Nokian drives up HI sales and earnings

Nokia, Finland – Nokian Tyres plc has posted another strong quarter, with net sales for the three months to 30 June up 16.5% to €393.0 million and operating profit 21.5% higher at €94.1 million.

The second-quarter gains contributed to a 17.2% rise in net sales to €718.9 million and 19.6% increase in operating profit to €153.0 million over the first six months of 2017.

Over the first half, Nokian Tyres delivered a “strong performance” in all of its main markets, stated Nokian’s new president and CEO Hille Korhonen, in a financial report issued 8 Aug,

The Finnish tire group has responded to growing demand by increasing the production volumes at both factories and by building a new production line at the Russian factory. This new production line, said Nokian’s boss, will be “taken into use” by the end of the year.

Raw material costs, however, continued to go up during the first half, increasing by around 20% year-over-year. Nokian estimated an increase of approximately 20% for the full year 2017.

“We have already implemented the necessary price increases in all markets, and the full effect of these increases will be seen from H2 onwards due to the seasonality of Nokian Tyres’ business model,” said Korhonen.

Nokian’s Heavy Tyres unit increased its sales and production volume especially in the forestry business – helped by investments in production technology, people and marketing activities.

Vianor sales were impacted by an “atypical” spring season, and its profitability was affected by non-recurring expenses.

In May, Nokian announced an investment in a new greenfield factory in Dayton, Tennessee. The US factory, said Korhonen, “will enable us to further enhance our position in the North American market with a wider product range and better customer service.”

Nokian’s total investments in the first half amounted to €60.0 million: comprising investments in its Russian and Finnish tire factories, moulds for new products, ICT and process development projects, and Vianor expansion projects.

Market situation

Commenting on market conditions, Nokian’s report noted that first-half sales of new cars in Europe had increased 5% year-on-year. Car tire sell-in to distributors was down 1% year-over-year, with winter tire demand increased 2%.

In the Nordic countries, new car sales increased 2% year-on-year in the first six months. The market volume of car tires decreased by 5%added Nokian, which expects car tire demand for full-year 2017 to remain at the same level as last year.

In North America, the estimated new car sales were down by 9% in the first half. The market volume of car tires was up slightly year-over-year. However, demand for winter tyres increased 13%. For the full year 2017, car tyre demand is estimated to increase slightly year-over-year.

Global demand for special heavy tires varied a lot, with demand for OE forestry tires remaining strong. Increased use of wood and the good profitability of pulp manufacturers will also support the demand for forestry machines and tires in the following quarters, forecast Nokian, which also saw signs of improvement in the agricultural tire segment.

Between January and June, the sell-in of premium truck tires lifted 7% in Europe, while in the Nordic countries demand was up by 7%. In Russia, demand for premium truck tires fell 7% year-on-year.

“Truck tire demand in 2017 is estimated to increase in all of Nokian Tyres’ Western markets; in Russia, demand is estimated to remain at the same level year-over-year,” added Nokian’s report.