Thursday 6 February 2020 9:40 am

Nokia investors must wait longer for dividend despite profit rise

Nokia posted a surprise profit rise for the end of 2019 today, as cost-cutting helped it navigate a “challenging” year in which it slashed its outlook and cancelled its dividend.

Read more: Nokia shares plummet as it cuts profit outlook amid tough 5G competition

The figures

Net sales were flat at €6.9bn in the three months to the end of December. 

But Nokia managed to eke out a rise in underlying earnings to €0.15 per share, up from €0.13 a year ago, to beat a Refinitiv poll of economists’ predictions.

Operating profit also inched up one per cent year on year to €1.13bn. And the Finnish telecom giant also hiked its profit margin by 10 basis points to 16.4 per cent.

But net cash sank 43 per cent to €1.73bn.

The telco’s shares rose three per cent in early trading.

Why it’s interesting

“Our fourth quarter was a strong end to a challenging year,” Nokia boss Rajeev Suri told press today.

It came after Nokia severely downgraded its outlook last October and cancelled its dividend. It admitted it needed to invest more heavily in 5G. That knocked shares down more than 20 per cent.

In its latest quarter, the company’s networks division posted a three per cent jump in net sales to €163m, but Nokia’s software, technologies and other divisions all slumped compared to last year.

North America and Europe both posted a fall in sales at the end of 2019. But it posted a 16 per cent sales rise in Asia-Pacific and a 10 per cent jump in the Middle East.

Nokia also said it plans to resume dividend payments once its net cash position hits €2bn. Currently it stands at €1.7bn.

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But Suri warned that may not happen in 2020. “Given typical cash seasonality, we would not expect to reach that level in the first three quarters of this year,” he said.

“Should we exceed the €2bn level after that point, the board will assess the possibility of proposing a dividend distribution for financial year 2020.”

Nokia reiterated its 2020 forecast of €0.20 to €0.30 underlying earnings per share for 2020. It hit  €0.22 in 2019.

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Meanwhile, the company expressed hesitancy on China’s market and excluded it from its forecast after sales there plunged 25 per cent in the fourth quarter.

“We have decided to exclude China, given that pursuing market share in China presents significant profitability challenges and the region has some unique market dynamics,” Nokia confirmed.

What Nokia said

President and CEO Rajeev Suri said:

When I look at Nokia’s full-year 2019 performance, we saw good progress in our strategic focus areas of enterprise and software. Nokia Enterprise delivered exceedingly well on its target of double-digit sales growth, considerably outpacing the market. Nokia Software showed its long-term promise, with exceptional profitability expansion compared to 2018. In addition, IP Routing continued its remarkable momentum, gaining significant share and increasing profitability in a difficult market; and Nokia Technologies continued to generate robust profitability.

We recognise, however, that we have faced challenges in Mobile Access and in cash generation. We will have a sharp focus on these two areas over the course of 2020, which we believe to be a year of progressive improvement as the actions we have underway start to deliver results.

Our Board said it expects to resume dividend distributions after Nokia’s net cash position increases to approximately €2bn. Given typical cash seasonality, we would not expect to reach that level in the first three quarters of this year.

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