U.S. on Nokian's list for 3rd factory

LONDON (Feb. 10, 2016) — Nokian Tyre P.L.C.'s plans for a third plant include possibly locating it in the U.S., according to company spokesman Antti-Jussi Tähtinen, but the Finnish company has ruled out China as potential site.

“We originally had three locations in mind, Eastern Europe, United States and China for the third plant,” Mr. Tähtinen, vice president, marketing and communcations, told European Rubber Journal, a sister publication of Tire Business. “However, China has been dropped now and we will make a decision on the final location by (the fourth quarter).”

Nokian's decision on the new plant will take place against the background of lower sales in many of its key markets. The Nokian spokesman declined to give further details on the size of the investment and the planned capacity of the plant.

Nokian's existing plants are in Nokia, Finland, and Vsevolozhsk, Russia. Nokian has been studying the feasibility of a third plant since early 2013.

North America represents 12 percent of Nokian's global annual sales, or roughly $180 million in 2015. Sales in the region were up 25 percent last year, Nokian's latest financial results show, despite “almost non-existing” winter season sales.

Nokian's European sales pushed up its results, CEO Ari Lehtoranta said at the company's annual results conference, and that combined with a sharp decline in raw materials cost helped Nokian achieve profitability,

Raw materials costs for Nokian Tyres were down 13.1 percent year-over-year in 2015, which saved the company approximately $44 million, and are expected to be around 5 percent lower this year, providing a tailwind of approximately $16.5 million vs. 2015.

As for markets, Mr. Lehtoranta said Russia was still the company's biggest single country in terms of sales, although the country's economic outlook for 2016 is negative.

“This together with the North American inventory situation will limit our capability to grow this year,” noted the CEO.

Nokian also went through a round of job and capacity cuts in its Nokian plant in August 2015.

“However, we have increased our investments in R&D, marketing and sales much more than the savings achieved in that program,” said Mr. Lehtoranta, who added that productivity in Nokian's passenger car tire manufacturing improved by 5 percent last year.

Net sales fell 2.1 percent to $1.49 billion. Currency rate changes were the main contributor to the drop, cutting the figure by $76 million compared with the rates in 2014.

Operating profit was also down 4.1 percent at $325 million.

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This report appeared in European Rubber Journal, a United Kingdom-based sister publication of Tire Business.