Nokian profit drops amid flat sales

Nokia, Finland – Currency fluctuation and ramp-up costs for the recently opened US production factory have impacted Nokian Tyres’ profits for the year 2019.

Operating profit fell 15% year-on-year to €316.5 million in 2019, while sales remained flat at €1.6 billion, Nokian said in a statement 4 Feb.

The US factory ramp-up costs, the Finnish tire maker said, stood at €20 million while currency effects had a €7-million impact on profits.

Commenting on the company’s performance, Hille Korhonen, President and CEO, said the car and tire markets continued to be soft in Europe in 2019, resulting in “tightening competition.” 

In addition, winter tire demand in the final quarter of the year was negatively impacted by the warm winter in Nokian Tyres’ key markets. 

Against its expectations, Nokian also saw the Russian market decline during the year, driven by low new car sales and consumer spending.

“In the short term, we are facing headwind in Russia. Nevertheless… we continue to build a more balanced portfolio across the Nordics, Russia, Central Europe and North America,” said Korhonen. “[This] will lead to a sustainable, positive impact on our long-term performance.” 

For 2020, Nokian expects net sales and operating profit in Russia to “decline substantially”.

This will impact the company’s passenger car tires segment in 2020 especially during the first and second quarters of the year, according to Korhonen. 

The segment contributed to over 71% of the company’s total net sales in 2019.

“Carry-over stocks in the distribution in Russia are on a high level, and in 2020, our focus in Russia is on increasing our sell-out and decreasing distributors’ stock levels,” said Korhonen. 

In addition, the company will reposition its “B segment” winter products in Russia to make them more competitive. 

The Finnish tire maker also said that it would launch “several new products” in 2020 to support growth in Central Europe and North America.