2013-10-31 07:00:01 CET
2013-10-31 07:00:13 CET
REGULATED INFORMATION
Nokian Renkaat - Interim report (Q1 and Q3)
Nokian Tyres plc Interim Report January-September 2013: EBIT improved in Q3 – a good sales mix, strong market position and raw material tailwind support margins
Nokia, Finland, 2013-10-31 07:00 CET (GLOBE NEWSWIRE) -- Nokian Tyres plc
Interim Report 31 October 2013, 8 a.m.
Nokian Tyres plc Interim Report January-September 2013:
EBIT improved in Q3 - a good sales mix, strong market position and raw material
tailwind support margins
7-9/2013:
Nokian Tyres Group's Net sales decreased by 3.0% to EUR 357.0 million (EUR
368.0 million in
7-9/2012). Operating profit grew by 11.9% to EUR 95.7 million (85.5). Profit
for the period amounted to EUR 70.9 million (59.6). Earnings per share amounted
to EUR 0.53 (EUR 0.45).
1-9/2013:
Nokian Tyres Group's Net sales decreased by 4.9% to EUR 1,109.1 million (EUR
1,166.0 million in
1-9/2012). Operating profit was EUR 292.2 million (303.3). Profit for the
period amounted to EUR 220.1 million (242.6). Earnings per share amounted to
EUR 1.66 (EUR 1.85).
Outlook:
The market demand for replacement car tyres in Nordic countries and Central
Europe have taken a turn for the better in H2 after a weak start for the year
and are expected to be close to previous year's level in full year 2013. In
Russia lower GDP growth and car sales still penalize tyre demand in Q4 but
there are signs of some recovery for both summer and winter tyres going into
2014.
Nokian Tyres' full year sales in Nordic countries are expected to show some
growth, and to be on previous year's level in Central Europe. Despite a clear
improvement in market share and growth of winter tyre sales, full year sales is
estimated to show some decrease in Russia and North America.
The pricing environment for 2013 remains challenging for all tyre categories.
Nokian Tyres margins, however, are supported by an improved industrial
structure combined with approximately 12.5% lower raw material costs (€/kg)
offering a tailwind of some EUR 50 million in full year 2013. The unfavorable
currency exchange rate development of the Russian Rouble during 2013 is
estimated to generate a negative effect of approximately EUR 25 million on Net
sales and approximately EUR 14 million on Operating profit of Nokian Tyres
Group in full year 2013.
Due to the weakened Rouble exchange rate and softer market demand for tyres in
Russia, Nokian Tyres' Net sales and Operating profit are estimated to be
somewhat lower in the second half and full year 2013 compared to 2012. In 2014
the company estimates to be back on a profitable growth track.
Financial guidance (updated 4 October 2013)
In 2013, Net sales and Operating profit will show some decline compared to 2012.
Previous guidance from 9 August 2013
In 2013, the company is positioned to show flat to some growth in Net sales and
Operating profit compared to 2012.
Key figures, EUR 7-9/13 7-9/12 Change 1-9/13 1-9/12 Change 2012
million: % %
Net sales 357.0 368.0 -3.0 1,109.1 1,166.0 -4.9 1,612.4
Operating profit 95.7 85.5 11.9 292.2 303.3 -3.6 415.0
Operating profit % 26.8 23.2 26.3 26.0 25.7
Profit before tax 83.4 73.2 13.9 255.1 283.5 -10.0 387.7
Profit for the period 70.9 59.6 19.0 220.1 242.6 -9.2 330.9
Earnings per share, 0.53 0.45 18.6 1.66 1.85 -10.1 2.52
EUR
Equity ratio, % 65.6 62.7 71.2
Cash flow from -94.3 -125.9 25.1 -190.2 -289.8 34.3 262.3
operations
RONA,% (roll. 12 21.6 24.3 23.0
months)
Gearing, % 28.9 35.6 -4.5
Kim Gran, President and CEO:
“Our strong market leader position in the core markets in Russia and Nordic
countries is intact and we managed again to increase both market share and our
distribution footprint in all markets. The newly launched Hakkapeliitta tyre
range has set new standards for winter tyres. It has been very well received by
both consumers and distributors, helping us to maintain average prices, to
improve sales mix and to book reasonably good results. The headwind, with low
car sales and weaker tyre demand, in the European economy continued and spread
to Russia. We do not foresee any major improvement in demand short term but
there are some signs of improvement already in H2 and going into 2014. We
continue to target growth, to improve results, to excel on the back of new
products, to expand distribution and improve productivity further.
Nokian Tyres' sales in the Nordic countries are solid, the growth supported by
the renewed winter tyre range and an expanding distribution network. Our
already strong market position in the Nordics has in 2013 been further improved
by a clear growth in Sweden. Our sales growth in Russia took a breath in the
third quarter, even though we managed again to grow winter tyre sales in a
weaker market. In CE we see the tide turning and our sales volumes increasing
faster than the average market demand.
The highlights of Q3 results were that our profitability remained strong and
market shares improved. Our sales mix was strong securing a flat ASP €/kg in a
challenging market. Our margins remained while being pulled in two directions:
a strong tailwind from material cost was challenged by the unfavourable
exchange rate of the Russian Rouble and a tough pricing environment. A
reasonably high utilization rate and an increased share of Russian production
gave our profits a shield against increased depreciation and marketing costs.
During the present phase of slower market growth we continue to develop and
improve productivity and our industrial structure. In Q1 we commissioned
another line (line 12) in the Russian factory and followed up in Q2 with
installation of line 13. This is taking the annualized capacity in Russia to
more than 15 million tyres by end of 2013.
We continue to expand our distribution network spearheaded by Vianor. We opened
124 new Vianor stores in Jan-Sep 2013, now totalling 1,161 stores in 26
countries. In Russia and CIS Nokian Hakka Guarantee dealership program includes
nearly 3,000 tyre stores and car dealers. A new softer partner franchise model
Nokian Authorized Dealer (NAD) has also been rolled out with 262 shops
contracted in Italy, Germany and China.
We are looking into the future with confidence and the fighting Hakkapeliitta
spirit. New product and service innovations and a growing share of Russian
production support our profitability. Our winter tyre sales in our core markets
are fuelled by the spearhead product Nokian Hakkapeliitta 8's overwhelming
winning streak in the car magazines' winter tyre tests. Our tyre chains Vianor
and NAD are to be expanded and our market geography in Russia and Northern
Europe is showing signs of improving demand offering us a good base for
profitable business.”
Market situation
The global economy has showed signs of improvement during the last few months.
The global year end growth in 2013 is expected to be modest but to turn to a
growth of 3.9% in 2014. USA, shadowed by the fiscal drag, still seems to be the
growth engine with an improved housing sector and employment giving fuel for
further GDP growth. China's economy is again believed to be stronger than
expected with a GDP growth of approximately 7.5% in 2013. During the summer the
European economy started to grow after 18 months of recession. Growth is still
fragile and uncertainty prevails as many risks remain in the financial sector.
In Nokian Tyres' core markets the Nordic countries continue to show slow but
comparatively stable development with a full year 2013 GDP growth estimate of
1%. In Russia the growth rate has been slowing down with full year 2013 GDP
growth estimated at 1.8% and growth for 2014 projected as 3.5%.
In Russia consumer confidence has been on a relatively healthy level, but
consumer spending has been held back by increased interest rates and the
uncertainty relating to the global economic turmoil. The sales of new cars in
1-9/2013 in Russia decreased by 7%, while foreign brands, representing some 80%
of total, are down 6% compared to 1-9/2012. September sales seems to confirm
that on the back of government's recent program to subsidize car loan interest
rates, the new car sales are estimated to take an upturn in Q4/2013 and during
early 2014. In 2013 demand for tyres is expected to decrease compared to 2012,
slightly for winter tyres and clearly for summer tyres. Tyre prices have
decreased, especially in the B-segment, due to price pressure and reductions by
the Japanese suppliers.
In Europe the weak economy had a clear negative effect on consumer confidence
and spending in the beginning of the year. In the review period the sales of
new cars dropped by 4% year-over-year, however, sales during end Q3 was already
up compared to 2012 in the north of Europe. Replacement car tyre sales
decreased by 2%, with winter tyre sell-in to distributors down by 8% compared
to 1-9/2012. Consumer sales for tyres turned to growth during summer months and
demand for winter tyres picked up in Q3 due to seasonality and pent up demand.
There has been pricing pressure both in the premium and economy tyre segments
in Central Europe and sell-in prices of the tyre industry declined during
H1/2013. The price rot seems to have stopped but there is still little evidence
of price increases.
In the Nordic countries the new car sales decreased by 4% in 1-9/2013
year-over-year. The market volume of car tyres showed a slight decrease of 1%,
with winter tyre sell-in increasing 2%. The sales of new cars and consumer
tyres started to pick up towards the end of the review period, and the full
year volumes are expected to reach the previous year's level, with winter tyre
sales growing.
The demand for speciality heavy tyres remains comparatively weak. Demand for
mining machinery tyres has decreased along with the weakening prices of metals.
Forestry tyre markets have been soft in the review period, but are showing
signs of improvement.
During the review period there has been a recovery in truck tyre demand. In
Europe the demand for premium truck tyres was up by 7%, and in Russia the
demand increased by 21% year-over-year. In the Nordic countries, however, the
demand was still down by 5%.
Raw materials
Tyre industry raw material prices have continued to decrease in the review
period, and the tailwind is expected to continue all 2013 and into H1/2014. The
raw material cost (€/kg) for Nokian Tyres was down 12.3% in 1-9/2013
year-over-year. The raw material cost is estimated to decrease by 1% in Q4/2013
versus Q3/2013, and 12.5% full year offering a tailwind of some EUR 50 million
in 2013 vs. 2012.
July-September 2013
Nokian Tyres Group recorded Net sales of EUR 357.0 million (368.0), showing a
decrease of 3.0% compared with Q3/2012. In the Nordic countries sales increased
by 1.0%. Sales in Russia decreased by 24.4%. Russia and CIS consolidated sales
was down by 10.2%. In Other Europe sales were up by 18.4% year-over-year. In
North America sales increased by 7.2%.
Raw material cost (EUR/kg) in manufacturing decreased in the third quarter by
17.2% year-over-year and decreased by 8.5% versus the second quarter of 2013.
Fixed costs amounted to EUR 95.0 million (89.7), accounting for 26.6% (24.4%)
of net sales.
Nokian Tyres Group's Operating profit amounted to EUR 95.7 million (85.5). The
Operating profit was negatively affected by expensed credit losses and
provisions of EUR 2.5 million (0.0).
Net financial expenses were EUR 12.3 million (12.3). Net interest expenses were
EUR 5.4 million (4.8) including EUR 2.5 million (2.3) in non-cash expenses
related to convertible bonds. Net financial expenses include EUR 6.8 million
(7.5) of exchange rate differences of which EUR 8.6 million is unrealized
related to internal lending in Rouble due in the end of the year.
Profit before tax was EUR 83.4 million (73.2). Profit for the period amounted
to EUR 70.9 million (59.6), and EPS were EUR 0.53 (EUR 0.45).
Income financing after the change in working capital, investments and the
disposal of fixed assets (Cash flow from operations) was EUR -94.3 million
(-125.9).
January-September 2013
Nokian Tyres Group recorded Net sales of EUR 1,109.1 million (1,166.0), showing
a decrease of 4.9% compared with 1-9/2012. In the Nordic countries sales
increased by 2.0% representing 32% (31%) of the group's total sales. Sales in
Russia decreased by 3.7%. Russia and CIS consolidated sales grew by 0.8% and
formed 37% (36%) of the group's total sales. In Other Europe sales were down by
8.6% year-over-year representing 23% (25%) of the group's total sales. In North
America sales decreased by 1.1% and were 7% (7%) of the group's total sales.
Sales of Passenger Car Tyres were down by 5.5% representing 74% (75%) of the
group's total sales. Heavy Tyres' sales decreased by 10.2% and were 6% (6%) of
the group's total sales. Vianor's sales increased by 0.6% forming 17% (16%) of
the group's total sales. The sales of Other operations were up by 2.4%
representing 3% (3%) of the group's total sales.
Raw material cost (EUR/kg) in manufacturing decreased by 12.3% year-over-year.
Fixed costs amounted to EUR 297.2 million (276.7), accounting for 26.8% (23.7%)
of Net sales. Total salaries and wages were EUR 136.7 million (141.7).
Nokian Tyres Group's Operating profit amounted to EUR 292.2 million (303.3).
The Operating profit was negatively affected by the IFRS 2 -compliant option
scheme write-off of EUR 10.2 million (8.3) and expensed credit losses and
provisions of EUR 5.9 million (4.9).
Net financial expenses were EUR 37.1 million (19.7). Net interest expenses were
EUR 13.3 million (11.3) including EUR 7.0 million (6.7) in non-cash expenses
related to convertible bonds. Net financial expenses include EUR 23.9 million
(8.4) of exchange rate differences of which EUR 23.9 million is unrealized
related to internal lending in Rouble due in the end of the year.
Profit before tax was EUR 255.1 million (283.5). Profit for the period amounted
to EUR 220.1 million (242.6), and EPS were EUR 1.66 (EUR 1.85).
Return on net assets (RONA, rolling 12 months) was 21.6% (24.3%). Income
financing after the change in working capital, investments and the disposal of
fixed assets (Cash flow from operations) was EUR -190.2 million (-289.8).
The Group employed an average of 4,153 (4,057) people, and 4,201 (4,009) at the
end of the period. The equity-owned Vianor tyre chain employed 1,497 (1,329)
people and Russian operations 1,344 (1,238) people at the end of the period.
Exchange rate differences
Net Financial expenses include EUR 23.9 million (8.4) of exchange rate
differences of which EUR 23.9 million is unrealized related to internal
RUB-nominated loans granted by the Finnish parent company to Russian
subsidiaries maturing in the end of year 2013.
Investments
Investments in the review period amounted to EUR 104.8 million (168.5). This
comprises of production investments in the Russian and Finnish factories,
moulds for new products and the Vianor expansion projects.
Financial position on 30 September 2013
Gearing ratio was 28.9% (35.6%). Interest-bearing net debt amounted to EUR
417.2 million (480.5). Equity ratio was 65.6% (62.7%).
The Group's interest-bearing liabilities totalled EUR 502.8 million (543.5) of
which current interest-bearing liabilities amounted to EUR 316.9 million
(205.8). The average interest rate of interest-bearing liabilities was 3.5%
(3.4%). The average interest rate of interest-bearing liabilities was 1.9%
(2.0%) with calculatory non-cash expenses related to the convertible bond
eliminated. Cash and cash equivalents amounted to EUR 85.7 million (63.0).
At the end of the review period the company had unused credit limits amounting
to EUR 536.7 million (479.3) of which EUR 305.9 million (306.1) 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
In the review period the Group's tax rate was 13.7% (14.4%). In 2012 the tax
rate was 14.7%. The tax rate is affected by tax incentives 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 benefits and incentives until approximately 2020. The
estimated tax rate going forward for the next 5 years is 17%.
The authorities' final approvals of the new factory building in Russia took
place at the end of 2012 and the new agreed tax benefits and incentives came
into force in the beginning of January 2013.
PASSENGER CAR TYRES
7-9/13 7-9/12 Change% 1-9/13 1-9/12 Change% 2012
Net sales, m€ 273.8 282.9 -3.2 865.4 915.9 -5.5 1,220.1
Operating profit, m€ 96.3 87.9 9.6 303.3 316.7 -4.2 410.8
Operating profit, % 35.2 31.1 35.0 34.6 33.7
RONA,% (roll.12 m.) 29.9 34.6 32.5
7-9/2013:
Net sales of Nokian Passenger Car Tyres were EUR 273.8 million (282.9).Operating profit improved to EUR 96.3 million (87.9). Operating profit
percentage was up to 35.2% (31.1%).
Operating profit increased in the third quarter on the back of a good sales
mix, decreased raw material cost, high utilization of production capacity and
an increased share of Russian production.
1-9/2013:
Net sales of Nokian Passenger Car Tyres totalled EUR 865.4 million (915.9),
down by 5.5% from the corresponding period a year earlier. Operating profit
amounted to EUR 303.3 million (316.7). Operating profit percentage improved to
35.0% (34.6%). The negative sales growth in the review period related mainly to
weak demand in Central Europe and to Nokian Tyres ending contract manufacturing
of tyres for Bridgestone after 2012.
The company continues to win market share in Russia & CIS and in the Nordic
countries, and the company is the clear market leader in the premium and mid
segment winter tyres. In CE the company has gained market share during the
review period in all product segments, especially in winter tyres as well as
SUV winter and summer tyres.
The Average Selling Price (€/kg) was down 0.4% compared with 1-9/2012 although
the share of mid segment tyres was high and the pricing environment for tyres
was tight. Winter tyres represented 80% (73%) of the company's sales volume in
the review period, which improved mix and supported ASP.
Raw material costs (€/kg) were down 12% year-over-year, which supported margins.
A major overhaul of key winter product offering, altogether five new product
ranges, is being done in 2013. The biggest launch ever includes the new
generation of studded Nokian Hakkapeliitta 8, non-studded Hakkapeliitta R2 and
Hakkapeliitta R2 SUV targeting further growth in core markets. In addition to
the Nordic product range, Nokian Tyres is also introducing two new winter tyres
for the Central European and North American markets: Nokian WR G3 and Nokian WR
SUV 3.
The new Nokian Hakkapeliitta 8 has dominated the winter tyre tests with
victories in practically all car magazines. Also the Central European winter
tyre test results have been a success for Nokian Tyres with test wins in key
markets. The new summer tyre range with the spearhead products Nokian Hakka
Black, Nokian Hakka Blue, Nokian Hakka Green and Nokian Line won several car
magazines' tests in the core markets and in Central Europe in 2012-2013.
Fixed costs increased due to the commissioning of the new factory in Russia
which increased depreciation, and due to increased marketing costs relating to
the launch of new products. Inventories and Capex decreased resulting in an
improved cash flow.
Production output (pcs) was flat versus 1-9/2012. After slow Q1 the output
increased in Q2 with commissioning of a new line (12) in Russia in March. Yet
another line (13) in Russia was installed in Q2. The company utilized full
capacity in Q3/2013 to ensure delivery capability in the consumer winter tyre
season. In the review period 81% of Nokian car tyres (pcs) were manufactured in
the Russian factories.
The target for 2013 is to maximize sales, defend ASP, to win market share in
core markets with new products, to expand distribution further and to improve
productivity and the utilization of capacities.
HEAVY TYRES
7-9/13 7-9/12 Change% 1-9/13 1-9/12 Change% 2012
Net sales, m€ 23.1 25.0 -7.5 70.6 78.5 -10.2 104.4
Operating profit, m€ 2.7 3.5 -24.8 7.5 9.9 -23.7 11.3
Operating profit, % 11.5 14.2 10.7 12.6 10.8
RONA,% (roll.12 m.) 10.4 14.4 12.5
The net sales of Nokian Heavy Tyres totalled EUR 70.6 million (78.5), down by
10.2% year-over-year. Operating profit was EUR 7.5 million (9.9), and the
Operating profit percentage 10.7% (12.6%).
Nokian Heavy Tyres' sales decreased due to weak demand in mining, forestry and
harbour tyres and slowing down of machine building in Europe in most of the
heavy end use product groups. Average Selling Price remained on the same level
year-over-year despite a challenging market situation. Margins were supported
by lower raw material cost and improved productivity.
The production volume was cut by reducing working days to match a lower demand
and to control the inventory level. In the review period the production output
(tonnes) decreased 15%. The low utilization rate with a higher share of fixed
costs penalized the profits.
An investment program is in progress to modernize the factory, to open
bottlenecks in production and to increase radial tyre output. The upgrade of
the factory will be completed in the beginning of 2014. The structural changes
in manufacturing have already reduced manning and improved product quality,
flexibility, and productivity in 1-9/2013.
The outlook in 2013 remains challenging with demand at a comparatively low
level, although the forestry machine building is showing some signs of
improvement. The focus for 2013 is to maximize sales and to optimize production
output.
VIANOR
Equity-owned operations
7-9/13 7-9/12 Change% 1-9/13 1-9/12 Change% 2012
Net sales, m€ 65.3 64.6 1.0 195.3 194.0 0.6 315.3
Operating result, m€ -4.7 -4.6 -3.3 -14.6 -11.7 -24.5 0.0
Operating result, % -7.2 -7.0 -7.5 -6.0 0.0
RONA,% (roll.12 m.) -1.6 0.7 0.0
At the end of the review period Vianor had 183 (178) equity-owned stores in
Finland, Sweden, Norway, USA, Switzerland and Russia. Vianor's net sales
amounted to EUR 195.3 million (194.0), up by 0.6% compared with 1-9/2012.
Operating result was EUR -14.6 million (-11.7) and the Operating result
percentage was -7.5% (-6.0%).
Vianor succeeded in its strategic task of expanding distribution and setting
market prices for Nokian products and was able to win market shares in a
challenging market situation. Net sales were flat year-over-year. Operating
result was negative in the review period due to normal seasonality; it is
expected to turn positive in Q4 and full year 2013 due to sales and profit
generation during the winter tyre season and increased service revenues.
The gradual change of operating model from tyre sales to full car service in
the stores continues with investments and local acquisitions of car service
shops. At the end of the review period a total of 43 car service operations had
been acquired and integrated to existing Vianor stores, which has increased
service sales and caused some consolidation costs.
In 2013 there are on-going special projects in expanding the network,
developing consumer tyre sales and the car services business, improving the
customer experience further, updating all the processes (Vianor Way) and
renewing the ERP-system.
Franchising and partner operations
Vianor expanded the shop network in Nokian Tyres' key markets by 124 stores
during the review period. At the end of the review period the Vianor network
operates in 26 countries and is comprised of totally 1,161 stores of which 978
were partners. Nokian Tyres' market shares improved as a result of the
expansion in each respective country. Expanding the partner franchise network
will continue according to plans; the target is to have more than 1,180 Vianor
stores by the end of 2013.
A new softer partner franchise model Nokian Authorized Dealer (NAD) has been
rolled out with first 262 shops contracted in Italy, Germany and China.
OTHER OPERATIONS
Truck Tyres
Net sales of Nokian Truck Tyres were EUR 39.2 million (38.3), up by 2.4%
compared to 1-9/2012. Operating profit and cash flow improved and were on a
healthy level.
Net sales improved although the truck tyre market was challenging in the Nordic
countries with overall tyre industry sales down by 5%. In the core markets,
Nordic countries and Russia, Nokian Tyres' market share increased due to an
improved product range in both premium and standard tyres.
The distributors' low truck tyre inventories in the Nordic countries, a growing
demand for premium truck tyres in Russia in combination with winter tyre season
are expected to support sales in Q4/2013.
During the rest of the year the focus will be on increasing sales and improving
market shares in the core markets. Expansion to Russia and CIS utilizing the
“Vianor Truck” service concept will continue.
RUSSIA AND THE CIS COUNTRIES
Nokian Tyres' sales in Russia decreased year-over-year by 3.7% to EUR 411.7
million (427.3). Sales in CIS countries (excluding Russia) increased to EUR
42.4 million (23.0). Consolidated sales in Russia and CIS increased by 0.8% to
EUR 454.0 million (450.3).
Nokian Tyres' sales in Russia were down due to lower market demand, especially
of summer tyres and some lower demand of winter tyres, relating to economic
uncertainty and the decreased new car sales in the review period. Nokian winter
tyre sales increased clearly with a growing share of mid-price segment tyres.
Summer tyre sales were down due to distributors' carry-over stocks and the
company selling a bulk of summer tyres for 2013 already in Q4/2012. Nokian
winter tyre market shares improved clearly and the company strengthened its
market leader position in Russia. Payments of customers' trade receivables and
governmental tax incentives came in as planned.
The distribution network was extended by signing additional distribution
agreements and expanding the Vianor network. There were a total of 603 Vianor
stores in 345 cities in Russia and CIS countries at the end of the review
period. The Hakka Guarantee retail network in Russia, working closely with
Nokian Tyres, comprised of 2,776 tyre stores, Vianor shops, car dealers, and
web shops. Nokian Tyres' e-commerce development proceeded according to plans.
The second line in the new factory (line 12) became on stream in Q1/2013,
increasing annual capacity in the Russian factories to approximately 14 million
tyres. Capacity and productivity has increased further as line 13 installation
has been completed in Q2/2013. The completion of line 13 increases the
annualized capacity to in excess of 15 million tyres by end 2013. In Q3
production was running at full utilization.
The Nokian Tyres plant located in Russia inside the customs borders combined
with strong brands and an expanding Vianor chain provides a significant
competitive edge on the market. By Russia joining WTO, the tyre duties will go
down gradually; duty of car and van tyres will decrease from 20% to 18% in 2013
and gradually to 10% in 5 years.
OTHER MATTERS
1. Stock options on the NASDAQ OMX Helsinki Stock Exchange
The total number of stock options 2010A is 1,320,000. Each stock option 2010A
entitles its holder to subscribe for one Nokian Tyres plc share. The shares can
be subscribed with the stock options 2010A during 1 May 2012 - 31 May 2014. In
the aggregate, the stock options 2010A entitle their holders to subscribe for
1,320,000 shares. The present share subscription price with stock options 2010A
is EUR 14.84/share. The dividends payable annually shall be deducted from the
share subscription price.
The total number of stock options 2010B is 1,340,000. Each stock option 2010B
entitles its holder to subscribe for one Nokian Tyres plc share. The shares can
be subscribed with the stock options 2010B during 1 May 2013 - 31 May 2015. In
the aggregate, the stock options 2010B entitle their holders to subscribe for
1,340,000 shares. The present share subscription price with stock options 2010B
is EUR 30.25/share. The dividends payable annually shall be deducted from the
share subscription price.
2. Shares subscribed with option rights
After 17 December 2012 registered new shares a total of 116,427 Nokian Tyres
plc's shares have been subscribed with the 2007C option rights and 248,376 with
the 2010A option rights. These option rights are attached to the Nokian Tyres
plc's Option Programs of 2007 and 2010. New shares have been registered into
the Trade Register on 19 February 2013, as of which date the new shares have
established shareholder rights. As a result of the share subscriptions, the
number of Nokian Tyres plc shares increased to 132,321,930 shares.
After 19 February 2013 registered new shares a total of 160,246 Nokian Tyres
plc's shares have been subscribed with the 2007C option rights and 127,320 with
the 2010A option rights. These option rights are attached to the Nokian Tyres
plc's Option Programs of 2007 and 2010. The subscription time with the 2007C
option rights ended on 31 March 2013. New shares have been registered into the
Trade Register on 14 May 2013, as of which date the new shares have established
shareholder rights.
As a result of the share subscriptions, the number of Nokian Tyres plc shares
increased to 132,609,496 shares.
After 14 May 2013 registered new shares a total of 464,130 Nokian Tyres plc's
shares have been subscribed with the 2010A option rights and 40 with the 2010B
option rights. These option rights are attached to the Nokian Tyres plc's
Option Program of 2010. New shares have been registered into the Trade Register
on 22 August 2013, as of which date the new shares have established shareholder
rights. As a result of the share subscriptions, the number of Nokian Tyres plc
shares increased to 133,073,666 shares.
3. Share price development
The Nokian Tyres' share price was EUR 37.54 (EUR 31.65) at the end of the
review period. The volume weighted average share price during the period was
EUR 33.56 (EUR 32.12), the highest EUR 38.49 (EUR 38.20) and the lowest EUR
29.85 (EUR 24.84). A total of 97,837,785 shares were traded during the period
(148,817,615), representing 74% (113%) of the company's overall share capital.
The company's market value at the end of the period amounted EUR 4.996 billion
(EUR 4.173 billion). The company's percentage of Finnish shareholders was 36.4%
(37.0%) and 63.6% (63.0%) were foreign shareholders registered in the nominee
register. This figure includes Bridgestone Corporation's ownership of
approximately 15.0%.
4. Decisions made at the Annual General Meeting
On 11 April 2013, Nokian Tyres Annual General Meeting accepted the financial
statements for 2012 and discharged the Board of Directors and the President and
CEO from liability.
The meeting decided that a dividend of EUR 1.45 per share shall be paid for the
period ending on 31 December, 2012. The dividend shall be paid to shareholders
included in the shareholder list maintained by Euroclear Finland Ltd on the
record date of 16 April 2013. The dividend payment date was decided to be 26
April 2013.
4.1. Members of the Board of Directors and Auditor
The meeting decided that the Board of Directors has six members. Current
members Kim Gran, Hille Korhonen, Risto Murto, Hannu Penttilä, Aleksey Vlasov
and Petteri Walldén will continue in the Nokian Tyres' Board of Directors.
Authorised public accountants KPMG Oy Ab 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
80,000 per year, while that paid to Board members is set at EUR 40,000 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, 50% of the annual fee be paid in cash and 50% in company shares,
such that in the period from 12 April to 30 April 2013, EUR 40,000 worth of
Nokian Tyres plc shares will be purchased at the stock exchange on behalf of
the Chairman of the Board and EUR 20,000 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.
4.3. Issue of stock options
The Board of Directors decided that stock options will be issued by the General
Meeting of Shareholders to the personnel of the Nokian Tyres Group as well as
to a wholly owned subsidiary of Nokian Tyres plc.
The Company has a weighty financial reason for the issue of stock options,
since the stock options are intended to form part of the incentive and
commitment program for the personnel. The purpose of the stock options is to
encourage the personnel to work on a long-term basis to increase shareholder
value. The purpose of the stock options is also to commit the personnel to the
Company.
The maximum total number of stock options issued will be 3,450,000 and they
will be issued gratuitously. Of the stock options, 1,150,000 are marked with
the symbol 2013A, 1,150,000 are marked with the symbol 2013B and 1,150,000 are
marked with the symbol 2013C. The stock options entitle their owners to
subscribe for a maximum total of 3,450,000 new shares in the Company or
existing shares held by the Company. The stock options now issued can be
exchanged for shares constituting a maximum total of 2.5 percent of all of the
Company's shares and votes of the shares, after the potential share
subscription, if new shares are issued in the share subscription.
The share subscription period for stock options 2013A, will be 1 May 2015 - 31
May 2017, for stock options 2013B, 1 May 2016 - 31 May 2018 and for stock
options 2013C, 1 May 2017 - 31 May 2019.
The share subscription price for stock option 2013A is the trade volume
weighted average quotation of the Company's share on NASDAQ OMX Helsinki Ltd.
during 1 January - 30 April 2013, for stock option 2013B, the trade volume
weighted average quotation of the share on NASDAQ OMX Helsinki Ltd. during 1
January - 30 April 2014, and for stock option 2013C, the trade volume weighted
average quotation of the share on NASDAQ OMX Helsinki Ltd. during 1 January -
30 April 2015. The share subscription price will be credited to the reserve for
invested unrestricted equity.
The Board of Directors will decide on the distribution of stock options
annually in spring 2013, 2014 and 2015.
A share ownership plan shall be incorporated with the 2013 stock options,
obliging the Group's senior management to acquire the Company's shares with a
proportion of the income gained from the stock options.
Terms and conditions of the Stock options and the Share ownership plan are
presented in the appendix of the press release dated 11 April 2013.
4.4. Authorizing the Board of Directors to resolve to repurchase treasury shares
The Annual General Meeting of Shareholders authorized the Board of Directors to
resolve to repurchase a maximum of 300,000 shares in the Company by using funds
in the unrestricted shareholders' equity. The proposed number of shares
corresponds 0.2 per cent of all shares of the Company.
The price paid for the shares repurchased under the authorization shall be
based on the market price of the Company's share in public trading. The minimum
price to be paid would be the lowest market price of the share quoted in public
trading during the authorization period and the maximum price the highest
market price quoted during the authorization period.
The Board decides how treasury shares will be repurchased. Treasury shares can
be repurchased otherwise than in proportion to the shareholdings of the
shareholders (directed repurchase).
The authorization will be used for purposes determined by the Board of
Directors, among other things, for the Company's incentive plans.
The authorization be effective until the next Annual General Meeting of
Shareholders, however, at most until 11 October 2014.
5. Corporate social responsibility
Nokian Tyres plc is qualified to the OMX GES Sustainability Finland index. The
index is designed to provide investors with a liquid, objective and reliable
benchmark for responsible investment. The benchmark index comprises of the 40
leading NASDAQ OMX Helsinki listed companies in terms of sustainability. The
index criteria are based upon international guidelines for environmental,
social and governance (ESG) issues. The index is calculated by NASDAQ OMX in
cooperation with GES Investment Services.
Nokian Tyres published its Corporate Responsibility Report in June, 2013.
6. Changes in ownership
Nokian Tyres plc received an announcement from Bridgestone Europe NV and
Bridgestone Corporation on 2nd May 2013, according to which Bridgestone Europe
NV has concluded an agreement with Bridgestone Corporation to transfer
Bridgestone Europe NV's shares in the capital of Nokian Tyres plc to
Bridgestone Corporation on 7th May 2013. This agreement decreases the ownership
of Bridgestone Europe NV under the level of 5% of the share capital in Nokian
Tyres plc and increases the ownership of Bridgestone Corporation over the level
of 15% of the share capital in Nokian Tyres plc.
7. Forming of Commercial Tyres profit centre as of 1st January 2014
On 23 September 2013 Nokian Tyres announced the decision to integrate Heavy
Tyres and Truck Tyres profit centers and form a new Commercial Tyres profit
centre as of 1st January 2014. The combined Net sales of the two profit centres
were approximately EUR 150 million in 2012 and they employ about 280 people in
Nokia, Finland. The integration of two small business units' resources,
operations and management is expected to improve sales and profitability.
Pontus Stenberg, the current Director of Nokian Truck Tyres, was appointed
Director of the new profit centre. For the transition period, Pontus Stenberg
was appointed also as Director of Heavy Tyres as of 1st October 2013.
8. Events after the review period
With a stock exchange release on 4 October 2013 Nokian Tyres announced that in
2013, Net sales and Operating profit are estimated show some decline compared
to 2012. The unfavorable currency exchange rate development of Russian Rouble
during 2013 was estimated to generate a negative effect of approximately EUR 25
million on Net sales and approximately EUR 14 million on Operating profit of
Nokian Tyres Group in full year 2013.
In the same release the company stated that Nokian Tyres has booked excellent
test results and victories in all major magazines with its new winter tyre
Nokian Hakkapeliitta 8 and increased its market shares in all core markets.
RISKS, UNCERTAINTY AND DISPUTES IN THE NEAR FUTURE
The global economy has showed signs of improvement during the last few months.
Growth is still fragile as many risks remain in the global financial sector. In
Nokian Tyres' core markets the Nordic countries continue to show slow but
comparatively stable development, while in Russia the growth rate has been
slowing down. All in all the economic uncertainties may weaken future demand
for tyres and increase credit risk.
The company's receivables increased in the review period due to seasonality and
business model. Tyre inventories are on a planned level. The company follows
the development of NWC very closely. At the end of the review period Russian
trade receivables accounted for 39% of the Group's total trade receivables.
Around 32% of the Group's Net sales in 2013 are estimated to be 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.
Nokian Tyres' other risks and uncertainty factors relate to the challenging
pricing environment of tyres. The maintaining of profitability in case of
rising raw material prices depends on the company's ability to raise tyre
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.
Nokian Tyres Group has no pending disputes or litigations expected to have
material effect on the performance or future outlook of the Group.
OUTLOOK FOR 2013
The global economy has showed signs of improvement during the last few months.
The global year end growth in 2013 is expected to be modest but to turn to
further growth in 2014. During the summer the European economy started to grow
after 18 months of recession. Growth is still fragile and uncertainty prevails
as many risks remain in the financial sector.
In Nokian Tyres' core markets the Nordic countries continue to show slow but
comparatively stable development with a full year 2013 GDP growth estimate of
1%. In Russia the growth rate has been slowing down with full year 2013 GDP
growth estimated at 1.8% and growth for 2014 projected as 3.5%.
The market demand for replacement car tyres in Nordic countries and Central
Europe have taken a turn for the better in H2 after a weak start for the year
and are expected to be close to previous year's level in full year 2013. In
Russia lower GDP growth and car sales still penalize tyre demand in Q4 but
there are signs of some recovery for both summer and winter tyres going into
2014.
Nokian Tyres' full year sales in Nordic countries are expected to show some
growth, and to be on previous year's level in Central Europe. Despite a clear
improvement in market share and growth of winter tyre sales, full year sales is
estimated to show some decrease in Russia and North America.
The pricing environment for 2013 remains challenging for all tyre categories.
Nokian Tyres margins, however, are supported by an improved industrial
structure combined with approximately 12.5% lower raw material costs (€/kg)
offering a tailwind of some EUR 50 million in full year 2013. The unfavorable
currency exchange rate development of the Russian Ruble during 2013 is
estimated to generate a negative effect of approximately EUR 25 million on Net
sales and approximately EUR 14 million on Operating profit of Nokian Tyres
Group in full year 2013.
Due to the weakened Rouble exchange rate and softer market demand for tyres in
Russia, Nokian Tyres' Net sales and Operating profit are estimated to be
somewhat lower in the second half and full year 2013 compared to 2012. In 2014
the company estimates to be back on a profitable growth track.
Nokian Tyres' growing car tyre production capacity in Russia offers growth
potential, productivity gains, and a moderate growth of fixed costs supports
profitability. Production output in Nokia, Finland has been cut to support
growth of production in Russia. The second line in the new factory (line 12)
became on stream in Q1/2013, increasing annual capacity in the Russian
factories to approximately 14 million tyres. Capacity and productivity has
increased further as line 13 installation has been completed in Q2/2013. The
completion of line 13 increases the annualized capacity to in excess of 15
million tyres by end 2013. In Q3 production was running at full utilization.
The demand for heavy tyres remains comparatively weak. The outlook for Nokian
Heavy Tyres for 2013 is weaker compared to 2012. The focus for 2013 is in sales
and in optimizing production output.
Vianor is expected to add more than 140 stores to the retail network in 2013
and to reach 1,180 stores, increase sales, develop service business further and
to show a positive Operating result in full year 2013.
A strong position in the core markets, an expanding distribution channel, an
improved cost structure with majority of production inside duty borders of
Russia and CIS combined with new test winner Hakkapeliitta products give Nokian
Tyres opportunities to strengthen its market leadership in the core markets and
to show growth again in 2014.
Financial guidance (updated 4 October 2013)
In 2013, Net sales and Operating profit will show some decline compared to 2012.
Previous guidance from 9 August 2013
In 2013, the company is positioned to show flat to some growth in Net sales and
Operating profit compared to 2012.
INVESTMENTS IN 2013
Nokian Tyres' budget for total investments in 2013 is EUR 144 million (209.2).
EUR 83 million will be invested in Russia. The balance comprises of investments
in Nokia plant (automation, moulds, ICT, R&D) EUR 44 million, Heavy tyres EUR 6
million and sales companies including Vianor chain with its acquisitions EUR 11
million.
Nokia, 31 October 2013
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.
***
DEFINITIONS OF SALES AREAS
Nordic countries: Finland, Norway, Sweden.
Russia and CIS:
Russia, Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Moldova, Ukraine.
Other Europe: Austria, Belgium, Bosnia and Herzegovina, Bulgaria, Croatia,
Cyprus, Czech Republic, Denmark, Estonia, France, Germany, Greece, Hungary,
Iceland, Ireland, Italy, Latvia, Lithuania, The Former Yugoslav Republic of
Macedonia, 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
Load the whole Interim Report from www.nokiantyres.com
****
Nokian Tyres Interim Report January-September was published on Thursday 31
October, 2013 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/resultinfoq32013
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 0077. Conference id: 937298.
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 result 2013 will be published on Friday 7 February, 2014. Releases
and company information will be found from http://www.nokiantyres.com
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