Cost of living crisis hammers Ericsson and Nokia shares
Ericsson and Nokia shares plunged after the telecommunications equipment suppliers said that a slowdown was smashing profits and sales in spending as the cost of living crisis hammers consumer spending.
Finnish firm lowers earnings expectations, while Swedish company predicts flat or ‘slightly up’ margins.
Nokia shares fell after the cost of living crisis:
Nokia moved to slash its yearly sales prediction. It reduced its expectations on profit margin this year, citing the knock-on effect of high inflation and growing interest rates on consumer spending.
The Finnish firm, which in 2021 reported up to 10,000 job cuts worldwide in an attempt to contend with competitors in the race to provide 5G telecoms equipment, cut the range of anticipated sales this year from between €24.6bn (£21.1bn) and €26.2bn to €23.2bn and €24.6bn.
Shares of Nokia, which even lowered the top end of its range for earnings margins from 14% to 13%, fell by 9.6% on Friday – the biggest fall in two years.
“The weaker demand outlook in the second half is due to both the macroeconomic environment and customers’ inventory digestion,” the company said, suggesting that belt-tightening customers are holding back on advanced mobile phones.
“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.”
The firm, which this year finished a two-year plan to lower its international workforce to “reset” its price base for future investment, hinted that more cuts could be coming.
“Across the group, Nokia has been proactively managing costs to protect profitability,” it stated. “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.”
Shares in Ericsson dropped by 8.7% to the lowest level since 2018 after the Swedish telecoms equipment maker stated profit margins would be flat or “slightly up” in the third quarter, compared with critic consensus expectations of 10%.
