Nokia 2008 Annual Report Download - page 80

lower operating expenses and the impact of decreased restructuring charges and intangible asset
amortization and other purchase price accounting related items.
Corporate Common Functions
Corporate Common Functions’ expenses totaled EUR 396 million in 2008 compared with Corporate
Common Functions’ operating profit of EUR 1 709 million in 2007. In 2008, Corporate Common
Functions’ operating profit included a EUR 152 million loss due to transfer of Finnish pension
liabilities to pension insurance companies. In 2007, Corporate Common Functions’ operating profit
included a EUR 1 879 million nontaxable gain on the formation of Nokia Siemens Networks,
EUR 75 million of real estate gains and a EUR 53 million gain on a business transfer.
Net Financial Income and Expenses
During 2008, Nokia’s interest expense was EUR 2 million, compared with net financial income of
EUR 239 million in 2007. This change was primarily due to the increased interest expense as a result
of an increase in interestbearing liabilities incurred to finance the NAVTEQ acquisition. Foreign
exchange gains and losses increased due to a higher cost of hedging and increased volatility on the
foreign exchange market.
The net debt to equity ratio was negative 14% at December 31, 2008 compared with a net debt to
equity ratio of negative 62% at December 31, 2007. See Item 5B. “Liquidity and Capital Resources”
below.
Profit Before Taxes
Profit before tax and minority interests decreased 40% to EUR 4 970 million in 2008 compared with
EUR 8 268 million in 2007. Taxes amounted to EUR 1 081 million and EUR 1 522 million in 2008 and
2007, respectively. In 2008, taxes included the positive impact of EUR 128 million due to recognition
of certain tax benefits from prior years. In 2007, taxes include the positive impact of EUR 122 million
due to changes in deferred tax assets resulting from the decrease in the German statutory tax rate.
The effective tax rate increased to 21.8% in 2008 compared with 18.4% in 2007, primarily due to the
EUR 1 879 million nontaxable gain on formation of Nokia Siemens Networks in 2007.
Minority Interests
Minority shareholders’ interest in our subsidiaries’ losses totaled EUR 99 million in 2008 compared
with minority shareholders’ interest in our subsidiaries’ losses of EUR 459 million in 2007. The change
was primarily due to the decrease in the net losses of Nokia Siemens Networks.
Net Profit and Earnings per Share
Net profit in 2008 totaled EUR 3 988 million compared with EUR 7 205 million in 2007, representing a
yearonyear decrease in net profit of 44.6% in 2008. Earnings per share in 2008 decreased to
EUR 1.07 (basic) and EUR 1.05 (diluted) compared with EUR 1.85 (basic) and EUR 1.83 (diluted) in
2007.
2007 compared with 2006
As of April 1, 2007, Nokia results include those of Nokia Siemens Networks on a fully consolidated
basis. Nokia Siemens Networks, a company jointly owned by Nokia and Siemens, is comprised of our
former Networks business group and Siemens’ carrierrelated operations for fixed and mobile
networks. Accordingly, the results of the Nokia Group and Nokia Siemens Networks for the year ended
December 31, 2007 are not directly comparable to the results for the year ended December 31, 2006.
Nokia’s 2006 results included our former Networks business group only.
79