Nokian Tyres Plc Unsp/Adr

Hello and welcome to the Nokian Tyres Q2 2021 interim report. Throughout the call, all participants will be in listen-only mode and afterwards there will be a question and answer session. Just to remind you, this conference is being recorded. Today I am pleased to present Parvi Antalla. Please go ahead with your meeting.

Good afternoon from Helsinki and welcome to Nokian Tyres Q2 2021 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. In this call, we will go through the Q2 results, followed by a Q&A. So, Jukka, please go ahead.

Thank you, Päivi, and good afternoon on my behalf. Welcome to Nokian Tyres results call. I'll start with the prepared notes and I move to page two and just reflect the highlights of this quarter. So net sales and operating profit increased significantly. Net sales were $416 million, about 55% up with comparable currencies compared to 2022. That was driven by strong demand. for the business units and business areas contributed to growth, keeping in mind that Q2 in 2020 was particularly hit by COVID pandemic. Segment operating profit was at 89.6 million, up from 24.4 million in 2020 Q2. The biggest impact came from increased sales volume, and then we had some headwind from currencies by 5 million euro in the negative territory. I move to page three, some of the financial highlights, call out some key numbers. As mentioned, the top line up and the segment operating profit up. The percentage in segment operating profit was 1.5% versus 9% in second quarter 2020 and segments earnings per share 51 cents versus 9 cents a year ago. good development in cash flow despite the fact that we increased quite a bit of receivables and working capital as the business picked up compared to 2020. Nevertheless, we delivered positive cash flow in the quarter. Capital expenditure in the quarter were below prior year and this reflects the fact that some of the major investments that we were still completing in 2020, these programs are now behind and we are working to get the benefit from those. to mention particularly the Dayton factory and as well as Spanish test track of the two investments that we've completed since the second quarter 2020. Half year numbers, top line is up by 41.5% in constant currencies. Segments operating profit at 18.5% in six months versus 7.4% a year ago, and segments EPS at 80 cents per share versus 16 cents a year ago. Return on capital employed at this point of time, stock market rolling is at 13.9% versus 10.6% a year ago, and equity ratio after six months strong 66%, as well as gearing low at 9.4%. It is their net debt at this moment after six months is 140 million, and capital expenditure year-to-date six months is slightly below 40 million. With Thelma and Rowling, our net sales are now at 1.52 billion versus 1.3 billion in full year 2020. This point I hand over to Teemu. our CFO to talk about the financial results of the segment and other financial details. Teemu, please go ahead.

Thank you, Jufka. Starting with the passenger car tire business unit, key figures and highlights. Our net sales grew with comparable currencies almost 75%. driven by strong growth in Russia, followed by North America, Central Europe and Nordics. All main markets clearly increased the net sales. Our average sales price decreased due to the increased share of Russian volume, which was the case already in Q1. And our operating profit clearly increased because of the sales volume and we were able to record a segment operating profit close to 71 million and our segment operating profit for the period was on a level of 25 percent. In US and in Finland we have added new shifts to increase the production due to the fact that the demand is strong in all markets. If we move then to the next page where we can see the breakdown of our net sales and segment operating profit and starting with the net sales, we can see that clearly volume is the main driver and then the price mix is close to flat. minus 1% negative and then you had a headwind from the currencies. I repeat the same comment that I made in the Q1 call where I stated that the region or the business area mixed impact coming from Russia is about 3% negative. And then the net price mix is about 1% for the passenger car tires. Then moving to the segment operating profit here, maybe highlighting the material impact or the increasing or decreasing material cost in the Q2 and for the full year. Just reiterating our guidance that the raw material prices are increasing for the full year. In Q1, our estimate was about 9%. Now, our estimate has increased to the level of 12%, meaning that in the second half, we will have a strong headwind from material unit costs. If the full year guidance is 12% and for the first half we are small positive impact, then simple math indicates that in the second half the impact is negative around 24-25%. In order to offset that factor, we continue to increase our prices as we have already done in the first half, in the second half, in order to be in a better position to protect the profitability of our passenger car tire business unit. Then if we look at other aspects in the segment operating profit, you can see that Currency, been closer to the normal level after the last year when we cut the costs and then we haven't recorded any strategic commission in the period. Let's move then to the heavy tires where the net sales and segment operating profit continue to grow. Comparable currency net sales growth was on a level of 53%, in absolute terms on a level of close to 63 million, and our segment operating profit close to 12 million, and the segment operating profit for the period was on a level of 18.8%. The volume development was driven by the customer's strong production levels and also the new product launches that we have made. Therefore, the demand was strong in all product segments within the heavy tires business unit. If we look at the first half, operating profit for heavy tires, we recorded all time high segment operating properties the inventories are at the low level in in heavy tires despite the fact that we do our utmost to produce whatever we can to serve our customers in the best possible way then moving to vianor The performance has been good in all countries, recorded top-line growth with comparable currencies, 8% in absolute terms, close to 92 million, and the segment operating profit on a level of 10 million, and the profitability being on a healthy level of 11%. The operating profit improvement for the business has continued to be strong supported by stable operations that we do in the service centers. As we have highlighted, the focus for this year is about growing top line and focusing on the cash flow and therefore we have recorded a strong cash flow for the first six months as commented by Jukka. Moving to our assumptions, there are no major changes. The demand is strong both for the replacement car tires and for our Russian ruble is always a key factor in our performance, and then one addition that we wanted to include in our assumptions at this point is the logistic cost that we clearly see pressure coming from there. year impact is about high single millions coming from the logistic costs. We have not changed our guidance due to the fact that the assumptions have not changed and therefore we state that our Net sales with comparable currencies and segments operating profit are expected to grow significantly for the whole year.

Thank you Teemu. I wanted to just remind that we have an all-time high number of new launches, new product launches. and want to draw your attention to Hakkapeliper 10, which is our flagship winter range that will be available to consumers in the fall of 2021. And that will include safety and SKUs for passenger cars, SUVs, hybrids and EVs. A very comprehensive size selection and also good benefits in winter great comfort and reduced noise level, better on-road stability and silent drive technology. This is simply to highlight our key product but also keeping in mind that we have been launching late 2020, early 2021 and we continue to launch record number of new products and this is an important driver for our top line and also in terms of getting higher and better price points for our products. Also to remind that we are committed to safe and sustainable manufacturing, so in the quarter and this year we've been included in the European Climate Leaders 2021 list for significant greenhouse gas emission reductions. Our US factory also earned ISO 14001 certification in May and lead level four single certification in March. Finnish Factory earned ISO 45001 certification for occupational health and safety in January and we inaugurated the solar power plant on the Finnish Logistics Center in June. These are some of the highlights in our sustainability and that is an important part of our operation and the important part of our commitment going forward. I move to page 13, our priorities for second half 2021. We want to drive the growth with new product launches and continuous improvements in call-to-market activities, so volume growth. We want to protect our cash flows by prioritizing investments and capital outlays and also manage our working capital carefully. We'll take mitigating actions to reduce the impact of cost inflation, these mitigating year we continue to do them in the second half and as then was pointing out there's significant raw material cost logistic cost increases in the pipeline we will counteract them with price increases and also we want to keep the cost under control so this is the second mitigating action so there are two things to protect our profitability and cash flow against the cost in place on And we believe that with our value brand, strong expertise and strong production capacity, we are well positioned to develop and meet those expectations in the second half. So this completes my notes. I want to remind everybody that we have a Capital Markets Day scheduled on September 9, 2021, starting at 1 o'clock. The invitation to this Capital Markets Day went out today, so please put that on your calendars and Keep in mind that that's the moment when we talk about the long-term, medium-term targets and ambitions. Now I open and hand over back to Päivi, and we open for Q&A. Päivi, please.

Thank you, Jukka. Thank you, Teemu. And now we would be ready for questions from the audience, please.

Thank you. If you wish to ask a question, please dial 01 on your telephone keypad now to enter the queue. Once your name is announced, you can ask your question. If you find it's answered before it's your turn to speak, you can dial 02 to cancel. Our first question comes from the line of Akshak Kasha of JP Morgan. Please go ahead. Your line is open.

Thank you. Good afternoon. Akshak from JP Morgan. The first one on pricing, please. Can you comment on the price increases that you have implemented in your core markets as of now, Nordics and Russia, as well as the price increases in Europe and North America to offset the different elements of cost inflation that you spoke about, raw materials, freight, logistics, etc.? It would be helpful if you could quantify the net increases that you've been able to pass through in different markets. That's the first one. The second one is on the Russian market. You've obviously seen some very strong volume growth coming in the first half and you've also won market share in summer and all season tires. Can you just share your expectations for the rest of the year in terms of what are you seeing on market dynamics? Just talking about different elements like inventory levels, pricing and overall consumer sentiment as you look into the second half. And the third one is on Dayton. Just saw a limited mention of Dayton in the prepared remarks. Has there been any change in the ramp-up plans of the plant looking out beyond 2021? Those are the three.

Thank you. If I start with the price increases by region, as I said, we have implemented price increases in all of our markets clearly highest increases are in Russia where they are significant in terms of percentages then in Central Europe and Nordics and North America they are lower than in Russia but the ambition is to offset in local currencies, the price increases and the impact for the calendar year is we cannot offset the calendar year impact because the raw material prices are increasing but on a rolling basis that is the ambition to fully offset the input cost price increases.

If I continue with the Russian market, so obviously we have had a good trading in Russian market. Why that happens is that we are strongly dedicated to Russia. It's an important market for us. We also see that some of the competition may not prioritize Russian market the same way we do, so therefore we've gained market share. and we continue to see that momentum strong throughout the year and also into 2022. Inventory levels in Russia, from our perspective, are healthy, so therefore we don't see any excess. We see a strong sell-out as well as a strong sell-in in our pipeline. And as Teemu was talking about the price increases, implemented price increases in Russian market, which are offsetting the raw materials and aiming to offset those also into 2022, keeping in mind that the environment is, the cost increases are coming, but we are quite pleased of the Russian momentum and we expect to enjoy a good, a strong volume into 2022. Dayton, no change. We continue to ramp up. We started the third shift during the quarter and after the quarter in July we started the fourth shift and we continue to ramp up. In terms of just a general comment about the production, essentially we are running flat out in all our factories. We have had a short summer break in late June, early July, but we are well loaded and our main important task is to find a digital capacity and capability which we can mobilize in order to supply the market and this is the situation so in terms of data no change we keep on ramping up and our ambition is to go into higher volumes in 2022. thank you one quick follow-up if i may on price increases

Is it possible to split out the price-mix impact in Q2? Can we separate price and mix, please?

As I have said earlier, in terms of going into the specifics within the price mix, in our case, we should look at the long-term trend, not to only look at the one quarter or even first half due to the fact that our customer portfolio is more condensed than with our competitors, so there are swings that are not transparent on a long-term basis.

mix in macro level then winter tires about half of the volume and then summer tires all season is the other half and that typically is not the case typically we have more winter tires than what we have had this year in the first six months.

Yeah I was just trying to get to the underlying positive price impact in that number.

I understand that.

Thank you.

Maybe just to To reiterate what I said earlier in the call, that the region of the BA mix impact, the negative impact is about 3%. So taking that into account, the price mix is plus 2% give or take.

Thank you both. Thank you. Our next question comes from the line of Thomas Besson of Kepler Schaeffer. Please go ahead. Your line is open.

Thank you very much. It's Thomas Besson at Kepler Schaeffer. I have a few questions as well. Firstly, I'd like to get a few comments on your new range that is going to support your market share and profitability in the next two, three years, particularly in the second half. Could you discuss the... level of interest from your dealers and the level of orders already in the first part of the year for this AKP Data 10 range, please. That's the first question. The second question is more on the bridge. You report for the second consecutive quarter in a row kind of reversion of provisions for that debt of 5 million, so that's 8 for the first half. Could you indicate if there is more of that to come in the second half or if you've already reversed everything that could be reversed in the first half? And thirdly, I'd like to get a few comments, if that's possible, on the level of profitability which is achieved in Dayton in 2021 compared with your plan. Are you ahead, thanks to the very unusual pricing environment in the NAFTA, or are you just in line with plan in North America? And that's it for me. Thank you.

Maybe if I start with the Dayton and profitability. We are basically on our plan, so there's no change in that. Obviously, we will see then at the end of the year because the bigger part of the volume is expected in the second half, simply based on the fact that we add more shifts and they become operative as we speak. Therefore, of course, the volume and the profit generation is expected to be strong in the second half. Now most of the profitability improvements in the first six months are coming from a strong loading of Russia and also improved loading and heavy tire performance. If we talk about the Hakka-Belita 10 expectations, so it's in the early stages and shipments and so on and I believe that performance of the tyre is very good. So we are very pleased with the performance as we tested that and so on. Obviously what is important to see is that what is the external tests and what kind of feedback they give and those would be available in the early fall. But so far we see a good demand on that and I think that especially this time we have a very good and strong offering in winter tyres throughout Nordic Russia and also Canadian the northern part of the U.S. territories and especially for example Russia when we have Hakapellita 10, Hakapellita 9, Nordman 8 we have a quite a strong lineup of the same applies to Nordics and North America and as this is made very important for us we've also taken enough capacity and enough focus to make sure that we are capable to deliver for that season. That's all I can say at this point of time. I believe that then we have a third quarter behind us and during the third quarter there will be test results and similar available that externally you can also verify that this high performer as a product.

Then you have the question regarding the bad test provision. It's good to think that in the light of the events that we faced last year due to COVID and therefore the picture was more gloomy than it is at the moment and therefore we provided with our best estimate about this provision last year. Currently, naturally, the outlook is better. and therefore we haven't put any bad debt provision here today.

Strong performance throughout the value chain including ourselves, our distribution and so on.

Sorry, thank you for these replies. I was asking if there are going to be more releases of bad debt provisions from last year in H2 or whether you've released everything you had because it's been a decent boost in H1.

so these are not releases this is the delta between last year and this year so last year we booked this year and i understand so is there going to be again a gap between last year h2 and this year's h2 or are we seeing all the benefits of that difference for the year as i commented the outlook is is more positive than a year ago but hard to comment in advance the bad debt provision, but at least how it seems today, I'm optimistic about the second half.

Okay, thank you very much for all your answers.

Thank you. Our next question comes from the line of Mathias Hombay of TMB. Please go ahead, your line is open.

Thank you and hello everyone. Given what you know right now about raw materials and logistics costs, will you be able to fully compensate with price increases this year or should we expect it to be a net negative?

As I commented for the calendar year, I'm not expecting to offset the raw material price increases fully, but on a rolling basis, that's our ambition level in local currencies to offset the impact of increased costs.

We watch this raw material evolution carefully and obviously as we have seasonal pricing and continued focus on this, we will seek to increase prices and to mitigate this as we go along because this is an environment that everybody understands that the cost in place is there and that the important thing is to take actions to mitigate that and the actions are really twofold. One is to increase prices, the second one is to contain costs and with these two we seek to secure the profitability development. But this is an environment that is not going to stop, but most likely this year cost inflation will continue well into 2022 is our expectation. So therefore, working on that continuously is vitally important.

Thank you. Maybe I'm just not smart enough, but can you please explain what's preventing you from simply adjusting your prices to cover the costs at this point and why you need a longer time to compensate?

As we said, this is our ambition that we offset, but obviously it takes a little bit of time to work. So you don't work step by step, but you work a little bit in heavy tires. We have escalation, de-escalation, which has slightly lag, and then in the other places we work as quickly as we can.

Understood. Thank you. And finally from me, you mentioned I think single digit million higher logistics costs for the full year. Would you be able to specify how much of that you've seen in H1 or if it all is sort of an H2 issue?

I would say that if you split that by two then you are close enough. Because it has started already in the beginning of the year.

It was clearly visible in the second quarter that logistic costs and the availability of containers and such at higher price was visible and also experienced by us.

Great. Thank you.

Thank you. Our next question comes from the line of Sascha Gomel of Jefferies. Please go ahead. Your line is open.

Thank you very much for taking my questions. I've got a few items. Firstly, on the guidance. halfway through the year, but you still remain fairly vague about your 2021 performance. Any particular reason why you're not more detailed in your guidance for this year?

No particular reason. We believe that we provided the guidance early in the year and don't see any need to change that because it covers our expectation of the full year.

Okay, perfect. And then my second question would be on the mix impact in the second half of the year. Is it fair to assume that the negative impacts from kind of the Russia improvement will be lower and then the new products will drive a positive product mix? Is that the right way to think about the second half of the year?

Especially our expectation is that the negative impact will be smaller in Q4 due to the fact that Q4 was already a strong quarter in Russia. Therefore, the growth expectation for Russia in the port quarter is lower than in the first nine months.

And the new products, obviously, when they go to market and are being delivered, then they come at a better pricing than the older existing. And this is, of course, something that we expect to help our second half. And as mentioned, this is something that is important for us, but also all the other new products.

Understood. And then my last question is on working capital. your payables remained flat versus Q1, but your receivables went up. And then you had quite a significant increase in other payables. So I was just wondering if you can help me reconcile those numbers a little bit.

So, clearly the receivables are increasing because of the sales increase. Then in Q1, I think that is the result of all the actions that we have taken in order to improve it and this is the end result of this one. And then the third point is the dividend that we recorded in our payables in this quarter that will be paid in December due to the fact that the board already decided and therefore we took it away from the equity and it is in payables.

Half of the dividend is basically unpaid but it's away from equity and so equity is artificially lower and therefore this booking actually has an impact on that.

Makes sense. And one follow-up on the payables. Should the payables number also go up in light of the growing top line? And also rising raw maps, shouldn't that have a positive impact on your payables?

It has an impact, but as I said, it also impacts the timing of our of our purchases and the inventory level. So one quarter is too short period to look at it.

Visibility is more in the quarter three and quarter four based on the expectation of the raw material.

Understood. Thank you.

Thank you. Our next question comes from the line of Artem Beletsky of SCB. Please go ahead. Your line is open.

something from sb thank you for taking my questions i actually have two questions relating to product mix could you could you maybe first comment on to what extent actually new products have been already visible in q2 numbers so looking at for example russia so growth there was clearly more than 100 percent so with those products like how they have been impacting the quarter already then looking at full year product mix So still quite high share of summer tires what you have been selling also in Q2. Is it fair to assume that on full year basis mix or basically portion of summer tires should be in line with history or basically roughly 20% of the total? And the last one is relating actually to heavy tires with record sales in the quarter. Is it basically, so to say, maximum volume what you can deliver on quarterly basis within this segment, just keeping in mind all these capacity increases, what you have been doing over the past year. So, ours was basically completed now. Thank you. Thank you.

So about product mix, I would expect that the full year is similar to our past history. When we then come to the end of the year, including then the full calendar year, it becomes comparable. Obviously, what is important is that the all-season volumes have increased, and the share of all-season is likely to go up. And that comes to... in addition so that that percentage is probably higher but then overall the volumes go up so that the share of various products will remain roughly at the same level as in the past so therefore you can expect that strong deliveries of winter tires. We've shipped a lot more summer tires in all season in the first half and we hope to catch up based on what I said hope to catch up that the mix will be

normalized by the end of the year and then your question regarding the heavy tires production output that is right that at the moment we ship everything that we can produce and therefore i made the comment earlier that also our inventories are at a low level because we we are not able to increase the inventory levels because the high demand

Overall, as a comment, we are really tight on capacity, so we see capacity opportunities left and right. That is important. That has been in the end of the second quarter and going into the third quarter. That is the situation. So clearly very important to pay attention to that and important operative job for us to make availability and production run well.

Yes, very clear. And maybe just on the topic of basically new products being visible in Q2 mix, is it fair to assume that you have been shipping already Hakka 10, for example, on Russian market, or has there been already some impact there?

Some of that, yes, but I think that basically it's coming along as we speak. So obviously the Hakka 10 production and the studying and so on is ongoing, important as we speak.

Okay, very clear. Thank you.

Thank you. Our next question comes from the line of Panu Laitinmaki of Denska Bank. Please go ahead. Your line is open.

Yes, thank you. I have two questions. Firstly, on the raw material cost inflation, can you kind of repeat the expected inflation in terms of percentage and do you have a number in terms of euros for the second half? like you mentioned, for the logistic costs? And then secondly, given all the inflation and mitigation actions and what have you, do you expect the second half EBIT matches to be up year on year?

So if I help you in the math, so I get that 12% roughly give or take for the full year. First half, we have seen a gain in material unit cost. So in percentages, if you just multiply that by two, you are on a level of 24, 25%. In euros, you can see that in our bridge, we have shown a positive number of 5 million, meaning that then the second half should be If the bullier impact would be on a level of 40, gain of five means that the second half should be on a level of 45, give or take, millions.

All right. Thanks. And then on the EBIT margins, do you have an expectation that you could share with us? Do you expect the margin expansion to continue to the second half?

But unfortunately, we are not disclosing that.

Okay. That's fair. Thank you. We understand what needs to be done and we work diligently to achieve.

All right.

Thank you. Our next question comes from the line of Pasi Faissinen of Nordea. Please go ahead. Your line is open.

Great. Thanks. This is Pasi from Nordea. firstly, about the markets. I mean, what is the current status when looking at the market recovery and the sales volume? So, kind of, when this current inventory restocking and the pent-up demand peak will be over, and when you are going to see an ordinary kind of growth figures in Nokia tires? And secondly, about your guidance, so... Well, would it be a kind of a reasonable assumption that a significant sales growth actually means over 20% or not on a full year basis? And maybe lastly, just to confirm, so should we then expect about a 1 million annual volume increase in date on plant for coming years?

Thanks. Okay. So the market recovery, I think that if you look at the replacement tire market to the first six months of 2021 versus the first six months of not 2020 but 2019. I think we're still behind that 2019 level in 2021 in first six months. So therefore in order to get the recovery to 2019 level there's still some way to go and then Of course what is also missing is then the potential or likely growth that this has not materialized in from 2019 to 2021. So there are a couple of elements that still will help the volumes most likely. Our expectation is as LMC expectation that the markets will recover between from 2020 level quite a bit but not maybe achieving exactly 2019 level in 2021 so that 2022 we believe that then the recovery is full and maybe the momentum to continue growth will happen in 2022 so that actually those volumes will be higher than or at the same level higher than 2019. Significant Yeah, I think that that is an interpretation that obviously we see a strong momentum in our net sales and year-to-date constant currency growth in six months is about 40 plus percent. And so that is what we have right now. In order to anticipate what will happen in the second half, some recovery probably, but then the final quarter already 2020 was a strong recovery quarter. momentum of 40 percent will not continue the full year but where it lands difficult to anticipate at this point of time and what was the third one the Dayton volumes yeah we are basically working on with the Dayton volume so that we get to four shifts and then we are also adding the lines to be able to build and cure four million tires and That program is ongoing including the necessary expansions on the factory and so we can expect that the volumes go up this year and next year and the year after we start installing the lines and so step by step we achieve four million. Probably it's a good proxy to think that it's not a linear one million per year but there is a plan to go to four million. we come a little bit back on that at this cmd in about one month's time and then we talk about the expectation and the volumes that is our midterm targeting across all the factories in passenger car tires as well as in heavy tires great thanks i hear you that was all from my side

Thank you. Our next question comes from the line of Eduardo Esquilan of HSBC. Please go ahead. Your line is open.

Good afternoon. Thanks for taking my two questions. The first is on production versus sales. I think you're producing at elevated rates now, almost flat out, I understand, but also selling very high volumes. Can you comment on whether the Production levels were adequate to the sales. Do you expect to keep producing at very high levels for the second half of the year? A bit of commentary on that would be great. Inventory levels for the passenger car division. And the second question is on the raw materials. I think it would be very interesting to understand how you think about the current inflationary environment. First, for demand, if there is any positive impact on Russia per se, but also, secondly, given your growth strategy for volume, are you happy that there is raw material inflation? Does it help you in being more opportunistic to push the volumes that you want? Thank you very much.

The first question was about the production and running at elevated rates. So obviously when we went into this year, the recovery was quite strong, and so therefore we increased the capacity and the run rates of the factories very quickly. We also added shifts in Dayton and in Nokia, and some of those benefits will come in the second half. We are running essentially at the full utilization of the available capacity, expect that to continue till the end of the year and then we will see how 2022 and the pre-orders for 2022 will happen. But at this point of time the added capacity, added volumes are needed and we'll go with the plans to see how much more capacity we can add. So we are loaded or fully loaded if you want. And it is the same story.

Can you repeat the second question?

Yes, the second question is on the raw materials. I think that the raw material price is growing, so I wanted to ask if you see any benefit in Russian demand, if there is any good oil price support to Russian demand, but also on the strategy, because you want to grow volume very much, is it helpful for you that raw material prices are growing, because competitors are increasing the pricing? So I just wanted to ask if internally you are happier that the raw material prices are going up, would it be better for you that the raw material prices were going down?

So if I give you the rule of thumb in the industry that has been presented, so when the raw material prices have been going up it has been beneficial for the whole industry and if this rule of thumb still applies This is a good situation for us and for the industry.

And I believe that the price increases are being executed in the industry, not only by us, but also by competition. And you've certainly seen that commentary from the competition, as well as from us, that the price increases in the inflationary cost environment are important and necessary.

Okay, thank you. And this is not a problem for the volume growth, like maybe even, I don't know if it's better for the volume growth, but the raw material pressing, is it a problem for volume?

Not at this point of time, because the matter is mostly availability, that how can we make enough tires to meet the demand. Thank you.

Thank you. We currently have one further question left on the Q&A queue. So just as a reminder to participants, if you do wish to ask a question, please dial 01 on your telephone keypads now. And that question comes from the line of Pierre Kimene of Stiefel. Please go ahead. Your line is open.

Yes. Good afternoon, Pierre Kimene of Stiefel. Thanks for taking my question. Just one left for me. Regarding your spending, they have been quite close. In the first half, in the cash flow, we had a capex of 39 million. Is it a new normal, or should we expect a catch-up in the second half and in next year?

Thank you. Basically, the capital outlay at this point of time is in the early part of the year clearly below what we spent in 2020. Obviously, 2020 included some of the major plans that were in the execution at that time. The new normal is below 20-24 year level, so 150 million. Most of our capital expenditure at this point of time goes into new modes and productivity improvements and such, and then also increasing the capacity in Dayton. And we believe that in round numbers we will be below that 150 million in years to come. There may be some a year where they might be higher but on on the macro level, 150 million or below will be enough for us to maintain the growth momentum and to achieve our ambitions. We'll come back to that also at the CMD, but basically on the background of that is that major investments have taken place in the past couple of years, three years, and that it's time to get the benefit out of those and therefore the capital requirements immediately in the major plans will be limited, however there will be of course productivity equipment here and there and especially the new product related mold investments that will take place every year.

Thank you Jukka. Just to follow up on that one, should we expect CAPEX to be above the triple digit threshold this year, above 100 million, right?

We think that when we went into the year, we anticipated somewhere in the 120-130 million level.

Many thanks.

Thank you. And as there are no further questions in the queue at this time, I'll hand out to our speakers for the closing comments.

So if there are no additional comments, it's time to finish the call. And as Jukka mentioned earlier, the next event will be our Capital Markets Day on the 9th of September, where we will focus on Nokia and Taurus mid-term growth ambitions. The CMD will be an online event, and you will find more information about the event on the release, which we published earlier today, as well as on our website. And this ends today's conference call. Thank you for participating and have a good day.