Finnish Tire Maker Nokian Confident on Russian Market After Plant Expansion

Posted: November 21, 2014 in Econ 101, Free Trade, Sanctions on Russia Meaningless

SOURCE: http://www.reuters.com/article/2014/11/21/finland-nokianrenkaat-idUSL6N0TA5EW20141121

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Finnish tyre maker Nokian remains confident on Russia, eyes China

Fri Nov 21, 2014

(Reuters) – Finnish tyre maker Nokian Renkaat aims to strengthen its position in Russia despite the uncertainty of the Ukraine crisis and has also set its sights on future growth opportunities in China, its chief executive said.

The company, which shares its industrial roots with the country’s flagship technology company Nokia, has benefited from its strong focus on winter tyres and is the segment’s market leader in Russia and the Nordics, while in Central Europe it ranks behind industry heavyweights Michelin and Continental.

Nokian was ahead of its Western rivals to put a large factory in Russia, where the climate makes it a prime market for high-margin winter tyres, though a drop in demand amid the Ukraine crisis and the weakened rouble prompted a recent cut in the company’s full-year profit forecast.

Yet Ari Lehtoranta, who took the helm at Nokian last month after his predecessor’s retirement, is confident that the firm’s heavy exposure to Russia will remain a strength.

“Predictability, in Russia it is not too good right now,” Lehtoranta acknowledged at the company’s headquarters in the small Finnish town of Nokia. “… (but) next year I believe our winter tyre market share will increase further in Russia on the back of new products.”

Russia accounts for about 30 percent of the company’s total sales of around 1.5 billion euros ($1.9 billion).

While rival Bridgestone is aiming to start production in Russia in 2016, Lehtoranta said he believes that Nokian’s advantage will persevere for some time.

“I would be surprised if the planned plant projects would proceed according to their targeted schedules,” he said, referring to the economic and political uncertainty in the country.

He also noted that Nokian could increase production capacity at its plant near St Petersburgh. It currently has an annual capacity of 15 million tyres, with more than 60 percent of its output exported out of Russia.

Tightened winter tyre regulation has helped the European market to grow in recent years, but one major region remains unregulated as yet.

“China is likely to become a significant winter tyre market in the long run, maybe only slightly smaller than Europe,” Lehtoranta said, adding that Nokian is slowly starting to push sales in the country. (1 US dollar = 0.8022 euro) (Editing by David Goodman)

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