Nokian on track for higher 2012 sales, profits

Half year 2012 financial results for Nokian Tyres have been released, and these show the Finnish tyre maker’s sales to be 27.1 per cent up on a year ago. Nokian achieved group net sales of 798.0 million in the six months to 30 June, while operating profit increased 31.5 per cent to 217.7 million euros. Net profit went up 33.9 per cent to 182.9 million euros and earnings per share rose from 1.06 euros to 1.40 euros. Net sales, operating and net profits for the second quarter of 2012 were 413.8 million euros, 112.7 million euros and 95.4 million euros respectively.

Upon releasing its first half figures, Nokian reports that the order book for its passenger car tyres “remains good despite a more challenging market.” The company says it has further improved its position by winning market share in all targeted markets in Russia and Northern Europe, and its rising production capacity offers Nokian further growth potential and productivity gains. Sales of Nokian’s heavy tyres for full year 2012 are estimated to decrease compared to 2011 due to weaker demand.

“We continued to show strong progress and good results in the first semester of 2012,” commented Nokian Tyres’ president and CEO Kim Gran. “Our strategy of focusing on value-added growth, replacement and consumer business – primarily winter, SUV and premium summer tyres – high productivity and a tight ship continues to pay off. Car tyre sales improved in Q2 in the wake of our strong growth in Russia and market share improvement in Northern Europe. Improved productivity, successful cost control, as well as higher ASP, were the main factors for profit growth. We managed to increase sales, improve market shares and expand distribution in all of our targeted markets.” 

Gran shares that increasing production in Nokian’s Russian factory has boosted output tonnage by 27 per cent year-on-year: “The new plant, wall to wall with the existing Russian factory, produced its first tyres in June. The ramp-up of capacity in the new plant continues as the second line comes on stream during end Q4/2012. Production in Nokia, Finland has been cut and moved to Russia to further improve productivity in H2.”

Growth in Central Europe, particularly Germany, occurred in the first half and Gran described this phenomenon, despite a “challenging market situation”, as encouraging. “One of the cornerstones for our growth is a continuous expansion of a committed distribution with a strong consumer focus,” the president and CEO commented. “During H1 our Vianor chain opened 51 new stores, now totalling 961 stores in 24 countries. Our target of exceeding 1,000 stores by the end of 2012 seems quite realistic.”

Passenger car tyres

Net sales of Nokian’s passenger car tyres totalled 633.0 million euros, up 35.1 per cent from the corresponding period a year earlier. Operating profit increased to 228.7 million euros. Passenger car tyre sales grew in all market areas with the bulk of the total sales growth occurring in Russia, where winter tyre sales in particular grew significantly. Good sales growth was also recorded in Germany and the Czech Republic. Winter tyres represented 65 per cent of total passenger car tyre sales volumes, up from 62 per cent a year earlier. 

Unit production output of Nokian’s passenger car tyre business rose 29 per cent year-on-year, boosted by increasing capacity in Russia. The shift pattern of car tyre production in Nokia, Finland was cut from seven days a week to five days a week production by the end of June. Simultaneously, production in Russia was increased. The first line in Nokian’s new Russian plant commenced production in June and the second line is estimated to come on stream later this year. Capacity will further increase following the addition of two more lines in 2013 and 2014. The planned combined output of the Nokia and Vsevolozhsk factories in 2012 is 16.5 million tyres.

The market situation in Nokian Tyres’ core passenger car tyre markets was mixed. Sales of new cars in Russia increased 14 per cent year-on-year in the first half, with Western brands growing 24 per cent. New car sales in the Nordic countries decreased approximately six per cent year-on-year.

The sell-in sales volume for replacement market car tyres in the Nordic countries in the first half showed a one per cent, whereas in Europe the market declined by 13 per cent. The full year estimated sell-out to consumers for car tyres in Europe is estimated to be down approximately five percent versus the previous year. In Russia, tyre industry deliveries to distributors increased by approximately 20 per cent, trailing the improving economy and continued growth in new car sales.

At the end of June 2012 passenger car tyre distributors, especially in Central Europe, possessed carry-over stocks of both winter and summer tyres, which is expected to shift manufacturers’ winter tyre sales closer to the consumer season in the fourth quarter. A balance exists between supply and demand for premium passenger car tyres seem, while the budget segment is facing overcapacity.

Heavy and truck tyres

Net sales of Nokian heavy tyres amounted to 53.6 million euros in the first half, a year-on-year decrease of 5.5 per cent. Operating profit was 6.3 million euros. Sales of heavy tyres decreased due to weaker forestry tyre demand and sales compared to first half of 2011. Sales of mining and radial tyres showed growth, especially in North America and Russia, but did not fully compensate for the decline in the forestry sector. The order book going forward is stable and on the same level as by end of Q1/2012.

The demand for premium truck tyres and retreads has fallen by 30 per cent in Europe. The Nordic countries have suffered the least, with a two per cent decrease in truck tyre demand. In Russia the drop in demand for premium truck tyres has been approximately 20 per cent, whereas demand for budget radial tyres is increasing. Net sales of Nokian truck tyres came to 25.3 million euros in the first half, down 2.0 per cent year-on-year.

Full year outlook

The company’s projections for 2012 remain unchanged; Nokian says it is “positioned to improve net sales and operating profit compared to 2011.” The outlook for Nokian’s passenger car business is one of good order books and growth in production, while the focus in the heavy tyre business is to increase radial segment sales. Nevertheless, sales and operating profit is expected to be below that of 2011 in the heavy tyre segment.