Nokia plans to lift its financial guidance for this year at the end of the month as the Finnish telecoms equipment manufacturer continues its turnround from early struggles with 5G networks.
Shares in the group rose 6 per cent on Tuesday morning to their highest level in two years after it said it had seen “continued strength” in the second quarter, “improving its expectations for the full year”.
In an unusual move Nokia did not outline how or which parts of its guidance for 2021 were likely to be improved but said it would give more details with its second-quarter results on July 29.
Chief executive Pekka Lundmark said Nokia was making good progress on its new strategy, following the announcement of up to 10,000 job cuts this spring.
“Our first-half performance has shown evidence of this in good cost control and also benefited from strength in a number of our end markets. We continue to expect some headwinds in the second half as we have previously highlighted but our performance in the first half provides a good foundation for the full year,” he added.
The Finnish group lost out in the early days of 5G to rivals Huawei and Ericsson after it was caught out by an earlier-than-expected start to the new mobile network technology as it was still digesting its €15.6bn acquisition of Alcatel-Lucent.
Nokia replaced its chief executive and chair last year, bringing in Lundmark — a Nokia veteran — from his former job heading the main Finnish electricity utility Fortum.
The group’s current guidance for this year is for net sales of €20.6bn-€21.8bn, an underlying operating profit margin of 7-10 per cent, positive free cash flow and underlying return on invested capital of 10-15 per cent.
Last year the comparable figures were net sales of €21.8bn, an operating margin of 4 per cent, positive cash flow, with an underlying return on invested capital of 11.9 per cent in the fourth quarter.
Lundmark has said he is willing to invest “whatever it takes to win in 5G” and told the Financial Times in February that he expected 2021 to be a “year of transition” as it sacrificed some profitability to regain technology leadership. Nokia also expected “meaningful headwinds due to market share loss and price erosion in North America”.
Nokia’s shares were at €4.90 on Tuesday, a level they last reached in July 2019, but are below where they were for much of the five years prior to that after the Finnish group sold its mobile phone business and focused on network equipment.
