Nokian first half sales, earnings drop amid global pandemic

Nokia, Finland – Nokian Tyres plc has reported significant declines in both half year sales and earnings, as Covid-19 pandemic continued to take its toll on the business.

Net sales for the first six months of the year fell 27% to €550.5 million, due mainly to reduced demand caused by global lockdowns as well as measures taken to reduce high carry-over stocks in Russia, Nokian announced 4 Aug.

"Segments operating profit" declined 73% to just under €41 million, due in part to lower volumes caused by “underabsorption of factory costs.”  The Finnish tire maker reported an operating loss of €13.7, down from first half profit of €148 million the year before. 

“Nokian Tyres’ 2020 second quarter results were strongly impacted by the Covid-19 pandemic,” said Jukka Moisio, president and CEO, commenting on the company results.

In the face of the “exceptional situation”, Moisio said Nokian has set itself a short-term priority to provide customers with “world-class products and services” while keeping costs in strict control.

The company, he said, aims to protect cash flow by cutting back investments, managing working capital, and delaying activities.

“Nokian Tyres has a strong balance sheet, and we have further strengthened our liquidity position in the first half,” the recently appointed CEO said.

Looking beyond the current headwinds, Moisio said Nokian expected to benefit from its significant investments in capacity expansion in the past quarters, and increase sales when the market rebounds. 

Nokian’s passenger car tires segment reported a 45% decline in sales to €354.4 million during the first half, hit by Covid-19 pandemic, reduction of high carry-over stocks in Russia and a mild winter.

Segment operating profit fell 73% to €40 million, due to lower volumes and low factory utilisation rates at all locations.

During the period, Nokian said it reduced overall production by 39% year-on-year and adjusted production according to demand in Russia and Finland. In the US factory, recruitment of second shift has been postponed. 

In 2020, the company expects the sales of new cars in Russia to decline by 20–25% compared to 2019, driven by Covid restrictions and the ongoing economic recession. 

Nokia expects its total replacement tire market sell-in in Russia to decline by approximately 20% this year, due to weak demand and high carry-over stocks.

In the heavy tires segment, Nokian noted weaker OE demand impacting sales.

Net sales decreased by 4.6% to €91 million, while segment operating profit fell 37% to €11 million, as volumes and factory utilisation rates dropped. 

Nokian, which withdrew its 2020 financial guidance in March, said it would not offer an outlook for the year, due to the “continuous uncertainties” caused by the Covid pandemic.