Nokian strikes deal to sell Russia tire operations

NOKIA, Finland—Nokian Tyres P.L.C. has agreed to sell its Russian operations to Russian energy and chemicals company P.J.S.C. Tatneft, effectively completing the Finnish tire maker's previously announced exit from Russia.

The purchase price of the "debt-free and cash-free" sale is expected to be around $400 million in U.S. funds. Nokian said the final purchase price is affected by, among other things, net cash and working capital adjustments and changes in the exchange rate.

Nokian—which reports annual revenue from sales in Russia and Asia of around $378 million from the plant in Vsevolozhsk, Leningrad Oblast, Russia—was among the first tire makers to react to Russia's invasion of Ukraine, saying Feb. 25 it had moved production of some of its key lines out of its plant in Russia to plants in Finland and the U.S., while securing "transport capacity from Russia with existing and new service providers."

The plant in Vsevolzhsk is rated at close to 16 million tires per year.

Tatneft, one of Europe's larger suppliers of synthetic rubber, recently agreed to sell its tire business to J.S.C. Tatneftekhiminvest-Holding, an entity independent of Tatneft Group.

All remaining Nokian personnel at the plant will be transferred to Tatneft.

The transaction is subject to approval by the relevant regulatory authorities in Russia and other conditions, Nokian said, which will affect the timing, terms and conditions and the closing of the transaction.

On June 22, the company said it had to dismiss 320 employees and cut production due to a lack of exports. In addition, the Vsevolzhsk plant experienced problems with raw materials imports, as Western sanctions barred deliveries from Europe.

A week later, Nokian said it would begin a controlled exit from Russia.

Nokian opened its Russian plant in 2005, and by 2021, the company said approximately 80 percent of the its passenger car tires were produced in Russia. Nokian said its business in Russia and Asia represented approximately 20 percent of its net sales.

As a result of the departure, Nokian said it has continued to increase capacity at its plants in Finland and in the U.S. (in Dayton, Tenn.). The company also said it is investing in new supply capability in Europe.

Nokian said its departure from Russia will impact Nokian's financials, adversely impacting sales in Central Europe over the next two or three years. The company said the loss would be of $278 million related to Russia, as well as a $20 million "write-down" of deferred tax assets in Russia in the second quarter of 2022.

The company said the final figures won't be known until the transaction has been completed.

Nokian's assets in Russia and Belarus, excluding tax and financial items, were around $571 million after the losses incurred in the second quarter of 2022 and to $587 million at the end of the third quarter of 2022.

Its assets in Russia and Belarus, minus the net debt, was $477 million at the end of the third quarter of 2022. The working capital and timing of the closing, among other factors, will impact the net value of Russia and Belarus, Nokain said, and thus affecting the cash received from the transaction.

Nokian also said its "strong balance sheet continues to support the company" in the wake of divesting its Russian business.

Of the six other non-Russian tire companies with manufacturing operations in Russia (Continental A.G., Bridgestone Corp.; Michelin, Pirelli S.P.A.; Yokohama Rubber Co. Ltd.; and Titan International), all have cut back sharply their business activities there, and one other, Michelin ,declared it is cutting ties completely.

Nokian recently acquired a 290,500-sq.-ft. industrial property located adjacent to its headquarters tire plant in Nokia, with the aim of supporting future growth.That was in addition to the the acquisition of seven-plus acres of land in June in the "immediate vicinity" of its headquarters site, allowing Nokian to "secure future development opportunities at the Nokia factory."