2009-08-06 07:00:00 CEST
2009-08-06 07:00:05 CEST
REGULATED INFORMATION
Nokian Renkaat - Interim report (Q1 and Q3)
NOKIAN TYRES INTERIM REPORT FOR JANUARY-JUNE 2009: RESTRUCTURING AND COST CUTS GAIN MOMENTUM - MARKET HEADWIND CONTINUES
Nokian Tyres plc Interim Report Aug 6, 2009 8.00 a.m.
NOKIAN TYRES INTERIM REPORT FOR JANUARY-JUNE 2009: RESTRUCTURING AND COST CUTS
GAIN MOMENTUM - MARKET HEADWIND CONTINUES
The Group's net sales decreased by 34.6% to EUR 346.7 million (EUR 530.3
million in Jan-June 2008). Operating result fell to EUR 17.5 million (EUR 128.6
million), while earnings per share decreased to EUR 0.01 (EUR 0.80).
Sales and operating result improved in the second quarter compared to the first
quarter but were significantly down versus previous year. Sales and operating
margin were penalized by lower demand, devaluation of the Russian rouble, the
Swedish and Norwegian krona and preseason sales of winter tyres being delayed
to the second half of the year.
Restructuring of operations and manufacturing structure combined with cost cuts
gained momentum. Inventories were reduced by EUR 31.6 million compared to year
end 2008. Personnel costs were cut by EUR 19.1 million during the first six
months compared to the corresponding period last year. Cash flow started to
improve especially during the second quarter.
Outlook and guidance for 2009 (updated):
Uncertainty in the market is expected to continue all 2009 although underlying
drivers for demand on Nokian Tyres core markets show signs of stabilizing.
Market headwind will continue all 2009 but the winter tyre season, improving
sales mix, restructuring and lower raw material costs are expected to improve
sales and operating margin clearly during the second half compared to the first
half of the year. Cash flow is expected to be significantly better than in
2008. However, the net sales and operating result for full year 2009 will be
significantly lower than in 2008.
Previous guidance of May 7, 2009 was: “The first quarter of 2009 is expected to
be the weakest of the year for Nokian Tyres. The company expects sales to
increase clearly during the later quarters due to seasonality. However, the net
sales and operating result in the second quarter and full year 2009 will be
significantly lower than in 2008.”
Key figures, EUR million:
4-6/09 4-6/08 1-6/09 1-6/08 2008
Net sales 191.1 284.0 346.7 530.3 1,080.9
Operating result 20.3 74.2 17.5 128.6 247.0
Result before tax 12.0 68.6 -5.3 118.4 173.8
Result for the period 11.9 54.0 1.5 99.1 139.9
Earnings per share, EUR 0.10 0.43 0.01 0.80 1.12
Equity ratio,% 51.8 56.4 54.8
Cash flow from operations, 7.4 -68.6 -88.6 -146.9 9.5
(Cash Flow II)
RONA,% (rolling 12 months) 10.8 25.6 20.5
Gearing,% 68.0 47.3 41.0
Kim Gran, President and CEO:
“Market changes which started during the second half of last year have
continued to hit hard Nokian Tyres' core markets in the Nordic countries and
Russia. Currencies have devaluated and GDP and consumer spending for consumer
durables such as cars and tyres have declined significantly.
The level of demand seems to have hit the bottom, stabilized and some signs of
improvement can be seen. We however base our actions on a gradual rather than
rapid recovery. The changes in demand have left the market and tyre producers
with carry-over inventory and receivables which during this year require
special attention.
We at Nokian Tyres have taken decisive actions to streamline our operations and
cost base to the new market challenges. The results of our actions are not yet
fully visible but will have a stronger impact during the second half of this
year and for years to come.
During this year our focus is to provide clearly stronger cash flow by reducing
inventory and receivables by more than 100 million euros and cutting
investments by 96 million euros compared with 2008. A full collection of our
receivables in Russia and CIS by the end of the winter tyre season is our
target. Overdue trade receivables have approximately halved compared to
year-end 2008.
In sales our focus is to defend our price leader position on our core markets
and continue to compensate for exchange rate changes by improving sales mix and
by implementing price increases. The launches of new products such as Nokian
Hakkapeliitta 7 for this year's winter season are vital and preseason orders
are promising. The share of Russian and CIS sales in our portfolio will fall
this year and is partly compensated by increased sales in North America and in
Central and Eastern Europe. This will have an adverse effect on average sales
prices in 2009.
In terms of production, we responded to the weakening demand already in late
2008 and have continued to do so during 2009. The streamlining measures aiming
at a lighter cost structure and full utilization of a lower cost production in
the Russian plant have been implemented and will be fully completed during
2009. Our cost saving program of annual sustainable savings of approximately 50
million euros is running as planned.
A strong distribution, good seasonal logistics, local low cost production
inside duty borders and new products will give us a good chance to strengthen
our market leadership in the core markets and to return to profitable growth as
soon as markets start to recover.”
Market situation
The sharp downturn in the global economy that started in late 2008 was further
escalated during the review period. In key markets this resulted in a clear
decrease in car sales and machine manufacture. The after market sales for
passenger car tyres declined in the Nordic countries by an estimated 12% and
elsewhere in Europe by 6%. Tyre deliveries shrank drastically to less than half
in Russia and the CIS countries, trailing the declining economy and reduced car
sales.
As car manufacture volumes decreased significantly, there was an excess supply
of summer tyres which resulted in price erosion of some volume sizes. Prices
for winter tyres have resisted the general price erosion better than summer
tyres. Tyre manufacturers implemented significant price increases in order to
offset the currency devaluation in Russia, Ukraine, Sweden and Norway. Price
increases have not yet fully compensated for the devaluation effects.
The truck tyre market declined in Europe by more than 30%, and the demand for
special heavy tyres shrank to less than half of the previous year. Overall, the
market environment has become more competitive.
Raw material prices have dropped significantly compared to the end of 2008 but
carry-over stocks and contracts have penalized tyre manufacturers' results
during first half of 2009.
April-June 2009
In the second quarter of 2009 Nokian Tyres Group recorded net sales of EUR
191.1 million (EUR 284.0 million), showing a decrease of 32.7% on the
corresponding period a year earlier. Sales decreased in the Nordic countries by
21.9%. In Russia and the other CIS countries sales decreased by 79.7%. In
Central and Eastern Europe sales grew by 10.1% and in North America by 38.9%.
Raw material costs (eur/kg) in manufacturing were up 4.6% year-over-year in the
second quarter but down 5.4% versus the first quarter of 2009. Raw material
purchases in 2008 still penalized costs. Fixed costs were EUR 65.6 million (EUR
74.9 million), accounting for 34.3% (26.4%) of net sales.
Nokian Tyres Group's operating result was EUR 20.3 million (EUR 74.2 million).
Net financial expenses were EUR -8.3 million (EUR -5.5 million). Financial
expenses include EUR 1.9 million in non-cash expenses related to convertible
bonds. Net financial expenses include EUR -4.8 million (EUR -1.4 million) of
exchange rate differences. Since 1.1.2009 exchange rate differences contain
interest rate differential from foreign currency derivatives. Comparison
information is modified accordingly.
Result before tax was EUR 12.0 million (EUR 68.6 million). Result for the
period amounted to EUR 11.9 million (EUR 54.0 million), and EPS was EUR 0.10
(EUR 0.43).
Income financing after the change in working capital, investments and the
disposal of fixed assets (cash flow II) was EUR 7.4 million (EUR -68.8
million).
January-June 2009
Nokian Tyres Group's net sales in January-June totalled EUR 346.7 million (EUR
530.3 million), signifying a 34.6% year-over-year decrease. In the Nordic
countries sales decreased by 23.8% representing 43% (37%) of the group's total
sales. In Russia and CIS sales fell by 68.3% and formed 20% (40%) of the
group's total sales. In Central and Eastern Europe sales went down by 2.9%
representing 25% (17%) of the group's total sales. In North America sales grew
by 27.9% and was 12% (6%) of the group's total sales.
Sales of passenger car tyres were down by 36.5% representing 63% (67%) of the
group's total sales. Heavy tyres' sales declined by 57.4% and was 6% (9%) of
the group's total sales. Vianor's sales fell by 12.5% forming 29% (22%) of the
group's total sales. The sales of Other operations was down by 22.9%
representing 2% (2%) of the group's total sales.
Raw material costs (eur/kg) increased by 13.5% year-over-year in the first
half, still penalized by raw material purchases in 2008. Fixed costs amounted
to EUR 136.9 million (EUR 148.3 million), accounting for 39.5% (28.0%) of net
sales. Total salaries and wages were EUR 65.5 million (EUR 84.6 million)
representing a saving of EUR 19.1 million year-over-year.
Nokian Tyres Group's operating result was EUR 17.5 million (EUR 128.6 million).
This was negatively affected by the IFRS 2-compliant option scheme write-off of
EUR 5.6 million (EUR 8.5 million).
Net financial expenses were EUR -22.9 million (EUR -10.1 million). Financial
expenses include EUR 3.7 million in non-cash expenses related to convertible
bonds. Net financial expenses include EUR
-15.1 million (EUR -3.4 million) of exchange rate differences. Since 1.1.2009
exchange rate differences contain interest rate differential from foreign
currency derivatives. Comparison information is modified accordingly.
Result before tax was EUR -5.3 million (EUR 118.4 million). Result for the
period amounted to EUR 1.5 million (EUR 99.1 million), and EPS was EUR 0.01
(EUR 0.80).
Return on net assets (RONA, rolling 12 months) was 10.8% (25.6%). Income
financing after the change in working capital, investments and the disposal of
fixed assets (cash flow II) was EUR -88.6 million (EUR -146.9 million). Equity
ratio was 51.8% (56.4%). At the end of the review period the company had unused
credit limits amounting EUR 309.7 million of which EUR 153.6 million were
committed.
The Group employed an average of 3,650 (3,736) people, and 3,509 (3,764) at the
end of the period, including 234 people whose contract will end during the
latter half of the year. The Vianor tyre chain employed 1,386 (1,471) people
and Russian operations 644 (580) people at the end of the period.
Tax rate
The Group's tax rate is effected by tax relieves in Russia. The tax relieves
are valid for as long as the company accrues tax on yields corresponding to the
amount of the Russian investment, and for two years thereafter.
The Group anticipates the tax rate on the entire year 2009 to remain at
previous year's level or increase slightly due to a lower share of taxable
profit made in Russia.
PASSENGER CAR TYRES
4-6/09 4-6/08 Change% 1-6/09 1-6/08 Change% 2008
Net sales, m€ 127.6 195.6 -34.8 245.0 385.7 -36.5 741.6
Operating result, m€ 18.7 63.8 -70.6 34.8 128.8 -73.0 230.0
Operating result,% 14.7 32.6 14.2 33.4 31.0
RONA,% 14.4 34.9 26.6
(rolling 12 months)
The net sales of Nokian passenger car tyres decreased 36.5% year-over-year in
the first half, amounting to EUR 245.0 million (EUR 385.7 million). Operating
result was EUR 34.8 million (EUR 128.8 million) and the operating result
percentage 14.2% (33.4%).
Nokian Tyres' sales decreased in line with the tyre market development. Nokian
Tyres was able to maintain its market shares in the core markets. The preseason
deliveries in Russia declined which derive mainly from the customers' high tyre
inventories and lack of financing. Nokian Tyres' sales grew clearly in North
America.
The financial performance in the review period was affected by the deployed
streamlining measures, a weaker sales mix, lower average price and later timing
of winter tyre preseason sales in Russia and CIS. The currency devaluations in
core markets weakened profits. Price increases implemented in this review
period improved summer tyre prices but a weaker product and country mix and
timing of winter tyre sales reduced winter tyre average price.
Actions to adjust production were implemented in the review period and the
inventory levels started to go down. Fixed costs decreased and cash flow
improved clearly year-over-year. Raw material costs remained high in the review
period due to the use of deliveries and stock lots purchased in 2008 at higher
prices. The decreasing raw material prices and the increased proportion of less
expensive production in Russia were not yet fully reflected in the financial
result; they will become evident gradually during 2009.
Utilizing new sales opportunities in the western markets, securing the market
position in Russia and CIS, defending tyre price levels and controlling the
receivables are key objectives for the rest of the year. The cash flow in 2009
will be improved by restructuring of operations, reducing inventory levels,
personnel adjustments, investment cuts and cost-cutting program including all
cost types.
Nokian summer tyres gained good results with several test wins in international
magazine tests. A new Nordic studded tyre, the Nokian Hakkapeliitta 7, is
expected to boost sales in the winter season.
HEAVY TYRES
4-6/09 4-6/08 Change% 1-6/09 1-6/08 Change% 2008
Net sales, m€ 10.2 25.5 -60.2 22.7 53.4 -57.4 97.7
Operating result, m€ -1.9 5.1 -137.0 -4.0 11.4 -135.5 17.7
Operating result,% -18.4 19.8 -17.8 21.3 18.1
RONA,% 3.4 35.6 25.9
(rolling 12 months)
In the first half the net sales of Nokian Heavy Tyres totalled EUR 22.7 million
(EUR 53.4 million), showing a decrease of 57.4% year-over-year. The operating
result was EUR -4.0 million (EUR 11.4 million) and the operating result
percentage -17.8% (21.3%). The financial performance suffered from weak sales
volumes and drastic production cuts taken due to high carry-over stock from
2008.
Heavy tyres sales decreased in all product categories. Average price remained
on previous year's level. Exceptionally low volumes of machine manufacture cut
the demand for forestry tyres. The demand for harbour and mining tyres, as well
as for various special machinery tyres decreased by more than 50% due to the
slowdown in the global economy. Orders, however, started to recover gradually
at the end of the second quarter, due to customers' low inventories and some
regaining of trust on the markets.
The production cuts that were initiated late last year and have continued all
2009 have gradually started to take effect. Inventories have decreased
significantly from the beginning of the year and cash flow turned positive in
April-June. Lower inventory is expected to gradually improve production volumes
and productivity.
In 2009 focus will be on further inventory cuts, bringing in new customers,
speeding up the development process for new products as well as launching new
logistics and customer service concepts.
Heavy tyre demand is estimated to start to improve slightly during the second
half of 2009 resulting in a slow recovery of production and profits.
VIANOR
4-6/09 4-6/08 Change% 1-6/09 1-6/08 Change% 2008
Net sales, m€ 71.1 80.6 -11.8 111.4 127.3 -12.5 308.3
Operating result, m€ 3.0 5.9 -48.9 -8.6 -4.5 -92.9 4.4
Operating result,% 4.2 7.3 -7.7 -3.5 1.4
RONA,% 0.3 4.0 3.0
(rolling 12 months)
Vianor's net sales decreased by 12.5% year-over-year in the first half,
amounting to EUR 111.4 million (EUR 127.3 million). Operating result was EUR
-8.6 million (EUR -4.5 million) and the operating result percentage -7.7%
(-3.5%).
Vianor's sales and operating result for the first half decreased, but Vianor's
market shares in the core markets are estimated to be the same as last year.
Part of the preseason sales of winter tyres was postponed to the latter half of
the year.
Vianor continued its cost adjustment measures, which included shutting down
non-profitable outlets, making personnel cuts and reducing stock levels. Cash
flow improved with fixed costs and stock levels decreasing. Most of the savings
will be realised in the latter half of the year.
The network expansion proceeded according to plan. At the end of the review
period, Vianor network comprised of 541 outlets of which 368 were partners and
173 equity-owned. Vianor operated in 16 countries; the Nordic countries,
Russia, Ukraine, Kazakhstan, Armenia, the Baltic countries, the USA and Central
Europe. The network grew with 21 outlets during the second quarter.
In 2009 focus will be on improving sales and market shares, maintaining tyre
prices as well as implementing restructuring operations, cost-saving and
procurement programmes. Expanding the partner franchise network will continue
in 2009 according to earlier plans.
Car sales are estimated to increase gradually in the Nordic countries during
the second half compared to the first half of 2009, which will benefit winter
tyre sales and demand for tyre related services.
OTHER OPERATIONS
Truck tyres
The net sales of Nokian truck tyres were EUR 9.6 million (EUR 12.4 million),
down 22.9% over the previous year. The European markets declined more than 30%.
Nokian truck tyres sales were expanded to new market regions in Eastern Europe.
Contract manufacturing volumes were reduced and the inventory levels cut.
The clear majority of Nokian truck tyre sales derive from winter products
during the second half of the year. Sales will however be lower than in 2008.
The new Nokian Hakkapeliitta Truck F launched in the first half will expand
sales opportunities.
RUSSIA AND THE CIS COUNTRIES
Nokian Tyres' sales in Russia and the CIS countries totalled EUR 71.9 million
(EUR 226.3 million) in the review period. This entails a 68.3% decrease from
the previous year. Sales in Russia were EUR 52.7 million (EUR 191.2 million).
Sales in CIS (excluding Russia) were EUR 19.2 million (EUR 35.1 million).
Nokian Tyres' preseason sales declined due to customers' high carry-over
inventories and lack of financing. The distribution network was extended by
signing additional distribution agreements and expanding the Vianor network.
There were 289 Vianor franchising outlets in Russia and the other CIS countries
at the end of the review period.
Six out of seven production lines of the Russian plant were operating with
limited capacity. A significant share of the production was exported due to the
decline in demand in Russia. New mixing machines were installed, and a storage
extension was taken in use during the review period. The fully completed
production process creates logistics and raw material cost savings compared to
2008. The Hakkapeliitta Village construction continued.
Russian economy has fallen into recession in 2009 with estimated real GDP
growth rate of -9.6% year-over-year at the end of the review period. Actual
growth rate will depend primarily on commodity prices like oil and gas. Yet,
overall growth trend is estimated to continue: average GDP growth for 2008-2014
is estimated to be at roughly 4% a year. Overall, the economy seems to have
adapted to the new crisis reality and, for the most part, stabilized. However,
there is still uncertainty despite the partly recovered oil price.
Consumer purchasing power is estimated to be lower in 2009 but it is expected
to improve from 2010 onwards. Ruble's devaluation against major currencies has
exceeded 20% from late 2008 to early 2009. Further devaluation is possible in
case of falling oil prices.
Decrease of car sales continued in early 2009 (-49% in January-June). Decline
of over 50% is currently forecasted for 2009 in the basic scenario with
recovery starting in 2010 and gaining momentum in 2011-2012. Huge market
potential has not disappeared; there is still strong underlying consumer
demand. The Nokian Tyres plant located in Russia, inside the customs borders,
provides a significant competitive edge on the market.
INVESTMENTS
Investments during the review period amounted to EUR 59.7 million (EUR 80.3
million). The company's total investments in 2009 will be approximately EUR 85
million (EUR 181.2 million). EUR 50 million (EUR 121 million) will be spent on
completing projects started in 2008 concerning the Russian plant's operations
and extension. The remainder comprises production investments in the Nokia
plant, 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 2007A on the NASDAQ OMX Helsinki Ltd so that the listing would
commence on 1 March 2009.
The total number of stock options 2007A is 2,250,000. Each stock option 2007A
entitles its holder to subscribe for one Nokian Tyres plc share. The shares can
be subscribed with the stock options 2007A during 1 March 2009 - 31 March 2011.
In the aggregate, the stock options 2007A entitle their holders to subscribe
for 2,250,000 shares. The present share subscription price with stock options
2007A is EUR 16,08/share. The dividends payable annually will be deducted from
the share subscription price.
2. Shares subscribed with option rights
After December 9, 2008 registered increase in share capital a total of 400
Nokian Tyres plc's shares have been subscribed with the 2004B option rights and
200 shares with 2004C option rights. These option rights are attached to the
Nokian Tyres plc's Option Programs of 2004. An increase in share capital
totalling 120 euros was entered into the Trade Register on February 25, 2009.
The shares are traded on the Nasdaq OMX Helsinki Ltd together with the old
shares as of February 26, 2009. After the increase, the number of Nokian Tyres
shares is 124,846,590 and the share capital is EUR 24,969,318.
After February 25, 2009 registered increase in share capital a total of 1,900
Nokian Tyres plc's shares have been subscribed with the 2004B option rights.
These option rights are attached to the Nokian Tyres plc's Option Programs of
2004. An increase in share capital totalling 380 euros was entered into the
Trade Register on May 25, 2009. The shares will be traded on the NASDAQ OMX
Helsinki Ltd together with the old shares as of May 26, 2009. After the
increase, the number of Nokian Tyres shares is 124,848,490 and the share
capital is EUR 24,969,698.00.
3. Share price development
The Nokian Tyres' share price was EUR 13.40 at the end of the review period
(EUR 30.50). The average share price during the period was EUR 10.62 (EUR
27.16), the highest EUR 14.58 (EUR 33.73) and the lowest EUR 7.00 (EUR 19.04).
A total of 135,454,384 shares were traded during the period (126,584,416),
representing 108 % (101%) of the company's overall share capital. The company's
market value at the end of the period amounted EUR 1,673 billion (EUR 3,807
billion). The company's percentage of Finnish shareholders was 40.2% (24.8%)
and 59.8% (75.2%) 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
The Annual General Meeting of Nokian Tyres held on April 2, 2009 accepted the
profit and loss statement for 2008 and discharged the Board of Directors and
the President from liability. The final dividend was set at EUR 0.40 per share.
The matching date was April 7, 2009 and the payment date April 21, 2009.
4.1 Board of Directors and auditor
The number of Board members was set at seven. Kim Gran, Hille Korhonen, Hannu
Penttilä, Aleksey Vlasov, Petteri Walldén and Kai Öistämö will continue as
Board members. Yasuhiko Tanokashira was elected as a new member of the Board.
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 Board members
The Annual General Meeting decided that the monthly fee paid to the Chairman of
the Board would be EUR 5,833, or EUR 70,000 per year, while that paid to Board
members was set at EUR 2,917 or EUR 35,000 per year. It was also decided that
each member of the Committee will receive a meeting fee of EUR 500 for each
Committee meeting attended.
In addition, it was decided that, according to the existing practices, 60% of
the annual fee be paid in cash and 40% in company shares, such that in the
period from April 3 to April 30, 2009, 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
decision 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. Adjustment measures and cost-cutting programme
At the turn of the year, Nokian Tyres initiated measures to adjust its
production and structure, the goal being to improve productivity and achieve
annual cost savings of approximately EUR 50 million. The company informed about
the statutory negotiations decisions related to adjustment issues in stock
exchange releases on November 19 and December 19, 2008, as well as January 20
and March 9, 2009.
The production of Nokia plant was changed from a continuous three-shift
seven-days model to a five-day (discontinued) three-shift model. As a result of
the adjustments, the annual production volume of Nokian passenger car tyres at
the Nokia plant will decrease from the previous 6 million to less than 4
million tyres in 2009.
In the review period the total group personnel was cut by 494 employees.
Lay-offs were carried out in all business units according to the cost-cutting
programme.
RISKS, UNCERTAINTY FACTORS AND DISPUTES IN THE NEAR FUTURE
The Group's short term risks are derived from continuing uncertainty of the
world economy and the impact on the tyre markets. A decrease in demand may have
a negative effect on sales volume and lead to decreasing profits.
In terms of exchange rate risks, the main risks facing Nokian Tyres in the near
future are related to the development of the Russian rouble, the Ukrainian
hryvnia and the Kazakhstanian tenge.
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 Ukrainian hryvnia, the US dollar, and the Swedish and
Norwegian krona.
Nokian Tyres' other risks and uncertainty factors in the near future have to do
with the shortage of financing for customers in Russia and CIS, the success of
sales in the key markets, the repatriation of receivables and the development
of the financial markets. Special attention has been drawn to securing customer
payments. Russian receivables account for around 40% of the Group's total
receivables. All overdue trade receivables have been restructured and incoming
payments are in line with the agreements.
Nokian Tyres has certain pending legal proceedings and litigations in some
countries. At this moment, the company does not expect these proceedings to
have any material impact on the performance or future outlook.
OUTLOOK FOR 2009
Uncertainty in the market is expected to continue all 2009 although underlying
drivers for demand on Nokian Tyres' core markets show signs of stabilizing. The
negative changes in demand have left the market and tyre producers with
carry-over inventory and receivables. At the moment the level of demand seems
to have hit the bottom, stabilized and some signs of improvement can be seen.
The last six months of the year, and especially the fourth quarter, have
traditionally had the biggest impact on the sales and performance of Nokian
Tyres, due to the seasonal nature of operations and the high share of winter
tyres. In 2009, the timing of sales is expected to revert to the traditional
model with preseason winter tyre sales being done later than in 2008. The share
of Russian and CIS sales in the portfolio will fall this year and is partly
compensated by increased sales in North America and in Central and Eastern
Europe. This will have an adverse effect on average sales prices in 2009.
The defence of profitability at Nokian Tyres will be supported by the
increasing share of Russian manufacture, structural changes and the
cost-cutting measures that affect all Group operations. The benefits of
restructuring are gradually impacting results with full effect during the
second half of the year.
Raw material costs are estimated to drop by approximately 20% during second
half-year compared to the first half of 2009.
In 2009 Nokian Tyres will provide clearly stronger cash flow by reducing
inventory and receivables by more than EUR 100 million and cutting investment
by EUR 96 million compared with 2008.
A strong distribution, good seasonal logistics, local low cost production
inside duty borders and new products will give Nokian Tyres a good chance to
strengthen its market leadership in the core markets and to return to
profitable growth as soon as markets start to recover.
Guidance for 2009(updated):
Market headwind will continue all 2009 but the winter tyre season, improving
sales mix, restructuring and lower raw material costs are expected to improve
sales and operating margin clearly during the second half compared to the first
half of the year. Cash flow is expected to be significantly better than in
2008. However, the net sales and operating result for full year 2009 will be
significantly lower than in 2008.
Previous guidance of May 7, 2009 was: “The first quarter of 2009 is expected to
be the weakest of the year for Nokian Tyres. The company expects sales to
increase clearly during the later quarters due to seasonality. However, the net
sales and operating result in the second quarter and full year 2009 will be
significantly lower than in 2008.”
This interim report has been prepared in accordance with IAS 34
'Interim Financial Reporting'. Since 1.1.2009 the Group has
applied amendment to the IAS 1 'Presentation of Financial Statements'
affecting the disclosure of the consolidated income statement and
statement of changes in equity. In addition, the Group has adopted
new IFRS 8 'Operating Segments' affecting the disclosure of the notes
to the consolidated financial statements. Otherwise this interim
report has been prepared in accordance with the same accounting
policies as in the most recent annual financial statements.
The interim report figures are unaudited.
NOKIAN TYRES
CONSOLIDATED INCOME STATEMENT
Million euros 4-6/09 4-6/08 1-6/09 1-6/08 Last 12 1-12/08
months
Net sales 191.1 284.0 346.7 530.3 897.3 1,080.9
Cost of sales -122.0 -151.6 -224.7 -285.0 -527.9 -588.1
Gross profit 69.1 132.5 122.1 245.4 369.4 492.7
Other operating income 0.6 0.2 1.0 0.6 2.6 2.2
Selling and marketing
expenses -41.1 -48.4 -84.9 -96.3 -187.4 -198.8
Administration expenses -6.0 -5.3 -12.7 -11.4 -28.8 -27.4
Other operating expenses -2.4 -4.8 -7.9 -9.7 -20.0 -21.8
Operating result 20.3 74.2 17.5 128.6 135.9 247.0
Financial income -4.0 2.9 58.3 21.9 147.6 111.1
Financial expenses -4.3 -8.4 -81.2 -32.0 -233.5 -184.3
Result before tax 12.0 68.6 -5.3 118.4 50.0 173.8
Tax expense (1 -0.1 -14.7 6.8 -19.4 -7.6 -33.9
Result for the period 11.9 54.0 1.5 99.1 42.3 139.9
Attributable to:
Equity holders of the
parent 11.9 54.0 1.5 99.1 42.3 139.9
Minority 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 0.10 0.43 0.01 0.80 0.34 1.12
diluted, euros 0.10 0.40 0.03 0.75 0.36 1.10
CONSOLIDATED OTHER COMPREHENSIVE
INCOME 4-6/09 4-6/08 1-6/09 1-6/08 1-12/08
Million euros
Result for the period 11.9 54.0 1.5 99.1 139.9
Other comprehensive
income,net of tax:
Gains/Losses from hedge
of net investments in
foreign operations -5.6 -1.0 -10.8 3.4 6.2
Interest rate swaps 0.0 0.0 0.0 0.2 -0.1
Translation differences
on foreign operations (2 8.7 0.8 -25.3 -11.6 -46.4
Total other comprehensive
income for the period,
net of tax 3.1 -0.2 -36.1 -8.1 -40.3
Total comprehensive income
for the period 15.0 53.7 -34.6 91.0 99.6
Total comprehensive income
attributable to:
Equity holders of the
parent 15.0 53.7 -34.6 91.0 99.6
Minority 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.
2)Since the beginning of this year the Group has internal loans that
are recognised as net investments in foreign operations in accordance
with IAS 21 'The Effects of Changes in Foreign Exchange Rates'.
KEY RATIOS 30.6.09 30.6.08 31.12.08
Equity ratio, % 51.8 56.4 54.8
Gearing, % 68.0 47.3 41.0
Equity per share, euro 5.59 6.07 6.20
Interest-bearing net debt,
mill. euros 474.4 358.7 319.0
Capital expenditure,
mill. euros 59.7 80.3 181.2
Depreciation and amortisations,
mill. euros 30.9 26.3 56.2
Personnel, average 3,650 3,736 3,812
Acquisitions and disposals of items
of property, plant and equipment 52.0 70.7 150.1
Number of shares (million units)
at the end of period 124.85 124.83 124.85
in average 124.85 124.39 124.61
in average, diluted 128.87 132.49 131.47
CONSOLIDATED STATEMENT OF 30.6.09 30.6.08 31.12.08
FINANCIAL POSITION
Million euros
Non-current assets
Property, plant and equipment 508.5 463.0 499.8
Goodwill 54.0 54.7 53.9
Other intangible assets 20.0 13.7 19.0
Investments in associates 0.1 0.1 0.1
Available-for-sale
financial assets 0.2 0.3 0.2
Other receivables 11.1 13.7 11.6
Deferred tax assets 30.6 22.4 20.3
Total non-current assets 624.5 567.9 604.9
Current assets
Inventories 259.3 237.1 290.9
Trade receivables 301.8 421.4 268.4
Other receivables 136.7 92.8 143.0
Cash and cash equivalents 24.1 26.2 113.2
Total current assets 721.8 777.6 815.5
Equity
Share capital 25.0 25.0 25.0
Share premium 155.2 155.0 155.2
Translation reserve -89.1 -21.0 -53.0
Fair value and hedging reserves -0.1 0.2 -0.1
Retained earnings 606.6 598.8 647.6
Minority interest 0.0 0.0 2.7
Total equity 697.6 757.8 777.3
Non-current liabilities
Deferred tax liabilities 26.6 29.0 27.6
Provisions 1.2 0.0 1.1
Interest-bearing liabilities 301.6 252.1 394.5
Other liabilities 2.1 2.3 2.1
Total non-current liabilities 331.5 283.4 425.3
Current liabilities
Trade and other payables 119.3 170.3 178.9
Provisions 1.1 1.1 1.1
Interest-bearing liabilities 196.9 132.8 37.8
Total current liabilities 317.3 304.3 217.8
Total assets 1,346.4 1,345.4 1,420.4
CONSOLIDATED STATEMENT OF
CASH FLOWS 1-6/09 1-6/08 1-12/08
Million euros
Cash flows from operating activities:
Cash generated from
operations -46.6 -54.4 201.1
Financial items and taxes 4.2 -61.0 -182.7
Net cash from operating
activities -42.4 -115.3 18.4
Cash flows from investing activities:
Net cash used in investing
activities -60.8 -83.7 -177.2
Cash flows from financing activities:
Proceeds from issue of share
capital 0.0 6.2 6.4
Change in current financial
receivables and debt 156.0 120.5 25.1
Change in non-current financial
receivables and debt -91.6 3.1 147.5
Dividends paid -49.9 -62.3 -62.3
Net cash from financing
activities 14.4 67.5 116.7
Net change in cash and cash
equivalents -88.7 -131.5 -42.1
Cash and cash equivalents at
the beginning of the period 113.2 158.1 158.1
Effect of exchange rate changes 0.4 0.3 2.8
Cash and cash equivalents at
the end of the period 24.1 26.2 113.2
-88.7 -131.5 -42.1
The effect of exchange rate changes 0.4 million euros
are included in the net cash from operating activities.
Year 2008 that effect was 0.3 million euros.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Million euros
Fair
value Mino-
Trans- and rity
Share Share lation hedging Retained inte-
capital premium reserve reserves earnings rest Total
Equity,
Jan 1st 2008 24.7 149.0 -12.8 0.0 551.9 0.0 712.8
Dividends paid -62.3 -62.3
Exercised
warrants 0.2 6.0 6.2
Share-based
payments 8.5 8.5
Other changes 1.6 1.6
Total compre-
hensive income
for the period -8.2 0.2 99.1 91.0
Change in
minority inte-
rest 0.0
Equity,
Jun 30th 2008 25.0 155.0 -21.0 0.2 598.8 0.0 757.8
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 5.6 5.6
Other changes 1.8 1.8
Total compre-
hensive income
for the period -36.1 0.0 1.5 -34.6
Change in
minority inte-
rest -2.7 -2.7
Equity,
Jun 30th 2009 25.0 155.2 -89.1 -0.1 606.6 0.0 697.6
SEGMENT INFORMATION
The segment information is reported according to the business
segments. Segments are based on the internal profit centre
organisation and financial reporting structure. The segments
comprise of entities with products and services subject to
marketing strategies, distribution channels, risks and returns
that are different from those of other segments. They are also
managed separately.
Application of IFRS 8 has not changed the reported business segments
of the Group as the segment information has been based on financial
reporting structure also before where the measurement principles are
in accordance with IFRS standards.
Pricing of the inter-segment transactions reflect current market
prices. Evaluation of profitability and decicions on resource
allocation are based on operating result of each segment.
Segments are:
Passenger car tyres -profit centre develops, produces and obtains
revenues from sales of summer and winter tyres for cars and vans.
Heavy tyres -profit centre obtains its revenues from tyres for
forestry machinery, special tyres for agricultural machinery and
industrial machinery.
Vianor tyre chain sells car and van tyres, truck tyres as well as
other automotive products and services. In addition to Nokian brand,
Vianor sells also other leading tyre brands.
Other operations include truck tyre business. In addition, Other
operations contain business development and Group management
unallocated to the segments.
Million euros 4-6/09 4-6/08 1-6/09 1-6/08 1-12/08
Net sales
Passenger car tyres 127.6 195.6 245.0 385.7 741.6
Heavy tyres 10.2 25.5 22.7 53.4 97.7
Vianor 71.1 80.6 111.4 127.3 308.3
Other operations 5.2 7.5 9.6 12.4 33.4
Eliminations -22.9 -25.2 -42.0 -48.5 -100.2
Total 191.1 284.0 346.7 530.3 1,080.9
Operating result
Passenger car tyres 18.7 63.8 34.8 128.8 230.0
Heavy tyres -1.9 5.1 -4.0 11.4 17.7
Vianor 3.0 5.9 -8.6 -4.5 4.4
Other operations -1.2 -1.6 -3.9 -4.0 -6.4
Eliminations 1.6 1.0 -0.7 -3.1 1.2
Total 20.3 74.2 17.5 128.6 247.0
Operating result,
% of net sales
Passenger car tyres 14.7 32.6 14.2 33.4 31.0
Heavy tyres -18.4 19.8 -17.8 21.3 18.1
Vianor 4.2 7.3 -7.7 -3.5 1.4
Total 10.6 26.1 5.1 24.2 22.8
Cash Flow II
Passenger car tyres -5.7 -57.1 -81.7 -101.5 -2.3
Heavy tyres 5.4 2.8 0.7 -3.8 10.6
Vianor 6.5 -4.3 -7.9 -17.2 1.4
Total 7.4 -68.8 -88.6 -146.9 9.5
CONTINGENT LIABILITIES 30.6.09 30.6.08 31.12.08
Million euros
FOR OWN DEBT
Mortgages 0.9 1.0 0.9
Pledged assets 35.2 41.8 37.4
OTHER OWN COMMITMENTS
Guarantees 2.9 1.4 2.1
Leasing and rent commitments 111.8 103.1 104.9
Purchase commitments of
property, plant and equipment 0.8 24.4 1.5
DERIVATIVES 30.6.09 30.6.08 31.12.08
Million euros
INTEREST RATE DERIVATIVES
Interest rate swaps
Notional amount 14.2 14.7 14.4
Fair value -0.3 0.2 -0.1
FOREIGN CURRENCY DERIVATIVES
Currency forwards
Notional amount 390.3 622.4 396.5
Fair value 1.3 0.4 24.4
Currency options, purchased
Notional amount 46.7 13.0 5.0
Fair value 0.8 0.2 0.5
Currency options, written
Notional amount 91.0 14.0 10.1
Fair value -0.7 -0.2 -0.3
The fair value of interest rate derivatives is defined by cash flows
due to contracts. Interest rate swaps are wholly designated as cash
flow hedges and their changes in fair value relating to the effective
portion of the hedge is recognised in equity and the potential
ineffective portion is recognised in the income statement.
The fair value of forward exchange contracts is calculated at the
forward rates on the reporting date on the basis of cash flows
arising from contracts. The fair value of currency options is
calculated using the Garman-Kohlhagen option valuation model.
Foreign currency derivatives are only used to hedge the Group's net
exposure. The changes in fair value of foreign currency derivatives
are reported in the income statement excluding the foreign currency
derivatives that are hedging the foreign currency denominated net
investment in a foreign subsidiary. Hedge accounting is applied for
those hedges and for hedges meeting the hedge accounting criteria the
changes in fair value are wholly deferred in equity except for the
potential ineffective portion and the time value of currency options,
which are recognised in the income statement.
The notional amount of foreign currency derivatives is the euro
equivalent of the contracts' currency denominated amount on the
reporting date.
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
1-6/09 1-6/08 1-12/08
Sales of goods 17.5 24.2 26.7
Purchases of goods 13.7 12.4 33.5
30.6.09 30.6.08 31.12.08
Trade and other receivables 6.6 10.9 2.5
Trade and other payables 5.8 7.6 9.5
Key management personnel 1-6/09 1-6/08 1-12/08
Total employee benefit expenses 4.0 3.8 8.7
Of which share-based payments 2.7 2.5 5.8
During January 1 - June 30, 2009, the President and other key
management personnel were granted no share options (during January 1 - June 30,
2008, a total of 766,000 share options for
the subscription of 766,000 shares was granted). The share option
plan terms for the key management personnel are equal to the share
options directed at other personnel. On June 30, 2009 the key
management personnel held 1,368,153 share options for the
subscription of 1,568,340 shares (1,450,300 share options for the
subscription of 1,759,000 shares on June 30, 2008). Of these share
options 708,153 pcs were exercisable for the subscription of 908,340
shares on June 30, 2009 (34,300 pcs exercisable for the subscription of 343,000
shares on June 30, 2008).
No share options have been granted to the other members of the
Board of Directors.
ACQUISITIONS
Acquisitions in 2009
In 2009 the Group has expanded in Vianor-chain through a minor asset
deal with US-based Kingdom Ventures, Inc. on 1 February 2009.
Additionally, on March 12 2009 the Group acquired the whole remaining
stock of Hakka Invest Oy domiciled in Finland. The company has been
consolidated as a group company even prior to the acquisition based
on the exercised control through contractual arrangements, although
the group ownership has not exceeded 22%.
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 recogition of goodwill.
Specification of the cost of business combinations
Paid in cash 3.1
Costs directly attributable to the
business combinations 0.0
Total cost of the business combinations 3.1
Fair value of the net assets acquired 3.0
Goodwill 0.0
Carrying
Fair values amounts
recorded in before
combination combination
Specification of acquired net assets
Intangible assets 0.0 0.0
Property, plant and equipment 0.2 0.2
Inventories 0.1 0.1
Receivables 2.6 2.6
Cash and cash equivalents 0.0 0.0
Liabilities 0.0 0.0
Net assets acquired 3.0 3.0
Consideration paid in cash 3.1
Cash and cash equivalents
in the subsidiaries acquired 0.0
Net cash outflow 3.1
Since these pieces of information are not material individually,
the presentation is aggregated. The profits of the acquired
companies, totalling EUR 0.1 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:
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 and major media
Nokian Tyres plc will publish the interim report January-June on Thursday
August 6, 2009 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/resultinfo2009q2
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: 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 January-September 2009 result will be published on November 3,
2009. Releases and company information will be found from
http://www.nokiantyres.com
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