Nokian Tyres sees drop in sales value in Q1 2014

ERJ staff report (TP)

Nokian, Finland – Nokian Tyres said its net sales and operating profit decreased in Q1 2014.

Net sales fell by 6.3 percent to €311.9m (€333.1m in Q1 2013). Operating profit was €68.4m (€76.3m in Q1 2013).

Profit for the period amounted to €38.7m (€63.6m in Q1 2013). Earnings per share amounted to €0.29 (€0.48 in Q1 2013).

Despite the results, the firm’s outlook is mainly positive.

“The market demand for replacement car tires is expected to show growth in the Nordic countries, Central Europe and North America in 2014. In Russia the clearly devalued Rouble has hurt the economy, thus weakening growth in GDP, sales of new cars and tire demand,” Nokian Tyres said.

“Heavy industrial tire demand is recovering in Nokian core products and is expected to improve clearly. The pricing environment for 2014 remains tight for all tire categories.

“The sales volume of Nokian Tyres is expected to show growth and the market position to improve in all end-user markets in 2014. Net sales, however, is expected to decrease due to currency devaluations and a weaker sales mix in Russia and CIS.

“Nokian Tyres continues to have competitive advantages from having manufacturing inside Russia. Of the Russian production 55 percent is exported and the margin between production costs in Roubles and export sales in Euros has improved.

“A decline of raw material costs is estimated to provide a tailwind of €50m full year 2014 supporting profitability. However, this is not enough to fully compensate for the weaker market conditions in Russia and CIS in 2014.”

Kim Gran, President and CEO, said: “The company is debt free with a strong balance sheet, which together with inbuilt capacity reserves gives us a good platform to further develop our business.

“We continue to develop our growth engine and expand our distribution network spearheaded by Vianor and a softer partner franchise model, Nokian Tyres Authorized Dealer (NAD).

“We added 29 Vianor shops during the first quarter and the network consists presently of 1,235 stores in 27 countries. The NAD network grew by 104 outlets in Q1 to 536 shops contracted in Italy, Germany, Ukraine, China, Denmark and Bulgaria. In Russia our dealership programs include 3,400 tire stores and car dealers.

“In 2014 we target to excel on the back of our renewed tire range, expanding distribution and our strong industrial structure. Every cloud has a silver lining and despite tougher times and present headwind we remain confident that also Russia, as many times before, will kick back to healthy growth in due course and that our Hakkapeliitta team is again able to capitalise on the changing market conditions.”