A fresh start: 4 things to know about Nokian's growth plan

This year won't be a quiet one for Nokian Tyres P.L.C. Because as it turns out, the tire maker's to-do list is quite comprehensive.

And that's to be expected, especially as Nokian works to rebuild and redefine its global footprint. They are steps that the company says are imperative given the geopolitical landscape and the impacts of Russia's war in Ukraine.

Ultimately, it was the war that led Nokian to close and potentially sell its factory in Vsevolzhsk, Russia, where it employed around 975. They produced 80 percent of the company's passenger tires, and the facility had capacity for about 17 million units per year, according to Rubber News data.

Despite the factory's importance, Nokian couldn't stay in Russia.

"It's a necessity," Nokian President and CEO Jukka Moisio said during an investors' call Feb. 7. "It's a necessity from the company point of view that we move on. We built a new company, (and) at the same time we value and pay attention … that we do in a professional way the process in Russian exit."

Nokian has a plan to right the ship, to return manufacturing capacity to pre-war levels. It will take a couple of years, but the company is focused.

Here are four things Moisio emphasized about the ongoing rebuilding process as the company enters 2023.

Nokian will grow in the months and years ahead, Moisio told investors.

It is going to build a new factory in Romania, ramp up capacity at its U.S. plant in Dayton, Tenn., and continue to serve its customers by establishing contract manufacturing when and where it's feasible and possible.

And all of that will happen, he said, regardless of how quickly or smoothly the Russian exit goes.

"So, despite the ongoing Russian process, the rebuild of the company in terms of building the new factory in Romania and advancing with the capacity rebuild is not dependent on the Russian exit," Moisio said. "… These are two separate things. Russian exit is one, it's a process in its own. And then the other part is that we build a new Nokian Tyres independently of how it goes and when it comes to conclusion."

In the midterm, ensuring that it has the capacity to meet demand, especially in Central Europe, is critical. And this is where the tire maker's recent agreement with Sentury Tire Co. Ltd. comes into play.

It's the first—and Moisio said it likely won't be the last—contract agreement Nokian reaches in this regard.

"We keep on negotiating additional contract manufacturing opportunities so that we complement our product portfolio in late 2023 and especially in 2024, 2025," Moisio said. "… How confident are we that we can deliver those contract manufacturing volumes? We are quite confident."

And when those products are delivered, Moisio said he and the Nokian team will take confidence in knowing that they are of the same quality and reliability that customers have come to expect from the Finnish brand.

"We tested the quality, we audited—or we are in the process of auditing—the supplier plants, and we see that in terms of logistics and factory quality. We are confident that we can deliver," Moisio said. "…. The important part (is) making sure that we provide to our customers and our distribution (network) Nokian products so that they have a good portfolio of products."

A key facet for the new Nokian will be the $650 million plant in Romania. That's why it's important to get the facility online as quickly as possible.

"We have a very tight schedule to build it and to get the first tires dropping out, which is the latter part of 2024, and then commercial production starting in 2025," Moisio said.

The process is moving quickly at the new Romanian site, which recently received $108 million in financial backing from the Romanian Government. And, already, the tire maker has invested heavily in the facility and its equipment.

For 2022, Nokian noted that its capital expenditures fell in the $73 million range, and more than half of that—about $42 million, in all—was designated for new equipment for the Romanian factory.

"… To achieve the Romania factory (is the) first step," Moisio said. "So (we are) building the real estate and then starting to install the machines (to be) prepared for H2 2024, first (for) tire manufacturing and then (for) commercial production in 2025. So, this is one project. The other one is to ensure that the Nokia factory ramps up."

If getting tire manufacturing capacity in Europe up to speed is the first priority, beefing up the U.S. facility's capacity and warehouse space is the second.

Last month, Nokian said it would invest $174 million in its Dayton facility, where it plans to produce light trucks tires for the time ever this year.

"Dayton continues to ramp up, and the new machine installations will be delivered," Moisio told investors. "Those are quite important things."

In addition to increasing capacity, Nokian looks to add a 350,000 sq.-ft. warehouse on site in Tennessee. It will have the capability to house as many as 600,000 tires. The warehouse should come online by mid-2024, and when it does it will be the tire maker's 10th in the U.S. and Canada.