The the economic situation in Russia and the CIS countries has led to a downgrade in Nokian Tyres’ 2015 outlook. The Finnish tyre maker says sales of passenger car tyres have continued to decline in this region, and those tyres being purchased within the Russian market are increasingly lower B or C segment brand products. The company’s own sales in Russia were down 39.1 per cent year-on-year during the first half of 2015.
Although it enjoyed growth in Western markets during the first quarter of 2015, Nokian Tyres reports that its business in Russia “remains challenging”. The tyre maker’s 9.9 per cent year-on-year decrease in net sales to €281.3 million was driven by a 43.9 per cent decline in gross sales in Russia and the CIS. Operating profit dropped 29.4 per cent to €48.3 million and profit margin contracted from 21.9 per cent to 17.2 per cent. A windfall meant good news on the bottom line, however; the annulment of a previous tax ruling meant the company was able to return taxes and interest of €100.3 million to its financial result. Therefore profit for the three-month period rose 249.3 per cent from €38.7 million in Q1 2014 to €135.3 million this year.
Nokian Tyres already operates 13 production lines within its facilities in Russia and only has space to install one more. Company CEO Ari Lehtoranta says arrangements have been made to implement this extra line, and looking further ahead the company is “preparing plans” for its next factory. During a conference call on 8 May, he outlined the options the tyre maker was considering for this additional plant as well as the timetable for the related decision process.
The latest GRI G4 compliant Corporate Sustainability Report from Nokian Tyres is now available. This report, says the tyre maker, describes Nokian Tyres’ activities from the perspective of environmental, social and economic responsibility as part of an international value chain.
Following weak performance in Russia and the CIS region in the third quarter of 2014, Nokian Tyres has revised its operating profit projection for the full year. The Finnish company now estimates operating profit of €300 million to €320 million for 2014, considerably lower than last year’s €385.5 million. Net sales, as per previous guidance, are also expected to fall compared with 2013.
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