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So good morning, everybody, on the line and here in Helsinki. We have the first quarter 2018 results available for Nokian Tyres. My name is Hille Korhonen, and I'm the President and CEO of Nokian Tyres.Before I start the presentation, I would like to take the opportunity to warmly thank Anne Leskelä, who has been in the company for over 20 years, making a fantastic career and contribution to the success of the company. And unfortunately, she has decided to continue with other challenges in her life. So I really want to warmly thank her and wish you Anne all the best for the future.I would also like to introduce, at the same time, Päivi Antola, who has started couple of days ago in the company as Vice President, Investor Relations and Corporate Communications. So welcome Päivi. And Päivi is coming from Amer Sports. And this makes it also possible for Antti-Jussi Tähtinen to really focus on marketing. As we all know, we will really be investing a lot in marketing and brand building in our new markets to support our growth. So welcome Päivi. I will first go through the presentation and then I will take the first questions from the audience here in Helsinki, and then from the audience on the line.Nokian Tyres had a good start of the year. We have been able to grow our volumes and also prices. However, there is headwind from currencies. It's good to remember that we are only the first quarter in the year and we are, in our business, focusing on seasons and not the quarters, and as we know, the weather has been quite different this year compared to the previous years. And finally, also here in Helsinki, the summer season is starting after a very long winter, as it has been also in many other markets where we operate.And as a result of our volume growth, the net sales has been increasing over 9%. And when we take into account the currency impact, the net sales has increased by 3.1% compared to first quarter 2017. As said, in Passenger Car Tires, we have been able to improve our average sales prices in local currencies compared to previous year first quarter and also improve the volumes, and also the product mix has been developing to good -- to better mix with more sales in for example, winter SUV tire.The summer season, as said, has not really been starting during the first quarter, and we can clearly see this in the behavior of our customers and that has been also impacting the Vianor sales in very concrete terms. So we have been selling winter tires and really not that many summer tires yet. In Heavy Tires, the markets have been improving -- improving well, and especially we have been growing in agricultural and forestry tires.On the group level, our operating profit has been increased compared to first quarter 2017, despite of the negative currency impact. And one impacting factor is also that in the Passenger Car Tires, our sales to local market, to Russian market has been -- the share of sales to local market has been increasing to 45%. And as we have stated earlier, when the local sales to Russian market out of the total production volume is roughly 30%, that means that then we are currency neutral against the ruble [indiscernible]. Heavy Tires and Vianor have also improved their performance during the first quarter in 2018.When we look at the markets, there are quite a few different stories behind what has been happening in different markets, and I will take some highlights of what has been taking place during the first quarter. In the Nordic countries, we see that the new car sales has been declining. And for example, in Norway, this is coming from the fact that the share of electric and hybrid cars is very high in Norway, and as there are longer and longer lead times to get these cars, it's clearly impacting the sales of new cars.Car tire sell-in has been declining in the premium and mid-segment and there are couple of factors behind this. For example, in Norway, the [ Cray ] imports have been increasing and in other markets the share of [ offset ] and economy tires has been increasing.In Russia, we see still continuing growth in the economical situation. And this is mainly driven by the consumer consumption and retail development. The inflation rate is historically low, and it means that for the first time in 3 years time, the consumer purchasing power has been actually increasing. However, the rate of increase is not yet very high. So it will take like 4 to 5 years until the consumer purchasing power will be on the same level compared to 2003. But this is positively impacting the economical situation in Russia.The new car sales has been Increasing by 22% during the first quarter and the comparison number in the first quarter 2017 is quite low, especially January and February. And we are expecting the full year new car sales growth to be on the level 12% to 15%. What comes to car tire sales in A and B segments have been growing 10% during the first quarter and we are expecting the growth to be roughly between 3% to 5% for the full year. And both summer and winter tires will be growing. What comes to inventory levels, the winter tire inventory levels in the channel are on a normal level, and summer tire inventories are, at this point of time, a bit higher, due to the fact that the season has been starting 2 to 3 weeks later than normal.In Europe, the car tire sell-in, in premium and mid-segment has been declining compared to previous year, and this is mainly coming from the fact that the first quarter 2017 was very strong because of coming price increases. So there was a lot of pre-seasonal purchasing taking place in January, February, March. And this is, of course, then leveling off during this year, this big change.In North America, new car sales has been growing and especially the light trucks and SUVs have been growing even more than this 2%. Car tire sale in premium and mid-segment and especially in the areas where we are operating has been declining, due to the fact that the winter season has really been exceptionally long this year.Then when we look at the Heavy Tire segments for our core products, in the Nordic countries, forestry in Russia, mining in Europe, especially agri in North America, agri and earth moving segments have been growing. And as said, the currency impact has been quite remarkable during the first quarter, representing about EUR 20 million impact on the top line overall, and ruble was exceptionally strong during the first quarter last year and in the Nordic countries, we are talking about the impact from Norwegian and Swedish kronas and U.S. dollars, Canadian dollars from North America.When we look at the Nokian Tyres performance in financial numbers, the net sales was EUR 336 million, improving by 3% from previous year's first quarter. Operating profit was growing by 4%. Cash flow was stronger than last year same quarter. And the capital expenditure has been on the same level compared to previous year. So good development and good start of the year.When we look at our performance in different markets, I would like to emphasize our strong performance in all the markets. So we have been able to grow our net sales in the Nordic countries, in Russia, in other parts of Europe and also in North America. In the Nordic countries, the volumes have not been growing, but this growth has been then driven by strong pricing situation. And our market share has been improving in all the markets. And when we look at, for example, Russia, we have been improving our market share in all the segments where we operate and both in winter and in summer.What comes to group level profitability, clearly see the currency impact. Raw material impact has been roughly less than 1%. Fixed cost on a group level, on the -- roughly on the same level compared to previous year. And we have been able to improve our production volumes, not only in Passenger Car Tires, but also in Heavy Tires to support the growth. Regarding distribution, there are no major changes in the structure of our distribution networks. In Vianor, we are continuously managing our network structure based on the profitability.When we look at the operating profit on a quarterly level, one conclusion from this picture on the Page #8 is that the quarter -- first quarter is clearly the smallest quarter for us and when we are looking at the first half year that is then kind of more decisive from our total performance point of view. Raw material cost development for the full year is estimated to be roughly on the same level compared to last year. We are seeing some decline for the second and third quarters and then increase in raw material cost for the fourth quarter. We have been covering already our needs for natural rubber until end of third quarter. And what comes to chemicals, there has been a lot of price pressure towards chemicals, as China has been limiting the operations of chemical factories due to environmental reason. So there seems to be global shortage of many materials, but we have been able to secure our supply.When we look at the total investments for the year, this is clearly a big year of Investments for Nokian Tyres. Majority of the investment focus is on building our third factory in Dayton, Tennessee in U.S. and there we are planning to invest roughly EUR 110 million this year. The construction works have been starting and we will be delivering the first tires beginning of 2020. And this plan for the size of the investment and for the schedule is still valid.We are not forgetting other factories either, so we keep investing in automation, both in Nokian factory and in our Russian factory in order to keep the productivity on a high level. And what comes to Russia, we are investing roughly EUR 40 million this year by building a high-bay automated warehouse to support our growth plans. In Heavy Tires, we have been proceeding with our big investment to add 50% of capacity to our Nokian factory and that will take roughly 3 years until the capacity is in place. We are at the same time also, digitalization terms, improving our customer service to our dealers and taking kind of dealer portals into use in different markets and also investing in online shop in Russia.On Page 12, we have the business units separate and the relevant numbers. When we look at the big picture, the share of passenger car tires is still on a level 77% of the total business. And I will now go to more details regarding the different business units. As said, Passenger Car Tires business has been developing well during the first quarter 2017. We have been growing our volumes, especially in Russia and in North America.Due to the complexity, i.e. we have very high number of different SKUs in our manufacturing, part of the sales have been shifted from the first quarter to the second quarter. And we have been adding capacity in Russia. So the last investment to the new line, end of last year, is in full use. We have been adding resources in Nokian factory, and we still have possibilities to add new shift arrangements in Nokia to support the growth. Overall, the capacity is in line with what we have estimated the demand to be on a yearly level.What comes to new products, we have been continuously bringing new products to the market and supplying different markets with new types of products in order to really secure and build profitable growth for the future. And one important thing is, of course, to be excellent in the tire test in those markets where the consumers are interested in the test results. The net sales breaks picture is here attached, and if you have further questions regarding this, Anne will be happy to answer your questions. We have been launching new products also beginning of the year, and as you can tell, we are really renewing our product range in all the markets. So not only focusing on the growth markets, but in Nordic, Russian and North American markets with new innovative products.In Heavy Tires, the performance has been very good in the first quarter. So they have been able to increase the sales, operating profit, and production volumes. So improving productivity, having higher average sales prices compared to the first quarter last year, and really being able to support the growth with increasing volumes. And in Heavy Tires, we are also continuously making sure that we can grow for the future with new innovative products for different applications areas.When we look at Vianor, it's good to remember that the first quarter is always a tough quarter for Vianor. We are usually seeing red numbers in the first quarter, as the seasonality of the business is such that the most important quarter in sales terms is the fourth quarter, as we are then selling more winter tires. In Vianor, we continue to work on the profitability program network optimization, but also developing our services and making sure that also we are getting the top line growth for the future.Here I would like to take this opportunity to say some words about our brand evolution. I would not be saying about brand revolution because when we have been now looking at the needs of different consumers in our growth markets, there are important things that are in the core of our brand that we want to further build on. Our Scandinavian values, our commitment to sustainability and our history and strong heritage in innovation are the cornerstones of our brand for the future. It's important that we however take into account different views that the consumers have in the markets where we will be selling not only winter tires, but also summer tires and All-Season tires in the future. And therefore, the mission is to really focus on protecting life and ensuring that all the people, all of you and your families are able to travel safe home wherever you are coming from, and especially in demanding conditions. And what you have been seeing also in this presentation is the kind of physical outcome of the brand with pictures, not only of cars and tires, but covering people and bringing the authentic Scandinavian values to life.So looking at the rest of the year, there are no changes in the assumptions that we have been sharing with you in February. So we still continue to build on these assumptions that the demand in our core markets will be growing in a healthy way, and no major change is expected in our raw material cost. And based on that we will keep our year 2018 full year guidance unchanged, saying that with the current exchange rates, net sales and operating profit are expected to grow compared with 2017. And to grow in our terms means growing between [ 15% ] to 20%, as we have been earlier stating and of course, depending on the currencies, we are saying that this will be most likely [ one ] single-digit numbers that we are talking about.Thank you, everybody. And now I will take questions from the audience here in Helsinki. Thank you.
It's Petri Kajaani from Inderes. I'm just wondering about the large share of sales from your Russian plant to Russian market. Why is that? Do you see at the moment it's just contemporary or it's going by at some point of the year, or do you see that made in Russia is not a good thing now in the rest of the world?
Well, we are a kind of market-driven company. So the order book has been and is on a very healthy level in Russia. And then there are, of course, timing questions. As said, when we have complex product mix, meaning that we have high number of SKUs in the production, we need to time the deliveries. So it's both timing and it's about the strong performance in the Russian market. So we do not see any issues with made in Russia products. We are producing extremely high-quality products in Russia.
Okay. So you think that the high percentage of exports that you normally have from the Russian plant, it's not changing anyhow in the near future?
Not in the big picture at the moment.
It's Panu Laitinmäki from Danske Bank. I have two questions, firstly to clarify on the guidance. So did you say that EBIT and sales will grow by single digits this year?
Most likely, but of course, as we know, the currency situation is tricky, so depending on the currencies.
Okay. And the second question on this raw material outlook, you mentioned that you expect some decline in Q2 and Q3. Does it mean decline in kind of year-on-year or from Q1 level? And then related to that, do you expect the impact on EBIT to be positive from the raw material development in those quarters?
Thank you. So we are then comparing with the different quarters. So it will decline compared to first quarter. And for the full year, there will be no major impact on the EBIT. So it will be kind of EBIT neutral.
Artem Beletski from SEB. Also a couple of questions from my side. Just continuing on this guidance question. So basically you stated growth means [ 5% ] to 20% and you're referring to sort of a single-digit level, what will be happening this year, just to clarify, 5% to 10% is basically the rough range.
Rough range depending on the currencies, of course.
Okay. And then what comes to FX impact. So it was quite negative in Q1, so 6% to 7% on total level with some net negative impact from ruble. Could you maybe comment how do you see the full year impact from currencies and also whether ruble will be net negative at current rates of course?
Okay. I will hand this question over to Anne Leskela.
Okay. If you look at like the sales pattern which we are having, so of course, we are selling quite a lot of tires in Russia during the first half of the year and then in the fourth quarter. So those are the ones which are having the majority of the ruble impact as such. And now we have like since 3 months of the year and the currency impact therefore, roughly EUR 20 million. And well, you're talking about the yearly level, we are like talking about numbers, which are then hovering around like [indiscernible] depending on what it's like the currency effect, but that's compared with the like previous year's numbers and currencies.
Okay. And then maybe a question regarding this complex mix what you have been talking about impacting basically Q1. So what was the impact in terms of sales shift and whether do you expect this kind of less complex mix basically going forward?
Well, the complexity of the mix is of course driven by the fact that we are producing also the U.S. market products in our Russian factory. And that complexity will be staying until we have the U.S. factory up and running. But we are used to having the complexity, but of course, it's then impacting the shift -- volumes shifts between the different quarters.
Okay. And maybe last one from my side. Could you remind us what is your, so to say, maintenance CapEx annually, what is the run rate right now and when Dayton is ready because I guess you're doing right now quite a lot of growth investments?
Roughly [ EUR 100 million ], slightly less than [ EUR 100 million ].
It's Panu Laitinmäki again. Just a question on this pricing environment. You mentioned tough pricing in all markets. So basically the question is, is there a change to previous quarters and what you are seeing in that, is it so that the raw material volatility is causing some pressure on pricing?
I would say that in a big picture, the pricing environment is probably tougher as we see in Central Europe that the growth numbers first quarter 2017 were so much stronger than in 2018. Okay, thank you. And then we will take questions from the line. Please go ahead.
Our first question comes from Thomas Besson, Kepler Cheuvreux.
I'll start with the question on your Slide 14, please. Can you break down for us please the price-mix currency on EBIT, the minus EUR 9.5 million. I understand from your comments that it's about EUR 20 million from currency. I'd like you to confirm that and to give us an idea of how price and mix break down as well please?
So when talking about price mix, majority of that bracket is coming from prices -- pricing.
Okay. And the currency [ that's actually ] minus EUR 20 million?
Yes, that's for the first quarter. Yes. And you could say that roughly half of that is ruble and the rest is other currencies.
Second question, please. I'm not sure I understood the answer on the evolution of the local sales in coming quarters. I understand that Q1 , Q2, Q4 are quarters where you tend to sell more to Russia, but is it reasonable to assume that in the coming quarters the relative end market development should support lower share of Russian sales from Russia than what we have seen in Q1? So have we probably seen the worst of the ruble negative impact, if we assume that ruble stays flat?
Yes, of course, [indiscernible] as I said, is done in the first half of the year to the Russian market, of course, some done in Russia. Yes. But looking at like the effect of the ruble, then you could say that the first half of the year and then the fourth quarter are the ones where we see the biggest impact on ruble, or -- then talking about like the share of Russian sales compared to the production, then on an annual level, we do not see big changes on that.
It should stay around [ 30% ] on an annual level?
Roughly there, yes.
Okay, great. Last question please and just on the comment on growth. You have currently consensus expectations that are broadly for 6% and 10% growth in revenues and EBIT. If we assume that currencies stay where they are today and with your planning in terms of volumes by market, are you happy with this consensus expectations really?
Well, as said, we have been -- we have only the first quarter behind, so let's look at the second quarter and we will come back with more concrete guidance after the first half of the year.
Our next question comes from Mattias Holmberg, DNB Markets.
When I look back at my notes, it seems like you have been able to improve the productivity in car tires every quarter since Q1, 2014, yet in Q1 of '18 you only say that it's remained at the same level on a year-on-year comparison. Please say anything about why you did not manage to improve the productivity in this quarter, please.
Well, we normally start a bit later in January after the Christmas break and the maintenance break. So this year it was -- compared to previous year, it was a bit slower start. So nothing dramatic.
Okay. Another thing, when I -- also on the EBIT bridge on Slide 14, we can see that both production, fixed and other costs are increasing compared to last year. Could you please just give some color on this in terms of, is this coming from general cost inflation, or is it an effect of increased production in the plant in Finland, or is there anything else?
It's good to remember that the currency effect is not shown on those numbers. So the currency effect, which is of course positive when talking about fixed cost as such, is in the bracket which has stayed in other materials [indiscernible] other materials, and the FX positive for the cost side. So the situation is not reflecting like that. So there are positives coming from the currencies. And if we are talking about the fixed costs, all-in-all, of course, when looking at customs duties and freight et cetera, of course, then we are receiving more tires and delivering them, those are increasing based on the volume.
Great, thank you. Final one from me is on the CapEx, which, I mean, it's quite low at [ EUR 70 million ], considering that you've guided for I think EUR 260 million for the full year. Am I reading into this too much by maybe assuming that you're running a bit behind on the investments in the U.S. factory, or is it just a seasonal effect that we should expect it to come back later during the year?
Well, we are not running late with the investments in U.S. Of course, the bigger portion of the investment that is then related with the machinery and building, we will be realizing towards end of the year. So there is nothing dramatic about the investment figures for the first quarter.
Our next question comes from Henning Cosman, HSBC.
As a first question, can I please ask why your share of Russian sales out of the production Russia was as high as 45%. Was that more a conscious decision for some reason because you have preference to local demand in Russia, or could you have chosen to sell more outside of Russia? That's my first question.
Well, of course, when we look at the season start, it was slow in other markets, or usually we would have shipped more summer tires to other markets. However, our customers did not want to take in summer tires yet because they still had the winter tires there, and that's mainly -- the main reasons behind the split in the first quarter.
Okay, great. And then you are talking about the shift into Q2 to some extent, and I suppose some pent-up demand from the seasonal situation you are discussing. Especially with respect to Russia, I'm just conscious of this very, very tough comp. If we strip out currency, I think it was up about almost 100% last year in Q2. So could you give us a bit more color on your expectations for Q2 in Russia? Do you think you can stay flat there on volumes or even can grow a little bit?
Well, our ambition is continue to grow in the second quarter as well. So as stated, we have healthy order book for Russian market.
Okay, that's great. And then finally, maybe from me, again on the 3 bridge elements, the production, fixed cost and other costs. Could you just make -- I'm not sure if you said that earlier, but could you just indicate a little bit where that's going for the full year? Is that the line item where you said that's trending towards neutral for the full year, or will that stay at that run rate roughly because you said it's more functional for growing volume?
Well, as we've said and guided about the raw materials, they are going to be roughly at the same level as last year. And then when talking about the other costs, of course there is like costs which are then volume driven, and we can see increase on those.
So a [ EUR 5 million, EUR 6 million ] run rate for those, as far as the bridge goes, is that sensible to assume that as a run rate for each quarter?
Yes. Depending on how the currencies are affecting the fixed cost side.
Our next question comes from Ashik Kurian, Jefferies.
I've just got two left. The first one is, when I look at the volume benefit on the sales bridge, it's around 8% and you state 10% growth in production. Just wondering, like, did you end up all producing in Q1 and will that reverse in the coming quarters, or it's not a like-for-like comparison, what you say on production versus what shows upon the volume bridge?
Yes, of course, production is running against the order book, and I said, the summer purchases were slightly delayed. So we are not of course like producing for inventories, but there was slight mismatch in looking at the sales as an order book and then -- than production. So that is then something which is then going to be corrected in the second quarter.
Thank you. And then given this -- I mean I accept the seasonality on Vianor. But last year you talked about significantly improving the profitability of Vianor in the coming years. Is that still the plan or should we expect similar levels of profitability in Vianor for 2018 given how the markets are developing?
So now we are talking about Vianor. Yes, we have clear targets for improving the profitability to the level of plus 3% EBITDA, end of 2019. And the team is working hard to get that done.
Our next question comes from Gaetan Toulemonde, Deutsche Bank.
I have two quick questions. The first one is that when you read the comment on the first quarter, you mentioned that the complexity of the production in Q1 translated into some shift to Q2. Are we talking about something significant, or we talk about relatively margin or volume? That's my first question. And the second question is related to the ForEx. When I do my basic arithmetics, FX should be more negative in the second quarter than first quarter. So my question is very simple. I know that the pricing is tough. But do you expect to announce or to increase some prices in some countries to try and to limit the negative impact of the ForEx in the second quarter or in coming quarters? That's my two questions. Thank you.
Okay, thank you. We always have different splits between the quarters, as to say which markets we are supplying and that shift is not -- nothing major, so it's marginal. What comes to the price increase is we have been announcing already price increases in the Nordic markets and Russia to compensate the impact of the currency exchanges.
What is the order of magnitude of those price increase? Rough number.
Well, couple of percentage, I would say, on average.
Our next question comes from Kai Mueller, Bank of America Merrill Lynch.
Two from me. The first one, we understand the Russian volumes were a lot better than anticipated in terms of the share of your sales. Can you just outline a little bit what -- how you might have been impacted or could be impacted by obviously the recent discussions or new sanctions, if there is something that could impact you in terms of your ability also to export. And have you seen anything along those lines impacting your sales revenues in Russia, and could impact you over the next couple of quarters? And the second point, the margin of the tire business obviously was lower than the normal sort of 30% run rate you said. What gives you confidence that you are getting back to that run rates, should the share of the Russian sales actually stay at a possibly higher level?
Okay thank you for the question. What comes to the Russian sanctions, they don't have, at the moment, any material impact on our business operations and there is no visibility to how they could impact actually for the coming year. So we are running the business as normal in Russia. And then the second question was about? Sorry...
About the margin. You obviously said you should be getting back to the 30% level. What gives you that confidence?
Yes. And that of course is then also driven by the currencies. So in the operational -- operationally, we are continuing to improve our performance in different markets. And then what comes to currency is there is nothing really we can do about the currencies, except to make some price increases in the markets where we have strong position.
Okay. So just to clarify, if currency stays where it is and we have the share of the Russian sales coming back towards the 30% level that gets you to the 30% margin. But should it stay higher, it might make it more difficult.
Close to 30%, yes.
Our next question comes from Akshay Katkar, JPMorgan.
My first question, sorry, again on Russia. As we are already into the second quarter and we get back to normal summer selling in other markets in the second quarter, share -- I would imagine that the share should be back to normal in the second quarter. That is my first question. And my second question is on your EBIT bridge. I would have imagined that a weak ruble would have a positive impact on production cost. Am I missing something there? Or is there any other line on the EBIT bridge that incorporates that impact? And my final question is on stronger outperformance in Central Europe and North America despite declining sell-in in those markets?
So the first question was about the share of Russian sales and, well, when we look at the first and second quarters, the Russian share is and has been very strong as also in the fourth quarter. And it depends also on the timing of Central European deliveries, how the share will end up. And sorry, you had...
Second question on the EBIT bridge. I would have imagined a weak ruble to --
On the EBIT bridge. So I will hand this over to Anne.
Could you repeat the question, please?
I would have imagined that a weak ruble would have had a positive impact on production costs on the EBIT bridge?
As I stated, we are not like taking into account the ruble in the cost side as such, it's like -- out of those numbers. So that positive FX effect on the fixed cost side is embedded in the other materials bracket, which is there, plus EUR 3 million.
[Operator Instructions] We have a follow-up question from Henning Cosman, HSBC.
I'll just ask a follow-up then on the Russian risk. You said you have no visibility on how the sanctions might affect you in this year. Can I just ask you how you manage that risk, or I mean it's obviously difficult seeing the high share of production in Russia, but what sort of measures are you taking, or are you lobbying at all for something or what's your connections into the channels to as early as possible maybe anticipate some change there?
Well, we -- in Finland, we are used to working with Russian pressure and we have good connections there and we, of course, follow up the situation every day and I mean, how can anybody forecast the sanctions, for example, and where they are aimed at, that's of course impossible. But we have a big organization there and they are, of course, being updated all the time on what's happening. If somebody would like close the border, so that there are no goods coming in or out, as we know, today there are being 17 million tires exported from Russia, there are also the same amount of tires being imported from Russia. Then we would sell more to Russian market and we would ramp up the Nokian factory capacity. So that's like, if there would be something very, very radical taking place.
So that also includes competitors, right, that the imports of competitors into Russia would equally go down and that would create an opportunity for yourselves in Russia to fill that gap. So it wouldn't be as bad, maybe?
Yes.
[Operator Instructions] We have no further questions. Dear speaker, back to you for the conclusion.
Thank you, everybody, and I wish you a very good and sunny day.
This concludes today's conference call. Thank you for your participation. You may now disconnect.