KIANEWS Nokia shares rise in China
07. 08. 2020 Friday / By: Robert Denes / Business / Exact time: BST / Print this page
The rise in Nokia shares, as seen by several sources, is on the rise in China. Nokia’s stock rose 15% as the telecom maker issued full-year guidelines after announcing unexpected second-quarter earnings growth.
According to the Finnish telecom manufacturer, its net profit for the quarter increased by 21% to 311 million euros, despite a 11% drop in sales to 5.1 billion euros due to better-than-expected profitability improvement. The decline in sales was chosen by the impact of Covid-19 and the company’s decision to take a more prudent approach to closing deals in China.
He claimed that the coronavirus epidemic had a negative impact of € 300 million on net sales for the quarter, but most of these sales were expected to be postponed rather than lost. Nokia has struggled to secure 5G contracts from Chinese telecom companies, but reached an agreement in June to hand over about 10% of China Unicom’s core network. The ‘high level of competition’ and prudent approach has led to a capture of market share, with sales in China falling by 41%. In addition to Huawei and Ericsson Ericsson, Nokia is the three main providers of 5G networks. The Finnish company said it had made 83 5G deals. Read: Nokia can take advantage of 5G releases. And the stock is cheap Proactive steps to reduce the volume of the “low-margin services business” can also drive sales. The increase in gross and operating profit margins, which led to a surprising increase in earnings, was driven by the strength of the mobile access segment, driven by better costs for 5G products. Gross margin of 39.6% exceeds analysts ’estimates of 36%.Underlying earnings rose to € 0.06 per share from € 0.05 a year earlier, despite the company warning that the virus would cause a weak second quarter. According to the company, adjusted earnings per share for 2020 are € 0.20-0.30, based on the original forecast of € 0.18 to € 0.28.
Looking ahead. Outgoing CEO Rajeev Suri welcomes his successor, Pekka Lundmark, who is scheduled to take over this weekend. The new boss still has a job on his hands and wants to return to increase sales and improve market share. The reluctance of some governments to buy Huawei equipment will help both Nokia and Ericsson - both of which have said they are ready to take action in the UK to comply with the ban on the Chinese company.Based on Nokia management projections, analysts predict EPS of $0.03 on revenue of $5.70 billion. Nokia EPS in the same period a year ago totaled $0.06. Sales were $6.49 billion. The Wall Street estimate would represent a 50.0% decline in the company's earnings. Revenue would be down 0.87% on a year-over-year basis.
"We do not mind trading poor revenue which doesn't have high quality margin for better revenue," outgoing chief executive Rajeev Suri told Reuters.
Nokia said its underlying earnings in April through June rose to 0.06 euros per share from 0.05 euros a year ago, beating the 0.03 euros consensus in a Refinitiv poll. Nokia, which had warned of a weak second quarter due to the virus, raised its forecast for 2020 underlying earnings per share to between 0.20 and 0.30 euros, from 0.18-0.28 euros. Quarterly revenue fell 11% to 5.09 billion euros, below a consensus figure of 5.28 billion, Refinitiv Eikon data showed. Most of the drop was due to the effects on the economy of COVID-19, but Suri also cited a sharp decline in China based on a "prudent approach" in that market, and proactive steps to reduce low-margin services business, though he didn't say what the latter consisted of. Nokia lowered its outlook for its market share in its main markets, measured by revenue, to underperform from its previous guidance of performing in line with rivals. Suri's successor Lundmark still faces key decisions on finding a balance between improving profitability and defending Nokia's market share, which currently makes it number two behind China's Huawei but ahead of Sweden's Ericsson when measured by revenue. "While the improvement in profitability from extremely low levels is clearly very encouraging, we are unsure on how much further Nokia can take such an improvement when sales are coming under significant pressure," Liberum analyst Janardan Menon said. Ericsson had reported a rise in 5G network sales and software revenue two weeks ago. Suri steps down after more than a decade in charge of Nokia and Nokia Siemens Networks. The leadership change comes as turbulence prevails in European telecoms markets, with increasing pressure from some governments for operators to exclude or limit the use of 5G equipment from Huawei. Via Link