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UPDATE 1-Finnish tyre maker Nokian Renkaat hit by Russia weakness
August 8, 2014 / 6:26 AM / 3 years ago

UPDATE 1-Finnish tyre maker Nokian Renkaat hit by Russia weakness

* Nokian Q2 operating profit 91 mln euros (105 expected)

* Sales in Russia fell 43.6 pct y/y

* Gross margin fall disappoints analysts (Adds details, analyst)

HELSINKI, Aug 8 (Reuters) - Finnish tyre maker Nokian Renkaat reported a second-quarter operating profit below expectations due to plummeting sales in Russia and a weaker operating margin.

The company’s April-June operating profit fell to 91 million euros(121.63 million US dollar) from 120 million a year ago, below all expectations in a Reuters poll, in which the estimates ranged from 98 to 112 million euros.

Nokian, which makes about a third of its sales in Russia, in April cut its profit outlook for the full-year due to weakened consumer demand in the country amid the Ukraine crisis.

The company said its margin from tyres produced in Russia and then exported to the West had improved as the rouble has weakened, this was not enough to compensate for weak sales in the country this year.

“The markets in Russia ... proved to be more challenging than estimated,” Nokian Chief Executive Kim Gran said in a statement on Friday.

Second-quarter sales fell by 12 percent to 370 million euros from the same period a year earlier. Sales in Russia fell by a whopping 43.6 percent.

“This was a very worrying earnings report, it was bad across the board,” Inderes analyst Sauli Vilen said. “Gross margins disappointed badly, and Russia sales were ugly.”

Vilen said that the fall in margins were an indication that the company had been forced to cut prices not only in Russia, but also in central Europe.

Nokian repeated its updated guidance, saying it expected sales and operating profit to fall this year from 2013, adding that pricing remained challenging.

“The pricing environment for 2014 remains tight for all tyre categories,” the company said.

1 US dollar = 0.7482 euro Reporting By Sakari Suoninen; Editing by Biju Dwarakanath and Jane Merriman

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