Nokian Tyres Plc

Welcome to the Nokian TIRES Q1 2022 interim report. Throughout the call, all participants will be in listen-only mode, and afterwards there will be a question and answer session. I'll now hand the floor to Head of IR Paivi Antola. Please go ahead.

Thank you. Good afternoon from Helsinki, and welcome to Nokian TIRES Q2 results conference call. My name is Päivi Antola, and I am the head of industrial relations in Nokian Tyres. And together with me in the call, I have Jukka Moisio, the president and CEO of the company, and Teemu Kangat-Kärki, the CFO of Nokian Tyres. In this call, we will go through Q2 results and then update on the progress with the exit from Russia, with the new capacity, and our focus in the coming quarters. And this all will be presented by Jukka and Teemu and followed by a Q&A. So Jukka, please go ahead.

Thank you, Taivi, and welcome on my behalf as well. I would like to go through the third notes in the presentation where the heading is for Ukraine overshadow H1. And I move to page two. Some quick reflections before I go into highlights of the numbers. exit from Russia initiated. So the board decided to initiate the controlled exit from Russia as it's no longer feasible or sustainable to continue operations. Right now, at this moment, we are evaluating different options. We've hired external advisors and we are in discussions with possible candidates as we speak. a part of the process impairment and breakdown of about 300 million euro were recorded in quarter two results. Actions to increase the capacity outside Russia are ongoing, so we are increasing capacity at the Finnish and US factories for passenger car tires. These programs were initiated already in 2021 and they have continued throughout 2022. in the latter part of this year so that they will be used for readiness for 2023 and also as mentioned about the US factory readiness for 2024 and we are on our way to achieve 4 million tires capacity in the US and between 5 and 6 million in Finland. Investment in new factory in Europe is proceeding. We have a list of possible locations in place. We are doing the evaluation Engineering has been done and we are finalizing the steps to make the decision to start the investment. Outsourcing options are also being blocked, so we look to have alternative suppliers to help us during the time when the capacity is being built in Europe and these offtake options are being developed currently as well. I move to page three, have a highlight of the numbers of quarter two. Net sales increased by 7.4% in constant currencies. So we recorded 482 million in net sales versus 416 million in 2021 in the same quarter. Tire demand continued good and volumes were down due to supply constraints in our company. operating environment was increasingly more challenging due to war and targeting sanctions. Segment operating profit at 86 million versus 89.6 million in Q2 2021. We increased prices to combat cost inflation and that led to higher net average selling price. Our team performed extremely well. It was a demanding quarter in terms of sanctions having an impact as well as the logistics becoming increasingly more difficult to take raw materials to Russia and also ship tires from Russia to other markets. Under these circumstances, I want to thank our team and also congratulate them, because it has been a very demanding environment, and we did well in that environment. I move to page four. We have a strong balance sheet. Cash flow was impacted by higher working capital. I call out some key numbers in the financials. Net sales popped by 7.4%, as mentioned, year-to-date. We are about 14% in constant currency ahead of the entire year, so at about almost €900 million in the first six months versus €758 million in 2021. Operating profit percentage in the quarter was about 18% versus 21.5% a year ago. And year-to-date, we are at 17% versus 18.5% in 2021 and 19% in full year 2021. Segments, earnings per share, so before the write-off and so on, 55 cents versus 51 cents a year ago. And in the first six months, 93 cents versus 80 cents in 2021. one return on capital employed at 15.2% before the write-offs. Our equity ratio, including write-offs, is 64%, so that shows that we have a strong balance sheet, and despite the write-offs, continues to be strong. Obviously, the currencies and various other matters are impacting that, but nevertheless, so 64% equity ratio. Cash flow was weaker, and we incurred higher working capital. Both the inventories were high because of the more expensive raw materials. Also, the receivables were higher because of the good net sales, and also the currencies impacted in our working capital by increasing the absolute amounts of working capital. Gearing at 14.8% and interest rate net debt at the end of the June at 243 million versus 140 million a year ago. Capital expenditures are 18.7 million in the quarter and 33 million year-to-date, both below last year numbers. However, as we've said, we will start incurring more capital expenditures towards the new factory in the latter part of the year. And with that, I hand over to Teemu to talk about financials and segment and profitability.