Nokian Tyres presented with “opportunity to increase sales” in 2011 – Gran
A jaunty nautical appraisal of this year’s outlook greeted shareholders upon the release of Nokian Tyres’ 2010 financial statements. The man at the helm, president and CEO Kim Gran, stated that “a clear improvement in the drivers for demand in core business brought Nokian Tyres back to a strong growth track. The sails are now bulging with strong tailwind as we go into 2011 with thick order books and growing capacity.”
According to the company’s February 9 stock exchange release, Nokian Tyres navigated its way to a 32.5 per cent sales increase during 2010, reaching sales of 1,058.1 million euros. This was accompanied by a more than doubling of operating profit from 102.0 million euros in 2009 to 222.2 million euros last year. Net profit for the year was 169.7 million euros, up 191 per cent year-on-year. Nokian also reports that earnings per share increased from 0.47 to 1.34 euros while cash flow from operations improved 159 per cent to 318.8 million euros. The company’s Board of Directors proposes a dividend of 0.65 euros per share, up 65 per cent from the 2009 dividend.
Broken down into segments, net sales from passenger car tyres amounted to 714.7 million euros, up 35.5 per cent on the previous year. Production volume in this segment increased 40 per cent during 2010 following the introduction of two new production lines (lines seven and eight) in Nokian’s factory in Russia. Heavy tyres accounted for 81.0 million euros’ worth of sales in 2010, up from 50.1 million euros a year earlier. In terms of tonnage, segment production volume in 2010 was double that of 2009. Truck tyre sales reached 41.2 million euros last year, a year-on-year increase of 44.3 per cent. Net sales from the company’s Vianor network increased 12.5 per cent to 307.9 million euros.
Elaborating on specific elements of the tyre maker’s 2010 performance, Gran said “demand for Nokian Tyres’ core products started to improve rapidly in Q2 in all our business units. The clear turnaround was driven by improving economies in the Nordic countries and Russia, strong growth in new car sales and better consumer confidence. Our operations were ramped up accordingly and we need to further increase capacity in order to keep up with the growing demand. We managed to increase market shares, implemented price increases and improved our sales mix. Our distribution network continued to expand not only in Nordic countries and Russia & CIS but also in Central Europe. The Vianor chain opened 148 new shops now totalling 771 in 20 countries. Our productivity increased significantly as a result of implementing structural changes and an improving utilisation of our capacities. Our strong winter tyre brand and solid distribution foothold in core markets together with a snowy winter in all Europe helped us to present good results and strong growth for the whole year.”
The company president and CEO noted improvements in the global economy during 2010, with growth in emerging markets exceeding that in developed countries, particularly Europe, where uncertainty over governmental borrowing and its effect on financial markets remains. Gran remarked that overall, however, the growth drivers in Nokian Tyres’ core markets “improved significantly”; passenger car aftermarket sales volumes grew by an estimated ten per cent in the Nordic countries and eight per cent in Europe year-on-year. Tyre industry deliveries to distributors increased by approximately 35 per cent in Russia.
Other factors aiding Nokian Tyres in 2010 were, as Gran put it “the second consecutive true winter with heavy snowfall in all Europe and Russia” plus significant increases in forest and mining machine manufacture in 2010, which drove demand for special heavy tyres. A boost in truck tyre sales came through recovery in the transport sector during the year, and supply issues in the aftermarket were experienced. “Overall, the market environment has improved clearly and demand exceeds supply in many product groups,” Gran commented.
A fly in the ointment at Nokian was, as has been the case for all manufacturers, raw material prices. Speaking on the industry as a whole, Gran observes that between early 2009 and the end of 2010 the price of natural rubber more than tripled, and while price increases on tyre products have been implemented some negative effects on profitability have been experienced, especially for producers in developing countries.
Looking forward to the rest of this year, Kim Gran says Nokian Tyres will “significantly” increase its investments in 2011 to secure future growth. Planned investments have been increased have increased 132 per cent year-on-year to a total of 117 million euros and cover the introduction of two additional production lines (the ninth and tenth) in the company’s Russian factory during the second and third quarters of the year, and Gran says Nokian is “looking for further capacity expansion of both production and distribution.”
Announced alongside the company’s 2010 figures was a new addition to its Board of Directors. Benoit Raulin, who previously served as managing director of Bridgestone Deutschland GmbH and was appointed vice president Finance & Procurement at Bridgestone Europe NV/SA on October 1, 2010, succeeds Bridgestone’s Yasuhiko Tanokashira on the Finnish manufacturer’s Board of Directors – a clear nod to Japanese’ tyre maker’s status as the largest single shareholder in Nokian tyres.
“Going into 2011 our order book is all-time high and it provides us with a good opportunity to increase sales, again operating more selectively,” Gran concluded. “We will also continue to launch new product lines, increase prices and improve mix to offset higher raw material costs. Low inventories in the distribution channel and our growing production capacity offer a good starting point for further profitable growth in 2011.”