Nokian Tyres Plc

Good afternoon from Helsinki and welcome to Nokian Tyres Q2 2020 results conference call. My name is Päivi Antola and I am the Head of Investor Relations in Nokian Tyres and together with me in the call I have Jukka Moisio, the President and CEO of the company and Teemu Kangaskärki, the CFO of Nokian Tyres. And as usual, we will start the call with a brief presentation by Jukka and Teemu and then continue with a Q&A. So, Jukka, please go ahead.

Thank you, Päivi, and welcome on my behalf. So, this is not yet 100 days milestone for me. It's actually about 70 days now as the president and CEO. And so, therefore, I move to page two and talk about the results from our presentations. Q2 was hit by COVID-related economic slowdown. Look at our net sales. We were about 271 million euro. Remembering Q1, we had about 270, 280 million euros. Obviously, comparable numbers. In Q2, the expectation was higher because prior year, our top line was about 416 million. So the decline is about 32% in comparable currencies. Obviously, the COVID and the measures to reduce the carryover stocks in Russian distribution channel had an impact on our net sales. In terms of operating profit, we reported 24.4 million versus 98.8 in 2019. The big impact came from COVID, about 40 million euros. Additionally, we had about 20 million euro impact from Russian inventory reduction and distribution channel stocks reduction and also from low factory utilization as we stopped all of our factories during the second quarter in order to observe the low demand due to COVID. We got some bail-in from lower raw materials and also cost-cutting measures helped our profitability. profitable was Viano's performance in the second quarter and they had a good reaction to market decline and the profitability is slightly improved compared to 2019. If you look at what impacts we had in the first quarter obviously the Covid was only at about 10 million level in the first quarter and the Russian and the first to about 40 million in the second one. If I then move to page number three, some key figures to repeat it. So net sales, 271 million change in nominal numbers, about 35% and 32% in constant currency. Year-to-date, our net sales are about 550 million which is 27% change in nominal currencies and 25% in constant currency. Operating profit of the segment, 24 million, about 9% margin, versus 24% margin in 2019. Year-to-date our margin is at 7.4 versus 20.6 in 2019. And segment EPS, 9 cents in the quarter, and year-to-date 16 cents in the quarter, as well as in half-year, clearly behind the prior year performance. Return on capital employed at 10.6 versus 17.2 in 2019. and equity ratio still remaining at high levels despite the weak quarters in 2020. Now I hand over to Teemu and he will talk about the cash flow and capital expenditure. Teemu, please.

Thank you all for the call. If I move to the cash flow from operating activities, you can see that we were able to perform better. in the first half this year compared to the previous year and clearly the networking capital component is the key for this development. And there naturally one of the key components is the trade receivables due to the decline on top line our trade receivables didn't increase And then also our inventory level decrease, and especially I would say that the inventory management was a good topic that we were able to manage well. We were able to cut down the production in the declining market, and we were able to decrease the inventory levels, which I find good achievements. Then if you look at our interest bearing net debt, we were on the same level than last year, and the additional benefit that helped our cash flow was the capex that was clearly down from last year, and the main decrease obviously came from the Dayton factory. Out of these 87 million CAPEX this year, the biggest three items are about 50 million containing Dayton, heavy tires, and Spanish test truck.