Nokian Tyres plc Interim Report January−September 2019: Strategic journey continues despite softness in the market
Nokian Tyres plc Interim Report January−September 2019, October 30, 2019, 2:00 p.m.
This release is a summary of Nokian Tyres’ Interim Report January−September 2019. The complete report is attached to this release. It is also available on the company website at www.nokiantyres.com/company/investors/.
July–September 2019
- Net sales were EUR 357.3 million (356.9 in 7−9/2018). With comparable currencies, net sales decreased by 1.2%.
- Operating profit was EUR 67.5 million (85.9), with no significant currency impact.
- Profit for the period was EUR 51.1 million (65.2).
- Earnings per share were EUR 0.37 (0.48).
- Cash flow from operating activities was EUR -88.7 million (-73.7).
January–September 2019
- Net sales were EUR 1,120.1 million (1,122.0 in 1−9/2018). With comparable currencies, net sales decreased by 0.3%.
- Operating profit was EUR 215.5 million (255.2), negatively impacted by currencies.
- Profit for the period was EUR 318.8 million (199.3), positively impacted by EUR 149.6 million related to the rulings on the tax disputes concerning the years 2007−2011.
- Earnings per share were EUR 2.31 (1.45), positively impacted by EUR 1.08 related to the rulings on the tax disputes.
- Cash flow from operating activities was EUR -178.5 million (76.9; positively impacted by EUR 148 million due to the rulings on the tax disputes).
Guidance for 2019 (updated October 22)
In 2019, net sales with comparable currencies are expected to be approximately at the level of 2018 and operating profit margin to be approximately at the level of 20%. 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 January-September 2019, our net sales with comparable currencies were at the previous year’s level. The good progress in Heavy Tyres and Vianor continued, while net sales in Passenger Car Tyres decreased as the car and tire market in Europe continued to be soft. This together with higher material and expansion costs impacted our profitability negatively. In Russia, the market has turned weak, which is a clear change compared to our expectations in the beginning of the year. It is expected that markets will remain soft in 2020.
Regardless of the headwind in the market, we focus on executing our strategy. In October, we reached a significant milestone when we celebrated the opening of our US factory in Dayton, Tennessee. We are extremely excited about the opportunities the new facility provides us to further expand our presence in North America. We will start the commercial tire production in US in January 2020. In addition, the construction of our new testing center in Spain and the project to increase Heavy Tyres’ capacity are proceeding according to plan.
In September, we received great recognition for our sustainability achievements when Nokian Tyres was again selected in the DJSI World index and also in the more strictly defined DJSI Europe index. I’m also very pleased with the occupational safety development, especially in the Heavy Tyres business, which has been an entire year with no occupational accidents leading to absence. We want Nokian Tyres to be seen as a sustainability benchmark in the industry and these results prove that we are on the right track.”
Key figures, EUR million
| 7–9 /19 |
7–9 /18 |
Change % |
CC* Change % |
1–9 /19 |
1–9 /18 |
Change % |
CC* Change % |
2018 | |
| Net sales | 357.3 | 356.9 | 0.1% | -1.2% | 1,120.1 | 1,122.0 | -0.2% | -0.3% | 1,595.6 |
| Operating profit | 67.5 | 85.9 | 215.5 | 255.2 | 372.4 | ||||
| Operating profit % | 18.9% | 24.1% | 19.2% | 22.7% | 23.3% | ||||
| Profit before tax | 62.1 | 82.8 | 241.7 | 248.2 | 361.7 | ||||
| Profit for the period | 51.1 | 65.2 | 318.8 | 199.3 | 295.2 | ||||
| Earnings per share, EUR ** | 0.37 | 0.48 | 2.31 | 1.45 | 2.15 | ||||
| ROCE, % *** | 17.9% | 24.2% | 23.3% | ||||||
| Equity ratio, % | 66.3% | 70.5% | 71.0% | ||||||
| Cash flow from operating activities | -88.7 | -73.7 | -178.5 | 76.9 | 536.9 | ||||
| Gearing, % | 25.0 | 1.8 | -21.2% | ||||||
| Interest-bearing net debt |
422.6 | 25.8 | -315.2 | ||||||
| Capital expenditure | 88.1 | 49.4 | 236.1 | 114.2 | 226.5 |
* Comparable currencies
** EPS 1-9/19 excl. the impact of the rulings on the tax disputes of EUR 1.08 were EUR 1.23
*** 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 Q3 income statement (EBIT impact EUR +1.8 million, net income impact EUR -1.2 million). Interest-bearing net debt on September 30, 2019 increased by EUR 118.0 million and assets by EUR 116.8 million due to the recognition of right-of-use assets.
BUSINESS UNIT REVIEWS
| Passenger Car Tyres |
| 7–9 /19 |
7–9 /18 |
Change % |
CC* Change % |
1–9 /19 |
1–9 /18 |
Change % |
CC* Change % |
2018 | |
| Net sales, M€ | 259.5 | 265.9 | -2.4% | -4.3% | 816.0 | 834.0 | -2.2% | -2.4% | 1,150.8 |
| Operating profit, M€ | 68.2 | 91.5 | 211.3 | 260.0 | 356.5 | ||||
| Operating profit, % | 26.3% | 34.4% | 25.9% | 31.2% | 31.0% |
* Comparable currencies
Heavy Tyres
| 7–9 /19 |
7–9 /18 |
Change % |
CC* Change % |
1–9 /19 |
1–9 /18 |
Change % |
CC* Change % |
2018 | |
| Net sales, M€ | 52.2 | 45.1 | 15.7% | 15.8% | 148.2 | 134.7 | 10.0% | 10.0% | 187.7 |
| Operating profit, M€ | 8.3 | 5.9 | 25.6 | 19.0 | 28.6 | ||||
| Operating profit, % | 15.9% | 13.0% | 17.3% | 14.1% | 15.2% |
* Comparable currencies
Vianor, own operations
| 7–9 /19 |
7–9 /18 |
Change % |
CC* Change % |
1–9 /19 |
1–9 /18 |
Change % |
CC* Change % |
2018 | ||
| Net sales, M€ | 69.7 | 68.6 | 1.5% | 3.0% | 216.4 | 214.9 | 0.7% | 1.9% | 337.2 | |
| Operating profit, M€ | -3.8 | -5.4 | -6.4 | -10.1 | 1.6 | |||||
| Operating profit, % | -5.5% | -7.9% | -3.0% | -4.7% | 0.5% | |||||
| Number of own service centers at period end |
189 | 191 | 188 |
* Comparable currencies
CONFERENCE CALL
A conference call for investors, analysts and media will be held on October 30, 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: 14159738#
The call can also be listened live via www.nokiantyres.com/resultinfo-Q3-2019
A recording of the conference call and a transcript will be available on the company’s website later.
FINANCIAL REPORTING
Financial Statement Release 2019: February 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
Attachment: Nokian Tyres’ Interim Report January−September 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