Nokian scrubs China from third-plant location list

London – The construction of a third tire plant is still on the table for Nokian Tyre and a decision will be announced in the fourth quarter of 2016, company spokesman Antti-Jussi Tähtinen told ERJ.

“We originally had three locations in mind, Eastern Europe, United States and China for the third plant. However, China has been dropped now and we will make a decision on the final location by then,” he added.

The Nokian spokesman declined to give further details on the size of the investment and the planned capacity of the plant.

The Finnish tire maker's decision on the new plant will take place against the background of lower sales in many of its key markets.

Nokian’s European sales pushed up its results against “almost non-existing” winter season sales in Russia and the US, the company’s chief executive officer Ari Lehtoranta reported on 5 Feb.

In addition to the high demand in Europe, a sharp decline in raw materials cost helped Nokian achieve profitability, said Lehtoranta at the company’s annual results conference.

Raw material costs (€/kg) for Nokian Tyres were down 13.1 percent year-over-year in 2015 , which saved the company approximately €40 million.

According to Nokian, raw material costs are also estimated to decrease around 5 percent in full year 2016, providing a tailwind of approximately €15 million versus 2015.

As for markets, Lehtoranta said Russia was still the company’s biggest single country in terms of sales, although the country’s economic outlook for 2016 is negative.

“This together with the North American inventory situation will limit our capability to grow this year,” noted the CEO.

Nokian also went through a round of job and capacity cuts in its Nokian plant in August 2015.

“However, we have increased our investments in R&D, marketing and sales much more than the savings achieved in that programme,” said Lehtoranta, who added that productivity in Nokian’s passenger car tire manufacturing improved by 5 percent last year.

Net sales decreased 2.1 percent to €1.36 billion. Currency rate changes were the main contributor to the drop, cutting the figure by €69.3 million compared with the rates in 2014.

Operating profit was also down 4.1 percent at €296 million.