Russian troubles knock Nokian

ERJ staff report (TP)

Nokia, Finland – Nokian Tyres reported a net sales drop of 9.4% in its first-half 2014 results due to weak demand in Russia and the Ukrainian crisis.

For the period January to June 2014, net sales decreased to €681.5 million (€752.2m in 1-6/2013) because of “currency rate changes” and difficult conditions abroad.

Kim Gran, president and CEO, said: “The markets in Russia and CIS proved to be more challenging than estimated as a result of the Russia/Ukraine crisis escalating, devaluations and slow economies with a clear drop in sales value as a consequence.

“Reductions in input costs, raw materials, improved productivity and good development in the West were not enough to compensate for the negatives in Russia/CIS.”

Operating profit was €159.1 million (€196.6m). Profit for the period amounted to €104.8 million (€149.2m).

In its outlook for the rest of the year, Nokian said: “The market demand for replacement car tires is expected to continue to show growth in the Nordic countries, Central Europe and North America in H2/2014.

“In Russia and CIS the company’s sales volume is expected to decline. Nokian Tyres’ net sales are expected to decrease due to currency devaluations combined with weaker sales mix and ASP.

“Nokian Tyres continues to have competitive advantages from having manufacturing inside Russia. Of the Russian production 55% 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 €50 million full year 2014 supporting profitability. However, this is not enough to fully compensate for the weaker market conditions in Russia and CIS in 2014."

More details in the 27-page PDF report here.

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