Nokian Tyres plc Stock Exchange Release 13 February 2008 at 8:00 a.m.
NOKIAN TYRES PLC FINANCIAL STATEMENTS BULLETIN 2007
Net sales of Nokian Tyres Group increased by 22.6% in 2007 and were 1,025.0
million (2006:EUR 835.9 million). Operating profit was EUR 234.0 million (EUR
153.1 million). EPS rose to EUR 1.37 (EUR 0.88). Profit for the period was EUR
168.9 million (EUR 107.3 million). The Board of Directors proposes that a
dividend of EUR 0.50 per share (EUR 0.31) be distributed. In 2008, the company
is positioned to achieve strong growth in sales with improved profits in line
with previous years.
Key figures
EUR million: 10-12 10-12 1-12 1-12
2007 2006 2007 2006
Net sales 356.4 302.0 1,025.0 835.9
Operating profit 93.2 67.5 234.0 153.1
Profit before tax 85.0 61.5 213.8 139.3
Profit for the period 61.4 48.0 168.9 107.3
Earnings per share, EUR 0.50 0.39 1.37 0.88
Equity ratio, % 61.8 63.0
Cash flow from operations,
(Cash Flow II) 319.4 242.8 105.6 77.7
RONA, % (rolling 12 months) 24.2 19.4
Gearing, % 14.4 22.8
Kim Gran, President and CEO:
“Nokian Tyres enjoyed strong growth throughout the year, and a particularly
successful period in the final quarter completed our good performance. Passenger
car tyres accounted for the majority of the growth, but also all other profit
centres recorded improved net sales and operating profit. Sales grew in all key
markets and particularly in Russia. Despite significant investments, our cash
flow improved. The average tyre prices rose as a result of the improved sales
mix, new products and successfully implemented price increases. Russian
manufacture grew clearly from the year before, and the benefits gained improved
profitability significantly. The outlook for 2008 is good, and we expect the
strong growth to continue in our key markets."
Market situation
The strong demand growth continued in the markets relevant for Nokian Tyres. The
winter tyre and SUV tyre markets as well as replacement markets for high-speed
summer tyres in Russia, CIS countries and Eastern Europe accounted for the
strongest growth. Markets declined slightly in the Nordic countries and Western
Europe. The demand for heavy special tyres and truck tyres was high, and the
shortage of heavy special tyres continued. Several tyre manufacturers raised
their prices in response to the higher raw material prices.
Nokian Tyres October to December 2007
In the period from October to December 2007 the Nokian Tyres Group recorded net
sales of EUR 356.4 million (EUR 302.0 million), representing an increase of
18.0% over the corresponding period a year earlier. The Group's invoicing to the
Nordic countries grew by 7.5%, to Russia and other CIS countries by 66.7%, and
to the Eastern Europe by 28.0%. Sales to the USA were down by 20.0%.
Raw material purchase prices in manufacturing (EUR/kg) decreased by
-3,7% in the final quarter compared to the corresponding period a year earlier.
Fixed costs amounted to EUR 84.5 million (EUR 71.0 million). The share of fixed
costs of net sales was 23.7% (23.5%).
Nokian Tyres Group's operating profit rose to EUR 93.2 million (EUR 67.5
million). Net financial expenses were EUR 8.2 million (EUR 6.0 million).
Financial expenses include EUR 1.8 million in calculatory non-cash expenses
related to convertible bonds.
Profit before tax was EUR 85.0 million (EUR 61.5 million). Profit for the period
amounted to EUR 61.4 million (EUR 48.0 million) while earnings per share
increased to EUR 0.50 (EUR 0.39).
Income financing after the change in working capital, investments and the
disposal of fixed assets (cash flow II) was EUR 319.4 million (EUR 242.8
million).
January to December 2007
In the period from January to December 2007 the Nokian Tyres Group booked net
sales of EUR 1,025.0 million (EUR 835.9 million), representing an increase of
22.6% over the corresponding period a year earlier. The Group's invoicing to the
Nordic countries grew by 11.1%, to Russia and other CIS countries by 56.9%, and
to the Eastern Europe by 44.4%. Sales to the United States decreased by 15.9%
from the previous year as sales were restricted due to the weak U.S. dollar.
Raw material purchase prices in manufacturing (EUR/kg) increased by 1.5%
compared to the corresponding period a year earlier. Price increases and a good
sales mix resulted in average prices/kg in manufacturing to rise by 8.3% (4.4%).
Fixed costs amounted to EUR 277.4 million (EUR 236.7 million), representing
27.1% (28.3%) of net sales.
Nokian Tyres Group's operating profit rose to EUR 234.0 million (EUR 153.1
million). The figure includes reservation of bad debts amounting to EUR 5.8
million (EUR 4.7 million). In compliance with IFRS, the operating profit for the
review period was burdened by an option scheme write-off of EUR 13.3 million
(EUR 8.0 million). The Group's tax rate was reduced to 21% as a consequence of
tax reliefs in compliance with the Russian agreements.
Net financial expenses were EUR 20.2 million (EUR 13.8 million). Financial
expenses include EUR 3.6 million in calculatory non-cash expenses related to
convertible bonds. Net financial items contain EUR -3.1 million (EUR -1.2
million) of exchange rate differences.
Profit before tax rose to EUR 213.8 million (EUR 139.3 million). Profit for the
period amounted to EUR 168.9 million (EUR 107.3 million), and EPS were EUR 1.37
(EUR 0.88).
Return on net assets (RONA, rolling 12 months) was 24.2% (19.4%). Income
financing after the change in working capital, investments and the disposal of
fixed assets (cash flow II) picked up to EUR 105.6 million (EUR 77.7 million).
Equity ratio was 61.8% (63.0%).
An expected improvement occurred in terms of receivables and inventories in the
final quarter.
The Group employed an average of 3,462 (3,234) people over the period, and 3,535
(3,297) at the end of the period. The Vianor tyre chain had 1,241 (1,279)
employees at the end of the period. The number of employees in Russia was 511
(322).
PASSENGER CAR TYRES
10-12 10-12 Change 1-12 1-12 Change
2007 2006 % 2007 2006 %
Net sales, MEUR 233.5 189.0 23.5 691.2 533.2 29.6
Operating profit,
MEUR 74.2 52.4 41.5 212.0 133.4 58.9
Operating profit, % 31.8 27.7 30.7 25.0
RONA, % 31.2 24.6
(rolling 12 months)
The net sales of Nokian passenger car tyres in January to December totalled EUR
691.2 million (EUR 533.2 million); 29.6% more than in the previous year.
Operating profit amounted to EUR 212.0 million (EUR 133.4 million) and the
operating profit percentage was 30.7% (25.0%).
Passenger car tyres sold very well throughout the year with a marked sales
increase in the final quarter. Russia, the other CIS countries and the Eastern
Europe contributed to the strongest growth. Sales consisted mostly of winter
tyres, with the Nokian Hakkapeliitta 5 and Nokian Hakkapeliitta SUV 5 tyres
representing the best-selling products. The Nokian Hakka summer tyre range with
the Hakka guarantee was well received in the Nordic and Russian markets,
cementing the company's position as a summer tyre manufacturer. Nokian-branded
tyres performed well in the tyre tests of trade magazines and were ranked number
one several times.
As a result of the good sales mix, new products and successfully implemented
price increases, the average tyre prices rose from the previous year. Winter
tyres represented 83,9% (82,1%) and new products 53% (34%) of net sales.
The production volumes grew as planned due to the capacity increase at the
Russian plant. Off-take contract manufacturing volume remained at the previous
year's level. Benefits gained from the increased manufacture in Russia improved
profitability clearly.
In September, Nokian Tyres introduced three new passenger car tyre families,
Nokian Hakka Z and Nokian Hakka SUV summer tyres, and the Nokian Hakkapeliitta R
SUV winter tyre. The consumer sales of these new products will begin in 2008.
The tyres are designed for demanding conditions and aimed at the Nordic and
Russian markets.
HEAVY TYRES
10-12 10-12 Change 1-12 1-12 Change
2007 2006 % 2007 2006 %
Net sales,MEUR 27.2 24.4 11.4 100.8 90.1 11.9
Operating profit,
MEUR 5.4 4.6 17.5 22.3 19.9 11.9
Operating profit, % 19.9 18.8 22.1 22.1
RONA, % 39.0 39.0
(rolling 12 months)
The January-December net sales of Nokian Heavy Tyres totalled EUR 100.8 million
(EUR 90.1 million), showing an increase of 11.9% on the corresponding period of
the previous year. Operating profit rose to EUR 22.3 million (EUR 19.9 million),
and the operating profit percentage was 22.1% (22.1%).
Demand remained strong in Heavy Tyres. Sales and order income grew in all
product groups and in all core markets for both original equipment and
replacement markets. Higher production volumes of machine and equipment
manufacturers boosted sales growth. Better sales mix and the price increases
raised average prices.
Investments contributed to the planned raise in the production volumes. Despite
the volume increase, delivery capacity was not sufficient to meet the high
demand in the market.
Original equipment installation represented 45.3% (42.0%) of the unit's net
sales.
VIANOR
10-12 10-12 Change 1-12 1-12 Change
2007 2006 % 2007 2006 %
Net sales, MEUR 108.1 96.9 11.6 278.5 246.9 12.8
Operating profit,
MEUR 11.9 8.3 42.0 8.4 2.3 262.9
Operating profit % 11.0 8.6 3.0 0.9
RONA, % 6.0 1.8
(rolling 12 months)
Vianor's January to December net sales totalled EUR 278.5 million (EUR 246.9
million), showing an increase of 12.8% year on year. Operating profit amounted
to EUR 8.4 million (EUR 2.3 million) and the operating profit percentage was
3.0% (0.9%).
Vianor's performance during both summer and winter tyre peak seasons was better
than a year earlier. Sales picked up in the retail and wholesale sectors, and in
all product and customer groups. Sales of services increased, which improved
Vianor's profitability. Sales mix improved from the previous year and average
prices were up. Nokian- branded tyres were the best-selling products. Vianor
Finland performed particularly well, and for the first time operations in all
Nordic countries were profitable.
New Vianor outlets were opened in all key market areas and in Russia in
particular. During 2007, the Vianor network started operations in Switzerland,
Ukraine and Kazakhstan, and at the year-end in the United States where Nokian
Tyres acquired Goss Tire Company, a retail tyre sales company. At the end of the
year, the Vianor network comprised a total of 366 sales outlets, 192 of which
are partner and franchising stores.
OTHER OPERATIONS
Truck Tyres
The net sales of Nokian truck tyres in January-December were EUR 32.8 million
(EUR 21.0 million). The net sales increased by 56.2%. The unit's product range
mainly consists of winter products, the sales of which are highest in the second
half of the year.
The sales of new truck tyres increased significantly throughout the year. Sales
were particularly brisk in the final quarter. A revamped truck tyre range and
higher production capacity boosted sales growth. New products accounted for 49%
of the unit's net sales.
Sales focused more strongly on the new markets - Russia and Eastern and Central
Europe - than in the previous year. Nokian Tyres' market share grew
significantly in the Nordic countries.
RUSSIA AND CIS COUNTRIES
In 2007, sales in Russia and in the CIS countries amounted to EUR 340.3 million.
The sales increased by 56.9% compared to previous year, and the market shares
improved. The distribution network was extended by signing additional
distribution agreements, and through Vianor's activities.
The four production lines of the Russian plant operate continuously in three
shifts, and the plant's production volume and quality level are on target.
On 15 February 2007 the Board of Directors of Nokian Tyres decided to launch
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 is being built adjacent to the existing
plant, which has a capacity of four million tyres. The extension will enable the
planned increase in production volume. The construction work has progressed as
planned. Installation of machinery and equipment for the fifth and the sixth
production lines have started as planned. The objective is to increase
production capacity at a steady rate annually, in line with the growth in
demand.
The total investment in 2007-2010 amounts to approximately EUR 195 million, of
which EUR 95 million is allocated to 2008. Increasing the capacity also requires
future investments in the expansion of the mixing production.
INVESTMENTS
Investments in the final quarter amounted to EUR 34.1 million (EUR 20.7 million)
and EUR 117.1 million (EUR 97.0 million) for the year 2007. Some EUR 92 million
(EUR 59.6 million) was spent on the Russian plant's operations and extension.
Other investments include production investments at the Nokia plant, moulds for
new products, and acquisitions associated with Vianor's growth.
KAZAKHSTAN
On 19 October 2007, Nokian Tyres announced it had signed an agreement with the
Kazakhstanian multi-industrial company Ordabasy Corporation JSC to build a
greenfield passenger car tyre factory in Kazakhstan. The new factory will be a
joint venture company of which Nokian Tyres' share will be 10% with the option
to increase ownership to a minimum of 50%.
The new factory is scheduled to be on line during 2009. The total investment
will be approximately EUR 160 million, financed through equity of approximately
EUR 40 million and external loans. Nokian Tyres has signed a long-term technical
support and management aid agreement with Ordabasy Corporation.
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. The
subscription period for options 2004B commenced on 1 March 2007 and expires on
31 March 2009. The total amount of shares available for subscription with
options 2004B is 2,450,000. The current subscription price with stock options
2004B is EUR 11.34 per share. The annually paid dividends shall 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 increase in share capital resulting from the subscription, EUR
82,868, was entered in the Trade Register on 12 January 2007. Trading of the
shares along with the old shares began on 15 January 2007. Following the
increase, the number of Nokian Tyres shares is 122,446,610 and the share capital
is EUR 24,489,322.
After the increase in share capital registered on 12 January 2007, a total of
34,800 shares were subscribed for with the 2001A bonds with warrants attached to
the Nokian Tyres' Option Schemes of 2001 and 2004, 72,300 shares with the 2001B
warrants, 91,600 shares with the 2001C warrants, and 7,630 shares with the 2004A
warrants.
The increase in share capital resulting from the subscription, 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. After the increase, the number of
Nokian Tyres shares is 122,652,940 and the share capital is EUR 24,530,588.
After the increase in share capital registered on 22 February 2007, a total of
60,600 shares were subscribed for with the 2001A bonds with warrants attached to
the Nokian Tyres' Option Schemes of 2001 and 2004, 77,400 shares with the 2001B
warrants, 128,850 shares with the 2001C warrants, 21,310 shares with the 2004A
warrants, and 48,520 with the 2004B warrants. The increase in share capital
resulting from the subscription, 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.
After the increase in share capital registered on 21 May 2007, a total of
202,090 shares were subscribed for with the 2,004A bonds with warrants attached
to the Nokian Tyres' Option Scheme of 2004 and 120,200 shares with the 2,004B
warrants. The increase in share capital resulting from the subscription, EUR
64,458, was entered in the Trade Register on 20 August 2007. Trading of the
shares along with the old shares began on 21 August 2007. Following the
increase, the number of Nokian Tyres shares is 123,311,910 and the share capital
is EUR 24,662,382.
After the increase in share capital registered on 20 August 2007, a total of
23,280 shares were subscribed for with the 2,004A bonds with warrants attached
to the Nokian Tyres' Option Scheme of 2004 and 5,170 shares with the 2,004B
warrants. The increase in share capital resulting from the subscription, EUR
5,690, was entered in the Trade Register on 14 November 2007. Trading of the
shares along with the old shares began on 15 November 2007. Following the
increase, the number of Nokian Tyres shares is 123,340,360 and the share capital
is EUR 24,668,072.
After the increase in share capital registered on 14 November 2007, a total of
353,300 shares were subscribed for with the 2,004A bonds with warrants attached
to the Nokian Tyres' Option Scheme of 2004 and 2,620 shares with the 2,004B
warrants. The increase in share capital resulting from the subscription, EUR
71,184, was entered in the Trade Register on 20 December 2007. Trading of the
shares along with the old shares began on 21 December 2007. Following the
increase, the number of Nokian Tyres shares is 123,696,280 and the share capital
is EUR 24,739,256.
3. Share price development
The Nokian Tyres' share price was EUR 24.05 at the end of the review period (EUR
15.52). The average share price during the period was EUR 23.11 (EUR 13.28), the
highest EUR 29.92 (EUR 16.68) and the lowest EUR 13.99 (EUR 9.90). A total of
236,332,864 shares were traded during the period (257,824,937), representing
191% (211%) of the company's overall share capital. The company's market value
at the end of the period was EUR 2.975 billion (EUR 1.894 billion). The
company's percentage of Finnish shareholders was 27.6% (35.0%) and 72.4% (65.0%)
were nominee-registered foreign shareholders, including Bridgestone's ownership
of approximately 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 on 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. In its meeting in
May, the Board of Nokian Tyres decided to establish a committee for appointments
and rewards. Board members Hille Korhonen and Hannu Penttilä and the Chairman of
the Board Petteri Walldén are members of the committee.
Authorised public accountants KPMG Oy Ab continue as auditors.
4.2 Remuneration of the 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, such 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 a
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 The 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 to 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 bond loan for Finnish and international institutional investors
On 20 June 2007 the Board of Directors of Nokian Tyres announced the issue of a
convertible bond totalling EUR 130.4 million, deviating from the pre-emptive
rights of the company's shareholders, for subscription by Finnish and
international institutional investors in the tender procedure. The loan was
heavily oversubscribed within three hours of the beginning of the tender
procedure. With reference to the earlier announcement, on 20 June 2007 Nokian
Tyres announced the issue of a convertible bond loan totalling EUR 130.4
million, expiring in 2014.
The Board of Directors of Nokian Tyres accepted the final terms of the loan and,
on the basis of the authorisation granted by the Annual General Meeting on 3
April 2007, issued a loan for institutional investors, deviating from the
pre-emptive rights of the company's shareholders.
The loan was issued to finance the company's strategy-based investments, to
refinance existing financial arrangements, and for the company's general needs.
The loan was issued as bonds with a capital of EUR 100,000. The loan was issued
up to 100 per cent of the amount of its capital and will not bear interest
during the loan period. The loan will be redeemed when it finally expires for an
amount producing an annual yield of 3.0%, or for 123 per cent of the loan
capital, unless it has previously been exchanged, redeemed, purchased or
cancelled. Each bond of EUR 100,000 can be traded for 2,672 company shares. The
premium on the exchange rate is 40% higher than the reference price of the
company share EUR 26.73 on 20 June 2007. The right to trade the loan for company
shares starts on 7 August 2007 and ends on 20 June 2014 at 4:00 p.m. Finnish
time. If the loan is traded for company shares in its entirety, the total number
of new shares issued by the company will be 4,008,441, corresponding to 3.3% of
the total amount of company shares on 20 June (providing the over-allocation
option is fully executed).
The due date of the loan is 27 June 2014, unless it is redeemed, exchanged,
purchased or cancelled prior to this date. The company may redeem the loan for
the capital price accumulated by its due date at any given time on 27 June 2011
or after this date, providing the price of the company share multiplied by the
exchange ratio figure is at least 130% of the then applicable accumulated
capital for 20 trading days during 30 consecutive trading days. Furthermore, the
company has the right to redeem the loan at any given time when the outstanding
total capital of the loan is 15%, or less, of the original capital of the issued
loan.
The payment of the issue took place on 27 June 2007, and the issue was entered
into the Finnish Trade Register on 28 June 2007.
Nokian Tyres granted an over-allocation option to Nomura International Plc. On
the basis of this option, extra loan may be subscribed for to a maximum of EUR
19.6 million, only to cover excessive demand, and the option may be used at any
given time, but no later than 20 July 2007.
The trading of the loan on the Euro MTF market of Luxembourg commenced on 17
July 2007. The company issued a Listing Document concerning the listing of the
loan (and its terms) on 17 July 2007. The new shares issued in conjunction with
converting the loan will be listed on the Helsinki Stock Exchange.
The parties arranging the issue are Nomura International Plc (Sole Bookrunner
and Joint Lead Manager) and Carnegie Investment Bank AB (Joint Lead Manager).
On 17 July 2007 Nokian Tyres announced that Nomura International Plc, the party
arranging the company's convertible bond loan expiring in 2014, had executed the
over-allocation option of EUR 19.6 million in full. The additional loan of EUR
19.6 million will only be used to cover excessive demand. Following the
execution of the over-allocation option, the sum total of the convertible bond
loan is EUR 150 million.
6. Changes in share holdings
On 20 July 2007 Nokian Tyres received a notification from Grantham, Mayo, Van
Otterloo & CO LLC, according to which Grantham, Mayo, Van Otterloo & Co LLC's
holding of Nokian Tyres has exceeded the limit of 5 per cent as a consequence of
the share transaction on 19 July 2007. Grantham, Mayo, Van Otterloo & Co LLC
hold 6,224,719 shares in Nokian Tyres, which correspond to 5.06% of the
company's 122,989,620 shares and votes.
On 22 October 2007 Nokian Tyres received a notification from Grantham, Mayo, Van
Otterloo & CO LLC, according to which Grantham, Mayo, Van Otterloo & Co LLC's
holding of Nokian Tyres had decreased from the earlier 5.06% to 4.96% as a
result of a share transaction conducted on 10 October 2007. Grantham, Mayo, Van
Otterloo & Co LLC now hold a total of 6,121,442 shares in Nokian Tyres, which
correspond to 4.96% of the company's 123,311,910 shares and votes.
RISKS, INSECURITY FACTORS AND LITIGATIONS IN THE NEAR FUTURE
Roughly 35% of the Group's net sales are generated from euro-denominated sales.
The most important sales currencies in addition to the euro are the Russian
ruble, U.S. dollar, and Swedish and Norwegian krona. A change of one per cent in
the EUR/RUB exchange rate would cause a change of approximately EUR 4 million in
the company's net sales. A corresponding change in the EUR/USD exchange rate
would cause a change of approximately EUR 0.5 million in the company's net
sales. A change of one per cent in the EUR/SEK and EUR/NOK exchange rates would
cause a change of roughly one million euro in the company's net sales.
Nokian Tyres' future risks and uncertainty factors have to do with the
development of the growing markets, the success of winter tyre sales in the 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 has certain pending legal proceedings and litigations in some
countries. At this moment, the company does not expect these proceedings to have
any material impact on the performance or future outlook.
TAX BASE
As a consequence of tax relief from Russia, the company's tax rate has reduced.
The tax relief is valid for as long as the company gains yields corresponding to
the amount of the Russian investment, and for two years thereafter. Tax returns
are entered on the basis of cash and are not divided by periods. The tax rate of
the entire year 2007 was 21%, and the company anticipates the tax rate to
continue reducing slightly in 2008.
OUTLOOK FOR 2008
The brisk economic growth in Russia and CIS countries is expected to continue
despite increased uncertainty in the global economy. Strong sales of new cars
and the expansion of the car park are expected to carry on for some years to
come.
The outlook 2008 for Nokian Tyres is good, and the first quarter has started off
as planned. The growth in demand for winter tyres, UHP summer tyres and SUV
tyres is continuing, particularly in Russia, other CIS countries and Eastern
Europe. In the Nordic countries and Western Europe markets remain flat.
Manufacture of forestry and other machinery and equipment is active, and the
global shortage of heavy special tyres is continuing.
In 2008 raw material prices are expected to go up by 7.0% compared to 2007.
Nokian Tyres' average prices will rise as a result of new products, an improved
sales and product mix and price increases.
The company's product range will be expanded to feature a large number of new
products, which, together with an enhanced distribution network, offers 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 good profit margins.
Nokian Tyres pays specific attention to growth projects, sales and logistics
management, as well as to expanding the distribution network. Capacity will be
raised in accordance with an accelerated plan in Russia. Heavy Tyres will focus
on production bottlenecks in order to further increase capacity.
Traditionally, the sales and performance of Nokian Tyres are focused on the
second half of the year, and in particular on the last quarter of the year,
owing to the seasonal nature of the operations and the high share of winter
tyres. Growth in Russia and the higher share of preseason tyre sales have
brought some balance to the seasonality, which shows in more evenly divided
sales and profits within the year.
The order book for the beginning of the year is higher than last year, and
production capacity has increased. In 2008, the company is positioned to achieve
strong growth in sales with improved profits in line with previous years. All
profit centres are estimated to show growth and improved profits.
Total investments in 2008 are approximately EUR 150 million (EUR 117 million),
with some EUR 95 million (EUR 58 million) being spent on the Russian plant's
operations and extension. The remainder comprises production investments in the
Nokia plant, moulds for new products and Vianor expansion.
Nokia, 13 February 2008
Nokian Tyres plc
Board of Directors
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.
NOKIAN TYRES
CONSOLIDATED INCOME STATEMENT
Million euros 10-12/07 10-12/06 1-12/07 1-12/06 Change %
Net sales 356.4 302.0 1,025.0 835.9 22.6
Cost of sales -196.6 -177.7 -569.1 -491.3 15.8
Gross profit 159.8 124.2 455.8 344.5 32.3
Other operating income 1.0 0.6 2.4 2.0 18.8
Selling and marketing
expenses -55.0 -48.4 -179.4 -157.6 13.8
Administration expenses -7.5 -6.0 -23.5 -18.9 24.5
Other operating expenses -5.0 -3.0 -21.3 -17.0 25.5
Operating profit 93.2 67.5 234.0 153.1 52.8
Financial income 42.2 3.9 63.1 22.3 182.2
Financial expenses -50.4 -9.9 -83.3 -36.2 130.3
Profit before tax 85.0 61.5 213.8 139.3 53.5
Tax expense (1 -23.6 -13.4 -44.9 -32.0 40.3
Profit for the period 61.4 48.0 168.9 107.3 57.4
Attributable to:
Equity holders of the parent 61.4 48.0 168.9 107.3
Minority interest 0.0 0.0 0.0 0.0
Earnings per share from the profit
attributable to equity holders of the
parent
basic, euros 0.50 0.39 1.37 0.88 55.7
diluted, euros 0.47 0.38 1.31 0.86 52.6
KEY RATIOS 31.12.07 31.12.06 Change %
Equity ratio, % 61.8 63.0
Gearing, % 14.3 22.8
Equity per share, euro 5.76 4.56 26.4
Interest-bearing net debt,
mill. euros 102.0 126.9
Capital expenditure, mill.
euros 117.1 97.0
Depreciation and
amortisations, mill. euros 47.1 40.8
Personnel, average 3,462 3,234
Number of shares (million units)
at the end of period 123.70 122.03
in average 122.95 121.63
in average, diluted 129.09 125.15
1) Tax expense in the consolidated income statement is
based on the taxable profit for the period.
CONSOLIDATED BALANCE SHEET 31.12.07 31.12.06
Non-current assets
Property, plant and equipment 419.9 353.2
Goodwill 52.8 51.8
Other intangible assets 7.5 8.2
Investments in associates 0.1 0.1
Available-for-sale
financial assets 0.2 0.2
Other receivables 12.8 0.8
Deferred tax assets 17.7 14.3
Total non-current assets 511.0 428.6
Current assets
Inventories 193.2 159.8
Trade receivables 225.3 209.7
Other receivables 67.7 47.6
Cash and cash equivalents 158.1 39.0
Total current assets 644.3 456.1
Equity
Share capital 24.7 24.5
Share premium 149.0 142.7
Translation reserve -12.8 -2.2
Fair value and hedging reserves 0.0 -0.1
Retained earnings 551.9 391.6
Minority interest 0.0 0.0
Total equity 712.8 556.6
Non-current liabilities
Deferred tax liabilities 30.1 20.5
Interest-bearing liabilities 248.7 110.6
Other liabilities 2.4 1.9
Total non-current liabilities 281.1 133.0
Current liabilities
Trade and other payables 148.9 138.9
Provisions 1.1 1.0
Interest-bearing liabilities 11.4 55.3
Total current liabilities 161.4 195.2
Total assets 1,155.4 884.7
CONSOLIDATED CASH FLOW STATEMENT 1-12/07 1-12/06
Million euros
Cash flows from operating activities:
Cash generated from
operations 206.2 165.7
Financial items and taxes -36.3 -59.1
Net cash from operating
activities 169.9 106.6
Cash flows from investing activities:
Net cash used in investing
activities -117.7 -89.8
Cash flows from financing activities:
Proceeds from issue of share
capital 6.5 5.2
Change in current financial
receivables and debt -44.4 42.5
Change in non-current financial
receivables and debt 143.9 -41.0
Dividends paid -38.0 -27.9
Net cash from financing
activities 68.0 -21.2
Net change in cash and cash
equivalents 120.3 -4.5
Cash and cash equivalents at
the beginning of the period 39.0 45.7
Effect of exchange rate changes 1.2 2.2
Cash and cash equivalents at
the end of the period 158.1 39.0
120.3 -4.5
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 0.4 0.4
Translation differences -7.2 -7.2
Gains/losses from hedge
of net investments in
foreign operations,
net of tax 0.3 0.3
Profit for the period 107.3 107.3
Total recognised income and
expenses for the period 0.0 0.0 -6.9 0.4 107.3 0.0 100.8
Dividends paid -27.9 -27.9
Exercised warrants 0.3 4.9 5.2
Share-based payments 8.0 8.0
Other changes -1.0 0.8 -0.3
Change in minority interest -0.7 -0.7
Equity,
31 Dec 2006 24.5 142.7 -2.2 -0.1 391.6 0.0 556.6
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 -13.2 -13.2
Gains/losses from hedge
of net investments in
foreign operations,
net of tax 2.6 2.6
Profit for the period 168.9 168.9
Total recognised income and
expenses for the period 0.0 0.0 -10.7 0.2 168.9 0.0 158.4
Dividends paid -38.0 -38.0
Exercised warrants 0.3 6.3 6.5
Share-based payments 13.3 13.3
Equity component of the
convertible bond 16.0 16.0
Other changes 0.0
Equity,
31 Dec 2007 24.7 149.0 -12.8 0.0 551.9 0.0 712.8
SEGMENT INFORMATION 10-12/07 10-12/06 1-12/07 1-12/06 Change %
Million euros
Net sales
Passenger car tyres 233.5 189.0 691.2 533.2 29.6
Heavy tyres 27.1 24.4 100.8 90.1 11.9
Vianor 108.1 96.9 278.5 246.9 12.8
Others and eliminations -12.4 -8.3 -45.6 -34.3 -32.9
Total 356.4 302.0 1,025.0 835.9 22.6
Operating result
Passenger car tyres 74.2 52.4 212.0 133.4 58.9
Heavy tyres 5.4 4.6 22.3 19.9 11.9
Vianor 11.9 8.3 8.4 2.3 262.9
Others and eliminations 1.8 2.1 -8.7 -2.5 -244.9
Total 93.2 67.5 234.0 153.1 52.8
Operating result, % of net sales
Passenger car tyres 31.8 27.7 30.7 25.0
Heavy tyres 19.9 18.8 22.1 22.1
Vianor 11.0 8.6 3.0 0.9
Total 26.2 22.3 22.8 18.3
Cash Flow II
Passenger car tyres 288.4 211.9 102.3 68.9 48.4
Heavy tyres 15.9 13.4 21.0 19.4 8.4
Vianor 13.6 14.8 -5.6 7.5 -175.1
Total 319.4 242.8 105.6 77.7 36.0
CONTINGENT LIABILITIES 31.12.07 31.12.06
Million euros
FOR OWN DEBT
Mortgages 1.0 0.0
Pledged assets 0.0 0.0
OTHER OWN COMMITMENTS
Guarantees 1.0 1.0
Leasing and rent
commitments 89.9 82.5
Purchase commitments of
property, plant and equipment 28.2 5.3
INTEREST RATE DERIVATIVES
Interest rate swaps
Fair value 0.1 -0.2
Notional amount 15.0 15.4
Options, purchased
Fair value 0.0 0.0
Notional amount 0.0 0.0
CURRENCY DERIVATIVES
Forward contracts
Fair value 2.6 1.1
Notional amount 312.1 199.9
Options, purchased
Fair value 0.1 0.0
Notional amount 4.8 12.6
Options, written
Fair value 0.0 -0.1
Notional amount 4.8 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 in-
effective 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 in-
effective 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.
Nokian Tyres plc
Raila Hietala-Hellman
Vice President, Corporate Communications
For further information, contact: Kim Gran, President and CEO, tel. +358 10 401
7336
Distribution: OMX and the key media
***
Nokian Tyres plc will publish the Financial Statements Bulletin 2007 on
Wednesday February 13, 2008 at 8.00 am Finnish time.
The result presentation to analysts and media will be held in Helsinki at 10.00
am Finnish time.
The presentation can be listened through audiocast via internet at
http://www.nokiantyres.com/Resultinfo2007
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 from http://www.nokiantyres.com/ir-calendar
After the event the audio recording can be downloaded from the same page.