By Dominic Chopping


Nokia cut its full-year sales expectations as the market remains uncertain, with telecom operators continuing to hold back on investing in new network equipment.

The Finnish telecommunications company doesn't provide specific group sales guidance but instead offers sales growth assumptions across its business units, which are all now seen at a weaker level than earlier as the expected net sales recovery is happening later than previously hoped.

However, the company said Thursday that comparable operating profit guidance of 2.3 billion euros to 2.9 billion euros ($2.52 billion-$3.17 billion) this year remains intact, tracking toward the mid-point or slightly below the mid-point.

"We believe the industry is stabilizing and given the order intake seen in recent quarters we expect a significant acceleration in net sales growth in the second half," said Chief Executive Pekka Lundmark.

High inflation and rising interest rates have seen network operators spend cautiously over the last couple of years, but orders have slowly ticked higher over the last couple of quarters and the trend is continuing, particularly in network infrastructure, it said.

Nokia, like its Swedish rival Ericsson, has struggled to replace the strong revenue, high-margin contracts they enjoyed in North America early in the 5G cycle. When work in the region dried up, India became the main revenue generator, but work there attracted much lower margins and sales have now also slowed sharply.

Overall, sales at Nokia's key mobile networks business fell 25% on year, mainly due to the sharp drop in India, but the company got a EUR150 million boost from a contract settlement with AT&T.

Late last year the U.S. operator awarded a major network contract to Ericsson, replacing Nokia equipment. Nokia had contracts with AT&T and the Finnish company said it will still receive the value of those contracts while remaining a significant customer through other deals.

Network infrastructure sales declined 11% on the year, but Nokia said the unit has returned to growth in North America, which is important as it was one of the first markets to experience the 2023 market slowdown.

"With the challenges of 2023 behind us, and more normalized customer inventory levels, we believe we can now look forward to a stronger second half and a return to growth [in network infrastructure], which we expect to continue into 2025," Lundmark said.

The company reported an operating margin of 8.7% in its mobile networks unit and it now expects to report a margin of between 4% and 7% in 2024, from 1% to 4% previously. It reported a margin of 6.4% in network infrastructure and still expects a margin of between 11.5% and 14.5% this year.

Group comparable net profit fell 21% to EUR325 million in the second quarter, beating a FactSet estimate of EUR280 million. Sales fell 18% to EUR4.47 billion, missing consensus at EUR4.78 billion.

Improving cash generation means Nokia now intends to accelerate its continuing EUR600 million buyback program with the view to completing it by the end of this year, compared to its previous end-of-2025 target, it said.


Write to Dominic Chopping at dominic.chopping@wsj.com


(END) Dow Jones Newswires

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