Q4 2024 Nokia Oyj Earnings Call - Pre-Recorded
<unk> head of Investor Relations and joining me here from Expo as Pekka Lundmark, our president and CEO.
Please note that in this video we will be focusing on discussing our financial performance on a constant currency basis regarding growth rates and on a comparable basis for profit and margins full reconciliation tables to our eye for S. Financials are published in our Q4 financial report with that let's get started.
Speaker Change: Pekka you saw a very strong quarter to end 'twenty 'twenty four what were the highlights.
Pekka: Thank you David if that's indeed being a very strong finish to the year with net sales growing 9% in the quarter.
Speaker Change: We saw growth in both network infrastructure and cloud and network services.
Speaker Change: Nokia technologies grew strongly unsigned numerous deals in the quarter in mobile networks. After a challenging 12 months. The business is now showing signs of stabilizing.
Speaker Change: We also delivered an excellent quarter in terms of profitability with a comparable operating margin of 19.1%.
Speaker Change: This is the highest margin Nokia has achieved in a very long time.
Speaker Change: This meant we achieved operating profit for the full year of $2 6 billion Euro right at the midpoint of our guidance of two points related to your point 9 billion.
Speaker Change: We also had a strong cash performance generating 2 billion euro of free cash flow and finishing the year with a net cash position of $4 9 billion Euro even after returning $1 4 billion euro to shareholders through buybacks and dividends. So overall, a very positive finish to the year.
Speaker Change: Given the strong cash performance that you highlighted pekka what does Nokia planned to do with that cash.
Speaker Change: I'm pleased that our strong cash position means that the board can propose to the annual general meeting an increase in the dividend to <unk> 14 cents per share in respect of financial year 2024.
Speaker Change: We also continue to execute on the buyback related to offsetting the dilution of the expected Infinera acquisition.
Speaker Change: We remain committed to managing our cash position to achieve our target of 10% to 15% net cash as a proportion of annual net sales and after the Infinera acquisition closes we should move closer to that range.
Speaker Change: And if we now turn to the business groups and their performance in the fourth quarter quite as network infrastructure do.
Speaker Change: Improving net sales trend we saw in Q3 further strengthened in Q4 network infrastructure net sales grew 17% in the fourth quarter.
Speaker Change: IP networks had a standout performance growing 24%, primarily driven by North America and strong demand from Csp's.
Speaker Change: Fixed networks grew by 16% with most regions growing and a notable contribution from India.
Speaker Change: Optical networks grew 7% as the improving trends already seen elsewhere also became more visible in optical.
Speaker Change: In addition to the strong growth we saw record high operating margin in network infrastructure of 19, 6% in the quarter, which is 420 basis points above the prior year.
Speaker Change: And you already mentioned earlier, the Infinera acquisition, how is that progressing.
Speaker Change: We have been making good progress with the required approvals you may have seen that we filed with the European Union last week and assuming we achieve the target there timelines. We now expect the deal to close during the first quarter of 2025.
Speaker Change: And if we move on to mobile networks, how did that business perform in the fourth quarter.
Speaker Change: Mobile networks net sales declined by 2% in the quarter. We are now seeing the sales trend stabilize as we have annualized some of the most challenging comparisons in India.
Speaker Change: In the quarter there was growth in both North America and Europe, while the other regions declined.
Speaker Change: Gross margin remained strong at 38% and operating margin was seven 7% in the quarter.
Speaker Change: It's also worth mentioning that we had very good commercial momentum in 2024.
Speaker Change: On a net basis, we won deals that represent an increase of 18000 base station sites.
Speaker Change: The strength of our products are being well recognized in the market and we are winning deals while maintaining our pricing discipline.
Speaker Change: And if we turn to your cloud and network services, maybe you could comment on how that business did in the quarter and also the rapid acquisition that was announced.
Speaker Change: Yes. It was it was great to see cloud and network services deliver 7% net sales growth. Despite a four percentage points headwind from a business disposal earlier in the year.
Speaker Change: This was driven by a combination of growth in core networks, along with strong growth in our enterprise campus edge business.
Speaker Change: The fourth quarter saw the acquisition of rapid technology assets and this will bolster our R&D capacity and network is code and increase our developer access.
Speaker Change: We already have 48 partners for our network is called platform and taken together with our autonomous networks applications wait we are leading the industry in enabling operators fully automate and monetize their networks.
Speaker Change: And in Nokia Technologies, you had very strong growth in the fourth quarter what drove this.
Speaker Change: Nokia technologies had indeed, a very strong quarter, we signed several new deals, including with the mobile devices vendor transition as well as deals related to our multimedia portfolio with both HP and Samsung.
Speaker Change: The run rate for Nokia technologies has increased from approximately $1 3 billion Euro and is now between one three and $1 4 billion Euro.
Speaker Change: This is a positive step as we progress towards our mid term target of 1.4 to $1 5 billion Euro.
Speaker Change: So we've discussed in detail the financial performance in the fourth quarter, but maybe we can take a step back are there any strategic callouts you'd like to highlight from the full year 2024, well, yes. It has been a pretty eventful year for Nokia and I've been really pleased with the many steps we have taken to further execute against our strategy.
Speaker Change: Operationally that's been good to see the demand in most of our end markets stabilize and improve particularly network infrastructure, where we returned to strong growth in the second half. This leaves us much more optimistic as we enter 2025.
Speaker Change: We have also taken some important steps with the sale of summary networks and the Infinera acquisition.
Speaker Change: These steps will reshape our N I portfolio and give us three very strong pillars on which to build in the future.
Speaker Change: The other area, where we have made significant progress in diversifying our sales and growth in markets, such as data Center defense and private wireless.
Speaker Change: We are starting to get much stronger recognition and traction in the data center market with important deals in Q4, with Microsoft and scale, along with go to market partnerships with kindred and Lenovo.
Speaker Change: Considering the opportunity and momentum we see we have decided to accelerate our investment into the data center space and IP networks, and we will now spend up to an additional 100 million euro in annual operating expenses with the goal of driving 1 billion euro of incremental sales by 2028.
Speaker Change: Also in private wireless we continue to have very good momentum and we now have 850 customer centricity.
Speaker Change: Yes.
Speaker Change: Sure.