NOKIA, Finland—Nokian Tyres P.L.C. reported double-digit declines in half-year sales and earnings, as the COVID-19 pandemic continues to take its toll on business.
Sales for the first six months of the year fell 27.2 percent to $607 million, due mainly to reduced demand caused by global lockdowns as well as measures taken to reduce high carry-over stocks in Russia.
Segment operating profit declined 73.8 percent to just under $45 million, due in part to lower volumes caused by "underabsorption of factory costs." The Finnish tire maker reported a net loss of $24.7 million, compared with a net profit of nearly $300 million the year before.
Sales in the quarter dropped 34.9 percent to $245.5 million and segment operating income plunged 98.8 percent to $26.9 million. The net loss was $27.3 million.
Nokian's sales in the Americas plunged 51 percent in the second quarter, to $30 million, which pushed down first-half sales 34.4 percent, to $72 million.
"Nokian Tyres' 2020 second quarter results were strongly impacted by the COVID-19 pandemic," Nokian President and CEO Jukka Moisio said of the company results.
In the face of the "exceptional situation," Moisio said Nokian has set itself a short-term priority to provide customers with "world-class products and services" while keeping costs in strict control.
The company, he said, aims to protect cash flow by cutting back investments, managing working capital, and delaying activities.
"Nokian Tyres has a strong balance sheet, and we have further strengthened our liquidity position in the first half," the recently appointed CEO said.
Looking beyond the current headwinds, Moisio said Nokian expected to benefit from its significant investments in capacity expansion in the past quarters, and increase sales when the market rebounds.
Nokian's passenger car tires segment reported a 45 percent decline in sales to $390.7 million during the first half, hit by COVID-19 pandemic, reduction of high carry-over stocks in Russia and a mild winter.
Segment operating profit fell 73 percent to $47 million, due to lower volumes and low factory utilization rates at all locations.
During the period, Nokian said it reduced overall production by 39 percent year-on-year and adjusted production according to demand in Russia and Finland. In the U.S. factory, recruitment of second shift has been postponed.
In 2020, the company expects the sales of new cars in Russia to decline by 20 percent to 25 percent from 2019, driven by COVID restrictions and the ongoing economic recession.
Nokian said it expects replacement tire market sell-in in Russia to decline by approximately 20 percent this year, due to weak demand and high carry-over stocks.
In the heavy tires segment, Nokian noted weaker OE demand impacting sales. Sales in this segment decreased by 4.6 percent to $101 million, while segment operating profit fell 37.6 percent to $11.9 million, as volumes and factory utilization rates dropped.
Nokian, which withdrew its 2020 financial guidance in March, said it would not offer an outlook for the year, due to the "continuous uncertainties" caused by the pandemic.