Nokian Tyres: Optimistic Outlook for Profitability and Growth
2023-07-25
Nokian Tyres held its Q2 2023 earnings call meeting to discuss the company's financial performance, progress on new facilities, profitability, and the impact of supply volumes and currency headwinds on net sales. The meeting was attended by Paivi Antola, Head of Investor Relations, Jukka Moisio, President and CEO, and Teemu Kangas-Karki, CFO.
During the meeting, the management highlighted that the market outlook for the company remains relatively stable. They emphasized their focus on building new Nokian tires in the second half of the year. The company expressed optimism about the performance of its Heavy Tyres segment, aiming to achieve a segment operating profit of 15% in the long term. They anticipate an improved performance in the second half of the year, targeting an EBITDA of 24-25% and a segment operating profit of 15% in the future.
In terms of the pricing environment, Nokian Tyres expects stability with no significant price increases in the coming quarters. However, they mentioned the possibility of promotional activities by competitors, which could result in a decrease in net real price changes in certain markets. On the other hand, the company anticipates price increases in the Nordics due to currency factors.
The key drivers of the business for Nokian Tyres are the sales of winter tires, cost reduction measures, the pricing environment, and their long-term ambition to achieve a segment operating profit of 15%.
During the meeting, several important numbers were cited. The segment's EBITDA for the quarter was €14.1 million, representing a 14.1% increase compared to the previous year. The segment's operating profit stood at 5.2%. Earnings per share for the quarter were $0.05 per share. Capital expenditure for the quarter amounted to €3 million, down from €19 million in the prior year. However, the company reported a decrease in cash flow from operating activities, with a negative value of €67 million in the current year compared to €109 million in the previous year. The top-line revenue also saw a decline, with a reported change of minus 19% and revenue of €529 million in the current year compared to €655 million in the previous year. The segment EBITDA for the first six months of the year was 9.9%, down from 13% in the previous year.
Looking ahead, Nokian Tyres expects a relatively stable outlook for the quarter and the year. They anticipate an improvement in the performance of the Heavy Tyres segment in the second half of the year, aiming for a segment operating profit of 13% to 15%. The company also expects stable development in OE demand and a reduction in excess costs. While the first half of the year did not deliver significant profitability, they anticipate improved performance in the second half, particularly with the launch of winter tires. Nokian Tyres has a long-term ambition to achieve a segment operating profit of 50%, and they plan to work towards that goal incrementally, with improvements expected every year and every quarter. The pricing environment is expected to remain stable, with no significant price increases or decreases, although some competitors may engage in promotional activities that could result in net real price changes going down in certain markets.
Overall, Nokian Tyres remains focused on its strategic goals and aims to navigate the challenges of the market while capitalizing on opportunities for growth and profitability.