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. Last Updated: 07/27/2016

Finnish Tire Maker Looks East to Boost Production

HELSINKI, Finland -- Finnish tire maker Nokian Renkaat said Monday it would break into the Russian market via a manufacturing deal with Amtel Holding Co. and that earnings would be boosted from the fourth quarter 2002.

"This will be a direct plus to this year's fourth-quarter result," Nokian Renkaat chief executive Kim Gran said in a telephone interview. He declined to give specific financial targets for the deal with Amtel.

"[The result impact will grow] at an accelerating rate so that next year, if the volumes are twice or three times as big, this will have a significant financial impact as Russian trade is important business for us," Gran said.

Amtel has interests in the petrochemicals, metals processing and pharmaceuticals industries. The holding has stakes in the Kirov and Krasnoyarsk tire factories, as well as the Supershina factory, also based in Krasnoyarsk, and the ROSAVA joint venture in Ukraine.

Nokian Renkaat said it would start manufacturing winter tires with Amtel under contract from autumn 2002, aiming to make 200,000 tires this year, with production gradually increasing.

The tires for the Russian market will be made under Nokian Renkaat's Nordman brand, and production could later be expanded to summer tires, the company said.

"The aim is to grow substantially -- this is just a start, what we are doing this year. The aim is for production to grow by many times over in the next few years," Gran said.

Last year, some 9 percent of Nokian Renkaat's net sales, or 33.2 million euros ($28.92 million), came from Russia, Gran said. He said this was up 60 percent on the previous year.

In the early 1990s, Nokian Renkaat was an early Western investor in Russia, and at their height its Russian operations made up 11 percent of group turnover. By the late 1990s, the firm was in distribution and production talks with several local partners, including oil majors LUKoil and Yukos, and had founded a wholly-owned firm, Nokian-Rosshina Tire Holding Ltd., for possible cooperation projects.

But Nokian Renkaat was burned by Russia's economic collapse and the devaluation of the ruble, and it was forced to put Russian manufacturing on hold in 1998.

"The country and currency risks were very high, but now we see that the situation is different, more stable. The country risk has evaporated, the political situation is more calm and it looks like the economy is holding up better," Gran said.

He said the contract manufacturing deal with Amtel was an example of how it would move forward in Russia. "This is the way we will proceed [in Russia]. First we work with a partner in off-take production, after which we develop factories and technology with which we can move forward. This is a first step in that direction."