Nokian 1Q Sales Increase

Nokian Tyres has released its 1Q figures, which show a 17.8 per cent increase in sales over 1Q 03, from 95.7 million Euros to 112.7 million Euros. Group operating profit was up to 10.7 million Euros (3.2 million).Profit before taxes was 9.6 million Euros (1.6 million) and net profit totalled 6.5 million Euros (0.7 million). The performances of the different product groups are outlined below.

Passenger car tyre sales rose 26.4 per cent to 73.1 million Euros (57.8 million), with operating profit totalling 16.5 million Euros (10.0 million). Sales growth was strongest in the Nordic countries, Russia and the USA and was due largely to a number of new products. Winter tyre sales were strong too, accounting for 48 per cent of sales. A new, non-studded winter tyre was introduced in January, but sales of this will not commence until this autumn. Nokian’s new summer tyre, the NRHi, proved popular in Nordic countries and in Germany, winning several tyre tests in trade magazines. The tyre is notable too for the fact that its manufacture involves only environmentally safe, low aromatic oils.

Nokian’s heavy tyre sales rose by 6 per cent to 15.9 million Euros (15.0 million) and operating profit was up also, to 2.3 million Euros (1.8 million). The strongest area of growth was in the USA and an increase in production of forestry machinery meant that OE tyre demand was particularly high. Contract manufacturing continued to progress and Nokian signed an agreement with Balkrishna Tyres, whereby the Indian manufacturer will produce agricultural tyres. The first test tyres are ready and actual production will begin in the summer.

The story was not so good for bicycle tyres, where sales slipped 12.4 per cent to 1.2 million Euros (1.4 million), but operating profit improved despite low demand.

Retreading materials operations were reorganised at the end of last year and recorded net sales of 4.8 million Euros (2.1 million). Operating profit was positive, says Nokian, but the reorganisation makes direct comparisons impossible. There was an increase in demand for retreading materials for truck tyres in the Nordic countries at the start of the year.

Roadsnoop, the pressure monitoring device, continued to suffer from weak market demand and so far, the unit has not made a profit.

The Vianor retail chain had sales of 36.0 million Euros (31.8 million), but made an operating loss of -3.4 million Euros (-5.2 million). On a positive note, Nokian branded tyres increased their share of all tyres sold by Vianor.

Nokian has been active in the Russian market and, in March, announced its plan to focus on sales of Nokian-branded A-segment products and the construction of its own tyre factory in Russia. As part of this strategy, Nokian took steps to discontinue the operations of its joint venture operation Amtel-Nokian Tyres, which had been set up with the intention of selling Nordman-branded B segment tyres. Construction if the new factory, near St. Petersburg, begins this spring and the plan is to begin passenger car tyre production in 2005. The project entails an investment of 52 million Euros over the period 2004-2005. A new logistics centre has also been established near Moscow.

Looking ahead, Nokian believes it is well positioned to reach its 2004 objective, which is to outperform 2003 results in terms of sales and net profits. On the downside, the company warns that growing tyre production in China and an improving global economy will continue to put pressure on raw material prices.

Nokian will continue its strategy to focus on expanding and profitable markets and profitable product segments, such as winter and high performance tyres. It also forecasts continuing growth in the heavy (particularly forestry) tyre segment. For passenger car tyres, capacity at the Nokia factory will be increased to more than six million tyres annually. An increase in contract manufacturing will also free up production capacity at the Nokia plant for special products with high profit margins.