Change in net sales at constant currency excludes the effect of changes in exchange rates in comparison to euro, our reporting currency. Manufacturing, supply chain and logistics, Cloud operations, management and orchestration, North America government relations and public affairs, Airtel and Nokia to collaborate on Industry 4.0 applications for enterprises, New consortium to develop a 5G and beyond strategic roadmap for future European connectivity systems and components, Live-stream: Network insights in the time of COVID-19 and beyond, Amortization of acquired intagible assets, Nokia and the United Nations Sustainable Development Goals, Our portfolio – energy efficient and climate-driven, Governmental and multilateral organizations, 2020 Ada Lovelace Honoree Anne Lee “Pioneering Software Engineer” in telecommunications technology, 2020 Ada Lovelace Honoree Paola Galli “Need for Speed” in the field of Silicon Photonics, Dr. Katherine Guo, Nokia’s 2019 Ada Lovelace Honoree. We continue to work closely with all our customers, to ensure that the changing needs and requirements at this time are well understood and that we respond appropriately to them. Nokia's new organizational structure places the company in a forward moving competitive environment. Capital structure affects a company’s overall value through its impact on operating cash flows and the cost of capital. Networks and Nokia Software are expected to be influenced by factors including: Nokia Technologies is expected to be influenced by factors including: Additionally, our outlook is based on the following assumptions: ANALYST CONFERENCE CALL Nokia's analyst conference call will begin on July 31, 2020 at 3 p.m. Finnish time. Nokia Enterprise also grew year-on-year constant currency sales by 18% compared to one year ago and expanded margins. If the capital structure of a company is with greater weightage on preference shares and debentures, the earnings leftover after paying fixed charges of dividend and interest on preference shares and debentures respectively will be claimed by relatively a smaller section of equity shareholders. During Q2 2020, net cash increased by approximately EUR 0.2 billion, resulting in an end-of-quarter net cash balance of approximately EUR 1.6 billion. We have in place strict protocols for Nokia facilities and provided clear advice to our employees about how they can mitigate the risks of COVID-19 in situations where they have to go about critical work. There was not much change in the capital structure during the three years apart from a buy-back and cancellation of shares that were owned by the company during 2008 and 2009 respectively. “Capital structure is the combination of debt and equity securities that comprise a firm’s financing of its assets.”—John J. In Q2 2020, we estimate that COVID-19 had an approximately EUR 300 million negative net impact on our net sales; with the majority of these net sales expected to be shifted to future periods, rather than being lost. The company has initiated yet another restructuring. In 1996, it launched the world’s first smartphone, the Communicator, and was also responsible for Nokia’s first camera phone in 2001 and its second-generation smartphone, the innovative 7650. Investors should not rely on summaries of our financial reports only, but should review the complete financial reports with tables. 1473 0 obj <<4174319d38fa7d275aa9b013ae7eb07b>]>>stream This is my last quarterly announcement as CEO of Nokia and I want to close with a note of thanks: thanks to our shareholders, thanks to our customers, thanks to our many other stakeholders, and a particular thanks to the great employees of Nokia. You have constantly made me proud and I expect that you will continue to do so in the many years to come. Tommi Uitto, President of Mobile Networks at Nokia, said: "Nokia is committed to leading the open mobile future by investing in Open RAN and Cloud RAN … Strong capital structure and prudent financing strategy 27. Expressed as a formula, capital structure … x�cd```d`~$X� �@�u7�`� $8�202� ����,\ ���[g�1��^�s�����cը��@RZ4�J5߲�&�C�jY��ɞv9*���cF�5�qex:���R�b".���t��2��zD2��Z��~ �c��WeM�. Networks and Nokia Software are expected to be influenced by factors including: During the COVID-19 pandemic, we have continued to advance our 5G roadmap and product evolution, as planned, and our COVID-19 mitigation actions in R&D have been very successful. Kinds of Share Capital: A private limited company can have – 1. 1 Free cash flow = net cash from/(used in) operating activities - capital expenditures + proceeds from sale of property, plant and equipment and intangible assets – purchase of non-current financial investments + proceeds from sale of non-current financial investments.. KEY DRIVERS OF NOKIA’S OUTLOOK. The business risk remains constant and is assumed to be independent of capital structure and financial risk. Thank you all. The optimal capital structure of a firm is often defined as the proportion of debt and equity that result in the lowest weighted average cost of capital (WACCWACCWACC is a firm’s Weighted Average Cost of Capital and represents its blended cost of capital including equity and debt. We have a particularly powerful portfolio in mid-band mobile radio, with proven products deployed with 55 customers, and the first live C-Band network demonstrated in the U.S. during the quarter. Due to our strong free cash flow performance in the first six months of 2020, we no longer expect our free cash flow seasonality in 2020 to be similar to 2019. Nokia responded that its investment rating is backed by its "strong liquidity position and capital structure," with a gross cash balance of €9.8 billion ($12.8 billion). The complete financial report for Q2 and half year 2020 with tables is available at www.nokia.com/financials. Potential risks and uncertainties related to the scope and duration of the COVID-19 impact and the pace and shape of the economic recovery following the pandemic; Competitive intensity, which is particularly impacting Mobile Access and is expected to continue at a high level in full year 2020, as some competitors seek to take share in the early stage of 5G; Our expectation that we will accelerate our product roadmaps and cost competitiveness through additional 5G investments in 2020, thereby enabling us to drive product cost reductions and maintain the necessary scale to be competitive; Our expectation that we will drive improvements in automation and productivity through additional digitalization investments in 2020; Customer demand could weaken and risk could increase further in India, after the country’s Supreme Court upheld a ruling that telecoms companies must pay retroactive license and spectrum fees; Opportunities and risks in North America following the completion of a merger, and, more broadly, the potential for temporary capital expenditure constraints due to potential mergers or acquisitions by our customers; The timing of completions and acceptances of certain projects; Some customers are reassessing their vendors in light of security concerns, creating near-term pressure to invest in order to secure long-term benefits; Our expectation that we will improve our R&D productivity and reduce support function costs through the successful execution of our cost savings program, which is explained in more detail in the Cost savings program section of Nokia Corporation interim report for Q2 and half year 2020; Our product and regional mix, including the impact of the high cost level associated with our first generation 5G products; and. When Nokia was in the situation of full loss in 1992, the com-pany’s board of directors hired Ollila as president of the company. 20 121. 7. In addition, and in accordance with our prudent management of our capital structure, we took further proactive steps to strengthen our liquidity position by raising EUR 1.0 billion of debt in Q2 2020, on a net basis. About 1% of the shares were owned by Nokia Corporation during 2009. Based on these assessments, COVID-19 is currently not expected to have such long-term effects on Nokia’s financial performance that it would require adjustments to the carrying amounts of goodwill and other intangible assets or deferred tax assets. Q2 2020 was the fourth quarter in a row of solid cash performance. Our expectation that we will slightly underperform our primary addressable market, which is expected to be flattish on a constant currency basis in full year 2020, excluding China (, Our expectation for operating profit seasonality in 2020 to be similar to 2019, with the majority of operating profit to be generated in the fourth quarter. This, then, would be an example of … Capital Structure is the mix between owner’s funds and borrowed funds. Since the interest expense on debt is tax deductible in most countries, a company can reduce its after-tax cost of capital by increasing debt relative to … These forward-looking statements are only predictions based upon our current expectations and views of future events and developments and are subject to risks and uncertainties that are difficult to predict because they relate to events and depend on circumstances that will occur in the future. As previously announced, Nokia agreed to sell HERE, its mapping and location services business, to a consortium of leading German automotive companies. Equity Share Capital with voting rights and equity share capital with differential rights as to dividend, voting or otherwise. When Nokia was in the situation of full loss in 1992, the com-pany’s board of directors hired Ollila as president of the company. Driving a lean corporate structure 29. From a technical perspective, the capital structure is the careful balance between equity and debt that a business uses to finance its assets, day-to-day operations, and future growth. View nokia business summary and other industry information. ... As for Nokia, the company … Nokia is engaged in the manufacturing of mobile devices and in converging Internet and communications industries. We also saw a reduction driven by our proactive steps to reduce the volume of low margin services business. Press Release. 6%. We do not undertake any obligation to publicly update or revise forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent legally required. Since establishing a program in 2019 to focus on free cash flow, we have made great progress driving sustainable operational improvements, particularly in net working capital management. We expect that the majority of sales missed in the quarter due to COVID-19 will shift to future periods. The timing and value of new and existing patent licensing agreements with smartphone vendors, automotive companies and consumer electronics companies; Results in brand and technology licensing; Costs to protect and enforce our intellectual property rights; and. Get the latest news from Nokia delivered straight to your inbox. ?… 8. Potential risks and uncertainties continue to exist related to the scope and duration of the COVID-19 impact and the pace and shape of the economic recovery following the pandemic. In this post, we shall examine the capital structure of a private limited company. COVID-19 has affected the valuations of certain assets, including investments in non-publicly quoted assets through Nokia’s venture fund investments and pension plans, the valuation of which is inherently challenging in fast-moving market conditions (for details, please refer to note 5, “Pensions and other post-employment benefits” and note 8, “Fair value of financial instruments” in the "Financial statement information" section included in Nokia Corporation interim report for Q2 and Half Year 2020). Preferred Stock, Equity Stock, Reserves and Long- term Debts). Most companies are funded by a mix of debt and equity, including some short-term debt, some long-term debt, a number of shares of common stock, and perhaps shares of preferred stock. Nokia's other main business group is Nokia Networks, which is responsible for about 30 percent of net sales. Non-IFRS income taxes are expected at a rate of approximately 26% in full year 2020 and approximately 25% over the longer-term, subject to the absolute level of profits, regional profit mix and changes to our operating model; Cash outflows related to income taxes are expected to be approximately EUR 400 million in full year 2020 and approximately EUR 450 million per annum over the longer term until our US or Finnish deferred tax assets are fully utilized (, Capital expenditures are expected to be approximately EUR 550 million in full year 2020 and approximately EUR 600 million per annum over the longer-term. At the start of the year, we said we would have a sharp focus on our Mobile Access business and improving cash generation. We announced new deals that bring connectivity to the most rural areas of, for example, California and Ireland, making sure small businesses, farms and schools are connected. Factors, including risks and uncertainties that could cause these differences include, but are not limited to: 1) our strategy is subject to various risks and uncertainties and we may be unable to successfully implement our strategic plans, sustain or improve the operational and financial performance of our business groups, correctly identify or successfully pursue business opportunities or otherwise grow our business; 2) general economic and market conditions, general public health conditions (including its impact on our supply chains) and other developments in the economies where we operate, including the timeline for the deployment of 5G and our ability to successfully capitalize on that deployment ; 3) competition and our ability to effectively and profitably invest in existing and new high-quality products, services, upgrades and technologies and bring them to market in a timely manner; 4) our dependence on the development of the industries in which we operate, including the cyclicality and variability of the information technology and telecommunications industries and our own R&D capabilities and investments; 5) our dependence on a limited number of customers and large multi-year agreements, as well as external events impacting our customers including mergers and acquisitions and the possibility of our customers awarding business to our competitors; 6) our ability to maintain our existing sources of intellectual property-related revenue through our intellectual property, including through licensing, establishing new sources of revenue and protecting our intellectual property from infringement; 7) our ability to manage and improve our financial and operating performance, cost savings, competitiveness and synergies generally, expectations and timing around our ability to recognize any net sales and our ability to implement changes to our organizational and operational structure efficiently; 8) our global business and exposure to regulatory, political or other developments in various countries or regions, including emerging markets and the associated risks in relation to tax matters and exchange controls, among others; 9) our ability to achieve the anticipated benefits, synergies, cost savings and efficiencies of acquisitions; 10) exchange rate fluctuations, as well as hedging activities; 11) our ability to successfully realize the expectations, plans or benefits related to any future collaboration or business collaboration agreements and patent license agreements or arbitration awards, including income to be received under any collaboration, partnership, agreement or arbitration award; 12) Nokia Technologies' ability to protect its IPR and to maintain and establish new sources of patent, brand and technology licensing income and IPR-related revenues, particularly in the smartphone market, which may not materialize as planned, 13) our dependence on IPR technologies, including those that we have developed and those that are licensed to us, and the risk of associated IPR-related legal claims, licensing costs and restrictions on use; 14) our exposure to direct and indirect regulation, including economic or trade policies, and the reliability of our governance, internal controls and compliance processes to prevent regulatory penalties in our business or in our joint ventures; 15) our reliance on third-party solutions for data storage and service distribution, which expose us to risks relating to security, regulation and cybersecurity breaches; 16) inefficiencies, breaches, malfunctions or disruptions of information technology systems, or our customers’ security concerns; 17) our exposure to various legal frameworks regulating corruption, fraud, trade policies, and other risk areas, and the possibility of proceedings or investigations that result in fines, penalties or sanctions; 18) adverse developments with respect to customer financing or extended payment terms we provide to customers; 19) the potential complex tax issues, tax disputes and tax obligations we may face in various jurisdictions, including the risk of obligations to pay additional taxes; 20) our actual or anticipated performance, among other factors, which could reduce our ability to utilize deferred tax assets; 21) our ability to retain, motivate, develop and recruit appropriately skilled employees; 22) disruptions to our manufacturing, service creation, delivery, logistics and supply chain processes, and the risks related to our geographically-concentrated production sites; 23) the impact of litigation, arbitration, agreement-related disputes or product liability allegations associated with our business; 24) our ability to re-establish investment grade rating or maintain our credit ratings; 25) our ability to achieve targeted benefits from, or successfully implement planned transactions, as well as the liabilities related thereto; 26) our involvement in joint ventures and jointly-managed companies; 27) the carrying amount of our goodwill may not be recoverable; 28) uncertainty related to the amount of dividends and equity return we are able to distribute to shareholders for each financial period; 29) pension costs, employee fund-related costs, and healthcare costs; 30) our ability to successfully complete and capitalize on our order backlogs and continue converting our sales pipeline into net sales; 31) risks related to undersea infrastructure; and 32) the impact of the COVID-19 virus on the global economy and financial markets as well as our customers, supply chain, product development, service delivery, other operations and our financial, tax, pension and other assets, as well as the risk factors specified in our 2019 annual report on Form 20-F published on March 5, 2020 under "Operating and financial review and prospects-Risk factors" as supplemented by the form 6-K published on April 30, 2020 under the header “Risk Factors” and in our other filings or documents furnished with the U.S. Securities and Exchange Commission. Both non-IFRS and reported net sales in Q2 2020 were EUR 5.1bn, compared to EUR 5.7bn in Q2 2019. Naturally, Nokia’s first focus during the COVID-19 crisis is to our employees. Macroeconomic, industry and competitive dynamics. Capital structure affects a company’s overall value through its impact on operating cash flows and the cost of capital. 6 215. Our communications service provider customers support more than 6.4 billion subscriptions with our radio networks, and our enterprise customers have deployed over 1,300 industrial networks worldwide. Preferred Stock, Equity Stock, Reserves and Long- term Debts). The company competes with Nokia in this area but the total global addressable market is large, projected to be $700 billion in 2030 compared to less than $10 billion today. It is headquartered in Keilaniemi, Espoo, a city neighbouring Finland's capital Helsinki. Non-IFRS gross margin was 39.6% (reported 39.4%) and non-IFRS operating margin was 8.3% (reported 3.3%). 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