Menu

Interim Report for Nokian Tyres plc January - March 2002

Fri April 26 12:00 am 2002 in category Stock exchange releases
Nokian Tyres plc Stock Exchange Release 26 April 2002 8.00 a.m.

Net sales and operating profit improved compared to the corresponding period a year earlier. Earnings per share in January-March were EUR
-0.31 (EUR -0.35 in the first quarter of 2001). Net sales rose by
10.3% to EUR 84.5 million (EUR 76.6 million). Operating result improved to EUR -1.0 million (EUR -1.9 million). Nokian Tyres' objective for 2002 is to outperform the results of 2001 in terms of growth and profit.

NET SALES AND PROFIT


Demand in the European tyre market was on previous year's level. Demand for passenger car tyres in Nokian Tyres' key markets the Nordic countries, Eastern Europe and Russia grew. Sales of new cars further decreased in the Nordic countries. A large number of car winter tyres were sold in the Nordic countries at the beginning of the year, because the summer tyre season did not fully start. The global economic uncertainty continued to impact on the heavy tyres business, the situation was, however, slightly more positive than at the end of last year.

Nokian Tyres' net sales and operating profit improved from the previous year, and the market shares of Nokian brand tyres increased clearly in key markets. Vianor was also able to boost its market share. The most powerful sales growth was seen in the Nordic countries, Eastern Europe and North America. Demand for tyres continued to grow in Russia. High margin products, such as car winter tyres and other special products accounted for the majority of the sales volume.

In the January to March period, Nokian Tyres booked net sales of EUR 84.5 million (EUR 76.6 million), showing an increase of 10.3% on the corresponding period a year earlier.

Fixed costs amounted to EUR 41.5 million (EUR 36.5 million) and represented 49.1% (47.7%) of net sales.
The tyre chain accounted for EUR 2.2 million of the growth of fixed costs. Depreciation of goodwill amounted to EUR 1.8 million (EUR 1.7 million).

Raw material prices in manufacturing decreased by 6% from the corresponding period a year earlier.

The operating result of the Nokian Tyres Group improved to EUR -1.0 million (EUR -1.9 million). The operating profit from the manufacturing business was EUR 8.3 million (EUR 4.8 million). Vianor tyre chain recorded an operating loss of EUR -8.5 million (EUR -6.6 million).

Net financial expenses were EUR 2.9 million (EUR 3.2 million).

Result before extraordinary items and tax was EUR -4.0 million (EUR
-5.0 million). Net result for the period totalled EUR -3.3 million (EUR -3.7 million). Earnings per share were EUR -0.31 (EUR -0.35).

The return on net assets (RONA, rolling 12 months) was 13,0% (11.3%). Income financing after the change in working capital, investments and the disposal of fixed assets (cash flow II) was EUR -19.0 million (EUR 1,6 million). The decline in cash flow could primarily be attributed to Vianor's working capital, which was tied up in the
summer tyre inventories earlier than in the previous year. Equity ratio was 39.0% (33.6%) and included the capital loan.

During the review period, the Group employed an average of 2,637 (2,489) people, and 2,601 (2,495) at the end of the period. The tyre chain employed 1,206 (1,026) people at the end of the period.

PASSENGER CAR TYRES


Net sales from the Nokian passenger car tyres business totalled EUR 48.1 million (EUR 39.2 million), showing an increase of 22.4% on the previous year. Its operating profit amounted to EUR 7.1 million (EUR 4.0 million).

Sales performance was better than in the previous year in Finland, Sweden and Norway, where the company's own distribution network and its expertise were effectively utilised. Sales also developed favourably in Eastern Europe, USA and Russia. Winter tyres and other special products with high profit margins accounted for a large portion of total sales. Thanks to a good product mix, lower material costs and the implemented price increases, sales profitability continued to improve.

Investments in brand and corporate image building produced good results in Central Europe, and a good performance in the tyre tests of car magazines enhanced brand awareness. The price position for Nokian brand tyres climbed significantly in the key market areas in Central Europe.

Thanks to investments in production and the productivity-boosting measures taken, production volumes increased and productivity (kg/mh) improved by 11.8% on the previous year. Productivity in the manufacture of high-performance tyres (such as the V and W speed ranges) rose considerably.

HEAVY TYRES


Nokian heavy tyres sales totalled EUR 12.0 million (EUR 13.3 million), showing a 10.1% decrease from the corresponding period in the previous year, when the demand for heavy tyres was active. The heavy tyres business recorded an operating profit of EUR 0.9 million (EUR 1.5 million).

The global economic uncertainty continued to be reflected in machine and equipment manufacture, and in the demand for heavy tyres. Demand was low in both the original equipment and replacement markets. The situation was particularly challenging in the North American forestry tyres market. Even though the price competition in the heavy tyres market became increasingly fierce, Nokian Tyres was able to maintain its price level.

The domestic market showed signs of recovery compared with the situation at the year-end. Sales of radial tyres continued to develop favourably.

BICYCLE TYRES


Nokian's bicycle tyres business booked sales of EUR 1.5 million (EUR 1.6 million), down 5% on the previous year.

The demand for bicycle tyres picked up somewhat, and the production efficiency boosting and streamlining measures completed at the Lieksa plant clearly helped improve financial performance. Productivity improved and the product range was significantly reduced. Sales were sharply focused on Scandinavia, and developed together with local agencies in Europe and the USA.

RETREADING MATERIALS


Nokian's retreading materials business booked sales of EUR 2.0 million (EUR 2.4 million), down 14.4% on the previous year.

For the retreading materials business, the beginning of the year in the domestic market was normal, although clearly slower than in the previous year, when the demand for winter treads was exceptionally brisk owing to the late winter.

The export of retreading materials progressed as planned, and saw growth from last year, especially in Sweden and Norway.

VIANOR


Vianor generated net sales of EUR 32.3 million (EUR 29.4 million), showing an increase of 10% on the corresponding period last year. Vianor's operating result was EUR -8.5 million (EUR -6.6 million).
Cash flow II totalled EUR -11.4 million (EUR 8.0 million). Vianor's stock level before the launch of the summer tyre season was higher than in the previous year.

Vianor's figures included 13 new sales outlets acquired in Sweden at the end of last year. Their sales will occure mostly at the year-end, but the costs they involved encumbered the financial result at the beginning of the year.

Vianor's sales picked up from the previous year in Finland and in Sweden and the market shares improved. Tyre prices did not fluctuate significantly. The first months of the year were fairly quiet in the tyre chain's business, which is quite normal. The passenger car summer tyre season had not yet fully started, and the demand for truck tyres dropped from the previous year.

Efforts to expand the Vianor chain into Russia continued. New service concepts were developed, and another tyre hotel was opened in the town of Turku, in Finland.

The integration process continued, and special attention was paid to managing fixed costs. Overlapping activities were rationalised and low-profit sales outlets were closed down and sold in Finland. The cost cuts will affect Vianor's performance in the second half of the year. At the end of the period, Vianor had 164 outlets and it employed 1,206 people.

ROADSNOOP


The RoadSnoop pressure watch was demonstrated to tyre stores early in the year, and the product received ample publicity at the Geneva car show in Switzerland. Preliminary sales to the product's distributors were promising, and the products will enter the market during the course of the spring in Europe, North America, and Russia. Some minor changes were made to the RoadSnoop pressure watch during the review period, which made the product even more functional and easier to install.

INVESTMENTS


Investments in the period totalled EUR 6.7 million (EUR 11.7 million). Measures to limit new investments and to make more efficient use of previous investments were continued. The most important investments included the purchases of new moulds, as well as investments in machinery and equipment to eliminate production bottlenecks.

The new logistics centre constructed in the town of Nokia was introduced as planned.

Nokian Tyres has budgeted total investments of EUR 37 million for 2002.

OTHER BUSINESS DURING THE PERIOD UNDER REVIEW

CONTRACT MANUFACTURING IN RUSSIA


In February, Nokian Tyres announced its intention to start contract manufacturing of passenger car winter tyres with Amtel Holdings Company in Russia during the autumn 2002. Tyres will initially be manufactured under the Nordman brand, and they will be directed to the Russian market. The objective is to manufacture 200,000 tyres during 2002, and to gradually expand the manufacturing to also cover car summer tyres.

Co-operation with Amtel is the first and important step for Nokian Tyres on its road to establishing a presence as a tyre manufacturer in this strategically important and growing market area.

DECISIONS MADE AT THE ANNUAL GENERAL MEETING OF NOKIAN TYRES PLC

The Annual General Meeting of Nokian Tyres, held on 3 April 2002 approved the financial statements for 2001 and discharged the Board members and the president from liability. A decision was made to pay a dividend of EUR 0.83 per share. The matching date was 8 April 2002 and the payment date 15 April 2002.

It was decided that the Board of Directors would have seven members. The following people were elected Board members: Bo-Erik Haglund, D.Sc., h.c.; Satu Heikintalo, M. Sc. (Econ.); Olli-Pekka Kallasvuo, Chief Financial Officer, Nokia Group; Matti Oksanen, Director, Fortum Oil and Gas Oy; Hannu Penttilä, Managing Director, Stockmann plc; Antti Saarialho, Professor (emeritus), and Kim Gran, President and CEO of Nokian Tyres plc.

KPMG Wideri Oy, authorised public accountants continue as auditors.

The company's share capital in euro is EUR 17,798,127.40.

In connection with the switchover to euro, the share capital will be raised through a bonus issue of EUR 3,366,444.60 to EUR 21,164,572.00. An amount equivalent to the increase will be transferred to the share capital from the share premium account. No new shares will be issued in connection with the bonus issue, nor will the number of company shares change. After the conversion of the share capital into euro and the bonus issue, each share will have a nominal value of two (2) euro.

Section 3 of the Articles of Association will be amended to state that the company's minimum share capital shall be sixteen million (16,000,000) euro, and the maximum share capital shall be sixty-four million (64,000,000) euro, within which limits the share capital may be increased or decreased without amending the Articles of Association.

Section 4 of the Articles of Association will be amended to state that each share shall have a nominal value of two (2) euro.

The Annual General Meeting decided that owing to a change made in Chapter 9, section 1, paragraph 2 of the Companies Act, section 12 of the Articles of Association shall be amended to state that a shareholder must announce his participation in the Shareholders' Meeting to the company no later than on the date set in the invitation, which may be ten days prior to the Shareholders' Meeting at the earliest.

The Annual General Meeting authorised the Board of Directors of Nokian Tyres to make a decision within one year from the Annual General Meeting on whether to increase the share capital with one or more rights issues. The Board of Directors also has the right to deviate from the shareholders pre-emptive right to subscribe for shares, provided there is a compelling financial reason referred to in chapter 4, section 2a of the Companies Act.

As a result of share issues arranged under 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 with a nominal value of EUR 2. At the same time, any other effective authorisations to increase the share capital will be nullified.

OUTLOOK FOR THE YEAR-END


The global economic uncertainty will continue in spite of some signs of recovery.

The outlook for Nokian Tyres for the first half of the year, and for the whole of the year 2002, is positive. The Nokian brand awareness and the brand's market shares have grown in the key markets, and new products represent a large portion of the product portfolio. Vianor has been able to improve its position and market share, and co-operation with manufacturing will bring the company considerable synergy benefits.

The summer tyre season had a good start in the Nordic countries, and the company anticipates a higher demand for Nokian brand tyres in the winter tyre season as a result of changes in the competitive scene.

The winter tyre season is expected to be better than in the previous year in the Nordic countries, as well as elsewhere in Europe. Owing to the heavy snowfall last winter, the distribution network has no excess winter tyre stocks. This autumn, it will be three years since winter tyres became compulsory in Sweden. The current year will mark a year for winter tyre replacement in Sweden.

Special focus will be placed on customer service, especially during the high seasons. The opportunities provided by the new logistics centre have been in active use since the beginning of April. Throughout the Vianor chain, various campaigns will be arranged to boost consumer sales, and special emphasis will be placed on increasing wholesale and the sale of services.

Production volumes and productivity will rise in all business units. Contract manufacturing will begin in Russia, and manufacturing will be increased in Indonesia, Poland and the USA.

Achieving higher return on capital will be an important objective for all business units. Measures will be taken to avert the growth of fixed costs and to limit new investments.

Although there is pressure to raise the prices of raw materials, prices are estimated to remain on previous year's level during the second quarter of the year.

In 2002, Nokian Tyres aims to perform better than in 2001, in terms of both growth and profit.

NOKIAN TYRES
CONSOLIDATED PROFIT AND LOSS ACCOUNT

Million euros 1-3/02 1-3/01 Last 12 1-12/01
months

Net sales 84.5 76.6 431.4 423.4
Operating expenses 77.0 70.2 348.4 341.6
Depreciation according
to plan 8.5 8.2 31.6 31.3
Operating result -1.0 -1.9 51.3 50.5
Financial income
and expenses -2.9 -3.2 -13.2 -13.5
Result before extra-
ordinary items and tax -4.0 -5.0 38.1 37.0
Extraordinary items 0.0 0.0 0.0 0.0
Direct tax for the period 1) -0.7 -1.3 12.5 11.9
Profit applicable to
minority shareholders 0.0 0.0 0.0 0.0
Net result -3.3 -3.7 25.6 25.2

CONSOLIDATED BALANCE SHEET 31.3.02 31.3.01 31.12.01

Intangible assets 13.8 12.6 14.0
Goodwill 46.1 48.4 47.8
Tangible assets 197.1 194.8 196.5
Investments 0.4 0.4 0.4
Inventories 102.8 93.1 87.0
Receivables 99.2 103.4 95.9
Cash in hand and at bank 7.8 12.6 18.2

Shareholders' equity 146.1 120.4 149.0
Capital loan 36.0 36.0 36.0
Minority shareholders' interest 0.0 0.0 0.0
Long-term liabilities
interest bearing 136.8 124.1 137.0
non interest bearing 19.8 18.0 19.1
Current liabilities
interest bearing 54.2 80.9 39.4
non interest bearing 74.5 85.9 79.2

Total assets 467.3 465.4 459.8

Interest bearing net debt 183.2 192.4 158.2
Capital expenditures 6.7 11.7 45.3
Personnel average 2,637 2,489 2,636

NOKIAN TYRES Last 12
KEY RATIOS 31.3.02 31.3.01 months 31.12.01

Earnings per share, euro -0.31 -0.35 2.42 2.38
Equity ratio, % 2) 39.0 33.6 40.2
Equity ratio, % 31.3 25.9 32.4
Gearing, % 2) 100.6 123.0 85.5
Shareholders' equity
per share, euro 13.80 11.38 14.08

Number of shares
(1,000 units) 10,582 10,582 10,582

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 1-3/02 1-3/01 1-12/01
Net sales 84.5 76.6 423.4
Manufacturing 63.5 56.6 274.7
Vianor 32.3 29.4 193.5

Operating result -1.0 -1.9 50.5
Manufacturing 8.3 4.8 50.3
Vianor -8.5 -6.6 -0.5

Cash Flow II -19.0 1.6 47.7
Manufacturing -8.2 -5.9 30.0
Vianor -11.4 8.0 18.4

CONTINGENT LIABILITIES Million euros
FOR OWN DEBT
Mortgages 0.7 0.7 0.7
Mortgages on company assets 0.0 0.0 0.0
Pledged assets 0.0 0.1 0.1
Guarantees 1.2 1.2 1.2

The amount of debts with security 0.0 2.3 0.0

ON BEHALF OF OTHER COMPANIES
Guarantees 0.0 0.0 0.0

OTHER OWN COMMITMENTS
Leasing and rent
commitments 38.5 16.9 27.6
Acquisition commitments 0.2 5.3 0.6

INTEREST RATE DERIVATIVES
Interest rate swaps
Fair value -0.8 0.0 -1.0
Underlying value 46.5 8.4 37.5

CURRENCY DERIVATIVES
Forward contracts
Fair value -0.6 -1.1 -0.4
Underlying value 42.9 51.2 50.9

Options, purchased
Fair value 0.0 0.0 0.0
Underlying value 0.0 0.0 3.0
Options, written
Fair value 0.0 0.0 0.0
Underlying value 0.0 0.0 4.0

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.
(Unaudited figures)

Nokian Tyres plc

Raila Hietala-Hellman
Vice President, Public Information

Further information: Mr. Kim Gran, President and CEO,
tel. +358 3 340 7336

Distribution: Hex and major media