Nokian eyes 3rd factory, plans expansion

By Shahrzad Pourriahi, Crain News Service

NOKIA, Finland (May 11, 2015) — Nokian Tyres P.L.C. is planning to increase capacity at its plant in Russia and is scouting locations in eastern Europe for a new plant, according to CEO Ari Lehtoranta, speaking at a conference call about its financial results.

Mr. Lehtoranta said Nokian intends to install an extra production line — the 14th — at its plant in Vsevolozhsk, Russia, near Saint Petersburg. He didn't disclose the timing, scale or value of the expansion at the plant, which opened in 2005 and has since been expanded to 15 million tires annually. Mixing capacity there would be expanded as well.

He added that Nokian's plans for a third plant focus on eastern Europe to support the growth in central Europe — which represents about a quarter of global sales — but that North America and Asia also could be possible locations for the plant. Nokian has been studying the feasibility of a third plant since early 2013.

Regarding North America as a location, Mr. Lehtoranta said: “If growth in North America would prove to be sustainable, it might make sense to put it there.”

For the quarter ended March 31, Nokian's operating profit fell 29.4 percent to $54.3 million on 9.8-percent lower sales of $316.4 million. More than 90 percent of the sales drop was linked to currency exchange rates, Nokian said.

Sales in North America jumped 49 percent to $44 million, accounting for 14 percent of Nokian's global sales.

The company attributed the lower earnings in part to tax issues it has been dealing with for some time.

Net income more than tripled to $152.2 million because of a one-time $113 gain related to the resolution of a disupute with the Finnish Tax Administration.

The company said it expected its fiscal 2015 sales and operating profit would decline slightly from 2014, due primarily to the exchange rate issues.

According to Mr. Lehtoranta, the biggest negative impacts have come from currency valuations and delay in the start of the winter tire sales in Russia.

“While the whole market has gone down in Russia and CIS, we have been able to improve market share, volumes and margins in all other markets,” he added while stating that Nokian had improved in the area of expanding distribution and improved productivity.

The competitiveness of our product portfolio continues to improve; we have launched new winter tires and all-weather tires for central Europe and North America,” he added.

Nokian also expanded its captive distribution activities, adding 16 Vianor stores in Europe, growing that business unit to 1,371 outlets, and setting up an “N-Tyre” partner concept that numbers 67 stores in Russia and Kazakhstan.