Interim report for Nokian Tyres plc January - September 2001

Tue October 23 08:00 am 2001 in category Stock exchange releases
Nokian Tyres plc Stock exchange bulletin 23 October 2001 8 a.m.


Net sales and operating profit improved both in manufacturing and in Vianor. Operating profit was EUR 25.3 million (EUR 11.9 million January-September 2000). Earnings per share were EUR 0.86 (EUR 0.26). Net sales grew by 7.4% to EUR 277.7 million (EUR 258.6 million). The target in 2001 is to reach sales growth of approx. 10% and to make a better profit than in the previous year.


The tyre market remained highly challenging throughout the period, with decline in key European markets. Sales of new cars shrank considerably, particularly in the Nordic countries. The global economy suffered from increased uncertainty, which reduced demand for tyres. Problems in the European agricultural sector hampered the demand for heavy tyres. At the end of the period, winter tyre deliveries to North America were suspended for roughly two weeks.

Apart from Germany, Nokian Tyres was able to improve its sales in all of its main markets, especially in Russia and the East European countries. Both manufacturing business and Vianor continued to increase market share in the Nordic countries.

July to September 2001

Nokian Tyres recorded net sales of EUR 106.1 million in the third quarter (EUR 106.4 million a year earlier). Net sales from manufacturing picked up by 7%. The entire net sales of the tyre outlets, which were acquired in early 2000, were consolidated into Nokian Tyres in September 2000. This explains why Vianor's net sales were 10.9% lower than in the previous year. Vianor's comparable net sales represented the previous year's level. Fixed costs totalled EUR 35 million (EUR 35 million).

Both the manufacturing business and the Vianor tyre chain achieved operating profit improvement to a total of EUR 18.6 million (EUR 13.3 million). The operating profit from the manufacturing business amounted to EUR 22.6 million (EUR 18.1 million) while Vianor booked an operating result of EUR -1.7 million (EUR -3.4 million). The operating profit includes a profit from a real estate sale EUR 3 million.

Profit before taxes rose to EUR 14.8 million (EUR 10.5 million) and the net profit for the period to EUR 9.8 million (EUR 6.9 million).

January to September 2001

In the January to September period, net sales amounted to EUR 277.7 million (EUR 258.6 million), showing an increase of 7.4% on the corresponding period a year earlier. Net sales from manufacturing grew by 8% and Vianor's by 9% on the previous year.

Both the manufacturing business and Vianor succeeded in improving their profitability. This could be largely attributed to an improved product mix, implemented price increases, improved productivity, and lower than expected material costs in the manufacturing business.

Sale prices in the manufacturing business went up 7.9% while material costs increased by 8.3% from the average prices a year earlier. The Group's fixed costs increased by EUR 6 million, or 6%, on the previous year and totalled EUR 107.2 million (EUR 101.3 million). Fixed costs represented 39% (39%) of net sales.

Operating profit rose to EUR 25.3 million (EUR 11.9 million). Operating profit from the manufacturing business amounted to EUR 34.0 million (EUR 23.4 million) while Vianor booked an operating result of EUR -6.4 million (EUR -9.4 million). Net financial expenses were EUR 10.1 million (EUR 7.2 million).

Profit before taxes was up to EUR 15.2 million (EUR 4.7 million). Net profit for the period totalled EUR 9.1 million (EUR 2.7 million). Earnings per share were EUR 0.86 (EUR 0.26).

Return on net assets (RONA, rolling 12 months) was 13.5% (10.3%).

Income finance after the change in working capital and capital expenditure (cash flow II) was EUR -20.9 million, representing an improvement of EUR 31.9 million on the previous year.

The Group employed an average of 2 656 (2 418) people, and there were 2 618 (2 533) employees at the end of the period. In contrast, Vianor employed 1 111 (1 055) people at the period end.


Passenger car tyres

Nokian passenger car tyres sales grew by 14.8% on the previous year and totalled EUR 142.5 million (EUR 124.1 million). Sales picked up in all key markets, apart from Germany. In the Nordic countries, the market share of Nokian summer and winter tyres continued to grow.

A general slowdown in the automotive industry and the weak Swedish krona held back the growth of sales value in the Nordic countries. In Central Europe, demand decreased owing to large winter tyre stocks. In September, winter tyre deliveries to North America were suspended for two weeks. Meanwhile, sales to Russia and the East European countries saw a considerable improvement.

The new ultra high-performance summer tyre, Nokian NRZi, was the sales success during the period. Sales in the third quarter mainly involved high profit margin winter tyres. Sales of winter tyres had a promising start in Finland and Sweden, unlike in the previous year, when the demand for winter tyres was exceptionally low.
New products, a good product mix, price increases, clearly improved productivity and lower material costs than were anticipated helped raise profitability.

At the end of the period, the Nokian NRW winter tyre designed for the Central European market was ranked first in a test carried out by highly respected German tyre-testing firm ADAC. All major tyre manufacturers were included in the test. Besides the Nokian NRW tyre, other Nokian brand tyres performed well in the tests reported in trade magazines.

Passenger car tyre production volumes increased throughout the period. Tyre production capacity was considerably raised, due to the new mixing plant introduced this spring and expansions in component manufacture and curing capacity.

Heavy tyres

Nokian heavy tyres generated sales of EUR 37.6 million (EUR 40.8 million), showing a decline of 7.9% on the previous year.

The uncertainties of the global economy and the major problems troubling the European agricultural sector continued to reflect on the heavy tyres business. Demand was low in all product groups, particularly in the replacement markets. In the USA, the sale of tyres for forestry machines continued to shrink throughout the period and halted almost entirely in September.

The business environment was more favourable for the forestry machine original equipment installation and the sale of special radial tyres. In fact, the demand for radial tyres has increased at a steady rate, and consequently Nokian Tyres has made major investments in expanding this production technology.

The heavy tyres production volume was adjusted to meet the demand. Contract manufacturing with the Michelin Group proceeded according to plan.

In the heavy tyres market, the declining demand translated into price cuts and special offers as companies attempted to reduce their excess stocks. Despite these developments, Nokian Tyres carried out the scheduled price increases and strengthened its position as one of the leading manufacturers of tyres for forestry machines.

Bicycle tyres

Nokian's bicycle tyres business booked sales of EUR 3.8 million (EUR 4.8 million), down 19.7% on the previous year.

A tough market environment persisted in the bicycle tyres business.
Rationalisation measures continued, and the sales organisation was renewed to intensify the sales-boosting efforts.

Retreading materials

Sales generated from Nokian Tyres' retreading materials business totalled EUR 8.1 million (EUR 7.4 million), up by 9.1% on the previous year.

Demand for retreading materials was strong, and sales developed favourably in all key markets throughout the period. Nokian Tyres was able to cement its market position, particularly in its principal market: the Nordic countries. Sales to North America continued to be brisk, and sales to new clients in Estonia, Hungary, Italy and Russia were also good.

The number-one product was the Nokian Noktop 32 tread. During the period, the product range was expanded to cover all required widths.

Earlier this year, the shortage for mixing capacity restricted sales growth in the retreading materials business. However, with the new mixing plant, the retreading unit's delivery capacity improved dramatically from the previous year, and production reached record volumes at the end of the period.


Vianor generated net sales of EUR 117.7 million (EUR 107.9 million), showing an increase of 9% on the corresponding period in 2000.

In the third quarter, operating result totalled EUR -1.7 million (EUR -3.4 million) and EUR -6.4 million in the entire period (EUR -9.4 million).

Despite the decline in the automotive industry, Vianor's sales developed well throughout the period, and its market share in the Nordic countries improved considerably. In the third quarter, the sale of truck tyres perked up remarkably. In addition, the sale of winter tyres for passenger cars started out well in Sweden. The purchase benefits gained by standardising the product selection had a positive impact on profit margins. Cost management improved clearly with the integration of the chain's operations.

During the period, Vianor's integration and development projects continued. IT systems were developed, and a real-time sales and stock follow-up system was also introduced in Sweden. This system is already being used in Finland, Norway and Estonia.

The partnership programme was extended and the first Vianor retail outlet was opened in Moscow. The objective is to build a wholesale and partnership-based Vianor network in the largest Russian cities within the next few years. Roughly 100 sales outlets are scheduled to be set up by 2006.

A total of EUR 1.5 million will be invested in the Vianor chain integration process this year. Measures will also be taken to strengthen the chain in Sweden.

The Vianor chain currently comprises 157 company-owned sales outlets and 14 partner outlets in Finland, Sweden, Norway, Estonia, Latvia and Russia.


Nokian Tyres spent a total of EUR 37.1 million (EUR 44.5 million) on investments during the period. Previous investments were exploited during the period. The first and the second phase of the mixing department investment were completed and was brought fully on line. As a result, the reliability of tyre and retreading material deliveries improved considerably. Furthermore, this eliminated the need to purchase rubber mix from outside the company.

Budgeted investments for 2001 total EUR 52 million. Major investments include machinery and equipment purchases to eliminate production bottlenecks, and the corporate arrangements associated with the Vianor chain.

The construction work of the 32,000 square metre logistics centre began this spring and is progressing as planned. Nokian Tyres will rent the premises, which will be completed in early 2002, from a real estate management company, and plans to relocate its passenger car tyres logistics operations to these facilities. The storage facilities can hold up to 700,000 tyres.



In the period under review, Nokian Tyres set up a subsidiary called Roadsnoop Ltd. to take care of the product profiling and the commercial deployment of the intelligent tyre concept.

On 18 October 2001, Nokian Tyres announced the introduction of the first-generation RoadSnoop product. The RoadSnoop pressure watch monitors the tyre pressure and temperature, and warns the driver of insufficient tyre pressure over a radio channel into a small receiver. The product is targeted primarily at replacement markets, and deliveries will begin in March 2002.

The RoadSnoop pressure watch will be sold by Nokian Tyres' own tyre chain, sales companies and importers in Europe, North America, Russia and Japan. The product's retail price will be roughly EUR 250-300. In the future, RoadSnoop products can also be manufactured using the clients' own private labels.

The product is manufactured by Flextronics International, an electronics contract manufacturer.

Nokian Tyres estimates that a total of approximately 300 000 tyre pressure measuring systems will be sold in the replacement markets in 2002. The company's objective is to become the market leader in the replacement markets.

The financial focus will be on having Roadsnoop Ltd., the subsidiary in charge of developing the intelligent tyre technology and of the commercial deployment of the product, break even in 2002, and make a profit and generate cash flow from 2003 onwards.

The wireless RoadSnoop pressure watch is very simple and easy to use. Unlike many other pressure monitoring systems, RoadSnoop gets its power from a battery, so no fixed installation is required. A tyre store can install the pressure monitoring system when changing the tyres. The system is activated when the car starts moving, and it alerts the driver with a signal tone and a light if the pressure drops below the recommended level. The receiver is a small display unit that weighs roughly 40 grams. It should ideally be placed in the driver's range of vision or hearing for the duration of each journey.

Nokian Tyres has also developed a pressure monitoring system that utilises Bluetooth technology. The first Bluetooth products in the RoadSnoop range will be demonstrated once receivers with Bluetooth capability become more widespread.


The result of Nokian Tyres is dominantly made during the winter season, in other words in the final quarter of the year. The company will focus sharply on the upcoming season in the manufacturing business and the Vianor tyre chain alike.

The weakness and uncertainty of the global economy will persist and continue to impact the automotive and tyre industry.

Nevertheless, the sales outlook for Nokian Tyres' passenger car tyre and retreading materials businesses as well as the Vianor tyre chain are still relatively good. The company expects the retail of winter tyres in the Nordic countries and Russia to improve from the previous year. The recent tragic events in the USA will incite more uncertainty in the market. For the moment, the sales outlook in the USA remains largely unaffected, but changes are possible.

Nokian winter tyres have gained a stronger position in its key markets. With new products, investments in marketing, an expanded distribution network and increased production capacity, the company is well positioned for successful performance in the important year-end season.

Good performance in the tyre tests of trade magazines will give an extra sales boost. With the new All Weather Plus winter tyre, the company plans to increase its sales and win a larger share of the growing North American winter tyre markets, as well as in Germany.

This winter tyre season, Nokian Tyres has introduced a 24-hour customer service concept designed to ensure a maximum customer service level in the Nordic market. In practice, this means that in the peak season, tyre stores will have the opportunity to order products in the evenings and receive the ordered goods the following day.

In the heavy tyres business, the sales is not anticipated to pick up towards the year-end. The company will, however, pursue measures aimed at identifying new sales opportunities, and production volume will be adjusted to meet the demand.

Preliminary spring sales of the RoadSnoop pressure watch will be launched in the course of the final quarter.

Material costs are expected to remain at the previous year's level.
Production volumes and productivity have seen very positive development. There has also been an improvement in off-take manufacturing compared with the previous year. The company has entered into negotiations to start tyre manufacturing in Russia as soon as possible.

To improve the cash flow and return on capital, Nokian Tyres will continue to reduce stock levels. Furthermore, the company will take measures to utilise the investments more efficiently and to avert the growth of fixed costs.
The objective for 2001 is to reach sales growth of approx. 10% and to make a better profit than in the previous year.

Nokia, October 23, 2001


Million euros 7-9/01 7-9/00 1-9/01 1-9/00 Last 12 1-12/00

Net sales 106.1 106.4 277.7 258.6 417.6 398.5
Operating expenses 79.3 85.3 227.6 225.5 332.2 330.1
Depreciation according
to plan 8.1 7.8 24.9 21.3 32.5 28.9
Operating result 18.6 13.3 25.3 11.9 52.9 39.4
Financial income
and expenses -3.8 -2.8 -10.1 -7.2 -15.2 -12.3
Result before extra-
ordinary items and tax 14.8 10.5 15.2 4.7 37.7 27.2
Extraordinary items 0.0 0.0 0.0 0.0 0.0 0.0
Direct tax for the
period 1) 5.0 3.7 6.2 1.9 11.6 7.4
Profit applicable to
minority shareholders 0.0 0.0 0.0 0.0 0.0 0.0
Net result 9.8 6.9 9.1 2.7 26.2 19.8

CONSOLIDATED BALANCE SHEET 30.9.01 30.9.00 31.12.00

Intangible assets 14.9 10.6 11.5
Goodwill 45.6 51.5 50.2
Tangible assets 194.3 185.3 190.1
Investments 0.3 0.5 0.4
Inventories 97.0 95.4 81.3
Receivables 131.0 121.4 116.5
Cash in hand and at bank 5.6 5.8 14.0

Shareholders' equity 132.7 115.0 131.3
Capital loan 36.0 36.0 36.0
Minority shareholders' interest 0.0 0.1 0.0
Long-term liabilities
interest bearing 159.7 145.0 125.7
non interest bearing 17.1 17.0 18.1
Current liabilities
interest bearing 67.7 78.7 70.4
non interest bearing 75.6 78.7 82.5

Total assets 488.8 470.5 464.0

Interest bearing net debt 221.7 217.9 182.1
Capital expenditures 37.1 44.5 67.5
Personnel average 2 656 2 418 2 462

KEY RATIOS 30.9.01 30.9.00 months 31.12.00

Earnings per share, euro 0.86 0.26 2.47 1.88
Equity ratio, % 2) 34.5 32.1 36.1
Equity ratio, % 27.2 24.5 28.3
Gearing, % 2) 131.4 144.2 108.9
Shareholders' equity
per share, euro 12.54 10.86 12.41

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 7-9/01 7-9/00 1-9/01 1-9/00 1-12/00

Net sales
Manufacturing 79.8 74.6 192.1 177.1 260.8
Vianor 40.7 45.7 117.7 107.9 176.5

Operating result
Manufacturing 22.6 18.1 34.0 23.4 43.0
Vianor -1.7 -3.4 -6.4 -9.4 -1.7

Million euros

Mortgages 0.7 9.5 1.4
Mortgages on company assets 0.0 5.6 0.0
Pledged assets 0.1 0.1 0.1
Guarantees 5.1 5.0 1.2

The amount of debts with security 2.6 7.9 3.6

Guarantees 0.0 0.0 0.0

Leasing and rent
commitments 28.6 15.3 17.2
Acquisition commitments 4.8 4.4 5.3
Not entered interest on
capital loan 1.3

Interest rate swaps
Fair value -0.4 0.3 0.0
Underlying value 33.4 8.4 8.4
Options, purchased
Fair value 0.0 0.1 0.0
Underlying value 0.0 5.0 5.0

Forward contracts
Fair value 1.3 -1.2 1.5
Underlying value 66.1 51.4 58.5

Options, purchased
Fair value 0.0 0.0 0.0
Underlying value 0.0 6.0 0.0
Options, written
Fair value 0.0 -1.1 0.0
Underlying value 0.0 16.0 2.0

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, Nokian Tyres plc, tel. +358 3 340 7336.

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