The Covid-19 pandemic has had a significant impact on global car and tire demand, however, Nokian Tyres, according to an address by company president and CEO Jukka Moisio, feels that the market outlook has positive elements, provided short-term issues are kept under control.
Explaining the company’s immediate priorities, Moisio stated, “We will continue to provide our customers and consumers with world-class products and services, while at the same time keeping costs under strict control. We will prioritize cash flow by cutting back investments and actively managing working capital. In this volatile market environment, our focus in the second half of 2020 is tactical. A more thorough review of our longer-term growth strategy will take place once the market has stabilized.”
He also noted that steps the company took in the early stages of the pandemic have stood it in good stead to weather the storm: “We have a strong balance sheet and we strengthened our liquidity position further in the first half of the year. We have increased our focus on working capital management, taking manufacturing downtime to reduce inventory levels and reducing capital spending to ensure a healthy cash flow. As visibility to the market remains low, it is essential that we continue keeping costs under strict control.”
Looking beyond the short-term tactical focus, the company says that driving top-line growth is its number one priority. To achieve that, Moisio highlighted the importance of having the correct product line-up and an extensive pipeline of new product launches.
“We want to ensure that the innovation pipeline in passenger car tires and heavy tires is strong and that we continuously launch new tires that meet the consumer and customer needs. We have a record number of new product launches planned for the coming months which will be a key driver for boosting sales,” Moisio said.
“Penetration is still low in certain markets, so a lot more work needs to be done in expanding distribution, commercial marketing and convincing consumers,” he added. “As a premium tire manufacturer, Nokian Tyres is known for its high-quality, innovative and safe products, and we will continue to build on this strength.”
The company has made significant investments in recent years, including a new US factory, a testing center in Spain, and a heavy tires capacity expansion in Finland.
“We have a unique production platform consisting of three factories that allows us to scale output up or down according to demand and further improve service levels,” commented Moisio.
“All three factories have important roles in Nokian Tyres’ growth plan. In North America, we continue to ramp up the new factory. At the same time, we aim to maximize production in Russia. Our factory in Finland is the key location for R&D, prototyping, testing and manufacturing of more specialized tires, in addition to normal volume production. And our heavy tires growth is supported strongly by the expansion of the Finnish factory with state-of-the-art technology.
“The investment phase is starting to be behind us, which will further support our free cash flow generation. Now we need to make sure that we benefit from these investments in the best possible way. The capacity and capability available will help us increase sales once the market rebounds.”