Nokian Tyres plc Stock Exchange Release 8 Aug 2014, 8 a.m.
Nokian Tyres Group’s Net sales decreased by 11.8% to EUR 369.5 million (EUR 419.1 million in 4-6/2013). Operating profit was EUR 90.7 million (120.2). Profit for the period amounted to EUR 66.1 million (85.6). Earnings per share amounted to EUR 0.50 (EUR 0.65).
Nokian Tyres Group’s Net sales decreased by 9.4% to EUR 681.5 million (EUR 752.2 million in 1-6/2013). Currency rate changes cut Net sales by EUR 51.2 million compared with the rates in the corresponding period in 2013. Operating profit was EUR 159.1 million (196.6). Profit for the period amounted to EUR 104.8 million (149.2). Earnings per share amounted to EUR 0.79 (EUR 1.13).
The market demand for replacement car tyres is expected to continue to show growth in the Nordic countries, Central Europe and North America in H2/2014. In Russia and CIS the overall uncertainty, the Ukrainian crisis, and the clearly devalued currencies have hurt the economies, thus weakening growth in GDP, sales of new cars and tyre demand. Heavy industrial tyre demand is recovering in Nokian core products and is expected to continue to improve. The pricing environment for 2014 remains tight for all tyre categories.
The sales volume of Nokian Tyres is expected to show growth and the market position to improve in 2014 in the Nordic countries, Central Europe and North America. In Russia and CIS the company’s sales volume is expected to decline.Nokian Tyres’ Net sales are expected to decrease due to currency devaluations combined with weaker sales mix and ASP. Nokian Tyres continues to have competitive advantages from having manufacturing inside Russia. Of the Russian production 55% is exported and the margin between production costs in Roubles and export sales in Euros has improved. A decline of raw material costs is estimated to provide a tailwind of EUR 50 million full year 2014 supporting profitability. However, this is not enough to fully compensate for the weaker market conditions in Russia and CIS in 2014.
Financial guidance (unchanged)
In 2014, Net sales and Operating profit are to decline compared to 2013.
Kim Gran, President and CEO:
“Nokian Tyres performed well in all markets in relation to market conditions. As strong positives we recorded healthy growth in the Nordic countries, Central Europe and North America where sales, profitability and market shares improved. The markets in Russia and CIS, on the other hand, proved to be more challenging than estimated as a result of the Russia/Ukraine crisis escalating, devaluations and slow economies with a clear drop in sales value as a consequence. Reductions in input costs, raw materials, improved productivity and good development in the West were not enough to compensate for the negatives in Russia/CIS. Despite lower sales value and margins we maintained a reasonably good level of profitability and improved cash flow. The company has a strong balance sheet, which together with inbuilt capacity reserves gives us a good platform to further develop our business and provide healthy cash flows. The company is positioned to outperform local market development in its main market areas in 2014 and the future.
While our passenger car tyre sales volume grew by 4%, we lost Net sales of over EUR 50 million due to devalued currencies, especially the Russian Rouble. However, growth in summer tyre sales and good preseason sales of winter tyres in the Nordic countries, Central Europe and North America secured a reasonably good top line for us in the first semester. Our passenger car tyre sales excluding Russia/CIS showed growth of 20% and our market shares improved again in all our western market areas. The expansion of our sales network is now starting to pay dividends in CE, where we managed to double our sales volume growth in relation to market growth.
The pricing in all markets remains tight for all year 2014. In the first semester our ASP was hit by currency rate effects and an increase in the share of mid-segment winter tyres sales in Russia. We were, however, able to defend profitability with the help of a strong tailwind from material cost and lower production costs in Russia. A high share of Russian production from the highly automated factory improved productivity.
We continue to develop our growth engine and expand our distribution network spearheaded by Vianor and a softer partner franchise model, Nokian Tyres Authorized Dealer (NAD). We added 54 Vianor shops during the first half and the network consists presently of 1,260 stores in 27 countries. The NAD network grew by 240 outlets in H1 to 672 shops contracted in Italy, Germany, Ukraine, China, Denmark France, Czech Republic and Bulgaria. In Russia our dealership programs include over 3,600 tyre stores and car dealers.
In 2014 we see a recovery in our western markets in Central Europe, Nordic countries and North America. We aim to continue to improve our market position and to provide healthy margins on the back of our renewed successful product lines, expanding distribution, efficient industrial structure and decreasing raw material cost. Despite the recent negative development we remain confident that also Russia, as history has taught us, will kick back to healthy growth in due course. As the recovery may take a while, we take decisive actions this year to maximize our sales and to defend our position in the Russian market.”
Read the whole stock exchange release here.
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