Nokian Tyres PLC (NKRKF) Q3 2024 Earnings Call Highlights: Strong Sales Growth and Strategic ...

GuruFocus News
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In This Article:

  • Net Sales: EUR 314 million, 14% increase in comparable currencies.

  • Segment EBITDA: EUR 58.8 million, margin 18.8% versus 16.7% prior year.

  • Segment Operating Profit: EUR 30.4 million, 9.7% margin, up from EUR 19.6 million last year.

  • Capital Expenditure: EUR 101 million in the quarter, primarily for the Romanian factory.

  • Net Sales (Year-to-Date): EUR 875 million versus EUR 805 million last year.

  • Segment EBITDA (Year-to-Date): 13.5% margin versus 12.2% last year.

  • Return on Capital Employed: 4.2% (12-month rolling).

  • Equity Ratio: 49.6% versus 6.1% last year.

  • Interest Bearing Net Debt: EUR 800 million.

  • Passenger Car Tire Segment Operating Profit: EUR 34.4 million, 16.4% margin versus 11.1% last year.

  • Heavy Tire Segment Profitability: 12.9% margin, improved from last year.

  • Vianor Segment: Sales at last year's level, facing negative operating profit due to inflation.

  • Guidance: Net sales and segment operating profit expected to grow significantly compared to last year.

Release Date: October 29, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Nokian Tyres PLC (NKRKF) reported a 14% increase in net sales in Q3, reaching EUR 314 million, driven by improved passenger car tire availability.

  • Segment operating profit improved significantly to EUR 30.4 million, with a margin of 9.7%, up from 6.1% the previous year.

  • The Romanian factory is progressing on schedule, with the first tire manufactured in July and a grand opening in September.

  • The company secured a EUR 150 million loan from the European Investment Bank to finance the Romanian factory.

  • Nokian Tyres PLC (NKRKF) expects net debt to decrease and cash flow to turn positive from 2024 onwards as the investment phase concludes.

Negative Points

  • The overall car and tire market remains weak, making it difficult to predict future market and consumer behavior.

  • The company faced a EUR 11 million inventory write-down due to contract manufacturing delays, impacting profitability.

  • Net debt reached EUR 800 million, the highest level expected, indicating significant financial leverage.

  • The heavy tire segment experienced a decrease in net sales, primarily due to a weak OEM market.

  • Inflation and a weak business-to-business market negatively impacted the Vianor segment's operating profit.

Q & A Highlights

Q: Could you explain the supply chain improvement and assumptions for raw material costs for the next two quarters? A: The supply chain improvement, valued at EUR8 million, is mainly due to reduced reliance on external warehouses, particularly with the new finished goods warehouse at the Dayton factory. Regarding raw material costs, they are expected to moderate, with some fluctuations tied to oil prices. For 2025, there might be a slight increase due to certified natural rubber costs, but it should remain moderate. (Niko Haavisto, CFO)

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