Nokian Tyres: Russia/CIS markets drag down Q3 profits
Following weak performance in Russia and the CIS region in the third quarter of 2014, Nokian Tyres has revised its operating profit projection for the full year. The Finnish company now estimates operating profit of €300 million to €320 million for 2014, considerably lower than last year’s €385.5 million. Net sales, as per previous guidance, are also expected to fall compared with 2013.
Group net sales in the 1 July to 30 September quarter decreased 8.2 per cent to €327.7 million, while operating profit was down 24.6 per cent to €72.1 million. At 22.0 per cent, operating profit margin was still high, however several points lower than the 26.8 per cent achieved in the third quarter of 2013. Profit for the quarter decreased 24.6 per cent to €53.4 million, and earnings per share were down 24.1 per cent to €0.40.
Year to date net sales are €1,009.2 million, 9.0 per cent lower than in the 1 January to 30 September period of 2013; Nokian says exchange rate effects reduced net sales by €60.0 million. Operating profit for the nine-month period is down 20.9 per cent to €231.2 million, and operating profit margin declined to 22.9 per cent (Jan-Sept 2013: 26.3 per cent). Profit for the period decreased 28.1 per cent to €158.3 million and earnings per share reduced 28.5 per cent to €1.19.
“We have been fighting this year to compensate the negative impacts from the effects of the Russia-Ukraine crisis; currencies in Russia and CIS weakened clearly against the euro, and the purchasing power started to fall,” commented Ari Lehtoranta, who took over from Kim Gran as Nokian Tyres’ president and CEO on 1 September. “This made consumers buy less and cheaper products. These factors resulted in a clearly weakened ASP for Nokian Tyres.”
Russian and CIS market sales dropped 28.7 per cent year-on-year to €289.3 million, while sales in CIS countries, excluding Russia, were down 69.8 per cent to €12.8 million as Ukrainian sales were hit hard by regional problems. Consolidated sales in Russia and the CIS decreased 33.5 per cent to €302.1 million.
Although net sales and operating profit are expected to be lower in 2014 than a year earlier, the tyre maker sees itself as holding a strong position in its core markets and aims to strengthen its position there. “The mid-term visibility is poor at the moment, but we are in a good position to pursue future success,” Lehtoranta stated. “The company has a strong balance sheet and an efficient industrial structure with potential to grow. The continuous success of our product line in the European tyre tests is expected to reward us in coming years. Our distribution is expanding with a good pace; the current number of Vianor stores is 1,302 and the NAD network has already grown to 773 stores. We are targeting to maintain our tradition of improving our market position in our core markets, both in good and in bad times. Despite the current turmoil, in the Russian economy in particular, Nokian Tyres continues to be a profitable, growth-seeking company.”
Full details of Nokian Tyres’ financial results can be found in our company profiles and reports section.