SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 6-K

 

Report of Foreign Private Issuer

Pursuant to Rule 13a -16 or 15d -16 of

the Securities Exchange Act of 1934 

 

Report on Form 6-K dated October 28, 2021

(Commission File No. 1-13202)

 

Nokia Corporation

Karakaari 7A

FI-02610 Espoo

Finland

(Name and address of registrant’s principal executive office)

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
     
Form 20-Fx   Form 40-F: ¨
     
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
 
Yes: ¨   Nox
     
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):
 
Yes: ¨   Nox
     
Indicate by check mark whether the registrant by furnishing the information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
     
Yes: ¨   Nox

 

 

 

 

 

 

Enclosures:

 

· Stock Exchange Release: Nokia Corporation Financial Report for Q3 2021
     
  · Report attached to stock exchange release: Nokia Interim Report for Q3 2021

  

 

  STOCK EXCHANGE RELEASE     1 (6)

28 October 2021                                      

 

Nokia Corporation 

Interim report
28 October 2021 at 08:00 EEST

 

Nokia Corporation Financial Report for Q3 2021

 

Strong profitability and cash generation

 

· Constant currency sales growth of 2% constrained by expected supply chain and Mobile Networks North America headwinds

 

· Strong sales growth in Network Infrastructure (+6% y-o-y constant currency) and Cloud & Network Services (+12%)

 

· Comparable gross margin of 40.8% (reported 40.7%), reflecting continued strong execution across the business

 

· Mobile Networks comparable gross margin of 37.8% (+220 bps y-o-y) showed better cost competitiveness

 

· Comparable operating margin of 11.7% (reported 9.3%), new operating model bringing strong financial accountability

 

· Comparable diluted EPS of EUR 0.08; reported diluted EPS of EUR 0.06

 

· Strong free cash flow generation of €0.7bn

 

· Launched new FP5 IP routing silicon which sets new industry benchmarks particularly on power efficiency

 

· Continuing to manage supply chain constraints but challenges are increasing into Q4

 

· Reiterating our full year guidance for net sales of €21.7bn – 22.7bn and comparable operating margin of 10-12% and now expect to be towards upper-end of the margin range considering continued strong performance

 

All financial metrics above refer to Q3 2021

 

This is a summary of the Nokia Corporation Financial Report for Q3 published today. Nokia only publishes a summary of its financial reports in stock exchange releases. The summary focuses on Nokia Group's financial information as well as on Nokia's outlook. The detailed, segment-level discussion will be available in the complete financial report hosted at www.nokia.com/financials. A video interview summarizing the key points of our Q3 results will also be published on the website. Investors should not solely rely on summaries of Nokia's financial reports, but should also review the complete report with tables.

 

 

  STOCK EXCHANGE RELEASE     2 (6)

28 October 2021                                      

  

PEKKA LUNDMARK, PRESIDENT AND CEO, ON Q3 2021 RESULTS

 

We delivered another great quarter driven by our increased investments in technology leadership and strong market demand. The highlight of the quarter was the launch of our next generation FP5 IP routing silicon – delivering up to three times more capacity while reducing power consumption by up to 75% per bit compared to previous generation. This will help reduce the carbon footprint of both Nokia and our customers, while also helping customers to manage their operating expenses.

 

The third quarter saw us achieve 2% constant currency net sales growth despite the impact of earlier communicated headwinds in North America for Mobile Networks and global supply chain constraints. These headwinds were offset by strong growth in Network Infrastructure against a tough year-on-year comparison and by Cloud and Network Services achieving double-digit growth. Our comparable operating margin for the quarter was 11.7%, which is a further testament to the accountability and financial discipline that our new operating model is driving through the organization.

 

We now have over 380 private wireless customers and the business continues to grow strongly. We are further increasing our investment to ensure we maintain the lead we have built with the industry’s most complete offering.

 

Overall, I am pleased with our strong financial performance in 2021 so far. We continue to expect seasonality to be less pronounced this year than previously and are reiterating our full year 2021 outlook. Considering our continued strength, we now expect to be towards the upper-end of our comparable operating margin range. As we look ahead, we believe we are well positioned to capitalize on strong demand in our end markets through strengthened technology leadership and improved cost competitiveness. However, the uncertainty around the global semiconductor market limits our visibility into Q4 and 2022. We are working closely not only with our suppliers to ensure component availability but also with our customers to ensure we can meet their needs and mitigate the unprecedented component cost inflation our industry faces. Coupled with the one-offs we’ve benefited from this year, this may limit our margin expansion potential in 2022.

 

 

  STOCK EXCHANGE RELEASE     3 (6)

28 October 2021                                      

 

 

FINANCIAL RESULTS

 

EUR million (except for EPS in EUR)   Q3'21   Q3'20   YoY 
change
  Constant 
currency 
YoY 
change
  Q1–
Q3'21
  Q1–
Q3'20
  YoY 
change
  Constant 
currency 
YoY 
change
 
Reported results                                  
Net sales   5 399   5 294   2 % 2 % 15 788   15 299   3 % 6 %
Gross margin %1   40.7 % 37.1 % 360 bps     39.9 % 36.9 % 300 bps    
Research and development expenses1   (1 036 ) (923 ) 12 %     (3 096 ) (2 942 ) 5 %    
Selling, general and administrative expenses1   (674 ) (631 ) 7 %     (2 034 ) (2 121 ) (4 )%    
Operating profit   502   350   43 %     1 418   444   219 %    
Operating margin %   9.3 % 6.6 % 270 bps     9.0 % 2.9 % 610 bps    
Profit for the period   351   197   78 %     965   180   436 %    
EPS, diluted   0.06   0.03   100 %   0.17   0.03   467 %    
Net cash and current financial investments   4 300   1 869   130 %     4 300   1 869   130 %    
Comparable results                                  
Net sales   5 399   5 294   2 % 2 % 15 788   15 301   3 % 6 %
Gross margin %   40.8 % 37.4 % 340 bps     40.5 % 37.8 % 270 bps    
Research and development expenses   (1 007 ) (880 ) 14 %     (2 992 ) (2 808 ) 7 %    
Selling, general and administrative expenses   (583 ) (558 ) 4 %     (1 719 ) (1 820 ) (6 )%    
Operating profit   633   486   30 %     1 867   1 025   82 %    
Operating margin %   11.7 % 9.2 % 250 bps     11.8 % 6.7 % 510 bps    
Profit for the period   463   305   52 %     1 377   653   111 %    
EPS, diluted   0.08   0.05   60 %     0.24   0.11   118 %    
ROIC2   20.2 % 11.6 % 855 bps                    

 

1 In Q4 2020, Nokia reclassified certain items of income and expenses from other operating income and expenses to the functions. The comparative reported results for Q3’20 and Q1–Q3'20 have been recast accordingly. Refer to Note 1, Basis of preparation, in the Financial statement information section included in Nokia Corporation Financial Report for Q3 2021 for details.

2 Comparable ROIC = Comparable operating profit after tax, last four quarters / invested capital, average of last five quarters’ ending balances. Refer to Note 10, Performance measures, in the Financial statement information section included in Nokia Corporation Financial Report for Q3 2021 for details.

 

Reconciliation of reported operating profit to comparable operating profit        

 

EUR million   Q3'21     Q3'20     YoY change     Q1–Q3'21     Q1–Q3'20     YoY
change
 
Reported operating profit     502       350       43 %     1 418       444       219 %
Amortization of acquired intangible assets     99       101               293       308          
Restructuring and associated charges     34       120               211       337          
Impairment of assets, net of impairment reversals     (1 )     5               32       25          
Settlement of legal disputes     0       0               (80 )     0          
Gain on defined benefit plan amendment     0       (90 )             0       (90 )        
Other, net     (1 )     0               (7 )     1          
Comparable operating profit     633       486       30 %     1 867       1 025       82 %

 

OUTLOOK

 

    Full year 2021   Full year 2023
Net sales1   EUR 21.7 billion to EUR 22.7 billion   Grow faster than the market
Comparable operating margin2   10 to 12%   10 to 13%
Free cash flow3   Clearly positive   Clearly positive
Comparable ROIC2,4   17 to 21%   15 to 20%

 

1 Assuming actual currency rates until Sept 2021 and end of Sept EUR/USD rate of 1.16 continues in the remainder of 2021 (adjusted from actual until June and EUR/USD rate of 1.19 in the remainder of 2021).

2 Comparable measures exclude intangible asset amortization and other purchase price fair value adjustments, goodwill impairments, restructuring related charges and certain other items affecting comparability. Refer to Note 10, Performance measures, in the Financial statement information section included in Nokia Corporation Financial Report for Q3 2021 for details.

3 Free cash flow = net cash from/(used in) operating activities - capital expenditures + proceeds from sale of property, plant and equipment and intangible assets – purchase of non-current financial investments + proceeds from sale of non-current financial investments.

4 Comparable ROIC = comparable operating profit after tax, last four quarters / invested capital, average of last five quarters’ ending balances. Refer to Note 10, Performance measures, in the Financial statement information section included in Nokia Corporation Financial Report for Q3 2021 for details.

 

 

  STOCK EXCHANGE RELEASE     4 (6)

28 October 2021                                      

 

OUTLOOK ASSUMPTIONS

 

· Nokia’s outlook assumptions for the comparable operating margin of each business group in 2021 and 2023 are provided below:

 

    Full year 2021   Full year 2023
Mobile Networks   4 to 7%   5 to 8%
Network Infrastructure   8 to 11%   9 to 12%
Cloud and Network Services   3 to 6%   8 to 11%
Nokia Technologies   >75%   >75%

 

· We maintain our expectation for Nokia Technologies to deliver a slight improvement in comparable operating profit in full year 2021, relative to full year 2020, and stable performance over the longer-term;
· Group Common and Other primarily consists of support function costs. We expect the net negative impact of Group Common and Other to be between EUR 150 and 200 million in 2021 and approximately EUR 200 million over the longer-term. The update to our 2021 expectation largely reflects the year-to-date impact from Nokia’s venture fund investments (update);
· In full year 2021, Nokia expects the free cash flow performance of Nokia Technologies to be approximately EUR 600 million lower than its operating profit, primarily due to prepayments we received from certain licensees in previous years;
· Comparable financial income and expenses are expected to be an expense of approximately EUR 200 million in full year 2021 and EUR 250 million over the longer-term;
· Comparable income tax expenses are expected to be approximately EUR 450 million in full year 2021 and over the longer-term, subject to regional profit mix, net sales subject to withholding taxes and the timing of patent licensing cash flow. Over the longer-term, there is some uncertainty in forecasting income tax expenses, as they are also subject to changes in tax legislation, including potential tax reform in the U.S. and the OECD Pillar initiatives (update);
· Cash outflows related to income taxes are expected to be approximately EUR 350 million in full year 2021 and over the longer-term until our US or Finnish deferred tax assets are fully utilized, subject to regional profit mix, net sales subject to withholding taxes and the timing of patent licensing cash flow. Over the longer-term, there is some uncertainty in forecasting cash taxes, as they are also subject to changes in tax legislation, including potential tax reform in the U.S. and the OECD Pillar initiatives (update);
· Capital expenditures are expected to be approximately EUR 600 million over the longer-term; 2021 slightly below that level and with some variation in future years around that level (update); and
· Rule of thumb related to currency fluctuations: Assuming our current mix of net sales and total costs (refer to Note 1, Basis of Preparation, in the Financial statement information section included in Nokia Corporation Financial Report for Q3 2021 for details), we expect that a 10% increase in the EUR/USD exchange rate would have an impact of approximately negative 4 to 5% on net sales and an approximately neutral impact on operating profit.

 

 

  STOCK EXCHANGE RELEASE     5 (6)

28 October 2021                                      

 

RISK FACTORS

 

Nokia and its business are exposed to a number of risks and uncertainties which include but are not limited to:

 

· Competitive intensity, which is particularly impacting Mobile Networks and is expected to continue at a high level in full year 2021, as some competitors seek to take share in the early stages of 5G;
· Our ability to accelerate our product roadmaps and cost competitiveness through additional 5G investments in full year 2021, thereby enabling us to drive product cost reductions and maintain the necessary scale to be competitive;
· Some customers are reassessing their vendors in light of security concerns, creating near-term pressure to invest in order to secure long-term benefits;
· Developments in North America following the conclusion of the C-band auction, including the potential for temporary capital expenditure constraints or the acceleration of 5G deployments;
· The scope and duration of the COVID-19 impact, particularly in certain countries, including India, where the pandemic has worsened, and the pace and shape of the economic recovery following the pandemic;
· The disturbance in the global supply chain;
· Accelerating inflation;
· Other macroeconomic, industry and competitive dynamics;
· Our ability to procure certain standard components and the costs thereof, such as semiconductors;
· The timing of completions and acceptances of certain projects;
· Our product and regional mix;
· The timing and value of new and existing patent licensing agreements with smartphone vendors, automotive companies, consumer electronics companies and other licensees;
· Results in brand and technology licensing; costs to protect and enforce our intellectual property rights; and the regulatory landscape for patent licensing;

as well as the risk factors specified under Forward-looking Statements of this release, and our 2020 annual report on Form 20-F published on 4 March 2021 under Operating and financial review and prospects-Risk factors.

 

FORWARD-LOOKING STATEMENTS

 

Certain statements herein that are not historical facts are forward-looking statements. These forward-looking statements reflect Nokia's current expectations and views of future developments and include statements regarding: A) expectations, plans, benefits or outlook related to our strategies, product launches, growth management and operational key performance indicators; B) expectations, plans or benefits related to future performance of our businesses (including the expected impact, timing and duration of the impact of COVID-19 on our businesses, our supply chain and our customers’ businesses) and any future dividends; C) expectations and targets regarding financial performance, cash generation, results, the timing of receivables, operating expenses, taxes, currency exchange rates, hedging, cost savings and inflation, product cost reductions and competitiveness, as well as results of operations including targeted synergies, better commercial management and those results related to market share, prices, net sales, income and margins; D) ability to execute, expectations, plans or benefits related to changes in organizational and operational structure and cash or cost savings arrangements; and E) any statements preceded by or including "continue", “believe”, “commit”, “estimate”, “expect”, “aim”, “influence”, "will” or similar expressions. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control, which could cause our actual results to differ materially from such statements. These statements are based on management’s best assumptions and beliefs in light of the information currently available to them. These forward-looking statements are only predictions based upon our current expectations and views of future events and developments and are subject to risks and uncertainties that are difficult to predict because they relate to events and depend on circumstances that will occur in the future. Factors, including risks and uncertainties that could cause these differences, include those risks and uncertainties identified in the Risk Factors above.

 

 

  STOCK EXCHANGE RELEASE     6 (6)

28 October 2021                                      

 

ANALYST WEBCAST

 

Nokia's video webcast will begin on 28 October 2021 at 11.30 a.m. Finnish time (EEST). A link to the webcast will be available at www.nokia.com/financials. Media representatives can follow the presentation via the link, or alternatively call +1-412-717-9224.

 

About Nokia

 

At Nokia, we create technology that helps the world act together.

 

As a trusted partner for critical networks, we are committed to innovation and technology leadership across mobile, fixed and cloud networks. We create value with intellectual property and long-term research, led by the award-winning Nokia Bell Labs.

 

Adhering to the highest standards of integrity and security, we help build the capabilities needed for a more productive, sustainable and inclusive world.

 

Inquiries:

 

Nokia

Communications

Phone: +358 10 448 4900

Email: press.services@nokia.com

Katja Antila, Head of Media Relations

 

Nokia

Investor Relations

Phone: +358 40 803 4080

Email: investor.relations@nokia.com

 

 

 

 

Summary

 

 

 

Interim Report for Q3 2021

 

Strong profitability and cash generation

 

§ Constant currency sales growth of 2% constrained by expected supply chain and Mobile Networks North America headwinds

 

§ Strong sales growth in Network Infrastructure (+6% y-o-y constant currency) and Cloud & Network Services (+12%)

 

§ Comparable gross margin of 40.8% (reported 40.7%), reflecting continued strong execution across the business

 

§ Mobile Networks comparable gross margin of 37.8% (+220bps y-o-y) showed better cost competitiveness

 

§ Comparable operating margin of 11.7% (reported 9.3%), new operating model bringing strong financial accountability

 

§ Comparable diluted EPS of EUR 0.08; reported diluted EPS of EUR 0.06

 

§ Strong free cash flow generation of €0.7bn

 

§ Launched new FP5 IP routing silicon which sets new industry benchmarks particularly on power efficiency

 

§ Continuing to manage supply chain constraints but challenges are increasing into Q4

 

§ Reiterating our full year guidance for net sales of €21.7bn – 22.7bn and comparable operating margin of 10-12% and now expect to be towards upper-end of the margin range considering continued strong performance

 

All financial metrics above refer to Q3 2021

 

EUR million (except for EPS in EUR)   Q3'21     Q3'20     YoY change     Constant
currency
YoY change
    Q1–Q3'21     Q1–Q3'20     YoY change     Constant
currency
YoY change
 
Reported results                                                                
Net sales     5 399       5 294       2 %     2 %     15 788       15 299       3 %     6 %
Gross margin %1     40.7 %     37.1 %     360 bps             39.9 %     36.9 %     300 bps        
Research and development expenses1     (1 036 )     (923 )     12 %             (3 096 )     (2 942 )     5 %        
Selling, general and administrative expenses1     (674 )     (631 )     7 %             (2 034 )     (2 121 )     (4 )%        
Operating profit     502       350       43 %             1 418       444       219 %        
Operating margin %     9.3 %     6.6 %     270 bps             9.0 %     2.9 %     610 bps        
Profit for the period     351       197       78 %             965       180       436 %        
EPS, diluted     0.06       0.03       100 %             0.17       0.03       467 %        
Net cash and current financial investments     4 300       1 869       130 %             4 300       1 869       130 %        
Comparable results                                                                
Net sales     5 399       5 294       2 %     2 %     15 788       15 301       3 %     6 %
Gross margin %     40.8 %     37.4 %     340 bps             40.5 %     37.8 %     270 bps        
Research and development expenses     (1 007 )     (880 )     14 %             (2 992 )     (2 808 )     7 %        
Selling, general and administrative expenses     (583 )     (558 )     4 %             (1 719 )     (1 820 )     (6 )%        
Operating profit     633       486       30 %             1 867       1 025       82 %        
Operating margin %     11.7 %     9.2 %     250 bps             11.8 %     6.7 %     510 bps        
Profit for the period     463       305       52 %             1 377       653       111 %        
EPS, diluted     0.08       0.05       60 %             0.24       0.11       118 %        
ROIC2     20.2 %     11.6 %     855 bps                                        

 

1 In Q4 2020, Nokia reclassified certain items of income and expenses from other operating income and expenses to the functions. The comparative reported results for Q3’20 and Q1–Q3'20 have been recast accordingly. Refer to Note 1, Basis of preparation, in the Financial statement information section for details.

2 Comparable ROIC = Comparable operating profit after tax, last four quarters / invested capital, average of last five quarters’ ending balances. Refer to Note 10, Performance measures, in the Financial statement information section for details.

 

Reconciliation of reported operating profit to comparable operating profit        

 

EUR million   Q3'21     Q3'20     YoY change     Q1–Q3'21     Q1–Q3'20     YoY change  
Reported operating profit     502       350       43 %     1 418       444       219 %
Amortization of acquired intangible assets     99       101               293       308          
Restructuring and associated charges     34       120               211       337          
Impairment of assets, net of impairment reversals     (1 )     5               32       25          
Settlement of legal disputes     0       0               (80 )     0          
Gain on defined benefit plan amendment     0       (90 )             0       (90 )        
Other, net     (1 )     0               (7 )     1          
Comparable operating profit     633       486       30 %     1 867       1 025       82 %

28 October 2021   1

 

 

Summary

 

 

 

 

 

We delivered another great quarter driven by our increased investments in technology leadership and strong market demand. The highlight of the quarter was the launch of our next generation FP5 IP routing silicon – delivering up to three times more capacity while reducing power consumption by up to 75% per bit compared to previous generation. This will help reduce the carbon footprint of both Nokia and our customers, while also helping customers to manage their operating expenses.

 

The third quarter saw us achieve 2% constant currency net sales growth despite the impact of earlier communicated headwinds in North America for Mobile Networks and global supply chain constraints. These headwinds were offset by strong growth in Network Infrastructure against a tough year-on-year comparison and by Cloud and Network Services achieving double-digit growth. Our comparable operating margin for the quarter was 11.7%, which is a further testament to the accountability and financial discipline that our new operating model is driving through the organization.

 

We now have over 380 private wireless customers and the business continues to grow strongly. We are further increasing our investment to ensure we maintain the lead we have built with the industry’s most complete offering.

 

Overall, I am pleased with our strong financial performance in 2021 so far. We continue to expect seasonality to be less pronounced this year than previously and are reiterating our full year 2021 outlook. Considering our continued strength, we now expect to be towards the upper-end of our comparable operating margin range. As we look ahead, we believe we are well positioned to capitalize on strong demand in our end markets through strengthened technology leadership and improved cost competitiveness. However, the uncertainty around the global semiconductor market limits our visibility into Q4 and 2022. We are working closely not only with our suppliers to ensure component availability but also with our customers to ensure we can meet their needs and mitigate the unprecedented component cost inflation our industry faces. Coupled with the one-offs we’ve benefited from this year, this may limit our margin expansion potential in 2022.

 

28 October 2021   2

 

 

 Outlook

 

 

 

Outlook

 

    Full year 2021   Full year 2023
Net sales1   EUR 21.7 billion to EUR 22.7 billion   Grow faster than the market
Comparable operating margin2   10 to 12%   10 to 13%
Free cash flow3   Clearly positive   Clearly positive
Comparable ROIC2,4   17 to 21%   15 to 20%

 

1 Assuming actual currency rates until Sept 2021 and end of Sept EUR/USD rate of 1.16 continues in the remainder of 2021 (adjusted from actual until June and EUR/USD rate of 1.19 in the remainder of 2021).

2 Comparable measures exclude intangible asset amortization and other purchase price fair value adjustments, goodwill impairments, restructuring related charges and certain other items affecting comparability. Refer to Note 10, Performance measures, in the Financial statement information for details.

3 Free cash flow = net cash from/(used in) operating activities - capital expenditures + proceeds from sale of property, plant and equipment and intangible assets – purchase of non-current financial investments + proceeds from sale of non-current financial investments.

4 Comparable ROIC = comparable operating profit after tax, last four quarters / invested capital, average of last five quarters’ ending balances. Refer to Note 10, Performance measures, in the Financial statement information for details.

 

 

Outlook assumptions

 

§ Nokia’s outlook assumptions for the comparable operating margin of each business group in 2021 and 2023 are provided below:

 

    Full year 2021   Full year 2023
Mobile Networks   4 to 7%   5 to 8%
Network Infrastructure   8 to 11%   9 to 12%
Cloud and Network Services   3 to 6%   8 to 11%
Nokia Technologies   >75%   >75%
         
§ We maintain our expectation for Nokia Technologies to deliver a slight improvement in comparable operating profit in full year 2021, relative to full year 2020, and stable performance over the longer-term;
   
§ Group Common and Other primarily consists of support function costs. We expect the net negative impact of Group Common and Other to be between EUR 150 and 200 million in 2021 and approximately EUR 200 million over the longer-term. The update to our 2021 expectation largely reflects the year-to-date impact from Nokia’s venture fund investments (update);
   
§ In full year 2021, Nokia expects the free cash flow performance of Nokia Technologies to be approximately EUR 600 million lower than its operating profit, primarily due to prepayments we received from certain licensees in previous years;

 

§ Comparable financial income and expenses are expected to be an expense of approximately EUR 200 million in full year 2021 and EUR 250 million over the longer-term;

 

§ Comparable income tax expenses are expected to be approximately EUR 450 million in full year 2021 and over the longer-term, subject to regional profit mix, net sales subject to withholding taxes and the timing of patent licensing cash flow. Over the longer-term, there is some uncertainty in forecasting income tax expenses, as they are also subject to changes in tax legislation, including potential tax reform in the U.S. and the OECD Pillar initiatives (update);

 

§ Cash outflows related to income taxes are expected to be approximately EUR 350 million in full year 2021 and over the longer-term until our US or Finnish deferred tax assets are fully utilized, subject to regional profit mix, net sales subject to withholding taxes and the timing of patent licensing cash flow. Over the longer-term, there is some uncertainty in forecasting cash taxes, as they are also subject to changes in tax legislation, including potential tax reform in the U.S. and the OECD Pillar initiatives (update);

 

§ Capital expenditures are expected to be approximately EUR 600 million over the longer-term; 2021 slightly below that level and with some variation in future years around that level (update); and

 

§ Rule of thumb related to currency fluctuations: Assuming our current mix of net sales and total costs (refer to Note 1, Basis of Preparation, in the Financial statement information section for details), we expect that a 10% increase in the EUR/USD exchange rate would have an impact of approximately negative 4 to 5% on net sales and an approximately neutral impact on operating profit.

 

28 October 2021   3

 

 

Financial results

 

 

Financial Results 

  

Net sales and comparable operating profit by business group

 

 

 

    

EUR million   Q3'21     Q3'20     YoY change     Constant
currency
YoY
change
    Q1–Q3'21     Q1–Q3'20     YoY
change
    Constant
currency
YoY
change
 
Net sales     5 399       5 294       2 %     2 %     15 788       15 299       3 %     6 %
Mobile Networks     2 315       2 448       (5 )%     (5 )%     6 957       7 217       (4 )%     0 %
Network Infrastructure     1 915       1 793       7 %     6 %     5 420       4 756       14 %     17 %
Cloud and Network Services     748       663       13 %     12 %     2 125       2 125       0 %     3 %
Nokia Technologies     367       331       11 %     11 %     1 133       1 020       11 %     12 %
Group Common and Other     64       67       (4 )%     (5 )%     183       210       (13 )%     (9 )%
Items affecting comparability     0       (1 )                     0       (2 )                
Eliminations     (10 )     (9 )     11 %             (30 )     (29 )     3 %        
Comparable operating profit/(loss)     633       486       30 %             1 867       1 025       82 %        
Mobile Networks     169       206       (18 )%             495       403       23 %        
Network Infrastructure     187       212       (12 )%             536       247       117 %        
Cloud and Network Services     31       (119 )                     20       (164 )                
Nokia Technologies     285       264       8 %             903       816       11 %        
Group Common and Other     (38 )     (77 )                     (87 )     (277 )                

 

Q3 2021 to Q3 2020 bridge for net sales and operating profit
EUR million   Q3'21     Volume,
price, mix
and other
    Foreign
exchange
impact
    Items
affecting
comparability
    Q3'20  
Net sales     5 399       95       9       1       5 294  
Operating profit     502       141       6       5       350  
Operating margin %     9.3 %                             6.6 %

28 October 2021   4

 

 

Financial results

 

 

 

Net sales by region

 

 

  

EUR million   Q3'21     Q3'20¹     YoY
change
    Constant
currency
YoY
change
    Q1–Q3'21     Q1–Q3'20¹     YoY
change
    Constant
currency
YoY
change
 
Asia Pacific     688       593       16 %     18 %     1 851       1 936       (4 )%     (1 )%
Europe     1 559       1 639       (5 )%     (5 )%     4 695       4 638       1 %     2 %
Greater China     363       380       (4 )%     (8 )%     1 139       1 051       8 %     8 %
India     251       268       (6 )%     (7 )%     789       659       20 %     26 %
Latin America     260       243       7 %     7 %     876       740       18 %     23 %
Middle East & Africa     467       503       (7 )%     (8 )%     1 305       1 410       (7 )%     (4 )%
North America     1 809       1 668       8 %     9 %     5 133       4 864       6 %     11 %
Total     5 399       5 294       2 %     2 %     15 788       15 299       3 %     6 %

 

1 In the first quarter of 2021, Nokia aligned how it externally reports financial information on a regional basis with its internal reporting structure. As a result, India which was earlier presented as part of Asia Pacific region is presented as a separate region. In addition, certain countries are now presented as part of a different region. The comparative net sales by region amounts for Q3'20 and Q1–Q3'20 have been recast accordingly.    

  

Net sales by customer type

 

 

  

EUR million   Q3'21     Q3'20     YoY
change
    Constant
currency
YoY
change
    Q1–Q3'21     Q1–Q3'20     YoY
change
    Constant
currency
YoY
change
 
Communication service providers     4 364       4 316       1 %     1 %     12 739       12 561       1 %     5 %
Enterprise     368       383       (4 )%     (4 )%     1 079       1 070       1 %     3 %
Licensees     367       331       11 %     11 %     1 133       1 020       11 %     12 %
Other1     300       264       14 %     14 %     836       648       29 %     30 %
Total     5 399       5 294       2 %     2 %     15 788       15 299       3 %     6 %
                                                                 
1 Includes net sales of Submarine Networks which operates in a different market, and Radio Frequency Systems (RFS), which is being managed as a separate entity, and certain other items, such as eliminations of inter-segment revenues and certain items related to purchase price allocation. Submarine Networks and RFS net sales include also revenue from communication service providers and enterprise customers.

 

28 October 2021   5

 

 

 

Financial results

 

 

 

Net sales

 

In Q3 2021, net sales increased 2% on both a reported and constant currency basis.

 

Net sales growth was driven by continued strength in Network Infrastructure, and double-digit growth in both Cloud and Network Services and Nokia Technologies, balanced by a decline in Mobile Networks.

 

From a regional perspective, North America, Asia Pacific and Latin America witnessed strong growth, which was partly offset by declines in Europe, Middle East and Africa, Greater China and India. Notably, net sales in North America increased 9% on a constant currency basis, primarily due to Network Infrastructure and Cloud and Network Services, partially offset by declines in Mobile Networks. The growth in Asia Pacific was primarily driven by strong 5G investments in Japan.

 

From a customer perspective, net sales to Enterprise customers decreased 4% on both a reported basis and constant currency basis. In the quarter, we faced headwinds related to Network Infrastructure Enterprise products, but we continued to see strong momentum in private wireless, with strong growth in our Mobile Networks Enterprise products. We now have more than 380 customers for our private wireless solutions. In Q3 2021, we added 101 new Enterprise customers and our pipeline remains strong.

 

Gross margin

 

Reported gross margin in Q3 2021 was 40.7%, compared to 37.1% in Q3 2020. Comparable gross margin was 40.8%, compared to 37.4% in Q3 2020. The improvement in comparable gross margin was primarily driven by Mobile Networks and Cloud and Network Services. The increase in Mobile Networks stems mainly from progress in our cost competitiveness, improvements in indirect cost of sales and favorable customer mix. This was partially offset by the earlier communicated impact from market share loss and price erosion in North America. The increase in Cloud and Network Services was primarily driven by the absence of a project-related loss provision that negatively impacted Q3 2020, as well as higher net sales and overall operational improvements.

 

Operating profit and margin

 

Reported operating profit was EUR 502 million, or 9.3% of net sales, compared to EUR 350 million, or 6.6% of net sales in Q3 2020. Comparable operating profit was EUR 633 million, or 11.7% of net sales, compared to EUR 486 million, or 9.2% of net sales in Q3 2020. The improvement in comparable operating profit and operating margin was primarily driven by higher gross profit and a net positive fluctuation in other income and expenses, related to Nokia’s venture fund investments and the absence of loss allowances on certain trade receivables, which negatively impacted Q3 2020. This was partially offset by higher R&D expenses, in both Mobile Networks and Network Infrastructure, and to a lesser extent, higher SG&A expenses. In Q3 2021, operating profit was negatively impacted by higher incentive accruals, compared to Q3 2020.

 

In Q3 2021, the net benefit related to Nokia’s venture fund investments, which is recorded in Group Common and Other results, was approximately EUR 40 million, compared to a net loss of approximately EUR 20 million in Q3 2020.

 

In Q3 2021 and Q3 2020, the difference between reported and comparable operating profit was primarily related to restructuring and associated charges and the amortization of acquired intangible assets. In Q3 2020, reported operating profit also included a gain on defined benefit plan amendment, which was not included in comparable results.

  

Profit/loss for the period

 

Reported net profit was EUR 351 million, compared to a net profit of EUR 197 million in Q3 2020. Comparable net profit was EUR 463 million, compared to EUR 305 million in Q3 2020. The improvement in comparable net profit was primarily driven by the increase in comparable operating profit and a net positive fluctuation in financial income and expenses, partially offset by an increase in income tax expenses, reflecting higher profit before tax.

 

In Q3 2021 and Q3 2020, in addition to the items impacting comparability included in operating profit (and their associated tax effects), the difference between reported and comparable net profit was primarily related to the change in financial liability to acquire Nokia Shanghai-Bell non-controlling interest.

 

Earnings per share

 

Reported diluted EPS was EUR 0.06, compared to EUR 0.03 in Q3 2020. Comparable diluted EPS was EUR 0.08, compared to EUR 0.05 in Q3 2020.

 

Comparable return on Invested Capital (“ROIC”)

 

Q3 2021 comparable ROIC was 20.2%, compared to 11.6% in Q3 2020. The increase was primarily driven by growth in operating profit and lower invested capital, reflecting growth in average total cash and current financial investments and a decrease in average total equity, partially offset by an increase in average total interest-bearing liabilities. The decrease in average total equity is primarily attributable to the derecognition of Finnish deferred tax assets in Q4 2020.

 

Cash performance

 

During Q3 2021, net cash increased approximately EUR 610 million, resulting in an end-of-quarter net cash balance of approximately EUR 4.3 billion. During Q3 2021, total cash increased by approximately EUR 630 million, resulting in an end-of-quarter total cash balance of approximately EUR 9.4 billion. The cash performance in Q3 2021 reflected strong operating profit and a minimal decrease in cash related to net working capital, driven by restructuring as well as supply chain challenges, which limited our ability to build inventory. Q3 2021 was the sixth quarter in a row of positive free cash flow.

 

Pension Update

 

In Q3 2021, Nokia modified the terms of its US defined benefit pension plans. As a result of the modification, Nokia recognized a reduction in the effect of the asset ceiling of approximately EUR 1.4 billion, increasing the defined benefit pension assets by the same amount. Consequently, the impact of the modification on other comprehensive income and fair value and other reserves was approximately EUR 1.1 billion positive net of tax.

 

More information on the funded status of Nokia’s defined benefit plans can be found in Note 4, Pensions and Other Post-Employment Benefits, in the Financial statement information section.

 

28 October 2021   6

 

 

Financial results

 

 

 

January-September 2021 compared to January-September 2020

 

Net sales

 

In the first nine months of 2021, reported net sales increased 3%, primarily driven by Network Infrastructure and Nokia Technologies, partially offset by Mobile Networks and Cloud and Network Services, which were negatively impacted primarily by foreign exchange rate fluctuations.

 

On a constant currency basis, Nokia net sales increased 6% in the first nine months of 2021. Network Infrastructure saw growth across all four of its businesses. Nokia Technologies net sales grew, driven by higher patent licensing net sales related to both new and renewed patent license agreements signed this year and in Q4 2020 and catch-up net sales related to new patent license agreements, partially offset by lower brand licensing net sales. The increase in Cloud and Network Services was primarily driven by Core Networks and Enterprise Solutions, partially offset by Cloud and Cognitive Services and Business Applications. Mobile Networks net sales were flat, primarily driven by strong growth in 5G, partially offset by legacy radio access products, as well as services.

 

From a regional perspective, the increase in constant currency net sales was driven by broad-based growth across most regions, with the exception of Middle East and Africa and Asia Pacific. Notably, net sales in North America increased 6% on a reported basis and 11% on a constant currency basis, primarily due to Network Infrastructure and Cloud and Network Services, partially offset by Mobile Networks.

 

From a customer perspective, net sales to Enterprise customers increased 1% on a reported basis and 3% on a constant currency basis. Year-to-date, we have added 227 new Enterprise customers, and our pipeline remains strong. We also continued to have strong momentum in private wireless, now with more than 380 customers.

 

Gross margin

 

Reported gross margin in the first nine months of 2021 was 39.9%, compared to 36.9% in the first nine months of 2020. Comparable gross margin was 40.5%, compared to 37.8% in the year-ago period. The improvement in comparable gross margin was primarily driven by Mobile Networks, Cloud and Network Services and, to a lesser extent, Nokia Technologies. The increase in Mobile Networks stems mainly from 5G growth, favorable regional mix and the impact of a one-time software deal that was completed in Q2 2021. The increase in Cloud and Network Services was primarily driven by the absence of a project-related loss provision that negatively impacted the year-ago period, as well as higher net sales. The increase in Nokia Technologies reflected higher net sales.

 

Operating profit and margin

 

Reported operating profit in the first nine months of 2021 was EUR 1 418 million, or 9.0% of net sales, compared to EUR 444 million, or 2.9% of net sales, in the first nine months of 2020. Comparable operating profit was EUR 1 867 million, or 11.8% of net sales, compared to EUR 1 025 million, or 6.7% of net sales in the year-ago period. The improvement in comparable operating profit and operating margin was primarily driven by higher gross profit, a net positive fluctuation in other income and expenses, primarily related to Nokia’s venture fund investments, foreign exchange hedging and the reversal of loss allowances on certain trade receivables, as well as lower SG&A expenses. This was partially offset by higher R&D expenses in Mobile Networks and, to a lesser extent, Network Infrastructure. In the first nine months of 2021, operating profit was negatively impacted by higher incentive accruals, compared to the first nine months of 2020.

 

In the first nine months of 2021, the net benefit related to Nokia’s venture fund investments, which is recorded in Group Common and Other results, was approximately EUR 140 million, compared to a net loss of approximately EUR 60 million in the year-ago period.

 

In the first nine months of 2021 and the first nine months of 2020, the difference between reported and comparable operating profit was primarily related to restructuring and associated charges, the amortization of acquired intangible assets and the impairment of assets. In the first nine months of 2021, reported operating profit also included a gain related to the settlement of legal disputes, which was not included in comparable results. In the first nine months of 2020, reported operating profit also included a gain on defined benefit plan amendment.

 

Profit/loss for the period

 

Reported net profit was EUR 965 million, compared to EUR 180 million in the first nine months of 2020. Comparable net profit was EUR 1 377 million, compared to EUR 653 million in the year-ago period. The improvement in comparable net profit was primarily driven by the increase in comparable operating profit and a net positive fluctuation in financial income and expenses, partially offset by an increase in income tax expenses, reflecting higher profit before tax.

 

In the first nine months of 2021 and the first nine months of 2020, in addition to the items impacting comparability included in operating profit (and their associated tax effects), the difference between reported and comparable net profit/loss was primarily related to the change in financial liability to acquire Nokia Shanghai-Bell non-controlling interest and change in the income tax expense driven by the one-off deferred tax expense related to legal entity restructuring in the first nine months of 2020 and a deferred tax benefit due to tax rate changes in the first nine months of 2021.

 

Earnings per share

 

Reported diluted EPS in the first nine months of 2021 was EUR 0.17, compared to EUR 0.03 in the first nine months of 2020. Comparable diluted EPS was EUR 0.24, compared to EUR 0.11 in the year-ago period.

  

Cash performance

 

The strong cash performance in the first nine months of 2021 was primarily driven by our strong operating profit, lower levels of inventory due to supply chain challenges, as well as good collection of receivables in Q1 2021. At the end of Q3 2021, we had a net cash balance of approximately EUR 4.3 billion and a total cash balance of approximately EUR 9.4 billion.

 

28 October 2021   7

 

 

Financial results

 

 

 

Cash and cash flow in Q3 2021

 

EUR million, at end of period   Q3'21     Q2'21     QoQ change     Q4'20     YTD change  
Total cash and current financial investments     9 381       8 751       7 %     8 061       16 %
Net cash and current financial investments1     4 300       3 688       17 %     2 485       73 %

 

1 Net cash and current financial investments does not include lease liabilities. For details, please refer to Note 10, Performance measures, in the Financial statement information.

 

EUR billion

 

 

 

Free cash flow

 

During Q3 2021, Nokia’s free cash flow was EUR 706 million, reflecting strong operating profit and a minimal decrease in cash related to net working capital.

 

Net cash from operating activities

 

Net cash from operating activities was driven by:

 

§ Nokia’s adjusted profit of EUR 815 million.
§ Approximately EUR 110 million of restructuring and associated cash outflows, related to our current and previous cost savings programs.
§ Excluding the restructuring and associated cash outflows, the increase in net cash related to net working capital was approximately EUR 80 million, as follows:
o The increase in receivables was approximately EUR 60 million.
o The increase in inventories was approximately EUR 70 million, as our ability to increase inventories was limited by supply chain challenges.
o The increase in liabilities was approximately EUR 200 million, primarily due to an increase in liabilities related to employee incentives and an increase in accounts payable, partially offset by a decrease in contract liabilities and deferred revenue.
§ An outflow related to cash taxes of approximately EUR 40 million.
§ An outflow related to net interest of approximately EUR 20 million.

 

Net cash used in investing activities

 

§ Net cash used in investing activities was related primarily to capital expenditures of approximately EUR 130 million, which was mostly offset by a net cash inflow from non-current financial investments of approximately EUR 100 million, primarily related to venture fund distributions, and the sale of fixed assets of approximately EUR 10 million.

 

Net cash used in financing activities

 

§ Net cash used in financing activities was related primarily to lease payments of approximately EUR 70 million.

 

Change in total cash and net cash

 

In Q3 2021, the approximately EUR 20 million difference between the change in total cash and net cash was primarily due to changes in the carrying amounts of certain issued bonds, as a result of foreign exchange fluctuations.

 

Foreign exchange rates had an approximately EUR 20 million negative impact on net cash.

 

28 October 2021   8

 

 

Financial results

 

 

 

Comparable return on invested capital

 

    Rolling four quarters  
EUR million     Q3'21       Q2'21       Q3'20  
Comparable operating profit     2 923       2 776       2 159  
Comparable profit before tax     2 781       2 608       1 963  
Comparable income tax expense     (620 )     (606 )     (490 )
Comparable operating profit after tax     2 271       2 131       1 620  
                         
      Average  
EUR million     30 September 2021       30 June 2021       30 September 2020  
Total equity     14 453       14 238       15 274  
Total interest-bearing liabilities     5 327       5 498       5 090  
Total cash and current financial investments     (8 533 )     (8 155 )     (6 453 )
Invested capital     11 247       11 581       13 911  
Comparable ROIC1     20.2 %     18.4 %     11.6 %

 

1 Comparable ROIC = Comparable operating profit after tax, last four quarters / invested capital, average of last five quarters’ ending balances. Refer to Note 10, Performance measures, in the Financial statement information for details.

 

28 October 2021   9

 

 

Sustainability

 

 

 

Sustainability

 

Our strategy and focus areas

 

We create technology that helps the world act together. We strongly believe that connectivity and technology will play a key role in helping to solve many future challenges. Our sustainability strategy is focused on the areas we believe will have the greatest impact on sustainable development and our profitability: climate, integrity and culture.

 

Climate

 

The importance of combatting climate change through connectivity solutions will only increase and we recognize our responsibility in the fight against climate change. We have committed to cut our greenhouse gas emissions by 50 percent between 2019 and 2030 as part of our updated Science Based Targets (SBTs), in line with a 1.5°C warming scenario. This target covers emissions across our own operations and close to 100% of our current product portfolio, as well as logistics and final assembly factories within our supply chain.

 

We continue to invest in innovation to drive down emissions and energy consumption of our products. In September we launched FP5, our fifth generation of high-performance IP routing silicon. The FP5 network processors drive down power consumption per bit by 75% in comparison with previous generation.

 

Learning, capacity building and collaboration with our suppliers is a key part of our efforts in working towards reaching our emissions targets. In our annual supplier Diamond Awards held in Q3, the Sustainability award was given to WUS Printed Circuit for their significant achievements in reducing the emissions of PWB (printed wiring board) manufacturing by half over the past five years, helping Nokia to address one of the most energy intense parts in our supply chain and cut our supplier-born Scope 3 emissions.

 

Integrity

 

Integrity is embedded in everything we do. In Q3, we launched our 2021 Ethical Business Training course – a course that is mandatory for every Nokia employee each year. This course centers on our Code of Conduct and includes our annual Code acknowledgement and conflict of interest disclosure process. Training and communications are critical pillars of our compliance program to raise awareness about compliance risks and the many resources we provide to help support and guide our employees.

 

In Q3, we also celebrated our annual Integrity Day, with events such as a senior leader panel discussion, a gamified compliance learning module, and recognition of 25 ethical role models by our CEO and Chief Legal Officer, along with local events organized by teams around the globe. While it is important to practice high ethical standards every day, this annual event is an opportunity to reflect on the importance of integrity and to have engaging discussions with leaders and employees about the practical aspects of business ethics.

 

Culture

 

We believe our people are our greatest asset and we aim to enable a culture that drives business value based on three essentials that were launched this year as part of our new Nokia Platform: open, fearless and empowered. The essentials play a key role in our new Mode of Operation and so we hosted online sessions where we, as a company, came together to reflect on how we are learning and progressing in bringing our essentials to life in our everyday actions.

 

In support of an open and fearless culture we launched the mandatory Inclusion and Diversity training and our inclusion survey, through which we measure the improvement of internal inclusion. We revised our recruitment practices to be able to source and attract more women for Nokia’s open positions and trained our talent attraction teams and hiring managers on inclusive, unbiased hiring practices. During Q3, we finalized the delivery of online workshops to our suppliers on Nokia’s labor practices with a deep-dive into inclusion and diversity and a special focus on ethnic, religious, sexual and gender minorities. We have now carried out 24 country specific sessions and a global session addressed to all other country locations.

 

Also in Q3, we launched a scholarship program with Udacity and Blacks in Technology Foundation aimed at improving representation in the technology industry. The program offers over 300 scholarships to members of the underrepresented community in areas such as data science, AI and programming. With this program we reached our goal of directing 30% of our corporate social responsibility (CSR) spend toward programs focused on empowering diversity.

  

Other topics

 

We continue to do our part in driving digitalization and connecting the unconnected in rural, as well as disadvantaged urban areas. In Q3, we announced that in Kenya our work with UNICEF moved from a corporate social responsibility pilot program into a commercial rollout as we have now connected 90 primary schools around the country in close collaboration with multiple stakeholders including Safaricom, UNICEF Kenya and the Kenyan Ministries of Education and ICT.

 

In Q3, we also signed a Memorandum of Understanding (MoU) with the African Telecommunications Union (ATU) to drive digital transformation and the knowledge economy for socio-economic development across the continent. This will focus on areas such as connecting the unconnected with broadband, inclusion and diversity, and the development of emerging talent for digital innovation.

28 October 2021   10

 

 

Segment details

 

 

Segment details

 

Mobile Networks, Q3 2021 compared to Q3 2020

 

EUR million   Q3'21     Q3'20     YoY change     Constant
currency
YoY
change
    Q1–Q3'21     Q1–Q3'20     YoY
change
    Constant
currency
YoY
change
 
Reported results                                                
Net sales   2 315     2 448     (5 )%   (5 )%   6 957     7 217     (4 )%   0 %
Gross margin %   37.7 %   35.9 %   180 bps         36.8 %   33.7 %   310 bps      
Operating profit/(loss)   137     182     (25 )%         399     242     65 %      
Operating margin %   5.9 %   7.4 %   (150 )bps         5.7 %   3.4 %   230 bps      
Comparable results                                                
Gross margin %   37.8 %   35.6 %   220 bps         37.4 %   34.3 %   310 bps      
Operating profit/(loss)   169     206     (18 )%         495     403     23 %      
Operating margin %   7.3 %   8.4 %   (110 )bps         7.1 %   5.6 %   150 bps      

 

Addressable market development

 

As of the end of Q3 2021, the forecasted Mobile Networks addressable market, excluding China, for 2021 was EUR 46 billion, calculated assuming actual currency rates for the first nine months of 2021 and that the end of September EUR/USD rate of 1.16 continues for the remainder of 2021.

 

On a constant currency basis, we estimate that the addressable market, excluding China, will grow by approximately 5% (compared to our 6% forecast in Q2 2021). The change was primarily driven by reduced expectations for the CSP 4G and 5G radio access market in Asia Pacific, India and Middle East and Africa.

 

Net sales

 

Mobile Networks net sales decreased 5% on both a reported and constant currency basis.

 

Within Mobile Networks, strong 5G product demand was more than offset by continued declines in legacy radio access products, as well as services.

 

From a regional perspective, the decrease was primarily driven by North America, reflecting earlier communicated market share loss and price erosion. This was offset by strong performance in Asia Pacific, where strong growth in Japan was partially offset by declines in South Korea.

 

Gross margin

 

Reported gross margin was 37.7%, compared to 35.9% in Q3 2020. Comparable gross margin was 37.8%, compared to 35.6% in Q3 2020. The improvement in comparable gross margin stems mainly from progress in our cost competitiveness, improvements in indirect cost of sales and favorable customer mix. This was partially offset by the earlier communicated impact from market share loss and price erosion in North America.

 

Operating profit/(loss) and margin

 

Reported operating profit was EUR 137 million, or 5.9% of net sales, compared to EUR 182 million, or 7.4% of net sales, in Q3 2020. Comparable operating profit was EUR 169 million, or 7.3% of net sales, compared to EUR 206 million, or 8.4% of net sales, in Q3 2020. The decrease in comparable operating profit and operating margin was primarily driven by an increase in R&D expenses to accelerate our product roadmaps and cost competitiveness. This was partially offset by a net positive fluctuation in other operating income and expenses, related to the absence of loss allowances on certain trade receivables, which negatively impacted Q3 2020. In Q3 2021, operating profit was negatively impacted by higher incentive accruals, compared to Q3 2020.

 

In Q3 2021 and Q3 2020, the difference between reported and comparable operating profit was primarily related to restructuring and associated charges and the amortization of acquired intangible assets. In Q3 2020, reported operating profit also included a gain on defined benefit plan amendment, which was not included in comparable results.

 

Operational Key Performance Indicators

 

Proportion of our 5G shipments that are “5G Powered by ReefShark”

 

This KPI tracks shipments of our System-on-Chip (“SoC”) based 5G Powered by ReefShark (“5G PBR”) product portfolio. Increased 5G PBR shipments are expected to help reduce our product cost and improve the power efficiency of our products.

 

In Q3 2021, 5G PBR accounted for 53% of shipments. The slight sequential decline reflects delivery mix in the quarter. Our product development roadmaps remain on track for 5G PBR to account for ~70% of product shipments by the end of 2021, and ~100% of product shipments by the end of 2022, and we are reconfirming these previously stated targets. The new AirScale radio and baseband products launched in Q2 2021 are also important final steps towards our full SoC portfolio evolution.

 

Our weighted 5G conversion rate and market share

 

This KPI measures how we are doing in converting our end of 2018 4G footprint into 5G footprint. It factors in customer size, as well as new 5G footprint where we did not previously have a 4G installed base (meaning it can be over 100%).

 

At the end of Q3 2021, our 5G conversion rate remains approximately 90%, excluding China. Including China, our 5G conversion rate improved to the low 80% range, reflecting footprint gains in China. Since the end of 2018, our 4G to 5G conversion rate has been impacted by not converting all of our 4G footprint into 5G footprint in North America and China. We believe this has now stabilized and we see opportunities through which it could start to improve, but the timing of deals remains uncertain.

 

We are targeting 4G + 5G market share, excluding China, to be approximately 25% to 27% in full year 2021, although there are some uncertainties related to supply chain challenges.

 

28 October 2021   11

 

 

Segment details 

 

 

 

Network Infrastructure, Q3 2021 compared to Q3 2020

 

EUR million   Q3'21     Q3'20     YoY change     Constant
currency
YoY
change
    Q1–Q3'21     Q1–Q3'20     YoY change     Constant
currency
YoY
change
 
Reported results                                                
Net sales   1 915     1 793     7 %   6 %   5 420     4 756     14 %   17 %
IP Networks   668     670     0 %   (1 )%   1 923     1 824     5 %   9 %
Optical Networks   412     463     (11 )%   (12 )%   1 203     1 221     (1 )%   2 %
Fixed Networks   588     453     30 %   29 %   1 611     1 242     30 %   34 %
Submarine Networks   247     206     20 %   20 %   683     469     46 %   45 %
Gross margin %   35.7 %   35.4 %   30 bps         35.1 %   33.8 %   130 bps      
Operating profit/(loss)   100     118     (15 )%         270     (56 )            
Operating margin %   5.2 %   6.6 %   (140 )bps         5.0 %   (1.2 )%   620 bps      
Comparable results                                                
Gross margin %   35.9 %   36.1 %   (20 )bps         35.4 %   34.6 %   80 bps      
Operating profit/(loss)   187     212     (12 )%         536     247     117 %      
Operating margin %   9.8 %   11.8 %   (200 )bps         9.9 %   5.2 %   470 bps      

 

Addressable market development

 

As of the end of Q3 2021, the forecasted Network Infrastructure addressable market, excluding Submarine Networks, for 2021 was EUR 43 billion, calculated assuming actual currency rates for the first nine months of 2021 and that the end of September EUR/USD rate of 1.16 continues for the remainder of 2021.

 

On a constant currency basis, we estimate that the addressable market, excluding Submarine Networks, will grow by approximately 5% (compared to our 4% forecast in Q2 2021). The change was primarily driven by increased expectations for the CSP Fixed Networks and CSP IP Networks markets.

 

Net sales

 

Network Infrastructure net sales increased 7%. On a constant currency basis, Network Infrastructure net sales increased 6%.

 

The net sales increase in Network Infrastructure reflects strong growth in both Fixed Networks and Submarine Networks, flat performance in IP Networks and a decline in Optical Networks.

 

The flat performance in IP Networks was a result of strong growth in North America and Asia Pacific, offset by declines in Europe, Middle East and Africa, as well as Greater China.

 

Optical Networks faced a difficult year-on-year comparison, as Q3 2020 benefitted from pent-up demand. From a regional perspective, growth in North America and Latin America was offset by declines in Asia Pacific, where we faced a tough year-on-year comparison, as well as Middle East and Africa.

 

Strong growth continued in Fixed Networks, driven by Fixed Wireless Access and fiber technologies, as CSPs continue to invest in broadband connectivity, particularly in North America.

 

Submarine Networks continued to benefit from large sub-sea telecommunications projects.

 

Gross margin

 

Reported gross margin was 35.7%, compared to 35.4% in Q3 2020. Comparable gross margin was 35.9%, compared to 36.1% in Q3 2020. Gross margin performance was strong across all our businesses, except for Submarine Networks, which resulted in a slight decrease in comparable gross margin.

 

Operating profit/(loss) and margin

 

Reported operating profit was EUR 100 million, or 5.2% of net sales, compared to EUR 118 million, or 6.6% of net sales, in Q3 2020. Comparable operating profit was EUR 187 million, or 9.8% of net sales, compared to EUR 212 million, or 11.8% of net sales, in Q3 2020. The decline in comparable operating profit and operating margin was primarily driven by higher R&D expenses, partially offset by higher gross profit. We expect the increase in R&D expenses to persist for the remainder of 2021, as we continue to invest in customer-focused technology leadership. In Q3 2021, operating profit was negatively impacted by higher incentive accruals, compared to Q3 2020.

 

In Q3 2021 and Q3 2020, the difference between reported and comparable operating profit was primarily related to the amortization of acquired intangible assets and restructuring and associated charges.

28 October 2021   12

 

 

Segment details 

 

 

 

Cloud and Network Services, Q3 2021 compared to Q3 2020

 

EUR million   Q3'21     Q3'20     YoY change     Constant
currency
YoY
change
    Q1–Q3'21     Q1–Q3'20     YoY change     Constant
currency
YoY
change
 
Reported results                                                
Net sales   748     663     13 %   12 %   2 125     2 125     0 %   3 %
Gross margin %   37.2 %   17.6 %   1 960 bps         33.9 %   27.6 %   630 bps      
Operating profit/(loss)   23     (148 )               (56 )   (271 )            
Operating margin %   3.1 %   (22.3 )%   2 540 bps         (2.6 )%   (12.8 )%   1 020 bps      
Comparable results                                                
Gross margin %   37.6 %   19.6 %   1 800 bps         35.6 %   30.2 %   540 bps      
Operating profit/(loss)   31     (119 )               20     (164 )            
Operating margin %   4.1 %   (17.9 )%   2 200 bps         0.9 %   (7.7 )%   860 bps      

 

Addressable market development

 

As of the end of Q3 2021, the forecasted Cloud and Network Services addressable market for 2021 was EUR 26 billion, calculated assuming actual currency rates for the first nine months of 2021 and that the end of September EUR/USD rate of 1.16 continues for the remainder of 2021.

 

On a constant currency basis, we estimate that the addressable market will grow by approximately 4% (unchanged from previous estimate).

 

Net sales

 

Cloud and Network Services net sales increased 13%. On a constant currency basis, Cloud and Network Services net sales increased 12%.

 

The net sales increase reflected strong double-digit growth in both Core Networks, which continued to benefit from 5G core deployments, as well as in Enterprise Solutions. This was partially offset by Cloud and Cognitive Services, reflecting work to address poorly performing projects.

 

Gross margin

 

Reported gross margin was 37.2%, compared to 17.6% in Q3 2020. Comparable gross margin was 37.6%, compared to 19.6% in Q3 2020. The strong expansion in gross profit and margin was driven by the absence of a project-related loss provision that negatively impacted Q3 2020, as well as higher net sales and overall operational improvements.

 

Operating profit/(loss) and margin

 

Reported operating profit was EUR 23 million, or 3.1% of net sales, compared to an operating loss of EUR 148 million, or negative 22.3% of net sales, in Q3 2020. Comparable operating profit was EUR 31 million, or 4.1% of net sales, compared to an operating loss of EUR 119 million, or negative 17.9% of net sales, in Q3 2020. The improvement was primarily driven by higher gross profit. In Q3 2021, operating profit was negatively impacted by higher incentive accruals, compared to Q3 2020.

 

In Q3 2021 and Q3 2020, the difference between reported and comparable operating result was primarily related to restructuring and associated charges and the amortization of acquired intangible assets.

 

28 October 2021   13

 

 

 

Segment details

 

 

Nokia Technologies, Q3 2021 compared to Q3 2020

 

EUR million    Q3'21     Q3'20     YoY
change
    Constant
currency
YoY
change
    Q1–Q3'21     Q1–Q3'20     YoY
change
    Constant
currency
YoY
change
 
Reported results                                                                
Net sales     367       331       11 %     11 %     1 133       1 020       11 %     12 %
Gross margin %     99.7 %     98.8 %     90 bps             99.6 %     99.2 %     40 bps        
Operating profit/(loss)     285       263       8 %             902       814       11 %        
Operating margin %     77.7 %     79.5 %     (180 )bps             79.6 %     79.8 %     (20 )bps        
Comparable results                                                                
Gross margin %     99.7 %     99.1 %     60 bps             99.6 %     99.2 %     40 bps        
Operating profit/(loss)     285       264       8 %             903       816       11 %        
Operating margin %     77.7 %     79.8 %     (210 )bps             79.7 %     80.0 %     (30 )bps        

  

Net sales

 

Nokia Technologies net sales increased 11% on both a reported and constant currency basis.

 

The increase in Nokia Technologies net sales was primarily due to higher patent licensing net sales related to new and renewed patent license agreements signed this year and in Q4 2020, as well as a positive impact from a one-time transaction. This was partially offset by lower net sales from one licensee, following the expiration of a patent licensing agreement, which is now in litigation.

 

Nokia Technologies annualized net sales run rate was in the range of approximately EUR 1.4 to 1.5 billion in Q3 2021.

 

Gross margin

 

Reported gross margin was 99.7%, compared to 98.8% in Q3 2020. Comparable gross margin was 99.7%, compared to 99.1% in Q3 2020. The slight improvement in comparable gross margin reflects higher net sales.

 

Operating profit/(loss) and margin

 

Reported operating profit was EUR 285 million, or 77.7% of net sales, compared to EUR 263 million, or 79.5% of net sales, in Q3 2020. Comparable operating profit was EUR 285 million, or 77.7% of net sales, compared to EUR 264 million, or 79.8% of net sales, in Q3 2020. The improvement in comparable operating profit was primarily driven by higher net sales, partially offset by a settlement charge related to the one-time transaction, recorded in Q3 2021, within other operating income and expenses. In Q3 2021, operating profit was negatively impacted by higher incentive accruals, compared to Q3 2020.

 

28 October 2021   14

 

 

Segment details

 

 

Group Common and Other, Q3 2021 compared to Q3 2020

  

EUR million   Q3'21     Q3'20     YoY
change
    Constant
currency
YoY
change
    Q1–Q3'21     Q1–Q3'20     YoY
change
    Constant
currency
YoY
change
 
Reported results                                                                
Net sales     64       67       (4 )%     (5 )%     183       210       (13 )%     (9 )%
Gross margin %     (9.4 )%     7.5 %     (1 690 )bps             (6.0 )%     1.9 %     (790 )bps        
Operating profit/(loss)     (43 )     (65 )                     (98 )     (286 )                
Operating margin %     (67.2 )%     (97.0 )%     2 980 bps             (53.6 )%     (136.2 )%     8 260 bps        
Comparable results                                                                
Gross margin %     (7.8 )%     7.5 %     (1 530 )bps             (5.5 )%     4.3 %     (980 )bps        
Operating profit/(loss)     (38 )     (77 )                     (87 )     (277 )                
Operating margin %     (59.4 )%     (114.9 )%     5 550 bps             (47.5 )%     (131.9 )%     8 440 bps        

 

Net sales

 

Group Common and Other net sales decreased 4%. On a constant currency basis, Group Common and Other net sales decreased 5%.

 

The decrease in Group Common and Other net sales was driven by Radio Frequency Systems.

 

Gross margin

 

Reported gross margin was negative 9.4%, compared to 7.5% in Q3 2020. Comparable gross margin was negative 7.8%, compared to 7.5% in Q3 2020. The decrease was driven by Radio Frequency Systems.

 

Operating profit/(loss) and margin

 

Reported operating loss was EUR 43 million, or negative 67.2% of net sales, compared to an operating loss of EUR 65 million, or negative 97.0% of net sales, in Q3 2020. Comparable operating loss was EUR 38 million, or negative 59.4% of net sales, compared to an operating loss of EUR 77 million, or negative 114.9% of net sales, in Q3 2020. The improvement in comparable operating result and operating margin was primarily driven by a net positive fluctuation in other operating income and expense, primarily related to Nokia’s venture fund investments. This was partially offset by lower net sales and gross profit. In Q3 2021, the operating result was negatively impacted by higher incentive accruals, compared to Q3 2020.

 

In Q3 2021, the net benefit related to Nokia’s venture fund investments was approximately EUR 40 million, compared to a net loss of approximately EUR 20 million in Q3 2020.

 

In Q3 2021 and Q3 2020, the difference between reported and comparable operating result was primarily related to restructuring and associated charges.

 

28 October 2021   15

 

 

Additional information

 

 

Additional information

 

 

Dividend policy

 

Target recurring, stable and over time growing ordinary dividend payments, taking into account the previous year’s earnings as well as the company’s financial position and business outlook.

  

 

Cost savings program

 

In Q1 2021, we announced plans to reset our cost base, targeting a reduction of approximately EUR 600 million by the end of 2023.

 

Given the strength in our end markets thus far in 2021, the pace of restructuring in 2021 has been slower than we initially planned. The overall size of the plan however remains unchanged, and continues to depend on the evolution of our end markets – consistent with our commentary when we announced the plan.

 

We expect these cost savings to result in approximately EUR 600-700 million of restructuring and associated charges by 2023.

 

We continue to expect approximately EUR 500 million of cash outflows related to our previous restructuring program, of which EUR 250 million are expected to be recorded in 2021 and EUR 250 million beyond 2021.

   

    Expected amounts for        
In EUR million, rounded to the nearest EUR 50 million   2021     2022     2023     Beyond
2023
    Total amount1  
Recurring gross cost savings     150       300       100       50       600  
- cost of sales     50       100       50               200  
- operating expenses     100       200       50       50       400  
Restructuring and associated charges related to our most recent cost savings program     ~250       ~150       ~250               600–700  
Restructuring and associated cash outflows2     ~400       ~300       ~250       ~150       1 100–1 200  

 

1 Savings expected by end of 2023.
2 Includes cash outflows related to the most recent cost savings program, as well as the remaining cash outflows related to our previous programs.

 

Restructuring and associated charges by Business Group        
In EUR million, rounded to the nearest EUR 50 million        
Mobile Networks     300–350  
Network Infrastructure     ~100  
Cloud and Network Services     200–250  
Total restructuring and associated charges     600–700  

  

28 October 2021   16

 

 

Additional information

 

 

 

Significant events

 

January – September 2021

 

On 16 March 2021, Nokia announced plans to reset its cost base to invest in future capabilities. On a group level, this is expected to lower the company’s cost base by approximately EUR 600 million by the end of 2023. These savings are intended to offset increased investments in R&D, future capabilities and costs related to salary inflation. Nokia expects approximately EUR 600-700 million of restructuring and associated charges by 2023. Planned restructuring is expected to result in an 80 000-85 000 employee organization, over an 18-24-month period, instead of the approximately 90 000 employees Nokia had at the time of the announcement. The exact number will depend on market developments over the next two years from the announcement.

 

On 17 March 2021, Nokia announced it had appointed Melissa Schoeb as Chief Corporate Affairs Officer and member of the Group Leadership team effective from 12 April 2021. Nokia’s Chief Corporate Affairs Officer oversees Communications, Government Relations, Brand and Sustainability. Schoeb joins Nokia from Occidental, one of the world’s largest independent oil and gas companies, where she was Vice President, Corporate Affairs.

 

On 18 March 2021, Nokia held its Capital Markets Day and provided an overview of long-term market trends, how it is setting itself up for value creation, detailed plans for each of its business segments, its financial outlook and its updated dividend policy. For more details, refer to the stock exchange release by Nokia on 18 March 2021, and Nokia’s investor relations website at www.nokia.com/investors.

  

On 8 April 2021, Nokia held its Annual General Meeting (AGM) at its headquarters in Espoo under special arrangements due to the COVID-19 pandemic. Approximately 66 300 shareholders representing approximately 2 470 million shares and votes were represented at the meeting. The following resolutions were made:

 

§ No dividend is paid for the financial year 2020.

 

§ Sari Baldauf, Bruce Brown, Thomas Dannenfeldt, Jeanette Horan, Edward Kozel, Søren Skou, Carla Smits-Nusteling and Kari Stadigh were re-elected as members of the Board of Directors for a term ending at the close of the next AGM. In an assembly meeting that took place after the AGM, the Board re-elected Sari Baldauf as Chair of the Board, and Kari Stadigh as Vice Chair of the Board.

 

§ Remuneration Report of the Company’s governing bodies was supported.

 

§ Deloitte Oy was re-elected as the auditor for Nokia for the financial year 2022.
   
§ Board was authorized to resolve to repurchase a maximum of 550 million Nokia shares and to issue a maximum of 550 million shares through issuance of shares or special rights entitling to shares in one or more issues. The authorizations are effective until 7 October 2022 and they terminated the corresponding authorizations granted by the Annual General Meeting on 27 May 2020.

 

28 October 2021   17

 

 

Additional information

 

 

 

Shares 

 

The total number of Nokia shares on 30 September 2021, equaled 5 675 461 159. On 30 September 2021 Nokia and its subsidiary companies owned 40 906 775 Nokia shares, representing approximately 0.7% of the total number of Nokia shares and voting rights.

 

 

Risk Factors

 

Nokia and its business are exposed to a number of risks and uncertainties which include but are not limited to:

 

§ Competitive intensity, which is particularly impacting Mobile Networks and is expected to continue at a high level in full year 2021, as some competitors seek to take share in the early stages of 5G;

 

§ Our ability to accelerate our product roadmaps and cost competitiveness through additional 5G investments in full year 2021, thereby enabling us to drive product cost reductions and maintain the necessary scale to be competitive;

 

§ Some customers are reassessing their vendors in light of security concerns, creating near-term pressure to invest in order to secure long-term benefits;

 

§ Developments in North America following the conclusion of the C-band auction, including the potential for temporary capital expenditure constraints or the acceleration of 5G deployments;

 

§ The scope and duration of the COVID-19 impact, particularly in certain countries, including India, where the pandemic has worsened, and the pace and shape of the economic recovery following the pandemic;

 

§ The disturbance in the global supply chain;

 

§ Accelerating inflation;

 

§ Other macroeconomic, industry and competitive dynamics;

 

§ Our ability to procure certain standard components and the costs thereof, such as semiconductors;

 

§ The timing of completions and acceptances of certain projects;

 

§ Our product and regional mix;

 

§ The timing and value of new and existing patent licensing agreements with smartphone vendors, automotive companies, consumer electronics companies and other licensees;

 

§ Results in brand and technology licensing; costs to protect and enforce our intellectual property rights; and the regulatory landscape for patent licensing;

 

as well as the risk factors specified under Forward-looking Statements of this report, and our 2020 annual report on Form 20-F published on 4 March 2021 under Operating and financial review and prospects-Risk factors.

 

 

Forward-looking statements

 

Certain statements herein that are not historical facts are forward-looking statements. These forward-looking statements reflect Nokia's current expectations and views of future developments and include statements regarding: A) expectations, plans, benefits or outlook related to our strategies, product launches, growth management and operational key performance indicators; B) expectations, plans or benefits related to future performance of our businesses (including the expected impact, timing and duration of the impact of COVID-19 on our businesses, our supply chain and our customers’ businesses) and any future dividends; C) expectations and targets regarding financial performance, cash generation, results, the timing of receivables, operating expenses, taxes, currency exchange rates, hedging, cost savings and inflation, product cost reductions and competitiveness, as well as results of operations including targeted synergies, better commercial management and those results related to market share, prices, net sales, income and margins; D) ability to execute, expectations, plans or benefits related to changes in organizational and operational structure and cash or cost savings arrangements; and E) any statements preceded by or including "continue", “believe”, “commit”, “estimate”, “expect”, “aim”, “influence”, "will” or similar expressions. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control, which could cause our actual results to differ materially from such statements. These statements are based on management’s best assumptions and beliefs in light of the information currently available to them. These forward-looking statements are only predictions based upon our current expectations and views of future events and developments and are subject to risks and uncertainties that are difficult to predict because they relate to events and depend on circumstances that will occur in the future. Factors, including risks and uncertainties that could cause these differences, include those risks and uncertainties identified in the Risk Factors above.

 

 

Proposed organizational changes

 

Proposed organizational changes referenced in this release may be subject to consultation with employee representatives in certain jurisdictions and are not considered final until such processes are completed.

 

28 October 2021   18

 

 

  

Financial tables, unaudited

 

 

 

Financial statement information

 

28 October 2021   19

 

 

Financial tables, unaudited

 

 

 

Consolidated income statement (condensed)

 

    Reported     Comparable  
EUR million   Q3'21     Q3'20     Q1–Q3'21     Q1–Q3'20     Q3'21     Q3'20     Q1–Q3'21     Q1–Q3'20   
Net sales (Notes 2, 3)     5 399       5 294       15 788       15 299       5 399       5 294       15 788       15 301  
Cost of sales1     (3 203 )     (3 331 )      (9 488 )     (9 659 )      (3 194 )      (3 313 )      (9 394 )      (9 516 ) 
Gross profit1 (Note 2)     2 196       1 962       6 300       5 640       2 205       1 981       6 394       5 785  
Research and development expenses1     (1 036 )      (923 )     (3 096     (2 942     (1 007     (880 )     (2 992 )      (2 808 ) 
Selling, general and administrative expenses1     (674 )     (631 )     (2 034 )      (2 121 )      (583 )     (558 )     (1 719 )      (1 820 ) 
Other operating income and expenses1     16       (58 )     248       (134 )     19       (57 )     185       (133 )
Operating profit (Note 2)     502       350       1 418       444       633       486       1 867       1 025  
Share of results of associated companies and joint ventures     (7 )     0       (11 )     2       (7 )     0       (11 )     2  
Financial income and expenses     (50 )     (73 )     (173 )     (134 )     (47 )     (78 )     (138 )     (172 )
Profit before tax     446       276       1 234       311       580       407       1 718       855  
Income tax expense (Note 5)     (95 )     (74 )     (261 )     (124 )     (117 )     (103 )     (341 )     (202 )
Profit from continuing operations     350       203       973       187       463       305       1 377       653  
Profit/(loss) from discontinued operations     1       (6 )     (8 )     (7 )     0       0       0       0  
Profit for the period     351       197       965       180       463       305       1 377       653  
Attributable to                                                                
Equity holders of the parent     342       193       947       170       454       300       1 359       642  
Non-controlling interests     9       4       18       11       9       4       18       11  
                                                                 
Earnings per share, EUR (for profit attributable to equity holders of the parent)                                                                
Basic                                                                
Continuing operations     0.06       0.04       0.17       0.03       0.08       0.05       0.24       0.11  
Profit for the period     0.06       0.03       0.17       0.03       0.08       0.05       0.24       0.11  
Diluted                                                                
Continuing operations     0.06       0.04       0.17       0.03       0.08       0.05       0.24       0.11  
Profit for the period     0.06       0.03       0.17       0.03       0.08       0.05       0.24       0.11  
                                                                 
Average number of shares ('000 shares)                                                                
Basic                                                                
Continuing operations     5 631 572       5 613 580       5 628 367       5 610 724       5 631 572       5 613 580       5 628 367       5 610 724  
Profit for the period     5 631 572       5 613 580       5 628 367       5 610 724       5 631 572       5 613 580       5 628 367       5 610 724  
Diluted                                                                
Continuing operations     5 691 352       5 638 003       5 671 235       5 632 841       5 691 352       5 638 003       5 671 235       5 632 841  
Profit for the period     5 691 352       5 638 003       5 671 235       5 632 841       5 691 352       5 638 003       5 671 235       5 632 841  

    

1In the fourth quarter of 2020, Nokia reclassified certain items of income and expenses from other operating income and expenses to the functions. The comparative reported amounts for Q3’20 and Q1–Q3'20 have been recast accordingly. Refer to Note 1, Basis of preparation.

 

The above condensed consolidated income statement should be read in conjunction with accompanying notes.  

 

28 October 2021   20

 

  

Financial tables, unaudited

 

 

  

Consolidated statement of comprehensive income (condensed)

 

    Reported  
EUR million     Q3'21       Q3'20       Q1–Q3'21       Q1–Q3'20  
Profit for the period     351       197       965       180  
Other comprehensive income                                
Items that will not be reclassified to profit or loss                                
Remeasurements of defined benefit plans     1 850       164       2 942       138  
Income tax related to items that will not be reclassified to profit or loss     (450 )     (33 )     (733 )     (25 )
Items that may be reclassified subsequently to profit or loss                                
Translation differences     347       (582 )     779       (742 )
Net investment hedges     (75 )     156       (154 )     205  
Cash flow and other hedges     (7 )     9       (10 )     45  
Financial assets at fair value through other comprehensive income     (2 )     10       9       45  
Other changes, net     1       0       1       3  
Income tax related to items that may be reclassified subsequently to profit or loss     0       (35 )     1       (58 )
Other comprehensive income/(loss), net of tax     1 664       (311 )     2 835       (389 )
Total comprehensive income/(loss) for the period     2 015       (114 )     3 800       (209 )
                                 
Attributable to:                                
Equity holders of the parent     2 004       (117 )     3 777       (218 )
Non-controlling interests     11       3       23       9  

 

The above condensed consolidated statement of comprehensive income should be read in conjunction with accompanying notes.

 

28 October 2021   21

 

  

 

Financial tables, unaudited

 

 

 

Consolidated statement of financial position (condensed)

EUR million   30 September 2021     30 September 2020     31 December 2020  
ASSETS                        
Goodwill     5 348       5 436       5 074  
Other intangible assets     1 708       2 116       1 953  
Property, plant and equipment     1 807       1 740       1 783  
Right-of-use assets     910       832       805  
Investments in associated companies and joint ventures     219       216       233  
Non-current financial investments (Note 6)     711       660       745  
Deferred tax assets (Note 5)     1 018       4 844       1 822  
Other non-current financial assets (Note 6)     336       385       306  
Defined benefit pension assets (Note 4)     7 602       4 948       5 038  
Other non-current assets     251       211       217  
Non-current assets     19 909       21 387       17 976  
Inventories     2 482       2 745       2 242  
Trade receivables (Note 6)     4 557       4 136       5 503  
Contract assets     1 232       1 380       1 080  
Prepaid expenses and accrued income     872       937       850  
Current income tax assets     301       339       265  
Other current financial assets (Note 6)     277       249       214  
Current financial investments (Note 6)     2 478       796       1 121  
Cash and cash equivalents (Note 6)     6 903       6 836       6 940  
Current assets     19 102       17 417       18 215  
Total assets     39 010       38 805       36 191  
SHAREHOLDERS' EQUITY AND LIABILITIES                  
Share capital     246       246       246  
Share issue premium     425       420       443  
Treasury shares     (352 )     (352 )     (352 )
Translation differences     (673 )     (949 )     (1 295)  
Fair value and other reserves     4 121       1 568       1 910  
Reserve for invested unrestricted equity     15 724       15 655       15 656  
Accumulated deficit     (3 200 )     (1 452 )     (4 143 )
Total capital and reserves attributable to equity holders of the parent     16 292       15 137       12 465  
Non-controlling interests     100       83       80  
Total equity     16 392       15 220       12 545  
Long-term interest-bearing liabilities (Notes 6, 8)     4 524       5 099       5 015  
Long-term lease liabilities     832       719       721  
Deferred tax liabilities     274       219       260  
Defined benefit pension and post-employment liabilities (Note 4)     3 508       4 391       4 046  
Contract liabilities     410       677       566  
Deferred revenue and other long-term liabilities     482       580       541  
Provisions (Note 7)     675       527       736  
Non-current liabilities     10 706       12 212       11 885  
Short-term interest-bearing liabilities (Notes 6, 8)     557       664       561  
Short-term lease liabilities     198       212       189  
Other financial liabilities (Note 6)     791       831       738  
Current income tax liabilities     146       164       188  
Trade payables (Note 6)     3 231       3 167       3 174  
Contract liabilities     2 524       2 598       2 394  
Accrued expenses, deferred revenue and other liabilities     3 686       3 032       3 721  
Provisions (Note 7)     780       705       796  
Current liabilities     11 913       11 373       11 761  
Total shareholders' equity and liabilities     39 010       38 805       36 191  
                         
Shareholders' equity per share, EUR     2.89       2.69       2.22  
Number of shares (1 000 shares, excluding treasury shares)     5 634 554       5 617 060       5 617 496  

 

The above condensed consolidated statement of financial position should be read in conjunction with accompanying notes.

 

28 October 2021   22

 

 

Financial tables, unaudited

 

 

 

Consolidated statement of cash flows (condensed)
EUR million     Q3'21       Q3'20       Q1–Q3'21       Q1–Q3'20  
Cash flow from operating activities                                
Profit for the period     351       197       965       180  
Adjustments     464       544       1 391       1 502  
Depreciation and amortization     274       279       818       853  
Restructuring charges     21       60       169       237  
Financial income and expenses     48       74       171       139  
Income tax expense     95       77       261       126  
(Gain)/loss from non-current investments     (43 )     20       (135 )     48  
Other     69       34       107       99  
Cash from operations before changes in net working capital     815       741       2 356       1 682  
Change in net working capital     (31 )     (211 )     105       (575 )
(Increase)/decrease in receivables     (57 )     48       957       689  
(Increase)/decrease in inventories     (66 )     49       (180 )     68  
Increase/(decrease) in non-interest-bearing liabilities     92       (308 )     (672 )     (1 332 )
Cash from operations     784       530       2 461       1 107  
Interest received     10       8       35       24  
Interest paid     (28 )     (43 )     (150 )     (4 )
Income taxes paid, net     (37 )     (82 )     (207 )     (247 )
Net cash from operating activities     729       413       2 139       880  
Cash flow from investing activities                                
Purchase of property, plant and equipment and intangible assets     (129 )     (97 )     (401 )     (340 )
Proceeds from sale of property, plant and equipment and intangible assets     8       3       56       5  
Acquisition of businesses, net of cash acquired     0       0       (33 )     (104 )
Proceeds from disposal of businesses, net of disposed cash     0       4       0       11  
Purchase of current financial investments1     (1 009 )     (410 )     (1 594 )     (801 )
Proceeds from maturities and sale of current financial investments1     32       9       250       100  
Purchase of non-current financial investments     (13 )     (20 )     (55 )     (44 )
Proceeds from sale of non-current financial investments     111       20       244       77  
Foreign exchange hedging of cash and cash equivalents2     (33 )     21       (38 )     96  
Other     1       (2 )     9       11  
Net cash used in investing activities     (1 032 )     (472 )     (1 562 )     (989 )
Cash flow from financing activities                                
Purchase of a subsidiary's equity instruments     0       2       0       0  
Proceeds from long-term borrowings     2       0       17       1 593  
Repayment of long-term borrowings     0       (19 )     (482 )     (230 )
(Repayment of)/proceeds from short-term borrowings     (13 )     (64 )     (63 )     19  
Payment of principal portion of lease liabilities     (67 )     (60 )     (170 )     (183 )
Dividends paid     (1 )     (3 )     (4 )     (19 )
Net cash (used in)/from financing activities     (79 )     (144 )     (702 )     1 180  
Translation differences2     33       (49 )     88       (145 )
Net (decrease)/increase in cash and cash equivalents     (349 )     (252 )     (37 )     926  
Cash and cash equivalents at beginning of period     7 252       7 088       6 940       5 910  
Cash and cash equivalents at end of period     6 903       6 836       6 903       6 836  

 

1In Q3’21, Nokia changed the presentation of certain financial instruments impacting the cash flows within investing cash flow for Q1-Q3’21 to better reflect the nature of these instruments.

 

2In 2021, Nokia changed the presentation of the cash flows relating to foreign exchange hedging of cash and cash equivalents from translation differences to cash flow from investing activities. The comparative amounts for 2020 have been reclassified accordingly. Refer to Note 1, Basis of preparation.

 

Consolidated statement of cash flows combines cash flows from both the continuing and the discontinued operations. The figures in the consolidated statement of cash flows cannot be directly traced from the statement of financial position without additional information as a result of acquisitions and disposals of subsidiaries and net foreign exchange differences arising on consolidation.

 

The above condensed consolidated statement of cash flows should be read in conjunction with accompanying notes.  

 

28 October 2021   23

 

 

Financial tables, unaudited

 

 

 

Consolidated statement of changes in shareholders' equity (condensed)

                                                             
EUR million   Share capital     Share issue
premium
    Treasury
shares
    Translation
differences
    Fair value
and other
reserves
    Reserve for
invested
unrestricted
equity
    Accumulated
deficit
    Attributable
to equity
holders of
the parent
    Non-
controlling
interests
    Total equity  
1 January 2020     246       427       (352 )     (372 )     1 382       15 607       (1 613     15 325       76       15 401  
Profit for the period     0       0       0       0       0       0       170       170       11       180  
Other comprehensive loss     0       0       0       (577 )     186       0       2       (388 )     (1 )     (389 )
Total comprehensive loss     0       0       0       (577 )     186       0       172       (218 )     9       (209 )
Share-based compensation     0       58       0       0       0       0       0       58       0       58  
Excess tax benefit on share-based compensation     0       (5 )     0       0       0       0       0       (5 )     0       (5 )
Settlement of performance and restricted shares     0       (60 )     0       0       0       48       0       (12 )     0       (12 )
Dividend     0       0       0       0       0       0       0       0       (5 )     (5 )
Acquisition of non-controlling interest     0       0       0       0       0       0       (10 )     (10 )     0       (10 )
Investment in subsidiary by non-controlling interest     0       0       0       0       0       0       0       0       2       2  
Total transactions with owners     0       (7 )     0       0       0       48       (10 )     31       (3 )     28  
30 September 2020     246       420       (352 )     (949 )     1 568       15 655       (1 452     15 137       83       15 220  
                                                                                 
1 January 2021     246       443       (352 )     (1 295     1 910       15 656       (4 143     12 465       80       12 545  
Profit for the period     0       0       0       0       0       0       947       947       18       965  
Other comprehensive income     0       0       0       622       2 211       0       (2 )     2 830       5       2 835  
Total comprehensive income     0       0       0       622       2 211       0       945       3 777       23       3 800  
Share-based compensation     0       75       0       0       0       0