Nokian Stock Plunges
Mika Leskinen, a fund manager at Pohjola Asset Management of Helsinki stated that “competition is set to intensify” and that reasons for the stock’s fall included a massive 37 per cent rise throughout May and the recent Russian military intervention in Georgia. He suggests that analysts recommending the stock and raising earnings estimates had been a little “too optimistic”. Bloomberg’s straw pole of 15 banks however suggests that analysts are still happy to get behind the stock, with only London-based Merrill Lynch analysts suggesting their sale.
Nokian had experienced a doubling of profits and shares in two years, following the opening of its plant near St. Petersburg in 2005, though it has shed 7.2 per cent this year. Kim Gran, Nokian Renkaat chief executive officer remains unruffled by the oncoming competition and stock decline: “It takes about three years from the decision to build a plant to producing any meaningful volumes. So we are ahead.” He added, “The Russian market is set to mature in three to five years and it's vital that we take our share of the market during the growth phase. We have a long-term commitment.”
The largest Scandinavian tyre manufacturer predicts that the Russian replacement market (the premium segment of which accounted for 60 per cent of total volume) will grow from 1.3 billion euros this year to 2.9 billion by 2013. At present Bridgestone possesses 14 per cent, while Michelin , Continental and Goodyear control around 13 per cent of the premium segment.
