Nokian Tyres has released its 2012 annual report, and the Finnish manufacturer reports a 10.7% growth in net sales to 1.61 billion euros, 9.2% rise in operating profit to 415.0 million euros, and a 7.1% increase in profit to 330.9 million euros.
Russia proved a regional strength during the year and demand for Nokian’s passenger car tires increased there, while demand “decreased clearly” in Central Europe. Combined output of the company’s plants in Nokia, Finland, and Vsevolozhsk, Russia, in 2012 was 15.7 million tires, and the annualized capacity at year-end was 18 million pieces.
“In 2012, Nokian Tyres performed well in a challenging environment and recorded all time high sales and profits combined with excellent cash flow,” reported CEO Kim Gran. “Our position is very strong in core markets, the company is debt-free and we are able to further develop our business from a healthy position.”
Although Gran observed that “uncertainty and slowing growth” continued to be a feature of the global economy, he pointed out that Nokian Tyres’ two core markets, Russia and the Nordic countries, “were among the best of the developed world” from an economic development point of view.
Sales of passenger car tires in Russia, a market where Nokian Tyres describes itself as “the market leader and the biggest manufacturer of premium tires,” grew three times faster than those in the overall market. In 2012, Russia and the CIS accounted for 35% of the company’s total net sales. Nokian estimates that 41 million car and van tires were sold on the Russian market during the year, and it anticipates that the premium tire market there will grow by a yearly average of 10%.
Nordic sales “came in as planned,” Gran commented. Finland, Sweden and Norway, where Nokian claims to be “market and price leader,” accounted for some 34% of Nokian’s net passenger car tire sales last year. Annual passenger car and van tire sales in these countries total some 10 million tires units, 6 million of which are winter tires. The markets in the Nordic region typically grow around 1%-3% a year, the tiremaker notes, and around 80 brands compete for a share of the market.
As previously mentioned, demand was significantly lower in Central Europe due to the region’s economic situation combined with high carry-over inventories. Nokian gives the size of the European market in 2012 (excluding the Nordic countries) as approximately 230 million car and van tires. It adds that total market growth is slow, with the winter tire segment growing faster.
The Nokian Tyres CEO made no reference in the annual report to any plans for establishing a factory in Eastern Europe, as has been reported by some publications. However, he did share that following the opening of its second plant in Russia, the tiremaker now has additional capacity in this strong market. Gran says output there can be increased by a further 50% simply by adding extra production lines in Russia.
“The production costs of tires are clearly lower in Russia than in Finland and other western countries,” states Nokian’s annual report. “Production in Russia has been supported by tax relief based on the amount of investment and the location of the factory within customs barriers. By Russia joining WTO, the tire duties will go down gradually; duty of car and van tires will decrease from 20% to 18% in 2013 and gradually to 10% in five years.” (Tyres & Accessories)
