Nokian 1H profits double, sales up 41%

Nokian Tyres reports that the group’s net sales increased by 41.4 per cent to 628.0 million euros during the first six month of 2011 (444.2 million euros in the first half of 2010). Operating profit grew faster still, almost doubling to 165.6 million euros (2010: 82.0 million euros) and earnings per share increased to 1.06 euros (2010: 0.58 euros).

According to the company, the strong growth follow an upturn in car tyre demand and deliveries driven by “a recovery of consumer confidence,” growth of GDP on Nokian Tyres’ core markets, growth in car sales and improved financing to distributors. Higher industrial activity in machine building and transportation supports growth of heavy tyre and truck tyre sales. Inventories are low in the tyre industry and distribution channels. Nokian Tyres’ order book is on an all-time high level in all manufacturing units and demand may exceed supply capacity at times in 2011.

As a result of the strong results, Nokian reported that its 2011 guidance remains unchanged: “the company is positioned to provide strong sales growth and to improve operating profit clearly compared to 2010.”

Kim Gran, president and CEO explained that the “flying start for 2011” was also supported by new product launches and growing market share in the Russia and Nordic markets where the company is already strong: “The launch of our new summer tyres was a success and we gained market share on all key markets, especially in Russia and the Nordic countries. An improved sales mix combined with price increases improved our margins despite a significant increase in raw material cost. We continued to expand our distribution network as planned spearheaded by Vianor, which now has more than 800 stores.”

Our production output (tons) increased by 53 per cent year-on-year but was still not enough to satisfy the growth in demand. As a result additional production capacity will reportedly come on stream as “line start-ups in Russia have commenced as planned during summer and the plant in Nokia is back to 7 days/week full capacity as from August.” The building of the new plant in Russia next to the current one has commenced and will start production by summer 2012. A new agreement concerning incentives has been completed with Russian authorities in line with the previous package.

A slowing global economy

The growth rate of the global economy started to slow down during the first half of 2011. GDP growth was slower than expected in many countries causing downward revisions of economic forecasts. “In Europe there has been uncertainty related to the governmental borrowing and its effects to financial markets but so far it has had minor input on the private sector’s spending. The uncertainty in macroeconomics has increased globally and may convert into weaker demand,” Gran continued.

However annual GDP growth averaged approximately 4 per cent in both the Nordic countries and in Russia at the end of the review period. New car sales increased in the Nordic countries by 15 per cent year-over-year. In Russia new car sales were up by 56 per cent in January-June compared to the corresponding period in 2010. New car sales in Russia are expected to continue to grow by approximately 30 per cent in 2011.

Related news:

• Tyrepac takes Nokian tyres to Singapore market

• Vianor enters Italian market

• Improved core business gives Nokian a ‘flying start’ to 2011