Nokian Tyres Plc

Good afternoon from Helsinki and welcome to Nokian Tyres Q4 and full year 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. So in this call, as usual, we will go through the Q4 and full year results, followed by Q&A. So Jukka, please go ahead.

Thank you, Kaivi, and welcome on my behalf as well. I would start the presentation with prepared notes, and I have a PowerPoint presentation that heading is record high sales with improved profit in 2021. And I move to page two, just to reflect the quarterly net sales. we reported 513 million, about 18.4% up from prior year in comparable currencies, and demand continued strong in all main markets, and also net sales increased in all business units and all business areas. Segment operating profit at 88 million versus 80.1 million in 2020, and that was driven by higher sales volume, and we also had price increases higher net selling prices. I move to page 3. We had a strong performance across the whole organization in 2021. All in all, we reported a net sales of 1.714 billion, which is 29, almost 30% above 2020. And 1.7 billion is all-time high in our reported net sales. And this is in comparable currencies, so 30% above prior year. Of course, the prior year, 2020, was impacted by COVID pandemic, and so, therefore, the increase is significant. However, the reported offline is the highest we've ever reported. All business units have contributed to the growth. Heavy tires also had an all-time high for year net sales and segment operating profit. We also improved our market position in all key areas. segments operating profit at €325 million for the whole year, up from €190 million in 2020. That was driven by increased sales volume and also the fact that cost inflation with price increases and careful cost control. And the board proposes a dividend over €1.32 per share, and that is to be paid in two installments, one in springtime and one in the final quarter. Go to page four. There are highlights of the financials. I call out some key numbers on that one. First of all, the top line growth, 18.4% segment operating profit in the final quarter, 17.2% versus 19.4% a year ago. Full year segment operating profit at 19% versus 14.5% full year 2020. Return on capital employed increased from 9.3% in 2020 to 15.8% in 2021. And balance sheet remains strong with equity ratio of more than 68%. Also, cash flow in the final quarter was quite significant. We had an operative cash flow of almost 500 million versus slightly over 400 million in 2020. Therefore, the full-year cash flow is almost 400 million, despite the increase in working capital and receivables. Net interest rate at the end of the year is 5%. minus 98.7, which means that we have 100 million of positive cash in our balance sheet and no debt. Capital structure, no net debt. And capital expenditure at 60 million in the final quarter and 120 million in full year. We've guided that on the average, we have a capital expenditure at around 150 million, which we had in 2020. This year, 2021, we had a little bit lower. If I then go to page 5 and reflect our progress towards the financial targets that we announced in September 2021, said that we are targeting an excess of €2 billion. Right now, we are at €1.71 billion in the full year 2021. We said the segment operating profit ambition is 20%. We are at 19%. And return of capital employed, we target 20%, and we are 15.8%. As we discussed already at the time when we announced these targets, we said that the biggest gaps will be in net sales, and we made good progress in 2021, and also in return of capital employed, where we also made a significant progress from 2020 onwards. to 2021. However, work remains to be done to achieve our financial targets. We also had a financial target to grow ordinary dividend, and it won 32 per share. That's a 10% increase over 2020 level, which was 120 per share. And that is more than 50% of net earnings as our financial ambition is At this point, I hand over to Teemu Kangaskärki, our CEO, to talk about the financials in segments and in the business. Please, Teemu, go ahead.

Thank you, Jukka. Let's start with the passenger car tire business. The strong volume continued to... We had a strong volume growth in the fourth quarter, so all in all, the year 21 was super strong, and we... recorded in comparable currencies for the full year almost 38% growth and for the last quarter a comparable currency growth of 24%. The net sales for the fourth quarter was on a level of 342 million euros and the segment operating profit close to 78 million euros. The net sales grew in all markets, and we were able to increase the average sales prices as we have been indicating in our previous calls. The main driver was naturally the higher sales volumes. And because of the good demand, our Russian factory ran at full capacity last year, and we have added more shifts in our Finnish and U.S. factories to meet the demand. And if we go to the next page where we can see that the bridges, and if I start with the net sales bridge in the fourth quarter, you can see that the sales volume was up by 16%, and the price mix development was positive almost 8%. And as we have been indicating this year, the VA mix has been negative, which is visible in the price mix, and therefore the pure price impact is around 10% in this price mix column. Then moving to the segment operating profit in the fourth quarter, here you can see the the negative headwind coming from the material costs, and in the fourth quarter, the headwind was around 38%, which is a significant change to the prior year Q4. The price mix and sales volumes are naturally then in green, which is then helping us to improve the profit to the level of 73 million, excluding the currency impact. In the SG&A, you can see that certain activities were visible in the fourth quarter, in line with the growing demand and increasing sales. If we then move to the heavy tires, like to start with the full year performance as stated by Jukka. 21 was a record year for heavy tires in terms of net sales and operating profit, all-time high numbers, and we are extremely happy about that. Then moving to the fourth quarter, the net sales was on a level of 65 million the growth in comparable currencies was around 19%, and then the segment operating profits around 4 million euros. The segment operating profit decreased slightly, which is due to the higher raw material cost and other cost components which were partly offset the price increases. In the segment operating profit, you can also see the timing of certain activities and therefore the cost level was on a higher level. Inventories in the heavy tires are at the low level and we also would like to specifically Note the excellent development in safety, which is part of our sustainability target as well. Two years without lost time injuries is an excellent achievement. Then moving to the VNO. Their performance was on a good level in all countries. Our net sales reached a level of 123 million in the fourth quarter, and in comparable currencies, that corresponds 2.8% increase. In segment operating profit, it was on a level of 8.4 million, and there we also had some operative one-off items that we are recording in the segment operating profit. And then some of you have had time to read our release as well. We recorded some non-operative items. We did some impairment charges. And then the main component was was the goodwill allocated to Vianor business. There is no change in the economic value of our overall business. It was rather a function of how goodwill was originally allocated to cash generating units between passenger car tire and Vianor. And as you know, we view this as a whole and therefore we We view that there is no economic value or change in the economic value. We continuously look at our assets prudently, and this then led to the impairment of the VNR goodwill. Then, if we move to the next, and please, you've got things from there.