Nokian gearing up for strong 2011 sales, operating profit growth

On the back of a 41.3 per cent year-on-year increase in net sales in the first nine months of 2011, Nokian Tyres retains its outlook that it is “positioned to provide strong sales growth and to improve operating profit clearly compared to 2010.” The Finnish tyre maker recorded group net sales of 974.3 million euros, up from 689.4 million euros between January and September 2010. During this same period operating profit doubled from 130.4 million to 261.0 million euros. Earnings per share also effectively doubled, from 0.85 euros to 1.66 euros per share. Net sales increased 41.2 per cent in the third quarter to 346.3 million euros, operating profit jumped 97.4 per cent to 95.4 million euros and earnings per share increased 122 per cent year-on-year to 0.60 euros per share.

“A successful first semester was followed by strong growth in Q3 in sales, production output and productivity,” commented Kim Gran, president and CEO of Nokian Tyres. “Sales in all our core markets grew significantly and we continued to win market share. The successful launch of our new test winning Central European winter tyre Nokian WR D3 combined with strong sales of Nordic/Russian Hakkapeliitta winter tyre range fuelled growth and improved ASP. An improved sales mix combined with additional price increases improved margins. We continue to expand our distribution network spearheaded by Vianor, which has this year recorded 102 new stores, totalling 873 by end of September.

“Our production output (in tonnes) increased by 51 per cent year-on-year, both factories running full utilisation but not enough to fully satisfy the growth in demand,” Gran continued. “The start-up of new production lines nine and ten in Russia was completed as planned. The ramp-up of capacities continues in Q4, which will further improve output, productivity and service levels.”

Replacement market sales up, some shortages expected

According to Nokian Tyres’ figures, replacement market passenger car tyre sales volume increased five per cent year-on-year during the first nine months of 2011, while a four per cent rise was witnessed in the Nordic countries. Tyre industry deliveries to distributors are said to have increased by more than 30 per cent in Russia, a phenomenon that trailed the country’s improving economy, strong consumer confidence and low stocks at distributors – the winter of 2010/11, the second consecutive severe winter in Europe and Russia, resulted in strong winter tyre consumer sales and left retailers with low inventories. Shortages at the wholesale and retail level, particularly for winter tyres, are expected in Russia. At the same time, the summer tyre market was stable in Europe but increased significantly in Russia.

Demand for special heavy tyres, says Nokian, is expected to remain good throughout 2011 in the forestry machine, harbour and mining sectors, however signs of demand levelling off are starting to appear due to weakened demand and raw material prices. In the truck tyre segment, Nokian says demand has remained strong and some short supply in the replacement market exists. “Overall, the market environment in Nokian Tyres’ core markets is healthy and demand exceeds supply in car and truck tyres,” the tyre maker states.

Growth in Europe/Russia, decline in America

The Nordic countries are still Nokian’s largest single regional market, accounting for 37 per cent of the company’s sales between January and September 2011. Sales there increased 22.9 per cent during this period and 23.5 per cent in the third quarter alone. Russia and the CIS proved to be the tyre maker’s fastest growing region and it accounted for 29 per cent of the group’s total sales in the first nine months of the year, up from 21 per cent a year earlier. Consolidated sales in Russia and the CIS increased 94.9 per cent between January and September and 81.3 per cent in the third quarter. Central and Eastern European sales grew 39.6 per cent year-on-year in the first nine months of the year and represented 26 per cent of Nokian’s total sales, while sales in this region increased 45.3 per cent in the third quarter. Decline was the order of the day in North America, with sales decreasing 5.8 per cent in the first nine months of the year and by 37.8 per cent in the third quarter alone. Between January and September this region accounted for just six per cent of Nokian’s group sales, down from nine per cent a year earlier.

Nokian’s passenger car tyre sales increased 48.5 per cent year-on-year in the first nine months of 2011 and represented 70 per cent of all tyre sales, up from 65 per cent a year earlier. Heavy tyre sales increased 50.5 per cent during the same period and accounted for eight per cent of the total, one percentage point more than in the first nine months of 2010. Vianor outlet sales decreased 2.3 per cent and their share of group total sales dropped from 24 per cent to 17 per cent. Sales through Nokian’s ‘other operations’ increased 57.7 per cent and represented four per cent of the group’s total sales.

Looking ahead to the full year, Nokian expects demand for passenger car tyres to remain strong in its core markets, while the aforementioned low inventories and a clear growth in winter tyre sales in Europe and Russia/CIS offer further growth potential. Nokian describes expected full-year demand for its heavy tyres as “healthy” but states that growth in order intake is levelling off.

“The visibility to this year sales and results is good,” commented Kim Gran. “Our sales will correlate closely with our growing production output. ASP will be strong due to seasonality and raw material prices and cost are levelling off, which will help to maintain healthy profitability. In 2011 our sky seems reasonably clear and our sails continue to bulge with tailwind. We will go in to 2012 stronger than ever and well prepared to take on opportunities and challenges, whatever they may be.”