Russia going strong – targeting growth in a slower market
Nokian Tyres Group’s net sales decreased by 13.3 % to EUR 333.1 million (EUR 384.3 million in Q1/2012). Operating profit was EUR 76.3 million (EUR 105.0 million). Profit for the period amounted to EUR 63.6 million (87.6). Earnings per share amounted to EUR 0.48 (EUR 0.67).
Outlook: The demand for replacement car tyres in 2013 is expected to be on previous year’s level in Nordic countries, but to remain weak in Central Europe. In Russia demand is estimated to show growth in winter tyres but be flat for summer tyres. The pricing environment for 2013 is challenging for all tyre categories. Margins, however, will be supported by easing of raw material costs (€/kg) by approximately 6% in the full year 2013. Nokian Tyres’ sales are expected to show flat to some growth during 2013. Sales in Russia and North America are expected to grow whereas sales in Nordic countries and Central Europe are expected to be flat.
Financial guidance: In 2013, the company is positioned to show some growth in Net sales and Operating profit compared to 2012. On the back of Q1 results, Net Sales and Operating profit in H1 are, however, still going to be weaker than in 2012.
Kim Gran, President and CEO: “Our strong market leader position in the core markets in Russia and Nordic countries is intact and helped us to book reasonable Q1 results. Headwind was heavy with the European economy, car sales and replacement tyre market demand being clearly down. We do not foresee any major improvement in the market for 2013 but target to grow and excel on the back of our renewed winter tyre range, expanding distribution and our strong industrial structure.
“In the first quarter our strongest card was, once again, Russia. A significant increase in winter tyre sales and market share brought us most of our profits. We expect the good performance to continue with our new winter tyres spearheaded by Hakkapeliitta 8 coming on stream from Q2 onwards. The Russian tyre market is growing modestly in 2013 but offer still further growth opportunities in replacement winter tyres. The Central European market was as bad as expected in Q1 with a clear drop in demand. Sales in all Europe suffered from a prolonged winter, which for both Nokian and Vianor caused most of the consumer summer tyre sales and profit to shift to Q2.
“Our profitability remained on a reasonably good level, price €/kg was flat due to improved mix and tailwind from raw material cost supported margins, but a lower utilization rate in production penalized operations.
“During the present phase of slower market growth we continue to develop and improve productivity and our industrial structure. In Q1 we commissioned another line (line 12) in the Russian factory and will follow up in H2 with completion of line 13. This is taking the annualized capacity in Russia to more than 15 million tyres by end of 2013.
“We continue to develop our growth engine and expand our distribution network spearheaded by Vianor. We opened 40 new Vianor stores, now totalling 1,077 stores in 26 countries. In Russia and CIS Nokian Hakka Guarantee dealership program includes over 2,300 tyre stores and car dealers. A new softer partner franchise model Nokian Authorized Dealer (NAD) has also been rolled out in Q1 with 175 shops contracted in Italy, Germany and China.
“We are looking into the rest of 2013 with confidence and fighting Hakkapeliitta spirit. After a slow start for the year in Q1 we expect the market to present us with some growth opportunities. With overwhelming test wins in 2012, the newly launched next generation of Hakkapeliitta winter tyres and test winner summer tyres, our product offering will be by far the best ever. Vianor and NAD are to be expanded again by more than 200 shops and our market geography in Russia and Northern Europe is looking comparatively healthy offering us a good base for profitable business.”
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