Nokian Tyres plans an investment decision in the third quarter on a new production plant in Europe to replace Russian output, its chief executive said on Tuesday after the company plunged into the red in the second quarter.
Shares in Nokian dived more than 10% after the Finnish company said its exit from Russia pushed it to make an operating loss for April-June of 203 million euros ($207.6 million), missing a forecast 33.1 million euro profit in a company-provided poll.
Russia’s attack on Ukraine, which Moscow calls a “special operation”, and sanctions put in place by the European Union forced Nokian to halt production at its plant near St Petersburg, where the company used to make 80% of its passenger car tyres.
Chief Executive Jukka Moisio said the company expected to announce the investment and location of the new plant in the third quarter.
“We’ve been through multiple countries and options and we’ve zoomed into a few… and it’s going to be greenfield,” Moisio told a conference call, referring to the company’s plans to build its own new facilities instead of a joint venture or purchasing an existing plant.
“We expect that (an investment decision) will happen before the Q3 earnings,” he added.
Shares in the tyre maker were down more than 10% in afternoon trade, having plunged nearly 70% this year due to the loss of Russian output.
As building and ramping up a new facility will take several years the company plans to outsource some of its production in the meantime, Moisio said, without providing exact numbers.
“Discontinued supply of tyres from Russia will have an adverse impact on sales especially in Central Europe in the second half of 2022,” he said.
In June, Nokian said it would wind down its operations in Russia, a move that would reduce the value of its Russian net assets by between 300 million and 400 million euros in the second quarter.
Impairments and write-downs amounted to 300.7 million euros in the quarter, Nokian said on Tuesday.
Inderes analyst Rauli Juva said the second-quarter numbers were largely in line with expectations.
“Perhaps the most impatient (investors) had expected some kind of news on their plans,” he said.
($1 = 0.9780 euros)
(Reporting by Essi Lehto and Anne Kauranen, editing by Terje Solsvik and Susan Fenton)