January 24, 2020 / 6:53 AM / a month ago

CORRECTED-UPDATE 3-Nokian Tyres sees weaker 2020 on Russia slowdown

(Corrects to read shares, bullet point 4)

* Sees 2020 oper profit falling significantly

* Sees 2020 sales down

* Consensus was for 4% profit growth, 2% sales growth

* Shares drop over 9% to lowest since Aug 2015

HELSINKI, Jan 24 (Reuters) - Finland’s Nokian Tyres on Friday warned of a significant fall in its 2020 operating profit hurt by its Russian operations, sending its shares sharply lower.

It said the Russian market was weaker than expected in 2019 and that it expects a substantial decline there this year.

“Low consumer spending, declining new car sales and increasing competition resulted in a significant increase in carry-over stocks at the year-end in Russia,” the company said in a statement.

Nokian said it expected its 2020 group sales to decline as profits and sales in Russia, which contribute around 20% to group revenue, would decline significantly.

Analysts had expected 2020 operating profit growth of 2% on sales up 4%, Refinitiv data showed.

Nokian share fell more than 9% in early trade to their lowest level since August 2015. They were down 7% at 0905 GMT.

Equity analyst firm Inderes called the 2020 guidance “an ugly miss” and “a rough disappointment”.

“Nokian’s mid-term strategy of growing top-line at a more than 5% CAGR (compound annual growth rate) and maintaining group profitability at least at 22% looks far out of reach for the company as the underlying market environment has turned out to be much weaker than expected,” JP Morgan analysts said in a note.

Nokian, which is scheduled to release its fourth-quarter numbers on February 4, reiterated its October outlook for flat net sales for 2019, with an operating profit margin of approximately 20%.

“In 2019, the car and tyre markets continued to be soft in Europe, which resulted in tightening competition. Winter tyre demand in October-December was negatively impacted by the warm winter in Nokian Tyres’ key markets,” the company said.

Nokian warned already back in September that European distributors were holding back from buying winter tyres due to high inventories, with oversupply also putting pressure on prices. (Reporting by Tarmo Virki, Boleslaw Lasocki and Anne Kauranen; editing by Sam Holmes and Jason Neely)

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