HELSINKI -- Tire maker Nokian Renkaat's second-quarter profits soared to the top end of market forecasts on good demand in its home Nordic region and in Russia, and it forecast on Friday rising second-half earnings.
The Finnish company, one of the most profitable in the sector due to its focus on expensive winter and specialty tires, said new summer tires and a wider size range helped it gain market share and boost results in the seasonally weak quarter.
April-June pre-tax profits jumped 54 percent from a year ago to 17.2 million euros ($20.75 million). Net sales rose 20 percent to 138 million.
"The markets for our key products and in our key regions remain very good," said Chief Executive Kim Gran. "The main issue for us has been and will remain how to make the best use of our limited capacity."
Gran said he expected raw material prices to be 7 percent higher year-on-year at the end of the third quarter but added that these would be offset by price hikes.
"We expect better net sales and profits in the second half versus ... 2003, although we don't expect profits to double like in the first half," Gran said.
First-half pre-tax profits rose to 28.6 million euros from 12.8 million. Nokian's 2003 July-to-December pre-tax profit was 57 million on sales of 318 million.
Nokian has benefited from fast growth in Eastern European and Russian markets, while industry leaders such as Goodyear and Michelin wrestle with slow growth in more developed markets.
Analysts said all signs pointed to a good winter tire season. Nokian said pre-season sales to distributors had been successful, with order books also stronger than a year ago.
Morgan Stanley Dean Witter analyst Nicholas Hirth said Nokian was benefiting the most from the fact that harsh winters in the past two years have emptied retailers' winter tire stocks, but rival winter tire makers were also helped by that.
"We think that they have done very well and will continue to do well on the volume side for this year for sure, but I remain of the view that some other tyre makers have exposure to these trends and you can get (their stock) at half price," Hirth said.
"These fundamentals help Nokian in a more direct way, but it is a much cheaper and less volatile exposure to go with (German peer) Continental," he added, saying he still rated Nokian at "equal-weight".