Nokian Tyres: demand is exceeding supply

ERJ staff report (TB)

Nokia, Finland -- Nokian Tyres PLC expects to expand production capacity more than 30 percent this year to keep pace with rising demand, which the company said likely will exceed capacity throughout 2011.

The high demand helped Nokian triple its operating profit in the quarter ended March 31 to $98.8 million on 57.3-percent higher sales of $395.2 million. Net earnings also tripled to $85.2 million.

Nokian expanded output by more than 60 percent in the quarter and will expand capacity throughout the year primarily by bringing on stream two new production lines at its plant in Vsevolozhsk, Russia. Nokian also has approved the investment for a second plant in Russia, to be built adjacent to the existing plant and be on stream during 2012.

Despite the high demand for the firm's products, Nokian President and CEO Kim Gran was still cautious.

“Our sails bulge with tailwind, however it is not plain sailing,” he said. “We still face serious challenges with further significant raw material cost increases, availability issues and general uncertainties of the global economy. We trust to be able to tackle these challenges as in times of short supply we will make choices which will enhance productivity and profitability.”

Regarding the first quarter, Nokian noted that new car sales increased in the Nordic countries by 17 percent and in Russia by 77 percent. New car sales in Russia are expected to continue to grow by approximately 30 percent the rest of the year.

Additionally, aftermarket sales for car tyres increased 7 percent throughout Europe, includin the Nordic countries, driven in part by a long winter that resulted in prolonged sales of winter tyres into the first quarter. This left retailers with depleted inventories.

Sales in Russia and the former East Bloc countries more than doubled in the period and now make up more than 35 percent of Nokian's global sales. Sales in Central and Eastern Europe were up 58 and in the Nordic countries by a third.

Sales in North America fell nearly 10 percent, but the company offered no explanation for the decline.

From Tire Business (A Crain publication)

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