Nokia Sees Rise in Net Profit Despite Sales Drop Amid India Slowdown
Finnish telecoms equipment maker Nokia has reported a 32-percent increase in net profit for the third quarter, despite experiencing an eight-percent drop in sales. The company’s net profit rose to 175 million euros, driven by improved product mix, regional mix, and reduced product costs.
According to Nokia’s chief executive, Pekka Lundmark, the company is “now turning the corner in many parts of our business, even if some continue to experience market weakness.” However, the recovery of net sales is happening slower than expected, with sales growth offset by a decline in Mobile Networks primarily in India.
Nokia’s sales for the third quarter stood at 4.3 billion euros, lower than forecast by analysts surveyed by Bloomberg. The company has maintained its operating profit outlook at between 2.3 billion to 2.9 billion euros.
Atte Riikola, an analyst with Finnish market research firm Inderes, notes that Nokia’s earnings development was mostly in line with expectations, with a few exceptions. Riikola attributes the drop in net sales to a slower-than-expected market recovery, stating that “Nokia’s net sales have been declining for one year, and now minor recovery was expected, but net sales still came down.”
The analyst also warns that next year will be tough for Nokia due to challenges in the network business. “At this point, the expectation is that earnings will not grow next year,” Riikola says.
The slowdown in India has not only affected Nokia but also other major telecoms equipment manufacturers, including Sweden’s Ericsson and China’s Huawei. The companies have faced a decline in investment from their customers, telecom operators, and slackening growth in India. Ericsson posted a four-percent drop in sales for the third quarter, while Nokia announced plans to cut up to 14,000 jobs last year due to weakening demand in the United States.
As the demand for 5G equipment slows, Nokia and Ericsson are cutting costs and jobs to stay afloat. Riikola notes that it will be a tough market to maintain growth in for many years, highlighting the need for these companies to adapt and innovate in response to changing market conditions.
