Nokian Tyres’ update on the war in Ukraine

Due to the war in Ukraine and the subsequent, tightening sanctions it is no longer feasible nor sustainable for Nokian Tyres plc to continue operations in Russia. The company has signed an agreement to sell its Russian operations. The process will be done with due consideration to local employees and legislation.

Nokian Tyres will update this page as necessary as the situation evolves.

October 28, 2022

NOKIAN TYRES PLC TO SELL ITS OPERATIONS IN RUSSIA

Nokian Tyres plc has signed an agreement to sell its Russian operations to Tatneft PJSC. The debt free and cash free purchase price is expected to be approximately EUR 400 million. The final purchase price is affected, among other things, by net cash and working capital adjustment and changes in RUB/EUR exchange rate.

The transaction is subject to approval by the relevant regulatory authorities in Russia and other conditions, which creates substantial uncertainties related to the timing, terms and conditions and the closing of the transaction.

Nokian Tyres announced in June 2022 that it would initiate a controlled exit from Russia. Upon the closing of the transaction, Nokian Tyres ends all its operations in Russia and the company’s personnel in Russia will transfer to the new owner.

Nokian Tyres has been operating in Russia since 2005. In 2021, approximately 80% of the company’s passenger car tires were produced in Russia and the business area Russia and Asia represented approximately 20% of Nokian Tyres’ net sales.

The exit from Russia will significantly impact Nokian Tyres’ financial results. Discontinued supply of tires from Russia will have an adverse impact on sales especially in Central Europe in next two to three years. In order to secure supply of its products, Nokian Tyres has continued to increase capacity at its factories in Finland and in the US, and is proceeding with the investment in new supply capability in Europe.

Financial effects of the divestment

As part of the exit from Russia, impairments of EUR -280.7 million related to the Russian assets and a write-down of EUR -20.0 million of deferred tax assets in Russia were recorded in the second quarter of 2022. Due to the significant uncertainties, final accounting implications including translation differences among other things can only be assessed when the transaction has been duly completed.

Nokian Tyres’ assets in Russia and Belarus excluding tax and financial items amounted to EUR 574.5 million after the impairments and the write-down at the end of the second quarter and to EUR 590.4 million at the end of the third quarter of 2022. Net assets in Russia and Belarus excluding net debt amounted to EUR 480.3 million at the end of the third quarter of 2022. Seasonality of the working capital and timing of the closing, among other things, impact the net asset value of Russia and Belarus and thus the cash consideration received from the transaction.

Nokian Tyres has assessed that both the Group’s equity ratio (64.0% at 30.9.2022) and the gearing ratio (22.2% at 30.9.2022) remain at a good level after the divestment. The Group’s strong balance sheet continues to support the company in building the new Nokian Tyres without Russian business.

The above 30.9.2022 stated figures are preliminary figures for the third quarter. Nokian Tyres will restate comparative information for 2022 after the closing of the Russia divestment and reclassification to discontinued operations.

June 28, 2022

NOKIAN TYRES PLC INITIATES A CONTROLLED EXIT FROM RUSSIA

Nokian Tyres’ Board of Directors has today decided to initiate a controlled exit from the Russian market. Due to the war in Ukraine and the subsequent, tightening sanctions it is no longer feasible nor sustainable for Nokian Tyres plc to continue operations in Russia. The exit preparations will start immediately, and the company will evaluate different options for the exit. The process will be done with due consideration to local employees and legislation.

As part of the process, Nokian Tyres will record impairments of approximately EUR 300 million related to the Russian assets in the second quarter of 2022. These will be recorded as non-IFRS exclusions. Taking the impairments into account, the value of Nokian Tyres’ net assets in Russia and Belarus totalled approximately EUR 400 million on May 31, 2022.

“For the past months, we have witnessed shocking events in Ukraine. We have followed the situation with great sadness and we, along with the whole international community, unequivocally condemn the war, which has caused unspeakable suffering to so many”, says Jukka Moisio, President and CEO of Nokian Tyres. “Our short-term focus has been on adapting to the fast-changing, highly uncertain operating environment, and maintaining control of our operations in Russia.”

“After a thorough consideration and assessment of various options, we have decided to rebuild Nokian Tyres without a presence in Russia and focus on growth opportunities in our other core markets. This was not an easy decision given we have over 1,600 dedicated employees in Russia whose expertise we highly value as well as many long-standing customer and supplier relations built over the past 17 years”, Moisio continues.

To secure supply of its products, Nokian Tyres has continued to increase capacity at its factories in Finland and in the US, and has decided to invest in completely new capacity in Europe. The company announced earlier in the year that it had stopped investments into the Russian facility and started transferring production of selected key product families from Russia to its other factories.

As of today, Andrey Pantyukhov, who has been heading Nokian Tyres’ business area Russia and Asia, no longer is a member of Nokian Tyres’ management team.

April 28, 2022

WAR IN UKRAINE OVERSHADOWED Q1 – OPERATING ENVIRONMENT REMAINS HIGHLY UNCERTAIN

Nokian Tyres held its Annual General Meeting on April 28, 2022. The company published its Q1 results on April 27, 2022.

Jukka Moisio, President and CEO:

“For the past two months, we have witnessed shocking events in Ukraine. We have followed the situation with great sadness and we, along with the whole international community, unequivocally condemn the war, which has caused unspeakable suffering to so many.

The war in Ukraine started to impact our operating environment in late February. However, the year began with good tire demand and in January−March, our net sales with comparable currencies increased by 21.9% and segments operating profit improved. The result was driven by price increases that we implemented in a wide range of markets and products to offset high raw material and other cost inflation.

At these difficult times, our first priority has been to help our Ukrainian colleagues and their families stay safe, and support all Nokian Tyres employees. To secure supply of our products, we immediately activated contingency plans in February, including shipping tires closer to our customers, securing the raw material supply, and transferring production of selected key product lines from Russia to our other factories. To reduce reliance on the Russian production and to diversify our manufacturing footprint, we have continued to increase capacity at our factories in Finland and in the US, and we are expediting our plans to invest in new capacity in Europe.

The war in Ukraine will significantly impact our financial results in 2022, especially starting from the third quarter. Due to high uncertainty and dynamic environment, it is impossible to estimate the ultimate impact on our overall performance at the moment. The sanctions have a significant impact on our ability to manufacture tires in Russia, and thus our ability to sell tires in Russia and in Central Europe.

Our short-term focus will be on adapting to the fast-changing, highly uncertain operating environment, maintaining control of our operations in Russia and securing cash flow. We have a strong product portfolio, and although there will be difficulties in the short term, we will do our utmost to ensure supply of our products to customers. In the mid-term, adding new supply capability to Europe will be one of our key priorities. At the same time, the Board is evaluating long-term strategic paths in the changing operating environment.

I would especially like to thank all Nokian Tyres employees for their perseverance and resilience during this difficult time.”

War in Ukraine – Summary of Nokian Tyres’ actions

On February 24, Russia started the war in Ukraine, which has caused high uncertainty related to Nokian Tyres’ operating environment and manufacturing capacity.

On April 8, the EU announced new sanctions against Russia, which impact Nokian Tyres’ business. The sanctions prohibit the import of tires from Russia to the EU, prohibit the export of certain raw materials from the EU to Russia, and limit transportation from and to Russia. The sanctions have a significant impact on Nokian Tyres’ ability to manufacture tires in Russia, and ability to sell tires both in Russia and in the EU, specifically in Central Europe.

In 2021, Russia represented approximately 20% of Nokian Tyres’ net sales, and approximately 80% of Nokian Tyres passenger car tires were produced in Russia. Of raw materials for tires produced in Russia, approximately half came from outside of Russia. Raw material availability and its logistics will have a significant impact on the company’s capability to continue production in Russia.

Nokian Tyres is expediting its plans to invest in new production capacity in Europe, and continues to increase production capacity at its factories in Nokia, Finland and Dayton, US. According to the plan, in the future all tires sold in the Nordic countries will be produced in Nokia, and all tires sold in North America will be produced in Dayton and in Nokia.

The Heavy Tyres business of Nokian Tyres plc is not impacted by the ban to import tires from Russia to the EU, as all Nokian Tyres’ heavy tires are produced in Finland. Sales and distribution of heavy tires to Russia were stopped due to the war. Nokian Tyres has never sold tires to the Russian army, and the Russian Federation is not a customer of Nokian Tyres.

Nokian Tyres has taken active measures, such as below, to manage the impacts of the war in Ukraine to its personnel and business:

Health and safety actions

Continuously communicating about the situation in the organization and providing support to Nokian Tyres’ employees
Being in daily contact with the Ukrainian colleagues to help them and their families stay safe
Donating to humanitarian efforts in Ukraine

Operational response actions

Ensuring compliance with applicable sanctions regime
Establishing a crisis management team and activating contingency plans to limit the operational and financial impacts, including shipping tires closer to customers, securing the raw material supply to the factories, and transferring production of selected key product lines from Russia to Finland and the US
Taking care of the personnel and management in Ukraine and Russia
Securing control of the asset base in Russia (March 31, 2022: EUR 476.1 million)
Stopping investments into the Russian production, and stopping all heavy tire sales and distribution to Russia
Expediting plans to diversify manufacturing footprint by investing in new production capacity in Europe and continuing to increase passenger car tire capacity in the Finnish and US factories
Implementing cost measures by cutting and delaying activities and reducing discretionary spending

Financial response actions

On March 30, the Board of Directors decided to change its dividend proposal to the Annual General Meeting to be held on April 28, 2022 from EUR 1.32/share to EUR 0.55/share (2021: EUR 1.20). The new dividend proposal cuts the total dividend payable to shareholders by EUR 106 million to fund the new capacity in Europe
Taking measures to secure the company’s liquidity and financial flexibility
Leveraging the strong balance sheet to support the company in difficult times

The Interim Report for January-March 2022 can be read here: Interim and Half year financial reports and Financial Statements / Nokian Tyres

April 11, 2022

NOKIAN TYRES PLC: INFORMATION ON EU’S NEWLY IMPOSED SANCTIONS

As communicated on April 9, 2022, the EU has announced new sanctions against Russia, impacting Nokian Tyres’ business. The sanctions prohibit the import of tires from Russia to the EU, prohibit the export of certain raw materials from the EU to Russia, and limit transportation from and to Russia. New sanctions will have a significant impact on Nokian Tyres’ ability to manufacture tires in Russia, and ability to sell tires both in Russia and in the EU, specifically in Central Europe.

Nokian Tyres is expediting its plans to invest in new production capacity in Europe. We continue to increase production capacity at our factories in Nokia, Finland and Dayton, US. According to our plan, in the future all tires sold in the Nordic countries will be produced in Nokia, Finland, and all tires sold in North America will be produced in Dayton, US and in Nokia, Finland.

The Heavy Tyres business of Nokian Tyres plc is not impacted by the ban to import tires from Russia to the EU, as all Nokian Tyres’ heavy tires are produced in Finland. Sales and distribution of heavy tires to Russia has been stopped already earlier. Nokian Tyres has never sold tires to the Russian army, and the Russian Federation is not a customer of Nokian Tyres.

According to the sanction regarding specifically tires:

“1. It shall be prohibited to purchase, import, or transfer, directly or indirectly, goods which generate significant revenues for Russia thereby enabling its actions destabilising the situation in Ukraine, as listed in Annex XXI into the Union if they originate in Russia or are exported from Russia.

2. It shall be prohibited to:

(a) provide technical assistance, brokering services or other services related to the goods and technology referred to in paragraph 1 and to the provision, manufacture, maintenance and use of those goods and technology, directly or indirectly in relation to the prohibition in paragraph 1.
(b) provide financing or financial assistance related to the goods and technology referred to in paragraph 1 for any purchase, import or transfer of those goods and technology, or for the provision of related technical assistance, brokering services or other services, directly or indirectly in relation to the prohibition in paragraph 1.
3. The prohibitions in paragraphs 1 and 2 shall not apply to the execution until 10 July 2022 of contracts concluded before 9 April 2022, or ancillary contracts necessary for the execution of such contracts.” (Official Journal of the European Union, April 8, 2022)

The company has no further information to provide on the subject at this point but will announce any material direct impacts as appropriate and in a timely manner.

April 9, 2022

NOKIAN TYRES PLC: EU BANNING TIRE IMPORTS FROM RUSSIA TO THE EU

Nokian Tyres plc has received information that the EU has announced new sanctions against Russia, including a ban on tire imports from Russia to the EU. We are currently studying the newly imposed sanctions in detail, and we continue to implement our contingency plans. As we communicated on March 30, 2022, Nokian Tyres plc is expediting its plans to invest in new production capacity in Europe.

We continue to increase production capacity at our factories in Nokia, Finland and Dayton, USA. The Heavy Tyres business of Nokian Tyres plc is not impacted by the ban to import tires from Russia to the EU, as all Nokian Tyres’ heavy tires are produced in Finland.

April 8, 2022

DIVERSIFYING NOKIAN TYRES’ MANUFACTURING CAPACITY – THE BOARD’S NEW DIVIDEND PROPOSAL FUNDS NEW PRODUCTION IN EUROPE BY EUR 106 MILLION

Last week Nokian Tyres announced that the company starts to expedite its plans to invest in new production capacity in Europe. Therefore, the Board of Directors changed the proposal to the Annual General Meeting regarding the dividend payment, cutting the total dividend payable to shareholders by EUR 106 million to fund the new capacity.

Because of the war in Ukraine, the company starts to expedite its plans to invest in new production capacity in Europe. Nokian Tyres also continues to increase capacity at its factories in Finland and the US, aiming to become geographically more diversified in its manufacturing operations.

In its proposal announced on March 30, 2022, the Board of Directors proposed that a dividend of EUR 0.55 per share be paid from the financial year January 1–December 31, 2021, i.e. approximately EUR 76.1 million in total. The Board of Directors’ earlier dividend proposal announced on February 8, 2022 was EUR 1.32 per share.

Comparing to the cost of the Dayton plant, which is around EUR 350-400 million, the dividend reduction would give ~25% of the funds to finance a new plant.

Nokian Tyres is no longer investing into production in Russia. By continuing to operate the passenger car tire factory in Russia, the company wants to make sure that the factory is controlled by Nokian Tyres. Shipments of passenger car tires to Russia have been suspended. All Nokian Tyres’ heavy tires are designed and manufactured in Finland. Tires for trucks and buses are designed in Finland and produced in the EU. Sales and distribution of heavy tires to Russia has been stopped. Nokian Tyres has never sold tires to the Russian army, and the Russian Federation is not a customer of Nokian Tyres.

March 30, 2022

NOKIAN TYRES PLC: BOARD OF DIRECTORS CHANGES THE PROPOSAL TO THE AGM REGARDING THE DIVIDEND PAYMENT, PREPARATIONS FOR NEW CAPACITY IN EUROPE STARTING

Nokian Tyres plc, Inside information, March 30, 2022 at 3:40 p.m.

The war in Ukraine has caused high uncertainty related to Nokian Tyres plc’s (“Nokian Tyres”) operational environment and manufacturing capacity. Consequently, the company starts to expedite its plans to invest in new production capacity in Europe. Therefore, the Board of Directors of Nokian Tyres has decided to change its dividend proposal to the Annual General Meeting to be held on April 28, 2022. The company continues to increase capacity at its factories in Finland and the US.

The Board of Directors proposes that a dividend of EUR 0.55 per share be paid from the financial year January 1–December 31, 2021, i.e. approximately EUR 76.1 million in total based on the total number of outstanding shares of Nokian Tyres at the time of the proposal. The proposed dividend corresponds to the minority dividend pursuant to Chapter 13, Section 7 of the Finnish Companies Act, i.e. eight per cent of the shareholders’ equity.

The dividend is proposed to be paid to the shareholders who are registered in the company’s shareholder register maintained by Euroclear Finland Oy on the dividend record date of May 2, 2022. The payment date proposed by the Board of Directors is May 11, 2022.

The Board of Directors’ earlier dividend proposal from the financial year January 1–December 31, 2021 announced on February 8, 2022 was EUR 1.32 per share payable in two instalments.

According to the financial statements for the financial year January 1–December 31, 2021, the distributable funds of Nokian Tyres amounted to EUR 742.7 million.

March 22, 2022

NOKIAN TYRES’ UPDATE

As a company, Nokian Tyres has followed the situation in Ukraine with great sadness and we hope for a quick diplomatic solution to this tragedy.

We are in daily contact with our Ukrainian team, and we have helped and continue to help our employees and their families to stay safe. Over half of our Ukrainian employees are male and cannot leave the country, but we assist them in any way possible given the current situation. In addition, Nokian Tyres has made a donation to UNICEF to help the children in the war zone in Ukraine.

We use all possibilities to accelerate the increase of capacity in our factories in Finland and in the US. According to the plan, all tires sold in the Nordic countries in the future will be produced in Nokia, Finland, and all tires sold in North America in the future will be produced in Dayton, US and in Nokia, Finland. The company is actively looking for additional capacity and aims to become geographically more diversified in its manufacturing operations.

All Nokian Tyres’ heavy tires are designed and manufactured in Finland. Tires for trucks and buses are designed in Finland and produced in the EU. We don’t accept orders for heavy tires from Russia.

By continuing to operate the passenger car tire factory in Russia we want to make sure that the factory is operated and controlled by Nokian Tyres also in the future. We no longer invest into the Russian production.

We do not want to speculate on how the situation in general will evolve. We will announce any material direct impacts to Nokian Tyres as appropriate and in a timely manner. We continue to assess the situation and are prepared for rapid responses when needed.

On Sunday Nokian Tyres was on the spotlight in the media regarding an analyst call. Certain statements were referred to as they would have been Nokian Tyres’ statements. Correction to the media have been made.

March 8, 2022

NOKIAN TYRES’ UPDATE

As a company, Nokian Tyres has followed the situation in Ukraine with great sadness and we hope for a quick diplomatic solution to this tragedy.

A crisis management team meets daily, and we are prepared for different scenarios. We are also monitoring closely the development of sanctions and potential counter-sanctions. We have activated our contingency plans to mitigate the financial and operational impacts to our business. For example, we are shipping tires closer to our customers, securing the raw material supply to our factories, transferring production of selected key product lines from Russia to Finland and to the US, and securing transport capacity from Russia with existing and new service providers. We continue to increase production in Finland and in the US. All Nokian Tyres’ heavy tires are designed and manufactured in Finland. Tires for trucks and buses are designed in Finland and produced in the EU.

Currently, our Russian operations are impacted by transportation capacity availability, and lead-times to our customers have increased. The operations can be further impacted by raw material supply. We have been able to fulfill the customer orders despite the supply chain challenges, and continue to do our best to serve our customers and to deliver as agreed with them.

Our compliance with current sanctions requires that some of our customers and suppliers in Russia need to change their bank. In cross-border transactions, there are delays and volume is small, as the currency trading is not working normally.

For us the safety of our employees is number one priority. We will do everything we can to support our Nokian Tyres team in this situation. We have been operating in Ukraine since 2006, and during those years have built many long-lasting relationships with Ukrainian colleagues and customers. We have some 20 employees in Ukraine. We are in daily contact with our Ukrainian team, and as a first priority, we have taken measures to secure their and their families’ safety as best as we can and we will continue our help to them, both on a personal level and as an employer. In addition, Nokian Tyres has donated EUR 100,000 to UNICEF to help the children in the war zone in Ukraine.

We do not want to speculate on how the situation in general will evolve. We will announce any material direct impacts to Nokian Tyres as appropriate and in a timely manner.

February 28, 2022

NOKIAN TYRES PLC WITHDRAWS FINANCIAL GUIDANCE FOR 2022

The Russian military actions in Ukraine and the consequent sanctions have caused significant uncertainty related to Russia, to the functionality of the Russian financial and payment system, and to the Russian ruble exchange rate. Therefore the Board of Directors of Nokian Tyres plc has decided to withdraw the Company’s financial guidance for 2022 published on February 8, 2022. Due to the prevailing uncertainties, the Board is not in a position to give a new guidance at this moment.

Earlier guidance from February 8, 2022:

In 2022, Nokian Tyres’ net sales with comparable currencies are expected to grow significantly and segments operating profit is expected to grow. The global car and tire demand is expected to grow. The COVID-19 pandemic continues to cause uncertainties, including cost inflation and availability challenges, in the whole automotive value chain. In addition, current geopolitical situation causes uncertainties in 2022.

Select country

Tue June 28 05:00 pm 2022 in category Articles

Nokian Tyres’ update on the war in Ukraine