Nokian Tyres Plc

Good afternoon from Helsinki, and welcome to Nokian Tyres Q3 results conference call. My name is Taivi Antola, and I am the Head of Investor Relations in Nokian Tyres, and together with me in this call I have Jukka Moisio, the President and CEO of the company, and Teemu Kangaskarki, the CFO of Nokian Tyres. As usual, we will start the call with Jukka and Teemu going through the Q3 results, and then that will be followed by a Q&A. So, Jukka, please go ahead.

Thank you, Päivi. Good afternoon and welcome on my behalf as well. I start going through the prepared notes, a PowerPoint presentation, and as Konto Kaur mentioned, we had a strong volume and profit growth in the third quarter. But before going into financial details of the quarter, just remind you that we announced our revised growth strategy in September, in our Capital Markets Day. Some of the highlights of that strategy is that we have an ambition to become a 2 billion euro company. Midterm, meaning three to five years. And that will happen by growing heavy tires by 50% from 12-month rolling basis ending June 21. Also growing in North America by 100%, Central Europe by 50%, maintaining and strengthening the number one position in Russia and also strengthening number one position in Nordics and Vianore. Our financial key targets are 20% operating profit and 20% return on capital employed. So those are the highlights of our mid-term targets, which we announced, as mentioned, in the middle of September. I go to page 5, which is our Q3 highlights. Net sales at 443 million euro, up from 350 million or 25 approximately 25 with comparable currencies all-time high third quarter both in the passenger car tires as well as in heavy tires and we had strong demand for our products in all markets operating profit increased from 69 million to 97 million in the quarter and that was driven especially by increased sales volume. We also made price increases to combat inflation that led to higher ASP. We also continued the prudent cost control, especially to ensure that the cost inflation is also controlled internally. I move to page six, and I call out some key numbers in our P&L. First of all, the segment operating profit percentage at 21.8% in the quarter compared to 19.8% one year ago. Year-to-date, our segment operating profit is at 19.7% in 2021 versus 12.2% in 2020. Cash flow in the quarter, minus 81 million. This is driven by increased working capital, both inventories and also receivables. And on the other hand, we also had increased payables, which helped with the cash flow. Capital expenditure remains below 2020 level. Also in year-to-date, we have invested in year-to-date about 60 million euros versus 119 million euros a year ago. equity ratio at the end of the quarter at 66% versus 57% and gearing at 16% versus 18% a year ago. Those are some of the financial highlights and now I hand over to Teemu to talk about passenger car tires and financial details. Teemu, please go ahead.

Thank you. Starting with the passenger car tires, we had a strong Volume growth in all markets, especially in Russia, that is visible in our numbers. The growth rate for the third quarter was close to 30%, and in absolute terms, net sales reached the level of $330 million. The segment operating profit for the passenger car tires in the third quarter was on a level of $90 million. seven million plus. We have been increasing the additional shifts in US and in Finnish factories in order to match the growing demand. All in all, if we move to the next page where we see the The breakdown of our net sales, you can see that in the third quarter, our price mix was positive about 1.4%, of which the price component was clearly about 6%. So here you can see that we have been increasing prices as anticipated. Then moving to the breakdown of our segment operating profit. Here volume is the biggest driver to boost the profit, and as discussed earlier several times, we have a significant headwind coming from the materials. and then when the factories are running with the full capacity we can see that the positive development in the supply chain basket and the net we are on a level of 97 million and in this quarter currency didn't play any significant role in terms of net asp we can see that that our flight increases have offset the negative BA mix impact when the share of Russian businesses is growing stronger than in other markets. If we then move to heavy tires, there we can see the all-time high third quarter. Net sales and operating profit with comparable currencies, The growth rate was on a level of 36%. Net sales on a level of 69 million. And the segment operating profit for the quarter, close to 12 million. And the growth was driven by new product launches, as we have been discussing earlier, that we have a strong NPD pipeline coming, and that is affecting positively to our top line and the customers strong production levels as the early timing of deliveries helped to reach the top line in terms of inventories we can clearly see that those are on a low level as also in the passenger car tire business and then moving to To VNR, the performance has been on a good level in all countries. The net sales growth was on a level of 4% in reported numbers, in absolute terms on a level of 70 million, and then the segment operating loss was around 4 million, and as we all remember, we are now two main seasons are Q2 and Q4, and therefore we are now in the middle of the main season in order to generate the profits. And maybe as a final comment of the Q3 and the second half, We clearly saw that the Q3 was stronger than we anticipated because of the lack of tires, but then in terms of our view on the second half, there hasn't been any significant changes as we see today.