After ‘somewhat lower’ 2013, Nokian expects ‘profitable growth’ next year

Upon announcing its third quarter 2013 results, Nokian Tyres points out that although its group sales decreased 3.0 per cent year-on-year to €357.0 million in the three months to 30 September, the company’s profitability remained strong and it improved market share. Operating profit rose 11.9 per cent to €95.7 million and profit for the period amounted to €70.9 million. Earnings per share were up €0.08 to €0.53.

“Our strong market leader position in the core markets in Russia and Nordic countries is intact and we managed again to increase both market share and our distribution footprint in all markets,” commented Nokian Tyres president and CEO Kim Gran. “The newly launched Hakkapeliitta tyre range has set new standards for winter tyres. It has been very well received by both consumers and distributors, helping us to maintain average prices, to improve sales mix and to book reasonably good results.”

Gran also shared on the challenges Nokian faced during the quarter: “The headwind, with low car sales and weaker tyre demand in the European economy continued and spread to Russia. We do not foresee any major improvement in demand short term but there are some signs of improvement already in H2 and going into 2014.” He added that the tyre maker continues to target growth, improve results, excel on the back of new products, further expand distribution and improve productivity.

Nokian’s outlook is for replacement passenger car tyres in the Nordic and Central European regions to finish the year at 2012 levels this year on the back of improving market demand in the second half of the year. In Russia, lower GDP growth and car sales are expected to affect tyre demand in the final quarter of 2013 however Nokian says signs exist of some recovery for both summer and winter tyres going into 2014.

The company’s full year sales in Nordic countries are expected to show some growth and reach the previous year’s level in Central Europe. Despite a clear improvement in market share and growth of winter tyre sales, full year sales are estimated to show some decrease in Russia and North America.

While Nokian says the pricing environment for 2013 remains challenging for all tyre categories, its margins are supported by an improved industrial structure combined with approximately 12.5 per cent lower raw material costs (€/kg), which will help to the tune of €50 million in 2013. The Russian rouble’s unfavourable development on currency exchange markets this year is estimated to generate a €25 million negative effect on Nokian Tyres’ full-year 2013 net sales and approximately €14 million on operating profit.

Due to the weaker rouble and softer market demand for tyres in Russia, Nokian Tyres’ net sales and operating profit are estimated to be somewhat lower in the second half and full-year 2013 compared to 2012. The company predicts a return to a “profitable growth track” in 2014.