Nokian Tyres has released its second quarter and first half 2016 figures, the numbers are also the first full quarter figures published since Nokian admitted it had been involved in tyre test irregularities in a series of press articles during the first quarter of the year. Forex issues and other problems in the Russian market are no-doubt connected to Nokian’s performance. Indeed, Russian sales declined by almost 30 per cent and mild winter weather is said to have left inventories in Russia and North America (see below for further details on this).
Looking at Nokian’s first quarter figures, net sales decreased 2.3 per cent to 337.4 million euros (2Q 2015: 345.5 million euros). Operating profit decreased 3.8 per cent 77.5 million euros (2015: 80.6 million euros). Operating profit margin remained relatively flat at 23 per cent (23.3 per cent).
Looking at the first half as a whole (January–June 2016), the figures show that net sales decreased 2.2 per cent to 613.3 million euros (1H 2015: 626.8 million euros). Operating profit decreased by 0.7 per cent to 128.0 million euros (again relatively flat compared with the same period in 2015: 128.8 million euros). The first half operating profit margin was flat at 20.9 per cent (20.6 per cent).
Russian forex/retail weakness behind numbers
Commenting on the figures Ari Lehtoranta, Nokian Tyres president and CEO said: “Our sales volumes in the second quarter were higher than we estimated earlier. Our customers’ winter tyre inventory situation made the winter tyre markets in North America and Russia as challenging as we had anticipated, but our good performance in Europe and in summer tyres in general helped to balance the situation.
“Heavy Tyres had slightly higher sales than last year, but profitability declined due to the higher share of truck tyres and the timing of some marketing activities. Productivity continued to improve both in Heavy Tyres and Passenger Car Tyres.”
Lehtoranta also sought to explained the relatively weakness of the company’s tyre retail business: “Vianor’s result in the second quarter was clearly better than in the first quarter, but it was not enough to compensate for the bad start of the year. Pricing pressure in retail remains high.”
Adding further detail about the company’s tyre retail operations, Lehtoranta added: “The growth of our branded distribution network continued but was slower than last year. The number of Vianor, NAD, and N-Tyre outlets in our network grew by 122 in H1/2016. The network currently includes 1,482 Vianor stores, and the NAD/N-Tyre network has already grown to 1,456 stores. The economic situation in Russia and the CIS slowed down the growth of the network, as some of our partner outlets have been closed.”
Despite Russian sales declining by almost 30 per cent, Nokian reported that the firm managed to increase market share as well as price position in Central Europe. And, as a result, the company’s management believes “Nokian’s strong position in the core markets, investments in growth markets, an expanding distribution channel, continuous investments in productivity, and competitive products give Nokian Tyres opportunities to strengthen its position and to provide healthy margins and a strong cash flow”. However, with forex issues in Russia and tyre retail challenges (including price pressure) across Russia and the rest of Europe, maintaining sales is clearly continuing to be a challenged.