Nokian Tyres Plc Unsp/Adr

Thank you. Good afternoon from Helsinki and welcome to Nokian Tyres Q3 results conference call. My name is Taivi Antola and I'm 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 Kangaskärki, the CFO of Nokian Tyres. In this call, we will go through the Q3 results and discuss the recent events, i.e. the agreement for the sale of the Russian operations, which was signed last week, and also the new factory, which will be built in Romania, which we announced earlier today. And what I can inform you about already now is the capital market stay and the timing of it. together with new financial targets. We will organize a capital market once the Russian exit deal has been closed. But now I'm handing over to Jukka and Tim.

Thank you, Päivi. Good afternoon on my behalf and welcome to this call. And I would like to go through the presentation, where the heading is Building New Nokian Tyres, started Greenfield Factory Romania Agreement for the Save of Russian Operations. I move to page two, and indeed taking the first steps to build the new Nokian Tyres. So we announced earlier today that we will build a new Greenfield Factory Romania. All in all, the investment is 650 million euros. annual capacity for that amount is 6 million tyres and we have a site which has potential to expand further in terms of capacity and number of tyres. We expect that the first tires will be manufactured in the second half of 2024, and we aim that the commercial production will start in 2025, and the construction of the site will begin in early 2023. This will be the first greenfield zero CO2 emission factory in the tire industry. We also are adding further supply capacity, so we are increasing capacities in this Nokia factory and also in the Dayton factory in the US, as previously announced, and this continues according to our plans and according to our earlier communication. We have also acquired land and property in Finland to secure opportunity to develop further the Nokia side. This means that property nearby the factory has been acquired by us. This will allow us to open the capacity in Nokia. Those plans are in the development phase at this point of time and when we are ready and we are clear with the plans we will then announce what kind of steps will be taken in Nokia. Also at the same time we are developing outsourcing options to supply especially central European markets. And final point of building new Nokian tires is that the exit decision, controlled exit from Russia was made in June and during the third quarter lots of discussions and negotiations and also in the early part of the fourth quarter we conducted and then we announced an agreement for sale on October 28th and we signed the agreement and the debt-free cash-free purchase price is expected to be around 400 million euro. The final purchase price is affected by net cash, working capital adjustments and changes causing the euro exchange rate. I move to page 3, just highlighting the Q3 net sales and profits. First of all, excuse me, the net sales were 466 million minus 6.4% with comparable currencies Obviously, we see that the currency tailwind was quite strong because our headline sales were higher than in the third quarter of 2021. Lower passenger car tire supply volumes were attacked as the imports from Russia to Europe and North America ended in July. Heavy tires also had slightly lower net sales due to supply constraints. Segment operating profit in the quarter, 54.9 million versus 96.9 million in 2021. Lowered main reasons, lower passenger car tire supply volumes, of course, the factory mix when lower production in Russia impacted our profitability. But at the same time, we were able to increase prices to compact cost inflation, and therefore we had a higher average selling price of tires. I move to page four. There are some key financial numbers. I call out a few numbers here. First of all, the segments operating profit percentage in the third quarter, 11.8% versus 21.8 in 21. And first nine months, segments operating profit at 15.2%, corresponding period. Segment EPS at 26 cents in the quarter and year-to-date at 1.19 cents. Full year in 2021 we had 1.84 cents. Our balance sheet remains strong so equity ratio is 64 percent versus 65.7 percent in 2021 Cash flow from operations was slightly weaker in the third quarter of 2022, and the year to date, the minus 323 million versus minus 96 million in 2021. Big impact on the working capital is higher raw material cost and also quite a high ready-made tires, which is still in our distribution network. Gearing at 32% versus 15.9% in 2021. Interest rate net debt at 374 million and capital expenditure at the same level in 2022 versus 2021 in the first nine months. Now I hand over to Teemu, and Teemu will talk about passenger car heavy tires, the other financials, and look at the outlook and assumptions. Teemu, please go ahead.

Thank you, Jukka. Let's start with passenger car tire performance in Q3 especially. Our net sales was on a level of 348 million. Reported growth was on a level of 5.6% growth. and with comparable currencies, the change was negative of 9.5%. Our segment operating profit for the quarter was on a level of 55 million. As we have been commenting already earlier, the lower tire supply will impact and has impacted our net sales negatively, especially in Central Europe. We have been able to increase our average sales prices with comparable currencies, and especially in Russia, the increases have been significant. Our customers have been securing their availability of tires, and now the inventories in the distribution are on a high level. In terms of our segment operating profit, naturally the lower sales volumes have an adverse impact as well as the change factory mix due to the floor production in Russia. We started adjusting our cost base in Central Europe and now we have aligned the resources there for the for the coming quarter's sales. Then moving to the net sales development by quarters, you can see here the trend lines. The sales volume drop is clearly visible there and is significant. And then when we move to the price mix, we can see strong strong positive development for the full bct business as well as in the call out boxes you can see the rice mix without russia which is also on a strong level and and then in the third quarter another positive factor to impact that is the changing region mix where the share of Nordic and is increasing and Central Europe is decreasing. Then moving to the bridges and here we can see the net sales components, sales volumes minus almost 32 percent, price mix 22 and then a strong currency tailwind of almost 15%. And then if we look at our segment operating breakdown, you can see the impact from sales volume and the positive development from the price mix worth of 73 million, which then offsets the material headwind, but don't offset fully both material and supply chain. impact and the currency impact for the third quarter in passenger car tire was plus 17 million on the segment operating profit level and then moving to the heavy tires our net sales in the heavy tires business unit was 68 million reported development was a minus and with comparable currencies it was minus 3.3%. Here we can see that supply constraints impacted the net sales in the quarter. Our segment operating profit was on a level of 9 million. Here we can see the same factors as in passenger car tires, lower sales volume, and then raw material and cost inflation showing a headwind in the business. Then moving to the V&R business unit, as we all know, the the third quarter is seasonally low quarter. But if we look at our top line, we can see that we reached net sales of 76 million euros, change in comparable currencies, 9.3%. And as always in the quarter, we show a loss of this time 5 million. Top line is driven with the price increases to combat the inflation. Moving to the assumptions for the full year. As we all know, the war in Ukraine and sanctions have a severe adverse impact on our supply capacity. And it will hit especially our central European area. Overall, the demand for both passenger car tires and heavy tires is estimated to be healthy this year. And the raw material and logistic costs continue to be on a high level. Then moving to our updated guidance that we announced last week, Friday, we increased our top line outlook. Now the new guidance is that the net phase is expected to be at previous year's level or increase. No change in the segment operating profit guidance, which is decrease significantly compared to the year 2021. And I'm handing back to you, Rukka.

Thank you, Teemu. And just recapping the discussion and presentation, also the material in the quarterly release. Indeed, past eight months since the war started in Ukraine, place in the past eight months in terms of first of all to secure that we keep on supplying our customers, secondarily to secure controlled exit from Russia and working on that also simultaneously and parallel to that to identify a site for the new plant and prepare the investment plans for the new tractor in Romania as well as expansion opportunities in Nokia and keeping on increasing capacity in Dayton as well as increasing capacity in Nokia. All of those have taken place simultaneously parallel during the past eight months. Now when we have announced that indeed the transaction has been signed in Russia, we move into securing the closing of the transaction as well as now that we announced that the plan for Romanian plant is approved and they will go into an implementation so there will be a time and period of implementation of these announcements and plans that will come in the coming quarters. It's of course quite important so first of all to secure that we are able to supply customers, keep on supplying them so we keep on adding capacity and making sure that both Nokia and Dayton plans are running well and adding capacity as planned and also then the new create a factory project that will get to a good start, as well as that we secure off-date volumes to help our revenue development and customer service in Central Europe. Then closing the transaction to exit Russia, quite an important implementation steps in coming months. We will also ensure that our Vianor and our operations all over the world, we supply the successful winter tires. Hakkapelitta 10 is a test winner. It's a strongly performing, studied winter tire. And our new product, Hakkapelitta R5, And we will ensure that the volumes and capacities of that tire is available to our customers. Business units and business areas continue to implement their specific plans. In Nordic, it's a high season and important winter season right now. North America, the same. And then Central Europe, we have, as Teemu mentioned, we have reduced our cost and we've They can cost actions, and they also adjusted the headcount and the cost level to expected volumes. Heavy tires are working on the expansion plans, including the Nokia site expansion, and Vianor has the high season in this quarter. While doing all that, it's important that we keep cost in strict control and we protect our cash flow. And we are pleased of the achievements of the quarter and year-to-date that at this point of time, when we go forward, we can say that we will focus on building new Nokian tires. And the new Nokian tires will be a company once we sign the agreement, close the agreement to exit Russia. We have no operations in Russia. We will be a company that operates in Western Europe and North America. And that is a significant change to our company, and building that company will be an exciting journey in the coming quarters and years. So thank you for your attention, and now I'll hand over back to Taivi.

Thank you, Jukka. Thank you, Teemu. And now, operator, we will be ready to move to the Q&A.

Thank you. If you would like to ask a question, please press star 1 on your telephone keypad, To withdraw your question from the queue, please press star two, but again, please press star one to ask a question. We'll take the first question from Michael Jacks from Bank of America.

Hi, good afternoon. Thanks for the presentation. I have a few questions, if I may. The first one, could you please provide the current net working capital position on the Russia balance sheet, including cash. And just give us a sense for how much of this, if any, is already factored in re-disposal value of 400 million. I'll stop there.

So the 400 million value, that is the enterprise value without debt and without cash. And then there is a factor that I cannot comment what is then the additional cash and working capital component. But the current net asset, as we have indicated in the release, excluding net debt, is on a level of 480 million, which maturity is our capital and that fluctuates during the year because of the seasonality. And then the cash, what we have been commenting already in our earlier quarterly calls at the end of Q3, it was some 50 million.

Thank you. And then just with regards to the remaining inventory balances, of ready-made tires exported from Russia that is sitting outside of Russia. Are you able to provide some information on the balance, the remaining balance there?

We can basically comment that in the passenger car tires, the Finnish good inventory at the end of Q3 was roughly at the same level as it was a year ago.

Understood. Thank you. And then just with regards to the fixed cost savings or the cost savings in Central Europe that you mentioned, could you give us a sense then, please, for the magnitude of these cost savings that have been implemented and whether or not we should expect any cash restructuring impacts attached to these?

So the cash restructuring impact is visible in our release, some five to six million coming in the coming months. And then the saving is roughly double of that annual saving.

Thank you. And then my final question, what will be the earliest date that you will begin to disclose the Russian operations as discontinued?

First, we need to close the deal and then Q3 is naturally the earliest point.

Okay, understood. And Elliot? And in the interim, are you able to give us any kind of a sense for the underlying profitability of the Group X Russia?

What we have been saying and commenting that Russia has a significant impact on our profit, and it has a twofold effect. First is the supply effect. uh that we have been saying that now when we lose the the supply the the cost per tire is some 10 euros per tire higher without pressure so there you can get the supply impact estimate and then the the commercial business impact in Russia is then the second one and traditionally it has been also a significant portion.

The final impact, especially in 2022, is that we have quite extraordinary high logistic costs because we took extraordinary measures to transport tires from Russia to Western Europe and North America. Those costs are also in the P&L of 2022 required and adjustment elimination so that we have the Western world profitability.

That's very clear. Thank you very much.

The next question comes from Akshat Kakar from JP Morgan.

Thank you. Good afternoon. Three from my side, please. The first one on greenfield investments announced in Romania. Can you just talk about the saving of that capital expenditure over the next three to four years and also the timeframe in which you expect to hit the six million tire annual capacity? That's the first one. The second one is on contract manufacturing. How quickly can you get access to contract manufacturing for the tires that you cannot produce going into 2023? And are these arrangements already in place? And also, it would be great to understand if you will use contract manufacturing only for summer and all-season tires or for winter tires as well. Thank you.

Capital outlay of the The plan will be a little bit in this year, so in terms of equipment, mostly in 2023-2024, and then a tail end in 2025. We would say that about 60 to 100 in this year, about 150 to 200 next year, 150 to 200 next year, and then the tail end in 2025. expect that volumes will be running at close to full capacity towards the end of 26 early 27.

As we stated in the release so the first tires will come out at the end of 24 commercial production starts in 25 and then we are with in full speed in full calendar year 27. Thank you.

Yeah, the question on contract manufacturing.

Yeah, we are working on the offtake and we expect that the first significant volumes of the offtake will be available in 2023.

And is it only for summer and all-season tires or for winter tires as well?

That we will see.

Thank you for the lead-off.

The next question comes from Giulio Pescador from BNP Paribas XN. Please go ahead.

Thanks for taking my question. The first one on the capacity runway that you currently have. Can you maybe remind us at what run rate would you close the year in your remaining plans in Finland and the U.S.? ? And also the second question, more on the deal with Dasnet. How do you plan to get the cash out of the country? Have you already spoken to the Russian authorities about this? And did you get an indication that they're in favor of positive signing of the transaction? Then the third question, if I may. On the winter season, it started on the British side so far, in Europe at least. Are you worried or is it too early to say? Thank you.

So if I start with the announcement from Friday, time flies. Now the process starts with all relevant authorities and We expect that with a strong buyer like TAPNET, we are able to navigate through this process. As we all know, it contains a lot of uncertainties, but we do our utmost to repatriate the money according to our agreement. How long the process? Last, we cannot comment at this point of time, because we don't know.

In terms of capacity utilization, as we've said, as we don't have the Russian supply anymore, so both the Dayton and Nokia, as well as the heavy tires, are running flat out in available capacity. based on our plans in 2022 Dayton is progressing towards that four million tyres in 2024 and we are very much on track and now we are progressing towards five to six million tyres very much on track. Heavy tyres also capacity fully utilized at this point.

Sorry, in the winter season?

So we believe that winter season is quite well covered and we are quite optimistic about winter season, but obviously it's early days, so we will see how it evolves. But in terms of product-wise, product availability, we are well prepared.

Sorry, can I just go back on your initial point on getting the cash out of Russia? In case there were any problems with the process, how do you manage to finance the expansion project I mean, I guess if you get 400 million, then we can all see how you finance the first few years of CapEx. But in case there were any delays or issues with that process, what are the other options?

As you know, our balance sheet has been traditionally strong. And in this kind of a situation, that is our benefit that regardless with the money From Russia, we are able to finance these 650 million investments in the coming years.

We, of course, work very much and focus on the operating cash flow EBITDA and across cash flow EBITDA. And we'll be ensuring and working to make that finance also the operations and the investments. So clearly a strong focus area is EBITDA.

Okay, thank you very much.

The next question comes from Christoph Laskali from Deutsche Bank.

Good afternoon, Christoph Laskali from Deutsche. Thank you for taking my question as well. Coming back to the 400 million and working capital from Russia, just to make sure I get this right. So the asset price would be roughly 400 million. And then on top of that, you will get cash for the existing working capital in the plants. Could you just roughly quantify that? or did I miss it earlier, basically? And then on the outsourced manufacturing or the contract manufacturing, you gave a comment on the business ex-Russia when it comes to production cost. Could you give a comment also on how the margin profile of this outsourced capacity would look like? I guess probably slightly dilutive to your current facilities in Europe and the U.S., And then lastly, on the heavy side, you just said the heavy production is also running flat out in terms of capacity. In the slides you mentioned and in the presentation, you mentioned some problems in the supply chain for heavy. Is that comment then reflecting that all the problems are essentially already solved again and you can proceed quite nicely into Q4, or should we expect any disruptions also in the last quarter? Thank you.

Let me start with the heavy tires. Basically, we have in Finland and some other countries as well, very high sick leaves in terms of COVID and various things. And so that has caused a little bit of issues on the manufacturing. And this high sick leave rate has a little bit slowed down our productivity and output. We believe that those issues are behind us. And when we go into the fourth quarter, we should not have those issues anymore. But, of course, it's something that we want to work on, and this is also related to how we see the COVID and various flu things coming in the autumn time or in the winter time. But so far, so good.

Regarding the Russia transaction, at this point, I don't want to disclose more than the cash balance that I mentioned earlier in the call.

Then finally about the offtake. So obviously offtake and outsourced is something that has a different margin profile but also maybe just important to keep in mind that they don't tie any manufacturing assets. So in terms of capital employed, offtake is a different kind of equation and we follow that based on capital employed and margin profile. It doesn't tie a lot of assets. But clearly it's not the kind of profitability that we historically enjoy in our own manufactured products.

A brief follow-up, if I may, on that. Is there an indication that you would want to give or can give already with regards to the size of the contract manufacturing? I guess not as big as the greenfield plant that you are currently looking to build, but could it be sizable or is it just a small addition?

it will be a stepwise more important addition of our product portfolio and over time our plan is that we have three manufacturing sites so romania nokia the u.s state and support factory we would have a virtual off-take factory so that that will remain as an important element in our manufacturing or let's say a product portfolio alternative. And so progressively we want to develop that long-term.

Understood. Thank you.

The next question comes from Thomas Besson from Kepler Chevrolet.

Thank you very much. I have several areas that I'd like to ask about. So if that's okay, I'll ask them one by one. First, on the quarter numbers, there are a few things that I don't really understand. Maybe you can help. Your Russian and Asian sales are up in Q3. Can you explain how it's possible? I understood you raised prices substantially and maybe you sold just a lot of stars in the first 10 days of July, but it seems to be difficult to understand. Second question on the accounts, you have record level of inventories and receivables at the end of Q3. Can you elaborate on that? And then, can you explain the 7 million forex boosts, and whether we should expect something similar in Q4, or whether that was just a pure one-off? That's the first set of questions. Thanks.

If I start with Russia, the price increases have been significant, and And that's also the main reason why our trade receivables have been increasing on our balance sheet. Then in terms of inventories, our inventories on a group level have been somewhat on the same level than prior year, but they are clearly higher In the best part and in Russia, they are clearly lower. So those were the comments to the balance sheet topics and pricing.

Currency tailwind, difficult to anticipate. So again, looking at the currencies, the forecasting there is difficult. But so far, we've been able to enjoy a tailwind in currency. year-to-date and in the third quarter.

Thank you for that. Moving to the second topic I wanted to address. If I understand clearly, with the plan, you're going to have Romania as a key new factory, plus a kind of flexible operation somewhere with your contract manufacturing operations. So you do not plan to build up a fourth factory somewhere, right?

The current plan is that we will have these three plants, as stated by Jukka, and the fourth one is the virtual factory, as we see today.

Great, thank you. And lastly, I'd like to come back to the cell. I'm sorry to ask that maybe a bit abruptly or directly. I often do that, but there's nothing I can do against that. You're the first company, and we look at a lot of companies, that manages to sell a Russian asset to a Russian company for an important sum of money. Most companies we've looked at exited Russia for one global, and we're happy to do that. Can you explain exactly both the legal and ethic consideration of the sell that happened that you announced on Friday and describe exactly what that nest is? You were keeping this asset in Q2 because you feared somehow it could be used for the wrong end, but now you're selling it. So I'd like to understand that. and also understand what additional write-down we can already factor in. Can we already do that? The difference between 480 and 400, should we assume that necessarily 80 are going to have to be written on, or is it dependent on the elements you can't comment on linked with working capital? Thank you very much.

If I start with the last comment or question you had about... possible write-down. As we stated in our release, there are so many different factors impacting the final outcome, so that we cannot estimate at this point, because there are factors

impacting to the process to the timing of the closing etc so therefore it is impossible to to quantify that at this point of time and then selling operation and sustainability of owning an operating factory in russia after the sanctions became impossible and so therefore remaining options were considered and then finding a buyer that is not making passenger car tires was of essence. And we believe that that's what we found. We did a lot of background work and did the work. And this is the outcome.

Thank you very much.

We'll now take the next question from Panu from Deutsche Bank. I beg your pardon, Panu from Danske Bank.

Yes, thank you. It's Manu from Gdansky. I have three questions. Firstly, on CapEx, thanks for guiding the factory investment well, but what is the maintenance CapEx level without the Russian factory going forward?

So roughly on a level of, I would say, now 100 million, give or take.

Okay, so it's not that much lower than it's been historically.

Panu, as Jukka was commenting earlier, in the coming years, some of the key metrics for us is the EBITDA, and also then we match our cap expense according to the EBITDA going forward on a cumulative basis.

It's also true that the mold investments are an important part of CapEx. That will actually skew our investments on CapEx higher.

Okay. Makes sense. The second question was on profitability without the Russian factory. You already commented that, but if I ask it this way, that Is Q3 a level that's even roughly representative of what you think you could kind of generate in terms of EBIT margin going forward?

You cannot draw that kind of conclusion at all. So let's come back to that when we have closed the deal and published the restated figures. But as I stated, Russia has a significant impact, twofold, the supply and the commercial side.

We need to clean the numbers because there are lots of noise in our numbers. So that will have to be done before conclusions and comparables can be drawn.

All right. My third question is on the Dayton factory. Basically, two things about it. I mean, you're now saying that you should reach 4 million in 2024, but how is it taking so long as the first commercial production started in 2020 already? So have you kind of changed plans in terms of mix or something else in the factory? And then secondly, on Dayton, do you have any plans of increasing the capacity above 4 million tires once you get there?

Dayton ramp up again is, as somebody was pointing out, it's not a benchmark in terms of a quick ramp up. And clearly, if you remember that, unfortunately, the COVID came and we slowed down our ramp up. Now, currently, increasing the volumes and so on are dependent on the equipment. So we are running flat out in Dayton. So all the capacity and capital which is on the floor is being used, but then the new equipment come in and we install them and then we ramp up machine by machine. But I think that our plan to achieve 4 million tires in 2024 has been there all along.

Okay, and on the plan of increasing it above 4 million?

think that uh again as i mentioned that we basically achieved that we increased capacity in nokia and look at the nokia factory expansions and then we built the new factory and then increase off take when we get to 2024 i we will then explore the situation and see what needs to be done and what can be done but obviously with these actions that we have coming two years will take place. When we are in 2024 or late 2023, then we will see what needs to be done.

All right. Thank you.

The next question comes from Pierre Quiminer from Stiefel. Please, go ahead.

Good afternoon to you all. Just a A couple of questions, but first off, data I missed. What did you say, Jukka, regarding the Finnish factory, end of this year and in 2024, regarding the passenger car tires capacity?

I think the Finnish factory, I said that we have acquired real estate next to the factory. and that historically we didn't have the opportunity to expand the footprint in Nokia because we were land restricted. Now we have acquired real estate and we have opportunity to expand the Nokia factory and increasing the size of it and working on the plans and as soon as we have the plans ready then we get the board decisions and then we go ahead. So we are working very much on Nokia expansion.

Yeah, but end of this year, what will be the actual capacity of Nokia?

I didn't say anything. I said that you think it was. I didn't say anything, okay. I didn't say anything. I would say we are working towards five to six million in our plan as agreed. And we are installing new machines in Nokia in the latter part of this year and then prepared for next year capacity increases.

Okay, that's fair enough. I would have three questions. One on volumes development Q3 and possibly Q4 and into next year. How much of the volumes of the shipments you made in Q3 were made out of inventories and how much were made out of, I would say, regular production from Nokia or Dayton?

So far this year, our inventories are at the same level, roughly at the end of Q3.

There is no drawdown on inventories? No drawdown on inventories, okay. And last, on Russia. Sorry, to go back to the topic again, I would have two questions. Like raised in a previous question, you still had significant revenues from Russia in the third quarter, close to €137 million in revenues. How should we think about the fourth quarter regarding Russia? And next year, I would suppose that there will be no longer Russian revenues, right?

When we sign the deal, we still have the operation. When we close the deal, then we have no operation and we do not consolidate anything from Russia, except, of course, the final impact of the purchase price. But between signing and closing, whatever we sell or deliver from inventory or manufacture in Russia will be part of our P&L. But sufficient to say that volumes, as you see, that the first nine months, the share of Russian factory now production has significantly reduced and will be at low level at the end of the year, towards the end of the year and until the closing.

Okay, so Q4 should be basically the contribution from Russia in terms of revenues and profitability should be lower than what we saw in Q3, right?

Well, you know, again, we come back to the seasonality that some of the tires that are in inventory or warehouses in Russia were made in early part of the year for winter season of this year. And those, of course, will be delivered to retail and distribution during the quarter. But again, it's not at the same level as previous year or what has been historically true.

Okay. And last question regarding the asset transfer. Honestly, I'll just try to understand how you have managed that kind of magic to monetize those Russian assets in a country which is under heavy sanctions, in my understanding, from both the EU and the US. But having said this, when you close the deal, will you be able to immediately repatriate the cash? Or can we assume that it could be segregated somewhere in Russia until the war ends, and then after you will be able to repatriate the cash, if at all? Thank you very much.

In its simplicity, we don't close the deal before we have the money.

Okay. Very clear. Thanks.

The next question comes from Artem Beletsky from SEB.

Yes, good afternoon and thank you for taking my questions. Maybe I can start with a couple of questions relating to investments. And firstly, starting with Romania, so you actually stated that There is scope for further expansion beyond 6 million tires. So could you maybe talk about what is basically possible at that site when it comes to potential phase 2 or phase 3? And could you also confirm that capex of 650 million euros also includes mixing capacity investments on that site? And then just a quick follow-up relating to a discussion what comes to first aid capacity expansion and basically land acquisition in Finland. Is it basically relating to passenger car tires where you're looking potentially to increase capacity or is it also heavy tires related?

So maybe if I start with Romania, so yes. Excuse me, it's a full business system, so including mixing, tire building, as well as all the other distribution, et cetera, et cetera, curing. So 650 million covers all that. And a good rule of thumb is that it's about 100 million euros per one million tires. So if you think about how the investment can be quantified. uh also uh the site allows uh tripling the volume if we go that route but i think that our learning recent learning from russia country risk and having all the eggs in one basket is probably a good guidance that we will not do that kind of an expansion we may consider something else on that site or distribution or other things, but we will not build a new Russia in Romania. We will make sure that our production footprint will be more diversified and we have alternatives and sources of tires from multiple geographies, including also then the virtual factory of offtake. So I think this is the recent learning. Hopefully you all understand that this is a very important learning for all of us. Then Nokia expansion, I believe that, of course, heavy tires is a main beneficiary of that. But at the same time, as we are installing new equipment in Nokia for passenger car tires right now and towards the year end and be available for next year. So obviously the combine of Nokia will then have a higher output of the passenger car tires as well as heavy tires.

Okay, that is very clear. And then maybe just following with some questions to Teemu relating to financials. So the first one looking at the EBIT breach in Q3. So there has been quite substantial negative item relating to supply chain of more than 60 million euros. Could you maybe a bit more discuss what is behind this negative development? Is it still basically high logistical expenses as you have mentioned in Q2? And then the second question is relating to price mix development, excluding Russia, up 28% year over year. Could you maybe indicate what is the portion of the mix in this development? I guess you have been more selective, for example, in Central Europe when it comes to deliveries.

Starting with the supply chain basket there. the two biggest drivers are as we have been discussing earlier the logistic warehouse and and that kind of stuff plus the factory mix now when we don't run our russian factory with full speed the negative delta is is visible there those are the two main main factors and then you were asking about uh the the price mix yeah so in the price mix without russia as i stated that the the region mix has a clear impact uh due to the reason i i i said So when the share of Nordics is increasing and the share of CE is decreasing, that will be then the end result that we see here in our price mix without pressure. Not to quantify that more precisely.

All right. Thank you.

If there are no further questions, I will hand the call back over to your host for closing remarks.

Thank you. If there are no additional questions, then I would like to thank you all for participating and have a good day. Thank you.

Thank you. Have a good day.