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August 09, 2016 02:00 AM

Nokian Q2 sales, profits down

European Rubber Journal Report
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    NOKIA, Finland—Nokian Tyres P.L.C. reported drops in operating profit for the quarter and six months ended June 30 on reduced sales, with 30 percent lower sales in Russia and unfavorable foreign exchange rates dragging down the results.

    Operating earnings fell 3.8 and 0.7 percent for the quarter and half to $87.1 million and $143.8 million, respectively.

    Sales for the periods dropped 2.3 and 2.2 percent, respectively, to $379.1 million and $689.1 million.

    Currency movements accounted for a nearly $20 million drop in net sales, which would otherwise have grown by 2.7 percent, the Finnish tire maker pointed out.

    Reviewing the six-month period, Nokian President and CEO Ari Lehtoranta said: “Our customers' winter tire inventory situation made the winter tire markets in North America and Russia as challenging as we had anticipated, but our good performance in Europe and in summer tires in general helped to balance the situation.”

    Sales of heavy tires, Lehtoranta said, were slightly higher than last year, but profitability declined due to the higher share of truck tires and the timing of some marketing activities.

    On a more positive note, Lehtoranta noted productivity gains both in heavy tires and passenger car tires, while production volumes were higher than last year.

    “The decline of raw material costs continued, and our lower production costs supported profitability. The development of ASP continued to be negative but, aside from the unfavorable currency impact, both price and mix changes were positive,” Lehtoranta said.

    While profitability remained at a good level, Lehtoranta said Nokian had to book an additional $7.1 million of bad debt provisions for “problematic cases” in Russia. This took the operating profit below last year's level by 3.8 percent.

    Difficulties continued in the Russian market, where sales declined by almost 30 percent, and a mild winter left inventories on the shelves in Russia and North America.

    “We continued to grow summer tire sales, and even though debt collection has become more problematic in Russia, we ended up very close to last year's sales and profitability,” Lehtoranta said.

    He concluded by pointing to market-share gains by the company in Central Europe, its investment in growth markets, an expanding distribution channel and ongoing investments in productivity.

    These developments, he said, would “give Nokian Tyres opportunities to strengthen its position and to provide healthy margins and a strong cash flow also in the future.”

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