Nokian posts 76.6% increase in first-half operating profit

Aug. 6, 2004

Nokian Tyres plc posted net operating profit of 29.5 million euros on net sales of 250.8 million euros for the first six months of 2004. That compares to operating profit of 16.7 million euros on sales of 210.9 million euros for the same period in 2003.

The comparative 76.6% increase in profit and 18.9% in sales means Nokian is well on its way to meeting its 2004 goal -- "to outperform the year 2003 in terms of net sales and profit."

For the second quarter ended June 30, 2004, Nokian announced operating profit of 18.9 million euros on consolidated net sales of 138 million euros, increases of 40% and 19.8%, respectively, vs. the corresponding period in 2003. Net profit totaled 13.5 million euros.

Here are the highlights of the first-half and second-quarter results for the company´s manufacturing group and its Vianor tire chain.

Manufacturing: For the first half, the manufacturing business posted operating profit of 34.3 million euros on net sales of 191.1 million euros. For 2Q, operating profit was 15.6 million euros on net sales of 96.2 million euros.

First-half net sales generated from the Nokian passenger tire business grew by 30.1% over the previous year and amounted to 148.3 million euros.

The new environmentally friendly summer tire, Nokian NRHi, boosted the company’s position as a summer tire manufacturer in the Nordic countries and especially in Germany.

Vianor: For the first half, Vianor´s operating profit was 1.4 million euros (before a depreciation of goodwill of 3.6 million euros) on net sales 93 million euros. For 2Q, the chain’s operating profit was 4.7 million euros (before a depreciation of goodwill of 1.8 million euros) on net sales of 57 million euros.

Nokian summed up its financial results as follows:

"The situation in Nokian Tyres´ main markets and core products continued favourably throughout the period under review. The demand for high-speed summer and winter tyres increased. Heavy tyres, especially forestry tyres and special tractor tyres, sold clearly better than the year before. In addition, the retreading of truck tyres increased in the Nordic countries.

"The strongest growth areas were the Nordic countries, Russia, Eastern Europe and the U.S.A. Sales of new cars continued to grow in Finland and in Norway boosting the demand for tyres.

"Raw material prices increased from the previous year, and tyre manufacturers raised their prices. The low value of the dollar still had a negative effect on the sales profitability of imported tyres in the U.S.A.

"Nokian Tyres´ sales growth continued strong during the whole period under review, with market shares improving especially in the Nordic countries and Russia. Sales of high-speed summer tyres and winter tyres increased remarkably from the previous year. Sales growth was fastest in the Nordic countries, Russia and the U.S.A. In the Nordic countries, sales to the car dealers increased considerably.

"Sales focused on passenger car tyres and other special products with high profit margins. The product range included many novelties, which, in addition to the implemented price increases, improved profitability. In (the) Vianor tyre chain, the summer season was good and the car summer retail sales were clearly up from the previous year.

"Productivity improved and production volumes increased at the Nokia factory. The material costs in the production were higher than a year ago due to the increased raw material prices."

Nokian says the outlook for its key markets and core products is good. It also had this to say:

"The global economic recovery and increasing tyre manufacture in China increase the pressure to raise raw material prices. Nokian Tyres estimates that the raw material prices will be approximately 7% higher at the end of the third quarter compared to the same period a year earlier. The value of the U.S. dollar is likely to remain at the first half’s level.

"The demand for passenger car winter tyres, high-speed summer tyres, heavy special tyres and retreading materials is estimated to further increase. Russia, Eastern Europe and the U.S.A. will continue to show the strongest growth. The company also has good opportunities for growth in the Nordic countries.

"In the second half of the year, Nokian Tyres’ focus in manufacturing operations, the tyre chain and logistics solutions will be on the vital winter tyre season. The aim is to exceed the previous years´ winter tyre sales in the Nordic countries and Russia. An upgraded product range and increasingly stronger market position in key markets support good sales outlook.

"The expanded product range includes the new friction tyre, Nokian Hakkapeliitta RSi, as well as additional sizes for the studded Nokian Hakkapeliitta 4. The consumer sales of the new products will start this autumn. New products and price increases planned for the second half will improve the sales profitability.

"The advance order book for passenger car winter tyres looks good, and the Nokia plant is prepared for a significant sales increase."

The prospects for its heavy tire and retreading operations "look better than the year before."

At Vianor, the share of Nokian´s own products will increase and the streamlining of operations will continue, added the company.