Nokia Corporation — 2023 Form 20-F Summary
Reporting period: Fiscal year ended 31 December 2023. The filing was submitted on 29 February 2024. Nokia reports under IFRS as issued by the IASB; figures below are in euros unless stated otherwise. This is an annual report, not a standalone fourth-quarter filing.
Business context and financial performance
Nokia sells network equipment, software and services to communications service providers and enterprises, and licenses intellectual property. In 2023, customers reduced or deferred spending amid macroeconomic uncertainty, higher interest rates and inventory digestion following supply-chain disruptions. North America was particularly weak; rapid 5G deployments supported growth in India.
| Metric | 2023 | 2022 | Change |
|---|---|---|---|
| Net sales | €22.258bn | €24.911bn | -11% |
| Gross profit / margin | €8.687bn / 39.0% | €10.222bn / 41.0% | Profit -15%; margin -2.0 pp |
| Operating profit / margin | €1.688bn / 7.6% | €2.318bn / 9.3% | Profit -27%; margin -1.7 pp |
| Comparable operating profit / margin (non-IFRS) | €2.375bn / 10.7% | €3.109bn / 12.5% | Profit -24% |
| Profit from continuing operations | €674m | €4.210bn | -84% |
| Profit for the year | €679m | €4.259bn | -84% |
| Diluted EPS from continuing operations | €0.12 | €0.74 | Down |
| Operating cash flow / free cash flow (non-IFRS) | €1.317bn / €665m | €1.474bn / €873m | Down |
Net sales declined across all four business groups. Enterprise sales increased 14% to €2.282bn, while CSP sales fell 11% to €17.652bn and licensee sales fell 32% to €1.085bn. Regional sales were notably lower in North America (-32%); India increased 120% to €2.842bn.
Business group results
| Business group | 2023 net sales | Year-on-year sales change | Operating margin |
|---|---|---|---|
| Network Infrastructure | €8.037bn | -11% | 13.1%, up from 12.2% |
| Mobile Networks | €9.797bn | -8% | 7.4%, down from 8.8% |
| Cloud and Network Services | €3.220bn | -4% | 7.9%, up from 5.3% |
| Nokia Technologies | €1.085bn | -32% | 67.6%, down from 75.7% |
Cash, debt and liquidity
- Cash and cash equivalents were €6.234bn at year-end, versus €5.467bn in 2022. Total cash and interest-bearing investments were €8.514bn, down from €9.244bn.
- Net cash and interest-bearing investments, a non-IFRS measure, were €4.323bn, compared with €4.767bn. Interest-bearing liabilities were €4.191bn; lease liabilities were €997m.
- Operating cash flow was €1.317bn; capital expenditure was €652m; free cash flow under Nokia’s revised definition was €665m. Dividends paid were €621m and share repurchases were €300m.
- Nokia reported an undrawn €1.5bn revolving credit facility with no financial covenants and stated it had sufficient funds for expected needs at least through 2024. Credit ratings disclosed were BBB- from S&P and Fitch and Ba1 from Moody’s.
- Equity was €20.628bn; equity ratio was 51.8%. Nokia reported no material off-balance-sheet arrangements apart from disclosed commitments, guarantees and lease obligations.
Material changes, outlook and management commentary
- Management cited cautious customer spending, inventory digestion and foreign-exchange effects as key drivers of the sales decline. Cost controls helped support profitability, while Nokia continued R&D investment.
- Net income comparisons were heavily affected by tax items: 2022 included recognition of €2.5bn of Finnish deferred tax assets; 2023 included a €392m tax expense related to an internal operating-model change. Net income therefore fell more sharply than operating profit.
- In October 2023 Nokia announced a cost program targeting €800m–€1.2bn of gross cost-base reductions by the end of 2026 versus 2023, before inflation. The plan anticipates an organization of 72,000–77,000 employees versus about 86,000 when announced. Nokia estimated restructuring charges and cash outflows to be similar to annual savings achieved; plans remain subject to demand and may change.
- Nokia said its smartphone patent-licensing renewal cycle concluded in early 2024. It reported a contracted recurring annual net-sales run-rate of about €1.3bn, excluding catch-up sales, and a mid-term ambition of €1.4bn–€1.5bn. These are management expectations, not guaranteed results.
- The Board proposed authorization to distribute up to €0.13 per share for 2023, at its discretion, and announced a new share-buyback program targeting up to €600m over two years, with purchases expected to begin in March 2024. These distributions are subject to approvals and conditions.
- Nokia’s estimated CSP addressable market declined 6% in 2023; management expects about 1% annual growth through 2028. Enterprise addressable market grew 7% in 2023, with a projected 7% CAGR through 2028. These market estimates are not company revenue guidance. The filing does not provide a clear consolidated 2024 financial forecast.
Risks, contingencies and unusual items
- Principal risks include continued weakness or delayed spending by CSP customers, pricing pressure and competition, customer concentration and contract timing, failure to realize cost savings, execution and technology risks, supply-chain or geopolitical disruption, foreign-exchange movements, cybersecurity and privacy events, and intellectual-property licensing uncertainty.
- Nokia commenced patent litigation against Amazon and HP in 2023 over video-related technologies. These proceedings were ongoing in the filing. Patent cross-license agreements with OPPO and vivo were concluded in January and February 2024, respectively, resolving pending litigation and providing royalty and catch-up payments.
- Other disclosed legal matters include approximately 300 U.S. asbestos-related cases and Brazilian labor claims. Management did not expect known proceedings to have a material adverse effect on financial position, while cautioning that litigation outcomes are uncertain.
- Unusual income-statement factors included a €257m net gain in other operating income and expenses, versus a €341m net expense in 2022, including foreign-exchange hedging effects, asset-sale gains and provision movements. Venture-fund investments recorded an approximately €70m loss, compared with an approximately €20m gain in 2022.
- Climate targets require monitoring: Nokia said 2023 emissions covered by its existing science-based target were at the 2019 baseline, leaving the 2030 reduction trajectory not on track. Nokia announced a 2040 value-chain net-zero ambition and an accelerated 2030 target for its own operations.
- Deloitte issued unqualified opinions on the IFRS financial statements and internal control over financial reporting. Management also concluded disclosure controls and financial-reporting controls were effective at year-end.
Important facts for investors to verify
- Whether demand recovery, especially in North America, supports sales and margins, and how customer inventory levels evolve.
- Progress against the €800m–€1.2bn cost-reduction target, including restructuring cash costs, headcount changes and any effect on R&D or competitiveness.
- Cash generation, working-capital trends, net cash and the use of cash for dividends and the announced buyback.
- Realization and timing of Nokia Technologies’ €1.3bn recurring sales run-rate, the mid-term target, and royalty or catch-up receipts from recently signed agreements.
- Developments in Amazon and HP patent litigation, other legal matters, customer credit exposures and the €381m venture-fund commitment.
- Tax assumptions and deferred-tax-asset recoverability, including the effect of the 2023 operating-model change and implementation of Pillar Two minimum-tax rules.
- Performance against climate commitments and the reliability of supplier and customer emissions data.