Mixed Response to Nokian’s Russia News

Some analysts have responded positively to a Nokian’s announcement that it has launched the second stage of its Russian plant. Deutsche Bank reported that the warehouse “raises delivery capacity while the mixing department improves the process and should hence save some cost given that the compounds have been imported from Finland thus far.” The analysts reported that production is on track and progress is in line with previous suggestions that the factory will be able to produce four million tyres in 2008.

However, one Reuters update focussed on the recent news of talks between Amtel-Vredestein and Continental, upstaging details of Nokian’s progress. According to Kaupthing bank’s Mika Metsala, the news could be a blow to Nokian’s long-term profitability. “There is a double-whammy effect on Nokian Renkaat as the speculation of it being an acquisition target is hit and its long-term profitability outlook is weaker,” Metsala said. “If it were to come true, it would tighten the competition in the Russian tyre market. Russia is absolutely the most important country for Nokian Renkaat,” Reuters quoted FIM Securities analyst Kim Gorschelnik as saying.