Nokian Tyres plc Interim Report 8 May 2015, 8 a.m.
Nokian Tyres plc Interim Report January-March 2015: Growth in the west – Russia
remains challenging
January-March 2015
· Net sales decreased by 9.8% to EUR 281.3 million (EUR 311.9 million in
Q1/2014). Currency rate changes cut Net sales by EUR 29.1 million compared with
the rates in Q1/2014.
· Operating profit was down by 29.4% to EUR 48.3 million (68.4). Operating
profit percentage was 17.2% (21.9%).
· Profit for the period increased by 249.3% amounting to EUR 135.3 million
(38.7). The company returned the 2007-2010 total additional taxes and punitive
interests of EUR 100.3 million to the financial result based on the annulment
decision made by the Board of Adjustment of Finnish Tax Administration.
· Earnings per share were up by 249.5% to EUR 1.02 (EUR 0.29).
Full year financial guidance reiterated
In 2015, with current exchange rates, Net sales and Operating profit are to
decline slightly compared to 2014.
Key figures, EUR million:
Q1/15 Q1/14 Change% Q2/14 Q3/14 Q4/14 2014
Net sales 281.3 311.9 -9.8 369.5 327.7 380.0 1,389.1
Operating 48.3 68.4 -29.4 90.7 72.1 77.5 308.7
profit
Operating 17.2 21.9 24.5 22.0 20.4 22.2
profit, %
Profit 63.5 55.9 13.6 78.6 61.7 65.0 261.2
before tax
Profit for 135.3 38.7 249.3 66.1 53.4 50.1 208.4
the period
Earnings per 1.02 0.29 249.5 0.50 0.40 0.37 1.56
share, EUR
Equity 71.7 66.8 67.5
ratio, %
Cash flow -59.7 -3.7 -1,494.3 -21.8 -95.3 579.1 458.3
from
operations
RONA,% 17.6 20.1 18.3
(roll. 12
months)
Gearing, % -8.0 -1.3 -13.6
Ari Lehtoranta, President and CEO:
“The end of the year 2014 was very volatile in Russia. Oil price, Ruble
valuation and purchasing behaviour changed on a daily basis following the
slightest moves in geopolitical and economic environment. The situation has
somewhat stabilized and our first quarter has gone according to our plans.
Biggest negative impacts have come from currency valuations and delay in the
start of the winter tyre sales in Russia. While the whole market has gone down
in Russia and CIS, we have been able to improve market share, volumes and
margins in all other markets. This is due to our competitive product portfolio,
expanding distribution, improved productivity and excellent people.
Currency rate changes cut our Net sales by EUR 29.1 million. Local price changes
and increasing success in SUV tyres compensated part of the drop. Together with
the raw material cost gone down by 15%, these helped us to maintain a reasonable
Operating profit level of 17.2%. According to the tax decision by Board of
Adjustments, we returned the 2007-2010 total additional taxes of EUR 100.3
million to the financial result, which improved our Net profit accordingly.
Our distribution network keeps on growing; the current number of Vianor stores
is 1,371, the NAD network has already grown to 930 stores and the new N-Tyre
partner concept has 67 stores in operation. The competitiveness of our product
portfolio continues to improve; we have launched new winter tyres and All
-Weather tyres for Central Europe and North America, and the magazine test
success has remained on good level. Our Heavy Tyres and Vianor business units
increased their sales and Heavy Tyres also its profitability. Vianor’s decline
in profitability is explained by the seasonality.
Even if the market development visibility in Russia and CIS is still poor at the
moment, we remain confident about our future. We reiterate our guidance for the
year and feel positive about the growth opportunities for the future.”
Market situation
USA has continued to be the growth engine with supportive monetary policy,
improved industrial production and strong employment ratio giving fuel for
growth. The European economy shows some new promise as in January 2015 the ECB
announced to begin a 1.2 trillion-euro quantitative easing program, which is
expected to improve the economic activity in the area. Even though many of the
emerging economies are currently weak and geopolitical risks have remained, the
global GDP is estimated to grow by 3.8% in 2015.
In the Nordic countries the new car sales increased in Q1/2015 by 4% year-over
-year. The market volume of car tyres showed an increase of 9% compared to
Q1/2014. However, no considerable change in tyre demand is visible in the Nordic
countries for full year 2015.
In Europe the sales of new cars increased in the first quarter by 8% year-over
-year. Car tyre sell-in to distributors was up by 2% compared to Q1/2014. Tyre
demand is estimated to show growth in Central Europe in 2015. The pricing
pressure is, however, tight.
In the USA the new car sales was up by 6% in Q1/2015 vs. Q1/2014. Car tyre
demand in North America is expected to grow by 3.5% in 2015 year-over-year.
Russia’s economy and consumer markets deteriorated in 2014 due to the falling
oil price resulting in significant devaluation of the Russian Ruble (over 60%
against EUR). The consumers’ purchasing power has significantly decreased also
due to high inflation and interest rates. In the first quarter of 2015 the
economy saw a rebound with some increase in oil price and strengthening of the
Ruble. However, the fundamental weakness of the economy and the impact of the
Ukraine conflict and US / EU sanctions against Russia have not disappeared,
which leaves little room for further improvement of the economy in 2015.
Russia’s full year 2015 GDP growth estimates vary currently between -3% and -8%.
The sales of new cars in Q1/2015 in Russia decreased by 36% year-over-year,
reflecting car price increases and extremely high levels of interest and poor
availability of car loans. New car sales are estimated to decline by 20-25% in
2015 vs. 2014, in the basic scenario. However, the car park is still growing
also this year.
In Q1/2015 the sell-in volume for A and B segment tyres in Russia is estimated
to have decreased by 20%. The mid class B-segment tyres’ increasing share of
total market has weakened the product mix, which combined with the devaluation
of the Ruble has resulted in lower Average Selling Prices in Euros in Russia. In
the year-turn the tyre manufacturers announced price increases of 5-10%. Further
price increases are unlikely provided that the Ruble remains at its current
relatively high level for the next couple of months. The overall pricing
environment in Russia remains tight.
The demand for special heavy tyres varied strongly between product and market
areas, but the overall sentiment in the business is positive. OE forestry tyre
demand continued to be strong in the first quarter. Although there are some
signs of the demand having passed its peak, the increased use of wood and good
profitability of pulp manufacturers will support forestry machine and tyre
demand also during the rest of 2015. Agricultural tyres also have a solid
outlook for 2015.
Truck tyre demand in the first quarter varied between areas; in Europe the sell
-in of premium truck tyres was down by 1%, but in the Nordic countries the
demand increased by 17% year-over-year. The premium truck tyre demand in Russia
decreased by 3% compared to Q1/2014. The truck tyre demand in 2015 is estimated
to be on the same level than in the previous year in all Nokian Tyres’ western
markets; in Russia the demand is expected to decline.
Raw materials
The tailwind from tyre industry raw material costs continued, but an upturn is
expected to take place in the second half of 2015. The raw material cost (€/kg)
for Nokian Tyres was down 15.4% in Q1/2015 year-over-year. The raw material cost
is estimated to decrease by 5% in full year 2015, providing a tailwind of EUR 15
million versus 2014.
JANUARY-MARCH 2015
Nokian Tyres Group recorded Net sales of EUR 281.3 million (311.9), showing a
decrease of 9.8% compared with Q1/2014. Currency rate changes cut Net sales by
EUR 29.1 million.
Gross sales development by market areas
Growth% % of total % of total
sales in sales in
Q1/2015 Q1/2014
Nordic countries 6.8 38.7 32.2
Russia and CIS -43.4 26.7 41.9
Other Europe 5.6 20.5 17.3
North 49.0 13.7 8.1
America
Net sales development by business units
Growth% % of total % of total
sales in sales in
Q1/2015 Q1/2014
Passenger Car Tyres -15.9 69.1 74.6
Heavy Tyres 8.8 12.5 10.4
Vianor 11.2 18.3 15.0
Fixed costs amounted to EUR 94.4 million (99.6), accounting for 33.6% (31.9%) of
Net sales. Total salaries and wages were EUR 44.9 million (47.5).
Nokian Tyres Group's Operating profit amounted to EUR 48.3 million (68.4). The
Operating profit was negatively affected by the IFRS 2 -compliant option scheme
accrual of EUR 1.9 million (3.3) and expensed credit losses and provisions of
EUR 1.8 million (1.7).
Net financial expenses were EUR -15.3 million (12.5). Net interest expenses were
EUR -17.7 million (5.5). Financial expenses have been adjusted with EUR 20.2
million reversal of interest on back tax as the reassessment decision on years
2007-2010 were annulled and returned to the Tax Administration for reprocessing.
Net financial expenses include EUR -3.2 million (-7.0) of exchange rate
differences.
Profit before tax was EUR 63.5 million (55.9). Profit for the period amounted to
135.3 million (38.7), and EPS were EUR 1.02 (EUR 0.29). Tax expense has been
adjusted with EUR 80.1 million as the tax reassessment decisions on years 2007
-2010 were annulled and returned to the Tax Administration for reprocessing.
Return on net assets (RONA, rolling 12 months) was 17.6% (20.1%). Income
financing after the change in working capital, investments and the disposal of
fixed assets (Cash flow from operations) was EUR -59.7 million (-3.7).
Investments
Investments in the review period amounted to EUR 21.9 million (17.1). This
comprises of production investments in the Russian and Finnish factories, moulds
for new products and the Vianor expansion projects.
Financial position on 31 March 2015
Gearing ratio was -8.0% (-1.3%). Interest-bearing net debt amounted to EUR
-112.6 million (-17.7). Equity ratio was 71.7% (66.8%).
The Group’s interest-bearing liabilities totalled EUR 285.7 million (367.7) of
which current interest-bearing liabilities amounted to EUR 0.0 million (184.6).
The average interest rate of interest-bearing liabilities was 3.9% (4.7%). Cash
and cash equivalents amounted to EUR 398.3 million (385.4).
At the end of the review period the company had unused credit limits amounting
to EUR 607.3 million (656.7) of which EUR 255.7 million (305.9) were committed.
The current credit limits and the commercial paper program are used to finance
inventories, trade receivables, subsidiaries in distribution chains and thus
control the typical seasonality in the Group’s cash flow due to changes in the
working capital.
Tax rate
Dispute of 2007-2010
The Board of Adjustment of Finnish Tax Administration annulled the reassessment
decision from the Tax Administration, according to which the Company was obliged
to pay EUR 100.3 million additional taxes with punitive tax increases and
interests concerning tax years 2007-2010 and returned the matter back to the Tax
Administration for reprocessing. According to the Board of Adjustment the Tax
Administration neglected the obligation to hear the taxpayer. Because of the
procedural fault of the Tax Administration, the Board of Adjustment annulled the
decision without considering the actual substance of the matter.
The Company returned the 2007-2010 total additional taxes of EUR 100.3 million
in full to the financial statement and result of first quarter result 2015. The
Company had recorded the same amounts as expenses in full to the financial
statement and result of year 2013. The Company also expects the Tax
Administration to return immediately EUR 43.1 million it has already set off
despite the stay of execution.
Dispute of U.S subsidiary 2008-2012
Nokian Tyres U.S. Finance Oy, a subsidiary of Nokian Tyres plc (ownership 100%
of shares), received a reassessment decision from the Finnish Tax
Administration, according to which the company is obliged to pay EUR 11.0
million additional taxes with punitive tax increases and interests concerning
tax years from 2008 to 2012. From the amount EUR 7.9 million is additional taxes
and EUR 3.1 million punitive tax increases and interests. The company recorded
them in full to the financial statement and result of Q1/2014.
Large Taxpayers’ Office carried out a tax audit concerning the Finnish Business
Tax Act, where the Tax Administration raised an issue about the restructuring of
the sales company and acquisitions of Nokian Tyres Group in North America
totally ignoring the business rationale and corresponding advance rulings
presented by the company.
Nokian Tyres U.S. Finance Oy considered the reassessment decision of the Tax
Administration as unfounded and left the claim for rectification to the Board of
Adjustment. If necessary, the company will continue the appeal process in the
Administrative Court.
Tax rate outcome and estimate
Due to the annulment of additional taxes, the Group’s tax rate was -113.1%
(30.7%) in the review period. Tax rate excluding the annulment of additional
taxes was 19.1%. The tax rate was positively affected by tax incentives in
Russia based on present investments and further investment-related incentive
agreements. The new agreed tax benefits and incentives came into force in the
beginning of 2013. The agreement will prolong the benefits and incentives until
approximately 2020.
The tax rate going forward will depend on the timetable and final result of the
ongoing back tax disputes with the Finnish Tax Administration. Group's corporate
annual tax rate may rise from present 17 % as a result of these cases.
Personnel
The Group employed an average of 4,264 (4,151) people, and 4,361 (4,176) at the
end of the review period. The equity-owned Vianor tyre chain employed 1,635
(1,496) people and Russian operations 1,319 (1,345) people at the end of the
review period.
BUSINESS UNIT REVIEWS
Passenger Car Tyres
Q1/15 Q1/14 Change% Q2/14 Q3/14 Q4/14 2014
Net sales, M€ 207.6 246.9 -15.9 273.7 244.7 237.9 1,003.2
Operating profit, M€ 60.1 80.0 -25.0 83.4 73.3 55.4 292.2
Operating profit, % 28.9 32.4 30.5 30.0 23.3 29.1
RONA, % (roll.12 23.0 27.6 23.5
m.)
Net sales dropped mainly due to Ruble devaluation and a clearly lower sales
volume in Russia. Sales volume increased in all other main market areas. The
strongest volume growth took place in North America, further boosted by a weaker
US Dollar. The company’s market share improved in Central Europe and North
America.
The Average Selling Price decreased mainly due to currency rate devaluations.
The sales mix was also negatively affected by the share of winter tyres in the
mix decreasing to 58% (62%). Minor price reductions have taken place in some
countries, which reflects the tight competitive situation and reductions in
material costs partly passing through to tyre prices. Local price increases in
Russia, however, supported the ASP development. The sales mix and price changes
overall contributed positively to the ASP. Of product groups especially premium
summer segment contributed well to the mix.
Raw material costs (€/kg) were down by 16% year-over-year, which together with
improved productivity and lower fixed costs supported margins.
In autumn 2014 Nokian tyres dominated the winter tyre tests with several
victories in Nordic and Russian car magazines. Particularly noteworthy were the
Central European winter tyre test results, which were a success for Nokian
Tyres. The new Nokian summer tyre range also won several car magazines’ tests in
Central Europe in spring 2015. Constant launches of products with new
innovations - improving the safety, comfort and ecological driving - have
supported the brand image and price position of Nokian Tyres.
In the first quarter the capacity was not fully utilized, and production output
(pcs) decreased by 12%. Productivity (kg/mh) improved by 5% year-over-year. In
Q1/2015, 80% (77%) of Nokian car tyres (pcs) were manufactured in the Russian
factory.
Heavy Tyres
Q1/15 Q1/14 Change% Q2/14 Q3/14 Q4/14 2014
Net sales, M€ 37.6 34.6 8.8 36.7 36.9 41.0 149.1
Operating profit, M€ 6.7 4.5 50.1 5.4 6.9 7.8 24.6
Operating profit, % 17.9 12.9 14.8 18.8 18.9 16.5
RONA, % (roll.12 25.5 18.2 22.9
m.)
Demand remained on a good level in the western markets in Nokian Heavy Tyres’
core product groups. The unit’s delivery capacity improved year-over-year,
resulting in higher Net sales. Forestry tyre sales were up by 14%, and
agricultural tyre sales showed positive development. Among market areas North
America showed the strongest sales growth and outlook for the rest of the year.
Russia and CIS sales were penalized by the currency devaluations against the
Euro.
Average Selling Price decreased slightly year-over-year due to a challenging
pricing environment, especially in truck tyres. Operating profit, however,
improved significantly on the back of increased sales volume and decreased fixed
costs. Margins were supported by lower raw material cost and improved
productivity.
The production output (tonnes) in Q1/2015 was up by 34% year-over-year on the
back of the factory modernization and automation in 2014. Increased delivery
capacity will support sales throughout 2015.
Vianor
Equity-owned operations
Q1/15 Q1/14 Change% Q2/14 Q3/14 Q4/14 2014
Net sales, M€ 55.0 49.5 11.2 81.0 66.7 117.5 314.8
Operating result, M€ -12.6 -12.0 -5.0 5.0 -4.1 13.1 2.1
Operating result, % -22.9 -24.2 6.2 -6.2 11.2 0.7
RONA, % (roll.12 0.9 1.3 1.2
m.)
At the end of the review period Vianor had 195 (186) equity-owned stores in
Finland, Sweden, Norway, USA, Switzerland and Russia.
Vianor succeeded in its strategic task of expanding distribution and was able to
win market shares in a challenging market situation. The spring season with high
summer tyre consumer sales started already in March in the Nordic countries,
which supported sales in Q1. Service sales increased by 9.4%, including car
service sales growth of 13.4%. Retail sales formed 48% of Vianor’s total sales.
Operating result was seasonally negative in Q1, and weakened slightly year-over
-year due to increased costs from an expanded store network.
The gradual change of operating model from tyre sales to full car service in the
stores continues with investments and local acquisitions of car service shops.
At the end of the review period a total of 59 car service operations have been
acquired and integrated with existing Vianor stores in the Nordic countries.
Franchising and partner operations
Vianor expanded the retail network in Nokian Tyres’ key markets by 16 stores
during Q1/2015. At the end of the review period the Vianor network comprised of
totally 1,371 stores of which 1,176 were partners. Vianor operates in 27
countries; most extensively in the Nordic countries, Russia and Ukraine. Nokian
Tyres’ market shares have improved as a result of the expansion in each
respective country. Expanding the partner franchise network will continue.
A softer partner model, Nokian Tyres Authorized Dealers (NAD), expanded in
Q1/2015 by 61 stores totalling 930 stores contracted in 14 European countries
and China. N-Tyre, a new Nokian Tyres partner network, is operating with 67
stores in Russia and Kazakhstan.
SPECIAL REVIEWS
Russia and the CIS countries
Nokian Tyres’ sales in Russia decreased year-over-year by 45.4% to EUR 76.8
million (140.7). Sales in CIS countries (excluding Russia) were EUR 3.9 million
(2.0), still low due to the Ukrainian crisis situation. Consolidated sales in
Russia and CIS decreased by 43.4% to EUR 80.7 million (142.7).
The decrease of the sales value relates strongly to local currencies that were
clearly weaker against the Euro than in Q1/2014. Nokian Tyres also lost some
sales volume and market share in Russia, due to a late start of winter tyres’
pre-season deliveries and consumers’ shifting towards cheaper brands. The same
reason resulted in a weaker product mix and ASP. Double-digit price increases in
Rubles were made in early 2015, but this does not fully compensate for the
currency devaluation effects. The pricing environment has remained somewhat
uncertain and the pricing pressure will remain tight throughout 2015.
The distribution network was extended by signing additional distribution
agreements and expanding the Vianor network. There were a total of 666 Vianor
stores in 383 cities in Russia and CIS countries at the end of the review
period. The Hakka Guarantee network and other retail partners working closely
with Nokian Tyres in Russia comprised of 3,600 tyre stores, Vianor shops, car
dealers, and web shops. The new N-Tyre network included 67 stores in Russia and
Kazakhstan at the end of Q1. The new concept enables more retail partners to
develop close cooperation with Nokian Tyres, as it implies somewhat softer
requirements towards the format, setup and equipment of a tyre shop compared to
the flagship Vianor chain.
The Nokian Tyres plant located in Russia inside the customs borders combined
with strong brands and an expanding distribution provide a significant
competitive edge on the market. Nokian Tyres will continue to target
outperforming the market in Russia also in 2015, but the current market
situation implies declined sales volume against the clearly falling market.
54% of the sales volume from the Nokian Tyres’ Russian factory was exported.
This supports the company’s margins, as the production costs are mainly in
Rubles and the sales mainly in Euros.
By Russia joining WTO, tyre duties will go down gradually; import duty of car
and van tyres has decreased from 18% to 16% in September 2014 and the official
target is 10% in 2017. This will have some positive impact on the competitors
that depend on importing tyres to Russia.
OTHER MATTERS
1. Stock options on the NASDAQ Helsinki Stock Exchange
The total number of stock options 2010B is 1,340,000. Each stock option 2010B
entitles its holder to subscribe for one Nokian Tyres plc share. The shares can
be subscribed with the stock options 2010B during 1 May 2013 - 31 May 2015. In
the aggregate, the stock options 2010B entitle their holders to subscribe for
1,340,000 shares. The present share subscription price with stock options 2010B
is EUR 27.35/share. The dividends payable annually shall be deducted from the
share subscription price.
The total number of stock options 2010C is 1,340,000. Each stock option 2010C
entitles its holder to subscribe for one Nokian Tyres plc share. The shares can
be subscribed with the stock options 2010C during 1 May 2014 - 31 May 2016. In
the aggregate, the stock options 2010C entitle their holders to subscribe for
1,340,000 shares. The present share subscription price with stock options 2010C
is EUR 30.95/share. The dividends payable annually shall be deducted from the
share subscription price.
2. Authorizations
The Board of Directors has no special authorizations effective in 2015.
3. Own shares
No share repurchases were made in the review period, and the company did not
possess any own shares on 31 March 2015.
Nokian Tyres has entered into an agreement with a third-party service provider
concerning the share-based incentive program for key personnel. The third party
owns the shares until the shares are given to the participants within the
program. According to the IFRS these repurchased 300,000 shares have been
reported as treasury shares in the Consolidated Statement of Financial Position.
This number of shares corresponds 0.2% of the total shares and voting rights of
the company.
4. Trading of shares
The Nokian Tyres’ share price was EUR 27.85 (EUR 29.35) at the end of the review
period. The volume weighted average share price during the period was EUR 24.94
(EUR 31.43), the highest EUR 28.23 (EUR 36.19) and the lowest EUR 19.23 (EUR
27.36). A total of 68,078,058 shares were traded during the period (50,172,785),
representing 51% (38%) of the company's overall share capital. The company’s
market value at the end of the period amounted EUR 3.717 billion (EUR 3.914
billion). The amount of shareholders was 48,389 (37,823). The percentage of
Finnish shareholders was 34.4% (37.4%) and 65.6% (62.6%) were foreign
shareholders registered in the nominee register. This figure includes
Bridgestone's ownership of approximately 15%.
5. Changes in ownership
Nokian Tyres received a notification from The Capital Group Companies Inc. on 23
February 2015, according to which the total holding of The Capital Group
Companies Inc. in Nokian Tyres plc fell below 5 percent as a result of a share
transaction concluded on 20 February 2015.
Nokian Tyres received an announcement from BlackRock Inc. on 23 March 2015,
according to which the holdings of the mutual funds managed by BlackRock
exceeded level of 5% of the share capital in Nokian Tyres plc, as a result of a
share transactions concluded on 20 March 2015. BlackRock held on deal date a
total of 6,790,650 Nokian Tyres’ shares representing 5.09% of company’s
133,470,833 shares and voting rights.
6. Decisions made at the Annual General Meeting
On 8 April 2015, Nokian Tyres Annual General Meeting accepted the financial
statements for 2014 and discharged the Board of Directors and the President and
CEO from liability.
6.1 Dividend
The meeting decided that a dividend of EUR 1.45 per share shall be paid for the
period ending on 31 December, 2014. The dividend was decided to be paid to
shareholders included in the shareholder list maintained by Euroclear Finland
Ltd on the record date of 10 April 2015. The dividend payment date was decided
to be 23 April 2015.
6.2. Members of the Board of Directors and Auditor
The meeting decided that the Board of Directors has six members. Current members
Hille Korhonen, Raimo Lind, Inka Mero, Hannu Penttilä and Petteri Walldén were
elected to continue in the Board of Directors. New member was chosen to the
Board: Mr Tapio Kuula.
Authorised public accountants KPMG Oy Ab continue as auditors.
6.3. Remuneration of the Members of the Board of Directors remained unchanged
The meeting decided that the fee paid to the Chairman of the Board is EUR 80,000
per year, while that paid to Board members is set at EUR 40,000 per year.
Members of the Board will also be granted a fee of EUR 600 for every Board
meeting and Committee meeting attended.
According to the existing practices, 50% of the annual fee be paid in cash and
50% in company shares, such that in the period from 9 April to 30 April 2015,
EUR 40,000 worth of Nokian Tyres plc shares was decided to be purchased at the
stock exchange on behalf of the Chairman of the Board and EUR 20,000 worth of
shares on behalf of each Board member. This means that the final remuneration
paid to Board members is tied to the company’s share performance.
7. Chairman of the Board and Committees of the Board of Directors
In the Board meeting on 8 April 2015 Petteri Walldén was elected chairman of the
Board. The members of the Nomination and Remuneration committee are Petteri
Walldén (chairman), Hille Korhonen and Hannu Penttilä. The members of the Audit
committee are Raimo Lind (chairman), Inka Mero and Tapio Kuula.
8. Corporate social responsibility
Nokian Tyres published its Corporate Sustainability Report in March 2015. The
report, implemented according to the revised GRI G4 guidelines, has been
published as a web version at www.nokiantyres.com/company/sustainability. In
addition to product safety and quality, profitable growth, good HR management,
and environmental issues are important for the development of sustainable
business operations in Nokian Tyres.
Nokian Tyres plc is qualified to the OMX GES Sustainability Finland GI index.
The index is designed to provide investors with a liquid, objective and reliable
benchmark for responsible investment. The benchmark index comprises of the 40
leading NASDAQ Helsinki listed companies in terms of sustainability. The index
criteria are based upon international guidelines for environmental, social and
governance (ESG) issues. The index is calculated by NASDAQ in cooperation with
GES Investment Services.
9. Nokian Tyres introduced new winter products for Central Europe
On 16 February Nokian Tyres announced that it is adding five new tyres to its
product selection for varying Central European winter weather. The new Nokian WR
D4 passenger car tyre, the Nokian WR C3 for versatile use on vans, and the
Nokian Weatherproof product family that demonstrates the All-Weather concept,
improve the company’s competitive strength especially in Central Europe.
Central Europe is the world's largest market area for winter tyres.
Approximately 70 million winter tyres were sold in 2014 and the winter tyre
segment is growing faster than the overall market. As the tyre markets expand
and winter tyre legislation becomes more common, Central Europe has become one
of Nokian Tyres' most important areas for growth.
RISKS, UNCERTAINTY AND DISPUTES IN THE NEAR FUTURE
The growth in Russia is expected to be negative with full year GDP growth around
-3 %...-8% due to low oil price, high interest rates, slow investments, and the
Ukraine crisis. An escalation of the Ukraine crisis could cause a serious
disruption, additional trade barriers and further slowdown of economic
development in Russia, CIS and Finland. All in all the uncertainties may weaken
future demand for tyres and increase credit risk.
The company’s receivables increased in the review period due to seasonality and
business model. Tyre inventories are on the planned level. The company follows
the development of NWC very closely.
At the end of the review period the Russian trade receivables accounted for 44%
(51%) of the Group’s total trade receivables.
Around 40% of the Group’s Net sales in 2015 are estimated to be generated from
Euro-denominated sales. The most important sales currencies in addition to the
Euro are the Russian Ruble, the Swedish and Norwegian Krona, the US and the
Canadian Dollar.
Nokian Tyres’ other risks and uncertainty factors relate to the challenging
pricing environment of tyres. The maintaining of profitability in case of rising
raw material prices depends on the company’s ability to raise tyre prices in
line with the increasing raw material cost.
More detailed information related to financial risks can be found at
http://www.nokiantyres.com/annual-reports, Financial review 2014, pages 40-45.
Tax disputes
Nokian Tyres Group has pending disputes with the Finnish Tax Administration that
are described under section “Tax rate” earlier in this report.
OUTLOOK FOR 2015
In January 2015, the ECB announced to begin 1.2 trillion-euro quantitative
easing program, which is expected to improve the economic activity in Europe.
Even though many of the emerging economies are currently weak and geopolitical
risks have remained, the global GDP is estimated to grow by 3.8% in 2015.
The Nordic area is estimated to show slow but comparatively stable development
with a full year 2015 GDP growth of 2%. In Russia the consumer spending has been
held back by the devalued Ruble combined with high inflation and interest rates.
Full year 2015 GDP growth estimates for Russia vary currently between -3% and
-8%.
In 2015 market demand for replacement car tyres is expected to show growth in
Central Europe and North America, and to be on the previous year’s level in the
Nordic countries. In Russia and CIS the overall uncertainty will decrease tyre
demand in 2015.
The company’s market position is expected to improve in 2015 in all markets. In
Russia and CIS the company’s sales volume is expected to decline, but less than
the overall market. Nokian Tyres’ Net sales are expected to decrease due to
weakened demand and currency in Russia. Raw material cost is estimated to
decrease by 5%. The pricing environment for 2015 remains tight for all tyre
categories.
Nokian Tyres continues to have competitive advantages from having manufacturing
inside Russia. Of the Russian production approximately 60% is exported and the
margin between production costs in Rubles and export sales in Euros has improved
along with the Ruble devaluation. In the case of demand upturn, Nokian Tyres’
car tyre production capacity in Russia offers an inbuilt capability to increase
output rapidly without capex, to meet market growth.
Heavy tyre demand in Nokian core products is estimated to remain healthy. Nokian
Heavy Tyres’ delivery capability has improved, and therefore sales and EBIT are
expected to continue to gradually improve.
Vianor is expected to continue expanding its retail network, to increase sales,
to develop service business further and to show a positive Operating result in
full year 2015. Other Nokian Tyres’ partner networks, like Nokian Tyres
Authorized Dealers (NAD) and N-Tyre network, will continue expanding.
Nokian Tyres’ estimate for total investments in 2015 is EUR 100 million (80.6).
The competitiveness of Nokian Tyres’ product offering is very strong. The number
of magazine test wins is at highest level and a series of successful launches of
new innovative products has resulted in a wider portfolio than ever before. A
strong position in the core markets, an expanding distribution channel, and an
improved cost structure combined with new test winner products give Nokian Tyres
opportunities to strengthen its market leadership in the core markets and to
provide healthy margins and a strong cash flow also in 2015.
Full year financial guidance reiterated
In 2015, with current exchange rates, Net sales and Operating profit are to
decline slightly compared to 2014.
Nokia, 8 May 2015
Nokian Tyres plc
Board of Directors
***
The above-said information contains forward-looking statements relating to
future events or future financial performance of the company. In some cases,
such forward-looking statements can be identified by terminology such as ”may”,
”will”, ”could”, ”expect”, ”anticipate”, ”believe” ”estimate”, ”predict”, or
other comparable terminology. Such statements are based on the current
expectations, known factors, decisions and plans of the management of Nokian
Tyres. Forward-looking statements involve always risks and uncertainties,
because they relate to events and depend on circumstances that may or may not
occur in the future. Future results may thus vary even significantly from the
results expressed in, or implied by, the forward-looking statements.
Please read the whole report from http://www.nokiantyres.com/company/investors/
or from the annex.
*****
Nokian Tyres plc
Antti-Jussi Tähtinen, Vice President, Marketing and Communications
Further information: Mr. Ari Lehtoranta, President and CEO, tel: +358 10 401
7733
Distribution: NASDAQ OMX, media, www.nokiantyres.com
*****
Nokian Tyres Interim Report January-March 2015 was published on Friday 8 May,
2015 at 8.00 a.m. Finnish time.
The result presentation for analysts and media will be held in Hotel Kämp in
Helsinki on 8 May at 10.00 a.m Finnish time. The presentation can be listened
through audiocast via internet at www.nokiantyres.com/resultinfo-Q1-2015
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
FI +358 9 8171 0495, UK +44 20 31940552 or US +1 855 7161597
Stock exchange release and presentation material will be available before the
event from www.nokiantyres.com/ir-calendar
After the event the audio recording can be downloaded from the same page.
Nokian Tyres interim report January-June 2015 will be published on 7 August,
2015.
Releases and company information will be found from www.nokiantyres.com
Nokian Tyres is the only tyre manufacturer in the world that focuses on customer
needs in northern conditions. The company supplies innovative tyres for cars,
trucks and special heavy machinery mainly in areas with special challenges on
tyre performance: snow, forests and harsh driving conditions in different
seasons. Nokian Tyres’ product development is consistently aiming for
sustainable solutions for safety and the environment, taking into account the
whole life cycle of the tyre. A part of the Nokian Tyres group, the tyre chain
Vianor has 1,371 outlets in 27 countries. In 2014 Nokian Tyres had over 4,200
employees and net sales of approximately 1,4 billion euros. Nokian Tyres’ share
is listed on the NASDAQ Helsinki. Further information: www.nokiantyres.com
Nokian Tyres plc Interim Report January-March 2015: Growth in the west – Russia remains challenging
| Source: Nokian Renkaat
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