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August 10, 2017 02:00 AM

Nokian posts double-digit sales, profit gains

Tire Business Staff
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    NOKIA, Finland — Nokian Tyres P.L.C. posted double-digit gains in sales and operating profit for the quarter and half-year ended June 30, with key contributions by all of the firm's operating businesses.

    Second quarter operating income jumped 21.5 percent to $101.8 million on 16.5-percent higher sales of $425.3 million. Operating earnings for the half year were up 19.6 percent to $165.6 million, while sales climbed 17.2 percent to $778 million.

    Over the first half, Nokian Tyres delivered a "strong performance" in all of its main markets, according to Hille Korhonen, Nokian's new president and CEO.

    Strong growth at Nokian's passenger car tires business unit "was driven by Russia due to its stronger currency, price increases and low carry-over stocks from 2016," said Ms. Korhonen, who predicted more modest growth in that country for the second half of the year.

    The Finnish tire group has responded to growing demand by increasing the production volumes at its plants in Vsevolozhsk, Russia, and Nokia and by adding a production line at the Russian factory. This new production line, said Nokian's boss, will be "taken into use" by year-end.

    Raw materials costs, however, continued to rise during the first half, increasing by around 20 percent year-over-year. Nokian estimated an increase of approximately 20 percent for the full year 2017.

    "We have already implemented the necessary price increases in all markets, and the full effect of these increases will be seen from H2 onwards due to the seasonality of Nokian Tyres' business model," Ms. Korhonen said.

    The firm's business in North America grew 8.7 percent in the first half, but that lagged behind growth in Russia and Eastern Europe (84.4 percent) and Western Europe (10.6 percent).

    In North America, Nokian estimates that industrywide car tire demand will increase slightly year-over-year, reflecting the first-half situation. New car sales were down 9 percent.

    Nokian is planning a ground-breaking ceremony in mid-September for its first U.S. factory, to built near Dayton, Tenn.

    That factory, due on stream by 2020, "will enable us to further enhance our position in the North American market with a wider product range and better customer service," Ms. Korhonen said.

    Nokian anticipates 5-percent growth in operating income for the full fiscal year on sales growth of at least 10 percent over 2016.

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