Quarterly Report • Oct 27, 2020
Quarterly Report
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Nokian Tyres plc Interim Report January–September 2020, October 27, 2020 at 2:00 p.m.
"In July-September 2020, our sales with comparable currencies increased, driven by North America and Central Europe. Net sales of Passenger Car Tyres increased in all areas except Russia, where we have successfully continued the measures to reduce high carry-over stocks in the distribution channel. Heavy Tyres and Vianor maintained their previous year's performance level, which is a good achievement in a volatile market environment. Segments operating profit declined slightly from the comparison period, mainly due to the lower passenger car tire sales in Russia.
Good development was partly driven by some sales shifting from the second quarter to the third quarter as result of improved customer confidence. We have responded to the changes in demand with fast measures. At the same time, we have continued to manage costs prudently while preserving cash and maintaining our strong balance sheet. In the third quarter, operating cash flow developed positively and was significantly higher than in the comparison period.
Nokian Tyres has made significant investments in recent years. The investment phase is starting to be behind us, which will further support our free cash flow generation. Now we need to make sure that we benefit from these investments in the best possible way. In the Nokia factory, we will continue to increase heavy tires production, while the passenger car tire manufacturing will focus on the production of high-quality premium car tires and prototyping.
The fourth quarter of the year is typically seasonally strong to us, however, the uncertainty in the market continues. We have proven the resilience of our business model and the ability of our team to adapt to the changing market conditions. Going forward, top-line growth continues to be our top priority. Expanding product portfolio will be a key driver for boosting sales."
| CC* | CC* | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| EUR million | 7–9/20 | 7–9/19 Change | Change | 1–9/20 | 1–9/19 Change | Change | 2019 | ||
| Net sales | 349.9 | 354.5 | -1.3% | 3.3% | 900.4 | 1,110.6 | -18.9% | -15.9% 1,585.4 | |
| Operating profit | 62.3 | 67.5 | 48.6 | 215.5 | 316.5 | ||||
| Operating profit % | 17.8% | 18.9% | 5.4% | 19.2% | 19.8% | ||||
| Profit before tax | 56.2 | 62.1 | 35.1 | 241.7 | 336.7 | ||||
| Profit for the period | 52.5 | 51.1 | 30.1 | 318.8 | 399.9 | ||||
| EPS, EUR ** | 0.38 | 0.37 | 0.22 | 2.31 | 2.89 | ||||
| Segments operating profit |
69.3 | 74.9 | 110.1 | 230.4 | 337.2 | ||||
| Segments operating profit % |
19.8% | 21.1% | 12.2% | 20.7% | 21.3% | ||||
| Segments EPS, EUR** |
0.44 | 0.43 | 0.60 | 2.43 | 3.06 | ||||
| Segments ROCE, %*** |
9.5% | 22.1% | 18.6% | ||||||
| Equity ratio, % | 57.5% | 66.3% | 75.9% | ||||||
| Cash flow from operating activities |
7.1 | -88.7 | -6.6 | -178.5 | 219.8 | ||||
| Gearing, % | 18.5% | 25.0% | 2.3% | ||||||
| Interest-bearing net debt |
280.6 | 422.6 | 41.1 | ||||||
| Capital expenditure | 31.0 | 88.1 | 118.5 | 236.1 | 299.6 |
* Comparable currencies
** EPS 1-9/2019 excl. the impact of the rulings on the tax disputes of EUR 1.08 were EUR 1.23. Segments EPS 1-9/2019 excl. the impact were EUR 1.35.
*** Rolling 12 months
| The Nordic countries |
Russia | Europe (excl. the Nordic countries) |
North America |
|
|---|---|---|---|---|
| New car sales in 1−9/2020 y-o-y |
-18% | -14% | -30% | -19% |
| Car tire sell-in in 1−9/2020 y-o-y |
-12% | -28% | -16% | -15% |
| Car tire demand E2020 (management estimate) |
decline | decline | decline | decline |
| Heavy tire segments* E2020 (management estimate) |
decline | decline | decline | decline |
* Nokian Tyres' core product segments
Net sales in July−September 2020 decreased by 1.3% and amounted to EUR 349.9 million (July−September 2019: 354.5). With comparable currencies, net sales increased by 3.3%. Currency exchange rates affected net sales negatively by EUR 16.5 million.
| CC* | |||||
|---|---|---|---|---|---|
| EUR million | 7−9/20 | 7−9/19 | Change | Change | 2019 |
| Nordics | 139.1 | 136.0 | 2.2% | 4.5% | 613.2 |
| Other Europe | 111.7 | 106.3 | 5.1% | 8.4% | 375.5 |
| Russia and Asia | 31.6 | 52.1 | -39.3% | -26.3% | 324.3 |
| Americas | 54.3 | 43.3 | 25.4% | 32.6% | 209.3 |
| Other | 13.1 | 16.7 | -21.9% | -21.8% | 63.2 |
| Total | 349.9 | 354.5 | -1.3% | 3.3% | 1,585.4 |
* Comparable currencies
| CC* | |||||
|---|---|---|---|---|---|
| EUR million | 7−9/20 | 7−9/19 | Change | Change | 2019 |
| Passenger Car Tyres | 254.9 | 256.7 | -0.7% | 4.8% | 1,123.8 |
| Heavy Tyres | 49.8 | 52.2 | -4.5% | -2.0% | 202.7 |
| Vianor | 67.4 | 69.7 | -3.3% | -1.2% | 336.5 |
| Other operations and eliminations |
-22.2 | -24.1 | 7.8% | -77.6 | |
| Total | 349.9 | 354.5 | -1.3% | 3.3% | 1,585.4 |
* Comparable currencies
Raw material unit costs (EUR/kg) in manufacturing decreased by 15.9% year-over-year, negatively impacted by currencies, and by 11.1% from the first half of 2020.
Segments operating profit amounted to EUR 69.3 million (74.9). The decline was mainly due to lower passenger car tire sales in Russia and negative currency impact, partly offset by lower raw material unit cost.
Operating profit was EUR 62.3 million (67.5). This includes EUR -7.0 million as non-IFRS exclusions of which EUR -6.6 million are related to the US factory ramp-up.
| EUR million | 7–9/20 | 7–9/19 | 2019 |
|---|---|---|---|
| Passenger Car Tyres | 71.8 | 75.6 | 308.5 |
| Heavy Tyres | 7.8 | 8.3 | 35.7 |
| Vianor | -3.2 | -3.8 | 7.7 |
| Other operations and eliminations | -7.2 | -5.2 | -14.7 |
| Segments operating profit total | 69.3 | 74.9 | 337.2 |
| Non-IFRS exclusions | -7.0 | -7.5 | -20.8 |
Net financial expenses were EUR 6.1 million (5.3), including net interest expenses of EUR 3.6 million (1.6). Net financial expenses include an expense of EUR 2.4 million (3.7) due to exchange rate differences. Segments profit before tax was EUR 63.2 million (69.6). Profit before tax was EUR 56.2 million (62.1) and taxes were EUR -3.7 million (-11.0). Segments profit for the period amounted to EUR 60.5 million (58.6). Profit for the period amounted to EUR 52.5 million (51.1). Segments earnings per share were EUR 0.44 (0.43), and earnings per share were EUR 0.38 (0.37).
In July−September 2020, cash flow from operating activities was EUR 7.1 million (-88.7). Working capital increased by EUR 80.2 million (increased by 177.7). Inventories decreased by EUR 4.0 million (increased by 40.7) and receivables increased by EUR 166.8 million (increased by 164.8). Payables increased by EUR 82.6 million (increased by 27.8).
Net sales in January−September 2020 decreased by 18.9% and amounted to EUR 900.4 million (January−September 2019: 1,110.6). With comparable currencies, net sales decreased by 15.9% especially due to COVID-19, measures taken to reduce high carry-over stocks in the Russian passenger car tire distribution channel, and mild winter in all main markets. Currency exchange rates affected net sales negatively by EUR 33.3 million.
| CC* | |||||
|---|---|---|---|---|---|
| EUR million | 1−9/20 | 1−9/19 | Change | Change | 2019 |
| Nordics | 389.5 | 409.4 | -4.9% | -1.8% | 613.2 |
| Other Europe | 237.1 | 268.6 | -11.7% | -9.4% | 375.5 |
| Russia and Asia | 127.9 | 244.2 | -47.6% | -42.8% | 324.3 |
| Americas | 119.3 | 142.4 | -16.2% | -14.4% | 209.3 |
| Other | 26.5 | 45.8 | -42.2% | -42.1% | 63.2 |
| Total | 900.4 | 1,110.6 | -18.9% | -15.9% | 1,585.4 |
* Comparable currencies
| CC* | |||||
|---|---|---|---|---|---|
| EUR million | 1−9/20 | 1−9/19 | Change | Change | 2019 |
| Passenger Car Tyres | 609.2 | 806.5 | -24.5% | -21.3% | 1,123.8 |
| Heavy Tyres | 141.4 | 148.2 | -4.6% | -2.8% | 202.7 |
| Vianor | 202.7 | 216.4 | -6.4% | -3.1% | 336.5 |
| Other operations and eliminations |
-53.0 | -60.6 | 12.6% | -77.6 | |
| Total | 900.4 | 1,110.6 | -18.9% | -15.9% | 1,585.4 |
* Comparable currencies
Raw material unit costs (EUR/kg) in manufacturing decreased by 9.5% year-over-year, negatively impacted by currencies.
Segments operating profit amounted to EUR 110.1 million (230.4). The decline was mainly due to COVID-19 (impact approximately EUR -50 million), lower sales in Russia (impact approximately EUR -50 million), and low factory utilization rate.
Operating profit amounted to EUR 48.6 million (215.5). This includes EUR -61.5 million of items as non-IFRS exclusions, including the following that were announced in June: the impairments and writedowns in the Vianor (EUR -18 million) and Passenger Car Tyres business (EUR -7 million), the unification of the Group's accounting principles of product development costs (EUR -11 million), and non-operative items which are not indicative of Nokian Tyres' underlying business performance (EUR -6 million). Furthermore, the non-IFRS exclusions include EUR -19.7 million related to the US factory ramp-up.
| EUR million | 1–9/20 | 1–9/19 | 2019 |
|---|---|---|---|
| Passenger Car Tyres | 111.3 | 226.3 | 308.5 |
| Heavy Tyres | 18.7 | 25.6 | 35.7 |
| Vianor | -6.0 | -6.4 | 7.7 |
| Other operations and eliminations | -13.9 | -15.0 | -14.7 |
| Segments operating profit total | 110.1 | 230.4 | 337.2 |
| Non-IFRS exclusions | -61.5 | -15.0 | -20.8 |
Net financial expenses were EUR 13.5 million (income 26.2; includes a return of EUR 35.9 million related to the rulings on the tax disputes), including net interest expenses of EUR 7.2 million (income 30.8). Net financial expenses include an expense of EUR 6.3 million (4.6) due to exchange rate differences. Segments profit before tax was EUR 96.6 million (256.6; positively impacted by the returned punitive interest of EUR 34.4 million related to the tax disputes in the previous fiscal years). Profit before tax was EUR 35.1 million (241.7) and taxes were EUR -5.0 million (77.1; positively impacted by the returned additional taxes and punitive increases of EUR 115.2 million in the previous fiscal years). Segments profit for the period amounted to EUR 82.9 million (333.7; positively impacted by EUR 149.6 million related to the rulings on the tax disputes concerning the years 2007−2011). Profit for the period amounted to EUR 30.1 million (318.8; positively impacted by EUR 149.6 million related to the final rulings on the tax disputes). Segments earnings per share were EUR 0.60 (2.43; positively impacted by EUR 1.08 related to the rulings on the tax disputes). Earnings per share were EUR 0.22 (2.31; positively impacted by EUR 1.08 related to the tax disputes).
In January−September 2020, cash flow from operating activities was EUR -6.6 million (-178.5). Working capital increased by EUR 153.7 million (increased by 587.5). Inventories increased by EUR 3.2 million (increased by 60.4) and receivables increased by EUR 182.1 million (increased by 388.2). Payables decreased by EUR 31.6 million (decreased by 139.3).
Investments in January−September 2020 amounted to EUR 118.5 million (236.1). This includes construction of the new US factory and the testing center in Spain, and production investments in Heavy Tyres. Strategic projects are generally proceeding in line with plan with some delays due to COVID-19. Depreciations and amortizations totaled EUR 100.0 million (92.4). Impairments were EUR 24.2 million (0.0).
Nokian Tyres has implemented actions to strengthen the liquidity position, which as of September 30, 2020 amounted to EUR 722.8 million, including cash, cash equivalents and undrawn committed shortand long-term credit limits (EUR 424.3 million at the end of 2019). In April, additional EUR 125 million committed credit facilities were signed.
| EUR million | Sept 30, 2020 |
Sept 30, 2019 |
Dec 31, 2019 |
|---|---|---|---|
| Cash and cash equivalents | 517.5 | 92.7 | 218.8 |
| Interest-bearing liabilities | 798.1 | 515.3 | 259.9 |
| of which current interest-bearing liabilities | 597.6 | 277.6 | 30.9 |
| Interest-bearing net debt | 280.6 | 422.6 | 41.1 |
| Unused credit limits* | 413.8 | 298.7 | 561.0 |
| of which committed | 205.4 | 205.5 | 205.5 |
| Gearing ratio, % | 18.5% | 25.0% | 2.3% |
| Equity ratio, % | 57.5% | 66.3% | 75.9% |
* The current credit limits and the commercial paper program are used to finance inventories, trade receivables, and subsidiaries in distribution chains, thereby controlling the typical seasonality in the Group's cash flow. The commercial paper program was increased from EUR 350 million to EUR 500 million in April 2020.
Nokian Tyres has continued to take necessary precautions to ensure the health and safety of its employees and partners during the COVID-19 outbreak. These include limiting travelling, remote work, social distancing, face masks, and implementing other health and safety practices. Occupational health and safety KPIs have continued to improve: 45% less lost time accidents reported in January−September 2020 compared to the same period last year. The company announced temporary layoffs in Finland in Q1 to adjust costs to lower production levels and declining demand. These actions have continued in Q2 and Q3. Cost saving measures have been implemented also in other markets based on demand. Nokian Tyres' Group Management Team has contributed to the savings with a salary reduction equivalent to one month's salary in 2020
| 1–9/20 | 1–9/19 | 2019* | |
|---|---|---|---|
| Group employees | |||
| on average | 4,853 | 4,870 | 4,995 |
| at the end of the review period | 4,785 | 5,120 | 4,847 |
| in Finland, at the end of the review period | 1,854 | 1,976 | 1,781 |
| in Russia, at the end of the review period | 1,529 | 1,607 | 1,604 |
| in North America, at the end of the review period | 218 | 296 | 296 |
| Vianor (own) employees, at the end of the review period** | 1,592 | 1,741 | 1,504 |
* Figures corrected to include passive employments in December 2019 (employees on long leaves).
**Included in Group employee figures
| CC* | CC* | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| EUR million | 7–9/20 | 7–9/19 Change | Change | 1–9/20 | 1–9/19 Change | Change | 2019 | ||
| Net sales | 254.9 | 256.7 | -0.7% | 4.8% | 609.2 | 806.5 | -24.5% | -21.3% 1,123.8 | |
| Segment operating profit |
71.8 | 75.6 | 111.3 | 226.3 | 308.5 | ||||
| Segment operating profit, % |
28.2% | 29.5% | 18.3% | 28.1% | 27.4% |
* Comparable currencies
In July−September 2020, net sales of Passenger Car Tyres totaled EUR 254.9 million (256.7). With comparable currencies, net sales increased by 4.8%. Net sales increased in all areas except Russia, where the measures to reduce high carry-over stocks in the distribution channel continued. Average Sales Price with comparable currencies decreased in July−September 2020 due to the measures taken in Russia and as the share of winter tire sales decreased.
Segment operating profit was EUR 71.8 million (75.6). The decline was mainly due to the lower sales in Russia and negative currency impact, partly offset by lower raw material unit cost.
In January−September 2020, net sales of Passenger Car Tyres totaled EUR 609.2 million (806.5). With comparable currencies, net sales decreased by 21.3% as a result of the COVID-19 pandemic, the measures taken in Russia to reduce high carry-over stocks in the distribution channel, and the mild winter. Average Sales Price with comparable currencies decreased in January−September 2020 due to the measures taken in Russia and as the share of winter tire sales decreased. The share of sales volume of winter tires was 67% (73%), the share of summer tires was 20% (17%), and the share of all-season tires was 13% (10%).
Summer tire inventories in the Russian distribution channel have decreased compared to the previous year, but the level is still higher than normal due to weak and delayed sell-out. Winter tire inventories in the distribution in Russia decreased compared to the previous year, as the company is limiting sellin in 2020 in order to normalize stock levels, reflecting weaker consumer demand and high carry-over stocks, while maximizing sell-out through various sell-out support measures.
Production has been adjusted according to demand in Russia and Finland. Production output (pcs) decreased by 27.4% year-over-year. In January−September 2020, 87% (83%) of passenger car tires (pcs) were manufactured in Russia. In the US factory, recruitment of the second shift is in progress.
Segment operating profit was EUR 111.3 million (226.3). The decline was mainly due to the lower sales in Russia (impact approximately EUR -50 million), the COVID-19 (impact approximately EUR - 45 million), and the low factory utilization rate in all locations.
Nokian Tyres launched a new UHP winter tire Nokian Snowproof P in March and a new Seasonproof all-season tire range in September for Central European market. In September, the Nokian Hakka summer tire range for Northern conditions expanded with two new premium summer tires, Nokian Hakka Green 3 and Nokian Hakka Van. The Nokian Nordman tire range got two new additions: Nokian Nordman SZ2 and Nokian Nordman S2 SUV.
In 2020, the company expects the sales of new cars in Russia to decline by 10–15% compared to 2019, driven by the COVID-19 related restrictive measures and the ongoing economic recession. The
total replacement tire market sell-in in Russia in 2020 is expected to decline by approximately 20% compared to 2019, driven by weak demand and high carry-over stocks.
| CC* | CC* | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| EUR million | 7–9/20 | 7–9/19 Change | Change | 1–9/20 | 1–9/19 Change | Change | 2019 | ||
| Net sales | 49.8 | 52.2 | -4.5% | -2.0% | 141.4 | 148.2 | -4.6% | -2.8% | 202.7 |
| Segment operating profit |
7.8 | 8.3 | 18.7 | 25.6 | 35.7 | ||||
| Segment operating profit, % |
15.8% | 15.9% | 13.2% | 17.3% | 17.6% |
* Comparable currencies
In July−September 2020, net sales of Heavy Tyres totaled EUR 49.8 million (52.2). With comparable currencies, net sales decreased by 2.0% due to the lower sales volume especially in OEM. Excluding the Levypyörä acquisition in August 2019, net sales with comparable currencies declined by 3.2%.
Segment operating profit was EUR 7.8 million (8.3).
In January−September 2020, net sales of Heavy Tyres totaled EUR 141.4 million (148.2). With comparable currencies, net sales decreased by 2.8%, due to the lower sales volume especially in OEM. Excluding the Levypyörä acquisition in August 2019, net sales with comparable currencies declined by 7.8%.
Segment operating profit was EUR 18.7 million (25.6), negatively impacted by the lower volumes and low factory utilization rate.
A flow of product launches with new innovations continued in January−September. For example, new Nokian Hakkapeliitta Truck E2 and Nokian E-Truck 17.5 tire ranges were launched and the production of a new tractor tire, Nokian Ground King, started. In addition, Nokian Tractor King tire range got several new sizes and the first agricultural and contracting tractor tires equipped with Nokian Tyres Intuitu smart tire technology became available for sales.
| CC* | CC* | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| EUR million | 7–9/20 | 7–9/19 Change | Change | 1–9/20 | 1–9/19 Change | Change | 2019 | ||
| Net sales | 67.4 | 69.7 | -3.3% | -1.2% | 202.7 | 216.4 | -6.4% | -3.1% | 336.5 |
| Segment operating profit |
-3.2 | -3.8 | -6.0 | -6.4 | 7.7** | ||||
| Segment operating profit, % |
-4.8% | -5.5% | -3.0% | -3.0% | 2.3% | ||||
| Number of own service centers at period end |
175 | 189 | 189 |
* Comparable currencies
** Includes EUR 2.0 million profit from sale of real estate
In July−September 2020, net sales of Vianor totaled EUR 67.4 million (69.7). With comparable currencies, net sales decreased by 1.2%.
Segment operating profit was EUR -3.2 million (-3.8). The third quarter is seasonally low in Vianor, therefore negative in profitability. The winter tire season starts in the fourth quarter.
In January−September 2020, net sales of Vianor totaled EUR 202.7 million (216.4). With comparable currencies, net sales decreased by 3.1%.
Segment operating profit was EUR -6.0 million (-6.4).
Vianor US network, including ten service centers, was sold in August. Nokian Tyres' products are offered in the US via selected partners.
At the end of the review period, Vianor had 175 (189) own service centers in Finland, Sweden and Norway.
| 7–9/2020 | Net sales |
Cost of sales |
SGA | Other operating income/ expenses |
Operating profit |
Financial income/ expenses |
Taxes | Profit for the period |
|---|---|---|---|---|---|---|---|---|
| Segments Total | 349.9 | -220.5 | -54.4 | -5.7 | 69.3 | -6.1 | -2.8 | 60.5 |
| US factory ramp-up | -6.6 | -6.6 | 1.2 | -5.4 | ||||
| Non-operative items and others |
-0.4 | -3.8 | 4.0 | -0.3 | -2.2 | -2.5 | ||
| Total Non-IFRS exclusion |
-7.0 | -3.8 | 4.0 | -7.0 | -1.0 | -8.0 | ||
| Nokian Tyres Total | 349.9 | -227.7 | -58.2 | -1.7 | 62.3 | -6.1 | -3.7 | 52.5 |
| 1–9/2020 | Net sales |
Cost of sales |
SGA | Other operating income/ expenses |
Operating profit |
Financial income/ expenses |
Taxes | Profit for the period |
|---|---|---|---|---|---|---|---|---|
| Segments Total | 900.4 | -605.8 | -170.8 | -13.7 | 110.1 | -13.5 | -13.7 | 82.9 |
| US factory ramp-up | -17.9 | -1.8 | -19.7 | 3.9 | -15.8 | |||
| Impairments and write-downs of tangible and intangible assets, and certain other items |
-6.2 | -13.7 | -5.0 | -24.9 | 3.8 | -21.1 | ||
| Unification of the Group's accounting principles of product development costs |
-5.7 | -4.9 | -10.5 | 2.1 | -8.4 | |||
| Non-operative items and others |
-0.4 | -9.5 | 3.6 | -6.3 | -1.0 | -7.4 | ||
| Total Non-IFRS exclusion |
-30.2 | -29.8 | -1.4 | -61.5 | 0.0 | 8.8 | -52.8 | |
| Nokian Tyres Total | 900.4 | -636.0 | -200.7 | -15.1 | 48.6 | -13.5 | -5.0 | 30.1 |
At the end of September 2020, the number of shares was 138,921,750.
| Number of shares (million units)* | 30.9.20 | 30.9.19 | 31.12.19 |
|---|---|---|---|
| at the end of period | 138.22 | 138.73 | 138.72 |
| in average | 138.53 | 137.98 | 138.17 |
| in average, diluted | 138.53 | 138.27 | 138.38 |
*Excluding treasury shares
In 2020, the Annual General Meeting authorized the Board of Directors to resolve to repurchase a maximum of 13,800,000 shares in the Company by using funds in the unrestricted shareholders' equity. The proposed number of shares corresponded to approximately 9.9% of all shares in the company at the time of the proposal. The authorization will be effective until the next Annual General Meeting, however at most until June 30, 2021.
In 2020, the Annual General Meeting authorized the Board of Directors to make a decision to offer no more than 13,800,000 shares through a share issue, or by granting special rights under chapter 10, section 1 of the Finnish Limited Liability Companies Act that entitle to shares (including convertible bonds), on one or more occasions. The authorization will be effective until the next AGM, however at most until June 30, 2021. This authorization will invalidate all other Board authorizations regarding share issues and special rights.
In 2019, the Annual General Meeting authorized the Board of Directors to resolve to repurchase a maximum of 5,000,000 shares in the company by using funds in the unrestricted shareholders' equity. The proposed number of shares corresponded to 3.6% of all shares in the company at the time of the proposal. The authorization was effective until the Annual General Meeting of 2020.
The Board did not utilize the authorizations in January−September 2020.
No share repurchases were made during the review period, and the company did not possess any own shares on September 30, 2020. Nokian Tyres has an agreement with a third-party service provider concerning the share-based incentive program for key personnel. The third party owns Nokian Tyres' shares related to the incentive program until the shares are given to the participants of the program. On September 30, 2020, the number of these shares was 697,400, reported as treasury shares (December 31, 2019: 197,947). This number of shares corresponded to 0.50% (0.14%) of the total shares and voting rights in the company.
A total of 237,851,491 (132,234,213) Nokian Tyres' shares were traded in Nasdaq Helsinki during the period, representing 171% (95%) of the company's overall share capital. The average daily volume during the period was 1,258,473 shares (699,652). Nokian Tyres' shares are also traded on alternative exchanges, such as BATS CXE, Turquoise, and BATS BXE. The total trading volume on these alternative exchanges was 74,648,356 (80,816,289) shares during the review period.
Nokian Tyres' share price was EUR 24.15 (25.88) at the end of the review period. The volume weighted average share price during the period was EUR 21.18 (28.15), the highest was EUR 27.67 (32.44) and the lowest was EUR 16.38 (24.17). The company's market capitalization at the end of the period was EUR 3.3 billion (3.6 billion).
At the end of the review period, the company had 62,220 (53,316) registered shareholders. The percentage of Finnish shareholders was 44.8% (34.3%), and 55.2% (65.7%) were non-Finnish holders and foreign shareholders registered in the nominee register. Public sector entities owned
13.9% (10.3%), financial and insurance corporations 7.3% (4.6%), households 15.6% (13.4%), nonprofit institutions 3.4% (3.5%), and private companies 4.1% (2.6%).
Nokian Tyres received notifications from Sprucegrove Investment Management on March 10, and on July 30 according to which the direct holding in Nokian Tyres shares, exceeded the level of 5% of the share capital in Nokian Tyres plc, as a result of share transactions concluded on March 9, and on July 27.
Nokian Tyres received notification from Sprucegrove Investment Management on June 18 according to which the direct holding in Nokian Tyres shares, fell below the level of 5% of the share capital in Nokian Tyres plc, as a result of share transactions concluded on June 17.
Nokian Tyres received notifications from BlackRock, Inc. on March 11, on June 12, on June 18, on July 1, July 15, and on July 28 according to which the holdings of the mutual funds managed by BlackRock, Inc., or indirect holding in Nokian Tyres shares, fell below the level of 5% of the share capital in Nokian Tyres plc, as a result of share transactions concluded on March 10, on June 11, on June 17, on June 30, on July 14, and on July 27.
Nokian Tyres received notifications from BlackRock, Inc. on March 20, on June 15, on June 30, on July 13, and on July 16 according to which the holdings of the mutual funds managed by BlackRock, Inc., or indirect holding in Nokian Tyres shares, exceeded the level of 5% of the share capital in Nokian Tyres plc, as a result of share transactions concluded on March 19, on June 12, on June 29, on July 10, and on July 15.
Detailed information on notifications of change in shareholding can be found at www.nokiantyres.com/company/investors/share/flagging-notifications/.
On April 2, 2020, the Annual General Meeting (AGM) of Nokian Tyres approved the Financial Statements for 2019, discharged the members of the Board of Directors and the President and CEO from liability for the 2019 financial year and adopted the Remuneration Policy.
The meeting decided that a dividend of EUR 0.79 per share shall be paid for the period ending on December 31, 2019. The dividend payment date was April 17, 2020 and the dividend was paid to shareholders included in the shareholder list maintained by Euroclear Finland Oy on the record date of April 6, 2020.
The AGM also decided to authorize the Board of Directors to decide on dividend payment of a maximum of EUR 0.79 per share to be distributed in one or several instalments at a later stage when Nokian Tyres is able to make a more reliable estimate on the impacts of the COVID-19 to the company's business. The authorization would be valid until the next AGM. The company will publish the possible Board decision on dividend payment separately, and at the same time confirm the pertinent record and payment dates.
The meeting decided that the Board of Directors has eight members. Current members of the Board of Directors Heikki Allonen, Kari Jordan, Raimo Lind, Veronica Lindholm, Inka Mero, George Rietbergen and Pekka Vauramo will continue in the Board of Directors. Jukka Hienonen was elected as a new member to the Board of Directors.
The audit firm KPMG Oy Ab will continue as auditors.
The meeting decided that the monthly fee paid to the Chairman of the Board shall be EUR 7,917 or EUR 95,000 per year, the monthly fee paid to the Deputy Chairman of the Board and to the Chairman of the Audit Committee shall be EUR 5,833 or EUR 70,000 per year, and the monthly fee paid to Members of the Board shall be EUR 3,958 or EUR 47,500 per year.
60% of the annual fee is to be paid in cash and 40% in Company shares, to the effect that in the period from May 6 to June 5, 2020, EUR 38,000 worth of shares in Nokian Tyres plc will be purchased at the stock exchange on behalf of the Chairman of the Board, EUR 28,000 worth of shares in Nokian Tyres plc will be purchased at the stock exchange on behalf of the Deputy Chairman of the Board and Chairman of the Audit committee, and EUR 19,000 worth of shares will be purchased on behalf of other members of the Board. The Company is liable to pay any asset transfer taxes, which may arise from the acquisition of the Company shares.
Furthermore, each member of the Board will receive EUR 600 for meetings held in their home country and EUR 1,200 for meetings held outside their home country. If a member participates in a meeting via telephone or video connection, the remuneration will be EUR 600. Travel expenses will be compensated in accordance with the company's travel policy.
The AGM authorized the Board of Directors to resolve to repurchase a maximum of 13,800,000 shares in the company by using funds in the unrestricted shareholders' equity. The proposed number of shares corresponded to approximately 9.9% of all shares in the company at the time of the proposal. The authorization will be effective until the next AGM, however at most until June 30, 2021.
The AGM authorized the Board of Directors to make a decision to offer no more than 13,800,000 shares through a share issue, or by granting special rights under chapter 10, section 1 of the Finnish Limited Liability Companies Act that entitle to shares (including convertible bonds), on one or more occasions. The authorization will be effective until the next AGM, however at most until June 30, 2021. This authorization will invalidate all other Board authorizations regarding share issues and special rights.
The AGM decided to establish a Shareholders' Nomination Board to prepare proposals to the Annual General Meeting and, when necessary, to the Extraordinary General Meeting concerning the number of members, the composition, the Chairman and possible Deputy Chairman of the Board of Directors as well as the remuneration of the Board of Directors and Committees as well as to identify possible successor candidates for the members of the Board of Directors. In addition, the AGM decided to approve the Charter of the Shareholders' Nomination Board.
In 2020, the Annual General Meeting resolved to amend the Articles of Association §4 and §11 as follows:
The Company's administration and proper organization of operations shall be the responsibility of the Board of Directors, consisting of a minimum of four and a maximum of nine members, in accordance with the decision made by the General Meeting of the Shareholders. The term of office of the members of the Board of Directors ends at the closing of the first Annual General Meeting following the election.
The Annual General Meeting shall be held annually on a day fixed by the Board of Directors, by the end of May. The Meeting shall be held either at the Company's registered place of business or in either the city of Tampere or Helsinki, as decided by the Board of Directors.
The Annual General Meeting shall review:
shall resolve:
granting discharge from personal liability to the members of the Board of Directors and the Managing Director;
shall elect:
shall deal with:
In the Board meeting on April 2, 2020, Jukka Hienonen was elected Chairman of the Board and Kari Jordan was elected Deputy Chairman of the Board. The Board elected Kari Jordan (Chairman), Veronica Lindholm and Jukka Hienonen as members of the Personnel and Remuneration Committee. The Board elected Raimo Lind (Chairman), Heikki Allonen, Inka Mero and Pekka Vauramo as members of the Audit Committee.
Nokian Tyres' Shareholders' Nomination Board was established in April 2020. The Nomination Board consists of five members of which four members represent the company's four largest shareholders, and one member is the Chairman of the Board. In June 2020, the following members were appointed to the Board:
In October 2020, Anna Hyvönen, Senior Vice President, Nordics and Vianor, and a member of the Nokian Tyres Management Team, was appointed Senior Vice President, North America, Nordics and Vianor. Mark Earl, who has been Nokian Tyres Senior Vice President, Americas, and a member of the Management Team, decided to leave the company to pursue other career opportunities.
In August 2020, Tytti Bergman, Senior Vice President, People and Culture, resigned from Nokian Tyres to pursue other career opportunities. Tarja Kaipio, Vice President, Human Resources, was assigned an interim role as Senior Vice President, Human Resources, until a successor for the position has been appointed.
In May 2020, Nokian Tyres' Board of Directors announced the appointment of Jukka Moisio as the new President and CEO of Nokian Tyres plc effective May 27, 2020. Jukka Moisio succeeds Hille
Korhonen, who led the company for three years as the President and CEO, and prior to that as a member of the Board of Directors.
In May 2020, Toni Silfverberg was appointed to lead the company's new Marketing & Sales Excellence team and a member of the Management Team. He reports to Jukka Kasi, Senior Vice President, Products and Marketing.
In April 2020, Adrian Kaczmarczyk was appointed Senior Vice President, Supply Operations and a member of the Management Team. He reports to Jukka Moisio, the President and CEO.
Nokian Tyres published its Corporate Sustainability Report in the first quarter of 2020. The report is available in Finnish and English on the company's website at www.nokiantyres.com/company/sustainability/.
In the first quarter of 2020, Nokian Tyres updated its Sustainability Strategy and Sustainability Road Map to guide the company's work on sustainability.
In May 2020, Nokian Tyres announced that its emissions reduction targets had been approved by the Science Based Targets initiative (SBTi) as the first tire company in the world. The targets covering greenhouse gas emissions from Nokian Tyres' operations (scopes 1 and 2) are consistent with reductions required to keep climate warming to below 2°C.
By 2030, Nokian Tyres commits to reduce scope 1 and 2 GHG emissions by 52% per ton of tires from a 2015 base year and scope 3 GHG emissions from purchased goods and services and upstream and downstream transportation and distribution by 25% per ton of tires from a 2018 base year. Nokian Tyres also commits to reduce scope 3 GHG emissions from the use of sold products by 25% per ton of tires by 2030 from a 2018 base year.
On February 4, 2020, Nokian Tyres announced that the Board of Directors of Nokian Tyres plc has decided on a share-based long-term incentive scheme for the Company's management and selected key employees for years 2020–2022 as a continuation to the earlier plans decided in 2019. The decision includes Performance Share Plan 2020 ("PSP 2020") as the main structure and Restricted Share Plan 2020 ("RSP 2020") as a complementary structure.
The purpose of the share-based incentive scheme is to align the goals of the Company's shareholders and key personnel in order to increase the value of the Company in the long term and to commit key personnel to the Company and its strategic targets.
The Performance Share Plan consists of annually commencing individual three-year Performance Periods, followed by the payment of the potential share reward. The commencement of each individual Performance Period is subject to a separate Board approval.
The Performance Period (PSP 2020–2022) commences effective as of the beginning of 2020 and the potential share reward thereunder will be paid in the first half of 2023 provided that the performance targets set by the Board of Directors are achieved. The potential reward will be paid partly in shares of Nokian Tyres plc and partly in cash. Cash portion of the reward is intended to cover the taxes arising from the paid reward. Eligible to participate in PSP 2020–2022 are approximately 200 individuals, including the members of Nokian Tyres Management Team.
The potential share reward payable under the PSP 2020–2022 are based on the Earnings Per Share (EPS) growth and Return on Capital Employed (ROCE). The possible rewards paid based on the Performance Period of 2020–2022 will be a maximum of 569,260 gross shares.
If the individual's employment with Nokian Tyres terminates before the payment date of the share reward, the individual is not, as a main rule, entitled to any reward based on the plan.
The purpose of the Restricted Share Plan is to serve as a complementary tool for individually selected key employees of Nokian Tyres in situations like new hires and retention needs. It consists of annually commencing individual Restricted Share Plans, each with a three-year retention period after which the share rewards granted within the plan will be paid to the participants in shares of Nokian Tyres plc and partly in cash.
The commencement of each individual plan is subject to a separate Board of Directors approval.
A precondition for the payment of the share reward based on the Restricted Share Plan is that the employment relationship of the individual participant with Nokian Tyres continues until the payment date of the reward.
The next plan (RSP 2020–2022) within the Restricted Share Plan structure commences effective as of the beginning of 2020 and the potential share reward thereunder will be paid in the first half of 2023. The possible rewards paid based on RSP 2020–2022 correspond approximately to a maximum of 120,000 gross shares.
Nokian Tyres applies a share ownership policy to the members of Nokian Tyres Management Team. According to this policy each member of the Management Team is expected to retain in his/her ownership at least 25% of the shares received under the share-based incentive programs of the Company until the value of his/her share ownership in the Company corresponds to at least his/her annual gross base salary.
The Board of Directors anticipates that no new shares will be issued based on the share-based incentive scheme and that the scheme will, therefore, have no dilutive effect on the registered number of the Company's shares.
Nokian Tyres' business and financial performance may be affected by several uncertainties. The Group has adopted a risk management policy, approved by the Board of Directors, which supports the achievement of strategic goals and ensures business continuity. The Group's risk management policy focuses on managing both the risks pertaining to business opportunities and the risks affecting the achievement of the Group's goals in the changing operating environment. The risk management process aims to identify and evaluate the risks and to plan and implement the practical measures for each risk. Nokian Tyres has detailed the overall business risks and risk management in the 2019 Corporate Governance Statement.
For example, the following risks could potentially have an impact on Nokian Tyres' business:
Nokian Tyres is subject to risks related to consumer confidence and macroeconomic and geopolitical conditions. Political uncertainties may cause serious disruption and additional trade barriers and affect the company's sales and credit risk. Economic downturns may increase trade customers' payment problems and Nokian Tyres may need to recognize impairment of trade receivables.
The tire wholesale and retail landscape is evolving to meet changing consumer needs. New technologies are fueling this with increasing digitalization. Failure to adapt to the changes in the sales channel could have an adverse effect on Nokian Tyres' financial performance.
Nokian Tyres' success is dependent on its ability to innovate and develop new products and services that appeal to its customers and consumers. Despite extensive testing of its products, product quality issues and failure to meet demands of performance and safety could harm Nokian Tyres' reputation and have an adverse effect on its financial performance.
Nokian Tyres' production facilities are located in Finland, Russia and the US. Any unexpected production or delivery breaks at these facilities would have a negative impact on the company's business. Interruptions in logistics could have a significant impact on peak season sales.
Significant fluctuations in raw material prices may impact margins. Nokian Tyres sources natural rubber from producers in countries such as Indonesia and Malaysia. Although Nokian Tyres has policies such as the Supplier Code of Conduct and established processes to monitor the working conditions, it cannot fully control the actions of its suppliers. The violation of laws, regulations or standards by raw material producers, or their divergence from practices generally accepted as ethical in the European Union or the international community, could have a material adverse effect on Nokian Tyres' reputation.
Tire industry can be subject to risks caused by climate change, such as changes in consumer tire preferences, regulatory changes or impact of extreme weather events on natural rubber producers. Nokian Tyres is committed to reducing GHG emissions from its operations in order to combat climate change. Nokian Tyres calculates the GHG emissions from its operations annually and reduces them systematically. More detailed analysis on Nokian Tyres' climate change related risks and opportunities has been provided in Nokian Tyres' Non-Financial Reporting Statement for 2019.
Foreign exchange risk consists of transaction risk and translation risk. The most significant currency risks arise from the Russian ruble, the Swedish and Norwegian krona, and the US and Canadian dollar. Approximately 60% of the Group's sales are generated outside of the euro-zone.
In May 2017, the Finnish Financial Supervisory Authority filed a request for investigation with the National Bureau of Investigation regarding possible securities market offences. In March 2019, the police moved the suspicions of securities markets offences to consideration of charges. The suspects have denied any involvement in criminal activity.
-The COVID-19 pandemic represents a short-term risk to Nokian Tyres' business and operating environment, which has rapidly changed. The company has proactively taken preventive actions to minimize the impacts of the pandemic and to ensure business continuity. Despite these efforts, the uncertainty over the duration of the pandemic, the containment measures and the resulting slowdown
in economic activity is expected to have a negative impact on Nokian Tyres' operations and supply chain as well as the demand and pricing for the company's products.
Nokian Tyres' risk analysis also pays special attention on corporate social responsibility risks, the most significant of which are related to the company's brand image and product quality. Analyses and projects related to information security, data protection, and customer information are continuously a special focus area.
In May 2019, Nokian Tyres U.S. Finance Oy, a subsidiary of Nokian Tyres plc (ownership: 100% of the shares), received a negative ruling from the Hämeenlinna Administrative Court regarding the company's appeal against a reassessment of EUR 18.5 million concerning the years 2007–2013. Of this amount, EUR 11.0 million were additional taxes and EUR 7.5 million were tax increases and interest. The company has paid and recorded them in full in the financial statements and results for 2013, 2014, and 2017. The company considers the decision unfounded and has appealed against it by filing a claim with the Supreme Administrative Court in July 2019.
Employee health and safety actions:
Operational response actions:
Financial response actions:
On October 13, Nokian Tyres announced that its US factory's production building had earned LEED v4 Silver certification for green building leadership. The facility earned the certification due to a wide range of sustainable elements, including smart building automation designed to save energy, ecofriendly building materials, efficient water and waste management systems, electric vehicle charging stations in the parking lot and renewable energy generation via onsite solar panels.
Due to the COVID-19 outbreak, which has increased the uncertainty in the car and tire market, the Board of Directors of Nokian Tyres plc decided on March 27, 2020 to withdraw the company's financial guidance for 2020 published on February 4, 2020. Given the continuous uncertainties, the company refrains from giving a guidance for 2020.
Earlier guidance from February 4, 2020:
In 2020, net sales with comparable currencies are expected to decline and operating profit to be significantly below the level of 2019. In line with Nokian Tyres' updated 2018 strategy, the company is targeting further growth in Russia, Central Europe, and North America. In 2020 however, net sales and operating profit in Russia are expected to decline substantially due to the changed market dynamics. Operating profit in 2020 will include costs related to the North American expansion and other investment programs to support long-term growth, as communicated in 2018.
Helsinki, October 27, 2020
Nokian Tyres plc Board of Directors
***
The information hereinabove contains forward-looking statements relating to future events or future financial performance of the company. In some cases, such forward-looking statements can be identified by terminology such as "may", "will", "could", "expect", "anticipate", "believe", "estimate", "predict" or other comparable terminology. Such statements are based on the current expectations, known factors, decisions, and plans of the management of Nokian Tyres. Forward-looking statements always involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Therefore, future results may even differ significantly from the results expressed in, or implied by, the forward-looking statements.
***
This Interim Report has been prepared in accordance with IFRS compliant recognition and measurement principles and the same accounting policies as in the most recent annual financial statements, but it has not been prepared in compliance with all requirements set out in IAS 34 'Interim Financial Reporting'.
The Group has assessed the potential accounting implications of decreased economic activity as a result of the COVID-19 pandemic. The preparation of interim financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Based on the analysis, the Group has not identified any further need for goodwill impairment in addition to the ones that were announced in June 2020.
The Group has reviewed and updated its expected credit loss model for trade receivables to take into account the macro-economic developments. This update did not result in a significant increase of credit loss allowances for trade receivables at the end of September, however the credit risk may increase if the current trading conditions deteriorate further.
The impact of COVID-19 on Nokian Tyres' operating profit in January-September 2020 is estimated to be approximately EUR -50 million. Actions have been implemented to strengthen Nokian Tyres' liquidity position, which as of September 30, 2020 amounted to EUR 722.8 million, including cash, cash equivalents and undrawn committed short- and long-term credit limits (EUR 424.3 million at the end of 2019).
The interim report figures are unaudited.
| 7-9/20 | 7-9/19 | 1-9/20 | 1-9/19 | 1-12/19 | Change % |
|---|---|---|---|---|---|
| 349.9 | 354.5 | 900.4 | 1,110.6 | 1,585.4 | -1.3 |
| -227.7 | -226.9 | -636.0 | -703.9 | -1,013.8 | -0.3 |
| 122.2 | 127.6 | 264.4 | 406.7 | 571.6 | -4.2 |
| 2.5 | 0.2 | 3.5 | 1.0 | 3.5 | 951.6 |
| -45.4 | -39.6 | -135.1 | -128.5 | -175.1 | -14.7 |
| -12.8 | -18.4 | -65.6 | -60.0 | -75.2 | 30.7 |
| -4.3 | -2.4 | -18.6 | -3.6 | -8.4 | -80.4 |
| 62.3 | 67.5 | 48.6 | 215.5 | 316.5 | -7.7 |
| 22.6 | 15.1 | 96.0 | 45.2 | 67.3 | 49.6 |
| -28.7 | -20.5 | -109.5 | -19.0 | -47.0 | -40.2 |
| 56.2 | 62.1 | 35.1 | 241.7 | 336.7 | -9.5 |
| -3.7 | -11.0 | -5.0 | 77.1 | 63.1 | 66.2 |
| 52.5 | 51.1 | 30.1 | 318.8 | 399.9 | 2.7 |
| 52.5 | 51.1 | 30.1 | 318.8 | 399.9 | |
| 3.0 | |||||
| 0.38 | 0.37 | 0.22 | 2.31 | 2.89 | 2.5 |
| 0.38 | 0.37 | 0.22 | 2.31 | 2.89 |
| INCOME | 7-9/20 | 7-9/19 | 1-9/20 | 1-9/19 | 1-12/19 |
|---|---|---|---|---|---|
| Million euros | |||||
| Result for the period | 52.5 | 51.1 | 30.1 | 318.8 | 399.9 |
| Other comprehensive income, items | |||||
| that may be reclassified subsequently | |||||
| to profit and loss, net of tax: | |||||
| Cash flow hedges | 0.0 | -0.7 | -1.0 | -3.8 | -1.2 |
| Translation differences | |||||
| on foreign operations | -82.5 | 26.4 | -159.8 | 84.3 | 86.6 |
| Total other comprehensive income | |||||
| for the period, net of tax | -82.5 | 25.7 | -160.8 | 80.5 | 85.4 |
| Total comprehensive income | |||||
| for the period | -30.0 | 76.8 | -130.7 | 399.3 | 485.3 |
| Total comprehensive income | |||||
| attributable to: | |||||
| Equity holders of the parent | -30.0 | 76.8 | -130.7 | 399.3 | 485.3 |
1) Financial expenses in 1-9/19 and 1-12/19 contain EUR 34.4 million of returned punitive interest related to tax disputes that were booked in previous fiscal years based on tax reassessment decisions. Additionally, financial expenses in 1-9/19 and 1-12/19 contain a gain of EUR 1.4 million of interest from returned taxes.
2) Tax expense in 1-9/19 and 1-12/19 contains EUR 115.2 million of returned additional taxes and punitive increases that were booked in previous fiscal years based on tax reassessment decisions.
| CONSOLIDATED STATEMENT OF | |||
|---|---|---|---|
| FINANCIAL POSITION | 30.9.20 | 30.9.19 | 31.12.19 |
| Million euros | |||
| Non-current assets | |||
| Property, plant and equipment | 833.6 | 851.3 | 885.0 |
| Right of use assets | 95.3 | 116.8 | 122.9 |
| Goodwill | 76.3 | 83.9 | 84.4 |
| Other intangible assets | 25.0 | 36.6 | 35.3 |
| Investments in associates | 0.1 | 0.1 | 0.1 |
| Non-current financial investments | 2.9 | 0.9 | 0.7 |
| Other receivables | 5.3 | 7.9 | 7.7 |
| Deferred tax assets | 22.1 | 13.3 | 15.9 |
| Total non-current assets | 1,060.6 | 1,110.7 | 1,152.0 |
| Current assets | |||
| Inventories | 354.8 | 446.4 | 387.0 |
| Trade receivables | 618.5 | 804.4 | 498.3 |
| Other receivables | 94.2 | 92.2 | 76.4 |
| Cash and cash equivalents | 517.5 | 92.7 | 218.8 |
| Total current assets | 1,584.9 | 1,435.7 | 1,180.5 |
| Total assets | 2,645.6 | 2,546.4 | 2,332.6 |
| Equity | |||
| Share capital | 25.4 | 25.4 | 25.4 |
| Share premium | 181.4 | 181.4 | 181.4 |
| Treasury shares | -18.2 | -7.9 | -8.0 |
| Translation reserve | -438.6 | -281.2 | -278.8 |
| Fair value and hedging reserves | -2.7 | -4.3 | -1.8 |
| Paid-up unrestricted equity reserve | 238.2 | 238.2 | 238.2 |
| Retained earnings | 1,535.3 | 1,536.1 | 1,613.3 |
| Non-controlling interest | - | - | - |
| Total equity | 1,520.7 | 1,687.7 | 1,769.7 |
| Non-current liabilities | |||
| Deferred tax liabilities | 30.1 | 28.2 | 36.4 |
| Provisions | 0.0 | 0.0 | 0.0 |
| Interest-bearing liabilities | 200.5 | 237.6 | 229.1 |
| Other liabilities | 1.1 | 0.7 | 1.0 |
| Total non-current liabilities | 231.7 | 266.6 | 266.5 |
| Current liabilities | |||
| Trade payables | 97.8 | 100.1 | 89.4 |
| Other current payables | 189.9 | 209.0 | 171.1 |
| Provisions | 7.8 | 5.3 | 5.0 |
| Interest-bearing liabilities | 597.6 | 277.6 | 30.9 |
| Total current liabilities | 893.1 | 592.1 | 296.4 |
| Total equity and liabilities | 2,645.6 | 2,546.4 | 2,332.6 |
Nokian Tyres Interim Report for January–September 2020
27 (31)
| CONSOLIDATED STATEMENT OF CASH FLOWS | 1-9/20 | 1-9/19 | 1-12/19 |
|---|---|---|---|
| Million euros | |||
| Result for the period | 30.1 | 318.8 | 399.9 |
| Adjustments for | |||
| Depreciation, amortisation and impairment | 124.2 | 92.4 | 125.2 |
| Financial income and expenses | 13.5 | -26.2 | -20.3 |
| Gains and losses on sale of intangible assets, other changes | -2.0 | 8.4 | 6.4 |
| Income Taxes | 5.0 | -77.1 | -63.1 |
| Cash flow before changes in working capital | 170.8 | 316.3 | 448.0 |
| Changes in working capital | |||
| Current receivables, non-interest-bearing, increase (-) / decrease (+) | -182.1 | -388.2 | -68.0 |
| Inventories, increase (-) / decrease (+) | -3.2 | -60.4 | 6.1 |
| Current liabilities, non-interest-bearing, increase (+) / decrease (-) | 31.6 | -139.3 | -173.8 |
| Changes in working capital | -153.7 | -587.9 | -235.7 |
| Financial items and taxes | |||
| Interest and other financial items, received | 1.1 | 3.4 | 4.1 |
| Interest and other financial items, paid | -5.3 | 24.8 | -56.7 |
| Income taxes paid | -19.4 | 64.8 | 60.1 |
| Financial items and taxes | -23.7 | 93.1 | 7.4 |
| Cash flow from operating activities (A) | -6.6 | -178.5 | 219.8 |
| Cash flows from investing activities | |||
| Acquisitions of property, plant and equipment and intangible assets | -118.3 | -224.6 | -290.1 |
| Proceeds from sale of property, plant and equipment and intangible assets | 4.6 | 0.4 | 2.3 |
| Acquisitions of Group companies | - | -9.5 | -9.5 |
| Acquisitions of other investments | 0.0 | 0.0 | 0.0 |
| Other cash flow from investing activities | 0.9 | - | - |
| Cash flows from investing activities (B) | -112.8 | -233.8 | -297.2 |
| Cash flow from financing activities: | |||
| Proceeds from issue of share capital | - | 15.6 | 15.6 |
| Purchase of treasury shares | -10.2 | - | - |
| Change in current financial receivables, increase (-) / decrease (+) | 0.0 | 5.3 | 75.0 |
| Change in non-current financial receivables, increase (-) / decrease (+) | -1.9 | 0.4 | 1.2 |
| Change in current financial borrowings, increase (+) / decrease (-) | 571.8 | 142.3 | -125.8 |
| Change in non-current financial borrowings, increase (+) / decrease (-) | -0.8 | 127.8 | 127.9 |
| Payment of lease liabilities | -23.9 | -19.6 | -30.7 |
| Dividends received | 0.0 | 0.3 | 0.3 |
| Dividends paid | -109.7 | -218.1 | -218.1 |
| Cash flow from financing activities (C) | 425.2 | 54.2 | -154.5 |
| Change in cash and cash equivalents, increase (+) / decrease (-) (A+B+C) | 305.8 | -358.1 | -231.9 |
| Cash and cash equivalents at the beginning of the period | 218.8 | 447.5 | 447.5 |
| Effect of exchange rate fluctuations on cash held | -7.1 | 3.3 | 3.2 |
| Cash and cash equivalents at the end of the period | 517.5 | 92.7 | 218.8 |
| Equity attributable to equity holders of the parent | ||||||||
|---|---|---|---|---|---|---|---|---|
| Million euros | A | B | C | D | E | F | G | H I |
| Equity, 1 Jan 2019 | 25.4 | 181.4 | -11.4 | -365.4 | -0.6 | 222.6 | 1,434.2 | - 1,486.1 |
| Result for the period | 318.8 | 318.8 | ||||||
| Other comprehensive income, | ||||||||
| net of tax: | ||||||||
| Cash flow hedges | -3.8 | -3.8 | ||||||
| Net investment hedge | - | |||||||
| Translation differences | 84.3 | 84.3 | ||||||
| Total comprehensive | ||||||||
| income for the period | 84.3 | -3.8 | 318.8 | 399.3 | ||||
| Dividends paid | -218.1 | -218.1 | ||||||
| Exercised warrants | 15.6 | 15.6 | ||||||
| Acquisition of treasury shares | - | |||||||
| Share-based payments | 3.5 | 1.2 | 4.8 | |||||
| Total transactions with owners | ||||||||
| for the period | 3.5 | 15.6 | -216.9 | -197.7 | ||||
| Equity, 30 Sep 2019 | 25.4 | 181.4 | -7.9 | -281.2 | -4.3 | 238.2 | 1,536.1 | - 1,687.7 |
| Equity, 1 Jan 2020 | 25.4 | 181.4 | -8.0 | -278.8 | -1.8 | 238.2 | 1,613.3 | - 1,769.8 |
| Result for the period | 30.1 | 30.1 | ||||||
| Other comprehensive income, | ||||||||
| net of tax: | ||||||||
| Cash flow hedges | -1.0 | -1.0 | ||||||
| Net investment hedge | - | |||||||
| Translation differences | -159.8 | -159.8 | ||||||
| Total comprehensive | ||||||||
| income for the period | -159.8 | -1.0 | 30.1 | -130.7 | ||||
| Dividends paid | -109.7 | -109.7 | ||||||
| Exercised warrants | - | |||||||
| Acquisition of treasury shares | -10.2 | -10.2 | ||||||
| Share-based payments | 1.6 | 1.6 | ||||||
| Total transactions with owners | ||||||||
| for the period | -10.2 | -108.1 | -118.3 | |||||
| Equity, 30 Sep 2020 | 25.4 | 181.4 | -18.2 | -438.6 | -2.7 | 238.2 | 1,535.3 | - 1,520.7 |
| SEGMENT INFORMATION | 7-9/20 | 7-9/19 | 1-9/20 | 1-9/19 | 1-12/19 | Change % |
|---|---|---|---|---|---|---|
| Million euros | ||||||
| Net sales | ||||||
| Passenger car tyres | 254.9 | 256.7 | 609.2 | 806.5 | 1,123.8 | -0.7 |
| Heavy tyres | 49.8 | 52.2 | 141.4 | 148.2 | 202.7 | -4.6 |
| Vianor | 67.4 | 69.7 | 202.7 | 216.4 | 336.5 | -3.3 |
| Other operations and eliminations | -22.2 | -24.1 | -53.0 | -60.6 | -77.6 | 7.8 |
| Total | 349.9 | 354.5 | 900.4 | 1,110.6 | 1,585.4 | -1.3 |
| Operating result | ||||||
| Passenger car tyres | 64.3 | 68.2 | 72.8 | 211.3 | 287.7 | -5.8 |
| Heavy tyres | 7.8 | 8.3 | 18.7 | 25.6 | 35.7 | -5.1 |
| Vianor | -1.8 | -3.8 | -20.2 | -6.4 | 7.7 | 53.1 |
| Other operations and eliminations | -8.0 | -5.2 | -22.7 | -15.0 | -14.7 | -55.6 |
| Total | 62.3 | 67.5 | 48.6 | 215.5 | 316.5 | -7.7 |
| Operating result, % of net sales | ||||||
| Passenger car tyres | 25.2 | 26.6 | 12.0 | 26.2 | 25.4 | |
| Heavy tyres | 15.8 | 15.9 | 13.2 | 17.3 | 17.6 | |
| Vianor | -2.7 | -5.5 | -10.0 | -3.0 | 2.3 | |
| Total | 17.8 | 19.0 | 5.4 | 19.4 | 19.8 | |
| NET SALES BY GEOGRAPHICAL AREA | 7-9/20 | 7-9/19 | 1-9/20 | 1-9/19 | 1-12/19 | Change % |
| Million euros | ||||||
| Nordics | 139.1 | 136.0 | 389.5 | 409.5 | 613.2 | 2.2 |
| Other Europe | 111.7 | 106.3 | 237.1 | 268.6 | 375.5 | 5.1 |
| Russia and Asia | 31.6 | 52.1 | 127.9 | 244.2 | 324.3 | -39.3 |
| America | 54.3 | 43.3 | 119.3 | 142.4 | 209.3 | 25.4 |
| Other | 13.1 | 16.7 | 26.5 | 45.8 | 63.2 | -21.9 |
| Total | 349.9 | 354.5 | 900.4 | 1,110.6 | 1,585.4 | |
| CONTINGENT LIABILITIES | 30.9.20 | 30.9.19 | 31.12.19 | |||
| Million euros | ||||||
| For own debt | ||||||
| Mortgages | 0.9 | 0.9 | 0.9 | |||
| Enterprise mortgages | 3.5 | 2.5 | 2.5 | |||
| Pledged assets | 2.2 | 2.2 | 2.2 | |||
| On behalf of others | ||||||
| Guarantees | 0.0 | 0.4 | 0.4 | |||
| Other own commitments | ||||||
| Guarantees | 41.8 | 30.0 | 29.9 | |||
| Purchase commitments | 0.0 | 30.3 | 29.4 |
| DERIVATIVE FINANCIAL | |||
|---|---|---|---|
| INSTRUMENTS | 30.9.20 | 30.9.19 | 31.12.19 |
| Million euros | |||
| INTEREST RATE DERIVATIVES | |||
| Interest rate swaps | |||
| Notional amount | 100.0 | 100.0 | 100.0 |
| Fair value | -3.7 | -4.6 | -3.2 |
| FOREIGN CURRENCY DERIVATIVES | |||
| Currency forwards | |||
| Notional amount | 280.0 | 380.5 | 396.8 |
| Fair value | 4.2 | -6.2 | 0.5 |
| Currency options, purchased | |||
| Notional amount | 19.4 | 5.1 | 20.3 |
| Fair value | 0.1 | 0.0 | 0.0 |
| Currency options, written | |||
| Notional amount | 29.8 | 10.1 | - |
| Fair value | -0.1 | -0.1 | - |
| Interest rate and currency swaps | |||
| Notional amount | 75.0 | 86.0 | 75.0 |
| Fair value | 16.5 | 9.4 | -2.7 |
| ELECTRICITY DERIVATIVES | |||
| Electricity forwards | |||
| Notional amount | 4.5 | 4.0 | 3.9 |
| Fair value | -0.4 | 1.4 | 0.9 |
The new standard became effective on 1 January 2019 and replaced the previous standard IAS 17. Nokian Tyres chose to apply the modified retrospective approach, under which the cumulative effect of initial application is recognised in retained earnings at 1 January 2019.
Nokian Tyres has chosen 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.
Below is a summary of the effects of the treatment of leases in accordance with IFRS 16 for the period so far this year.
| Balance sheet effects | 30.9.20 | 30.9.19 | 31.12.19 | |
|---|---|---|---|---|
| Fixed assets | ||||
| Right to use | 95.3 | 116.8 | 122.9 | |
| Total | 95.3 | 116.8 | 122.9 | |
| Equity & Liability | ||||
| Non-current liability | 72.4 | 103.5 | 94.8 | |
| Current liability | 25.2 | 14.5 | 30.0 | |
| Total | 97.7 | 118.0 | 124.8 | |
| P&L effects | 1-9/20 | 1-9/19 | 1-12/19 | Change % |
| Reversed rents | 23.9 | 25.1 | 32.2 | -4.5 |
| Depreciations | -22.3 | -23.3 | -31.1 | 4.0 |
| Finance costs | -2.3 | -2.9 | -3.8 | 21.1 |
| Total | -0.7 | -1.1 | -2.7 | 37.4 |
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