HELSINKI - The Nordic region's largest tire maker, Nokian Renkaat, reported on Tuesday higher earnings on healthy seasonal demand in key markets and said its focus on high-end niche products would deliver even stronger results in 2003.
The Finnish firm, one of the most profitable in the industry due to its high-end winter tire focus, has been gaining share in a stagnant global market.
The company expects demand for its niche products -- passenger car winter tires, high performance summer tires and special heavy tires -- to keep growing in Europe and Russia, countries the group sees as key to its future growth.
"We have to be the Porsche of the tire industry... focusing on high-end products instead of trying to do everything," Chief Executive Kim Gran told a news conference, referring to the world's most profitable carmaker.
Nokian Renkaat posted a fourth-quarter profit before extraordinary items of 33.2 million euros ($35.63 million), up 52 percent year-over-year and above a Reuters' poll average forecast of 28 million.
October-December net sales rose 15.3 percent to 168 million euros. The firm proposed a dividend of 1.11 euros per share, versus a dividend of 0.83 euros for 2001.
The firm said its result was helped by its Vianor retail chain, which after a restructuring started last year, posted a 43-percent jump in fourth-quarter operating profit to 8.6 million and turned to a full-year profit.
Analysts said while the result was strong, the firm's plans to spend 52 million euros this year on a joint venture, new products and further restructuring of its retail unit Vianor, could be overstretching its finances.
"Nokian's strategy to focus... on niche products seems to be working and providing good result despite the global economic downturn," said Nordea's analyst Ville Kivela. He added he will keep his "buy" recommendation on the stock.
But investment bank Morgan Stanley Dean Witter said in a reseach note: "We think that the ability to expand is limited at least in the near term because (capital expenditure) has got to be growing faster than profitability.
"The free cash flow yield is not bad, but compared to its competitors we find a better value elsewhere," the bank said.
Nokian Renkaat said it expected flat or higher profits in the seasonally weak first quarter, year-over-year, with raw materials' prices rising 5 percent from last year's levels. The firm generates the bulk of its profits in the second half.
But the group said it was well positioned to meet the growing demand in its core areas in 2003, adding it aimed to boost its market share in the Nordics through new products. Another 65 job losses were seen this year, mainly at Vianor in Sweden and Norway after 80 were cut last year.
It expects a joint venture with Russian tire maker Amtel, signed in December, to cement its market position in Russia and the former Soviet Union, where Nokian Renkaat already is the leading tire importer with a 14-percent market share.