Nokia warns on profits as demand falters

Shares in Nokia Corporation fell sharply on Friday, after the telecoms equipment specialist warned on profits.

The Finnish firm said high inflation and rising interest rates had dented demand, with customer spending plans increasingly being pushed back.

Second-quarter net sales were flat at €5.7bn, with an operating margin of around 11%. Analysts have been expecting sales of around €6bn.

As a result, Nokia has lowered its full-year sales outlook, to between €23.2bn and €24.6bn, and trimmed the profit margin to between 11.5% and 13%. Previous guidance had been for sales of between €24.6bn and €26.2bn and a margin of between 11.5% and 14%. Its network infrastructure and mobile networks divisions were most affected, it noted.

It continued: "The weaker demand outlook in the second half is due to both the macroeconomic environment and customers’ inventory digestion.

"Customer spending plans are increasingly impacted by high inflation and rising interest rates, along with some projects now slipping to 2024, notably in North America.

"There is also inventory normalisation happening at customers after the supply chain challenges of the past two years."

As at 1000 BST, shares in Nokia were trading 9% lower.

Nokia, which is due to release second-quarter numbers on 20 July, added that it had been "proactively managing costs" to protect profitability.

It continued: "As it progresses through this period of uncertainty, Nokia will continue to take measures to ensure it remains on track towards its long-term targets of growing faster than the market and delivering a comparable operating margin of at least 14%."

The update coincided with second-quarter numbers from Swedish rival Ericsson, which reported a 62% slide in adjusted operating profits, to Skr2.8bn (£178.9m). That was slightly ahead of forecasts, however, after strong trading in India helped offset weaker performances in the US and elsewhere. Net sales rose 3% to Skr64.4bn.