NOKIA, Finland—Nokian Tyres P.L.C. posted another strong quarter, with net sales for the second quarter up 16.5 percent to $461.8 million and operating profit 21.5 percent higher at $110.6 million.
The second quarter gains contributed to a 17.2 percent rise in net sales to $844.8 million, and a 19.6 percent increase in operating profit to $179.8 million for the first six months of 2017.
Throughout the first half, Nokian delivered a "strong performance in all of its main markets," Hille Korhonen, Nokian's new president and CEO, said in a financial report issued Aug. 8.
Russia's strong currency, strong growth, price increases and low carry-over stocks from 2016 were among factors that drive growth for Nokian's Passenger Car Tires business unit. Korhonen predicted more modest growth in that country for the second half of the year.
To address growing demand Nokian increased production volumes at both of its factories—inVsevolozhsk, Russia, and Nokia, Finland—and is building a new production line at the Russian plant that should come on stream by the end of the year.
Raw material costs continued to go up during the first half, increasing by around 20 percent year-over-year. In response, Nokian implemented price increases in all markets, and expects to see the impact of those price hikes in the second half of 2017.
Investments production technology, people and marketing activities increased sales and production volume for the Heavy Tires unit, especially in the forestry business.
Vianor sales were impacted by an atypical spring season and its profitability was affected by non-recurring expenses.
In May, Nokian said it would invest $360 million to build a new factory in Dayton, Tenn. Korhonen said the U.S. factory "will enable us to further enhance our position in the North American market with a wider product range and better customer service."
Nokian's total investments in the first half amounted to $70.5 million, comprising investments in its Russian and Finnish tire factories, molds for new products, ICT and process development projects, and Vianor expansion projects.
Commenting on market conditions, Nokian's report noted that first half sales of new cars in Europe had increased 5 percent year-on-year. Car tire sell-in to distributors was down 1percent year-over-year, with winter tire demand increased 2 percent.
In the Nordic countries, new car sales increased 2 percent year-on-year in the first six months. The market volume of car tires decreased by 5 percent added Nokian, which expects car tire demand for full-year 2017 to remain at the same level as last year.
In North America, estimated new car sales were down by 9 percent in the first half. The market volume of car tires was up slightly year-over-year. However, demand for winter tires increased 13 percent. For the full year 2017, car tire demand is estimated to increase slightly year-over-year.
Global demand for special heavy tires varied a lot, with demand for OE forestry tires remaining strong. Increased use of wood and the good profitability of pulp manufacturers will also support the demand for forestry machines and tires in the following quarters, Nokian said, adding it also saw signs of improvement in the agricultural tire segment.
Between January and June, the sell-in of premium truck tires lifted 7 percent in Europe, while in the Nordic countries demand was up by 7 percent. In Russia, demand for premium truck tires fell 7 percent year-on-year.
"Truck tire demand in 2017 is estimated to increase in all of Nokian Tyres' Western markets; in Russia, demand is estimated to remain at the same level year-over-year," Nokian said.