Thu October 31 08:00 am 2013 in category Stock exchange releases
Nokian Tyres plc Stock Exchange Release 31 October 2013, 8 a.m.

Nokian Tyres plc Interim Report January-September 2013:

EBIT improved in Q3 – a good sales mix, strong market position and raw material tailwind support margins

Nokian Tyres Group’s Net sales decreased by 3.0% to EUR 357.0 million (EUR 368.0 million in 7-9/2012). Operating profit grew by 11.9% to EUR 95.7 million (85.5). Profit for the period amounted to EUR 70.9 million (59.6). Earnings per share amounted to EUR 0.53 (EUR 0.45).

Nokian Tyres Group’s Net sales decreased by 4.9% to EUR 1,109.1 million (EUR 1,166.0 million in 1-9/2012). Operating profit was EUR 292.2 million (303.3). Profit for the period amounted to EUR 220.1 million (242.6). Earnings per share amounted to EUR 1.66 (EUR 1.85).

The market demand for replacement car tyres in Nordic countries and Central Europe have taken a turn for the better in H2 after a weak start for the year and are expected to be close to previous year’s level in full year 2013. In Russia lower GDP growth and car sales still penalize tyre demand in Q4 but there are signs of some recovery for both summer and winter tyres going into 2014.

Nokian Tyres’ full year sales in Nordic countries are expected to show some growth, and to be on previous year’s level in Central Europe. Despite a clear improvement in market share and growth of winter tyre sales, full year sales is estimated to show some decrease in Russia and North America.

The pricing environment for 2013 remains challenging for all tyre categories. Nokian Tyres margins, however, are supported by an improved industrial structure combined with approximately 12.5% lower raw material costs (€/kg) offering a tailwind of some EUR 50 million in full year 2013. The unfavorable currency exchange rate development of the Russian Rouble during 2013 is estimated to generate a negative effect of approximately EUR 25 million on Net sales and approximately EUR 14 million on Operating profit of Nokian Tyres Group in full year 2013.

Due to the weakened Rouble exchange rate and softer market demand for tyres in Russia, Nokian Tyres’ Net sales and Operating profit are estimated to be somewhat lower in the second half and full year 2013 compared to 2012. In 2014 the company estimates to be back on a profitable growth track.

Financial guidance (updated 4 October 2013)
In 2013, Net sales and Operating profit will show some decline compared to 2012.

Previous guidance from 9 August 2013
In 2013, the company is positioned to show flat to some growth in Net sales and Operating profit compared to 2012.

Kim Gran, President and CEO:

“Our strong market leader position in the core markets in Russia and Nordic countries is intact and we managed again to increase both market share and our distribution footprint in all markets. The newly launched Hakkapeliitta tyre range has set new standards for winter tyres. It has been very well received by both consumers and distributors, helping us to maintain average prices, to improve sales mix and to book reasonably good results. The headwind, with low car sales and weaker tyre demand, in the European economy continued and spread to Russia. We do not foresee any major improvement in demand short term but there are some signs of improvement already in H2 and going into 2014. We continue to target growth, to improve results, to excel on the back of new products, to expand distribution and improve productivity further.

Nokian Tyres’ sales in the Nordic countries are solid, the growth supported by the renewed winter tyre range and an expanding distribution network. Our already strong market position in the Nordics has in 2013 been further improved by a clear growth in Sweden. Our sales growth in Russia took a breath in the third quarter, even though we managed again to grow winter tyre sales in a weaker market. In CE we see the tide turning and our sales volumes increasing faster than the average market demand.

The highlights of Q3 results were that our profitability remained strong and market shares improved. Our sales mix was strong securing a flat ASP €/kg in a challenging market. Our margins remained while being pulled in two directions: a strong tailwind from material cost was challenged by the unfavourable exchange rate of the Russian Rouble and a tough pricing environment. A reasonably high utilization rate and an increased share of Russian production gave our profits a shield against increased depreciation and marketing costs.

During the present phase of slower market growth we continue to develop and improve productivity and our industrial structure. In Q1 we commissioned another line (line 12) in the Russian factory and followed up in Q2 with installation of line 13. This is taking the annualized capacity in Russia to more than 15 million tyres by end of 2013.

We continue to expand our distribution network spearheaded by Vianor. We opened 124 new Vianor stores in Jan-Sep 2013, now totalling 1,161 stores in 26 countries. In Russia and CIS Nokian Hakka Guarantee dealership program includes nearly 3,000 tyre stores and car dealers. A new softer partner franchise model Nokian Authorized Dealer (NAD) has also been rolled out with 262 shops contracted in Italy, Germany and China.

We are looking into the future with confidence and the fighting Hakkapeliitta spirit. New product and service innovations and a growing share of Russian production support our profitability. Our winter tyre sales in our core markets are fuelled by the spearhead product Nokian Hakkapeliitta 8’s overwhelming winning streak in the car magazines’ winter tyre tests. Our tyre chains Vianor and NAD are to be expanded and our market geography in Russia and Northern Europe is showing signs of improving demand offering us a good base for profitable business.”

Read the whole stock exchange release here.