Profitable growth back on track

One of the main achievements, in terms of our future, was yet again the excellent success of our products in car magazine tests. Independent reviews testifying to the superiority of our tyres in northern conditions put us in a good position to continue as a market and price leader in the future.

Dear reader,Kim Gran

Nokian Tyres’ demand, sales and profitability saw a clear positive turn in 2010. In the Nordic countries and Russia, which form the company’s core markets, GDP began to increase and customer confidence improved, leading to rapid growth in our order intake in the second quarter. The distributors’ winter tyre inventores were low after a winter with heavy snowfall, and in the latter part of the year demand momentarily exceeded our supply capacity. In addition to the performance in our core markets, we were delighted by the strong growth seen in the sales and profitability of our Central and Eastern European operations. Our net sales rose by one-third in annual terms, and our market share increased in the main market areas.

We increased production utilization throughout the year, our capacity being in full use at the end of 2010. Production lines 7 and 8 came online at the Russian plant, and our annual production volumes rose by 40%. The structural changes carried out in 2009 and the enhanced utilisation of capacity led to clearly improved productivity at both plants. The unit-specific production cost decreased from the previous year due to higher production volumes and the increase in the share of Russian manufacture.

During the second quarter, we carried out price increases in all product groups in order to compensate for higher raw material costs. An improved sales mix and exchange rate changes in the core markets helped to raise the average price by 5% year-over-year. Our profitability improved notably, with fixed costs increasing moderately compared to sales growth. Our cash flow was record high and our balance sheet is strong. All in all, I am relatively satisfied with the company’s financial performance in 2010.

Our distribution channel continued to expand in the Nordic countries, Russia and the CIS countries, as well as in Central Europe. Having launched 148 new stores in 2010, Vianor now has a total of 771 stores in 20 countries. Vianor will continue to play an important role in the implementation of Nokian Tyres’ strategy in the coming years.

One of the main achievements, in terms of our future, was yet again the excellent success of our products in car magazine tests. Independent reviews testifying to the superiority of our tyres in northern conditions put us in a good position to continue as a market and price leader in the future.

At the end of the year, our order intake was record high and tyre stocks were low throughout the distribution channel. This gives us a good opportunity to once again increase sales more selectively. We have already decided to install and introduce the next two production lines at our Russian plant this year. Moreover, we will analyse alternative ways to further increase our capacity in production and distribution. We will also continue to launch new products, raise prices and improve our sales mix to compensate for the rise in raw material costs.

I would like to thank our customers, personnel and other stakeholders who have helped us make the past year a success. It has been great to see how the return to a growth track and development projects have inspired people and boosted all our operations. We are committed to jointly making this year and the coming years even better than the past one.

Kim Gran