Nokia 2007 Annual Report Download - page 78

Net Profit and Earnings per Share
Net profit in 2007 totaled EUR 7 205 million compared with EUR 4 306 million in 2006, representing a
yearonyear increase in net profit of 67% in 2007. Earnings per share in 2007 increased to EUR 1.85
(basic) and EUR 1.83 (diluted) compared with EUR 1.06 (basic) and 1.05 (diluted) in 2006.
2006 compared with 2005
Nokia Group
The following table sets forth selective line items and the percentage of net sales that they represent
for Nokia for the fiscal years 2006 and 2005.
Year Ended
December 31,
2006
Percentage of
Net Sales
Year Ended
December 31,
2005
Percentage of
Net Sales
Percentage
Increase/
(Decrease)
(EUR millions, except percentage data)
Net sales ................. 41121 100.0% 34 191 100.0% 20%
Cost of sales .............. (27742) (67.5)% (22 209) (65.0)% 25%
Gross profit ............... 13379 32.5% 11 982 35.0% 12%
Research and development
expenses ............... (3897) (9.5)% (3 825) (11.2)% 2%
Selling and marketing
expenses ............... (3314) (8.1)% (2 961) (8.7)% 12%
Administrative and general
expenses ............... (666) (1.6)% (609) (1.8)% 9%
Other operating income and
expenses ............... (14) 52 0.2%
Operating profit............ 5488 13.3% 4 639 13.6% 18%
For 2006, our net sales increased 20% to EUR 41 121 million compared with EUR 34 191 million in
2005. At constant currency, group net sales would have grown 17% in 2006. Our gross margin in
2006 was 32.5% compared with 35.0% in 2005. This lower gross margin primarily reflected the
inability of certain highend products in our portfolio to compete effectively in various markets,
coupled with a general shift to lower priced products driven primarily by the growth of emerging
markets and our strong position in those markets. Gross margin was also negatively impacted by a
decline in Networks’ gross margin, which was primarily affected by pricing pressure and our efforts to
gain market share, a greater proportion of sales from emerging markets and a higher share of service
sales.
Research and development, or R&D, expenses were EUR 3 897 million in 2006, up 2% from
EUR 3 825 million in 2005. R&D expenses represented 9.5% of net sales in 2006, down from 11.2% in
2005. The decrease in R&D as a percentage of net sales reflected our continued effort to improve the
efficiency of our investments. R&D expenses increased in Multimedia and Networks and decreased in
Mobile Phones and Enterprise Solutions. In 2005, Multimedia incurred a restructuring charge of
EUR 15 million related to R&D activities.
In 2006, selling and marketing expenses were EUR 3 314 million, up 12% from EUR 2 961 million in
2005, reflecting increased sales and marketing spend in all business groups to support new product
introductions. Selling and marketing expenses represented 8.1% of Nokia net sales in 2006, down
from 8.7% in 2005.
Administrative and general expenses were EUR 666 million in 2006 and EUR 609 million in 2005.
Administrative and general expenses were equal to 1.6% of net sales in 2006 compared to 1.8% in
2005.
In 2006, other operating expenses included EUR 142 million of charges primarily related to the
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