Nokia reported a 32% drop in second-quarter operating profit due to weak demand for 5G telecoms equipment, but the Finnish company hopes to recover by the end of 2024 on the back of orders from North America.
Image source: nokia.com
Profit, excluding certain items of expenses and the revaluation of assets to make it comparable with last year’s results, fell to €423 million – in the second quarter of last year it was €619 million. Nokia and its rival Ericsson faced a drop in demand for telecommunications equipment and announced about layoffs that affected thousands of employees. Net sales fell by 18% year-on-year due to the slowdown in investment in 5G technology in India, while a year earlier they were growing rapidly. Sales and earnings excluding one-off gains fell short of forecasts, Jefferies analysts said, with Nokia shares down 8% as of this morning.
The recovery in sales has taken longer than previously expected, Nokia CEO Pekka Lundmark said, but he expects net sales to rise in the second half of the year, a forecast Ericsson gave last week. The head of the Finnish company pointed to the recovery of the fiber optic market in the United States and the country’s $42 billion program to expand citizens’ access to high-speed broadband Internet.
Nokia and Ericsson can also increase their financial performance at the expense of the European market, where Chinese companies continue to lose their positions – it recently became known that Germany has decided to completely abandon Huawei and ZTE 5G equipment by 2029. Nokia is still studying the possible effect of this decision, Mr. Lundmark said – the company did not change its annual forecast for comparable operating profit.