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2020-04-30

Nokia makes little profit in the face of disruption of supply

Image:-Nokia lumia

Nokia Oyj (NOKIA.HE) made a small profit in the first quarter, backed by demand for its new high-margin 5 G telecommunications equipment, and forecast a strong second half of the year, sending higher shares.

The Finnish company said the bulk of the impact on coronavirus will be felt during the current quarter. Its revenue slipped 2 percent in the first three months of the year as it took a hit of approximately €200 million ($217 million) largely due to the pandemic disrupting supply from China operations.

Nokia, battling with China's Huawei and Sweden's Ericsson (ERICb. ST), is trying to reinforce its 5 G slate and is particularly looking for growing deployment by U.S. telecom firms.

In the first quarter, Ericsson and Huawei both increased their revenue, helped by a strong demand as telecom services help keep businesses working remotely during the pandemic.

Nokia expects a seasonally strong second half when it will have new leadership as former energy group Fortum executive Pekka Lundmark (FORTUM.HE) is due to replace chief executive Rajeev Suri in September.

It cut its full-year earnings forecast from 25 cents to 23 euro cents, but the company's shares grew by 0900 GMT by 2.7 per cent.

China was a weak spot for Nokia, but CEO Suri said the company won a 10 per cent share of China Unicom's 5 G core network order, with Huawei and ZTE (000063.SZ) taking most of the order.

"We're China Unicom's only foreign supplier for the 5 G core," Suri told Reuters in an interview.

Nokia has won no 5 G radio contracts in recent bidding rounds from Chinese telecom companies-China Mobile, China Unicom and China Telecom-according to media reports.

According to Refinitiv data, Nokia reported revenues falling to 4.9 billion euros in January-March, missing the 5.1 billion euro consensus figure.

"In the first quarter, we were not seeing a decline in demand. However, as the COVID-19 situation develops, there is a possibility of increasing supply and delivery challenges in a number of countries and some customers may reassess their spending plans, "Suri said in a statement.

According to Refinitiv data based on 10 analysts, Nokia generated 1 per cent underlying profit per share in the first quarter, broadly matching analyst forecasts. In the same period last year it had posted a loss of 2 cents per share.

Nokia, which axed its dividend following a profit warning last October, tried to tackle shipment costs and delays and pointed to progress for its new 5 G ReefShark equipment.

"As expected, due to the pandemic new uncertainties have been added to the outlook but resolving the internal problems of the company appears to be progressing on schedule," Inderes analyst Mikael Rautanen wrote in a note.