June 12 (Bloomberg) -- Nokian Renkaat Oyj, the Nordic region’s biggest tiremaker, fell to its lowest in six months in Helsinki trading as Morgan Stanley and Citigroup Inc. warned that declining car sales in Russia may hurt profits.
Nokian Renkaat fell as much as 2.2 percent to 29.95 euros, breaching the 30-euro threshold for the first time since Dec. 28. Shares in the Nokia, Finland-based company dropped 1.3 percent at 12:56 p.m. in Helsinki. Volume was 55 percent of the three-month daily average.
“We see increasing risks to Russian car and tire volume estimates for 2013,” Morgan Stanley analysts, including Edoardo Spina, said in a note today. The bank lowered its 12-month share price estimate to 31 euros from 33 euros. “With competition ramping up local capacity and import tariffs phasing out, we do not believe margins can remain at current record levels.”
New car sales in Russia declined 12 percent in May from a year earlier, the Association of European Businesses in Russia said on June 10. The Russian economic expansion will slow to 2.8 percent this year from 3.4 percent in 2012, according to a median of 35 economist estimates compiled by Bloomberg.
Russia and other former Soviet republics increased their share of Nokian Renkaat’s revenue to 35 percent last year from 27 percent in 2011. Rivals including Pirelli & C. SpA and Continental AG are set to increase production in the country through this year and next.
Citigroup placed Nokian Renkaat on its least-preferred list today, citing increased competitive pressure in Russia.
“Nokian has disappointed several quarters in a row,” analyst Philip Watkins said in a note. “Over time we believe that competitors could still cut prices in a meaningful way without reducing their margins once they are established in Russia.”
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