Nokian Reports “Satisfactory Results” for 2009

Upon the release of his company’s annual figures, Nokian Tyres president and CEO Kim Gran commented that “eventually, after taking decisive action in a tough market, we achieved quite satisfactory results in 2009.” This action, which included cutting investments by 94.7 million euros and wages and salaries by 44.6 million, helped the company achieve an annual net profit of 58.3 million euros, a figure that is, coincidentally, 58.3 per cent lower than the company’s 2008 profit. Net sales for January to December 2009 amounted to 798.5 million euros, 26.1 per cent less than a year earlier. Operating profit was 102.0 million euros compared with 247.0 million for the 2008 financial year.

“The launch of our new winter tyre, Hakkapeliitta 7, has been a great success and has helped us to maintain healthy prices and strengthen our market leader position on our core markets,” Gran noted. “Prices were increased on all core markets to compensate for devaluations but did not fully cover the changes in sales and market mix. The Vianor chain was expanded by 116 shops and now consists of over 600 outlets.

“The streamlining measures aiming at a lighter cost structure and full utilisation of a lower cost production in the Russian plant were implemented as planned,” the Nokian Tyres chairman and CEO continued. “Our actions will have a strong impact on our results for years to come. Manufacturing operations booked improved results and margins in the fourth quarter year-over-year signalling that actions taken in 2009 are starting to have a positive effect.”

Speaking on the economic climate experienced during the year, Gran said that although the global downturn that started in late 2008 continued during 2009, the second half of the year showed some positive signs. “The aftermarket sales volume for passenger car tyres in 2009 declined in the Nordic countries by an estimated 10 per cent year-over-year,” he commented. “Tyre deliveries shrank drastically in Russia and the CIS countries, trailing the declining economy and reduced car sales. As car manufacture volumes decreased significantly, there was an excess supply of summer tyres which resulted in price erosion of some volume sizes.” Gran pointed out, however, that winter tyre prices have been more resilient to price erosion compared with summer tyres: “An early start of winter tyre consumer sales and true winter with heavy snowfall in all Europe, Russia and CIS have cut inventory levels and present good opportunities for sales growth in 2010,” he said.

Gran further observed that raw material prices dropped significantly at the end of 2008 and the first half of 2009, however carry-over stocks and contracts penalised tyre industry results in early 2009. “Raw material suppliers’ requests for price increases intensified during the second half of 2009,” he commented. “Especially the price of natural rubber has been increasing rapidly in the turn of the year, having some negative effects on industry profits in the second half of 2010.”

Demand for heavy tyres began to recover at the end of the year, supported by a moderate increase in forestry and mining machinery manufacturing. The truck European tyre market declined around 30 per cent, however, and demand for special heavy tyres shrank to less than half that of the previous year. “Overall, the market environment has become more competitive in all tyre categories,” Gran commented.

Evaluating the coming year, Gran stated “we have already set our minds to return to the growth track, expecting that in 2010 we will have a good possibility to increase our sales, instead of merely focusing on cost savings. Sales will be supported by a slowly recovering economy on our core markets and our distributors’ quite moderate carry-over stocks after this winter.” He noted that Russian and Nordic markets have stabilised and are showing early signs of growth. Yet, in spite of “some encouraging signals”, Nokian Tyres intends to base its actions on a gradual rather than a rapid recovery. “A strong growing distribution, good seasonal logistics, an improved cost structure with production inside duty borders of Russia and CIS and new products will give us a good chance to strengthen our market leadership in the core markets and to return to profitable growth in 2010,” Gran added.