FILE PHOTO: A cyclist rides past a Nokia logo during the Mobile World Congress in Barcelona, Spain February 25, 2018. REUTERS/Yves Herman
February 2, 2022
By Essi Lehto and Supantha Mukherjee
HELSINKI (Reuters) – After three quarters of growth, Finland’s Nokia is expected to round 2021 off with another set of strong results, which investors hope will lead to the resumption of dividends and a bolder outlook for this year’s revenue.
Under CEO Pekka Lundmark, who took the helm at Nokia 18 months ago, the telecoms network supplier has gained ground on rivals such as Sweden’s Ericsson in attracting customers for its 5G equipment.
“The reset phase of the strategy is done with and now it could slowly move to steady growth,” Inderes analyst Atte Riikola said, adding that Nokia’s recovery has benefited from a faster-than-expected rise in demand.
As a result, shareholders who have enjoyed a 42% rise in the stock’s price in the last 12 months, could soon see a resumption of cash payments, which were suspended in 2019.
“Nokia’s turnaround journey has reached a stage where dividend taps can be reopened,” Riikola said.
While cost cuts have boosted Nokia’s profit margin, revenue has been under pressure due to the loss in 2020 of a multi-billion dollar contract with Verizon and pandemic-linked supply chain issues that hampered production.
Still, the suspension of dividends and cost cuts over the last two years, to sharpen its focus on research to match the equipment made by Ericsson and Huawei, has led the company to regain lost market share.
“Nokia’s turnaround last year was clearly faster than originally expected,” Riikola said. “One could say that they are starting to have a competitive offering again.”
Nokia last month said it expected comparable operating margins to be 11-13.5% in 2022, higher than in 2021, but did not give an estimate for annual sales.
The focus is now on the revenue and margin outlook beyond this year, OP analyst Kimmo Stenvall told Reuters.
“Possible challenges seem to mainly impact the revenue, it looks like Nokia can handle costs quite well because it has given a bold margin guidance,” Stenvall said referring to the component shortage and increased production costs.
Inderes expects Nokia’s revenue to be 22.9 billion euros in 2022 and 23.6 billion in 2023, with a comparable operating margin of 13.9% for the latter of those years, above Nokia’s earlier guidance of 10-13% in 2023.
(Reporting by Essi Lehto in Helsinki and Supantha Mukherjee in Stockholm; Editing by Terje Solsvik and Bernadette Baum)