Nokian Tyres in 2000
Nokian Tyres plc Stock Exchange Release February 13,2001 8.00 am
NOKIAN TYRES IN 2000
Earnings per share were 1,88 euros (2,51 euros in 1999). Net sales increased by 23,5% and were EUR 398,5 million (EUR 322,6 million). Manufacturing net sales and profit were somewhat higher than the previous year. Net sales and profitability from the tyre chain were below set targets. The Board of Directors will propose the payment of a dividend of 35% of net profit, that is 0,65 euros (0,85 euros) per share.
NET SALES AND PROFIT
Nokian Tyres' net sales and operating profit during the first six months of the year 2000 were lower than a year ago, but during the second half of the year and especially during the last quarter, they exceeded previous year's level.
Net sales stood at EUR 398,5 million (EUR 322,6 million) which is 23,5% higher than the previous year. Commensurate net sales, i.e. net sales excluding the acquisitions in 2000 were EUR 359,8 million, which is 11,5% higher than the previous year. Invoicing outside Finland represented 67% (74%) of the total net sales.
Raw material prices of manufacturing increased by 9,1% on the average price last year. The lack of own compound mixing capacity increased raw material costs as rubber compounds were purchased from other manufacturers. This inflated the overall cost increase of raw materials to 13,7%.
Fixed costs increased EUR 37,4 million, which is 36% higher than the previous year and amounted to EUR 141,1 million (EUR 103,7 million). Fixed costs of the tyre chain represented 79% of the total increase. Commensurate fixed cost increase was 13,7%
Operating profit stood at EUR 39,4 million (EUR 42,1 million). Commensurate operating profit was EUR 44,7 million. Operating profit of manufacturing stood at EUR 43,0 million (EUR 38,5 million) and operating result from the tyre chain stood at EUR -1,7 million (EUR 4,5 million). The exceptionally mild winter in Nordic countries, integration costs of tyre outlets, increased goodwill deprecations, as well as high fixed costs in relation to sales had a negative effect on the tyre chain result. Non-recurrent integration costs were EUR 3,2 million.
Net financial expenses were EUR 12,3 million (EUR 6,2 million).
The profit before tax was EUR 27,2 million (EUR 35,5 million). Net profit for the financial period was EUR 19,8 million (EUR 25,7 million). Commensurate net profit was EUR 25,6 million. Earnings per share was 1,88 euros (2,51 euros).
Return on net assets was 11,0% (15,9%).
Research and Development costs amounted to EUR 8,3 million (EUR 7,8 million), that is 2,1% from parent company's net sales.
During the fiscal year, the Group employed an average of 2.462 people (2.023). The corresponding figure within the Parent Company was 1.396 (1.337) people. At the end of the fiscal year, the Group employed 2.519 (2.226) people and the Parent Company 1.376 (1.347) people.
The number of employees increased most in the tyre chain, which employed 1054 (795) people at the end of the year.
PASSENGER CAR TYRES
Nokian passenger car tyre net sales grew by 13,5% on the previous year and amounted to EUR 186,2 million (EUR 164,0 million). The emphasis of sales was on winter tyres and other high margin new products. The share of new products was approximately 40% of the passenger car tyre sales. Sales were boosted by the best ever winter tyre test results gained in motor magazines. Winter tyre sales accounted for 69% of passenger car tyre sales.
The increase in demand for high-speed summer tyres continued on all main markets in Europe. Their share of Nokian passenger car summer tyre sales increased clearly. Demand for winter tyres decreased in Nordic countries and especially in Sweden, where the winter tyre market declined by approximately 40% from the previous year.
Swedish retailers overestimated demand due to winter tyres becoming compulsory in 1999 with a carry-over effect from the previous season as a result. In addition, the market experienced an exceptionally mild winter both in Nordic countries and elsewhere in Europe. The market position of Nokian Tyres, however, remained on the previous year's level.
Sales in other Nordic countries and in Western Europe developed favourably and market positions improved. Sales increased clearly also in Russia and in North America. Exports represented 75% (77%) of car tyre sales. Market prices for tyres remained stable at the beginning of the year, but improved during the autumn. Nokian Tyres implemented planned price increases. An up-graded sales mix and the launch of new products resulted in higher prices.
The production volume of passenger car tyres increased from 4,1 million tyres to 4,3 million tyres. The focus was to increase the added value of production and to improve the product mix. The daily production grew by 19% during the year.
The high demand for heavy tyres continued during the whole year. The demand for especially forestry and radial tyres increased clearly.
Nokian heavy tyre net sales increased by 4,2% and amounted to EUR 57,3 million (EUR 54,9 million). Exports amounted to 67% (66%) and original equipment installations to 39% (36%) of product area net sales.
Sales growth was restricted by supply problems in off-take manufacturing of agricultural and truck tyres and the transfer of production to a new factory hall at the beginning of the year. Sales of forestry and harbour machinery tyres developed favourably.
The annual production volume grew from 10.020 tons to 10.422 tons. The daily production grew by 15%.
Net sales of Nokian bicycle tyres amounted to EUR 6,5 million (EUR 7,1 million), which is 8,4% less than the previous year. The share of original equipment installations was 34,4% and the exports amounted to 62% (68%) of the product area net sales.
Nokian bicycle tyre sales, domestic replacement sales in particular, picked up clearly during the last months of the year. Also in Switzerland and in the USA the sales were better than the previous year. The share of high margin bicycle tyres increased.
In 2000, Lieksa factory manufactured 1,2 million (1,3 million) bicycle tyres and 1,1 million (1 million) bicycle inner tubes. In the end of the year, the inner tube production line of Lieksa factory was sold to Nokian Tyres' off-take partner, Rubena AS in Czech Republic.
Nokian Tyres' retreading material sales was EUR 10,8 million (EUR 11,1 million) which is 2,5% less than the previous year. Exports amounted to 42% (45%) of the product area net sales.
Demand for car tyre retreading materials decreased in Finland and in Sweden, whereas demand for truck and bus tyre retreading materials increased from the previous year in all main market areas. The market position strengthened in all focus countries due to new products and stronger marketing efforts.
Sales and production growth were limited by the lack of mixing capacity.
Production volume was 4,543 tons (5,176 tons) in year 2000.
Net sales of Nokian tyre chain increased by 75,4% from the previous year and amounted to EUR 176,5 million (EUR 100,6 million). Commensurate net sales were EUR 117,4 million.
Tyre demand was unusually low at the beginning of the year. The sales picked up clearly during the second quarter of the year. The summer tyre season was good and also the sales of truck tyres started well. The demand declined again towards the end of the year. Due to an exceptionally mild winter in Sweden, sales of winter tyres were lower than planned.
Targets for the year were to complete the tyre chain structure and to start the integration process.
The tyre chain structure was completed with the purchase of the Rengasmestarit-Kumi-Helenius Group, which had 31 outlets in Finland. The Nokian tyre chain in Finland expanded to cover the whole country. The acquisition price was EUR 8,3 million and the seller was Mr. Matti Kupiainen and his family. In April, the competition authorities approved the acquisition.
The operations within the Finnish tyre chain were unified as a part of the integration process. This meant centralising retreading operations and transferring the administration of the Rengasmestarit-Kumi-Helenius Group to the town of Lappeenranta. A project to unite the Nokian tyre chain under a common name and visual identity was completed. The new name of the Nordic tyre chain is Vianor, the name previously used by the Nokian tyre chain in Norway. In Finland, the Isko and Mestarit group's outlets were renamed Vianor and in Sweden, Vianor will replace the names of the private chains. The tyre chain structure was simplified by establishing Vianor Holding at the end of the year.
In 2000, Nokian Tyres invested the total of EUR 67,5 million (EUR 85,7 million). Production and operational investments amounted to EUR 49,3 million and tyre chain investments to EUR 18,2 million.
The investment program was implemented as planned. Installations of machinery at the new heavy tyre building hall (11.000 square meters) progressed as planned and the production in the new facility started in early autumn. The production hall that now was free was taken over by the passenger tyre production with new potential to increase production capacity.
The most significant single investment was the expansion of the mixing department, amounting to EUR 33 million. The effect on investments in year 2000 was approximately EUR 18 million. The start-up of the expansion will be summer 2001.
OTHER MATTERS DURING THE REVIEW PERIOD
Result of the public purchase offer of Isko plc
Nokian Tyres' purchase offer on all Isko shares that was started on 28 December 1999 ended on 28 January 2000. On the ending date of the public purchase offer, Nokian tyres owned or had received approval for all 900,000 K and 890,076 A shares in Isko. Nokian Tyres started redemption of the rest of the shares according to the regulations of the Companies' Act.
On 16 August, 2000 the court of arbitration appointed by the Finnish Central Chamber of Commerce confirmed in its session that Nokian Tyres had an undisputed right to redeem the minority shares in Isko and approved the security issued by Nokian Tyres. Pursuant to the Companies Act Nokian Tyres had the right to receive title to the minority shares of Isko, as it had issued a security approved by the Court of Arbitration, whereas its portion of the shares in Isko had risen to 100%.
Isko had on 16 August 2000 filed an application regarding the removal of its shares from the I-list of Helsinki Stock Exchange with the Board of Directors of the Helsinki Stock Exchange. On September 11, 2000 the Court of Arbitration determined the redemption price of minority shares in Isko to be FIM 151,00 per share.
Nokian Tyres' capital loan 1/2000
Nokian Tyres financed the acquisition of Isko with the capital loan. The amount of the capital loan is EUR 36 million and the coupon interest rate is 7,25%. The subscription date of the loan was 16 March 2000. The issue price of the loan was 101.018. The loan was oversubscribed approximately 1,9 times.
The Board of Directors decided in a meeting held on 14 February 2000 that Nokian Tyres would apply Helsinki Exchanges' Regulations on Insider trading valid as of 1 March 2000.
Subscription of bonds with warrants
37.500 Nokian Tyres shares had been subscribed with warrants pertaining to the 1996 bonds by 3 April 2000. An increase in share
capital was registered on the trade register in May 2000. The total subscription price was 285,709 euros. 5.000 shares from the 1996 bonds remain unsubscribed.
Change in company management
Mr. Kim Gran, Vice President of Nokian Tyres' passenger car product area, was appointed President and CEO of Nokian Tyres as of 1st September 2000. The former President and CEO, Mr. Lasse Kurkilahti had been appointed Chief Executive Officer of Raisio Group. Lasse Kurkilahti continued as a Member of the Board of Directors of Nokian Tyres.
Co-operation with Michelin Group
Nokian Tyres announced on 3rd August 2000 that the French company, Michelin, had been selected as a partner through off-take production. On 29 September Nokian Tyres and Michelin Group signed a frame agreement on co-operation. On 5 October two manufacturing agreements were signed on manufacturing Nokian branded agricultural, industrial and truck tyres at Michelin factories. The agreements are valid for three years, after which they are to be confirmed annually.
The manufacturing of agricultural and industrial tyres started at the Michelin factory in Poland in the autumn and the first tyres entered to the market at the end of the year. During recent years, this product group has accounted for a total of 3-4% of the net sales of Nokian Heavy Tyres.
Additionally, a truck tyre manufacturing co-operation started and first tyres will be manufactured during the year 2001 at Michelin's new truck tyre factory in Poland. Truck tyres represent approximately 15% of Nokian Tyres' heavy tyre sales.
Off-take manufacturing co-operation with Michelin provides Nokian Tyres with an opportunity to boost sales in these product areas, to expand the product range and to improve customer service. Additionally, off-take manufacturing enables Nokian Tyres to focus on own manufacturing of core products and presents an opportunity to improve productivity.
Intelligent tyre technology combined with Bluetooth
On October, the company informed that as the first tyre manufacturer in the world, Nokian Tyres has developed an intelligent tyre technology system that communicates directly with the driver's mobile phone. The system sends real-time data on tyre pressures alternatively to the driver's mobile phone or to the car computer display system. Nokian Tyres owns the rights to the product concept and a patent for the system is pending. The functionality of the intelligent tyre project will progress along with the development of the required technologies.
With the intelligent tyre technology system, Nokian Tyres has entered a new area of technology and business. During the year 2001, the company aims to commercialise and globalise the system. The process of selecting co-operation partners for the different application areas is in progress.
The first commercial applications of the intelligent tyre technology system will be implemented on truck and van tyres as well as passenger car tyres with high-speed ratings.
The intelligent tyre technology system has been developed in co-operation with Flextronics International, Nokia, Tekes, VTI Hamlin and the Technical Research Centre of Finland (VTT).
OUTLOOK FOR THE YEAR 2001
The company excepts a growth of 1-2% to continue on the global tyre market. In some product segments the demand will, however, grow clearly more than the tyre market in average. Growth areas are high-speed car summer and winter tyres, heavy radial tyres, and light truck and SUV (Sport Utility Vehicle) tyres. Nokian Tyres concentrates on these growth segments. The target for 2001 is to continue to grow at a clearly faster pace than the market average, i.e. over 10% of net sales.
Raw material prices are estimated to further increase at the beginning of the year. In 2001, Nokian Tyres estimate the raw material cost to increase 10% compared with the pervious year. The new mixing department will be taken into use in early summer and the need to purchase rubber compounds from other manufacturers will disappear.
It will be a challenging task to reach the first quarter results of the year 2000. Demand on tyre market is generally low during the first quarter of the year. However, structural fixed costs are the same throughout the whole year. Due to the acquisitions in 2000, the cost structure during the first half of the year is heavier than the previous year.
For the whole year, the capacity to improve results is better than during the previous year. The production capacity and productivity have clearly improved and sales prices have been increased at the end of the previous year. In the retail chain actions have been taken to simplify the product range and organisation has been streamlined.
The product range consists of high margin special products and additional new tyres will be launched to the market also during the current year. The status of the heavy tyre off-take production has improved.
Cash flow and return on net assets are in the focus alongside with the earnings per share to control the operational efficiency and to improve profitability. Investments are targeted to improve utilisation of investments that already have been completed. The investments in 2001 will be EUR 56 million, 85% of which will be production machinery and equipment investments.
In 2001, Nokian Tyres is in a good position to achieve over 10% growth in sales and to improve results compared to the previous year.
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Million euros 10-12/00 10-12/99 1-12/00 1-12/99 Change %
Net sales 139.8 123.6 398.5 322.6 23.5
Operating expenses 104.6 93.5 330.1 260.7 26.6
to plan 7.7 6.4 28.9 19.8 46.5
Operating profit 27.6 23.7 39.4 42.1 -6.4
and expenses -5.1 -1.8 -12.3 -6.2 98.0
Profit before extra-
ordinary items and tax 22.5 22.0 27.2 35.9 -24.3
Extraordinary items 0.0 -0.4 0.0 -0.4
Direct tax for the period 1) 5.4 5.7 7.4 9.8 -25.0
Profit applicable to
minority shareholders 0.0 0.0 0.0 0.0
Net profit 17.1 15.8 19.8 25.7 -22.8
CONSOLIDATED BALANCE SHEET 31.12.00 31.12.99
Intangible assets 11.5 8.9
Goodwill 50.2 50.7
Tangible assets 190.1 154.1
Investments 0.4 0.7
Inventories 81.3 68.4
Receivables 116.5 94.9
Cash in hand and at bank 14.0 14.3
Shareholders' equity 131.3 121.0
Capital loan 36.0 0.0
Minority shareholders' Interest 0.0 0.1
interest bearing 125.7 127.5
non interest bearing 18.1 16.6
interest bearing 70.4 57.2
non interest bearing 82.5 69.4
Total assets 464.0 391.8
Interest bearing net debt 182.1 170.4
Capital expenditures 67.5 85.7
Personnel average 2,462 2,023
KEY RATIOS 31.12.00 31.12.99 Change%
Earnings per share, euro 1.88 2.51 -25.2
Equity ratio, % 2) 36.1 30.9
Equity ratio, % 28.3 30.9
Gearing, % 2) 108.9 140.6
per share, euro 2) 15.81 11.47 37.8
Number of shares
(1,000 units) 10,582 10,545
1) Direct tax in the consolidated profit and loss account is
based on the taxable profit for the period.
2) Capital loan is included in equity
BUSINESS AREA INFORMATION 1-12/00 1-12/99 Change %
Manufacturing 260.8 237.1 10.0
Tyre chain 176.5 100.6 75.4
Manufacturing 43.0 38.5 11.8
Tyre chain -1.7 4.5 -137.8
FOR OWN DEBT
Mortgages 1.4 7.4
Mortgage on company assets 0.0 11.4
Pledged assets 0.1 0.1
Guarantees 4.7 1.2
The amount of debts mortgaged for 3.6 6.5
ON BEHALF OF OTHER COMPANIES
Guarantees 0.0 0.0
OTHER OWN COMMITMENTS
Leasing and rent
commitments 16.9 3.0
Acquisition commitments 5.3 5.1
INTEREST RATE DERIVATIVES
Interest rate swaps
Fair value 0.0 0.3
Underlying value 8.4 8.4
Fair value 0.0 0.0
Underlying value 5.0 5.0
Fair value 1.5 -1.3
Underlying value 58.5 58.4
Fair value 0.0 0.1
Underlying value 0.0 7.0
Fair value 0.0 -0.2
Underlying value 2.0 11.0
Currency derivatives are used to hedge the Group's net exposure.
Currency derivatives are included in the financial result at market
value except for those relating to order stock and budgeted net
currency positions, which are entered in the profit and loss
account as the cash flow is received.
Nokian Tyres plc
Vice President. Public Information
Further information: Mr. Kim Gran. President and CEO.
tel. +358 03 340 7336
Distribution: HEX and major media