2011-08-05 07:00:00 CEST
2011-08-05 07:00:16 CEST
REGULATED INFORMATION
Nokian Renkaat - Interim report (Q1 and Q3)
NOKIAN TYRES PLC INTERIM REPORT JANUARY-JUNE 2011
Nokia, Finland, 2011-08-05 07:00 CEST (GLOBE NEWSWIRE) -- Nokian Tyres plc
Interim Report 5 August 2011, 8 a.m.
NOKIAN TYRES PLC INTERIM REPORT JANUARY-JUNE 2011: High demand, strong sales
growth and improved results
Nokian Tyres group's net sales increased by 41.4% to EUR 628.0 million (EUR
444.2 million in
1-6/2010). Operating profit grew to EUR 165.6 million (EUR 82.0 million) and
Earnings per share increased to EUR 1.06 (EUR 0.58).
Outlook:
Car 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 and transportation supports growth of heavy tyre and truck
tyre sales. Inventories are low in the tyre industry and distribution channels.
Nokian Tyres' order book is on an all-time high level in all manufacturing
units and demand may exceed supply capacity at times in 2011.
Financial guidance (unchanged):
In 2011, the company is positioned to provide strong sales growth and to
improve operating profit clearly compared to 2010.
Key figures, EUR million:
4-6/11 4-6/10 Change% 1-6/11 1-6/10 Change% 2010
Net sales 338.8 260.4 30.1 628.0 444.2 41.4 1,058.1
Operating profit 93.3 60.9 53.3 165.6 82.0 101.9 222.2
Profit before tax 85.4 60.6 40.9 155.3 82.8 87.5 208.8
Profit for the period 74.2 52.6 41.1 136.6 72.6 88.1 169.7
Earnings per share, 0.57 0.42 36.7 1.06 0.58 84.5 1.34
EUR
Equity ratio, % 70.2 60.9 68.4
Cash flow from -49.9 -2.5 -1,900.9 -102.3 -27.3 -274.4 318.8
operations
RONA,% (rolling 12 24.1 13.5 17.8
months)
Gearing, % 20.0 37.3 0.1
Kim Gran, President and CEO:
“A flying start for 2011 was followed in Q2 by further strong growth in our
core business. The first semester was a success for us as we beat all previous
H1 results.
Sales in our core markets grew significantly. The launch of our new summer
tyres was a success and we gained market share on all key markets, especially
in Russia and the Nordic countries. An improved sales mix combined with price
increases improved our margins despite a significant increase in raw material
cost. We continued to expand our distribution network as planned spearheaded by
Vianor, which now has more than 800 stores.
Our production output (tons) increased by 53% YOY but was still not enough to
satisfy the growth in demand. Some winter tyre preseason deliveries were pushed
forward to Q3/Q4. Additional production capacity will come on stream as line
start-ups in Russia have commenced as planned during summer and the plant in
Nokia is back to 7 days/week full capacity as from August. The building of the
new plant in Russia next to the current one has commenced and will start
production by summer 2012. A new agreement concerning incentives has been
completed with Russian authorities in line with the previous package.
The visibility to this year's sales is good. Inventories of all our core
products remain low in Nokian Tyres and in the distribution. Our order book has
reached another record level and our sales growth will correlate closely with
the ramp-up of production.
The sky seems still reasonably clear and our sails continue to bulge with
tailwind. Some clouds, however, appear in the form of raw material cost
increases, availability issues and an increase in general uncertainties of the
global economy. Despite the challenges we trust to be able to make choices
which will improve our product mix, productivity and profitability.”
Market situation
The growth rate of the global economy started to slow down during the first
half of 2011. GDP growth was slower than expected in many countries causing
downward revisions of economic forecasts. Major economies are still expected to
grow, although at a slower pace, backed by easy monetary policies and low
interest rates. Nokian Tyres' core markets, Northern European economies and
especially Russia, have shown positive development. In Europe there has been
uncertainty related to the governmental borrowing and its effects to financial
markets but so far it has had minor input on the private sector's spending. The
uncertainty in macroeconomics has increased globally and may convert into
weaker demand.
Drivers for growth in Nokian Tyres' core markets improved. Annual GDP growth
averaged approximately 4% in both the Nordic countries and in Russia at the end
of the review period. The new car sales increased in the Nordic countries by
15% year-over-year. In Russia the new car sales were up by 56% in January-June
compared to the corresponding period in 2010. New car sales in Russia are
expected to continue to grow by approximately 30% in 2011.
The aftermarket sales volume for car tyres in the review period increased in
the Nordic countries by an estimated 2% and in Europe by 4% year-over-year.
Tyre industry deliveries to distributors increased by over 50% in Russia,
trailing the improving economy, lower stocks of distributors and strong
consumer confidence.
The second consecutive true winter with heavy snowfall prolonged well into 2011
in all Europe and Russia resulted in strong winter tyre consumer sales and left
retailers with low inventories. Summer tyre market was stable in Europe but
increased significantly in Russia. Tyre stocks are low due to the previous
year's rapid recovery of demand continuing in 2011. In the tyre industry strong
demand and improved sales for 2011 are expected.
The demand for special heavy tyres has continued to improve supported by
forestry machine manufacturers' expanding production, harbours operating with
full capacity as well as increasing investments in mining industry. In the
aftermarket demand has also increased for other special use tyres, i.e.
agricultural tyres. The increase derives from improved demand and prices of
pulp, sawmill products, metals and food raw materials.
A recovery of the transport sector has improved demand for truck tyres and
created some short supply in the aftermarket.
Overall, the market environment in Nokian Tyres' core markets seems healthy and
demand exceeds supply in many product groups.
The prices for natural rubber and oil-based materials rose significantly from
early 2009 to mid-2011 and some materials were in short supply. In early 2011
raw material costs continued to go up triggering additional price increases
from the tyre industry. At the end of the review period raw material prices and
availability seem to stabilize, but the tyre industry raw material costs are
still expected to rise slightly in H2/2011 due to stocks purchased with higher
prices. There will be less room for tyre price increases in H2 than in H1/2011.
April-June 2011
In the second quarter of 2011 Nokian Tyres Group recorded net sales of EUR
338.8 million (260.4), showing an increase of 30.1% on the corresponding period
a year earlier. Sales increased in the Nordic countries by 15.7% and in Russia
by 101.3%. The consolidated sales in Russia and CIS grew by 88.4%. In Central
and Eastern Europe sales grew by 22.9% while in North America sales increased
by 33.8%.
Raw material costs (EUR/kg) in manufacturing increased in the second quarter by
32.0% year-over-year and increased 7.5% versus the first quarter of 2011. Fixed
costs were EUR 84.6 million (74.6), accounting for 25.0% (28.6%) of net sales.
Nokian Tyres Group's Operating profit was EUR 93.3 million (60.9). Net
financial expenses were EUR 7.9 million (0.3). Net interest expenses were EUR
4.1 million (5.1) including EUR 2.1 million (2.0) in non-cash expenses related
to convertible bonds. Net financial expenses include EUR 3.8 million (-4.8) of
exchange rate differences.
Profit before tax was EUR 85.4 million (60.6). Profit for the period amounted
to EUR 74.2 million (52.6), and EPS were EUR 0.57 (EUR 0.42).
Income financing after the change in working capital, investments and the
disposal of fixed assets (Cash flow from operations) was EUR -49.9 million
(-2.5).
January-June 2011
Nokian Tyres Group recorded net sales of EUR 628.0 million (444.2), showing an
increase of 41.4% on the corresponding period a year earlier. In the Nordic
countries sales increased by 22.6% representing 36.0% (41.9%) of the group's
total sales. Sales in Russia increased by 110.7%. Russia and CIS consolidated
sales grew by 102.0% and formed 30.9% (21.8%) of the group's total sales. In
Central and Eastern Europe sales were up by 36.4% year-over-year representing
25.4% (26.6%) of the group's total sales. In North America sales increased by
13.7% and were 7.3% (9.2%) of the group's total sales.
Sales of passenger car tyres were up by 47.0% representing 69.8% (64.7%) of the
group's total sales. Heavy tyres' sales increased by 52.8% and were 8.4% (7.5%)
of the group's total sales. Vianor's sales decreased by 0.2% forming 18.0%
(24.5%) of the group's total sales. The sales of Other operations were up by
62.1% representing 3.8% (3.2%) of the group's total sales.
Raw material cost (EUR/kg) in manufacturing increased in the review period by
35.8% year-over-year. Fixed costs amounted to EUR 165.9 million (147.6),
accounting for 26.4% (33.2%) of net sales. Total salaries and wages were EUR
87.2 million (68.4).
Nokian Tyres Group's Operating profit amounted to EUR 165.6 million (82.0). The
Operating profit was negatively affected by the IFRS 2 -compliant option scheme
write-off of EUR 3.8 million (2.9) and expensed credit losses and provisions of
EUR 0.8 million (-0.4).
Net financial expense was EUR 10.3 million (-0.8). Net interest expenses were
EUR 6.5 million (9.9) including EUR 4.1 million (3.9) in non-cash expenses
related to convertible bonds. Net financial expense includes EUR 3.8 million
(-10.7) of exchange rate differences.
Profit before tax was EUR 155.3 million (82.8). Profit for the period amounted
to EUR 136.6 million (72.6), and EPS were EUR 1.06 (EUR 0.58).
Return on net assets (RONA, rolling 12 months) was 24.1% (13.5%). Income
financing after the change in working capital, investments and the disposal of
fixed assets (Cash flow from operations) was EUR -102.3 million (-27.3).
The Group employed an average of 3,727 (3,221) people, and 3,786 (3,264) at the
end of the period. The equity-owned Vianor tyre chain employed 1,317 (1,349)
people and Russian operations 965 (691) people at the end of the period.
Financial position by 30 June 2011
Gearing ratio was 20.0% (37.3%). Interest-bearing net debt amounted to EUR
205.0 million (319.6). Equity ratio was 70.2% (60.9%).
The Group's interest-bearing liabilities totalled EUR 227.4 million (371.0) of
which current interest-bearing liabilities amounted to EUR 24.2 million
(167.6). The average interest rate of interest-bearing liabilities was 5.19%
(3.56%). The average interest rate of interest-bearing liabilities was 1.53%
(1.51%) 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 495.2 million (381.0) of which EUR 205.9 million (235.8) 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 was 18.7% and it is estimated to remain at the
same level during 2011.The tax rate is effected by tax relieves in Russia based
on present investments and further investment-related incentive agreements. A
new agreement has been completed with authorities in Russia concerning
additional investment in the existing factory and building the new factory. The
agreement will prolong the tax benefits and incentives for 5-10 years.
PASSENGER CAR TYRES
4-6/11 4-6/10 Change% 1-6/11 1-6/10 Change% 2010
Net sales, m€ 238.8 179.5 33.0 468.5 318.7 47.0 714.7
Operating profit, m€ 83.9 51.5 63.0 168.0 86.9 93.3 205.5
Operating profit, % 35.2 28.7 35.9 27.3 28.8
RONA,% (roll.12 m.) 33.0 17.6 23.3
The net sales of Nokian Passenger Car Tyres in January-June totalled EUR 468.5
million (318.7), up by 47.0% from previous year. Operating profit increased to
EUR 168.0 million (86.9). Operating profit percentage improved to 35.9%
(27.3%).
The demand for car tyres continued to grow. Nokian Tyres' sales were strong in
all core markets, majority of the sales increase coming from Russia. Among
product groups the SUV tyres showed the strongest growth. Nokian car tyres'
market share improved in the Nordic countries, Russia and Europe. High demand
exceeded the company's supply capacity and some sales shifted to the second
half of the year.
The new summer tyre models with the spearhead product Nokian Hakka Green, a
tyre giving clear savings in fuel-consumption, won car magazines' tyre tests in
the core markets, which boosted sales.
Sales mix improved clearly despite a lower share of winter tyres
year-over-year, which together with successful price increases and favourable
currency exchange rates development raised the Average Selling Price compared
to H1/2010, thus compensating for the raw material cost increase of 35.9%
versus the corresponding period a year earlier.
Production output (pcs) grew by 48% compared with the corresponding period a
year earlier, boosted by the increased capacity in Russia. Productivity
improved along with high utilization and capacity increases. The production
capacity will increase further as the line 9 in Russia is now on stream and
line 10 will commence production in the end of Q3. The plant in Nokia is back
to 7 days/week full capacity as from August. The company will also increase
off-take contract manufacturing.
Earth work for the new plant and warehouse next to the current ones in Russia
has started. The new plant is estimated to commence production during 2012 and
the capacity increase during 2012-2014.
Fixed costs increased moderately compared to the sales growth which helped to
improve margins.
The order book for 2011 is all-time high and the inventories are low. Tyre raw
materials' availability has improved and material prices seem to be levelling
off. The most important challenges in 2011 will be to secure the tyre supply
capacity and to optimise the logistics for growing deliveries.
HEAVY TYRES
4-6/11 4-6/10 Change% 1-6/11 1-6/10 Change% 2010
Net sales, m€ 28.3 20.3 39.6 56.7 37.1 52.8 81.0
Operating profit, m€ 4.6 3.9 17.2 10.0 7.7 29.6 13.7
Operating profit, % 16.2 19.3 17.7 20.8 16.9
RONA,% (roll.12 m.) 22.2 19.0 21.0
The net sales of Nokian Heavy Tyres totalled EUR 56.7 million (37.1) in the
review period, up by 52.8% year-over-year. Operating profit was EUR 10.0
million (7.7), and the Operating profit percentage 17.7% (20.8%).
Demand for heavy tyres continued to grow at a healthy pace trailing increasing
activity in machine building and a stronger replacement market. Sales of Nokian
Heavy Tyres improved clearly in all product groups. Forestry, mining and radial
tyres showed strongest growth. Sales in Russia has been improving rapidly.
Order book was healthy at the end of the review period.
Price increases were implemented during the first half of the year but with a
delay compared to the raw material cost increase; mix improvement and further
price increases will be carried out in the second half of the year in order to
fully offset the higher raw material cost.
The production was at full utilization and volume (tons) increased by 44%
year-over-year. Further investment to open bottlenecks in production and to
increase output in 2012-2013 by approximately 25% from present level have been
taken. Installation of machinery will start during H2/2011.
A new product category, Beyond All-Steel Radial (BAS) developed by Nokian Tyres
was launched targeting harbour and mining end use applications. Sales have
started in late 2010 challenging traditional all-steel tyres.
VIANOR
Equity-owned operations
4-6/11 4-6/10 Change% 1-6/11 1-6/10 Change% 2010
Net sales, m€ 78.7 78.7 0.0 120.6 120.9 -0.2 307.9
Operating result, m€ 5.9 6.8 -13.2 -7.2 -5.1 -43.2 4.0
Operating result, % 7.5 8.6 -6.0 -4.2 1.3
RONA,% (roll.12 m.) -1.6 -1.0 2.6
At the end of the review period Vianor had 173 (170) equity-owned stores in
Finland, Sweden, Norway, USA, Switzerland and Russia. Vianor's net sales in
January-June amounted to EUR 120.6 million (120.9), down by 0.2% compared with
the corresponding period a year earlier. Operating result was EUR -7.2 million
(-5.1) and the Operating result percentage was -6.0% (-4.2%). The Operating
result was negative due to seasonality. As in previous years, the last quarter
with winter tyre consumer season will be decisive for Vianor's results.
In 2011 the focus will be on improving sales and market shares further,
developing the car services business and improving cost efficiency.
Franchising and partner operations
Vianor expanded the network on Nokian Tyres' core markets by 49 stores during
the review period. At the end of June 2011, the global Vianor network comprised
of 820 stores of which 647 were partners. Vianor operated in 22 countries; most
extensively in the Nordic countries, in Russia and in Ukraine. New Vianor
countries in the second quarter were Italy and Azerbaijan. In USA Vianor
started partner operations alongside the equity-owned network. Nokian Tyres'
market shares improved as a result of the expansion.
Expanding the partner franchise network will continue according to plans;
target is to have more than 900 stores by the end of 2011.
OTHER OPERATIONS
Truck Tyres
The net sales of Nokian Truck Tyres were EUR 25.8 million (15.9), up by 62.1%
from the previous year. Nokian truck tyres' 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 premium and standard tyres. Sales of retreading
materials improved due to a higher utilization rate in the transport sector and
restocking by customers.
Due to the market upturn there is a global shortage of truck tyres. Nokian
Tyres will continue to get more capacity in order to meet higher demand. In
2011 the focus will also be on streamlining logistics and expanding the product
range. 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 year-over-year by 110.7% to EUR 192.8
million (91.5). Sales in CIS countries (excluding Russia) were EUR 12.0 million
(9.9). Consolidated sales in Russia and CIS increased by 102.0% to EUR 204.8
million (101.4).
Sales in Russia grew significantly due to recovering consumer demand,
distributors' low inventory levels and improving credit capability. Summer tyre
sales increased substantially, both in premium and standard tyres. Nokian Tyres
improved its market shares in premium tyres in Russia.
The distribution network was extended by signing additional distribution
agreements and expanding the Vianor network. The Vianor tyre chain was expanded
and there were a total of 450 Vianor stores in Russia and CIS countries at the
end of the review period.
A total of 8 production lines have been operating since September 2010 with an
annualized capacity of 8 million tyres. During 2011 two new production lines (9
and 10) in the Russian factory will increase the annual capacity to
approximately 11 million tyres. Line 9 is in start-up phase and line 10 will
commence production by end Q3/2011. The company is also building a new plant
next to the current one, which will increase the annual car tyre capacity
further by 5-6 million tyres. Earth and foundation work has commenced.
Negotiations with Russian authorities about tax relieves and infrastructure
investments have been successfully completed. The new plant is estimated to
commence production during 2012 and the capacity increase during 2012-2014.
Russian economy recovered at an estimated real GDP growth of 4% in H1/2011
versus H1/2010. Consumer confidence was strong and purchasing power improved.
Russia is expected to show a healthy GDP growth of 4-5% in 2011.
New car sales, the main driver for premium tyres, increased by 56% in H1/2011
compared to H1/2010. The new car sales was supported by the credit rates
offered by banks (including loans subsidized by car manufacturers) returning to
pre-crisis values. New sertificates of the car scrappage incentive program are
no longer granted, but the program's positive effect on car sales still
continues. The car sales annual growth in 2011 is forecasted to be
approximately 30% with a gradual return to pre-crisis volume. The sales of used
cars is also strong with demand exceeding supply. Western cars that were
acquired in large volumes 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 is
evident with strong growth in car and tyre sales. Tyre industry deliveries to
distributors increased by over 50% in H1/2011 year-over-year.
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 January-June amounted to EUR 52.6 million (27.6). This comprises
of production investments in the Russian and Finnish factories, moulds for new
products and the Vianor expansion projects.
OTHER MATTERS
1. Stock options on the NASDAQ OMX Helsinki Stock Exchange
The total number of stock options 2007C is 2,250,000. Each stock option 2007C
entitles its holder to subscribe for one Nokian Tyres plc share. The shares can
be subscribed with the stock options 2007C during 1 March 2011 - 31 March 2013.
In the aggregate, the stock options 2007C entitle their holders to subscribe
for 2,250,000 shares. The present share subscription price with stock options
2007C is EUR 7.56/share. The dividends payable annually shall be deducted from
the share subscription price.
2. Shares subscribed with option rights
After 14 December, 2010 registered new shares a total of 1,146,301 Nokian Tyres
plc's shares have been subscribed with the 2007A option rights and 250 with the
2007B 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 on 24 February, 2011. After the subscription, the number of Nokian
Tyres shares was 128,849,012 and the share capital remained EUR 25,437,906.00.
After 24 February 2011 registered new shares a total of 448,867 Nokian Tyres
plc's shares have been subscribed with the 2007A option rights and 175 with the
2007B option rights and 177,790 with the 2007C 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 on 12 May 2011. After the
subscription, the number of Nokian Tyres plc shares increased to 129,475,844
shares.
3. Share price development
The Nokian Tyres' share price was EUR 34.60 (EUR 20.15) at the end of the
review period. The volume weighted average share price during the period was
EUR 30.69 (EUR 18.54), the highest EUR 35.45 (EUR 21.40) and the lowest EUR
26.07 (EUR 15.89). A total of 79,232,991 shares were traded during the period
(101,452,569), representing 61% (80%) of the company's overall share capital.
The company's market value at the end of the period amounted EUR 4.480 billion
(EUR 2.553 billion).The company's percentage of Finnish shareholders was 37.2%
(37.4) and 62.8% (62.6) were foreign shareholders registered in the nominee
register. This figure includes Bridgestone's ownership of approximately 15.5%.
4. Decisions made at the Annual General Meeting
On 7 April 2011, Nokian Tyres Annual General Meeting accepted the financial
statements for 2010 and discharged the Board of Directors and the President and
CEO from liability.
The meeting decided that a dividend of EUR 0.65 per share shall be paid for the
period ending on 31 December, 2010. The dividend was decided to be paid to
shareholders included in the shareholder list maintained by Euroclear Finland
Ltd on the record date of 12 April 2011. The proposed dividend payment date was
decided to be 27 April 2011.
4.1. Members of the Board of Directors and Auditor
The meeting decided that the Board of Directors has six members. Kim Gran,
Hille Korhonen, Hannu Penttilä, Petteri Walldén and Aleksey Vlasov continued in
the Nokian Tyres' Board of Directors. Benoit Raulin was elected as a new member
of the Board. Authorised public accountants KPMG Oy Ab was decided to 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 29 April 2011, 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.
5. Signing of credit facility
Nokian Tyres plc signed a EUR 100 million Multicurrency Revolving Credit
Facility for 5 years with international banks on the 31st of March 2011. The
Facility will be used to refinance the existing EUR 180 million Multicurrency
Revolving Credit Facility that was signed 4th of November 2009 and for general
corporate purposes. Mandated Lead Arrangers and Bookrunners for the facility
are: HANDELSBANKEN CAPITAL MARKETS, SVENSKA HANDELSBANKEN AB (PUBL),NORDEA BANK
FINLAND PLC, POHJOLA BANK PLC and SAMPO BANK PLC. The coordinator and facility
agent for the facility was Nordea.
6. Changes in ownership
Nokian Tyres received a notification from The Goldman Sachs Group, Inc. on 12
April 2011, according to which the total ownership of Goldman Sachs & Co.,
Goldman Sachs International and Goldman Sachs Asset Management L.P. increased
above the level of 5% of the share capital in Nokian Tyres plc as a result of a
share transaction concluded on 11 April 2011. The Goldman Sachs Group held on
deal date a total of 7,829,934 Nokian Tyres' shares representing 6,08% of
company's 128,849,012 shares and voting rights.
Nokian Tyres received a notification from The Goldman Sachs Group, Inc. on 14
April 2011, according to which the total ownership of Goldman Sachs & Co.,
Goldman Sachs International and Goldman Sachs Asset Management L.P. fell below
the level of 5% of the share capital in Nokian Tyres plc as a result of a share
transaction concluded on 13 April 2011.
RISKS, UNCERTAINTY AND DISPUTES IN THE NEAR FUTURE
Ongoing uncertainty related to governmental borrowing in Europe may cause
disruption in the financial markets. The increased uncertainty in
macroeconomics globally may convert into weaker demand, sales and results.
Nokian Tyres' other risks and uncertainty factors relate to the prices of raw
materials. The maintaining of profitability depends on company's ability to
raise prices in line with the increasing raw material cost. An efficient
ramp-up of new production lines in Russia will depend on the success of
recruiting and retaining work force in a tightening labour market.
Around 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 Swedish and Norwegian krona, the US dollar and 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 41% 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 2011
Car 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 and transportation supports growth of heavy tyre and truck
tyre sales. Inventories are low in the tyre industry and distribution channels.
Nokian Tyres' order book is on an all-time high level in all manufacturing
units and demand may exceed supply capacity at times in 2011.
Nokian Tyres will add to production capacity by more than 30% in 2011 versus
2010. Production in H2 will be increased by investment and start-up of two new
lines in the Russian plant and by shifting the plant in Nokia back to 7
days/week full capacity. The company is also building a new plant in Russia
next to the current one, which will increase the annual car tyre capacity by
5-6 million tyres. Negotiations with Russian authorities about tax relieves and
infrastructure investments have been successfully completed. The new plant is
estimated to commence production during 2012 and the capacity increase during
2012-2014.
Productivity is expected to improve due to the benefits of restructuring and
higher capacity utilization. The development of profits at Nokian Tyres is
estimated to be supported by higher sales volumes, improved sales mix and an
increasing share of Russian production. There will be less room for further
tyre price increases in H2 than in H1/2011.
Nokian Tyres' raw material cost is gradually levelling off, but for full year
2011 it is estimated to increase by approximately 30% compared to 2010. In
order to compensate the company is targeting an ASP increase of 9% for 2011.
The year-over-year ASP development in the first half exceeded the target.
A strong demand, healthy order book, expanding distribution channel, fluent
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 strong profitable growth in 2011.
Financial guidance (unchanged):
In 2011, the company is positioned to provide strong sales growth and to
improve operating profit clearly compared to 2010.
INVESTMENTS IN 2011
Nokian Tyres' budget for total investments in 2011 is approximately EUR 140
million (50.5). Roughly EUR 75 million will be invested in Russia, including
the start of construction of the new production facilities. The balance
comprises of investments in Nokia plant and processes EUR 25 million, moulds
for new products EUR 26 million and Vianor chain including acquisitions EUR 14
million.
Nokia, 5 August 2011
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 IAS 34 Interim Reports
standard. The company has adopted certain new or revised IFRS standards and
IFRIC interpretations at the beginning of the financial period as described in
the Financial Statements for 2010. However, the adaption of these new or
amended standards has not yet had an effect on the reported figures in
practice. On the other respects, the same accounting policies have been
followed as in the Financial Statements for 2010.
NOKIAN TYRES
CONSOLIDATED INCOME STATEMENT 4-6/11 4-6/10 1-6/11 1-6/10 Last 12 1-12/10
Million euros months
Net sales 338.8 260.4 628.0 444.2 1,241.9 1,058.1
Cost of sales -181.1 -145.6 -336.7 -254.2 -686.5 -604.0
Gross profit 157.7 114.8 291.2 190.0 555.4 454.1
Other operating income 0.5 1.9 1.2 2.8 2.7 4.3
Selling and marketing expenses -51.8 -45.8 -103.3 -90.4 -205.7 -192.9
Administration expenses -8.3 -6.5 -14.5 -12.5 -29.6 -27.6
Other operating expenses -4.8 -3.5 -9.0 -7.8 -17.0 -15.8
Operating profit 93.3 60.9 165.6 82.0 305.7 222.2
Financial income 15.0 16.7 49.6 46.0 99.9 96.3
Financial expenses -23.0 -17.0 -59.9 -45.2 -124.3 -109.7
Peofit before tax 85.4 60.6 155.3 82.8 281.3 208.8
Tax expense (1 -11.2 -8.0 -18.7 -10.2 -47.7 -39.1
Profit for the period 74.2 52.6 136.6 72.6 233.7 169.7
Attributable to:
Equity holders of the parent 74.2 52.6 136.6 72.6 233.7 169.7
Non-controlling interest 0.0 0.0 0.0 0.0 0.0 0.0
Earnings per share from the
profit
attributable to equity holders
of the
parent
basic, euros 0.57 0.42 1.06 0.58 1.34
diluted, euros 0.57 0.41 1.05 0.57 1.32
CONSOLIDATED OTHER COMPREHENSIVE
INCOME 4-6/11 4-6/10 1-6/11 1-6/10 1-12/10
Million
euros
Result for 74.2 52.6 136.6 72.6 169.7
the period
Other
comprehensi
ve income,
net of tax:
Gains/Losses
from hedge
of net
investments 0.4 -4.3 0.6 -20.4 -17.9
in foreign
operations
Cash flow -0.9 -0.2 0.7 -0.8 -0.6
hedges
Translation
differences
on foreign -1.8 25.2 4.4 69.1 37.0
operations
Total other
comprehensi ve income
for the -2.2 20.6 5.7 48.0 18.5
period, net
of tax
Total
comprehensi
ve income
for the 71.9 73.2 142.5 120.7 188.2
period
Total
comprehensi
ve income
attributable
to:
Equity 71.9 73.2 142.5 120.7 188.2
holders of
the parent
Non-controll 0.0 0.0 0.0 0.0 0.0
ing interest
1) Tax expense in the consolidated income statement is based on the taxable
result for the period.
KEY RATIOS 30.6.11 30.6.10 31.12.10 Change %
Equity ratio, % 70.2 60.9 68.4
Gearing, % 20.0 37.3 0.1
Equity per share, euro 7.92 6.74 7.34 17.6
Interest-bearing net debt,
mill. euros 205.0 319.6 0.7
Capital expenditure,
mill. euros 52.6 27.6 50.5
Depreciation, mill. euros 35.4 34.6 69.4
Personnel, average 3,727 3,221 3,338
Number of shares (million units)
at the end of period 129.48 127.19 127.70
in average 128.68 126.25 126.75
in average, diluted 135.90 132.16 132.96
CONSOLIDATED STATEMENT OF
FINANCIAL POSITION 30.6.2011 30.6.2010 31.12.10
Million euros
Non-current assets
Property, plant and equipment 503.6 524.9 483.6
Goodwill 60.1 57.4 58.8
Other intangible assets 19.8 18.1 19.7
Investments in associates 0.1 0.1 0.1
Available-for-sale
financial assets 0.3 0.3 0.3
Other receivables 21.4 11.8 20.6
Deferred tax assets 19.2 36.2 22.3
Total non-current assets 624.5 648.6 605.2
Current assets
Inventories 310.3 231.0 210.6
Trade receivables 419.8 369.8 258.9
Other receivables 84.9 106.5 80.4
Cash and cash equivalents 22.4 51.4 216.6
Total current assets 837.4 758.7 766.3
Equity
Share capital 25.4 25.4 25.4
Share premium 181.4 181.4 181.4
Translation reserve -66.0 -41.4 -71.1
Fair value and hedging reserves 0.1 -0.8 -0.6
Paid-up unrestricted equity reserve 34.4 0.0 8.0
Retained earnings 850.7 692.5 793.9
Non-controlling interest 0.0 0.0 0.0
Total equity 1,026.0 857.1 937.2
Non-current liabilities
Deferred tax liabilities 30.3 30.4 39.3
Provisions 0.1 1.4 0.1
Financial liabilities 203.2 203.5 204.2
Other liabilities 1.4 2.9 1.9
Total non-current liabilities 234.9 238.2 245.5
Current liabilities
Trade payables 86.7 60.5 81.0
Other current payables 87.8 83.1 92.7
Provisions 2.2 0.7 2.2
Short-term financial liabilities 24.2 167.6 13.0
Total current liabilities 201.0 311.9 189.0
Total assets 1,461.9 1,407.3 1,371.6
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
Million euros 1-6/11 1-6/10 1-12/10
Cash flows from operating activities:
Cash generated from
operations -64.2 56.0 372.7
Financial items and taxes -26.3 -56.3 -45.4
Net cash from operating
activities -90.5 -0.3 327.2
Cash flows from investing activities:
Net cash used in investing
activities -53.5 -24.1 -33.7
Cash flows from financing activities:
Proceeds from issue of share
capital 26.4 26.6 34.7
Change in current financial
receivables and debt 11.1 125.6 -29.8
Change in non-current financial
receivables and debt -4.3 -90.2 -95.2
Dividends paid -83.7 -50.7 -50.7
Net cash from financing
activities -50.5 11.4 -141.0
Net change in cash and cash
equivalents -194.5 -13.1 152.6
Cash and cash equivalents at
the beginning of the period 216.6 62.5 62.5
Effect of exchange rate changes 0.3 1.9 1.5
Cash and cash equivalents at
the end of the period 22.4 51.4 216.6
-194.5 -13.1 152.6
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
A = Share capital
B = Share premium
C = Translation reserve
D = Fair value and hedging reserves
E = Paid-up unrestricted equity reserve
F = Retained earnings
G = Non-controlling interest
H = Total equity
Equity attributable to equity holders of the parent
Million euros A B C D E F G H
Equity, Jan 1st 2010 25.0 155.2 -90.2 0.0 0.0 667.6 0.0 757.6
Profit for the period 72.6 72.6
Other comprehensive
income,net of tax:
Cash flow hedges -0.8 -0.8
Net investment hedge -20.4 -20.4
Translation differences 69.1 69.1
Total comprehensive
income for the period 48.8 -0.8 72.6 120.7
Dividends paid -50.7 -50.7
Exercised warrants 0.5 26.1 26.6
Share-based payments 2.9 2.9
Total transactions with
owners for the period 0.5 26.1 -47.8 -21.1
Equity, Jun 30th 2010 25.4 181.4 -41.4 -0.8 0.0 692.5 0.0 857.1
Equity, Jan 1st 2011 25.4 181.4 -71.1 -0.6 8.0 793.9 0.0 937.2
Profit for the period 136.6 136.6
Other comprehensive
income,net of tax:
Cash flow hedges 0.7 0.7
Net investment hedge 0.6 0.6
Translation differences 4.4 4.4
Total comprehensive
income for the period 5.0 0.7 136.6 142.3
Dividends paid -83.7 -83.7
Exercised warrants 26.4 26.4
Share-based payments 3.8 3.8
Total transactions with
owners for the period 26.4 -79.9 -53.5
Equity, Jun 30th 2011 25.4 181.4 -66.0 0.1 34.4 850.7 0.0 1,026.0
SEGMENT INFORMATION
Million euros 4-6/11 4-6/10 1-6/11 1-6/10 1-12/10 Change
%
Net sales
Passenger car tyres 238.8 179.5 468.5 318.7 714.7 47.0
Heavy tyres 28.3 20.3 56.7 37.1 81.0 52.8
Vianor 78.7 78.7 120.6 120.9 307.9 -0.2
Other operations 19.3 10.1 32.1 16.1 41.6 99.1
Eliminations -26.2 -28.1 -49.9 -48.6 -87.2 -2.8
Total 338.8 260.4 628.0 444.2 1,058.1 41.4
Operating result
Passenger car tyres 83.9 51.5 168.0 86.9 205.5 93.3
Heavy tyres 4.6 3.9 10.0 7.7 13.7 29.6
Vianor 5.9 6.8 -7.2 -5.1 4.0 -43.2
Other operations -1.2 0.9 -0.7 -0.5 -1.6 -35.2
Eliminations 0.0 -2.2 -4.5 -7.0 0.6 36.1
Total 93.3 60.9 165.6 82.0 222.2 101.9
Operating result, % of net sales
Passenger car tyres 35.2 28.7 35.9 27.3 28.8
Heavy tyres 16.2 19.3 17.7 20.8 16.9
Vianor 7.5 8.6 -6.0 -4.2 1.3
Total 27.5 23.4 26.4 18.5 21.0
Cash Flow II
Passenger car tyres -22.6 -2.0 -36.7 -10.5 291.2 -250.3
Heavy tyres -5.3 2.0 -13.1 -1.3 8.5 -903.0
Vianor -7.9 0.0 -20.1 -9.1 12.4 -119.7
Total -49.9 -2.5 -102.3 -27.3 318.8 -274.4
CHANGES IN PROPERTY, PLANT AND EQUIPMENT
Million euros 30.6.11 30.6.10 31.12.10
Opening balance 483.6 507.6 507.6
Capital expenditure 52.5 26.4 50.5
Decrease -2.5 -0.4 -24.6
Depreciation for the period -32.8 -32.1 -64.3
Other changes 0.0 0.0 -7.5
Exchange differences 2.8 23.4 21.9
Closing balance 503.6 524.9 483.6
CONTINGENT LIABILITIES 30.6.11 30.6.10 31.12.10
Million euros
FOR OWN DEBT
Mortgages 1.0 0.9 1.1
Pledged assets 0.0 0.0 0.0
OTHER OWN COMMITMENTS
Guarantees 6.1 5.7 6.2
Leasing and rent commitments 97.2 98.7 102.1
Purchase commitments 1.7 3.4 2.2
DERIVATIVE FINANCIAL INSTRUMENTS 30.6.11 30.6.10 31.12.10
Million euros
INTEREST RATE DERIVATIVES
Interest rate swaps
Notional amount 59.9 61.2 30.7
Fair value -0.7 -1.6 -1.3
FOREIGN CURRENCY DERIVATIVES
Currency forwards
Notional amount 412.7 371.5 563.2
Fair value -0.8 -8.1 -3.3
Currency options, purchased
Notional amount 64.6 31.6 0.0
Fair value 0.9 0.6 0.0
Currency options, written
Notional amount 113.1 71.9 0.0
Fair value -0.9 -0.6 0.0
ELECTRICITY DERIVATIVES
Electricity forwards
Notional amount 16.3 - -
Fair value 0.5 - -
RELATED PARTY TRANSACTIONS
The Group has related party relationships with members of the Board of
Directors, the President,
other key management personnel, and close members of their families, and
Bridgestone Group
with significant influence through share ownership.
Transactions and outstanding balances with parties having significant influence
Shareholders
Bridgestone Group 1-6/11 1-6/10 1-12/10
Sales of goods 13.9 14.8 16.0
Purchases of goods 17.3 14.4 26.7
30.6.11 30.6.10 31.12.10
Trade and other receivables 4.4 2.9 0.2
Trade and other payables 6.7 3.9 6.1
Key management personnel 1-6/11 1-6/10 1-12/10
Total employee benefit 2.9 2.6 6.2
expenses
Of which share-based 1.4 1.1 2.2
payments
During 1 January and 30 June 2011 the President and other key management
personnel were
granted a total of 410,000 share options (during 1 January and 30 June 2010
452,020 share
options). The share option plan terms for the key management personnel are equal
to the share
options directed at other personnel. On 30 June 2011 the key management
personnel held
1,345,655 share options, with 505,655 exercisable (on 30 June 2010 2,135,720
share options,).
with 1,317,620 exercisable
No share options have been granted to the other members of the Board of
Directors.
BUSINESS COMBINATIONS
Vianor-chain acquired full ownership in Norvegian Dekkvarehuset As and
Dekkvarehallen AS on 7 March
2011. The expectations relating to the growth in sales through increased
customer base,
and the future expectations on improved market area coverage and sales increase
resulted
in the recognition of goodwill.
Specification of the cost of business combination
Paid in cash 2.1
Cost directly attributable to the business 0.0
combinations
Total cost of the business combinations 2.1
Fair value of the net asset acquired 0.1
Goodwill 2.0
Fair values
recorded in
combination
Specification of acquired net assets
Intangible assets 0.0
Property, plant and equipment 0.0
Inventories 0.7
Receivables 0.1
Cash and cash equivalents 0.4
Liabilities -1.1
Net assets acquired 0.1
Consideration paid in cash 2.1
Cash and cash equivalents
in the subsidiaries acquired 0.4
Net cash outflow 1.7
Since these pieces of information are not material individually, the
presentation is aggregated.
The profits of the acquired companies, totalling EUR 0.0 million, are included
in the
consolidated income statement. The actual acquisition dates and the nature of
the operations taken into account the effect of the acquisitions on the
consolidated net
sales and profits is not material even if they were combined as of the beginning
of the financial year.
DEFINITIONS OF CONSOLIDATED KEY FINANCIAL INDICATORS
Earnings per share, euro:
Profit for the period attributable to the equity holders of the
parent / Average adjusted number of shares during the period
Earnings per share (diluted), euro:
Profit 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
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.
Core markets: Nordic countries, Russia and CIS.
*****
Nokian Tyres plc
Antti-Jussi Tähtinen, Vice President, Marketing and Communications
Further information: Mr. Kim Gran, President and CEO, tel: +358 10 401 7336
Distribution: NASDAQ OMX, media, www.nokiantyres.com
*****
Nokian Tyres plc interim report January- June 2011 was published on Friday 5
August, 2011 at 8.00 a.m. Finnish time.
The result presentation to analysts and media will be held in Hotel Kämp in
Helsinki at 10.00 a.m. Finnish time. The presentation can be listened through
audiocast via internet at http://www.nokiantyres.com/resultinfo2011q2
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: 900619
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 interim report January-September 2011 will be published on 4
November, 2011. Releases and company information will be found from
http://www.nokiantyres.com
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