Nokian Tyres plc Interim Report 3 November 2010, 8 a.m.
INTERIM REPORT FOR NOKIAN TYRES PLC JANUARY-SEPTEMBER 2010:
Sales and order book continued to improve, operating profit doubled
The Group's net sales increased by 25.2% to EUR 689.4 million (EUR 550.8 million
in Jan-September 2009). Operating profit grew to EUR 130.4 million (EUR 61.2
million) and Earnings per share increased to EUR 0.85 (EUR 0.23).
Outlook and guidance (unchanged):
In 2010, the company is positioned to clearly improve net sales and operating
result compared to 2009.
Key figures, EUR million:
7-9/10 7-9/09 1-9/10 1-9/09 2009
Net sales 245.2 204.1 689.4 550.8 798.5
Operating profit 48.3 43.7 130.4 61.2 102.0
Profit before tax 39.6 32.1 122.5 26.7 73.5
Profit for the period 34.5 27.5 107.1 29.0 58.3
Earnings per share, EUR 0.27 0.22 0.85 0.23 0.47
Equity ratio,% 58.2 50.5 62.0
Cash flow from operations -12.0 -37.5 -39.3 -126.1 123.1
RONA,% (rolling 12 months) 13.9 8.6 8.4
Gearing,% 44.9 72.0 34.8
Kim Gran, President and CEO:
“The positive trend on Nokian Tyres' core markets continues to gain strength.
Our operations are ramped up accordingly but demand exceeded delivery capability
during Q3 and pushed deliveries and sales to Q4.
The demand for Nokian Tyres' core products has seen a very strong growth during
Q2 and Q3 and continues to grow. The growth is driven by improving economies in
the Nordic countries and Russia, strong growth in sales of new cars and better
consumer confidence.
Our sales in Q3 were strong with order book continuing to grow throughout the
quarter. Improvement in sales and results, however, were limited by lack of
production capacity and low inventories after high preseason sales in Q2. The
production caught better up with demand in September. We managed to get our new
lines in Russia in full production by the end of the quarter which will help us
to improve productivity and sales in Q4 and going forward.
Car tyre price increases were implemented as planned and had a clear positive
effect on Average Selling Price with a delay as from September. Raw material
cost increase still had a negative impact on margins in Q3. The ASP continues to
increase with mix improvement and further price increases becoming effective in
Q4. Our target of a more than 4% ASP improvement for full year 2010 seems
realistic.
Going into Q4 our order book is very healthy and it provides us with a good
opportunity to increase sales, again operating more selectively. An improving
market and our restructuring operations have left us with untapped potential for
further growth both short and long term. In order to secure growth, two
additional production lines for Russia (numbers 9 and 10) have been ordered for
installation and commissioning in 2011. This will further improve output and
productivity when going forward.
Our main challenges for Q4 are to further ramp up production in order to keep up
with growing demand and to continue to increase prices and improve mix to offset
higher raw material costs.
Conclusive test wins for our products in car magazines, success in adding 41 new
members in Q3 to the Vianor network now totalling 714 shops as well as
additional capacity offer a good starting point for further profitable growth.”
Market situation
The global economy turnaround that started in late 2009 has continued. Easier
monetary policies and low interest rates improved global macro indicators.
Growth rates of the developed countries were exceeded by those in the emerging
markets. In Europe there was uncertainty related to the governmental borrowing
and its effects to financial markets. Some double-dip fear emerged mainly due to
the economic indicators of the USA.
Positive signs in the Nokian Tyres' core markets strengthened. In the first nine
months of 2010 the new car sales increased in the Nordic countries by 33%
year-over-year. In Russia the new car sales development turned positive in March
followed by growth of 51% in Q3/2010 versus Q3/2009 and 18% in 1-9/2010 compared
with 1-9/2009. New car sales in Russia are expected to increase by more than 20%
in 2010 compared to 2009.
The aftermarket sales volume for car tyres increased in the Nordic countries by
an estimated 10% and in Europe by 9% in 1-9/2010 year-over-year. Tyre deliveries
increased more clearly in Russia, trailing the stabilizing economy, lower stocks
of distributors and improved consumer confidence. True winter with heavy
snowfall in all Europe and Russia caused strong winter tyre consumer sales in Q1
and cut inventory levels, which increased demand for winter tyre preseason sales
in the second and third quarter, thus presenting good opportunities for sales
growth in 2010.
Heavy tyres' demand has continued to improve supported by a clear increase in
forest and mining machine manufacture. In the aftermarket demand has also
increased for other special use machine tyres, i.e. container handling. The
increase derives from improved demand and prices of pulp, sawmill products and
metals.
Truck manufacturers have clearly increased production volumes, thus creating
demand for OE tyres and some short supply in the truck tyre aftermarket.
Overall, the market environment has improved clearly and demand exceeds supply
in many product groups and sizes.
Raw material prices have risen significantly since early 2009; the price for
natural rubber has roughly tripled. Oil-based materials have also risen
significantly and some materials are in short supply. In the third quarter of
2010 higher raw material costs have started to have a negative effect on the
operating profits of the tyre manufacturers. The tyre industry has announced
consecutive price increases to offset the effect of increasing raw material
costs, first ones effective from early summer 2010, further increases taking
place in the rest of the year and in early 2011.
July-September 2010
In the third quarter of 2010 Nokian Tyres Group recorded net sales of EUR 245.2
million (204.1), showing an increase of 20.2% on the corresponding period a year
earlier. Sales increased in the Nordic countries by 26.7% and in Russia by
79.5%. The consolidated sales in Russia and CIS decreased by 4.9%. In Central
and Eastern Europe sales grew by 32.2% and in North America by 35.6%.
Raw material cost (EUR/kg) in manufacturing increased in the third quarter by
26.4% year-over-year and 11.6% versus the second quarter of 2010. Fixed costs
were EUR 70.3 million (62.1), accounting for 28.7% (30.4%) of net sales.
Nokian Tyres Group's operating profit was EUR 48.3 million (43.7). Net financial
expenses were EUR 8.7 million (11.7). Net interest expenses were EUR 4.3 million
including EUR 2.1 million in non-cash expenses related to convertible bonds. Net
financial expenses include EUR -4.4 million (-5.5) of exchange rate differences.
Profit before tax was EUR 39.6 million (32.1). Profit for the period amounted to
EUR 34.5 million (27.5), and EPS were EUR 0.27 (EUR 0.22).
Income financing after the change in working capital, investments and the
disposal of fixed assets (Cash flow from operations) was EUR
-12.0 million (-37.5).
January-September 2010
Nokian Tyres Group recorded net sales of EUR 689.4 million (550.8), showing an
increase of 25.2% on the corresponding period a year earlier. In the Nordic
countries sales increased by 25.0% representing 42% (43%) of the group's total
sales. Sales in Russia increased by 74.5%. Russia and CIS consolidated sales
grew by 21.0% and formed 21% (22%) of the group's total sales. In Central and
Eastern Europe sales were up by 36.9% year-over-year representing 27% (24%) of
the group's total sales. In North America sales grew by 6.6% and were 9% (11%)
of the group's total sales.
Sales of passenger car tyres were up by 25.9% representing 65% (64%) of the
group's total sales. Heavy tyres' sales increased by 59.2% and were 7% (6%) of
the group's total sales. Vianor's sales grew by 9.8% forming 24% (27%) of the
group's total sales. The sales of Other operations was up by 47.0% representing
4% (3%) of the group's total sales.
Raw material cost (EUR/kg) in manufacturing decreased in the review period by
2.8% year-over-year. Fixed costs amounted to EUR 217.9 million (199.0),
accounting for 31.6% (36.1%) of net sales. Total salaries and wages were EUR
102.2 million (93.9).
Nokian Tyres Group's operating profit amounted to EUR 130.4 million (61.2). This
was positively affected by a real estate sales profit of EUR 1.8 million. The
operating profit was negatively affected by the IFRS 2 -compliant option scheme
write-off of EUR 4.7 million (9.0) and expensed credit losses and provisions of
EUR 0.5 million (4.0).
Net financial expenses were EUR 7.9 million (34.5). Net interest expenses were
EUR 14.3 million (14.0) including EUR 6.0 million (5.7) in non-cash expenses
related to convertible bonds. Net financial expenses include EUR 6.4 million
(-20.5) of exchange rate differences.
Profit before tax was EUR 122.5 million (26.7). Profit for the period amounted
to EUR 107.1 million (29.0), and EPS were EUR 0.85 (EUR 0.23).
Return on net assets (RONA, rolling 12 months) was 13.9% (8.6%). Income
financing after the change in working capital, investments and the disposal of
fixed assets (Cash flow from operations) was EUR -39.3 million (-126.1).
The Group employed an average of 3,262 (3,536) people, and 3,411 (3,259) at the
end of the period. The Vianor tyre chain employed 1,395 (1,341) people and
Russian operations 815 (640) people at the end of the period.
Financial position by 30 September 2010
Gearing ratio was 44.9% (72.0%). Interest-bearing net debt amounted to EUR 382.9
million (521.2). Equity ratio was 58.2% (50.5%).
The Group's interest-bearing liabilities totalled EUR 430.0 million (537.5) of
which current interest-bearing liabilities amounted to EUR 226.9 million
(322.8). The average interest rate of interest-bearing liabilities was 3.20%
(3.35%). The average interest rate of interest-bearing liabilities was 1.44%
(1.97%) with calculatory non-cash expenses related to the convertible bond
eliminated.
At the end of the review period the company had unused credit limits amounting
to EUR 322.2 million (255.6) of which EUR 235.9 million (186.0) 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
The Group's tax rate in 2010 is expected to fall below the rate of 2009 (20.7%).
The tax rate is effected by tax relieves in Russia continuing for the next two
years based on present investments and thereafter subject to further
investment-related incentive agreements.
PASSENGER CAR TYRES
7-9/10 7-9/09 Change% 1-9/10 1-9/09 Change% 2009
Net sales, m€ 174.7 146.7 19.0 493.3 391.7 25.9 527.3
Operating profit, m€ 48.7 43.3 12.5 135.6 78.1 73.7 106.2
Operating profit, % 27.9 29.5 27.5 19.9 20.1
RONA, % 18.2 11.4 11.7
(rolling 12 months)
The net sales of Nokian Passenger Car Tyres in January-September totalled EUR
493.3 million (391.7), up by 25.9% from the corresponding period in 2009.
Operating profit was EUR 135.6 million (78.1) and the operating profit
percentage was 27.5% (19.9%).
Sales development was good throughout the review period. Inventories going into
Q3/2010 were very low due to strong preseason sales in Q2, and despite the
ramp-up in production demand exceeded supply in Q3. Deliveries of orders were
delayed with sales being pushed to Q4. Sales growth came from a significant
increase in winter tyre preseason sales in Russia. Sales were also up in the
Nordic Countries as well as in Central and Eastern Europe, beating already the
previous all-time-high numbers of 2008. Nokian Tyres increased its market share
in all sales areas mentioned. The winter tyres' share of total sales grew
year-over-year. The company's spearhead product Nokian Hakkapeliitta 7, a
studded winter tyre for northern conditions, won practically all car magazine
tyre tests in the Nordic countries and in Russia.
The Average Selling Price increased compared with the corresponding period a
year earlier, despite a somewhat weaker winter tyre sales mix in Russia and an
increased share of sales going to Central and Eastern Europe. Cash flow improved
significantly due to lower inventories and investments compared to 1-9/2009.
The increased production volumes and restructuring with a higher share of
production in Russia improved productivity. Two additional production lines
(7&8) have been commissioned during 2010 and two more (9&10) have been ordered
for installation in 2011.
The increasing raw material prices had a negative impact on margins in
July-August. In order to compensate for this, price increases have been
implemented for all tyre ranges. The impact of price increases became evident
with a delay as from September. Further price increases will take place in the
fourth quarter. An improving market will help to increase prices and our target
of increasing average price by more than 4 % in 2010 versus 2009 is realistic.
The demand for Nokian core products is very healthy for the rest of 2010. The
production capacity is ramped up further in order to fully utilize the growth
potential.
HEAVY TYRES
7-9/10 7-9/09 Change% 1-9/10 1-9/09 Change% 2009
Net sales, m€ 18.3 12.0 51.7 55.4 34.8 59.2 50.1
Operating result, m€ 1.7 1.8 -5.2 9.5 -2.2 525.3 0.0
Operating result, % 9.5 15.1 17.1 -6.4 0.0
RONA, % 18.4 -0.03 0.0
(rolling 12 months)
The January-September net sales of Nokian Heavy Tyres totalled EUR 55.4 million
(34.8), up by 59.2% year-over-year. Operating result was EUR 9.5 million (-2.2),
and the operating result percentage was 17.1% (-6.4%).
Demand for heavy tyres has continued to grow in the forestry, mining and
container handling sectors. Nokian Heavy Tyres' sales improved significantly in
all special use product groups during the review period, with forestry tyres
showing strongest growth. In Q3 low inventory and time lag in ramping up
capacity limited sales growth and pushed sales into Q4 as demand exceeded supply
capability.
A large share of sales to original equipment manufacturers with fixed prices
until October have delayed price increases which in combination with higher raw
material costs cut margins in Q3. Nokian Heavy Tyres has increased replacement
market prices and further price increases for original equipment and replacement
markets will take place in the fourth quarter and in the beginning of 2011.
The increase in production volumes improved capacity utilization and
productivity in the first half of the year. In the third quarter the extra costs
of capacity ramp-up increased fixed costs but will further improve output,
productivity and customer service going into Q4.
Nokian Heavy Tyres achieved good results in developing its distribution network.
New importers and new “Vianor Industrial” concept stores have been established
to meet the increasing need for more technical services for the customers.
The demand for Nokian heavy tyres is very healthy and the demand exceeds the
supply in many product groups. The focus for the rest of the year is to increase
prices and further ramp-up of the production capacity.
VIANOR
Equity-owned operations
7-9/10 7-9/09 Change% 1-9/10 1-9/09 Change% 2009
Net sales, m€ 64.5 57.3 12.5 185.3 168.7 9.8 273.2
Operating result, m€ -2.8 -2.2 -29.9 -7.9 -10.8 26.9 -3.0
Operating result, % -4.4 -3.8 -4.3 -6.4 -1.1
RONA, % -1.5 0.4 -3.2
(rolling 12 months)
Vianor's net sales in January-September were EUR 185.3 million (168.7), up by
9.8% compared with the corresponding period in 2009. Operating result improved
to EUR -7.9 million (-10.8) but was still negative due to seasonality. The
operating result was positively affected by a real estate sales profit of EUR
1.8 million. The operating result percentage was -4.3% (-6.4%).
At the end of the review period Vianor had 168 equity-owned outlets in Finland,
Sweden, Norway, USA, Switzerland and Russia. All customer and product groups
showed positive sales development, the biggest improvement coming from the fleet
customers and heavy industrial tyres. Fast fit service sales increased in double
digit numbers. Vianor's market shares in the core market areas are estimated to
have improved from the previous year.
In the last quarter the focus will be on improving sales and market shares
further, developing the fast fit services business, increasing retail tyre
prices as well as improving cost efficiency.
Franchising and partner operations
In the third quarter Vianor expanded the franchise and partner network on Nokian
Tyres' core markets by 41 outlets. At the end of the review period, Vianor
operated in 20 countries; most extensively in the Nordic countries, in Russia
and in Ukraine. The global Vianor network comprised of 714 outlets of which 546
were partners. Market shares improved as a result of the expansion.
Expanding the partner franchise network will continue according to earlier
plans; target is to have more than 740 outlets by the end of 2010.
OTHER OPERATIONS
Truck Tyres
The net sales of Nokian Truck Tyres were EUR 28.3 million (19.2), up by 47.0%
from the previous year. Sales development was good in all market areas. Truck
manufacturing grew clearly and caused additional demand for tyres also in the
aftermarket. Nokian truck tyre market share increased in the Nordic countries,
in Russia as well as in Central and Eastern Europe due to an improved product
range in both A- and B-segments. Sales of retreading materials improved due to
better utilization rate in the transport sector and restocking by customers.
Truck Tyres benefited from the decreased raw material cost in both contract
manufacturing purchases and in the own retreading operations in the first half
of the year. In the third quarter Nokian Truck Tyres increased prices to offset
higher contract manufacturing purchase costs caused by higher raw material
prices. Further price increases will take place in the last quarter of the year.
In Q4/2010 the focus will be on increasing prices, streamlining logistics
further and utilizing the stronger winter product range, especially the Nokian
Hakkapeliitta Truck tyres for northern conditions. The expansion to Russia, CIS
and Eastern Europe utilizing the “Vianor truck” service concept will continue.
RUSSIA AND THE CIS COUNTRIES
Nokian Tyres' sales in Russia increased by 74.5% to EUR 141.4 million (81.1).
Sales in CIS countries (excluding Russia) were EUR 13.4 million (46.9).
Consolidated sales in Russia and CIS increased by 21.0% to EUR 154.8 million
(127.9).
Sales in Russia grew significantly due to recovering consumer demand and
distributors' improving credit capability. Especially the winter tyre preseason
sales increased substantially. Nokian Tyres improved market shares in Russia and
strengthened its position as the market and price leader in the A-segment of
premium branded tyres. Sales in other CIS countries declined due to the timing
of preseason sales and delivery restrictions relating to distributors'
carry-over stocks.
The distribution network was extended by signing additional distribution
agreements and expanding the Vianor network. The Vianor tyre chain was expanded
by 23 franchising outlets in Q3/2010 and there were a total of 401 Vianor
outlets in Russia and CIS countries at the end of the review period.
In the review period two new production lines have been taken into use in the
Russian plant. The 8th production line has been operating since September.
Productivity has improved along with the increased production volumes. A
significant share of the production was exported.
Backed by the oil price the Russian Rouble strengthened against the Euro in the
first half of the year. Russian economy recovered at an estimated real GDP
growth of 4.0% in 1-9/2010 versus 1-9/2009. Russia is expected to show healthy
growth of 4-5% this year. Consumer confidence and purchasing power improved in
the review period.
New car sales, the main driver for premium tyres, increased by 18% in 1-9/2010
compared to 1-9/2009. The growth was 51% in Q3/2010 compared to Q3/2009. In
September the new car sales increased by 55% year-over-year. The new car sales
is supported by the scrappage incentive program, which has been announced to be
extended into 2011, and the credit rates offered by banks (including loans
subsidized by car manufacturers) returning to pre-crisis values. A recovery of
new car sales with growth of more than 20% in 2010 and growth gaining momentum
in 2011-2012 is presently forecasted. In used car market demand has exceeded
supply in the review period. Western cars that were acquired in large amounts
2-4 years ago are now in need for both summer and winter replacement tyres.
The market potential with strong underlying consumer demand in Russia has become
more evident with strong growth in car and tyre sales in the review period. The
Nokian Tyres plant located in Russia inside the customs borders (duty 20% for
imported tyres) combined with an expanding Vianor chain provides a significant
competitive edge on the market.
INVESTMENTS
Investments in the review period amounted to EUR 30.6 million (76.9). This
comprises of production investments in the Russian factory, moulds for new
products and the Vianor expansion projects.
OTHER MATTERS
1. Stock options on the NASDAQ OMX Helsinki Stock Exchange
The Board of Directors of Nokian Tyres plc resolved to apply for listing of the
stock options 2007B on the NASDAQ OMX (Helsinki Stock Exchange) so that the
listing would commence on 1 March 2010.
The total number of stock options 2007B is 2,250,000. Each stock option 2007B
entitles its holder to subscribe for one Nokian Tyres plc share. The shares can
be subscribed with the stock options 2007B during 1 March 2010 - 31 March 2012.
In the aggregate, the stock options 2007B entitle their holders to subscribe for
2,250,000 shares. The present share subscription price with stock options 2007B
is EUR 22.97/share. The dividends payable annually shall be deducted from the
share subscription price.
2. Shares subscribed with option rights
After 15 December 2009 registered increase in share capital a total of 1,835,020
Nokian Tyres plc's shares have been subscribed with the 2004C option rights.
These option rights are attached to the Nokian Tyres plc's Option Programs of
2004. An increase in share capital relating to 2004C option rights totalling
367,004 euros was entered into the Trade Register on 25 February, 2010. The
shares have been traded on the NASDAQ OMX Helsinki Ltd together with the old
shares as of 26 February, 2010. After the increase, the number of Nokian Tyres
shares was 126,686,410 and the share capital was EUR 25,337,222.00.
After 25 February 2010 registered increase in share capital a total of 503,420
Nokian Tyres plc's shares have been subscribed with the 2004C option rights.
These option rights are attached to the Nokian Tyres plc's Option Programs of
2004. An increase in share capital relating to 2004C option rights totalling
100,684 Euros was entered into the Trade Register on 20 May, 2010. The shares
have been traded on the NASDAQ OMX Helsinki Ltd together with the old shares as
of 21 May, 2010. After the increase, the number of Nokian Tyres shares was
127,189,830 and the share capital was EUR 25,437,906.00.
After 20 May, 2010 registered increase in share capital a total of 150 Nokian
Tyres plc's shares have been subscribed with the 2007A option rights. These
option rights are attached to the Nokian Tyres plc's Option Programs of 2007.
New shares have been registered into the Trade Register 19 August, 2010. The
share capital will not increase with subscriptions made by 2007A option rights.
The sum, corresponding to earlier nominal value, will be entered into the
reserve for invested unrestricted equity. The shares have been traded on the
NASDAQ OMX Helsinki Ltd together with the old shares as of 20 August, 2010.
After the increase, the number of Nokian Tyres shares is 127,189,980 and the
share capital remained EUR 25,437,906.00.
3. Share price development
The Nokian Tyres' share price was EUR 25.19 (EUR 15.93) at the end of the review
period. The volume weighted average share price during the period was EUR 19.68
(EUR 11.66), the highest EUR 25.38 (EUR 17.37) and the lowest EUR 15.89 (EUR
7.00). A total of 134,973,979 shares were traded during the period
(179,873,310), representing 107% (144%) of the company's overall share capital.
The company's market value at the end of the period amounted EUR 3.191 billion
(EUR 1.989 billion). The company's percentage of Finnish shareholders was 37.1%
(37.4) and 62.9% (62.6) were foreign shareholders registered in the nominee
register. This figure includes Bridgestone's ownership of approximately 16%.
4. Decisions made at the Annual General Meeting
On 8 April, 2010, Nokian Tyres Annual General Meeting accepted the financial
statements for 2009 and discharged the Board of Directors and the President and
CEO from liability.
The meeting decided that a dividend of EUR 0.40 per share shall be paid for the
period ending on 31 December, 2009. The dividend shall be paid to shareholders
included in the shareholder list maintained by Euroclear Finland Ltd on the
record date of 13 April, 2010. The dividend payment date is 23 April, 2010.
4.1 Members of the Board of Directors and Auditor
The meeting decided that the Board of Directors has seven members. Kim Gran,
Hille Korhonen, Hannu Penttilä, Yasuhiko Tanokashira, Aleksey Vlasov, Petteri
Walldén and Kai Öistämö will continue as Nokian Tyres' Board of Directors. In a
meeting held after the Annual General Meeting, Petteri Walldén was elected
Chairman of the Board. Authorised public accountants KPMG Oy Ab continue as
auditors.
4.2 Remuneration of the Members of the Board of Directors
The meeting decided that the fee paid to the Chairman of the Board is EUR 70,000
per year, while that paid to Board members is set at EUR 35,000 per year. With
the exception of the President and CEO, members of the Board and the Nomination
and Remuneration Committee are also granted an attendance fee of EUR 600 per
meeting.
In addition, 60% of the annual fee be paid in cash and 40% in company shares,
such that in the period from 8 April to 30 April, 2010, EUR 28,000 worth of
Nokian Tyres plc shares will be purchased at the stock exchange on behalf of the
Chairman of the Board and EUR 14,000 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. No separate compensation will be paid to the
President and CEO for Board work.
4.3 Granting of stock options and the management's share ownership plan
The meeting decided on the granting of stock options to the personnel of Nokian
Tyres Group and to its fully owned subsidiary. The company has a weighty
financial reason for issuing stock options since they are intended to form a
part of the incentive and commitment programme for the personnel. The purpose of
the issue is to encourage the personnel to work on a long-term basis to increase
shareholder value. Another purpose of the stock options is to increase personnel
commitment to the company. The stock options entitle their holders to subscribe
for a maximum total of 4,000,000 new shares in the company. The stock options
now issued can be exchanged for shares constituting a maximum total of 3 % of
the company's shares and votes of the shares, after the potential share
subscription.
The subscription price for stock options is based on the market price of Nokian
Tyres shares in NASDAQ OMX Helsinki Oy (Helsinki Stock Exchange) in April 2010,
April 2011 and April 2012.
The share subscription period for stock options 2010A shall be 1 May 2012 — 31
May 2014, for stock options 2010B, 1 May 2013 — 31 May 2015 and for stock
options 2010C, 1 May 2014 — 31 May 2016.
A share ownership plan shall be incorporated with the 2010 stock options,
obliging the Group's senior management to acquire the Company's shares with a
proportion of the income gained from the stock options. The stock option plan
and the management's share ownership plan have been introduced in more detail in
the enclosure of AGM decisions press release.
4.4 Amendment to the Articles of Association
The meeting decided that the article regarding the invitation to a General
Meeting of shareholders is amended, due to an amendment to the Finnish Companies
Act now in effect, as follows:
9§ Invitation to Annual General Meeting
The invitation to Annual General Meeting must be published, in accordance with
the Board of Directors' decision, on the company's website and in one national
and one Tampere region daily newspaper, no earlier than three months before the
record date referred to in Chapter 4, section 2, subsection 2 of the Finnish
Companies Act and no later than three weeks before the Annual General Meeting.
The invitation must, however, be delivered no later than nine days before the
record date of the Meeting.
4.5 Donations to the institutes of higher education
The meeting authorised the Board to donate a maximum of EUR 500,000 to support
universities and other institutes of higher education, and to decide on the
payment schedules of donations and other terms relating to donations.
5. Changes in share ownership
Nokian Tyres received an announcement from BlackRock, Inc. on 25 February, 2010,
according to which the ownership of Black Rock Investment Management (UK)
Limited increased above the level of 10% of the share capital in Nokian Tyres
plc as a result of a share transaction concluded on 22 February, 2010. Black
Rock Investment Management (UK) Limited held on deal date a total of 12,565,454
Nokian Tyres' shares representing 10,06% of company's 124,851,390 shares and
voting rights.
An increase in Nokian Tyres' share capital relating to 2004C option rights
totalling 367,004 euros was entered into the Trade Register on 25 February,
2010. After the increase, the number of shares rose to 126,686,410, and thus the
ownership of Black Rock Investment Management (UK) Limited decreased below the
level of 10% to 9.92% of shares and voting rights.
Nokian Tyres received an announcement from BlackRock, Inc. on 4 May 2010,
according to which the ownership of Black Rock Investment Management (UK)
Limited had increased above the level of 10% of the share capital in Nokian
Tyres plc as a result of a share transaction concluded on 30 April 2010. Black
Rock Investment Management (UK) Limited held on deal date a total of 12,809,656
Nokian Tyres' shares representing 10.11% of company's 126,686,410 shares and
voting rights.
Nokian Tyres received an announcement from Invesco Limited on 24 June 2010,
according to which the ownership of Invesco Limited had decreased under the
level of 5% of the share capital in Nokian Tyres plc as a result of a share
transaction concluded on 18 June 2010. Invesco Limited held on deal date a total
of 6,321,453 Nokian Tyres' shares representing 4.97% of company's 127,189,830
shares and voting rights.
Nokian Tyres received an announcement from Invesco Limited on 9 July 2010,
according to which the ownership of Invesco Limited had increased above the
level of 5% of the share capital in Nokian Tyres plc as a result of a share
transaction concluded on 5 July 2010. Invesco Limited held on deal date a total
of 6,365,866 Nokian Tyres' shares representing 5.00% of company's 127,189,830
shares and voting rights.
Nokian Tyres received an announcement from Invesco Limited on 20 July 2010,
according to which the ownership of Invesco Limited had decreased under the
level of 5% of the share capital in Nokian Tyres plc as a result of a share
transaction concluded on 12 July 2010. Invesco Limited held on deal date a total
of 6,318,941 Nokian Tyres' shares representing 4.97% of company's 127,189,830
shares and voting rights.
RISKS, UNCERTAINTY AND DISPUTES IN THE NEAR FUTURE
Ongoing uncertainty related to governmental borrowing in Europe may cause
disruption in the financial markets. This with the somewhat worrying news from
U.S economy can still hurt GDP growth in Nokian Tyres' core markets during 2010.
Nokian Tyres other risks and uncertainty factors relate to significantly
increased raw material prices and to company's ability to raise prices in line
with the raw material cost in order to maintain profitability. An efficient
ramp-up of new production lines in Russia will partly depend on the success of
recruiting new work force from a tightening labour market.
A little over 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 rouble, the US dollar, the Swedish and Norwegian krona and the Ukrainian
hryvnia. The main risk facing Nokian Tyres in the near future is related to the
development of the Ukrainian hryvnia.
Special attention will be drawn to controlling net working capital. Inventory
and trade receivable rotation have improved compared to previous year in all
business units. Russian trade receivables account for around 35% of the Group's
total trade receivables.
Nokian Tyres has certain pending legal proceedings and litigations in some
countries. At the moment, the company does not expect these proceedings to have
any material impact on the performance or future outlook.
OUTLOOK FOR 2010
Tyre demand and deliveries have increased clearly driven by a recovery of
consumer confidence, growth of GDP on Nokian Tyres' core markets, growth in car
sales and improved financing to distributors. Higher industrial activity in
machine building supports growth of heavy tyre and truck tyre sales. Nokian
Tyres' order book is now very healthy in all product categories and some sales
were postponed to Q4 due to demand exceeding supply capacity in Q3.
The improvement of productivity and profits at Nokian Tyres is supported by
higher sales volumes and an increasing share of Russian production.
High raw material cost presents a challenge to Nokian Tyres' margins during the
last quarter. Raw material cost for full year 2010 is estimated to increase by
approximately 10% compared to 2009.
Along with Nokian Tyres, major tyre manufacturers have announced further price
increases to take effect in the autumn and winter. Seasonal improvement of mix
and price increases in all product categories will help Nokian Tyres to defend
the ASP.
A strong expanding distribution, good seasonal logistics, an improved cost
structure with majority of production inside duty borders of Russia and CIS as
well as new test winner products will give Nokian Tyres a good chance to
strengthen its market leadership in the core markets and to continue profitable
growth in 2010.
Outlook and guidance (unchanged):
In 2010, the company is positioned to clearly improve net sales and operating
result compared to 2009.
INVESTMENTS IN 2010
Nokian Tyres' total investments in 2010 will be approximately EUR 50 million
(86.5). About EUR 20 million will be spent on moulds and equipment for new
products and EUR 15 million (51.2) on the Russian plant's operations.
Nokia, 3 November 2010
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.
***
This interim report has been prepared in accordance with IFRS
compliant recognition and measurement principles and the same
accounting policies as in the most recent annual financial
statements but it has not been prepared in compliance with all
requirements set out in IAS 34 'Interim Financial Reporting'.
The interim report figures are unaudited.
NOKIAN TYRES
CONSOLIDATED INCOME STATEMENT
EUR million 7-9/10 7-9/09 1-9/10 1-9/09 Last 12 1-12/09
months
Net sales 245.2 204.1 689.4 550.8 937.1 798.5
Cost of sales -144.6 -109.9 -398.8 -334.6 -542.2 -478.0
Gross profit 100.6 94.2 290.6 216.2 394.8 320.4
Other operating income 0.5 0.2 3.3 1.2 4.3 2.2
Selling and marketing
expenses -43.3 -39.4 -133.7 -124.4 -183.4 -174.1
Administration expenses -6.2 -5.3 -18.8 -18.0 -25.2 -24.5
Other operating expenses -3.3 -5.9 -11.0 -13.8 -19.3 -22.1
Operating result 48.3 43.7 130.4 61.2 171.1 102.0
Financial income 25.6 15.1 71.7 73.5 95.3 97.1
Financial expenses -34.3 -26.8 -79.6 -108.0 -97.2 -125.7
Result before tax 39.6 32.1 122.5 26.7 169.2 73.5
Tax expense (1 -5.2 -4.5 -15.4 2.3 -32.8 -15.2
Result for the period 34.5 27.5 107.1 29.0 136.3 58.3
Attributable to:
Equity holders of the
parent 34.5 27.5 107.1 29.0 136.3 58.3
Non-controlling interest 0.0 0.0 0.0 0.0 0.0 0.0
Earnings per share from
the result attributable to
equity holders of the
parent
basic, euros 0.27 0.22 0.85 0.23 1.09 0.47
diluted, euros 0.27 0.22 0.84 0.26 1.08 0.49
CONSOLIDATED OTHER COMPREHENSIVE INCOME
EUR Million
7-9/10 7-9/09 1-9/10 1-9/09 1-12/09
Result for the period 34.5 27.5 107.1 29.0 58.3
Other comprehensive
income, net of tax:
Gains/Losses from hedge
of net investments in
foreign operations 4.9 -3.5 -15.5 -14.3 -24.4
Interest rate swaps -0.1 0.0 -0.9 0.0 0.1
Translation differences
on foreign operations -45.1 -0.5 24.0 -25.8 -12.8
Total other comprehensive
income for the period,
net of tax -40.4 -4.0 7.7 -40.1 -37.0
Total comprehensive income
for the period -5.9 23.5 114.8 -11.0 21.2
Total comprehensive income
attributable to:
Equity holders
of the parent -5.9 23.5 114.8 -11.0 21.2
Non-controlling interest 0.0 0.0 0.0 0.0 0.0
1)Tax expense in the consolidated income statement is based on the
taxable result for the period.
KEY RATIOS 30.9.10 30.9.09 1-12/09
Equity ratio, % 58.2 50.5 62.0
Gearing, % 44.9 72.0 34.8
Equity per share, euro 6.71 5.80 6.07
Interest-bearing net debt,
mill. euros 382.9 521.2 263.7
Capital expenditure,
mill. euros 30.6 76.9 86.5
Depreciation, EUR million 52.1 45.8 61.9
Personnel, average 3,262 3,536 3,503
Number of shares (million units)
at the end of period 127.19 124.85 124.85
in average 126.56 124.85 124.85
in average, diluted 132.59 129.41 129.76
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
30.9.10 30.9.09 31.12.09
EUR million
Non-current assets
Property, plant and equipment 490.5 509.6 507.6
Goodwill 57.9 54.9 55.0
Other intangible assets 17.1 19.6 19.2
Investments in associates 0.1 0.1 0.1
Available-for-sale
financial assets 0.2 0.2 0.2
Other receivables 17.3 10.4 9.9
Deferred tax assets 34.4 31.4 28.7
Total non-current assets 617.6 626.2 620.7
Current assets
Inventories 224.1 249.4 200.0
Trade receivables 464.1 408.2 248.0
Other receivables 115.6 132.9 90.7
Cash and cash equivalents 47.1 16.3 62.5
Total current assets 850.9 806.8 601.2
Equity
Share capital 25.4 25.0 25.0
Share premium 181.4 155.2 155.2
Translation reserve -81.6 -93.1 -90.2
Fair value and hedging reserves -0.9 -0.1 0.0
Paid-up unrestricted equity reserve 0.0 0.0
Retained earnings 728.7 636.6 667.6
Non-controlling interest 0.0 0.0 0.0
Total equity 853.1 723.6 757.6
Non-current liabilities
Deferred tax liabilities 29.9 27.5 29.4
Provisions 1.4 1.2 1.4
Interest bearing liabilities 203.1 214.7 253.8
Other liabilities 3.1 2.1 2.1
Total non-current liabilities 237.6 245.4 286.7
Current liabilities
Trade payables 65.2 45.5 33.8
Other current payables 85.1 94.5 70.7
Provisions 0.7 1.1 0.7
Interest-bearing liabilities 226.9 322.8 72.4
Total current liabilities 377.9 464.0 177.6
Total assets 1,468.5 1,433.0 1,221.9
Changes in net working capital arising from operative business are
partly covered by EUR 250 million domestic commercial paper
programme.
CONSOLIDATED STATEMENT OF CASH FLOWS
1-9/10 1-9/09 1-12/09
EUR million
Cash flows from operating activities:
Cash generated from
operations 9.0 -67.8 228.5
Financial items and taxes -62.1 -5.7 -34.3
Net cash from operating
activities -53.2 -73.5 194.2
Cash flows from investing activities:
Net cash used in investing
activities -27.2 -76.9 -92.8
Cash flows from financing activities:
Proceeds from issue of share
capital 26.6 0.0 0.1
Change in current financial
receivables and debt 183.8 281.3 -117.2
Change in non-current financial
receivables and debt -95.9 -177.4 15.4
Dividends paid -50.7 -49.9 -49.9
Net cash from financing
activities 63.8 54.0 -151.7
Net change in cash and cash
equivalents -16.5 -96.3 -50.2
Cash and cash equivalents at
the beginning of the period 62.5 113.2 113.2
Effect of exchange rate changes 1.1 -0.6 -0.5
Cash and cash equivalents at
the end of the period 47.1 16.3 62.5
-16.5 -96.3 -50.2
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
A = Share capital
B = Share premium
C = Translation reserve
D = Paid-up unrestricted equity reserve
E = Fair value and hedging reserves
F = Retained earnings
G = Non-controlling interest
H = Total equity
Equity attributable to equity holders of the parent
EUR million A B C D E F G H
Equity,
Jan 1st 2009 25.0 155.2 -53.0 -0.1 647.6 2.7 777.3
Dividends paid -49.9 -49.9
Exercised
warrants 0.0 0.0 0.0
Share-based
payments 9.0 9.0
Other changes 0.9 0.9
Total compre-
hensive income
for the period -40.1 0.0 29.0 -11.0
Change in
non-controlling
interest -2.7 -2.7
Equity,
Sep 30th 2009 25.0 155.2 -93.1 -0.1 636.6 0.0 723.6
Equity,
Jan 1st 2010 25.0 155.2 -90.2 0.0 0.0 667.6 0.0 757.6
Dividends paid -50.7 -50.7
Exercised
warrants 0.5 26.1 0.0 26.6
Share-based
payments 4.7 4.7
Total compre-
hensive income
for the period 8.6 -0.9 107.1 114.8
Equity,
Sep 30th 2010 25.4 181.4 -81.6 0.0 -0.9 728.7 0.0 853.1
SEGMENT INFORMATION
EUR million 7-9/10 7-9/09 1-9/10 1-9/09 1-12/09
Net sales
Passenger car tyres 174.7 146.7 493.3 391.7 527.3
Heavy tyres 18.3 12.0 55.4 34.8 50.1
Vianor 64.5 57.3 185.3 168.7 273.2
Other operations 12.4 9.7 28.5 19.2 28.5
Eliminations -24.5 -21.6 -73.1 -63.6 -80.7
Total 245.2 204.1 689.4 550.8 798.5
Operating result
Passenger car tyres 48.7 43.3 135.6 78.1 106.2
Heavy tyres 1.7 1.8 9.5 -2.2 0.0
Vianor -2.8 -2.2 -7.9 -10.8 -3.0
Other operations 2.1 1.0 1.6 -2.8 -5.0
Eliminations -1.4 -0.3 -8.4 -1.0 3.7
Total 48.3 43.7 130.4 61.2 102.0
Operating result,
% of net sales
Passenger car tyres 27.9 29.5 27.5 19.9 20.1
Heavy tyres 9.5 15.1 17.1 -6.4 0.0
Vianor -4.4 -3.8 -4.3 -6.4 -1.1
Total 19.7 21.4 18.9 11.1 12.8
Cash Flow II
Passenger car tyres 2.8 -20.4 -7.7 -102.1 109.9
Heavy tyres -1.8 -1.2 -3.1 -0.6 5.7
Vianor -13.2 -10.7 -22.3 -18.6 7.6
Total -12.0 -37.5 -39.3 -126.1 123.1
CONTINGENT LIABILITIES 30.9.10 30.9.09 31.12.09
EUR million
FOR OWN DEBT
Mortgages 1.0 0.9 0.9
Pledged assets 0.0 35.1 35.8
OTHER OWN COMMITMENTS
Guarantees 6.0 3.0 5.5
Leasing and rent commitments 102.4 105.9 101.1
Purchase commitments 1.7 4.2 3.4
DERIVATIVE FINANCIAL INSTRUMENTS 30.9.10 30.9.09 31.12.09
EUR million
INTEREST RATE DERIVATIVES
Interest rate swaps
Notional amount 90.8 4.0 3.9
Fair value -1.8 -0.2 0.0
FOREIGN CURRENCY DERIVATIVES
Currency forwards
Notional amount 360.9 438.1 427.2
Fair value 9.5 -12.4 -7.1
Currency options, purchased
Notional amount 43.1 47.4 3.9
Fair value 0.8 0.3 0.0
Currency options, written
Notional amount 86.6 91.4 3.9
Fair value -0.6 -0.9 -0.1
DEFINITIONS OF CONSOLIDATED KEY FINANCIAL INDICATORS
Earnings per share, euro:
Result for the period attributable to the equity holders of the
parent / Average adjusted number of shares during the period
Earnings per share (diluted), euro:
Result for the period attributable to the equity holders of the
parent / Average adjusted and diluted number of shares during
the period
The share options affect the dilution as the average share market
price for the period exceeds the defined subscription price.
Equity ratio, %:
Total equity x 100 / (Total assets - advances received)
Gearing, %:
Interest-bearing net debt x 100 / Total equity
Equity per share, euro:
Equity attributable to equity holders of the parent / Adjusted
number of shares on the reporting date
Operating margin:
Operating result, % of net sales
DEFINITIONS OF SALES AREAS
Nordic countries: Finland, Norway, Sweden.
Russia and CIS:
Russia, Armenia, Belarus, Georgia, Kazakhstan, Moldova, Ukraine.
Central and Eastern Europe:
Albania, Austria, Belgium, Bulgaria, Croatia, Czech Republic, Denmark, Estonia,
France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Lithuania,
The Former Yugoslav Republic of Macedonia, Montenegro, Netherlands, Poland,
Portugal, Romania, Serbia, Slovakia, Slovenia, Spain, Switzerland, Turkey,
United Kingdom.
North America: Canada, USA.
Nokian Tyres plc
Anssi Mäki
Communications Manager
Further information: Mr. Kim Gran, President and CEO,
Tel: +358 10 401 7336
Distribution: NASDAQ OMX, media, www.nokiantyres.com
***
Nokian Tyres plc will publish interim report January-September, 2010 on
Wednesday 3 November, 2010 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/resultinfo2010q3
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: 878396, 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.
Nokian Tyres result 2010 will be published on February, 2011. Releases and
company information will be found from http://www.nokiantyres.com
