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By Ben King, 24 January 2002 11:00

NEWS Profits and sales fell at Nokia last year but the group has survived a tough market in good shape. On a pro-forma basis, second quarter sales were down five per cent year on year to E8.8bn (£5.4bn), but they were up three per cent for 2001 as a whole. On a pro-forma basis, net profit was E3.8bn (£2.3bn) for the year as a whole, down six per cent from 2000, but including one-off items and goodwill amortisation it was E2.2bn (£1.35bn) - a 44 per cent fall from the year before. Operating profit fell 8 per cent for the quarter, and 11 per cent for the year as a whole. They were hit by a big fall in profits from the networks division, which marked a two per cent boost in profits from the mobile phones division for the fourth quarter. On a reported basis, which includes goodwill amortisation and non-recurring items, operating profit for the fourth quarter of 2001 was much lower, at E853m (£526m) - a 51 per cent fall from the previous quarter. The company sees business conditions improving over 2002, with sales growth of around 15 per cent over the whole year, but the first quarter of 2002 will be tough, especially in comparison to strong sales of the first quarter of 2001. Chairman and chief executive officer Jorma Ollila said in a statement: "The year was characterised by intense competition, extreme volatility and a weakened global economy." "Even in this environment, with our strong and focused team, we increased sales, sustained solid profitability and achieved extraordinary strong operating cash flow of E6.5bn (£4bn)." Ben Wood, analyst at Gartner, said: "As expected Nokia, along with other players in the market found the second half of 2001 very challenging and are forecasting that the first half of 2002 will be difficult - particularly in Western Europe."