Tue May 5 02:00 pm 2020 in category Stock exchange releases
Nokian Tyres plc Interim Report January–March 2020: Russia, COVID-19 and mild winter impacting first quarter – Strong balance sheet supporting in difficult times
Nokian Tyres plc Interim Report January–March 2020, May 5, 2020, 2:00 p.m.
This release is a summary of Nokian Tyres’ Interim Report January–March 2020. The complete report is attached to this release. It is also available on the company website at www.nokiantyres.com/company/investors/.
January–March 2020
- Net sales were EUR 279.8 million (340.3 in January−March 2019). With comparable currencies, net sales decreased by 16.5% especially due to measures taken to reduce high carry-over stocks in the Russian distribution channel, slowing economic activity caused by COVID-19, and mild winter in all main markets.
- Segments operating profit was EUR 16.3 million (56.7), with no significant currency impact. The decline was due to lower volumes and underabsorption of factory costs. Operating profit was EUR 9.0 million (53.9).
- Segments earnings per share were EUR 0.09 (1.44, positively impacted by EUR 1.08 related to the rulings on the tax disputes). Earnings per share were EUR 0.02 (1.41, positively impacted by EUR 1.08 related to the rulings on the tax disputes).
- Cash flow from operating activities was EUR -38.9 million (-68.9).
- Guidance was withdrawn in March 2020 due to increased uncertainty in the car and tire market. Due to the prevailing uncertainties, the Board is not in a position to give a new guidance.
COVID-19 – Summary of actions to date
Employee health and safety actions:
- Continuous monitoring and communication of COVID-19 status in the organization
- Implementing health and safety guidance/orders of each country
- Travel and visitor restrictions in the early phases of the pandemic starting late February
- Remote working launched mid March for most white collar employees
- Protective measures in the factories and service outlets like separation of teams, active cleaning and increased hygiene
Operational response actions:
- Working capital management: continuous production capacity adjustments to manage the inventory levels and secure availability, enhanced actions to monitor customer payments
- Labor cost reduction: working together with employee representatives, implemented temporary layoffs across the company for both white collar and blue collar employees
- Temporarily closed the manufacturing facilities in Russia, Finland and the US. The company is now restarting production in the impacted facilities, maintaining close coordination with local authorities.
- Management Team salary reduction equivalent to one month’s salary
- Cost efficiencies: cutting and delaying activities in 2020, reducing discretionary spending
Financial response actions:
- Dividend EUR 0.79/share (2019: EUR 1.58). Furthermore, the Annual General Meeting authorized the Board of Directors to decide on an additional dividend payment of a maximum of EUR 0.79/share to be distributed in one or several instalments at a later stage when Nokian Tyres is able to make a more reliable estimate on the impacts of the COVID-19 to the company’s business.
- Capex reduction from approximately EUR 200 million to approximately EUR 170 million for 2020.
- Actions implemented to strengthen Nokian Tyres’ liquidity position, which as of March 31, 2020 amounted to EUR 608.9 million, including cash, cash equivalents and undrawn committed short- and long-term credit lines (EUR 424.3 million at the end of 2019).
- Nokian Tyres is further working on enhancing liquidity including new financing facilities.
- Strong balance sheet supporting in difficult times
Hille Korhonen, President and CEO:
“In the first quarter of 2020, we initiated measures to reduce high carry-over stocks in the Russian distribution channel in line with plan announced in February 2020. This, together with the mild winter and the COVID-19 impact toward the end of the quarter, had a significant negative effect on Passenger Car Tyres’ net sales and operating profit. Despite this challenging environment, we were able to keep our strong market position in the Nordics. In Central Europe, our market share in summer tires improved. In Heavy Tyres, the performance was solid.
In the exceptional circumstances and uncertainties posed by COVID-19, we immediately took all necessary preventive actions not only to mitigate the spread of the pandemic but, above all, to safeguard health and safety of our employees and stakeholders. As part of our business continuity plan, we initiated measures to reduce our cost base in order to minimize the negative business impact of the weakening demand. These include suspending production, temporary personnel layoffs, cutting executive pay for a month and postponing all non-critical projects. Along with a strict cost control and efficient cash flow management, we are continuously monitoring the market situation and taking further actions accordingly.
Going forward, we expect the second quarter of 2020 - as we see the situation today - to be severely impacted by COVID-19. At this point of time the financial impacts are very difficult to predict due to limited visibility to customer and consumer behavior. We have a solid foundation, including a valued brand, leading position in home markets and a strong balance sheet, to navigate through this difficult situation.
Nokian Tyres’ success is built on close customer partnerships, which are increasingly important in times like this. Given our sound financial structure, organizational resilience and a clear strategy geared towards sustainable, long-term success, I am confident that we are well positioned to take advantage of the opportunities that arise when the demand recovers.”
Reporting of non-IFRS figures
Nokian Tyres is increasing the level of disclosure in order to provide greater transparency on the underlying performance of the company and its business lines. Starting with the results for the first quarter of 2020, Nokian Tyres will report non-IFRS figures in addition to its IFRS-reported results, which is also in line with reporting practices in the tire industry. The Segments Total figures exclude costs related to the US factory ramp-up, goodwill impairment charges, restructuring and certain other items, which are not indicative of Nokian Tyres’ underlying business performance. In the 2019 results, the Segments Total figures exclude the US factory ramp-up cost only. More information: www.nokiantyres.com/company/news-article/nokian-tyres-provides-restated-financial-statements-for-the-four-quarters-and-the-full-financial-yea/
Key figures, EUR million
| 1–3 /20 |
1–3 /19 |
Change % |
CC* Change % |
2019 | |
| Net sales | 279.8 | 340.3 | -17.8% | -16.5% | 1,585.4 |
| Operating profit | 9.0 | 53.9 | 316.5 | ||
| Operating profit % | 3.2% | 15.7% | 19.8% | ||
| Profit before tax | 5.8 | 90.7 | 336.7 | ||
| Profit for the period | 2.4 | 194.6 | 399.9 | ||
| EPS, EUR** | 0.02 | 1.41 | 2.89 | ||
| Segments operating profit | 16.3 | 56.7 | 337.2 | ||
| Segments operating profit % | 5.8% | 16.7% | 21.3% | ||
| Segments EPS, EUR** | 0.09 | 1.44 | 3.06 | ||
| Segments ROCE, %*** | 14.4% | 18.6% | |||
| Equity ratio, % | 69.4% | 75.7% | 75.9% | ||
| Cash flow from operating activities | -38.9 | -68.9 | 219.8 | ||
| Gearing, % | 7.3% | -3.2% | 2.3% | ||
| Interest-bearing net debt |
120.9 | -54.9 | 41.1 | ||
| Capital expenditure | 50.9 | 54.3 | 299.6 |
* Comparable currencies
** EPS 1-3/2019 excl. the impact of the rulings on the tax disputes of EUR 1.08 were EUR 0.33. Segments EPS 1-3/2019 excl. the impact were 0.36
*** Rolling 12 months
BUSINESS UNIT REVIEWS
Passenger Car Tyres
| 1–3 /20 |
1–3 /19 |
Change % |
CC* Change % |
2019 | |
| Net sales, M€ | 190.5 | 253.0 | -24.7% | -23.4% | 1,123.8 |
| Segment operating profit, M€ | 25.8 | 66.0 | 308.5 | ||
| Segment operating profit, % | 9.7% | 25.0% | 27.4% |
* Comparable currencies
Heavy Tyres
| 1–3 /20 |
1–3 /19 |
Change % |
CC* Change % |
2019 | |
| Net sales, M€ | 51.2 | 48.3 | 6.0% | 6.4% | 202.7 |
| Segment operating profit, M€ | 8.2 | 9.0 | 35.7 | ||
| Segment operating profit, % | 16.1% | 18.7% | 17.6% |
* Comparable currencies
Vianor, own operations
| 1–3 /20 |
1–3 /19 |
Change % |
CC* Change % |
2019 | ||
| Net sales, M€ | 54.4 | 57.0 | -4.4% | -1.7% | 336.5 | |
| Segment operating profit, M€ | -12.4 | -12.0 | 7.7** | |||
| Segment operating profit, % | -22.8% | -21.0% | 2.3% | |||
| Number of own service centers at period end | 186 | 187 | 189 |
* Comparable currencies
** Including EUR 2.0 million profit from sale of real estate
CONFERENCE CALL
A conference call for investors, analysts and media will be held on May 5, 2020 at 3:00 p.m. Finnish time. In the call, President and CEO Hille Korhonen and CFO Teemu Kangas-Kärki will present the financial results.
To participate, please dial in 5−10 minutes before the beginning of the event:
Finland: +358 981 710 310
Sweden: +46 856 642 651
UK: +44 333 300 08 04
US: +1 631 913 1422
PIN: 61745217#
The call can also be listened live via www.nokiantyres.com/resultinfo-Q1-2020.
A recording of the conference call and a transcript will be available on the company’s website later.
FINANCIAL REPORTING
Half Year Financial Report for January–June 2020: August 4, 2020
Releases and company information are available at www.nokiantyres.com/company/investors/.
Nokian Tyres plc
Päivi Antola, SVP, Communications and IR
Further information:
Hille Korhonen, President and CEO, tel: +358 10 401 7733
Teemu Kangas-Kärki, CFO, tel: +358 10 401 7750
Päivi Antola, SVP, Communications and IR, tel: +358 10 401 7327
Distribution: Nasdaq Helsinki, media, www.nokiantyres.com