Tue February 15 12:00 am 2000 in category Stock exchange releases
Nokian Tyres plc Stock Exchange Bulletin 15 February 2000 8.00 am
In 1999, Nokian Tyres plc's profit per share stood at 2.51 euros (2.04 euros in 1998), which is 23% higher than the previous year. Net sales increased by 28% and stood at 322.6 million euros (251.3 million euros). The Board of Directors will propose the payment of a dividend of 35% of net profit, that is 0.85 euros (0.73 euros) per share.
NET SALES AND PROFIT
Net sales in 1999 stood at 322.6 million euros (251.3 million euros), which is 28% higher than the previous year. Net sales, excluding Isko, which was acquired in the autumn of 1999, was 304 million euros, which is 21% higher than the previous year. The share of foreign invoicing was 74% (74%) of total net sales.
Fixed expenses increased by 28.4 million euros, which is an increase of 38% on the previous year, and stood at 103 million euros (74 million euros). Commensurate fixed expenses were 87 million euros, which is 17.1% higher than the previous year. Investment costs and related depreciation costs and retail expenses increased the most.
Operating profit amounted to 42.1 million euros (33.2 million euros), which is 27% higher than the previous year. Net financial expenses were 6.2 million euros (3.9 million euros).
Profit before tax increased by 19% on the previous year and amounted to 35.5 million euros (29.9 million euros). Net profit was 25.7 million euros (21.6 million euros), which is 19% higher than the previous year. The commensurate net profit was 24.6 million euros, which is 14% higher than the previous year. Earnings per share increased by 23% on the previous year and amounted to 2.51 euros.
Return on capital employed was 16.9% (19.8%).
Research and development costs reached 7.8 million euros (6.6 million euros), which is 2.4% of net sales.
During the fiscal year, the Group employed an average of 2,023 people (1,620). The corresponding figure within the Parent Company was 1,337 (1,276) people. At the end of the fiscal year, the Group employed 2,226 (1,732) people, and the Parent Company 1,347 (1,273). The number of employees increased most in the retail network, which employed 795 (379) people at the end of the year.
PASSENGER CAR TYRES
Nokian passenger car tyre sales grew by 20% on the previous year and amounted to 164.0 million euros (136.8 million euros). Winter tyre sales accounted for 69% and original equipment sales for 2.4% of passenger car tyre sales. Exports amounted to 77% of sales.
Demand for winter tyres increased in all Nokian Tyres' major market areas and price levels remained stable. Sales of Nokian brand winter tyres were particularly good in Sweden and Germany. Demand for lower speed rating (S and T) summer tyres decreased and price pressures
increased. Demand for high-speed (V and W) tyres increased in the Nordic countries and in Western Europe. The new V-speed class summer tyre, the Nokian NRV, was received particularly well on the market and its sales exceeded forecasts.
New products, that is, products that were launched during 1998 and 1999, accounted for 29% of passenger car tyre sales.
In September, Nokian Tyres introduced a new H-speed rated summer tyre, the Nokian NRH2, which was launched at the beginning of 2000. The Nokian NRH2 is one of Nokian Tyres' key products, as demand for H-speed rated tyres in Europe is constantly increasing.
Nokian Tyres' surveys show that recognisability and desirability of the Nokian brand clearly increased in 1999. Nokian Tyres' advertisements received many national and international awards.
Production of passenger car tyres increased from 3.8 million tyres to 4.1 million. Although the company increased its production capacity, demand for new tyre models and other core products exceeded supply capacity at times. Sales of off-take tyres manufactured increased by 31% on the previous year and amounted to 8.9 million euros, which is 5,4% of sales in the product area.
Nokian heavy tyres' sales increased by 3% on the previous year and amounted to 54.9 million euros (53.5 million euros). Exports amounted to 66% (62%) and original equipment installations amounted to 36% of sales.
In the Heavy tyres product area, the increase in demand was highest in radial tyres, where the company has made considerable product development investments in recent years. New radial products, such as special agricultural tyres, were well received on the market. New products amounted to 9% of sales in the product area.
At the beginning of the year, demand for truck tyres decreased, particularly in Finland because of reduced road transport to Russia. However, demand started to pick up towards the end of the review period. The decline in transport to Russia also reduced demand for harbour machinery tyres in Finland. Demand was low on the Swedish and North American forestry tyre replacement markets.
In September, Nokian Tyres launched a new truck winter traction tyre, the Nokian NTR-831, which is intended for the Nordic market for long-distance goods vehicles, buses and timber trucks.
The production of heavy tyres increased from 9,658 tons to 10,020 tons. Sales of off-take manufacture tyres decreased by 6% and amounted to 8.0 million euros, which is 14.6% of sales in the product area.
In December, Nokian Tyres announced the termination of its co-operation agreement with the Romanian tyre manufacturer, Tofan Grup, which had been started in 1997. Tofan Grup manufactured certain Nokian agricultural and industrial tyres at its factories in Romania. It was decided to terminate the co-operation, because Tofan Grup could not achieve the product and process quality, which Nokian Tyres and its customers expect. Nokian Tyres aims to reach a new agreement before the summer.
Sales of Nokian bicycle tyres stood at 7.1 million euros (7.6 million euros), which is 6% less than the previous year. Original equipment installations made up 33%.
Bicycle factories reduced production when compared with the previous year and wholesale and retail channels reduced their inventories, which decreased sales of bicycle tyres in Finland. Exports developed positively and amounted to 68% (63%) of sales in the product area.
An operations management project was implemented at the Lieksa bicycle tyre factory, which resulted in a considerable increase in manufacturing to order and to a reduction in the inventory of finished products. In 1999, the Lieksa factory manufactured 1.3 million bicycle tyres (1.7 million) and 1 million bicycle tyre inner tubes (1.5 million). During the second quarter, production was adjusted to meet demand.
A lot of changes were made to the bicycle tyre product range. Product development focus included cross-country tyres, studded tyres and a new product family for the Western European touring bike market. New products amounted to 28% of sales in the product area.
The bicycle tyre supply chain from supplier to wholesale and retail was renewed to support the specialisation strategy of the product area. In the autumn, co-operation with new distribution partners started in Finland, Sweden, Norway and North America.
Nokian Tyres' retreading material sales stood at 11.1 million euros (10.0 million euros), which is 10% higher than the previous year.
Demand for retreading materials decreased slightly on the previous year and price competition intensified on the market. Demand was particularly low at the beginning of the year, but clearly increased during the autumn.
Passenger car retreading material sales increased particularly in Sweden and the position of Nokian Tyres as the largest supplier of retreading materials in the Nordic countries was further strengthened.
The autumn season was favourable for truck tyre retreading materials. The market area was expanded and new customer agreements were made abroad, which increased the share of exports in net sales in the product area to 45%(36%).
Production of retreading materials amounted to 5,176 tons (4,900 tons). The product range was renewed by developing tailored tread
materials for different conditions and uses. New products accounted for 26% of net sales in the product area.
1999 was a year of substantial growth for Nokian Tyres' retail operations. Net sales from Nokian Tyres' retail operations increased by 108% on the previous year and amounted to 100.6 million euros (48.3 million euros). Commensurate net sales, that is net sales excluding Isko that was acquired in the autumn, stood at 76.8 million euros, which is 59% higher than the previous year.
The increase in sales of passenger car tyres showed the effects of legislation in Sweden to make winter tyres compulsory, which was brought into force in the autumn of 1999. The fee for using studded tyres in major cities in Norway continued to increase the already high demand for friction tyres there. The peak season for winter tyres was in the last quarter of the year.The year was unusually quiet in heavy tyres.
In the autumn, the company expanded its retail network in Finland and Estonia as Nokian Tyres acquired 69% of the Isko tyre company and 94% of votes in the company. Isko is the largest tyre wholesale and retail company in Finland. The acquisition was approved by Finnish competition authorities on 30 November 1999. The purchase price was 25.73 euros per share, which amounts to a total of 33.5 million euros. Later, Nokian Tyres made an offer to buy all remaining Isko shares at the same price. On 20 December 1999, when the offer ended, Nokian Tyres owned 98.5% of Isko shares and 99.7% of all votes pertaining to Isko shares. On 28 December 1999, Nokian Tyres made, according to the Securities Market Act, a tender for all Isko shares and securities. The validity of the tender ended on 28 January 2000, when Nokian Tyres owned 99.4% of Isko shares and approximately 99.9% of votes in the company. Nokian Tyres will, according to the provision of Companies' Act, redeem the rest of Isko shares.
Isko's profit was consolidated into Nokian Tyres' profit and loss account as of 1 October 1999. Isko became a subsidiary of Nokian Tyres and, operatively, part of Nokian Tyres' retail business.
The acquisition of Isko increased Nokian Tyres' retail network by 40 outlets. Nokian Tyres now has the largest retail network in the Nordic countries. At the end of 1999, the network included a total of 117 sales outlets. During 1999, the Norwegian network grew by 3 new outlets and the Swedish network by 8 new outlets. A strong position in tyre retail ensures that the company's sales and profitability development targets will be met. An extensive network yields considerable synergy benefits in purchasing, marketing and administration.
In 1999, Nokian Tyres invested 85.7 million euros (72.7 million euros). Production and operation investments amounted to approximately 30 million euros, production office investments stood at 2 million euros and retail company acquisitions 54 million euros.
The construction of the heavy tyre building hall progressed as planned and machinery installations in the new building started in December.
OTHER MATTERS DURING THE REVIEW PERIOD
Approval to increase share capital
The Annual General Meeting authorised Nokian Tyres' Board of Directors to decide upon increasing the share capital with one or more rights issues within one year from the registration of the authorisation. The Board of Directors also has the right to deviate from the shareholders' pre-emptive right to subscribe stock, provided there is a compelling corporate reason. The share capital of the company may increase by a maximum of 3.4 million euros as a result of the shares issues included in the authorisation. A maximum of 2,000,000 new shares can be issued each bearing a nominal value of 1.68 euros. At the same time, any other effective authorisations to increase share capital were made null and void.
Employee share options
Nokian Tyres' Annual General Meeting on 24 March 1999 decided to issue bonds with warrants to employees of the Nokian Tyres Group and the employees of the subsidiary wholly owned by the Group. The shareholders' pre-emptive right to subscribe to stock is not valid, since the bonds issue is part of the company's incentive scheme. The minimum amount of the bonds issue is 336,376 euros and the maximum amount is 470,926 euros. The loan, which will be repaid on 23 April 2001 bears no interest. In total, the warrants pertaining to the bonds entitle the subscription of a minimum of 500,000 and a maximum of 700,000 shares in the company. The share subscription price after adjustment is 32.45 euros. The amount of the dividend shall be deducted from the subscription price before subscription for shares.
Nokian Tyres' Board of Directors approved the subscription of Nokian Tyres Group's personnel issue. 53% of the Group's employees subscribed to the bonds with warrants. The minimum subscription amount was 168.19 euros.
Additionally, the Board of Directors approved a 58,058.47 euro subscription by Direnic Oy, a subsidiary of Nokian Tyres. Direnic's bonds with warrants may be offered to employees of the Nokian Tyres Group, or to newly recruited employees.
The total amount of the bond loan is 403,651.02 euros and the warrants pertaining to the bonds confer the right to subscribe to a maximum of 600,000 Nokian Tyres plc shares between 2001 and 2005.
Increases in share capital
31,500 Nokian Tyres shares were subscribed with warrants pertaining to the 1995 bonds by 25 March 1999, 40,000 shares by 23 November 1999 and 10,000 shares by 24 November 1999. The increases in share capital were registered on the Trade Register in April and December 1999. No shares from the 1995 bonds remain unsubscribed.
57,500 shares were subscribed with warrants pertaining to the 1996 bonds by 8 December 1999. The increases in share capital were registered on the Trade Register in December 1999. 42,500 shares remain unsubscribed, which equals 0.4% of current shares. Of the remaining shares, a total of 5,000 shares will remain completely unsubscribed.
After the increases in April and December, the company's own share capital amounts to 17,735,057 euros.
Nokian Tyres decided to strengthen its balance structure through the introduction of equity securities. The securities will be issued in early 2000.
MATTERS SUBSEQUENT TO THE FINANCIAL PERIOD
At the beginning of February, Nokian Tyres introduced to the media and retail customers a new studded passenger car winter tyre and three new delivery van tyres each tailored for different market areas.
The new passenger car tyre, the Nokian Hakkapeliitta 2, is the first tyre to combine the gripping properties of studded and friction tyres, which is the main innovation of the tyre. Of the delivery van tyres introduced, the Nokian Hakkapeliitta C2 is a studded tyre, the Nokian Hakkapeliitta CQ is a friction tyre aimed at the Nordic market and the Nokian Hakkapeliitta CS is a winter tyre designed for Western European conditions.
The new products will be launched to consumers in the autumn of 2000. With these new products, Nokian Tyres aims to strengthen its position both in the Nordic countries and in Western Europe.
OUTLOOK FOR THE YEAR 2000
Tough competition in the passenger car tyre market will continue. There is an excess supply particularly of the lower speed rating passenger car tyres, which increases price pressure.
The increase in demand for winter tyres and high performance summer tyres is expected to continue. The outlook for heavy tyres is also positive.
Despite price pressure from competition and higher raw material prices, Nokian Tyres aims to grow and increase its profitability by focusing on high-class speciality products, launching new products and developing its production capacity. In the year 2000, the company will invest a total of approximately 36 million euros in expanding its production capacity. Investments are part of the company's five-year plan, where the target is to increase production capacity by 50% and to increase the share of premium tyres in production. Particularly in passenger car tyre production, this will lead to increased production of high performance and ultra high performance tyres.
In the year 2000, the company will launch more new products than ever before. Whole new product families will be introduced in several product groups. Important structural changes will continue in production and production capacity in 2000 will be 10% higher than in 1999.The company has the largest retail chain in the Nordic countries, which benefits purchasing, marketing and administration. In 2000, the target of Nokian Tyres is to improve sales and profits as in previous years.
NOKIAN TYRES CONSOLIDATED PROFIT AND LOSS ACCOUNT
Thousand euros 1-12/99 1-12/98 Change %
Net sales 322,623 251,275 28.4
Operating expenses 260,748 203,775 28.0
Depreciation according to plan 19,754 14,282 38.3
Operating profit 42,122 33,218 26.8
Financial income and expenses -6,194 -3,903 58.7
Profit before extra-
ordinary items and tax 35,928 29,315 22.6
Extraordinary items -447 607
Direct tax for the year 9,797 8,324 17.7
Profit applicable to
minority shareholders 3
Net profit 25,682 21,598 18.9
CONSOLIDATED BALANCE SHEET 31.12.99 31.12.98
Goodwill 50,716 14,548
Fixed assets 163,625 125,446
Inventories 68,368 51,011
Receivables 94,876 65,672
Cash in hand and at bank 14,263 12,640
Shareholders' equity 121,000 99,957
Minority shareholders' Interest 148
interest bearing 127,472 77,320
non interest bearing 16,607 13,154
interest bearing 57,174 29,569
non interest bearing 69,447 49,317
Total assets 391,849 269,317
Interest bearing net debt 170,384 94,249
Capital expenditures 85,681 72,701
Personnel 2,023 1,620
NOKIAN TYRES KEY RATIOS 31.12.99 31.12.98 Change %
Earnings per share, euro 2.51 2.04 23.0
Equity ratio, % 30.9 37.1
Gearing, % 140.8 94.3
Shareholders' equity per share, euro 11.47 9.69 18.5
Number of shares (1,000 units) 10,545 10,320
CONTINGENT LIABILITIES (Thousand euros)
FOR OWN DEBT
Mortgages 18,711 1,438
Pledged assets 67 386
Guarantees 1,177 1,177
ON BEHALF OF OTHER COMPANIES
Guarantees 9 8
OTHER OWN COMMITMENTS
Leasing and rent
commitments 2,988 3,817
Acquisition commitments 5,109 0
INTEREST RATE DERIVATIVES
Interest rate swaps
Fair value 283 473
Underlying value 8,409 8,409
Fair value 41 0
Underlying value 5,046 0
Fair value -1,266 292
Underlying value 58,375 48,488
Fair value 148 174
Underlying value 7,000 15,247
Fair value -240 -8
Underlying value 11,000 6,857
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
For additional information, please contact Mr Lasse Kurkilahti, President, tel. +358-3-340 7336