Despite shaky Q1, Nokian looks forward to 2013 growth
Upon reporting increased sales and profit in 2012, Finland’s Nokian Tyres shared its projection for replacement market growth this year in its main markets. Nokian anticipates demand for replacement passenger car tyres will grow one to two per cent in Europe, two per cent in Nordic countries and two to five per cent in Russia. Admittedly, the tyre maker concedes the pricing environment for all tyre categories will be “challenging” this year, although margins will be supported by a ten per cent year-on-year easing in raw material costs in the first quarter of 2013 and a four per cent easing over the entire year. Although Nokian expects to see growth in net sales and operating profit in 2013, it believes that first quarter performance will be “clearly weaker” than in 2012.
Net sales increased 10.7 per cent to 1.61 billion in 2012, while operating profit rose from 380.1 million euros in 2011 to 415.0 million a year later. Profit for the reporting period amounted to 330.9 million euros, a year-on-year increase of 7.1 per cent. Earnings per share increased from 2.39 euros to 2.52 euros. Cash flow from operations was 262.3 million euros, more than double that of a year earlier, and Nokian’s Board of Directors has proposed a dividend of 1.45 euros per share.
“In 2012 Nokian Tyres performed well in a challenging environment and recorded all time high sales and profits combined with excellent cash flow. Our market position improved in core areas, the company is debt free and we are able to develop our business further from a healthy position,” commented Kim Gran, president and CEO of Nokian Tyres. “We got a flying start to the year 2012 sales and were running full utilisation of our capacities in the first half. The weak economic situation in Central Europe combined with high carry-over inventories in distribution resulted however in a dramatic drop in demand in Central Europe. Also our sales were hit and growth in Central Europe stalled during quarters three and four. Due to decisive and rapid changes in production, allocating a higher share of production and sales to Russia and support from reduced costs we managed to end the year with reasonably good results.”
Gran stated that the Russian tyre market continued to grow “double digits” while the Nordic countries were “relatively healthy.” He added that “challenges” were experienced in Central Europe in 2012, yet despite this Nokian managed to increase full year car tyre sales volumes, improve sales mix, overall ASP and improve its market position. “Our car tyre sales in Russia grew at a triple rate compared to the overall market, further strengthening our market leader position. In the Nordic countries sales came in as planned, we gained winter tyre market share and continue to be a clear market leader.”
In the course of 2012 Nokian opened 127 new Vianor outlets, Gran reported, bringing the network total to 1,037. France, Serbia and Bosnia gained a Vianor presence last year; the network now operates in 26 countries. “A continued expansion of our distribution network spearheaded by Vianor, combined with test winning products are cornerstones to our growth,” Gran commented.
Regarding Nokian’s new second factory in Russia, built alongside the existing Vsevolozhsk plant, Gran said it “represents the absolute top in automation, productivity and quality.” He added that last year its operation in Russia achieved a six per cent increase in labour productivity and 11 per cent rise in production despite a harsh market environment. “With the new factory up and running we have presently an inbuilt capability to increase output rapidly without capex to meet market growth and further to increase output by 50 per cent by adding lines in Russia,” he continued. Gran did not broach the issue of job cuts at the tyre maker’s Nokia, Finland plant in the financial statement bulletin released by Nokian Tyres on 6 February.
As already mentioned, Nokian is looking forward to market growth this year, with sales in the core Russian and Nordic markets expected to increase. “We are looking into 2013 with confidence. After a slow start for the year in quarter one we expect the market to present us with some growth opportunities,” said Gran. “With overwhelming test wins in 2012, the newly launched next generation of Hakkapeliitta winter tyres and test winner summer tyres, our product offering will be by far the best we have ever had. Vianor is to be expanded again by more than 100 shops and our market geography in Russia and Northern Europe is looking comparatively healthy offering us a good base for profitable business.”
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