FINA NCIAL
REVIEW
2018
Contents
Peace of mind in all conditions
CO NTENTS
Peace of mind in all conditions .........................................................................1
Nokian Tyres in brief ............................................................................................ 2
Key figures 2018 ....................................................................................................3
Highlights of the year 2018 ...............................................................................4
Review by the President & CEO........................................................................ 5
Strategy ................................................................................................................... 7
Report by the Board of Directors ................................................................... 11
Financial Statements ....................................................................................... 23
Consolidated Income Statement ................................................................. 24
Consolidated Statement of Financial Position ........................................ 25
Consolidated Statement of Cash Flows..................................................... 26
Consolidated Statement of Changes in Equity ....................................... 27
Accounting policies for the Consolidated Financial Statements....... 28
Notes to the consolidated financial Statements ................................... 34
Parent Company Income Statement and Balance Sheet .................... 63
Parent Company Statement of Cash Flows .............................................. 64
Accounting policies for the Parent Company .......................................... 65
Notes to the Financial Statement of the Parent Company ............... 66
Key financial indicators .....................................................................................71
Information on Nokian Tyres’ share .............................................................73
Nokian Tyres group structure ........................................................................75
Signatures ............................................................................................................76
Auditors’ Report .................................................................................................. 77
Corporate Governance Statement .............................................................. 80
Salaries and remunerations 2018 ................................................................. 87
Board of Directors .............................................................................................. 91
Management Team ............................................................................................92
Investor Information and Investor Relations ............................................ 94
PEACE OF MIND IN
ALL CON DITION S
In the heart of a rainstorm or heavy snowfall, you can
rely on us to bring you home safely.
Nokian Tyres is the Scandinavian pioneer in demanding
conditions and the inventor of the winter tire. We make
premium tires for consumers and customers who
value safety, sustainability, and innovative products.
Our offer also includes tires for trucks and heavy
machinery.
With our highly innovative team and advanced
technology, we have built some of the most efficient
tire factories in the industry. A new factory is under
construction in the US.
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018
1
Nokian Tyres in brief
PRODUCTS
SOLD IN
62
COUNTRIES
WINTER TIRES
SHARE OF SALES
2/3
NET SALES EUR
1,595
MILLION
4,800
EMPLOYEES
SAFE,
SUSTAINABLE
AND INNOVATIVE
PRODUCTS
120YEARS
NOKI AN TYRES
IN BRIEF
Nokian Tyres develops and
manufactures premium tires
for people who value safety,
sustainability, and innovative
products. We offer peace of mind
in all conditions and instill our
Scandinavian heritage in every tire
we make. Our company designs
tires for passenger cars, trucks,
and heavy machinery.
Our business is divided into
We are market
leaders in
premium tires in the
Nordic countries
and Russia
three units: Passenger Car Tyres, Heavy Tyres and Vianor, our
chain of tire and car service centers.
Our headquarters is based in Nokia, Finland. We have
factories in Finland and Russia, and a third one is under
construction in the US. Production in the US factory will start
in 2020. We have two testing centers in Finland and a new
one is being built in Spain.
We are the inventor of the winter tire. With our
motivated and innovative team we can take safety to a
new level in the summer, all-season, and all-weather tires as
well. We are market leaders in premium tires in the Nordic
countries and Russia. In five years we aim to double our sales
in North America and grow by 50% in Central Europe.
Sustainability is an essential part of our business. We
aim for sustainable safety and eco-friendliness throughout
the product life cycle. In addition to sustainable product
development and products, we care about people and the
environment as well as our customers and employees.
In 2018, the company’s net sales were EUR 1.6 billion and
it employed some 4,800 people. Nokian Tyres is listed on
Nasdaq Helsinki.
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – NOKIAN TYRES IN bRIEF
2
Key figures 2018
KEY FIGURES 2018
EUR million
Net sales
Operating profit
Operating profit %
Profit before tax
Profit for the period
Earnings per share, EUR
ROCE, %
Equity ratio, %
Cash flow from operating
activities
gearing, %
Interest-bearing net debt
Capital expenditure
* Comparable currencies
2018
2017
Change
%
CC*
Change
%
Net sales, operating profit
and operating profit %
Earnings per share and
dividend per share
1,595.6
1,572.5
1.5
5.7
372.4
23.3
361.7
295.2
2.15
23.3
71.0
536.9
–21.2
–315.2
226.5
365.4
23.2
332.4
221.4
1.63
22.4
78.2
234.1
–14.2
–208.3
134.9
EUR million
2,000
Operating profit %
50
1,600
1,200
800
400
0
40
30
20
10
0
2014
2015
2016
2017
2018
Net sales
Operating
profit
Operating
profit %
EUR
2.5
2.0
1.5
1.0
0.5
0.0
2014
2015
2016
2017
2018
Earnings
per share
Dividend
per share
2014
2015
2016
2017
2018
2014 2015 2016 2017 2018
Net sales, EUR
1,389.1 1,360.1 1,391.2 1,572.5 1,595.6
Earnings per share
1.56
1.8
1.87
1.63
Operating profit, EUR
308.7
296.0
310.5
365.4 372.4
Dividend per share
1.45
1.50
1.53
1.56
2.15
1.58
Operating profit %
22.2
21.8
22.3
23.2
23.3
Net sales by market area, %
Return on Capital Employed, %
%
25
20
15
10
5
0
Nordic countries
Russia
Other Europe
North America
Other Countries
2017
2018
40
19
28
11
2
39
19
27
12
2
Net sales by business unit* , %
2014
2015
2016
2017
2018
2014 2015 2016 2017 2018
Return on Capital
Employed, ROCE, % 19.20 20.30 19.90 22.40 23.30
Passenger Car Tyres
Heavy Tyres
Vianor
* including internal sales
2017
2018
72
11
22
72
12
21
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – KEY FIgURES 2018
3
Highlights of the year 2018
HIGHL IGHTS OF T HE YEAR
NET SALES IN
COMPARABLE
CURRENCIES
+5.7%
BUILDING OF OUR
NEW US
FACTORY
STARTED
WE
STRENGTHENED
OUR MARKET
POSITION IN
NORTH AMERICA
AND RUSSIA
WE WERE AGAIN INCLUDED IN DOW JONES’ DJSI
WORLD SUSTAINABILITY INDEX AND ALSO IN THE
MORE STRICTLY DEFINED DJSI EUROPE INDEX
NOKIAN
POWERPROOF
AND NOKIAN
WETPROOF
WERE INTRODUCED
TO THE CENTRAL
EUROPEAN MARKET
WE STARTED TO
BUILD A TESTING
CENTER IN SPAIN
VIANOR IMPROVED
ITS PROFITABILITY
DRIVEN BY INCREASED OPERATIONAL
EFFICIENCY AND SALES MANAGEMENT
HEAVY TYRES STARTED TO BUILD
NEW CAPACITY IN
FINLAND
WE REDUCED ROLLING
RESISTANCE BY
8%
IN AVERAGE IN 2013–2018
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – HIgHLIgHTS OF THE YEAR
4
Review by the President & CEO
NEW FI NANCIAL TARGETS G U IDE
US IN EXECUT ING OUR STRATEGY
I am pleased to report that
we reached many important
milestones in 2018: we started
construction work on our new
US factory; we began building a
new testing center in Spain; we
initiated investments to increase
Heavy Tyres’ production capacity
by 50% in Finland; and we were
again selected in Dow Jones’ DJSI
World sustainability index, as well
as DJSI Europe index. At the same
time, we successfully continued to
strengthen our position in North
America and Russia.
In 2018, we celebrated 120 years in business. That is an
impressive track record for any company! Innovative
products, a trusted brand, motivated employees, and a
commitment to serving customers sustainably over the
long-term, have all contributed to strengthening our position
in the market.
We had a good year – delivering higher net sales
and operating profit. Net sales increased by 5.7% with
comparable currencies, driven by Passenger Car Tyres,
despite a delayed summer as well as lower new car sales
in Sweden and Norway. We experienced good growth in
Heavy Tyres, especially in sales of agricultural and forestry
tires. Vianor successfully continued to improve operational
efficiency and sales management. Overall, we increased the
operating profit for the group, despite a significant negative
currency impact.
Key strategic ambitions will help us
deliver our new financial targets
Nokian Tyres has now entered its next phase of growth.
In line with our updated 2018 strategy, we will seize the
opportunities for further growth in Russia, Central Europe
and North America.
Our financial targets for 2019–2021 are the following:
• to grow faster than the market: CAgR above 5% with
comparable currencies
• to maintain healthy profitability: EbIT at the level of 22%
• to deliver good returns for our shareholders: Dividend
above 50% of net earnings
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – REVIEW bY THE PRESIDENT & CEO
5
We will reach these targets by meeting our six strategic
ambitions:
1. We are the market leader in selected segments in the
Nordic countries and Russia
2. We increase our sales by 50% in Central Europe in five
years
3. We double our sales in North America in five years
4. Our tires are available in all major winter tire markets
5. We increase the EbITDA of Vianor (own) to +3% by the end
of 2019
6. We increase sales of Heavy Tyres by 50% in four years
We have already made a good start in delivering on these
ambitions during 2018. We grew by 14.7% in comparable
currencies in Russia and by 17.0% in North America. We
turned Vianor’s operating result positive one year ahead
of the target schedule, and grew Heavy Tyres by 10.7% in
comparable currencies. At the end of 2018, we split business
Area Europe into two separate business Areas, Central
Europe and Nordics, in order to have even more focus on
these regions. Japan and China are attractive winter tire
markets, and we are building the platform for future growth
in these markets.
In 2019, we
continue to pursue
our growth agenda,
outperforming the
competition.
With our strategy update, we have re-designed our
operating model, having both product centricity as well as
customer and consumer focus. In the new model, shared
processes and roles across the organization leverage
synergies and support the scalability of operations.
Our new factory in the US and testing
center in Spain will support growth
Construction work at our new US factory in Dayton,
Tennessee, is proceeding as planned, and commercial
production is scheduled to begin in 2020. Annual capacity
at the factory will be 4 million tires in 2023, with further
expansion potential. The new factory will ensure we can meet
increasing demand throughout North America. It will also
allow us to free up capacity in our other factories to service
growth markets elsewhere.
In 2018, we started a project to build a testing center in
Spain. It is expected to be fully operational in 2020, enabling
accelerated product development and range extension.
Comprehensive testing and a thorough understanding of
customer needs ensure that our premium tires perform in
the best possible way in all conditions. High-quality, safe
products are our number one priority.
Another initiative to support growth is our decision
to increase production capacity by 50% in Heavy Tyres in
Finland during 2018–2020. As part of this investment, Heavy
Tyres is building a new research and development center,
accelerating the testing phase of new tire models.
We are committed to high
standards in sustainability
Sustainability is an important part of our strategy, and I am
particularly proud to announce that in 2018 we were again
included in the Dow Jones’ DJSI World sustainability index.
Nokian Tyres was also selected for the more strictly defined
DJSI Europe index. In February 2019, in the RobecoSAM
Sustainability Yearbook 2019, we received the Silver Class
distinction.
During 2018, we joined the Science based Targets
initiative, which is a partnership between UN global Compact,
CDP, World Resources Institute and WWF for promoting the
best practices in setting scientific climate goals. being part
of this initiative is a natural continuation of our long-term
work for the environment.
Our growth journey continues in 2019
In 2019, we continue to pursue our growth agenda,
outperforming the competition. Our focus is on executing
our strategic projects, especially the US factory ramp-up. We
aim to strengthen our market leadership in Russia through
even stronger distribution and online sales. We are building
the product offering and distribution in Central Europe to
support our growth target in the region. In the Nordics, we
have reorganized Vianor and Nokian Tyres Nordics under one
leadership, which will increase synergies and help us further
strengthen our position in Finland, Sweden and Norway. In
Heavy Tyres, we continue to focus on growth especially in the
Nordics, Central Europe and North America, supported by
new products.
Peace of mind in all conditions
Nokian Tyres is a life driven company, facilitating safe driving.
As people drive home in their everyday lives, we offer peace
of mind in all conditions. Our mission is powerful, giving all of
us at Nokian Tyres a high purpose for our work, every day.
I would like to thank our customers, employees, and
other stakeholders for another successful year in 2018. We
have an impressive 120 year history and are committed to
continue building on our success together in years to come.
Hille Korhonen
President & CEO
Read also Hille Korhonen’s greetings in the Corporate
Sustainability Report: www.nokiantyres.com/company/
sustainability/
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – REVIEW bY THE PRESIDENT & CEO
6
Strategy
ENT ERING OUR NEX T PHASE OF GROWT H
OUR DI FFERENTIATORS
OUR AMBITION
SAFEST TIRES
CONSUMER-TRUSTED
PREFERRED PARTNER
FOR ALL CONDITIONS
PREMIUM BRAND
FOR CUSTOMERS
FORERUNNER IN
RESPONSIVE AND
SELECTED HEAVY TIRE
PRODUCTS
EFFICIENT
SUPPLY CHAIN
HIGH-PERFORMING
ENGAGED TEAM
WE ARE THE MARKET LEADER IN SELECTED
SEGMENTS IN THE NORDIC COUNTRIES AND RUSSIA
WE INCREASE OUR SALES BY 50% IN CENTRAL
EUROPE IN FIVE YEARS
WE DOUBLE OUR SALES IN
NORTH AMERICA IN FIVE YEARS
OUR TIRES ARE AVAILABLE IN ALL MAJOR
WINTER TIRE MARKETS
WE INCREASE THE EBITDA OF VIANOR (OWN)
TO +3% BY THE END OF 2019
WE INCREASE THE SALES OF HEAVY TYRES BY
50% IN FOUR YEARS
F IN A N CIA L TA RG ETS 2019–202 1
GROWING FASTER THAN THE MARKET:
ABOVE 5% CAGR WITH COMPARABLE
CURRENCIES
HEALTHY PROFITABILITY:
EBIT AT THE LEVEL OF 22%
GOOD RETURNS FOR OUR
SHAREHOLDERS:
DIVIDEND ABOVE 50% OF NET EARNINGS
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – STRATEgY
7
SA FEST TIRES FO R
ALL CONDITI ONS
CO NSUM ER-TRUSTED
PRE MI UM BRA ND
P REFERR ED PARTNER
FOR CUSTOMER S
We operate within the premium passenger
car tire segment and focus on the replace-
ment tire market. We offer the world’s best
winter tires on all major winter tire markets.
As pioneers in demanding conditions, our
competitive summer tires, all-season tires,
and all-weather tires take safety to a new
level under all conditions.
Our tires are made for people, who value
the promise of the Nordic premium: high-
tech products that are manufactured
sustainably. We make good on our promise
on the road, as our tires offer reliability,
performance, and peace of mind from
winter snowfall to heavy summer rain.
Our partners have higher earnings poten-
tial selling our products and our customer
satisfaction is high. Nokian Tyres offers
premium end-to-end digital customer and
consumer experiences. Our branded retail
concepts support strong sell-out and
provide data, which enables us to serve our
consumers better.
FORERUNNER IN SELECTED
HEAVY TIRE PRODUCTS
RESP ONSI V E AND EFFI CIENT
S UPPLY C HA IN
HI GH-P ERFOR MI NG
ENGAGED TEAM
In the development and manufacturing of
heavy tires, we focus on carefully selected
segments with high profit margins, such as
tires intended for forestry, agriculture, and
material handling. Our premium tires feature
unique solutions that support the business of
our end users, and we sell them on both the
replacement and original equipment markets.
We ensure the functionality of our tires by
also serving our customers down in the mine
or deep in the woods.
We have some of the most efficient tire
factories in the world. The high level of
automation ensures superior productivity
and product quality. Our customer oriented
supply chain ensures excellent customer
service capability even during high season.
Our open and participatory company and
leadership culture ensures that we work,
develop, and achieve great results together.
Our motivated and committed personnel
have a continuous desire to develop
their personal competence as well as our
company as a whole.
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – STRATEgY
8
OUR SEV EN
AMB ITIONS
Nokian Tyres’ ambition is to continue to be the market leader in the Nordic
countries and Russia and to grow faster than the market in other main
markets. Over a five-year period of 2018–2022, the target is to grow by 50 %
in Central Europe and double sales in North America. Heavy Tyres’ ambition is
to grow by 50 % in four years. With Vianor (own), our ambition was to increase
the EBITDA to +3 % by the end of 2019. This target was reached in 2018.
Would you like to know more about our strategic ambitions? Here you can
watch Hille Korhonen, the President and CEO of Nokian Tyres, present at our
capital markets day in 2018.
THE NORDIC COUNTRIES
W E ARE TH E MARKET LEADER I N SELECT ED
SEgMEN TS IN THE NORDIC COUNTRIES
STATUS TODAY
KEY INI TI ATIV ES
• A big winter tire market and our
• Leading product portfolio both in winter
home market
and summer segments
• Strong market position with high
• Superior service level
brand awareness
• Solid distribution setup
• Vianor, strong own distribution channel
STRO NG M AR KET PRES EN CE I N ALL CHA NNELS
RUSSIA
CENTRAL EUROPE
WE ARE THE MARK ET LEA DE R I N
SEL ECT ED S EgM EN TS IN RUSS IA
W E INC RE ASE OUR SALES b Y 50% IN
CE NTRA L EUROPE IN FIVE YEARS
STATUS TODAY
KEY INITIATIV ES
STATUS TODAY
KEY INI TIATIV ES
• The world’s second biggest winter tire
• Winning market share in A+b segments
• biggest winter tire area, with already
• Market-relevant products
market and our home market
• Strong brand image
• Country-wide multi-channel distribution
coverage, long-term partnership with
distributors
• Large-scale, highly efficient local
production provides a strong competitive
advantage
• Further development of direct
distribution in selected regions
• Effective support of customers’ sell-out
• Development of direct and indirect online
sales channels
strong Nokian Tyres presence in Eastern
Europe
• Low market share – room to grow in
selected segments and markets
• Our premium products and brand are
well-aligned with regional consumer
preferences
• building selective distribution in focus
markets
• brand building through Vianor partners,
NADs and focused marketing
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – STRATEgY
9
NORTH AMERICA
ALL MAJOR WINTER TIRE MARKETS
WE DOUbLE OUR SALES I N NORT H
AMERICA IN F IV E YEAR S
OUR TI RES ARE AVAIL AbLE IN ALL
M AJ OR WINTER TI RE MARKE TS
STATUS TODAY
KEY INITIATIV ES
FUTURE POTENT IAL
KEY INI TI ATIV ES
• After 30 years of market presence, a
• Expanding our market-relevant product
• Northern China has a sizable and growing
• building distribution and logistics setup
solid position in the Canadian winter tire
market
offering
premium winter tire market
in selected areas in China
• Extending the geographic footprint by
• Japan has an established winter tire
• Distribution partnership in Japan
• Premium winter tire brand known for
superior technical performance
partnering with key retailers/independent
distributors in all season markets
market, which offers a good strategic fit
with our product portfolio and brand
• Consumer segment valuing safety and
sustainability
• Starting in 2020, local manufacturing will
improve our service throughout North
America
JAPA N AND CH INA ARE POT EN T IA L F UT URE
GROWTH M AR KETS FOR NOK I A N T YRES
VIANOR
HEAVY TYRES
TARgETINg 3% EbI TDA OF NOKI A N T YRES
OWN ED VIANOR bY T HE EN D O F 20 19
W E INC RE ASE THE SALES OF HEAVY
TYRES b Y 50% IN FOUR Y EARS
STATUS TODAY
KEY INITIATIV ES
STATUS TODAY
KEY INI TI ATIV ES
• Unleashing the full potential of Vianor as a
• Focus on operational efficiency
• $26bn global market with CAgR of 5%
• Capacity expansion 20 Mkg ➞ 32 Mkg
market-leading tire chain
• Shifting focus from expansion to
profitable growth
• Vianor supports Nokian Tyres’ home
market position
• The target of 3% EbITDA was reached in
2018
• Improve fixed cost management
• Optimize service center network
• Improve sales and pricing management
• Reform Vianor Partner concept
2017−2022
• More than 200 new products by 2022
• A long history of niche innovation in
with new technologies
forestry and agriculture, together with
OE customers
• Market leader in Forestry CTL tires
• Focus markets: the Nordic Countries,
Central Europe and North America
• Focus segments: forestry, agriculture,
• Industry leading productivity
on-road, and off-the-road (OTR)
• growth in aftermarket
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – STRATEgY
10
Report by the Board
of Directors
REP ORT BY THE B OARD
OF DIRECTORS 2018
JANUARY–DECEMBER 2018
The Nokian Tyres group’s net sales in 2018 increased by 1.5% and were EUR 1,595.6 million (2017: 1,572.5;
2016: 1,391.2). With comparable currencies, net sales increased by 5.7%, driven by Russia and North
America. Currency exchange rates affected net sales negatively by EUR 67.2 million.
Net sales by market area
Nordic countries
Russia
Other Europe
North America
Other countries
*Comparable currencies
M€
2018
629.3
305.5
436.9
194.5
29.5
M€
2017
625.2
305.2
440.8
172.0
29.2
Change
%
CC*
Change
%
% of total
net sales
in 2018
% of total
net sales
in 2017
0.6
0.1
–0.9
13.1
0.7
3.5
14.7
0.6
17.0
6.9
39.4
19.1
27.4
12.2
1.8
39.8
19.4
28.0
10.9
1.9
Net sales by business unit**
M€
2018
M€
2017
Change
%
CC*
Change
%
% of total
net sales
in 2018
% of total
net sales
in 2017
Passenger Car Tyres
1,150.8
1,138.8
Heavy Tyres
Vianor
**including internal sales
*Comparable currencies
187.7
337.2
172.3
339.4
1.0
8.9
–0.6
6.1
10.7
1.9
72.1
11.8
21.1
72.4
11.0
21.6
Raw material costs (EUR/kg) in manufacturing decreased by 1.0% compared to the previous year,
positively impacted by currencies.
Operating profit amounted to EUR 372.4 million (2017: 365.4; 2016: 310.5). Operating profit
percentage was 23.3% (2017: 23.2%; 2016: 22.3%).
Operating profit by business unit
Passenger Car Tyres
Heavy Tyres
Vianor
Other operations and eliminations
Total
M€
2018
356.5
28.6
1.6
–14.3
372.4
M€
2017
359.9
32.2
–5.8
–20.9
365.4
Net financial expenses were EUR 10.7 million (33.0), including net interest expenses of EUR 3.0 million
(24.3; including EUR 18.3 million in interest related to tax disputes). Net financial expenses include an
expense of EUR 7.7 million (8.7) due to exchange rate differences. Profit before tax was EUR 361.7 million
(332.4) and taxes were EUR –66.5 million (–111.0). Profit for the period amounted to EUR 295.2 million
(221.4), and earnings per share were EUR 2.15 (1.63). In 2017, profit was penalized by additional taxes and
interest of EUR 59 million and EUR 3.1 million in interest related to the tax disputes.
Return on equity was 20.0% (2017: 15.1%; 2016: 18.7%).
Guidance given for 2018
In Nokian Tyres’ financial statement bulletin for 2017 published in February 2018, the company published
the following outlook for the year:
In 2018, with the current exchange rates, net sales and operating profit are expected to grow
compared with 2017.
In the January−September 2018 interim report published in October 2018, the guidance was updated
as follows:
In 2018, net sales and operating profit are expected to be at the same level or slightly higher
compared with 2017 due to the continued negative currency impact.
Cash flow
In 2018, cash flow from operating activities was EUR 536.9 million (234.1; affected by payments totaling
EUR 77.5 million related to tax disputes).
Working capital decreased by EUR 132.4 million (increased by EUR 72.9 million). Inventories increased
by EUR 41.8 million (51.8) and receivables increased by EUR 11.0 million (69.0). Payables increased by
EUR 185.3 million (47.9). The Finnish Tax Administration returned the previously paid EUR 148 million in
additional taxes and interest to the company in June 2018. The Tax Recipient Services Unit has applied
for permission to appeal.
11
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – REPORT BY THE BOARD OF DIRECTORS Investments
Investments in 2018 amounted to EUR 226.5 million (134.9). This comprises the construction of the new
US factory, production investments in the Russian and Finnish factories, molds for new products, and
ICT and process development projects. Depreciations totaled EUR 93.4 million (98.3).
Research & Development
In 2018, Nokian Tyres introduced several new tire models. Approximately 50% of R&D investments are
allocated to product testing. Nokian Tyres’ R&D costs in 2018 totaled approximately EUR 20.8 million
(2017: 21.8; 2016: 20.3), which is 5.8% (2017: 5.8%; 2016: 5.6%) of the group’s operating expenses.
In 2018, the construction of the new US factory progressed in line with plan. Equipment installations
started in all building areas. The commercial production is expected to commence in early 2020.
To support the testing of new tires, Nokian Tyres launched the construction project of a new testing
center in Spain in 2018. The first test tracks will be completed in 2019, and the testing center is expected
to be fully in operation in 2020.
Financial position on December 31, 2018
Cash and cash equivalents, M€
Interest-bearing financial liabilities, M€
of which current interest-bearing financial liabilities, M€
Interest-bearing net debt, M€
Unused credit limits*, M€
of which committed, M€
gearing ratio, %
December 31,
2018
December 31,
2017
447.5
132.3
126.0
–315.2
558.8
205.5
–21.2
343.4
135.2
0.8
–208.3
508.9
155.6
–14.2
Equity ratio, %
* The current credit limits and the commercial paper program are used to finance inventories, trade receivables,
and subsidiaries in distribution chains, thereby controlling the typical seasonality in the group’s cash flow.
71.0
78.2
Tax rate
The group’s tax rate in 2018 was 18.4% (33.4%; tax rate without tax disputes was 19.2%). The tax rate
is positively affected by tax incentives in Russia which are valid until approximately 2022. The group’s
estimated operational tax rate is expected to be at the level of 19% for 2019.
The tax rate in the coming years will depend on the timetable and final outcome of the ongoing tax
disputes with the Finnish Tax Administration. The group’s corporate annual tax rate may rise as a result
of these cases. For further information on the ongoing tax disputes, please see page 17.
Personnel
In 2018, the key focus areas in Human Resources management were global rewarding development and
providing support to the implementation of Nokian Tyres’ new operating model.
group employees
on average
at the end of the year
in Finland, at the end of the year
in Russia, at the end of the year
Vianor (own) employees, at the end of the review period
2018
2017
2016
4,790
4,719
1,769
1,574
1,563
4,630
4,635
1,724
1,503
1,660
4,433
4,392
1,616
1,368
1,742
Salaries, incentives, and other related costs in 2018 totaled EUR 228.9 million (2017: 224.7; 2016: 219.0).
Sales and distribution
good availability and precise, quick deliveries especially during season are increasingly important parts
of a successful tire retail experience. Nokian Tyres is continuously developing the logistics systems and
retailer network in order to ensure efficient distribution.
Nokian Tyres’ distribution network consists of Nokian Tyres’ own Vianor service centers and service
centers run by partners, the Nokian Tyres Authorized Dealer (NAD) partners, the N-Tyre retailers, and
other tire and vehicle retailers as well as online stores. At the end of 2018, the number of stores was as
follows:
• Vianor: 1,318 (1,466) service centers in total, of which 1,130 (1,272) partners
• NAD: 2,162 (1,855) stores
• N-Tyre: 127 (127) stores
BUSINESS UNIT REVIEWS
Passenger Car Tyres
Net sales, M€
Operating profit, M€
Operating profit, %
* Comparable currencies
2018
1,150.8
356.5
31.0
2017
Change %
CC*
Change %
1,138.8
359.9
31.6
1.0
6.1
In 2018, net sales of Nokian Passenger Car Tyres totaled EUR 1,150.8 million (1,138.8). With comparable
currencies, net sales increased by 6.1%. The growth was driven by higher sales volumes and price/mix
with comparable currencies. Average Sales Price with comparable currencies increased slightly. Net sales
in July–December were negatively impacted by high inventory levels of summer tires in Russia and lower
new car sales in Sweden and Norway. Summer tire inventories are also at a high level in Central Europe.
Winter season started late in Central Europe and the Nordic countries.
In 2018, the share of winter tires of sales was 69% (69%), the share of summer tires was 21% (21%),
and the share of all season tires was 10% (10%).
Operating profit was EUR 356.5 million (359.9). Operating profit was negatively impacted by
currencies and lower volumes in the second half of the year. Raw material costs (€/kg) were down by
1.7% year-over-year, positively impacted by currencies. In order to support further growth, the company
is investing in sales and marketing in Central Europe and North America, and building scalable business
platforms.
During the review period, capacity utilization increased year-over-year, and the production output
(pcs) increased by 6%. In 2018, 84% (85%) of Nokian passenger car tires (pcs) were manufactured in
Russia.
12
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – REPORT BY THE BOARD OF DIRECTORS Nokian Tyres’ products achieved success in several car magazine tests all over the world. For more
information, see: www.nokiantyres.com/test-success/. A flow of product launches with new innovations
– improving safety, comfort, and eco-friendly driving – continued in the review period. For example, the
Nordic non-studded Nokian Hakkapeliitta R3 and Nokian Hakkapeliitta R3 SUV winter tires for the Nordic,
Russian, and North American markets, the Nokian WR SUV 4 for the Central European markets, and the
Nokian WR g4 for the North American markets were introduced in January 2018. The Nokian Powerproof
and Nokian Wetproof summer tires for the Central European markets as well as the Nokian WR g4 SUV
all-weather tire for North American markets were introduced in October 2018.
In May, Nokian Tyres introduced a tire scanning technology SnapSkan. SnapSkan allows people to
find out the condition of their tires free of charge. Nokian Tyres aims to improve road safety and build a
comprehensive network of SnapSkan stations. Read more at: www.nokiantyres.com/snapskan
Market situation in Russia
In 2019, sales of new cars in Russia are expected to grow by approximately 8−12% compared with 2018,
driven by deferred demand but restricted by stagnating real incomes. The total replacement tire market
sell-in in Russia is expected to grow by 5–7% in 2019 compared with 2018, with the winter tire sell-in
growing and the summer tire sell-in declining due to high carry-over stocks.
Heavy Tyres
Net sales, M€
Operating profit, M€
Operating profit, %
* Comparable currencies
2018
187.7
28.6
15.2
2017
172.3
32.2
18.7
Change %
8.9
CC*
Change %
10.7
In 2018, net sales of Nokian Heavy Tyres totaled EUR 187.7 million (172.3). With comparable currencies,
net sales increased by 10.7%. Demand was good in Nokian Heavy Tyres’ core product groups. Sales of
agricultural tires and forestry tires increased in particular.
Operating profit was EUR 28.6 million (32.2). The decrease is due to the negative currency impact,
inventory valuation, and increased costs related to the ongoing ramp-up of new production capacity.
Production output (metric tons) increased slightly compared with the previous year.
Heavy Tyres is increasing its production capacity by 50% by investing a total of approximately EUR
70 million in the factory in Finland during the years 2018−2020. The aim is to increase the maximum
capacity for heavy tire production from approximately 20 million kg to 32 million kg. As part of this
investment, Heavy Tyres is building a new research and development center. The R&D center will
accelerate the testing phase of new tire models. The investments started in April−June 2018, and the
project is proceeding in line with plan.
A flow of product launches with new innovations continued in 2018. For example, the Nokian Armor
gard 2 for urban excavation was introduced in March, and the Nokian Tractor King for the heaviest of
machinery and the most difficult terrain in forestry, earthmoving, and road construction was introduced
in June. The Nokian Hakkapeliitta Truck T winter tire, the Nokian R-Truck tire for demanding use, and the
Nokian MPT Agile 2 off-road tire for versatile use were introduced in August.
Vianor, own operations
Net sales, M€
Operating profit, M€
Operating profit, %
Own service centers, pcs, at period end
* Comparable currencies
Change %
–0.6
CC*
Change %
1.9
2018
337.2
1.6
0.5
188
2017
339.4
–5.8
–1.7
194
In 2018, net sales totaled EUR 337.2 million (339.4). With comparable currencies, net sales increased by
1.9%.
Operating profit was EUR 1.6 million (–5.8). The improvement was driven by increased operational
efficiency, and better sales management.
At the end of the review period, Vianor had 188 (194) own service centers in Finland, Sweden, Norway,
and the USA.
CORPORATE GOVERNANCE
In its decision-making and administration, Nokian Tyres adheres to the Finnish Limited Liability
Companies Act, the Finnish Securities Markets Act and the rules issued by Nasdaq Helsinki Ltd, Nokian
Tyres’ Articles of Association, and the Finnish Corporate governance Code 2015 for listed companies.
Nokian Tyres complies with the code without exceptions. The code is published at www.cgfinland.fi/en/.
The Corporate governance Statement has been prepared pursuant to the Finnish Corporate
governance Code 2015 for listed companies and the Securities Markets Act (Chapter 7, Section 7) and
it is issued separately from the board of Directors’ report. The board of Directors has reviewed the
Corporate governance Statement, and the auditor KPMg has verified that the Statement has been
issued and that the description of the main features of the internal control and risk management
systems relating to the financial reporting process is consistent with the financial statements.
CHANGES IN MANAGEMENT
In April, Ms. Tytti bergman started as SVP, People & Culture and a member of the Management Team.
In April, Nokian Tyres announced the resignation of Ms. Anne Leskelä, Vice President, Finance and IR
from the company. Leskelä continued in her position until the beginning of July 2018.
In May, Mr. Mark Earl started as Vice President, Americas business Area and a member of the
Management Team. Ms. Päivi Antola started as Vice President, Investor Relations & Corporate
Communications and a member of the Management Team.
In July, Mr. Teemu Kangas-Kärki started as Nokian Tyres’ Chief Financial Officer (CFO) and a member
of the Management Team.
In October, Mr. Jukka Kasi started as Vice President, Products and Technologies and a member of
the Management Team.
In December, Nokian Tyres announced that the company is separating business Area Europe into
two business areas: business Area Central Europe and business Area Nordics. Anna Hyvönen, SVP, Vianor
and member of Nokian Tyres’ Management Team, was appointed SVP, Nordics and Vianor, with the
additional responsibility for Nokian Tyres Nordics. Pontus Stenberg, SVP, Europe and member of Nokian
Tyres’ Management Team, left the company to pursue his career outside of Nokian Tyres. Hannu Liitsola,
Managing Director, Central Europe, was appointed interim Head of business Area, Central Europe.
Ms. bergman, Mr. Earl, Ms. Antola, Mr. Kangas-Kärki, Mr. Kasi, Ms. Hyvönen, and Mr. Liitsola all report to
the President & CEO.
Detailed information on management can be found at www.nokiantyres.com/company/investors/
corporate-governance/the-groups-management-team/
13
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – REPORT BY THE BOARD OF DIRECTORS SHARES AND SHAREHOLDERS
At the end of December 2018, the number of shares was
138,065,719.
Authorizations
In 2017, the Annual general Meeting authorized the board of
Directors to make a decision to offer no more than 25,000,000
shares through a share issue, or by granting special rights under
Chapter 10, Section 1 of the Finnish Limited Liability Companies Act
that entitle to shares (including convertible bonds), on one or more
occasions. The authorization was effective until the Annual general
Meeting of 2018.
In 2017, the Annual general Meeting authorized the board of
Directors to resolve to repurchase a maximum of 5,000,000 shares
in the company by using the funds in the unrestricted shareholders’
equity. The authorization was effective until the Annual general
Meeting of 2018.
In 2018, the Annual general Meeting authorized the board of
Directors to make a decision to offer no more than 25,000,000
shares through a share issue, or by granting special rights under
chapter 10, section 1 of the Finnish Limited Liability Companies Act
that entitle to shares (including convertible bonds), on one or more
occasions. The authorization will be effective until the next Annual
general Meeting of Shareholders, however at most until June 30,
2019. This authorization invalidated all other board authorizations
regarding share issues and special rights.
In 2018, the Annual general Meeting authorized the board of
Directors to resolve to repurchase a maximum of 5,000,000 shares
in the Company by using funds in the unrestricted shareholders’
equity. The authorization will be effective until the next Annual
general Meeting of Shareholders, however at most until June 30,
2019.
The board did not utilize the authorizations in 2018.
Stock options on the Nasdaq Helsinki Stock Exchange
The share subscription period for stock options 2013b ended in May
2018. The total number of stock options 2013b was 1,150,000. Each
stock option 2013b entitled its holder to subscribe to one share
in Nokian Tyres plc. The shares with the stock options 2013b were
subscribed during the period of May 1, 2016 to May 31, 2018.
The total number of stock options 2013C is 1,150,000. Each
stock option 2013C entitles its holder to subscribe to one share
in Nokian Tyres plc. The shares can be subscribed with the stock
options 2013C during the period of May 1, 2017 to May 31, 2019.
The current share subscription price with stock options 2013C is
EUR 19.83/share. The dividends paid are deducted from the share
subscription price.
Shares subscribed with option rights
On February 8, 2018, Nokian Tyres announced that after the
registrations of new shares on December 21, 2017, a total of 10,370
shares in Nokian Tyres plc had been subscribed with the 2013b
option rights and a total of 120 shares with the 2013C option rights.
As a result of the share subscriptions, the number of Nokian Tyres
plc shares increased to 137,277,072 shares.
On May 22, 2018, Nokian Tyres announced that after the
registrations of new shares on February 8, 2018, a total of 206,882
shares in Nokian Tyres plc had been subscribed with the 2013b
option rights and a total of 706 shares with the 2013C option rights.
As a result of the share subscriptions, the number of Nokian Tyres
plc shares increased to 137,484,660 shares.
On August 21, 2018, Nokian Tyres announced that after the
registrations of new shares on May 22, 2018, a total of 553,277
shares in Nokian Tyres plc had been subscribed with the 2013b
option rights and a total of 2,320 shares with the 2013C option
rights. As a result of the share subscriptions, the number of Nokian
Tyres plc shares increased to 138,040,257 shares.
On November 13, 2018, Nokian Tyres announced that after the
registrations of new shares on August 21, 2018, a total of 25,462
shares in Nokian Tyres plc had been subscribed with the 2013C
option rights. As a result of the share subscriptions, the number of
Nokian Tyres plc shares increased to 138,065,719 shares.
Own shares
No share repurchases were made during the review period, and the
company did not possess any own shares on December 31, 2018.
Nokian Tyres has an agreement from 2017 with a third-party
service provider concerning the share-based incentive program for
key personnel. The third party owns Nokian Tyres shares related to
the incentive program until the shares are given to the participants
of the program. In accordance with IFRS, these repurchased shares,
480,000 in 2017, have been reported as treasury shares in the
Consolidated Statement of Financial Position. On December 31,
2018, the number of these shares was 278,083. This number of
shares corresponded to 0.2% of the total shares and voting rights
in the company.
Trading in shares
A total of 137,669,465 (117,227,947) Nokian Tyres’ shares were
traded in Nasdaq Helsinki in 2018, representing 100% (85%) of the
company’s overall share capital. The average daily volume in 2018
was 550,678 shares (467,044). Nokian Tyres’ shares are also traded
on alternative exchanges, such as bATS CXE, Turquoise, and bATS
bXE. The total trading volume on these alternative exchanges was
106,076,128 (83,293,139) shares in 2018.
Nokian Tyres’ share price was EUR 26.82 (37.80) at the end of
2018. The volume weighted average share price in 2018 was EUR
33.79 (37.25), the highest was EUR 41.26 (41.95) and the lowest was
EUR 26.35 (34.24). The company’s market capitalization at the end
of 2018 was EUR 3.7 billion (5.2 billion).
At the end of the year, the company had 47,007 (39,028)
registered shareholders. The percentage of Finnish shareholders
was 28.7% (25.5%), and 71.3% (74.5%) were non-Finnish holders
and foreign shareholders registered in the nominee register.
Public sector entities owned 6.4% (6.0%), financial and insurance
corporations 4.6% (3.2%), households 12.1% (10.6%), non-profit
institutions 3.3% (3.2%), and private companies 2.3% (2.4%).
Major shareholders, December 31, 2018
(does not include nominee registrations)
Number of
shares
% of share
capital
Varma Mutual Pension Insurance
Company
Ilmarinen Mutual Pension Insurance
Company
The State Pension Fund
Odin Norden
Mandatum Life Insurance Company
Limited
Nordea bank AbP
Nordea
Schweizer Nationalbank
OP Investment Funds
Svenska litteratursällskapet i
Finland r.f.
3,772,007
3,040,088
1,150,000
1,016,559
749,711
660,659
577,366
530,789
508,046
501,470
2.7
2.2
0.8
0.7
0.5
0.5
0.4
0.4
0.4
0.4
Changes in ownership
Nokian Tyres has received notifications from blackRock, Inc. on
January 19, January 25, February 27, March 12, March 23, March
29, April 20, April 25, April 26, May 21, June 18, June 28, August
24, September 13, October 1, October 12, November 5, November
26, November 29, December 6, December 11, and December 12,
according to which the holdings of the mutual funds managed by
blackRock, or indirect holding in Nokian Tyres shares, exceeded the
level of 5% of the share capital in Nokian Tyres plc as a result of a
share transactions concluded on January 18, January 24, February
26, March 9, March 22, March 28, April 19, April 24, April 25, May 16,
May 21, June 15, June 27, August 23, September 11, September 28,
October 11, November 2, November 23, November 28, December 5,
December 10, and December 11.
Nokian Tyres has received notifications from blackRock, Inc.
on January 24, February 20, February 28, March 19, March 26, April
3, April 19, April 24, June 19, June 29, September 5, September
17, October 3, November 6, November 22, November 30, and
December 7, according to which the holdings of the mutual funds
managed by blackRock, or indirect holding in Nokian Tyres shares,
fell below the level of 5% of the share capital in Nokian Tyres plc as
a result of share transactions concluded on January 23, February
19, February 27, March 16, March 23, March 29, April 18, April 23, June
14
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – REPORT BY THE BOARD OF DIRECTORS 18, June 28, September 4, September 13, October 2, November 5,
November 21, November 29, and December 6.
Nokian Tyres has received a notification from Janus Henderson
group plc on July 2, according to which the indirect holding in
Nokian Tyres shares reached the level of 5% of the share capital
in Nokian Tyres plc as a result of share transactions concluded on
June 29.
Nokian Tyres has received a notification from bridgestone
Corporation on November 13, according to which the direct holding
in Nokian Tyres shares fell below level of 10% of the share capital
in Nokian Tyres plc as a result of share transactions concluded on
November 12.
Detailed information on notifications of change in shareholding
can be found at www.nokiantyres.com/company/investors/share/
flagging-notifications/.
Shareholdings of the Board of Directors,
President and CEO, and Management
Team on December 31, 2018
Board of Directors
Petteri Walldén, chairman
Kari Jordan, deputy chairman
Heikki Allonen, member
Raimo Lind, member
Veronica Lindholm, member
Inka Mero, member
george Rietbergen, member
Pekka Vauramo, member
Total
Number of
shares
20,865
1,011
1,867
3,862
1,867
3,260
1,204
674
34,610
President and CEO
Hille Korhonen, President & CEO
Number of
shares
40,308
Stock options
2013
2013C
0
Management Team
Päivi Antola, IR & Corporate
Communications
Tytti bergman, People & Culture
Mark Earl, Americas
Esa Eronen, Supply Chain &
Sustainability
Anna Hyvönen, Nordics & Vianor
Teemu Kangas-Kärki, Finance
Jukka Kasi, Products &
Technologies
Andrei Pantioukhov, Russia & Asia
Manu Salmi, Nokian Heavy Tyres
Timo Tervolin, Strategy & M&A
Susanna Tusa, Legal & Compliance
Antti-Jussi Tähtinen, Marketing
Frans Westerlund, IT & Processes
Number of
shares
Stock options
2013
2013C
0
50
0
16,541
19,117
0
0
63,588
24,003
8,865
5,507
14,555
2,775
0
0
0
0
0
0
0
0
15,000
0
4,000
0
0
Total
155,001
19,000
On December 31, 2018, Nokian Tyres’ board members and the
President and CEO held a total of 74,918 Nokian Tyres shares. The
shares represent 0.05% of the total number of votes. The board
members and the President and CEO did not hold Nokian Tyres’
stock options.
Managers’ transactions
Nokian Tyres announced managers’ transactions on February 20,
2018, on March 22, 2018, on March 27, 2018, on April 16, 2018, on
April 18, 2018, on May 15, 2018, on May 22, 2018, on May 31, 2018, on
August 23, 2018, and on September 3, 2018. Read more at:
www.nokiantyres.com/company/publications/releases/2018/
managementTransactions/.
DECISIONS MADE AT THE ANNUAL
GENERAL MEETING
On April 10, 2018, the Annual general Meeting of Nokian Tyres
approved the Financial Statements for 2017 and discharged the
members of the board of Directors and the President and CEO from
liability for the 2017 financial year.
Dividend
The meeting decided that a dividend of EUR 1.56 per share shall
be paid for the period ending on December 31, 2017. The dividend
payment date was April 25, 2018, and the dividend was paid
to shareholders included in the shareholder list maintained by
Euroclear Finland Ltd on the record date of April 12, 2018.
Members of the Board of Directors and Auditors
The meeting decided that the board of Directors has eight
members. The current members Heikki Allonen, Raimo Lind,
Veronica Lindholm, Inka Mero, george Rietbergen, and Petteri
Walldén will continue on the board of Directors. Mr. Kari Jordan and
Mr. Pekka Vauramo were elected as new members of the board.
Audit firm KPMg Oy Ab continue as auditors.
Remuneration of the Members of the Board of Directors
The meeting decided that the monthly fee paid to the Chairman of
the board shall be EUR 7,500 (or EUR 90,000 per year), the monthly
fee paid to the Deputy Chairman of the board and to the Chairman
of the Audit Committee shall be EUR 5,625 (or EUR 67,500 per year),
and the monthly fee paid to Members of the board shall be EUR
3,750 (or EUR 45,000 per year).
50% of the annual fee is to be paid in cash and 50% in company
shares, to the effect that during the period from April 11 to April
30, 2018, EUR 45,000 worth of shares in Nokian Tyres plc were
purchased at the stock exchange on behalf of the Chairman
of the board, EUR 33,750 worth of shares in Nokian Tyres plc
were purchased at the stock exchange on behalf of the Deputy
Chairman of the board and Chairman of the Audit committee, and
EUR 22,500 worth of shares were purchased on behalf of each
board Member.
The company is liable to pay any asset transfer tax which may
arise from the acquisition of shares. Furthermore, each member
of the board will receive EUR 600 for meetings held in their home
country and EUR 1,200 for meetings held outside their home
country. If a member participates in a meeting via telephone
or video connection, the remuneration will be EUR 600. Travel
expenses will be compensated in accordance with the company’s
travel policy.
Authorizations
In 2018, the Annual general Meeting authorized the board of
Directors to make a decision to offer no more than 25,000,000
shares through a share issue, or by granting special rights under
chapter 10, section 1 of the Finnish Limited Liability Companies Act
that entitle to shares (including convertible bonds), on one or more
occasions. The authorization will be effective until the next Annual
general Meeting of Shareholders, however at most until June 30,
2019. This authorization will invalidate all other board authorizations
regarding share issues and special rights.
In 2018, the Annual general Meeting authorized the board of
Directors to resolve to repurchase a maximum of 5,000,000 shares
in the Company by using funds in the unrestricted shareholders’
equity. The proposed number of shares corresponds to 3.6% of all
shares in the Company. The authorization will be effective until the
next Annual general Meeting of Shareholders, however at most until
June 30, 2019.
15
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – REPORT BY THE BOARD OF DIRECTORS BOARD OF DIRECTORS’ WORKING ARRANGEMENTS
In the board meeting on April 10, 2018, Petteri Walldén was elected
Chairman of the board and Kari Jordan was elected Deputy
Chairman of the board. The board elected Kari Jordan (Chairman),
Veronica Lindholm, and Petteri Walldén as members of the
Personnel and Remuneration Committee. The board elected Raimo
Lind (Chairman), Heikki Allonen, Inka Mero, and Pekka Vauramo as
members of the Audit Committee.
CORPORATE SUSTAINABILITY
In February 2018, Nokian Tyres received a bronze Class distinction
in the Auto Components category of the RobecoSAM Sustainability
Yearbook 2018. Nokian Tyres also received the Industry Mover
award.
In May 2018, Nokian Tyres joined the Science based Targets
initiative with the aim of setting more precise climate targets that
are assessed and approved by an external organization. The new
climate goals will be linked to the company’s value chain as well as
the environmental impacts of its products.
In September 2018, Nokian Tyres was again included in Dow
Jones’ DJSI World sustainability index. The company was also
selected for the more strictly defined DJSI Europe index. In 20 out
of the 21 criteria of the 2018 assessment, the company scored
higher than the average of the global Auto Components sector.
Nokian Tyres will publish a Corporate Sustainability Report in
March 2019.
PERFORMANCE SHARE PLAN: PERFORMANCE
PERIOD 2018 AND REALIZATION OF
PERFORMANCE PERIOD 2017
On February 2, 2018, Nokian Tyres announced that the potential
reward from the performance period 2018 will be based on the
Nokian Tyres group´s net sales and operating profit. The rewards to
be paid on the basis of the performance period 2018 correspond to
an approximate maximum total of 560,000 shares in Nokian Tyres
plc, including also the proportion to be paid in cash. During the
performance period 2018, the Plan is directed at approximately 230
key employees, including the members of the group’s Management
Team. The potential reward from the performance period 2018
will be paid partly as shares in the Company and partly in cash in
2019. The shares paid as reward may not be transferred during
an approximately one-year restriction period established for the
shares. For shares paid on the basis of the performance period
2018, the restriction period will end on March 31, 2020.
The rewards paid in 2018, based on the achievement of the
performance criteria of the performance period 2017, corresponded
to a total of 519,000 shares in Nokian Tyres plc, including also
the proportion to be paid in cash. The rewards were paid in March
2018. For the key employees who have joined the Plan during
the performance period 2017, including the President and CEO
of Nokian Tyres plc and a member of the group´s Management
Team, the rewards were paid in September 2018. The Plan was
directed to 201 key employees, including the members of the
group’s Management Team. The shares paid as reward may not be
transferred during an approximately one-year restriction period
established for the shares. For shares paid on the basis of the
performance period 2017, the restriction period will end on March
31, 2019. The members of the group’s Management Team must hold
25% of the received gross shares until the member’s shareholding
in the Company equals the member’s fixed gross annual salary.
FINANCIAL TARGETS FOR 2019–2021
On November 12, 2018, Nokian Tyres announced financial targets for
2019–2021. In line with the strategy update earlier in 2018, Nokian
Tyres has entered the next phase of growth and is looking for faster
growth especially in North America and Central Europe.
Nokian Tyres’ new financial targets are:
• growing faster than the market: CAgR above 5% with
comparable currencies
• Healthy profitability: EbIT at the level of 22%
• good returns for our shareholders: Dividend above 50% of net
earnings
The financial targets will guide the company in reaching its six
strategic ambitions, which were set in early 2018:
1. We are the market leader in selected segments in the Nordic
countries and Russia
2. We increase our sales by 50% in Central Europe in five years
3. We double our sales in North America in five years
4. Our tires are available in all major winter tire markets
5. We increase the EbITDA of Vianor (own) to +3% by the end of
2019
6. We increase the sales of Heavy Tyres by 50% in four years
SIGNIFICANT RISKS AND UNCERTAINTIES,
AND ONGOING DISPUTES
Nokian Tyres’ business and financial performance may be
affected by several uncertainties. The group has adopted a risk
management policy, approved by the board of Directors, which
supports the achievement of strategic goals and ensures continuity
of business. The group’s risk management policy focuses on
managing both the risks pertaining to business opportunities and
the risks affecting the achievement of the group’s goals in the
changing operating environment. The risk management process
aims to identify and evaluate the risks, and to plan and implement
the practical measures for each risk. Nokian Tyres has detailed the
overall business risks and risk management in the 2018 Corporate
governance Statement.
For example, the following risks could potentially have an
impact on Nokian Tyres’ development:
• Nokian Tyres is subject to risks related to consumer confidence
and macroeconomic and geopolitical conditions. Political
uncertainties may cause serious disruption and additional trade
barriers and affect the company’s sales and credit risk. Economic
downturns may increase trade customers’ payment problems
and Nokian Tyres may need to recognize impairment of trade
receivables.
• The tire wholesale and retail landscape is evolving to meet
changing consumer needs. New technologies are fueling this
with increasing digitalization. A failure to adapt to the changes in
the sales channel could have an adverse effect on Nokian Tyres’
financial performance.
• Nokian Tyres’ success is dependent on its ability to innovate
and develop new products and services that appeal to its
customers and consumers. Despite extensive testing of its
products, product quality issues and failure to meet demands on
performance and safety could harm Nokian Tyres’ reputation and
have an adverse effect on its financial performance.
• Nokian Tyres’ production facilities are located in Finland and
Russia. Any unexpected production or delivery breaks at these
facilities would have a negative impact on the company’s
business. A new factory is under construction in the US in order
to diversify the manufacturing footprint. Interruptions in logistics
could have a significant impact on peak season sales.
• Significant fluctuations in raw material prices may impact
margins. Nokian Tyres sources natural rubber from producers
in countries such as Indonesia and Malaysia. Although Nokian
Tyres has policies such as the Supplier Code of Conduct, and
established processes to monitor the working conditions, it
cannot fully control the actions of its suppliers. The violation of
laws, regulations or standards by raw material producers, or their
divergence from practices generally accepted as ethical in the
European Union or the international community, could have a
material adverse effect on Nokian Tyres’ reputation.
• Foreign exchange risk consists of transaction risk and translation
risk. The most significant currency risks arise from the Russian
ruble, the Swedish and Norwegian krona, and the US and
Canadian dollar. Approximately 60% of the group’s sales are
generated outside of the euro-zone.
• In May 2017, the Finnish Financial Supervisory Authority
filed a request for investigation with the National bureau of
Investigation regarding possible securities market offences.
The National bureau of Investigation has initiated a preliminary
investigation into the matter.
The risk analysis conducted in 2018 also focused special
attention on corporate social responsibility risks, the most
significant of which are related to the company’s reputation and
product quality. Analyses and projects related to information
security, data protection, and customer information were a special
focus area.
16
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – REPORT BY THE BOARD OF DIRECTORS Tax disputes
Dispute concerning 2007–2011
Administrative Court ruling in the tax dispute case
concerning the years 2007–2010 positive for the company
In May 2018, the company received the ruling of the Administrative
Court in the tax dispute concerning the years 2007–2010. The
Administrative Court overturned the tax reassessment decisions of
EUR 89.2 million of the board of Adjustment completely and ordered
the Tax Administration to pay Nokian Tyres’ legal costs to the amount
of EUR 40,000. The company has recorded the tax reassessment
decisions in full to the financial statement and result in earlier years.
The company received back the previously paid EUR 89.2 million in
additional taxes and interest in June 2018. The Tax Recipient Services
Unit applied for permission to appeal in July 2018. Adjustments to the
financial reporting will be done when the ruling is final.
background of the Administrative court ruling:
The Large Taxpayers’ Office carried out a transfer pricing tax audit
regarding the tax years 2007–2011 during 2012–2013, investigating
if the intercompany transactions between Nokian Tyres plc and its
subsidiaries were at arm’s length. The Company paid a total of EUR
89.2 million in additional taxes and tax increases concerning the tax
years 2007–2010 based on tax reassessment decisions from the
Tax Administration and filed an appeal concerning them with the
Administrative Court in January 2017.
Tax Administration’s decision in the appeal concerning
the tax year 2011 positive for the company
In June 2018, the company received the reassessment decision
from the Tax Administration concerning the tax year 2011. The Tax
Administration approved the appeal Nokian Tyres made in November
2017, and the Tax Administration returned the previously paid EUR 59
million in additional taxes and interest to the company in June 2018.
The company has recorded the tax reassessment decision in full to
the financial statement and result in earlier years. The Tax Recipient
Services Unit applied for permission to appeal in July 2018. Adjustments
to the financial reporting will be done when the decision is final.
background of the Tax Administration’s decision:
In October 2017, Nokian Tyres received a reassessment decision from
the Tax Administration concerning the tax year 2011, according to
which the company was obliged to pay a total of EUR 59 million, of
which EUR 39 million were additional taxes and EUR 20 million were
tax increases and interest. The company recorded the amount in
full to the financial statement and result of Q3/2017 and paid it in
Q4/2017. The company considered the reassessment decision of
the Tax Administration unfounded and appealed to the board of
Adjustment in November 2017.
Dispute concerning the US subsidiary 2007–2013
Nokian Tyres U.S. Finance Oy, a subsidiary of Nokian Tyres plc
(ownership: 100% of the shares), received reassessment decisions
from the Finnish Tax Administration in 2013 and 2014. According
to the reassessment decisions, and with interest until the actual
payment in August 2017, the company was obliged to pay a total of
EUR 18.5 million in additional taxes, with tax increases and interest
concerning the tax years 2007–2013. Of this amount, EUR 11.0
million were additional taxes and EUR 7.5 million were tax increases
and interest. The company recorded them in full in the financial
statements and results for 2013, 2014, and 2017.
The Large Taxpayers’ Office carried out a tax audit concerning
the Finnish business Tax Act, where the Tax Administration raised
an issue regarding the restructuring of the sales company and
acquisitions by the Nokian Tyres group in North America, completely
ignoring the business rationale and corresponding precedent rulings
presented by the company.
Nokian Tyres U.S. Finance Oy considered the reassessment
decision of the Tax Administration unfounded and filed a claim for
rectification with the board of Adjustment.
In June 2017, the board of Adjustment rejected the company’s
claim for rectification. The company considers the decision
unfounded and appealed against it by filing a claim with the
Administrative Court in July 2017. The company has paid the amount
of EUR 18.5 million in full in August 2017.
NON-FINANCIAL REPORTING STATEMENT
Nokian Tyres is the Nordic pioneer in demanding conditions and the
inventor of the winter tire. The company develops and manufactures
premium tires for consumers and customers who value safety,
sustainability and innovative products. In addition to the Passenger
Car Tyres unit, the group includes Nokian Heavy Tyres, which
develops and manufactures tires for trucks and heavy machinery,
and Vianor, chain of tire and car service centers. In 2018, the
company’s net sales were EUR 1.6 billion and it employed on average
4,800 people. Nokian Tyres’ share is listed on Nasdaq Helsinki.
The company has factories in Finland and Russia and is currently
constructing a new factory in the United States. In 2018, Nokian
Tyres’ products were sold in 62 countries. The home markets are the
Nordic countries and Russia, where the company is the market leader
in premium tires. Central Europe and North America are important
growth markets for the company.
The risk management policy adopted by Nokian Tyres’ board
of Directors supports achieving the company’s strategic goals
and ensuring business continuity. You can read more about the
company’s risk management in the Report by the board of Directors,
section Significant Risks and Uncertainties and in the Corporate
governance Statement.
Corporate Sustainability at Nokian Tyres
Nokian Tyres has joined the United Nations global Compact (UNgC)
initiative as a supporting member. The initiative’s ten principles cover
the areas of Human Rights, Labor, Environment, and Anti-Corruption
measures. The purpose of the voluntary initiative is to guide
companies in integrating the principles as part of their business.
In May 2018, Nokian Tyres joined the Science based Targets
initiative with the aim of setting more precise climate targets that
are assessed and approved by an external organization. The new
climate goals will be linked to the company’s value chain as well as the
environmental impacts of its products.
In September 2018, Nokian Tyres was again included in Dow Jones’
DJSI World sustainability index. The company was also selected for
the more strictly defined DJSI Europe index.
Sustainability management
At Nokian Tyres, sustainability is part of daily work and company
culture. The guiding principle in Nokian Tyres sustainability
management is continuous improvement, and ambition level is
extended to go beyond the minimums required by the law and
applicable standards. In sustainability management Nokian Tyres
takes into account the entire product lifecycle and all of the business
activities.
The company’s sustainability activities are led by a member of the
group’s management team who is ultimately responsible for meeting
the goals of corporate sustainability. All supervisors’ duties include
day-to-day leadership of sustainability. Ambitions, targets and other
key topics are discussed by the Management Team and at least once
a year by the board of Directors.
Leadership and direction of corporate
sustainability within the Nokian Tyres group
17
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – REPORT BY THE BOARD OF DIRECTORS
Five areas of corporate sustainability
Nokian Tyres has divided corporate sustainability into five
categories:
1. Our Way to Sustainable business
2. World on Wheels
3. Economy
4. People
5. Planet
T
N
E
M
E
G
A
N
A
M
Y
T
I
L
I
B
A
N
A
T
S
U
S
I
OUR WAY TO SUSTAINABLE BUSINESS
Indicator: All of our major natural rubber processors (at least 80%
of our natural rubber purchasing volume) have been audited by
2020.
Nokian Tyres has nine sustainability principles that are connected
with the company’s strategy and way of working. Three of these
principles apply to Our Way to Sustainable business -section:
■ Responsible and ethical purchasing policies
As a participant in the UN global Compact initiative, Nokian Tyres
follows the UNgC’s ethical principles as well as the company’s own
principles, which address the issues of responsibility in the supply
chain. Furthermore, Nokian Tyres requires all raw material suppliers
to adhere to Nokian Tyres’ Supplier Code of Conduct, which was
revised in 2018. All raw material suppliers must, at a minimum, have
an ISO 9001-certified quality management system in place. Nokian
Tyres prefers suppliers with an ISO 14001-certified environmental
management system. One of the basic raw materials of tires
is natural rubber. Nokian Tyres only purchases natural rubber
from processors that the company has approved. Nokian Tyres
supervises their activities through audits, among other things. In
2018 the company conducted four audits and four follow-up audits.
■ Risk management and good governance
At Nokian Tyres, Corporate Risk Management (CRM) includes
sustainability aspects. Nokian Tyres’ business is guided by the
ethical principles presented in the board-approved Code of
Conduct, which was revised in 2018. The document specifies the
principles for Nokian Tyres’ business, instructions for various
ethical issues and a procedure for all group personnel including
anti-bribery guidelines. Our employees or their closely associated
persons may not offer, accept or otherwise approve of benefits,
gifts or hospitality that may have an inappropriate effect on their
decision-making at work. Suspected infringements can always
be reported internally, or by sending an email to whistleblow@
nokiantyres.com or by regular mail.
VALUES, STRATEGY AND GOALS
Sustainability is a part of our company’s culture, strategy, and goals.
We manage our sustainability in five areas.
1. OUR WAY TO SUSTAINABLE BUSINESS
The principles that guide our
operations throughout the Group
■ Risk management and good governance
■ Responsible and ethical purchasing policies
■ Human rights in the supply chain
Our group’s business is guided by our Code of Conduct,
whistleblowing policy; Environment, Safety and Quality
policy; purchasing and communication policy, SDg’s, gRI
reporting and the UN global Compact initiative.
AREAS OF OPERATIONAL SUSTAINABILITY MANAGEMENT
2. WORLD ON WHEELS
3. ECONOMY
4. PEOPLE
5. PLANET
We develop and
manufacture eco-friendly,
safe and high-quality tires
that reach their destination
safely even under
demanding conditions.
We emphasize the eco-
friendliness of our products.
Through profitable growth,
we enable the further
development of our
operations and ensure
financial security, work
and well-being for our
stakeholders.
We aim for good dividends
for our shareholders.
We develop and maintain
a company culture that
promotes fair and equal
treatment, caring and
respect.
We guarantee a safe
working environment
for our employees and
partners.
We ensure that our
actions do not harm the
environment or people;
instead, our objective is
promoting well-being in
general.
We aim to be among the
tire industry pioneers as
regards the environmental
aspects.
THE ESSENTIAL STANDARDS, GROUP POLICIES AND PROCEDURES IN TERMS OF DEVELOPING OUR OPERATIONS
Tire/vehicle safety (e.g. type
approval tests), EU Tyre
Labels, chemical regulation,
indoor & outdoor testing to
fulfil internal criteria.
Rules of the stock
exchange, IFRS codes,
good accounting practice,
Corporate Governance
system, risk management,
objective decision making,
credits, legal matters.
Safety and well-being,
hiring, induction,
people reviews, further
development of personnel
competence, travel, social
media, privacy protection.
ISO 14001, environmental
protection, control of
chemicals, the Responsible
Care program.
In addition to the categories of sustainability at Nokian Tyres, the figure visualizes the essential principles, commitments, and guidelines.
LOCAL GUIDELINES AND PROCEDURES
18
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – REPORT BY THE BOARD OF DIRECTORS
■ Human rights in supply chain
Through commitment to Code of Conduct, local legislation
and external social responsibilities, Nokian Tyres ensures equal
opportunities for all employees and promotes fair and equal
treatment at each of the company’s locations. Nokian Tyres
respects the privacy of its personnel, and handles personal
data in line with this principle. Employment in Nokian Tyres is
based on employment contracts in accordance with the local
legislation and any collective agreements. Nokian Tyres respects
its employees’ right to organize and cooperates with the appointed
representatives of trade unions.
WORLD ON WHEELS
Indicator: A decrease in CO2 emissions from traffic by 500 million
kg by reducing the rolling resistance of the product range by 7%
from 2013➞2020.
As a tire manufacturer, Nokian Tyres is responsible for the user
safety of its products. Our mission is to offer peace of mind in
demanding weather conditions. Nokian Tyres has a long experience
in developing the safest tires for winter conditions. This expertise
is utilized in developing other advanced solutions for the products,
for example the rolling resistance of tires (fuel consumption, carbon
dioxide emissions) or the ground compression caused by tires in
agriculture and forestry.
In 2015, the company set a goal for 2020 to reduce the rolling
resistance of Nokian Tyres product range by 7% compared to
the 2013 baseline, resulting in a decrease of 500 million kg in CO2
emissions from traffic during the target period. The company
reached this goal well ahead of schedule in 2017. The company
made progress in 2018 and has reduced the rolling resistance by 8%
in average since 2013.
The proportion of tires that reduce fuel consumption through
low rolling resistance was 91% in 2018 (90% in 2017), which translates
to an annual decrease of approximately 100 million kg in CO2
emissions.
Nokian Tyres actively looks for and tests renewable raw
materials. For example, in connection with the testing center
currently under construction in Spain, the company supports the
local university’s project that is among the first in Europe to study
growing guayule, intended as a replacement for natural rubber.
ECONOMY
Indicator: We aim for profitable financial results and paying good
dividends each year.
Financial success and the ability to create value for our
stakeholders lay the foundation for Nokian Tyres’ financial
responsibility. business must be profitable in order the company to
be able to offer work and well-being for its personnel and suppliers,
while being a good investment for investors and a good partner for
customers and other stakeholders.
In November 2018, Nokian Tyres’ board of Directors decided on
new financial targets for 2019–2021. Nokian Tyres’ financial targets
for 2019–2021 are:
• growing faster than the market: CAgR above 5% with
comparable currencies
• Healthy profitability: EbIT at the level of 22%
• good returns for our shareholders: Dividend above 50% of net
earnings
Nokian Tyres contributes to society and communities through
the payment of salaries and taxes. We directly employ around 4,800
people around the world. All of the subcontractors included, Nokian
Tyres’ role as a job creator becomes even more significant.
PEOPLE
Indicator: Occupational health and safety: 70% improvement in the
LTIF accident frequency from 2015➞2020.
The company’s principles in all operations are fair treatment and
respecting human rights when dealing with its personnel or other
stakeholders. This principle of equality and non-discrimination
is an essential part of the company’s operations, and the
management of diversity is based on the concept of equality and
equal prerequisites for work. Diversity is important in terms of the
company’s success, since people with different backgrounds and
competencies play a key role in the development of the company
as well as new innovative solutions.
Motivated personnel through goal-
oriented HR management
Nokian Tyres is an internationally growing business that builds
the implementation and management of its strategy on strong
corporate culture. good management and supervisor work support
the development of competence, well-being, and equal treatment
of the company’s motivated and professional staff. Leadership
aims at top results based on the Hakkapeliitta culture, which is built
around the entrepreneurship, inventiveness and team spirit of the
personnel.
Internal job rotation, on-the-job learning, and training solutions
are used to support personnel development. Personal People
Reviews have a key role in personnel development. The People
Reviews focus on managing performance and personal goals and
development. In 2018, a total of 82.2% of our personnel took part in
a People Review (83.4% in 2017). The personnel satisfaction survey
allows the company to actively receive feedback from the personnel
concerning areas for improvement. In the survey performed in 2018,
86.2% responded (91.3% in 2017).
The focus areas of Nokian Tyres supervisors’ education in
2018 were People Reviews and team development. The new
EU regulations on general Data Protection Regulation were
implemented and personnel were educated on being aware of the
impacts of the new gDPR.
Nokian Tyres has launched several projects to bring a more
global approach into the way of working. The company has a pilot
project, where the working hours of the pilot groups are more
flexible and adjusted to the global way of working in between
different time zones. New digital tools are introduced to enable
more flexible working conditions. In 2018 we introduced a group
wide HR data system which helps Nokian Tyres to synchronize the
life span of an employment relationship with remuneration, global
activities as well as Personal Reviews.
Safety culture is developed together
A safe and comfortable working environment is integral for Nokian
Tyres operations. Occupational safety is promoted through risk
management, continuous improvement of processes, and new
investments. The company’s goal is to make operations even safer
and aim for zero harm target. In 2018, the development of safety
culture continued and more than 12,000 safety actions were made.
A number of technical improvements were carried out to improve
the safety of the operators. However, the main KPI on safety did not
improve. The number of lost time injuries occurring in a workplace
per 1 million hours worked (LTIF) was 8.3 in 2018 (7.5 in 2017). Safety
update is part of every Management Team meeting.
Managing health at work was executed by co-operating
closely with occupational health care and by together completing
planned improvements. Managing health at work is a part of the
supervisor’s daily work. In 2018, the positive development continued
as long term absences due to illness declined. Well-being at work is
supported by, for example, the comprehensive selection of physical
exercise we offer for our employees, group activities and personnel
events.
Committed and competent personnel together with a safe
working environment enable business growth in line with Nokian
Tyres strategy.
PLANET
Indicator: We will utilize 100% of our production waste and take no
production waste to landfills; Finland 2016, Russia 2020.
At Nokian Tyres, environmental and chemical safety and
the coordination of sustainability belong to the Quality and
Sustainability department. Its goals are accident prevention in
all areas of operations, uninterrupted production, sustainable
operations and good corporate citizenship. When developing
activities, the company applies best practices and advanced
solutions while taking into account human factors and financial
circumstances. Nokian Tyres promotes environmental and chemical
safety through risk management, continuous improvement of
processes, and new investments.
The factories in Finland and Russia and the Swedish sales
company Nokian Däck Ab are certified pursuant to the international
ISO 14001 environmental management system standard and the ISO
9001 quality system standard. The company has held ISO/TS 16949
approval for the automotive industry since 2013.
19
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – REPORT BY THE BOARD OF DIRECTORS
Nokian Tyres emphasizes eco-friendliness of its products
and processes. A lifespan approach is the starting point for
environmental protection: the company takes responsibility for the
environmental effects of its products throughout their lifespan.
The company is a shareholder in Suomen Rengaskierrätys Oy,
which centrally manages the collection and reuse of used tires
in Finland. In Finland, nearly 100% of decommissioned tires are
recycled, and in Europe, the degree of recycling is approximately
94%. In Russia, Nokian Tyres has been actively participating in
discussions for improving tire recycling. Together with some other
major tire manufacturers, the company has established the Eco tire
association in Russia. The association manages tire recycling for
actors in the tire industry. The activities started in 2017.
In 2018, the environmental impacts of production were at the
level of 2017. In 2018, VOC emissions in relation to production were
down approximately 27% compared to previous year, but they are
still above the level required by the EC directive. In 2018, special
attention was paid to energy efficiency improvement, chemicals
safety and sustainability work across different fields of business.
While building the US factory and the testing center in Spain, the
environmental and chemical safety was taken into account already
in the planning phase.
At the production facilities, emphasis remained on reusing
waste, and the utilization degree of waste was 100% at the Finnish
factory and 88% at the Russian factory. The biomass power plant in
Nokia has reduced the use of fossil fuels and increased the use of
local energy sources.
MATTERS AFTER THE REVIEW PERIOD
Changes in ownership
Nokian Tyres has received a notification from blackRock, Inc.
on January 7, 2019, and January 11, 2019 according to which the
holdings of the mutual funds managed by blackRock, or indirect
holding in Nokian Tyres shares, exceeded the level of 5% of the
share capital in Nokian Tyres plc, as a result of share transactions
concluded on January 4, 2019, and January 10, 2019
Nokian Tyres has received notifications from blackRock, Inc.
on January 2, 2019, January 8, 2019, January 22, 2019, and January
29, 2019, according to which the holdings of the mutual funds
managed by blackRock, or indirect holding in Nokian Tyres shares,
fell below the level of 5% of the share capital in Nokian Tyres plc
as a result of share transactions concluded on December 31, 2018,
January 7, 2019, January 21, 2019, and January 28, 2019.
Nokian Tyres has received a notification from Janus Henderson
group plc on January 17, 2019, according of which the indirect
holding in Nokian Tyres shares fell below the level of 5% of the
share capital in Nokian Tyres plc as a result of share transactions
concluded on January 16, 2019.
Detailed information on notifications of change in shareholding
can be found at www.nokiantyres.com/company/investors/share/
flagging-notifications/.
ASSUMPTIONS FOR 2019
In 2019, the market demand for replacement car tires is expected
to increase slightly. The company’s replacement tire market position
(sell-in) is expected to improve in 2019.
The demand for Nokian Heavy Tyres’ core products is estimated
to remain healthy.
Vianor (partners) and Nokian Tyres’ other branded distribution,
such as Nokian Tyres Authorized Dealers (NAD) and the N-Tyre
network, will continue to expand.
Raw material costs (€/kg) are estimated to increase slightly in
2019 compared with 2018.
As a result of ongoing investment programs to support Nokian
Tyres growth, operating profit in 2019 will include significant
additional operating costs compared to the previous year, driven
especially by the US factory ramp-up, Heavy Tyres capacity
expansion in Finland as well as building the testing center in Spain.
GUIDANCE FOR 2019
In 2019, net sales with comparable currencies are expected to grow
and operating profit to be approximately at the level of 2018. In line
with Nokian Tyres updated 2018 strategy, the company is targeting
further growth in Russia, Central Europe and North America. As
a result of ongoing investment programs to support the growth,
operating profit in 2019 will include significant additional operating
costs.
THE PROPOSAL FOR THE USE OF
PROFITS BY BOARD OF DIRECTORS
The distributable funds in the Parent company total EUR 683.0
million.
The board of Directors proposes to the Annual general Meeting
that the distributable funds are to be used as follows:
A dividend of
be paid out, totaling
retained in equity
Total
1.58 EUR/share
EUR 218.6 million
EUR 464.4 million
EUR 683.0 million
No material changes have taken place in the financial position
of the company since the end of the financial year. The liquidity
of the company is good, and the proposed distribution of profits
does not compromise the financial standing of the company as
perceived by the board of Directors.
Nokia, February 5, 2019
Nokian Tyres plc
board of Directors
20
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – REPORT BY THE BOARD OF DIRECTORS Net sales, operating profit
and operating profit %
EUR million
2,000
Operating profit %
50
1,600
1,200
800
400
0
40
30
20
10
0
2014
2015
2016
2017
2018
Net sales
Operating
profit
Operating
profit %
2014
2015
2016
2017
2018
Net sales, EUR
1,389.1 1,360.1 1,391.2 1,572.5 1,595.6
Operating profit, EUR
308.7
296.0
310.5
365.4 372.4
Operating profit %
22.2
21.8
22.3
23.2
23.3
Earnings per share and
dividend per share
EUR
2.5
2.0
1.5
1.0
0.5
0.0
2014
2015
2016
2017
2018
Earnings
per share
Dividend
per share
2014 2015 2016 2017 2018
Earnings per share
1.56
1.8
1.87
1.63
Dividend per share
1.45
1.50
1.53
1.56
2.15
1.58
Average number of personnel
Profit before tax
5,000
4,000
3,000
2,000
1,000
0
2014
2015
2016
2017
2018
EUR million
400
300
200
100
0
2014 2015 2016 2017 2018
2014 2015 2016 2017 2018
Persons
4,272 4,421 4,433 4,630 4,790
EUR million 261.2 274.2 298.7 332.4 361.7
2014
2015
2016
2017
2018
R&D expenses
EUR million
Gross investments
EUR million
25
20
15
10
5
0
250
200
150
100
50
0
2014
2015
2016
2017
2018
2014
2015
2016
2017
2018
2014 2015 2016 2017 2018
2014 2015 2016 2017 2018
EUR million
16.6
18.7
20.3
21.8
20.8
EUR million
80.6 101.7 105.6 134.9 226.5
Net sales by market area, %
Net sales by business unit*, %
Nordic countries
Russia
Other Europe
North America
Other Countries
2017
2018
40
19
28
11
2
39
19
27
12
2
Passenger Car Tyres
Heavy Tyres
Vianor
* including internal sales
2017
2018
72
11
22
72
12
21
21
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – REPORT BY THE BOARD OF DIRECTORS Passenger Car Tyres
Net sales, Operating profit and Operating profit %
Heavy Tyres
Net sales, Operating profit and Operating profit %
Vianor
Net sales, Operating profit and Operating profit %
EUR million
EUR million
2,000
Operating profit %
50
1,600
1,200
800
400
0
40
30
20
10
0
2014
2015
2016
2017
2018
Net sales
Operating
profit
Operating
profit %
200
150
100
50
0
EUR million
Operating profit %
40
EUR million
400
Operating profit %
30
20
10
0
300
200
100
0
-100
2014
2015
2016
2017
2018
Net sales
Operating
profit
Operating
profit %
12
9
6
3
0
–3
2014
2015
2016
2017
2018
Net sales
Operating
profit
Operating
profit %
2014
2015
2016
2017
2018
2014
2015
2016
2017
2018
2014
2015
2016
2017
2018
Net sales, EUR
1,003.2
951.5
981.1 1,138.8 1,150.8
Net sales, EUR
149.1
155.3
155.3
172.3 187.7
Net sales, EUR
314.8
327.6
334.8
339.4 337.2
Operating profit, EUR
292.2
285.5
305.8
359.9 356.5
Operating profit %
29.1
30.0
31.2
31.6
31.0
Operating profit, EUR
Operating profit %
24.6
16.5
28.7
18.5
28.2
18.2
32.2
18.7
28.6
15.2
Operating profit, EUR
Operating profit %
2.1
0.7
–1.9
–0.6
–8.1
–2.4
–5.8
–1.7
1.6
0.5
Gearing
Equity ratio
%
30
20
10
0
–10
–20
–30
2014
2015
2016
2017
2018
%
80
60
40
20
0
2014
2015
2016
2017
2018
2014
2015
2016
2017
2018
2014
2015
2016
2017
2018
%
–13.6
–16.9
–19.7
–14.2
–21.2
EUR million
67.5
70.8
73.8
78.2
71.0
22
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – REPORT BY THE BOARD OF DIRECTORS Financial Statements
FINANCIAL STAT EMENTS 20 18
This report is a translation. The original Finnish is the authoritative version.
23
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – FINANCIAL STATEMENTS Consolidated Income Statement
CONSOLIDATED I NCO ME STATEM E NT, IF R S
EUR million 31.12.
Net sales
Cost of sales
Gross profit
Other operating income
Selling and marketing expenses
Administration expenses
Other operating expenses
Operating profit
Financial income
Financial expenses (1
Profit before tax
Tax expense (2 (3
Profit for the period
Attributable to:
Equity holders of the parent
Non-controlling interest
Earnings per share (EPS) for the profit attributable
to the equity holders of the parent:
(11)
basic, euros
Diluted, euros
Notes
(1)
(3)(6)(7)
(4)
(6)(7)
(6)(7)
(5)(6)(7)
(8)
(9)
(10)
–66.5
–111.0
2018
1,595.6
–865.5
2017
EUR million 31.12.
Notes
2018
2017
1,572.5
–838.8
CONSOLIDATED OTHER COMPREHENSIVE INCOME
730.2
733.7
2.5
–286.4
–47.9
–25.9
372.4
83.3
–94.0
361.7
5.8
–294.3
–52.7
–27.0
365.4
118.3
–151.3
332.4
Result for the period
Other comprehensive income, items that may be
reclassified subsequently to profit and loss, net of tax
gains/Losses from hedge of
net investment in foreign operations
Cash flow hedges
Translation differences on foreign operations(4
(10)
(10)
Total comprehensive income for the period
Total comprehensive income attributable to:
Equity holders of the parent
Non-controlling interest
295.2
221.4
0.0
1.3
–67.8
–66.6
228.7
228.7
-
0.0
1.3
–33.5
–32.2
189.2
189.2
-
(1 Financial expenses in 1–12/17 contain EUR 15.2 million expensed interest for tax reassessment decisions on year
2011. Additionally financial expenses 1–12/17 contain EUR 3.1 million expensed interest for tax reassessment
decisions on years 2007–2013 of a group company.
(2 Tax expense in 1–12/17 contains EUR 43.7 million expensed back taxes with increases for tax reassessment
295.2
221.4
decisions on year 2011.
(3 Otherwise tax expense in the consolidated income statement is based on the taxable result for the period.
(4 Since the beginning of year 2014 the group had internal loans that were recognised as net investments in
foreign operations in accordance with IAS 21 "The Effects of Changes in Foreign Exchange Rates". The impact in
1–9/17 was EUR 0.2 million and 1–12/17 EUR 0.2 million. These internal loans have been converted to equity in
the subsidiaries.
295.2
-
2.15
2.14
221.4
-
1.63
1.61
24
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – FINANCIAL STATEMENTS Consolidated Statement
of Financial Position
CONSOLIDATED STATEMENT O F
FINA NCIAL POSI TION , IFR S
EUR million 31.12.
ASSETS
Non-current assets
Property, plant and equipment
goodwill
Other intangible assets
Investments in associates
Non-current financial investments (1
Other receivables
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Current tax assets
Cash and cash equivalents
Total assets
(1)
2,092.9
1,877.4
Notes
2018
2017
EUR million 31.12.
Notes
2018
2017
EQUITY AND LIABILITIES
Equity attributable to equity holders of the parent
(21)(22)
647.3
83.6
33.6
0.1
0.7
7.3
9.3
554.1
83.3
35.6
0.1
0.7
8.9
9.2
Share capital
Share premium
Treasury shares
Translation reserve
Fair value and hedging reserves
Paid-up unrestricted equity reserve
Retained earnings
(12)
(2)(13)
(13)
(15)
(15)
(14)(16)
(17)
(18)
(19)(27)
(20)
781.8
691.9
369.2
481.3
13.0
447.5
340.1
489.6
12.3
343.4
1,311.0
1,185.4
Non-controlling interest
Total equity
Liabilities
Non-current liabilities
Deferred tax liabilities
Provisions
Interest-bearing financial liabilities
Other liabilities
Current liabilities
Trade and other payables
Current tax liabilities
Provisions
Interest-bearing financial liabilities
Total liabilities
25.4
181.4
–11.4
–365.4
–0.6
222.6
1,434.1
1,486.1
-
1,486.1
32.5
0.0
6.3
0.5
39.3
430.5
6.5
4.4
126.0
567.4
606.8
25.4
181.4
–20.3
–297.6
–1.8
203.9
1,377.4
1,468.4
-
1,468.4
30.4
0.1
134.4
0.4
165.3
231.5
6.9
4.4
0.8
243.6
409.0
(17)
(24)
(25)(27)
(26)
(24)
(25)(29)
(1)
Total equity and liabilities
2,092.9
1,877.4
1) With the adaption of IFRS 9 the previous term "Available-for-sale financial assets" has been changed to "Non-
current financial investments". No other changes regarding the asset class have been made.
Changes in net working capital arising from operative business are partly covered by EUR 350 million domestic
commercial paper programme.
25
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – FINANCIAL STATEMENTS Consolidated Statement
of Cash Flows
CONSOLIDATED STATEMENT O F CASH F LOWS, IF R S
EUR million 31.12.
Profit for the period
Adjustments for
Depreciation, amortisation and impairment
Financial income and expenses
gains and losses on sale of intangible assets, other
changes
Income Taxes
Cash flow before changes in working capital
Changes in working capital
Current receivables, non-interest-bearing, increase
(–) / decrease (+)
Inventories, increase (–) / decrease (+)
Current liabilities, non-interest-bearing, increase (+) /
decrease (–)
Changes in working capital
Financial items and taxes
Interest and other financial items, received
Interest and other financial items, paid
Dividens received
Income taxes paid
Financial items and taxes
2018
295.2
93.4
10.7
11.8
66.5
477.6
–11.0
–41.8
185.3
132.4
2.2
–12.4
0.0
–63.0
–73.2
2017
221.4
98.4
33.1
5.9
111.0
469.8
–69.0
–51.8
47.9
–72.9
2.6
–36.5
0.0
–128.9
–162.7
Cash flow from operating activities (A)
536.9
234.1
EUR million 31.12.
Cash flow from financing activities:
Proceeds from issue of share capital
Purchase of treasury shares
Change in current financial receivables, increase (–) /
decrease (+)
Change in non-current financial receivables, increase
(–) / decrease (+)
Change in current financial borrowings, increase (+) /
decrease (–)
Change in non-current financial borrowings, increase
(+) / decrease (–)
Dividens received
Dividends paid
Cash flow from financing activities (C)
Change in cash and cash equivalents, increase (+) /
decrease (–) (A+B+C)
Cash and cash equivalents at the beginning of the
period
Effect of exchange rate fluctuations on cash held
Cash and cash equivalents at the end of the period
2018
18.7
-
–9.0
0.5
123.5
–125.1
0.5
–214.2
–205.1
2017
35.0
–17.8
–16.2
0.7
–78.4
11.5
0.1
–208.0
–273.1
104.7
–172.0
343.4
0.7
447.5
513.2
–2.2
343.4
based on the annulled and later renewed tax reassessment decisions on years 2007–2013 of a group company
the financial items and taxes contain paid tax increases and interest of EUR 18.5 million in 1–12/17. Changes
in working capital include EUR 59.0 million based on the tax reassessment decision on year 2011 and EUR 89.2
million based on the tax reassessment decision on years 2007–2013. based on the tax reassessment decisions
on years 2007–2013 the financial items and taxes contain paid tax increases and interest of EUR 77.5 million in
1–12/17.
Cash flows from investing activities
Acquisitions of property, plant and equipment and
intangible assets
Proceeds from sale of property, plant and equipment
and intangible assets
Acquisitions of group companies
Change in non-controlling interest
Acquisitions of other investments
–226.5
–134.9
groups financial borrowings were at the beginning of the year 1.1.2018 total EUR 135.2 million and at the end
of the year EUR 132.3 million. Changes affecting cash flow were EUR 0.2 million and non-cash changes were EUR
–3.0 million.
0.3
–0.9
-
0.0
1.7
–0.3
-
0.0
Cash flows from investing activities (B)
–227.1
–133.5
26
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – FINANCIAL STATEMENTS Consolidated Statement
of Changes in Equity
CONSOLIDATED STATEMENT O F
C HANGES IN EQ UI TY, I FRS
EUR million
Equity, 1 Jan 2017
Profit for the period
Other comprehensive income, net of tax:
Cash flow hedges
Net investment hedge
Translation differences
Total comprehensive income for the period
Dividends paid
Exercised warrants
Acquisition of treasury shares
Share-based payments
Total transactions with owners for the period
Equity, 31 Dec 2017
Equity, 31 Dec 2017
Change in accounting principles (IFRS 2)
Change in accounting principles (IFRS 9)
Equity, 1 Jan 2018
Profit for the period
Other comprehensive income, net of tax:
Cash flow hedges
Net investment hedge
Translation differences
Total comprehensive income for the period
Dividends paid
Exercised warrants
Acquisition of treasury shares
Share-based payments
Total transactions with owners for the period
Equity, 31 Dec 2018
Equity attributable to equity holders of the parent
Notes
Share
capital
25.4
Share
premium
181.4
Treasury
shares
–6.7
Translation
reserve
–264.1
Fair value
and
hedging
reserves
–3.1
Paid-up
unrestricted
equity
reserve
168,9
Non-
controlling
interest
-
Retained
earnings
1,356.6
221.4
(22)
(22)
(23)
(22)
(22)
(23)
1.3
1,3
–33,5
–33,5
–17.8
4.2
–13.6
–20.3
25.4
181.4
–297.6
–1.8
35,0
35,0
203.9
25.4
181.4
–20.3
–297.6
–1.8
203.9
25.4
181.4
–20.3
–297.6
–1.8
203.9
1.3
1.3
–67.8
–67.8
25.4
181.4
8.9
8.9
–11.4
–365.4
–0.6
18.7
18.7
222.6
221,4
-208,0
7,4
–200,6
1,377.4
1,377.4
6.1
–9.6
1,373.8
295.2
295.2
–214.2
–20.7
–234.9
1,434.2
-
-
-
-
Total
equity
1,458.5
221.4
1.3
-
–33.5
189.2
–208.0
35.0
–17.8
11.5
–179.3
1,468.4
1,468.4
6.1
–9.6
1,464.8
295.2
1.3
-
–67.8
228.7
–214.2
18.7
-
–11.8
–207.3
1,486.1
27
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – FINANCIAL STATEMENTS Accounting policies for the
Consolidated Financial Statements
ACCOUNTING P OLI CIES FOR TH E
CONSOLIDATED FI NA NC IA L STATEM EN TS
Basic information
Nokian Tyres Plc is a Finnish public corporation founded in
accordance with the Finnish laws and domiciled in the city of Nokia.
The shares of Nokian Tyres Plc have been quoted on the Nasdaq
Helsinki Oy since 1995.
Nokian Tyres group develops and manufactures summer
and winter tyres for passenger cars and vans, and special tyres
for heavy machinery. The group also manufactures retreading
materials and retreads tyres. The largest and most extensive tyre
retail chain in the Nordic countries, Vianor, is also a part of the
group. The core business areas in the group are Passenger Car
Tyres, Heavy Tyres and Vianor.
Basis of preparation
The consolidated financial statements have been prepared in
accordance with the International Financial Reporting Standards
and in compliance with the IAS and IFRS standards as well as
the SIC and IFRIC interpretations in force on 31 December 2018.
International Financial Reporting Standards refer to the standards
and related interpretations to be applied within the Community as
provided in the Finnish Accounting Act and the provisions issued
on the basis of this Act, and in accordance with the procedure laid
down in Regulation (EC) No 1606/2002 of the European Parliament
and of the Council on the application of international accounting
standards. Notes to the consolidated financial statements also
comply with the Finnish accounting and corporate laws.
The information in the financial statements is presented
in millions of euro and is prepared under the historical cost
convention except as disclosed in the following accounting policies.
Revised standards and interpretations
The group has adopted new and revised standards and
interpretations enforced in the EU during the period. The changes
had no material impact on the result, the financial position or the
other information presented in the financial statements of the
group for the period.
IFRS are under constant development. Other new standards,
The following table on the next page show the measurement
interpretations or their amendments have also been published
but they are not yet in force and the group will not apply them
before they are enforced. The group will adopt each standard and
interpretation on the effective date or from the beginning of the
following financial period.
■ IFRS 2 - Share-based Payments
The group adopted IFRS 2 – Share-based Payments standard on
January 1, 2018.
The amendment concerns incentive schemes with net
settlement features to cover withholding tax obligations and where
the employer has an obligation to withhold tax from the received
benefit on the share-based payment. The previous standard
requires the entity to divide the payment in to equity-settled
component and a cash-settled component. According to the new
standard, all compensation costs will be recognized based on the
entire scheme being an equity-settled payment. The withholding
tax paid by the group is recognized directly in equity.
The group’s financial statements 2017 included a EUR 6.1 million
short-term liability relating to cash-settled component. Due to the
amendment, this portion has been adjusted in the opening balance
sheet from the liabilities to equity’s retained earnings.
■ IFRS 9 – Financial Instruments
The group adopted IFRS 9 – Financial Instruments standard on
January 1, 2018. The new standard replaced the IAS 39 – Financial
Instruments: Recognition and Measurement standard and
related interpretations. IFRS 9 includes renewed guidance on the
classification and measurement of financial instruments, the
recognition of expected credit losses, and the application of hedge
accounting.
The group recognized the difference of the expected credit
losses (IFRS 9) and incurred credit losses (IAS 39) of EUR –9.6 million
as an adjustment to trade receivables and retained earnings at the
date of initial application of IFRS 9, on January 1, 2018.
categories and carrying amounts of the financial assets and
financial liabilities in accordance with IAS 39 and IFRS 9 at the date
of initial application of the new standard, on 1 January 2018.
■ IFRS 15 – Revenue from Contracts with Customers
In IFRS 15 a five-step model is applied to determine when to
recognise revenue, and at what amount. Revenue is recognised
when (or as) a company transfers control of goods or services to
a customer either over time or at a point in time. The standard
introduces also extensive new disclosure requirements. The impacts
of IFRS 15 on Nokian Tyres’ consolidated financial statements have
been assessed as follows:
Key concepts of IFRS 15 have been analysed for different
revenue streams and based on that a preliminary survey has been
conducted on the standard and its differences to the current
reporting practices, and possible needs for adjustments. The group
business activity primarily comprises of the trade in consumer
discretionary with conventional customer contracts, payment
and other terms, involving traditional delivery chains in diverse
lengths. Rebates and other variable considerations are tracked
while defining the transaction price. Sale of services and goods
form separate performance obligations. For the time being services
generate only a minor share of the net sales.
According to the performed surveys the expected impacts in
the group are limited with the current business operations. Any
possible adjustment needs to contracts and thresholds for revenue
recognition are minimal. In the future as the share of the service
business and complexity within is expected to increase the group
will emphasize system development and contract management in
relation to revenue recognition. The renewed instruction on agent/
principal was assessed not to change present handling of the
commissions payable to distributors.
The group has implemented the standard fully retrospectively
with no special relieves applied.
28
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – FINANCIAL STATEMENTS CLASSIFICATION OF FINANCIAL ASSETS AND LIABILITIES
Million euros
Financial assets
Measurement category
Original
under IAS 39
New
under IFRS 9
1 Jan 2018
Carrying amount
Original
under IAS 39
New
under IFRS 9
Difference
Derivatives held for trading
Financial assets at fair value through profit or loss
Fair value through profit or loss
Derivatives designated as hedges
Financial assets at fair value through profit or loss*
Fair value through profit or loss*
Money market instruments
Financial assets at fair value through profit or loss
Amortized cost
Other non-current receivables
Trade and other receivables
bank deposits
Cash in hand and at bank
Loans and receivables
Loans and receivables
Loans and receivables
Loans and receivables
Amortized cost
Amortized cost
Amortized cost
Amortized cost
Unquoted shares
Total financial assets
Financial liabilities
Available-for-sale financial assets
Fair value through other comprehensive income
Derivatives held for trading
Financial liabilities at fair value through profit or loss
Fair value through profit or loss
Derivatives designated as hedges
Financial liabilities at fair value through profit or loss*
Fair value through profit or loss*
Interest-bearing financial liabilities
Financial liabilities measured at amortized cost
Trade and other payables
Financial liabilities measured at amortized cost
Amortized cost
Amortized cost
Total financial liabilities
* Fair value changes are recognised according to the hedge accounting standards for hedging relationships.
9.5
12.8
30.0
8.9
433.4
14.4
299.1
0.7
808.8
1.2
3.2
135.2
72.8
212.4
9.5
12.8
30.0
8.9
423.8
14.4
299.1
0.7
799.2
1.2
3.2
135.2
72.8
212.4
-
-
-
-
–9.6
-
-
-
–9.6
-
-
-
-
-
■ IFRS 16 – Leases
The group has assessed the impact of the standard, and estimates
that the new standard will have some impact on the future financial
statements of the group.
The group estimates that the other published improvements or
amendments will not have a material impact on the result, financial
position or other disclosures of the future financial statements of
the group.
The standard will primarily affect the accounting for the
group’s operating leases. At the reporting date, the group has
non-cancellable operating lease commitments of EUR 159.3
million. This amount includes payments for short-term and low
value leases which will be recognized on a straight-line basis as an
expense in profit and loss. However, the group has assessed what
other adjustments, if any, are necessary for example because of
the change in the definition of the lease term and the different
treatment of variable lease payments and of extension and
termination options. It is not yet possible to precisely estimate the
amount of right-of-use assets and lease liabilities that will have to
be recognized on adoption of the new standard and how this may
affect the group’s profit or loss and classification of cash flows
going forward.
Mandatory application date is for financial years commencing
on or after 1 January 2019. The group have not adopted the
standard before its effective date. The group intends to apply the
simplified transition approach and will not restate comparative
amounts for the year prior to first adoption.
Use of estimates
The preparation of financial statements in compliance with IFRS
requires the use of estimates and assumptions that affect the
amount of assets and liabilities shown in the statement of financial
position at the time of preparation, the presentation of contingent
assets and liabilities in the financial statements, and the amount
of revenues and expenses during the reporting period. Estimates
have been used e.g. to determine the amount of items reported in
the financial statements, to measure assets, to test goodwill and
other assets for impairment, and for the future use of deferred
tax assets. Since the estimates are based on the best current
assessments of the management, the final figures may deviate
from those used in the financial statements.
Key sources of estimation uncertainty still relate to the
country risk in the Russian business environment. Though the
positive development in global economy is expected to continue
in 2019, political uncertainties could cause serious disruption and
additional trade barriers, and affect the company’s sales and
credit risk. brexit, as such, has practically no effect on Nokian Tyres’
business. Other sources of uncertainty relate to the challenging
pricing environment of tyres in line with price development of raw
materials.
Principles of consolidation
The consolidated financial statements include the financial
statements of the parent company Nokian Tyres Plc as well as all
subsidiaries in which the Parent company owns, directly or indirectly,
more than 50% of the voting rights or in which the Parent company
otherwise exercises control. Control exists when the group through
participation in an investee is exposed or entitled to its variable
returns and is able to affect the returns through exercising power
over the investee.
Associated companies in which the group has 20 to 50% of
the voting rights and in which it exercises significant influence but
not control, have been consolidated using the equity method. If
the group’s share of the associated company’s losses exceeds its
holding in the associated company, the carrying amount will be
recorded in the balance sheet at nil value and losses in excess of
that value will be ignored unless the group has obligations towards
29
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – FINANCIAL STATEMENTS the associated companies. Investments in associates include the
carrying amount of the investment in an associated company
according to the equity method, and possible other non-current
investments in the associated company, which are, in substance,
part of a net investment in the associated company.
A joint arrangement refers to a contractual undertaking,
in which the group has agreed to share control over material
financial and business principles with one or more parties. A joint
arrangement is either a joint operation or a joint venture. In a
joint venture the group holds rights to the net assets of the
arrangement whereas in a joint operation the group holds rights
to the assets and carries obligations on the liabilities of the
arrangement. Nokianvirran Energia Oy is a joint operation as the
parties share control according to a specific Mankala-principle
where the company is not intended to make profit while the parties
have agreed to utilize the total output. Nokianvirran Energia Oy
is accounted for as a group company using the proportionate
consolidation method on each row according to the 32.3%
shareholding.
Acquired subsidiaries have been consolidated using the
acquisition method, according to which the acquired company’s
assets and liabilities are measured at fair value on the date of
acquisition. The cost of goodwill is the excess of the cost of the
business combination over the acquirer’s interest in the net fair
value of the identifiable assets, liabilities and contingent liabilities.
Acquisition-related costs, except for the costs to issue debt or
equity securities, are expensed. Possible contingent consideration
is measured at fair value on the date of acquisition and is classified
as a liability. Contingent consideration classified as a liability is
measured at fair value on each reporting date and the following
gain or loss is recognized in the income statement. Under IFRS
goodwill is not amortised but is tested annually for impairment.
Subsidiaries acquired during the financial year have been
consolidated from the acquisition date and those divested until the
divestment date.
All internal transactions, receivables, liabilities and unrealised
margins, as well as distribution of profits within the group, are
eliminated while preparing the consolidated financial statements.
Profit for the period is attributed to the owners of the
Parent company and to the non-controlling interests. Moreover,
non-controlling interests are disclosed as a separate item under the
consolidated equity.
Foreign currency items
Transactions in foreign currencies have been recorded at the
exchange rates effective on the transaction date. In the statement
of financial position all items in foreign currencies unsettled on
the reporting date are measured at the European Central bank’s
closing exchange rate. The quotations of the relevant central bank
are applied if the European Central bank does not quote a specific
currency. Foreign exchange gains and losses related to business
operations and financing activities have been recorded under
financial income and expenses.
Foreign Group companies
The statements of financial position of foreign subsidiaries have
been translated into euro using the European Central bank’s closing
rates, and the income statements monthly using the average rate
for the period. Translation differences arising from the subsidiaries’
income statements and statements of financial position have been
recorded under other comprehensive income and in the translation
reserve within equity as a separate item. Translation differences
arising from the elimination of foreign company acquisition cost
and from the profits and losses incurred after the acquisition have
been recorded under other comprehensive income as a separate
item and in the translation reserve within equity. If settlement
of a loan to a foreign operation is neither planned nor likely to
occur in the fore-seeable future, then the loan is considered as a
net investment in a foreign operation and the foreign exchange
gains and losses arising on the item are recognized in other
comprehensive income and accumulated in the translation reserve
in equity.
When a subsidiary is divested fully or in part, the related
accumulated translation differences are brought from equity to the
income statement and entered as a gain or loss on the sale.
Cash and cash equivalents
Cash and cash equivalents include cash in hand and other current
investments, such as commercial papers and bank deposits.
Financial assets and liabilities
Classification of financial instruments
When recognizing a financial asset in its statement of financial
position the group classifies it into one of the following
measurement categories:
• Amortized cost
• Fair value through other comprehensive income
• Fair value through profit or loss
These categories apply to subsequent measurement and profit
or loss recognition. The classification is based on the business
model for managing the asset and the contractual cash flow
characteristics of the asset.
A financial asset is classified as subsequently measured at
amortized cost when the objective is to hold financial assets to
collect contractual cash flows that are payments of principal and
interest on the principal amount outstanding. In the group in
principle this measurement category includes trade receivables,
loan receivables and cash and cash equivalents including liquid
short-term investments in money market instruments.
A debt instrument in the financial assets is classified as
subsequently measured at fair value through other comprehensive
income when the objective is to both hold the financial assets to
collect contractual cash flows that are payments of principal and
interest on the principal amount outstanding and sell the financial
assets.
If there are other business objectives for the holding of a
financial asset than the foresaid, it is classified as subsequently
measured at fair value through profit or loss. The group’s derivative
assets are included in this category. However, when recognizing an
investment in an equity instrument in its statement of financial
position the group may make an irrevocable election to present
subsequent changes in fair value in other comprehensive income.
The election is made on an instrument-by-instrument basis. The
group typically designates investments in quoted and unquoted
shares that are not held for trading as at fair value through other
comprehensive income.
The measurement category of a financial liability is either at
amortized cost or at fair value through profit or loss. A financial
liability is classified as at fair value through profit or loss if it is
held-for-trading, is a derivative or is specifically designated as such.
Other financial liabilities are subsequently measured at amortized
cost. The financial liabilities of the group are classified as measured
at amortized cost except for derivative liabilities.
Measurement of financial instruments
At initial recognition all financial assets and liabilities are measured
at its fair value taking into account any transaction costs and in
the statement of financial position they are included in current
or non-current assets or liabilities depending on the maturity of
the item. Financial assets and financial liabilities are subsequently
measured at amortized cost, at fair value through other
comprehensive income, or at fair value through profit or loss in
accordance with the measurement category of the item.
Impairment of financial assets
At each reporting date the group recognizes a loss allowance for
expected credit losses on a financial asset that is not measured
at fair value through profit or loss. Expected credit losses are a
probability-weighted estimate of credit losses over the expected
life of the financial instrument. When measuring expected credit
losses the group reviews actual credit losses, current conditions
and forecasts of future economic conditions.
For trade receivables the group follows the simplified
approach whereby the impairment recognized in trade receivables
corresponds to lifetime expected credit losses for trade receivables.
Derivative financial instruments
and hedge accounting
The group may hold derivative financial instruments to hedge its
interest rate, foreign currency and commodity price risk exposures.
Derivatives are recognized initially at fair value and subsequently
measured at fair value. Publicly quoted market prices and rates, as
well as generally used measurement models, are used to define
the fair value of derivatives. The data and assumptions used in the
measurement models are based on verifiable market prices and
values.
30
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – FINANCIAL STATEMENTS Fair value changes of derivatives are recognized in profit or
loss unless the derivative is part of a hedging relationship when fair
value changes are recognized according to the hedge accounting
standards for hedging relationships.
In general, hedge accounting is not applied to the derivatives
used to hedge cash flows from the group’s business operations in
foreign currencies.
Hedge accounting can be used to reduce the volatility in the
income statement caused by the items measured at fair value
through profit or loss. Hedge accounting eliminates the accounting
asymmetry between the hedging instrument and the hedged
item as it enables the foresaid to affect the income statement
simultaneously. The group may designate derivative financial
instruments as hedging instruments to hedge the variability in cash
flows that is attributable to changes in foreign exchange rates,
interest rates and electricity prices. In addition, the group may, if
necessary, designate derivative financial instruments and other
financial instruments as hedging instruments in hedges of foreign
exchange risk on a net investment in a foreign operation.
At the inception of hedge accounting for a hedging relationship
the group designates and documents the hedging relationship
and the risk management objective and strategy for undertaking
the hedge. The documentation includes an assessment whether
the hedge effectiveness requirements are met in the hedging
relationship. The group aims to use hedging instruments that
create no ineffective portion.
Cash flow hedges
In cash flow hedges the effective portion of changes in the
fair value of the hedging instrument is recognized in other
comprehensive income and accumulated in the cash flow hedge
reserve in equity. Any ineffective portion of changes in fair value is
recognized immediately in profit or loss. The amount accumulated
in the cash flow hedge reserve is reclassified to profit or loss as the
hedged item affects profit or loss.
The group applies hedge accounting to interest rate swaps by
which floating rate borrowings have been converted into fixed rate
borrowings and interest rate and currency swaps where foreign
currency floating rate loan receivables have been converted into
functional currency floating rate loan receivables. The gains or
losses related to both the effective and ineffective portion of the
hedge are presented in profit or loss within financial items.
The price risk of the group’s forecast electricity purchases
in Finland is hedged with electricity derivatives to which hedge
accounting is applied. The group may hedge separately the two
components of electricity price risk, the system price and the area
price difference, or a combination of these components. The gain
or loss related to the effective portion of the hedge is presented
in profit or loss within cost of sales. The ineffective portion is
recognized in profit or loss within other operating income or
expenses.
Hedge of a net investment in a foreign operation
Hedges of net investments in foreign operations are accounted
for similarly to cash flow hedges. The effective portion of changes
in the fair value of the hedging instrument is recognized in other
comprehensive income and accumulated in the translation
reserve in equity. Any ineffective portion of changes in fair value is
recognized immediately in profit or loss. The amount accumulated
in the translation reserve is reclassified to profit or loss on the
disposal or partial disposal of the foreign operation.
The group does not currently have hedges of a net investment
in a foreign operation.
Income recognition
Revenue is recognised when (or as) a company transfers control of
goods or services to a customer either over time or at a point in
time. Rebates and other variable considerations are tracked while
defining the transaction price. Sale of services and goods form
separate performance obligations.
Research and development costs
Research costs are recorded as other operating expenses for the
financial period in which they incurred. Development costs are
capitalised once certain criteria associated with commercial and
technical feasibility have been met. Capitalised development costs
primarily comprising materials, supplies and direct labour costs, as
well as related overheads, are amortised systematically over their
expected useful life. The amortisation period is 3–5 years.
Government grants
grants received from governments or other parties are recognised
adjustments to related expenses in the income statement for the
period. grants received for the acquisition of property, plant and
equipment reduce the acquisition cost.
Operating profit
The group has defined operating profit as follows: operating profit
is the net sum of net sales plus other operating income less cost
of sales, selling and marketing expenses, administration expenses
and other operating expenses. Operating profit does not include
exchange rate gains or losses.
Borrowing costs
The borrowing costs of items included in property, plant and
equipment or other intangible assets, and requiring a substantial
construction period, are capitalised for the period needed to
produce the investment for the intended purpose. Other borrowing
costs are recognised as expenses for the period in which they
incurred.
Income taxes
The tax expense of the group include taxes based on the profit or
loss for the period or dividend distribution of the group companies,
as well as change in deferred tax, and adjustment of taxes from
prior periods. The penalty interests on those are recorded as
financial expenses. The tax impact of items recorded directly
in equity or other comprehensive income is correspondingly
recognised directly in equity or in other comprehensive income.
The share of associated companies’ profit or loss is shown in the
income statement calculated from the net result, and thereby
includes the impact of taxes. Deferred taxes are measured
with tax rates enacted by the reporting date, to reflect the net
tax effects of all temporary differences between the financial
reporting and tax bases of assets and liabilities. The most
significant temporary differences arise from the amortisation and
depreciation differences of intangible assets and property, plant
and equipment, measuring the net assets of business combinations
at fair value, measuring available-for-sale financial assets and
hedging instruments at fair value, internal profits in inventory
and other provisions, appropriations and unused tax losses.
Deferred tax liabilities will also be recognised from the subsidiaries’
non-distributed retained earnings if profit distribution is likely and
will result in tax consequences. Deferred tax assets relating to
the temporary differences is recognised to the extent that it is
probable that future taxable profits will be available against which
the asset can be utilised before expiration. Deferred taxes are not
recorded on goodwill that is not deductible for tax purposes.
Earnings per share
basic earnings per share are calculated by dividing the profit or loss
attributable to the equity holders of the parent for the period by
the weighted average number of shares outstanding during the
period. The average number of treasury shares has been deducted
from the number of shares outstanding.
For the calculation of the diluted earnings per share the diluting
impact of all potentially diluting share conversions have been taken
into account. The group has share options and previously also
convertible bonds as diluting instruments. The dilution of share
options has been computed using the treasury stock method. In
dilution, the denominator includes the shares obtained through the
assumed conversion of the options, and the repurchase of treasury
shares at the average market price during the period with the funds
generated by the conversion. The assumed conversion of options
is not taken into account for the calculation of earnings per share
if the effective share subscription price defined for the options
exceeds the average market price for the period. The convertible
bonds are assumed to have been traded for company shares after
the issue.
31
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – FINANCIAL STATEMENTS Property, plant and equipment
The values of property, plant and equipment acquired by the
group companies are based on their costs. The assets of acquired
subsidiaries are measured at fair value on the date of acquisition.
Depreciation is calculated on a straight-line basis from the original
acquisition cost, based on the expected useful life. Depreciation
includes any impairment losses.
In the statement of financial position, property, plant and
equipment are stated at cost less accumulated depreciation
and impairment losses. The borrowing costs of items included
in property, plant and equipment, and requiring a substantial
construction period, are capitalised for the period needed to
produce the investment for the intended purpose. Other borrowing
costs are recognised as expenses in the period they incurred.
Depreciation is based on the following expected useful lives:
buildings
Machinery and equipment
Other tangible assets
Land is not depreciated.
20–40 years
4–20 years
10–40 years
The expected useful lives are reviewed at each reporting
date, and if they differ materially from previous estimates, the
depreciation schedules are changed accordingly.
Regular maintenance and repair costs are recognised
as expenses for period. Expenses incurred from significant
modernisation or improvement projects are recorded in the
statement of financial position if the company gains future
economic benefits in excess of the originally assessed standard of
performance of the existing asset. Modernisation and improvement
projects are depreciated on a straight-line basis over their useful
lives. gains and losses from the divestment and disposal of
property, plant and equipment are determined as the difference
of the net disposal proceeds and the carrying amounts. Sales gains
and losses are included in operating profit in the income statement.
Goodwill and other intangible assets
goodwill arising from business combinations is recognised as the
amount by which the aggregate of the transferred consideration,
any non-controlling interest in the acquiree and any previously
held interest exceeds the fair value of the net assets acquired.
goodwill is not amortised but is tested for impairment annually and
whenever an indication of possible impairment exists.
Other intangible assets include customer relationships,
capitalised development costs, patents, copyrights, licences and
software. Intangible rights acquired in business combinations are
measured at fair value and amortised on a straight-line basis over
their useful lives. Other intangible assets are measured at cost
and amortised on a straight-line basis over their useful lives. An
intangible asset is only recorded in the statement of financial
position if it is probable that the expected future economic
benefits that are attributable to the asset will flow to the company
and cost can be measured reliably. Subsequent expenses related
to the assets are only recorded in the statement of financial
position if the company gains future economic benefits in excess
of the originally assessed standard of performance of the existing
asset; otherwise, costs are recognised as expenses at the time of
occurrence.
In the statement of financial position, intangible assets are
recorded at cost less accumulated amortisation and impairment
losses. The borrowing costs of items included in other intangible
assets, and requiring a substantial construction period, are
capitalised for the period needed to produce the investment for
the intended purpose. Other borrowing costs are recognised as
expenses in the period they incurred. The amortisation schedule for
intangible assets is 3–10 years.
Impairment
At reporting date the group shall assess whether there is any
indication that an asset may be impaired. If any such indication
exists, the recoverable amount of the asset in question is
estimated. goodwill and intangible assets not yet available for use
are tested for impairment at least annually. To assess impairment,
the group’s assets are allocated to cash-generating units on the
smallest group that is largely independent of other units and the
cash flows of which can be separated.
The recoverable amount is the higher of fair value of the asset
less costs to sell and a value in use. As a rule, value in use is based
on the discounted future cash flows that the corresponding asset
or the cash-generating unit can derive. The impairment recognised
in the income statement is the amount by which the carrying
amount of the asset exceeds the corresponding recoverable
amount, and in the statement of financial position it is allocated
first to reduce the carrying amount of any goodwill of the unit
and then pro rata against the other assets. An impairment loss
recognised in prior periods will be reversed if the estimates used
to determine the recoverable amount change. However, a reversal
of impairment loss shall not exceed the carrying amount that
would have been determined in the statement of financial position
without the recognised impairment loss in prior periods. Impairment
loss on goodwill is not reversed under any circumstances.
Leasing agreements
Leasing agreements are classified as either finance leases or
operating leases. Leasing agreements by which the risks and
benefits associated with the ownership of an asset are substantially
transferred to the lessee company represent finance leases.
The Group as a lessee
Assets held under finance leases, less depreciation, are included
in intangible assets and property, plant and equipment and the
obligations resulting from the lease in financial liabilities. Lease
payments resulting from finance leases are apportioned between
finance charges and the reduction of the outstanding liability.
Charges paid under operating leases are recognized as expenses in
the income statement.
Finance leases have been recorded in the statement of
financial position in the amount equaling the fair value of the
leased property or, if lower, present value of minimum lease
payments, each determined at the inception of the lease. The
assets are depreciated consistent with assets that are owned and
any impairment losses are recorded. Depreciation is carried out over
the useful life or a shorter lease term.
The Group as a lessor
Assets held under finance leases have been recorded in the
statement of financial position as receivables at amount equal
to the net investment in the lease. Lease income resulting from
finance leases are recorded in the income statement with constant
periodic rate of return on the lessor’s net investment in the finance
lease. Assets held under leases other than finance leases are
included in intangible assets and property, plant and equipment
in the statement of financial position. These are depreciated over
their useful lives, consistent with assets in the company’s own use.
Lease income is recorded in the income statement on a straight-
line basis over the lease term.
Inventories
Inventories are measured at the lower of cost or the net realisable
value. Cost is primarily determined in accordance with standard
cost accounting, which corresponds to the cost calculated in
accordance with the FIFO (first-in, first-out) method. The cost of
finished goods and work in progress includes raw material purchase
costs, direct manufacturing wages, other direct manufacturing
costs, and a share of production overheads, borrowing costs
excluded. Net realisable value is the estimated sales price in
ordinary activities less the costs associated with the completion of
the product and the estimated necessary costs incurred to make
the sale of the product.
32
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – FINANCIAL STATEMENTS Other option and incentive schemes
No other option and incentive schemes were in use during 2018.
Non-current assets held for sale
and discontinued operations
A non-current asset, or a group of disposable items, is classified
as being held for sale if the amount corresponding to its carrying
amount will primarily be generated from the sale of the asset
instead of being generated from the continued use of the asset.
Non-current assets held for sale, and assets related to discontinued
operations, are measured at their carrying amounts, or the lower
fair value less costs to sell, if the amount corresponding to its
carrying amount will primarily be generated from the sale of the
asset and if the sales transaction is most likely to take place.
A discontinued operation is a part of the entity that has been
divested or classified as being held for sale and represents a
separate core business area or a geographic operating area.
The group’s financial statements for 2018 and 2017 do not
include any non-current assets held for sale or any discontinued
operations.
Trade receivables
Trade receivables in the statement of financial position are carried
at the original invoice value (and those in foreign currencies are
measured at the closing rate of the European Central bank) less a
loss allowance for expected credit losses and credits for returned
goods.
Dividend
The dividend proposed by the board of Directors at the Annual
general Meeting has not been recognised in the financial
statements. Dividends are only accounted for on the basis of the
decision of the Annual general Meeting.
Equity
The acquisition cost of treasury shares repurchased by the group is
recognised as a deduction in equity. The consideration received for
the treasury shares when sold, net of transaction costs and tax, is
included in equity.
Provisions
A provision is entered into the statement of financial position if
the group has a present legal or constructive obligation as a result
of a past event, and it is probable that an outflow of economic
benefits will be required to settle the obligation and the amount
of the obligation can be reliably estimated. Provisions may be
related to the reorganisation of activities, unprofitable agreements,
environmental obligations, trials and tax risks. Warranty provisions
include the cost of product replacement during the warranty
period. Provisions constitute best estimates at the balance sheet
date and are based on past experience of the level of warranty
expenses.
Contingent liabilities and contingent assets
A contingent liability is a possible obligation that arises from past
events and whose existence will be confirmed only by realization
of an uncertain future event not totally controllable by the group.
A contingent liability is also defined as a present obligation that
probably will not require the settlement of the obligation, or cannot
be measured reliably. A contingent liability is disclosed in the notes
to the consolidated financial statements.
Correspondingly, a contingent asset is a possible asset that
arises from past events and whose existence will be confirmed only
by realization of an uncertain future event not totally controllable
by the group. In case an inflow of economic benefits is probable,
a contingent asset is disclosed in the notes to the consolidated
financial statements.
Employee benefits
Pension liabilities
The group companies have several pension schemes in different
countries based on local conditions and practices. These pension
arrangements are classified as either defined contribution plans or
defined benefit plans. Payments for defined contribution plans are
recorded as expenses in the income statement for the period they
relate to. All of the material pension arrangements in the group are
defined contribution plans.
Share-based payments
Share options are measured at fair value on the grant date
and expensed on a straight-line basis over the vesting period.
Corresponding amounts are recorded as an increase in equity. The
expense determined on the grant date is based on the group’s
estimate of the number of options that are assumed to vest at
the end of the vesting period. The black & Scholes’ option pricing
model is used to determine the fair value of options. The impact of
non-market-based conditions (such as profitability and a certain
profit growth target) is not included in the fair value of the option;
instead, it is taken into account in the final number of options that
are assumed to vest at the end of the vesting period. The group
updates the assumption of the final number on each reporting
date. Changes in the estimates are recognised in the income
statement.
When options are exercised, the payments received on the
basis of share subscriptions (adjusted with any transaction costs)
are recorded in paid-up unrestricted equity reserve.
Performance shares are measured at fair value on the grant
date and are expensed on a straight-line basis over the vesting
period. The equity-settled amounts are recorded as an increase in
equity. The expense determined on the grant date is based on the
group’s estimate of the number of shares that are assumed to vest
at the end of the vesting period. The impact of non-market-based
conditions (such as net sales and operating profit) is not included
in the fair value of the share; instead, it is taken into account in
the final number of shares that are assumed to vest at the end of
the vesting period. The group updates the assumption of the final
number on each reporting date. The fair values of cash-settled
amounts are similarly updated on each reporting date and recorded
as in equity. Changes in the estimates of both the equity and
cash-settled amounts are recognised in the income statement.
33
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – FINANCIAL STATEMENTS Notes to the
consolidated financial
Statements
NOTE S TO THE
CONSOLIDATED
FINA NCIAL
STAT EMENTS
1. SEGMENT INFORMATION
The group’s management team is the chief operating decision
maker. The segment information is presented in respect of the
business and geographical segments. business segments are based
on the internal organization and financial reporting structure.
The business segments comprise of entities with assets and
operating activities providing products and services. The segments
are managed as separate entities.
Pricing of inter-segment transactions is based on current
market prices and the terms of evaluating profitability and
resources allocated to segments are based on profit before
interests and taxes.
Segment assets and liabilities include items directly attributable
to a segment and items that can be allocated on a reasonable basis.
The unallocated items contain tax and financial items together
with joint group resource items. Capital expenditure comprises of
additions to intangible assets and property, plant and equipment
used in more than one period.
Operating segments
2018
EUR million
Net sales from external customers
Services
Sales of goods
Inter-segment net sales
Net sales
Operating result
% of net sales
Financial income and expenses
Profit before tax
Tax expense
Profit for the period
Assets
Unallocated assets
Total assets
Liabilities
Unallocated liabilities
Total liabilities
Capital expenditure
Depreciation and amortisation
Other non-cash expenses
2017
EUR million
Net sales from external customers
Services
Sales of goods
Inter-segment net sales
Net sales
Operating result
% of net sales
Financial income and expenses
Profit before tax
Tax expense
Profit for the period
Assets
Unallocated assets
Total assets
Liabilities
Unallocated liabilities
Total liabilities
Passenger
Car Tyres
1,090.1
1,090.1
60.7
1,150.8
356.5
31.0%
Heavy
Tyres
159.1
159.1
28.7
187.7
28.6
15.2%
Vianor
336.5
86.6
250.0
0.7
337.2
1.6
0.5%
Other
operations
9.9
Eliminations
0.0
9.9
0.6
10.5
–13.3
–126.7%
0.0
–90.6
–90.6
–1.0
1,275.7
143.0
161.2
21.0
–14.3
184.6
38.0
51.4
0.7
–12.2
201.5
74.3
10.2
Passenger
Car Tyres
1,076.6
1,076.6
62.3
1,138.8
359.9
31.6%
17.9
9.7
1.5
Heavy
Tyres
146.6
146.6
25.7
172.3
32.2
18.7%
6.2
8.5
1.2
Vianor
338.6
118.5
220.1
0.7
339.4
–5.8
–1.7%
0.9
0.9
–0.5
0.0
0.0
0.0
Other
operations
10.6
Eliminations
0.0
10.6
0.6
11.2
–23.7
–210.8%
0.0
–89.3
–89.3
2.8
1,166.3
134.6
163.3
21.4
–7.4
155.8
26.8
46.6
3.9
0.2
Capital expenditure
Depreciation and amortisation
Other non-cash expenses
117.1
79.4
6.2
11.6
9.0
0.8
6.2
8.9
0.9
0.1
0.9
1.3
0.0
0.0
0.0
Group
1,595.6
86.6
1,509.0
1,595.6
372.4
23.3%
–10.7
361.7
–66.5
295.2
1,586.6
506.3
2,092.9
262.5
344.3
606.8
226.5
93.4
12.5
Group
1,572.5
118.5
1,453.9
1,572.5
365.4
23.2%
–33.0
332.4
–111.0
221.4
1,478.3
399.1
1,877.4
233.2
175.7
409.0
134.9
98.3
9.1
34
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – FINANCIAL STATEMENTS Business segments
Passenger Car Tyres business unit covers the development and
production of summer and winter tyres for cars and vans.
Heavy Tyres business unit comprises tyres for forestry machinery,
special tyres for agricultural machinery, tractors and industrial
machinery as well as retreading and truck tyre business.
Vianor tyre chain sells car and van tyres as well as truck tyres. In
addition to Nokian brand, Vianor sells other leading tyre brands and
other automotive products and services.
Other operations contain business development and group
management unallocated to the segments.
Eliminations consist of eliminations between different business
segments.
Notes concerning geographical segments
The business segments are operating in seven geographic regions:
Finland, Sweden, Norway, Russia, the rest of Europe, North America
and the rest of the world.
In presenting information on the basis of geographical
segments, segment revenue is based on the location of the
customers and segment assets are based on the location of the
assets.
Geographical information
2018
EUR million
Net sales
Services
Sales of goods
Assets
Unallocated assets
Total assets
Finland
Sweden
Norway
233.8
33.7
200.1
204.1
20.6
183.5
191.4
29.8
161.6
Russia
305.5
0.0
the rest
of Europe
North
America
the rest of
the world
Group
436.9
194.5
29.5
1,595.6
0.0
2.6
86.6
305.5
436.9
191.9
29.5
1,509.0
472.5
82.6
62.0
518.4
187.3
206.0
8.8
1,537.6
555.3
2,092.9
Capital expenditure
64.8
1.3
3.4
38.8
12.1
105.9
0.1
226.5
2017
EUR million
Net sales
Services
Sales of goods
Assets
Unallocated assets
Total assets
Finland
Sweden
Norway
221.5
30.4
191.1
214.3
58.2
156.2
189.4
26.7
162.7
Russia
305.2
0.0
305.2
the rest
of Europe
North
America
the rest of
the world
Group
440.8
0.9
439.9
172.0
2.4
169.6
29.2
1,572.5
118.5
29.2
1,453.9
444.9
91.6
53.3
558.6
164.4
96.8
7.2
1,416.9
460.5
1,877.4
Capital expenditure
57.8
1.4
3.1
65.2
1.2
6.2
0.0
134.9
35
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – FINANCIAL STATEMENTS 2. ACQUISITIONS
The expectations relating to the growth in sales through
EUR million
Acquisitions and other changes in 2018
On December 31 2018 Vianor AS acquired Dekksenteret Forde AS.
This acquisition has minor impact on group accounts
EUR million
Purchase consideration
Consideration paid in cash
Contingent consideration liability
Total consideration
Recognised amounts of identifiable assets
acquired and liabilities assumed:
EUR million
Property, plant and equipment
Inventories
Trade and other receivables
Cash and cash equivalents
Total Assets
Deferred tax liabilities
Financial Liabilities
Trade and other payables
Total Liabilities
Total identifiable net assets
Composition of goodwill in the acquisition
Consideration transferred
Total identifiable net assets
Goodwill
Consideration paid in cash
Cash and cash equivalents in the subsidiaries
acquired
Net cash outflow
Note
(12)
(18)
(14)
2018
1.0
-
1.0
2018
0.0
0.1
0.2
0.1
0.5
-
-
0.3
0.3
0.1
1.0
0.1
0.9
1.0
0.1
0.9
increased customer base, and the future expectations on improved
market area coverage and sales increase resulted in the recognition
of goodwill.
The actual acquisition dates and the nature of the operations
taken into account the effect of the acquisitions on the
consolidated net sales and profit is not material even if they all
were combined as of the beginning of the financial year.
The acquisition related costs of EUR 0.0 million have been
recorded as cost of sales expenses. There were no other
transactions recognised separately from these acquisitions. The
consideration has been transferred in cash and no significant
contingent consideration arrangements were included. No
non-controlling interest remained in the acquiree. The identifiable
asset acquired and liabilities assumed are recorded in fair value.
Total identifiable net assets
Composition of goodwill in the acquisition
Note
2017
0.3
Consideration transferred
Total identifiable net assets
Goodwill
(14)
Consideration paid in cash
Cash and cash equivalents in the subsidiaries
acquired
Net cash outflow
0.3
0.3
0.0
0.3
-
0.3
Acquisitions and other changes in 2017
On September 29 2017 the group acquired the studding
operations from Nokian Nasta Oy through an asset deal.
This acquisition has minor impact on group accounts.
EUR million
Purchase consideration
Consideration paid in cash
Contingent consideration liability
Total consideration
Recognised amounts of identifiable assets
acquired and liabilities assumed:
The actual acquisition dates and the nature of the operations
taken into account the effect of the acquisitions on the
consolidated net sales and profit is not material even if they all
were combined as of the beginning of the financial year.
The acquisition related costs of EUR 0.0 million have been
recorded as cost of sales expenses. There were no other
transactions recognised separately from these acquisitions. The
consideration has been transferred in cash and no significant
contingent consideration arrangements were included. No
non-controlling interest remained in the acquiree. The identifiable
asset acquired and liabilities assumed are recorded in fair value.
2017
0.3
-
0.3
EUR million
Property, plant and equipment
Inventories
Trade and other receivables
Cash and cash equivalents
Total Assets
Deferred tax liabilities
Financial Liabilities
Trade and other payables
Total Liabilities
Note
(12)
2017
0.5
-
-
-
0.5
-
-
0.1
0.1
(18)
36
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – FINANCIAL STATEMENTS
3. COST OF SALES
EUR million
Raw materials
goods purchased for resale
Wages and social security contributions on
goods sold
Other costs
Depreciation of production
Sales freights
Change in inventories
Total
4. OTHER OPERATING INCOME
EUR million
gains on sale of property, plant and
equipment
Other income
Total
5. OTHER OPERATING EXPENSES
EUR million
Losses on sale of property, plant and
equipment and other disposals
Research and development costs
Quality control
Other expenses
Total
2018
347.9
226.3
46.4
140.6
70.3
58.6
–24.5
865.5
2017
355.6
217.5
43.8
137.7
69.3
53.4
–38.6
838.8
2018
2017
0.9
1.6
2.5
1.7
4.1
5.8
6. DEPRECIATION, AMORTISATION
AND IMPAIRMENT LOSSES
EUR million
Depreciation and amortisation by asset
category
Intangible rights
Other intangible assets
buildings
Machinery and equipment
Other tangible assets
Total
Impairment losses by asset category
Intangible assets
goodwill
Total
Depreciation and amortisation by
function
Production
Selling and marketing
Administration
Other depreciation and amortisation
2018
2017
Total
0.6
20.8
3.1
1.4
25.9
0.3
21.8
3.0
1.9
27.0
Impairment losses by function
Selling and marketing
Administration
Total
8. FINANCIAL INCOME
2018
2017
EUR million
Interest income
2018
2017
Financial assets measured at amortized
cost
2.0
2.6
8.1
2.0
11.1
71.3
0.9
93.4
1.9
-
1.9
70.3
11.2
9.1
2.8
93.4
-
1.9
1.9
10.4
1.9
12.3
72.3
1.3
98.3
-
1.4
1.4
69.3
14.0
11.6
3.4
98.3
1.4
-
1.4
Dividend income
Non-current financial investments
measured at fair value through other
comprehensive income
Exchange rate gains and changes in fair
value
Financial assets and liabilities at
amortized cost
Foreign currency derivatives
Other financial income
Total
9. FINANCIAL EXPENSES
EUR million
Interest expenses
Financial liabilities measured at
amortized cost
Interest rate derivatives designated as
hedges
Exchange rate losses and changes in fair
value
Financial assets and liabilities at
amortized cost
Foreign currency derivatives
Other financial expenses
Total
0.0
0.0
32.4
48.7
0.2
83.3
22.8
92.8
0.1
118.3
2018
2017
–2.9
–0.9
–5.4
–0.9
–42.0
–46.8
–1.4
–94.0
–61.5
–62.8
–20.7
–151.3
Other operating expenses include the ineffective portion of the
electricity derivatives used as cash flow hedges amounting to EUR
0.0 million (EUR 0.2 million in 2017).
7. EMPLOYEE BENEFIT EXPENSES
EUR million
Wages and salaries
Pension contributions - defined
contribution plans
Share-based payments
Other social security contributions
2018
173.0
27.1
11.4
17.4
2017
164.8
25.4
16.1
18.3
Total
228.9
224.7
Information on the employee benefits and loans of the key
management personnel is presented in note 33 Related party
transactions.
Financial expenses in 2017 contain EUR 15.2 million expensed
punitive interest for tax reassessment decisions on year 2011.
Additionally financial expenses 2017 contain EUR 3.1 million
expensed interest for tax reassessment decisions on years
2007–2013 of a group company.
37
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – FINANCIAL STATEMENTS 10. TAX EXPENSE
EUR million
Current tax expense
Adjustment for prior periods
Change in deferred tax
Total
11. EARNINGS PER SHARE
2018
–64.3
–0.4
–1.7
2017
–71.5
–42.1
2.6
–66.5
–111.0
basic earnings per share is calculated by dividing the profit or
loss for the period by the weighted average number of shares
outstanding during the period. The average weighted number
of shares used for the calculation of diluted EPS takes into
consideration the dilutive effect of the options outstanding during
the period.
The reconciliation of tax expense recognised in the income
statement and tax expense using the domestic corporate tax rate
(2018: 20.0%, 2017: 20.0%):
EUR million
Profit before tax
2018
361.7
2017
332.4
EUR million
Profit attributable to the equity holders
of the parent
Profit for the period to calculate the
diluted earnings per share
2018
2017
295.2
221.4
295.2
221.4
Tax expense using the domestic corporate
tax rate
Effect of deviant tax rates in foreign
subsidiaries
Tax exempt revenues and non-deductible
expenses
Losses on which no deferred tax benefits
recognised
Adjustment for prior periods
Other items
Tax expense
–72.3
–66.5
Shares, 1,000 pcs
Weighted average number of shares
137,260
136,253
7.1
–5.2
3.7
–0.4
0.6
2.2
–6.9
1.6
–42.1
0.6
–66.5
–111.0
Dilutive effect of the options
884
Diluted weighted average number of shares 138,144
1,024
137,277
Earnings per share, euros
basic
Diluted
2.15
2.14
1.63
1.61
Income tax relating to components of other comprehensive income:
2018
EUR million
Cash flow hedges
Translation differences on foreign
operations
2017
EUR million
Cash flow hedges
Translation differences on foreign
operations
Before
tax
amount
Tax
benefit
Net
of tax
amount
1.6
–0.3
1.3
–67.8
–66.2
–67.8
–66.6
–0.3
Before
tax
amount
1.6
Tax
benefit
–0.3
Net
of tax
amount
1.3
–33.5
–31.9
–33.5
–32.2
–0.3
38
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – FINANCIAL STATEMENTS 12. PROPERTY, PLANT AND EQUIPMENT
EUR million
Accumulated cost, 1 Jan 2017
Increase
Acquisitions through business combinations
Decrease
Transfers between items
Other changes
Exchange differences
Accumulated cost, 31 Dec 2017
Accum. Depreciation, 1 Jan 2017
Depreciation for the period
Decrease
Other changes
Exchange differences
Accum. Depreciation, 31 Dec 2017
Carrying amount, 31 Dec 2017
Accumulated cost, 1 Jan 2018
Increase
Acquisitions through business combinations
Decrease
Transfers between items
Other changes
Exchange differences
Accumulated cost, 31 Dec 2018
Accum. Depreciation, 1 Jan 2018
Depreciation for the period
Decrease
Other changes
Exchange differences
Accum. Depreciation, 31 Dec 2018
Carrying amount, 31 Dec 2018
Land
property
8.2
0.0
–0.2
–0.2
7.8
0.0
0.0
7.7
7.8
4.6
0.0
–0.3
12.1
0.0
0.0
12.1
Buildings
291.5
3.0
–1.5
1.2
0.0
–12.3
281.9
–88.6
–12.3
0.0
5.0
–95.9
185.9
281.9
2.4
–1.4
8.9
–0.2
–21.4
270.2
–95.9
–11.1
0.6
6.2
–100.2
170.0
Machinery
and equipment
933.3
Other
tangible
assets
17.9
Advances and
fixed assets under
construction
43.9
41.4
–7.4
56.2
–1.2
–30.7
991.7
–649.9
–72.3
3.1
0.9
19.3
–698.9
292.8
991.7
46.6
–11.6
41.9
0.0
–54.5
1,014.2
–698.9
–71.3
3.2
0.4
33.0
–733.6
280.5
1.3
–0.2
0.5
–0.4
–1.2
17.8
–13.9
–1.3
0.2
0.3
1.0
–13.7
4.1
17.8
0.4
–0.1
0.3
0.0
–0.7
17.7
–13.7
–0.9
0.1
0.0
0.7
–13.9
3.8
81.2
0.0
–57.9
0.0
–3.6
63.6
63.6
63.6
176.0
–0.2
–57.1
0.0
–1.4
180.9
180.9
Total
1,294.8
126.9
0.0
–9.4
0.0
–1.6
–48.0
1,362.7
–752.4
–85.9
3.3
1.2
25.3
–808.6
554.2
1,362.7
212.6
0.0
–13.2
–6.0
–0.2
–78.3
1,495.0
–808.6
–82.9
3.3
0.6
39.9
–847.7
647.3
39
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – FINANCIAL STATEMENTS 13. INTANGIBLE ASSETS
EUR million
Accumulated cost, 1 Jan 2017
Increase
Goodwill
86.5
Intangible
rights
74.1
9.4
Acquisitions through business combinations
0.8
Decrease
Transfers between items
Other changes
Exchange differences
Accumulated cost, 31 Dec 2017
Accum. Depreciation, 1 Jan 2017
Depreciation for the period
Impairment
Decrease
Other changes
Exchange differences
Accum. Depreciation, 31 Dec 2017
Carrying amount, 31 Dec 2017
–2.8
84.6
-
–1.4
0.1
–1.3
83.3
0,0
83.4
–44.3
–10.4
0.0
–54.7
28.7
Other
intangible
assets
21.4
1.2
0.0
0.7
–0.9
22.4
–14.1
–1.9
0.5
–15.5
6.9
Total
182.0
10.5
0.8
0.0
0.7
-
–3.7
190.4
–58.4
–12.3
–1.4
-
-
0.6
–71.5
118.9
EUR million
Accumulated cost, 1 Jan 2018
Increase
Goodwill
84.6
Acquisitions through business combinations
1.0
Decrease
Transfers between items
Other changes
Exchange differences
Accumulated cost, 31 Dec 2018
Accum. Depreciation, 1 Jan 2018
Depreciation for the period
Impairment
Decrease
Other changes
Exchange differences
Accum. Depreciation, 31 Dec 2018
Carrying amount, 31 Dec 2018
–0.7
84.9
–1.3
0.0
–1.3
83.6
Intangible
rights
Other
intangible
assets
83.4
6.2
–0.6
0.3
0.0
–0.1
89.2
–54.7
–6.3
–1.9
0.1
–62.8
26.4
22.4
3.1
0.0
0.0
–1.6
23.8
–15.5
–2.0
0.9
–16.6
7.2
Total
190.4
9.2
1.0
–0.6
0.3
0.0
–2.4
197.9
–71.5
–8.2
–1.9
0.0
0.0
0.9
–80.7
117.2
Impairment losses
In 2018 Vianor recorded impairment losses of total EUR 1.9 million
on intangible assets. The impairments were caused by operational
cancellations of certain functionalities in the ICT-system. This is
fully recognized as losses, which are reported in administration
expenses.
In 2017 Vianor recorded impairment losses of total EUR 1.4
million on other intangible assets. The losses were caused by an
impairment of goodwill due the profit improvement program and
the network optimization and are reported in selling and marketing
expenses.
Impairment tests for goodwill
goodwill has been allocated to the group’s cash-generating units
that have been defined according to the business organization.
Allocation of goodwill
EUR million
Passenger Car Tyres
Vianor
Total goodwill
69.0
14.6
83.6
The recoverable amount of a cash-generating unit is based on
The testing indicated no need to recognise impairment losses.
calculations of the value in use. The cash flow forecasts used in
these calculations are based on five-year financial plans approved
by the management. The estimated sales and production volumes
are based on the current condition and scope of the existing assets.
The key assumptions used in the plans include product selection,
country-specific sales distribution, margin on products, and their
past actual outcomes. Assumptions are also based on commonly
used growth, demand and price forecasts provided by market
research institutes.
The discount rate used is the weighted average cost of capital
(WACC) before taxes defined for the group. The calculation
components are risk-free rate of return, market risk premium,
industry-specific beta co-efficient, borrowing cost and the capital
structure at market value at the time of testing. The discount
rate used for Passenger Car Tyres is 6.0% (6.2% in 2017) and for
Vianor is 5.3–7.9% (5.7–7.2% in 2017) varying through country
locations. Future cash flows after the forecast period approved by
the management have been capitalised as a terminal value using
a steady 2% growth rate and discounted with the discount rate
specified above.
In Vianor the calculations indicated that the recoverable amount
exceeded the carrying value by EUR 38 million (EUR 25 million in
2017). Of the key assumptions, Vianor is the most sensitive to actual
realisation of gross margin levels based on demand forecasts. A lag
of mere 1.3%-units from the gross margin target levels in future
years might lead to a need for impairment. The recoverable amount
in Passenger Car Tyres significantly (well over 100%) exceeds the
carrrying amount of the cash-generating unit, and small sales
margin or sales volume changes have no effect on the impairment
testing results. A possible impairment would require e.g. an annual
decrease above 20% in net sales or a weakening of the present
gross margin level permanently over 50%.
40
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – FINANCIAL STATEMENTS 14. CARRYING AMOUNTS AND FAIR VALUES OF FINANCIAL ASSETS AND LIABILITIES
EUR million
Financial assets
Fair value through profit or loss
Derivatives held for trading
Derivatives designated as hedges
Amortized cost
Other non-current receivables
Trade and other receivables
Money market instruments
bank deposits
Cash in hand and at bank
Fair value through other comprehensive income
Unquoted shares
Total financial assets
Financial liabilities
Fair value through profit or loss
Derivatives held for trading
Derivatives designated as hedges
Amortized cost
Interest-bearing financial liabilities
Trade and other payables
Total financial liabilities
Note
Carrying
amount
2018
Fair value
Level 1 Level 2 Level 3
Carrying
amount
2017
Fair value
Level 1 Level 2 Level 3
(28)
(28)
(16)
(19)
(20)
(20)
(20)
(15)
(28)
(28)
(25)
(26)
5.5
23.4
7.3
409.9
83.0
-
364.4
0.7
894.3
9.9
3.9
132.3
111.0
257.1
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5.5
23.4
6.1
410.5
83.0
-
364.4
-
892.9
9.9
3.9
133.1
111.0
257.8
-
-
-
-
-
-
-
0.7
0.7
-
-
-
-
-
9.5
12.8
8.9
433.4
30.0
14.4
299.1
0.7
808.8
1.2
3.2
135.2
72.8
212.4
-
-
-
-
-
-
-
-
-
-
-
-
-
-
9.5
12.8
8.3
434.0
30.0
14.4
299.1
-
808.0
1.2
3.2
136.0
72.8
213.2
-
-
-
-
-
-
-
0.7
0.7
-
-
-
-
-
Fair value measurements have been classified using a fair value
hierarchy that reflects the significance of the inputs used in making
the measurements. The fair value hierarchy has the following levels:
Level 1: Quoted prices in active markets for identical assets or
liabilities.
Level 2: Inputs other than quoted prices included within Level 1 that
are observable for the asset or liability, either directly (i.e. as prices)
or indirectly (i.e. derived from prices).
Level 3: Inputs for the asset or liability that are not based on
observable market data (unobservable inputs).
The level in the fair value hierarchy within which the fair value
measurement is categorised in its entirety shall be determined on
the basis of the lowest level input that is significant to the fair value
measurement in its entirety.
All items measured at fair value through profit or loss have
been classified to Level 2 in the fair value hierarchy and items
include group’s derivative financial instruments. To establish the
fair value of these instruments the group uses generally accepted
valuation models with inputs based on observable market data.
Level 3 includes unquoted shares measured at fair value
through other comprehensive income since cost is assessed to
represent the fair value.
Financial assets and liabilities not measured at fair value but
for which the fair value can be measured are categorised in Level
2 in the fair value hierarchy. Level 2 includes financial assets and
financial liabilities measured at amortized cost. Their fair values are
based on the future cash flows that are discounted with market
interest rates on the reporting date.
There were no transfers between different levels during the
financial year.
The carrying amount of financial assets corresponds to the maximum exposure to the credit risk on the reporting date.
See note 27 for the impairments in respect of trade receivables. Other financial assets measured at amortized cost and fair value through other
comprehensive income are not subject to material impairment.
41
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – FINANCIAL STATEMENTS 15. INVESTMENTS IN ASSOCIATES AND
NON-CURRENT FINANCIAL INVESTMENTS
EUR million
Accumulated cost, 1 Jan 2018
Decrease/Increase
Accumulated cost, 31 Dec 2018
Carrying amount, 31 Dec 2018
Carrying amount, 31 Dec 2017
Investments
in associates
Unquoted
shares
0.1
-
0.1
0.1
0.1
0.7
-
0.7
0.7
0.7
16. OTHER NON-CURRENT RECEIVABLES
EUR million
Loan receivables
Total
2018
7.3
7.3
2017
8.9
8.9
42
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – FINANCIAL STATEMENTS 17. DEFERRED TAX ASSETS AND LIABILITIES
EUR million
Deferred tax assets
31 Dec
2016
Recognised
in income
statement
Recognised
in other
comprehensive
income
Net
exchange
differences
Acquisitions/
disposals of
subsidiaries
31 Dec
2017
Intercompany profit in inventory
13.4
Provisions
Tax losses carried forward
Cash flow hedges
Other items
Total
Deferred tax assets offset
against deferred tax liabilities
Deferred tax assets
Deferred tax liabilities
Property, plant and equipment
and intangible assets
Untaxed reserves
Undistributed earnings in
subsidiaries
Other items
Total
Deferred tax liabilities offset
against deferred tax assets
Deferred tax liabilities
0.8
0.0
–0.3
13.7
27.7
–15.3
12.4
18.3
0.6
29.8
17.3
65.9
–15.3
50.6
–0.1
0.2
–0.3
–2.0
–2.3
–1.2
–3.4
–1.0
–0.2
–2.5
–15.4
–19.2
–1.2
–20.3
13.2
0.9
–0.3
–0.3
12.0
25.7
–16.5
9.2
17.3
0.5
27.3
1.9
46.9
–16.5
30.4
-
-
-
-
0.0
0.0
0.2
0.2
0.0
0.2
0.1
0.1
0.1
-
-
EUR million
Deferred tax assets
Intercompany profit in inventory
Provisions
Tax losses carried forward
Cash flow hedges
Other items
Total
Deferred tax assets offset
against deferred tax liabilities
Deferred tax assets
Deferred tax liabilities
Property, plant and equipment
and intangible assets
Untaxed reserves
Undistributed earnings in
subsidiaries
Other items
Total
Deferred tax liabilities offset
against deferred tax assets
Deferred tax liabilities
31 Dec
2017
Recognised
in income
statement
Recognised
in other
comprehensive
income
Net
exchange
differences
Acquisitions/
disposals of
subsidiaries
31 Dec
2018
13.2
0.9
–0.3
–0.3
12.0
25.7
–16.5
9.2
17.3
0.5
27.3
1.9
46.9
–16.5
30.4
1.7
0.0
0.3
–0.9
1.1
–1.0
0.0
–0.7
0.9
3.0
0.0
3.2
–1.0
2.1
14.9
0.9
0.0
–0.3
11.1
26.8
–17.5
9.3
16.6
1.3
30.3
1.9
50.0
–17.5
32.5
-
-
-
-
-
-
-
-
0.0
0.0
0.0
0.0
0.0
0.0
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current
tax assets against current tax liabilities and when the deferred income taxes relate to the same fiscal
authority.
On 31 December 2018 the group had carry forward losses for EUR 0.0 million (EUR 9.1 million in
2017), on which no deferred tax asset was recognised. It is not probable that future taxable profit will be
available to offset these losses before they expire by 2026.
The group has utilised previously unrecognised tax losses from prior periods with EUR 0.0 million in
2018 (EUR 0.0 million in 2017).
No deferred tax liability was recognised on the undistributed earnings, EUR 54.8 million in 2018
(EUR 52.8 million in 2017), of foreign subsidiaries as the earnings have been invested permanently to the
countries in question.
43
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – FINANCIAL STATEMENTS 18. INVENTORIES
EUR million
Raw materials and supplies
Work in progress
Finished goods
Total
2018
126.4
6.9
236.0
369.2
2017
115.8
6.6
217.7
340.1
Annually an additional expense is recognised in the carrying
amounts of all separate inventory items to avoid them exceeding
their maximum probable net realisable values. In 2018 EUR 1.1
million expense was recognised to decrease the carrying amount of
the inventories to reflect the net realisable value (EUR 0.7 million in
2017).
19. TRADE AND OTHER RECEIVABLES
20. CASH AND CASH EQUIVALENTS
EUR million
Cash in hand and at bank
bank deposits
Money market instruments
Total
2018
364.4
-
83.0
447.5
2017
299.1
14.4
30.0
343.4
EUR million
Trade receivables
Loan receivables
Accrued revenues and deferred expenses
Derivative financial instruments
Designated as hedges
Measured at fair value through profit or
loss
Current tax assets
Other receivables
Total
2018
409.5
0.5
21.1
20.6
5.6
13.0
21.9
2017
432.9
0.5
14.9
12.9
10.2
12.3
18.1
492.1
501.9
The carrying amount of trade and other receivables corresponds to
the maximum exposure to the credit risk on the reporting date.
The carrying amount of trade and other receivables is a
reasonable approximation of their fair value.
See note 27 for the impairments in respect of trade
receivables.
Significant items under accrued revenues
and deferred expenses
EUR million
Annual discounts, purchases
Financial items
Social security contributions
Insurances
Payments in transit
Other items
Total
Significant items under other receivables
EUR million
VAT receivables
Advance payments
Total
2018
5.9
0.6
1.9
0.5
2.9
9.4
21.1
2018
19.6
2.3
21.9
2017
3.3
0.4
2.9
0.3
-
8.2
14.9
2017
13.3
4.8
18.1
44
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – FINANCIAL STATEMENTS 21. EQUITY
Reconciliation of the number of shares
EUR million
1 Jan 2017
Exercised warrants
Acquisition/conveyance of treasury shares
Other changes
31 Dec 2017
1 Jan 2018
Exercised warrants
Acquisition/conveyance of treasury shares
Other changes
31 Dec 2018
Number of
shares
(1,000 pcs)
135,679
1,355
–289
-
136,745
136,745
799
243
-
Share
capital
25.4
-
-
-
25.4
25.4
-
-
-
Share
premium
181.4
Paid-up
unrestricted
equity reserve
168.9
-
-
-
181.4
181.4
-
-
-
35.0
-
-
203.9
203.9
18.7
-
-
222.6
137,788
25.4
181.4
The nominal value of shares was abolished in 2008, hence
no maximum share capital of the group exists anymore. All
outstanding shares have been paid for in full.
Below is a description of the reserves within equity:
Share premium
before the nominal value of shares was abolished, the amount
exceeding the nominal value of shares received by the company in
connection with share issue and share subscription were recognised
in share premius.
Translation reserve
Translation reserve includes the differences arising from the
translation of the foreign subsidiaries’ financial statements. The
gains and losses from the net investments in foreign units and
hedging those net investments are also included in translation
reserve once the requirements of hedge accounting have been met.
Fair value and hedging reserves
The fair value and hedging reserves comprises of two sub reserves:
a fair value reserve for financial assets measured at fair value
through other comprehensive income and a hedging fund for
changes in the fair value of the derivative financial instruments
used for cash flow hedging.
Paid-up unrestricted equity reserve
After the nominal value of shares was abolished, the entire share
subscription made by option rigts are entered in the paid-up
unrestricted reserve.
Treasury shares
The group or the Parent company themselves do not directly hold
any treasury shares.
Nokian Tyres has an agreement from 2017 with a third-party
service provider concerning the share-based incentive program for
key personnel. The third party owns Nokian Tyres shares related to
the incentive program until the shares are given to the participants
of the program. In accordance with IFRS, these repurchased
shares, 480,000 in 2017, have been reported as treasury shares in
the Consolidated Statement of Financial Position. On December
31, 2018, the number of these shares was 278,083. This number of
shares corresponded to 0.2% of the total shares and voting rights
in the company.
Dividends
After the balance sheet date, the board of Directors proposed that
a dividend of EUR 1.58 per share be paid (EUR 1.56 in 2017).
Specification of the distributable funds
The distributable funds on 31 December 2018 total EUR 683.0
million (EUR 658.0 million on 31 December 2017) and are based on
the balance of the Parent company and the Finnish legislation.
Treasury
shares
–6.7
-
–17.8
4.2
–20.3
–20.3
-
8.9
-
–11.4
Total
369.1
35.0
–17.8
4.2
390.4
390.4
18.7
8.9
-
418.0
45
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – FINANCIAL STATEMENTS 22. SHARE-BASED PAYMENTS
SHARE OPTION PLANS
Share option plan 2013 directed at personnel
The Annual general Meeting in 2013 decided to issue a share option plan, as a part of the group’s incentive scheme, to employees of the group or
persons recruited to the group at a later stage. The board issued the shares in spring 2014 (2013b warrants) and 2015 (2013C warrants).
The share options were granted to the personnel employed by or in the service of the Nokian Tyres group and to Direnic Oy, a wholly owned
subsidiary of Nokian Tyres. Should a share option holder cease to be employed by or in the service of the Nokian Tyres group before the warrants
become exercisable, for any other reason than the death of the employee, or the statutory retirement of the employee in compliance with the
employment contract, or the retirement of the employee otherwise determined by the company, the holder shall without delay and compensation offer
to Nokian Tyres or its order the share options for which the share subscription period under the terms and conditions had not begun at the last day of
such holder’s employment or service.
The following tables present more specific information on the share option plans.
BASIC INFORMATION
Annual general Meeting date
Initial amount of options, pcs
Shares to subscribe per option, pcs
Initial exercise price, EUR
Dividend adjustment
Current exercise price, EUR
Initial allocation date
Vesting date
Expiration date
Maximum contractual life, years
Remaining contractual life, years
Participants at the end of period
Method of settlement
Vesting condition
* Weighted average
2013 warrants
2013B
2013C
11 April 2013
1,150,000
11 April 2013
1,150,000
1
29.54
yes
23.50
5 May 2014
1 May 2016
31 May 2018
4.1
0.0
0
1
24.42
yes
19.83
7 May 2015
1 May 2017
31 May 2019
4.1
0.4
859
in equity
employment requirement until the vesting date
Total
2,300,000
4.1 *
0.2 *
46
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – FINANCIAL STATEMENTS 2013 warrants
2013B
2013C
Exercise price,
weighted
average, €
Total
TRANSACTIONS DURING THE PERIOD
1 January 2018
At the beginning of the period (pcs)
outstanding
reserve
Changes during the period (pcs)
granted during the period
Forfeited during the period
Exercised during the period
Weighted average exercise price during the exercise period, €
Weighted average share price during the excercise period, € *
Expired during the period
Not issued & expired
31 December 2018
At the end of the period (pcs)
exercised
outstanding
vested & outstanding
reserve
935,575
40,321
0
350
760,159
23.50
35.97
1,312
40,321
934,263
0
0
0
911,460
136,005
0
0
28,818
19.84
33.79
0
131,353
882,642
882,645
136,005
*The weighted average price of the Nokian Tyres plc share during the period that the option in question was exercisable in 2018.
EUR million
Impact on period profits and financial position
Expense recognised for the period
Expense recognised for the period, equity-settled
23.25
22.23
1,847,035
176,326
23.50
23.37
23.37
34.88
25.39
350
788,977
1,312
40,321
23.05
20.44
20.44
20.67
1,065,616
882,642
882,642
136,005
2018
2017
-
0.4
1.8
1.8
47
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – FINANCIAL STATEMENTS PERFORMANCE SHARE PLANS
Performance share plan 2013 directed at key employees
In 2013 the board approved a new share based incentive plan for
the key employees of the group. The plan was intended to combine
the objectives of the shareholders and the key employees in order
to increase the value of the group, to commit the key employees to
the group, and to offer them a competitive incentive plan based on
earning the Nokian Tyres’s shares. The plan included three earning
periods, calendar years 2013, 2014 and 2015. The board decided
on the performance criteria and their targets for the plan at the
beginning of each earning period.
The performance shares were granted to the key employees
of the Nokian Tyres group. In general no performance shares
were released, if the key employee’s employment or service
ended before the delivery point of the shares. The performance
shares may not be transferred during an approximately two-year
restriction period established for the shares.
Performance share plan 2016 directed at key employees
In 2016 the board approved a new share based incentive plan for
the key employees of the group. The plan is intended to combine
the objectives of the shareholders and the key employees in order
to increase the value of the group, to commit the key employees to
the group, and to offer them a competitive incentive plan based on
earning the Nokian Tyres’s shares. The plan includes three earning
periods, calendar years 2016, 2017 and 2018. The board will decide
on the performance criteria and their targets for the plan at the
beginning of each earning period.
The performance shares are granted to the key employees of
the Nokian Tyres group. In general no performance shares will be
released, if the key employee’s employment or service ends before
the end of the restriction period. The performance shares may
not be transferred during an approximately one-year restriction
period established for the shares. The members of the group’s
Management Team must hold 25% of the received gross shares
until the member’s shareholding in the Company equals the
member’s fixed gross annual salary.
The following tables present more specific information on the
performance share plans.
Measurement of fair value
Inputs to the fair value determination of the performance shares
expensed during the financial year 2018 are listed in the below
table as weighted average values. The total fair value of the
performance shares is based on the company’s estimate on 31
December 2018 as to the number of shares to be eventually
vesting.
BASIC INFORMATION
Issuing date
Annual general Meeting date
Initial amount of shares, pcs
Dividend adjustment
Initial allocation date
beginning of earning period
End of earning period
End of restriction period
Vesting conditions
Maximum contractual life, years
Remaining contractual life, years
Participants at the end of period
Method of settlement
* Weighted average
TRANSACTIONS DURING THE PERIOD
1 January 2018
At the beginning of the period (pcs)
outstanding
Changes during the period (pcs)
granted during the period
Forfeited during the period
Restriction period ended during FY
Earned during the period (gross)
Delivered during the period (net)
31 December 2018
At the end of the period (pcs)
outstanding
Earning period
2018
23 February 2016
12 April 2016
Total
560,000 1,815,000
PSP 2013
Earning period
2015
5 February 2013
11 April 2013
200,000
no
7 May 2015
1 January 2015
Earning period
2016
23 February 2016
12 April 2016
515,000
no
23 February 2016
1 January 2016
PSP 2016
Earning period
2017
23 February 2016
12 April 2016
540,000
no
31 January 2017
1 January 2017
no
2 February 2018
1 January 2018
31 December 2015 31 December 2016 31 December 2017 31 December 2018
31 March 2020
31 December 2018
Net sales &
Net sales &
operating profit
operating profit
2.2
3.7
1.3
0.0
224
0
in equity & cash
in equity & cash
31 March 2019
Net sales &
operating profit
2.2
0.3
190
in equity & cash
31 March 2018
Net sales &
operating profit
2.1
0.0
0
in equity & cash
2.5*
0.4*
PSP 2013
Earning period
2015
Earning period
2016
PSP 2016
Earning period
2017
Earning period
2018
Total
164,000
397,175
519,100
0 1,080,275
0
0
164,000
0
0
0
0
397,175
0
0
0
34,500
0
415,100
220,324
522,050
26,600
0
0
0
522,500
61,100
561,175
415,100
220,324
0
0
484,600
495,450
980,050
Earning period 2018
Share price at grant, EUR
Share price at reporting date, EUR
Expected dividends, EUR
Fair market value per share at grant, EUR
Total fair value 31 December 2018, EUR million
EUR million
Impact on period profits and financial position
Expense for the period
Expense for the period, equity-settled
37.96
26.82
1.60
36.36
5.0
2017
14.3
5.6
48
2018
-
9.9
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – FINANCIAL STATEMENTS 23. PENSION LIABILITIES
25. INTEREST-BEARING FINANCIAL LIABILITIES
All material pension arrangements in the group are defined contribution plans.
24. PROVISIONS
EUR million
1 Jan 2018
Provisions made
Provisions used
31 Dec 2018
EUR million
Non-current provisions
Current provisions
Warranty
provision
Restructuring
provision
4.4
0.9
–0.9
4.4
0.1
-
–0.1
0.0
2018
-
4.4
Total
4.5
0.9
–1.0
4.4
2017
-
4.5
EUR million
Non-current
Loans from financial institutions and pension loans
Current
Commercial papers
Current portion of non-current loans from financial
institutions and pension loans
Interest-bearing financial liabilities by currency
EUR million
Currency
EUR
RUb
Total
2018
2017
6.3
6.3
-
126.0
126.0
134.4
134.4
-
0.8
0.8
2018
2017
112.3
20.1
132.3
112.1
23.1
135.2
Warranty provision
The goods are sold with a normal warranty period. Additionally, a Hakka guarantee warranty has been
established in certain markets for certain products to compensate tyre damages not covered by
the normal warranty, one year after the purchase and to a certain wear limit. Damaged goods will be
repaired at the cost of the company or replaced with a corresponding product. The provisions are
based on the sales and statistical compensation volumes of the tyres sold under these warranties. The
warranty provisions are expected to be utilised within 1 year.
Effective interest rates for interest-bearing financial liabilities
Loans from financial institutions and pension loans
Total
2018
2017
Without
hedges
With
hedges
2.0%
2.0%
2.7%
2.7%
Without
hedges
2.0%
With
hedges
2.7%
2.0%
2.7%
See note 14 for the fair values of the interest-bearing financial liabilities.
49
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – FINANCIAL STATEMENTS
26. TRADE AND OTHER PAYABLES
EUR million
Trade payables
Accrued expenses and deferred revenues
Advance payments
Derivative financial instruments
Designated as hedges
Measured at fair value through profit or loss
Current tax liabilities
Other liabilities
Total
The carrying amount of trade and other payables is a reasonable approximation of their fair value.
Significant items under accrued expenses and deferred revenues
EUR million
Wages, salaries and social security contributions
Annual discounts, sales
Financial items
Commissions
Share-based payments
goods received and not invoiced
Marketing expenses
Transportation costs
Warranties
Returned taxes from tax disputes
Value added tax liabilities
Other items
Total
2018
111.0
292.9
0.6
2.3
10.0
6.5
23.4
437.1
2018
38.2
63.9
0.0
5.4
-
1.3
4.9
3.9
4.3
148.2
7.3
15.4
292.9
2017
72.8
124.6
0.8
3.8
2.0
6.9
27.6
238.4
2017
37.3
54.2
0.0
5.6
5.7
1.9
8.4
1.3
5.3
-
2.2
2.7
124.6
Accrued expenses and deferred revenues include EUR 59.0 million based on the tax reassessment decision on year 2011 and EUR 89.2 million based on the
tax reassesment decision on years 2007–2013 that the group received back. The rulings are not final.
50
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – FINANCIAL STATEMENTS 27. FINANCIAL RISK MANAGEMENT
The objective of financial risk management is to protect the group’s
planned profit development from adverse movements in financial
markets. The principles and targets of financial risk management
are defined in the group’s financial policy, which is approved by
the board. Financing activities and financial risk management are
centralized to the parent company group Treasury, which executes
financing and hedging transactions with external counterparties
and acts as a primary counterparty to business units in financing
activities like funding, foreign exchange transactions and cash
management. The group Credit Committee makes credit decisions
that have a significant impact on the credit exposure of the group.
Foreign currency risk
The Nokian Tyres group consists of the parent company in Finland,
the sales companies in Russia, Sweden, Norway, the USA, Canada,
Czech Republic, Switzerland, Ukraine, Kazakhstan, belarus and
China, the tire chain companies in Finland, Sweden, Norway and the
USA. The tire plants are located in Nokia, Finland and Vsevolozhsk,
Russia. The group is currently building a third tire plant in Dayton,
Tennessee, USA.
Transaction risk
According to the group’s financial policy, transactions between the
parent company and the foreign subsidiaries are primarily carried
out in the local currency of the subsidiary in question, and the
transaction risk is carried by the parent company and there is no
significant currency risk in the foreign subsidiaries. Exceptions to
the main rule are subsidiaries, which have non-home currency items
due to the nature of business activities. In this case transactions
between the parent company and the subsidiary are carried out
in a currency appropriate for the group currency exposure. The
parent company manages transaction risk in these subsidiaries and
implements required hedging transactions for hedging the currency
exposure of the subsidiary according to the group hedging
principles. Hedging principles are not applied to the currency
exposures of the Ukrainian and belarusian subsidiaries as UAH and
bYN are non-convertible currencies.
The transaction exposure of the parent company and the
subsidiaries with non-home currency items comprises of the foreign
currency denominated receivables and payables in the statement
of financial position and the foreign currency denominated binding
purchase and sales contracts. According to the group’s financial
policy the significant transaction exposure in every currency
pair is hedged, although 20% over-hedging or under-hedging is
allowed if a +/– 10% change in the exchange rate does not create
over EUR 1 million impact on the income statement. However, a
simultaneous +/– 10% change in all the group exposure currencies
against EUR must not create over a EUR 5 million impact on the
income statement. Exceptions to the main rule are non-convertible
currencies, which do not have active hedging markets available. For
budget exposure the estimated currency cash flows are added to
the transaction exposure so that the overall foreign currency risk
exposure horizon covers the next 12 months. The budget exposure
may be hedged according to the market situation and the hedge
ratio can be up to 70% of the budget exposure. Currency forwards,
currency options and cross-currency swaps are used as hedging
instruments.
Transaction risk
EUR million
Functional currency
Foreign currency
Trade receivables
Loans and receivables
Total currency income
Trade payables
borrowings
Total currency expenditure
EUR
CAD
17.7
8.4
26.2
0.0
–7.6
–7.6
EUR
NOK
20.5
39.1
59.6
EUR
RUB
16.7
95.4
112.1
31 Dec 2018
EUR
SEK
23.4
54.7
78.1
EUR
USD
27.7
10.6
38.4
CZK
EUR
92.8
1.7
94.5
0.0
–42.3
–39.3
–39.3
–125.8
–168.1
0.0
–11.8
–11.8
–1.7
–19.0
–20.7
–42.0
–84.2
–126.2
Foreign exchange derivatives
–16.0
–20.1
53.3
–71.2
–18.8
30.7
binding sales contracts
binding purchase contracts
Future interest items
Net exposure
7.1
0.0
0.1
9.7
5.0
0.0
0.6
1.3
–0.3
0.1
2.6
0.0
0.4
0.8
–6.2
0.0
10.8
–5.1
–0.6
5.9
–1.7
–1.9
–6.6
4.6
–6.0
–2.0
UAH
EUR
0.0
0.0
0.0
0.0
–6.0
–6.0
0.0
0.0
0.0
0.0
RUB
EUR
24.1
0.1
24.2
–6.1
–20.0
–26.1
EUR
CAD
11.3
6.6
17.8
0.0
0.0
0.0
EUR
NOK
20.6
35.7
56.3
EUR
RUb
24.0
123.4
147.4
0.0
–39.3
–39.3
–0.1
–180.6
–180.6
31 Dec 2017
EUR
SEK
26.9
54.5
81.3
0.0
–0.1
–0.1
EUR
USD
24.8
10.2
35.0
CZK
EUR
92.3
59.9
152.2
–0.7
–20.1
–20.7
–52.6
–121.3
–173.9
0.0
–13.3
–12.7
32.1
–70.6
–12.5
19.7
0.0
0.0
–0.1
3.8
0.0
0.0
8.4
3.3
0.0
0.6
8.1
1.1
0.0
–0.7
2.4
0.0
0.4
5.0
–2.8
0.1
51.1
–41.0
–0.2
UAH
EUR
0.0
0.0
0.0
0.0
–6.9
–7.0
0.0
0.0
0.0
0.0
RUb
EUR
68.3
0.0
68.3
–7.2
–72.0
–79.2
0.0
0.0
0.0
–0.5
–0.6
13.5
4.1
8.1
–7.0
–10.9
51
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – FINANCIAL STATEMENTS Translation risk
In financial statements the statements of financial position of the
foreign subsidiaries are translated into euro using the European
Central bank’s closing rates and the income statements monthly
using the monthly average rate for the period. The impacts of the
exchange rate fluctuations arising on translation of the subsidiaries’
income statements and statements of financial position are
recorded as translation differences in other comprehensive income
and in the translation reserve in equity. The net investments in
foreign subsidiaries are not hedged based on the board decision in
2013.
group’s total comprehensive income was negatively affected by
translation differences on foreign operations by EUR –67.8 million
(EUR –33.5 in 2017) of which EUR 0.0 million (EUR 0.2 million in 2017)
was recorded on internal loans recognized as net investment in
foreign operation. In 2018 no internal loans were recognized as net
investment in foreign operation.
Translation risk
Net investments by currency
EUR million
Currency of net investment
CZK
NOK
RUb
SEK
USD
31 Dec 2018
31 Dec 2017
45.0
44.4
542.2
16.6
167.8
39.4
39.1
560.5
14.2
96.9
Sensitivity analysis for foreign currency risk
The following table demonstrates the sensitivity to a reasonably possible change in the base currency against the quote
currency, with all other variables held constant, of the group’s profit before tax and equity due to changes in the fair value of
financial assets and liabilities.
A reasonably possible change is assumed to be a 10 % base currency appreciation or depreciation against the quote currency.
A change of a different magnitude can also be estimated fairly accurately because the sensitivity is nearly linear.
EUR million
Base currency / Quote currency
EUR/CAD
EUR/CZK
EUR/NOK
EUR/RUb
EUR/SEK
EUR/UAH
EUR/USD
31 Dec 2018
Base currency
31 Dec 2017
Base currency
10% stronger
10% weaker
10% stronger
10% weaker
Income
statement
Equity
Income
statement
Equity
Income
statement
Equity
Income
statement
Equity
–0.3
–0.1
–1.0
0.1
0.5
–0.6
0.4
-
-
-
-
-
-
-
0.3
0.1
0.4
–0.1
–0.5
0.6
–0.5
-
-
-
-
-
-
-
–0.5
–0.4
–0.9
–1.0
–1.2
–0.7
–0.2
-
-
-
-
-
-
-
0.5
0.4
0.5
1.0
0.3
0.7
0.2
-
-
-
-
-
-
-
52
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – FINANCIAL STATEMENTS Interest rate risk
The interest rate risk of the group consists mainly of borrowing,
which is split between floating and fixed rate instruments. On the
reporting date the floating rate interest-bearing financial liabilities
amounted to EUR 25.4 million (EUR 28.6 million in 2017) and the
fixed rate interest-bearing liabilities EUR 107.0 million (EUR 106.6
million in 2017) including the interest rate derivatives. The group’s
policy aims to have at least 50% of the non-current financial
liabilities in fixed rate instruments. Interest rate risk is managed by
using interest rate derivatives. On the reporting date the portion
of the non-current fixed rate interest-bearing financial liabilities
was 100% (79% in 2017) and the average fixing period of the
interest-bearing financial liabilities was 8 months (17 months in 2017)
including the interest rate derivatives. The group uses interest rate
derivatives as cash flow hedges and hedge accounting is mainly
applied for those derivatives.
Electricity price risk
The group purchases electricity in Finland at market price from
the Nordic electricity exchange and this leads to an electricity
price exposure. Annually around 90 gWh of electricity is procured.
According to the procurement policy electricity purchases are
hedged with electricity derivatives within the limits set by the
pre-defined hedge ratios for the coming five year period. On the
reporting date the energy amount of the electricity derivatives
amounted to 180 gWh (210 gWh in 2017).
Sensitivity analysis for interest rate risk
The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant, of
the group’s profit before tax through the impact on floating rate borrowings and interest rate hedges measured at fair value through profit
or loss and the group's equity due to changes in the fair value of cash flow hedges.
A reasonably possible change is assumed to be a 1%-point increase or decrease of the market interest rates. A change of a different
magnitude can also be estimated fairly accurately because the sensitivity is nearly linear.
31 Dec 2018
Interest rate
31 Dec 2017
Interest rate
1%-point higher
1%-point lower
1%-point higher
1%-point lower
EUR million
Income
statement
Impact of interest rate change
–1.3
Equity
1.7
Income
statement
1.3
Equity
–1.7
Income
statement
–1.3
Equity
1.6
Income
statement
1.3
Equity
–1.6
Sensitivity analysis for electricity price risk
The following table demonstrates the sensitivity to a reasonably possible change in electricity price, with all other variables held
constant, of the group’s profit before tax and equity due to changes in the fair value of the electricity derivatives.
A reasonably possible change is assumed to be a 5 EUR/MWh increase or decrease of the electricity market prices.
A change of a different magnitude can also be estimated fairly accurately because the sensitivity is nearly linear.
31 Dec 2018
Electricity price
31 Dec 2017
Electricity price
5 EUR/MWh higher
5 EUR/MWh lower
5 EUR/MWh higher
5 EUR/MWh lower
EUR million
Income
statement
Equity
Income
statement
Impact of electricity price change
-
0.9
-
Equity
–0.9
Income
statement
0.0
Equity
1.0
Income
statement
0.0
Equity
–1.0
53
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – FINANCIAL STATEMENTS Liquidity and funding risk
In accordance with the group’s financial policy, the group Treasury
is responsible for maintaining the group’s liquidity, efficient cash
management and sufficient sources of funding. The committed
credit limits cover all funding needs, like outstanding commercial
papers, other current loans, working capital changes arising from
operative business and investments.
Refinancing risk is reduced by split maturity structure of loans
and credit limits. The revolving credit facility with an international
bank syndicate was increased from EUR 100 million to EUR 150
million due in 2023 as a 2-year extension option was executed.
Additionally, there is a EUR 350 million domestic commercial paper
program available. The current credit limits and the commercial
paper program are used to finance inventories, trade receivables,
subsidiaries in distribution chains and thus to control the typical
seasonality in the group’s cash flows.
The group reports the main financial covenants to creditors
quarterly. If the group does not satisfy the requirements set in
financial covenants, creditor may demand accelerated repayment
of the credits. In 2018 the group has met all the requirements set
in the financial covenants, which are mainly linked to equity ratio.
Management monitors regularly that the covenant requirements
are met. Financing agreements contain terms and conditions upon
which the agreement may be terminated, if control in the company
changes as a result of a public tender offer.
On the reporting date the group’s liquidity in cash and cash
equivalents was EUR 447.5 million (EUR 343.4 million in 2017). At the
end of the year the group’s credit limits available were EUR 558.8
million (EUR 508.9 million in 2017), out of which the committed
limits were EUR 205.5 million (EUR 155.6 million in 2017). The
available committed non-current credits amounted to EUR 150.0
million (EUR 150.0 million in 2017).
The group’s interest-bearing financial liabilities totaled EUR
132.3 million, compared to the year before figure of EUR 135.2
million. Around 85% of the interest-bearing financial liabilities were
in EUR. The average interest rate of interest-bearing financial
liabilities was 2.7%. Current interest-bearing financial liabilities,
including the portion of non-current financial liabilities maturing
within the next 12 months, amounted to EUR 126.0 million (EUR 0.8
million in 2017).
Contractual maturities of financial liabilities
EUR million
Non-derivative financial liabilities
Loans from financial institutions and pension loans
Fixed rate loans
Floating rate loans
Trade and other payables
Derivative financial liabilities
Interest rate derivatives
Designated as hedges
Foreign currency derivatives
Designated as hedges
Cashflow out
Cashflow in
Measured at fair value through profit or loss
Cashflow out
Cashflow in
Electricity derivatives
Designated as hedges
Total
2018
Contractual maturities*
2019
2020
2021
2022
2023 2024–
Total
Carrying
amount
7.0
–0.8
125.4 –126.6
111.0 –111.0
–0.8
0.0
0.0
–0.7
0.0
0.0
–0.7
0.0
0.0
–1.2
0.0
0.0
–3.7
–7.9
0.0 –126.6
0.0 –111.0
1.6
–0.8
–0.7
–0.4
–0.1
0.2
0.2
–1.6
0.7
–18.9
–56.2
68.7
–1.7
0.2
–1.6
0.2
–1.6
0.3
–19.1
18.8
0.0
0.0
–80.2
88.2
7.9 –435.0
–3.5 431.8
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0 –435.0
0.0 431.8
–2.9
1.6
228.2 –228.3
0.9
–2.0
0.3
–2.2
0.1
–2.0
0.0
–1.3
0.0
2.9
–3.5 –239.3
* The figures are undiscounted and include both the finance charges and the repayments.
EUR million
Non-derivative financial liabilities
Loans from financial institutions and pension loans
Fixed rate loans
Floating rate loans
Trade and other payables
Derivative financial liabilities
Interest rate derivatives
Designated as hedges
Foreign currency derivatives
Designated as hedges
Cashflow out
Cashflow in
Measured at fair value through profit or loss
Cashflow out
Cashflow in
Electricity derivatives
Designated as hedges
Total
2017
Contractual maturities*
2018
2019
2020
2021
2022 2023–
Total
Carrying
amount
6.6
128.6
72.8
–0.7
–0.7
–2.8 –129.5
0.0
–72.8
–0.7
0.0
0.0
–0.6
0.0
0.0
–0.6
0.0
0.0
–4.3
–7.6
0.0 –132.3
–72.8
0.0
1.3
–0.9
–0.3
0.0
0.0
0.0
0.0
–1.3
1.5
–12.2
–4.5
0.9
–61.9
68.6
1.2 –382.4
391.5
–9.5
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
–66.4
69.5
0.0 –382.4
391.5
0.0
0.0
190.2
–0.3
0.1
–72.0 –123.7
0.2
–0.5
0.1
–0.6
0.0
–0.6
0.0
0.0
–4.3 –201.8
* The figures are undiscounted and include both the finance charges and the repayments.
54
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – FINANCIAL STATEMENTS Credit Risk
The group is exposed to credit risk from customers’ trade
receivables and also from deposits and derivative transactions with
different banks and financial institutions.
The credit risk in financial transactions is controlled by doing
business only with banks and financial institutions with high credit
ratings. In investments the group’s placements are current and
funds are invested only in solid domestic listed companies, public
institutions or non-listed domestic companies which meet the
criteria set by the investment policy. The board approves the
investment policy for financial instruments annually.
The principles of customers’ credit risk management are
documented in the group’s credit policy approved by the board.
The group Credit Committee makes all the significant credit
decisions. Financial statements as well as credit analysis and
payment history collected by credit information companies are
used for evaluating credit worthiness. The credit status of the
customers is reviewed at the subsidiaries regularly according to
the group credit policy principles. bank guarantees, documentary
credits and specific payment terms are used in controlling the
credit risk in trade receivables. Payment programs, which customer
is committed to, are always agreed upon for past due receivables.
In addition, the country risk is monitored constantly and credits
are limited in countries where political or economic environment
is unstable. There are no over 15% customer or country risk
concentrations in trade receivables, other than the Russian
customers’ share of 39% (35% in 2017) on the reporting date.
Aging and impairment of trade receivables
Impairment recognized in trade receivables corresponds to lifetime
expected credit losses for trade receivables. When measuring
expected credit losses the group reviews sales over the past five
years, customer payment behavior, actual credit losses, current
conditions and forecasts of future economic conditions.
The aging and impairment of trade receivables
31 Dec 2018
1 Jan 2018
EUR million
Not past due
Past due less than 30 days
Past due between 30 and 90 days
Past due between 91 and 180 days
Past due more than 180 days
Total
Trade receivables
gross amount
Impairment loss
allowance
362.5
38.4
3.6
2.7
53.2
460.4
–2.8
–1.1
–0.2
–0.3
–46.5
–51.0
Changes in the impairment loss allowance for trade receivables
EUR million
Loss allowance, 1 Jan under IAS 39
Adjustment on initial application of IFRS 9
Loss allowance, 1 Jan under IFRS 9
Write-offs
Change in loss allowance recognized in profit or loss
Loss allowance, 31 Dec
Trade receivables
gross amount
382.4
Impairment
loss allowance
–3.3
30.0
5.2
3.0
55.6
476.3
2018
43.4
9.6
53.0
–2.0
0.0
51.0
–1.0
–0.4
–0.4
–48.0
–53.0
2017
58.6
–15.4
0.2
43.4
55
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – FINANCIAL STATEMENTS Capital Management
The group’s objective of managing capital is to secure with an
efficient capital structure the group’s access to capital markets
at all times despite of the seasonal nature of the business. The
group monitors its capital structure on the basis of Net debt to
EbITDA ratio and Equity ratio. Equity ratio has to be at least at the
level of 30% in accordance with the financial covenants. Equity
ratio is calculated as a ratio of total equity to total assets excluding
advances received.
Net debt / EBITDA
EUR million
Average interest-bearing liabilities
Less: Average liquid funds
Average net debt
Operating profit
Add: Depreciations and amortisations
EbITDA
Average net debt / EBITDA
Equity ratio
EUR million
Equity attributable to equity holders of the parent
Add: Non-controlling interest
Total equity
Total assets
Less: Advances received
Adjusted total assets
Equity ratio
28. FAIR VALUES OF DERIVATIVE FINANCIAL INSTRUMENTS
EUR million
Derivatives measured at fair value through profit or loss
Foreign currency derivatives
Currency forwards
Currency options, purchased
Currency options, written
Derivatives designated as cash flow hedges
Foreign currency derivatives
Interest rate and currency swaps
Interest rate derivatives
Interest rate swaps
Electricity derivatives
Electricity forwards
2018
133.8
274.5
–140.7
372.4
93.4
465.8
–0.30
2018
1,486.1
0.0
1,486.1
2,092.9
0.6
2,092.3
2017
177.3
272.5
–95.2
365.4
98.3
463.7
–0.21
2017
1,468.4
0.0
1,468.4
1,877.4
0.8
1,876.6
71.0%
78.2%
2018
2017
Notional
amount
Fair value
Assets
Fair value
Liabilities
Notional
amount
Fair value
Assets
Fair value
Liabilities
420.0
27.5
37.6
5.2
0.3
-
86.0
18.9
200.0
4.8
1.6
2.9
9.7
-
0.2
0.7
3.1
0.0
387.2
15.2
30.5
9.4
0.1
-
67.5
12.2
100.0
5.6
-
0.5
Derivatives are maturing within the next 12 months excluding the interest rate and currency swaps, interest rate swaps and electricity forwards.
The fair value of forward exchange contracts is measured using the forward rates on the reporting date. The fair value of currency options is calculated using an option valuation model.
The fair values of interest rate and currency swaps and interest rate derivatives are determined as the present value of the future cash flows based on market interest rates on the reporting date.
The fair value of electricity derivatives is based on quoted market prices in active markets on the reporting date.
1.1
-
0.2
1.5
1.3
0.5
56
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – FINANCIAL STATEMENTS 29. FINANCIAL INSTRUMENTS DESIGNATED AS HEDGING INSTRUMENTS
CASH FLOW HEDGES
Financial instruments designated as hedging instruments
Interest rate and currency swaps
Hedged item: Floating rate RUb loan receivables
Notional amount, EUR million
Average EUR/RUb rate
Interest rate swaps
Hedged item: Floating rate EUR debt
Notional amount, EUR million
Average fixed rate
Electricity forwards
Hedged item: Electricity system price
Notional amount, EUR million
Notional amount, gWh
Average forward rate, e/MWh
Hedged item: Electricity Finnish area price difference
Notional amount, EUR million
Notional amount, gWh
Average forward rate, e/MWh
Interest rate and currency swaps
Hedged item: Floating rate RUb loan receivable
Notional amount, EUR million
Average EUR/RUb rate
Interest rate swaps
Hedged item: Floating rate EUR debt
Notional amount, EUR million
Average fixed rate
Electricity forwards
Hedged item: Electricity system price
Notional amount, EUR million
Notional amount, gWh
Average forward rate, e/MWh
Hedged item: Electricity Finnish area price difference
Notional amount, EUR million
Notional amount, gWh
Average forward rate, e/MWh
2019
2020
2021
2022
2023
2024–
Total
2018
Maturity
67.5
59.22
100.0
0.6%
1.7
70
24.8
0.1
20
4.9
1.5
61
24.2
0.1
18
3.8
0.9
35
25.3
0.5
18
27.3
2017
Maturity
18.4
76.06
100.0
0.5%
86.0
62.83
200.0
0.5%
4.6
184
25.0
0.2
37
4.4
2018
2019
2020
2021
2022
2023–
Total
67.5
59.22
100.0
0.6%
1.5
61
24.6
0.0
9
4.9
2.3
74
30.3
0.1
13
6.2
0.7
26
25.1
1.0
44
22.9
0.1
18
3.8
67.5
59.22
100.0
0.6%
5.4
206
26.4
0.2
39
4.8
57
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – FINANCIAL STATEMENTS Effect of hedging instruments on the statement of financial position and statement of
comprehensive income
EUR million
Notional amount
Notional amount, gWh
Assets
2018
Foreign currency
derivatives
Interest rate
derivatives
Interest rate and
currency swaps
Interest rate
swaps
86.0
-
200.0
-
Electricity
derivatives
Electricity
forwards
4.8
221
EUR million
Notional amount
Notional amount, gWh
Assets
2017
Foreign currency
derivatives
Interest rate
derivatives
Electricity
derivatives
Interest rate and
currency swaps
67.5
Interest rate
swaps
100.0
-
-
Electricity
forwards
5.6
250
Carrying amount
Line item in the statement of financial position
18.9
Trade and
other receivables
1.6
Trade and
other receivables
2.9
Trade and
other receivables
Carrying amount
Line item in the statement of financial position
12.2
Trade and
other receivables
-
Trade and
other receivables
0.5
Trade and
other receivables
Liabilities
Carrying amount
Line item in the statement of financial position
Change in value for recognizing hedge
ineffectiveness
Hedged item
Hedging instrument
Effective portion
Amount recognized in other comprehensive
income
Amount reclassified from the cash flow hedge
reserve to profit or loss
Line item in the income statement
0.7
Trade and
other payables
3.1
Trade and
other payables
0.0
Trade and
other payables
Carrying amount
Line item in the statement of financial position
1.5
Trade and
other payables
1.3
Trade and
other payables
0.5
Trade and
other payables
Liabilities
–7.4
7.4
1.2
–1.2
–3.7
3.7
Hedged item
Hedging instrument
Effective portion
Change in value for recognizing hedge
ineffectiveness
7.4
–1.2
3.7
–8.3
Financial items
0.9
Financial items
–1.0
Cost of sales
Amount recognized in other comprehensive
income
Amount reclassified from the cash flow hedge
reserve to profit or loss
–4.8
4.8
4.8
–4.6
0.0
0.0
0.0
0.9
–0.5
0.5
0.5
0.0
Line item in the income statement
Financial items
Financial items
Cost of sales
Ineffective portion
Amount recognized in profit or loss
Line item in the income statement
-
Financial items
-
-
Financial items Other operating
income or
expenses
Ineffective portion
Amount recognized in profit or loss
Line item in the income statement
-
Financial items
-
–0.2
Financial items Other operating
income or
expenses
58
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – FINANCIAL STATEMENTS 31. CONTINGENT LIABILITIES AND ASSETS AND CONTRACTUAL COMMITMENTS
Effect of hedging instruments on equity
EUR million
Cash flow hedge reserve, 1 Jan
Cash flow hedges
Change in fair value recognized in other comprehensive income
Interest rate and currency swaps
Interest rate swaps
Electricity forwards
Amount reclassified to profit or loss
Interest rate and currency swaps
Interest rate swaps
Electricity forwards
Tax effect
Cash flow hedge reserve, 31 Dec
30. OPERATING LEASE COMMITMENTS
EUR million
The Group as a lessee
Non-cancellable minimum operating lease payments
In less than 1 year
In 1 to 5 years
In over 5 years
2018
–1.8
2017
–3.1
EUR million
For own debt
Mortgages
Pledged assets
On behalf of other companies
guarantees
Other own commitments
guarantees
Contractual commitments
7.4
–1.2
3.7
–8.3
0.9
–1.0
–0.3
–0.6
4.8
0.0
0.5
–4.6
0.9
0.0
–0.3
–1.8
2018
2017
42.4
96.2
20.8
159.3
21.7
53.6
14.0
89.3
The group leases office and warehouse spaces and retail outlets under various non-cancellable
operating leases. The terms of the leases vary from few years to 15 years. The most significant
agreements from the financial reporting point of view are Vianor service centers. The income statement
in 2018 contains EUR 60.8 million expenses for operating lease agreements (EUR 58.4 million in 2017).
The Group as a lessor
Vianor has conventional lease contracts for truck tyre frames and treads with short lease periods. These
do not involve options for purchase nor lease period extentions.
The leasing income is not material.
2018
2017
0.9
4.7
0.4
27.7
29.9
1.0
4.6
0.4
10.3
1.1
59
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – FINANCIAL STATEMENTS 32. SIGNIFICANT RISKS AND UNCERTAINTIES,
AND ONGOING DISPUTES
Nokian Tyres’ business and financial performance may be
affected by several uncertainties. The group has adopted a risk
management policy, approved by the board of Directors, which
supports the achievement of strategic goals and ensures continuity
of business. The group’s risk management policy focuses on
managing both the risks pertaining to business opportunities and
the risks affecting the achievement of the group’s goals in the
changing operating environment. The risk management process
aims to identify and evaluate the risks, and to plan and implement
the practical measures for each risk. Nokian Tyres has detailed the
overall business risks and risk management in the 2018 Corporate
governance Statement.
For example, the following risks could potentially have an
impact on Nokian Tyres’ development:
• Nokian Tyres is subject to risks related to consumer confidence
and macroeconomic and geopolitical conditions. Political
uncertainties may cause serious disruption and additional trade
barriers and affect the company’s sales and credit risk. Economic
downturns may increase trade customers’ payment problems
and Nokian Tyres may need to recognize impairment of trade
receivables.
• The tire wholesale and retail landscape is evolving to meet
changing consumer needs. New technologies are fueling this
with increasing digitalization. A failure to adapt to the changes in
the sales channel could have an adverse effect on Nokian Tyres’
financial performance.
• Nokian Tyres’ success is dependent on its ability to innovate
and develop new products and services that appeal to its
customers and consumers. Despite extensive testing of its
products, product quality issues and failure to meet demands on
performance and safety could harm Nokian Tyres’ reputation and
have an adverse effect on its financial performance.
• Nokian Tyres’ production facilities are located in Finland and
Russia. Any unexpected production or delivery breaks at these
facilities would have a negative impact on the company’s
business. A new factory is under construction in the US in order
to diversify the manufacturing footprint. Interruptions in logistics
could have a significant impact on peak season sales.
• Significant fluctuations in raw material prices may impact
margins. Nokian Tyres sources natural rubber from producers
in countries such as Indonesia and Malaysia. Although Nokian
Tyres has policies such as the Supplier Code of Conduct, and
established processes to monitor the working conditions, it
cannot fully control the actions of its suppliers. The violation of
laws, regulations or standards by raw material producers, or their
divergence from practices generally accepted as ethical in the
European Union or the international community, could have a
material adverse effect on Nokian Tyres’ reputation.
• Foreign exchange risk consists of transaction risk and translation
risk. The most significant currency risks arise from the Russian
ruble, the Swedish and Norwegian krona, and the US and
Canadian dollar. Approximately 60% of the group’s sales are
generated outside of the euro-zone.
• In May 2017, the Finnish Financial Supervisory Authority
filed a request for investigation with the National bureau of
Investigation regarding possible securities market offences.
The National bureau of Investigation has initiated a preliminary
investigation into the matter.
The risk analysis conducted in 2018 also focused special
attention on corporate social responsibility risks, the most
significant of which are related to the company’s reputation and
product quality. Analyses and projects related to information
security, data protection, and customer information were a special
focus area.
Tax disputes
Dispute concerning 2007–2011
Administrative Court ruling in the tax dispute case
concerning the years 2007–2010 positive for the company
In May 2018, the company received the ruling of the Administrative
Court in the tax dispute concerning the years 2007–2010. The
Administrative Court overturned the tax reassessment decisions
of EUR 89.2 million of the board of Adjustment completely and
ordered the Tax Administration to pay Nokian Tyres’ legal costs to
the amount of EUR 40,000. The company has recorded the tax
reassessment decisions in full to the financial statement and result
in earlier years. The company received back the previously paid
EUR 89.2 million in additional taxes and interest in June 2018. The
Tax Recipient Services Unit applied for permission to appeal in July
2018. Adjustments to the financial reporting will be done when the
ruling is final.
background of the Administrative court ruling:
The Large Taxpayers’ Office carried out a transfer pricing tax audit
regarding the tax years 2007–2011 during 2012–2013, investigating
if the intercompany transactions between Nokian Tyres plc and its
subsidiaries were at arm’s length. The Company paid a total of EUR
89.2 million in additional taxes and tax increases concerning the tax
years 2007–2010 based on tax reassessment decisions from the
Tax Administration and filed an appeal concerning them with the
Administrative Court in January 2017.
Tax Administration’s decision in the appeal concerning
the tax year 2011 positive for the company
In June 2018, the company received the reassessment decision
from the Tax Administration concerning the tax year 2011. The
Tax Administration approved the appeal Nokian Tyres made in
November 2017, and the Tax Administration returned the previously
paid EUR 59 million in additional taxes and interest to the company
in June 2018. The company has recorded the tax reassessment
decision in full to the financial statement and result in earlier years.
The Tax Recipient Services Unit applied for permission to appeal in
July 2018. Adjustments to the financial reporting will be done when
the decision is final.
background of the Tax Administration’s decision:
In October 2017, Nokian Tyres received a reassessment decision
from the Tax Administration concerning the tax year 2011,
according to which the company was obliged to pay a total of EUR
59 million, of which EUR 39 million were additional taxes and EUR
20 million were tax increases and interest. The company recorded
the amount in full to the financial statement and result of Q3/2017
and paid it in Q4/2017. The company considered the reassessment
decision of the Tax Administration unfounded and appealed to the
board of Adjustment in November 2017.
Dispute concerning the US subsidiary 2007–2013
Nokian Tyres U.S. Finance Oy, a subsidiary of Nokian Tyres plc
(ownership: 100% of the shares), received reassessment decisions
from the Finnish Tax Administration in 2013 and 2014. According
to the reassessment decisions, and with interest until the actual
payment in August 2017, the company was obliged to pay a total of
EUR 18.5 million in additional taxes, with tax increases and interest
concerning the tax years 2007–2013. Of this amount, EUR 11.0
million were additional taxes and EUR 7.5 million were tax increases
and interest. The company recorded them in full in the financial
statements and results for 2013, 2014, and 2017.
The Large Taxpayers’ Office carried out a tax audit concerning
the Finnish business Tax Act, where the Tax Administration
raised an issue regarding the restructuring of the sales company
and acquisitions by the Nokian Tyres group in North America,
completely ignoring the business rationale and corresponding
precedent rulings presented by the company.
Nokian Tyres U.S. Finance Oy considered the reassessment
decision of the Tax Administration unfounded and filed a claim for
rectification with the board of Adjustment.
In June 2017, the board of Adjustment rejected the company’s
claim for rectification. The company considers the decision
unfounded and appealed against it by filing a claim with the
Administrative Court in July 2017. The company has paid the
amount of EUR 18.5 million in full in August 2017.
60
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – FINANCIAL STATEMENTS 33. RELATED PARTY TRANSACTIONS
Parent and Group company relations:
Parent company
Nokian Tyres plc
Group companies
Nokian Heavy Tyres Ltd.
Nokian Däck Ab
Nokian Dekk AS
Nokian Tyres gmbH
Nokian Tyres Ag
Nokian Tyres U.S. Holdings Inc.
Nokian Tyres Inc
Nokian Tyres U.S. Operations LLC
Nokian Tyres Canada Inc.
Nokian Tyres s.r.o.
TOV Nokian Shina
TOO Nokian Tyres
OOO Nokian Shina
TAA Nokian Shina belarus
Nokian Tyres Holding Oy
OOO Nokian Tyres
OOO Hakkapeliitta Village
Nokian Tyres Trading (Shanghai) Co Ltd
NT Tyre Machinery Oy
Direnic Oy
Hakka Invest Oy
OOO Hakka Invest
Koy Nokian Nosturikatu 18
Koy Nokian Rengaskatu 4
Nokian Tyres Spain S.L.U.
Nokianvirran Energia Oy
Vianor Holding Oy
Vianor Oy
Vianor Russia Holding Oy
Posiber Oy
Vianor Ab
Nordicwheels Ab
Vianor AS
Dekkspesialisten AS
Vianor Inc.
EAM NRE1V Holding Oy
Associated companies
Sammaliston Sauna Oy
Group
holding
%
Voting
rights
%
Parent
company
holding
%
Domicile
Country
Nokia
Finland
100
100
100
100
100
100
100
100
100
100
100
99
99
100
100
100
100
100
100
32.3
100
Nokia
Vsevolozhsk
Nokia
Vsevolozhsk
Vsevolozhsk
Nokia
Nokia
Nokia
Vsevolozhsk
Nokia
Nokia
Nokia
Nokia
Lappeenranta
Nokia
Nokia
Finland
Sweden
Norway
germany
Switzerland
USA
USA
USA
Canada
Czech Rep.
Ukraine
Kazakhstan
Russia
belarus
Finland
Russia
Russia
China
Finland
Finland
Finland
Russia
Finland
Finland
Spain
Finland
Finland
Finland
Finland
Finland
Sweden
Sweden
Norway
Norway
USA
Finland
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
32.3
100
100
100
100
100
100
100
100
100
0
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
32.3
100
100
100
100
100
100
100
100
100
100
Nokia
Finland
33
33
33
Nokianvirran Energia Oy is a joint operation with three parties that
supplies production steam for the tyre plant in Nokia. The parties
share control according to a specific Mankala-principle where the
company is not intended to make profit while the parties have
agreed to utilize the total output. The company is accounted for as
a group company.using the proportionate consolidation method on
each row according to the 32.3% shareholding.
The board of Directors decided in their meeting on July 12, 2017
to implement a share aquisition and administration arrangement of
Nokian Tyres Plc (Nokian Tyres) shares with Evli Awards Management
Oy (EAM) according to the stipulations of the Companies Act for
financing the purchase of own shares (the Finnish Companies Act,
Chapter 13, Section 10, Subsection 2) relating to incentive plans. As
a part of this arrangement EAM founded EAM NRE1V Holding Oy
(Holding company) which aquires the shares with Nokian Tyres’s
funding and according to the agreement. These shares will be
delivered to the employees according to the Nokian Tyre’s share plan
terms and conditions. The Holding company is owned by the EAM in
legal terms, but according to the agreement Nokian Tyres has control
over the company and acts as the principal, whereas EAM is an agent
through the Holding company. This control arising from contractual
terms means that the Holding company is consolidated in to the
group’s IFRS financial statements as a structured entity.
61
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – FINANCIAL STATEMENTS The related parties of the group consist of members of the board of Directors, the President, other key
management personnel, and close members of their families.
Transactions and outstanding balances with parties having significant influence
1,000 euros
2018
2017
Key management personnel
Employee benefit expenses
Short-term employee benefits
Post-employment benefits
Termination benefits
Share-based payments
Total
Remunerations
Hille Korhonen, President
of which incentives for the reported period
Andrei Pantioukhov, President 1 January –31 May
2017
of which incentives for the reported period
5,119.4
4,587.4
-
-
91.1
109.9
5,231.5
8,141.4
10,350.9
12,929.8
883.2
189.9
720.2
308.7
granted (pcs)
Shares
Share options
Held (pcs)
Shares
-
-
125.0
Share options
-
Exercisable
No special pension commitments have been granted to the members of the board of Directors and no
statutory pension expense incurs. In 2018 the statutory pension expense for President Korhonen was
EUR 288 thousand (in 2017 for President Korhonen EUR 126 thousand and President Pantioukhov EUR 22
thousand) and the expense for supplementary pension plan was EUR 132 thousand (in 2017 for President
Korhonen EUR 77 thousand). The agreed plan retirement age is 65 years. The annual account deposits
for the pension capital redemption contract have been pledged to guarantee the recognized pension
plan commitment. The contract is a defined contribution plan.
No loans, guarantees or collaterals have been granted to the related parties.
Shares and share options granted to the President and other key management personnel.
The share option plan terms for the key management are equal to the share options directed at other
personnel.
2018
2017
229,000
301,000
-
-
195,309
19,000
19,000
415,323
205,125
205,125
Members of the board of Directors
No performance shares nor share options have been granted to the members of the board of Directors.
34. EVENTS AFTER THE REPORTING DATE
No events have occurred after the reporting date affecting the financial statements significantly.
Petteri Walldén
Heikki Allonen
Raimo Lind
Veronica Lindholm
Inka Mero
george Rietbergen
Kari Jordan
Pekka Vauramo
Prior members of the board of Directors
Hille Korhonen
Tapio Kuula
Total
No incentives were paid to the members of the
board of Directors.
102.0
54.0
78.9
57.0
54.0
53.4
75.9
52.2
-
-
527.4
93.8
53.8
74.4
52.0
53.2
46.8
3.0
85.2
462.2
Other key management personnel
of which incentives for the reported period
3,708.8
1,128.2
3,349.6
1,162.6
62
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – FINANCIAL STATEMENTS Parent Company
Income Statement
and Balance Sheet
PARENT CO MPANY
INCOME STATEMENT, FAS
PARENT COMPANY
BAL A NCE SHE ET, FAS
Notes
(1)
(2)(3)
2018
707.8
–546.8
2017
686.2
–538.9
EUR million 31.12.
Note
2018
2017
ASSETS
160.9
147.3
Fixed assets and other non-current assets
EUR million 1.1. - 31.12.
Net sales
Cost of sales
Gross profit
Selling and marketing expenses
Administration expenses
Other operating expenses
Other operating income
Operating profit
(2)(3)
(2)(3)(4)
(2)(3)
–32.8
–34.5
–9.0
0.2
84.9
–28.9
–29.2
–22.7
0.8
67.2
Financial income and expenses
(5)
164.9
253.4
Profit before appropriations and tax
249.8
320.6
Appropriations
Income tax
Profit for the period
(6)
(7)
–16.2
–22.4
211.2
–0.2
–85.8
234.7
Intangible assets
Tangible assets
Shares in group companies
Investments in associates
Shares in other companies
Total non-current assets
Current assets
Inventories
Non-current receivables
Current receivables
Cash and cash equivalents
Total current assets
LIABILITIES AND SHAREHOLDERS' EQUITY
Shareholders' equity
Share capital
Share premium
Treasury shares
Paid up unrestricted equity fund
Retained earnings
Profit for the period
Total shareholders' equity
Untaxed reserves and provisions
(8)
(8)
(9)
(9)
(9)
(10)
(11)
(15)
(13)
15.5
157.6
254.5
4.3
0.6
432.5
106.0
255.1
357.7
398.6
1,117.4
14.9
138.8
149.6
4.3
0.6
308.1
90.5
232.8
503.0
307.8
1,134.1
1,549.9
1,442.3
25.4
182.5
–10.1
222.6
259.4
211.2
891.0
25.4
182.5
–19.0
203.9
238.4
234.7
866.0
Accumulated depreciation in excess of plan
(8)
38.2
37.0
Liabilities
Non-currenwt liabilities
Current liabilities
Total liabilities
(14)
(15)
0.2
620.5
620.7
102.5
436.8
539.3
1,549.9
1,442.3
63
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – FINANCIAL STATEMENTS Parent Company
Statement of Cash Flows
PARENT CO MPANY STATEME NT OF CAS H F LOWS, FAS
EUR million 1.1.–31.12.
Profit for the period
Adjustments for
Depreciation, amortisation and impairment
Financial income and expenses
gains and losses on sale of intangible assets, other changes
Income Taxes
Cash flow before changes in working capital
Changes in working capital
Current receivables, non-interest-bearing, increase (-) / decrease (+)
Inventories, increase (-) / decrease (+)
Current liabilities, non-interest-bearing, increase (+) / decrease (-)
Changes in working capital
Financial items and taxes
Interest and other financial items, received
Interest and other financial items, paid
Dividens received
Income taxes paid
Financial items and taxes
2018
2017
EUR million 1.1.–31.12.
2018
2017
211.2
234.7
Cash flow from financing activities:
Proceeds from issue of share capital
29.2
26.3
Purchase of treasury shares
–164.9
–253.4
Change in current financial receivables, increase (-) / decrease (+)
0.0
85.8
93.4
Change in non-current financial receivables, increase (-) / decrease (+)
Change in current financial borrowings, increase (+) / decrease (-)
Change in non-current financial borrowings, increase (+) / decrease (-)
group contributions paid
Dividends paid
–138.4
Cash flow from financing activities (C)
18.7
0.0
–1.7
–22.3
109.1
–102.3
0.0
–214.2
–212.7
35.0
–17.8
4.8
41.3
–95.3
–0.1
0.0
–208.0
–240.0
1.0
–9.9
–147.2
18.4
–33.3
274.3
–89.5
169.9
Change in cash and cash equivalents, increase (+) / decrease (-) (A+B+C)
90.8
–175.1
Cash and cash equivalents at the beginning of the period
Cash and cash equivalents at the end of the period
307.8
398.6
482.9
307.8
based on the annulled and later renewed tax reassessment decisions on years 2007–2013 of a group
company the financial items and taxes contain paid tax increases and interest of EUR 18.5 million in
1–12/17. Changes in working capital include EUR 59.0 million based on the tax reassessment decision on
year 2011 and EUR 89.2 million based on the tax reassessment decision on years 2007–2013.
based on the tax reassessment decisions on years 2007–2013 the financial items and taxes contain
paid tax increases and interest of EUR 77.5 million in 1–12/17.
0.0
22.4
97.9
149.7
–15.5
74.0
208.2
15.6
–2.5
160.8
–21.8
152.0
Cash flow from operating activities (A)
458.1
116.0
Cash flows from investing activities
Acquisitions of property, plant and equipment and intangible assets
Proceeds from sale of property, plant and equipment and intangible
assets
Acquisitions of group companies
Acquisitions of other investments
Cash flows from investing activities (B)
–49.7
–34.5
0.0
0.0
–104.9
–154.7
0.0
0.0
–16.6
–51.0
64
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – FINANCIAL STATEMENTS Accounting policies for
the Parent Company
ACCOUNTING P OLI CIES FOR TH E PA R EN T COM PA NY
General
The financial statements of Nokian Tyres plc, domiciled in the city
of Nokia, have been prepared according to the Finnish Accounting
Standards (FAS).
Pensions and coverage of pension liabilities
Pension contributions are based on periodic actuarial calculations
and are charged to the income statement.
In Finland the pension schemes are funded through payments
to a pension insurance company.
Equity
The acquisition cost of treasury shares repurchased by the group is
recognised as a deduction in equity. The consideration received for
the treasury shares when sold, net of transaction costs and tax, is
included in equity.
Foreign currency items
Transactions in foreign currencies are recorded at the exchange
rates ruling at the dates of the transactions. At the end of the
accounting period unsettled balances on foreign currency
transactions and forward exchange contracts are valued at the
rates published by the European Central bank as on the financial
statement date.
All foreign currency exchange gains and losses are entered
under financial income and expenses.
Direct taxes
The income statement includes direct taxes based on the taxable
profit and the change in deferred tax arising from temporary
differences. The untaxed reserves are shown in full in the balance
sheet, and the deferred tax liability is not recorded.
The deferred tax liability and assets are recorded as separate
items and are based on the prevailing corporate tax rate.
Inventory valuation
Inventories are valued at the lower of cost and net realisable value.
Cost is determined on a first in - first out (FIFO) basis. In addition
to the direct costs, an appropriate proportion of production
overheads is included in the value of finished goods.
Fixed assets and depreciation
Fixed assets are stated in the balance sheets at cost less
depreciation according to plan. The accumulated difference
between the total depreciation charged to the income statement
and depreciation according to plan is shown as a separate item in
untaxed reserves.
Depreciations according to plan are calculated on the basis
of the estimated useful life of the assets using the straight line
method.
The depreciation times are as follows:
Intangible assets
buildings
Machinery and equipment
Other tangible assets
3–10 years
20–40 years
4–20 years
10–40 years
Land property, as well as investments in shares, are not regularly
depreciated.
Research and development
Research and development costs are charged to the other
operating expenses in the income statement in the year in which
they are incurred. Certain significant development costs with
useful life over three years are capitalised and are amortised on a
systematic basis over their expected useful lives. The amortisation
period is between three and five years.
65
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – FINANCIAL STATEMENTS Notes to the Financial
Statement of the
Parent Company
NOTE S TO THE FINANC I AL STATEM EN TS
OF THE PARENT CO MPA NY
1. NET SALES BY SEGMENTS AND MARKET AREAS
3. DEPRECIATION
5. FINANCIAL INCOME AND EXPENSES
EUR million
Passenger Car Tyres
Heavy Tyres
Other
Total
Finland
Other Nordic countries
baltic countries and Russia
Other European countries
North America
Other countries
Total
2018
535.8
172.0
0.0
707.8
133.4
185.9
48.9
186.6
139.1
13.9
707.8
2. WAGES, SALARIES AND SOCIAL EXPENSES
EUR million
Wages and salaries
Pension contributions
Other social expenses
Total
2018
56.9
9.0
1.6
67.5
2017
514.6
171.6
0.0
686.2
127.0
191.1
40.9
195.2
120.4
11.6
686.2
2017
49.8
8.0
2.2
60.0
Remuneration of the members of the
board of the Directors and the President on
accrual basis
of which incentives
1.4
0.2
1.3
0.3
No special pension commitments have been granted to the members of
the board. The agreed retirement age of the President is 65 years. See
also Notes to Consolidated Financial Statements, note 33 Related party
transactions.
Personnel, average during the year
Total
2018
842
2017
762
EUR million
Depreciation according to plan by asset
category
Intangible assets
buildings
Machinery and equipment
Other tangible assets
Total
Depreciation by function
Production
Selling and marketing
Administration
Other operating depreciation
Total
4. AUDITORS' FEES
2018
2017
5.1
2.3
21.6
0.2
29.2
20.9
1.0
4.5
2.8
29.2
5.4
2.2
21.1
0.1
28.7
20.5
0.5
5.5
2.3
28.7
EUR million
Dividend income
From the group companies
From others
Total
Interest income, non-current
From the group companies
From others
Total
Other interest and financial income
From the group companies
From others
Total
2018
2017
160.8
0.0
160.8
274.3
0.0
274.3
10.8
0.0
10.8
4.4
0.4
4.8
14.5
0.0
14.5
3.5
0.4
3.9
EUR million
Authorized public accountants KPMg Oy Ab
2018
2017
Auditing
Tax consulting
Other services
Total
0.1
0.4
0.2
0.7
0.1
0.4
0.3
0.8
Exchange rate differences (net)
–4.4
–6.9
Interest and other financial expenses
To the group companies
To others
Other financial expenses
Total
–4.9
–1.6
–0.5
–7.0
–10.3
–21.7
–0.5
–32.4
Total financial income and expenses
164.9
253.4
66
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – FINANCIAL STATEMENTS 6. APPROPRIATIONS
EUR million
Change in accumulated depreciation in
excess of plan
Intangible assets
buildings
Machinery and equipment
Other tangible assets
Total
Other appropriations
group contributions
Total
Total appropriations
7. INCOME TAX
EUR million
Direct tax for the year
Direct tax from previous years
Change in deferred tax
Total
2018
2017
Intangible assets
Tangible assets
8. FIXED ASSETS
Intangible
rights
54.5
0.6
–0.1
5.1
60.1
–40.1
0.1
–4.9
–45.0
15.1
14.4
2.9
2.3
Other
intangible
rights
3.6
3.6
–3.1
0.0
–0.1
–3.2
0.4
0.5
0.1
0.1
0.5
–0.6
1.2
0.0
1.2
15.0
15.0
16.2
2018
–22.4
0.0
-
–22.4
–0.5
–0.4
1.0
0.1
0.2
-
-
0.2
2017
–26.6
–59.2
-
–85.8
EUR million
Accumulated cost, 1 Jan 2018
Increase
Decrease
Transfer between items
Accumulated cost, 31 Dec 2018
Accum. depr. acc. to plan
1 Jan 2018
Accum. depr. on disposals
Depreciations for the period
Accum. depr. acc.to plan,
31 Dec 2018
Carrying amount, 31 Dec 2018
Carrying amount, 31 Dec 2017
Accum. depreciation in excess of plan,
31 Dec 2018
Accum. depreciation in excess of plan,
31 Dec 2017
9. INVESTMENTS
EUR million
Accumulated cost, 1 Jan 2018
Decrease
Increase
Accumulated cost, 31 Dec 2018
Carrying amount, 31 Dec 2018
Carrying amount, 31 Dec 2017
Land
property Buildings
Machinery
and
equipment
Other
tangible
assets
Advances and fixed
assets under
construction
5.1
0.2
5.3
–3.7
0.0
–0.2
–3.9
1.5
1.5
17.1
35.5
–21.5
31.1
31.1
17.1
0.7
0.2
0.9
0.9
0.7
-
-
72.7
0.8
1.6
75.1
438.0
27.1
–16.7
14.6
463.0
–35.7
–355.5
1.2
–21.6
–375.9
87.1
82.5
–2.3
–38.0
37.1
37.0
12.3
12.6
19.1
–0.3
17.9
–0.3
Shares in Group
companies
Investments in
associates
Shares in other
companies
149.6
-
104.9
254.5
254.5
149.6
4.3
-
-
4.3
4.3
4.3
0.6
-
-
0.6
0.6
0.6
67
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – FINANCIAL STATEMENTS 10. INVENTORIES
EUR million
Raw materials and supplies
Work in progress
Finished goods
Total
11. NON-CURRENT RECEIVABLES
EUR million
Loan receivables from the group
companies
Loan receivables from others
Total long-term receivables
13. SHAREHOLDERS' EQUITY
EUR million
2018
2017
Restricted shareholders' equity
2018
73.1
2.7
30.3
106.0
2017
56.3
2.7
31.4
90.5
Share capital, 1 January
Emissions
Share capital, 31 December
2018
2017
Share issue premium, 1 January
Emission gains
232.7
Share issue premium, 31 December
254.7
0.4
255.1
0.2
232.8
Total restricted shareholders' equity
207.9
207.9
25.4
-
25.4
25.4
-
25.4
182.5
182.5
-
-
182.5
182.5
The members of the board of Directors and the President have not
been granted loans.
Non-restricted shareholders' equity
12. CURRENT RECEIVABLES
EUR million
Receivables from the group companies
Trade receivables
Loan receivables
Accrued revenues and deferred expenses
Total
Trade receivables
Other receivables
Accrued revenues and deferred expenses
Total
2018
2017
138.4
131.5
23.6
293.5
31.6
4.3
28.3
64.2
138.8
276.7
16.6
432.2
37.2
5.1
28.6
70.8
Paid-up unrestricted equity reserve,
1 January
Emission gains
Paid-up unrestricted equity reserve,
31 December
Retained earnings, 1 January
Dividends to shareholders
Retained earnings, 31 December
203.9
18.7
169.0
35.0
222.6
203.9
473.1
–213.7
259.4
445.0
–206.5
238.4
Treasury shares
–10.1
–19.0
Profit for the period
211.2
234.7
Total short-term receivables
357.7
503.0
Total non-restricted shareholders' equity
683.0
658.0
Significant items under accrued revenues
and deferred expenses
Financial items
Social payments
Capital expenditure in factories
goods and services rendered and not
invoiced, subsidiary
Other items
Total
Total shareholders' equity
891.0
866.0
28.4
0.6
1.3
18.8
2.9
51.9
23.5
1.6
0.3
11.7
8.2
45.2
Specification of the distributable funds,
31 December
Retained earnings
Treasury shares
Paid-up unrestricted equity reserve
Profit for the period
Distributable funds, 31 December
259.4
–10.1
222.6
211.2
683.0
238.4
–19.0
203.9
234.7
658.0
The group or the Parent company themselves do not directly hold
any treasury shares.
Nokian Tyres has an agreement from 2017 with a third-party
service provider concerning the share-based incentive program for
key personnel. The third party owns Nokian Tyres shares related to
the incentive program until the shares are given to the participants
of the program. In accordance with IFRS, these repurchased shares,
480,000 in 2017, have been reported as treasury shares in the
Consolidated Statement of Financial Position. On December 31,
2018, the number of these shares was 278,083. This number of
shares corresponded to 0.2% of the total shares and voting rights
in the company.
68
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – FINANCIAL STATEMENTS 14. NON-CURRENT LIABILITIES
15. CURRENT LIABILITIES
EUR million
Interest-bearing
Loans from financial institutions
Total
Non-interest-bearing
Accrued expenses and deferred revenues
Total
Total non-current liabilities
2018
2017
EUR million
2018
2017
0.0
0.0
0.2
0.2
0.2
102.4
102.4
0.1
0.1
Interest-bearing
Liabilities to the group companies
Finance loans
Total
Non-interest-bearing
Liabilities to the group companies
102.5
Trade payables
Accrued expenses and deferred revenues
Total
Trade payables
Liabilities to the others
Accrued expenses and deferred revenues
Total
224.1
224.1
324.0
324.0
48.8
17.5
66.2
38.4
104.4
187.4
330.1
50.3
2.4
52.8
26.3
2.1
31.7
60.0
16. CONTINGENT LIABILITIES
EUR million
On behalf of Group companies and
investments in associates
2018
2017
guarantees
80.4
55.4
The amount of debts and commitments
mortgaged for total EUR 72.7 million
(2017: EUR 51.8 million).
On behalf of other companies
guarantees
Other own commitments
guarantees
Leasing and rent commitments
Payments due in 2019/2018
Payments due in subsequent years
0.2
0.1
43.5
30.7
2.0
5.7
2.5
2.7
Total non-interest-bearing liabilities
396.4
112.8
Total current liabilities
620.5
436.8
Significant items under accrued expenses
and deferred revenues
Wages, salaries and social security
contributions
Annual discounts, sales
Taxes
Financial items
Commissions
goods received and not invoiced
Warranty commitments
group contributions
Other items
Total
12.5
5.8
149.6
12.5
5.2
1.2
0.8
15.0
2.3
204.8
11.9
5.7
0.7
5.2
5.2
1.5
0.9
-
2.9
34.1
69
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – FINANCIAL STATEMENTS
17. DERIVATIVE FINANCIAL INSTRUMENTS
EUR million
Interest rate derivatives
Interest rate swaps
Notional amount
Fair value
Foreign currency derivatives
Currency forwards
Notional amount
Fair value
Currency options, purchased
Notional amount
Fair value
Currency options, written
Notional amount
Fair value
Interest rate and currency swaps
Notional amount
Fair value
Electricity derivatives
Electricity forwards
Notional amount
Fair value
2018
2017
200.0
–1.6
100.0
–1.3
450.8
–4.3
413.0
8.3
27.5
0.3
37.6
–0.2
86.0
18.1
15.2
0.1
30.5
–0.2
67.5
10.8
4.8
2.9
5.6
0.0
Unrealised fair value changes of interest rate and electricity
derivatives are not recognised in profit and loss. The interest
rate swap hedges the future interest payments of a loan from a
financial institution and the electricity forwards hedge the future
electricity purchase prices in Finland. The contractual terms of
these derivatives and the hedged items are congruent. The cash
flows of the interest rate swaps will occur during the next six years
and the cash flows of the electricity forwards during the next four
years.
The fair value of forward exchange contracts is measured using
the forward rates on the reporting date. The fair value of currency
options is calculated using an option valuation model.
The fair value of interest rate derivatives is determined as the
present value of the future cash flows based on market interest
rates on the reporting date.
The fair value of electricity derivatives is based on quoted
market prices in active markets on the reporting date.
18. ENVIRONMENTAL COMMITMENTS AND EXPENSES
Expenses relating to environment are included to production costs.
The company has duly attended to environmental commitments
and has no information on material environmental liabilities. In
addition to the environmental aspects presented in the Annual
Report, Nokian Tyres issued a Corporate Social Responsibility
Report in spring 2018.
70
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – FINANCIAL STATEMENTS Key financial indicators
CONSOLIDATED K EY FI NA NCI A L I ND ICATOR S
Figures in EUR million unless otherwise indicated
Net sales
growth, %
Operating margin (EbITDA)
Depreciation and amortisation
Operating profit (EbIT)
% of net sales
Profit before tax
% of net sales
Return on equity, %
Return on capital employed, %
Total assets
Interest-bearing net debt
Equity ratio, %
gearing, %
Net cash from operating activities
Capital expenditure
% of net sales
R&D expenditure
% of net sales
Dividends (proposal)
Personnel, average during the year
PER SHARE DATA
Figures in EUR million unless otherwise indicated
Earnings per share, EUR
growth, %
Earnings per share (diluted), EUR
growth, %
Cash flow per share, EUR
growth, %
Dividend per share, EUR (proposal)
Dividend pay out ratio, % (proposal)
Equity per share, EUR
P/E ratio
Dividend yield, % (proposal)
Market capitalisation 31 December
Adjusted number of shares during the year, average, million units
diluted, million units
Number of shares 31 December, million units
Number of shares entitled to a dividend, million units
2018
1,595.6
1.5%
465.8
93.4
372.4
23.3%
361.7
22.7%
20.0%
23.3%
2,092.9
–315.2
71.0%
–21.2%
536.9
226.5
14.2%
20.8
1.3%
218.1
4,790
2018
2.15
32.4%
2.14
32.5%
3.91
127.2%
1.58
73.9%
10.79
12.5
5.9%
3,702.9
137.26
138.14
137.79
138.07
2017
1,572.5
13.0%
463.7
98.3
365.4
23.2%
332.4
21.1%
15.1%
22.4%
1,877.4
–208.3
78.2%
–14.2%
234.6
134.9
8.6%
21.8
1.4%
214.2
4,630
2017
1.63
–13.0%
1.61
–13.2%
1.72
–36.3%
1.56
96.7%
10.74
23.3
4.1%
5,188.7
136.25
137.28
136.75
137.28
2016
1,391.2
2.3%
395.2
84.7
310.5
22.3%
298.7
21.5%
18.7%
19.9%
1,975.7
–287.4
73.8%
–19.7%
364.4
105.6
7.6%
20.3
1.5%
208.0
4,433
2016
1.87
3.6%
1.86
3.2%
2.70
27.4%
1.53
82.6%
10.75
19.0
4.3%
4,814.0
134.86
135.56
135.68
135.93
2015
1,360.1
–2.1%
378.6
82.6
296.0
21.8%
274.2
20.2%
19.6%
20.3%
1,754.8
–209.7
70.8%
–16.9%
283.4
101.7
7.5%
18.7
1.4%
202.0
4,421
2015
1.80
15.1%
1.80
15.0%
2.12
–12.7%
1.50
83.9%
9.24
18.4
4.5%
4,458.3
133.63
133.74
134.39
134.69
2014
1,389.1
–8.7%
398.5
89.8
308.7
22.2%
261.2
18.8%
16.0%
19.2%
1,797.0
–164.6
67.5%
–13.6%
323.4
80.6
5.8%
16.6
1.2%
193.5
4,272
2014
1.56
12.9%
1.56
12.9%
2.43
1.4%
1.45
92.9%
9.07
13.0
7.1%
2,708.1
133.16
135.10
133.17
133.47
2013
1,521.0
–5.7%
479.0
93.5
385.5
25.3%
312.8
20.6%
13.0%
21.8%
2,062.9
–56.4
67.6%
–4.1%
317.6
125.6
8.3%
16.1
1.1%
193.3
4,194
2013
1.39
–45.0%
1.39
–43.5%
2.39
–19.2%
1.45
105.2%
10.45
25.2
4.2%
4,647.7
132.65
137.62
133.29
133.34
2012
1,612.4
10.7%
496.9
81.9
415.0
25.7%
387.7
24.0%
25.2%
24.3%
2,019.6
–65.2
71.2%
–4.5%
388.7
209.2
13.0%
16.9
1.0%
191.9
4,083
2012
2.52
5.4%
2.46
5.8%
2.96
64.2%
1.45
58.0%
10.89
11.9
4.8%
3,971.9
131.24
137.39
131.96
132.32
2011
1,456.8
37.7%
451.7
71.6
380.1
26.1%
359.2
24.7%
29.1%
27.4%
1,875.9
–3.6
63.2%
–0.3%
232.9
161.7
11.1%
15.1
1.0%
156.6
3,866
2011
2.39
78.7%
2.32
75.8%
1.80
–30.1%
1.20
50.7%
9.15
10.4
4.8%
3,224.7
129.12
135.70
129.61
130.50
2010
1,058.1
32.5%
291.5
69.4
222.2
21.0%
208.8
19.7%
20.0%
19.9%
1,371.6
0.7
68.4%
0.1%
327.2
50.5
4.8%
12.7
1.2%
83.8
3,338
2010
1.34
186.9%
1.32
168.2%
2.58
66.0%
0.65
49.4%
7.34
20.5
2.4%
3,505.4
126.75
132.96
127.70
128.85
2009
798.5
–26.1%
164.0
61.9
102.0
12.8%
73.5
9.2%
7.6%
9.4%
1,221.9
263.7
62.0%
34.8%
194.2
86.5
10.8%
12.0
1.5%
50.7
3,503
2009
0.47
–58.4%
0.49
–55.4%
1.56
953.2%
0.40
87.0%
6.07
36.4
2.4%
2,122.5
124.85
129.76
124.85
126.69
71
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – FINANCIAL STATEMENTS CONSOLIDATED K EY FI NA NCI A L I ND ICATOR S
Definitions
Return on equity, % =
Profit for the period
Total equity (average)
Return on capital employed, % =
Profit before tax + interest and other financial expenses
Total assets – non-interest-bearing debt (average)
Equity ratio, % =
gearing, % =
Total equity
Total assets – advances received
Interest-bearing net debt
Total equity
Earnings per share, EUR =
Profit for the period attributable to the equity holders of the parent
Average adjusted number of shares1 during the year
Earnings per share (diluted2), EUR =
Profit for the period attributable to the equity holders of the parent
Average adjusted and diluted2 number1 of shares during the year
Cash flow per share, EUR =
Cash flow from operations
Average adjusted number of shares1 during the year
Dividend per share, EUR =
Dividend for the year
Number of shares entitled to a dividend
X 100
X 100
X 100
X 100
Dividend pay-out ratio, % =
Dividend for the year
Net profit
X 100
Equity per share, EUR =
Equity attributable to equity holders of the parent
Adjusted number of shares1 on the balance sheet date
P/E ratio =
Dividend yield, % =
Share price, 31 December
Earnings per share
Dividend per share
Share price, 31 December
1 without treasury shares
2 the share options affect the dilution as the average share market price for the financial year exceeds the defined subscription price
72
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – FINANCIAL STATEMENTS Information on Nokian Tyres’ share
INFORMATION O N NOK IA N TY R E S ’ S H A R E
Share data
Market
Listing date
Currency
ISIN
Symbol
Reuters symbol
bloomberg symbol
Industry
Sector
Industry
Number of shares, December 31, 2018
Nasdaq Helsinki
June 1, 1995
euro
FI0009005318
NRE1V
NRE1V.HE
NRE1V:FH
OMXH Large Caps
Consumer goods
Automobiles and parts
138,065,719
Share capital and shares
The company has one class of shares, each share entitling the
shareholder to one vote and carrying equal rights to a dividend. On
December 31, 2018, the number of shares was 138,065,719.
Read more: www.nokiantyres.com/company/investors/share/
share-information/
Dividend policy
Nokian Tyres’ dividend policy for 2016–2018 was to distribute a
dividend of at least 50% of net earnings.
In November 2018, Nokian Tyres’ board of Directors decided on
a new dividend policy for 2019–2021. Nokian Tyres’ dividend policy is
to distribute a dividend above 50% of net earnings.
Stock options 2013 directed at personnel
The Annual general Meeting held on April 11, 2013 decided to issue
stock options to the personnel of the Nokian Tyres group and the
wholly owned subsidiary of Nokian Tyres plc. A deviation was made
from the shareholders’ pre-emptive subscription right because the
stock options were designed to be part of the group’s incentive
and commitment program.
The stock option 2013 program has been defined as follows:
The purpose of the stock options is to encourage the personnel
to work on a long-term basis to increase shareholder value. The
maximum total number of stock options issued will be 3,450,000
and they will be issued gratuitously. Of the stock options, 1,150,000
are marked with the symbol 2013A, 1,150,000 are marked with the
symbol 2013b, and 1,150,000 are marked with the symbol 2013C.
The stock options entitle their owners to subscribe for a maximum
total of 3,450,000 shares in the Company or existing shares held
by the Company. The stock options issued can be exchanged
for shares constituting a maximum total of 2.5% of all of the
Company’s shares and votes of the shares, after the potential share
subscription, if new shares are issued in the share subscription.
The share subscription price for stock option 2013A is the
trade volume weighted average quotation of the Company’s share
on Nasdaq Helsinki between January 1 and April 30, 2013, i.e. EUR
32.26, for stock option 2013b, the trade volume weighted average
quotation of the share on Nasdaq Helsinki between January 1
and April 30, 2014, i.e. EUR 29.54, and for stock option 2013C, the
trade volume weighted average quotation of the share on Nasdaq
Helsinki between January 1 and April 30, 2015, i.e. EUR 24.42. The
share subscription price will be credited to the reserve for invested
unrestricted equity.
If the company distributes dividends or similar assets from
the reserves of unrestricted equity, the amount of the dividend
or distributable unrestricted equity shall be deducted from the
share’s subscription price of the stock options and decided after
the beginning of the period for the determination of the share
subscription price but before share subscription, as per the
dividend record date or the record date of the repayment of equity.
The share subscription period:
May 1, 2015–May 31, 2017 for stock options 2013A
May 1, 2016–May 31, 2018 for stock options 2013b
May 1, 2017–May 31, 2019 for stock options 2013C.
As a result of the subscriptions with the 2013 stock options,
the number of shares in Nokian Tyres plc may increase by a
maximum of 3,450,000 new shares. The share subscription price
shall be credited to the paid-up unrestricted equity reserve. A share
ownership plan is incorporated into the 2013 stock options, obliging
the group’s senior management to acquire the Company’s shares
with a proportion of the income gained from the stock options.
Read more: www.nokiantyres.com/company/investors/share/
stock-options/
Stock options listed on the main
list of Nasdaq Helsinki Oy
The share subscription period for stock options 2013b ended in May
2018. The total number of stock options 2013b was 1,150,000. Each
stock option 2013b entitled its holder to subscribe to one share
in Nokian Tyres plc. The shares with the stock options 2013b were
subscribed during the period of May 1, 2016 to May 31, 2018.
The total number of stock options 2013C is 1,150,000. Each
stock option 2013C entitles its holder to subscribe to one share
in Nokian Tyres plc. The shares can be subscribed with the stock
options 2013C during the period of May 1, 2017 to May 31, 2019. At
the end of 2018, the share subscription price with stock options
2013C was EUR 19.83/share. The dividends paid are deducted from
the share subscription price.
73
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – FINANCIAL STATEMENTS Number of shareholders on December 31, 2018
Number of shares
1–100
101–500
501–1,000
1,001–5,000
5,001–10,000
10,001–50,000
50,001–100,000
100,001–500,000
500,001–
Total
Number of
shareholders
% of
shareholders
Total number of
shares
% of share
capital
22,500
16,720
4,015
3,152
333
214
32
29
12
47.9
35.6
8.5
6.7
0.7
0.5
0.1
0.1
0.0
1,125,062
4,296,072
3,093,877
6,558,829
2,397,826
4,556,090
2,210,667
7,344,069
106,483,227
47,007
100
138,065,719
0.8
3.1
2.2
4.8
1.7
3.3
1.6
5.3
77.1
100
Share trading volumes on Nasdaq
Helsinki Jan 1, 2014–Dec 31, 2018
pcs million
5
4
3
2
1
0
Shareholder structure on December 31, 2018
Nominee registered and non-Finnish holders
Households
general government
Financial and insurance corporations
Non-profit institutions
Corporations
Total
Number of
shares
98,484,587
16,768,270
8,774,873
6,288,886
4,557,923
3,191,180
138,065,719
Read more: www.nokiantyres.com/company/investors/share/major-shareholders/
14
15
16
17
18
% of share
capital
Share price development on Nasdaq
Helsinki Jan 1, 2014–Dec 31, 2018
71.3
12.1
6.4
4.6
3.3
2.3
100
EUR
50
40
30
20
10
14
15
16
17
18
Read more: www.nokiantyres.com/company/investors/share/share-performance/
74
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – FINANCIAL STATEMENTS Nokian Tyres group structure
NO KIAN TYRES
GRO UP STRUCTURE
NOKIAN DÄCK AB
NOKIAN DEKK AS
NOKIAN TYRES AG
NOKIAN TYRES GMBH
NOKIAN TYRES CANADA INC.
DIRENIC OY
NOKIAN TYRES PLC
VIANOR HOLDING OY
VIANOR AB
VIANOR AS
VIANOR OY
POSIBER OY
VIANOR INC.
NOKIAN TYRES U.S. HOLDINGS INC
VIANOR RUSSIA HOLDING OY
NOKIAN TYRES INC.
NORDICWHEELS AB
NOKIAN TYRES U.S. OPERATIONS LLC
NT TYRE MACHINERY OY
NOKIAN TYRES HOLDING OY
TAA NOKIAN SHINA BELARUS
OOO NOKIAN SHINA, Vsevolozhsk
OOO NOKIAN TYRES, Vsevolozhsk
OOO HAKKAPELIITTA VILLAGE
NOKIAN TYRES TRADING (SHANGHAI) CO LTD
NOKIAN TYRES S.R.O.
NOKIAN HEAVY TYRES LTD
TOV NOKIAN SHINA
TOO NOKIAN TYRES
HAKKA INVEST OY
OOO HAKKA INVEST
NOKIAN TYRES SPAIN S.L.U
KIINTEISTÖ OY NOKIAN NOSTURIKATU 18
KIINTEISTÖ OY NOKIAN RENGASKATU 4
NOKIANVIRRAN ENERGIA OY
32.3%
75
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – FINANCIAL STATEMENTS Signatures
SIGNATURE S FOR THE FI NAN CI AL
STATE MEN TS AND THE REPO RT
BY THE BOARD OF DI RECTO R S
Nokia, 5 February 2019
Petteri Walldén
Veronica Lindholm
Heikki Allonen
Inka Mero
Raimo Lind
George Rietbergen
Kari Jordan
Pekka Vauramo
Hille Korhonen
CEO
76
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – FINANCIAL STATEMENTS Auditors’ Report
REP ORT ON T HE AUDIT OF
TH E FINANCIAL STATEMENTS
To the Annual general Meeting of Nokian Tyres Plc
Report on the Audit of the Financial Statements
Opinion
We have audited the financial statements of Nokian Tyres
Plc (business identity code 0680006-8) for the year ended
31 December, 2018. The financial statements comprise the
consolidated balance sheet, income statement, statement of
comprehensive income, statement of changes in equity, statement
of cash flows and notes, including a summary of significant
accounting policies, as well as the parent company’s balance sheet,
income statement, statement of cash flows and notes.
In our opinion
• the consolidated financial statements give a true and fair view
of the group’s financial position, financial performance and
cash flows in accordance with International Financial Reporting
Standards (IFRS) as adopted by the EU
• the financial statements give a true and fair view of the
parent company’s financial performance and financial position
in accordance with the laws and regulations governing the
preparation of financial statements in Finland and comply with
statutory requirements.
Our opinion is consistent with the additional report submitted
to the Audit Committee.
Basis for Opinion
We conducted our audit in accordance with good auditing practice
in Finland. Our responsibilities under good auditing practice are
further described in the Auditor’s Responsibilities for the Audit of
the Financial Statements section of our report.
We are independent of the parent company and of the group
companies in accordance with the ethical requirements that are
applicable in Finland and are relevant to our audit, and we have
fulfilled our other ethical responsibilities in accordance with these
requirements.
In our best knowledge and understanding, the non-audit
services that we have provided to the parent company and group
companies are in compliance with laws and regulations applicable
in Finland regarding these services, and we have not provided any
prohibited non-audit services referred to in Article 5(1) of regulation
(EU) 537/2014. The non-audit services that we have provided have
been disclosed in the notes to the financial statements.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the
financial statements of the current period. These matters
were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these matters.
The significant risks of material misstatement referred to in
the EU Regulation No 537/2014 point (c) of Article 10(2) are
included in the description of key audit matters below.
We have also addressed the risk of management override of
internal controls. This includes consideration of whether there was
evidence of management bias that represented a risk of material
misstatement due to fraud.
Materiality
The scope of our audit was influenced by our application of
materiality. The materiality is determined based on our professional
judgement and is used to determine the nature, timing and extent
of our audit procedures and to evaluate the effect of identified
misstatements on the financial statements as a whole. The level of
materiality we set is based on our assessment of the magnitude of
misstatements that, individually or in aggregate, could reasonably
be expected to have influence on the economic decisions of the
users of the financial statements. We have also taken into account
misstatements and/or possible misstatements that in our opinion
are material for qualitative reasons for the users of the financial
statements.
77
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – FINANCIAL STATEMENTS Revenue recognition and impairment of trade receivables
(Refer to Accounting policies for the consolidated financial statements, notes 19 and 27)
Income tax issues
(Refer to Accounting policies for the consolidated financial statements, notes 10, 17 and 32)
The key audit matter
How the matter was addressed in the audit
The key audit matter
How the matter was addressed in the audit
• The trade receivables amounted to EUR 409.5
million in the consolidated statement of
financial position as at 31 December 2018.
• The industry is marked by seasonal sales and
long credit periods granted to clients.
Our audit procedures included, among others:
• We assessed and tested internal controls over
recording sales transactions and recognising
related revenues, maintaining customer data
as well as over the approval practices related to
price changes, among others.
• We assessed the group’s credit control process
and considered the related instructions and
other documentation, both on group level and
in group companies.
• We evaluated credit risk and the level of credit
losses recorded based on the information on
group’s trade receivables and customers.
• The parent company has been subject to a tax
audit concerning the tax years 2007-2011. As
a result the parent company was obliged to
pay significant additional taxes and interest
regarding transfer pricing in the intra-group
sales between Finland and Russia.
• based on the appeal Nokian Tyres made,
the Finnish Tax Administration returned the
previously paid additional taxes and interest to
the company in June 2018.
• The Tax Recipient Services Unit applied for
permission to appeal in July 2018. The tax
rectification process is still ongoing.
• The group´s effective tax rate is low mainly due
to tax incentives received in Russia.
Our audit procedures included, among others:
• Together with KPMg tax specialists we
obtained an understanding of the decisions
made by the Finnish Tax Administration and
the related claims submitted by the company.
We also evaluated the appropriateness of the
related accounting principles the accuracy
and adequacy of the disclosures given in the
financial statements.
• We gained an understanding of the
agreements entered into with the Russian tax
authority related to tax incentives in Russia.
We also evaluated the appropriateness of the
accounting principles applied in respect tax
incentives as well as assessed the calculations
made in connection with the year-end financial
statements.
Foreign currency risks
(Refer to Accounting policies for the consolidated financial statements notes 9, 27 and 29)
The key audit matter
How the matter was addressed in the audit
• A significant part of the group’s operations
are derived from Russia, and the exchange
rate between Euro and Rouble may fluctuate
significantly.
• The group has invested heavily in Russia by
building a production plant. In the Russian
subsidiaries there is a significant amount of
equity and the euro-denominated value of the
equity may fluctuate substantially following
the development of Rouble exchange rate.
Our audit procedures included, among others:
• We obtained an understanding of the
centralised group Treasury and the methods
and policies used by financial management to
manage exchange rate risks.
• We evaluated the appropriateness of
measurement of items denominated in foreign
currencies in the financial statements.
78
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – FINANCIAL STATEMENTS Responsibilities of the Board of Directors and the
Managing Director for the Financial Statements
The board of Directors and the Managing Director are responsible
for the preparation of consolidated financial statements that
give a true and fair view in accordance with International Financial
Reporting Standards (IFRS) as adopted by the EU, and of financial
statements that give a true and fair view in accordance with
the laws and regulations governing the preparation of financial
statements in Finland and comply with statutory requirements. The
board of Directors and the Managing Director are also responsible
for such internal control as they determine is necessary to enable
the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the board of Directors
and the Managing Director are responsible for assessing the
parent company’s and the group’s ability to continue as going
concern, disclosing, as applicable, matters relating to going
concern and using the going concern basis of accounting. The
financial statements are prepared using the going concern basis
of accounting unless there is an intention to liquidate the parent
company or the group or cease operations, or there is no realistic
alternative but to do so.
Auditor’s Responsibilities for the Audit
of Financial Statements
Our objectives are to obtain reasonable assurance on whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with good auditing practice will always
detect a material misstatement when it exists. Misstatements can
arise from fraud or error and are considered material if, individually
or in aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of the financial
statements.
As part of an audit in accordance with good auditing practice,
we exercise professional judgment and maintain professional
skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the
financial statements, whether due to fraud or error, design
and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to
provide a basis for our opinion. The risk of not detecting a
material misstatement resulting from fraud is higher than for
one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of
internal control.
• Obtain an understanding of internal control relevant to the audit
in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the parent company’s or the group’s
internal control.
• Evaluate the appropriateness of accounting policies used and the
reasonableness of accounting estimates and related disclosures
made by management.
• Conclude on the appropriateness of the board of Directors’
and the Managing Director’s use of the going concern basis of
accounting and based on the audit evidence obtained, whether
a material uncertainty exists related to events or conditions
that may cast significant doubt on the parent company’s or the
group’s ability to continue as a going concern. If we conclude that
a material uncertainty exists, we are required to draw attention
in our auditor’s report to the related disclosures in the financial
statements or, if such disclosures are inadequate, to modify
our opinion. Our conclusions are based on the audit evidence
obtained up to the date of our auditor’s report. However, future
events or conditions may cause the parent company or the
group to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the
financial statements, including the disclosures, and whether the
financial statements represent the underlying transactions and
events so that the financial statements give a true and fair view.
• Obtain sufficient appropriate audit evidence regarding the
financial information of the entities or business activities within
the group to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and
performance of the group audit. We remain solely responsible for
our audit opinion.
We communicate with those charged with governance
regarding, among other matters, the planned scope and timing of
the audit and significant audit findings, including any significant
deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with
a statement that we have complied with relevant ethical
requirements regarding independence, and communicate with
them all relationships and other matters that may reasonably
be thought to bear on our independence, and where applicable,
related safeguards.
From the matters communicated with those charged with
governance, we determine those matters that were of most
significance in the audit of the financial statements of the current
period and are therefore the key audit matters. We describe
these matters in our auditor’s report unless law or regulation
precludes public disclosure about the matter or when, in extremely
rare circumstances, we determine that a matter should not be
communicated in our report because the adverse consequences
of doing so would reasonably be expected to outweigh the public
interest benefits of such communication.
Other Reporting Requirements
Information on our audit engagement
Nokian Tyres Plc has become a PIE entity in June 1995. KPMg Oy Ab
has been auditor during all the years the company has been a PIE
entity.
Other Information
The board of Directors and the Managing Director are responsible
for the other information. The other information comprises the
report of the board of Directors and the information included in
the Annual Report, but does not include the financial statements
and our auditor’s report thereon. We have obtained the report of
the board of Directors prior to the date of this auditor’s report, and
the Annual Report is expected to be made available to us after that
date.
Our opinion on the financial statements does not cover the other
information.
In connection with our audit of the financial statements, our
responsibility is to read the other information identified above and,
in doing so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge
obtained in the audit, or otherwise appears to be materially
misstated. With respect to the report of the board of Directors,
our responsibility also includes considering whether the report of
the board of Directors has been prepared in accordance with the
applicable laws and regulations.
In our opinion, the information in the report of the board
of Directors is consistent with the information in the financial
statements and the report of the board of Directors has been
prepared in accordance with the applicable laws and regulations.
If, based on the work we have performed on the other
information that we obtained prior to the date of this auditor’s
report, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have
nothing to report in this regard.
Other opinions
We support that the financial statements should be adopted.
The proposal by the board of Directors regarding the use of
the distributable funds shown in the Financial Statements is in
compliance with the Limited Liability Companies Act. We support
that the Members of board of Directors and the Managing Director
should be discharged from liability for the financial period audited
by us.
Helsinki 18 February 2019
KPMg OY Ab
LASSE HOLOPAINEN
Authorised Public Accountant, KHT
79
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – FINANCIAL STATEMENTS Corporate Governance Statement
CO RPORATE GOV ERN AN CE STATE ME N T
I Introduction
Nokian Tyres plc (hereinafter referred to as “Nokian Tyres”
or the “Company”) follows the Corporate governance Code
published by the Securities Market Association that entered
into force on January 1, 2016 (the “Corporate governance
Code”) and the Company complies with the recommendations
in the said code. The Corporate governance Code is available
in its entirety at www.cgfinland.fi/en/. The Company follows the
Finnish Limited Liability Companies Act, laws and regulations
relating to stock-listed companies, the Articles of Association,
the rules of procedure of the board of Directors and the
committees, the Nasdaq Helsinki rules and regulations, and
the orders and instructions from the European Securities
and Markets Authority as well as the Financial Supervisory
Authority.
The Company publishes its Corporate governance
Statement as a separate document and as part of the annual
report. The statement also includes a Report of the Salaries and
Remuneration. The statement is available on the Company’s
website at www.nokiantyres.com under Investors – Corporate
governance.
The Company’s corporate governance is based on the
general Meeting, the Articles of Association, the board of
Directors, the President and CEO, the group’s management
team, the legislation and regulations mentioned hereinabove
as well as the group’s policies, procedures, and practices. The
board of Directors has approved the Corporate governance
Statement. The Company’s auditor verifies that the statement
and its related descriptions of the internal reporting controls
and risk management correspond to the financial reporting
process. The statement will not be updated during the financial
period; however, up-to-date information will be updated on
the Company’s website at www.nokiantyres.com/company/
investors/.
II Descriptions concerning governance
Nokian Tyres is a Finnish limited liability company and its
registered place of business is Nokia. The parent company
Nokian Tyres and its subsidiaries form the Nokian Tyres group.
The administrative bodies of the parent company Nokian
Tyres plc, i.e. the general Meeting, board of Directors and
President and CEO, are responsible for the administration
and operation of the Nokian Tyres group. The general
Meeting elects the members of the board of Directors, and
the board of Directors appoints the Company’s President
and CEO. The President and CEO is assisted by the
management team in leading the Company’s operations.
Nokian Tyres’ administrative organization
Shareholders
Auditors
General Meeting
Board
Internal control
President and CEO
Management Team
Audit Committee
Personnel and
Remuneration
Committee
General Meeting
The Company’s highest decision-making power is held
by the general Meeting, whose tasks and procedures are
outlined in the Limited Liability Companies Act and the
Articles of Association. The Annual general Meeting decides
on such matters as the confirmation of the Company’s
annual accounts, profit distribution, and discharging
the board of Directors and the President and CEO from
liability. Furthermore, the Annual general Meeting decides
on the number of members in the board of Directors, the
selection of the board members and the auditor, and
their remuneration. In addition, the general Meeting can
make decisions on questions such as amendments to the
Articles of Association, share issues, granting warrants, and
acquisition of the company’s own shares.
The Annual general Meeting is held by the end of May of
each year on a date determined by the board of Directors,
either at the Company’s registered place of business or in
the city of Tampere or Helsinki. An extraordinary general
meeting is summoned whenever the board considers this to
be necessary or if an auditor or a group of shareholders with
a holding of a total of at least one-tenth of the entire stock
requires it in writing in order to address a particular issue.
According to law, shareholders are entitled to subject
matters belonging to the general Meeting’s scope of power
to be addressed at the meeting; this requires that the
shareholders submit the requirement to the board in time for
inclusion in the invitation to the meeting. The shareholders
shall submit their requirement for subjecting a matter to be
addressed by the general Meeting by the date indicated on
the Company’s website.
The Articles of Association state that the invitation to the
general Meeting must be published in one daily newspaper
distributed nationwide and one distributed in the Tampere
region. In addition, the Company publishes the invitation to
the general Meeting as a stock exchange release and on its
website. The invitation lists the agenda of the meeting.
The Company’s Articles of Association are available on
the Company’s website at www.nokiantyres.com/company/
investors/.
Shareholders are entitled to participate in the general
Meeting if they are registered in the Company’s list of
shareholders, maintained by Euroclear Finland Oy, on the
record date separately indicated by the Company. Owners of
administratively registered shares can be temporarily added
to the shareholder register in order to make them eligible to
attend the general Meeting.
According to the Corporate governance Code, the
Chairman of the board, the board members and the President
and CEO must be present at the general Meeting, and the
auditor must be present at the Annual general Meeting. board
member candidates must be present at the general Meeting
deciding on their election.
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – CORPORATE gOVERNANCE STATEMENT
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – CORPORATE gOVERNANCE STATEMENT
80
The Annual general Meeting for 2018 took place on 10 April
The Company has a separate Audit Committee and a
2018 at the Tampere Hall in Tampere. The meeting confirmed
the consolidated financial statements and discharged the
board members and the President and CEO from liability
for the fiscal year 2017. All of the documents related to the
Annual general Meeting are available on the Company’s
website at www.nokiantyres.com/company/investors.
The Annual general Meeting for 2019 will take place on 9
April 2019 at 4:00 p.m. in Tampere.
Board of Directors
Operation of the Board of Directors
The board is responsible for corporate governance and the
appropriate conduct of ordinary activities pursuant to the
Limited Liability Companies Act and other regulations. The
board holds the general authority in company-related issues,
unless other company bodies have the authority under the
applicable legislation or the Articles of Association. The
policies and key tasks of the board are defined in the Limited
Liability Companies Act, the Articles of Association, and the
board’s rules of procedure. The key tasks include:
• Consolidated financial statements, half year reviews and
interim reports
• Matters presented to the general Meeting
• Appointing and dismissing the President and CEO
• Organization of financial control.
In addition, the board deals with, and decides on, matters of
principle as well as issues that carry financial and business
significance, such as:
• group and business unit level strategies
• The group’s action, budget, and investment plans
• The group’s risk management and reporting procedures
• Decisions concerning the structure and organization of
the group
• Significant individual investments, acquisitions,
divestments, and reorganizations
• The group’s insurance and financing policies
• Reward and incentive schemes for the group’s
management
• Appointing board committees, and
• Monitoring and evaluating the actions of the President and
CEO.
Personnel and Remuneration Committee.
The President and CEO of Nokian Tyres is in charge of
ensuring that the board members have the necessary and
sufficient information on the Company’s operations. The board
assesses its activities and operating methods by carrying out
a self-evaluation once a year. Members of the board will not
participate in making a decision where the law states that they
must be disqualified due to a conflict of interest.
In 2018, in addition to its regular duties, the board
discussed the Company’s strategy that was updated in
early 2018. The board also discussed the incentive schemes.
Incentive schemes support the Company in fulfilling its
strategy.
Composition of the Board
According to the Articles of Association of Nokian Tyres, the
board of Directors comprises no fewer than four and no more
than eight members. The proposal regarding the composition
of the board for the general Meeting is prepared by the
Personnel and Remuneration Committee. The number of
board members and the composition of the board shall be
such that the board is capable of efficiently carrying out its
tasks, while taking into account the requirements set by the
Company’s operations and its stage of development. The
elected board members must be qualified for the task and
able to allocate enough time for the board duties.
Members of the board are elected at the Annual general
Meeting for a one-year term of office that begins after the
closing of the Annual general Meeting and ends at the end
of the next Annual general Meeting. The board of Directors
appoints a Chairman and a Deputy Chairman from among its
members. The remuneration payable to the board members is
also confirmed at the Annual general Meeting.
The board meetings usually take place in Helsinki. The
board also visits the main units of the group and holds its
meetings at these locations. When necessary, telephone
conferences can also be arranged. The President and CEO
participates in the board meetings. The Chief Financial Officer
and other group Management Team members as well as
the internal auditor participate in the board meetings, when
necessary. The auditor participates annually in the meetings
dealing with financial statements and the auditing plan. The
group general Counsel is the secretary of the board. At the
end of its meetings, the board holds discussions without the
Company’s senior management.
Information on the Board members
The Annual general Meeting on April 10, 2018 elected 8 board
members. The board members Heikki Allonen, Raimo Lind,
Veronica Lindholm, Inka Mero, george Rietbergen, and Petteri
Walldén were re-elected. Kari Jordan and Pekka Vauramo
were elected as new members. In the constituent meeting
held after the Annual general Meeting, the board appointed
Petteri Walldén as its Chairman and Kari Jordan as the Deputy
Chairman.
Petteri Wallden, Chairman of the Board (b. 1948)
Member of the board since 2005. Member of the Personnel and
Remuneration Committee.
Education: Master of Science (Technology)
Full-time position: CEO, Wapiti Oy
Key experience:
2007–2010 Alteams Oy, President and CEO;
2001–2005 Onninen Oy, President and CEO;
1996–2001 Ensto Oy, President and CEO;
1990–1996 Nokia Kaapeli Oy, President and CEO;
1987–1990 Sako Oy, President and CEO.
Key positions of trust:
Chairman of the board: Savonlinna Opera Festival, Componenta
Corporation
Deputy Chairman of the board: Tikkurila Oyj
Member of the board: Efla Oy, Kuusakoski group Oy
Kari Jordan, Deputy Chairman of the Board (b. 1956)
Member of the board since 2018. Chairman of the Personnel
and Remuneration Committee.
Education: Master of Science (Economics)
Full-time position: Chairman of the board, Outokumpu Oyj
Key experience:
2006–2018 Metsä group, President and CEO
2004–2017 Metsäliitto Cooperative, CEO
1981–2004 Several management positions in the banking and
financial sector at Citibank, OKO bank, KOP bank and Nordea
group
Key positions of trust:
Chairman of the board: Outokumpu Oyj
Chairman of the Supervisory board: Varma Mutual Pension
Insurance Company
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – CORPORATE gOVERNANCE STATEMENT
81
Heikki Allonen (b. 1954)
Veronica Lindholm (b. 1970)
Member of the board since 2016. Member of the Audit
Committee.
Member of the board since 2016. Member of the Personnel
and Remuneration Committee.
George Rietbergen (b. 1964)
Member of the board since 2017.
Education: Master of Science (Technology)
Full-time position: President and CEO, Hemmings Oy Ab
Education: Master of Science (Economics)
Full-time position: CEO, Finnkino Oy
Key experience:
2016– Hemmings Oy Ab, President and CEO
2008–2016 Patria Oyj, President and CEO;
2004–2008 Fiskars Oyj, President and CEO;
2001–2004 SRV Oyj, President and CEO;
1992–2001 Wärtsilä Oy (Metra Oy Ab), Member of the board;
1991–1992 Metra Oy Ab, VP of Development;
1986–1991 Oy Lohja Ab, VP/Assistant VP of Corporate
Planning.
Key experience:
2015– Finnkino Oy, CEO;
2013–2015 Mondelez Finland, CEO;
2009–2013 Walt Disney Company Nordic, VP, Chief Marketing
Officer;
2008–2009 Walt Disney Studios, Head of Digital Distribution
EMEA;
2000–2008 Walt Disney International Nordic, Marketing
Director.
Key positions of trust:
Vice Chairman of the board: VR group Oy
Member of the board and Chairman of the Audit Committee:
Detection Technology Oyj
Member of the board: Savox Oy Ab
Raimo Lind (b. 1953)
Member of the board since 2014. Chairman of the Audit
Committee.
Education: Master of Science (Economics)
Full-time position: Professional board member
Key experience:
2005–2013 Wärtsilä Corporation, Senior Executive Vice
President and deputy to the CEO;
1998–2004 Wärtsilä Corporation, CFO;
1992–1997 Tamrock Oy; Coal division president, Service
division president, CFO;
1990–1991 Scantrailer Ajoneuvoteollisuus Oy; Managing
Director
1976–1989 Service division, Vice president, Wärtsilä Singapore
Ltd, MD, Diesel division, VP group Controller, Wärtsilä
Key positions of trust:
Chairman of the board: Elisa Oyj and Nest Capital
Member of the board: Nordkalk Oy and HiQ Ab
Key positions of trust:
Chairman of the board: Forum Cinemas SIA and Forum
Cinemas UAb
Member of the board: Service Sector Employers PALTA and
the Finnish Chamber of Films
Member of the Supervisory board: Forum Cinemas AS
Inka Mero (b. 1976)
Member of the board since 2014. Member of the Audit
Committee.
Education: Master of Science (Economics).
Full-time position: Industryhack Oy, Partner and Chairwoman
Key experience:
2018– Industryhack Oy, Partner and Chairwoman;
2016– Pivot5 Oy, Co-founder and Chairwoman;
2008– KoppiCatch Oy, Co-founder and Chairwoman;
2006–2008 Playforia Oy, CEO;
2005–2006 Nokia Corporation, Director;
2001–2005 Digia plc, VP, Sales and Marketing;
1996–2001 Sonera Corporation, Investment Manager
Key positions of trust:
Chairman of the board: KoppiCatch Oy and Industryhack Oy
Member of the board: Fiskars Corporation and YIT
Corporation
Education: Master of business Administration
Full-time position: 5Square Committed Capital, Partner
Key experience:
2017– 5Square Committed Capital, Partner;
2016–Nokian Tyres plc, Advisor to the board;
2015–2016 Arriva Netherlands, COO;
2013–2015 goodyear Dunlop Tyres, CEO, DACHgermany;
2012–2013 goodyear Dunlop Tyres, Vice President,
Commercial Tires, EMEAbelgium;
2010–2012 goodyear Dunlop Tyres, CEO, UK & IrelandUK;
2005–2010 goodyear Dunlop Tyres, Director,
beneluxNetherlands;
2002–2005 goodyear Dunlop Tyres, Director, Retail business,
EMEANetherlands;
2001–2002 goodyear Dunlop Tyres, Director, E-business and
Retail business, EMEANetherlands;
1999–2001 KLM, Director of Ebusiness.
Pekka Vauramo (b. 1957)
Member of the board since 2018. Member of the Audit
Committee.
Education: Master of Science (Technology)
Full-time position: Metso Corporation, President and CEO
Key experience:
6/2013–8/2018 Finnair Plc, President and CEO;
2007–2013 Various management positions at Cargotec
1985–2007 Various management positions at Sandvik
Key positions of trust:
Member of the board: boliden group
Independence of the Board members
Pursuant to the recommendation of the Corporate
governance Code, the board assesses the independence of
its members annually. According to the board’s estimate, all
board members are independent of the Company and its
major shareholders.
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – CORPORATE gOVERNANCE STATEMENT
82
Shares owned by Board members and
their controlled corporations
Nokian Tyres holdings of the Company’s
current Board members
Petteri Walldén, chairman
Kari Jordan, deputy chairman
Heikki Allonen, member
Raimo Lind, member
Veronica Lindholm, member
Inka Mero, member
george Rietbergen, member
Pekka Vauramo, member
Total
Number of
shares,
December 31,
2018
20,865
1,011
1,867
3,862
1,867
3,260
1,204
674
34,610
The Board members’ attendance at meetings
The board convened a total of 12 times in 2018.
Attendance at meetings by the Company’s Board
members in 2018
Attendance/
meetings
Petteri Walldén, chairman
Kari Jordan, deputy chairman (since April 10, 2018)
Heikki Allonen, member
Raimo Lind, member
Veronica Lindholm, member
Inka Mero, member
george Rietbergen, member
Pekka Vauramo, member (since April 10, 2018)
12/12
8/8
12/12
12/12
12/12
12/12
12/12
7/8
Diversity of the Board of Directors
The Company sees diversity as a success factor enabling the
achievement of Nokian Tyres’ strategic goals and business
growth. In practice, diversity means different factors such as
gender, age, nationality, and the complementary expertise
of the members, their education and experience in different
professional areas and industrial sectors. Leadership
experience and personal capacities are also considered.
The board shall have no fewer than two representatives
from both genders. If two candidates are equally qualified,
the candidate from the minority gender has priority. This goal
has been met in the current board. The board members have
significant experience in industry, consumer business and
financial management, among other things. The status and
progress of diversity will be monitored by the Personnel and
Remuneration Committee in its self-assessment discussion.
The principles concerning the selection of the board and
its diversity are visible on the Company’s website at
www.nokiantyres.com/company/investors/.
Committees of the Board
The board will decide on the committees and their
chairpersons and members each year during the constituent
meeting. In 2018, the board had two committees: the
Personnel and Remuneration Committee and the Audit
Committee. Each committee must include no fewer than
three members having the competence and expertise
necessary for working in the committee. The majority of the
members of the Personnel and Remuneration Committee
must be independent of the Company The members of the
Audit Committee must be independent of the Company,
and at least one member must be independent of all
major shareholders. The President and CEO and the other
members of the Company management cannot act as
members of the Personnel and Remuneration Committee.
Personnel and Remuneration Committee
The committee prepares a proposal to the general Meeting
on the members to be appointed to the board of Directors
and the remuneration to be paid to the board members. In
addition, the committee prepares a proposal to the board
on the Company’s President and CEO and on the salary
and other incentives paid to the President and CEO. The
Personnel and Remuneration Committee also submits
a proposal to the board on the allocation and criteria of
the personnel share rewards system and other incentives.
The committee has no independent decision-making
power; collective decisions are made by the board, which
is responsible for carrying out the tasks assigned to the
committee.
The committee receives access to the information
regarding factors affecting the assessment of the
independence of new member candidates and the results
from the assessment of the board’s work.
In 2018, the members of the Personnel and Remuneration
Committee were Kari Jordan (chairman) from April 10, 2018
onwards, Raimo Lind until April 10, 2018, Veronica Lindholm,
and Petteri Walldén.
The committee assembled 10 times.
All committee members are independent of the Company
and of all major shareholders in the Company.
Audit Committee
The Audit Committee assists the board of Directors in its
regulatory duties and reports to the board. The committee
has no independent decision-making power; collective
decisions are made by the board, which is then responsible
for carrying out the tasks assigned to the committee.
According to the rules of procedure specified by the
board, the committee controls that bookkeeping, financial
administration, financing, internal control, internal
auditing, audit of the accounts, and risk management are
appropriately arranged in the Company. The committee
follows the reporting process for financial statements as
well as any significant changes in the recording principles
and the items valued in the balance sheet. The committee
also processes the general description of the mechanisms
of internal auditing and risk management of the financial
reporting process, which forms part of the Corporate
governance Statement. The committee follows the statutory
auditing of the financial statement and the consolidated
financial statements and assesses the independence of
the statutory auditor. The committee prepares the draft
resolution on selecting the auditor. The Audit Committee
must have the expertise and experience required for its tasks.
In 2018, the members of the Audit Committee were Raimo
Lind (chairman), Heikki Allonen, Inka Mero, george Rietbergen
until April 10, 2018, and Pekka Vauramo from April 10, 2018
onward. The Company’s chief auditor participates in the
committee’s meetings.
The committee assembled 5 times in 2018.
All committee members are independent of the Company
and of all major shareholders in the Company.
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – CORPORATE gOVERNANCE STATEMENT
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The attendance of Board members at
committee meetings in 2018
Personnel and
Remuneration Committee
Audit
Committee
Petteri Walldén
Kari Jordan (since April 10, 2018)
Heikki Allonen
Raimo Lind
Veronica Lindholm
Inka Mero
george Rietbergen (until April 10, 2018)
Pekka Vauramo (since April 10, 2018)
10/10
6/6
4/4
10/10
5/5
5/5
5/5
1/1
1/1
President and CEO and his/her duties
The President and CEO conducts the group’s business and
manages the Company operations in accordance with
the Limited Liability Companies Act and the instructions
and guidelines provided by the board of Directors. The
President and CEO is responsible for informing the board
of Directors regarding the development of the Company’s
business and financial situation. The President and CEO
prepares the Company´s strategy and objectives for the
board of Directors. The President and CEO is also responsible
for implementing the approved strategy and plans. The
President and CEO is liable for ensuring the legal compliance
of the Company’s bookkeeping and for arranging reliable
asset management. The President and CEO is elected by the
board of Directors.
Hille Korhonen, Lic. Sc. (Tech) has been working as the
Company’s President and CEO since June 1, 2017.
Hille Korhonen (b. 1961)
Education: Licentiate of Science (Technology)
Position: President and CEO June 1, 2017–
Duties and responsibilities and Nokian Tyres holdings
and options holdings of the Group’s management team
and controlled corporations, December 31, 2018
Key experience:
2013−5/2017 Alko Oy, President and CEO;
2008−2012 Fiskars Corporation, Vice President, Production,
Purchasing and Logistics;
2003−2007 Iittala, group Director, Operations;
1996−2003 Nokia Corporation, Management duties for
logistics;
1993−1996 Outokumpu Copper, Manager, Logistics and
Marketing Development.
Key positions of trust:
Member of the board: Ilmarinen Mutual Pension Insurance
Company
Nokian Tyres holdings and options holdings of the President
and CEO and controlled corporations, December 31, 2018
Hille Korhonen, President & CEO
Number of
shares
40,308
Stock options
2013
2013C
-
Other management
The group’s management team is responsible for assisting
the President and CEO in preparing the Company’s strategy
and in operative management, and for discussing matters
that involve substantial financial or other impacts, such
as corporate transactions and organization changes. The
management team has no activities based on the legislation
or the Articles of Association. According to the group’s
meeting practices, the management team assembles once
per month. In addition to the President and CEO, the heads
of the business units, business areas and service functions
participate in the meetings.
Päivi Antola
Investor Relations & Corporate
Communications
Tytti bergman
People & Culture
Mark Earl
Americas business Area
Esa Eronen
Supply Chain & Sustainability
Anna Hyvönen
Nordics business Area and Vianor
business Unit
Teemu Kangas-Kärki
Finance
Jukka Kasi
Products & Technologies
Andrei Pantioukhov
Russia and Asia business Area
Manu Salmi
Nokian Heavy Tyres business Unit
Timo Tervolin
Strategy & M&A
Susanna Tusa
Legal & Compliance
Antti-Jussi Tähtinen
Marketing
Frans Westerlund
IT & Processes
Number of
shares
Stock options
2013
2013C
0
50
0
16,541
19,117
0
0
63,588
0
0
0
0
0
0
0
0
24,003
15,000
8,865
5,507
14,555
2,775
0
4,000
0
0
More detailed information concerning the group’s
management team is available on the Company’s
website at www.nokiantyres.com/company/investors/
corporate-governance/the-groups-management-team/.
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – CORPORATE gOVERNANCE STATEMENT
84
III Descriptions of mechanisms of internal
control and risk management
Internal control
The purpose of the group’s internal control mechanisms is
to ensure that the Company’s operation is in line with the
existing laws and regulations and the Company’s Code of
Conduct. As regards the financial reporting process, the
purpose of the group’s internal control mechanisms is to
ensure that the financial reports released by the Company
have been compiled in accordance with the accounting
principles applied by the Company and that they contain
essentially correct information on the group’s financial
position, and to ensure that financial reporting is accurate
and reliable. The group has defined group-level policies and
instructions for the key operative units specified below in
order to ensure efficient and profitable Company operations.
The group’s business functions consist of the Passenger
Car Tyres, Heavy Tyres, and Vianor business units. The
Passenger Car Tyres is further divided into the Americas,
Europe, Nordics and Russia and Asia business areas. Heavy
Tyres and the Passenger Car Tyres business areas are
responsible for their own operations, financial results, risk
management, balance sheet and investments, supported by
the different service functions. The group’s sales companies
serve as product distribution channels in local markets. The
tire retail chain is organized into a sub-group. Its parent
company is Vianor Holding Oy, 100% owned by the parent
company Nokian Tyres plc. The tire outlets operating in
different countries are part of the sub-group.
The CEOs of the Company’s subsidiaries are responsible
for the daily operations and administration of their companies.
They report to the director responsible for the said business
area, while the CEOs of the Vianor chain report to the director
of the Vianor business unit.
The board of Directors is responsible for the functionality
of the internal control mechanisms, which are managed by
the Company’s management and implemented throughout
the organization. Internal control is not a separate function;
it is an integral part of all activities of the group at all
levels. The Company’s operative management bears the
main responsibility for operational control. Every supervisor
is obliged to ensure sufficient control over the activities
belonging to his or her responsibility and to continuously
monitor the functionality of the control mechanisms. The
Chief Financial Officer is responsible for organizing financial
administration and reporting processes and the internal
control thereof. The parent company’s Finance and Control
unit is responsible for internal and external accounting; its
tasks also include producing financial information concerning
the different areas and ensuring the accuracy of this
information.
The preparation process of the consolidated financial
statements (IFRS), the related control measures, and the
task descriptions and areas of responsibility related to the
reporting process are defined. The Company’s Finance and
Control unit produces the consolidations and information
for the group level and the different areas. Each legal entity
within the group produces its own information in compliance
with the instructions provided and in line with local legislation.
The net sales and operating profit of the group and business
units are analyzed, and the consolidated profit is compared
with the management’s assessment of business development
and the information received from operative systems. The
group’s Finance and Control unit is centrally responsible
for the interpretation and application of financial reporting
standards as well as for monitoring compliance with these
standards.
Effective internal control requires sufficient, timely, and
reliable information in order for the Company’s management
to be able to monitor the achievement of targets and the
efficiency of the control mechanisms. This refers to financial
information as well as other kinds of information received
through IT systems and other internal and external channels.
The instructions on financial administration and other matters
are shared on the Company’s intranet for all of those who
need them, and training is organized for personnel with regard
to these instructions when necessary. Communication with
the business units is continuous. The Company’s financial
performance is internally monitored by means of monthly
reporting complemented with rolling forecasts. The financial
results are communicated to Company personnel immediately
after the official stock exchange releases have been
published.
Investor Communications
The goal of Nokian Tyres’ investor relations is to regularly and
consistently provide the stock market with essential, correct,
sufficient, and up-to-date information that is subsequently
used to determine the share value. The operations are based
on equality, openness, and accuracy.
Risk management
The group has adopted a risk management policy, approved
by the board of Directors, which supports the achievement
of strategic goals and ensures continuity of business. The
group’s risk management policy focuses on managing
both the risks pertaining to business opportunities and the
risks affecting the achievement of the group’s goals in the
changing operating environment.
The risks are classified as strategic, operational and
financial risks. Strategic risks are related to customer
relationships, competitors’ actions, political risks, country risks,
brand, product development, and investments. Operational
risks arise as a consequence of shortcomings or failures in
the Company’s internal processes, actions by its personnel or
systems, or external events, such as unforeseen changes in
the operating environment, management of the supply chain,
or changes in raw material prices. Financial risks are related to
fluctuations in interest rate and currency markets, refinancing,
and counterparty and receivables risks.
The most significant risks related to Nokian Tyres’
business are the country risks related to the Russian
business environment and other risks of change within
the operating environment, risks related to products and
product development, production outage risks, currency and
receivable risks, and tax risks. Due to the Company’s product
strategy, interruption risks that are related to marketing and
logistics may also have a significant impact on peak season
sales. The risk analysis conducted in 2018 also focused
special attention on corporate social responsibility risks,
the most significant of which are related to the company
reputation and product quality. Analyses and projects related
to information security, data protection and customer
information were a special focus area.
The risk management process aims to identify and
evaluate the risks, and to plan and implement the practical
measures for each risk. Among others, such measures may
include avoiding the risk, reducing it in different ways or
transferring the risk through insurance policies or agreements.
Control functions and measures are verification or back-up
procedures applied in order to reduce the risks and ensure
the completion of the risk management measures.
Risk management is not assigned to a separate
organization. Rather, its tasks follow the general division of
responsibilities adopted elsewhere in the organization and its
business. Assisted by the Audit Committee, the Company’s
board of Directors monitors and assesses the efficiency of
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – CORPORATE gOVERNANCE STATEMENT
85
the Company’s risk management mechanisms and monitors
the assessment and management of risks related to the
Company’s strategy and functions. The Audit Committee
monitors that the risk management actions are in line
with the risk management policy. The Company’s board of
Directors discusses the most significant risks annually in
connection with the strategic process.
IV Other information provided
Internal audit
The group’s internal audit systematically carries out
assessments and audits on the efficiency of risk
management, internal control, and corporate governance
processes. Internal audit is an independent and objective
function whose aim is to help the organization to achieve its
goals. The principles for internal audit have been confirmed
in the internal audit’s rules of procedure approved by the
board of Directors.
The group’s Internal Audit function is managed by the
Chief Audit Executive (CAE), who works under the board
of Directors and the President and CEO. The group’s
internal audit function has been designed to be conducted
in accordance with the International Standards for the
Professional Practice of Internal Auditing. An external auditor
performed an assessment of the group’s Internal Audit in the
spring of 2015. The focus areas for internal audit are approved
by the board of Directors each year. The audit assignments
are based on the key strategic focus areas of the company’s
business operations and functions and the risks involved. The
operation of Internal Audit covers all of the business activities,
functions and processes within the Nokian Tyres group. The
CAE reports on their findings and the agreed further actions
to the Audit Committee, the board of Directors and the
President and CEO. The Company’s board of Directors follows
and monitors the efficiency of the Internal Audit.
In 2018, Internal Audit focused on assessing, among
other things, the operations and risks of various country
organizations, corporate governance arrangements, risk
management arrangements and instructions, corporate
sustainability and information security matters as well as
specific misconduct risks and cases, including the black
Donuts case where Nokian Tyres was the complainant. The
Internal Audit function at Vianor focuses on guiding the
outlets and ensuring conformity to the Vianor activity
management system. It reports to the Internal Auditor of the
group and the country managers.
Related party transactions
The Company assesses and monitors related party
transactions and ensures that all conflicts of interest and
the Company’s decision-making process are appropriately
taken into account. The group’s financial management
monitors and supervises related party transactions as part of
the Company’s normal reporting and monitoring procedures.
The Company only has related party transactions that are
a part of normal business, and the information regarding
them is provided in the annual report and the notes to the
financial statements.
Insider management
The Company complies with the guidelines for insider trading
drawn up by Nasdaq Helsinki. Furthermore, the Company has
drawn up separate insider trading guidelines that have been
approved by the board of Directors and that supplement
other insider trading regulations as well as include
instructions on insiders and insider administration.
Project-specific insider lists are drawn up of people
involved in insider projects. Persons with insider information
are not allowed to trade in the Company’s financial
instruments until the project has become void or been
published. Those entered into the project-specific list of
insiders are notified of their entry and the duties it entails, as
well as the termination of the list’s maintenance. Separate
instructions are available for the establishment of a project-
specific list of insiders.
The Company draws up a separate list of people in
executive positions and their related entities. In 2018, the
persons holding executive positions in the Company, as
defined in the Market Abuse Regulation, were the members
of the board of Directors, the President and CEO, the Chief
Financial Officer, the directors of the business areas in the
Passenger Car Tyres business unit, the director of the Nokian
Heavy Tyres business unit and the director of the Vianor
business unit.
Persons holding executive positions within the Company
are not allowed to trade in the Company’s securities for
30 days before the publication of the Company’s financial
statement report, half year report, or interim report (“closed
window”). The same applies to persons who participate in the
preparation, drawing up, and/or publication of the Company’s
financial reports. The prohibition on trading mentioned
hereinabove also applies to persons who process the financial
reporting and forecasts of the Nokian Tyres group and those
who have access to group-level financial figures through
different systems.
The group general Counsel for Nokian Tyres is responsible
for the overall management of insider matters in the
Company and the related communication (limitations on
trade, obligations to announce and publish management
transactions). The group general Councel will check the
information for the persons holding executive positions and
their related entities at least once per year. The CFO is the
group general Counsel’s substitute for insider matters.
Whistleblowing
The Company has defined processes that relevant parties
can use to notify of any violations of the Company’s insider
trading guidelines or other instructions, or of any other
malpractices. External parties can use the email address
whistleblow@nokiantyres.com, among others.
Audit
The auditor has an important role as a controlling body
appointed by the shareholders. The audits give shareholders
an independent opinion on how the financial statements
and report by the board of Directors of the Company have
been drawn up and the accounting and administration of the
Company have been managed. The auditor elected at the
Annual general Meeting of 2018 is KPMg Oy Ab, authorized
public accountants, with Lasse Holopainen, Authorized Public
Accountant, acting as the Chief Auditor. The auditor’s term
of office lasts until the end of the following Annual general
Meeting. In addition to his duties under the valid regulations,
he reports all audit findings to the group’s management.
The group’s audit fees in 2018 amounted to EUR
411,326 (2017: 406,000). The fees paid to the authorized
public accountants for other services totaled EUR 827,885
(1,009,000).
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – CORPORATE gOVERNANCE STATEMENT
86
Salaries and remunerations 2018
SAL ARIES AN D REMUN ERATIO N S 2 0 18
A. Decision-making mechanism for remuneration
B. General principles for remuneration
Each year, the Annual general Meeting decides on the
remuneration payable to the board members on the basis
of a proposal drawn up by the Personnel and Remuneration
Committee.
The board of Directors decides on the salary, benefits,
and short and long-term incentives of the President and
CEO as well as the rest of the group Management Team. The
Personnel and Remuneration Committee prepares the above-
mentioned matters for the board to decide on, while using
external experts when necessary. The President and CEO
decides on the goals for the management team’s short-term
incentive system.
In 2018, the Annual general Meeting authorized the
board of Directors to make a decision to offer no more than
25,000,000 shares through a share issue. This authorization
is valid until the next Annual general Meeting, but however at
most until June 30, 2019.
In 2018, the Annual general Meeting authorized the board
of Directors to decide on the repurchase of a maximum of
5,000,000 of the company’s own shares using funds from
the Company’s unrestricted equity. This authorization is valid
until the next Annual general Meeting, but however at most
until June 30, 2019. The board may also use these shares as
incentives.
Remuneration of the Board members
The board members receive an annual fee and a meeting fee
for the meetings of the board and its committees. Travel
costs are compensated according to the company’s travel
policy. 50% of the annual fee is paid in cash and 50% is paid
in shares of the company that are purchased for the board
members in April following the Annual general Meeting. The
company is responsible for any asset transfer tax.
The Annual general Meeting in 2018 decided on the
following fees for board members:
• Annual fee for chairman, EUR 90,000
• Annual fee for deputy chairman and for the chairman of the
Audit Committee, EUR 67,500
• Annual fee for member, EUR 45,000
• Meeting fee EUR 600/attended meeting/person, or if the
member of the board is living outside of Finland, EUR 1,200/
attended meeting/person.
board members are not included in the company’s option or
share incentive plans.
Remuneration of the President and CEO
The board of Directors decides on the salary, incentives and
other benefits of the President and CEO.
The remuneration consists of a base salary, fringe benefits,
short-term incentive based on annually defined performance
criteria and the share-based long-term incentive plans.
The total annual base salary for the President and CEO,
Hille Korhonen, has been set at EUR 693,240 including fringe
benefits such as car and phone benefit.
Short-term and long-term incentive plans
The President and CEO’s short-term performance-related
incentive is based on the group’s profitability and net
sales, and it may amount to a maximum of 100% of the
annual base salary. The performance period is one year and
the possible reward is paid out in the first half of the year
following the performance period.
The President and CEO’s long-term incentive consists of
share incentive plans. The performance criteria for the share
incentive plans in force at any given time can be found under
Long-term incentive plans for key personnel. The maximum
LTI award opportunities are set forth in Table 1.
Pensions and information regarding the
termination of the employment
The President and CEO’s age of retirement is set by written
agreement at 65 years. The pension is determined on the
basis of the Employees Pensions Act and a separately
defined benefit pension plan taken out by the company. The
amount paid in 2018 was EUR 132,048.
The President and CEO’s period of notice is 6 months. If
the agreement is terminated by the company, the President
and CEO is entitled to compensation corresponding to 12
months’ salary and other benefits, in addition to the notice
period’s salary.
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – SALARIES AND REMUNERATIONS 2018
87
Remuneration the Group Management Team
The board approves the salaries, benefits and the incentive
plans of the group Management Team based on the proposal
by the Personnel and Remuneration Committee.
Remuneration of the group Management Team consists
of a base salary and fringe benefits, such as phone and car
benefits, a short-term incentive based on annually defined
performance criteria, and a share-based long-term incentive
plan.
The salaries of the management team members (excluding
the President and CEO) were in total EUR 2,580,611 in 2018 (EUR
1,977,745 in 2017), and the short-term incentives amounted to a
total of EUR 753,063 in 2018 (EUR 604,213 in 2017).
Short-term and long-term incentive plans
The performance criteria for the short-term incentive plan for
2018 were group’s operating profit and the achievement of
the financial and strategic goals set for respective business
or function of each Management Team member. The business
and function specific goals consist of e.g. profitable growth,
net sales, and the efficiency of the operative process. The
main performance criteria will remain the same for 2019,
with the addition of group’s net sales growth. The maximum
short-term incentive corresponds to 60–70% of a group
Management Team member’s annual base salary. The
performance period is one year and the possible reward is
paid out in the first half of the year following the performance
period.
The group Management Team members are eligible for
long-term incentive plans. Details of long-term incentive
plans are presented in Incentive plans for key personnel. The
maximum LTI award opportunities are set forth in Table 1.
Pensions and information regarding the
termination of the employment
A separate defined benefit pension plan is introduced to The
group Management Team members as of 1.1.2019. The annual
contributions to this plan will be 5–15% of annual base salary
for each group Management Team member depending on their
home country practices. group Management Team members
are eligible for the paid contributions after 3 years continuous
employment with the company. Retirement age has been set
to 63 years. Terms and conditions of supplementary Pension
may vary between countries.
A management team member’s notice period is 6
months when terminated by the company and 3 months
when terminated by the management team member. If the
employment is terminated due to a reason attributable to
the company, the management team member is entitled to
compensation corresponding to 12 months’ salary and other
benefits.
Long-term Incentive plans for key personnel
Option scheme 2013
The Annual general Meeting held in 2013 decided on the
issue of stock options as part of the group’s incentive
and commitment system for personnel. The system also
covers persons employed or recruited by the group at a
later date. The board distributed the options in the spring
of 2013 (options 2013A), 2014 (2013b), and 2015 (2013C). The
subscription period of 2013C options will end on 31 May 2019.
Performance Share Plan 2016
In the spring of 2016, the board of Nokian Tyres plc decided
to update the group’s incentive schemes. The update
aims to clarify and improve the schemes and to offer a
competitive rewards system for all personnel.
The purpose of Nokian Tyres’ share-based incentive
system was to harmonize the goals of the owners and key
personnel in order to increase the value of the company in
the long term, and to commit key personnel to the company.
The share rewards system covered some 5% of the group’s
personnel, including the management team members.
The share rewards system had three one-year earnings
periods for the calendar years 2016, 2017, and 2018. The
company’s board decided separately on each earnings period
for the system and set the earning criteria, and the goals for
each criterion, at the beginning of the earnings period. The
system’s possible reward for the earnings period of 2018
was based on the group’s operating profit and net sales.
The maximum rewards paid for the earnings period of 2018
correspond to a maximum of 519,000 shares in Nokian Tyres
plc, including the monetary reward.
The possible reward from the earnings period of 2018
will be paid in 2019, partially as shares in the company and
partially as money. The monetary reward is intended to cover
the taxes and tax-like charges incurred on the key person. As
a rule, the reward is not paid if the key person’s employment is
terminated before the reward is due. Shares that are offered
as a reward cannot be handed over during the limitation
period of approximately one year.
A member of the group’s Management Team must own
25% of the gross total number of shares earned through the
system, up to the point where the total value of their share
ownership is equal to their gross annual salary. They must own
this number of shares for as long as they are involved in the
group’s Management Team.
Performance Share Plan 2019 and
Restricted Share Plan 2019
In February 2019, the board of Nokian Tyres plc decided to
establish a new share-based long-term incentive scheme for
the Company’s management and selected key employees.
The decision includes a Performance Share Plan (PSP) as
the main structure and a Restricted Share Plan (RSP) as a
complementary structure for specific situations.
The purpose of the share-based incentive plans is to
harmonize the goals of the Company’s owners and key
personnel in order to increase the value of the Company in
the long term, to commit key personnel to the Company and
its strategic target and to offer a competitive rewards system
for personnel. The Performance Share Plan is targeted to the
President and CEO, group Management Team members and
other key employees.
The Performance Share Plan 2019 consists of annually
commencing three year performance periods after which
the possible reward is deliver to participants. The company’s
board will decide separately on each performance period and
set the performance criteria at the beginning of the earnings
period.
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – SALARIES AND REMUNERATIONS 2018
88
A member of the group’s Management Team must own
Table 1. Long-term incentives
25% of the gross total number of shares earned through the
system, up to the point where the total value of their share
ownership is equal to their gross annual salary. They must own
this number of shares for as long as they are involved in the
group’s Management Team.
Performance Period 2019–2020 and
Performance Period 2019–2021
The first plan (PSP 2019–2021) commences effective as
of the beginning of 2019 and the potential share reward
thereunder will be paid in the first half of 2022 provided that
the performance targets set by the board of Directors are
achieved. The potential reward will be paid partly in shares
of Nokian Tyres Plc and partly in cash. Cash portion of the
reward is intended to cover the taxes arising from the paid
reward.
In addition to the 3 year performance period (PSP
2019–2021), a separate one-time 2 year performance period
(PSP 2019–2020) commences in 2019 in order to bridge the
previous two year PSP 2018 and three year PSP 2019–2021.
Potential share reward thereunder will be paid in the first half
of 2021 provided that the performance targets set by the
board of Directors are achieved.
The potential share reward payable under the PSP
2019–2020 and PSP 2019–2021 are based on the Earning Per
Share (EPS) growth and Return on Capital Employed (ROCE).
The possible rewards paid based on the performance period
of 2019–2020 correspond to a maximum of 580,000 gross
shares and based on the performance period of 2019–2021 to
a maximum of 535,000 gross shares.
Performance Share Plan 2016 (maximum)
Performance Share Plan 2019 (maximum)
President and CEO
Other management
team
Performance
period 2017
70,000
216,875
Performance
period 2018
55,000
Performance period
2019–2020
Performance period
2019–2021
250%
250%
194,500
100%–200%
100%–200%
Maximum share rewards defined as pieces of shares
Maximum share rewards defined as % of annual base salary
Restricted Share Plan 2019–2021
The Restricted Share Plan (RSP) consists of annually
commencing restricted share plans, each with a three-year
vesting period after which the allocated share rewards will be
delivered to the participants provided that their employment
with group continues until the delivery date of the share
rewards. The commencement of each new plan is subject to
a separate approval by the board.
The RSP 2019–2021 wil commence at the beginning of
2019 and any potential share rewards will be delivered in the
first half of 2022. The possible rewards paid based on the
Restricted Share Plan 2019–2021 correspond to a maximum of
70,000 gross shares.
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – SALARIES AND REMUNERATIONS 2018
89
C. Remuneration statement
Board of Directors
The remuneration paid to the board members, the number
of shares purchased, and the meeting fees for the board and
the committees are presented in the table below.
Table 2. Remuneration paid to the Board members in 2018 (cash basis)
Position on the Board
Fixed annual fee, €**
Meeting
remuneration
fees, €
Committee meeting
remuneration fees, €
Total
remuneration fees, €
Shares acquired with a
fixed annual fee, number
of shares
Share holdings of the
Board, number of shares
90,000
6,000
6,000
102,000
1,348
20,865
Petteri Walldén
Kari Jordan *
Heikki Allonen
Raimo Lind
Veronica Lindholm
Inka Mero
george Rietbergen
Pekka Vauramo *
Total
Chairman
Deputy Chairman,
Chairman of the Personnel
and Remuneration
Committee
member
Chairman of the Audit
Committee
member
member
member
member
67,500
45,000
67,500
45,000
45,000
45,000
45,000
4,800
6,000
6,000
6,000
6,000
7,800
4,800
450,000
47,000
3,600
3,000
5,400
6,000
3,000
600
2,400
30,000
75,900
54,000
78,900
57,000
54,000
53,400
52,200
527,400
* member since April 10, 2018
** 50% of the annual remuneration to be paid in cash and 50% in company shares
President and CEO and management team
Table 3: Salaries and financial benefits paid to the President and CEO and the company’s other management team members in 2018 (cash basis)
Annual salary, €
(including fringe
benefits)
Performance based
bonuses, €
(based on year 2017)
President and CEO
Other members of the management
team
693,240
2,580,611
411,540
753,063
Signing fees, €
0
31,915
Severance
package, €
Total value of share-
based bonus, €*
2,497,082
0
0
6,714,353
10,079,941
* According to the stock exchange price of the assignment date of March 26, 2018 / August 31, 2018 the payment for the performance period of 2017 of the share-based incentive plan
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – SALARIES AND REMUNERATIONS 2018
90
1,011
674
1,011
674
674
674
674
6,740
Total, €
3,601,862
1,011
1,867
3,862
1,867
3,260
1,204
674
34,610
Share-based bonus
paid in shares,
number of shares
32,381
98,771
Board of Directors
BOARD OF DIRECTORS DECEM BE R 3 1, 201 8 | See the details for the board of Directors at www.nokiantyres.com/board-of-directors
PETTERI WALLDÉN
• b. 1948
• Master of Science (Technology)
• CEO, Wapiti Oy
• Member of the board since 2005,
Chairman of the board
• Member of the Personnel and
Remuneration Committee
• Independent of the company
• Shares: 20,865
KARI JORDAN
• b. 1956
• Master of Science (Economics),
Vuorineuvos (Finnish honorary title)
• Chairman of the board, Outokumpu Oyj
• Member of the board since 2018,
Deputy Chairman of the board
• Chairman of the Personnel and
Remuneration Committee
• Independent of the company
• Shares: 1,011
HEIKKI ALLONEN
• b. 1954
RAIMO LIND
• b. 1953
• Master of Science (Technology)
• Master of Science (Economics)
• President and CEO, Hemmings Oy Ab
• Professional board member
• Member of the board since 2016
• Member of the board since 2014
• Member of the Audit Committee
• Chairman of the Audit Committee
• Independent of the company
• Independent of the company
• Shares: 1,867
• Shares: 3,862
VERONICA LINDHOLM
• b. 1970
INKA MERO
• b. 1976
• GEORGE RIETBERGEN
• b. 1964
PEKKA VAURAMO
• b. 1957
• Master of Science (Economics)
• Master of Science (Economics)
• Master of business Administration
• Master of Science (Technology)
• CEO, Finnkino Oy
• Chairwoman and Partner, Industryhack Oy
• 5Square Committed Capital, Partner
• President and CEO, Metso Corporation
• Member of the board since 2016
• Member of the board since 2014
• Member of the board since 2017
• Member of the Personnel and
Remuneration Committee
• Independent of the company
• Shares: 1,867
• Member of the Audit Committee
• Independent of the company
• Independent of the company
• Shares: 1,204
• Shares: 3,260
• Member of the board since 2018
• Member of the Audit Committee
• Independent of the company
• Shares: 674
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – bOARD OF DIRECTORS
91
Management Team
MANAGEME NT TEAM DECEM BER 31, 20 18 | Look at details of Management at: www.nokiantyres.com/management
HILLE KORHONEN
• b. 1961
• President and CEO
• Licentiate of Science (Technology)
• Member of the board 2006–2017,
member of management team and
President and CEO since 2017
ANDREI PANTIOUKHOV
• b. 1972
PÄIVI ANTOLA
• b. 1971
TYTTI BERGMAN
• b. 1969
• Investor Relations & Corporate Communications
• People & Culture
• Executive Vice President, Nokian Tyres plc and
general Manager, Russia and Asia business area
• Master of business Administration
• Master of Arts, CEFA
• With the company and a member of
• With the company since 2004 and a member
management team since 2018
of management team since 2009
• Master of Science (Economics and
business Administration)
• With the company and a member of
management team since 2018
MARK EARL
• b. 1960
ESA ERONEN
• b. 1957
ANNA HYVÖNEN
• b. 1968
TEEMU KANGAS-KÄRKI
• b. 1966
• Americas business Area
• Supply Chain and Sustainability
• Nordics business Area and Vianor business Unit
• Finance
• bachelor of Sciences in business
Administration, Computer Science
• With the company and a member of
management team since 2018
• Technology Engineer
• Licentiate of Science (Technology)
• With the company since 1988 and a member
• With the company and a member of
of management team since 2001
management team since 2016
• Master of Science (Economics and
business Administration)
• With the company and a member of
management team since 2018
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – MANAgEMENT TEAM
92
JUKKA KASI
• b. 1966
MANU SALMI
• b. 1975
• Products & Technologies
• Nokian Heavy Tyres business Unit
TIMO TERVOLIN
• b. 1977
• Strategy and M&A
SUSANNA TUSA
• b. 1972
• Legal and Compliance
• Master of Science (Technology)
• Master of Military Sciences, Master of Science
• Master of Science (Technology), Master of
• Master of Laws and Master of
• With the company and a member of
management team since 2018
(Economics and business Administration),
Master of business Administration
Science (Economics and business Administration)
International business
• With the company and a member of
• With the company since 2007 and a member
• With the company since 2001 and a member
management team since 2016
of management team since 2018
of management team since 2008
TARJA KAIPIO, VP, Human Resources was a member of the Management Team until April 2018
TOMMI HEINONEN acted as VP, Americas business Area until May 2018
ANNE LESKELÄ acted as CFO until July 2018
PONTUS STENBERG acted as SVP, business Area Europe until December 2018
ANTTI-JUSSI TÄHTINEN
• b. 1965
• Marketing
• Master of Arts
• With the company since 2005 and a member
of management team since 2009
FRANS WESTERLUND
• b. 1966
• IT and Processes
• Master of Science (Economics and
business Administration)
• With the company and a member of
management team since 2017
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – MANAgEMENT TEAM
93
Investor Information and Investor Relations
IN VESTOR INFO RMAT ION
AN D INVESTOR REL AT IONS
Annual General Meeting 2019
The Annual general Meeting of Nokian Tyres plc will be
held at Tampere-talo in Tampere, Finland, street address
Yliopistonkatu 55, on April 9, 2019, at 4 p.m. Registration of
attendants, the distribution of ballots and a coffee service
will begin at 2:30 p.m.
More information is available at
www.nokiantyres.com/annualgeneralmeeting2019
Dividend payment
The board of Directors proposes to the Annual general
Meeting a dividend of EUR 1.58 per share for the financial
year 2018, representing a payout ratio of 73.9%.
Stock exchange releases
Stock exchange releases are available in Finnish and English
at www.nokiantyres.com/investors immediately after
publication. Stock exchange releases can be subscribed at
www.nokiantyres.com/company/publications/order-releases/
Financial reports in 2019
• January–March: May 8, 2019
• January–June: August 6, 2019
• January–September: October 30, 2019
Silent period
Nokian Tyres observes a silent period before issuing financial
statements, interim and half-year reports.
• Start of the silent period: January 1, April 1, July 1, and
October 1.
• End of the silent period: The results of the respective
quarter are made public.
During the silent period, the company’s top management
and Investor Relations do not meet representatives of
capital markets or financial media, nor comment on issues
related to the company’s financial situation or general
outlook. If an event occurring during the silent period
requires immediate disclosure, Nokian Tyres will disclose the
information without delay in compliance with disclosure rules
and may also comment on the event concerned.
Investor relations pages on the web
Nokian Tyres’ investor relations pages at www.nokiantyres.
com/investors contain a share monitor, information about
Nokian Tyres’ largest shareholders registered in Finland,
presentations and reports, among others.
Change of address
Shareholders are advised to inform any changes in their
contact information to the book entry register in which they
have a book entry securities account.
Flagging notifications
Under the provisions of the Securities Markets Act, changes
in holdings must be disclosed when the holding reaches,
exceeds or falls below 5, 10, 15, 20, 25, 30, 50 or 90 per cent
or two thirds of the voting rights or the numbers of shares of
the company.
Notifications of changes in holdings or voting rights must be
made without undue delay.
Shareholders are advised to send the flagging notifications
to flaggings@nokiantyres.com
Contact information
Regarding inquiries and meeting requests, you can send an
email to ir@nokiantyres.com
Päivi Antola, SVP, Corporate Communications & IR
Tel. +358 10 401 7327
Jutta Meriläinen, Manager, Investor Relations & business
Development
Tel. +358 10 401 7231
Anne Aittoniemi, Financial Communications Specialist
Tel. +358 10 401 7641
Address:
Nokian Tyres plc
P.O. box 20
(Visiting address: Pirkkalaistie 7)
FI–37101 Nokia
NOKIAN TYRES PLC – FINANCIAL REVIEW 2018 – INVESTOR INFORMATION
94
www.nokiantyres.com