Nokia beats fourth-quarter estimates amid ‘robust’ demand

NOKIA Oyj reported better-than-expected earnings, saying demand “remains robust” even amid a weaker macro-economic backdrop with phone carriers set to take a more cautious approach to spending on 5G networks.

Adjusted operating profit rose 27% to €1.15 billion ($1.3 billion) for the fourth quarter, the Espoo, Finland-based mobile network company said in a statement on Thursday. That compares to an average analyst estimate of €946 million, according to a Bloomberg survey. Adjusted earnings per share came to 16 cents, more than estimated by analysts.

“We said at the start of 2022 that it would be a year of acceleration and we delivered what we promised,” Chief Executive Officer Pekka Lundmark said in the statement. “We expect another year of growth.”

Shares of Nokia gained as much as 7.2% to €4.52 in Helsinki on Thursday, the most since July.

The growing economic headwinds have continued to pressure 5G equipment vendors, with sales shifting toward lower-margin markets like India and spending at US carriers declining. Last week, competitor Ericsson AB reported a bigger-than-expected drop in earnings after some of its major customers for 5G networks pulled back on spending, citing an uncertain economic environment.

“Supply chain obviously was an issue, especially when it came to semiconductors and that is not anymore a constraint,” Lundmark said in an interview. “The situation has pretty much normalized. The thing that has not yet normalized is lead times, which are unusually long, and that has a direct connection to our net working capital.”

Earlier in the week Nokia had announced a multi-year cross-license patent agreement with Samsung Electronics Co. that lets the handset maker use Nokia’s technology in its products in exchange for royalties. The new agreement followed the expiration of the companies’ previous intellectual property contract.

On Thursday, Nokia said that a long-term licensee exercised an option to extend its license into perpetuity at the end of the year.

Nokia said its operating margin would be 11.5% to 14% this year, compared with 12.5% in 2022, on a comparable basis. Sales are expected to rise to as much as €26.5 billion this year, it said. Analysts in a Bloomberg survey forecast average net sales of €25.4 billion.

“We started the year with a with a strong backlog, which actually one could argue in relative terms is even stronger than the backlog that we had a year ago,” Lundmark said in the interview. –BLOOMBERG