Nokian Tyres Plc Unsp/Adr

Good afternoon and welcome to Nokian Tire's Q4 and full year 2025 results webcast. I am Annukka Angaria from Nokian Tire's investor relations. Joining me today are Nokian Tire's president and CEO Paolo Pompei and interim CFO Jari Vuhtanen. As usual, we will begin with the results presentation. And after that, we will open the line for questions. You may have noticed that in the connection with the results, we published also Nokian Tire's updated strategy and financial targets. These topics will be discussed in detail tomorrow at our Capital Markets Day. And in today's call, we will focus on Q4 and 2025 financial performance and the key drivers behind the results. And with that, Paolo, please go ahead.

Thank you, Anoukka, and good afternoon also from my side. Thank you for participating in our quarter four release as well as year-end release. And what we will do now in the next few minutes, moving to the agenda, we are moving to the highlights. discuss about our financial performance. Yari will present the business unit performance and we will close the presentation together with the assumptions as well as the guidance. let's move to the highlights moving directly to page number four it was quite a good year in terms of improvement we have been improving a lot our performance and this was possible to due to strong price and mix improvement in particular in the passenger car tires We've been also very active in releasing new products, mainly related to Central Europe and North American market as a new growing areas for our business area. And we've been strengthening a lot our premium positioning through pricing, but also through very effective communication and through dedicated marketing and communication activities. We've also completed a major investment in Oradea. We will discuss about that later on. And we had also a strong improvement of the cash flow, supported mainly by improved working capital, but also by the reduced capex that are now gradually getting back to normal level. Every tire was performing, remained pretty soft actually due to the market decline in particular in the agricultural and forest tires industry. Moving to slide number five, we completed the first important step of our expansion in Romania with reaching one million pieces produced in our facility in December 2025. So this was actually an important milestone for us because now we clearly move from the investment phase to stabilizing our manufacturing platform at the moment Our team is extremely busy implementing new sizes and developing new products for the Central European market. We also obtained at the end of December the first installment of 32.6 million from the Romanian government as a state aid. As you may remember, we are entitled up to 100 million euros to be supported by the Romanian government at the end of the full process. Moving to slide number 6, this is also an important highlight when we think about the 2025 We have been investing heavily in our brand, we have been investing heavily on our product development. We signed different partnerships. I would like to highlight the one we signed with our brand ambassador, Kimi Raikkonen, that is well reflecting our brand values. And he will be with us also in 2026, supporting our development, being with us during the launch of new products and supporting us in the development of the new products. We also signed an important agreement with the IHF organization since we will support the World Cup of ice hockey that will take place in May in Switzerland. As I mentioned before, we were very active in delivering new products. We have developed more than 150 new products in 2025 that will support our future growth in 2026-2028 and of course we've been focusing a lot in releasing new product in our growing market like Central Europe as well as North America to support the demand coming from those markets. Moving to slide number seven, we did also important progress when we talk about our sustainability journey. We are pretty proud about that because we have clearly set a direction that is getting closer to our long-term financial targets. We achieved 28% renewable and recyclable material within our products, moving up from 25% that we had in 2024, so a significant improvement that is supporting us towards our target of 50% by 2040. Then we reduce by 38% our CO2 emissions. I remind you the baseline is 2022. This was possible for scope 1 and 2 also due to the startup of our operational Aurora DEA as you remember very well, are reflecting 0.2 emissions in the current setup. We also reduce significantly our accident frequency from 4.6 last year to 3.7 this year. There is still a lot to do. Obviously, having new operations, we are improving day by day also on the new site, but I think also when we look at this kind of KPIs, we are improving significantly compared to previous years. And now let's move to the financial performance. So moving to slide number nine. Well, we have been navigating in a pretty stable market in 2025. The passenger car tire market was pretty stable. both in europe as well as in north america we are less exposed to the tractor market who remains stable as well we are more exposed to the agricultural and forestry tire market that was down five percent in the replacement channel and ten percent in the original equipment segment so the market was not really supporting our journey but we have been obviously navigating well in these market conditions I think we will see that quarter four 2025 was our best quarter of the last three years, while sales remain pretty flat. And this is also driven by the fact that in quarter four 2024 we were heavily pushing for higher sales, this year we fully dedicated our attention to improving term of profitability. And this is quite visible when we look at our EBITDA improvement in quarter four, we were up by 30% up to 87.1 million euros or 20.9% in relation to sales. Our segment operating profit also increased significantly by 43%, up to €51.5 million, all 12.3% of net sales. This was mainly driven by strong price repositioning in the passenger car tyre, and of course in Q4 we had also some support from lower raw material costs. We had also, I would say, a strong improvement in terms of operating profit, up to 35.1 million euros, this is 128% more than previous year, or 8.4% of net sales. Looking at the same numbers for the full year, moving to slide number 11, we were able to increase sales by 7.2% with comparable currency. And we were able to grow actually in all the regions. Our segment EBITDA was 222.2 million or plus 20% compared to previous year. It was 16.2% of net sales. Segment operating profit increased by 28% up to 91.3 million euros or 6.6% of net sales. And again, same as in quarter four, strong price increases or price repositioning. And of course, in the full year, positive effect obviously coming from the sales volume. The operating profit was €35.8 million at the end, a significant improvement compared to previous year, or 2.6% of net sales. The Board of Directors has just proposed a dividend of €0.25 per share to be paid in April 2026. Moving to slide number 12, as I mentioned before, we were able to grow actually in all the geographical areas where we operate. We were able to grow in the Nordics, in Central and Southern Europe, as well as in North America. I would say the growth in North America of 16.6% was really a good performance in terms of growth, in particular when we talk about price repositioning in the North American market. Moving to slide number 13, I would like to highlight when we talk about this slide about two things, very, very important development. The first one is the interest-bearing net debt. That was $664 million at the end of 2025. This was actually much better than what we were also estimating at the end of, previously at the end of quarter four, ourself, but that was turning really in the right direction. As well as the capital expenditure was of $106 billion. 26.9 million almost 127 million we need to remind you obviously this included 32.6 million state aid from the Romanian government so we were approximately at 160 million in total so moving significantly down from previous year cash flow also was improving both in the quarter as well as year to date But let's look at the cash flow in more details in the following slide, in slide number 14. As you can see, we were able to improve the change in cash flow by over 200 million. This was obviously driven by an improvement of the EBITDA, but also an important improvement of the working capital despite the growing sales. And of course, we were investing significantly less than previous year. Financial cost has gone up clearly by $16 million and then of course we paid a dividend of $0.25 during 2000-2025 and our debt has gone up compared to previous years. So I would say also in terms of cash development we are improving significantly our position and we see actually a better outlook for 2020-2026. Moving to slide number 15, you can clearly see that we have now completed a strong investment phase that was approximately 800 million euros between 2023 to 2025. CAPEX now is returning to a normal level in line with the depreciation. We are estimating and anticipating approximately 130 million euros to be invested in 2026. And now stop here and I would like to ask Yari to comment the business unit performance.

44.1 million and net sales increased by 3.9%. Average sales price with comparable currencies improved and the share of higher than 18 inches tires increased significantly. Segment operating profit was 32.3 million or 13.2% of the net sales comparing to last year 13.6 million or 5.7%. Segment operating profit improved due to price increases, favorable product mix, and lower material costs. In the next page, we can see passenger car tires, net sales, and segment operating profit bridges. Net sales in the last quarter increased by 6 million. And again, we can see very positive improvement coming from price mix, plus 20 million. On the other hand, sales volume was down by 11 million. And then some headwind made from the US dollar minus 3 million. In the segment operating profit bridge, the same positive price mix plus 20 million. And now first time in 2025, we had positive contribution coming from the material costs plus 6 million. Sales volume in operating profit was slightly down, as well as SGA, otherwise quite neutral changes compared to the last year. In page 19, we have Passage Card Tires net sales components and quarterly changes. In price mix, we can see that this was now third quarter in a row that we reported quite significant positive change comparing to the last year numbers. In the fourth quarter, price mix positive impact was 8.5%. Volume change was minus 4.6% and currency minus 1.4%. Moving to page 20, heavy tires. In the last quarter, lower volume affected net sales. Net sales was 60 million and the change in comparable currencies minus 2.8%. And net sales decreased caused by lower volume of forestry tires. Segment operating profit was 6 million or 10% of the sales and profitability declined mainly due to lower volume, weaker product mix and inventory valuation, which had a positive impact on last year numbers. And Vianor in the last quarter operating profit was stable, Net sales was 132.4 million and net sales with comparable currencies decreased by 2.7%. And sales was impacted by the mild winter in the last quarter. Segment operating profit was 11.2 million or 8.5% of the net sales and segment operating profit was exactly at last year level 11.2 million. Then handing over back to you, Paolo, with assumptions and the guidance.

Paolo, please unmute yourself.

Thank you, Anouk. Before we move to the guidance, I would like to say, first of all, thank you to the whole team. This was, for us, an important year of transformation, moving really from managing a strong transformation to start to create value, future value for our own shareholders. This has been well managed by the team, has been working hard in multiple dimensions, and we'll be happy also tomorrow to talk about our journey and how we will be able actually to improve further our performance for the years to come. But let's move to the assumption and guidance that is also very, very important. We are expecting for 2026 net sales to grow. compared to previous year and our segment operating profit as a percentage of net sales to be between 8 to 10%. So we are becoming more specific about our guidance because we want to make sure that You will be able to follow our own journey with more information and more precise information now that our journey is becoming more and more reliable and more and more easy to manage when we look at our future development. the entire demand from the nokia entire market is expected to remain pretty flat in 2026 so we are not expecting the market to grow significantly of course the development of the global economy as well as the geopolitical situation or trade tariff is creating some uncertainty and some volatility but obviously the improvement is supported by new high performing product prime mix and of course efficiency improvements that will be still having a strong effect in the years to come. Before to move to the question and answer, I would like to remind you that we have appointed a new CFO. He will start the latest the 15th of April, 2026. So we will have the opportunity with Yari to keep working together on the quarter one release. Timo Koponen is the appointed new CFO. He has an extensive experience in the financial operation. He has been in important companies such as Normet, where he is currently the CFO, Lamor Corporation, but also he had an extensive career in Wärtsilä, Ackman, as well as Kone Cranes at the beginning of his career. So we'll be happy to present Timo as soon he will be able to join us latest, as I said, by the 15th of April. We remind you that tomorrow we will hold our Capital Market Day. This will be done actually here in Helsinki in the Scalding Up Hotel. So you are really welcome to join and we hope to see you tomorrow at 2 p.m. to discuss together our new financial targets as well as our new journey up to 2029. We can now move to the question and answer and we look forward to your questions.

If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Akshat Kakkar from JPM. Please go ahead.

Good afternoon, Paolo and Yari Akshat from JPMorgan. I have three questions, please, and I will take them one by one, if possible. The first one on end markets and what your peers have been saying recently. So Goodyear last evening talked about global tire shipments being down 10% in the first quarter. And I understand they do have exposure to the truck business and there are some weather-related impacts in the U.S. But could you just give us a download on how you're seeing the inventory situation in both Europe and North America? And how do you expect the start of the year in terms of selling volumes, please?

Thank you. Thank you very much for your question. Obviously, comparing Nokia and Tire with Goodyear and other companies, I need to remind you that obviously we are mainly focusing on specific segments, while Goodyear obviously is exposed to... larger to a larger scope. In general, we see, I would say, an healthy development of the inventory. We believe that from the pure dealer or seller point of view, the inventory were pretty stable during 2025. And we see a pretty stable also consumer demand. So this is not really affecting our own business. Of course, when we look at the quarter four performance of Nokiantari in particular, we should not forget winter. came pretty late so in some way we were affected by a lower let's say a mild winter season in quarter four fortunately since i would say before christmas then winter started to come and started to come heavily in in europe both in the nordics as well as in north america so This is also making us confident about the inventory development of 2026, because obviously a stronger winter for a company like us that is strongly exposed to the winter tire business or all-season business, it's obviously something that is helping the inventory to be released to the end user. And consequently, we can anticipate that from the inventory point of view, we don't see major issues in 2026.

Thank you. And the second question I have is on your top line assumptions. When I think about 2026, you're talking about top line growth. Could you just help us understand that better? What kind of growth assumptions are you working with either in the passenger car business or for the group overall? And what does that mean in terms of volume growth for the business in 2026? That's the second question, please.

Thank you also. This is a very important question. When we say growth, we are expecting one-digit growth. This is the best visibility we have at the moment and it's also reflecting our strong focus on profitability improvement. What I mean is that we are not going to look for market share growth, we are not going to fight for higher volume. As far as we don't see, those volumes will deliver value. This was the journey, as you know very well, that we started in 2025. We will keep carrying this journey in 2026. So when we say growth, we are at the moment indicating one single digit growth.

Understood. And the last question is on the definition of segments operating profit. Sorry, I can hear a massive echo. The question is on these IFRS exclusions. I thought the idea was to move away from any excluded costs in the medium term. Could you just tell me your recent view on how you want to tackle these exclusions going forward and what do you want to book in those one-off costs, please? Thank you.

Yes, we have anticipated several times that we will gradually go away from this exclusions concept. Obviously, we will do it gradually because last year we had 70 million exclusions. In 2024, in 2025, we had 55 million exclusions. So we will go gradually down. When we will discuss tomorrow our financial targets, obviously our financial targets will be very close to segment operating profit equal to operating profit. This is obviously a gradual process, so you can expect a gradual reduction. Obviously, a gradual reduction will carry on, obviously, up to 2027, 2028. Thank you, Paolo.

Look forward to seeing you tomorrow.

The next question comes from Thomas Besson from Kepler-Chouvreau. Please go ahead.

Thank you very much. Hi, it's Thomas Besson at Kepler-Chouvreau. I also have a few questions. I'd like to start with just a follow-up on the previous question. It's very difficult for analysts to make a forecast if we don't know what your exclusions are going to be. Can we assume, as you said, that in 2019 it should be almost zero? that you're going to see 2026 exclusion go down by 15 or 20 million, the same way they've declined between 24 or 25, or is it not going to be a linear decline?

Your assumptions are correct. Obviously, at the moment, we are not planning any exclusion. There are no specific projects that will come up later on. But at the moment, we are not planning any specific exclusion for 2029. And obviously, we will go down 15, 20 million year on year to get obviously to zero. So your calculation and your assumptions are pretty correct.

Great. Thank you very much. Second question, I'd like you to discuss about the heavy tar market and how you see that developing for NUCCAN in 2026. Of course, you have a specific exposure to forestry and ag in specific markets. Do you see these markets showing signs of a turning point or not yet? Are you assuming in your 2026 guidance that the end markets in the habitat segment grow or not.

Thank you, Thomas. This is a very good question. Obviously, you know very well the agricultural and forestry market has been cyclical since I was born, meaning that it's up and down. It's been always quite difficult to see when the market was going up and down. Clearly, this cycle is longer than usual, so I'm expecting the market to recover within 6 to 12 months. Obviously, this is my estimation based on my experience in that industry. As I said, the last cycle has been pretty long. 2025 was a difficult year, particularly for the forestry machinery producers, and as you know very well, we are strongly exposed to those guys. At this moment, I don't see in the immediate, let's say in quarter one, any strong improvement, but we should expect that something will improve starting already from the second half of 2026. Again, this is the best estimate we can do based mainly on the analysis of the historical cycles.

Thank you. I think you have a very good experience of these markets, so that's very helpful. Thank you. Could you also please discuss the timing of the Romanian state aid? I think you had about one-third of what was expected in 2025. Should we assume that to be one-third, one-third, one-third, over 2026, 2027 as well? Or are you going to get the remainder of the aid, so 67, 68 million in 2026?

Well, obviously, please remind that these incentives are not fixed. What I mean is up to 100 million, and this will be dependent on the final total investment level. This is very important, we remember. So it can be any value close to 100 million, but obviously, or lower than 100 million, depending on the final calculation of the investment level. Clearly, we will apply for, we have a routine of applying for those incentives year on year, so we could expect a second payment within 2026, but I will be very careful in giving you a strong estimation about this, because as you know, we are talking about, obviously, As I told you, up to the end of last year, we didn't know exactly when those incentives were coming. Finally, they came in December. The Romanian government was extremely reliable in respecting that deadline of 2025. But again, there is a strong bureaucratic process that we need to run to get those incentives on time. But the best estimation we can do will be that, obviously, the second part will come based on our investment level in 2026 and eventually the last part in 2027.

Thank you very much. I have a last question. Could you comment on the evolution of pricing in Q4 and year-to-date, given that raw materials have become, finally, as you were saying, after two or three years, a support to thermoeconomics? Do you see any signs of price erosion or because oil prices have picked up again and some of the oil materials are going up again, pricing has held up very well.

focusing a lot on repositioning our own product in 2025 and so we are expecting this effect to roll over in 2026 the raw material i would say at the moment we see the raw material trend favorable but also because we have been doing a lot we've been working hard and really improving our raw material costs both in terms of negotiating new agreements with our suppliers but also in terms of better utilization of the material in our own products as well as in our own manufacturing facilities. So at the moment of course it's very difficult to anticipate in February what will happen for the full year when we talk about raw material, they can go up and down. But at the moment, we see raw material pretty stable, and we see, obviously, a positive rollover in 2025 of the good job done by the team in 2026, rewarding the good job done by the team in 2025.

Great. Thank you very much.

The next question comes from Artem Beletsky from SEB. Please go ahead.

Yes, good afternoon, Paolo and Jari. Still two questions from my side. So the first one is relating to passenger car tires and seasonality on that front. How we should think about Q1? Because looking at past years, you have been unprofitable in this business, but I think that those years are not that representative when it comes to 2026 and Q1 development. So maybe some... inputs you can provide on that front and then the second question is relating to price mix outlook for this year so it has been really strong also in q4 up more almost nine percent year over year uh some pricing effects are likely to be fading away gradually but you're also introducing new products so what is the picture what comes to price mix outlook for 2026 so those are some of my two questions

Thank you very much for your question. I start with seasonality. Historically, even when I was not working in Nokian Tire, I was observing Nokian Tire from outside. Nokian Tire has been always having, I will call it growing seasonality, meaning that quarter one is normally Very slow quarter two is improving, quarter three and quarter four obviously are improving further. This is mainly reasoned by our strong exposure to the winter tire business because in quarter one mainly we produce and in quarter two, quarter three and quarter four we start to release. all the stock that we have produced to face the new season. We have obviously, if you look at the performance of the last two years, we were negative both in 2024 as well as in 2025. Clearly, we are here to improve day by day and quarter by quarter. So this is really reflecting our long-term plan to improve quarter by quarter compared to previous years. But of course, there will be always some seasonality related to the fact that we want, we are, we will be strongly exposed to the winter tire seasons. About pricing, obviously, we did, the team made a very good job in 2025. That was my first priority since the very beginning to make sure that we were getting back to the level where we should be in term of price positioning, in particular in the new market like Central Europe and North America. And I would say that we will see this carry over in 2026 because obviously we should maintain this value within the company. New products that we are going to release, actually we are very excited about the new product that we are going to release very soon starting from March in particular for the Nordic market. will of course present an upgrade. But that is my, I would say, so we are expecting an improvement in terms of positioning and mix. Obviously, as you can appreciate, we cannot make any comment about price development from now to the remaining part of the year for competitors' rules.

Yes, that's very clear. But I have still one follow-up question relating to the start of the year. So we indeed have seen really snowy or winter weather conditions in Nordics, in Central Europe and in North America. Should we anticipate any tailwind from this weather picture during the season or basically in Q1? Or should it be the impact for, let's say, Q2, Q3 ahead of the season when dealers are taking in new tires.

it will start because obviously this will at the moment what we see is probably the inventory of our own customers are going down because obviously the winter has been pretty strong i would say everywhere in nordics in europe in north america as well so their inventory are now going down and this will be a very i think is a very good news for us for the new season that will start so we are talking about really uh quarter uh quarter three and quarter four of 2026. this is the way i see it at the moment so you should not expect any effect today because of because now today is the time for our customer really to reduce their inventory right great thank you that's all from my end and see you tomorrow

The next question comes from Pasi Vaisanen from Nordia. Please go ahead.

Thanks. This is Pasi from Nordia. Well, I would like to start with the regulation. And so what is the latest information regarding this possible anti-dumping duties against China's And if those will be kind of set, could it even affect Nokia tires of tech agreements, those tires coming from China to Europe? And secondly, what could be the realistic sales volume forecast for your Romanian factory this year and also on next year when looking at this ramp-up schedule? Thanks.

Thank you. Two very important questions. you read the news as we read the news at the moment the anti-dumping investigation is moving on there will not be apparently any preliminary duties that are coming from the preliminary investigation so I think the investigation will need to be completed and then obviously the European authority will decide based on the finding that they will see during the investigation There is no effect really now. We don't expect any effect for the future in Nokian Tire because obviously we are mainly now sourcing from different countries than China. So obviously the impact on Nokian Tire, considering the latest news, meaning that there are no duties in the immediate future, will not have an impact on us because in the wild time we have been obviously moving our sourcing to other countries that are not today under investigation at all. I said very clearly as well that with the ramp-up of Radea, of course we have been insourcing a lot of products that before we had, by definition, we had to produce in partnership with other suppliers. Moving to the question about Oradea, clearly Oradea is set now to increase significantly the production. This will be strongly dependent on the development of the sales in Central Europe. We should expect anyway Oradea to in some way double the production volume compared to this year. But it will be very difficult. We should be more precise during the year to give you an exact estimation of where we are going to land. It's all dependent on sales development and the success of the new product that we are expecting will deliver value to the customers.

Thanks, I understand. And maybe still one detail regarding the ramp-up costs. If I remember right, they were close to 10 million in the third quarter and now roughly 16 million. So which figure of these should be used as estimate for the first quarter or the run rate for the full year?

Before we are expecting, I can guide you for the full year, because obviously the ramp-up cost is directly proportional to the ramp-up of the production as well in Romania. As you know, in quarter four, we've been moving from five days to seven days, 24-hour shift. So this is an important step for us in order to get to a normal production level and to increase our production output. So obviously in quarter four they were a little bit heavier than in quarter three. We said before that you should expect year on year an reduction of our exclusion of a region of 15, maximum 20 million year on year moving forward up to 2028 up to zero. So this is more or less our best estimate at the moment.

Okay, I see. Thanks.

That was all from my side. Thanks.

It seems that there are no further questions, so it is time to conclude this call. Thank you, Paolo and Jari and everyone who joined us online. And hopefully we will meet many of you tomorrow at our Capital Markets Day. For now, goodbye and enjoy the rest of the day.

Thank you very much. Looking forward to meet you tomorrow.