TIDMNOKIA
Nokia Corporation
Stock Exchange Release
18 March 2021 at 8:00 EET
Nokia speeds up transformation to improve profitability
Capital Markets Day 2021
-- Company sets out a three-phased journey to deliver sustainable,
profitable growth and technology leadership.
-- Reiterates its financial outlook for 2021 and provides outlook for 2023.
-- Anticipates comparable operating margin to increase to 10--13% in 2023
and to grow faster than the market in full-year 2023.
-- Launches new company purpose and ways of working.
-- Capital Markets Day presentations will update on key market opportunities,
focus areas and long-term trends.
Today Nokia is holding its Capital Markets Day 2021 and providing 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.
"Nokia is repositioning itself to deliver sustainable, profitable growth,
adapting our business to lead in an increasingly digitalized world. We
have a clear and detailed plan for how we will reset the business,
accelerate competitiveness and scale up our lead in the markets we
choose to play in. This plan will enable us to deliver double-digit
comparable operating margins in 2023," says Pekka Lundmark, President
and CEO of Nokia.
"We have moved away from end-to-end as a cornerstone of our equity story
and have instead put in place four fully accountable, empowered business
groups, arranged according to how customers buy. Each of these business
groups has solid strategies and targets to grow market share and margins
through enhanced technology leadership," he continues.
Nokia sees a number of major trends impacting the industry over the next
few years, with 5G and resulting technologies at their core and creating
opportunities for CSPs, enterprises and webscales.
These trends include next-generation access with fiber-to-the-home and
optimized transport technologies delivering a seamless experience for
consumers in homes and workplaces, enabling a "gigabit society" when
combined with mobile 5G. In addition, connected digital enterprise will
drive massive productivity, efficiency and safety gains across
industries. A result of this will be significant growth in the
Enterprise market.
"5G is still in its early phase. We estimate that the peak of the 5G
market will last roughly twice as long as it did with 4G. So these
trends of next generation access and digital connected enterprise still
have a long way to run. I want Nokia be able to shape them, delivering
best-of-breed products, services and connectivity that allow our
customers to deliver constantly improving performance," says Lundmark.
New company purpose
The world is changing rapidly and facing fundamental challenges.
Pressure on the planet is increasing, productivity is stalling and
access to opportunity remains stubbornly unequal.
Nokia believes technology is central to the solution.
Technology can help to respond to climate change through more efficient
use and re-use of the world's resources. It can be essential for
restoring productivity growth by digitalizing physical industry, and it
can help provide more inclusive access to work, healthcare, markets and
education.
"With that in mind, our new purpose at Nokia is to create technology
that helps the world act together. With our customers, we create the
critical networks that bring together the world's people, machines, and
devices. And everything we do in our business will contribute to this
aim" Lundmark continues.
To deliver on its refreshed purpose, Nokia will strengthen its position
as a trusted partner for critical networks, which underpin more and more
mission-critical functions for businesses and across societies. In
addition, Nokia focuses on technology leadership in each of its
businesses and captures the value shift to cloud and new business models
as critical networks evolve. Nokia also creates value with long-term
research and intellectual property which provide both the technology and
the financial platform for the company to be successful over the long
term.
In addition, Nokia is refreshing its ways of working and promoting a
culture where its people are open to continuous development, fearless to
experiment and empowered to act with clear accountability.
Reset, Accelerate, Scale -- three phases to delivering above market
growth
To deliver on its targets for sustainable growth Nokia has set out a
three-phased approach.
First, an ongoing reset, with focus on securing technology leadership;
implementing the new operating model to reduce complexity and increase
accountability; securing full portfolio competitiveness in Mobile
Networks; resetting its cost base; and renewing the ways of working.
From 2022 onwards the company will accelerate competitiveness and aims
to grow margins through enhanced technology leadership, digitalization
of own operations, automation and capturing emerging opportunities. It
then plans to scale up to drive growth in new use cases and business
models including in enterprise and private wireless in order to grow
faster than the market.
Market development 2020 to 2023
Nokia's total estimated addressable market is expected to grow at a
compounded annual growth rate (CAGR) of approximately 1% from 2020 to
2023, comprising of the following estimates:
-- Mobile Networks estimated 2020 -- 2023 addressable market CAGR, excluding
China, of approximately 1%;
-- Network Infrastructure estimated 2020 -- 2023 global addressable market
CAGR of approximately 2%;
-- Cloud and Network Services estimated 2020 -- 2023 global addressable
market CAGR of 2%.
Financial outlook for 2021 and 2023
Today, Nokia reiterated its financial outlook for 2021 and provided its
outlook for 2023.
Outlook Full year 2021 Full year 2023
Net sales, adjusted for EUR 20.6 billion to Grow faster than the
currency fluctuations(1) EUR 21.8 billion market
Comparable operating
margin(2) 7 to 10% 10 to 13%
Free cash flow(3) Positive Clearly positive
Comparable ROIC(2,4) 10 to 15% 15 to 20%
(1) Assuming continuation of 2020 year-end EUR/USD rate of 1.23.
(2) Comparable measures exclude intangible asset amortization and other
fair value adjustments, goodwill impairments, restructuring related
charges and certain other items affecting comparability.
(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) / (Average
total equity + average interest-bearing liabilities -- average total
cash and current financial investments).
Providing transparency to Nokia's four new business groups
In addition, regarding the underlying assumptions of Nokia's financial
outlook, Nokia updated its outlook assumptions for its four new business
groups and Group Common and Other in 2021, and provided new outlook
assumptions for 2023.
Between 2021 and 2023, each business group is expected to contribute to
shareholder value creation. Each business group is focused on driving
improved focus on capital allocation and technology leadership in 2021,
positioning Nokia to grow profitably in 2022 and beyond. Over time, each
business group is expected to generate a return on capital employed
(ROCE) greater than Nokia's weighted average cost of capital (WACC) of
7%.
Comparable operating margin
Outlook assumptions Full year 2021 Full year 2023
Mobile Networks -1% to +2% 5 to 8%
Network Infrastructure 7 to 10% 9 to 12%
Cloud and Network Services 3 to 6% 8 to 11%
Nokia Technologies >75%* >75%*
*Although we are now providing our outlook assumption for Nokia
Technologies in terms of comparable operating margin, we continue to
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.
Where possible, we have now embedded support function costs directly
into our business groups. Therefore, we expect the net negative impact
of Group Common and Other to decrease, relative to previous levels, to
approximately EUR200 million in 2021 and 2023.
Sustainability
Nokia strongly believes that connectivity and technology will play a key
role in helping to solve many future challenges. Its sustainability
strategy is focused on areas it believes will have the greatest impact
on sustainable development and on its business. To improve people's
lives, it is focusing on climate, integrity and culture:
-- On climate, Nokia recently announced that it is targeting to reduce
emissions by 50% across both its own operations and products in use
between 2019 and 2030. Its new recalibrated Science Based Targets
fulfil its commitment to align with a 1.5degC global warming scenario.
-- On integrity, Nokia has been recognized as one of the world's most
ethical companies by the Ethisphere institute and intends to continue to
strengthen its position.
-- On culture, Nokia wants to prioritize greater inclusion and diversity. As
one example, it is targeting an increase of female hires in global
external recruits.
Updated dividend policy
Today, Nokia also updated its dividend policy. It is 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.
As previously announced, Nokia's Board of Directors did not propose a
dividend or dividend authorization for the financial year 2020. After Q4
2021, the Board will assess the possibility of proposing a dividend
distribution for the financial year 2021 based on the updated dividend
policy.
Speakers and webcast details
Nokia's webcast for investors and analysts will begin on 18 March 2021
at 14:00 EET (Helsinki) / 8:00 EST (New York). Full program and a link
to the webcast is available on the event webpage http://nokia.ly/CMD.
Note: The 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.
About 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.
Investor Enquiries:
Nokia
Investor Relations
Tel. +358 4080 3 4080
Email: investor.relations@nokia.com
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Media Enquiries:
Nokia
Communications
Phone: +358 10 448 4900
Email: press.services@nokia.com
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Katja Antila, Head of Media Relations
Forward-looking statements
It should be noted that Nokia and its businesses are exposed to various
risks and uncertainties and 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 or
benefits related to our strategies, 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 that impact of COVID-19 on our businesses, our
supply chain and our customers' businesses) and any future dividends
including timing and qualitative and quantitative thresholds associated
therewith; C) expectations and targets regarding financial performance,
cash generation, results, the timing of receivables, operating expenses,
taxes, currency exchange rates, hedging, cost savings, 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) expectations, plans or benefits related to changes in organizational
and operational structure; E) expectations regarding competition within
our market, market developments, general economic conditions and
structural and legal change globally and in national and regional
markets, such as China; F) our ability to integrate acquired businesses
into our operations and achieve the targeted business plans and benefits,
including targeted benefits, synergies, cost savings and efficiencies;
G) expectations, plans or benefits related to any future collaboration
or to business collaboration agreements or patent license agreements or
arbitration awards, including income to be received under any
collaboration or partnership, agreement or award; H) timing of the
deliveries of our products and services, including our short term and
longer term expectations around the rollout of 5G, investment
requirements with such rollout, and our ability to capitalize on such
rollout; I) expectations and targets regarding collaboration and
partnering arrangements, joint ventures or the creation of joint
ventures, and the related administrative, legal, regulatory and other
conditions, as well as our expected customer reach; J) outcome of
pending and threatened litigation, arbitration, disputes, regulatory
proceedings or investigations by authorities; K) expectations regarding
restructurings, investments, capital structure optimization efforts,
uses of proceeds from transactions, acquisitions and divestments and our
ability to achieve the financial and operational targets set in
connection with any such restructurings, investments, capital structure
optimization efforts, divestments and acquisitions, including our
current cost savings program; L) expectations, plans or benefits related
to future capital expenditures, reduction of support function costs,
temporary incremental expenditures or other R&D expenditures to develop
or rollout software and other new products, including 5G, ReefShark and
increased digitalization; M) expectations regarding our customers'
future actions, including our customers' capital expenditure constraints
and our ability to satisfy customer's needs and retain their business;
and N) statements preceded by or including "believe", "expect",
"expectations", "deliver", "maintain", "strengthen", "target",
"estimate", "plan", "intend", "assumption", "focus", "continue",
"should", "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, but are
not limited to: 1) our strategy is subject to various risks and
uncertainties and we may be unable to successfully implement our
strategic plans, sustain or improve the operational and financial
performance of our business groups, correctly identify or successfully
pursue business opportunities or otherwise grow our business; 2) general
economic and market conditions, general public health conditions
(including its impact on our supply chains) and other developments in
the economies where we operate, including the timeline for the
deployment of 5G and our ability to successfully capitalize on that
deployment; 3) competition and our ability to effectively and profitably
invest in existing and new high-quality products, services, upgrades and
technologies and bring them to market in a timely manner; 4) our
dependence on the development of the industries in which we operate,
including the cyclicality and variability of the information technology
and telecommunications industries and our own R&D capabilities and
investments; 5) our dependence on a limited number of customers and
large multi-year agreements, as well as external events impacting our
customers including mergers and acquisitions and the possibility of our
customers awarding business to our competitors; 6) our ability to
maintain our existing sources of intellectual property-related revenue
through our intellectual property, including through licensing,
establishing new sources of revenue and protecting our intellectual
property from infringement; 7) our ability to manage and improve our
financial and operating performance, cost savings, competitiveness and
synergies generally, expectations and timing around our ability to
recognize any net sales and our ability to implement changes to our
organizational and operational structure efficiently; 8) our global
business and exposure to regulatory, political or other developments in
various countries or regions, including emerging markets and the
associated risks in relation to tax matters and exchange controls, among
others; 9) our ability to achieve the anticipated benefits, synergies,
cost savings and efficiencies of acquisitions; 10) exchange rate
fluctuations, as well as hedging activities; 11) our ability to
successfully realize the expectations, plans or benefits related to any
future collaboration or business collaboration agreements and patent
license agreements or arbitration awards, including income to be
received under any collaboration, partnership, agreement or arbitration
award; 12) Nokia Technologies' ability to protect its IPR and to
maintain and establish new sources of patent, brand and technology
licensing income and IPR-related revenues, particularly in the
smartphone market, which may not materialize as planned, 13) our
dependence on IPR technologies, including those that we have developed
and those that are licensed to us, and the risk of associated
IPR-related legal claims, licensing costs and restrictions on use; 14)
our exposure to direct and indirect regulation, including economic or
trade policies, and the reliability of our governance, internal controls
and compliance processes to prevent regulatory penalties in our business
or in our joint ventures; 15) our reliance on third-party solutions for
data storage and service distribution, which expose us to risks relating
to security, regulation and cybersecurity breaches; 16) inefficiencies,
breaches, malfunctions or disruptions of information technology systems,
or our customers' security concerns; 17) our exposure to various legal
frameworks regulating corruption, fraud, trade policies, and other risk
areas, and the possibility of proceedings or investigations that result
in fines, penalties or sanctions; 18) adverse developments with respect
to customer financing or extended payment terms we provide to customers;
19) the potential complex tax issues, tax disputes and tax obligations
we may face in various jurisdictions, including the risk of obligations
to pay additional taxes; 20) our actual or anticipated performance,
among other factors, which could reduce our ability to utilize deferred
tax assets; 21) our ability to retain, motivate, develop and recruit
appropriately skilled employees; 22) disruptions to our manufacturing,
service creation, delivery, logistics and supply chain processes, and
the risks related to our production sites; 23) the impact of litigation,
arbitration, agreement-related disputes or product liability allegations
associated with our business; 24) our ability to re-establish investment
grade rating or maintain our credit ratings; 25) our ability to achieve
targeted benefits from, or successfully implement planned transactions,
as well as the liabilities related thereto; 26) our involvement in joint
ventures and jointly-managed companies; 27) the carrying amount of our
goodwill may not be recoverable; 28) uncertainty related to the amount
of dividends and equity return (if any) we are able to distribute to
shareholders for each financial period; 29) pension costs, employee
fund-related costs, and healthcare costs; 30) our ability to
successfully complete and capitalize on our order backlogs and continue
converting our sales pipeline into net sales; 31) risks related to
undersea infrastructure; and 32) the scope and duration of the COVID-19
impact on the global economy and financial markets as well as our
customers, supply chain, product development, service delivery, other
operations and our financial, tax, pension and other assets, and the
shape of the economic recovery following the pandemic as well as the
risk factors specified in our 2020 annual report on Form 20-F published
on March 4, 2021 under "Operating and financial review and
prospects-Risk factors" and in our other filings or documents furnished
with the U.S. Securities and Exchange Commission. Other unknown or
unpredictable factors or underlying assumptions subsequently proven to
be incorrect could cause actual results to differ materially from those
in the forward-looking statements. We do not undertake any obligation to
publicly update or revise forward-looking statements, whether as a
result of new information, future events or otherwise, except to the
extent legally required.
(END) Dow Jones Newswires
March 18, 2021 02:15 ET (06:15 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.
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