Nokian Tyres Plc

Good afternoon from Helsinki and welcome to Nokian Tires Q2 24 results conference call. My name is Päivi Antola. I'm heading the investor relations in Nokian Tires. And together in this call, I have Jukka Moitio, the president and CEO of the company, and Nico Haavisto, the CFO. As usual in this call, we will go through the results and talk about some other topicals as well. And this will be presented by Jukka and Nipko, followed by a Q&A. So, Jukka, the floor is yours.

Thank you, Päivi. Welcome on my behalf. And indeed, we'll talk about the results and some of the recent highlights that have happened in the company. But we will go through the presentation. I go through the presentation called Improved Tire Availability, Driving Sales Growth in a Challenging Environment. I taped it on July 19th and I moved to page 1, which is the Romanian factory progress. We reported on July 1st that the first tire was manufactured at the Oradea factory in Romania. We are going to remind that the commercial production is expected to start in 2025. However, the 60-member launch team has been trained in Finland and they are now ready start the preparations for the commercial production. And we are also saying that the investment is in budget and on schedule. And indeed, this is the first zero CO2 emission tire factory in the world. And so in that sense, we are making history. And you see the team and you see also the first tire made in Romania on page two. And then I'll move to page three, which is just an aerial picture of the Romania factory, the site in June 2024. And on the left-hand side, you see the mixing building, which is being prepared right now. You see in the middle, the production building, and also on the right-hand side, the small office, which is part of the production building. And then on the right-hand side, things could warehouse. And as you see at the end of June, site has been prepared, the buildings are being prepared and we are very much on schedule to have the ribbon cutting in September and then to have the full commercial production in early 2025. Then I move to page four which is a similar aerial picture of our factory in the US Dayton and we have now completed the investments in Dayton so all the hardware All the investments have been done, and also the Finnish Good Warehouse, which can house up to 600,000 tyres, has been opened during the month of June, and indeed now the site is complete in terms of the capability to produce. And we will produce there all-season tyres and all-weather car tyres for North American markets, And also we started the light truck tire production this year. The plan was originally, when this factory was decided in 2017, that some of the light truck tire production would have been in Russia and then they would have supported the North American market. as you all know, who have been following the company for some time, that indeed we needed to sell the Russia factory in 2022, and we made a change in the production schedule in Dayton factory, and this change has now been completed and is coming to the market during the course of 2024. So this says that the investment phase has been completed in the US and the aerial picture compared to Romania, I moved to page five, and that is progress in the renewable material, which can potentially replace carbon black in tires. So we made the first ever concept tire with the renewable lignin-based material made by United Paper Mills, a Finnish fire materials company. It's called UPM Biomotion RFF trademark. and that is a product that United Petroleum will be making in their factory in Germany. It has the potential to replace a significant part of a carbon plaque and reduces the need for fossil materials and lowers the carbon emissions in tyre itself and in tyre manufacturing. And as a reminder, our target is to increase the share of recycled or renewable materials in tires to 50% by 2030. And this, again, is one step on that way. You may remember that earlier this year, we also made an agreement to buy recycled carbon black that can be used in tires. So two ways to improve the sustainability of tires and tire making. And now I move to page six, which is the net sales and segments operating profit in quarter two. Net sales increased by 11.2% with comparable currencies. That was driven by the improved tire availability, and especially Central Europe, which was the biggest growth area, strongest growth area, and that was achieved by better availability, especially with the off-take tires. Our segment's EBITDA at 46.8 million versus 41.3 in 2023. There was an improvement there. Obviously, we had the issue of political strikes in Finland in the first half of 2024, and we have already earlier said that the impact is roughly about 20 million Euros in EBITDA, other which more than half was in quarter one and then less than half in quarter two. We started the quarter two in the month of April. The first eight days were impacted by political strikes so that we couldn't produce anything in Nokia and neither could we ship anything in the first eight days. segments operating profit at €20.1 million versus €15.2 million in 2023, and higher sales and lower raw material costs helped our profitability improve. I move to page 7, which is reminding that we have a strong balance sheet, despite the fact that we are investing heavily, so our capital expenditure is 159 million in the first six months. Lion's share, a clear majority of those investments are related to Dayton warehouse, Dayton factory completion, as well as, of course, the Oradea factory build-up. And that number, 159 million, is clearly higher than 87 million that we invested in capital expenditure in 2023. This is also the time when our interest rate net debt is at its highest, because we are investing significantly, and our generation of EBITDA is still not at the level where we aim for, and the reason being that the factories that we are building are not yet delivering any EBITDA. And first six months sales, 561 million versus 529.5 million in 2023. And as just a reminder, 20 million euros impact from the political strikes in the first half on EBITDA. And then I will hand over to Niko to talk about the profitability in more detail.

Niko, please go ahead. Thank you. through the segments a little bit in more detail. So in the passenger car tire segment, we have the higher sales and improved profitability, and especially the sales increase was driven by the Central Europe. And in total, the net sales being 189 million euros, there is a growth a little bit more than 24% in comparable currencies. Also the KSP with comparable currencies increased slightly. So there is a better mix and and. For price mix and and and lower cost as well. The segments operating profit was in Q2 7.1 million euros. In the page. Nine, there is the passenger car tires breach. There you see that the volume growth is the plus 22%, 33 million euros, price and mix positive with 4 million euros, and the currency is not playing that big of a role in Q2. In the segments operating bridge, I would like to highlight there the supply chain cost. So it was increased largely due to the uptake imports, as well as, as Jukka pointed out, the Red Sea crisis, as well as the political strikes here in Finland. On the page 10, In the middle column there, the price and mix, so both were slightly positive in terms of development there, so the 2.4%. This will moderate towards or during the H2 when we have more products and sales volume in the Central Europe. Of course, the winter tires will flatten that a little bit as well, but especially the central Europe now being playing a bigger role, it will moderate going forward. Page 11 on the heavy tire segment, the market demand, especially in the OE was was weak, as we said already in Q1, that we saw that during the H1, it will be a weak demand in the OE. Yet we had the sales of 60 million euros, so there was a decrease of some 10%, but at the same time, I'm proud that we were able to keep the segments operating profit at around 13% level. So that is a good achievement in that business and in this market environment. And then, finally, our Vianor business. So in terms of sales, we were at the last year's level. The operating profit decreased by 2 million euros. And there, you know, we continue to say that the inflation to put that fully into the pricing. We have some difficulties there, but we are doing our best as we speak. And in terms of guidance, we get that unchanged, i.e. that our net sales and segments operating profit is expected to grow significantly compared to last year. the premises as well that we see that the raw material costs are expected to start gradually increase during the second half of this year. And with that, I hand back to Jukka to wrap it up.