Nokian Tyres Plc

Good afternoon everyone from sunny Helsinki and welcome to Nokian Tyres second quarter 2026 results call. I am Annukka Angeria from Nokian Tyres investor relations and joining me today are president and CEO Paolo Pompei and CFO Timo Koponen. Paolo will begin with an overview of the second quarter group level results and after that Timo will take us through the business unit financials. And as usual after the presentation we will be happy to take your questions.

And with that Paolo please. Thank you Annukka and thank you everyone for joining this quarterly call this afternoon. We start with the headline, Strong Profitability Improvement Driven by Higher Sales, Volumes, and Announced Pricing. We are going to comment a very good quarter, I would say, both dimensions, sales development as well as profitability. Moving to the agenda, we will start obviously with the quarterly highlights and the financial performance. Then Timo will comment the business units performance as well as the cash flow and the financial position. and now we will close the call with the assumption and guidance and then finally we will have our Q&A. Moving to slide number three, quarterly highlights and moving to slide number four. Before to start, we would like to highlight two important recognitions that we received during the quarter. The first one is about our sustainability, both of them are about our sustainability journey and the first one is about the financial time, who was ranking Nokian Tyres as the first tyre company in the sustainability, in the climate change leadership. And we were the highest scoring tyre company in this ranking and we were ranked globally 39 among 600 companies that were selected. The second recognition came from the Time Magazine and also identifying Nokian Tyres, one of the best sustainable companies. We were ranked 100 among the top 750 companies around the world. These two recognitions are very important to us because they highlight the strong effort of our team and our board in delivering sustainable operations. and in improving our performance in the sustainability area day by day and year after year. Moving to slide number five, let's comment together the highlights of quarter two. Operating profit improved significantly by over 130%, supported by higher sales volume, price increases, as well as lower manufacturing and raw material costs. We were able to grow sales in all the regions and in all the businesses and reflecting the high consumer trust on our brand. We had also good pre-sales in June, in particular when we talk about winter tires in the Nordic with the pre-sales of the Nokian Tire Acapulita 01. So we are very pleased about the development of this new flagship that is now part of our product portfolio. and then of course we keep improving our operation through efficiency improvement plans and we are progressing with our own initiative in line with our own plan. Moving to slide number six and slide number seven, let's first look at the market performance. The market in Europe was the replacement market quite stable in the first half of the year. While in North America, we experience a negative market trend, minus 5% in the replacement channel. Passenger car tire business is in some way recovering, when we talk about the Western producer, and there is some decline coming in particular due to the Tariff imposed by the European authorities to the Chinese production. Tractile business is also developing well in Europe in the aftermarket. We understand the market was up by 10%, and we see a slight recovery of the agricultural and forestry business, plus 5% both-year replacement in the first half of 2026. Moving to slide number eight, Going deeply in the numbers, we had quite a good growth in terms of sales in quarter two with a 10.6% sales increase or 9.7% in comparable currency. We were able to grow in all our regions, outperforming the market, and this was obviously driven by higher sales volumes and also price increases. But also good improvement of the segment EBITDA, plus 34%, reaching 76.8 million euros in the quarter. And this is representing 20.2% of net sales. That is not far away from our medium-term target of 24%. Segment operating profit increased significantly by 71%, over $45 million reach compared to $26.3 million in 2025 Q2, and this corresponds to 11.8% of net sales compared to last year of 7.7%. As we said at the beginning, improvement was driven by higher sales volume, price increases, and lower manufacturing as well as material costs. Finally, operating profit, we more than doubled our operating profit in the period, reaching 34.8 million compared to 14.8 million in 2025. Moving to slide number nine, we are very pleased to highlight the sales growth of the passenger car tire business, overall reaching almost 14% in comparable currency, but also every tire. was able to reach two-digit growth with 10.1% compared to the same quarter of 2025, while Vianor remained pretty stable in terms of sales. I want to drive your attention to the significant growth we had in Central Europe. We're very pleased about this growth because it's also supported by the good improvement and improved output of our new factory in Romania. So everything is developing in this area according to plan. Moving to slide number 10, we are improving in terms of mixed development. We were able to grow in many segments where we operate. However, we've been able to grow significantly in the all seasonal weather segments. But as you know very well, it's growing significantly in Europe in particular, and we were able to increase Our sales also supported by our new product range of Season Proof II. Winter Tire was able to grow as well but at a lower speed compared to the all-season business in particular in Central Europe and this is why the percentage is likely lower in terms of total sales compared to the same period in previous year. Mix is improving also in terms of dimensions. We reach 50% of our sales in the segment 18 inches plus. This is also an important achievement that is highlighting how Nokian Tire is able to focus on the premium range and obviously in the more demanding applications. Moving to slide number 11, more or less there are some numbers we have been already analyzing, analyzed together. What we want to align the attention to is probably the net sales here to date are now up by 7.6%. and the segment EBITDA is now up by 54%. Operating profit turned positive from a negative level of previous year, year-to-date. Last but not least, in the bottom of the slide, you will see that in terms of capital expenditure, we were very disciplined. Of course, we have a lower level compared to previous year when we were still ramping up our operations in Romania, reaching at year-to-date 24.5 million which is significantly lower than the level of previous year that was 90 million at this stage. Timo will comment shortly about the cash flow development. Moving to slide number 12, we are expecting for the full year capex to be significantly lower than the previous year, reaching in some way a level between 100 or even below the 100 million at this stage. This is our estimate. as of today. Then I hand it over to Timo for the comments about the business units.

Thank you, Paolo. Let's start with the passenger car tyres, which obviously was one of the main drivers behind the strong performance. Passenger car tyres continued very strong performance also in Q2. Net sales was up by 13.7% in comparable currencies. Prices were further improved as well as the transfer to the bigger rim sizes as already commented by Paolo. In segment operating profit the percentage was 15.1 for a quarter which is almost then Money-wise, more than doubling the profit from previous year same quarter. In H1, the net sales grew by 11.6% and the segment operating profits stood at 45.7 million. Then when breaking the performance on page 15 to various components, In the net sales, the volume component contributed 22 million or 10.5%, which of course is the main driver there. But that combined with the continued positive price mix, 6 million or 3.1%, we saw a very good volume on net sales development for the quarter. Then in segment operating profit the lower material cost as already highlighted was the biggest lever by 10 million and the other significant elements is the positive price mix and the lower materials. some negative development in terms of the supply chain and as SG&A but the main picture in this picture remains very very very green. Then looking at quarter by quarter we can see now that the volume indeed increased by 10.5 percent and the volume price mix we saw a fifth actually sixth consecutive The positive development, which we are extremely proud of. Currency is neutral for this quarter. Some negative development in North America, but that was offset by positive development in the Nordics. Moving to heavy tires on page 17. Heavy tires, as mentioned, already returned to growth in the quarter. going up by 10.1 percent and that was driven basically by ACRI but we saw positive development across all the end user segments. Segment operating profit improved to 10.1 million representing 15.0 percent driving also the H1 to be still above 15, which has been the target level. And this has been supported, as we already commented in Q1, on a very disciplined pricing as well as tight cost management. And then we are on our top line, more or less flat, but then in terms of the profitability, we were suffering Still of the cost inflation and somewhat the quarter was impacted by the early start of the spring season meaning that the season started already the March which then ate a little bit the volumes from Q2 as we have commented in the report. Then moving on to cash flow and financial position. Cash flow very strong, two main elements there of course the improved EBTA as well as then the significantly lower CAPEX and when looking at the free cash flow the improvement was roughly 97 million which then also enabled us to decrease the debt levels. The only area where we saw basically growth on a wrong direction was the working capital where the strong top line growth resulted in the increased receivables. Other than that, the initiatives that we have had ongoing in terms of capital efficiency in inventories or on a liability payable side are progressing as planned. and then finally on a net debt there the net debt decreased by 49 million in a quarter liquidity remaining on a very healthy stable level and then at the end still a reminder on the maturities during the quarter we made arrangements and executed the extension on a Revolving cash facility 100 million as well as another extension on a 300 million bilater of term loan facility. And then back to Paolo.

Thank you, Timo. Let's move on the assumptions and guidance, moving to slide number 23. We are not expecting major changes in the second half of the year. We are expecting the passenger car tire The replacement market to remain pretty stable between plus minus 2%. This is the visibility we have at the moment. While we also maintain a positive outlook when we talk about the truck tires between 5% to 10% positive as well as agricultural and forestry tires when we see the market to be between 0% to plus 5%. So a modest growth in particular in Europe at this stage. Moving to slide number 24, we confirm our guidance for the year where we say that we will grow and we will land with segment operating profit as a percentage of net sales between 8 to 10%. So no changes in the guidance at the moment for 2020. So moving to slide number 25 and completing our presentation of the quarterly results, just a quick update about the strategy execution that is, as you can see also from our financial results, is delivering the expected results. We keep pushing our premium positioning, strengthening our brand with strong marketing investments, with new products, and in particular with better prices. We are really proud of our team who was able to execute efficiently our continuous improvement plan across the organization and this is driving significant profitability improvement. So we are very well done for our team that has been able actually to focus on what really matters to influence our improvement in our P&L. We have new products coming up. They are driving growth in our selected segments. I'd like to remind you that our selected segments remain winter tires, all-season and all-weather tires, as well as agricultural and forestry tires. We have completed the investment phase, so we are creating a foundation for a stronger cash generation. We landed in quarter two at 24 million capex compared to 90 million last year, so you can clearly see that now we are moving forward We can now move to question and answer. Going back to Annukka.

Yes, we are ready for the questions.

If you wish to ask a question, please dial pound key 5 on your telephone keypad. To enter the queue, if you wish to withdraw your question, please dial pound key 6 on your telephone keypad. The next question comes from Artem Beletsky from SEB. Please go ahead.

Yes, good afternoon, Paolo and Timo, and thank you for taking my question. So I actually have two to be asked. And the first one is relating to PCT. First, a clear profitability improvement, what you have shown in the quarter. And could you maybe comment with this new product, as you have been commenting, for example, regarding Haka Pelito 01, so that pre-season sales has been Exceeding expectations, whether these new products have been supporting profitability of the business in the quarter or do you expect some of this impact to be visible, for example, in Q3? So this is the first question. And the other question is relating actually to raw materials. So could you maybe comment how you see H2 in terms of upward pressure on that front and whether you are still comfortable that you would be able to compensate it? Compensate the pressure through price increases when it comes to raw materials. Thank you.

Thank you very much for those two important questions. The first one is about the new products and the profitability improvement. Clearly, we've been investing a lot, as you know, in 2025 and the beginning of 2026 in new products that are covering not only winter tires with the Acapelita 01 and Snoop Proof 3P in Central Europe, but also in the old season and we had also with a Season Proof 2 in the Central European market. Of course, those new products are positioned better than the previous one, so they are driving the improvement in profitability. Acapulita 01 obviously being a product dedicated to the Nordic markets and to Canada is exposed to the pre-sales as well. So clearly we should expect that the new positioning will be obviously kept moving forward. And we are very pleased about this development. About the raw material, this is a complicated question in the way that obviously raw material will be at this stage higher in end of quarter three, beginning of quarter four. It's a little bit of a roller coaster, as you can appreciate, going up and down depending on the geopolitical situation. But of course, as always, we say that the task of the company is to make sure that we are able to compensate the raw material trend. So it's more a matter of understanding what will be the development, in particular at the end of the year at this stage.

Maybe just a quick follow-up relating to raw material situation and pricing conditions. Is it fair to assume that anti-dumping duties by EU against Chinese products should be helpful and whether we could see some impact from this topic already during this year?

It is helping to in some ways select to reduce the pressure coming from Tier 3 and Tier 4. It is also true that we need to acknowledge that the larger part of the production made in Asia is today produced outside China. and talking about other countries like Thailand, Cambodia, Vietnam and now even North Africa. So obviously we could expect a sort of rebalance of the market because obviously there are new sources where the Tyres are coming from. This is not really, I mean I think we should look at our journey. It's a different journey. It's in a sort of premium brand segment. So obviously We are obviously watching these dynamics, but we need to simply focus on our own segments. And as you know, our own segments are also less exposed to the mass production of the Chinese tire, in particular when we talk about summer tires. So this is making also our strategy a bit different because we are focused really on segments where we can deliver added value and where we can be Well, we can provide a different value proposition to our own customers.

Okay, this is very clear. Thank you.

Thank you very much.

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

Good afternoon. Hi, it's Thomas Besson from Kepler Shoebrew. I hope you can hear me.

Thank you. Yes, we can.

Great. First, congratulations on this quarter. I have a few questions, please. If that's okay, I'd like to ask them one by one. Firstly, I would like to start with the volume growth which I think is impressive. Could you help us understanding what has been driving that? Talk about the ramp up of your Romanian capacities and the potential decline of your off-take contracts. Can you maybe make some qualitative comments about that to start?

Sure, thank you for the question. I mean, the volume growth is a combination of different elements. One, as we said, is new products available in the market. Those are providing obviously good support to our sales growth. The second element is related to the possibility then to leverage our new manufacturing footprint. I keep repeating, I keep reminding everyone, the manufacturing platform is a tool But sales is about branding and positioning and creating consumer demand. So new product, I would say it's extremely important, extremely important in our strategy to drive growth. And then, of course, recovery. Don't forget we lost a significant amount of sales when we didn't have the possibility to leverage our manufacturing facility in Russia at the end of 2022. Now, obviously, we are approaching the market with a new spirit, regaining market share in all the key markets where we believe we can be successful in our own segments. And this is obviously the big effort of our sales team globally in order to make sure that we are able to promote our new products and value proposition successfully in all the key markets where we operate.

No comment on contract manufacturing. Have you reduced that?

We reduced the manufacturing, but as we said always, we keep 10% of our overall sales always made by manufacturing partners, in particular to producing with those manufacturing partners. segments or sizes where we believe those sizes are not strategic for us or where we believe we don't have a specific competitive advantage. So we will keep always our relationship with our manufacturing partners.

Thank you. I move to my second question. When I look at your operating profit breakdown and I look at the contribution from passenger tyres, heavy tyres and and others. I noticed that the others have become substantially bigger. It was in the first half last year 7.5 million negative, in the first half this year 19.4 million negative. So can you explain that big jump? I don't think historically there has been such a big other element. and I mean to some extent it does also positively impact the margins you're reporting for passenger tires and heavy tires so I would like to understand that better just to also know what we should model for the future in terms of relative offset of your manufacturing performance through this line.

Thank you, I mean basically Those operational eliminations, you're mentioning this one, I guess, are related obviously to between the saline activities between Vianor and the passenger car tire sales. And obviously more Vianor is reducing the stock, more the inter-elimination will be lower and vice versa. I think this is what you are referring to or is anything else? Yes. It's more about the sell-in and sell-out of VNR. We are eliminating, obviously, the sales in order to not double count the same sales in our P&L.

Understood. So it's really linked to the decisions you're taking at VNR level then?

It's not really about decision. It's part of the dynamics. VNR is acting as a sort of independent chain. So obviously, it's all about the movement of stock that we have in VNR while it's selling out. and Nokian Tyre Products.

Understood. I have two questions to finish about the cash flow, please. You've made comments about the capex to be somewhat lower. I think it's clear when we see what you've spent in H1. I think initially the comment was it was going to be a triple digit million figure for the year. No, it looks like it's going to be a double digit million figure. Can you give us even a range for CAPEX? Is it going to be like more 50-60, 80-90, something like that? Or you let us guess?

I think the last quarter we said around about 100 million and now Paolo said that it's going to be probably below that. So, not going to give you an exact range, but it's lower than 100 million and you can pick the number.

Okay, I will pick a number, thank you. Last question. Your receivables have jumped substantially. It's partly a reflection of your higher volumes, but the increase in the number of days of sales is quite sharp. Can you help us understanding that? Are you coming back to the Enochian of the old times being the bank of your dealers? Are you taking any risk or is that completely safe? And that was my last question.

Thank you. It is completely sales growth driven. Definitely we haven't done any payment terms Thank you very much.

Thank you very much, Timo. Thank you both.

Thank you.

Good afternoon, thank you for taking my questions. The first one, I'm sorry to come back to that, will be on raw materials again. Obviously in the year-to-date bridge in PASCAS, you were showing a 19 million tailwind and I think the overall market expectation also from other companies will clearly be to be negative in H2. Could you provide a comment It should be more like neutral for the full year or how it should trend in Q3, Q4. I guess with the sourcing that you already did, you should have decent visibility on that. And related to that also, how should we think about the price to cost phasing in Q3, Q4? Will any potential negative immateriality be directly offset in Q3 already? Or is it more ramping up towards Q4 and then potentially overcompensating there? And then another question just on Tyres. Actually, is there any EAPA benefits that you expect to book or have you booked one already year-to-date? And my last question will be basically a housekeeping one. Could you just confirm again that the contract manufacturing volumes that you have with your China are not subject to anti-dumping Tyres and potentially also not produced in China itself? Thank you.

Thank you very much. I think we can reply to all the questions. First of all, when we talk about the raw material, please remember what we presented also during the Capital Market Day. Raw material are obviously moving up and down depending on the market trend, but also we made a very important internal review of our raw material supplier at the end of 2025, beginning of 2026, and we've been able to achieve The trend is expected to go up as I said in our P&L because we need to think about there is always Thank you very much. Moving to the second question about tariff. Clearly, I'm not sure what you mean when we talk about benefit. Tariff are obviously redirecting the market flow, as I said, to other countries. At the moment, China has been obviously subject to tariff up to 50% actually from June, but as I said, a larger part of the Asian products are coming from other countries, including And we go to the question number three, our off-takes that are not coming from China at this stage, but they are coming from other countries. So we don't see at this stage any risk of new tariffs in our existing off-take contract manufacturing activities.

Thank you. One follow-up, if I may, just then on the Q2 PASCAR Tyre Bridge. How much of the price-mix benefit that you show would be linked to mix and higher than 18-inch tyres out of the 3.1%?

The prices have developed really in the right direction, so they are positive. So the overall actually is including a regional mix effect, meaning that of course when we sell in Central Europe, the overall margins are lower than in the Nordics. But obviously now in Central Europe we reach finally a level of profitability that we are really satisfied with. but in general I think prices are moving up at a good level and the prices in the mix is slightly negative.

Thank you.

The next question comes from Rauli Juva from Indiers. Please go ahead.

Hi, Rauli from Indiers here. Just one question from me. I was wondering given the Do you see an increase in raw material costs in the spring? Has there been any kind of advanced ordering or stock building visible from your clients or in the dealer network in general?

No, I mean we obviously don't disclose the procurement practices because obviously we don't want to give any advantage to anybody but in general I can say this time that there is not really There is not much to say because obviously there are no real speculations. At the moment it's very difficult for everybody, I think, to make any kind of speculation about the future trend of the raw material. Because as you can appreciate, every day is a new day at this stage. So I think it's very important, at least for us, to do what we can do always in this kind of situations to monitor the market and to make sure that we take daily decisions that are Not exposing the company to too high risk for a long term.

Or did you, Rauli, mean that the anticipation of the potential price increases and the sales would be advanced for more?

Yeah, exactly. That's what I was striving to.

No, we don't see that from the customer point of view. Okay, that's very clear. Thank you.

The next question comes from Mika Ihimaki from DNB Carnegie. Please go ahead.

Thank you for taking my question. This is Mika from DNB Carnegie. Given the strong passenger car tyre margining improvement in Q2 and presumably even stronger margin contribution in H2 given the larger weight of winter tyres in your sales mix, what's really the reason for maintaining your group margin if you also expect to compensate for the raw material pressure? So my question is really, are you cautious that there were actually some pull forward demand effects or time effects between the pricing and material costs that are translating into a headwind in H2? Or what's really making you cautious into your H2 margin profile, please?

Thank you very much. This is a great question. I think we have a very good control of what we can control. The only thing we are not able to control is the market development. So at the moment, we are very cautious in evaluating the market trend in terms of sales, because obviously those are driving also higher or lower margins depending on the magnitude of growth. So this is really the area that is today difficult to predict in the today market, while of course we are well under control when we talk about anything else, meaning manufacturing cost as GNA, efficiency improvement plans. I mean, I think there we are actually developing nicely and the team has a full under control, the execution of all the tasks that we have at the moment ongoing around the company in order to improve efficiency and productivity. The sales side is always difficult to plan and for sure we will have a better view closing quarter three most probably.

Okay, thank you. And then if you can elaborate on how the Romanian factory contributed to your Q2 results or more specifically, I'm interested in what kind of earnings contribution you expect from this facility in 2026, assuming an additional, let's say 1 million units are delivered this year. if you can really help us to understand where are we standing in terms of that contribution.

Well, the factory, as we said, is progressing above plan in terms of volume. Clearly, we are talking still about a ramp-up phase, so we are not talking about a factory that has already reached full capacity. So at the moment, it's absorbing money, but of course it starts to deliver a very good level of cost and we are very pleased with existing development. So clearly we don't disclose the margin by factory, as you can appreciate. The only thing I can say is that we are in the wrap-up phase. We are above plan in terms of ramp-up. So the factory is delivering better profit or better results than what we were expecting six months ago.

Okay, thank you. That's great, caller.

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

Thank you very much. I would like to follow up, please. I understand, even if I'm a bit surprised, but I understand you don't want to give much quantitative elements to your answers. Is it fair to assume that your Romanian plant will effectively produce 1 million Tyres in 2026 or is it going to be more? And can you update us on the evolution of your capacities in your US and Finnish factories as well please? Can we have a figure for the volume increase you are able to produce in 2026 please?

Sorry, I didn't catch exactly how much you were expecting from Romania. Can you please repeat?

Well, the previous question was assuming that you were increasing capacities in Romania to one million. Is that the right number? Can you give us maybe your latest plan for the Romanian ramp-up? So how many tiles are going to be produced in that factory in 26 and in 27, if you can share that number? And can you talk about the increase in capacity in the other factories if there is one?

Romania will produce more than 2 million pieces at this stage. So obviously Romania, as I said, is going better above our plan. So obviously we are very pleased about this development, driven by the fact that we are selling more in Central Europe. So as I said, the factory will always adapt to the requested volume by the market. And this 30% growth in quarter two obviously is helping and many more. We try to not disclose now anymore the overall capacity. Our competitor doesn't as well. So obviously, in general, obviously, we have, as I said already during the capital market day, the capacity we need to accomplish our strategic plan. So when you look at our sales outlook, which is between 1.8 to 2 billion euros by 2029, we are obviously highlighting that we can achieve this level of sales with our existing implemented capacity, including Romania and Dayton, and also some improvements in Nokia.

Thank you Paolo. I have two follow-up questions please. One, can you remind us how many TARs were produced in Romania in 2025 please? And two, can you remind us what is assumed in 2029? Is that effectively 6 million TARs produced in 2029 or at least is it 6 million TARs needed to get to your 1.8 to 2 billion revenues?

Last year we disclosed we were producing more than 1 million tyres and we are now disclosing that we will produce more than 2 million tyres actually this year in Roumen. So we more than doubled the production and obviously we will give you an update on the way. To achieve 1.8 billion in 2026, of course this will in 2029, 1.82 billion euros in 2029, This will always come also from Romania, but also from the growth we are expecting in North America as well as further growth in the Nordics. But of course, we will have at that time almost a full capacity utilization overall around the world. And this will obviously result probably in the next step, which we will be very pleased to take into consideration at that stage.

Understood. I have a last question please. I've noticed that almost all your growth has been driven by Central Europe in the quarter and I think that's also where you had lost the most share when you were short of capacities. I think it's fair to say. You also said that this is a less profitable region than the Nordics. Can you remind us your ranking in terms of regions and say maybe whether the Central European margins have made substantial progress in Q2? Is that fair to say that?

Central Europe is delivering, at the moment, great margins. Clearly, we need to consider that our position in the Nordics is pretty strong, meaning that you will always see marginal improvements. We are more following the market trend. When we talk about Central Europe, as you correctly said, we are recovering fast. We are also acquiring new customers because not all the customers were waiting for us to come back. So I think it's a great job done in Quarter 2 by our team again supported by also a completely new product range that is really premium in terms of performance, performing extremely well versus competition. We start to see also some Thank you very much. Approximately 5% we estimate. In H1 we were able actually to improve our sales. So from the sales point of view, we didn't leverage the market growth, but we were step by step gaining position in market share.

Thank you very much Paolo.

The next question comes from Jose Ossimandi from JP Morgan. Please go ahead. Jose Acemendi, your line is now unmuted. Please go ahead.

We cannot hear any question. Maybe there is a problem with the audio.

Thank you very much. Have a great summer. Thank you. Bye-bye.