Bridgestone went off the beaten track – Newspaper Kommersant No. 203 (7404) dated 11/01/2022

Bridgestone is the third largest tire company to decide to sell its Russian business. The Japanese corporation has a fairly new plant in Ulyanovsk, which was running at full capacity of 2 million tires in 2021 and then expanded to 2.4 million. Analysts and interlocutors of Kommersant in the market believe that the asset will find a buyer. Bridgestone is also considering a sale to management – Michelin has taken this path. Nokian has already announced the sale of its largest tire plant in Russia to Tatneft, and based on this deal, analysts value the Bridgestone plant at about €200 million.

Bridgestone is looking for a local buyer for Russian assets, the company said in a statement. The decision was made in light of general uncertainty and ongoing supply problems in Russia. Finding buyers and closing the deal is expected to take several months.

The Bridgestone plant in Ulyanovsk with a capacity of up to 2 million tires per year was launched in 2016, investments in production amounted to about 12.5 billion rubles. In addition to the plant, the company has an office in Moscow. From March 2022 Bridgestone suspended production and imports in the Russian Federation, and also froze investments. Russia accounted for less than 2% of Bridgestone’s global turnover. According to the report for the first half of the year, the company reduced the book value of Russian assets by ¥13.2 billion (about $90 million) to a fair estimate. Fair value was calculated using a discount rate for future cash flows of 15% or more.

The Ministry of Industry and Trade said that the company is considering transferring its assets in Russia to a local buyer – a third party or local management, adding that work continues at the plant to optimize logistics and supply of raw materials.

In December 2021, the head of Bridgestone in Russia and the CIS, Jeffrey Glover, in an interview “Autostat” said that 20% of the total volume produced in Ulyanovsk is exported: “Of these, 10% goes to Western Europe, and the rest goes to the markets of the near abroad.” Now EU sanctions limit not only the supply of raw materials for tires to the Russian Federation, but also prohibit exports. In this regard, for example, Pirelli announced the substitution of tire production for export to Romania and Turkey, and from the very beginning of the crisis, Nokian Tires began to transfer part of the production to its plants outside Russia and increase production volumes there.

The top manager also talked about plans for further expansion of production, mentioning that “new equipment has already been delivered.” In early February of this year, Sergey Vasin, CEO of the Ulyanovsk Region Development Corporation, reported that in 2021 alone the company had invested over 900 million rubles. in the development of the site in Ulyanovsk. The website of the local government then reported that the current capacities of the plant were fully loaded: “Compared to the beginning of 2021, production volumes increased by 30%.”

The Russian office of Bridgestone told Kommersant that the current production capacity of the plant is 2.4 million tires per year. Bridgestone supplied tires for both primary (to car assembly lines) and aftermarket vehicles. However, the interlocutor of Kommersant on the market specifies that for any tire manufacturer, secondary equipment is the main business. The Russian car tire market in recent years has been about 30–40 million units per year. At the same time, Tatneft is currently in the process of purchasing a Nokian Tires plant with a capacity of 17 million tires per year (see Fig. “Kommersant” dated October 29). In addition, Michelin in June announced plans to transfer the Russian business to local management by the end of 2022.

Kommersant’s interlocutor in the market notes that the Bridgestone plant is new and the third largest in Russia after Nokian and Pirelli (if we take into account the sites in Voronezh and Kirov), making it difficult to assess the prospects of the transaction in the current situation.

Dmitry Babansky from SBS Consulting believes that there will be interest in the asset – loading at Bridgestone was less dependent on exports than Nokian Tires, and a fairly wide range was also produced (for cars and light commercial vehicles, trucks). He notes that, based on the expected value of the Nokian deal at €400 million and the company’s revenue in the Russian Federation, it is possible to value the asset at about €200 million.

Olga Nikitina