BARCELONA, SPAIN – FEBRUARY 26: A logo is illuminated on the Nokia booth during Mobile World Congress 2024 on February 26, 2024 in Barcelona, Spain. (Photo by Xavi Torrent/Getty Images)
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Shares of the Finnish telecommunications company Nokia plunged on Thursday after the corporate reported a 32% drop in second-quarter operating profit as a result of weak demand for its 5G equipment.
The company’s Helsinki-listed shares had fallen 8 percent at 9 a.m. London time, shortly after the stock market opened.
Previously, Nokia said Comparable operating profit fell to 423 million euros (462 million dollars) within the second quarter, down almost a 3rd from 619 million euros in the identical period last yr.
Citing “ongoing market weakness,” the corporate said net revenue also fell 18% to €4.47 billion – the bottom for the reason that fourth quarter of 2015, in response to LSEG data.
“The biggest impact was the challenging comparison period of the previous year, when the rapid 5G expansion in India reached its peak. India accounted for three quarters of the decline,” Nokia CEO Pekka Lundmark said this within the earnings announcement.
The environment also stays “difficult as operators remain cautious in the mobile network sector,” he warned.
Nevertheless, based on last quarter’s order intake, Nokia forecasts a “stabilizing” industry environment and a “significant acceleration in net sales growth in the second half of the year.”
“Although momentum is improving, net sales are recovering somewhat later than we previously expected, which impacts our assumptions for business group net sales for 2024,” said Lundmark. “Nevertheless, we remain on track to achieve our full-year guidance, supported by our rapid cost reduction actions.”
The company continues to focus on a full-year result near or just under the midpoint of its comparable operating profit forecast of EUR 2.3 to 2.9 billion.
The lack of a crucial North American contract at the tip of last yr was a significant blow for Nokia. The US telecommunications giant AT&T had chosen Ericsson as a supplier to construct a telecommunications network that exclusively uses the so-called ORAN technology.
The Finnish company and its Swedish rival Ericsson have launched drastic cost-cutting programs as a part of an industry-wide battle against a slowing economy and cuts in infrastructure spending by mobile operators. Back in October, Nokia announced it will cut as much as 14,000 jobs after a slump in third-quarter profits with a purpose to reduce its gross costs by between 800 million and 1.2 billion euros by 2026.
The company announced on Thursday that it had made “significant progress” in its cost-saving program and implemented measures which can be expected to end in cost reductions of 400 million euros to this point.
— CNBC’s Arjun Kharpal contributed to this report.
