Interim Report January-September 2003
Nokian Tyres plc Stock Exchange Release 24.10.2003 at 8 a.m.
INTERIM REPORT JANUARY-SEPTEMBER 2003
Group's net sales and profit increased in Q3 and in the entire period in review. Net sales rose by 9.8% to EUR 341.5 million (EUR 311.2 million, Jan-Sept 2002). Group's operating profit improved to EUR 38.4 million (EUR 23.9 million). All profit centres improved their operating profits. EPS were up to EUR 2.05 (EUR 0.93). Main objective is to outperform the year 2002 results in terms of net sales and profit.
NET SALES AND PROFIT
Demand for tyres continued to grow in Nokian Tyres' key markets in
Nordic countries, Russia and Eastern Europe. Growth was strongest in high-speed summer tyres and winter tyres. The preseason sales of winter tyres was at an all time high in Europe. In Finland and Sweden the demand for tyres was boosted by the increased sales of new passenger cars. The demand for heavy special tyres also improved.
Raw material costs rose from the corresponding period in the pervious year. The weak dollar reduced the profitability of imported tyres in the USA.
Nokian Tyres grew steadily and improved market shares in core markets. High-speed summer tyres and passenger car winter tyres accounted for the majority of the net sales. Sales increased in the home market in Nordic countries in particular, as well as in Russia and Eastern Europe.
July to September 2003
Nokian Tyres' consolidated net sales were up by 10.9% to EUR 130.7 million (EUR 117.9 million in the corresponding period in 2002). Manufacturing net sales grew by 18.4% and the Vianor tyre chain's comparable net sales by 6%.
Fixed costs increased by 5% to EUR 40.4 million (EUR 38.5 million). Raw material costs for the manufacturing business was 1% higher than in the corresponding period a year earlier.
The Group's operating profit improved, totalling EUR 21.7 million (EUR 15.2 million). Operating profit from the manufacturing business amounted to EUR 25.6 million (EUR 19.9 million). Vianor's operating profit before the depreciation of goodwill was EUR 3.0 million (EUR 0.8 million). The depreciation of goodwill was EUR 1.7 million (EUR 2.0 million) and related to the Vianor tyre chain in its entirety.
The Group's profit before taxes improved, totalling EUR 19.0 million (EUR 12.4 million) and the net profit for the period totalled EUR 13.5 million (EUR 8.8 million).
January to September 2003
The Group's net sales in the January to September period of 2003 were EUR 341.5 million (EUR 311.2 million), showing an increase of 9.8% on the corresponding period a year earlier. Net sales from manufacturing grew by 17.8% and Vianor's comparable net sales by 3% from the previous year.
The comparable 2002 figure for Vianor's net sales include sales to the Finnish car dealers, which were transferred from Vianor to the parent company at the end of 2002. In 2003, sales to Finnish car dealers have been included in the net sales of Nokian passenger car tyre unit.
Implemented price increases, improved sales mix featuring new products and better productivity increased sales profitability.
Fixed costs increased by EUR 2.4 million, or 2.0%, on the previous year and totalled EUR 124.4 million (EUR 121.9 million). The share of fixed costs decreased to 36% (39%). Raw material prices were 4% higher than the average prices a year earlier. However, Nokian Tyres' material cost growth was only 1.3%.
The Group's operating profit improved, totalling EUR 38.4 million (EUR 23.9 million). Operating profit from the manufacturing business amounted to EUR 47.2 million (EUR 36.0 million), while Vianor's operating profit before the depreciation of goodwill was EUR 2.0 million (EUR -1.7 million). The depreciation of goodwill was EUR 5.2 million (EUR 5.9 million) and related to the Vianor tyre chain in its entirety.
Net financial expenses were EUR 6.6 million (EUR 9.2 million)
Profit before taxes totalled EUR 31.8 million (EUR 14.8 million). Net profit for the period under review was EUR 21.8 million (EUR 9.8 million). Earnings per share were up to EUR 2.05 (EUR 0.93).
The return on net assets (RONA, rolling 12 months) was 18.6% (12.3%). Income financing after the change in working capital and investments (cash flow II) was EUR '48.3 million (EUR '23.7 million). The equity ratio was 41.3% (37.0%) and included the capital loan in equity.
The Group employed an average of 2,616 (2,612) people; 2,710 (2,621) at the end of the period. At the end of the period Vianor employed 1,224 (1,190) people.
Passenger car tyres
The net sales generated from the Nokian passenger car tyre business grew 21.9% from the corresponding period in the previous year, totalling EUR 198.3 million (EUR 162.7 million). The operating profit amounted to EUR 41.8 million (EUR 30.6 million).
Sales of Nokian passenger car tyres developed favourably throughout the period in the key markets in the Nordic countries, Eastern Europe, Russia and the USA, and market shares improved. In the Nordic countries the market share of Nokian brand winter tyres increased from 28.6% to 31.5%. Sales to the car dealers developed particularly favourably.
Winter tyres and other special products with high profit margins accounted for a large proportion of total sales. Winter tyres represented 64.4% (51.9%) of the period's net sales. Sales were boosted by the introduction of the new studded winter tyre, the Nokian Hakkapeliitta 4, and its test wins in magazine tests.
The average price per unit rose by 6.4% as a result of improved sales mix and implemented price increases. Production volumes increased by 10.7% from the previous year and productivity (kg/mh) by 7.3%.
Efficient logistics solutions improved delivery capacity to distributors.
The net sales of Nokian heavy tyres business totalled EUR 43.6 million (EUR 39.9 million), showing an increase of 9.3% from the previous year. The operating profit amounted to EUR 4.4 million (EUR 3.0 million).
Sales of heavy tyres were favourable in Finland, Norway, Germany and Eastern Europe. Sales of forestry tyres for the Finnish original equipment markets developed most favourably. Sales of heavy industrial tyres and flotation tyres, designed for agricultural use, also improved from the previous year. The forestry tyre replacement market has not yet recovered in line with the original equipment market. Particularly in the USA, the demand for forestry tyres was still low.
The good sales mix and price increases implemented earlier in the year improved profitability. Production volumes increased by 10.7% and productivity improved.
The net sales of Nokian bicycle tyres were 3.7 million (EUR 4.0 million), i.e. down by 9.6% on the previous year. The operating profit was positive and better than the previous year.
The net sales of Nokian retreading materials business totalled EUR 7.4 million (EUR 7.6 million), showing a decrease of 2.1% from the previous year. The operating profit was positive and better than the previous year.
Sales of passenger car tyre retreading materials improved from the previous year in the key markets, but the demand for truck tyre retreading materials remained slow throughout the year in Nordic countries. However, sales picked up in Finland and Sweden in the third quarter of the year. Sales to Russia were also up on the previous year. The new retreading plant purchased in St. Petersburg in June, will strengthen Nokian Tyres' position in the expanding Russian market.
Sales and deliveries of the RoadSnoop Pressure Watch started as planned in 30 countries. Nokian Tyres also introduced a pressure watch designed for professional drivers. The unit is to be installed in the car's own electricity system. In addition, the development project of a pressure watch for original installation was started.
Vianor's net sales totalled EUR 129.2 million (EUR 134.6 million), showing a decrease of 4.0% on the corresponding period a year earlier. However, comparable net sales increased by 3%. Vianor's operating profit before the depreciation of goodwill totalled EUR 2.0 million (EUR -1.7 million). The depreciation of goodwill amounted to EUR 5.2 million (EUR 5.9 million). As a result of efficiency boosting measures, Vianor's operating profit improved in Sweden and Norway.
Cash flow II was EUR -14.2 million (EUR -16.2 million).
Consumer sales picked up clearly in September, and a large number of passenger car summer tyres were sold in the Nordic countries. Sales of truck tyres also picked up in Finland. The demand for retreaded tyres continued to decline. The share of Nokian branded tyres increased.
In September Nokian Tyres purchased two tyre shops, Grimstad Vulk AS and Mandal Vulk As, in Norway. The transaction involved four tyre outlets and one retreading plant in Southern Norway. The consolidated net sales of the companies totalled approximately NOK 33 million. Both companies have made profitable business. The sales and profit of the new outlets will be consolidated into Vianor as of 1 October 2003.
Nokian Tyres spent a total of EUR 31.2 million (EUR 21.1 million) on investments during the period. Investments included new moulds, as well as production machinery and equipment for the factory in the town of Nokia. Nokian Tyres' total investments for 2003 will be EUR 42.0 million.
Contract manufacturing of Nordman tyres at Amtel's plants progressed as planned. Sales and manufacturing volumes for 2003 are predicted to be 0.6 million tyres. The joint venture operations and consumer sales got off to a good start.
Nokian Tyres' contract manufacturing in Eastern Europe, Far East and in the USA progressed in line with the targets and increased clearly from the previous year.
Shares subscribed with option rights
In May a total of 22,030 shares were subscribed with the 2001A option rights attached to the Nokian Tyres' Option Program of 2001. An increase in share capital totalling EUR 44,060 was entered in the Trade Register on 12 May 2003. Trading of the shares together with the old shares started on 13 May 2003. After the increase the number of shares was 10,604,316 and the share capital EUR 21,208,632.00.
After the increase in share capital registered on 12 May 2003 a total of 51,200 shares were subscribed with the 2001A option rights attached to the Nokian Tyres' Option Program of 2001. As a result of the subscription an increase in share capital totalling EUR 102,400 was entered in the Trade Register on 14 August 2003. Trading of the shares together with the old shares started on 15 August 2003. After the increase the number of Nokian Tyres plc shares was 10,655,516 and the share capital EUR 21,311,032.00.
Authorisations granted to the Board of Directors
The Annual General Meeting of Nokian Tyres, held in March 2003, authorised the Board of Directors to make a decision about increasing the share capital on one or more occasions by an issue of new shares and/or convertible bonds. As a result of the authorisation the company's share capital may increase by a maximum of EUR 4 million. A maximum of 2,000,000 new shares may be issued, each bearing a nominal value of EUR 2.00.
The Board of Directors may also deviate from the shareholders' pre-emptive subscription right, provided there is a compelling financial reason for the company as referred to in chapter 4:2a of the Companies Act, regarding acquisitions and other corporate arrangements.
The Board of Directors has the right to decide upon the parties who are entitled to subscribe, as well as the subscription prices, terms and conditions of share subscription, and the terms and conditions of convertible bonds.
The validity of the authorisation is one year from the date of the Annual General Meeting. At the same time, any other effective authorisations to increase the share capital are nullified.
Changes in shareholders' ownership
As a result of a share transaction executed March 19, 2003, the holdings of Nokia Corporation in Nokian Tyres plc reduced from 18.9% to 0% of the voting rights and share capital in Nokian Tyres plc. The share transaction was executed in accordance with the agreement between Nokia Corporation and Bridgestone Europe NV/SA dated February 24, 2003 that was notified under Chapter 2, Section 10, of the Securities Markets Act on February 24, 2003.
Bridgestone Europe NV/SA informed that its holdings in Nokian Tyres plc had reached 18.9 % of the voting rights and share capital in Nokian Tyres plc.
As a result of a share transaction made on 19 August 2003, the Ilmarinen Mutual Pension Insurance Company's (trade register number 162.625) share of the Nokian Tyres plc share capital and votes fell below one-twentieth. Ilmarinen's holding was now 520,500 Nokian Tyres' shares, and its share of the company's share capital and votes decreased to 4.88%.
The share of foreign ownership in Nokian Tyres has increased steadily. At the end of the period in review, the share of foreign ownership was 58.67%.
OUTLOOK FOR THE YEAR-END
The trends in the global economy remain uncertain, but there are also some favourable signs.
Raw material prices for the whole year are estimated to be 2% higher than the previous year. The profitability of imported tyres in the USA continues to be influenced by the weak US dollar.
Nokian Tyres expects the demand for passenger car winter tyres, high-speed summer tyres and heavy special tyres to increase further, particularly in Eastern Europe and Russia. The company also has good opportunities for growth in the Nordic countries.
Nokian Tyres' winter season has got off to a good start and low stock levels in the tyre market indicate good winter tyre sales. The company will concentrate all its resources on managing the forthcoming important winter tyre season with the aim of exceeding the sales of the previous years in the Nordic countries and Russia. The new studded winter tyre, the Nokian Hakkapeliitta 4, is available for consumers for the first time boosting the sales of winter tyres. The tyre has scored top ratings in all tests published in trade magazines.
The service capacity of the new studded tyre has been increased by increasing production levels and by trimming the product range. Efficient logistics and information systems in the Nordic countries will further improve the service during the season.
Vianor is continuing its measures to boost production efficiency, increasing the share of own products and implementing rationalisation methods, particularly in Sweden and Norway.
The share of contract manufacturing is growing steadily in Eastern Europe and Russia. The joint venture in Russia has started the sales of Nordman branded tyres. Sales have had a good start and will activate further during the winter season. The production of Nordman branded summer tyres will begin during the final months of the year.
The main objective of Nokian Tyres for 2003 is to outperform the results of 2002 in terms of net sales and profit.
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Million euros 7-9/03 7-9/02 1-9/03 1-9/02 Last 12 1-12/02
Net sales 130.7 117.9 341.5 311.2 509.6 479.2
Operating expenses 99.4 93.8 275.5 261.3 398.5 384.2
to plan 7.9 6.8 22.4 20.0 29.4 27.0
Operating result before
non-recurring items and
goodwill amortisations 23.4 17.2 43.5 29.9 81.7 68.0
Non-recurring items 0.0 0.0 0.0 0.0 0.0 0.0
Goodwill amortisations 1.7 2.0 5.2 5.9 7.1 7.9
Operating result 21.7 15.2 38.4 23.9 74.5 60.1
and expenses -2.6 -2.8 -6.6 -9.2 -9.5 -12.1
Result before extra-
ordinary items and tax 19.0 12.4 31.8 14.8 65.0 48.0
Extraordinary items 0.0 0.0 0.0 0.0 0.0 0.0
for the period 1) 5.5 3.6 10.0 5.0 19.5 14.4
Profit applicable to
minority shareholders 0.0 0.0 0.0 0.0 0.0 0.0
Net result 13.5 8.8 21.8 9.8 45.5 33.6
CONSOLIDATED BALANCE SHEET 30.9.03 30.9.02 31.12.02
Intangible assets 14.6 12.9 12.5
Goodwill 36.0 42.3 40.8
Tangible assets 200.8 197.8 195.4
Investments 1.3 0.6 0.6
Inventories 101.9 98.1 78.8
Receivables 179.1 150.9 102.2
Cash in hand and at bank 4.9 5.3 20.5
Shareholders’ equity 186.4 151.8 175.4
Capital loan 36.0 36.0 36.0
Minority shareholders’ interest 0.0 0.0 0.0
interest bearing 122.6 124.2 98.0
non interest bearing 21.2 19.6 20.5
interest bearing 79.0 91.4 44.9
non interest bearing 93.5 84.9 76.1
Total assets 538.6 507.9 450.9
Interest bearing net debt 196.6 210.3 122.5
Capital expenditures 31.2 21.1 26.0
Personnel average 2,616 2,612 2,663
CASH FLOW STATEMENT
Cash flow from operating activities
before the financial items and
taxes -11.4 -6.7 91.3
Financial items and taxes -18.4 -17.7 -22.0
Cash flow from operating
activities -29.8 -24.4 69.3
Cash flow from investing
activities -29.6 -21.4 -26.2
Cash flow from financing activities
Share issues 1.3
Change in short-term financial
receivables and debt 28.9 52.5 5.3
Change in long-term financial
receivables and debt 25.5 -12.7 -37.4
Dividends paid -11.7 -7.1 -8.8
Cash flow from financing
activities 44.0 32.8 -40.9
Change in cash and cash
equivalents -15.5 -13.0 2.2
NOKIAN TYRES Last 12
KEY RATIOS 30.9.03 30.9.02 months 31.12.02
Earnings per share, euro 2.05 0.93 4.30 3.17
Equity ratio, % 2) 41.3 37.0 46.9
Equity ratio, % 34.6 29.9 38.9
Gearing, % 2) 88.4 112.0 57.9
per share, euro 17.49 14.34 16.57
Number of shares
(1,000 units) 10,656 10,582 10,582
No company shares are owned by the Parent company or the Group.
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
SEGMENT INFORMATION 7-9/03 7-9/02 1-9/03 1-9/02 1-12/02
Net sales 130.7 117.9 341.5 311.2 479.2
Manufacturing 104.0 88.1 252.2 214.2 314.5
Vianor 46.8 47.0 129.2 134.6 216.2
Operating result 21.7 15.2 38.4 23.9 60.1
Manufacturing 25.6 19.9 47.2 36.0 59.5
Vianor 1.3 -1.2 -3.2 -7.7 0.9
Operating result before
Vianor 3.0 0.8 2.0 -1.7 8.9
Cash Flow II -25.7 -4.9 -48.3 -23.7 70.1
Manufacturing -20.6 -1.9 -35.4 -8.3 59.3
Vianor -5.3 -3.0 -14.2 -16.2 10.3
CONTINGENT LIABILITIES 30.9.03 30.9.02 31.12.02
FOR OWN DEBT
Mortgages 1.1 0.7 1.0
Pledged assets 0.0 0.0 0.0
ON BEHALF OF OTHER COMPANIES
Guarantees 0.1 0.1 0.0
OTHER OWN COMMITMENTS
Guarantees 1.0 1.2 1.0
Leasing and rent
commitments 35.4 37.2 38.7
Acquisition commitments 1.0 0.4 1.2
INTEREST RATE DERIVATIVES
Interest rate swaps
Fair value -2.7 -1.6 -2.1
Underlying value 40.0 50.0 46.5
Fair value -0.6 -0.5 0.8
Underlying value 83.9 68.4 50.5
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, Communications and IR
For further information, please contact: Mr Kim Gran, President and CEO, tel. +358 3 340 7336.
Distribution: HEX and major media