NOKIA, Finland — Nokian Tyres P.L.C. posted a 7.4% drop in operating earnings for the quarter ended Sept. 30 on 1.3% lower sales revenue, indicating the falling demand curve has flattened out.
Operating profit fell to $81 million in third quarter, as the Finnish tire maker reduced carryover stocks in Russia and currency exchange rates impacted sales negatively.
Sales were down to $409 million, with consumer tire division revenue nearly equaling that of a year ago, falling just 0.7% short of the 2019 quarter at nearly $298 million.
Sales of heavy tires fell 4.5% to $58.2 million, while the distribution arm Vianor reported a 3.3% decline in sales to $78.7 million.
Broken down regionally, Nokian reported sales in the Americas grew 25.4% to $63.4 million, partially offsetting double-digit revenue drops in the company's Russia/Asia region and other regions. Sales in Europe were up 3.5%
President and CEO Jukka Moisio said Nokian management is pleased about the third-quarter performance, which he described as "better than we expected when we went into the quarter."
Looking ahead, Mr. Moisio said the fourth quarter is "typically seasonally strong" owing to the company's strengths in winter tires.
"Going forward, top-line growth continues to be our top priority," he said. "Expanding product portfolio will be a key driver for boosting sales."
For the first nine months of the year, sales fell 18.9% to $1.05 billion, due primarily to the negative effects of COVID-19, Russian stock adjustments and a mild 2019-20 winter in all main markets.
Sales revenue for the nine months was down in all regions, led by a 47.6% drop in the Russia/Asia region. Despite the positive sales report in the Americas in the third quarter, the region's revenue for the nine months was down 16.2% to $139.4 million.
During the period, segment operating profit was more than halved to $128.6 million, driven by lower volumes and "underabsorption" of factory costs.
For the full fiscal year, Nokian said it expects net sales and operating profit in Russia to decline "substantially" due to the changed market dynamics. Operating profit in 2020 will include costs related to the North American expansion and other investment programs to support long-term growth.
During the quarter Nokian divested its Vianor retail store assets in the U.S., selling 10 retail stores in New England to Gills Point S Tire of Oregon.