Improved profitability in Q3 supported by favourable product mix, raw material
cost savings and productivity development
Nokian Tyres plc Interim Report 30 October 2015, 8 a.m.
July-September 2015
· Net sales decreased 5.1% to EUR 311.0 million (EUR 327.7 million in 7
-9/2014). Currency rate changes cut net sales by EUR 10.3 million compared with
the rates in 7-9/2014.
· Operating profit increased 0.3% to EUR 72.4 million (72.1). Operating profit
percentage was 23.3% (22.0%).
· Profit for the period increased 8.0% to EUR 57.7 million (53.4).
· Earnings per share were up 7.2% to EUR 0.43 (EUR 0.40).
January-September 2015
· Net sales decreased 7.1% to EUR 937.9 million (EUR 1,009.2 million in 1
-9/2014). Currency rate changes cut net sales by EUR 48.3 million compared with
the rates in 1-9/2014.
· Operating profit was down 13.0% to EUR 201.2 million (231.2). Operating
profit percentage was 21.5% (22.9%).
· Profit for the period increased 62.7% to EUR 257.5 million (158.3). In Q1
the company returned to the financial result the 2007-2010 total additional
taxes and punitive interest of EUR 100.3 million, based on the annulment
decision made by the Board of Adjustment of the Finnish Tax Administration.
· Earnings per share were up 62.5% to EUR 1.93 (EUR 1.19).
Full year financial guidance (reiterated)
In 2015, with current exchange rates, net sales are to decline slightly compared
to 2014 and operating profit is estimated to be approximately EUR 270-295
million.
Key figures, EUR million:
7-9/15 7-9/14 Change% 1-9/15 1-9/14 Change% 2014
Net sales 311.0 327.7 -5.1 937.9 1,009.2 -7.1 1,389.1
Operating 72.4 72.1 0.3 201.2 231.2 -13.0 308.7
profit
Operating 23.3 22.0 21.5 22.9 22.2
profit, %
Profit 64.6 61.7 4.7 201.3 196.2 2.6 261.2
before tax
Profit for 57.7 53.4 8.0 257.5 158.3 62.7 208.4
the period
Earnings per 0.43 0.40 7.2 1.93 1.19 62.5 1.56
share, EUR
Equity 71.3 63.3 67.5
ratio, %
Cash flow -33.2 -95.3 65.2 -105.9 -120.8 12.3 458.3
from
operations
RONA,% 17.3 18.1 18.3
(roll. 12
months)
Gearing, % 14.0 27.7 -13.6
Ari Lehtoranta, President and CEO:
“Russia’s economic challenges continue. Winter season deliveries, especially in
Central Europe, are moving every year more and more towards the actual start of
the season. At the same time, however, European and especially North American
economies are more positive. Russia and CIS countries used to account for over
40% of our sales, and now that share is closer to 20%. Even though our net sales
still was below last year’s figure in third quarter, we were able to improve our
profitability, and the operating profit for the quarter reached last year’s
level.
Profitability improvement in passenger car tyres came from a good product mix,
improved productivity and lower raw material costs. The product mix was
supported by the continuous success of SUV and Van tyres and the increased share
of premium tyres. Productivity improvement was 5% this year despite the lower
volumes. Global raw material prices were low due to low oil price levels and
China’s economic slowdown.
Heavy Tyres contributed to the improved profitability and increased its net
sales as well. In Vianor we are still waiting for the proper season to start,
and profitability was lower than last year.
One of our key strengths, our distribution network, continued to grow as
planned. We added 177 new Vianor, NAD and N-Tyre outlets to our branded
distribution network, and the current number of Vianor stores is 1,429 and the
NAD/N-Tyre network has already grown to over 1,200 stores. The recent flow of
magazine test wins has proven that our product portfolio competitiveness is on
an excellent level.
We were able to complete the painful capacity reduction negotiations in Finland.
Our personnel has done tremendous work in a difficult environment, and I trust
we now can start to build up the future also in our Nokian site with renewed
organization. Our success can only come from the world’s best team of tyre
professionals.
Based on the situation described above, I feel very confident that we have now
started our journey back to profitable growth.”
Market situation
The global economy continues to grow at a modest pace. The USA continues to be
the growth engine, with its supportive monetary policy, improved industrial
production and strong employment ratio giving fuel for growth. Also Europe is
recovering, due to lower oil prices, weaker euro and the expansionary monetary
policy. The global GDP is estimated to grow by 3.1% in 2015. The GDP growth
estimates for Nordic countries are +0-3% and for Europe (including Nordics)
+1.3%.
In the Nordic countries new car sales increased in 1-9/2015 by 7% year-over
-year. The market volume of car tyres showed an increase of 6% compared to 1
-9/2014, but for full year 2015 the increase is expected to be lower.
In Europe sales of new cars increased in 1-9/2015 by 9% year-over-year. Car tyre
sell-in to distributors was up 1% compared to 1-9/2014, with winter tyre demand
decreasing by 8%. Overall tyre demand is estimated to grow in Central Europe in
2015. Pricing pressure is, however, tight.
In the USA estimated new car sales were up 5% in 1-9/2015 vs. 1-9/2014. The
market volume of car tyres was flat compared with 1-9/2014, due to specific
reasons related to the punitive import duties imposed on Chinese tyre suppliers.
Car tyre demand in North America is expected to grow by 1.5% in 2015 year-over
-year.
Russia’s economic decline has stabilized after seemingly having reached its
bottom in June - July: according to the first estimates, GDP contracted by 4.3%
(y-o-y) in Q3 (-3.8% in September). The whole year GDP decline is expected at
the level of 3.8 – 3.9% with Q4 growing compared to Q3. Inflation continued to
be high (over 10% since the beginning of the year, 15% y-o-y), resulting in the
cut of real wages of up to 10%. Russian consumers’ purchasing power clearly
weakened and consumer confidence remained at a very low level; no further
improvement took place in Q3 vs. Q2. As a result, consumers are holding back
their spending: retail turnover remains quite sluggish, with only minor
improvement on the way.
Sales of new cars in Russia declined in January - September 2015 by 33% and in
September by 29% vs. the same period a year earlier. Car manufacturers maintain
their full-year forecast at 1.57 million units, 37% decrease vs. 2014.
Tyre market (sell-in in A+B segments) is estimated to have declined by
approximately 20%, with continued shift towards cheaper segments and decrease of
imports by 34%. Total production of tyres increased by 10%, due to growing
exports and replacement of fallen imports. Tyre manufacturers have carried out
announced price increases of 5 – 10% in the local currency, partly compensating
the devaluation of the ruble. Some tyre manufacturers chose to pursue a more
aggressive pricing policy, buying market share. The overall pricing environment
in Russia remains tight. Price increases for the next year’s summer season are
expected to be quite modest at the current exchange rates.
The global demand for special heavy tyres varied still strongly between product
and market areas. OE forestry tyre demand continued to be strong. The increased
use of wood and good profitability of pulp manufacturers will also support
forestry machine and tyre demand during the following quarters.
In 1-9/2015 in Europe the sell-in of premium truck tyres was up 4%, and in the
Nordic countries demand was flat year-over-year. Demand in North America showed
growth. In Russia, however, demand for premium truck tyres decreased by 10 %
compared to 1-9/2014. Truck tyre demand in 2015 is estimated to show some
increase or to be at the same level as in the previous year in all Nokian Tyres’
western markets; in Russia demand is expected to decline.
Raw materials
The raw material costs continued to decline. Raw material prices are estimated
to be stable on rather low levels. Raw material costs (€/kg) for Nokian Tyres
were down 16.7 % in 1-9/2015 year-over-year. Raw material costs are estimated to
decrease around 10% in full year 2015, providing a tailwind of over EUR 30.0
million versus 2014.
JULY-SEPTEMBER 2015
Nokian Tyres Group recorded net sales of EUR 311.0 million (327.7), a decrease
of 5.1% compared with Q3/2014. Currency rate changes cut net sales by EUR 10.3
million. In the Nordic countries sales increased 0.5% year-over-year. Sales in
Russia decreased 51.5%. Russia and CIS consolidated sales dropped 47.7%. In
Other Europe sales were down 1.0% and in North America sales increased 37.9%.
The raw material cost (EUR/kg) in manufacturing decreased 20.5% year-over-year
and decreased 13.5% versus the second quarter of 2015. Fixed costs amounted to
EUR 95.0 million (93.3), accounting for 30.6% (28.5%) of net sales.
Nokian Tyres Group's operating profit amounted to EUR 72.4 million (72.1). The
operating profit was negatively affected by the recognition of credit losses and
provisions of EUR 3.9 million (1.2).
Net financial expenses were EUR 7.8 million (10.5). Net interest expenses were
EUR 6.0 million (3.0). Q3 financial expenses include EUR 2.7 million premium
related to Nokian Tyres voluntary buy-back of company’s bond maturing 2017
amounting to EUR 62.3 million. Net financial expenses include EUR 1.8 million
(7.5) of exchange rate differences.
Profit before tax was EUR 64.6 million (61.7). Profit for the period amounted to
EUR 57.7 million (53.4), and EPS were EUR 0.43 (EUR 0.40).
Income financing after the change in working capital, investments and the
disposal of fixed assets (cash flow from operations) was EUR -33.2 million (
-95.3).
JANUARY-SEPTEMBER 2015
Nokian Tyres Group recorded net sales of EUR 937.9 million (1,009.2), a decrease
of 7.1% compared with 1-9/2014. Currency rate changes cut net sales by EUR 48.3
million.
Gross sales development by market areas
Growth% % of total % of total
sales in 1 sales in 1
-9/2015 -9/2014
Nordic countries 3.9 41 36
Russia and CIS -39.7 18 27
Other Europe -4.6 27 26
North
America 30.0 13 9
Net sales development by business units
Growth% % of total % of total
sales in 1 sales in 1
-9/2015 -9/2014
Passenger Car Tyres -11.8 68 71
Heavy Tyres 5.0 11 10
Vianor 5.5 21 18
The raw material cost (EUR/kg) in manufacturing decreased by 16.7% year-over
-year. Fixed costs amounted to EUR 289.7 million (290.3), accounting for 30.9 %
(28.8%) of net sales. Total salaries and wages were EUR 142.2 million (142.4).
Nokian Tyres Group's operating profit amounted to EUR 201.2 million (231.2). The
operating profit was negatively affected by the IFRS 2 -compliant option scheme
accrual of EUR 6.9 million (8.0) and the recognition of credit losses and
provisions of EUR 6.4 million (4.8).
Net financial expenses were EUR -0.1 million (35.0). Net interest expenses were
EUR -10.3 million (12.1). Financial expenses have been adjusted with a EUR 20.2
million reversal of interest on back tax as the reassessment decisions on the
years 2007-2010 were annulled and returned to the Tax Administration for
reprocessing. Q3 financial expenses include EUR 2.7 million premium related to
Nokian Tyres voluntary buy-back of company’s bond maturing 2017 amounting to EUR
62.3 million. Net financial expenses include EUR 10.1 million (22.9) in exchange
rate differences.
Profit before tax was EUR 201.3 million (196.2). Profit for the period amounted
to EUR 257.5 million (158.3), and EPS were EUR 1.93 (EUR 1.19). The tax expense
has been adjusted by EUR 80.1 million as the tax reassessment decisions on the
years 2007-2010 were annulled and returned to the Tax Administration for
reprocessing.
Return on net assets (RONA, rolling 12 months) was 17.3% (18.1%). Income
financing after the change in working capital, investments and the disposal of
fixed assets (cash flow from operations) was EUR -105.9 million (-120.8).
Investments
Investments in the review period amounted to EUR 72.7 million (59.1). This
comprises of production investments in the Russian and Finnish factories, moulds
for new products, ICT and process development projects, and the Vianor expansion
projects.
Financial position on 30 September 2015
The gearing ratio was 14.0% (27.7%). Interest-bearing net debt amounted to EUR
182.6 million (362.3). Equity ratio was 71.3% (63.3%).
The Group’s interest-bearing liabilities totalled EUR 250.6 million (415.3), of
which current interest-bearing liabilities amounted to EUR 51.9 million (129.9).
The average interest rate for interest-bearing liabilities was 3.0% (2.5%). Cash
and cash equivalents amounted to EUR 68.0 million (53.0).
At the end of the review period the company had unused credit limits amounting
to EUR 477.1 million (476.7), of which EUR 155.6 million (255.8) were committed.
The current credit limits and the commercial paper program are used to finance
inventories, trade receivables and subsidiaries in distribution chains and thus
control the typical seasonality in the Group’s cash flow.
Tax rate
Dispute concerning 2007-2010
In April 2015 the Board of Adjustment of the 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 interest concerning the tax years 2007-2010, and returned the
matter 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 by 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 for the first quarter of 2015. The
Company had recorded the same amounts as expenses in full in the financial
statement and result for 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 concerning 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 in additional taxes with punitive tax increases and interest concerning
the tax years 2008 to 2012. EUR 7.9 million of this is additional taxes and EUR
3.1 million is punitive tax increases and interest. The company recorded them in
full in the financial statement and result for Q1/2014.
The 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 by Nokian Tyres Group in
North America, totally ignoring the business rationale and corresponding
precedent rulings presented by the company.
Nokian Tyres U.S. Finance Oy considered the reassessment decision of the Tax
Administration as unfounded and submitted a 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 -27.9%
(19.3%) in the review period. The tax rate excluding the annulment of additional
taxes was 13.2%. The tax rate was positively affected by tax incentives in
Russia for current investments and further investments in the future. The new
agreed tax benefits and incentives came into force in the beginning of 2013. The
agreement will extend the benefits and incentives until approximately 2020.
The tax rate in the coming years will depend on the timetable and final result
of the ongoing back tax disputes with the Finnish Tax Administration. The
Group's corporate annual tax rate may rise from its present level of 17% as a
result of these cases.
Personnel
In 2015 the Group employed an average of 4,372 (4,235) people, and 4,364 (4,271)
at the end of the review period. The equity-owned Vianor tyre chain employed
1,614 (1,534) people and Russian operations 1,336 (1,338) people at the end of
the review period.
BUSINESS UNIT REVIEWS
Passenger Car Tyres
7-9/15 7-9/14 Change% 1-9/15 1-9/14 Change% 2014
Net sales, M€ 226.3 244.7 -7.6 675.0 765.3 -11.8 1,003.2
Operating profit, M€ 75.6 73.3 3.1 205.3 236.8 -13.3 292.2
Operating profit, % 33.4 30.0 30.4 30.9 29.1
RONA, % (roll.12 24.8 24.2 23.5
m.)
Net sales dropped in 1-9/2015 mainly due to clearly lower sales volumes in
Russia and the devaluation of the ruble. Sales increased and market share
improved in North America, further boosted by the stronger USD and CAD against
the euro. Sales were flat in the Nordic countries. In Other Europe sales were
slightly down as winter tyre sales have continued the trend of sales shifting
towards the consumer winter season. Nokian Tyres summer tyre sales increased in
all key markets.
In 1-9/2015 the Average Selling Price in euros decreased due to currency rate
devaluations. The share of winter tyres in the sales mix was 72% (80%). Overall
sales mix development was positive, as the share of premium tyres in the winter
segment increased and successful SUV tyre sales improved the summer tyre mix.
Local price increases in Russia supported the ASP development. Minor price
reductions have taken place in some countries, which reflect the tight
competitive situation and reductions in material costs partly passing through to
tyre prices.
Raw material costs (€/kg) were down by 17.2% year-over-year, which together with
improved productivity supported margins.
Like in 2014, Nokian Tyres has again dominated the winter tyre tests with
several car magazine victories globally. Particularly noteworthy have been the
Central European winter tyre test results, which have been a success for Nokian
Tyres. The new Nokian Weatherproof took first place also in the British Auto
Express All-Season tyre comparison test. The new Nokian Tyres summer tyre range
also won several car magazine tests in Central Europe in spring 2015. A constant
flow of product launches with new innovations - improving safety, comfort and
ecological driving - have supported the brand image and price position of Nokian
Tyres.
In 1-9/2015 capacity was not fully utilized, and production output (pcs)
decreased by 10%. Productivity (kg/mh) improved by 5% year-over-year. In 1
-9/2015, 80% (79%) of Nokian car tyres (pcs) were manufactured in the Russian
factory.
Heavy Tyres
7-9/15 7-9/14 Change% 1-9/15 1-9/14 Change% 2014
Net sales, M€ 37.9 36.9 2.9 113.5 108.1 5.0 149.1
Operating profit, M€ 7.8 6.9 12.9 22.1 16.8 31.2 24.6
Operating profit, % 20.6 18.8 19.4 15.6 16.5
RONA, % (roll.12 29.3 20.5 22.9
m.)
Demand remained at a good level in the western markets in most of Nokian Heavy
Tyres’ core product groups. The delivery capacity improved year-over-year,
resulting in higher net sales. Forestry tyre sales remained on a good level and
other product groups developed moderately. North America showed the strongest
sales growth and outlook for the rest of the year. Also the Nordic countries and
Other Europe showed growth. Weak economies and currency devaluations against the
euro weakened Russia and CIS sales.
The Average Selling Price decreased slightly year-over-year due to a challenging
pricing environment. Operating profit, however, improved clearly on the back of
increased sales volumes and reduced fixed costs. Margins were supported by lower
raw material costs and double-digit productivity improvement.
Continuous investments to production and new products increased production
output (tonnes) in the review period 18% year-over-year.
Vianor
Equity-owned operations
7-9/15 7-9/14 Change% 1-9/15 1-9/14 Change% 2014
Net sales, 66.4 66.7 -0.5 208.2 197.3 5.5 314.8
M€
Operating -6.0 -4.1 -46.2 -12.9 -11.1 -17.0 2.1
result,
M€
Operating -9.1 -6.2 -6.2 -5.6 0.7
result,
%
RONA, % 0.1 1.0 1.2
(roll.12
m.)
At the end of the review period Vianor had 197 (189) equity-owned stores in
Finland, Sweden, Norway, USA, Switzerland and Russia.
Net sales grew in the Nordic countries, Norway showing the strongest
development. Car tyre and heavy tyre sales increased, whereas truck tyre sales
decreased slightly. Service sales increased by 6%, including growth of 8% in car
service sales. Retail sales formed 52% of Vianor’s total sales. As the season
did not start during Q3, operating result decreased compared to 2014.
The gradual change in the 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 62 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 74 stores
during 1-9/2015. At the end of the review period the Vianor network comprised in
total 1,429 stores, of which 1,232 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 the
review period by 118 stores and totals 1,144 stores under contract in 16
European countries and China. N-Tyre, a new Nokian Tyres partner network, is
operating with 94 stores in Russia and Kazakhstan.
SPECIAL REVIEWS
Russia and the CIS countries 1-9/2015
Nokian Tyres’ sales in Russia decreased year-over-year by 41.6% to EUR 169.1
million (289.3). Sales in the CIS countries (excluding Russia) were EUR 13.2
million (12.8), still low due to the Ukrainian situation. Consolidated sales in
Russia and CIS decreased by 39.7% to EUR 182.2 million (302.1).
Sales volume in Russia decreased clearly compared to the previous year. Nokian
Tyres’ market share in winter tyres on the sell-in level (distributor sales)
somewhat decreased in Russia measured in sales volume due to consumers’ shift
towards cheaper segments and brands driven by the weak purchasing power as well
as aggressive pricing of some competitors. Nokian Tyres’ market share on the
sell-out level (consumer sales) is expected to remain intact or even slightly
improve. The sales value decreased clearly also due to the ruble devaluation
against the euro. Double-digit price increases in rubles were made in early
2015, but this does not fully compensate for the impact of the currency
devaluation. However, Nokian Tyres’ product mix and ASP in the local currency
clearly improved due to the restructuring of the winter tyre range and the
launch of new SUV models in the B segment.
Nokian Tyres maintained its market leader position in the premium segment. The
company also became the clear market leader in summer tyres in both A and B
segments. The biggest growth categories for Nokian Tyres in summer tyres were
SUV, UHP (ultra-high performance) and other high value-added product lines.
The distribution network was extended by signing additional distribution
agreements and expanding the Vianor network. There were a total of 688 Vianor
stores in 388 cities in Russia and the 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 3,939 tyre stores, Vianor shops, car
dealers, and web shops. The N-Tyre network - a more flexible partner concept -
included 94 stores in Russia and Kazakhstan at the end of 1-9/2015.
The Nokian Tyres plant located in Russia inside the customs borders, combined
with strong brands and an expanding distribution network, provides a significant
competitive edge on the market. However, in the current market situation Nokian
Tyres estimates declined sales volume in the clearly falling market in 2015.
In the review period 70% of the sales volume from the Nokian Tyres’ Russian
factory was exported. This supports the company’s margins, as production costs
are mainly in rubles and sales mainly in euros.
After Russia joining WTO, tyre import duties will go down gradually; the duties
have already gradually decreased from 20% to 14%, and the official target is 10%
in 2017.
OTHER MATTERS
1. Stock options on the NASDAQ Helsinki Stock Exchange
The total number of stock options 2010B was 1,340,000. Each stock option 2010B
entitled its holder to subscribe for one Nokian Tyres plc share. The shares were
subscribed with the stock options 2010B during the period 1 May 2013 - 31 May
2015.
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 the period 1 May 2014 - 31 May
2016. The present share subscription price with stock options 2010C is EUR
30.95/share. The dividends payable annually are deducted from the share
subscription price.
The total number of stock options 2013A is 1,150,000. Each stock option 2013A
entitles its holder to subscribe for one Nokian Tyres plc share. The shares can
be subscribed with the stock options 2013A during the period 1 May 2015 - 31 May
2017. The present share subscription price with stock options 2013A is EUR
29.36/share. The dividends payable annually are deducted from the share
subscription price.
2. Authorizations
In 2012 the Annual General Meeting authorized the Board of Directors to make a
decision to offer no more than 25,000,000 shares through a share issue. The
authorization is effective for five years from that decision.
3. Own shares
No share repurchases were made in the review period, and the company did not
possess any own shares on 30 September 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. In accordance with IFRS these repurchased 300,000 shares have been
reported as treasury shares in the Consolidated Statement of Financial Position.
This number of shares corresponds to 0.2% of the total shares and voting rights
of the company.
4. Trading in shares
The Nokian Tyres’ share price was EUR 28.91 (EUR 23.88) at the end of the review
period. The volume weighted average share price during the period was EUR 26.81
(EUR 28.60), the highest EUR 32.48 (EUR 36.19) and the lowest EUR 19.23 (EUR
22.84). A total of 155,019,206 shares were traded during the period
(149,576,611), representing 115% (112%) of the company's overall share capital.
The company’s market capitalization at the end of the period was EUR 3.894
billion (EUR 3.187 billion).The company had 42,473 (47,706) shareholders. The
percentage of Finnish shareholders was 31.2% (39.9%) and 68.8% (60.1%) were
foreign shareholders registered in the nominee register. This figure includes
Bridgestone's holding of approximately 15%.
5. Changes in ownership
Nokian Tyres received 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 5% of the share capital in Nokian Tyres plc, as a result of share
transactions concluded on 20 March 2015. On the transaction date, BlackRock held
a total of 6,790,650 Nokian Tyres’ shares, representing 5.09% of the company’s
133,470,833 shares and voting rights.
Nokian Tyres has received notification from Varma Mutual Pension Insurance
Company on 27 May 2015, according to which the total holding of Varma in Nokian
Tyres plc fell below 5 percent as a result of a share transaction concluded on
26 May 2015.
Nokian Tyres has received an announcement from BlackRock Inc. on 20 August 2015,
according to which the holdings of the mutual funds managed by BlackRock fell
below level of 5% of the share capital in Nokian Tyres plc, as a result of a
share transactions concluded on 19 August 2015.
Nokian Tyres has received an announcement from BlackRock Inc. on 15 September
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 14 September 2015.
Nokian Tyres has received an announcement from The Capital Group Companies, Inc.
on 15 September 2015, according to which the holdings of the mutual funds
managed by The Capital Group Companies, Inc exceeded level of 5% of the share
capital in Nokian Tyres plc, as a result of a share transactions concluded on 14
September 2015.
6. Decisions made at the Annual General Meeting
On 8 April 2015, the Annual General Meeting of Nokian Tyres approved 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 be paid for the period
ending on 31 December 2014. It was decided to pay the dividend 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 23 April 2015.
6.2. Members of the Board of Directors and Auditor
The meeting decided that the Board of Directors has six members. Existing
members Hille Korhonen, Raimo Lind, Inka Mero, Hannu Penttilä and Petteri
Walldén were elected to continue on the Board of Directors. Mr Tapio Kuula was
elected as a new member of the Board.
Authorised public accountants KPMG Oy Ab continue as auditors.
6.3. Remuneration of the Members of the Board of Directors 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 are also granted a fee of EUR 600 for every Board meeting
and Committee meeting attended.
In accordance with current practice, 50% of the annual fee is paid in cash and
50% in company shares. It was decided, that in the period 9 April to 30 April
2015, EUR 40,000 worth of Nokian Tyres plc shares be purchased on 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 in accordance with the revised GRI G4 guidelines, has been
published as a web version at www.nokiantyres.com/company/sustainability.
Product safety and quality, as well as profitable growth, good HR management,
and environmental issues are important for the development of sustainable
business operations in Nokian Tyres.
Nokian Tyres plc is included in 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 on international guidelines for environmental, social and
governance (ESG) issues. The index is calculated by NASDAQ in cooperation with
GES Investment Services.
Nokian Tyres gets good grades for corporate responsibility
Nokian Tyres received consistently good results in the global Dow Jones
Sustainability Index. The Dow Jones Sustainability Index is the world's most
respected comparison of large companies in terms of corporate responsibility.
Every year, the 3,400 largest listed companies in the world, representing dozens
of different sectors, are invited to participate.
The evaluations reviews the corporate responsibility of the companies'
operations from 18 different perspectives including environmental affairs, human
rights, accountability in the procurement chain, and safety in the workplace.
In the 2015 evaluation, Nokian Tyres was graded above average for its sector in
all of the 18 sub-areas. The evaluation is carried out by a Swiss company named
RobecoSam.
9. Board of Adjustment annulled the reassessment decision against Nokian Tyres
plc concerning tax years 2007-2010
On 7 April 2015 Nokian Tyres announced that the Board of Adjustment had annulled
the reassessment decision from the Tax Administration, and that the Company
would return the 2007-2010 total additional taxes of EUR 100.3 million in full
to the financial statement and result for the first quarter of 2015.
10. Nokian Tyres plc’s share bonus scheme 2015 and actual performance in 2013
-2014
On 29 May 2015 Nokian Tyres announced that the targets set for the 2013-2014
earnings periods in the share based incentive plan were not met. As a result, no
bonus has been paid to the key employees for the years 2013-2014.
Bonuses for the 2015 performance period 2015 will be paid partly in Company
shares and partly in cash in 2017. The rewards to be paid on the basis of the
2015 performance period correspond to a maximum of some 160,000 Nokian Tyres plc
shares, including the portion to be paid in cash. The target group for the
scheme comprises approximately 40 people.
11. Nokian Tyres introduced new winter products for Central Europe
On 16 February 2015 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.
12. The launch of world's first AA class winter tyre in terms of wet grip and
fuel efficiency
On 12 May 2015 Nokian Tyres announced that it will in the autumn of 2015 offer
European SUV drivers the world’s first winter tyre that achieves the best
possible class A in wet grip and fuel efficiency for the EU tyre label. The
revolutionary Nokian WR SUV 3 winter tyre, in size 265/50 R19 V, can reduce
braking distances by up to 18 meters on wet roads and save fuel by up to 0.6
l/100 km.
13. Voluntary tender offer of Nokian Tyres EUR 150,000,000 3.25 percent notes
due 2017
On 28 August 2015 Nokian Tyres announced a voluntary cash tender offer for
noteholders holding its EUR 150,000,000 3.25 percent senior insecured notes
issued on 19 July 2012 (FI4000046370). The approximate nominal amount of notes
tendered under the tender offer was EUR 75,000,000.
The Offer Period expired at 4.00 p.m. EET on 8 September 2015. The aggregate
principal amount of Notes validly offered for purchase by Noteholders was EUR
62,300,000 representing 41.53 percent of the aggregate amount of all the Notes.
The Purchase Price was EUR 104,400 per each EUR 100,000 nominal amount of the
Notes which, together with Accrued Interest of EUR 772.54 (0.7725 percent) per
each EUR 100,000 nominal amount of the Notes, was payable by Nokian Tyres plc to
the relevant Noteholders. The settlement occured on 14 September 2015.
14. Statutory negotiations at Nokian Tyres’ Finnish factory ended
The statutory negotiations concerning workers and staff in car tyre production
and administration at Nokian Tyres’ Finnish factory ended on 28 September 2015.
Adjustments to production capacity utilization as well as cost savings will be
achieved by reducing 122 people. Statutory negotiations concerned a total of 900
people.
MATTERS AFTER THE REVIEW PERIOD
15. Changes in operational structure and management team
On 20 October 2015 Nokia Tyres announced that it will change its operational
structure and responsibilities in the management team to strengthen the
company's product and innovation leadership, end-to-end supply operations and
sales and distribution management which have been the core of Nokian Tyres'
success.
In the new management structure the former operations of Passenger car tyres
will be disintegrated and reorganized in a following way: product management,
R&D and sales functions will report directly to CEO. Procurement, demand and
supply management together with logistics and customer service functions will be
part of new Supply Operations unit. In the financial reporting Passenger car
tyres will continue to be separately reported like Vianor and Nokian Heavy
Tyres. Other operations will continue as earlier without any changes in
operative mode reporting to CEO.
RISKS, UNCERTAINTY AND DISPUTES IN THE NEAR FUTURE
Growth in Russia is expected to be negative with full year GDP growth around
-3%...-4% due to the low oil price, high interest rates, slow investments, and
sanctions followed the Ukraine crisis. An escalation of the Ukraine crisis could
cause serious disruption, additional trade barriers and a 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
the business model. Tyre inventories are at the planned level. The company
follows the development of NWC very closely.
At the end of the review period Russian trade receivables accounted for 30%
(41%) 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, and the US and
Canadian dollar.
Nokian Tyres’ other risks and uncertainty factors relate to the challenging
pricing environment for tyres. If raw material prices rise, maintaining
profitability depends on the company’s ability to raise tyre prices in line with
increasing raw material costs.
More detailed information relating to risks can be found at
http://www.nokiantyres.com/annual-reports, Financial review 2014, pages 40-45
and 63-64.
Tax disputes
Nokian Tyres Group has pending disputes with the Finnish Tax Administration that
are described in the section “Tax rate” earlier in this report.
OUTLOOK FOR 2015
The European economy is growing, as the ECB’s quantitative easing program has
increased economic activity in the area, and the weaker euro has supported the
export industry. The Nordic area is estimated to show slow but comparatively
stable development, with full year GDP growth in 2015 of +0-3%. In Russia
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 -4%. North America has continued its positive
economic development.
In 2015 market demand for replacement car tyres is expected to show growth in
Central Europe, North America and the Nordic countries. In Russia and CIS the
overall uncertainty will decrease tyre demand in 2015.
The company’s replacement tyre market position is expected to improve in 2015 in
North America, and stay at the same level in the Nordic countries and Other
Europe. In Russia the company expects to retain its market leader position in
the A + B segments.
Raw material cost is estimated to decrease around 10% in 2015 versus 2014. The
pricing environment for 2015 remains tight for all tyre categories.
Nokian Tyres continues to have competitive advantages from having manufacturing
inside Russia. About 70% of the Russian production is exported and the margin
between production costs in rubles and export sales in euros has improved along
with the ruble devaluation. If there is an upturn in demand, Nokian Tyres’ car
tyre production capacity in Russia offers an inbuilt capability to increase
output rapidly without capex, to meet market growth.
Demand in Nokian Heavy Tyres’ core products is estimated to remain healthy.
Nokian Heavy Tyres’ delivery capability has improved, therefore the sales and
EBIT are expected to remain on a good level in 2015.
Vianor (equity-owned) is expected to increase sales, to develop the service
business further and to show a positive operating result in full year 2015.
Vianor (partners) and 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 the Nokian Tyres product offering is very strong. The
number of magazine test wins is at the 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 position in 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 are to decline slightly compared
to 2014 and operating profit is estimated to be approximately EUR 270-295
million.
Nokia, 30 October 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/
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 Helsinki, media, www.nokiantyres.com
Nokian Tyres Interim Report January-September 2015 was published on Friday 30
October, 2015 at 8.00 a.m. Finnish time.
The result presentation for analysts and media will be held in Hotel Kämp in
Helsinki on 30 October at 10.00 a.m Finnish time. The presentation can be
listened through audiocast via internet at www.nokiantyres.com/resultinfo-Q3
-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 +358981710495, UK +442031940552 or US +18557161597
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 Result 2015 will be published on 5 February, 2016.
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 over 1,400 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
