Nokia quarterly operating profit lags expectation as margin drops

STOCKHOLM (Reuters) -Nokia on Thursday reported quarterly operating profit below market expectations even as the Finnish telecom equipment maker continues to benefit from strong demand from phone companies as they roll out 5G.

Third-quarter comparable operating profit rose to 658 million euros ($643.3 million) from 633 million last year, lagging the 690.6 million euro mean forecast of 10 analysts polled by Refinitiv.

While increasing macro and geopolitical uncertainty could have an impact on some customers’ capex spending, Nokia expects growth on a constant currency basis in its markets in 2023, Chief Executive Officer Pekka Lundmark said.

“Considering our recent success in new 5G deals in regions like India which are expected to ramp up strongly in 2023, we believe we are firmly on a path to outperform the market and to make progress towards achieving our long-term margin targets,” he said.

Net sales grew 6% in constant currency in the quarter compared to the same period a year ago to 6.24 billion euros, beating estimates of 6.06 billion.

But the comparable operating margin fell year-on-year to 10.5% from 11.7% as improving profitability in Mobile Networks and Network Infrastructure was offset by timing effects of contract renewals in Nokia Technologies, the company said.

Rival Ericsson also posted weaker-than-expected core earnings on Thursday.

Nokia’s share price is down some 15% year-to-date, outperforming Ericsson’s 28% drop and in line with European telecoms stocks which on average are down 15% in 2022.

($1 = 1.0229 euros)

(Reporting by Supantha Mukherjee in Stockholm and Stine Jacobsen in Copenhagen, editing by Terje Solsvik)