Review by the President and CEO

Nokian Tyres plc, Hille Korhonen, President and CEO

Hille Korhonen, President and CEO (Interim Report January–September 2017):

"In January–September 2017, Nokian Tyres demonstrated strong performance in all of its main markets. Our net sales and operating profit improved.

The Passenger Car Tyres business unit showed strong growth during 1–9/2017. Net sales increased in all markets. Operating profit increased clearly year-over-year. In Europe, the trend of sales shifting towards the consumer season has continued. We have been responding to the growing demand by increasing the production volumes at both factories and by building a new production line at the Russian factory. The new line has now been taken into use. In Q3/2017, raw material costs decreased slightly compared with Q2/2017. We estimate that raw material costs will increase by approximately 20% for the full year 2017 compared with 2016. We have implemented the necessary price increases in all markets, and the effect is already visible. We have continued to build the foundation for future growth by launching new products for all our markets.

Heavy Tyres increased its sales, operating profit and production volume. All product segments and market areas showed growth. In particular, sales of agricultural tyres were strong.

Vianor’s (own equity) net sales increased slightly but were affected by the tough pricing environment. The profitability improvement program is proceeding according to plan. Our branded distribution network, including Vianor, NAD, and N-Tyre stores, grew by 232 stores during 1–9/2017.

In September, we held a groundbreaking ceremony in Dayton (Tennessee, USA) to celebrate the beginning of the building work of our third factory. The new factory will be our first manufacturing facility in North America. The site will also house a distribution facility with a storage capacity of 600,000 tyres. Construction is scheduled to begin in early 2018, and production is planned to begin in 2020. Our ambition is to double our sales within North America in the next five years. Our goal is to lead the tyre industry in sustainable manufacturing as well as to make sure that our company is the employer of choice within the greater communities it serves.

In October, we received a tax reassessment decision from the Tax Administration regarding tax year 2011. We consider the reassessment decision of the Tax Administration to be unfounded and we are going to appeal to the Board of Adjustment and, if necessary, continue the appeal process in the Administrative Court.

Our employees have done a great job in improving all aspects of sustainability in our company. Our determination to be a sustainability pioneer in the tyre industry is demonstrated by our safe and eco-friendly products, as well as our inclusion in DJSI World. We are definitely on the right track, and the conditions are great for further improving our operations."