Nokian Preparing for Growth in 2010

The Western and Eastern Europe region grew in importance for Nokian Tyres throughout 2009. The Finnish tyre maker reports European sales accounted for 24 per cent of its total last year, up eight per cent from 2008. This percentage growth in sales occurred largely at the expense of those in Russia and the CIS, which last year made up only 20 per cent of Nokian’s total sales, as opposed to 34 per cent in 2008. Overall, the company reported decreased demand for its tyres in 2009, an occurrence it attributes to the financial crisis and lower vehicle sales. In its general overview of 2009, released April 8, 2010, the company confirmed that measures have been taken “to adjust production to reduced demand.”

Despite lower sales, Nokian comments that it is still the “most profitable tyre producer.” According to the company’s general overview, in 2009 Nokian recorded a net margin of 7.3 per cent, far higher than Michelin, Bridgestone and Continental, who achieved 0.7 per cent, 0.0 per cent and -8.0 per cent respectively. For 2010, Nokian estimates a net margin approaching 15 per cent.

Net sales reached 798.5 million euros in 2009, a decrease of 26.1 per cent. Passenger car tyres accounted for 60.0 per cent of these sales, as compared to 62.8 per cent of the total in 2008. The company’s Vianor network of 623 outlets in 19 countries generated 31.1 per cent of sales, up from 26.1 per cent the year before, while heavy tyres accounted for 5.7 per cent of sales, down from 8.3 per cent. Truck tyres accounted for 3.2 per cent of sales in 2009, up from 2.8 per cent a year earlier. Company EBIT, at 102.0 million euros, was 58.7 per cent lower than in 2008. Nokian recorded 58.3 million euros in profit for the year, down from 139.9 million.

In 2010 Nokian anticipates a return to growth, particularly in Russia, and the company states it is positioned to improve its net sales and operating result compared with 2009. Its Vsevolozhsk factory now exports to over 20 countries, and average Russian GDP is estimated to grow at four per cent per annum between 2010 and 2014. Nokian notes that car sales are estimated to begin recovering in 2010 and accelerate in 2011 and 2012.

Nokian Tyres estimates worldwide passenger car tyre sales to total some 1.1 billion tyres a year and values the global tyre market at approximately US$140 billion. Original equipment fitments account for some 28 per cent, the Finnish manufacturer estimates. Markets are growing at an estimated average rate of 2-4 per cent a year, with the strongest growth is registered in winter tyres, high-speed summer tyres and SUV tyres.

Nokian says that next year it intends to invest 50 million euros, 20 million of this in new products and 15 million in Russia. Demand is anticipated to improve for all its product segments over the course of 2010 despite an estimated 10 to 12 per cent rise in raw material costs, up from the previous estimate of six per cent. Plans are also in place to grow the Vianor network up to as much as 700 outlets in 2010, with the company establishing a new presence in Belorussia and Romania.