Nokian Tyres plc Half Year Financial Report January–June 2019: Strategic journey continues despite a challenging European market
Nokian Tyres plc Half Year Financial Report January–June 2019, August 6, 2019, 2:00 p.m.
This release is a summary of Nokian Tyres’ Half Year Financial Report January–June 2019. The complete report is attached to this release. It is also available on the company website at www.nokiantyres.com/company/investors/.
April–June 2019
- Net sales decreased by 2.3% to EUR 419.1 million (429.1 in 4−6/2018). With comparable currencies, net sales decreased by 2.6%.
- Operating profit decreased to EUR 94.1 million (108.0), with no significant currency impact.
- Cash flow from operating activities was EUR -20.8 million (169.0; positively impacted by EUR 148 million due to the rulings on the tax disputes).
- Profit for the period was EUR 73.0 million (87.5).
- Earnings per share decreased to EUR 0.53 (0.63).
January–June 2019
- Net sales decreased by 0.3% to EUR 762.8 million (765.2 in 1−6/2018). With comparable currencies, net sales increased by 0.2%.
- Operating profit decreased to EUR 148.0 million (169.3), negatively impacted by currencies.
- Profit for the period was EUR 267.6 million (134.1) and was positively impacted by EUR 149.6 million related to the rulings on the tax disputes concerning the years 2007−2011.
- Earnings per share increased to EUR 1.94 (0.97) and were positively impacted by EUR 1.08 related to the rulings on the tax disputes.
- Cash flow from operating activities was EUR -89.8 million (150.6; positively impacted by EUR 148 million due to the rulings on the tax disputes).
Guidance for 2019 (updated on June 14, 2019)
In 2019, net sales with comparable currencies are expected to be slightly higher and operating profit to be lower compared to 2018. In line with Nokian Tyres’ updated 2018 strategy, the company is targeting further growth in Russia, Central Europe, and North America. As a result of ongoing investment programs to support the growth, operating profit in 2019 will include significant additional operating costs.
Hille Korhonen, President and CEO:
“In the first half of the year, our net sales with comparable currencies were slightly higher than in the same period last year. The progress we made in Heavy Tyres and Vianor was offset by lower net sales in Passenger Car Tyres. The drop in the passenger car tire sales volumes, mainly in Central Europe, had a negative impact on our operating profit. In addition, the result was impacted by currencies and higher material and production costs.
In H1/2019, the development in the car and tire sector continued to be weak in Europe. The competitive landscape in the Central European replacement car tire market is tight due to weakness in the OE segment, as there is a high supply of tires in the market. We expect short-term weakness in sales volume growth in Central Europe to continue during the remainder of the year. There is also some level of uncertainty in the Russian market.
Despite market uncertainties, we will continue to pursue our growth agenda going forward. Our focus is on executing our strategic projects, especially the US factory ramp-up. During the first half, we invested EUR 148 million including the US factory, testing center in Spain and Heavy Tyres capacity increase. In the US, in line with the original schedule, we reached a significant milestone by producing the first test tire in the new factory in summer. Commercial production is expected to start in early 2020.
In Spain, the construction work of our new testing center is proceeding on schedule. The center enables year-round testing of summer, winter, and all season tires, and it is the largest single investment in testing in Nokian Tyres’ history. A good example of our strong R&D and testing capabilities are the new Central European summer tires, which are showing a good commercial success.
In Heavy Tyres, the project to increase the production capacity of the factory in Finland by 50% and more than double the number of new products is well underway. A new R&D center, which is being built as part of the investment to accelerate the testing phase of new tire models, will be completed this year.”
Key figures, EUR million
| 4–6 /19 |
4–6 /18 |
Change % |
CC* Change % |
1–6 /19 |
1–6 /18 |
Change % |
CC* Change % |
2018 | |
| Net sales | 419.1 | 429.1 | -2.3% | -2.6% | 762.8 | 765.2 | -0.3% | 0.2% | 1,595.6 |
| Operating profit | 94.1 | 108.0 | 148.0 | 169.3 | 372.4 | ||||
| Operating profit % | 22.4% | 25.2% | 19.4% | 22.1% | 23.3% | ||||
| Profit before tax | 88.9 | 105.4 | 179.5 | 165.4 | 361.7 | ||||
| Profit for the period | 73.0 | 87.5 | 267.6 | 134.1 | 295.2 | ||||
| Earnings per share, EUR ** | 0.53 | 0.63 | 1.94 | 0.97 | 2.15 | ||||
| ROCE, % *** | 20.4% | 25.3% | 23.3% | ||||||
| Equity ratio, % | 70.5% | 70.5% | 71.0% | ||||||
| Cash flow from operating activities | -20.8 | 169.0 | -89.8 | 150.6 | 536.9 | ||||
| Gearing, % | 15.7 | -7.2 | -21.2% | ||||||
| Interest-bearing net debt |
252.0 | -99.6 | -315.2 | ||||||
| Capital expenditure | 93.7 | 47.4 | 148.0 | 64.9 | 226.5 |
* Comparable currencies
** EPS excl. the impact of the rulings on the tax disputes of EUR 1.08 were EUR 0.33
*** Rolling 12 months
IFRS 16 Leases
The new IFRS 16 standard became effective on 1 January 2019 onwards and replaced the previous standard IAS 17.
Nokian Tyres chose to use the exemption provided by the standard not to account lease liability for leases, which have a lease term of 12 months or less and not to account lease liability for leases in which the underlying asset is not material to Nokian Tyres. The majority of leases recognized as Right-of-use assets under IFRS 16 are comprised of Vianor chain real estate and warehouses.
The IFRS 16 standard had a minor impact on the H1 income statement (EBIT impact EUR +1.3 million, net income impact EUR -0.8 million). Interest-bearing net debt on June 30, 2019 increased by EUR 126.1 million and assets by EUR 125.3 million due to the recognition of right-of-use assets.
BUSINESS UNIT REVIEWS
| Passenger Car Tyres |
| 4–6 /19 |
4–6 /18 |
Change % |
CC* Change % |
1–6 /19 |
1–6 /18 |
Change % |
CC* Change % |
2018 | |
| Net sales, M€ | 300.2 | 309.0 | -2.8% | -3.3% | 556.5 | 568.0 | -2.0% | -1.5% | 1,150.8 |
| Operating profit, M€ | 79.9 | 94.5 | 143.1 | 168.5 | 356.5 | ||||
| Operating profit, % | 26.6% | 30.6% | 25.7% | 29.7% | 31.0% |
* Comparable currencies
Heavy Tyres
| 4–6 /19 |
4–6 /18 |
Change % |
CC* Change % |
1–6 /19 |
1–6 /18 |
Change % |
CC* Change % |
2018 | |
| Net sales, M€ | 47.8 | 46.5 | 2.8% | 2.6% | 96.1 | 89.6 | 7.2% | 7.2% | 187.7 |
| Operating profit, M€ | 8.3 | 4.9 | 17.3 | 13.2 | 28.6 | ||||
| Operating profit, % | 17.4% | 10.5% | 18.0% | 14.7% | 15.2% |
* Comparable currencies
Vianor, own operations
| 4–6 /19 |
4–6 /18 |
Change % |
CC* Change % |
1–6 /19 |
1–6 /18 |
Change % |
CC* Change % |
2018 | |
| Net sales, M€ | 89.8 | 93.0 | -3.5% | -0.9% | 146.7 | 146.2 | 0.3% | 1.4% | 337.2 |
| Operating profit, M€ | 9.4 | 10.0 | -2.6 | -4.7 | 1.6 | ||||
| Operating profit, % | 10.4% | 10.7% | -1.8% | -3.2% | 0.5% | ||||
| Own service centers, pcs, at period end |
188 | 193 | 188 |
* Comparable currencies
CONFERENCE CALL
A conference call for investors, analysts and media will be held on August 6, 2019 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 14 22
PIN: 83559263#
The call can also be listened live via www.nokiantyres.com/resultinfo-Q2-2019
A recording of the conference call and a transcript will be available on the company’s website later.
FINANCIAL REPORTING
Interim Report January−September 2019: October 30, 2019
Releases and company information are be 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
Attachment: Nokian Tyres’ Half Year Financial Report January–June 2019
Nokian Tyres develops and manufactures premium tires for people who value safety and sustainability. Inspired by our Scandinavian heritage, we craft innovative products for passenger cars, trucks and heavy machinery that give you peace of mind in all driving conditions. Our Vianor chain provides tire and car services. In 2018, the company’s net sales were EUR 1.6 billion and it employed some 4,800 people. Nokian Tyres is listed on Nasdaq Helsinki. Further information: www.nokiantyres.com