Preferred shares in Finnish telecommunications group Nokia Oy fell by the equivalent of $10.12m to $138.38 in Helsinki by early afternoon yesterday, despite news that pre-tax profits for 1994 were up 263.6% to $880m, driven by the booming market for mobile phones. Shares had risen to $149.60 immediately after the release of the results, but then plunged to a low of $133.10 in afternoon trading, before recovering. Analysts expressed surprise over the decline, especially since Nokia’s results were in line with, or slightly above, market expectations. One possible explanation was that the decline resulted from profit-taking following a sharp gain over the last year. The preferred shares have risen by 130% since early last year. Nevertheless, Nokia plans a dividend increase of nearly 260% to $2.20 per share as well as a share split. Nokia, which accounts for about 30% of market capitalisation on the Helsinki bourse, showed net profit of $791.12m; and net sales rose by 27% to $6,640m. The good profit development seen in 1994 and our strengthened financial situation provide a solid foundation for favourable development in 1995, president Jorma Ollila told Reuters.
Sales growth of 50% to continue
He believed that Nokia could maintain the sales growth rates of between 50% and 80% of the last three years, this year and next, although it would be tough. Throughout 1994 Nokia continued its international expansion by emphasising its communications businesses, Nokia Telecommunications and Nokia Mobile Phones, which together accounted for 58.35% of net sales, a rise of 29.6% from 1993’s contribution. Nokia Telecommunications’ sales rose by 50.9% to $1,519m and operating profit rose 73% to $374m. But growth was fastest in cellular systems, where the firm strengthened its position as the second largest supplier of Groupe Speciale Mobile and Digital Cellular System equipment. The Mobile Phones division’s net sales soared 69.5% to $2,354m and its operating profit rose 84% to $383.9m, which the company attributed to the introduction of new products as well as an increase in general demand. The company also reported good business in the fixed networks of the deregulated telecommunications sector in Europe and Asia. Nokia Consumer and Industrial Electronics has been the problem unit of recent years, but this year it showed a small operating profit of $4.18m compared with a loss of $164.3m in 1993. The Cables and Machinery division, however, showed slipping sales down 3.3% to $1,049 and profit dropped to $42m down 26.8%. Nokia, a star performer on the Helsinki share market over the last two years, is second only to Motorola Inc in terms of mobile phone manufacture. The planned share split will see the par value of common and preferred shares divided by four, from $4.40 to $1.10. The company’s rising fortunes have been mirrored in the increasing number of staff, 28,593 at the end of 1994, up from 25,523 in 1993; the number of mobile phone staff rose to 7,554 from 4,223; and the telecommunications staff rose to 8,082 from 6,365. It says it will take on another 6,000 staff in 1995, only half of whom will be employed in Finland; at the moment 16,353 of all employees work in Finland, 8,594 worked in other European Community countries, 942 in the rest of Europe and 2,704 worked in other parts of the world.
