Nokian Tyres Plc

Good afternoon from Helsinki and welcome to Nokian Tires Q1 2022 results conference call. My name is Saivi Antola and I am the Head of Investor Relations in Nokian Tires and together with me in this call I have Jukka Moisio, the President and CEO of the company and Teemu Kangaskärki, the CFO. In this call we will go through the Q1 results and the impact of the war in Ukraine and the resulting sanctions on Nokian tires. This all will be presented by the CEO and CFO, followed by Q&A. So, Jukka, please go ahead.

Thank you, Paivi. Welcome on my behalf. And I will go through the prepared notes in the presentation, starting on the cover page that the war in Ukraine overshadowed Q1. Our operating environment is highly uncertain, but nevertheless, the tire demand in the global markets was good in the first quarter. I moved to phase two in terms of our net sales. They increased by about 22% in comparable currencies. That meant that the year began with good demand in all markets, and in late February, the war in Ukraine started to impact the operating environment. As our supply chain is quite long, so it means that the first quarter's tires mostly were made already in 2021 in the final quarter. And indeed, the strong momentum of the tire demand already in 2021 continued to 2022 in the first quarter. Our segment operating profit was 66.5 million up from 50.3 million a year ago. price increases were made to combat the cost inflation and that led to higher average selling price. Teemu will talk about that a little bit later. And also important to mention that our heavy tires business had all time high first quarter in operating profit. I move to page three, which is financial highlights. Again, the Profitability in terms of operating profit margin, 16% in the first quarter versus 14.7 a year ago. Equity is 70% of our balance sheet versus 68% at the end of financial year 2021. Cash flow from operating activities was negative, mostly because we tied money into receivables and inventory. and then gearing at 3.1%, net debt 53 million, and capital expenditure in the first quarter was 14.1 million, down from 17 million in 2021. We expect that the capital expenditure will remain at 100 to 120 million. On ongoing operations, we will not invest in production in Russia, However, we have activated and started to speed up the investment in new capacity in Eastern Europe and also look at the other options to improve our supply capability outside Russia. That includes, of course, building and continuing to build the capacity in Nokia, as well as ramping up our Dayton factory and investing there, as well as also increasing capacity in heavy tires in Nokia. and the capital expenditure most likely will be uh mostly focused on the final quarter last two quarters of 2022 and there we see and we'll most likely see an acceleration of capital expenditure and now i hand over to demo to talk about the uh probabilities of businesses and also a little bit more granularity in the financial performance then please go ahead

Thank you, and let's start with the passenger car tire business unit. The demand continued on a high level in the first quarter. Our net sales reached 350 million and segment operating profit on a level of 74. The top line growth was on a level of 28%, no major difference between reported and comparable currency change. The net sales was increasing all main markets and all season tires was the main driver for increasing volumes. We were able to increase our average sales prices in all markets. in order to offset the higher raw material and cost inflation. And when we started the year, our forecast for the full year in terms of raw material headwind was on a level of 20%, and now we see that it will be more than 30% because the cost inflation continues to rise in the second half this year. If we then move to the next page where we can see the breakdown of our net sales by quarters, here you can see that the volume component was up by 9% and our price mix on a level of 19%. Here you can see a strong development in the price mix as we have been discussing in the past quarters. We have increased prices and continue to do that in all markets and now in the first quarter we were able to see a strong momentum there. Currency, the aggregate impact was flat due to the fact that all other currencies except Russian ruble strengthened and therefore the net was close to zero. Then moving to the bridges, here we can see that on net sales level, the volume contributed to the top line around 22 million and the price mix was on a level of 47 million. Then moving to the segment operating profit and and if you look at the price mix 47 compared to the material deadwind minus or negative development of 28 million here we can see the positive delta between the price mix and material headwind then moving to the heavy tires business unit In the first quarter, we recorded all-time high segment operating profit for heavy tires. Top line was on a level of 66%, growth with comparable currencies almost 15%, and segment operating profit on a level of almost 13 million. same level than in prior year then if you look at relative profitability there it it was slightly lower than in comparison period in heavy tires the strong demand continued in in all product segments as we have been discussing in earlier quarters and naturally in heavy tires we have increased also safe prices and continue to do so in the coming orders and maybe the final comment from heavy tires is that the strong development in safety we have recorded over two years without lost time injuries which is a excellent achievement and lastly looking the vnr business unit performance the start for the year was low low in the first quarter which is not the main season as as we have been discussing the two main seasons are q2 and q4 in indiana the net sales was on a level of 57 million