Nokian expects “significant impact” from Ukraine war, Russian sanctions

Nokia, Finland – Nokian Tyres has reported a strong start to 2022, but the Russian war on Ukraine and the EU’s sanctions on Moscow are likely to have significant impact on its results.

The Finnish tire maker reported a 22% rise in first quarter sales to €416 million, up from €341 million the year before.

“The year began with good demand in all markets but in late February, the war in Ukraine started to impact on the operating environment,” said a 27 April statement.

Segments operating profit was up 32% year-on-year at €66.5 million, while operating profit rose 34% to €59.3 million.

The improvement, said president and CEO Jukka Moisio, was driven by price increases implemented in a wide range of markets and products to offset high raw material prices and other cost inflation.

However, Moisio said Russia’s war on Ukraine had caused “high uncertainty” with regard to the company's operating environment and manufacturing capacity.

In addition, the EU’s latest round of sanctions on Russia, announced 8 April, was further affecting Nokian’s business.

“The sanctions prohibit the import of tires from Russia to the EU, prohibit the export of certain raw materials from the EU to Russia, and limit transportation from and to Russia,” said Nokian which manufactures 80% of its passenger car tires in Russia.

“The sanctions have a significant impact on Nokian Tyres’ ability to manufacture tires in Russia, and ability to sell tires both in Russia and in the EU, specifically in central Europe,” it added.

Furthermore, Nokian said the sanctions will impact the sourcing of raw materials in Russia, where the company procures half of its raw materials from overseas.

“Raw material availability and its logistics will have a significant impact on the company’s capability to continue production in Russia,” it added.

In 2021, Russia represented approximately 20% of Nokian Tyres’ net sales.

“The war in Ukraine will significantly impact our financial results in 2022, especially starting from the third quarter,” said Moisio, without giving an estimate.

“Our short-term focus will be on adapting to the fast-changing, highly uncertain operating environment, maintaining control of our operations in Russia and securing cash flow,” he added.

In the mid-term, adding new supply capability to Europe will be one of Nokian’s key priorities, Moisio said.

As previously reported by ERJ, Nokian is expediting its plans to invest in new production capacity in Europe in the wake of the war.

In addition, the company is increasing production capacity at its factories in Nokia, Finland and Dayton, US.

The tire maker aims to manufacture all tires sold in the Nordic countries in Finland and all tires sold in North America in the US and Finland.

The company's Heavy Tyres business is not impacted by the ban on imports of tires from Russia to the EU, as all heavy tires are produced in Finland.