Finland’s state-owned investment arm, Solidium OY (Solidium) declared on Tuesday, March 31, 2020, that the company had increased its stake in Nokian Tyres, which led to soaring up the values of the shares of the Finnish tire maker nearly 15%.
Earlier, Solidium was reported to have raised its stake in the Finnish telecoms company, Nokia to 4.2% from 3.85% at the end of the year and the investment company is expected to continue its rescue plan to other Finnish companies.
Solidium’s Rescue for Nokian Tyres
Citing the new rescue funding, the CEO of Solidium, Antti Makinen told Reuters that Solidium’s holding in Nokian has now amounted to 6.2% of its shares, up from 5% at the end of the year. Makinen said, “The share price looked attractive to us” He added, refusing to elaborate on investment plans, “Let’s say we are looking at the market with interest, whether or not there is something out there for a cautious buyer.”
The nearly-sinking Nokian Tyres has experienced a record low of its sales in more than five-year earlier this month due to the coronavirus outbreak, which has resulted to cut off staff temporarily and scrap its outlook. On Monday, Nokian Tyres declared that it has temporarily closed its production from the three factories in Finland, Russia, and the US.
The tire manufacturing company had been slowing its production at its new U.S. factory in Dayton, Tennessee since the beginning of March, before shutting it down on March 27 for a minimum of two weeks due to the virus. Similarly, Nokian Tyres’ factory at Russia near St Petersburg, the closure of production started on Monday, initially for a week. The company had also announced to lay off all of its 1,630 employees in Finland temporarily.
Positive Steps for Solidium
Inderes equity research analyst, Joonas Korkiakoski stated that the new move by Solidium in Nokian Tyres was a positive sign, which allowed a wider space for investments and long-term focus. He explained, “Taking these factors into account, Solidium’s increased holdings can be seen as a psychological, yet slightly positive driver.”
Korkiakoski described, “Although we consider Nokian Tyres’ fair value to be higher than current market value, we do not expect it to realize that in the short-term, taking extremely challenging market conditions and weaker-than-sustainable-level operating profitability into account.”
Makinen added that Solidium had used some 300 million euros to pay off loans of companies and also reserved 130 million euros for additional purchases of the Finnish companies, which were badly hit by the virus outbreak.
Ahead of the coronavirus outbreak in Finland, Solidium had sold some 11 million shares in Finnish insurer, Sampo for roughly 460 million euros ($505 million), reducing its stake in the company to 8% from 10% in February.
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