingent liabilities on behalf of other
companies
Guarantees for loans 57 95
Leasing obligations 704 1,246
NOTIONAL AMOUNTS OF DERIVATIVE FINANCIAL INSTRUMENTS, EUR million 1)
(audited)
31.12.2002 31.12.2001
Foreign exchange forward contracts 2) 3) 11,118 20,978
Currency options bought 1,408 1,328
Currency options sold 1,206 1,209
Cash settled equity options 4) 209 -
Cash settled equity swaps 4) 12 182
1) The notional amounts of derivatives summarized here do not represent amounts exchanged by the
parties and, thus are not a measure of the exposure of Nokia caused by its use of derivatives.
2) Notional amounts outstanding include positions, which have been closed off.
3) As at December 31, 2002 notional amounts include contracts amounting to EUR 2.0 billion used to
hedge the shareholders' equity of foreign subsidiaries (December 31, 2001 EUR 1.1 billion).
4) Cash settled equity swaps and options can be used to hedge risks relating to incentive programs and
investment activities.
Closing rate, 1 EUR = 1.025 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 replacement market and the Company's success in
the 3G market; 2) demand for products and services; 3) market acceptance of new
products and service introductions; 4) the availability of new products and
services by operators; 5) weakened economic conditions in many of the Company's
principal markets; 6) pricing pressures; 7) intensity of competition; 8) the
impact of changes in technology; 9) consolidation or other structural changes in
the mobile communications market; 10) the success and financial condition of the
Company's partners, suppliers and customers; 11) the management of the Company's
customer financing exposure; 12) the continued success of product development by
the Company; 13) the continued success of cost-efficient, effective and flexible
manufacturing by the Company; 14) the ability of the Company to source component
production and R&D without interruption and at acceptable prices; 15) inventory
management risks resulting from shifts in market demand; 16) fluctuations in
exchange rates, including, in particular, the fluctuations in the euro exchange
rate between the US dollar and the Japanese yen; 17) impact of changes in
government policies, laws or regulations; 18) the risk factors specified on
pages 10 to 17 of the Company's Form 20-F for the year ended December 31, 2001.
NOKIA
Helsinki - January 23, 2003
For more information:
Lauri Kivinen, Corporate Communications, tel. +358 7180 34495
Ulla James, Investor Relations, tel. +1 972 894 4880
Antti Raikkonen, Investor Relations, tel. +358 7180 34290
www.nokia.com
- Nokia will report 1Q results on April 17, 2003 and plans a mid-quarter update
on March 11, 2003.
- Results announcements for 2Q and 3Q 2003 are planned for July 17 and October
16, respectively.
- The Annual General meeting will be held on March 27, 2003.
This information is provided by RNS
The company news service from the London Stock Exchange
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