UPDATE 2-Tyre firm Nokian Renkaat taps Russia market surge

Thu Apr 7, 2011 3:58am EDT

* New plant to boost capacity to 20-21 mln tyres

* To invest 240 mln eur into new Russia plant

* Russian car sales growing fast

* Shares up 1.1 pct

(Adds share move, CEO comments, details, background)

By Jussi Rosendahl and Ritsuko Ando

HELSINKI, April 7 (Reuters) - Finnish winter tyre specialist Nokian Renkaat (NRE1V.HE) plans to invest about 240 million euros ($343 million) into a new car tyre plant in Russia to boost production and meet growing demand.

A new plant to be built next to the existing facility will increase its annual car tyre capacity by 5-6 million to 20-21 million tyres during 2012-2014, it said.

"Market outlook has strengthened clearly and we need more production capacity," Chief Executive Kim Gran said in a statement.

The company said it expects Russian car sales to grow 25-35 percent this year. Nokian Renkaat is already adding new production lines in its existing Russian factory.

It also said it is considering adding production capacity for heavy tyres.

Nokian Renkaat, which makes 80 percent of its profit from winter tyres, has been focusing on the fast growing markets in Russia, other former Soviet republics and eastern Europe. In addition to Russia, the company also has a plant in Finland.

The company has also said it is looking closely at the Chinese market. [ID:nLDE6BC0S1]

Last week the company announced it expected January-March operating profit of 65-70 million euros on sales of around 278 million, topping analysts' average forecast. The results are due on May 6.

The company's shares rose 1.1 percent by 0726 GMT on the Helsinki bourse OMXH.PI, which was down 0.5 percent. The stock has nearly doubled in value since the beginning of 2010. (Editing by Hans Peters and Jon Loades-Carter)

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