Mon May 11 07:03 pm 2020 in category Company news
Nokian Tyres' Actions and Impacts in Response to COVID-19
This is a regularly updated text on Nokian Tyres’s actions and impacts due to the COVID-19 outbreak.
Construction of the new testing center in Spain has been re-started, step by step, following local instructions.
Nokian Tyres published its Interim Report January–March 2020 with a summary of actions due to COVID-19.
COVID-19 – Summary of actions to date
Employee health and safety actions:
- Continuous monitoring and communication of COVID-19 status in the organization
- Implementing health and safety guidance/orders of each country
- Travel and visitor restrictions in the early phases of the pandemic starting late February
- Remote working launched mid March for most white collar employees
- Protective measures in the factories and service outlets like separation of teams, active cleaning and increased hygiene
Operational response actions:
- Working capital management: continuous production capacity adjustments to manage the inventory levels and secure availability, enhanced actions to monitor customer payments
- Labor cost reduction: working together with employee representatives, implemented temporary layoffs across the company for both white collar and blue collar employees
- Temporarily closed the manufacturing facilities in Russia, Finland and the US. The company is now restarting production in the impacted facilities, maintaining close coordination with local authorities.
- Management Team salary reduction equivalent to one month’s salary
- Cost efficiencies: cutting and delaying activities in 2020, reducing discretionary spending
Financial response actions:
- Dividend EUR 0.79/share (2019: EUR 1.58). Furthermore, the Annual General Meeting authorized the Board of Directors to decide on an additional dividend payment of a maximum of EUR 0.79/share to be distributed in one or several instalments at a later stage when Nokian Tyres is able to make a more reliable estimate on the impacts of the COVID-19 to the company’s business.
- Capex reduction from approximately EUR 200 million to approximately EUR 170 million for 2020.
- Actions implemented to strengthen Nokian Tyres’ liquidity position, which as of March 31, 2020 amounted to EUR 608.9 million, including cash, cash equivalents and undrawn committed short- and long-term credit lines (EUR 424.3 million at the end of 2019).
- Nokian Tyres is further working on enhancing liquidity including new financing facilities.
- Strong balance sheet supporting in difficult times
Nokian Tyres plans to reopen our US factory on Monday, May 4, with some employees returning Monday, April 27. We are launching this phased reopening process after closely monitoring local and federal guidelines, and in light of recent actions taken by the State of Tennessee to begin reopening the state’s economy. This marks the conclusion of a shutdown that began Friday, March 27.
In accordance with guidelines from public authorities, Nokian Tyres will extend the temporary closure of its US factory through at least Sunday, April 26. Company leadership will continue to evaluate the COVID-19 situation and monitor guidelines from the CDC, state and local leaders to determine when to reopen the factory.
Production at the Nokian Tyres’ Russian factory in Vsevolozhsk will be re-launched on Monday, April 6th, as previously planned. The restrictions adopted by the President Decree dated 2 Apr 2020, extending the "non-working regime' until the end of April, do not apply to our Vsevolozhsk factory, as it is a continuously operating enterprise and it is thus allowed to continue normal operations.
Nokian Tyres Annual General Meeting will be held by special arrangements on 2 April 2020
Nokian Tyres’ Annual General Meeting will be arranged on 2 April 2020, according to the original schedule. The company has received a sufficient number of shareholders' cancellations of attendance, allowing the meeting to be held in accordance with the regulations set by authorities following the coronavirus pandemic. Based on the proxies and voting instructions received, the majority required under the Finnish Companies Act supports each of the proposals made to the Annual General Meeting in the notice to the meeting.
The AGM will be arranged at Nokian Tyres’ headquarters at Pirkkalaistie 7, 37100 Nokia. The meeting is scheduled to start at 4 p.m. EET on Thursday April 2, 2020. The reception will begin at the meeting venue at 3:30 p.m. EET. The meeting and all the presentations, including the CEO’s review, will be short and meet the minimal requirements. The participation of the members of the Board of Directors and the Group Management Team is limited to the minimum. The proposed new member of the Board will not be present at the AGM but he will be presented via the meeting materials. At the meeting, no coffee or refreshments will be served.
Due to the coronavirus pandemic, Nokian Tyres continues to appeal to shareholders who have preregistered to the AGM not to attend the meeting in person, but to follow the meeting via live webcast at www.nokiantyres.com/annualgeneralmeeting2020.
Although Russia closed its borders on Sunday, March 29th, road freight transportation is still ongoing. Our factory in Vsevolozhsk is situated some 35 kilometers from the city of St Petersburg, which so far is operating normally. The situation is fluid, we are constantly monitoring it and mitigating the impacts.
The employee cooperation negotiations concerning all personnel based in Finland at Nokian Tyres plc, Nokian Heavy Tyres Ltd, Vianor Holding Oy and Vianor Oy ended on Friday, March 27th. As a result, all 1,630 employees in Finland are planned to be temporarily laid off.
A two-week shutdown in Nokia factory, Finland, begins on April 6th. This includes both the personal car tire production as well as Nokian Heavy Tyres’ production and is aimed at preventing the spread of COVID-19.
Financial guidance withdrawn
Due to the COVID-19 outbreak, which has increased the uncertainty in the car and tire market, the Board of Directors of Nokian Tyres plc (“Nokian Tyres”) has decided to withdraw the Company’s financial guidance for 2020 published on February 4, 2020. Due to the prevailing uncertainties, the Board is not in a position to give a new guidance. You can read more here.
Due to the impacts of the pandemic, Nokian Tyres will temporarily cease production at its factories to guarantee the health and safety of its employees.
The Dayton factory closure is effective Friday, March 27, and will last a minimum of two weeks. At Nokian Tyres' Russian factory, the production shutdown will start on Monday, March 30 and will last for a week. Nokian Tyres will continue supplying customers through its regional warehouses. You can read more of the Russian and US factories here.
As of March 25th, COVID-19 is unlikely to cause a raw material shortage that would put Nokian Tyres plc production at risk. We have taken extra risk management measures to mitigate the risk in our raw material supply chain.
Most of our raw materials suppliers operate mainly in a normal way. However, we do see delays in deliveries as well as in transportations. We do have safety stocks that cover the delays we have seen so far or foresee in the coming weeks. We also have back-up suppliers. We follow the situation closely and update the status as the situation develops.
In Spain, construction work at the site of the new testing center has been ceased. The contractors will resume work as soon as it is safe, but this will mean the project in Spain will have some delays.
Nokian Tyres plc is entering into employee cooperation negotiations on planned temporary lay-offs affecting Nokian Tyres plc personnel based in Finland. The background for these activities is the decrease in the demand in the European car and tire market, which is due to the COVID-19 outbreak.
The negotiations concern approximately 1,630 people. The plan is to achieve the necessary level of adjustment by using temporary lay-offs of at most 90 days per employee. Read more here.
Nokian Tyres is closely tracking updates from global health organizations and following the guidelines issued by local governments in all areas we operate. We are taking all necessary precautions to ensure the safety of our employees. We have temporarily suspended all business travel and asked our employees not to have face-to-face meetings. In most of the countries, we have moved to remote work in all the roles it is possible, and in Russia we are preparing for that.
The company has issued self-quarantine rules to our employees traveling internationally on high outbreak areas. All travelers, business or leisure, are expected to stay in self-quarantine for 14 days after returning.
In Russia, we will be adjusting our production output in line with global demand in a flexible way. In the United States, we have postponed recruitment of additional employees at the Dayton factory. We are monitoring the situation and will resume the hiring process as circumstances allow.
Since the beginning of the outbreak in China, we have activated our global Business Continuity Program and taken all actions within our control to ensure employee safety and customer delivery. Strategic resiliency is the strength of Nokian Tyres’ delivery network. We have taken extra precautions to ensure deliveries to our customers and prohibited visits in our factory locations.