War in Ukraine strongly impacts Nokian in 2022

NOKIA, Finland—Nokian Tyres P.L.C. has seen a significant drop in second quarter operating profit, due to a $306 million impairment caused by the exit from Russia following the Ukraine war.

Second quarter operating profit went into red as the company recorded a loss of $207 million, down from the roughly $96 million reported last year. This, Nokian said in an Aug. 2 statement, was due to a negative $295 million booked as non-IFRS exclusions.

In June, Nokian initiated a controlled exit from Russia, where it manufactures more 17 million units per year of passenger car and light vehicle tires and generated more than $397 million in sales last year.

As part of the process, impairments and write-downs of around $307 million were recorded in the second quarter, the company said.

Sales for the second quarter was up 15.8 percent year-on-year at $492 million, while segment operating profit was down 3.7 percent at $87.8 million.

For the first six months of the year, sales grew 18.5 percent to $917.4 million, as the year "began with good demand in all markets."

Segments operating profit stood at $156 million up from $142.8 reported the year before, helped by a $13.2-million positive currency impact.

Nokian reported an operating loss of $146.5 million for the first half, down from $148 million the year before, as a negative $302.5 million was booked as non-IFRS exclusions.

"The war in Ukraine and resulting sanctions cause significant uncertainty to Nokian Tyres' operating environment," the company said.

The tire maker said it expected the exit from Russia to "significantly impact" its financial results in 2022, with the discontinued supply of tires from the country particularly hitting sales in Central Europe in the second half of the year.

The company said it was working on many fronts to secure supply of products for the region.

Commenting on the results, president and CEO Jukka Moisio said Nokian was "evaluating different options" for the exit from Russia, adding that discussions with possible candidates are ongoing.

"We will focus on growth opportunities in our other core markets, without a presence in Russia," Moisio said. "We have continued to increase capacity at our factories in Finland and in the U.S., and are proceeding with our investment in new supply capability in Europe, which is one of our key mid-term priorities."