Nokian Tyres announces sale of Russian operations

Nokia, Finland – Nokian Tyres plc has signed an agreement to sell its Russian operations to Tatneft PJSC. The debt free and cash free purchase price is expected to be approximately EUR 400 million. The final purchase price is affected, among other things, by net cash and working capital adjustment and changes in RUB/EUR exchange rate.

The transaction is subject to approval by the relevant regulatory authorities in Russia and other conditions, which creates substantial uncertainties related to the timing, terms and conditions and the closing of the transaction.

Nokian Tyres announced in June 2022 that it would initiate a controlled exit from Russia. Upon the closing of the transaction, Nokian Tyres ends all its operations in Russia and the company’s personnel in Russia will transfer to the new owner.

Nokian Tyres has been operating in Russia since 2005. In 2021, approximately 80% of the company’s passenger car tires were produced in Russia and the business area Russia and Asia represented approximately 20% of Nokian Tyres’ net sales.

The exit from Russia will significantly impact Nokian Tyres’ financial results. Discontinued supply of tires from Russia will have an adverse impact on sales especially in Central Europe in next two to three years. In order to secure supply of its products, Nokian Tyres has continued to increase capacity at its factories in Finland and in the US, and is proceeding with the investment in new supply capability in Europe.

Financial effects of the divestment

As part of the exit from Russia, impairments of EUR -280.7 million related to the Russian assets and a write-down of EUR -20.0 million of deferred tax assets in Russia were recorded in the second quarter of 2022. Due to the significant uncertainties, final accounting implications including translation differences among other things can only be assessed when the transaction has been duly completed.

Nokian Tyres’ assets in Russia and Belarus excluding tax and financial items amounted to EUR 574.5 million after the impairments and the write-down at the end of the second quarter and to EUR 590.4 million at the end of the third quarter of 2022. Net assets in Russia and Belarus excluding net debt amounted to EUR 480.3 million at the end of the third quarter of 2022. Seasonality of the working capital and timing of the closing, among other things, impact the net asset value of Russia and Belarus and thus the cash consideration received from the transaction.

Nokian Tyres has assessed that both the Group’s equity ratio (64.0% at 30.9.2022) and the gearing ratio (22.2% at 30.9.2022) remain at a good level after the divestment. The Group’s strong balance sheet continues to support the company in building the new Nokian Tyres without Russian business.

The above 30.9.2022 stated figures are preliminary figures for the third quarter. Nokian Tyres will restate comparative information for 2022 after the closing of the Russia divestment and reclassification to discontinued operations.