Nokian profits down in 1H, but quarterly improvements indicate Nordic strength

Nokian sales and profits are down 5.7 and 18.4 per cent respectively for the first half of 2013, the company has reported. However the second quarter has been increasingly strong for the company, with net sales totalling 419.1 million euros 1.3 per cent up on the second quarter of 2012. President and CEO Kim Gran said that the company had been strong in the Nordic countries and Russia particularly during this period, and Nokian expects growing winter tyre demand – playing to the company’s strengths – in these countries and in central Europe during the rest of the year.

With total tyre demand flat in the north and down in central Europe, Nokian expects flat sales overall, with profit margins supported by reduced raw materials costs (“approximately nine per cent down”, Nokian’s report said) over the course of 2013. The manufacturer has some ground to make up in order to achieve this: profits from the period total 149.2 million euros versus 182.9 million euros in 1H 2012. Net sales in the first half of 2013 were 752.2 million euros compared to 798.0 million euros in 1H 2012. The manufacturer will be looking to the launch of the Hakkapeliitta 8 in the second half of 2013 for a boost to reach the 330.9 million euro profits achieved in 2012. Even then, this year has not provided the growth expected in the optimistic 2012 full year report.

President and CEO statement

Kim Gran issued a full statement to the stock exchange alongside the results: “Our strong market leader position in the core markets in Russia and Nordic countries is intact and we managed again to increase market share in all our markets. Pre-season sales of our new Hakkapeliitta winter tyre range were good and helped us to book reasonably good results with growth in sales and EBIT during Q2. Headwind continued to be heavy in the European economy, car sales and replacement tyre market being clearly down.  We do not foresee any major improvement in the market for 2013 but target to grow and excel on the back of our renewed winter tyre range, expanding distribution and our strong industrial structure.

“In the second quarter our strongest cards were Russia and the Nordic countries. Our sales in Russia, our biggest market, continue to exceed last year’s numbers and we managed again to grow winter tyre sales clearly more than average market growth. The best growth rate in Q2, however, came from the Nordic countries supported by the renewed winter tyre range and expanding distribution.

“Our profitability remained good, price €/kg was flat due to an improved mix. A strong tailwind from material cost supported margins and offset higher depreciation costs.

“We expect the good performance to continue with our new winter tyres spearheaded by Hakkapeliitta 8 being launched to consumers in the second half of the year. The Russian tyre market is growing modestly in 2013, however, car and tyre sales are expected to start to improve during H2 with recently launched state financing support. The Central European winter tyre market has been weak and competitive, but we expect some improvement and an upturn in H2/2013.  

“During the present phase of slower market growth we continue to develop and improve productivity and our industrial structure. In Q1 we commissioned another line (line 12) in the Russian factory and followed up in Q2 with installation of line 13. This is taking the annualized capacity in Russia to more than 15 million tyres by end of 2013.  

“We continue to expand our distribution network spearheaded by Vianor. We opened 84 new Vianor stores in the first half of the year, now totalling 1,121 stores in 26 countries. In Russia and CIS Nokian Hakka Guarantee dealership program includes over 2,700 tyre stores and car dealers. A new softer partner franchise model Nokian Authorized Dealer (NAD) has also been rolled out in H1 with 217 shops contracted in Italy, Germany and China. 

“After a slow start for the year we managed to improve operations in Q2 and expect to be able to improve our sales and EBIT in H2. With the newly launched next generation of Hakkapeliitta winter tyres and test winner winter and summer tyres, our product offering will be by far the best ever. Our tyre chains Vianor and NAD are to be expanded and our market geography in Russia and Northern Europe is looking comparatively healthy offering us a good base for profitable business. A stronger than expected raw material tailwind will help to offset softer prices and additional costs.”

Related news:

• Nokian 1Q sales down 13%, operating profit down 20%
• Despite shaky Q1, Nokian looks forward to 2013 growth