Thu August 3 12:00 am 2000 in category Stock exchange releases
Nokian Tyres plc Stock Exchange Bulletin August 3,2000 8.00 a.m.
Earnings per share stood at -0.39 euros (corresponding figures for 1999: 0.16 euros). Net sales increased by 25.4% and totalled 152.2 million euros (121.4 million euros). Profit was lower than planned due to increases in expansion costs and the lower than expected sales of heavy tyres and from tyre chain. The target for the year 2000 remains at 20% growth in both sales and profit.
NET SALES AND PROFIT
Nokian Tyres' profit for January-June was negative. The main reasons for this were the lower than expected sales of heavy tyres and from tyre chain, the change in the timing of the operating profit and the investments and acquisitions made to strengthen the company's strategic position. During recent years, Nokian Tyres has significantly expanded its tyre chain. The share of total net sales from tyre chain stood at 14% in June 1998, at 23% in 1999 and at 41% this year.
The expansion of tyre chain means that the profit of the company will even more than earlier come in the second half of the year and especially during the last quarter. As the internal sales chain within the group has become longer, the profit can be seen in the company's accounts as and when consumers buy the products. The same growth and profitability targets have been set for tyre chain as for all other Nokian Tyres operations.
Net sales of Nokian Tyres in January-June 2000 amounted to 152.2 million euros (121.4 million euros), which is 25.4% higher than the corresponding figure from the previous year. Commensurate net sales, i.e. net sales excluding acquisitions made in 1999, were 132.6 million euros, in other words 9.2% higher than the previous year. The percentage of foreign invoicing went down to 69.0% (76.3%) as a result of the expansion of tyre chain in Finland.
Fixed costs increased by 22.5 million euros, i.e. 51.3% from the previous year's figure, and stood at 66.5 million euros (44.0 million euros). Acquisitions accounted for 70% of the increase in fixed costs. The commensurate increase in fixed costs was 15%.
The operating profit showed -1.5 million euros (5.0 million euros). The operating profit in manufacturing amounted to 5.3 million euros (7.5 million euros) and the operating profit of tyre chain showed -6.0 million euros (-2.6 million euros). Net financial expenses stood at 4.4 million euros (2.5 million euros).
Raw material prices increased by 8% from the average price of the previous year.
Profit before tax showed -5.9 million euros (2.5 million euros). Profit for this financial period showed -4.1 million euros (1.6 million euros). Commensurate profit for the financial period was -1.2 million euros (1.6 million euros).
The profit and balance sheet of the Rengasmestarit-Kumi-Helenius group acquired by Nokian Tyres in February will be consolidated into the Nokian Tyres group financial statements in the September interim report. It does not have a significant effect on the group financial statements in the financial period.
The number of employees in the group was 2,346 (1,842) people on average and 2,611 (1,913) at the end of the review period. The number of employees grew most in tyre chain, where the number of employees at the end of the review period was 1,078 (433).
PASSENGER CAR TYRES
Demand for passenger car tyres was below normal during the first quarter of the year, but sales caught up significantly in April.
Sales of Nokian passenger car tyres grew in January-June by 7.3% compared to figures from the previous year and amounted to 68.0 million euros (63.3 million euros). Summer tyres were sold in greater numbers than during the corresponding period of the previous year. Despite enormous pressure to reduce prices of summer tyres in particular, the planned price increases were carried out. Sales were especially good in Germany, Russia and the Eastern European countries. In Germany, sales were boosted by the new summer tyres, the Nokian NRV and the Nokian NRH 2, as well as their success in motor magazine tyre tests. The launch of consumer advertising in Germany also started to impact on sales.
The sales outlook for Nokian passenger car tyres for the end of the year is good, and the order books are looking healthy. Advance sales of the new winter tyre family introduced at the beginning of the year, the studded Nokian Hakkapeliitta 2, and the three new delivery van winter tyres tailored for different market areas have also started well. In Sweden and North America, demand for winter tyres was lower in the review period than the previous year, as tyre companies had ample stocks of winter tyres from the previous winter. During the autumn, the Nokian summer tyre family will be complemented with new products. New products will account for almost 50% of sales in the year 2000, while they mainly affect sales in the second half of the year.
HEAVY TYRES
Demand for heavy tyres continued to be favourable even during the second quarter of the year. Demand for radial special tyres in particular saw a significant increase.
Sales of Nokian heavy tyres grew by 1.6% at 27.1 million euros (26.7 million euros). Growth in sales was less than expected, as sales of truck tyres and harbour and mining machinery tyres failed to reach the targets set. Sales of agricultural tyres were hampered by problems in off-take manufacturing, but they are being eliminated along with the start of co-operation with a new partner. To secure its position in the agricultural tyres market, Nokian Tyres started its own production of the six radial field tyre sizes most important to sales during the review period.
Sales of forestry tyres were good in Europe and the USA, where sales power has been boosted with the introduction of a new retail network.
The product range of Nokian heavy tyres has been expanded with the introduction of many new radial products. In 1999, these tyres accounted for about 14% of net sales of all heavy tyres, and the target has been set at increasing this to 20% of net sales in 2000.
The volume of orders for the autumn in heavy tyres and the sales outlook for the end of the year appear to be good. New products will account for about 15% of sales in the year 2000, and their influence will be seen in the second half of the year in particular.
BICYCLE TYRES
Sales of Nokian bicycle tyres amounted to 3.2 million euros, i.e. 12.3% lower than the previous year (3.6 million euros). Demand for bicycle tyres increased a little compared with the beginning of the year.
Measures to increase the added value of the product range and production continued. Reorganisation of the supply chain also supports implementation of the specialisation strategy in the product area. New products will account for about 30% of sales in the year 2000.
RETREADING MATERIALS
Sales of Nokian Tyres' retreading materials amounted to 4.1 million euros (3.9 million euros), i.e. 4.0% higher than the previous year. Demand for passenger car tyre retreading materials was lower than the previous year. In contrast, demand for truck tyre retreading materials increased.
The new Nokian Noktop 31 winter traction tread was introduced in May. Its intended market areas are the Nordic countries, Western Europe and North America. New products will account for about 19% of sales in the year 2000, while the effects of their introduction will be seen in the second half of the year especially.
TYRE CHAIN
After an exceptionally quiet start to the year, tyre trade clearly livened up in the Nordic countries in the second quarter of the year. The summer tyre season was busy, and sales of truck tyres also made a good start.
Net sales of the Nokian tyre chain in January-June were 62.2 million euros (29.1 million euros), which is 114.0% more than in the corresponding period of 1999. Growth in sales was limited by the increasingly tough price competition. Commensurate net sales excluding acquisitions made in 1999 amounted to 32.9 million euros.
The Nokian tyre chain includes a total of 150 sales outlets, and has 1,078 employees.
During the review period, unification of operations within the Finnish tyre chain continued. This meant centralising retreading operations, closing six retreading plants and transferring the administration of the Rengasmestarit-Kumi-Helenius group to Lappeenranta.
The sales outlook for tyre chain is good for the end of the year. Figures for the end of the year will also be affected by the results of the Rengasmestarit-Kumi-Helenius group. The expenses for acquiring the group are already included in the figures of this financial period.
The main emphasis of profits from tyre chain will be on the last quarter of the year.
INVESTMENTS
Nokian Tyres invested a total of 35.4 million euros (22.7 million euros) during the review period. Installation of machinery at the new heavy tyre building hall progressed according to plan and will be completed during early autumn.
The company intends to invest a total of about 60 million euros into basic operations in the year 2000. The most significant individual investment will be the expansion of the mixing department, amounting to 33 million euros and this will be implemented as an operational lease. Its effect on total investments in the year 2000 will be about 13 million euros. Investments are part of a five-year-plan aiming to increase annual production by 50% compared with present levels. Expansion of the factory building and installation of new machinery and equipment will tie up capital before the new capacity can be utilised, but these investments are necessary to attain the kind of organic growth targeted.
OTHER MATTERS
Change in company management
In its stock exchange bulletin dated 29th May 2000, Nokian Tyres announced that Mr. Lasse Kurkilahti, President and CEO of Nokian Tyres plc has been elected Chief Executive Officer of Raisio Group and will start in his new position on 1 September 2000. Mr. Kurkilahti will continue as a Member of the Board of Directors of Nokian Tyres. On 22nd June 2000, the Vice President of Nokian Tyres' passenger car and delivery van tyres product area, Mr. Kim Gran, B.Sc. (Econ.), was appointed the new President and CEO of Nokian Tyres as of 1st September 2000.
MATTERS SUBSEQUENT TO THE FINANCIAL PERIOD
Nokian Tyres announced on 3rd August 2000 that the French company, Michelin, has been selected as a partner through off-take production. Nokian Tyres and Michelin have agreed to establish a partnership through off-take production in car and heavy tyres.
The main objective is to focus on core products and improve productivity. The agreement will be finalised by the end of September, 2000. The agreement does not exclude co-operation with other tyre manufacturers.
OUTLOOK FOR THE END OF THE YEAR
Fierce competition and price pressures will continue in the passenger car tyre market. Demand for Nokian Tyres' core products, studless and studded winter tyres and high speed summer tyres, is still expected to grow. The outlook for heavy tyres and retreading materials is also good.
The prices of raw materials are expected to increase from the previous year's level by 12%.
The end of the year is expected to be better than planned for Nokian Tyres. The company will launch a record number of new products in all product ranges this year, and they will have a particular effect in the second half of the year. The share of core products, such as winter tyres and forestry tyres, of total sales will be higher than planned.
Production numbers are growing thanks to investments in production, and the increase in demand can be exploited more efficiently. The company's position in its domestic market area has been significantly strengthened as a result of the expansion of tyre chain. Measures to strengthen the Nokian brand have been taken not only in passenger car tyres but also in heavy tyres. In addition to the Nordic countries, increased consumer marketing will also be directed to Germany and Russia.
The target of Nokian Tyres in the year 2000 is a 20% growth in sales and profit.
In Nokia, 3rd August 2000
Nokian Tyres plc
NOKIAN TYRES
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Million euros 4-6/00 4-6/99 1-6/00 1-6/99 Last 12 1-12/99
months
Net sales 85.1 64.7 152.2 121.4 353.4 322.6
Operating expenses 76.5 58.1 141.7 107.6 294.9 260.7
Depreciation according
to plan 5.6 4.2 11.9 8.8 22.9 19.8
Operating profit 3.0 2.3 -1.5 5.0 35.7 42.1
Financial income
and expenses -2.3 -1.5 -4.4 -2.5 -8.1 -6.2
Profit before extra-
ordinary items and tax 0.7 0.9 -5.9 2.5 27.5 35.9
Extraordinary items 0.0 0.0 0.0 0.0 -0.4 -0.4
Direct tax for the year 0.5 0.3 -1.7 0.9 7.2 9.8
Profit applicable to
minority shareholders 0.0 0.0 0.0 0.0
Net profit 0.2 0.6 -4.1 1.6 19.9 25.7
CONSOLIDATED BALANCE SHEET 30.6.00 30.6.99 31.12.99
Goodwill 49.4 14.5 50.7
Fixed assets 182.5 139.4 163.6
Inventories 85.3 66.3 68.4
Receivables 95.6 79.5 94.9
Cash in hand and at bank 9.0 9.0 14.3
Shareholders' equity 108.4 95.7 121.0
Capital loan 36.0
Minority shareholders' Interest 0.2 0.1
Long-term liabilities
interest bearing 144.9 95.7 127.5
non interest bearing 16.9 13.7 16.6
Current liabilities
interest bearing 48.7 53.7 57.2
non interest bearing 66.6 49.9 69.4
Total assets 421.6 308.6 391.8
Interest bearing net debt 184.6 140.4 170.4
Capital expenditures 35.4 22.7 85.7
Personnel 2,346 1,842 2,023
KEY RATIOS 30.6.00 30.6.99 Last 12 31.12.99
months
Earnings per share, euro -0.39 0.16 1.94 2.51
Equity ratio, % *) 34.3 31.0 30.9
Equity ratio, % 25.7 31.0 30.9
Gearing, % *) 127.7 146.7 140.6
Shareholders' equity
per share, euro *) 13.65 9.17 11.47
Number of shares
(1,000 units) 10,582 10,437 10,545
*) Capital loan is included in equity
NOKIAN TYRES 7/7
CONTINGENT LIABILITIES
Million euros
FOR OWN DEBT
Mortgages 1.2 0.5 7.4
Mortgage on company assets 1.3 0.0 11.4
Pledged assets 0.1 0.0 0.1
Guarantees 5.3 1.2 1.2
ON BEHALF OF OTHER COMPANIES
Guarantees 0.0 0.0 0.0
OTHER OWN COMMITMENTS
Leasing and rent
commitments 15.7 2.3 3.0
Acquisition commitments 5.0 0.0 5.1
Not entered interest on
capital loan 0.7
INTEREST RATE DERIVATIVES
Interest rate swaps
Fair value 0.3 0.7 0.3
Underlying value 8.4 8.4 8.4
Options, purchased
Fair value 0.1 0.0 0.0
Underlying value 5.0 0.0 5.0
CURRENCY DERIVATIVES
Forward contracts
Fair value -0.3 -0.6 -1.3
Underlying value 50.2 36.3 58.4
Options, purchased
Fair value 0.1 0.0 0.1
Underlying value 9.0 6.0 7.0
Options, written
Fair value -0.4 -0.1 -0.2
Underlying value 22.0 5.0 11.0
Currency derivatives are used to hedge the Group's net exposure.
Currency derivatives are included in the financial result at market
value except for those relating to order stock and budgeted net
currency positions, which are entered in the profit and loss
account as the cash flow is received.
Nokian Tyres plc
Raila Hietala-Hellman
Vice President, Public Information
For further information: Mr. Lasse Kurkilahti, President and CEO, tel +358 3 3407 336 and Mr. Kim Gran, Vice President, Nokian car and van tyres, + 358 3 3407 524
Distribution: HEX and Major media