BARCELONA, SPAIN – FEBRUARY 26: The logo is illuminated at the Nokia booth at the Mobile World Congress 2024 in Barcelona, Spain on February 26, 2024. (Photo by Xavi Torrent/Getty Images)
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Finnish telecommunications company shares Nokia The shares fell sharply on Thursday after the company reported a 32% drop in second-quarter operating profit due to weak demand for 5G equipment.
The company’s Helsinki-listed shares were down 8 percent as of 9 a.m. London time, shortly after the market opened.
On the same day, Nokia Said Comparable operating profit for the second quarter fell to 423 million euros ($462 million), down nearly a third from 619 million euros in the same period last year.
Citing “continued market weakness,” the company also said net sales fell 18 percent to 4.47 billion euros, the lowest level since the fourth quarter of 2015, according to LSEG data.
“The biggest impact was the challenging quarter last year that coincided with the peak of India’s rapid 5G rollout, with India accounting for three-quarters of the decline.” Nokia CEO Pekka Lundmark said in the earnings call:
Similarly, it warned that the situation remains tough in the mobile network sector as operators continue to adopt a cautious stance.
Still, Nokia expects the industry environment to “stabilize” based on recent quarterly orders and that “net sales growth will accelerate significantly” in the second half of the year.
“Although the situation is improving, the recovery in net sales is somewhat slower than initially expected, which has an impact on our operating group net sales assumptions for 2024,” Lundmark said. “Nevertheless, our rapid actions to reduce costs keep us on track to achieve our full-year guidance.”
The company continues to target a full-year operating profit performance close to or just below the midpoint of its guidance of 2.3 billion to 2.9 billion euros.
Nokia was hit hard late last year when US telecoms giant AT&T lost a major contract in North America. Ericsson as a supplier of telecommunications network construction It uses only so-called ORAN technology.
The Finnish company and Swedish rival Ericsson have embarked on deep cost-cutting programs amid a slowing economy and an industry-wide battle against cuts in infrastructure spending by mobile operators. In October Nokia Up to 14,000 jobs could be cut After a sharp drop in third-quarter profits, the company is aiming to cut total costs by between 800 million and 1.2 billion euros by 2026.
The company said on Thursday it had made “significant progress” on its cost-cutting plans, taking steps so far aimed at cutting costs by 400 million euros.
— CNBC’s Arjun Karpal contributed to this report.
