Nokian Tyres in 2001

Fri February 15 12:00 am 2002 in category Stock exchange releases
Nokian Tyres plc Stock exchange release 15 February 2002 8 a.m.


Profit before tax rose by 36% to EUR 37,0 million (EUR 27.2 million in 2000). Earnings per share rose to EUR 2.38 (EUR 1.88). Net sales grew by 6.3% to EUR 423.4 million (EUR 398.5 million). Equity ratio rose from 36.1% to 40.2%. Net cash flow grew to EUR 22 million and cash flow II picked up by EUR 56.9 million. The Board of Directors will propose the payment of a dividend equalling 35% of the net profit, i.e. EUR 0.83 (0.65) per share.


The decline of the global economy and the general uncertainty reflected on the car and tyre industry throughout the year. In the Nordic countries, the sales of new cars dropped from the previous year. Car winter tyre sales to consumers proceeded well in Europe and in the Nordic countries, but owing to dealers' high stock levels, winter tyre deliveries to the retail sector shrank by 10% from the previous year. Factors attributing to low heavy tyre demand included equipment manufacturers' reduced production volumes and the severe problems in the European agricultural sector, which reflected on the prices of heavy tyres.

Average raw material prices were higher than the previous year throughout the year, but dipped towards the year-end.

Regardless of the particularly challenging business environment, Nokian Tyres was able to boost its net sales and operating profit, and to strengthen its corporate structure. Sales increased in both the manufacturing business and in Vianor, and market shares improved in the key markets. The weak Swedish krona undermined the sales value. In terms of passenger car tyres, the strongest growth areas included Russia, Eastern Europe, Norway and the USA. Sales were up 60% on the previous year to Russia and other CIS countries, and 46% to Eastern Europe. Thanks to a good sales mix, the high proportion of new products and successfully implemented price increases, the average price of tyres rose by 5.5% from the previous year. Nokian-brand tyres represented an increasingly large part of Vianor's sales. Co-operation between manufacturing and Vianor produced considerable synergy benefits. Production volumes increased, productivity improved and production costs decreased in the manufacturing of passenger car tyres and retreading materials.

The year's key objectives, raising the equity ratio and improving cash flow, were achieved.

October-December 2001

Nokian Tyres recorded net sales of EUR 145.7 million in the third quarter (EUR 139.8 million a year earlier). Overall net sales from manufacturing were down 1.2% from the corresponding period a year earlier. Sales of passenger car tyres grew by 3.5% while sales of heavy tyres dropped by 19%. Vianor's net sales increased by 10.6%.

Fixed costs amounted to EUR 43.9 million (EUR 39.9 million). The comparison figure for 2000 includes a fixed assets sales gain of EUR 3.2 million that was fully allocated to the manufacturing business.

Operating profit was EUR 25.2 million (EUR 27.6 million)
The comparable operating profits from manufacturing and from Vianor were on previous year's level. The operating profit of Däckaffaren
2000 AB has been consolidated into Vianor's profit as of 1 November 2001.

Profit before taxes was EUR 21.8 million (EUR 22.5 million). Net profit for the period totalled EUR 16.1 million (EUR 17.1 million).

January-December 2001

Net sales in 2001 amounted to EUR 423.4 million (EUR 398.5 million), showing an increase of 6.3% on the previous year. Invoicing from outside Finland accounted for 68% (67%) of the overall net sales.

Good sales mix, the implemented price increases and improved productivity boosted the company's profitability. Sales prices in manufacturing rose by 5.5% and material costs by 4.9% from the averages last year. Material costs took a downward turn in the second half, and did not increase as much as was expected.

The Group's fixed costs increased by EUR 10.1 million, or 7.2%, on the previous year and totalled EUR 151.2 million (EUR 141.1 million). Fixed costs represented 35.7% (35.4%) of net sales. The tyre chain accounted for EUR 9.0 million of the growth of fixed costs.
Depreciation of goodwill amounted to EUR 6.9 million (EUR 6.7 million).

Operating profit rose to EUR 50.5 million (EUR 39.4 million). Operating profit from the manufacturing business amounted to EUR 50.3 million (EUR 43.0 million) while Vianor's operating result was EUR
-0.5 million (EUR -1.7 million). The impact of the weakened Swedish krona in the sales margin was EUR 2 million.

Net financial expenses were EUR 13.5 million (EUR 12.3 million). They represented 3.2% (3.1%) of net sales.

Profit before taxes rose to EUR 37.0 million (EUR 27.2 million). Net profit for the period amounted to EUR 25.2 million (EUR 19.8 million). Earnings per share were EUR 2.38 (EUR 1.88).

Return on net assets (RONA) was 12.8% (11.0%). Income financing after the change in working capital, investments and sales of fixed assets (cash flow II) was EUR 47.7 million, representing an improvement of EUR 56.9 million on the previous year. Equity ratio rose from 36.1% to 40.2% and included the capital loan.

Research and development costs totalled EUR 8.3 million (EUR 8.3 million), representing 3.0% of the net sales from manufacturing.

Over the year, the Group employed some 2,636 people on average (2,462). Meanwhile the parent company employed 1,383 (1,396) people.
At the end of the financial year, the Group employed 2,664 (2,519) people and the parent company 1,361 (1,376). At the year-end, Vianor employed 1,213 (1,054) people.


Passenger car tyres

Net sales from Nokian passenger car tyres grew by 11.0% from the previous year and totalled EUR 206.6 million (EUR 186.2 million). In the year's final quarter, net sales were up by 3.5%. Sales focused on winter tyres and other new products with a high profit margin; these
accounted for 44% of the product area's overall sales. Winter tyres represented 67% of the product area's total sales.

The operating profit of Passenger Car and Delivery Van Tyres rose to EUR 41.5 million (EUR 34.7 million).

A challenging market situation persisted: the tyre markets fell and price competition was fierce. Slower car sales in the Nordic countries as well as the Central European and Nordic tyre dealers' high stock volumes reduced the demand for tyres. The weak Swedish krona reduced the sales value.

Nokian-brand summer and winter tyres were able to expand their market shares in the key market areas. Tyres sold particularly well in Russia, the East European countries, Norway and the USA. Average tyre prices increased by 5.6% as a result of new product launches, a good product mix and price increases. Higher productivity and lower than expected material costs raised profitability.

Novelties launched earlier in the year included the Nokian NRZi summer tyre, which did very well in the markets. Test wins gained by Nokian NRW winter tyre in major German trade magazines, increased company's recognition in Central Europe and made a positive impact on sales. The so-called 24-hour service concept was introduced in the autumn. It improved the customer service and provided more sales opportunities during the peak winter season in the Nordic countries.

Passenger car tyre production volumes grew steadily over the year from 4.3 million to 4.8 million tyres, the emphasis being on increasing the added value of the production and improving the product mix. Productivity per person rose by 10.5%.

Heavy tyres

The Nokian heavy tyres business generated net sales of EUR 51.3 million (EUR 57.3 million). Total net sales shrank by 10.3% from the previous year and by 19% in the final quarter. Original equipment installation represented 38% (39%) of the product area's net sales. A number of new products were introduced in the product range, but owing to weak demand they accounted for only 12% of the product area's net sales.

The heavy tyres business recorded an operating profit of EUR 1.7 million (EUR 5.9 million).

The global economic uncertainty, equipment manufacturers' reduced production volumes and the difficulties in the European agricultural sector continued to reflect on the demand for heavy tyres throughout the year. Demand for all product groups was low, both in the original equipment installation and replacement markets.

Domestic oe-sales of forestry tyre developed slightly more positively, and truck tyres sold relatively well in Norway. The demand for radial tyres picked up from the previous year.

Weakened demand translated into price cuts and special offers designed to reduce the excess stocks of the industry. Nevertheless, Nokian Tyres was able to implement the scheduled 3.6% price increases and to retain its position as the world's leading manufacturer of cut-to-length forestry tyres.

Off-take production proceeded according to plans, and customer feedback concerning the new partner's products was good.

The annual output of the heavy tyres unit was 8,782 tons (10,020 tons in 2000).

Bicycle tyres

Net sales from the Nokian bicycle tyres business were down 19.0% on the previous year to EUR 5.3 million (EUR 6.5 million). Measures aimed at adjusting these operations will continue.

Retreading materials

Net sales from the Nokian retreading materials picked up by 5.8% on the previous year and totalled EUR 11.4 million (EUR 10.8 million). New products accounted for 21% of the product area's net sales.

Demand for retreading materials thrived and sales developed very well in all key markets throughout the year. Co-operation with Vianor produced considerable synergy benefits, and company's position as the leading retreading materials supplier in the Nordic countries strengthened. Sales to North America and to new customers in Estonia, Hungary, Italy and Russia developed well.

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

The shortage for mixing capacity hampered sales of retreading materials at the beginning of the year. With the introduction of the new mixing plant, retreading materials delivery capacity improved dramatically and towards the year-end, the product quantities significantly exceeded those of the previous year. The production output of retreading materials amounted to 4,727 tons (4,543 tons).


Vianor's net sales grew by 9.6% on the previous year to EUR 193.4 million (EUR 176.5 million). In the final quarter, net sales increased by 10.6%. Decreased sales volumes of new cars and low demand for tyres in December affected Vianor's sales. The weak Swedish krona reduced the sales value.

Operating result improved and totalled EUR -0.5 million (EUR -1.7 million). Because of the new booking method, purchase discounts were distributed evenly over the entire year, unlike in the previous year. The annual profit margin remained the same. Cash flow II climbed from EUR -24.5 million to EUR 18.4 million as a result of smaller investments and better working capital management.

Towards the end of the year, Nokian Tyres extended its Vianor chain in Sweden with the acquisition of Däckaffären 2000 AB. The transaction involved 13 tyre outlets in Southern and Central Sweden.

Vianor now runs 170 own sales outlets in five countries. The first Vianor partner outlets operating under the Vianor colours were opened in Moscow in the autumn. The objective is to build more partner outlets in major Russian cities.

During the period under review, efforts aimed at Vianor's integration and development continued. The introduction of a uniform product
selection in all stores generated purchase benefits, and the integrated operations started to lower the share of fixed costs of overall sales. A real-time sales and stock follow-up system was introduced across the entire chain.


In the period under review, Nokian Tyres set up the Roadsnoop unit to take charge of the product profiling and commercial utilisation of the intelligent tyre concept, and introduced 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. A tyre store can install the pressure monitoring system when changing the tyres. RoadSnoop products can also be manufactured using the customers' private labels.

Preliminary sales of the product have started as expected. The product is primarily targeted at the replacement market and the deliveries will begin in spring 2002. The product's retail price will be roughly EUR 200-250. The RoadSnoop unit aims to break even in 2002, and make positive profit and cash flow from 2003 onwards.

Nokian Tyres estimates that approximately 300,000 tyre pressure measuring systems will be sold in the replacement markets in 2002.


Nokian Tyres' investments in 2001 totalled EUR 45.3 million (EUR 67.5 million). Production and operating investments accounted for some EUR 38.2 million. Vianor's investments amounted to EUR 11.1 million (18.2), with business acquisitions representing EUR 7.1 million.

Over the period, Nokian Tyres was cautious with new investments and focused instead on making more efficient use of the previous investments. The most significant new investment was the new mixing plant, which was brought fully on-line two months ahead of schedule. The new mixing plant improved production management and enabled smaller raw material stocks. Other investments involved machinery and equipment required to eliminate production bottlenecks, and corporate arrangements associated with the Vianor chain.

In addition, a 32,000 square-metre logistics centre was built for Nokian Tyres in the town of Nokia. The company leased the property from a real estate management company, and plans to relocate its passenger car tyre logistics activities in these facilities as of the beginning of 2002.


Bond loan with warrants directed to the personnel

The Annual General Meeting of Nokian Tyres in 2001 decided to offer a bond loan with warrants to the personnel of the Nokian Tyres Group and the wholly-owned subsidiary of Nokian Tyres plc.

The bond loan with warrants amounts to FIM 2,400,000 (EUR 0.4 million). A total of 10,800 type I bond certificates, 9,600 type II bond certificates II and 9,600 type III bond certificates was issued. 600,000 warrants will be attached to the bonds, 216,000 of which will be attached to the type I bond certificates and marked with the symbol
2001A; 192,000 will be attached to type II bond certificates and marked with the symbol 2001B; and 192,000 will be attached to type III bond certificates and marked with symbol 2001C.

The share subscription price for warrants 2001A shall be nineteen (19) euros, for warrants 2001B the trade volume weighted average quotation of the Nokian Tyres plc share in the Helsinki Exchanges between 1 October and 31 October 2001 (EUR 25.94), and for warrants 2001C the trade volume weighted average quotation of the Nokian Tyres plc share in the Helsinki Exchanges between 1 April and 30 April 2002. The amount of the cash dividend distributed after 28 March 2001 but before the date of the share subscription shall be deducted from the share subscription price of warrants 2001A on the dividend record date. The price of shares subscribed for with warrants 2001B and 2001C shall be reduced by the amount of dividends paid after the commencement of the period for which the subscription price was determined, and dividends paid before the subscription, on the record date of each dividend payment.

The share subscription period shall begin on 1 March 2003 for warrants 2001A, on 1 March 2004 for warrants 2001B, and on 1 March 2005 for warrants 2001C. The subscription period for all warrants shall end on 31 March 2007. As a result of the subscriptions, the share capital of Nokian Tyres plc may increase by a maximum of FIM 6,000,000 (one million euro) and the number of shares by a maximum of 600,000 new shares.

The Board of Directors of Nokian Tyres plc has approved the subscriptions for the bond loan with warrants directed to the personnel of the Nokian Tyres Group. The bond loan with warrants was subscribed to by 42% of the entire personnel. A minimum subscription of FIM 320 for each subscriber was approved. In addition, a subscription of FIM 390,240 to Direnic Oy, a subsidiary of Nokian Tyres plc, was approved for later offering to the present or future personnel of Nokian Tyres Group. Bond certificates I and the attached warrants marked 2001A were offered to the subscribers of the 1999 bond loan with warrants provided that the warrant holder returns all his/her old 1999 warrants to the company. In the conversion, 433,800 old 1999 warrants were returned to the company. The total amount of the 2001 bond loan with warrants is FIM 2,400,000 and the maximum number of Nokian Tyres shares that can be subscribed for with the warrants between 1 March 2003 and 31 March 2007 is 600,000.

The company cancelled a total of 433,800 1999 warrants, which have been returned to the Group in the conversion and entitle to the subscription of 433,800 shares, as well as a total of 85,250 1999 warrants, which are in the possession of Direnic Oy, a wholly-owned subsidiary of Nokian Tyres plc, and entitle to the subscription of 85,250 shares.


In December, Nokian Tyres plc announced the launch of an incentive scheme based on the company's share price development. The scheme covers those holders of the 1999 warrants who did not exchange their 1999 warrants for the new 2001 warrants in May 2001.

The new incentive scheme will replace the 1999 option scheme.

The majority of the 1999 warrants were returned to the company and were subsequently cancelled in spring 2001 when the company issued new
2001 warrants. The new incentive scheme shall replace all the remaining warrants, after which the 1999 warrants shall no longer exist.

As a result, the total number of Nokian Tyres options given to personnel is 600,000.


The main objective for 2002 is to outperform the results of 2001 in terms of growth and profit.

This year, the business environment will continue to present major challenges. Uncertainty in the global economy is anticipated to persist, and regrettably, the sales of new cars and demand for tyres are not expected to perk up significantly. Nor is the heavy tyres market likely to recover in the first half.

The target is to improve the financial performance in the first half of 2002, although that the first quarter is expected to be negative as in the previous year. This is due to the fact that the demand for tyres is regularly quite low in the home market at the beginning of the year. The fixed costs that are not linked to sales will tax the profitability steadily throughout the year.

As for the whole year, Nokian Tyres' outlook for 2002 is good. The key strength is the strategy that places the focus on growing markets and product areas where demand exceeds the tyre industry's average annual growth of around 1-2%. Company's position has strengthened and market shares have improved in the key markets. Changes in the Nordic competitive scene will provide even better sales opportunities for Nokian-brand tyres.

Geographically, areas of strong growth include Russia, Eastern Europe and the so-called snow belt in North America, in other words countries in which Nokian Tyres has been able to strengthen its position and sales considerably in the recent years. Growing product areas include high-speed summer and winter tyres for passenger cars, heavy radial tyres, light truck tyres and SUV tyres. The product range will continue to be expanded with new, high profit margin products such as the winter tyre family designed for the Central European and North American markets. Deliveries of these tyres will begin this summer.

Efforts will continue to raise added valued and productivity in all company's product areas. Passenger car tyre production volumes are rising steadily. The off-take manufacturing activities will be further developed by increasing manufacture in Indonesia and by launching production in Russia.

The company will continue to develop its distribution network in the key markets, meanwhile the integrated manufacturing business and tyre chain is expected to generate more synergy benefits. Key priorities will include fully exploiting the logistic benefits derived from the company structure, boosting seasonal sales, and in Vianor, improving cost management and increasing the share of work of total sales.

Thanks to heavy snowfall this winter, stocks in Nokian Tyres' core markets have diminished, promising a good winter tyre season for the second half.

Measures aimed at improving cash flow and return on capital will continue. Growth of fixed costs will be restricted, and investments will be focused on eliminating production bottlenecks. Investments in 2002 will total EUR 37,0 million, EUR 34,0 million of which consists of production machinery and moulds for new products.

Raw material prices are expected to further decrease in the first half.

Nokia, 14 February 2002

Board of Directors

Million euros 10-12/01 10-12/00 1-12/01 1-12/00 Change %

Net sales 145,7 139,8 423,4 398,5 6,3
Operating expenses 111,9 104,6 341,6 330,1 3,5
Depreciation according
to plan 8,6 7,7 31,3 28,9 8,4
Operating result 25,2 27,6 50,5 39,4 28,1
Financial income
and expenses -3,4 -5,1 -13,5 -12,3 9,8
Result before extra-
ordinary items and tax 21,8 22,5 37,0 27,2 36,3
Extraordinary items 0,0 0,0 0,0 0,0
Direct tax for the
period 1) 5,7 5,4 11,9 7,4 61,3
Profit applicable to
minority shareholders 0,0 0,0 0,0 0,0
Net result 16,1 17,1 25,2 19,8 27,0


Intangible assets 14,0 11,5
Goodwill 47,8 50,2
Tangible assets 196,5 190,1
Investments 0,4 0,4
Inventories 87,0 81,3
Receivables 95,9 116,5
Cash in hand and at bank 18,2 14,0

Shareholders' equity 149,0 131,3
Capital loan 36,0 36,0
Minority shareholders' interest 0,0 0,0
Long-term liabilities
interest bearing 137,0 125,7
non interest bearing 19,1 18,1
Current liabilities
interest bearing 39,4 70,4
non interest bearing 79,2 82,5

Total assets 459,8 464,0

Interest bearing net debt 158,2 182,1
Capital expenditures 45,3 67,5
Personnel average 2 636 2 462

KEY RATIOS 31.12.01 31.12.00 Change %

Earnings per share, euro 2,38 1,88 26,9
Earnings per share, (diluted), euro 2,37 1,88 26,5
Equity ratio, % 2) 40,2 36,1
Equity ratio, % 32,4 28,3
Gearing, % 2) 85,5 108,9
Shareholders' equity
per share, euro 14,08 12,41 13,5

Number of shares
(1,000 units) 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 10-12/01 10-12/00 1-12/01 1-12/00 Change %

Net sales 145,7 139,8 423,4 398,5 6,3
Manufacturing 82,6 83,7 274,7 260,8 5,3
Vianor 75,8 68,6 193,5 176,5 9,6

Operating result 25,2 27,6 50,5 39,4 28,1
Manufacturing 16,3 19,6 50,3 43,0 16,9
Vianor 6,0 7,7 -0,5 -1,7 72,6

Cash Flow II 68,6 43,6 47,7 -9,2 617,6
Manufacturing 53,7 48,5 30,0 16,0 86,6
Vianor 16,2 0,0 18,4 -24,5 174,9

Million euros

Mortgages 0,7 1,4
Mortgages on company assets 0,0 0,0
Pledged assets 0,1 0,1
Guarantees 1,2 1,2

The amount of debts with security 0,0 0,2

Guarantees 0,0 0,0

Leasing and rent
commitments 27,6 17,2
Acquisition commitments 0,6 5,3

Interest rate swaps
Fair value -1,0 0,0
Underlying value 37,5 8,4
Options, purchased
Fair value 0,0 0,0
Underlying value 0,0 5,0

Forward contracts
Fair value -0,4 1,5
Underlying value 50,9 58,5

Options, purchased
Fair value 0,0 0,0
Underlying value 3,0 0,0
Options, written
Fair value 0,0 0,0
Underlying value 4,0 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.


Raila Hietala-Hellman
Vice President, Public Information

For more information, please contact: Mr Kim Gran, President, tel. +358 3 340 7336.

Distribution: Helsinki Exchanges and the key media