Nokian Tyres plc Stock exchange release 8 August 2007 at 8:00 a.m.
INTERIM REPORT FOR NOKIAN TYRES PLC JANUARY-JUNE 2007
Strong growth continued.
The Group's net sales were up by 23.8%, totalling EUR 432.5 million (EUR 349.4
million in H1 2006). Operating profit was EUR 89.2 million (EUR 48.6 million)
and earnings per share increased to EUR 0.57 (EUR 0.26). The company is
positioned to achieve strong sales growth in 2007 and to continue to outperform
the previous year's results.
Key figures, EUR million:
Q2/07 Q2/06 H1/07 H1/06 2006
Net sales 232.6 200.0 432.5 349.4 835.9
Operating profit 50.2 35.1 89.2 48.6 153.1
Profit before tax 46.9 31.9 82.4 42.0 139.3
Profit for the period 41.9 24.9 70.1 31.8 107.3
Earnings per share, EUR 0.34 0.20 0.57 0.26 0.88
Equity ratio,% 52.1 53.2 63.0
Cash flow from operations,
(Cash Flow II) -20.4 -27.1 -124.2 -91.9 77.7
RONA, % (rolling 12 months) 22.4 16.7 19.4
Gearing, % 46.6 56.2 22.8
Kim Gran, President and CEO:
“Nokian Tyres had a clearly better second quarter and first half of the year in
2007 compared to the previous year: net sales increased and operating profit
improved in all profit centres in the company's core markets. While most of the
increase in sales came from Russia, steep year-over-year sales growth was also
recorded in Eastern Europe and the Nordic countries. Passenger car tyre sales
mainly consisted of winter tyres, but summer tyres also sold well. The latter
were boosted by the Nokian Hakka summer tyre family, which saw its first season
in consumer sales. Average tyre prices rose as a result of the improved sales
mix, price increases and new products. The benefits gained from manufacturing
operations in Russia improved profitability. The outlook for the rest of the
year is good and the order book is strong, but sales growth and profit
improvement will be more moderate than in the first part of the year.”
Market situation
The replacement markets of passenger car tyres in Russia, the CIS countries and
Eastern Europe grew on the previous year. Growth in the Nordic countries and
Western Europe was moderate. The strongest growth was recorded in the markets
for winter tyres, SUV tyres and high-speed summer tyres. Demand for heavy
special tyres and truck tyres was high, and there was a shortage of heavy
special tyres. Many tyre manufacturers compensated for the rise in raw material
prices by increasing the prices of their products.
April-June 2007
In the April to June period, the Nokian Tyres Group recorded net sales of EUR
232.6 million (EUR 200.0 million), showing an increase of 16.3% on the
corresponding period a year earlier. Sales increased in the Nordic countries by
5.7%, in Russia and other CIS countries by 36.2% and in Eastern Europe by 27.3%
on the previous year. Sales in the USA were down 27.1% as a result of limiting
sales due to the weak US dollar.
Raw material prices in manufacturing increased by 2% in the second quarter
compared to the corresponding period a year earlier.
At EUR 67.3 million (EUR 58.4 million), fixed costs accounted for 28.9% (29.2%)
of net sales.
The Group's operating profit rose to EUR 50.2 million (EUR 35.1 million). Net
financial expenses were EUR -3.3 million (EUR -3.2 million).
Profit before taxes was EUR 46.9 million (EUR 31.9 million). Profit for the
period amounted to EUR 41.9 million (EUR 24.9 million) and EPS was EUR 0.34
(EUR 0.20).
Income financing after the change in working capital, investments and disposal
of fixed assets (Cash flow II) improved, totalling EUR -20.4 million (EUR -27.1
million).
January-June 2007
In the January to June period, the Nokian Tyres Group recorded net sales of EUR
432.5 million (EUR 349.4 million), which represented an increase of 23.8% on
the corresponding period a year earlier. Sales increased in the Nordic
countries by 11.8%, in Russia and other CIS countries by 52.1% and in Eastern
Europe by 66.2% on the previous year. Sales in the USA were down 23.5%.
Raw material prices in manufacturing in the first half increased by 5% on the
same period a year earlier. Fixed costs amounted to EUR 129.6 million (EUR
113.0 million) and represented 30.0% (32.3%) of net sales.
The Group's operating profit was EUR 89.2 million (EUR 48.6 million). It was
negatively affected by, among other things, the IFRS 2-compliant option scheme
write-off of EUR 5.1 million (EUR 3.7 million). The Group's tax rate decreased
to 15% as a result of tax reliefs in compliance with Russian agreements.
Net financial expenses were EUR -6.8 million (EUR -6.6 million) and included
exchange rate differences totalling EUR -0.5 million
(EUR -1.4 million).
Profit before taxes was EUR 82.4 million (EUR 42.0 million). Profit for the
period amounted to EUR 70.1 million (EUR 31.8 million) and EPS was EUR 0.57
(EUR 0.26).
Return on net assets (RONA, rolling 12 months) was 22.4% (16.7%). Income
financing after the change in working capital, investments and the disposal of
fixed assets (Cash flow II) was EUR -124.2 million (EUR -91.9 million). Equity
ratio was 52.1% (53.2%).
The Group employed an average of 3,372 (3,160) people, and 3,384 (3,175) at the
end of the period. The Vianor tyre chain employed 1,219 (1,203) people and
Russian operations 390 (308) people at the end of the period.
PASSENGER CAR TYRES
MEUR Q2/07 Q2/06 Change H1/07 H1/06 Change 2006
% %
Net sales 146.6 120.3 21.8 288.0 222.1 29,7 533,2
Operating profit 42.0 26.8 57.4 83.6 45.8 82.6 133.4
Operating profit, % 28.6 22.3 29.0 20.6 25.0
RONA, % 28.4 21.2 24.6
(rolling 12 months)
The net sales of Nokian passenger car tyres in January-June were up 29.7% year
over year, amounting to EUR 288.0 million (EUR 222.1 million). Operating profit
was EUR 83.6 million (EUR 45.8 million), and the operating profit percentage
was 29.0% (20.6%).
Summer and winter tyres for passenger cars sold very well in key markets,
especially in Russia. Sales mainly consisted of winter tyres, whose pre-sales
to distributors were brisk. The steepest growth in sales was recorded in Nokian
Hakkapeliitta 5 and Nokian Hakkapeliitta SUV 5 tyres. The market launch of the
Nokian Hakka summer tyre family boosted summer tyre sales.
Average tyre prices rose from the previous year due to a good sales mix, new
products and price increases.
The production volume rose as a result of the planned capacity increase at the
Russian plant. Russian manufacturing accounted for a clearly bigger share than
in 2006, and the benefits gained improved profitability.
HEAVY TYRES
MEUR Q2/07 Q2/06 Change H1/07 H1/06 Change 2006
% %
Net sales 24.9 23.3 7.1 50.5 45.2 11.9 90.1
Operating profit 5.8 5.4 6.5 11.9 10.9 9.1 19.9
Operating profit, % 23.2 23.3 23.5 24.1 22.1
RONA, % 38.0 41.1 39.0
(rolling 12 months)
The January-June net sales of Nokian Heavy Tyres totalled EUR 50.5 million (EUR
45.2 million), increasing by 11.9% over the previous year. Operating profit
rose to EUR 11.9 million (EUR 10.9 million), and the operating profit
percentage was 23.5% (24.1%).
Sales and the order income growth continued in all of the Heavy Tyres unit's
product groups and in all key markets, both in original equipment installation
and replacement markets. A price increase carried out in early 2007, combined
with a good sales mix, increased average prices.
The production volume grew from the previous year, but the unit did not have
sufficient delivery capacity to respond to the steep growth in market demand.
VIANOR
MEUR Q2/07 Q2/06 Change H1/07 H1/06 Change 2006
% %
Net sales 68.2 64.9 5.1 114.2 99.0 15.3 246.9
Operating profit 3.7 4.5 -16.8 -2.0 -4.3 53.4 2.3
Operating profit,% 5.5 6.9 -1.8 -4.4 0.9
RONA, % 3.5 1.0 1.8
(rolling 12 months)
Vianor's net sales in January-June totalled EUR 114.2 million (EUR 99.0
million), increasing by 15.3% year over year. Operating result amounted to EUR
-2.0 million (EUR -4.3 million) and the operating profit percentage was -1.8%
(-4.4%).
Vianor's sales growth was based on successful pre-sales of winter tyres last
autumn, which extended winter tyre restocking into the early part of 2007.
Winter tyre pre-sales for the coming season were also brisk. In the Nordic
countries, the main season for summer tyres got under way in the second quarter
showing good results. New and retreaded truck tyres and heavy tyres also sold
better than the previous year. The inputs made in fast fit services began to
pay off; services accounted for a bigger share of sales and brought a slight
improvement in profitability.
The Vianor network expanded in Sweden, Russia and Finland, and its clientele
grew in Norway. In the second quarter Vianor extended its reach to Switzerland
with the acquisition of Pneuhaus R Hauri and Pneuservice Birseck AG, two Swiss
businesses engaged in passenger car tyre retail. At the end of the review
period the Vianor network consisted of 166 outlets, 129 of which were partner
and franchising outlets.
OTHER OPERATIONS
The net sales of Nokian truck tyres were up 5.7% on the previous year,
totalling EUR 10.4 million (EUR 9.9 million). Since the unit's product range
mainly consists of winter items, most of its sales and profit are generated in
the second half of the year.
RUSSIA
In January-June sales in Russia and the CIS countries increased by 52.1%
compared to the previous year and the market shares improved. The distribution
network was expanded through new distribution agreements and Vianor outlets.
The three production lines of the Russian plant operate continuously in three
shifts, and the plant's production volume and quality level are on target. The
fourth production line has been installed and will come on line in autumn 2007.
On 15 February 2007, the Board of Directors of Nokian Tyres decided to launch
the extension and capacity increase measures at the Russian plant, which will
more than double the production volume of the Vsevolozhsk plant. The objective
is to reach a production volume of 10 million tyres by 2011.
An extension of 32,500 square metres will be built adjacent to the existing
plant, which has a capacity of four million tyres. The extension will enable
the planned increase in production volume. Earth construction work began in
March 2007, and on 21 June Nokian Tyres and Lemcon Oy, which is part of the
Lemminkäinen Group, signed a contract agreement on the expansion of the plant.
Work will start immediately and the expansion will be completed in March 2008.
Equipment and machinery installation will begin in early 2008. The objective is
to raise production capacity gradually every year in order to keep up with the
increase in demand.
The project will require a total investment of approximately EUR 195 million in
2007-2010, EUR 66 million of which has been scheduled for 2008. To increase
capacity, future investments will also be needed to expand the mixing
facilities and machine lines.
INVESTMENTS
Investments during the period under review amounted to EUR 57.7 million (EUR
52.6 million). The company's total investments in 2007 are approximately EUR
110 million (EUR 97 million), and some EUR 62 million (EUR 60 million) will be
spent on the Russian plant's operations and expansion. Other investments
include production investments at the Nokia plant, moulds for new products, and
business acquisitions associated with Vianor's growth plans.
OTHER MATTERS
1. Stock options on the Main List of the Helsinki Stock Exchange
The Board of Directors of Nokian Tyres plc decided to apply for the listing of
stock options 2004B on the Helsinki Stock Exchange effective as of 1 March
2007. There are a total of 245,000 2004B stock options. Each stock option 2004B
entitles the holder to subscribe for ten Nokian Tyres plc shares. Shares can be
subscribed for with the 2004B stock options from 1 March 2007 to 31 March 2009.
The maximum number of shares subscribed for with the 2004B stock options is
2,450,000. The current subscription price with stock options 2004B is EUR
11.649/share. The annually paid dividends will be deducted from the share
subscription price.
2. Shares subscribed for with stock options
After the increase in share capital registered on 21 August 2006, a total of
39,550 shares were subscribed for with the 2001A stock options under Nokian
Tyres' Option Schemes of 2001 and 2004, 104,100 shares with the 2001B options,
143,340 shares with the 2001C options, and 127,350 shares with the 2004A
options. The resulting increase of EUR 82,868 in share capital was entered in
the Trade Register on 12 January 2007. Trading of these shares along with the
old shares began on 15 January 2007. After the increase, Nokian Tyres has a
total of 122,446,610 shares and a share capital of EUR 24,489,322.
After the share capital increase registered on 12 January 2007, a total of
34,800 shares were subscribed for with the 2001A stock options, 72,300 shares
with the 2001B options, 91,600 shares with the 2001C options, and 7,630 shares
with the 2004A options.
The increase in share capital resulting from the subscriptions, EUR 41,266, was
entered in the Trade Register on 22 February 2007. Trading of the shares along
with the old shares began on 23 February 2007. Following the increase, Nokian
Tyres has a total of 122,652,940 shares and a share capital of EUR 24,530,588.
After the share capital increase registered on 22 February 2007, a total of
60,600 shares were subscribed for with the 2001A stock options, 77,400 shares
with the 2001B options, 128,850 shares with the 2001C options, 21,310 shares
with the 2004A options, and 48,520 shares with the 2004B options. The increase
in share capital resulting from the subscriptions, EUR 67,336, was entered in
the Trade Register on 21 May 2007. Trading of the shares along with the old
shares began on 22 May 2007.
The total number of Nokian Tyres shares after the increase is 122,989,620, and
the share capital is EUR 24,597,924.
3. Share price development
The Nokian Tyres' share price was EUR 26.02 at the end of the review period
(EUR 10.28). The average share price during the period was EUR 20.25 (EUR
12.62), the highest EUR 27.39 (EUR 14.89) and the lowest EUR 13.99 (EUR 9.90).
A total of 135,978,695 shares were traded during the period (135,424,641),
representing 111% (111%) of the company's overall share capital. The company's
market value at the end of the period was EUR 3,200,189,912 billion (EUR 1.254
billion). The company's percentage of Finnish shareholders was 31.4% (42.1%)
and 68,6% (57.9%) were foreign shareholders registered in the nominee register.
This figure includes Bridgestone's holding of approx 16%.
4. Decisions made at the Annual General Meeting
At the Annual General Meeting of Nokian Tyres held on 3 April 2007, the
financial statements for 2006 were approved and the Board of Directors and the
President were discharged from liability. The final dividend was set at EUR
0.31 per share. The matching date was 10 April 2007 and the payment date 17
April 2007.
4.1 Board of Directors and auditor
The number of Board members was set at seven. Kim Gran, Rabbe Grönblom, Hille
Korhonen, Hannu Penttilä, Koki Takahashi, Aleksey Vlasov and Petteri Walldén
will continue as Board members. In a meeting held after the Annual General
Meeting, Petteri Walldén was elected Chairman of the Board. At its meeting in
May, the Board of Directors decided to set up a Nomination and Compensation
Committee. The Board is represented on the Committee by Hille Korhonen and
Hannu Penttilä, Board members, and Petteri Walldén, Board Chairman.
Authorised public accountants KPMG Oy Ab continue as auditors.
4.2 Remuneration of Board members
It was decided that the monthly fee paid to the Chairman of the Board would be
EUR 5,000 or EUR 60,000 per year, while that paid to Board members was set at
EUR 2,500 or EUR 30,000 per year. It was also decided that according to the
existing practices, 60% of the annual fee be paid in cash and 40% in company
shares to the effect that in the period from 4 April to 30 April 2007, EUR
24,000 worth of Nokian Tyres plc shares will be purchased at the stock exchange
on behalf of the Chairman of the Board and EUR 12,000 worth of shares on behalf
of each Board member. This decision means that the final remuneration paid to
Board members is tied to the company's share performance. No separate
compensation will be paid to the President and CEO for Board work.
Each member of the Committee will receive a meeting fee of EUR 500 for each
Committee meeting attended.
4.3 The Board of Directors' authorisation to make a decision on a share issue
and on granting special rights entitling to shares
The Annual General Meeting authorised the Board of Directors to make a decision
to offer no more than 24,000,000 shares through a share issue or by granting
special rights under chapter 10, section 1 of the Finnish Companies Act that
entitle to shares (including convertible bonds) on one or more occasions. The
Board may decide to issue new shares or shares held by the company. The maximum
number of shares included in the authorisation accounts for approximately 20%
of the company's entire share capital. The company has one type of share with a
nominal value of EUR 0.20.
The authorisation includes the right to issue shares or special rights through
private offering, in other words to deviate from the shareholders' pre-emptive
right subject to provisions of the law.
Under the authorisation, the Board of Directors will be entitled to decide on
the terms and conditions of a share issue or the granting of special rights
under chapter 10, section 1 of the Finnish Companies Act, including the
recipients of shares or special rights entitling to shares, and the
compensation to be paid. It was decided that the authorisation should be
exercised for purposes determined by the Board.
The authorisation will be effective for five years from the decision made at
the Annual General Meeting. This authorisation invalidates all other Board
authorisations regarding share issues and convertible bonds.
4.4 Issue of stock options
The Annual General Meeting decided that stock options will be issued to the
personnel of the Nokian Tyres Group, as well as to a wholly-owned subsidiary of
Nokian Tyres plc. The company has a weighty financial reason for issuing stock
options, since the stock options are intended to form part of the incentive and
commitment programme for the personnel. The purpose of the stock options is to
encourage the personnel to work on a long-term basis to increase shareholder
value.
The purpose of the stock options is also to commit the personnel to the company.
The maximum total number of stock options issued shall be 6,750,000. The stock
options entitle their holders to subscribe for a maximum total of 6,750,000 new
shares in the company. The stock options now issued can be exchanged for shares
constituting a maximum total of 5.2% of the company's shares and votes of the
shares, after the potential share subscription.
The share subscription price shall be based on the prevailing market price of
the Nokian Tyres plc share on the Helsinki Stock Exchange in January—March
2007, January—March 2008 and January—March 2009.
The share subscription period for stock options 2007A shall be 1 March 2009—31
March 2011, for stock options 2007B 1 March 2010—31 March 2012 and for stock
options 2007C 1 March 2011—31 March 2013.
A share ownership plan shall be incorporated into the 2007 stock options,
according to which the Group's senior management shall be obliged to acquire
the company's shares with a proportion of the income gained from the stock
options.
5. Convertible bonds to Finnish and international institutional investors
On 20 June 2007 the Board of Directors of Nokian Tyres announced its intention
to issue convertible bonds to an aggregate amount of EUR 130.4 million in
deviation from the pre-emptive subscription right of the company's shareholders
to Finnish and international institutional investors in a book building
process. The bonds were oversubscribed several times within three hours of the
start of the process. Related to its earlier announcement, Nokian Tyres
announced later on 20 June that it had successfully issued its EUR 130.4
million convertible bonds due in 2014.
The Board of Directors approved the final terms of the bonds and, based on the
authorisation given by the Annual General Meeting on 3 April 2007, issued the
bonds to institutional investors in deviation of the pre-emptive rights of the
company's shareholders.
The bonds were issued to finance investments in line with the company's
strategy to refinance existing financing facilities and for general corporate
purposes.
The bonds were issued in principal amounts of EUR 100,000 and at 100% in their
principal amount. They will pay zero coupon, and, if not previously converted,
redeemed, purchased or cancelled, will be redeemed at final maturity at a price
which represents a yield-to-maturity equal to 3% per annum, or 123% of their
principal amount. Each EUR 100,000 bond will be convertible into 2,672 company
shares. The conversion price represents a premium of 40% above the reference
price of EUR 26.73 of the company's ordinary shares on 20 June 2007. The right
to convert the bonds into shares in the company commences on 7 August 2007 and
ends on 20 June 2014 at 4:00 p.m. Finnish time. In the event that all bonds
will be converted into ordinary shares of the company, the aggregate number of
new ordinary shares to be issued will be 4,008,551, which represents 3.3% of
the aggregate number of company shares on 20 June 2007 (provided that the
over-allotment option is fully used).
The maturity date of the bonds is 27 June 2014 unless previously redeemed,
converted, purchased or cancelled. The company may redeem the bonds at their
accreted principal amount as at the date fixed for redemption at any time on or
after 27 June 2011 provided that the price of the company's share multiplied by
the conversion ratio is equal to or exceeds 130% of the then applicable
accredited principal amount for a period of 20 trading days during a period of
30 consecutive trading days. In addition, the company has the right to redeem
the bonds if at any time the aggregate principal amount of the bonds
outstanding is equal to or less than 15% of the aggregate principal amount of
the bonds initially issued.
The offering took place on 27 June 2007 and was registered in the Finnish Trade
Register on 28 June 2007.
Nokian Tyres granted Nomura International plc an over-allotment option to
subscribe for up to EUR 19.6 million of additional bonds solely to cover
over-allotments, if any, which may be exercised at any time up to and including
20 July 2007.
Trading in the bonds on the Euro MTF Market of the Luxembourg Stock Exchange
began on 17 July 2007. The company published a Listing Document concerning the
listing of the bonds (including the terms and conditions) in Luxembourg on 17
July 2007. The ordinary shares of the company to be issued upon conversion of
the bonds will be listed on the Helsinki Stock Exchange.
The offering was managed by Nomura International plc (Sole Bookrunner and Joint
Lead Manager) and Carnegie Investment Bank AB (Joint Lead Manager).
FUTURE RISKS, UNCERTAINTY FACTORS AND LITIGATIONS
Approximately 40% of the company's turnover is invoiced in euros. Other
important sales currencies despite euro are Russian rouble, U.S. dollar and
Norwegian and Swedish crowns. One per cent variation in EUR/RUB- exchange rate
has approximately 2,5 million euros effect in company's turnover. Similar
change in EUR/USD- exchange rate has approximately 0,5 million euros impact in
turnover. One per cent change in EUR/SEK- and EUR/NOK- exchange rates effects
company's turnover by approximately one million euros.
Nokian Tyres' future risks and uncertainty factors have to do with the
development of growing markets, the success of winter tyre sales in key markets
and the development of raw material prices. The Russian plant capacity increase
has been implemented as planned, but future success depends on the availability
of skilled personnel.
Nokian Tyres is party to some litigations and disputes relating to the normal
business in different countries. At the moment Nokian Tyres do not expect any
material effect on the profits or future outlook of the company.
SEASONALITY OF SALES AND PROFITS
Owing to the seasonality, high share of winter tyres, sales and profits have
historically been primarily generated in the second half of the year,
especially in the final quarter. The growth in Russia and a higher share of
preseason sales have decreased seasonality to some extent resulting in a more
even distribution of sales and profits throughout the year.
TAX RATE
Tax rate has declined as a result of tax benefits in Russia. Benefit is valid
for a period equal to the profit accumulation reaching investment in Russia
plus two years. Tax refunds are booked when received with no accruals made.
Full year tax rate for 2007 is estimated at 20% and is expected to further
slightly decline in 2008.
DEVELOPMENTS AFTER THE PERIOD UNDER REVIEW
1. Convertible bonds to Finnish and international institutional investors
On 17 July, 2007 Nokian Tyres announced that Nomura International plc, the
manager of the company's convertible bonds due in 2014, had fully exercised the
EUR 19.6 million over-allotment option granted by Nokian Tyres plc. The
additional bonds will be used solely to cover over-allotments. Subsequent to
the exercise of the over-allotment option the total amount of the convertible
bonds is EUR 150 million.
2. Notice of changes in ownership
On 20 July, 2007 Nokian Tyres received an announcement from Grantham, Mayo, Van
Otterloo & Co LLC, according to which the holding of Grantham, Mayo, Van
Otterloo & Co LLC in Nokian Tyres had exceeded the limit of 5% following a
share transaction concluded on 19 July 2007. Grantham, Mayo, Van Otterloo & Co
LLC now hold a total of 6,224,719 Nokian Tyres shares, which represents 5.06%
of the company's 122,989,620 shares and votes.
OUTLOOK FOR THE REST OF THE YEAR
Demand will continue to increase in Nokian Tyres' key products, i.e. in winter
tyres, UHP summer tyres and SUV tyres in the company's key markets in Russia,
other CIS countries and Eastern Europe. Growth will be moderate in the Nordic
countries and elsewhere in Europe. The production of forestry machines is
brisk, and the sales outlook for forestry tyres is good. The shortage of tyres
for other industrial machinery continues.
The tyre markets will remain challenging, and raw material prices will rise.
Nokian Tyres expects its raw material costs in manufacturing (EUR/kg) to be
about 6% higher in 2007 than in 2006.
The company's product range contains a large number of new products, which,
along with an enhanced distribution network, offer good opportunities for sales
growth and for achieving the desired profit margin. Tyres manufactured in
Russia represent an increasingly large proportion of the Group's sales, which
contributes to sustaining the profit margin.
In the Nordic countries and Russia, the objective is to increase sales and
improve market shares. Sales and investments will especially target the CIS
countries and Eastern Europe.
In 2007 Nokian Tyres will pay special attention to growth projects, sales and
logistics management, and the expansion of its distribution network. Capacity
will be raised in accordance with an accelerated plan in Russia. Heavy Tyres
will focus on production bottlenecks in order to increase capacity.
The company is positioned to achieve growth in sales in 2007 and to continue to
outperform the previous year's results with slightly improved profitability.
Third-quarter started with sales slightly up compared to Q3 2006 and orders at
high level. The Group's full-year net sales are targeted to grow approx. 15%
and to amount EUR 900-1,000 million, depending on how successful the winter
tyre season is in the key markets.
This interim report has been prepared in accordance with IAS 34
'Interim Financial Reporting' and the same accounting policies as
in the most recent annual financial statements.
Changes to the accounting policies as of January 1, 2007:
- IFRS 7 'Financial Instruments: Disclosures' has been adopted by
the Group in 2007. The Group estimates that the new standard will
mainly affect the notes to the future consolidated financial
statements, e.g. disclosing sensitivity of market risks.
- Amendment to IAS 1 'IAS 1 Presentation of Financial Statements -
Capital Disclosures' has been adopted by the Group in 2007
The Group estimates that the new requirements will mainly affect the
notes to the future consolidated financial statements.
The interim report figures are unaudited.
NOKIAN TYRES
CONSOLIDATED INCOME STATEMENT
Million euros 4-6/07 4-6/06 1-6/07 1-6/06 Last 12 1-12/06
months
Net sales 232.6 200.0 432.5 349.4 919.0 835.9
Cost of sales -130.0 -116.9 -239.4 -208.2 -522.5 -491.3
Gross profit 102.6 83.2 193.1 141.2 396.5 344.5
Other operating income 0.5 0.5 0.9 0.9 2.0 2.0
Selling and marketing
expenses -43.3 -38.6 -83.9 -74.5 -166.9 -157.6
Administration expenses -5.8 -4.7 -10.9 -8.8 -21.0 -18.9
Other operating expenses -3.8 -5.1 -10.0 -10.1 -16.9 -17.0
Operating profit 50.2 35.1 89.2 48.6 193.7 153.1
Financial income 8.0 14.9 13.6 15.3 20.7 22.3
Financial expenses -11.3 -18.2 -20.4 -21.9 -34.7 -36.2
Profit before tax 46.9 31.9 82.4 42.0 179.7 139.3
Tax expense (1 -4.9 -7.1 -12.4 -10.1 -34.2 -32.0
Profit for the period 41.9 24.9 70.1 31.8 145.5 107.3
Attributable to:
Equity holders of the parent 41.9 24.8 70.1 31.8 145.5 107.3
Minority interest 0.0 -0.1 0.0 0.0 0.0 0.0
Earnings per share from the profit
attributable to equity holders of the
parent
basic, euros 0.34 0.20 0.57 0.26 1.20 0.88
diluted, euros 0.33 0.20 0.55 0.26 1.16 0.86
KEY RATIOS 30.6.07 30.6.06 31.12.06
Equity ratio, % 52.1 53.2 63.0
Gearing, % 46.6 56.2 22.8
Equity per share, euro 4.94 3.93 4.56
Interest-bearing net debt,
mill. euros 283.1 269.1 126.9
Capital expenditure, mill.
euros 57.7 52.6 97.0
Depreciation and amortisations,
mill. euros 22.7 20.0 40.8
Personnel, average 3,372 3,160 3,234
Acquisitions and disposals of items
of property, plant and equipment 48.8 40.7 89.0
Number of shares (million units)
at the end of period 122.99 121.88 122.03
in average 122.64 121.25 121.63
in average, diluted 126.95 124.80 125.15
1) Tax expense in the consolidated income statement is
based on the taxable profit for the period.
CONSOLIDATED BALANCE SHEET 30.6.07 30.6.06 31.12.06
Non-current assets
Property, plant and equipment 386.3 328.0 353.2
Goodwill 52.9 51.5 51.8
Other intangible assets 7.7 7.8 8.2
Investments in associates 0.1 0.1 0.1
Available-for-sale
financial assets 0.2 0.3 0.2
Other receivables 0.8 1.8 0.8
Deferred tax assets 22.0 19.0 14.3
Total non-current assets 470.1 408.4 428.6
Current assets
Inventories 211.9 173.7 159.8
Trade receivables 318.4 249.1 209.7
Other receivables 43.3 50.9 47.6
Cash and cash equivalents 123.5 17.0 39.0
Total current assets 697.1 490.7 456.1
Equity
Share capital 24.6 24.4 24.5
Share premium 144.2 141.2 142.7
Translation reserve -4.8 2.7 -2.2
Fair value and hedging reserves 0.1 -0.2 -0.1
Retained earnings 443.3 310.7 391.6
Minority interest 0.0 0.0 0.0
Total equity 607.4 478.6 556.6
Non-current liabilities
Deferred tax liabilities 27.6 23.2 20.5
Interest-bearing liabilities 300.3 165.8 110.6
Other liabilities 1.8 2.0 1.9
Total non-current liabilities 329.7 191.0 133.0
Current liabilities
Trade and other payables 122.9 108.3 138.9
Provisions 1.0 0.9 1.0
Interest-bearing liabilities 106.2 120.3 55.3
Total current liabilities 230.1 229.5 195.2
Total assets 1167.2 899.1 884.7
Changes in net working capital arising from operative business is partly
covered by EUR 150 million domestic commercial paper program.
CONSOLIDATED CASH FLOW STATEMENT 1-6/07 1-6/06 1-12/06
Million euros
Cash flows from operating activities:
Cash generated from
operations -63.3 -53.0 165.7
Financial items and taxes -18.4 -28.1 -59.1
Net cash from operating
activities -81.6 -81.1 106.6
Cash flows from investing activities:
Net cash used in investing
activities -57.9 -43.0 -89.8
Cash flows from financing activities:
Proceeds from issue of share
capital 1.6 3.5 5.2
Change in current financial
receivables and debt 51.5 106.1 42.5
Change in non-current financial
receivables and debt 208.7 13.6 -41.0
Dividends paid -38.0 -27.9 -27.9
Net cash from financing
activities 223.7 95.4 -21.2
Net change in cash and cash
equivalents 84.2 -28.7 -4.5
Cash and cash equivalents at
the beginning of the period 39.0 45.7 45.7
Effect of exchange rate changes -0.3 2.2
Cash and cash equivalents at
the end of the period 123.5 17.0 39.0
84.2 -28.7 -4.5
The effect of exchange rate changes -0.3 million euros
are included in the net cash from operating activities.
Year 2006 that effect was -1.5 million euros.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Million euros Fair
value Retai-Mino-
Trans- and ned rity
Share Share lation hedging ear- inte-
capital premium reserve reserves nings rest Total
Equity, 1 Jan 2006 24.2 137.8 5.7 -0.5 303.4 0.7 471.4
Interest rate swaps,
net of tax 0.3 0.3
Translation differences -3.1 -3.1
Gains/losses from hedge
of net investments in
foreign operations,
net of tax 0.1 0.1
Profit for the period 31.8 31.8
Total recognised income and
expenses for the period 0.0 0.0 -3.0 0.3 31.8 0.0 29.1
Dividends paid -27.9 -27.9
Exercised warrants 0.2 3.4 3.6
Share-based payments 3.7 3.7
Other changes -0.4 -0.4
Change in minority interest -0.7 -0.7
Equity, 30 Jun 2006 24.4 141.2 2.7 -0.2 310.7 0.0 478.6
Equity, 1 Jan 2007 24.5 142.7 -2.2 -0.1 391.6 0.0 556.6
Interest rate swaps, net of tax 0.2 0.2
Translation differences -3.0 -3.0
Gains/losses from hedge
of net investments in
foreign operations,
net of tax 0.4 0.4
Profit for the period 70.1 70.1
Total recognised income and
expenses for the period 0.0 0.0 -2.6 0.2 70.1 0.0 67.7
Dividends paid -38.0 -38.0
Exercised warrants 0.1 1.5 1.6
Share-based payments 5.1 5.1
Equity component of the
convertible bond 13.9 13.9
Other changes 0.5 0.5
Equity, 30 Jun 2007 24.6 144.2 -4.8 0.1 443.3 0.0 607.4
SEGMENT INFORMATION 4-6/07 4-6/06 1-6/07 1-6/06 1-12/06
Million euros
Net sales
Passenger car tyres 146.6 120.3 288.0 222.1 533.2
Heavy tyres 24.9 23.3 50.5 45.2 90.1
Vianor 68.2 64.9 114.2 99.0 246.9
Others and eliminations -7.1 -8.5 -20.2 -17.0 -34.3
Total 232.6 200.0 432.5 349.4 835.9
Operating result
Passenger car tyres 42.0 26.8 83.6 45.8 133.4
Heavy tyres 5.8 5.4 11.9 10.9 19.9
Vianor 3.7 4.5 -2.0 -4.3 2.3
Others and eliminations -1.3 -1.6 -4.2 -3.7 -2.5
Total 50.2 35.1 89.2 48.6 153.1
Operating result, % of net sales
Passenger car tyres 28.6 22.3 29.0 20.6 25.0
Heavy tyres 23.2 23.3 23.5 24.1 22.1
Vianor 5.5 6.9 -1.8 -4.4 0.9
Total 21.6 17.6 20.6 13.9 18.3
Cash Flow II
Passenger car tyres -25.8 -30.7 -109.0 -81.0 68.9
Heavy tyres 8.5 1.2 2.7 5.0 19.4
Vianor -3.0 0.9 -10.7 -2.0 7.5
Total -20.4 -27.1 -124.2 -91.9 77.7
CONTINGENT LIABILITIES 30.6.07 30.6.06 31.12.06
Million euros
FOR OWN DEBT
Mortgages 1.0 0.2 0.0
Pledged assets 0.0 0.0 0.0
OTHER OWN COMMITMENTS
Guarantees 1.0 1.0 1.0
Leasing and rent
commitments 81.4 76.5 82.5
Purchase commitments of
property, plant and equipment 30.4 4.1 5.3
INTEREST RATE DERIVATIVES
Interest rate swaps
Fair value 0.1 -0.3 -0.2
Notional amount 15.3 10.0 15.4
Options, purchased
Fair value 0.0 0.0 0.0
Notional amount 0.0 50.0 0.0
CURRENCY DERIVATIVES
Forward contracts
Fair value -2.2 0.5 1.1
Notional amount 298.1 212.3 199.9
Options, purchased
Fair value 0.4 0.0 0.0
Notional amount 76.8 3.1 12.6
Options, written
Fair value -0.8 0.0 -0.1
Notional amount 79.5 3.1 12.6
The fair value of interest rate derivatives is defined by cash flows
due to contracts. Interest rate swaps are wholly designated as cash
flow hedges and their changes in fair value relating to the effective
portion of the hedge is recognised in equity and the potential
ineffective portion is recognised in the income statement.
The fair value of forward foreign exchange contracts is calculated
at the forward rates on the balance sheet closing date on the basis
of cash flows arising from contracts. The fair value of currency
options is calculated by using the Garman-Kohlhagen option valuation
model.
Currency derivatives are only used to hedge the Group's net exposure.
The changes in the fair value of currency derivatives are reported in
the income statement excluding the currency derivatives
that are hedging the foreign currency denominated net investment in
a foreign subsidiary. Hedge accounting is applied for those hedges
and for hedges meeting the hedge accounting criteria the changes in
the fair value are wholly deferred in equity except for the potential
ineffective portion and the time value of currency options, which are
recognised in the income statement.
The notional amount of currency derivatives is the euro equivalent
of the contracts' currency denominated amount on the balance sheet
closing date.
RELATED PARTY TRANSACTIONS
Transactions and outstanding balances with parties having
significant influence
The Group has related party relationships with members of the Board
of Directors, the President, other key management personnel, and
Bridgestone Group with significant influence through share ownership.
Shareholders
Bridgestone Group
1-6/07 1-6/06 1-12/06
Sales of goods 24.4 17.2 17.6
Purchases of goods 11.1 13.4 27.4
30.6.07 30.6.06 31.12.06
Trade and other receivables 6.2 3.5 1.7
Trade and other payables 8.3 8.5 1.7
Key management personnel 1-6/07 1-6/06 1-12/06
Total employee benefit expenses 2.7 2.1 4.7
Of which share-based payments 1.6 0.9 2.1
During 1 January and 30 June 2007 the President and other key
management personnel were granted a total of 684,200 share options
for the subscription of 812,000 shares (during 1 January and 30 June
2006 a total of 73,000 pcs for the subscription of 730,000 shares).
The share option plan terms for the key management personnel are
equal to the share options directed at other personnel. On 30 June
2007 the key management personnel held 797,950 share options for the
subscription of 1,949,500 shares (181,385 pcs for the subscription of
1,813,500 shares on 30 June 2006). Of these share options 47,750 pcs
were exercisable for the subscription of of 477,500 shares on 30 June
2007 (42,325 pcs exercisable for the subscription of 423,250 shares
on 30 June 2006).
No share options have been distributed to the other members of the
Board of Directors.
ACQUISITIONS
Acquisitions in 2007
In 2007 the Group has still acquired only small companies or their
assets. On April 23rd, the Group acquired 100% of the share capital
in OOO Hakkapeliitta Village, a Russian domiciled company, to set up
the housing project for the personnel in Vsevolozhsk factory. On
March 1st, Vianor expanded with an asset deal for five outlets from
Swedish OKQ8 companies. On June 1st, Vianor acquired with another
asset deal the business in a Finnish-based company Capital Rengas
Oy. On July 1st, with yet another asset deal Vianor bought the
business in Pneuhaus R Haur and Pneuservice Birseck AG, both
domiciled in Switzerland.
The expectations relating to the growth in sales through increased
customer base, and the future expectations on improved market area
coverage and sales increase resulted in the recogition of goodwill.
Specification of the cost of business combinations
Paid in cash 4.2
Costs directly attributable to the business combinations 0.0
Total cost of the business combinations 4.2
Fair value of the net assets acquired 2.4
Goodwill 1.8
Carrying
Fair values amounts
recorded in before
combination combination
Specification of acquired net assets
Intangible assets 0.0 0.0
Property, plant and equipment 1.0 0.9
Inventories 1.5 1.4
Receivables 0.0 0.0
Cash and cash equivalents 0.0 0.0
Liabilities 0.0 0.0
Net assets acquired 2.4 2.3
Consideration paid in cash 4.2
Cash and cash equivalents
in the subsidiaries acquired 0.0
Net cash outflow 4.2
Since these pieces of information are not material individually,
the presentation is aggregated. The profits of the acquired com-
panies, totalling EUR -0.1 million, are included in the consolidated
income statement. The actual acquisition dates and the nature of
the operations taken into account the effect of the acquisitions on
the consolidated net sales and profits is not material even if they
were combined as of the beginning of the financial year.
DEFINITIONS OF CONSOLIDATED KEY FINANCIAL INDICATORS
Earnings per share, euro:
Profit for the period attributable to the equity holders of the
parent / Average adjusted number of shares during the period
Earnings per share (diluted), euro:
Profit for the period attributable to the equity holders of the
parent / Average adjusted and diluted number of shares during
the period
the share options affect the dilution as the average share market
price for the period exceeds the defined subscription price
Equity ratio, %:
Total equity x 100 / (Total assets - advances received)
Gearing, %:
Interest-bearing net debt x 100 / Total equity
Equity per share, euro:
Equity attributable to equity holders of the parent / Adjusted
number of shares on the balance sheet date
Nokian Tyres plc
Raila Hietala-Hellman
Vice President, Corporate Communications
Further information: Mr. Kim Gran, tel. +358 10 401 7336
Distribution: HEX and major media
***
Nokian Tyres will publish the January-June 2007 Interim Report on Wednesday,
August 8, 2007 at 8.00 am Finnish time.
The result presentation to analysts and media will be held on the same day at
Hotel Kämp, Helsinki at 10.00 am Finnish time. The presentation language will
be English.
The presentation can be listened through audiocast via internet on Wednesday,
August 8, 2007 at 10.00 am Finnish time
http://www.nokiantyres.com/Resultinfo2007q2en
To be able to ask questions during the event you can participate in the
conference call. Please dial in 5-10 minutes before the beginning of the event:
+44 (0)20 7162 0025
Password: Nokian Tyres
Stock exchange release and presentation material will be available before the
event at http://www.nokiantyres.com/investors_en.
After the event the audio recording can be found at the same address.