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Nokia Corporation (LSE:0HAF) has released its financial results for the second quarter and half-year of 2024, showcasing a dynamic landscape characterized by strategic repositioning and operational resilience amid market challenges.
Financial Performance Overview
In Q2 2024, Nokia reported a decline in net sales by 18% year-over-year in constant currency, with a reported decline of the same magnitude. This drop was primarily attributed to a particularly strong performance in the Indian market during the same period last year. Notably, Nokia has classified its Submarine Networks segment as discontinued operations, reflecting a strategic pivot away from this area.
Margin Improvements and Operational Efficiencies
Despite the revenue challenges, Nokia demonstrated resilience in its operational margins. The comparable gross margin for Q2 increased by 450 basis points year-over-year to 44.7%, while the reported gross margin saw a 380 basis points increase to 43.3%. This improvement was largely driven by the Mobile Networks division, benefiting partly from the resolution of a significant contract negotiation.
However, the comparable operating margin decreased by 190 basis points year-over-year to 9.5%, though the reported figure showed a slight increase to 9.7%. This divergence was attributed to lower net sales coverage of operating expenses, which overshadowed the positive impact of the aforementioned contract resolution in Mobile Networks.
Earnings Per Share and Cash Flow
Earnings per share (EPS) figures for Q2 2024 reflected a mixed picture. Nokia reported a comparable diluted EPS of EUR 0.06, while the reported diluted EPS stood at negative EUR 0.03. The reported EPS was notably affected by a non-cash impairment charge of EUR 514 million related to the Submarine Networks division, now treated as discontinued operations.
On the cash flow front, Nokia generated a free cash flow of EUR 0.4 billion in Q2 2024, contributing to a solid net cash balance of EUR 5.5 billion. Looking ahead, Nokia plans to accelerate its buyback program, underscoring its commitment to returning value to shareholders amidst the challenging market conditions.
Dividend Distribution
Authorized by the Annual General Meeting on 3 April 2024, the Board may distribute up to EUR 0.13 per share for the 2023 financial year, in up to four instalments tied to quarterly results, unless justified otherwise. On 18 July 2024, a dividend of EUR 0.03 per share was approved, payable on 1 August 2024, with the record date on 23 July 2024.
