FINANCIAL REVIEW 2020
CONTENTS
Nokian Tyres in brief ............................................ 1
Key figures 2020 ............................................................ 2
Highlights of the year ................................................. 3
Review by the President & CEO ................................ 4
Report by the Board of Directors...................... 6
Key financial indicators .............................................21
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 .................................................33
Parent company income statement
and balance sheet .......................................................61
Parent company statement of cash flows ........62
Accounting policies for the parent company ...63
Notes to the financial statements
of the parent company ............................................64
Information on Nokian Tyres’ share .....................69
Nokian Tyres Group structure ................................70
Signatures .......................................................................71
Auditor’s Report ...........................................................72
Corporate Governance Statement ................. 75
Remuneration report 2020 .....................................84
Board of Directors .......................................................89
Management Team .....................................................90
Investor information and investor relations .....91
Contents
ii
NOKIAN TYRES PLC REPORT BY THE BOARD OF DiRECTORS FiNANCiAL STATEMENTS GOVERNANCEFINANCIAL REVIEW 2020
NOKIAN TYRES IN BRIEF
Nokian Tyres develops and
manufactures premium tires
for people who value safety,
sustainability, and innovativeness.
Our products are used in millions of
passenger cars, trucks, and heavy
machinery each day. We offer
peace of mind in all conditions and
instill our Scandinavian heritage in
every tire we make.
Our business is divided into three units:
Passenger Car Tyres, Heavy Tyres and Vianor,
which is our chain of tire and car service
centers. Our manufacturing plants are
located in Finland, Russia, and the US, where
we started commercial tire production in
January 2020.
Intensive tire testing is a vital part of
product development and ensures high
quality of our products. We operate two
tire test centers in Finland and one in Spain,
which allows for year-round testing of tires.
Nokian Tyres is the inventor of the winter
tire. The diverse portfolio of winter tires is
complemented with summer, all-weather,
and all-season tires. Our products are sold
in approximately 70 countries. We are the
market leader in premium tires in the Nordic
countries and Russia and are strengthening
our position in North America and Central
Europe.
Sustainability is an essential part of our
business. We aim for sustainable safety and
eco-friendliness throughout the product life
cycle, and are committed to promoting safe
and responsible driving culture.
In 2020, the company’s net sales were 1,3
billion and it employed some 4,600 people.
Nokian Tyres is listed on Nasdaq Helsinki.
Nokian Tyres in brief
SAFE,
SUSTAINABLE
AND INNOVATIVE
PRODUCTS
NET SALES
1,314
(1,585)
EUR MILLION
4,600
(4,700)
EMPLOYEES
PRODUCTS SOLD IN
69
(61)
COUNTRIES
WINTER TIRES
68%
(71%)
OF TOTAL SALES
3.7
(4.3)
LOST TIME INJURY
FREQUENCY (LTIF)
1
NOKIAN TYRES PLC REPORT BY THE BOARD OF DiRECTORS FiNANCiAL STATEMENTS GOVERNANCEFINANCIAL REVIEW 2020
KEY FIGURES 2020
EUR million 2020 2019
Change
%
CC
1)
Change
%
Net sales 1,313.8 1,585.4 -17.1% -13.3%
Operating profit 120.0 316.5
Operating profit % 9.1% 19.8%
Profit before tax 106.0 336.7
Profit for the period 86.0 399.9
Earnings per share
2)
, EUR 0.62 2.89
Segments operating profit 190.2 337.2
Segments operating profit % 14.5% 21.3%
Segments earnings per share
2)
, EUR 1.04 3.06
Segments ROCE, % 9.3% 18.6%
Equity ratio, % 65.3% 75.9%
Cash flow from operating activities 422.4 219.8
Gearing, % -1.1% 2.3%
Interest-bearing net debt -17.2 41.1
Capital expenditure 149.9 290.1
Personnel (at the end of year)
3)
4,603 4,847
LTIF
4)
3.7
4.3
Rolling resistance
5)
, % 8.5% 8.3%
1)
Comparable currencies
2)
EPS 2019 excl. the impact of the rulings on the tax disputes of EUR 1.08 were
EUR 1.81. Segments EPS 2019 excl. the impact were EUR 1.98.
3)
2019 figure corrected to include passive employments (employees on long
leaves).
4)
Lost Time Injury Frequency: the number of lost time injuries occurring in a
workplace per 1 million hours worked.
5)
Reduction of rolling resistance since 2013. Rolling resistance refers to the
energy lost when a tire rolls against the road surface.
NET SALES AND SEGMENTS
OPERATING PROFIT*
SEGMENTS EARNINGS PER SHARE
AND DIVIDEND PER SHARE*
20202019201820172016
Net sales Segments
operating profit
Segments
operating profit %
EUR million
Segments operating profit %
0
400
800
1,200
1,600
2,000
0
10
20
30
40
50
20202019201820172016
EUR
Segments
earnings
per share
Dividend
per share
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
%
0
5
10
15
20
25
20202019201820172016
2016 2017 2018 2019 2020
Net sales, MEUR 1,391.2 1,572.5 1,595.6 1,585.4 1,313.8
Segments operating
profit, MEUR 310.5 365.4 372.4 337.2 190.2
Segments operating
profit % 22.3 23.2 23.3 21.3 14.5
2016 2017 2018 2019 2020
Segments earnings per
share, EUR 1.87 1.63 2.15 3.06* 1.04
Dividend per share, EUR 1.53 1.56 1.58 1.14 1.20**
NET SALES BY GEOGRAPHICAL AREA, %
NET SALES BY BUSINESS UNIT*, %
2019 2020
Passenger Car Tyres 71 66
Heavy Tyres 13 15
Vianor 21 24
* Including internal sales
2019 2020
Nordic countries 39 45
Other Europe 24 25
Russia and Asia 21 14
Americas 13 13
Other countries 4 3
2016 2017 2018 2019 2020
Segments ROCE, % 19.9 22.4 23.3 18.6 9.3
SEGMENTS ROCE*, %
Key figures 2020
* Comparable Segments Total figures for 2019–2020, earlier years reported based on IFRS
* Segments EPS 2019 excl. the impact of the rulings on the tax
disputes of EUR 1.08 were EUR 1.98
** The Board’s proposal to the Annual General Meeting
2
NOKIAN TYRES PLC REPORT BY THE BOARD OF DiRECTORS FiNANCiAL STATEMENTS GOVERNANCEFINANCIAL REVIEW 2020
HIGHLIGHTS
OF THE YEAR
IN 2020, WE CONTINUED TO
STRENGTHEN OUR POSITION
BY LAUNCHING AN EXPANDING
RANGE OF INNOVATIVE, NEXT-
GENERATION PRODUCTS TO
THE MARKETS. WE WERE
AGAIN RECOGNIZED FOR OUR
SUSTAINABILITY WORK.
Highlights of the year 2020
TIRE
PRODUCTION
began in the
US factory
NEW GUINNESS
WORLD RECORD
was set on our low
rolling resistance
winter tires
Heavy Tyres reached
a full year with
ZERO LOST-TIME INJURIES
Sales of
Nokian Tyres Intuitu
SMART TIRES
started in Finland
WE REDUCED ROLLING
RESISTANCE BY 8.5%
on average in 2013–2020
Tire testing in the
SPAIN TEST
CENTER
is in the ramp-up
phase
We are launching a
RECORD NUMBER OF
NEW PRODUCTS
in 2020–2021
WE WERE AGAIN INCLUDED IN
DJSI WORLD AND DJSI EUROPE
SUSTAINABILITY INDICES
3
NOKIAN TYRES PLC REPORT BY THE BOARD OF DiRECTORS FiNANCiAL STATEMENTS GOVERNANCEFINANCIAL REVIEW 2020
2020 was an exceptional year. The
COVID-19 pandemic stopped the
entire world for a moment, rapidly
changing both our personal
and business lives. Despite the
unprecedented circumstances,
Nokian Tyres’ agile organization
and strong brand showed their
strength once again – proving the
resilience of our business model.
While our net sales and segments
operating profit declined, the cash
flow improved significantly, and
we maintained a strong balance
sheet. I could not be prouder of
the results our team has achieved
in these turbulent times.
COVID-19 hit the car and tire industries
heavily in spring 2020, as restrictions
entered into force impacting the movement
and buying behavior of consumers. Even
though some signs of improving demand
could be seen during the second half of the
year, the entire year was overshadowed by
uncertainty.
Under these exceptional conditions,
we focused on safeguarding the health
and safety of our employees and ensuring
the continuity of our business. We quickly
reacted to changes in the market by
adjusting our production, cutting costs, and
reducing investments. Special attention
was paid to cash flow through active
working capital management. These tactical
measures were effective and enabled good
results toward the end of the year.
In 2020, we took measures to reduce
high carry-over stocks in the Russian
distribution channel. These actions were
necessary to ensure that we remain
competitive and continue to build a
sustainable business going forward. The
measures were successful and we exceeded
our target, however, they did have a negative
impact on Passenger Car Tyres’ sales in
2020. Heavy Tyres and Vianor performed
well in the volatile market.
NAVIGATING
TOGETHER THROUGH
TOUGH TIMES
Nokian Tyres’ agile
organization and
strong brand showed their
strength once again
4
NOKIAN TYRES PLC REPORT BY THE BOARD OF DiRECTORS FiNANCiAL STATEMENTS GOVERNANCEFINANCIAL REVIEW 2020
In 2021, our
focus will be on
growth and cash flow
New products as growth drivers
We have a strong position in the Nordic
countries and Russia and growth potential
in Central Europe and North America, in
particular, where we have been working hard
to expand distribution, market our products,
and better understand consumer needs. This
will help build our growing market share in
these regions.
Growth requires continued success in
product development and an attractive
product portfolio that meets consumer
needs. In 2020–2021, we are introducing a
record number of new winter, summer, and
all-season tires for passenger cars, trucks,
and heavy machinery. I am impressed by the
enormous dedication that our teams put
into this work. New innovations and a growing
range of products in carefully selected
segments support our customers’ success
and are a key driver for boosting our sales.
Pioneer in sustainability
Sustainability is at the heart of everything
we do. For example, we have been actively
reducing the rolling resistance of our
products in order to help cut greenhouse
gas emissions. Our long-term work in
sustainability is widely recognized, as we
were once again included in the Dow Jones
sustainability World and Europe indices. In
addition, we were the first tire company in
the industry to have its ambitious emissions
targets approved by the Science Based
Targets initiative.
We have made major advances in
occupational safety. In 2020, our LTIF figure
decreased from 4.3 to record low level of 3.7,
and Heavy Tyres gained another year without
any lost time accidents leading to absence.
However, the work continues, as even a single
accident is one too many.
Facing the future with confidence
We have many opportunities to develop our
business further. In 2021, our focus will be on
growth and cash flow. Growth will be driven
by innovative new products, together with
continuous improvements in go-to-market
activities. With our current capacity and
competence, we remain strong, resilient and
well-positioned to capture profitable growth
opportunities as we move forward. Our
goal is to pay predictable and competitive
dividends to our shareholders and maintain a
strong financial position.
Nokian Tyres has a valued brand and a
highly competent team that has achieved
excellent results in these exceptional times.
I would like to thank all our employees for
their great efforts and commitment, which
have helped us to navigate the challenging
year and will drive our future success.
I also extend my warm thanks to our
valued customers, shareholders, and other
stakeholders for their support and trust in
2020.
Jukka Moisio
President & CEO
Competitiveness through
investments
In the past quarters, Nokian Tyres has made
significant investments that will guarantee
growth opportunities far into the future.
Our US factory started commercial tire
production in January 2020, and the test
center in Spain, with over 10 test tracks, will
be completed during the first half of 2021.
The project to increase Heavy Tyres’ capacity
in Finland is proceeding as planned. Part of
this investment is a large-scale R&D center,
which is now up and running, and will be a
significant improvement both in terms of
testing quantity and quality.
Our production platform now consists
of three factories, which will further improve
our service capacity and bring greater
flexibility to production planning. In 2020,
we sharpened the focus of each factory.
We aim to maximize production in Russia,
while continuing to ramp up production
in North America. At the Nokia factory in
Finland, we continue to increase heavy tire
manufacturing, and focus passenger car tire
production on high-quality premium tires and
prototypes.
This significant investment phase will
soon be completed. This will improve cash
flow but also challenge us to make efficient
use of these investments. We have a new
and inspiring chapter ahead, and there is no
doubt that Nokian Tyres is ready to build an
even stronger foothold in its key markets.
5
NOKIAN TYRES PLC REPORT BY THE BOARD OF DiRECTORS FiNANCiAL STATEMENTS GOVERNANCEFINANCIAL REVIEW 2020
In 2020, the COVID-19 pandemic had a significant impact on global car and tire demand. Even though
some signs of improving demand could be seen during the second half of the year, the year was
overshadowed by uncertainty.
In the volatile operating environment, Nokian Tyres continued its key projects, including the US
factory, test center in Spain and Heavy Tyres capacity expansion, to support the company’s long-term
growth. The short-term focus was on cash flow and cost control.
In 2020, Nokian Tyres got its ambitious climate change targets for cutting greenhouse gas emissions
approved by the Science Based Targets initiative as the first company in the tire industry. Occupational
safety continued to develop positively.
Nokian Tyres increased the level of disclosure in order to provide greater transparency on the underlying
performance of the company and its business lines. Starting with the results for the first quarter of
2020, Nokian Tyres reported non-IFRS figures in addition to its IFRS-reported results, which is also in line
with reporting practices in the tire industry.
Nokian Tyres supplemented its financial reporting with non-IFRS figures on operational performance
and allocation of resources. The non-IFRS figures should not be viewed in isolation or as substitutes for
the equivalent IFRS figure(s) but should be used in conjunction with the most directly comparable IFRS
figure(s) in the reported results.
The Segments Total figures exclude costs related to the US factory ramp-up, impairment charges,
restructuring and certain other items, which are not indicative of Nokian Tyres’ underlying business
performance. The Segments Total figures for 2019 exclude the US ramp-up costs only.
Net sales and segments operating profit
Net sales in 2020 decreased by 17.1% and amounted to EUR 1,313.8 million (2019: 1,585.4; 2018: 1,595.6).
With comparable currencies, net sales decreased by 13.3% especially due to the COVID-19 pandemic, the
measures taken to reduce carry-over stocks in the Russian passenger car tire distribution channel, and
the mild winter 2019–2020 in all main markets. Currency exchange rates affected net sales negatively by
EUR 61.1 million.
Net sales by geographical area
EUR million 2020
2019
Change
%
CC*
Change
%
% of total
net sales
in 2020
% of total
net sales
in 2019
Nordics 592.2 613.2 –3.4% –0.9% 45% 39%
Other Europe 330.9 375.5 –11.9% –9.0% 25% 24%
Russia and Asia 188.7 324.3 –41.8% –33.0% 14% 21%
Americas 166.7 209.3 –20.3% –17.5% 13% 13%
Other 35.4 63.2 –44.0% –43.9% 3% 4%
Tota l 1,313.8 1,585.4 –17.1% –13.3% 100% 100%
* Comparable currencies
Net sales by business unit
EUR million 2020
2019
Change
%
CC*
Change
%
% of total
net sales
in 2020**
% of total
net sales
in 2019**
Passenger Car Tyres
871.3
1,123.8 –22.5% –18.0%
66%
71%
Heavy Tyres
194.6
202.7 –4.0% –1.8%
15%
13%
Vianor 318.1 336.5 –5.5% –2.8% 24% 21%
Other operations and
eliminations –70.1 –77.6 9.6%
Tota l
1,313.8
1,585.4 –17.1% –13.3%
* Comparable currencies
** Includes internal sales
Raw material unit costs (EUR/kg) in manufacturing decreased by 12.0% year-over-year, positively
impacted by currencies.
Segments operating profit amounted to EUR 190.2 million (2019: 337.2). The decline was mainly due
to the COVID-19 (impact approximately EUR –50 million), the lower sales in Russia (impact approximately
EUR –50 million), and the low factory utilization rate. Segments operating profit percentage was 14.5%
(2019: 21.3%).
Operating profit amounted to EUR 120.0 million (2019: 316.5; 2018: 372.4). The non-IFRS exclusions
were EUR –70.2 million (–20.8), including EUR –26.7 million (–13.9) related to the US factory ramp-up.
Operating profit percentage was 9.1% (2019: 19.8%; 2018: 23.3%).
Segments operating profit by business unit
EUR million 2020 2019*
Passenger Car Tyres 177.8 308.5
Heavy Tyres 23.7 35.7
Vianor 4.0 7.7
Other operations and eliminations –15.3 –14.7
Segments operating profit total 190.2 337.2
Non-IFRS exclusions –70.2 –20.8
* As of 2020, Nokian Tyres reports non-IFRS figures in addition to its IFRS-reported results. Restated figures for
2019 were published as a stock exchange release on April 24, 2020.
REPORT BY THE BOARD
OF DIRECTORS 2020
6
NOKIAN TYRES PLC FINANCIAL REVIEW 2020 FINANCIAL STATEMENTS GOVERNANCEREPORT BY THE BOARD OF DIRECTORS
Financial items and taxes
Net financial expenses were EUR 14.0 million (income 20.3; includes a return of EUR 35.9 million related
to the rulings on the tax disputes), including net interest expenses of EUR 8.6 million (income 29.4).
Net financial expenses include an expense of EUR 5.4 million (9.1) due to exchange rate differences.
Segments profit before tax was EUR 176.2 million (357.5; positively impacted by the returned punitive
interest of EUR 34.4 million related to the tax disputes in the previous fiscal years). Profit before tax
was EUR 106.0 million (336.7) and taxes were EUR 20.0 million (63.1; positively impacted by the returned
additional taxes and punitive increases of EUR 115.2 million in the previous fiscal years). Segments profit
for the period amounted to EUR 144.4 million (420.6; positively impacted by EUR 149.6 million related to
the final rulings on the tax disputes concerning the years 2007−2011). Profit for the period amounted
to EUR 86.0 million (399.9; positively impacted by EUR 149.6 million related to the rulings on the tax
disputes). Segments earnings per share were EUR 1.04 (3.06; positively impacted by EUR 1.08 related to
the rulings on the tax disputes). Earnings per share were EUR 0.62 (2.89; positively impacted by EUR 1.08
related to the rulings on the tax disputes).
Return on equity was 5.2% (2019: 24.6%, positively impacted by the tax disputes; 2018: 20.0%).
Guidance given for 2020
In Nokian Tyres’ financial statement release for 2019 published in February 2020, the company published
the following outlook for the year:
In 2020, net sales with comparable currencies are expected to decline and operating profit to be
significantly below the level of 2019. In line with Nokian Tyres’ updated 2018 strategy, the company is
targeting further growth in Russia, Central Europe, and North America. In 2020 however, net sales and
operating profit in Russia are expected to decline substantially due to the changed market dynamics.
Operating profit in 2020 will include costs related to the North American expansion and other
investment programs to support long-term growth, as communicated in 2018.
In March 2020, the Board of Directors of Nokian Tyres plc withdrew the company’s financial guidance
for 2020 due to the COVID-19 outbreak, which increased the uncertainty in the car and tire market.
Cash flow
In 2020, cash flow from operating activities was EUR 422.4 million (219.8). In the volatile environment
due to COVID-19, the company increased focus on working capital management, taking manufacturing
downtime to reduce inventory levels and reducing capital spending to ensure a healthy cash flow.
Working capital decreased by EUR 169.9 million (increased by 235.7). Inventories decreased by EUR 25.2
million (decreased by 6.1) and receivables decreased by EUR 121.9 million (increased by 68.0). Payables
increased by EUR 22.8 million (decreased by 173.8).
Investments
Investments in 2020 amounted to EUR 149.9 million (290.1). This includes construction of the new US
factory and the test center in Spain, and production investments in Heavy Tyres. Strategic projects
proceeded in line with the plan with some delays due to COVID-19. Commercial tire production began in
the US factory in January 2020. The test center in Spain will be completed during the first half of 2021.
Depreciations and amortizations totaled EUR 131.1 million (125.2). Impairments were EUR 24.9 million (0.0).
Financial position on December 31, 2020
In 2020, Nokian Tyres implemented actions to strengthen its liquidity position, which as of December 31,
2020 amounted to EUR 709.6 million, including cash, cash equivalents and undrawn committed short-
and long-term credit limits (EUR 424.3 million at the end of 2019). A total of EUR 275 million bilateral
loans, which were withdrawn in the first half of the year, were prepaid before maturity at the end of the
year.
EUR million
December 31,
2020
December 31,
2019
Cash and cash equivalents 504.2 218.8
Interest-bearing liabilities 487.0 259.9
of which current interest-bearing liabilities 229.7 30.9
Interest-bearing net debt
–17.2
41.1
Unused credit limits*
507.1
561.0
of which committed 205.5 205.5
Gearing ratio, % –1.1% 2.3%
Equity ratio, % 65.3% 75.9%
* 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. The
commercial paper program was increased from EUR 350 million to EUR 500 million in April 2020.
Personnel
During the year, Nokian Tyres took necessary precautions to ensure the health and safety of its
employees and partners due to the COVID-19 outbreak. These included limiting travelling, remote
work, social distancing, face masks, and implementing other health and safety practices. In addition,
training and webinars were offered to the employees and managers to cope with the special working
circumstances. Cost saving measures were implemented based on demand. Nokian Tyres’ Group
Management Team contributed to the savings with a salary reduction equivalent to one month’s salary in
2020.
Occupational health and safety KPIs continued to improve. Nokian Tyres’ accident frequency (LTIF, the
number of lost time injuries occurring in a workplace per 1 million hours worked) dropped from 4.3 to 3.7.
2020 2019* 2018
Group employees
on average
4,859
4,995 4,790
at the end of the review period 4,603 4,847 4,719
in Finland, at the end of the review period 1,721 1,781 1,769
in Russia, at the end of the review period 1,528 1,604 1,574
in North America, at the end of the review period 229 296 191
Vianor (own) employees, at the end of the review period** 1,411 1,504 1,563
* Figures corrected to include passive employments in December 2019 (employees on long leaves).
** Included in Group employee figures
Salaries, incentives, and other related costs in 2020 were EUR 224.7 million (2019: 235.3; 2018: 228.9).
Research and development
In 2020, Nokian Tyres introduced several new tire models. Approximately 50% of R&D investments is
allocated to product testing. Nokian Tyres’ R&D costs in 2020 totaled EUR 22.7 million (2019: 22.7; 2018:
20.8), which is 8.0% (2019: 8.8%; 2018: 5.8%) of the operating expenses.
To support the testing of new tires, Nokian Tyres is building a new test center in Spain. The building
will be completed during the first half of 2021, and tire testing is in the ramp-up phase.
7
NOKIAN TYRES PLC FINANCIAL REVIEW 2020 FINANCIAL STATEMENTS GOVERNANCEREPORT BY THE BOARD OF DIRECTORS
Sales and distribution
Good availability and precise, quick deliveries especially during season are an increasingly important part
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 2020, the number of stores was as
follows:
• Vianor: 1,117 (1,170) service centers in total, of which 943 (981) partners
• NAD: 2,282 (2,182) stores
• N-Tyre: 124 (133) stores
BUSINESS UNIT REVIEWS
Passenger Car Tyres
EUR million 2020 2019 Change %
CC*
Change %
Net sales 871.3 1,123.8 –22.5% –18.0%
Segment operating profit 177.8 308.5
Segment operating profit, % 20.4% 27.4%
* Comparable currencies
In 2020, net sales of Passenger Car Tyres totaled EUR 871.3 million (1,123.8). With comparable currencies,
net sales decreased by 18.0% as a result of the COVID-19 pandemic, the measures taken in Russia to
reduce carry-over stocks in the distribution channel, and the mild winter 2019−2020. Average Sales Price
with comparable currencies decreased in 2020 due to commercial programs to advance sell-out, and
as the share of winter tire sales decreased. The share of sales volume of winter tires was 68% (71%), the
share of summer tires was 20% (19%), and the share of all-season tires was 12% (10%).
Both summer and winter tire inventories in the Russian distribution channel were decreased
significantly compared to the previous year, with both seasons ending with low inventory levels, and the
company achieved its inventory level targets in the distribution channel set for 2020. In winter tires,
Nokian Tyres’ actions to limit sell-in and support sell-out in 2020 resulted in the company outperforming
the market in terms of sell-out.
Production output (pcs) decreased by 17.1% year-over-year. Production was adjusted according to
demand in Russia and Finland. In the US factory, commercial production started during the first quarter
of the year. The US ramp-up has been slower than planned due to COVID-19. In 2020, 87% (85%) of
passenger car tires (pcs) were manufactured in Russia.
Segment operating profit was EUR 177.8 million (308.5). The decline was mainly due to the lower sales
in Russia (impact approximately EUR –50 million), the COVID-19 (impact approximately EUR –45 million),
and the low factory utilization rate in all locations.
Nokian Tyres launched a new UHP winter tire Nokian Snowproof P in March and a new Seasonproof
all-season tire range in September for Central European market. In September, the Nokian Hakka
summer tire range for Northern conditions expanded with two new premium summer tires, Nokian
Hakka Green 3 and Nokian Hakka Van and the Nokian Nordman tire range got two new additions: Nokian
Nordman SZ2 and Nokian Nordman S2 SUV. In December, the company announced that, in early 2021, it
will introduce a new Nokian Hakkapeliitta 10 winter tire range as well as new studded Nokian Nordman 8
and Nokian Nordman 8 SUV winter tires.
Heavy Tyres
EUR million 2020 2019 Change %
CC*
Change %
Net sales 194.6 202.7 –4.0% –1.8%
Segment operating profit 23.7 35.7
Segment operating profit, % 12.2% 17.6%
* Comparable currencies
In 2020, net sales of Heavy Tyres totaled EUR 194.6 million (202.7). With comparable currencies, net sales
decreased by 1.8%, due to the lower sales volume especially in OE forestry tires. Sales in Nokian Tyres’
other core product segments remained relatively stable. Excluding the Levypyörä acquisition in August
2019, net sales with comparable currencies declined by 5.8%.
Segment operating profit was EUR 23.7 million (35.7), negatively impacted by volumes, low factory
utilization rate, investments and maintenance work in production, and currencies.
A flow of product launches with new innovations continued in 2020. For example, new Nokian
Hakkapeliitta Truck E2 and Nokian E-Truck 17.5 tire ranges were launched and the production of a new
tractor tire, Nokian Ground King, started. In addition, several new sizes to existing product ranges were
introduced and the first agricultural and contracting tractor tires equipped with Nokian Tyres Intuitu
smart tire technology became available for sales.
Vianor, own operations
EUR million 2020 2019 Change %
CC*
Change %
Net sales 318.1 336.5 –5.5% –2.8%
Segment operating profit
4.0
7.7**
Segment operating profit, %
1.3%
2.3%
Number of own service centers at
period end 174 189
* Comparable currencies
** Includes EUR 2.0 million profit from sale of real estate
In 2020, net sales of Vianor totaled EUR 318.1 million (336.5). With comparable currencies, net sales
decreased by 2.8%.
Segment operating profit was EUR 4.0 million (7.7, includes EUR 2.0 million profit from sale of real
estate).
Vianor US network, including ten service centers, was sold in August. Nokian Tyres’ products are
offered in the US via selected partners.
At the end of the review period, Vianor had 174 (189) own service centers in Finland, Sweden and
Norway.
8
NOKIAN TYRES PLC FINANCIAL REVIEW 2020 FINANCIAL STATEMENTS GOVERNANCEREPORT BY THE BOARD OF DIRECTORS
Segments Total to Nokian Tyres Total reconciliation
1–12/2020
Net
sales
Cost of
sales SGA
Other
operating
income/
expenses
Operating
profit
Financial
income/
expenses Taxes
Profit
for the
period
Segments Total 1,313.8 –871.9 –232.8 –18.8 190.2 –14.0 –31.9 144.4
US factory ramp-up –24.4 –2.3 –26.7 5.3 –21.4
Impairments
and write-downs
of tangible and
intangible assets,
and certain other
items –11.9 –13.7 –5.0 –30.6 6.1 –24.5
Unification of the
Group’s accounting
principles
of product
development costs –4.7 –4.9 –9.6 1.9 –7.7
Non-operative
items and others –0.5 –8.7 5.8 –3.4 0.0 –1.5 –4.8
Total Non-IFRS
exclusion –41.5 –29.6 0.8 –70.2 0.0 11.8 –58.4
Nokian Tyres Total 1,313.8 –913.4 –262.4 –18.0 120.0 –14.0 –20.0 86.0
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 2020 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 2020 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.
SHARES AND SHAREHOLDERS
At the end of December 2020, the number of shares was 138,921,750.
Number of shares (million units)* 31.12 . 2 0 31.12 .19
at the end of period 138.22 138.72
in average 138.46 138.17
in average, diluted 138.46 138.38
*Excluding treasury shares
Authorizations
In 2020, the Annual General Meeting authorized the Board of Directors to resolve to repurchase a maximum
of 13,800,000 shares in the company by using funds in the unrestricted shareholders’ equity. The proposed
number of shares corresponded to approximately 9.9% of all shares in the company at the time of the
proposal. The authorization will be effective until the next Annual General Meeting, however at most until
June 30, 2021.
In 2020, the Annual General Meeting authorized the Board of Directors to make a decision to offer no
more than 13,800,000 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 maximum number of shares included in the proposed authorization accounts
for approximately 9.9% of all shares in the company. The authorization will be effective until the next
AGM, however at most until June 30, 2021. This authorization will invalidate all other Board authorizations
regarding share issues and special rights.
In 2019, 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 corresponded to 3.6% of all shares in the company at the time of the proposal.
The authorization was effective until the Annual General Meeting of 2020.
The Board did not utilize the authorizations in 2020.
Own shares
No share repurchases were made during the review period, and the company did not possess any
own shares on December 31, 2020. Nokian Tyres has an agreement 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. On
December 31, 2020, the number of these shares was 697,400, reported as treasury shares (December 31,
2019: 197,947). This number of shares corresponded to 0.50% (0.14%) of the total shares and voting rights in
the company.
Trading in shares
A total of 279,145,453 (175,964,982) Nokian Tyres’ shares were traded in Nasdaq Helsinki in 2020,
representing 201% (127%) of the company’s overall share capital. The average daily volume in 2020 was
1,107,720 shares (703,860). 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 87,417,402
(109,439,468) shares in 2020.
Nokian Tyres’ share price was EUR 28.82 (25.63) at the end of 2020. The volume weighted average share
price in 2020 was EUR 22.15 (27.63), the highest was EUR 31.14 (32.44) and the lowest was EUR 16.38 (23.71).
The company’s market capitalization at the end of the period was EUR 4.0 billion (3.6 billion).
At the end of the review period, the company had 58,563 (54,067) registered shareholders. The
percentage of Finnish shareholders was 42.5% (34.9%), and 57.5% (65.1%) were non-Finnish holders and
foreign shareholders registered in the nominee register. Public sector entities owned 13.7% (10.1%), financial
and insurance corporations 7.2% (4.6%), households 14.4% (13.7%), non-profit institutions 3.5% (3.6%), and
private companies 3.7% (2.8%).
9
NOKIAN TYRES PLC FINANCIAL REVIEW 2020 FINANCIAL STATEMENTS GOVERNANCEREPORT BY THE BOARD OF DIRECTORS
Major shareholders on December 31, 2020
(Does not include nominee registered shareholders or treasury shares)
Number of
shares
% of share
capital
1. Solidium Oy 10,800,000 7.77
2. Ilmarinen Mutual Pension Insurance Company 3,600,678 2.59
3. Varma Mutual Pension Insurance Company 2,060,889 1.48
4. Elo Mutual Pension Insurance Company 1,566,285 1.13
5. OP-Finland 1,500,000 1.08
6. Nordea Nordic Small Cap Fund 1,186,266 0.85
7. Mandatum Life Insurance Company Ltd. 888,717 0.64
8. The State Pension Fund 750,000 0.54
9. Nordea Nordic Fund 652,163 0.47
10. Danske Invest Finnish Equity Fund 630,000 0.45
Changes in ownership
Transaction date Shareholder Threshold
% of shares
and voting
rights
% of shares and
voting rights
through financial
instruments Total, %
March 9, 2020
Sprucegrove
Investment
Management Above 5% 5.01% 5.01%
March 10, 2020 BlackRock, Inc Below 5% 4.98% 0.86% 5.85%
March 19, 2020 BlackRock, Inc Above 5% 5.02% 0.66% 5.69%
June 11, 2020 BlackRock, Inc Below 5% 4.96% 0.94% 5.90%
June 12, 2020 BlackRock, Inc Above 5% 5.22% 1.06% 6.28%
June 17, 2020
Sprucegrove
Investment
Management Below 5% 4.92% 4.92%
June 17, 2020 BlackRock, Inc Below 5% 4.91% 0.97% 5.89%
June 29, 2020 BlackRock, Inc Above 5% 5.04% 0.43% 5.47%
June 30, 2020 BlackRock, Inc Below 5% 4.67% 0.57% 5.24%
July 10, 2020 BlackRock, Inc Above 5% 5.22% 0.51% 5.73%
July 14, 2020 BlackRock, Inc Below 5% 4.46% 0.84% 5.30%
July 15, 2020 BlackRock, Inc Above 5% 5.25% 0.73% 5.98%
July 27, 2020 BlackRock, Inc Below 5% 4.90% 0.77% 5.68%
July 27, 2020
Sprucegrove
Investment
Management Above 5% 5.15% 5.15%
October 27, 2020 BlackRock, Inc Above 5% 5.07% 0.33% 5.21%
October 27, 2020
Société
Générale SA Above 5% 0.66% 5.21% 5.87%
October 28, 2020 BlackRock, Inc Below 5% 4.89% 0.14% 5.03%
October 29, 2020
Société
Générale SA Below 5% 0.70% 4.24% 4.94%
October 30, 2020
Société
Générale SA Above 5% 0.68% 4.53% 5.21%
November 9, 2020 BlackRock, Inc Above 5% 5.04% 0.76% 5.81%
November 10, 2020 BlackRock, Inc Below 5% 4.94% 0.77% 5.71%
December 1, 2020 BlackRock, Inc Below 5% Below 5% Below 5% Below 5%
December 2, 2020 BlackRock, Inc Above 5% 4.69% 0.47% 5.16%
December 4, 2020
BlackRock, Inc Below 5% Below 5% Below 5% Below 5%
December 9, 2020
BlackRock, Inc Above 5% 4.49% 0.52% 5.01%
December 22, 2020 BlackRock, Inc Below 5% Below 5% Below 5% Below 5%
December 29, 2020 BlackRock, Inc Above 5% 4.84% 0.27% 5.12%
December 30, 2020 BlackRock, Inc Below 5% Below 5% Below 5% Below 5%
Detailed information on notifications of change in shareholding can be found at
www.nokiantyres.com/company/investors/share/flagging-notifications/.
10
NOKIAN TYRES PLC FINANCIAL REVIEW 2020 FINANCIAL STATEMENTS GOVERNANCEREPORT BY THE BOARD OF DIRECTORS
Shareholdings of the Board of Directors, the President and CEO,
and the Management Team on December 31, 2020
Board of Directors Number of shares
Jukka Hienonen, chairman 12,795
Kari Jordan, deputy chairman 3,611
Heikki Allonen, member 3,617
Raimo Lind, member 6,462
Veronica Lindholm, member 3,617
Inka Mero, member 5,010
George Rietbergen, member 2,954
Pekka Vauramo, member 2,424
Total 40,490
President and CEO Number of shares
Jukka Moisio 18,000
Management Team Number of shares
Päivi Antola, Corporate Communications & IR 1,264
Anna Hyvönen, North America, Nordics & Vianor 21,715
Adrian Kaczmarczyk, Supply Operations 0
Tarja Kaipio, Human Resources 7,977
Teemu Kangas-Kärki, Finance 7,014
Jukka Kasi, Products & Innovations 4,420
Bahri Kurter, Central Europe 0
Andrei Pantioukhov, Russia & Asia, Global Marketing 69,359
Manu Salmi, Heavy Tyres & Nokia Factory 26,601
Timo Tervolin, Strategy & M&A 6,385
Frans Westerlund, IT & Processes 4,042
Total 148,777
On December 31, 2020, Nokian Tyres’ Board members and the President and CEO held a total of 58,490
Nokian Tyres shares. The shares represent 0,04% of the total number of votes.
Managers’ transactions
Nokian Tyres announced managers’ transactions on May 11 and November 3. Read more at: www.
nokiantyres.com/company/publications/releases/2020/managementTransactions/
DECISIONS MADE AT THE ANNUAL GENERAL MEETING
On April 2, 2020, the Annual General Meeting (AGM) of Nokian Tyres approved the Financial Statements
for 2019, discharged the members of the Board of Directors and the President and CEO from liability for
the 2019 financial year and adopted the Remuneration Policy.
Dividend
The meeting decided that a dividend of EUR 0.79 per share shall be paid for the period ending on
December 31, 2019. The dividend payment date was April 17, 2020 and the dividend was paid to
shareholders included in the shareholder list maintained by Euroclear Finland Oy on the record date of
April 6, 2020.
In October 2020, the Board of Directors decided on the payment of the second dividend instalment,
based on the authorization given by the AGM. The second instalment of EUR 0.35 per share was paid to
shareholders included in the shareholder list maintained by Euroclear Finland Ltd on the record date of
October 29, 2020. The dividend payment date was December 9, 2020.
The total amount of dividends paid by Nokian Tyres for the financial year 2019 was EUR 1.14 per
share.
Members of the Board of Directors and Auditors
The meeting decided that the Board of Directors has eight members. Heikki Allonen, Kari Jordan, Raimo
Lind, Veronica Lindholm, Inka Mero, George Rietbergen and Pekka Vauramo were re-elected to the Board
of Directors. Jukka Hienonen was elected as a new member to the Board of Directors.
The AGM elected audit firm KPMG Oy Ab as auditor.
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 7,917 or EUR
95,000 per year, the monthly fee paid to the Deputy Chairman of the Board and to the Chairman of the
Audit Committee shall be EUR 5,833 or EUR 70,000 per year, and the monthly fee paid to Members of
the Board shall be EUR 3,958 or EUR 47,500 per year.
60% of the annual fee is to be paid in cash and 40% in Company shares, to the effect that in the
period from May 6 to June 5, 2020, EUR 38,000 worth of shares in Nokian Tyres plc will be purchased
at the stock exchange on behalf of the Chairman of the Board, EUR 28,000 worth of shares in Nokian
Tyres plc will be purchased at the stock exchange on behalf of the Deputy Chairman of the Board and
Chairman of the Audit committee, and EUR 19,000 worth of shares will be purchased on behalf of other
members of the Board. The Company is liable to pay any asset transfer taxes, which may arise from the
acquisition of the Company 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
The AGM authorized the Board of Directors to resolve to repurchase a maximum of 13,800,000 shares
in the company by using funds in the unrestricted shareholders’ equity. The proposed number of shares
corresponded to approximately 9.9% of all shares in the company at the time of the proposal. The
authorization will be effective until the next AGM, however at most until June 30, 2021.
The AGM authorized the Board of Directors to make a decision to offer no more than 13,800,000
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 maximum number of shares included in the proposed authorization accounts for
approximately 9.9% of all shares in the Company. The authorization will be effective until the next AGM,
however at most until June 30, 2021. This authorization will invalidate all other Board authorizations
regarding share issues and special rights.
11
NOKIAN TYRES PLC FINANCIAL REVIEW 2020 FINANCIAL STATEMENTS GOVERNANCEREPORT BY THE BOARD OF DIRECTORS
Establishment of a Shareholders’ Nomination Board
The AGM decided to establish a Shareholders’ Nomination Board to prepare proposals to the Annual
General Meeting and, when necessary, to the Extraordinary General Meeting concerning the number
of members, the composition, the Chairman and possible Deputy Chairman of the Board of Directors
as well as the remuneration of the Board of Directors and Committees as well as to identify possible
successor candidates for the members of the Board of Directors. In addition, the AGM decided to
approve the Charter of the Shareholders’ Nomination Board.
Amendments of the articles of association
In 2020, the Annual General Meeting resolved to amend the Articles of Association §4 and §11 as follows:
§4 Board of Directors
The Company’s administration and proper organization of operations shall be the responsibility of the
Board of Directors, consisting of a minimum of four and a maximum of nine members, in accordance
with the decision made by the General Meeting of the Shareholders. The term of office of the members
of the Board of Directors ends at the closing of the first Annual General Meeting following the election.
§11 Annual General Meeting
The Annual General Meeting shall be held annually on a day fixed by the Board of Directors, by the end of
May. The Meeting shall be held either at the Company’s registered place of business or in either the city
of Tampere or Helsinki, as decided by the Board of Directors.
The Annual General Meeting shall review:
1. the financial statements, which include the consolidated financial statements, and annual report;
2. the auditor’s report;
shall resolve:
3. the adoption of the financial statements;
4. the use of the profit shown on the balance sheet;
5. granting discharge from personal liability to the members of the Board of Directors and the Managing
Director;
6. adoption of the remuneration policy, when necessary;
7. adoption of the remuneration report;
8. the remuneration payable to the members of the Board of Directors and the auditor;
9. the number of the members of the Board of Directors;
shall elect:
10. the members of the Board of Directors;
11. an auditor; and
shall deal with:
12. any other matters mentioned in the notice of the meeting.
BOARD OF DIRECTORS’ WORKING ARRANGEMENTS
In the Board meeting on April 2, 2020, Jukka Hienonen 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 Jukka Hienonen 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.
SHAREHOLDERS’ NOMINATION BOARD
The 2020 Annual General Meeting decided to establish a Shareholders’ Nomination Board. The
Nomination Board consists of five members of which four members represent the company’s four
largest shareholders, and one member is the Chairman of the Board. In June 2020, the following
members were appointed to the Board:
• Antti Mäkinen (CEO, Solidium Oy), appointed by Solidium Oy
• Heikki Westerlund (board professional), appointed by Bridgestone Corporation
• Mikko Mursula (Chief Investment Officer, Ilmarinen Mutual Pension Insurance Company), appointed by
Ilmarinen Mutual Pension Insurance Company
• Timo Sallinen (Senior Vice President, Investments, Varma Mutual Pension Insurance Company),
appointed by Varma Mutual Pension Insurance Company
• Jukka Hienonen, Chairman of the Board, Nokian Tyres plc
The Shareholders’ Nomination Board proposes to the 2021 Annual General Meeting that the Board
consist of nine members, the Chairman and the Deputy Chairman included, and that of the current
Board members, Heikki Allonen, Jukka Hienonen, Raimo Lind, Veronica Lindholm, Inka Mero, George
Rietbergen and Pekka Vauramo be re-elected and Christopher Ostrander and Jouko Pölönen be elected
as new members to the Board of Directors for a term ending at the end of the 2022 Annual General
Meeting.
Jukka Hienonen is proposed to be elected as Chairman and Pekka Vauramo as Deputy Chairman of
the Board of Directors. Of the current members, Kari Jordan has informed that he is not available for
re-election to the Board of Directors.
The Shareholders’ Nomination Board proposes that the annual remuneration to be paid to the
members of the Board of Directors elected at the Annual General Meeting 2021 be as follows:
• Chairman of the Board of Directors EUR 102,500 per year
• Deputy Chairman and the Chairman of the Audit Committee EUR 72,500 per year
• members EUR 50,000 per year
The Shareholders’ Nomination Board further proposes that 60% of the annual fee be paid in cash and
40% in Company shares. For each Board and Board Committee meeting the fee is proposed to be EUR
700. For Board members resident in Europe, the fee for each meeting in Europe outside a member’s
home country is doubled, and for each meeting outside Europe the fee is tripled. For Board members
resident outside Europe, the fee for each meeting outside a member’s home country is tripled. If a
member participates in a meeting via telephone or video connection, the remuneration is proposed to
be EUR 700. Travel expenses are proposed to be compensated in accordance with the Company’s travel
policy.
CHANGES IN MANAGEMENT
In May 2020, Nokian Tyres’ Board of Directors announced the appointment of Jukka Moisio as the new
President and CEO of Nokian Tyres plc effective May 27, 2020. Jukka Moisio succeeds Hille Korhonen,
who led the company for three years as the President and CEO, and prior to that as a member of the
Board of Directors.
The members of Nokian Tyres Management Team as of January 2021 are:
Jukka Moisio, President & CEO
Andrei Pantioukhov, Executive Vice President, Russia, Asia and Global Marketing
Päivi Antola, Senior Vice President, Corporate Communications and Investor Relations
Anna Hyvönen, Executive Vice President, North America, Nordics and Vianor
Adrian Kaczmarczyk, Senior Vice President, Supply Operations
Teemu Kangas-Kärki, CFO
Jukka Kasi, Senior Vice President, Products & Innovations
Bahri Kurter, Executive Vice President, Central Europe
Päivi Leskinen, Senior Vice President, Human Resources as of May 2021, interim SVP HR Tarja Kaipio
Manu Salmi, Executive Vice President, Heavy Tyres and Nokia Factory
12
NOKIAN TYRES PLC FINANCIAL REVIEW 2020 FINANCIAL STATEMENTS GOVERNANCEREPORT BY THE BOARD OF DIRECTORS
CORPORATE SUSTAINABILITY
In the first quarter of 2020, Nokian Tyres updated its Sustainability Strategy and Sustainability Road Map
to guide the company’s work on sustainability.
In May 2020, Nokian Tyres announced that its emissions reduction targets had been approved by
the Science Based Targets initiative (SBTi) as the first tire company in the world. The targets covering
greenhouse gas emissions from Nokian Tyres’ operations (scopes 1 and 2) are consistent with reductions
required to keep climate warming to below 2°C.
By 2030, Nokian Tyres commits to reduce scope 1 and 2 GHG emissions by 52% per ton of tires from
a 2015 base year and scope 3 GHG emissions from purchased goods and services and upstream and
downstream transportation and distribution by 25% per ton of tires from a 2018 base year. Nokian Tyres
also commits to reduce scope 3 GHG emissions from the use of sold products by 25% per ton of tires by
2030 from a 2018 base year.
In October 2020, Nokian Tyres announced that its US factory’s production building had earned
LEED v4 Silver certification for green building leadership. The facility earned the certification due to
a wide range of sustainable elements, including smart building automation designed to save energy,
eco-friendly building materials, efficient water and waste management systems, electric vehicle charging
stations in the parking lot and renewable energy generation via onsite solar panels.
In November 2020, Nokian Tyres was selected in Dow Jones’ World Sustainability index for the fourth
consecutive year. The company was also selected in the more strictly defined DJSI Europe index. The
company received full 100 points in Product Quality & Recall Management, Environmental Reporting,
Environmental Policy & Management and Social Reporting.
Nokian Tyres will publish its Corporate Sustainability Report for 2020 during the first quarter of 2021.
OTHER MATTERS
SHARE-BASED LONG-TERM INCENTIVE SCHEME 2020–2022 FOR THE
MANAGEMENT AND SELECTED KEY EMPLOYEES OF NOKIAN TYRES PLC
On February 4, 2020, Nokian Tyres announced that the Board of Directors of Nokian Tyres plc has
decided on a share-based long-term incentive scheme for the company’s management and selected
key employees for years 2020–2022 as a continuation to the earlier plans decided in 2019. The decision
includes Performance Share Plan 2020 (“PSP 2020”) as the main structure and Restricted Share Plan
2020 (“RSP 2020”) as a complementary structure.
The purpose of the share-based incentive scheme is to align the goals of the company’s
shareholders and key personnel in order to increase the value of the company in the long term and to
commit key personnel to the company and its strategic targets.
Performance Share Plan 2020
The Performance Share Plan consists of annually commencing individual three-year Performance
Periods, followed by the payment of the potential share reward. The commencement of each individual
Performance Period is subject to a separate Board approval.
The Performance Period (PSP 2020–2022) commences effective as of the beginning of 2020 and
the potential share reward thereunder will be paid in the first half of 2023 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. Eligible to participate in PSP 2020–2022 are approximately 200 individuals,
including the members of Nokian Tyres Management Team.
The potential share reward payable under the PSP 2020–2022 are based on the Earnings Per Share
(EPS) and Return on Capital Employed (ROCE). The possible rewards paid based on the Performance
Period of 2020–2022 will be a maximum of 569,260 gross shares.
If the individual’s employment with Nokian Tyres terminates before the payment date of the share
reward, the individual is not, as a main rule, entitled to any reward based on the plan.
Restricted Share Plan 2020
The purpose of the Restricted Share Plan is to serve as a complementary tool for individually selected
key employees of Nokian Tyres in situations like new hires and retention needs. It consists of annually
commencing individual Restricted Share Plans, each with a three-year retention period after which the
share rewards granted within the plan will be paid to the participants in shares of Nokian Tyres plc and
partly in cash.
The commencement of each individual plan is subject to a separate Board of Directors approval.
A precondition for the payment of the share reward based on the Restricted Share Plan is that the
employment relationship of the individual participant with Nokian Tyres continues until the payment date
of the reward.
In addition to the precondition described above, a financial performance criteria is applied to Nokian
Tyres Management Team. A pre-set financial threshold value must be exceeded, for a payment or a share
reward from the Restricted Share Plan 2020–2022 to take place. The financial performance threshold
value is tied to Return on Capital Employed (ROCE).
The latest plan (RSP 2020–2022) within the Restricted Share Plan structure commenced effective
as of the beginning of 2020 and the potential share reward thereunder will be paid in the first half of
2023. The possible rewards paid based on RSP 2020–2022 correspond approximately to a maximum of
120,000 gross shares.
Other terms
Nokian Tyres applies a share ownership policy to the members of Nokian Tyres Management Team.
According to this policy each member of the Management Team is expected to retain in his/her
ownership at least 25% of the shares received under the share-based incentive programs of the
company until the value of his/her share ownership in the company corresponds to at least his/her
annual gross base salary.
The Board of Directors anticipates that no new shares will be issued based on the share-based
incentive scheme and that the scheme will, therefore, have no dilutive effect on the registered number
of the company’s shares.
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 business continuity. 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 2020 Corporate
Governance Statement.
For example, the following risks could potentially have an impact on Nokian Tyres’ business:
• 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. 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 of 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, Russia and the US. Any unexpected
production or delivery breaks at these facilities would have a negative impact on the company’s
13
NOKIAN TYRES PLC FINANCIAL REVIEW 2020 FINANCIAL STATEMENTS GOVERNANCEREPORT BY THE BOARD OF DIRECTORS
business. Interruptions in logistics could have a significant impact on production and 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.
• Tire industry can be subject to risks caused by climate change, such as changes in consumer
tire preferences, regulatory changes or impact of extreme weather events on natural rubber
producers. Nokian Tyres is committed to reducing GHG emissions from its operations in order to
combat climate change. Nokian Tyres calculates the GHG emissions from its operations annually
and reduces them systematically. More detailed analysis on Nokian Tyres’ climate change related
risks and opportunities is provided at www.nokiantyres.com/company/sustainability/environment/
climate-change-related-risks-and-opportunities/.
• 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. In October 2020,
the prosecutor announced the decision to press charges against a total of six persons who acted as
Board members and the President & CEO of Nokian Tyres in 2015–2016. The prosecutor also requests
a corporate fine of a maximum of EUR 850,000 to be imposed on the company. The prosecutor has
also decided to press charges for suspected abuse of insider information against four persons who
were employees of Nokian Tyres in 2015. All persons charged deny their involvement in any criminal
activity.
• The COVID-19 pandemic represents a short-term risk to Nokian Tyres’ business and operating
environment, which has rapidly changed. The company has proactively taken preventive actions to
minimize the impacts of the pandemic and to ensure business continuity. Despite these efforts,
the uncertainty over the duration of the pandemic, the containment measures and the resulting
slowdown in economic activity is expected to have a negative impact on Nokian Tyres’ operations and
supply chain as well as the demand and pricing for the company’s products.
Nokian Tyres’ risk analysis also pays special attention on corporate social responsibility risks, the most
significant of which are related to the company’s brand image and product quality. Analyses and projects
related to information security, data protection, and customer information are continuously a special
focus area.
Tax disputes
In May 2019, Nokian Tyres U.S. Finance Oy, a former subsidiary of Nokian Tyres plc (ownership: 100%
of the shares), received a negative ruling from the Hämeenlinna Administrative Court regarding the
company’s appeal against a reassessment of EUR 18.5 million concerning the 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 has paid and recorded them in full in the financial statements and results for 2013, 2014, and
2017. The company considers the decision unfounded and has appealed against it by filing a claim with
the Supreme Administrative Court in July 2019.
COVID-19 – SUMMARY OF ACTIONS
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
• Temporary closures of the manufacturing facilities in Russia, Finland and the US during March-May
• 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. On October 27, 2020, the
Board decided on the distribution of a second dividend instalment of EUR 0.35 per share.
• Capex reduction from approximately EUR 200 million to EUR 149.9 million for 2020.
• Actions implemented to strengthen Nokian Tyres’ liquidity position, which as of December 31, 2020
amounted to EUR 709.6 million, including cash, cash equivalents and undrawn committed short- and
long-term credit limits (EUR 424.3 million at the end of 2019)
• Strong balance sheet supporting in difficult times
NON-FINANCIAL REPORTING STATEMENT
Nokian Tyres develops and manufactures premium tires for consumers and customers who value safety,
sustainability, and innovative products. Sustainability is at the core of Nokian Tyres’ business, and in
2020, the company was honored to be included in the prestigious DJSI World for a fourth consecutive
year, as well as in the more strictly defined DJSI Europe.
Nokian Tyres is a supporting member of the United Nations Global Compact (UNGC) initiative and
is committed to the Sustainable Development Goals (SDG’s) set by the UN. Nokian Tyres is the first tire
company to have its ambitious goals for reducing CO
2
emissions officially approved. The goals were
published in May 2020.
14
NOKIAN TYRES PLC FINANCIAL REVIEW 2020 FINANCIAL STATEMENTS GOVERNANCEREPORT BY THE BOARD OF DIRECTORS
Managing non-financial matters
The company’s sustainability activities are led by a member of
the Group’s Management Team. The duties of all supervisors
include day-to-day leadership of sustainability. Targets, milestones,
development items, and other key topics are discussed by the
Management Team at least twice a year, and at least once annually
by the Board of Directors.
Nokian Tyres’ business is guided by the ethical principles
presented in the Board-approved Code of Conduct. The document
specifies the principles for Nokian Tyres’ business, including
instructions for various matters related to ethics and the anti-
bribery guidelines. When reporting a suspected misuse or violation,
an employee is advised to contact either his/her supervisor, Internal
Audit, Legal & Compliance, or the HR unit. Misconducts can also be
reported by sending an email to whistleblow@nokiantyres.com or
via regular mail.
Nokian Tyres requires that all of its raw material suppliers
adhere to Nokian Tyres’ Supplier Code of Conduct. 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.
The risk management policy adopted by Nokian Tyres’ Board
of Directors supports achieving the company’s strategic goals and
ensuring business continuity. Read more about the company’s risk
management in the section Significant Risks and Uncertainties and
in the Corporate Governance Statement.
In 2020, Nokian Tyres began renewing its sustainability goals,
setting the target year for the new goals to 2025 and beyond.
Goals and their targets are due to be finalized during 2021.
The former goals for 2015–2020 were mostly achieved and
even exceeded. The results will be published in the Corporate
Sustainability Report 2020 in March 2021.
AREAS OF SUSTAINABILITY MANAGEMENT
Products / R&D
We develop and
manufacture ecofriendly,
safe and high-quality
tires that reach their
destination safely
even under demanding
conditions.
Economy
Through profitable
growth, we enable the
further development
of our operations and
ensure financial security,
work and well-being for
our stakeholders.
People
We are committed to
acting in the manner
required by the UN’s
Guiding Principles for
Business and Human
Rights, and to following
the International
Labour Organization’s
(ILO) Declaration on
Fundamental Principles
and Rights at Work. We
respect human rights
and treat all individuals
equally.
Environment
We are committed to act
in a way that does not
harm the environment or
people.
Procurement
We are committed to
sustainable procurement
and further developing
sustainability in our
supply chain.
Tire/vehicle safety
regulations, such as
United Nations tyre
regulations, various
tire labelling (consumer
information) regulations
and standards, such as EU
Tyre Labelling regulation,
chemical regulation,
Nokian Tyres tire
testing policy, UN Global
Compact.
Stock exchange
rules, IFRS, Corporate
Governance, Insider
Guidelines, risk
management, UN Global
Compact.
Policies and procedures
related to safety,
well-being, hiring,
induction, people
reviews and competence
development, human
rights and equality. ISO
45001, Travel Policy, Data
Protection Policy, UN
Global Compact.
ISO 14001,
IATF 16949, Environmental
Management, Chemical
Safety Management,
Responsible Care
program, Science Based
Targets, UN Global
Compact.
Procurement policy,
Supplier Code of Conduct,
ISO 9001, ISO 14001, UN
Global Compact.
ESSENTIAL STANDARDS, GROUP POLICIES AND PROCEDURES RELATED TO SUSTAINABILITY
LOCAL GUIDELINES AND PROCEDURES
Sustainability is a part of our company’s culture, strategy and goals. The management of sustainability is based on our values of
entrepreneurship, inventiveness and team spirit.
Our Sustainability Management is guided by Nokian Tyres Code of Conduct, Whistleblowing, Know Your Counterparty Guidelines and policies such
as Environment, Safety and Quality Policy, Group Treasury Policy, Group Credit Policy, Risk Management Policy, Procurement Policy, Disclosure
Policy, and IT Security Policy.
Sustainability management at Nokian Tyres
15
NOKIAN TYRES PLC FINANCIAL REVIEW 2020 FINANCIAL STATEMENTS GOVERNANCEREPORT BY THE BOARD OF DIRECTORS
Nokian Tyres’ new sustainability goals
Area Goal for 2025 Goal beyond 2025
Climate actions Energy efficiency: 10% relative
improvement (kWh / kg) (base
year 2015)
Scope 1 & 2 GHG emissions: 52%
relative reduction 2015–2030
(CO2 kg / product kg)
Scope 3 GHG emissions from
raw material production: 25%
relative reduction 2018–2030
Scope 3 GHG emissions from
logistics: 25% relative reduction
2018–2030
Scope 3 GHG emissions from
product use: 25% relative
reduction 2018–2030
Carbon neutrality in 2045
(Common goal for the Finnish
chemical industry)
Other environmental actions Zero waste to landfill from all
three factories
Regulated emissions to air: Fulfil
all local authority requirements
Avoiding environmental
accidents: O accidents per year
People Developing Human rights
policies
Accident frequency LTIF:
Decrease from 8.3 in 2018 to 1.5
Safety participation level: safety
actions from 100% of personnel
Supply chain Creating and implementing a
Policy for Sustainable Natural
Rubber Procurement
Sustainability Critical active
suppliers’ sustainability auditing:
100% audited
Sustainability Critical/
Medium criticality Suppliers
self-assessments:
• 2022: 100% of suppliers filled
out self-assessment
• 2025: 100% Approved
responses
Products and services 3 new environmental and safety
product innovations
No SVHC (substances of very
high concern) substances in raw
materials
Finance, Corporate Governance TFCD reporting of climate risks:
Regular evaluation & update
Communication &
Stakeholder engagement
Wide stakeholder expectations
mapping/study every 3 years
Nokian Tyres as a part of society
Nokian Tyres’ objective is to create value for its various stakeholders, such as consumers, customers,
personnel, and shareholders. The company wants to meet the stakeholders’ expectations. Through
sustainable business practices and financial success, Nokian Tyres offers security, work, and well-being
for its personnel and contributes to the well-being of local communities.
Nokian Tyres wants to be a good corporate citizen wherever it operates. The company offers
resources to projects based on the following three categories: road safety, supporting local
communities, and encouraging inventiveness & entrepreneurship. In Finland, we continued our local
support for the global FIA Action for Road Safety in Finland, where it is organized under the name of
“Turvassa tiellä” (“Safe on the road”). In the US, the company has donations committees in Dayton,
Nashville, and Colchester. In 2020, the Nashville committee made a donation to, among other things, the
Tennessee State University’s scholarship fund, in order to support educational efforts at the Nashville-
based school. To help schools cope with distance education during the COVID-19 pandemic, Nokian Tyres
also donated tablet computers to children from low-income families in Russia in the Vsevolozhsk region,
where our factory operates.
You can read about the effects of pandemic on Nokian Tyres’ operations in the COVID-19 – summary
of actions section.
Climate and the environment
Environmental and chemical safety and the coordination of sustainability are the responsibility of the
Quality and Sustainability department. The company promotes environmental and chemical safety
through risk management, continuous improvement of processes, and new investments. When
developing activities, the company applies best practices and advanced solutions while taking into
account human factors and financial circumstances.
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 US factory received ISO 9001 quality system certification in 2020 and the
ISO 14001 environmental management system certification is planned for 2021. The company has held
IATF 16949 approval for the automotive industry since 2013.
In 2019, the company defined its climate-change related risks and opportunities. The mapping of
risks and opportunities was conducted according to the recommendations of Task Force on Climate-
change Related Financial Disclosures (TCFD). You can read about the climate-related risks here.
In 2020, the company received approval for its targets for reducing greenhouse gas emissions from
the Science-Based Targets initiative. The four targets are in line with the Paris Agreement, and the base
year for the first three targets is 2018 and 2015 for the fourth target. All the targets should be achieved
by 2030.
16
NOKIAN TYRES PLC FINANCIAL REVIEW 2020 FINANCIAL STATEMENTS GOVERNANCEREPORT BY THE BOARD OF DIRECTORS
Nokian Tyres’ Science Based Targets
TARGET WHAT IT MEANS EXAMPLES
Reduce emissions from tire raw
material production by 25%
We encourage our raw material
producers to implement their
own actions in order to reduce
emissions.
Raw material producers will
be transitioning to zero or
low-emission energy and
improving the energy efficiency
of the entire production
process.
Reduce CO
2
emissions
by 25% in logistics
Achieving it requires emission
improvements from road, train,
marine and air transportation.
Increasing the share of biofuels,
improving the efficiency of
engines, and optimizing routes
further are key methods.
Reduce CO
2
emissions
from tire use by 25%
This improvement will have the
largest impact on reducing
global CO
2
emissions, as our
tires are used on millions of
vehicles.
The overall reduction of vehicle
emissions plays a big part in the
improvements. Lowering the
rolling resistance of a tire also
reduces the fuel consumption
of the vehicle.
Cut CO
2
emissions from the
energy that is purchased
and produced by 52%
Emissions produced mainly in
our own production facilities. A
part of this target has already
been achieved with the changes
made in recent years.
Most of the energy that
we purchase should be
low-emission or zero-emission
and produced with renewable
forms of energy. Improvements
in energy efficiency will also
reduce emissions.
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 95%. Together with some other major tire
manufacturers, Nokian Tyres has established the Eco Tire Association in Russia. In 2020, Nokian Tyres
continued to empty illegal tire landfills in Russia in the “Eco Challenge” together with the EcoShinSoyuz
(EcoTyresUnion). With the project, Nokian Tyres wants to increase public awareness of tire disposal as the
recycling rate in Russia is still low.
In 2020, a new environmental permit for VOC emissions (volatile organic compounds, or solvents)
was acquired for Nokian Tyres’ factory in Finland. VOC emissions are above the maximum allowed level,
and new measures for better collecting and conveying emissions for incineration are being researched.
In Finland, Nokian Tyres received one environmental complaint in 2020 concerning noise at the Finnish
factory. The company was also contacted concerning odor and noise emissions from local residents in
Sastamala, Finland, where our retreading unit is located. The complaints were investigated, and actions
implemented. The company received no environmental complaints from the US or Russia.
Special attention has been paid to improvements in energy efficiency, as well as chemicals safety
and sustainability work across different fields of business. In 2020, Nokian Tyres did not meet its target
of reducing the yearly energy consumption by 1% per production ton. This is mainly because of the
reduced production levels caused by the pandemic. Starting from 2021, Nokian Tyres’ target for reducing
energy consumption will be a part of the company’s 2025 targets.
At the production facilities, emphasis remained on reusing waste, and the utilization degree of waste
was 100% at the Finnish factory, 99% in the US and 99% at the Russian factory.
People
The company’s principles in all operations are fair treatment and respect of 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.
People Review discussions with all employees focus on managing performance and employee´s
personal development. Internal job rotation, on-the-job learning, and other learning solutions have a key
role in supporting personnel development. In 2020, a total of 93.0% of Nokian Tyres’ personnel took part
in a People Review (92.2% in 2019).
In 2020 we had pulse surveys to measure real time feeling and engagement of the organization.
In our company wide pulse survey, 86% of employees gave positive or neutral responses to a question
about the overall feeling at the moment.
The data privacy work (GDPR) was resumed by specifying and further developing the required
documentation and processes, for example by updating the Nokian Tyres’ privacy statements and
further increasing the awareness within the company.
Significant improvements in occupational health and safety
Nokian Tyres’ goal is to promote occupational health and minimize the number of occupational
accidents. Occupational health and safety are an integral part of the company’s daily management and
operations. During 2020, Nokian Tyres continued to globally communicate the safety slogan “Safety is
a choice”, meaning that everyone is responsible for safety: adhering to occupational safety guidelines,
observing defects and shortcomings as well as reporting and removing hazards.
Safety is Nokian Tyres’ first priority, both on the road and in production. The company’s goal for
2020 was to reduce the number of workplace injuries by 20% compared to the previous year. The
acquisition of the Levypyörä company in 2019 provided a challenge for achieving this goal, as the
safety figures of the acquired company showed room for improvement. The hard work paid dividends,
as in November Levypyörä was announced to have operated a whole year without accidents leading to
absence from work. As a result, the company managed to lower the group wide accident rate into 3.7.
Lost-time injury frequency (LTIF)
2016 2017 2018 2019 2020
11.2 7.5 8.3 4.3 3.7
Products
Carbon dioxide, CO
2
, is the most significant greenhouse gas generated by traffic. The higher the rolling
resistance of a tire is, the higher the fuel consumption and CO
2
emissions will be. In 2015, the company
set a goal for 2020 to reduce the rolling resistance of its product range by 7% in average compared to
the 2013 baseline. The company reached this goal in 2017. In 2020, the rolling resistance was in average
8.5% lower compared to 2013.
Rolling resistance reduction in average
2016 2017 2018 2019 2020
6.9 7.0 8.2 8.3 8.5
17
NOKIAN TYRES PLC FINANCIAL REVIEW 2020 FINANCIAL STATEMENTS GOVERNANCEREPORT BY THE BOARD OF DIRECTORS
Nokian Tyres’ R&D is also constantly developing new ways of replacing fossil-based raw materials
to enable more sustainable tire manufacturing. Nokian Tyres has been actively researching the use
of recycled carbon black in tires, but the quality and availability pose challenges. Our aim is to include
recycled carbon black in a commercial product line during 2021. By 2025, we aim to introduce a concept
tire made entirely of materials that are from renewable sources or recycled.
Supply chain
Natural rubber is one of the main ingredients of tires. Cooperation with the industry and other
stakeholders is vital in improving the conditions of the employees working in the natural rubber industry
and the state of the environment. The tire industry has made a joint effort to move towards sustainable
natural rubber, including labor rights. Nokian Tyres is a member of the Global Platform for Sustainable
Natural Rubber, which is a platform established by WWF, several other nonprofit organizations, rubber
traders and processors, and large tire manufacturers. In 2020, the company drafted a Policy for
Sustainable Natural Rubber Procurement, which will be finalized in 2021.
Human rights in the supply chain
The company has set a goal to audit all its major rubber processor partners by 2020, comprising at least
80% of the company’s natural rubber purchasing volume. After 2019, Nokian Tyres’ sustainability audits
covered 90% of the company’s natural rubber purchasing volume, thus exceeding its goal. The audits are
conducted by an external auditor. Due to the pandemic, the audits were put on hold in 2020.
In 2019, Nokian Tyres’ procurement team developed a new classification model for assessing all the
new suppliers globally. The assessment has four different categories: quality, sustainability, business/
strategic criticality, and safety at work. In 2020, all procurement category managers were trained
regarding the classification model, and they started classifying the existing suppliers as well.
MATTERS AFTER THE REVIEW PERIOD
Changes in ownership
Transaction date Shareholder Threshold
% of shares
and voting
rights
% of shares and
voting rights
through financial
instruments Total, %
January 13, 2021 BlackRock, Inc Above 5% 4.61% 0.43% 5.04%
January 14, 2021 BlackRock, Inc Below 5% Below 5% Below 5% Below 5%
February 2, 2021 Société Générale SA Below 5% 0.03% 1.53% 1.56%
ASSUMPTIONS FOR 2021
Nokian Tyres net sales growth in 2021 will be driven by an extensive pipeline of new product launches,
together with continuous improvements in go-to-market activities.
The investments comprising the new US factory, the test center in Spain and the Heavy Tyres’
capacity expansion in Finland are starting to be completed. Capital expenditure is expected to be below
2020 level. Working capital is anticipated to increase as net sales is expected to grow. In 2021, the
demand for replacement car tires is expected to increase, driven by stronger demand and increasing new
car sales. However, the COVID-19 pandemic continues to cause uncertainties for the development.
In Russia, the sales of new cars are expected to increase by 5–10% compared to 2020, as a result
of gradual economic recovery, deferred demand and low comparison base. The total replacement tire
market sell-in in Russia in 2021 is expected to increase by 10–15% compared to 2020, driven by stronger
demand and low carry-over stocks.
The unpredictability in the development of the Russian ruble exchange rate causes additional
uncertainty in 2021. The ruble has weakened in recent years and the average EUR/RUB was 72.5 in
2019, 82.7 in 2020 and 90.6 in January 2021. Raw material unit costs are estimated to increase in 2021
compared to 2020.
The demand for Nokian Heavy Tyres’ core products is estimated to increase in 2021. Aftermarket
demand is expected to continue healthy and OEM demand is expected to recover from 2020 level.
Nokian Heavy Tyres’ production capacity continues to increase, which will improve delivery capability for
all key markets.
GUIDANCE FOR 2021
In 2021, Nokian Tyres’ net sales with comparable currencies and segments operating profit are expected
to grow significantly.
The global car and tire demand is expected to pick up, but the COVID-19 pandemic continues to
cause uncertainties for the development.
THE PROPOSAL FOR THE USE OF PROFITS BY BOARD OF DIRECTORS
The distributable funds in the Parent company total EUR 723.1 million.
The Board of Directors proposes to the Annual General Meeting that the distributable funds are to
be used as follows:
A dividend of 1.20 EUR/share
be paid out, totaling EUR 165.9 million
retained in equity EUR 557.3 million
Tota l EUR 723.1 million
The Board of Directors also proposes that the dividend shall be paid in two instalments, in April and in
December 2021.
The first instalment of EUR 0.60 per share shall be paid to the shareholders who are registered in the
shareholder register maintained by Euroclear Finland Oy on the dividend record date of April 1, 2021. The
payment date proposed by the Board of Directors for the first instalment is April 15, 2021.
The second instalment of EUR 0.60 per share shall be paid in December. The second instalment of
the dividend shall be paid to the shareholders who are registered in the shareholder register maintained
by Euroclear Finland Oy on the dividend record date, which, together with the payment date, shall be
decided by the Board of Directors in its meeting scheduled for November 2, 2021. The dividend record
date for the second instalment would be November 4, 2021 and the dividend payment date December 9,
2021, at the latest.
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.
Notice to the Annual General Meeting will be published by March 9, 2021.
Helsinki, February 9, 2021
Nokian Tyres plc
Board of Directors
18
NOKIAN TYRES PLC FINANCIAL REVIEW 2020 FINANCIAL STATEMENTS GOVERNANCEREPORT BY THE BOARD OF DIRECTORS
20202019201820172016
0
1,000
2,000
3,000
4,000
5,000
NET SALES BY GEOGRAPHICAL AREA, % NET SALES BY BUSINESS UNIT*, %
2019 2020
Passenger Car Tyres 71 66
Heavy Tyres 13 15
Vianor 21 24
* Including internal sales
2019 2020
Nordic countries 39 45
Other Europe 24 25
Russia and Asia 21 14
Americas 13 13
Other countries 4 3
NET SALES AND SEGMENTS
OPERATING PROFIT*
AVERAGE NUMBER OF PERSONNEL
GROSS INVESTMENTS
20202019201820172016
Net sales Segments
operating profit
Segments
operating profit %
EUR million
Segments operating profit %
0
400
800
1,200
1,600
2,000
0
10
20
30
40
50
2016 2017 2018 2019 2020
Net sales, MEUR 1,391.2 1,572.5 1,595.6 1,585.4 1,313.8
Segments operating
profit, MEUR 310.5 365.4 372.4 337.2 190.2
Segments operating
profit % 22.3 23.2 23.3 21.3 14.5
2016 2017 2018 2019 2020
Personnel 4,433 4,630 4,790 4,995 4,859
2016 2017 2018 2019 2020
Gross Investments 105.6 134.9 226.5 290.1 149.9
SEGMENTS EARNINGS PER SHARE
AND DIVIDEND PER SHARE*
20202019201820172016
EUR
Segments
earnings
per share
Dividend
per share
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
2016 2017 2018 2019 2020
Segments earnings per
share, EUR 1.87 1.63 2.15 3.06* 1.04
Dividend per share, EUR 1.53 1.56 1.58 1.14 1.20**
* Segments EPS 2019 excl. the impact of the rulings on the tax
disputes of EUR 1.08 were EUR 1.98
** The Board’s proposal to the Annual General Meeting
%
0
5
10
15
20
25
20202019201820172016
0
5
10
15
20
25
20202019201820172016
EUR million
0
50
100
150
200
250
300
20202019201820172016
EUR million
2016 2017 2018 2019 2020
Segments ROCE, % 19.9 22.4 23.3 18.6 9.3
2016 2017 2018 2019 2020
R & D expenses 20.3 21.8 20.8 22.7 22.7
SEGMENTS ROCE*, %
R&D EXPENSES
* Comparable Segments Total figures for 2019–2020, earlier years reported based on IFRS
19
NOKIAN TYRES PLC FINANCIAL REVIEW 2020 FINANCIAL STATEMENTS GOVERNANCEREPORT BY THE BOARD OF DIRECTORS
0
20
40
60
80
20202019201820172016
%
–30
–20
–10
0
10
20
30
20202019201820172016
%
2016 2017 2018 2019 2020
Equity ratio 73.8 78.2 71.0 75.9 65.3
2016 2017 2018 2019 2020
Gearing –19.7 –14.2 –21.2 2.3 –1.1
EQUITY RATIOGEARING
PASSENGER CAR TYRES
Net sales and segment operating profit*
VIANOR
Net sales and segment perating profit*
HEAVY TYRES
Net sales and segment operating profit*
20202019201820172016
Net sales Segment
operating profit
Segment
operating profit %
EUR million
Segment operating profit %
0
400
800
1,200
1,600
2,000
0
10
20
30
40
50
0
50
100
150
200
250
20202019201820172016
Net sales Segment
operating profit
Segment
operating profit %
EUR million
Segment operating profit %
0
10
20
30
40
50
–100
0
100
200
300
400
20202019201820172016
Net sales Segment
operating profit
Segment
operating profit %
EUR million
Segment operating profit %
-3
0
3
6
9
12
2016 2017 2018 2019 2020
Net sales 981.1 1,138.8 1,150.8 1,123.8 871.3
Segment operating
profit 305.8 359.9 356.5 308.5 177.8
Segment operating
profit, % 31.2 31.6 31.0 27.4 20.4
2016 2017 2018 2019 2020
Net sales 155.3 172.3 187.7 202.7 194.6
Segment operating
profit 28.2 32.2 28.6 35.7 23.7
Segment operating
profit, % 18.2 18.7 15.2 17.6 12.2
2016 2017 2018 2019 2020
Net sales 334.8 339.4 337.2 336.5 318.1
Segment operating
profit –8.1 –5.8 1.6 7.7 4.0
Segment operating
profit, % –2.4 –1.7 0.5 2.3 1.3
* Comparable segment figures for 2019–2020, earlier years reported based on IFRS
20
NOKIAN TYRES PLC FINANCIAL REVIEW 2020 FINANCIAL STATEMENTS GOVERNANCEREPORT BY THE BOARD OF DIRECTORS
Figures in EUR million unless otherwise indicated 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011
Net sales 1,313.8 1,595.8 1,595.6 1,572.5 1,391.2 1,360.1 1,389.1 1,521.0 1,612.4 1,456.8
change, % –17.1% 0.0% 1.5% 13.0% 2.3% –2.1% –8.7% –5.7% 10.7% 37.7%
Operating margin (EBITDA) 251.0 441.7 465.8 463.7 395.2 378.6 398.5 479.0 496.9 451.7
Depreciation and amortisation 131.0 125.2 93.4 98.3 84.7 82.6 89.8 93.5 81.9 71.6
Operating profit (EBIT) 120.0 316.5 372.4 365.4 310.5 296.0 308.7 385.5 415.0 380.1
% of net sales 9.1% 19.8% 23.3% 23.2% 22.3% 21.8% 22.2% 25.3% 25.7% 26.1%
Profit before tax 106.0 336.7 361.7 332.4 298.7 274.2 261.2 312.8 387.7 359.2
% of net sales 8.1% 21.1% 22.7% 21.1% 21.5% 20.2% 18.8% 20.6% 24.0% 24.7%
Return on equity, % 5.2% 24.6% 20.0% 15.1% 18.7% 19.6% 16.0% 13.0% 25.2% 29.1%
Return on capital employed, % 6.0% 17.6% 23.3% 22.4% 19.9% 20.3% 19.2% 21.8% 24.3% 27.4%
Total assets
2,336.7
2,332.6 2,092.9 1,877.4 1,975.7 1,754.8 1,797.0 2,062.9 2,019.6 1,875.9
Interest-bearing net debt –17.2 41.1 –315.2 –208.3 –287.4 –209.7 –164.6 –56.4 –65.2 –3.6
Equity ratio, % 65.3% 75.9% 71.0% 78.2% 73.8% 70.8% 67.5% 67.6% 71.2% 63.2%
Gearing, % –1.1% 2.3% –21.2% –14.2% –19.7% –16.9% –13.6% –4.1% –4.5% –0.3%
Net cash from operating activities 422.4 219.8 536.9 234.6 364.4 283.4 323.4 317.6 388.7 232.9
Capital expenditure 149.9 290.1 226.5 134.9 105.6 101.7 80.6 125.6 209.2 161.7
% of net sales 11.4% 18.3% 14.2% 8.6% 7.6% 7.5% 5.8% 8.3% 13.0% 11.1%
R&D expenditure 22.7 22.7 20.8 21.8 20.3 18.7 16.6 16.1 16.9 15.1
% of net sales 1.7% 1.3% 1.3% 1.4% 1.5% 1.4% 1.2% 1.1% 1.0% 1.0%
Dividends 165.9 219.5 218.1 214.2 208.0 202.0 193.5 193.3 191.9 156.6
Personnel, average during the year
4,859
4,942 4,790 4,630 4,433 4,421 4,272 4,194 4,083 3,866
CONSOLIDATED KEY FINANCIAL INDICATORS
Figures in EUR million unless otherwise indicated 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011
Earnings per share, EUR 0.62 2.89 2.15 1.63 1.87 1.80 1.56 1.39 2.52 2.39
change, % –78.5% 78.1% 32.4% –13.0% 3.6% 15.1% 12.9% –45.0% 5.4% 78.7%
Earnings per share (diluted), EUR 0.62 2.89 2.14 1.61 1.86 1.80 1.56 1.39 2.46 2.32
change, % –78.5% 35.2% 32.5% –13.2% 3.2% 15.0% 12.9% –43.5% 5.8% 75.8%
Cash flow per share, EUR 3.05 3.89 3.91 1.72 2.70 2.12 2.43 2.39 2.96 1.80
change, % 91.8% –0.7% 127.2% –36.3% 27.4% –12.7% 1.4% –19.2% 64.2% –30.1%
Dividend per share, EUR 1.20 1.14 1.58 1.56 1.53 1.50 1.45 1.45 1.45 1.20
Dividend pay out ratio, %
192.9%
39.5% 73.9% 96.7% 82.6% 83.9% 92.9% 105.2% 58.0% 50.7%
Equity per share, EUR 11.01 12.76 10.79 10.74 10.75 9.24 9.07 10.45 10.89 9.15
P/E ratio 46.4 8.9 12.5 23.3 19.0 18.4 13.0 25.2 11.9 10.4
Dividend yield, % 4.2% 4.5% 5.9% 4.1% 4.3% 4.5% 7.1% 4.2% 4.8% 4.8%
Market capitalisation 31 December 4,003.7 3,560.6 3,702.9 5,188.7 4,814.0 4,458.3 2,708.1 4,647.7 3,971.9 3,224.7
Number of shares during the year, average, million units 138.46 138.17 137.26 136.25 134.86 133.63 133.16 132.65 131.24 129.12
diluted, million units 138.46 138.38 138.14 137.28 135.56 133.74 135.10 137.62 137.39 135.70
Number of shares 31 December, million units 138.22 138.72 137.79 136.75 135.68 134.39 133.17 133.29 131.96 129.61
Number of shares entitled to a dividend, million units 138.22 138.92 138.07 137.28 135.93 134.69 133.47 133.34 132.32 130.50
PER SHARE DATA
21
NOKIAN TYRES PLC FINANCIAL REVIEW 2020 FINANCIAL STATEMENTS GOVERNANCEREPORT BY THE BOARD OF DIRECTORS
Definitions
Return on equity, % =
Profit for the period
X 100
Total equity (average)
Return on capital employed, % =
Profit before tax + interest and other financial expenses
X 100
Total assets – non-interest-bearing debt (average)
Equity ratio, % =
Total equity
X 100
Total assets – advances received
Gearing, % =
Interest-bearing net debt
X 100
Total equity
Earnings per share, EUR =
Profit for the period attributable to the equity holders of the parent
Average adjusted number of shares
1
during the year
Earnings per share (diluted
2
), EUR =
Profit for the period attributable to the equity holders of the parent
Average adjusted and diluted
2
number
1
of shares during the year
Cash flow per share, EUR =
Cash flow from operations
Average adjusted number of shares
1
during the year
Dividend per share, EUR =
Dividend for the year
Number of shares entitled to a dividend
Dividend pay-out ratio, % =
Dividend for the year
X 100
Net profit
Equity per share, EUR =
Equity attributable to equity holders of the parent
Adjusted number of shares
1
on the balance sheet date
P/E ratio =
Share price, 31 December
Earnings per share
Dividend yield, % =
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
CONSOLIDATED KEY FINANCIAL INDICATORS
22
NOKIAN TYRES PLC FINANCIAL REVIEW 2020 FINANCIAL STATEMENTS GOVERNANCEREPORT BY THE BOARD OF DIRECTORS
FINANCIAL
STATEMENTS
2020
This report is a translation. The original Finnish is the authoritative version.
23
NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS GOVERNANCEFINANCIAL STATEMENTS
CONSOLIDATED INCOME STATEMENT, IFRS
EUR million 1.1.–31.12. Notes 2020 2019
Net sales (1) 1,313.8 1,585.4
Cost of sales (3)(6)(7) –913.4 –1,013.8
Gross profit 400.4 571.6
Other operating income (4) 4.8 3.5
Selling, marketing and R&D expenses (6)(7) –177.6 –175.1
Administration expenses (6)(7) –84.8 –75.2
Other operating expenses (5)(6)(7) –22.8 –8.4
Operating profit
Financial income (8) 114.4 67.3
Financial expenses
(1
(9) –128.4 –47.0
Profit before tax 106.0 336.7
Tax expense
(2 (3
(10) –20.0 63.1
Profit for the period 86.0 399.9
Attributable to:
Equity holders of the parent 86.0 399.9
Non-controlling interest - -
Earnings per share (EPS) for the profit attributable
to the equity holders of the parent: (11)
Basic, euros 0.62 2.89
Diluted, euros 0.62 2.89
EUR million 1.1.–31.12. Notes 2020 2019
CONSOLIDATED OTHER COMPREHENSIVE INCOME
Result for the period 86.0 399.9
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 (10)
Cash flow hedges (10) –1.1 –1.2
Translation differences on foreign operations
–168.7
Total other comprehensive income for the period, net of tax –169.7 85.4
Total comprehensive income for the period –83.8 485.3
Total comprehensive income attributable to:
Equity holders of the parent –83.8 485.3
Non-controlling interest
1)
Financial expenses 1–12/19 contain returned EUR 34.4 million punitive interest related to tax disputes that were
booked in previous fiscal years based on tax reassessment decisions. Additionally financial expenses 1–12/19
contain a gain of EUR 1.4 million of interest from returned taxes.
2)
Tax expense 1–12/19 contain returned EUR 115.2 million additional taxes and punitive increases that were
booked in previous fiscal years based on tax reassessment decisions.
3)
Otherwise tax expense in the consolidated income statement is based on the taxable result for the period.
24
NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS GOVERNANCEFINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF
FINANCIAL POSITION, IFRS
EUR million 31.12. Notes 2020 2019
ASSETS
Non-current assets
Property, plant and equipment (12) 824.9 885.0
Right of use assets (14) 152.0 122.9
Goodwill (2)(13) 79.2 84.4
Other intangible assets (13) 23.6 35.3
Investments in associates (16) 0.1 0.1
Non-current financial investments (16) 2.7 0.7
Other receivables (15)(17) 5.7 7.7
Deferred tax assets (18) 21.6 15.9
Current assets
Inventories (19) 329.4 387.0
Trade and other receivables (20)(28) 382.9 559.1
Current tax assets 10.3 15.6
Cash and cash equivalents (21) 504.2 218.8
Total assets (1) 2,336.7 2,332.6
EUR million 31.12. Notes 2020 2019
EQUITY AND LIABILITIES
Equity attributable to equity holders of the parent (22)(23)
Share capital 25.4 25.4
Share premium 181.4 181.4
Treasury shares –18.2 –8.0
Translation reserve –447.5 –278.8
Fair value and hedging reserves –2.8 –1.8
Paid-up unrestricted equity reserve 238.2 238.2
Retained earnings 1,544.9 1,613.3
Non-controlling interest - -
Total equity 1,521.3 1,769.7
Liabilities
Non-current liabilities
Deferred tax liabilities (18) 32.6 36.4
Provisions (25) 0.0 0.0
Interest-bearing liabilities (26)(28) 257.3 229.1
Other liabilities 0.9 1.0
Current liabilities
Trade and other payables (27) 281.3 255.9
Current tax liabilities 6.4 4.6
Provisions (25) 7.1 5.0
Interest-bearing liabilities (26)(28) 229.7 30.9
Total liabilities (1) 815.3 562.8
Total equity and liabilities 2,336.7 2,332.6
Changes in net working capital arising from operative business are partly covered by EUR 500 million domestic
commercial paper programme.
Interest-bearing liabilities include EUR 129.3 million of non-current and EUR 25.4 million of current lease liabilities.
25
NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS GOVERNANCEFINANCIAL STATEMENTS
EUR million 1.1.–31.12. 2020 2019
Profit for the period 86.0 399.9
Adjustments for
Depreciation, amortisation and impairment 156.0 125.2
Financial income and expenses 14.0 –20.3
Gains and losses on sale of intangible assets, other
changes 4.9 6.4
Income Taxes 20.0 –63.1
Cash flow before changes in working capital 280.8 448.0
Changes in working capital
Current receivables, non-interest-bearing,
increase (–) / decrease (+) 121.9 –68.0
Inventories, increase (–) / decrease (+) 25.2 6.1
Current liabilities, non-interest-bearing,
increase (+) / decrease (–) 22.8 –173.8
Changes in working capital 169.9 –235.7
Financial items and taxes
Interest and other financial items, received 1.5 4.1
Interest and other financial items, paid –7.8 –56.7
Income taxes paid –22.0 60.1
Financial items and taxes –28.3 7.4
Cash flow from operating activities (A) 422.4 219.8
Cash flows from investing activities
Acquisitions of property, plant and
equipment and intangible assets –149.9 –290.1
Proceeds from sale of property, plant and
equipment and intangible assets 8.7 2.3
Acquisitions of Group companies - –9.5
Acquisitions of other investments 0.0 0.0
Other cash flow from investing activities 0.6 -
Cash flows from investing activities (B) –140.6 –297.2
CONSOLIDATED STATEMENT
OF CASH FLOWS, IFRS
EUR million 1.1.–31.12. 2020 2019
Cash flow from financing activities:
Proceeds from issue of share capital - 15.6
Purchase of treasury shares –10.2 -
Change in current financial receivables,
increase (–) / decrease (+) 0.5 75.0
Change in non-current financial receivables,
increase (–) / decrease (+) –2.2 1.2
Change in current financial borrowings,
increase (+) / decrease (–) 203.4 –125.8
Change in non-current financial borrowings,
increase (+) / decrease (–) –0.9 127.9
Payment of lease liabilities –28.4 –30.7
Dividends received 0.0 0.3
Dividends paid –151.6 –218.1
Cash flow from financing activities (C) 10.7 –154.5
Change in cash and cash equivalents, increase (+) /
decrease (-) (A+B+C) 292.5 –231.9
Cash and cash equivalents at the
beginning of the period 218.8 447.5
Effect of exchange rate fluctuations on cash held –7.2 3.2
Cash and cash equivalents at the end of the period 504.2 218.8
26
NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS GOVERNANCEFINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY, IFRS
Equity attributable to equity holders of the parent
EUR million Notes
Share
capital
Share
premium
Treasury
shares
Translation
reserve
Fair value
and
hedging
reserves
Paid-up
unrestricted
equity
reserve
Retained
earnings
Non-
controlling
interest
Total
equity
Equity, 1 Jan 2019 25.4 181.4 –11.4 –365.4 –0.6 222.6 1,434.2 - 1,486.1
Profit for the period 399.9 399.9
Other comprehensive income, net of tax:
Cash flow hedges –1.2 –1.2
Net investment hedge -
Translation differences 86.6 86.6
Total comprehensive income for the period 86.6 –1.2 399.9 485.3
Dividends paid (22) –218.1 –218.1
Exercised warrants (22) 15.7 15.7
Acquisition of treasury shares -
Share-based payments (23) 3.4 –2.7 0.7
Total transactions with owners for the period 3.4 15.7 –220.7 –201.7
Equity, 31 Dec 2019 25.4 181.4 –8.0 –278.8 –1.8 238.2 1,613.3 - 1,769.7
Equity, 1 Jan 2020 25.4 181.4 –8.0 –278.8 –1.8 238.2 1,613.3 - 1,769.7
Profit for the period 86.0 86.0
Other comprehensive income, net of tax:
Cash flow hedges –1.1 –1.1
Net investment hedge -
Translation differences –168.7 –168.7
Total comprehensive income for the period –168.7 –1.1 86.0 –83.8
Dividends paid (22) –158.1 –158.1
Exercised warrants (22) -
Acquisition of treasury shares –10.2 –10.2
Share-based payments (23) 3.7 3.7
Total transactions with owners for the period –10.2 –154.4 –164.6
Equity, 31 Dec 2020 25.4 181.4 –18.2 –447.5 –2.8 238.2 1,544.9 - 1,521.3
27
NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS GOVERNANCEFINANCIAL STATEMENTS
Basic information
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.
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 2020.
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.
IFRS are under constant development. New standards,
interpretations or their amendments have 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. According to the Group’s assessment,
the published changes will not have a significant effect on the
consolidated financial statements.
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
ACCOUNTING POLICIES FOR THE
CONSOLIDATED FINANCIAL STATEMENTS
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 relate to the country
risk. Development of global economy is expected to improve in
2021, 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 statement of financial position at nil value and
losses in excess of that value will be ignored unless the Group
has obligations towards 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 amortized 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.
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
Nokian Tyres in brief
28
NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS GOVERNANCEFINANCIAL STATEMENTS
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.
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 may apply 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.
29
NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS GOVERNANCEFINANCIAL STATEMENTS
Revenue recognition
Income from the sale of products is recognised when the
significant risks and rewards connected with ownership of the
goods, as well as the right of possession and effective control, have
been transferred to the buyer and payment is probable. This is also
the case when a customer separately requests that the assignment
of goods be deferred. Revenue from services is recognised once
the services have been rendered. Generally, sales are recognised
upon delivery in accordance with the contractual terms and
conditions. To calculate the net sales, sales revenue is adjusted with
indirect taxes and discounts.
Lease agreements
In accordance with IFRS 16, all assets related to lease agreement
(right-of use assets) and future lease payment obligations (lease
liabilities) are recognized in the statement of financial position.
The only exceptions are the short-term leases and leases
for which the underlying asset is of low value, the accounting
treatment of which is explained below.
Nokian Tyres acts mainly as a lessee. The vast majority of leases
recognized as Right-of-use assets under IFRS 16 are comprised of
Vianor chain real estate and warehouses.
The Group as a lessee
Right-of-use assets, less depreciation, are included into fixed assets
and the obligation resulting from the lease commitment under IFRS
16 is recorded in financial liabilities. Lease payments resulting from
such lease commitments are apportioned between finance charges
and the amortization of outstanding lease liability. Charges paid for
low-value or short-term leases are recognized as expenses in the
income statement.
Lease commitments under IFRS 16 scope are recorded in
the statement of financial position in the amount equaling the
present value of the minimum lease payments, as determined
at the inception of the lease. The criteria used to determine the
discount rate by lease agreement are the category of the asset,
geographical location, currency, maturity of the risk-free interest
rate and the lessee’s credit risk premium. Right of use assets
are depreciated in a straight-line basis over the lease term, any
impairment losses are recorded.
Nokian Tyres applies the following practical measures in
assessment of lease agreements under IFRS 16 scope:
• Leases with lease term less than 12 months are accounted for as
short-term leases or are low value assets and not recognized in
the statement of financial position. The election shall be made by
class of underlying asset and is applied to all other classes except
cars, which are recognized in the statement of financial position
even if their remaining lease term would be less than 12 months
Nokian Tires applied the following transitional measures when
assessing leases in accordance with IFRS 16:
• At time of transition lease agreements with reasonably similar
characteristics are subject to one predetermined discount rate.
• In case of leases that the lease term includes extension
options or termination options, current knowledge is used in
determination of the lease term at time of transition.
Management judgements
Nokian Tyres complies with IFRS 16 guidance for determining the
lease term. In case of lease agreements where the lease term
is defined valid until further notice, the expected lease term is
based on management judgement. The financial impact of the
sanctions included in the leases, such as those related to the
early termination of the contract, has also been considered in
determining the expected lease term. According to the standard
guidance, the option to extend or terminate the lease is taken
into account in determining the lease term. The period covered
by an option to extend the lease is included into the lease term
if it is reasonably certain that the option will be exercised and,
and correspondingly, if it is reasonably certain that the option
to terminate the lease is not exercised the remaining period is
included in the lease term. When the agreement includes a lease
component and a non-lease component, Nokian Tyres separates
the non-lease components; such as maintenance or services, based
on either the stand-alone prices given in the lease agreement or by
using estimates.
The Group as a lessor
The lessor will classify each lease agreement into either finance or
operating lease, in accordance with IFRS 16 standard.
Assets held under finance leases are recorded in the statement
of the financial position as receivables at amount equal to the net
investment in the lease. Lease income resulting from finance leases
is recorded in the income statement with constant periodic rate of
return on the lessor’s net investment in the finance lease.
Assets held under operating leases are included into intangible
assets and property, plant and equipment in the statement of the
financial position. These assets are depreciated over their useful
lives, consistent with assets in the company’s own use. Income
from operating leases is recorded in the income statement on a
straight-line basis over the lease term.
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, sales, marketing and R&D 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 Group has adopted IFRIC 23, Uncertainty over Income Tax
Treatments, effective on January 1, 2019. The interpretation applies
to the accounting for income taxes in situations where there is
uncertainty about the tax treatment that affects the application
of IAS 12. The Group has reviewed its income tax treatment and
adopted the interpretation.
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 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.
30
NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS GOVERNANCEFINANCIAL STATEMENTS
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.
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 20–40 years
Machinery and equipment 4–20 years
Other tangible assets 10–40 years
Land is not depreciated.
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 recognized as the
amount by which the aggregate of the transferred consideration,
any non-controlling interest in the acquire and any previously
held interest exceeds the fair value of the net assets acquired.
Goodwill is not amortized 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.
Inventories
Inventories are measured at the lower of cost or the net realisable
value. Cost is primarily determined in accordance with standard
cost accounting. 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. Allowance is
recorded in obsolete items.
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 statement of
financial position 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.
31
NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS GOVERNANCEFINANCIAL 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
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
in equity. Changes in the estimates of both the equity and cash-
settled amounts are recognised in the income statement.
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 2020 and 2019 do not
include any non-current assets held for sale or any discontinued
operations.
32
NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS GOVERNANCEFINANCIAL STATEMENTS
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.
NOTES TO THE
CONSOLIDATED
FINANCIAL
STATEMENTS
1. OPERATING SEGMENTS
2020
EUR million
Passenger
Car Tyres
Heavy
Tyres Vianor
Other
operations and
eliminations Group
Net sales from external customers 819.3 166.2 317.6 10.7 1,313.8
Services 82.6 82.6
Sales of goods 819.3 166.2 235.0 10.7 1,231.2
Inter-segment net sales 52.0 28.4 0.5 –80.9
Net sales 871.3 194.6 318.1 –70.1 1,313.8
Operating result 132.7 21.7 –6.2 –28.2 120.0
% of net sales 15.2% 11.1% –2.0% 40.2% 9.1%
Financial income and expenses –14.0
Profit before tax 106.0
Tax expense –20.0
Profit for the period 86.0
Assets 1,333.4 197.1 231.7 9.7 1,771.9
Unallocated assets 564.7
Total assets 2,336.7
Liabilities 205.2 38.4 36.2 –1.1 278.6
Unallocated liabilities 536.7
Total liabilities 815.3
Capital expenditure 122.0 24.0 3.7 0.2 149.9
Depreciation and amortisation 87.5 12.7 27.0 3.8 131.0
Impairment 12.6 1.3 8.9 2.0 24.9
Other non-cash expenses 29.0 1.4 10.1 7.2 47.6
2019
EUR million
Passenger
Car Tyres
Heavy
Tyres Vianor
Other
operations and
eliminations Group
Net sales from external customers 1,065.8 173.3 335.6 10.7 1,585.4
Services 87.9 87.9
Sales of goods 1,065.8 173.3 247.7 10.7 1,497.5
Inter-segment net sales 58.0 29.4 0.8 –88.3
Net sales 1,123.8 202.7 336.5 –77.6 1,585.4
Operating result 287.7 35.7 7.7 –14.7 316.5
% of net sales 25.6% 17.6% 2.3% 18.9% 20.0%
Financial income and expenses 20.3
Profit before tax 336.7
Tax expense 63.1
Profit for the period 399.9
Assets 1,638.4 179.6 238.4 10.0 2,066.5
Unallocated assets 266.1
Total assets 2,332.6
Liabilities 167.2 43.1 51.8 –12.4 249.7
Unallocated liabilities 313.2
Total liabilities 562.8
Capital expenditure 253.4 40.4 5.7 0.1 299.6
Depreciation and amortisation 84.6 11.2 28.4 1.0 125.2
Other non-cash expenses 7.6 0.2 0.8 0.4 9.1
33
NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS GOVERNANCEFINANCIAL STATEMENTS
Geographical information
2020
EUR million Nordics
Russia
and Asia
Other
Europe Americas Other Group
Net sales 592.2 188.7 330.9 166.7 35.4 1,313.8
Services 81.0 0.0 0.0 1.6 82.6
Sales of goods 511.2 188.7 330.9 165.1 35.4 1,231.2
Assets 926.9 420.2 198.7 353.4 0.0 1,899.2
Unallocated assets 437.5
Total assets 2,336.7
Capital expenditure 76.2 10.0 24.2 39.5 0.0 149.9
2019
EUR million Nordics
Russia
and Asia
Other
Europe Americas Other Group
Net sales 613.2 324.3 375.5 209.3 63.2 1,585.4
Services 85.1 0.0 0.0 2.8 0.0 87.9
Sales of goods 528.0 324.3 375.5 206.5 63.2 1,497.5
Assets 771.0 684.9 197.3 365.9 0.0 2,019.2
Unallocated assets 313.4
Total assets 2,332.6
Capital expenditure 96.7 44.6 17.3 141.0 0.0 299.6
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 and eliminations contain business development
and Group management unallocated to the segments and
eliminations between different business segments.
Notes concerning geographical segments
The business segments are operating in five geographic regions:
Nordics, Russia and Asia, Other Europe, Americas and Other.
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.
34
NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS GOVERNANCEFINANCIAL STATEMENTS
2. ACQUISITIONS
Acquisitions and other changes in 2020
There were no significant acquisitions or other changes during
2020.
Acquisitions and other changes in 2019
On August 1
st
the Group acquired all shares of Levypyörä Oy.
This acquisition has minor impact on group accounts.
EUR million 2020
Purchase consideration
Consideration paid in cash 9.4
Contingent consideration liability -
Total consideration 9.4
Recognised amounts of identifiable assets
acquired and liabilities assumed:
EUR million Note 2020
Property, plant and equipment (12)
8.0
Inventories 3.0
Trade and other receivables 1.4
Cash and cash equivalents 1.1
Total Assets 13.6
Deferred tax liabilities (18)
0.1
Financial Liabilities 3.2
Trade and other payables 1.6
Total Liabilities 5.0
Total identifiable net assets 8.6
Composition of goodwill in the acquisition
Consideration transferred 9.4
Total identifiable net assets 8.6
Goodwill (13)
0.9
Consideration paid in cash 9.4
Cash and cash equivalents in the subsidiaries
acquired 1.1
Net cash outflow 8.3
The expectations relating to the growth in sales through increased
customer base, and the future expectations on improved market
area coverage and sales increase resulted in the recognition of
goodwill.
The actual acquisition date 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 it 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.
3. COST OF SALES
EUR million 2020 2019
Raw materials 286.5 354.7
Goods purchased for resale 188.0 220.2
Wages and social security contributions on
goods sold 45.4 46.2
Other costs 198.5 207.7
Depreciation of production 80.6 72.0
Sales freights
59.8
70.4
Warehousing
44.8
41.2
Change in inventories 9.8 1.3
Tot a l
913.4
1,013.8
4. OTHER OPERATING INCOME
EUR million 2020 2019
Gains on sale of property, plant and
equipment 2.4 2.7
Other income 2.5 0.8
Tot a l 4.8 3.5
5. OTHER OPERATING EXPENSES
EUR million 2020 2019
Losses on sale and disposals of tangible
fixed assets 1.8 0.4
Expensed credit losses and provisions 17.0 6.9
Other expenses 4.0 1.1
Tot a l 22.8 8.4
6. DEPRECIATION, AMORTISATION
AND IMPAIRMENT LOSSES
EUR million 2020 2019
Depreciation and amortisation by asset
category
Intangible rights
7.6
7.6
Other intangible assets
2.3
2.7
Buildings
10.9
8.1
Machinery and equipment
75.8
70.6
Right of use asset
29.5
31.1
Other tangible assets 4.9 5.0
Tot a l
131.0
125.2
Impairment losses by asset category
Intangible rights 6.7 -
Other intangible assets 4.8 -
Buildings 3.4 -
Machinery and equipment 4.8 -
Right of use asset 4.8 -
Other tangible assets 0.4 -
Tot a l 24.9 -
Depreciation and amortisation by
function
Production 80.6 72.0
Selling, marketing and R&D 38.5 45.4
Administration 12.0 7.8
Other depreciation and amortisation 0.0 -
Tot a l 131.0 125.2
Impairment losses by function
Production 6.2 -
Selling, marketing and R&D 10.6 -
Administration 7.4 -
Other impairment losses 0.8 -
Tot a l 24.9 -
35
NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS GOVERNANCEFINANCIAL STATEMENTS
7. EMPLOYEE BENEFIT
EXPENSES
EUR million 2020 2019
Wages and salaries 183.2 188.6
Pension contributions - defined
contribution plans 21.5 26.8
Share-based payments 3.7 3.0
Other social security contributions 16.3 16.9
Tot a l 224.7 235.3
Information on the employee benefits and loans of the key
management personnel is presented in note 33 Related party
transactions.
8. FINANCIAL INCOME
EUR million 2020 2019
Interest income
Financial assets measured at
amortized cost 1.4 3.9
Dividend income
Non-current financial investments
measured at fair value through other
comprehensive income 0.0 0.0
Exchange rate gains and changes in fair
value
Financial assets and liabilities at
amortized cost 44.4 10.0
Foreign currency derivatives 68.4 53.2
Other financial income 0.1 0.2
Tot a l 114.4 67.3
9. FINANCIAL EXPENSES
EUR million 2020 2019
Interest expenses
Financial liabilities measured at
amortized cost –4.5 –4.1
Interest rate derivatives designated as
hedges –0.9 –0.9
Lease liabilities –3.0 –3.8
Exchange rate losses and changes in fair
value
Financial assets and liabilities at
amortized cost –58.3 –4.5
Foreign currency derivatives –59.9 –67.8
Other financial expenses –1.7 34.1
Tot a l –128.4 –47.0
Financial expenses 2019 contain returned EUR 34.4 million punitive
interest related to tax disputes that were booked in previous fiscal
years based on tax reassessment decisions. Additionally financial
expenses 2019 contain a gain of EUR 1.4 million of interest from
returned taxes.
10. TAX EXPENSE
EUR million 2020 2019
Current tax expense –29.6 –52.8
Adjustment for prior periods 1.3 114.6
Change in deferred tax 8.4 1.3
Tot a l –20.0 63.1
The reconciliation of tax expense recognised in the income
statement and tax expense using the domestic corporate tax rate
(2020: 20.0%, 2019: 20.0%):
EUR million 2020 2019
Profit before tax 106.0 336.7
Taxes calculated according to the Finnish
tax rate of 20% –21.2 –67.3
Effect of deviant tax rates in foreign
subsidiaries 3.4 18.2
Withholding taxes 2.7 –6.8
Tax exempt revenues 0.1 0.3
Non-deductible expenses –4.5 –0.9
Losses on which no deferred tax benefits
recognised –0.5 5.7
Adjustment for prior periods 1.3 114.6
Change in the recoverability of deferred tax
assets –1.6 -
Other items 0.1 –0.7
Tax expense –20.0 63.1
Income tax relating to components of other comprehensive income:
2020
EUR million
Before
tax
amount
Tax
benefit
Net
of tax
amount
Cash flow hedges
–1.3 0.3 –1.1
Translation differences on foreign
operations –168.7 –168.7
–170.0 0.3 –169.8
2019
EUR million
Before
tax
amount
Tax
benefit
Net
of tax
amount
Cash flow hedges –1.5 0.3 –1.2
Translation differences on foreign
operations 86.6 86.6
85.1 0.3 85.4
11. EARNINGS PER SHARE
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.
EUR million 2020 2019
Profit attributable to the equity holders
of the parent 86.0 399.9
Profit for the period to calculate the
diluted earnings per share 86.0 399.9
Shares, 1,000 pcs
Weighted average number of shares 138,457 138,168
Dilutive effect of the options 0 216
Diluted weighted average number of shares 138,457 138,383
Earnings per share, euros
Basic 0.62 2.89
Diluted 0.62 2.89
36
NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS GOVERNANCEFINANCIAL STATEMENTS
12. PROPERTY, PLANT AND EQUIPMENT
EUR million
Land
property Buildings
Machinery
and equipment
Other
tangible
assets
Advances and
fixed assets under
construction Total
Accumulated cost, 1 Jan 2019 12.1 270.2 1,014.2 17.7 180.9 1,495.0
Increase 0.7 8.4 54.0 1.7 219.8 284.5
Decrease –0.3 –1.0 –14.4 –0.5 0.0 –16.3
Transfers between items 1.3 9.5 0.5 –11.3 0.0
Other changes 0.3 –28.7 –18.4 55.3 0.4 9.0
Exchange differences 0.2 17.8 51.2 4.2 5.2 78.6
Accumulated cost, 31 Dec 2019 13.0 267.9 1,096.1 78.8 395.0 1,850.8
Accum. Depreciation, 1 Jan 2019 0.0 –100.2 –733.6 –13.9 –847.7
Depreciation for the period –8.1 –70.6 –5.0 –83.7
Decrease 7.3 0.4 7.7
Other changes 18.7 15.2 –35.1 –1.2
Exchange differences –5.3 –33.1 –2.4 –40.8
Accum. Depreciation, 31 Dec 2019 0.0 –94.9 –814.9 –55.9 –965.8
Carrying amount, 31 Dec 2019 13.0 173.0 281.1 22.9 395.0 885.0
Accumulated cost, 1 Jan 2020
13.0 267.9 1,096.1 78.8 395.0 1,850.8
Increase
1.1 2.2 28.7 0.4 118.8 151.3
Decrease
–2.1 –0.9 –31.5 –1.2 0.0 –35.7
Transfers between items
126.2 202.3 24.0 –360.6 –8.0
Other changes 0.0 0.3 –0.1 0.0 1.3 1.5
Exchange differences –0.4 –40.3 –114.7 –18.4 –8.8 –182.6
Accumulated cost, 31 Dec 2020 11.7 355.4 1,180.9 83.7 145.6 1,777.3
Accum. Depreciation, 1 Jan 2020 0.0 –94.9 –814.9 –55.9 –965.8
Depreciation for the period –10.9 –75.8 –4.9 –91.6
Impairment –3.4 –4.8 –8.2
Decrease 0.5 21.9 0.3 22.7
Other changes 0.0 0.1 0.0 0.1
Exchange differences 8.1 70.4 11.9 90.4
Accum. Depreciation, 31 Dec 2020 0.0 –100.6 –803.1 –48.7 –952.4
Carrying amount, 31 Dec 2020 11.7 254.8 377.7 35.1 145.6 824.9
In 2020, the Group recorded impairments in the tangible assets for EUR 8.2 million based on management’s assessment. The impairments are shown in
the table in their own row.
37
NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS GOVERNANCEFINANCIAL STATEMENTS
13. INTANGIBLE ASSETS
EUR million Goodwill
Intangible
rights
Other
intangible
assets Total
Accumulated cost, 1 Jan 2019 84.9 89.2 23.8 197.9
Increase 5.2 5.9 11.2
Acquisitions through business combinations 0.9 0.9
Decrease 0.0 –0.9 –0.9
Other changes –1.3 0.0 0.2 –1.1
Exchange differences –0.1 0.0 1.7 1.6
Accumulated cost, 31 Dec 2019 84.4 94.4 30.7 209.6
Accum. Depreciation, 1 Jan 2019 –1.3 –62.8 –16.6 –80.7
Depreciation for the period –7.6 –2.7 –10.4
Other changes 1.3 0.0 0.8 2.0
Exchange differences 0.0 0.0 –1.0 –1.0
Accum. Depreciation, 31 Dec 2019 0.0 –70.4 –19.6 –89.9
Carrying amount, 31 Dec 2019 84.4 24.1 11.1 119.6
Impairment losses
Impairments from the intangible asset have been booked EUR 16.3
million as shown in the table based on management’s assessment.
The impairments from the goodwill have been made before the
impairments tests for goodwill.
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 63.9
Heavy Tyres 0.9
Vianor 14.4
Total goodwill 79.2
EUR million Goodwill
Intangible
rights
Other
intangible
assets Total
Accumulated cost, 1 Jan 2020
84.4 94.4 30.7 209.6
Increase
0.9 2.4 3.3
Acquisitions through business combinations
0.0
Decrease 0.0 –0.3 0.0 –0.3
Transfers between items 6.0 2.0 8.0
Other changes 0.0 0.0 –0.1 –0.1
Exchange differences –0.3 0.0 –3.5 –3.7
Accumulated cost, 31 Dec 2020 84.1 101.1 31.5 216.7
Accum. Depreciation, 1 Jan 2020 0.0 –70.4 –19.6 –89.9
Depreciation for the period –7.6 –2.3 –9.9
Impairment –4.8 –6.7 –4.8 –16.3
Decrease 0.0 0.2 0.0 0.3
Other changes 0.0 –0.1 0.1 0.0
Exchange differences 0.0 0.0 2.1 2.1
Accum. Depreciation, 31 Dec 2020 –4.9 –84.6 –24.5 –113.9
Carrying amount, 31 Dec 2020 79.2 16.5 7.1 102.8
The recoverable amount of a cash-generating unit is based on
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 6.3% (5.3% in 2019) and for
Vianor is 6.3–7.4% (4.7–6.8% in 2019) 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.
The testing indicated no need to recognise impairment losses.
In Vianor the calculations indicated that the recoverable amount
exceeded the carrying value by EUR 4 million (EUR 426 million
in 2019). Of the key assumptions, Vianor is the most sensitive to
actual realisation of gross margin levels based on demand forecasts.
A lag of 1.1%-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 6.9% in net sales or a weakening of the present
gross margin level permanently over 28.9%.
38
NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS GOVERNANCEFINANCIAL STATEMENTS
14. RIGHT OF USE ASSETS
EUR million
Land
property Buildings
Machinery
and
equipment Total
Accumulated cost, 1 Jan 2019 1.4 135.0 1.3 137.7
Increase 0.1 10.4 0.1 10.6
Decrease 0.0 –0.1 0.0 –0.1
Other changes 0.1 5.5 0.1 5.6
Exchange differences 0.0 0.4 0.0 0.4
Accumulated cost, 31 Dec 2019 1.6 151.1 1.5 154.1
Accum. Depreciation, 1 Jan 2019 0.0 0.0 0.0 0.0
Depreciation for the period
Decrease
Other changes –0.3 –30.5 –0.3 –31.1
Exchange differences 0.0 –0.1 0.0 –0.1
Accum. Depreciation, 31 Dec 2019 –0.3 –30.6 –0.3 –31.2
Carrying amount, 31 Dec 2019 1.2 120.5 1.2 122.9
EUR million
Land
property Buildings
Machinery
and
equipment Total
Accumulated cost, 1 Jan 2020 1.6 151.1 1.5 154.1
Increase 2.4 57.4 4.8 64.5
Decrease –0.1 –7.5 –1.0 –8.6
Other changes 0.0 –1.6 1.5 –0.1
Exchange differences –0.2 –3.5 0.0 –3.7
Accumulated cost, 31 Dec 2020 3.5 195.9 6.8 206.2
Accum. Depreciation, 1 Jan 2020 –0.3 –30.6 –0.3 –31.2
Depreciation for the period –0.2 –27.9 –1.4 –29.5
Decrease 0.1 5.1 1.0 6.1
Other changes 0.0 1.1 –1.0 0.1
Exchange differences 0.1 0.2 0.0 0.3
Accum. Depreciation, 31 Dec 2020 –0.4 –52.1 –1.7 –54.2
Carrying amount, 31 Dec 2020 3.2 143.8 5.0 152.0
Expenses arising from leases of low-value amounted to EUR 1.3 million and short-term leases
amounted to EUR 8.6 million in 2020. These contracts are not included in the right of use assets. The
corresponding expenses amounted to EUR 28.5 million in 2019. The additions to the right of use assets
in 2020 were both from more precise review of the contracts and corrected rental terms and as well as
new lease contracts.
39
NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS GOVERNANCEFINANCIAL STATEMENTS
15. CARRYING AMOUNTS AND FAIR VALUES OF FINANCIAL ASSETS AND LIABILITIES
2020 2019
Carrying
amount
Fair value
Carrying
amount
Fair value
EUR million Note Level 1 Level 2 Level 3 Level 1 Level 2 Level 3
Financial assets
Fair value through profit or loss
Derivatives held for trading (29) 19.6 - 19.6 - 2.9 - 2.9 -
Derivatives designated as hedges (29) 0.3 - 0.3 - 1.2 - 1.2 -
Unquoted securities (16) 2.4 - - 2.4 - - - -
Amortized cost
Other non-current receivables (17) 5.2 - 4.7 - 7.6 - 7.2 -
Trade and other receivables (20) 321.9 - 322.3 - 498.8 - 499.4 -
Money market instruments (21)
- - - -
- - - -
Cash in hand and at bank (21)
504.2 - 504.2 -
218.8 - 218.8 -
Fair value through other comprehensive income
Unquoted shares (16) 0.3 - - 0.3 0.7 - - 0.7
Total financial assets
853.8 - 851.0 2.7
730.1 - 729.5 0.7
Financial liabilities
Fair value through profit or loss
Derivatives held for trading (29)
6.1 - 6.1 -
2.3 - 2.3 -
Derivatives designated as hedges (29)
3.9 - 3.9 -
6.3 - 6.3 -
Amortized cost
Interest-bearing financial liabilities (26) 332.3 - 334.9 - 135.2 - 138.1 -
Trade and other payables (27) 98.1 - 98.1 - 89.4 - 89.4 -
Total financial liabilities
440.4 - 442.9 -
233.2 - 236.1 -
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.Quoted prices in active markets for identical assets or liabilities.
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
excluding unquoted securities 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 securities measured at fair
value through profit or loss, and 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 28 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.
40
NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS GOVERNANCEFINANCIAL STATEMENTS
16. INVESTMENTS IN ASSOCIATES AND
NON-CURRENT FINANCIAL INVESTMENTS
EUR million
Investments in
associates
Unquoted
securities
Unquoted
shares
Accumulated cost, 1 Jan 2020 0.1 - 0.7
Decrease/Increase - 2.4 0.0
Impairment - - –0.4
Carrying amount, 31 Dec 2020 0.1 2.4 0.3
Carrying amount, 31 Dec 2019 0.1 - 0.7
17. OTHER NON-CURRENT
RECEIVABLES
EUR million 2020 2019
Loan receivables 5.2 7.6
Other non-current receivables 0.6 0.1
Tot a l 5.7 7.7
41
NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS GOVERNANCEFINANCIAL STATEMENTS
18. DEFERRED TAX ASSETS AND LIABILITIES
EUR million
31 Dec
2018
Recognised
in income
statement
Recognised
in other
comprehensive
income
Net
exchange
differences
Acquisitions/
disposals of
subsidiaries
31 Dec
2019
Deferred tax assets
Inventories 14.9 –1.3 13.6
Provisions and accruals 0.9 0.2 1.1
Tax losses carried forward 0.0 4.0 4.0
Cash flow hedges –0.3 1.0 0.7
Other items 11.1 0.8 0.0 11.9
Tot a l 26.8 4.6 - 0.0 - 31.4
Deferred tax assets offset
against deferred tax liabilities –17.5 2.1 –15.4
Deferred tax assets 9.3 6.7 - 0.0 - 15.9
Deferred tax liabilities
Property, plant and equipment
and intangible assets 16.6 0.1 16.6
Untaxed reserves 1.3 0.5 0.0 1.8
Undistributed earnings in
subsidiaries 30.3 0.4 30.7
Other items 1.9 0.9 2.8
Tot a l 50.0 1.8 - 0.0 - 51.8
Deferred tax liabilities offset
against deferred tax assets –17.5 2.1 –15.4
Deferred tax liabilities 32.5 3.9 - 0.0 - 36.4
EUR million
31 Dec
2019
Adjust-
ments
between
items
Recognised
in income
statement
Recognised
in other
comprehensive
income
Net
exchange
differences
Acquisitions/
disposals of
subsidiaries
31 Dec
2020
Deferred tax assets
Inventories
13.6 –2.3 11.3
Property, plant and equipment
and intangible assets 0.0 0.8 0.8
Provisions and accruals 1.1 9.4 –2.3 8.2
Tax losses carried forward
4.0 3.1 –1.6 5.5
Cash flow hedges 0.7 0.1 0.2 –0.3 0.7
Other items 11.9 –12.5 1.8 0.0 1.2
Tot a l 31.4 –3.4 –0.3 0.0 - 27.7
Deferred tax assets offset
against deferred tax liabilities –15.4 9.4 –6.0
Deferred tax assets 15.9 6.0 –0.3 0.0 - 21.6
Deferred tax liabilities
Property, plant and equipment
and intangible assets 16.6 0.2 0.8 –1.1 16.6
Untaxed reserves 1.8 –1.0 –0.2 0.6
Undistributed earnings in
subsidiaries 30.7 –9.4 21.2
Other items 2.8 0.8 –3.3 0.2
Tot a l 51.8 –12.2 - –1.1 - 38.6
Deferred tax liabilities offset
against deferred tax assets –15.4 9.4 –6.0
Deferred tax liabilities
36.4 –2.8 - –1.1 - 32.6
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 2020 the Group had carry forward losses for EUR 27.8 million (EUR 27.1 million in 2019), on
which a deferred tax asset has been recognised. The Group also had carry forward losses for EUR 9.7 million (EUR
3.1 million in 2019), on which no deferred tax asset was recognised. It is not probable that future taxable profit will
be available to offset these losses.
The Group has utilised previously unrecognised tax losses from prior periods with EUR 1.3 million in 2020
(EUR 1.5 million in 2019).
The Group does not recognise deferred tax liability on undistributed profits from other than foreign
subsidiaries located in countries where distribution generates tax consequences when it is likely that the
earnings will be distributed in the foreseeable future. The group has not recognised deferred tax liability for the
undistributed earnings of Finnish subsidiaries and associates as such earnings can be distributed without any tax
consequences.
42
NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS GOVERNANCEFINANCIAL STATEMENTS
19. INVENTORIES
EUR million 2020 2019
Raw materials and supplies 113.7 139.1
Work in progress 9.8 7.8
Finished goods 205.9 240.1
Tot a l 329.4 387.0
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 2020 EUR 4.5
million expense was recognised to decrease the carrying amount of
the inventories to reflect the net realisable value (EUR 2.5 million in
2019).
20. TRADE AND OTHER RECEIVABLES
EUR million 2020 2019
Trade receivables 321.5 498.3
Loan receivables 0.4 0.5
Accrued revenues and deferred expenses 19.2 17.0
Derivative financial instruments
Designated as hedges 0.0 0.9
Measured at fair value through profit or
loss 19.6 2.9
Current tax assets 10.3 15.6
Value added tax receivables 21.5 33.9
Other receivables 0.6 4.5
Tot a l 393.1 573.7
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 28 for the impairments in respect of trade
receivables.
Significant items under accrued revenues
and deferred expenses
EUR million 2020 2019
Annual discounts, purchases 8.8 3.7
Financial items 0.4 0.6
Social security contributions 0.9 1.4
Insurances 0.4 0.9
Other items 8.7 10.5
Tot a l 19.2 17.0
21. CASH AND CASH EQUIVALENTS
EUR million 2020 2019
Cash in hand and at bank 504.2 218.8
Money market instruments - -
Tot a l 504.2 218.8
43
NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS GOVERNANCEFINANCIAL STATEMENTS
22. EQUITY
Reconciliation of the number of shares
EUR million
Number of
shares
(1,000 pcs)
Share
capital
Share
premium
Paid-up
unrestricted
equity reserve
Treasury
shares Total
1 Jan 2019 137,788 25.4 181.4 222.6 –11.4 418.0
Exercised warrants 856 - - 15.7 - 15.7
Acquisition/conveyance of treasury shares 80 - - - 3.4 3.4
Other changes - - - - - 0.0
31 Dec 2019 138,724 25.4 181.4 238.2 –8.0 437.0
1 Jan 2020 138,724 25.4 181.4 238.2 –8.0 437.0
Exercised warrants - - - - - 0.0
Acquisition/conveyance of treasury shares –499 - - - –10.2 –10.2
Other changes - - - - - 0.0
31 Dec 2020 138,224 25.4 181.4 238.2 –18.2 426.8
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
No share repurchases were made during the review period, and
the company did not possess any own shares on December 31,
2020.
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 and 500,000 in 2020, have been reported as
treasury shares in the Consolidated Statement of Financial Position.
On December 31, 2020, the number of these shares was 697,400.
This number of shares corresponded to 0.50% 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 1.20 per share be paid (EUR 1.58 in 2019).
Specification of the distributable funds
The distributable funds on 31 December 2020 total EUR
723.1 million (EUR 773.9 million on 31 December 2019) and are
based on the balance of the Parent company and the Finnish
legislation.
44
NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS GOVERNANCEFINANCIAL STATEMENTS
23. SHARE-BASED PAYMENTS
PERFORMANCE SHARE PLANS
Performance share plan
On February 5, 2019, Nokian Tyres announced that the Board of
Directors of Nokian Tyres plc had decided on a new share-based
long-term incentive scheme for the Company’s management and
selected key employees. The decision included a Performance
Share Plan (PSP 2019) as the main structure, and a Restricted
Share Plan (RSP 2019) as a complementary structure for specific
situations.
On February 4, 2020, Nokian Tyres announced that the Board
of Directors of Nokian Tyres plc has decided on a share-based
long-term incentive scheme for the Company’s management and
selected key employees for years 2020–2022 as a continuation
to the earlier plans decided in 2019. The decision includes
Performance Share Plan 2020 (PSP 2020) as the main structure
and Restricted Share Plan 2020 (RSP 2020) as a complementary
structure.
The purpose of the share-based incentive scheme is to align the
goals of the Company’s shareholders and key personnel in order to
increase the value of the Company in the long term and to commit
key personnel to the Company and its strategic targets.
Performance Share Plan 2019
The Performance Share Plan consists of annually commencing
individual three-year Performance Periods, followed by the
payment of the potential share reward to the participants. The
commencement of each individual Performance Period is subject
to a separate Board approval.
The first Performance Period (PSP 2019–2021) commenced as of
the beginning of 2019, and the potential share rewards thereunder
will be paid in the first half of 2022, provided that the performance
criteria set by the Board of Directors are achieved. The potential
reward will be paid partly in shares in Nokian Tyres plc and partly
in cash. The cash portion of the reward is intended to cover the
taxes arising from the paid reward. Approximately 200 individuals
are eligible to participate in PSP 2019–2021, including the members
of Nokian Tyres’ Management Team. The possible rewards paid
based on the Performance Period of 2019–2021 correspond
approximately to a maximum of 535,000 gross shares.
In addition to the 3-year performance period (PSP 2019–2021), a
separate one-time, two-year performance period (PSP 2019–2020)
commenced in 2019 in order to bridge the previous two-year
PSP 2018 and the three-year PSP 2019–2021. The potential share
rewards thereunder will be paid in the first half of 2021, provided
that the performance criteria set by the Board of Directors are
achieved. Approximately 210 individuals are eligible to participate
in PSP 2019–2020, including the members of Nokian Tyres’
Management Team. The possible rewards paid based on the
Performance Period of 2019–2020 correspond approximately to a
maximum of 580,000 gross shares.
The potential share rewards payable under the PSP 2019–2020 and
PSP 2019–2021 are based on the Company’s Earnings Per Share
(EPS) growth % and Return on Capital Employed (ROCE).
Restricted Share Plan 2019
The purpose of the Restricted Share Plan (RSP 2019–2021) is
to serve as a complementary tool for individually selected key
employees of Nokian Tyres in specific situations. It consists of
annually commencing individual Restricted Share Plans, each with a
three-year retention period after which the share rewards granted
within the plan will be paid to the participants.
The commencement of each individual plan is subject to a separate
Board approval.
A precondition for the payment of the share reward based on
the Restricted Share Plan is that the employment relationship of
the individual participant with Nokian Tyres continues until the
payment date of the reward. In addition to this precondition, the
management team has a separate financial performance measure
which must be achieved for a potential reward payment. The
potential reward will be paid partly in shares in Nokian Tyres plc and
partly in cash. Cash portion of the reward is intended to cover the
taxes arising from the paid reward.
The first plan (RSP 2019–2021) within the Restricted Share Plan
structure commenced as of the beginning of 2019, and the
potential share reward thereunder will be paid in the first half
of 2022. The possible rewards paid based on RSP 2019–2021
correspond approximately to a maximum of 70,000 gross shares.
Performance Share Plan 2020
The Performance Share Plan consists of annually commencing
individual three-year Performance Periods, followed by the
payment of the potential share reward. The commencement of
each individual Performance Period is subject to a separate Board
approval.
The Performance Period (PSP 2020–2022) commences effective
as of the beginning of 2020 and the potential share reward
thereunder will be paid in the first half of 2023 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. Eligible to participate
in PSP 2020–2022 are approximately 200 individuals, including the
members of Nokian Tyres Management Team.
The potential share reward payable under the PSP 2020–2022
are based on the Earnings Per Share (EPS) and Return on Capital
Employed (ROCE). The possible rewards paid based on the
Performance Period of 2020–2022 will be a maximum of 569,260
gross shares.
If the individual’s employment with Nokian Tyres terminates before
the payment date of the share reward, the individual is not, as a
main rule, entitled to any reward based on the plan.
Restricted Share Plan 2020
The purpose of the Restricted Share Plan is to serve as a
complementary tool for individually selected key employees of
Nokian Tyres in situations like new hires and retention needs. It
consists of annually commencing individual Restricted Share Plans,
each with a three-year retention period after which the share
rewards granted within the plan will be paid to the participants in
shares of Nokian Tyres plc and partly in cash.
The commencement of each individual plan is subject to a separate
Board of Directors approval.
A precondition for the payment of the share reward based on
the Restricted Share Plan is that the employment relationship of
the individual participant with Nokian Tyres continues until the
payment date of the reward. In addition to this precondition, the
management team has a separate financial performance measure
which must be achieved for a potential reward payment.
The most recent plan (RSP 2020–2022) within the Restricted Share
Plan structure commenced effective as of the beginning of 2020
and the potential share reward thereunder will be paid in the first
half of 2023. The possible rewards paid based on RSP 2020–2022
correspond approximately to a maximum of 120,000 gross shares.
Other terms
Nokian Tyres applies a share ownership policy to the members of
Nokian Tyres Management Team. According to this policy each
member of the Management Team is expected to retain in his/her
ownership at least 25% of the shares received under the share-
based incentive programs of the Company until the value of his/her
share ownership in the Company corresponds to at least his/her
annual gross base salary.
The Board of Directors anticipates that no new shares will be issued
based on the share-based incentive scheme and that the scheme
will, therefore, have no dilutive effect on the registered number of
the Company’s shares.
The following tables present more specific information on the
performance share plans.
45
NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS GOVERNANCEFINANCIAL STATEMENTS
Instrument PSP 2018 PSP 2019–2020 PSPS 2019–2021 PSP 2020–2022 RSP 2019–2021 RSP 2020–2022 Total
Issuing date 23.2.2016 5.2.2019 5.2.2019 4.2.2020 5.2.2019 4.2.2020
Initial amount, pcs 560,000 580,000 535,000 569,260 70,000 120,000 2,434,260
Dividend adjustment No No No No No No
Initial allocation date 2.2.2018 26.2.2019 26.2.2019 26.3.2020 26.8.2019 17.6.2020
Beginning of earning period 1.1.2018 1.1.2019 1.1.2019 1.1.2020 1.1.2019 1.1.2020
End of earning period 31.12.2018 31.12.2020 31.12.2021 31.12.2022 31.12.2021 31.12.2022
Vesting date 31.3.2020 31.3.2021 31.3.2022 31.3.2023 31.3.2022 31.3.2023
Vesting conditions EBIT Net sales
Earnings Per Share
(EPS) growth % and
Return on Capital
Employed (ROCE)
Earnings Per Share
(EPS) growth % and
Return on Capital
Employed (ROCE)
Earnings Per Share
(EPS) and Return on
Capital Employed
(ROCE)
Continued
employment. Return
on Capital Employed
(ROCE)
Continued
employment. Return
on Capital Employed
(ROCE) for special
cases
Maximum contractual life, yrs 2.1 2.1 3.1 3 2.6 2.8 2.6
Remaining contractual life, yrs 0 0.2 1.2 2.2 1.2 2.2 1.2
Number of persons at the end of reporting year 197 172 175 183 18 97
Payment method Cash & Equity Cash & Equity Cash & Equity Cash & Equity Cash & Equity Cash & Equity
Changes during period PSP 2018 PSP 2019–2020 PSPS 2019–2021 PSP 2020–2022 RSP 2019–2021 RSP 2020–2022 Total
1.1.2020
Outstanding in the beginning of the period 448,050 552,900 514,260 0 4,025 0 1,519,235
Reserve in the beginning of the period 111,950 27,100 20,740 0 65,975 0 225,765
Changes during period
Granted 0 0 0 574,020 46,800 99,850 720,670
Forfeited 4,000 38,060 30,700 28,000 3,225 3,000 106,985
Earned (Gross) 1,233 0 0 0 0 0 1,233
Delivered (Net) 821 0 0 0 0 0 821
31.12.2020
Outstanding at the of the period 0 514,840 483,560 541,260 47,600 96,850 1,684,110
Reserved at the of the period 0 65,160 51,440 28,000 22,400 23,150 190,150
46
NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS GOVERNANCEFINANCIAL STATEMENTS
Fair value determination Earning period 2020
Share price at grant, EUR 23.58
Share price at reporting date, EUR
30.35
Expected dividends, EUR
4.14
Fair market value per share at grant, EUR 19.32
Total fair value 31 December 2020, EUR million 12.21
Impact on period profits and financial position
Expenses for the financial year, share-based payments, equity-settled EUR million 3.70
Liabilities arising from share-based payments 31 December 2020 EUR million 0.00
Estimated amount of cash to be paid under these plans EUR million 10.41
FAIR VALUE DETERMINATION
Inputs to the fair value determination of the performance shares
expensed during the financial year 2020 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 2020 as to the number of shares to be eventually
vesting.
25. PROVISIONS
EUR million
Warranty
provision
Restructuring
provision Total
1 Jan 2020 4.9 - 4.9
Provisions made 4.5 2.5 7.1
Provisions used –0.6 - –0.6
Unused provisions reversed –4.3 - –4.3
31 Dec 2020 4.5 2.5 7.1
EUR million 2020 2019
Non-current provisions - -
Current provisions 7.1 4.9
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.
24. PENSION LIABILITIES
All material pension arrangements in the Group are defined contribution plans.
26. INTEREST-BEARING FINANCIAL LIABILITIES
EUR million 2020 2019
Non-current
Loans from financial institutions and pension loans 128.0 134.4
128.0 134.4
Current
Commercial papers 203.4 -
Current portion of non-current loans from financial
institutions and pension loans 0.9 0.9
204.3 0.9
Interest-bearing financial liabilities by currency
EUR million 2020 2019
Currency
EUR 314.8 112.3
RUB 17.5 22.9
Tota l 332.3 135.2
Effective interest rates for interest-bearing financial liabilities
2020 2019
Without
hedges
With
hedges
Without
hedges
With
hedges
Loans from financial institutions and pension loans 1.3% 2.1% 1.8% 2.4%
Commercial papers 0.8% 0.8% - -
Tota l 1.0% 1.3% 1.8% 2.4%
See note 15 for the fair values of the interest-bearing financial liabilities.
47
NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS GOVERNANCEFINANCIAL STATEMENTS
27. TRADE AND OTHER PAYABLES
EUR million 2020 2019
Trade payables 98.1 89.4
Accrued expenses and deferred revenues 138.4 141.7
Advance payments 2.0 0.6
Derivative financial instruments
Designated as hedges 3.8 6.3
Measured at fair value through profit or loss 6.1 2.3
Current tax liabilities 6.4 4.6
Value added tax liabilities 23.1 -
Other liabilities 9.8 21.7
Tota l 287.8 266.5
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 2020 2019
Wages, salaries and social security contributions 41.6 37.0
Annual discounts, sales 60.7 61.3
Commissions 10.0 5.4
Goods received and not invoiced 3.5 6.7
Marketing expenses 2.3 5.5
Transportation costs 3.0 3.7
Warranties 3.8 4.2
Financial items 0.2 0.0
Other items 13.4 17.8
Tota l 138.4 141.7
48
NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS GOVERNANCEFINANCIAL STATEMENTS
Transaction risk
EUR million 31 Dec 2020 31 Dec 2019
Functional currency EUR EUR EUR EUR EUR CZK UAH RUB EUR EUR EUR EUR EUR CZK UAH RUB
Foreign currency CAD NOK RUB SEK USD EUR EUR EUR CAD NOK RUB SEK USD EUR EUR EUR
Trade receivables 24.3 23.4 16.3 17.9 22.8 66.8 0.0 10.4 15.0 18.7 19.3 21.9 17.7 83.1 0.0 17.5
Loans and receivables 3.0 43.0 81.2 44.4 4.3 37.4 0.0 0.0 10.4 46.6 108.9 54.7 5.7 2.1 0.0 0.0
Total currency income 27.4 66.4 97.5 62.3 27.1 104.2 0.0 10.4 25.3 65.3 128.2 76.7 23.4 85.1 0.0 17.5
Trade payables –0.3 0.0 –9.9 0.0 –11.7 –38.2 0.0 –2.9 0.0 0.0 –44.6 0.0 –9.4 –43.3 –0.2 –6.0
Borrowings –10.8 –40.1 –169.9 –22.2 –21.9 –60.0 0.0 –10.0 0.0 –38.2 –86.2 –20.6 –7.9 –60.0 0.0 –15.0
Total currency expenditure –11.1 –40.1 –179.8 –22.2 –33.6 –98.2 0.0 –12.9 0.0 –38.2 –130.8 –20.6 –17.3 –103.3 –0.2 –21.0
Foreign exchange derivatives –9.6 –25.8 79.8 –45.8 –4.1 –7.4 0.0 0.0 –23.3 –21.8 –6.0 –59.3 –7.9 19.8 0.0 0.0
Binding sales contracts 12.8 2.7 4.1 3.4 0.3 10.5 0.0 0.0 8.3 3.1 5.2 3.6 0.3 13.5 0.0 0.0
Binding purchase contracts 0.0 0.0 –4.2 0.0 –29.4 –7.9 0.0 0.0 0.0 0.0 –13.1 0.0 –24.9 –15.8 0.0 0.0
Future interest items 0.0 0.9 –4.8 0.4 0.0 –0.6 0.0 0.0 0.0 0.7 1.2 0.3 0.0 –0.6 0.0 –0.1
Net exposure 19.5 4.1 –7.4 –2.1 –39.7 1.1 0.0 –2.5 10.4 9.1 –15.4 0.6 –26.5 –0.7 –0.1 –3.5
28. 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 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. COVID–19 pandemic related risks are covered in the note
34.
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 and Norway. The
tire plants are located in Nokia, Finland, in Vsevolozhsk, Russia and
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.
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.
49
NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS GOVERNANCEFINANCIAL STATEMENTS
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.
31 Dec 2020 31 Dec 2019
Base currency Base currency
10% stronger 10% weaker 10% stronger 10% weaker
EUR million
Income
statement Equity
Income
statement Equity
Income
statement Equity
Income
statement Equity
Base currency / Quote currency
EUR/CAD –0.7 - 0.7 - –0.2 - 0.2 -
EUR/CZK –0.1 - 0.1 - 0.2 - –0.2 -
EUR/NOK –0.1 - –0.1 - –1.1 - 2.5 -
EUR/RUB 0.0 - 0.0 - 0.5 - –0.5 -
EUR/SEK 0.6 - –0.6 - 0.3 - –0.3 -
EUR/UAH 0.0 - 0.0 - 0.0 - 0.0 -
EUR/USD 0.3 - –0.3 - 0.2 - –0.2 -
Net investments by currency
EUR million 31 Dec 2020 31 Dec 2019
Currency of net investment
CZK 58.4 52.4
NOK 48.1 49.8
RUB 457.4 625.2
SEK 26.8 21.1
USD 328.2 321.8
Translation risk
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 168.7 million
(positively affected by EUR 86.6 in 2019).
50
NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS GOVERNANCEFINANCIAL STATEMENTS
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 2020 31 Dec 2019
Electricity price 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 Equity
Income
statement Equity
Income
statement Equity
Impact of electricity price change
- 0.8 - –0.8
- 0.7 - –0.7
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.
31 Dec 2020 31 Dec 2019
Interest rate Interest rate
1%-point higher 1%-point lower 1%-point higher 1%-point lower
EUR million
Income
statement Equity
Income
statement Equity
Income
statement Equity
Income
statement Equity
Impact of interest rate change –0.2 3.3 –0.2 –3.3 –1.3 4.5 1.3 –4.5
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 326.6 million (EUR 128.8 million in 2019) and the
fixed rate interest-bearing liabilities EUR 5.7 million (EUR 6.3 million
in 2019) 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 82%
(79% in 2019) and the average fixing period of the interest-bearing
financial liabilities was 15 months (48 months in 2019) 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 170 GWh (140 GWh in 2019).
51
NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS GOVERNANCEFINANCIAL STATEMENTS
Contractual maturities of financial and lease liabilities
EUR million
2020
Carrying
amount
Contractual maturities*
2021 2022 2023 2024 2025 2026– Total
Non-derivative financial liabilities
Loans from financial institutions and pension loans
Fixed rate loans 5.7 –0.7 –0.7 –1.2 –0.6 –0.6 –2.5 –6.3
Floating rate loans 123.2 –1.8 –1.8 –1.8 –121.9 –0.3 –1.1 –128.7
Commercial papers 203.4 –203.4 0.0 0.0 0.0 0.0 0.0 –203.4
Trade and other payables 98.1 –98.1 0.0 0.0 0.0 0.0 0.0 –98.1
Lease liabilities 154.7 –46.1 –39.0 –35.2 –13.2 –10.0 –24.6 –168.1
Derivative financial liabilities
Interest rate derivatives
Designated as hedges 3.6 –1.0 –1.0 –1.0 –0.5 0.0 0.0 –3.5
Foreign currency derivatives
Designated as hedges
Cashflow out 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Cashflow in 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Measured at fair value through profit or loss
Cashflow out 6.1 –394.5 –46.9 –16.2 0.0 0.0 0.0 –457.6
Cashflow in –19.6 390.2 56.8 18.5 0.0 0.0 0.0 465.6
Electricity derivatives
Designated as hedges 0.0 –0.2 0.2 0.0 0.0 0.0 0.0 0.0
Tota l
575.2 –355.7 –32.5 –36.8 –136.2 –10.9 –28.2 –600.2
* The figures are undiscounted and include both the finance charges and the repayments.
Liquidity and funding risk
In accordance with the Group’s financial policy, 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 EUR 150 million domestic revolving credit
facility with an international bank syndicate is due in 2023. A EUR
350 million domestic commercial paper program was increased
to EUR 500 million. 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 strengthened its liquidity position due to the
potential negative impacts of the COVID–19 pandemic in first half
of the year by withdrawing bilateral loans totaling EUR 275 million.
These loans we prepaid before maturity in the end of the year.
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 2020 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 504.2 million (EUR 218.8 million in 2019). At the
end of the year the Group’s credit limits available were EUR 507.1
million (EUR 561,0 million in 2019), out of which the committed limits
were EUR 205.5 million (EUR 205.5 million in 2019). The available
committed non-current credits amounted to EUR 200.0 million
(EUR 200.0 million in 2019).
The Group’s interest-bearing financial liabilities totaled EUR
332.3 million, compared to the year before figure of EUR 135.2
million. Around 95% of the interest-bearing financial liabilities were
in EUR. The average interest rate of interest-bearing financial
liabilities was 1.3%. Current interest-bearing financial liabilities,
including the portion of non-current financial liabilities maturing
within the next 12 months, amounted to EUR 204.3 million (EUR 0.9
million in 2019).
EUR million
2019
Carrying
amount
Contractual maturities*
2020 2021 2022 2023 2024 2025– Total
Non-derivative financial liabilities
Loans from financial institutions and pension loans
Fixed rate loans
6.3 –0.8 –0.7 –0.7 –1.2 –0.6 –3.1 –7.1
Floating rate loans 128.8 –2.5 –2.5 –2.5 –2.4 –127.6 –1.3 –138.9
Commercial papers 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Trade and other payables 89.4 –89.4 0.0 0.0 0.0 0.0 0.0 –89.4
Lease liabilities 124.8 –32.5 –27.9 –19.9 –16.1 –12.0 –29.6 –137.9
Derivative financial liabilities
Interest rate derivatives
Designated as hedges 3.2 –0.8 –0.8 –0.7 –0.6 –0.2 0.0 –3.1
Foreign currency derivatives
Designated as hedges
Cashflow out 3.0 –5.0 –4.8 –62.0 –21.3 0.0 0.0 –93.1
Cashflow in –0.3 0.3 0.3 57.0 18.6 0.0 0.0 76.2
Measured at fair value through profit or loss
Cashflow out 2.3 –393.2 0.0 0.0 0.0 0.0 0.0 –393.2
Cashflow in –2.9 394.5 0.0 0.0 0.0 0.0 0.0 394.5
Electricity derivatives
Designated as hedges
–0.9 0.5 0.3 0.1 0.0 0.0 0.0 0.9
Tota l 353.8 –128.9 –36.1 –28.7 –22.9 –140.5 –34.1 –391.2
* The figures are undiscounted and include both the finance charges and the repayments.
asdasddasdasd
52
NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS GOVERNANCEFINANCIAL STATEMENTS
The aging and impairment of trade receivables
31 Dec 2020 31 Dec 2019
EUR million
Trade receivables
gross amount
Impairment loss
allowance
Trade receivables
gross amount
Impairment
loss allowance
Not past due 294.6 –1.4 445.6 –2.5
Past due less than 30 days 20.2 –0.4 34.2 –0.8
Past due between 30 and 90 days 5.0 –0.3 9.9 –0.6
Past due between 91 and 180 days 1.1 –0.2 1.6 –0.2
Past due more than 180 days 68.6 –65.7 66.3 –55.2
Tota l 389.6 –68.1 557.7 –59.4
Changes in the impairment loss allowance for trade receivables
EUR million 2020 2019
Loss allowance, 1 Jan 59.4 51.0
Write-offs –0.7 –0.6
Other changes –7.6 3.7
Change in loss allowance recognized in profit or loss 17.0 5.3
Loss allowance, 31 Dec 68.1 59.4
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, 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 35%
(47% in 2019) 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. In addition,
case-by-case analysis is applied for significant overdue receivables.
53
NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS GOVERNANCEFINANCIAL STATEMENTS
Net debt / EBITDA
EUR million 2020 2019
Average interest-bearing liabilities 598.1 350.8
Less: Average liquid funds 438.5 185.5
Average net debt 159.6 165.2
Operating profit 120.0 316.5
Add: Depreciations and amortisations 131.0 125.2
EBITDA 251.0 441.7
Average net debt / EBITDA 0.64 0.37
Equity ratio
EUR million 2020 2019
Equity attributable to equity holders of the parent 1,521.3 1,769.7
Add: Non-controlling interest 0.0 0.0
Total equity 1,521.3 1,769.7
Total assets 2,336.7 2,332.6
Less: Advances received 5.2 0.6
Adjusted total assets 2,331.5 2,332.0
Equity ratio 65.3% 75.9%
29. FAIR VALUES OF DERIVATIVE FINANCIAL INSTRUMENTS
2020 2019
EUR million
Notional
amount
Fair value
Assets
Fair value
Liabilities
Notional
amount
Fair value
Assets
Fair value
Liabilities
Derivatives measured at fair value through profit or loss
Foreign currency derivatives
Currency forwards 391.6 3.1 5.6 396.8 2.9 2.3
Currency options, purchased 12.9 0.2 - 20.3 0.0 -
Currency options, written 15.3 - 0.1 - - -
Interest rate and currency swaps 75.0 16.3 0.4 - - -
Derivatives designated as cash flow hedges
Foreign currency derivatives
Interest rate and currency swaps - - - 75.0 0.3 3.0
Interest rate derivatives
Interest rate swaps 100.0 - 3.6 100.0 - 3.2
Electricity derivatives
Electricity forwards 4.9 0.3 0.3 3.9 0.9 0.0
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.
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.
54
NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS GOVERNANCEFINANCIAL STATEMENTS
30. FINANCIAL INSTRUMENTS DESIGNATED AS HEDGING INSTRUMENTS
CASH FLOW HEDGES
Financial instruments designated as hedging instruments
2020
Maturity
2021 2022 2023 2024 2025 2026– Total
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 100.0 100.0
Average fixed rate
0.5% 0.5%
Electricity forwards
Hedged item: Electricity system price
Notional amount, EUR million 1.7 1.6 1.0 0.2 4.5
Notional amount, GWh 61 61 35 9 166
Average forward rate, e/MWh 27.9 26.1 27.1 28.4 27.1
Hedged item: Electricity Finnish area price difference
Notional amount, EUR million 0.0 0.2 0.1 0.3
Notional amount, GWh 1 35 18 54
Average forward rate, e/MWh
16.4 6.8 4.2 6.2
* Hedge accounting discontinued
2019
Maturity
2020 2021 2022 2023 2024 2025– Total
Interest rate and currency swaps
Hedged item: Floating rate RUB loan receivable
Notional amount, EUR million 56.6 18.4 75.0
Average EUR/RUB rate 70.65 76.06 71.98
Interest rate swaps
Hedged item: Floating rate EUR debt
Notional amount, EUR million 100.0 100.0
Average fixed rate 0.5% 0.5%
Electricity forwards
Hedged item: Electricity system price
Notional amount, EUR million 1.9 1.5 0.5 3.8
Notional amount, GWh 72 53 18 143
Average forward rate, e/MWh 25.8 27.9 27.3 26.7
Hedged item: Electricity Finnish area price difference
Notional amount, EUR million 0.1 0.1
Notional amount, GWh 22 22
Average forward rate, e/MWh 4.1 4.1
55
NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS GOVERNANCEFINANCIAL STATEMENTS
Effect of hedging instruments on the statement of financial position and statement of
comprehensive income
2020
Foreign currency
derivatives
Interest rate
derivatives
Electricity
derivatives
EUR million
Interest rate and
currency swaps*
Interest rate
swaps
Electricity
forwards
Notional amount - 100.0 4.6
Notional amount, GWh - - 221
Assets
Carrying amount - - 0.3
Line item in the statement of financial
position
Trade and
other receivables
Trade and
other receivables
Trade and
other receivables
Liabilities
Carrying amount
- 3.6 0.3
Line item in the statement of financial
position
Trade and
other payables
Trade and
other payables
Trade and
other payables
Change in value for recognizing hedge
ineffectiveness
Hedged item - 1.2 1.8
Hedging instrument - –1.2 –1.8
Effective portion
Amount recognized in other comprehensive
income
- –1.2 –1.8
Amount reclassified from the cash flow
hedge reserve to profit or loss –0.1 0.9 0.8
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
* Hedge accounting discontinued
2019
Foreign currency
derivatives
Interest rate
derivatives
Electricity
derivatives
EUR million
Interest rate and
currency swaps
Interest rate
swaps
Electricity
forwards
Notional amount
75.0 100.0 3.9
Notional amount, GWh
- - 164
Assets
Carrying amount
0.3 - 0.9
Line item in the statement of financial
position
Trade and
other receivables
Trade and
other receivables
Trade and
other receivables
Liabilities
Carrying amount
3.0 3.2 0.0
Line item in the statement of financial
position
Trade and
other payables
Trade and
other payables
Trade and
other payables
Change in value for recognizing hedge
ineffectiveness
Hedged item 18.3 2.5 1.1
Hedging instrument –18.3 –2.5 –1.1
Effective portion
Amount recognized in other comprehensive
income –18.3 –2.5 –1.1
Amount reclassified from the cash flow
hedge reserve to profit or loss 20.4 0.9 –0.9
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
56
NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS GOVERNANCEFINANCIAL STATEMENTS
Effect of hedging instruments on equity
EUR million 2020 2019
Cash flow hedge reserve, 1 Jan –1.8 –0.6
Cash flow hedges
Change in fair value recognized in other comprehensive income
Interest rate and currency swaps 0.0 –18.3
Interest rate swaps –1.2 –2.5
Electricity forwards –1.8 –1.1
Amount reclassified to profit or loss
Interest rate and currency swaps –0.1 20.4
Interest rate swaps 0.9 0.9
Electricity forwards 0.8 –0.9
Tax effect 0.3 0.3
Cash flow hedge reserve, 31 Dec –2.8 –1.8
31. CONTINGENT LIABILITIES AND ASSETS
EUR million 2020 2019
For own debt
Mortgages 0.0 0.9
Enterprise mortgages 3.5 0.0
Pledged assets 2.2 4.7
On behalf of other companies
Guarantees 0.0 0.4
Other own commitments
Guarantees 3.0 29.9
57
NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS GOVERNANCEFINANCIAL 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 business
continuity. 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 2020 Corporate
Governance Statement.
For example, the following risks could potentially have an
impact on Nokian Tyres’ business:
• 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. 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 of
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, Russia
and the US. Any unexpected production or delivery breaks at
these facilities would have a negative impact on the company’s
business. Interruptions in logistics could have a significant impact
on production and 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.
• Tire industry can be subject to risks caused by climate change,
such as changes in consumer tire preferences, regulatory
changes or impact of extreme weather events on natural rubber
producers. Nokian Tyres is committed to reducing GHG emissions
from its operations in order to combat climate change. Nokian
Tyres calculates the GHG emissions from its operations annually
and reduces them systematically. More detailed analysis on Nokian
Tyres’ climate change related risks and opportunities is provided
at www.nokiantyres.com/company/sustainability/environment/
climate-change-related-risks-and-opportunities/.
• 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. In October 2020,
the prosecutor announced the decision to press charges against a
total of six persons who acted as Board members and the President
& CEO of Nokian Tyres in 2015–2016. The prosecutor also requests
a corporate fine of a maximum of EUR 850,000 to be imposed on
the company. The prosecutor has also decided to press charges for
suspected abuse of insider information against four persons who
were employees of Nokian Tyres in 2015. All persons charged deny
their involvement in any criminal activity.
• The COVID–19 pandemic represents a short-term risk to Nokian
Tyres’ business and operating environment, which has rapidly
changed. The company has proactively taken preventive actions
to minimize the impacts of the pandemic and to ensure business
continuity. Despite these efforts, the uncertainty over the duration
of the pandemic, the containment measures and the resulting
slowdown in economic activity is expected to have a negative
impact on Nokian Tyres’ operations and supply chain as well as the
demand and pricing for the company’s products.
Nokian Tyres’ risk analysis also pays special attention on
corporate social responsibility risks, the most significant of which are
related to the company’s brand image and product quality. Analyses
and projects related to information security, data protection, and
customer information are continuously a special focus area.
Tax disputes
In May 2019, Nokian Tyres U.S. Finance Oy, a former subsidiary of
Nokian Tyres plc (ownership: 100% of the shares), received a negative
ruling from the Hämeenlinna Administrative Court regarding the
company’s appeal against a reassessment of EUR 18.5 million
concerning the 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 has paid and recorded them in full in the financial
statements and results for 2013, 2014, and 2017. The company
considers the decision unfounded and has appealed against it by filing
a claim with the Supreme Administrative Court in July 2019.
COVID–19 – SUMMARY OF ACTIONS
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
• Temporary closures of the manufacturing facilities in Russia,
Finland and the US during March-May
• 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. On October 27, 2020, the Board decided on the
distribution of a second dividend instalment of EUR 0.35 per
share.
• Capex reduction from approximately EUR 200 million to EUR
149.9 million for 2020.
• Actions implemented to strengthen Nokian Tyres’ liquidity
position, which as of December 31, 2020 amounted to EUR 709.6
million, including cash, cash equivalents and undrawn committed
short- and long-term credit limits (EUR 424.3 million at the end
of 2019)
• Strong balance sheet supporting in difficult times
58
NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS GOVERNANCEFINANCIAL STATEMENTS
33. RELATED PARTY TRANSACTIONS
Parent and Group company relations:
Domicile Country
Group
holding
%
Voting
rights
%
Parent
company
holding
%
Parent company
Group companies
Nokian Heavy Tyres Ltd. Nokia Finland 100 100 100
Levypyörä Oy Nastola Finland 100 100
Nokian Däck AB Sweden 100 100 100
Nokian Dekk AS Norway 100 100 100
Nokian Tyres GmbH Germany 100 100 100
Nokian Tyres AG Switzerland 100 100 100
Nokian Tyres SP Z.O.O Poland 100 100 100
Nokian Tyres U.S. Holdings Inc. USA 100 100 100
Nokian Tyres Inc USA 100 100
Nokian Tyres U.S. Operations LLC USA 100 100
Nokian Tyres Canada Inc. Canada 100 100 100
Nokian Tyres s.r.o. Czech,Rep. 100 100 100
TOV Nokian Shina Ukraine 100 100 100
TOO Nokian Tyres Kazakhstan 100 100 100
OOO Nokian Shina Vsevolozhsk, Russia 100 100 100
TAA Nokian Shina Belarus Belarus 100 100 100
Nokian Tyres Holding Oy Nokia Finland 100 100 99
OOO Nokian Tyres Vsevolozhsk, Russia 100 100
OOO Hakkapeliitta Village Vsevolozhsk, Russia 100 100
Nokian Tyres Trading (Shanghai) Co Ltd China 100 100
NT Tyre Machinery Oy Nokia Finland 100 100 100
OOO Hakka Invest Vsevolozhsk Russia 100 100 100
Koy Nokian Nosturikatu 18 Nokia Finland 100 100 100
Koy Nokian Rengaskatu 4 Nokia Finland 100 100 100
Nokian Tyres Spain S.L.U. Spain 100 100 100
Nokianvirran Energia Oy Nokia Finland 32.3 32.3 32.3
Vianor Holding Oy Nokia Finland 100 100 100
Vianor Oy Lappeenranta Finland 100 100
Posiber Oy Nokia Finland 100 100
Vianor AB Sweden 100 100
Nordicwheels AB Sweden 100 100
Vianor AS Norway 100 100
Vianor Inc. USA 100 100
EAM NRE1V Holding Oy Finland 0 100
Associated companies
Sammaliston Sauna Oy 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 August 7, 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.
59
NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS GOVERNANCEFINANCIAL 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 2020 2019
Key management personnel
Employee benefit expenses
Short-term employee benefits 5,549.7 4,524.4
Termination benefits 883.9 183.7
Share-based payments 0.0 2,186.1
Tota l 6,433.6 6,894.2
Remunerations
Jukka Moisio, President 27.5.2020- 429.6 -
Hille Korhonen, President 1.1.2020–26.5.2020 1,351.1 693.2
Members of the Board of Directors
Jukka Hienonen 105.8 -
Heikki Allonen 63.1 54.6
Raimo Lind 85.6 76.5
Veronica Lindholm 65.5 56.4
Inka Mero 63.1 54.6
George Rietbergen 60.1 54.6
Kari Jordan 87.4 78.3
Pekka Vauramo 63.1 53.4
Petteri Walldén 6.6 101.4
Tota l 600.3 529.8
No incentives were paid to the members of the
Board of Directors.
Other key management personnel 4,052.6 3,301.4
of which incentives for the reported period 519.0 180.0
No special pension commitments have been granted to the members of the Board of Directors and no
statutory pension expense incurs. In 2020 the supplementary pension expense for President and CEO
Korhonen was EUR 121 thousand. The agreed plan retirement age was 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. President and CEO Jukka Moisio
does not have a supplementary pension plan and his retirement age is in accordance to the statutory
pension regulations. The combined statutory pension expense for President and CEO Jukka Moisio and
Hille Korhonen was EUR 176 thousand. The other management has a suplamentary penson plan of 10%
of the annual salary and a retirement age of 63 years. Andrei Pantioukhov’s supplementary pension is
15% of his annual salary.
No loans, guarantees or collaterals have been granted to the related parties.
2020 2019
Granted (pcs)
Shares 309,040 260,260
Share options - -
Held (pcs)
Shares 166,777 221,940
Share options - -
Exercisable - -
No performance shares nor share options have been granted to the members of the Board of Directors.
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.
34. EVENTS AFTER THE REPORTING DATE
In 2021, Nokian Tyres’ net sales with comparable currencies and segments operating profit are expected
to grow significantly.
The global car and tire demand is expected to pick up, but the COVID–19 pandemic continues to
cause uncertainties for the development.
60
NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS GOVERNANCEFINANCIAL STATEMENTS
EUR million 1.1.–31.12. Notes 2020 2019
Net sales (1) 580.9 677.7
Cost of sales (2)(3) –483.9 –556.8
Gross profit 97.0 120.9
Selling, marketing and R&D expenses (2)(3) –56.7 –49.7
Administration expenses (2)(3)(4) –36.9 –26.8
Other operating expenses (2)(3) –21.6 –0.8
Other operating income 0.7 0.4
Operating profit –17.5 44.0
Financial income and expenses (5) 129.6 156.1
Profit before appropriations and tax 112.0 200.1
Appropriations (6) 12.1 –6.7
Income tax (7) –6.6 96.9
Profit for the period 117.6 290.4
PARENT COMPANY
INCOME STATEMENT, FAS
EUR million 31.12. Notes 2020 2019
ASSETS
Fixed assets and other non-current assets
Intangible assets (8) 14.3 17.6
Tangible assets (8)
167.6
175.6
Shares in Group companies (9) 418.0 371.2
Investments in associates (9) 4.3 4.3
Shares in other companies (9) 0.2 0.6
Unquoted securities
(9)
2.4 0.0
Total non-current assets 606.7 569.1
Current assets
Inventories (10) 82.7 101.0
Non-current receivables (11) 322.9 266.5
Current receivables (12) 252.3 328.9
Cash and cash equivalents 462.0 169.5
Total current assets 1,119.8 866.0
1,726.6 1,435.1
LIABILITIES AND SHAREHOLDERS' EQUITY
Shareholders' equity (13)
Share capital 25.4 25.4
Share premium 182.5 182.5
Treasury shares –17.8 –7.6
Paid up unrestricted equity fund 238.2 238.2
Retained earnings 385.1 252.8
Profit for the period 117.6 290.4
Total shareholders' equity 931.1 981.8
Untaxed reserves and provisions
Accumulated depreciation in excess of plan (8) 26.2 38.3
Liabilities
Non-current liabilities (14) 103.9 103.9
Current liabilities
(15)
665.4 311.0
Total liabilities 769.3 415.0
1,726.6 1,435.1
PARENT COMPANY
BALANCE SHEET, FAS
Nokian Tyres in brief
61
NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS GOVERNANCEFINANCIAL STATEMENTS
EUR million 1.1.–31.12. 2020 2019
Profit for the period 117.6 290.4
Adjustments for
Depreciation, amortisation and impairment 43.1 91.8
Financial income and expenses –129.6 –156.1
Gains and losses on sale of intangible assets, other changes 5.0 –0.4
Income Taxes 6.6 –96.9
Cash flow before changes in working capital 42.7 128.7
Changes in working capital
Current receivables, non-interest-bearing, increase (–) / decrease (+) –16.9 13.8
Inventories, increase (–) / decrease (+) 18.4 5.0
Current liabilities, non-interest-bearing, increase (+) / decrease (–) –12.9 –202.0
Changes in working capital –11.4 –183.2
Financial items and taxes
Interest and other financial items, received 11.9 20.1
Interest and other financial items, paid –12.7 –41.3
Dividens received 131.3 177.3
Income taxes paid –3.8 90.4
Financial items and taxes 126.7 246.5
Cash flow from operating activities (A) 157.9 192.0
Cash flow from investing activities
Acquisitions of property, plant and equipment and intangible assets –46.4 –51.8
Proceeds from sale of property, plant and equipment and intangible
assets
–2.1
0.2
Acquisitions of other investments –46.9 –177.0
Cash flow from investing activities (B) –95.3 –228.6
PARENT COMPANY STATEMENT OF CASH FLOWS, FAS
EUR million 1.1.–31.12. 2020 2019
Cash flow from financing activities:
Proceeds from issue of share capital 0.0 15.6
Purchase of treasury shares –10.2 0.0
Change in current financial receivables, increase (-) / decrease (+) 88.3 15.0
Change in non-current financial receivables, increase (-) / decrease (+) –56.4 –11.6
Change in current financial borrowings, increase (+) / decrease (-)
359.8
–106.9
Change in non-current financial borrowings, increase (+) / decrease (-) –0.1 103.7
Group contributions paid 0.0 8.4
Dividends paid –151.6 –218.1
Cash flow from financing activities (C) 229.8 –193.8
Change in cash and cash equivalents, increase (+) / decrease (–) (A+B+C)
292.4
–230.4
Cash and cash equivalents at the beginning of the period 169.5 398.6
Effect of exchange rate fluctuations on cash held 0.0 1.3
Cash and cash equivalents at the end of the period 462.0 169.5
Key figures 2020
62
NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS GOVERNANCEFINANCIAL STATEMENTS
General
The financial statements of Nokian Tyres plc, domiciled in the city
of Nokia, have been prepared according to the Finnish Accounting
Standards (FAS).
Inventory valuation
Inventories are measured at the lower of cost or the net realisable
value. Cost is primarily determined in accordance with standard
cost accounting. 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. Allowance is
recorded in obsolete items.
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 3 - 10 years
Buildings 20 - 40 years
Machinery and equipment 4 - 20 years
Other tangible assets 10 - 40 years
Land property, as well as investments in shares, are not regularly
depreciated.
ACCOUNTING POLICIES FOR THE PARENT COMPANY
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.
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 direct taxes from previous years. The untaxed reserves
are shown in full in the balance sheet, and the deferred tax liability
is not recorded.
Highlights of the year 2020
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NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS GOVERNANCEFINANCIAL STATEMENTS
1. NET SALES BY SEGMENTS AND MARKET AREAS
EUR million 2020 2019
Passenger Car Tyres 413.1 493.4
Heavy Tyres 167.9 184.3
Tota l 580.9 677.7
Finland 114.6 133.2
Other Nordic countries 167.8 199.4
Baltic countries and Russia 36.4 49.5
Other European countries 144.9 169.1
North America 108.4 115.4
Other countries 8.8 11.0
Tota l
580.9
677.7
2. WAGES, SALARIES AND SOCIAL EXPENSES
EUR million 2020 2019
Wages and salaries 48.5 52.5
Pension contributions 6.6 7.8
Other social expenses 2.0 1.6
Tota l 57.1 61.8
Remuneration of the members of the
Board of the Directors and the President on
accrual basis 2.4 1.2
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 2020 2019
Tota l 813 879
NOTES TO THE FINANCIAL STATEMENTS
OF THE PARENT COMPANY
3. DEPRECIATION
EUR million 2020 2019
Depreciation according to plan by asset
category
Intangible assets 6.2 6.7
Buildings 2.7 2.4
Machinery and equipment 21.5 22.3
Other tangible assets 0.3 0.2
Tota l 30.7 31.6
Impairment losses by asset category
Intangible assets 5.1 -
Buildings 3.4 -
Machinery and equipment 3.4 -
Shares in other companies 0.4 -
Tota l 12.3 -
Depreciation by function
Production 21.0 21.5
Selling, marketing and R&D 5.1 5.2
Administration 4.6 4.9
Tota l 30.7 31.6
Impairment losses by function
Production
5.9
-
Selling, marketing and R&D
4.9
-
Administration
1.2
-
Other impairment losses 0.4 -
Tota l
12.3
-
4. AUDITORS' FEES
EUR million 2020 2019
Authorized public accountants KPMG Oy Ab
Auditing
0.2
0.2
Tax consulting 0.2 1.0
Other services 0.0 0.1
Tota l 0.4 1.3
5. FINANCIAL INCOME AND EXPENSES
EUR million 2020 2019
Dividend income
From the Group companies 131.3 177.3
Tota l 131.3 177.3
Interest income, non-current
From the Group companies 8.9 11.6
Tota l 8.9 11.6
Other interest and financial income
From the Group companies
2.0
6.6
From others 0.2 1.9
Tota l 2.2 8.5
Exchange rate differences (net) –3.7 –9.4
Impairment, long-term investments –0.4 –60.0
Interest and other financial expenses
To the Group companies –3.7 –4.2
To others –3.9 32.9
Other financial expenses –1.0 –0.5
Tota l –8.6 28.2
Total financial income and expenses 129.6 156.1
Financial expenses 2019 include returned EUR 34.4 million interest booked
in previous fiscal year based on tax reassesment decisions. Additionally
financial income 2019 include a gain of EUR 1.4 million of interest from
returned taxes.
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NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS GOVERNANCEFINANCIAL STATEMENTS
8. FIXED ASSETS
Intangible assets Tangible assets
EUR million
Intangible
rights
Other
intangible
rights
Land
property Buildings
Machinery
and
equipment
Other
tangible
assets
Advances and fixed
assets under
construction
Accumulated cost, 1 Jan 2020 64.9 7.6 1.1 77.3 482.2 6.0 50.2
Increase 0.8 0.0 0.8 1.1 5.8 0.0 29.9
Decrease –0.2 0.0 0.0 –0.6 –21.5 –0.5 0.0
Transfer between items 5.3 2.0 0.0 13.7 18.7 0.3 –40.0
Accumulated cost, 31 Dec 2020 70.7 9.6 1.9 91.5 485.2 5.8 40.2
Accum. depr. acc. to plan 1 Jan 2020 –50.9 –4.1 0.0 –40.4 –396.8 –4.1 0.0
Accum. depr. on disposals 0.2 0.0 0.0 0.5 14.9 0.1 0.0
Depreciations for the period –5.7 –0.5 0.0 –2.7 –21.5 –0.3 0.0
Impairment –0.3 –4.9 0.0 –3.4 –3.4 0.0 0.0
Accum. depr. acc.to plan, 31 Dec 2020 –56.6 –9.4 0.0 –46.0 –406.9 –4.2 0.0
Carrying amount, 31 Dec 2020 14.1 0.2 1.9 45.5 78.4 1.6 40.2
Carrying amount, 31 Dec 2019 14.0 3.5 1.1 36.8 85.4 1.9 50.2
Accum. depreciation in excess of plan,
31 Dec 2020 2.2 0.0 - 9.3 11.5 0.1
Accum. depreciation in excess of plan,
31 Dec 2019 2.7 0.1 - 11.6 19.6 0.1
9. INVESTMENTS
EUR million
Shares in Group
companies
Investments in
associates
Shares in other
companies
Unquoted
securities
Accumulated cost, 1 Jan 2020 371.2 4.3 0.6 -
Decrease - - - -
Increase 46.9 - - 2.4
Impairment - - –0.4 -
Accumulated cost, 31 Dec 2020 418.0 4.3 0.2 2.4
Carrying amount, 31 Dec 2020 418.0 4.3 0.2 2.4
Carrying amount, 31 Dec 2019 371.2 4.3 0.6 0.0
6. APPROPRIATIONS
EUR million 2020 2019
Change in accumulated depreciation in
excess of plan
Intangible assets
0.7
0.1
Buildings 3.3 0.7
Machinery and equipment 8.1 –0.5
Other tangible assets 0.0 –0.4
Tota l 12.1 –0.2
Other appropriations
Group contributions 0.0 –6.6
Tota l 0.0 –6.6
Total appropriations
12.1
–6.7
7. INCOME TAX
EUR million 2020 2019
Direct tax for the year –6.6 –16.8
Direct tax from previous years 0.0 113.7
Tota l –6.6 96.9
In March 2019, the Supreme Administrative Court rejected an application
for leave to appeal from the Tax Recipients’ Legal Services Unit in Nokian
Tyres’ 2007–2010 tax dispute. The decision of the Administrative Court
in May 2018 is thus final and the tax dispute for the tax years 2007–2010
is completed. As a result of the decision of the Supreme Administrative
Court, the Tax Recipients’ Legal Services Unit withdrew their appeal
concerning Nokian Tyres’ tax year 2011 and the positive decision taken by
the Tax Administration in 2018 is thus final.
Adjustments to the financial reporting concerning tax years 2007–2010
and 2011 were done during the first quarter of 2019. The decision of
the Supreme Administrative Court had no cash flow impact, as the Tax
Administration returned the additional taxes paid by the company already
in 2018.
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NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS GOVERNANCEFINANCIAL STATEMENTS
10. INVENTORIES
EUR million 2020 2019
Raw materials and supplies 55.8 72.3
Work in progress 2.3 3.1
Finished goods 24.6 25.6
Tota l 82.7 101.0
11. NON-CURRENT RECEIVABLES
EUR million 2020 2019
Loan receivables from the Group
companies 322.3 265.9
Loan receivables from others 0.6 0.6
Total long-term receivables 322.9 266.5
The members of the Board of Directors and the President have not
been granted loans.
12. CURRENT RECEIVABLES
EUR million 2020 2019
Receivables from the Group companies
Trade receivables 143.4 134.7
Loan receivables 34.1 122.4
Accrued revenues and deferred expenses 16.6 22.8
Tota l 194.2 279.9
Trade receivables 27.0 31.1
Other receivables 3.1 3.0
Accrued revenues and deferred expenses 28.0 14.9
Tota l 58.1 49.0
Total short-term receivables 252.3 328.9
Significant items under accrued revenues
and deferred expenses
Financial items 23.4 8.0
Taxes 3.7 6.6
Social payments 0.5 0.8
Capital expenditure in factories 0.1 0.6
Goods and services rendered and not
invoiced, subsidiary 13.1 18.0
Other items 3.6 3.8
Tota l 44.6 37.7
13. SHAREHOLDERS' EQUITY
EUR million 2020 2019
Restricted shareholders' equity
Share capital, 1 January 25.4 25.4
Emissions - -
Share capital, 31 December 25.4 25.4
Share issue premium, 1 January 182.5 182.5
Emission gains - -
Share issue premium, 31 December 182.5 182.5
Total restricted shareholders' equity 207.9 207.9
Non-restricted shareholders' equity
Paid-up unrestricted equity reserve,
1 January
238.2
222.6
Emission gains 0.0 15.6
Paid-up unrestricted equity reserve,
31 December 238.2 238.2
Retained earnings, 1 January 543.2 470.6
Dividends to shareholders –158.1 –217.7
Retained earnings, 31 December 385.1 252.8
Treasury shares –17.8 –7.6
Profit for the period 117.6 290.4
Total non-restricted shareholders' equity 723.1 773.9
Total shareholders' equity 931.1 981.8
Specification of the distributable funds,
31 December
Retained earnings
385.1
252.8
Treasury shares
–17.8
–7.6
Paid-up unrestricted equity reserve
238.2
238.2
Profit for the period 117.6 290.4
Distributable funds, 31 December
723.1
773.9
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 and 500,000 in 2020, have been reported as
treasury shares in the Consolidated Statement of Financial Position.
On December 31, 2020, the number of these shares was 697,400.
This number of shares corresponded to 0.50% of the total shares
and voting rights in the company.
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NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS GOVERNANCEFINANCIAL STATEMENTS
14. NON-CURRENT LIABILITIES
EUR million 2020 2019
Interest-bearing
Loans from financial institutions 103.3 103.3
Tota l 103.3 103.3
Non-interest-bearing
Accrued expenses and deferred revenues 0.6 0.6
Tota l 0.6 0.6
Total non-current liabilities 103.9 103.9
15. CURRENT LIABILITIES
EUR million 2020 2019
Interest-bearing
Liabilities to the Group companies
Finance loans 329.5 172.6
Commercial papers 203.0 -
Total interest-bearing liabilities 532.5 172.6
Non-interest-bearing
Liabilities to the Group companies
Trade payables 18.9 49.9
Accrued expenses and deferred revenues 26.0 17.1
Tota l 44.9 67.0
Trade payables 41.4 36.1
Liabilities to the others 1.9 1.8
Accrued expenses and deferred revenues 44.8 33.5
Tota l 88.0 71.4
Total non-interest-bearing liabilities 132.9 138.4
Total current liabilities 665.4 311.0
Significant items under accrued expenses
and deferred revenues
Wages, salaries and social security
contributions 15.1 12.2
Annual discounts, sales 14.7 10.8
Financial items 8.3 6.2
Commissions 2.2 8.3
Goods received and not invoiced 0.1 3.4
Warranty commitments 0.9 0.9
Group contributions 0.0 6.6
Other items 29.5 2.3
Tota l 70.7 50.6
16. CONTINGENT LIABILITIES
EUR million 2020 2019
For own debt
Pledged assets 0.2 -
On behalf of Group companies and
investments in associates
Guarantees 69.8 108.8
The amount of debts and commitments mortgaged for total EUR
64.8 million (2019: EUR 103.3 million).
On behalf of other companies
Guarantees - 0.2
Other own commitments
Guarantees 22.1 45.0
Leasing and rent commitments
Payments due in 2021 2.9 2.2
Payments due in subsequent years 7.3 3.9
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NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS GOVERNANCEFINANCIAL STATEMENTS
17. DERIVATIVE FINANCIAL INSTRUMENTS
EUR million 2020 2019
Interest rate derivatives
Interest rate swaps
Notional amount 100.0 100.0
Fair value –3.6 –3.2
Foreign currency derivatives
Currency forwards
Notional amount 452.3 463.8
Fair value –3.1 0.8
Currency options, purchased
Notional amount 12.9 20.3
Fair value 0.2 0.0
Currency options, written
Notional amount 15.3 -
Fair value –0.1 -
Interest rate and currency swaps
Notional amount 75.0 75.0
Fair value 15.9 –2.7
Electricity derivatives
Electricity forwards
Notional amount 4.9 3.9
Fair value 0.0 0.9
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 swap and electricity forwards will occur
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 2020.
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NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS GOVERNANCEFINANCIAL STATEMENTS
INFORMATION ON NOKIAN TYRES’ SHARE
Share data
Market Nasdaq Helsinki
Listing date June 1, 1995
Currency euro
ISIN FI0009005318
Symbol TYRES
Reuters symbol TYRES.HE
Bloomberg symbol TYRES:FH
Industry OMXH Large Caps
Sector Consumer goods
Industry Automobiles and parts
Number of shares,
December 31, 2020 138,921,750
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, 2020,
the number of shares was 138,921,750.
Read more: www.nokiantyres.com/company/
investors/share/share-information/
NUMBER OF SHAREHOLDERS ON DECEMBER 31, 2020
Number of shares
Number of
shareholders
% of
shareholders
Total number
of shares
% of share
capital
1–100 29,172 49.8 1,352,636 1.0
101–500 19,935 34.0 5,113,587 3.7
501–1,000 4,810 8.2 3,700,292 2.7
1,001–5,000 3,931 6.7 8,135,767 5.9
5,001–10,000 380 0.6 2,665,063 1.9
10,001–50,000 262 0.4 5,242,598 3.8
50,001–100,000 27 0.1 1,933,099 1.4
100,001–500,000 29 0.1 7,166,337 5.2
500,001– 17 0.0 103,612,371 74.6
Tota l 58,563 100 138,921,750 100
SHAREHOLDER STRUCTURE ON DECEMBER 31, 2020
Number of
shares
% of share
capital
Nominee registered and non-Finnish holders 79,812,207 57.5
Households 20,072,168 14.4
General Government 19,093,813 13.7
Financial and insurance corporations 9,966,011 7.2
Non-profit institutions 4,796,393 3.5
Corporations 5,181,158 3.7
Tota l 138,921,750 100
Read more: www.nokiantyres.com/company/investors/share/major-shareholders/
Read more: www.nokiantyres.com/company/investors/share/
share-performance/
SHARE TRADING VOLUMES ON NASDAQ
HELSINKI JAN 1, 2016–DEC 31, 2020
SHARE PRICE DEVELOPMENT ON NASDAQ
HELSINKI JAN 1, 2016–DEC 31, 2020
0
2
4
6
8
10
12
2019181716
pcs million
10
20
30
40
50
2019181716
EUR
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NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS GOVERNANCEFINANCIAL STATEMENTS
NOKIAN TYRES
GROUP STRUCTURE
32.3%
99%
Nokian Tyres in brief
NOKIAN TYRES PLC
NOKIAN DÄCK AB VIANOR HOLDING OY
NOKIAN DEKK AS VIANOR AB
NOKIAN TYRES AG VIANOR AS
NOKIAN TYRES GMBH VIANOR OY
NOKIAN TYRES CANADA INC. POSIBER OY
NOKIAN TYRES U.S. HOLDINGS INC VIANOR INC.
NOKIAN TYRES INC. NORDICWHEELS AB
NOKIAN TYRES U.S. OPERATIONS LLC
NT TYRE MACHINERY OY
1%
NOKIAN RENKAAT 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 RASKAAT RENKAAT OY
LEVYPYÖRÄ OY
TOV NOKIAN SHINA
TOO NOKIAN TYRES
OOO HAKKA INVEST
NOKIAN TYRES SPAIN S.L.U
NOKIAN TYRES SP Z O.O.
KIINTEISTÖ OY NOKIAN NOSTURIKATU 18
KIINTEISTÖ OY NOKIAN RENGASKATU 4
NOKIANVIRRAN ENERGIA OY
70
NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS GOVERNANCEFINANCIAL STATEMENTS
Helsinki, 9 February 2021
Jukka Hienonen Veronica Lindholm
Heikki Allonen Inka Mero
Raimo Lind George Rietbergen
Kari Jordan Pekka Vauramo
Jukka Moisio
CEO
SIGNATURES FOR THE FINANCIAL
STATEMENTS AND THE REPORT
BY THE BOARD OF DIRECTORS
71
NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS GOVERNANCEFINANCIAL STATEMENTS
REPORT ON THE AUDIT OF
THE 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 December
31, 2020. The financial statements comprise the consolidated
statement of financial position, 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.
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.
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.
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NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS GOVERNANCEFINANCIAL STATEMENTS
The key audit matter How the matter was addressed in the audit
Revenue recognition and impairment of trade receivables
(Refer to Accounting policies for the consolidated financial statements, notes 20 and 28)
• Net sales, totaling EUR 1,313.8 million, is a significant individual item in the financial statements and
comprises revenue recognised from sale of tires and related services for passenger cars, trucks and
heavy machinery.
• The trade receivables amounted to EUR 321.5 million in the consolidated statement of financial
position as at December 31, 2020.
• The industry is marked by seasonal sales, long credit periods granted to clients and fluctuation of
client-specific discounts based on volumes.
• Due to the large number of sales transactions, risk of errors related to revenue recognition and credit
loss risk associated with trade receivables, revenue recognition and impairment of trade receivables
are addressed as a key audit matter.
Our audit procedures included, among others:
• We assessed and tested internal controls over recording sales transactions and recognizing 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 the level of credit risk and credit loss provisions recorded based on the information on
Group’s trade receivables and customers.
Foreign currency risks
(Refer to Accounting policies for the consolidated financial statements, notes 9, 28 and 30)
• A significant part of the Group’s operations is derived from Russia. During the financial year the
Group started production in factory located in the USA.
• In the Russian and US subsidiaries there is a significant amount of equity in the local currency,
and the development of Rouble/US dollar exchange rate may have a significant impact on the
consolidated equity.
Our audit procedures included, among others:
• We obtained an understanding of the centralized 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.
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NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS GOVERNANCEFINANCIAL 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, 16 February 2021
KPMG OY AB
LASSE HOLOPAINEN
Authorized Public Accountant, KHT
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NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS GOVERNANCEFINANCIAL STATEMENTS
I Introduction
During 2020 Nokian Tyres plc (hereinafter referred to as
“Nokian Tyres” or the “Company”) complied in full with the
Corporate Governance Code published by the Securities
Market Association that entered into force on January 1,
2020 (the “Corporate Governance Code 2020”) and the
Company complies with the recommendations in the said
code. This Corporate Governance Statement has been
prepared in accordance with the Corporate Governance
Code 2020. The Corporate Governance Code 2020 is
available in its entirety at www.cgfinland.fi/en/. The Company
follows the Finnish Limited Liability Companies Act, laws and
regulations relating to publicly listed companies in Finland,
the Articles of Association, the charters 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 State-
ment as a separate document and as part of the Financial
Review. The Company has prepared a separate remuneration
report in accordance with the Corporate Governance Code
2020. The statement and said report are 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 plc and its subsidiaries form the Nokian Tyres
Group. The administrative bodies of the parent company
Nokian Tyres plc, i.e. the General Meeting, the Board of
Directors and the 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 Chairman and the Deputy Chairman of the
Board upon the proposal by the Shareholders’ Nomination
Board, and the Board of Directors appoints the Company’s
President and CEO. The President and CEO is assisted by
the Group’s Management Team in leading the Company’s
operations.
Nokian Tyres’ administrative organization
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 all the shares in the
Company requires it in writing in order to address a particular
issue.
According to law, a shareholder has the right to have
a matter falling within the competence of the General
Meeting dealt with by the General Meeting, if the shareholder
so demands in writing from the Board of Directors well in
advance of the General Meeting, so that the matter can be
mentioned in the notice to the meeting. The shareholder shall
submit the request for having a matter to be dealt with by
the General Meeting by the date indicated on the Company’s
website.
CORPORATE GOVERNANCE STATEMENT
Shareholders
Shareholders’
Nomination Board
Auditors
Internal control
General Meeting
Board
Audit Committee
Personnel and
Remuneration
Committee
President and CEO
Management Team
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NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS FINANCIAL STATEMENTS GOVERNANCE
The Articles of Association state that the notice of a
General Meeting shall be published on the Company’s website.
In addition, the Company publishes the notice of a General
Meeting as a stock exchange release. 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 shareholders’
register, maintained by Euroclear Finland Oy, on the record
date separately indicated by the Company. A holder of
nominee registered shares can be temporarily registered in
the shareholders’ register of the Company for purposes of
participation in the General Meeting.
According to the Corporate Governance Code 2020, 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.
The Annual General Meeting for 2020 took place on April
2, 2020 at the Company’s headquarters in Nokia. The meeting
confirmed the consolidated financial statements, discharged
the Board members and the President and CEO from liability
for the fiscal year 2019, adopted the remuneration policy of
the Company, resolved to establish a Shareholders’ Nomina-
tion Board and decided to amend the Articles of Association
of the Company. 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 2021 will take place on
March 30, 2021 at 4:00 p.m.
Board of Directors
Operation of the Board of Directors
The Board is responsible for the Company’s corporate
governance and the appropriate organization of its
operations pursuant to the Finnish 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 Finnish Limited Liability
Companies Act, the Articles of Association, and the Board’s
charter. The key tasks include:
• Approving consolidated financial statements,
half year reports and interim reports
• Presenting matters to the General Meeting
• Appointing and dismissing the President and CEO
• Organization of financial control.
In addition, as defined in the Board charter, the Board
deals with, and decides on, matters of principle as well as
issues that carry financial and business significance, such as:
• Group strategy
• 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.
The Company has a separate Audit Committee, a
Personnel and Remuneration Committee and a Shareholders’
Nomination Board.
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 and the President and CEO will not participate in
making a decision where the law states that they must be
disqualified.
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 nine members. The proposal regarding the
composition and remuneration of the Board for the General
Meeting is prepared by the Shareholders’ Nomination
Board. 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 devote a sufficient amount
of 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. In 2020, the Board of
Directors appointed the Chairman and the Deputy Chairman
from among its members. Following the establishment of
the Shareholders’ Nomination Board, the Chairman and the
Deputy Chairman of the Board of Directors are appointed
from among the Board members by the Annual General
Meeting upon the proposal by the Shareholders’ Nomination
Board. The remuneration payable to the Board members is
also decided at the Annual General Meeting.
Information on the Board members
The Annual General Meeting on April 2, 2020 elected eight
Board members. The Board members Heikki Allonen, Kari
Jordan, Raimo Lind, Veronica Lindholm, Inka Mero, George
Rietbergen and Pekka Vauramo were re-elected. It was also
resolved to elect Jukka Hienonen as a new member of the
Board of Directors. In the constituent meeting held after
the Annual General Meeting, the Board appointed Jukka
Hienonen as its Chairman and Kari Jordan as the Deputy
Chairman.
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NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS FINANCIAL STATEMENTS GOVERNANCE
Jukka Hienonen, Chairman of the Board (b. 1961)
Member of the Board since 2020. Member of the Personnel
and Remuneration Committee. Member of the Shareholders’
Nomination Board.
Education: Master of Science (Economics)
Main occupation: Professional board member
Key experience:
2010−2014 SRV Plc, CEO
2005−2010 Finnair Plc, CEO
1995−2005 Stockmann Plc, Deputy CEO 2000−2005,
Director 1995−2000
1991−1995 Timberjack Oy, VP Marketing
1985−1991 Kaukomarkkinat Oy, Director 1988−1991,
Representative, Moscow 1986−1988
Key positions of trust:
Chairman of the Board: Juuri Partners
Deputy Chairman of the Board: SATO
Kari Jordan, Deputy Chairman of the Board (b. 1956)
Member of the Board since 2018. Chairman of the Personnel
and Remuneration Committee.
Vuorineuvos (Finnish honorary title)
Education: Master of Science (Economics)
Main occupation: Chairman of the Board, Outokumpu Oyj
Key experience:
2006–2018 Metsä Group, President and CEO
2004–2017 Metsäliitto Cooperative, CEO
1981–2004 Several Executive 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
Vice Chairman of the Board: Nordea Bank Abp
Heikki Allonen (b. 1954)
Member of the Board since 2016. Member of the Audit
Committee.
Education: Master of Science (Technology)
Main occupation: Professional board member
Key experience:
2008–2016 Patria Oyj, President and CEO
2004–2008 Fiskars Corporation, President and CEO
2001–2004 SRV Group Plc, President and CEO
1992–2001 Wärtsilä Oyj, VP, Corporate Development,
Member of the Board of Management
1986–1992 Oy Lohja Ab/Metra Oy Ab, Management positions
Key positions of trust:
Vice Chairman of the Board: VR Group Oy and Savox Oy Ab
Member of the Board: Detection Technology Plc
and Helsingin Satama Oy
Raimo Lind (b. 1953)
Member of the Board since 2014. Chairman of the Audit
Committee.
Education: Master of Science (Economics)
Main occupation: 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 Wärtsilä, Service division, Vice President;
Wärtsilä Singapore Ltd, Managing Director;
Wärtsilä Diesel division, Vice President Group Controller
Key positions of trust:
Member of the Board: Nordkalk Oy
Veronica Lindholm (b. 1970)
Member of the Board since 2016. Member of the Personnel
and Remuneration Committee.
Education: Master of Science (Economics)
Main occupation: CEO, Indoor Group Oy
Key experience:
2020– Indoor Group Oy, CEO
2015–2019 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:
Member of the Board: Finland Chamber of Commerce
Inka Mero (b. 1976)
Member of the Board since 2014. Member of the Audit
Committee.
Education: Master of Science (Economics)
Main occupation: Managing Partner & Founder, Voima
Ventures VC Fund
Key experience:
2019– Voima Ventures I & II VC Fund, Managing Partner &
Founder
2008– KoppiCatch Oy, Co-founder and Chairwoman
2016–2019 Industryhack Oy (Pivot5 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, Voima Ventures Oy
and Adamant Health Oy
Member of the Board: Fiskars Corporation Plc, Dispelix Oy,
Tactotek Oy, Elfys Oy, Skyfora Oy and Betolar Oy
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NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS FINANCIAL STATEMENTS GOVERNANCE
George Rietbergen (b. 1964)
Member of the Board since 2017.
Education: Master of Business Administration
Main occupation: CEO, Koninkijke Oosterberg
Key experience:
2021– Koninkijke Oosterberg, CEO
2017–2020 5Square Committed Capital, Partner
2016–2017 Nokian Tyres plc, Advisor to the board
2015–2016 Arriva Netherlands, COO
2013–2015 Goodyear Dunlop Tyres, Group man.
Director DACH
2012–2013 Goodyear Dunlop Tyres EMEA,
Vice president Commercial Tyres
2010–2012 Goodyear Dunlop Tyres, Group man.
director UK & Ireland
2001–2010 Goodyear Dunlop Tyres EMEA,
Director Retail and eBusiness
1998–2001 KLM Royal Dutch Airlines, director eBusiness
Pekka Vauramo (b. 1957)
Member of the Board since 2018. Member of the Audit
Committee.
Education: Master of Science (Technology)
Main occupation: President and CEO, Metso Outotec
Corporation,
Key experience:
2020– Metso Outotec Corporation, President and CEO
2018–2020 Metso, President and CEO
2013–2018 Finnair Plc, President and CEO
2007–2013 Various management positions at Cargotec
1995–2007 Various management positions at Sandvik AB
1985–1995 Various management positions at Tamrock
Corporation
Key positions of trust:
Vice Chairman of the Board: Technology Industries of Finland
Member of the Board: Confederation of Finnish Industries
Independence of the Board members
Pursuant to the recommendation of the Corporate
Governance Code 2020, 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.
Shares owned by Board members and
their controlled corporations
Nokian Tyres holdings of the
Company’s current Board members
Number of shares,
December 31, 2020
Jukka Hienonen, chairman 12,795
Kari Jordan, deputy chairman 3,611
Heikki Allonen, member 3,617
Raimo Lind, member 6,462
Veronica Lindholm, member 3,617
Inka Mero, member 5,010
George Rietbergen, member 2,954
Pekka Vauramo, member 2,424
Total 40,490
The Board members’ attendance at meetings
The Board convened a total of 19 times in 2020.
Attendance at meetings by the
Company’s Board members in 2020
Attendance/
meetings
Petteri Walldén, chairman (until April 2, 2020) 8/19
Jukka Hienonen, chairman (since April 2, 2020) 10/19
Kari Jordan, deputy chairman 18/19
Heikki Allonen, member 19/19
Raimo Lind, member 19/19
Veronica Lindholm, member 19/19
Inka Mero, member 19/19
George Rietbergen, member 19/19
Pekka Vauramo, member 19/19
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 in which the Group
mainly operates. 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 is monitored by the Shareholders’
Nomination Board.
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 2020, 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. At least one
member of the Audit Committee must have expertise
in accounting or auditing. The majority of the members
of the Personnel and Remuneration Committee must be
independent of the Company. The majority of the members
of the Audit Committee must be independent of the
Company, and at least one member must be independent of
the Company’s major shareholders. The President and CEO
and the other members of the Group Management Team
cannot act as members of the Personnel and Remuneration
Committee.
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NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS FINANCIAL STATEMENTS GOVERNANCE
Personnel and Remuneration Committee
The Personnel and Remuneration 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 prepares a proposal to the Board on the nominations,
salaries and other incentives of the Group Management
Team members. This Committee also reviews and submits a
proposal to the Board on the allocation and criteria of the
Nokian Tyres share-based incentive plans, and on the other
incentive plans. In addition, the key duties of the Personnel
and Remuneration Committee include the preparation of
the remuneration policy and the remuneration report for
the Board and the President and CEO in accordance with
applicable laws and regulations. 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.
In 2020, the members of the Personnel and Remuneration
Committee were Kari Jordan (Chairman), Veronica Lindholm,
and Petteri Walldén until April 2, 2020, and from there
onwards Kari Jordan (Chairman), Veronica Lindholm, and Jukka
Hienonen.
The committee assembled 11 times in 2020.
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 committee charter, the committee
controls that bookkeeping, financial administration, financing,
internal control, internal auditing, audit of the accounts, risk
management and compliance function are appropriately
arranged in the Company. The committee follows and assesses
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 state-
ment and the consolidated financial statements and assesses
the independence of the statutory auditor and the offering of
services other than auditing services by the auditor. Further-
more, the committee handles the auditor’s report and possible
audit minutes as well as the supplementary report presented
by the auditor to the committee. The committee prepares
the draft resolution on selecting the auditor. In addition, the
Audit Committee monitors and assesses how agreements and
other legal acts between the Company and its related parties
meet the requirements of the ordinary course of business
and arm’s length terms in accordance with applicable laws and
regulations. The Audit Committee must have the expertise and
experience required for its tasks.
In 2020, the members of the Audit Committee were Raimo
Lind (Chairman), Heikki Allonen, Inka Mero and Pekka Vauramo.
As a general rule, the Company’s chief auditor participates in
the committee’s meetings.
The committee assembled 7 times in 2020.
All committee members are independent of the Company
and of all major shareholders in the Company.
The attendance of Board members at
committee meetings in 2020
Personnel and
Remuneration Committee
Audit
Committee
Petteri Walldén (until April 2, 2020) 3/11
Jukka Hienonen (since April 2, 2020) 8/11
Kari Jordan 11/11
Heikki Allonen 7/7
Raimo Lind 7/7
Veronica Lindholm 11/11
Inka Mero 7/7
George Rietbergen
Pekka Vauramo 7/7
Shareholders’ Nomination Board
The Company’s Annual General Meeting 2020 decided to
establish a Shareholders’ Nomination Board (the “Nomination
Board”) and to approve the Charter of the Nomination Board.
The duties of the Nomination Board consist of the preparation
of proposals to the General Meeting concerning the number,
composition, Chairman and possible Deputy Chairman of the
Board and the remuneration of the members of the Board
and the Board committees. In addition, the Nomination
Board seeks prospective successor candidates for the
members of the Board.
The Nomination Board consists of five members of
which four members represent the Company’s four largest
shareholders who on the first banking day of June each year
are the largest shareholders as determined on the basis of
the shareholders’ register of the Company maintained by
Euroclear Finland Ltd. and wish to nominate a member to the
Nomination Board. The fifth member of the Nomination Board
is the Company’s Chairman of the Board. Proposals that have
been supported by at least three members of the Nomination
Board, shall constitute the proposals of the Nomination Board.
The Nomination Board is established to operate until
abolished by the decision of the General Meeting. The term
of the members of the Nomination Board shall end upon the
nomination of the following Nomination Board in accordance
with the Charter of the Nomination Board. The members
of the Nomination Board are not entitled to remuneration
from the Company on the basis of their membership unless
otherwise decided by the General Meeting.
The following members were appointed to the Nomination
Board in 2020:
• Antti Mäkinen (CEO, Solidium Oy), appointed by Solidium Oy
• Heikki Westerlund (board professional),
appointed by Bridgestone Corporation
• Mikko Mursula (Chief Investment Officer, Ilmarinen
Mutual Pension Insurance Company), appointed by
Ilmarinen Mutual Pension Insurance Company
• Timo Sallinen (Senior Vice President, Investments,
Varma Mutual Pension Insurance Company), appointed
by Varma Mutual Pension Insurance Company
• Jukka Hienonen, Chairman of the Board, Nokian Tyres plc
The proposals by the Nomination Board to the Annual
General Meeting 2021 were published on November 26,
2020.
The Charter of the Nomination Board is available
at www.nokiantyres.com/company/investors/
corporate-governance/shareholders-nomination-board/.
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NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS FINANCIAL STATEMENTS GOVERNANCE
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
Finnish 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 responsible 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 was the Company’s
President and CEO between January 1, 2020 and May 26,
2020. Jukka Moisio started as the Company’s President and
CEO on May 27, 2020.
Jukka Moisio (b. 1961)
Education: Master of Science (Economics), MBA
Position: President and CEO since May 27, 2020
Key experience:
2008–2019 Huhtamäki Oyj, President and CEO
2004–2008 Ahlstrom Oyj, President and CEO
1991–2004 Ahlstrom Oyj, various management positions
1989–1991 McKinsey & Company, Associate
Key positions of trust:
Chairman of the Board: Neles Corporation, Paulig Oy and
Sulapac Oy
Member of the Board: Atria Oyj and Metsä Board Corporation
Nokian Tyres holdings of the President and CEO and
controlled corporations, December 31, 2020
Number of
shares
Jukka Moisio, President & CEO 18,000
Management Team
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. Members of the Management Team carry the main responsibility for
their business areas and functions. The Management Team has no activities based on the applicable 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 functions participate in the
meetings.
Responsibility area, year of birth, education and Nokian Tyres holdings of the Group’s
Management Team and controlled corporations, December 31, 2020
Year of
birth Education
Number
of shares
Jukka Moisio
President and CEO
1961 Master of Science (Economics), MBA 18,000
Päivi Antola
Corporate Communications & Investor Relations
1971 Master of Arts, CEFA 1,264
Anna Hyvönen
North America, Nordics and Vianor
1968 Licentiate of Science
(Technology)
21,715
Adrian Kaczmarczyk
Supply Operations
1971 Dipl. Ing. Engineering, MBA 0
Tarja Kaipio
Human Resources (interim)
1962 Master of Psychology 7,977
Teemu Kangas-Kärki
Finance (CFO)
1966 Master of Science (Economics and
Business Administration)
7,014
Jukka Kasi
Products & Innovation
1966 Master of Science (Technology) 4,420
Bahri Kurter
Central Europe
1966 Master of Arts (Economics) 0
Andrei Pantioukhov
Russia, Asia, Global Marketing
1972 Master of Business Adminstration 69,359
Manu Salmi
Heavy Tyres and Nokia Factory
1975 Master of Military Sciences,
Master of Science (Economics), MBA
26,601
Timo Tervolin
Strategy & M&A
1977 Master of Science (Technology), Master of Science
(Economics and Business Administration)
6,385
Frans Westerlund
IT & Processes
1966 Master of Science (Economics and
Business Administration)
4,042
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/.
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NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS FINANCIAL STATEMENTS GOVERNANCE
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
applicable 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 consists of Passenger Car Tyres,
Heavy Tyres, and Vianor business units. Passenger Car Tyres
is further divided into the following business areas: Nordics,
Other Europe, North America, Russia and Asia. Heavy Tyres and
Passenger Car Tyres business units are responsible for their
own operations, financial results, risk management, balance
sheet and investments, supported by different functions.
The Group’s sales companies serve as product distribution
channels in local markets.
Subsidiaries are responsible for their daily operations and
administration. They report to the director responsible for
the said business area, while the Vianor chain reports 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 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 mecha-
nisms. The Chief Financial Officer is responsible for organizing
financial administration and reporting processes and the
internal control thereof. The parent company’s Finance
function is responsible for internal and external accounting; its
tasks include, among others, 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
function 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 Group’s Finance function 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, 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 updated forecasts. The financial results are communi-
cated 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, financial
and hazard risks. Strategic risks are related to customer rela-
tionships, competitors’ actions, political and legislative risks,
reputation, country risks, brand, product development, climate
change and sustainability risks and investments. Operational
risks arise as a consequence of shortcomings or failures in
the Company’s internal processes, actions by its personnel
or systems, contractual risks, risk of non-compliance, or
external events, such as unforeseen changes in the operating
environment, cyber and information security, management of
the supply chain, or changes in raw material prices. Financial
risks are related to fluctuations in interest rate and currency
markets, liquidity and refinancing, and counterparty and
credit risks. Hazard risks arise from property loss or business
interruption, shortcomings or failures in employee safety or
environmental management systems.
The most significant risks are the 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. The tire market is evolving to meet changing
consumer needs. Failure to innovate and develop new
products and services or to adapt to the changes in the sales
channel or new technologies could have an adverse effect on
the financial performance. Unexpected production or delivery
breaks at production facilities or interruptions in logistics
could have a significant impact on peak season sales. The risk
analysis conducted in 2020 also focused special attention on
corporate social responsibility risks, the most significant of
which are related to the Company reputation, product quality
and change in consumer behavior. Analyses and projects
related to information security, data protection and customer
information were a special focus area.
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NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS FINANCIAL STATEMENTS GOVERNANCE
The risk management process aims to identify and
evaluate the risks, and to plan and implement the practical
measures and continuous monitoring 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 to reduce the risks
and ensure the completion of the risk management measures.
Responsibility for identifying, evaluating and to large
extent, managing risks is delegated to business units, business
areas and functions. Treasury is responsible for developing
and maintaining risk management processes, methods and
tools. Assisted by the Audit Committee, the Company’s Board
of Directors monitors and assesses the efficiency of the
Company’s risk management mechanisms and monitors the
assessment and management of risks related to the Compa-
ny’s strategy and operations. The Audit Committee monitors
that the risk management actions are in line with the risk
management policy. Issues raising in risk analysis are noted in
the development of processes, compliance and control, and
in Internal Audit planning. The Company’s Board of Directors
discusses the most significant risks annually.
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 charter 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. 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
operations and the risks involved. The operation of Internal
Audit covers all 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, the President and CEO,
the Chief Financial Officer and the management of the
Company. The Company’s Board of Directors follows and
monitors the efficiency of the Internal Audit.
In 2020, Internal Audit focused on assessing, among other
things, the operations and risks of various business areas and
country organizations, corporate governance arrangements,
risk management, corporate sustainability and information
security matters as well as specific misconduct risks and cases
and the management of the COVID-19 pandemic in the Group.
The Internal Audit function at Vianor focuses on guiding the
retail outlets and ensuring conformity to the Vianor activity
management system, and reports to the CAE and to the
country managers.
Related party transactions
The Company has procedures in place to identify and
define its related parties and assesses and monitors
related party transactions to ensure that all conflicts of
interest and the Company’s decision-making process are
appropriately taken into account. The Audit Committee
monitors and assesses how agreements and other legal
acts between the Company and its related parties meet
the requirements of ordinary activities and arm’s length
terms in accordance with applicable laws and regulations.
The Group’s financial management monitors and supervises
related party transactions as part of the Company’s normal
reporting and monitoring procedures and reports to the
Audit Committee on regular basis. 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.
The decision-making processes have furthermore been
structured in order to avoid conflict of interests. In case
the Company would have any transactions that are not part
of the Company’s ordinary course of business or are not
implemented under arm’s length terms, such transactions
shall be handled by the Audit Committee and approved by
the Board and provided in the Financial Review and the notes
to the financial statements.
Insider management
The Company complies with the guidelines for insider trading
drawn up by Nasdaq Helsinki Ltd. Furthermore, the Company
has drawn up separate insider guidelines that have been
approved by the Board of Directors and that supplement
other insider regulations as well as include instructions on
insiders and insider administration.
Project-specific insider lists are drawn up of people
involved in insider projects of the Company. 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 into the said list and
the duties it entails, as well as the termination of the insider
project.
The Company maintains a separate list of people in mana-
gerial positions and their related persons. In 2020, 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 business area directors of the 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 managerial positions within the Company
are allowed to trade in the Company’s financial instruments
only for 30 days after the publication day of the Company’s
financial statement report, half year report, or interim
report. The same applies to persons who participate in the
preparation, maintaining, 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.
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 tran-
sactions). The Group General Counsel checks the information
for the persons holding executive positions and their related
persons at least once per year. The CFO is the Group General
Counsel’s substitute for insider matters.
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NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS FINANCIAL STATEMENTS GOVERNANCE
Whistleblowing
The Company has defined processes that internal and
external parties can use to notify of any suspected
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. All whistleblowing notifications
are investigated promptly in a confidential manner and
protecting the identity of the whistleblower as far as
possible.
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 2020 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 2020 amounted to EUR 602,486
(2019: 451,290). The fees paid to the authorized public
accountants for other services totaled EUR 222,158 (2019:
1,146,556).
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NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS FINANCIAL STATEMENTS GOVERNANCE
REMUNERATION REPORT 2020
Introduction
This remuneration report (the “Remuneration Report”)
describes the implementation of the remuneration policy
(the “Remuneration Policy”) of Nokian Tyres plc (the
“Company” or “Nokian Tyres”) for the financial year 2020.
The Remuneration Policy was presented to and adopted
by an advisory resolution in the 2020 Annual General
Meeting and shall be applied until the 2024 Annual General
Meeting, unless a revised policy is presented to the general
meeting before that. The Remuneration Policy describes the
remuneration of the Board of Directors and the President
and CEO, and the considerations of determining the policy
and operation of the policy. This Remuneration Report will
in turn provide investors more detailed information of the
development of remuneration and some strategic KPI’s
within Nokian Tyres as well as the implementation of the valid
Remuneration Policy. The Remuneration Report is presented
for the first time to the 2021 Annual General Meeting for an
advisory vote. An index comparison is presented in the table
below and a further breakdown of the development of the
remuneration of the Board of Directors and President and
CEO of the Company with a comparison to the development
of the average remuneration of the Company’s employees
and to the Company’s financial development over the
preceding 5 financial years is presented below under the
section “Remuneration and financial development between
2016 to 2020”.
Index of development between years 2016–2020
Remuneration index 2016 2017 2018 2019 2020
Total Board remuneration - Average annual fee paid to Board members** 100% 114% 121% 121% 136%
President and CEO salaries and financial benefits 100% 61% 171% 65% 90%
Average salary cost per employee*** 100% 98% 97% 95% 94%
Financial measures index*
Operating profit 100% 118% 120% 102% 39%
Earnings per share (EPS) 100% 87% 115% 155% 33%
Return of capital employed (ROCE) 100% 113% 117% 88% 30%
*Financial measures used for index according to IFRS reporting. Segments figures in accordance to Nokian Tyres new reporting practices available (2019 and
2020) in section “Remuneration and financial development between 2016 to 2020”. Stock exchange release about Nokian Tyres new reporting practices April
24th, 2020.
** Total Board remuneration - Average annual fee paid to Board members calculated by dividing total amount of fees paid to board members each year, by
composition of board (amount of members) during each year (2016: 7 board members, 2017 and onwards: 8 board members) and excluding fees paid to
members leaving during following term. Further details in section ‘’Remuneration and financial development between 2016 and 2020’’.
***Average cost per employee calculated based on average number of employees during each financial year, divided by total amount of salaries, incentives,
and other related employee costs for corresponding financial year.
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NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS FINANCIAL STATEMENTS GOVERNANCE
Financial year 2020 offered challenging conditions
for Nokian Tyres. The Company was able to show fast
adaptability to changed market conditions, cutting cost and
readjusting short-term business objectives to comply with
the transformed circumstances due to COVID–19 pandemic.
Fast adaptability was applied to remuneration, as the
structure and earning period of short-term incentive plans
were adjusted by a decision of the Board, to realign efforts
towards complying with the emerged situation. The earning
period was cut to the second half of the financial year 2020
in the Nokian Tyres Global STI plan and target setting was
modified and simplified due to the extraordinary effect
COVID–19 had on the whole global economy, in order to
ensure competitive remuneration to incentivize and retain
employees. These measures were in alignment with current
Remuneration Policy governance and supported the strong
Company performance against the challenging conditions
of the financial year 2020.
The executive remuneration of the Company is designed
to advance the strategy execution, business objectives
and long-term profitability of the Company. Nokian Tyres
aims to grow faster compared to the reference market,
to have strong profitability and offer good returns to the
shareholders. Nokian Tyres has two annually commencing
long-term share-based plans, under discretion of the Board
of Directors’ decision. The long-term share-based plans
mainly have performance periods of a minimum of three
years. The Nokian Tyres Performance Share Plan is measured
through group level financial KPI’s such as EPS (Earnings
per Share) and ROCE (Return on Capital Employed). The set
KPI’s are strongly aligned with long-term strategical goals
and shareholder value growth. The Nokian Tyres Restricted
Share Plan is designed as a complementary component to
other long-term incentives and can be used in situations
such as new hires and retentions at the Board’s discretion.
The restricted shares typically have a vesting period of
three years. Nokian Tyres published a Stock Exchange
Release February 4, 2020, describing the above mentioned
two shared-based plans commencing during the financial
year 2020. A stock exchange release relating to the
commencement of new Performance and Restricted Share
Plans during financial year 2021 was published on February 9,
2021. By a decision of the Board of Directors, the Restricted
Share Plans commencing 2019, 2020 and 2021 have a
threshold value for average ROCE over the vesting period for
the President and CEO and Nokian Tyres Management team.
With combined elements of regular remuneration review,
long-term performance and key talent retention, Nokian
Tyres remuneration continues to promote and build the
Company’s long-term financial success.
During the financial year 2020, Nokian Tyres temporarily
deviated from the adopted Remuneration Policy due to the
appointment of the new President and CEO in May 2020. As
a result of this appointment, the Board of Directors of the
Company decided to apply a financial performance criteria
to the restricted share plans offered for the President and
CEO. A further description of the deviation and clarification
of the circumstances justifying the deviation are presented
below under the section “
Remuneration of the President
and CEO 2020 – Long-term incentive plans
”. Apart from this
deviation, the remuneration of the Board of Directors and
the President and CEO complied with the Remuneration
Policy and no other deviations where made due to the
appointment of a new President and CEO.
Remuneration of the Board of Directors 2020
Nokian Tyres 2020 Annual General Meeting decided the
following annual fees to be paid to the Board of Directors
serving during financial year 2020:
Chairman of the Board: A monthly fee of EUR 7,917 or
EUR 95,000 per year
Deputy Chairman of the Board and to the Chairman of the
Audit Committee: A monthly fee of EUR 5,833 or
EUR 70,000 per year
Members of the Board: A monthly fee of EUR 3,958 or
EUR 47,500 per year
60% of the annual fee is paid in cash and 40% in Company
shares to the effect that in the period from May 6 to June
5, 2020, EUR 38,000 worth of Nokian Tyres plc shares
were purchased at the stock exchange on behalf of the
Chairman of the Board, EUR 28,000 worth of Nokian Tyres
plc shares were purchased at the stock exchange on behalf
of the Deputy Chairman of the Board and Chairman of the
Audit committee, and EUR 19,000 worth of Nokian Tyres plc
shares were purchased on behalf of each Board member.
The Company paid asset transfer taxes arising from the
acquisition of shares.
Each member of the Board received EUR 600 for
meetings held in their home country and EUR 1,200 for
meetings held outside their home country. When a member
participated in a meeting via telephone or video connection,
the remuneration paid was EUR 600. Travel expenses were
compensated in accordance with the Company’s travel policy.
The Board gathered frequently during financial year 2020
due to COVID–19’s impact on Nokian Tyres business.
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NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS FINANCIAL STATEMENTS GOVERNANCE
Board member
Position on the Board
Annual fixed fee
(EUR)*
Board meeting fees
(EUR)
Committee meeting
fees (EUR) Total fees (EUR)
Shares acquired with
fixed annual fee
(number
of shares)
Jukka Hienonen
Chairman of the Board / Member of the
Personnel and Remuneration Committee
(since April 2. 2020) 95,000 6,000 4,800 105,800 2,045
Kari Jordan
Deputy Chairman and Chairman of the
Personnel and Remuneration Committee 70,000 10 800 6,600 87,400 1,057
Raimo Lind Chairman of the Audit Committee 70,000 11,400 4,200 85,600 1,057
Heikki Allonen
Board member / Member of the Audit
Committee 47,500 11,400 4,200 63,100 1,022
Inka Mero
Board member / Member of the Audit
Committee 47,500 11,400 4,200 63,100 1,022
Pekka Vauramo
Board member / Member of the Audit
Committee 47,500 11,400 4,200 63,100 1,022
Veronica Lindholm
Board member / Member of the Personnel and
Remuneration Committee 47,500 11,400 6,600 65,500 1,022
George Rietbergen Board member 47,500 12,600 - 60,100 1,022
Petteri Walldén
Chairman of the Board / Member of the
Personnel and Remuneration Committee
(until April 2. 2020) - 4,800 1,800 6,600 -
* 60% of the annual fixed fee paid in cash and 40% in Company shares.
Remuneration of the President and CEO 2020
President and CEO
Fixed annual
salary (incl.
fringe benefits
and holiday
compensation)
Monthly base
salary
Paid
salary during
financial year
2020
Paid
performance-
based
bonuses (based
on year 2019)
Due
performance-
based
bonuses (based
on year 2020)**
Total value of
awarded
share-based
bonus
Supplementary
pension
contribution
Severance
payment
Total fees paid
during financial
year 2020
Jukka Moisio
May 27, 2020- 756,240 60,000 429,611 - 402,632 - - - 429,611
Hille Korhonen
June 1, 2017-May 26, 2020 693,240 55,000 691,148* - - - 121,044 660,000 1,472,192
Note: All amounts presented are in EUR.
* Including notice pay and annual leave allowance.
** Due performance-based bonuses (based on year 2020) will be paid during financial year 2021.
Short-term incentive opportunities as of annual base salary Performance share plan long-term incentives*
Target Max Target Max
50% 100% 125% 250%
* Nokian Tyres may in addition offer restricted share plans for President and CEO in situations like new hire and retention, at the Board’s discretion
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NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS FINANCIAL STATEMENTS GOVERNANCE
President and CEO Jukka Moisio has a Company paid mobile
phone benefit, with a value of EUR 20 per month or EUR 240
per annum. Fixed annual salary incl. holiday compensation
calculated by multiplying monthly base salary EUR 60,000 by
12.6.
Previous President and CEO Hille Korhonen had a
Company paid mobile phone benefit, with a value of EUR 20
per month or EUR 240 per annum. Fixed annual salary incl.
holiday compensation calculated by multiplying monthly
base salary EUR 55,000 by 12.6.
Short-term incentive plans
President and CEO Jukka Moisio is entitled to short-term
incentives as described in the Remuneration Policy. The
short-term incentive on target amount is equivalent to
50% of the annual base salary and the maximum amount is
100% of the annual base salary. The performance period is
typically one year, unless decided otherwise by the Board.
The possible reward is paid out in the first half of the year
following the performance period.
By decision of the Board of Directors, President and CEO
Jukka Moisio’s short-term incentives 2020 performance
measures were tied to Nokian Tyres EBIT and Nokian Tyres
Net Sales. Both measures were in alignment with the current
Remuneration Policy and had an equal weight of 50%. The
performance period was the second half of financial year
2020, due to the appointment in late May 2020. The paid
base salary during financial year 2020 functioned as the
basis for the incentive payout. The combined achievement
for the second half of financial year 2020 was 188% (100%
being the target level and 200% maximum) and the short-
term incentive payout to President and CEO Jukka Moisio
is 402,632 EUR. The proportion between fixed and variable
pay linked to financial year 2020 was 48.4% variable pay and
51.6% fixed pay. The actual payment of the 2020 short-term
incentive reward will take place during the first half of
financial year 2021.
Long-term incentive plans
The President and CEO’s long-term incentives consist of
share incentive plans. The value of the performance-based
LTI payout is capped at the level of 250% of the annual
base salary and the annual target amount is 125% of annual
base salary. The value of paid reward cannot exceed 250%
of the annual base salary, used to define the allocation at
grant. President and CEO Jukka Moisio was not granted
performance-based shares from Nokian Tyres Performance
Share Plan during the financial year 2020.
Nokian Tyres may in addition offer restricted share
plans for the President and CEO in situations like new hire
and retention, at the Board’s discretion. President and CEO
Jukka Moisio was granted 10,000 shares from the Restricted
Share Plan 2020–2022. The stock exchange price was 20.29
EUR/share on the assignment date of June 29, 2020. The
potential delivery of the share reward will take place after the
vesting period 2020–2022, during the first half of year 2023,
in case the threshold value of Return of Capital Employed
(ROCE) set by the Board is met.
In connection with the restricted share plan for the President
and CEO, Nokian Tyres temporarily deviated from the
adopted Remuneration Policy during the financial year 2020.
The deviation against the adopted Remuneration Policy
occurs in the Long-term incentive (LTI) section, where the
statue of Restricted Share Plans states; ‘’
For the possible
restricted share plans, there are no financial performance
criteria, but the share rewards under the restricted share
plan will be delivered to the President and CEO provided
that his or her service contract with the company continues
until the delivery date of the share rewards.
’’ The Board
of Directors of the Company decided to apply a financial
performance criteria to the three-year Restricted Share
Plans commencing during the years 2019, 2020 and 2021,
as a result of the appointment of the new President and
CEO in May 2020. The criterion is applied to the Restricted
Share Plans of the President and CEO and the management
team. The deviation was deemed necessary in order to align
the new President and CEO’s remuneration to the financial
performance of the Company and to promote efforts to
ensuring the long-terms interests and sustainability of the
Company. The financial performance criterion is measured
against a pre-set average threshold value for ROCE (a
minimum value that must be achieved in order for the share
reward to be delivered), for the three-year vesting period
of each Restricted Share Plan. As a result of the temporary
deviation, Nokian Tyres applied a financial performance
criteria to the 10,000 restricted shares allocated to President
and CEO Jukka Moisio from the Restricted Share Plan
2020–2022. Possible share allocations from the Restricted
Share Plan 2021–2023 will also have a threshold value tied to
average ROCE between financial years 2021–2023.
The potential reward will be paid partly in shares of
Nokian Tyres Plc and partly in cash. The cash portion of the
reward is intended to cover the taxes arising from the paid
reward.
The President and CEO is required to hold at least 25% of
the shares received as rewards from the long-term incentive
programs and to accumulate the shares from the incentive
programs until the value of the shares received from the
share programs equals the annual gross base salary of the
President and CEO.
Pension and information regarding the termination of
the employment of the previous President and CEO
Pension accumulation and retirement age of the President
and CEO is determined by the practices and terms of the
applicable law in the home country of the President and
CEO. An additional defined contribution pension plan that
corresponds to the relevant local market can be arranged
by the Company. President and CEO Jukka Moisio does not
have a Company paid supplementary pension arrangement.
The retirement age and the pension is determined in
accordance to the Employees Pensions Act.
The previous President and CEO Hille Korhonen had a
Company paid supplementary pension arrangement. The
age of retirement defined in the said arrangement was
set by written agreement to 65 years. The pension was
determined on the basis of the Employees Pensions Act and
a separately defined contribution pension plan taken out by
the Company. The amount paid in the defined contribution
pension plan 2020 was EUR 121,044, corresponding to 20%
of base salary until the end of employment during the
financial year 2020.
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.
87
NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS FINANCIAL STATEMENTS GOVERNANCE
Malus and claw back
Based on the terms and conditions of the incentive plans,
if the President and CEO receives a reward based on the
remuneration scheme that subsequently turns out to be
incorrectly paid due to intent or negligence by the President
and CEO, Nokian Tyres has the right to retroactively restate
the amount and reclaim the excess part of the rewards paid
from the short- and long-term incentives pursuant to rules
regarding unjust enrichment.
The short- and long-term remuneration schemes are
discretionary in nature and do not form part of the terms
and conditions of the service contract of the President
and CEO, and the Board of Directors shall decide on the
implementation of the schemes and their terms and
conditions at any time.
Nokian Tyres did not exercise any malus or claw back
rights during the financial year 2020.
Remuneration and financial development between 2016 and 2020
2016 2017 2018 2019 2020
Board remuneration, total pay EUR
Jukka Hienonen
- - - -
105,800
Kari Jordan
- - 75,900 78,300
87,400
Raimo Lind
50,800 74,400 78,900 76 500
85,600
Heikki Allonen
46,000 53,800 54,000 54,600
63,100
Inka Mero
50,200 53,200 54,000 54,600
63,100
Pekka Vauramo
- - 52,200 53,400
63,100
Veronica Lindholm
43,000 52,000 57,000 56,400
65,500
George Rietbergen
- 56,800 53,400 54,600
60,100
Petteri Walldén
91,400 93,800 102,000 101,400
6,600
Tapio Kuula
49,600 70,200 - -
-
Hille Korhonen
51,400 43,000 - -
-
Hannu Penttilä 6,000 - - - -
Total (excl. fees paid to leaving members)*
Board size, number of members
382,400
7
497,200
8
527,400
8
529,800
8
593,700
8
Average total pay per member*
54,629 62,150 65,925 66,225
74,213
Index
100% 113.8% 120.7% 121.2%
135.8%
President and CEO, total pay EUR
Jukka Moisio May 27, 2020-
- - - -
429,611
Hille Korhonen Jun 1, 2017-May 26, 2020
- 411,540 3,601,862 1,362,987
1,472,192
Andrei Pantioukhov Jan 1, 2017-May 31, 2017
- 235,940 - -
-
Ari Lehtoranta Sep 1, 2014-Dec 31, 2016
2,109,397 646,229 - - -
Total
2,109,397 1,293,709 3,601,862 1,362,987
1,901,803
Index
100% 61.3% 170.8% 64.6%
90.2%
Andrei Pantioukhov acted as interim President and CEO between Jan 1, 2017−May 31,
2017
Employee remuneration, average EUR
Salaries, incentives, and other related costs, MEUR
219.0 224.7 228.9 235.3
224.7
Group employees on average during financial year
4,433 4,630 4,790 4,995** 4,859
Average per year, k EUR
49.40 48.53 47.79 47.10
46.24
Index
100% 98.2% 96.7% 95.3%
93.6%
Financial development 2016–2020
Operating profit, MEUR
310.5 365.4 372.4 316.5
120.0
Segments operating profit, MEUR
- - - 337.2 190.2
Index***
100% 117.7% 119.9% 101.9%
38.6%
EPS, EUR
1.87 1.63 2.15 2.89****
0.62
Segments EPS, EUR
- - - 3.06**** 1.04
Index***
100% 87.2% 115.0% 154.5% 33.2%
ROCE, %
19.9% 22.4% 23.3% 17.6%
6.0%
Segments ROCE, %
- - - 18.6% 9.3%
Index***
100% 112.6% 117.1% 88.4%
30.2%
* Average total pay per Board member is calculated by dividing the total fees paid to the Board members, excl. members who left the Board during the
corresponding term. I.e. fees paid to Hannu Penttilä remover from year 2016 average and fees paid to Petteri Walldén removed from year 2020 average.
** Figures corrected to include passive employments in December 2019 (employees on long leaves).
*** Financial measures used for index according to IFRS reporting. Segments figures 2019–2020 presented (not calculated in index) in accordance to Nokian
Tyres new reporting practices Stock exchange release about Nokian Tyres new reporting practices April 24th, 2020.
**** EPS 2019 excl. the impact of the rulings on the tax disputes of EUR 1.08 were EUR 1.81. Segments EPS 2019 excl. the impact were EUR 1.98.
88
NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS FINANCIAL STATEMENTS GOVERNANCE
JUKKA HIENONEN
• b. 1961
• Master of Science (Economics)
• Member of the Board since 2020,
Chairman of the Board
• Member of the Personnel and
Remuneration Committee
• Member of the Shareholders’ Nomination Board
• Independent of the company
• Shares: 12,795
KARI JORDAN
• b. 1956
• Master of Science (Economics),
Vuorineuvos (Finnish honorary title)
• Member of the Board since 2018,
Deputy Chairman of the Board
• Chairman of the Personnel and
Remuneration Committee
• Independent of the company
• Shares: 3,611
HEIKKI ALLONEN
• b. 1954
• Master of Science (Technology)
• Member of the Board since 2016
• Member of the Audit Committee
• Independent of the company
• Shares: 3,617
RAIMO LIND
• b. 1953
• Master of Science (Economics)
• Member of the Board since 2014
• Chairman of the Audit Committee
• Independent of the company
• Shares: 6,462
VERONICA LINDHOLM
• b. 1970
• Master of Science (Economics)
• Member of the Board since 2016
• Member of the Personnel and
Remuneration Committee
• Independent of the company
• Shares: 3,617
INKA MERO
• b. 1976
• Master of Science (Economics)
• Member of the Board since 2014
• Member of the Audit Committee
• Independent of the company
• Shares: 5,010
GEORGE RIETBERGEN
• b. 1964
• Master of Business Administration
• Member of the Board since 2017
• Independent of the company
• Shares: 2,954
PEKKA VAURAMO
• b. 1957
• Master of Science (Technology)
• Member of the Board since 2018
• Member of the Audit Committee
• Independent of the company
• Shares: 2,424
BOARD OF DIRECTORS JANUARY 2021 | Further information at www.nokiantyres.com/board-of-directors
89
NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS FINANCIAL STATEMENTS GOVERNANCE
JUKKA MOISIO
• b. 1961
• President and CEO
• Master of Science (Economics),
Master of Business Administration
• With the company and a member of
Management Team since 5/2020
ANDREI PANTIOUKHOV
• b. 1972
• Executive Vice President
• Russia, Asia and Global Marketing
• Master of Business Administration
• With the company since 2004
and a member of Management
Team since 2009
PÄIVI ANTOLA
• b. 1971
• Corporate Communications
and Investor Relations
• Master of Arts, CEFA
• With the company and a member
of Management Team since 2018
ANNA HYVÖNEN
• b. 1968
• North America, Nordics and Vianor
• Licentiate of Science (Technology)
• With the company and a member
of Management Team since 2016
TARJA KAIPIO
• b. 1962
• Human Resources
• Master of Psychology
• With the company from 2016
and a member of Management
Team since 8/2020 (interim)
ADRIAN KACZMARCZYK
• b. 1971
• Supply Operations
• Dipl. Ing. Engineering, Master
of Business Administration
• With the company and a member of
Management Team since 9/2020
TEEMU KANGAS-KÄRKI
• b. 1966
• CFO
• Master of Science (Economics
and Business Administration)
• With the company and a member
of Management Team since 2018
JUKKA KASI
• b. 1966
• Products and Innovations
• Master of Science (Technology)
• With the company and a member
of Management Team since 2018
MANAGEMENT TEAM JANUARY 2021 | Further information at: www.nokiantyres.com/management
BAHRI KURTER
• b. 1966
• Central Europe
• Master of Arts (Economics)
• With the company and a member
of Management Team since 2019
MANU SALMI
• b. 1975
• Heavy Tyres and Nokia factory
• Master of Military Sciences, Master
of Science (Economics), Master
of Business Administration
• With the company since 2001
and a member of Management
Team since 2008
90
NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS FINANCIAL STATEMENTS GOVERNANCE
Annual General Meeting 2021
The Annual General Meeting of Nokian Tyres plc will be held
on Tuesday, March 30, 2021 at 4.00 p.m. (EET) with exceptional
meeting procedures based on the temporary legislative act
to limit the spread of the COVID-19 pandemic (677/2020). The
AGM will be organized without shareholders’ and their proxy
representatives’ presence at the venue. More information:
www.nokiantyres.com/annualgeneralmeeting2021
Dividend payment
The Board of Directors proposes to the Annual General
Meeting a dividend of EUR 1.20 per share for the financial year
2020, representing a payout ratio of 193%.
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.
Financial information
English. Financial reports, statements, and stock exchange
releases are available at www.nokiantyres.com/investors.
Comprehensive investor relations pages contain information
on Nokian Tyres’ share, largest shareholders registered in
Finland and upcoming IR events, among others.
Nokian Tyres’ stock exchange releases can be subscribed at
www.nokiantyres.com/company/publications/order-releases/
INVESTOR INFORMATION
AND INVESTOR RELATIONS
Financial reports in 2021
• January–March: May 4, 2021
• January–June: August 3, 2021
• January–September: November 2, 2021
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.
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
IR 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
Annukka Angeria, Investor Relations Manager
Tel. +358 10 401 7581
Address:
91
NOKIAN TYRES PLC FINANCIAL REVIEW 2020 REPORT BY THE BOARD OF DIRECTORS FINANCIAL STATEMENTS GOVERNANCE
www.nokiantyres.com