Nokian Tyres: 116.2-million-euro loss down to Russian car tyre production gap

Nokian Tyres reports that its fourth-quarter 2022 net sales totalled 411.3 million euros, down 19.8 per cent from 512.6 million euros in October–December 2021. Operating profit was 13.5 million euros (Q4 2022: 88.0 million). Despite that, the company’s full-year 2022 net sales grew 3.6 per cent to 1,776.1 million euros (2021: 1,714.1 million euros). However, that wasn’t enough to prevent a full-year 2022 loss of 116.2 million euros (2021: 268.2 million euros profit). Executives put the fourth-quarter declines down to “lower passenger car tyre supply volumes…”, something that is a veiled reference to the fact that the company is wrestling with a serious passenger car tyre production gap.

Prior to Nokian’s “controlled exit” from Russia, around 80 per cent of Nokian’s passenger car tyre production resided in the company’s Vsevolozhsk, St Petersburg, Russian tyre factory, which is in the process of being sold to Tatneft. The latest figures suggest that Russian car tyre production peaked at 82 per cent in 2021, but amounted to 65 per cent in full-year 2022 numbers. Whatever the precise figure is, it is a large proportion of the whole and Nokian’s repeated references to “lower…tyre supply volumes” is something of an admission that the company is suffering from a passenger car tyre production gap in the interim.

As we reported recently, Nokian executives have two plans to fill that gap: the construction of a new factory in Romania; and an off-take agreement with Chinese contract tyre manufacturer, Sentury. However, the Nokian tyre representatives told Tyres & Accessories that the first Sentury-produced Nokian tyres aren’t expected to hit the market until the second half of 2023.

Meanwhile, Nokian is understandably focusing on its high-quality and, crucially, high-value winter tyre sales. Winter tyres accounted for 55 per cent of Nokian’s car tyre sales in 2022 down from 62 per cent in 2021. Summer tyre sales represented 27 per cent (2021: 23%), while all-season share was the only segment to grow its share of Nokian’s total car tyre sales, up three percentage points to 18 per cent (2021: 15%).

That’s bad news for Nokian car tyre sales for two reasons: Firstly, because the time till the Romania tyre factor is production-ready must be measured in years and months. And secondly, because the production gap began in July 2022 when many winter tyres are shipped and pre-sold into the aftermarket. In the absence of Russian tyre capacity and the new Romanian plant, everything rests on the Sentury off-take deal tyres from which won’t manifest until the current winter season is done and dusted and potentially too late for the next winter season. That being the case, all that’s left is Nokian’s summer and all-season tyre sales, which aren’t as much of a niche speciality and aren’t necessarily as profitable.

A new 2-billion-euro Nokian Tyres

Nevertheless, Jukka Moisio, Nokian Tyres president and CEO remained upbeat and spoke of building a new Nokian Tyres:

“The year 2022 was exceptional and full of major changes. I am proud of the Nokian Tyres team, who showed exceptional strength and resilience in the midst of the unprecedented events, responding to fast-changing situations while at the same time caring for customers and for each other.

“During the year, we started to build the new Nokian Tyres without Russia, increased production in Finland and in the US, and launched high-performing new products in our core segments, making our product portfolio the strongest ever. We also made the decision to build a new passenger car tyre factory in Romania, which will be the world’s first zero CO2 emission factory in the tyre industry, and the decision to start collaborating with tire contract manufacturers. These actions are extremely important in terms of additional capacity and our future growth.

“The year 2023 will be a new start for [taking] Nokian Tyres to EUR 2 billion business long-term” – Jukka Moisio, Nokian Tyres president and CEO

“Despite the challenging operating environment, we had many successes and achievements in 2022. In Heavy Tyres, we had a record year in terms of net sales, profitability and productivity. Vianor delivered all-time high net sales, and in North America, we reached the highest ever sales volume of passenger car tyres. We improved workplace safety to the best ever level and were included in the Dow Jones Sustainability Europe Index, being one of the top-scoring companies in the Automobiles and Automotive components industry.

“As we enter 2023, our focus will be on adding new capacity, retaining a competitive premium product portfolio and serving our customers. The first half of the year will be demanding as we are lacking supply, but we expect our volumes to start picking up again from the second half of 2023 onwards as we continue to progress our ongoing strategic projects. The year 2023 will be a new start for Nokian Tyres to EUR 2 billion business long-term.”

Source: Nokian Tyres