A telecommunications equipment company, posted better-than-expected quarterly profits on Thursday, boosted by demand for 5G equipment despite supply chain limitations and increased component pricing.
After making its products more competitive by spending substantially on research and finding methods to decrease costs in other areas, the Finnish business has been gaining ground against competitors like Ericsson of Sweden and Huawei of China.
However, Nokia’s supply lines have been strained by a worldwide chip scarcity and additional COVID-19 lockdowns in China. Prices for parts used in Nokia’s devices have also increased as a result of the scarcity.
“It’s very clear that prices are going up,” Chief Executive Officer Pekka Lundmark. “There is inflation in parts, there is inflation in semiconductors, there is inflation pretty much in everything.”
“Right now, we’re talking to our consumers to determine how much of this may be passed on to customer prices,” he added.
Companies frequently sign long-term contracts to lock in rates, but they must account for current prices during contract renewals.
“A normal contract may be for three years,” Lundmark added, “which would indicate that one-third of our contracts, like in Mobile Networks (unit), will be renewed every year.”
Since taking over the top job in 2020, Lundmark has been focusing on reducing costs and making changes to recover from product missteps under previous management that hit the company’s 5G ambitions.
While Nokia is seeing higher demand in the Americas, Europe, and parts of Asia, countries such as India — expected to be a big driver of 5G demand – have not yet started a full-scale deployment.
The company’s first-quarter comparable operating profit rose to 583 million euros ($613 million) from 551 million euros last year, beating the 513 million euros mean forecast of 11 analysts polled by Refinitiv.
In constant currency, network infrastructure increased by 9% in the third quarter, owing to high demand in both fixed and submarine networks.
Net sales increased 5% to 5.35 billion euros, exceeding expectations of 5.26 billion euros.
In addition, the business reiterated its full-year net sales forecast of between 22.9 billion and 24.1 billion euros in constant currency.
Nokia stated earlier this month that it will exit Russia, resulting in a provision of 100 million euros, but maintained its full-year projection.