Russia
Although the war in Ukraine and subsequent sanctions continue to “cause significant uncertainty” for Nokian Tyres’ operating environment, especially in regards to its business in Russia, on Friday the company reported that demand for its tyres has nonetheless remained good. For this reason, and after successfully implementing price increases to mitigate the impact of inflation, Nokian Tyres has raised its net sales guidance for 2022.
Russian firm PSJC Tatneft has signed an agreement to sell its tyre business, and as such is transferring Kama Tyres to JSC Tatneftekhiminvest-Holding.
Pirelli & C. Spa has reported a strong set of first quarter 2022 results which show revenues and pre-tax profits (adjusted EBIT) were up 22.2 per cent and 35.4 per cent respectively despite considerable turmoil related to the war in Ukraine and the resultant sanctions against Russia, where Pirelli runs two tyre factories. However, the tyre manufacturer has also revised down full-year estimates due to the same “geopolitical tensions”.
Although Russian tyre maker Voltyre-Prom recently spoke of potential opportunities arising from the war in Ukraine and related international implications, majority shareholder Titan International confirms it will not be investing in this business any time soon. Details of Titan’s relationship with the Russian operation were set out in the US-based firm’s 10-Q financial report for Q1 2022 and further commented on during a teleconference held on 3 May.
On 25 April 2022, the UK Government announced a further tranche of trade sanctions against Russia. The new sanctions, which were introduced by International Trade Secretary Anne-Marie Trevelyan and Chancellor of the Exchequer Rishi Sunak, include import bans on silver, wood and high-end products like caviar. At the same time, the government has raised tariffs by 35 percentage points on items from Russia and Belarus, including diamonds and “rubber products”. Additional duties of 35 per cent were already introduced on “new pneumatic tyres, of rubber” on 25 March 2022.
Although war continues to rage in Ukraine, German tyre maker Continental is once again producing in Russia. The reason the company gives for resuming tyre manufacture is duty of care for its Russian workforce.
While other tyre makers are distancing themselves from Russia and moving production capacities elsewhere at present, Titan International Inc.’s subsidiary in Volzhsky, Volgograd Oblast has announced plans to increase its production volumes. Voltyre-Prom, which is majority owned and managed by the Illinois, USA-based off-highway tyre specialist, states that the current situation “opens up new opportunities” for it to increase production volumes and sales.
Michelin hasn’t only halted its tyre production in and exports to Russia in response to the current situation in Ukraine. It has announced that the Michelin Guide team has suspended all restaurant recommendation activities in the country.
The latest EU sanctions against Russia will seriously affect Nokian Tyres and its business in Europe. The tyre maker says the sanctions will have a “significant impact” on its ability to manufacture tyres in Russia, which will reduce its ability to sell tyres in the EU, and within Central Europe in particular.
Following Trelleborg Group’s confirmation that it cancelled plans to invest in new manufacturing facilities in Russia following Russia’s invasion of Ukraine at the end of February, Yale School of Management has upgraded the Swedish-based rubber products specialist business from grade “F” to “B”.
Nokian Tyres is expediting “plans to invest in new production capacity in Europe” in response to the sanctions against Russia, where the company has significant levels of tyre production. Specifically, Nokian’s board of directors will cut the dividend payable to shareholders by 106 million euros to fund the new capacity. Nokian Tyres will also increase capacity at its factories in Finland and the US with a view to becoming more geographically diversified in its manufacturing operations.
Trelleborg Group cancelled plans to invest in new manufacturing facilities in Russia following Russia’s invasion of Ukraine at the end of February. Back in October 2021 Trelleborg had announced plans to invest roughly 30 million euros in manufacturing operations in Russia, Vietnam, Japan and Morocco. The Russia project was set to focus on sealing solutions.
The war in Ukraine has brought “high uncertainty” to Nokian Tyres’ operational environment and manufacturing capacity, and as a result it is accelerating plans to invest in new production capacity in Europe. To help fund this capacity, the Board of Directors at Nokian tyres has decided to decrease the dividend payable for the 2021 financial year.
At the start of the year this column predicted a positive 2022 for the tyre business on the basis that we are better prepared for the unknown because of the adaptions made during the last few pandemic years. I still believe that. But my thesis is being tested by the implications of the now month-long war in Ukraine. All our expectations are being tested. For example, never before have I received an email which switches from normal editorial matters to “our country has been invaded” from one line to the next.
Japanese tyre manufacturer Yokohama is stopping production at its L.L.C. Yokohama R.P.Z. passenger car tyre factory in Lipetsk, Russia. Yokohama said it will “gradually stop production” in Russia “due to the current problem of raw material procurement”. The company will also donate more than $400,000 to humanitarian relief efforts.
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Pirelli
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