The difficult financial situation in Russia affected

We will return to growth through our strengthened product portfolio and extended distribution network

Dear reader,

Our activities last year were considerably affected by the financial situation in Russia. The weakened economy, a strong decline in oil prices, and the swift devaluation of the ruble led to a change in buyer behavior and a substantial decline in sales in Russia and the rest of the CIS. The financial uncertainty in the world is resuming; in addition to Russia, especially in Europe. The US is one of the few drivers of global growth, while China is seeking new ways to grow. Overall, Asia continues to retain substantial growth potential.

Despite the weak market, we strengthened our market leadership in Russia. The delivery volumes remained nearly at the previous year’s level. However, the decline in the euro value of sales was substantial. We were able to compensate this by improving our market position in Central Europe and especially in North America. The Central European market was negatively affected by the record-breaking winter temperatures. In the Nordic countries, our year was once again successful.

The average price of our products fell  due to changes in the value of a number of currencies and the development of the sales mix in Russia and the CIS. On the other hand, the devaluation of the ruble helped us in terms of costs, as did the significant decrease in the prices of raw materials. However, the latter made pricing globally more challenging, and was one factor that pulled our Average Selling Price downwards. In total, our production remained at the previous year’s level and the productivity of our factories continued to increase.

Our profits fell, but we still remained profitable and produced strong cash flow. The company has no net liabilities and it has a strong balance. The quality of our activities is at a good level, and I know we can continue to improve our market positions in 2015.

Looking forward, stronger than ever

The challenges we have faced have only strengthened our determination to move forward. Our product range continues to receive praise from the press and our customers, our distribution network continues to grow and our own organization further develops every day. We believe in strong growth in North America and Central Europe, while strengthening our positions in the difficult Russian and CIS markets and holding our strong position in the Nordic countries.

Our products dominated the winter tyre tests in the automotive media, securing nearly all of the most important test wins in the Nordic countries and Russia. Additionally, I want to emphasize the Central European winter tyre tests; success in these tests paves the way for increasing our awareness and sales in these markets. Our new summer tyre range also increasingly scored test wins in our core markets and in Central Europe in the spring of 2014.

In September 2014, Nokian Tyres introduced five new SUV summer tyres and renewed its van tyre range. In December, we launched a winter tyre for electric cars, the world’s first with an A class rolling resistance rating. The private and professional users of our products are enjoying safer driving than ever before. At the same time, their driving comfort is at a high level and less energy is being consumed. Our product range is now better than ever. This year, this will be seen in our customer satisfaction, sales, and market shares.

We continued expanding our distribution network in 2014 by opening 149 new Vianor outlets; the total number grew to 1,355 establishments in 27 countries. In Russia, the Nokian Tyres’ distribution partner network consists of 3,600 tyre and vehicle dealerships. Our new and lighter partnership model, the Nokian Tyres Authorized Dealer (NAD) also grew; a total of 869 cooperation contracts have been signed in Europe and China. The number of Vianor and NAD outlets will continue to grow in 2015. In Russia and Kazakhstan, we have launched the N-Tyre chain totaling 53 sales outlets. Strong distribution is one of our most important competitive advantages.

The Vianor stores owned by our group achieved nearly EUR 315 million in revenue and turned a profit. Gradually, we will be increasing the share of car service in our activities, which will allow us to even out the workload over the year. Excellent customer service combined with professional skill will support our growth and profitability improvement into the future.

The heavy tyres market, which is very important to us, had a positive year. Especially the forest segment grew, and we were able to strengthen our position. The winter tyre legislation is improving and it now covers heavy traffic in many of our target countries. In Finland and Russia, however, the legislators still have some work to do. The revenue and profitability of our heavy tyres business unit improved commendably during the second half of the year, since we were able to start utilizing our new machine investments and increase our production volumes.

Capacity increases were not required for passenger car tyres, which allowed us to keep investments at a low level. This improved our cash flow. We are also prepared to respond to market growth by quickly increasing production without making large investments.

In times of financial uncertainty, it is especially important to focus on the key issues: our customers and the further development of our personnel. I wish to thank all of our customers for their faith in us, and for the excitement that they have expressed toward our extended product range. I also want to thank our personnel for their excellent efforts in this challenging environment. We will continue our work in the Hakkapeliitta spirit and in very close cooperation with our customers. This, and the continuous improvement of our competence and activities, will ensure that our success story continues.

Ari Lehtoranta

Ari Lehtoranta

CEO Ari Lehtoranta

2014 year in review