Earnings call transcript: Nokian Tyres Q1 2025 results miss EPS forecasts

Nokian Tyres reported its Q1 2025 earnings, revealing an EPS of -0.10, which fell short of the anticipated -0.08. Despite revenue slightly surpassing expectations at €262 million against a forecast of €260.4 million, the company’s stock experienced a significant decline, dropping 8.84% to €7.01. According to InvestingPro data, the stock is now trading near its 52-week low of €6.74, with a market capitalization of approximately €998 million. The earnings miss and subsequent stock movement highlight challenges faced by the company amid a competitive market landscape.

Key Takeaways

• Nokian Tyres missed its EPS forecast, reporting -0.10 compared to the expected -0.08.
• Revenue exceeded expectations, reaching €262 million.
• Stock price fell by 8.84% following the earnings announcement.
• Strong sales growth was observed, but operating profit remained negative.
• New manufacturing facilities and product expansions are underway.

Company Performance

Nokian Tyres demonstrated a mixed performance in Q1 2025. While net sales increased by 14.2% year-over-year to €269 million, the company struggled with profitability, reporting a segment operating loss of €18.5 million. The company continues to face challenges in offsetting raw material costs, despite implementing price increases.

Financial Highlights

• Revenue: €269 million, up 14.2% year-over-year
• Segment EBITDA: €12.5 million, representing 4.6% of net sales
• Operating Profit: -€18.5 million
• Stock Price Change: -8.84%, last close at €7.01

Earnings vs. Forecast

Nokian Tyres’ EPS of -0.10 missed the forecasted -0.08 by 25%. This earnings miss is notable compared to previous quarters where the company met or exceeded expectations. The revenue, however, slightly beat forecasts, indicating strong sales performance.

Market Reaction

Following the earnings release, Nokian Tyres’ stock dropped 8.84%, reflecting investor concerns over the earnings miss. The stock’s current price is closer to its 52-week low, with a year-to-date return of -4.57%. InvestingPro analysis indicates the company maintains strong liquidity with a current ratio of 2.39, though it operates with significant debt burden. This decline contrasts with broader market trends, where many sector peers have shown resilience.

Outlook & Guidance

Nokian Tyres maintains its guidance for sales growth, aiming for €2 billion in sales. The company plans to improve manufacturing efficiency and expand its product range, particularly in all-season tires. While current gross margins remain pressured at 18.13%, long-term targets include an EBITDA margin of 23-25% and an EBIT margin of 15%. Analysts tracked by InvestingPro expect the company to return to profitability this year, with positive earnings forecasted for FY2025.

Executive Commentary

CEO Paolo Pompei acknowledged the company’s challenges, stating, "We are not fully satisfied with the financial performance." He emphasized the company’s growth potential, saying, "We believe we can position Nokian Tyres growing above market level."

Risks and Challenges

• Tariffs in North America pose a risk to profitability.
• Volatility in raw material costs continues to pressure margins.
• Manufacturing ramp-up challenges could impact operational efficiency.
• Uncertainty in the agricultural tire market remains a concern.

Q&A

During the earnings call, analysts inquired about the impact of tariffs and the potential to expand capacity at the Dayton facility. Management indicated minimal tariff impact in Q1 and highlighted plans to triple capacity at Dayton, underscoring a strategic focus on local manufacturing.

Full transcript - Nokian Renkaat Oyj (TYRES) Q1 2025:

Annok Gangaria, Investor Relations, Nokian Tyres: Good afternoon from Helsinki and welcome to Nokian Tyres Q1 twenty twenty five Results Webcast and Conference Call. My name is Annok Gangaria, and I’m working at Nokian Tyres Investor Relations. Together with me in this call, I have our President and CEO, Paolo Pompe and our CFO, Nico Harvist. As usual, Paolo and Nico will present the results. After and after that, there will be time for the questions.

Without further due, Paolo, please go ahead.

Paolo Pompei, President and CEO, Nokian Tyres: Good afternoon all from my side. I’m Paulo Pompei. I’m the president and CEO, and I will guide you through our quarterly one quarter one interim report this afternoon. I start from page one. The headline is strong sales growth in all regions.

Actions accelerated to improve financial performance. Moving to slide number two, the agenda of this today call will be the financial performance in quarter one. We will go through the numbers of the business unit. There will be some reflections from my side. And at the end, we will also address, the situation of the tariff in North America as well as the guidance for 02/2025.

Moving to slide number three, quarterly one financial performance. Let’s move to slide number four. We had strong sales growth in quarter one. This is continuing our journey and strong sales growth that we had also in quarter four and quarter three last year. This was succeeded in all, market and all region.

Our Romanian factory is proceeding according to plan. We were starting to deliver tires already at the March with an extremely good performance in a declining market for the heavy tire division. And, obviously, we are not fully satisfied, actually, with the financial performance, and we have accelerated actions to improve our financial performance in the next, quarters. The tariff, of course, are causing some disturbances and some uncertainties in North America. But, of course, with our local to local strategy, we are working hard to mitigate any kind of impact.

Moving to slide number five. The market has been, pretty stable in North America where we talk about passenger car and light truck tires and has been actually growing by 5% in Europe. The truck tire market has been stable in the aftermarket in Europe, while the agri tire business was actually, declining both in the replacement market by 7% as well as in the ODE segment by minus 20%. We are pleased to see that Nokian Tire in terms of sales outperformed the market in all the segments where we are operating today. Moving to slide number six.

Net sales at 269,000,000 was growing by 14.2% with comparable currency. We had a positive development in all the business units, and we improved our market position in all regions. Our segment EBITDA was stable at €12,500,000, and our percentage, 4.6% of net sales, was declining compared to previous year. Our segment operating profit was minus 18,500,000.0 compared to minus 15,100,000.0 previous year at 6.9% of net sales, minus 6.9% of net sales. The declining was mainly driven by the higher raw material and, obviously, the necessary s g and a cost to reinforce our market position in the growing, market areas.

We have implemented price increases in quarter one, which are obviously intended to offset offset the increased raw material cost, and this will be reflected in our quarter two onwards results. Moving to Slide number seven, you will see that we were, as anticipated, able to grow by almost 6% in The Nordics where we have already a leading position. We’ve been growing fast in Central Europe once again by 34%, and we were also growing fast in North America by 15%. Moving to slide number eight, I will ask Nico to comment the fur following slides.

Nico Harvist, CFO, Nokian Tyres: Yeah. Thank you, Paolo, and welcome on my behalf as well. From the key figures, I I I want to point out the net sales. As Paolo said, we we we increased the net sales by by some 14% compared to previous year. But at the same time, I I need to say that the profitability is not where we want to be, and and we must continue our tasks in in order to improve the profitability with with more control and and and a quicker way.

From the in as everybody knows in this call, we we are still final year in our investment phase. So the major investments to build on our new new Nokian will be done by the end of this year. Within this three three years period, we we we have been investing close to €800,000,000, and that’s a gross number. Want to highlight as well that the Romanian state aid approved by EU that will be paid by Romania, is not reflected in any of our numbers. And as said, in the earlier calls throughout last year as well, we’ll see that it will be in our our cash flow in the next three years to come.

Also, we we are returning, back to the more maintenance type of investments, I. E, the maintenance CapEx, estimating that to be around hundred and €20,000,000 starting next year, so clearly below our, depreciations. From the from the business units, side, we’ll start with the passenger car tires. So their, sales once again, were were on on a good level, but the profitability was was was weakened may mainly due to the higher raw material costs and the SG and A. And and we see that inventories are on on a lower level, so so more healthier than than in the previous or the comparable q one last year.

From the sales bridge, there we can see that the volume plus €31,000,000 was was then fairly neutral on the on the price and and and mix side in in in terms of, net sales. And then when you look at the segments operating bridge, those same elements there, I e, €10,000,000 coming from the volumes, €1,000,000 from the price and mix, and then, the materials and the supply chain as well as the SG and A were negatives in terms of the profitability. Slide number 13, this is the the sales and and and the quarterly changes there. Volume, but I would like volume up by by close to 22%. But but, really, I think what is what is good is the price and mix.

So so there, the trend is positive, you know, slightly positive, but we have ended the two two quarters decline that we had last year, I. E. H2 last year. So that has what was changed in the Q1 of twenty twenty five. Heavy tires also, as Paolo pointed out, really solid performance, especially weak OE market.

We were able to find new customers in in the aftermarket. So even with the low volumes, we’re able to make, 13%, EBIT. So so so really proud of this, something we need to need to continue and and contribute to the whole of Nokian Tyres. In terms of Vianor, there, the the first quarter is always seasonally low, and and now the Easter was was late actually in in in April. So so, the profitability was at the last year’s level.

But, this is a constant balance of of of controlling our costs. Of course, the lower inflation will will help us, but we we need to monitor and and and be on top of the the the business at all times. And with that, I hand it back to to Paolo and CEO reflections.

Paolo Pompei, President and CEO, Nokian Tyres: Thank you, Nico. Right. It’s really time to, some way, in some way summarize what happened since I joined the company in January 2000, ’25 and what are my reflection at this stage after leading the company for a few months. I move to page number 17. Clearly, we have a really strong foundation to become a leader in, this business when we talk about profitability.

We have invested a lot. We will complete our investment phase by the end of this year. And then, of course, growth will be, as it is already today, an important item of the agenda of all our business unit. Clearly, as we Nico anticipated, we are not satisfied with the financial performance. We know that the journey is not an easy journey after, obviously, activated our plan, exiting Russia and rebuilding nuclear entire outside the territory of Russia.

But I have to say that we have initiated activities at the moment to accelerate our financial performance and cash generation for the next quarters. What is really important to say is that who we are. Enochian tires has been a strong player in delivering safe product in extremely demanding weather conditions. And this is very important because this is and this will remain our main asset in our strong heritage, and we will carry on innovating, promoting our products in these, applications because this is where we can make the difference, and this is where we deliver value to, our customers. Clearly, we are a small player.

We don’t play anywhere, and we don’t want to play anywhere. We want to play in the profitable niches of the market, which today are winter tires, obviously, all season. We are delivering extremely innovative new range of all season tires, you know, and at the end, heavy tire as well. Those are extremely profitable niches. We are a small market player when we look at the even at the addressable market.

And, of course, we are still a small market player when we look at the global tire market, which is approximately €250,000,000,000. So we have plenty of opportunities to grow, confident that we can leverage our value proposition and can leverage our extremely competitive and superior products. So today, we can really found our business on wide offering when we talk about winter tire and all season. But more importantly, we can really build our future on safe and sustainable and high performing products. Our brand is a premium brand in The Nordics as we know very well.

It’s a very strong brand where we talk about winter tire in North America and in the rest of Europe. We will obviously need to build the brand in the other application, in the other markets. We have an extremely good and efficient distribution network in The Nordics, which is Vianor that is helping us to keep our premium position in the market. And in the other markets outside Nordics, we have extended our retail network now to 46 countries. And this is also very important to support our future growth.

The manufacturing is today, the area that, is, in my opinion, representing long term, one of the main asset of the company because now we can say that we have developed a local for local strategy, being less vulnerable than what we were before and being able to service our customers with dedicated product to dedicated markets. And, of course, we are not depending anymore on one giant production source, but we are depending on three strong manufacturing facilities where we talk about passenger car tires that are located in The Nordics, in Europe, in Romania in this case, and as well as in North America. And, of course, those facilities are really brand new. We have invested a lot, and this is representing, again, a strong foundation for our future growth. In Avitaire, also, we have a leading position global leading position in the forestry industry, but we are also expanding quickly our range in the agricultural tire segment where, obviously, we are aiming to grow it in the near future.

When you look at this, page number 20, you will see obviously that our profitability declined due to the responsible decision to leave the Russian market and to immediately focus on the construction of our new manufacturing facilities in Romania while at the same time building a strong alternative for North America as well as reinforcing our operation in Finland. Clearly, the Dayton production ramp up is now completed, so we can now leverage a higher output coming from our factories in North America. And, of course, we are, at the moment, working hard, in in the deliveries and in the ramp up of the production, output in Oradea in Romania. Of course, there is plenty of opportunity for us to grow and to improve our performance, in particular, when we talk about the commercial positioning in North America and in Central Europe. Manufacturing, of course, we’ve been focusing on growth.

We need now to focus, as I said, several time on the efficiency of our manufacturing facilities. We need to focus on better procurement, enlarging our supplier base, renegotiating our existing contract, and, of course, in the s g and a cost competitiveness. And at the end of the day, this will result in a reinforcement or in strengthening our balance sheet. More precisely, when we talk about North America, we need to accelerate, our effort the commercial effort to gain premium market share in in the market while enlarging our, sales network. In Central Europe, it’s really about growth, but it’s also about, aligning our positioning to a premium brand, segment.

Manufacturing, we discussed about Dayton, obviously, is now producing the expected output, but, obviously, we will need to work on the optimization and on the cost efficiency. And this will also result now the increase of volume in efficiency coming from cost reduction through scaling. When we talk about procurement, we will need we are working hard. We have initiated already plan to, reduce our raw material cost and, of course, to optimize our indirect spending. So we have created the different, work streams that are working in this multiple dimension.

And by the way, we didn’t complete at all the ramp up in Oradea that will be completed late in 02/1927, and this is gonna be a a key item in the agenda of our excellent manufacturing team. The new organization, as you know very well, that has been, launched, in quarter one was is aimed actually to create a stronger p and l and KPI ownership and at the same time, a clear accountability. So for this reason, we have also created dedicated work stream that are supporting a systematic follow-up and reporting activities that are necessity for all of us and also for you in the future to follow-up our progress and to make sure that we are delivering in line with the plan. There, when we talk about our capital allocation, we’ve been investing a lot. I mean, you can see clearly that from, 02/2022 to 02/2024, we’ve invested 728,000,000 so far.

And, obviously, we this has increased our net debt position, by 472,000,000, and, we had paid in the wild time 224,000,000 of dev dividends. What are we we expecting from this journey? What we are expecting as a result, an improvement of the operating cash flow. The CapEx level will return back to normal. We don’t see at this stage any need after 02/2025 to further have investment in our business.

And since we will be well set to manage the future growth and, of course, the ratio of one to, net debt to EBITDA, this will be obviously our target towards 02/2027. The road is as as I told you already since the very beginning, the road is bumping. There are, obviously, there is a lot to do. We are working very hard, really, to deliver growth and at the same time to improve our financial position. But I believe that, obviously, we can really position Oceantire growing above, the market level with our unique value proposition, safe and sustainable, and high performing products in demanding weather condition.

We’re obviously targeting a strong improvement of our profitability that will come and you will start to see later in the year. And, of course, with our efficient now new manufacturing footprint, we will see that, obviously, we have, we will allocate lower CapEx, and we will then generate more cash and investor returns in the, in the quarters to come up to 02/1927. Moving to the final section that is about the tariff and guidance. In slide 27, we see at the moment that the passenger car tire and the light truck tire industry will remain pretty stable in Central Europe as well as in Nordics and in North America. While we still see a heavy a weak market in the heavy tire industry, in particular, on the OE side.

Clearly, when we talk about North America, as you know very well, the situation is, at the moment, creating some uncertainties. North America represent today more than 20% of our sales as a group. 85% of what we produce in US is what we sell in US is is produced in Dayton. We supply Canada from both US and Europe, mainly 100% of winter tires are coming from Europe, so they will not be affected by the tariff. But, of course, they also see some tires are made in Dayton in US, and they are supporting the Canadian market, where today there are import duties, up to 25%.

Obviously, we we see that this, tariff can be also at the same time, representing an opportunity for us. The market in US is today made by 60% of imported tires. So the market in US is today importing more than 50, actually 60% of the tires that are sold in the in The in US. So, obviously, for us, having a direct presence in Dayton can represent an extremely good, element to play in the near future if the tariff will remain there. I would like to remind you that, obviously, the tariff are in place only now at the May, while, in April, obviously, the market was still not supporting tariff.

There will be some also indirect, indirect impact that is generated by raw material cost. Obviously, some uncertainties in the consumer that today, obviously, are more cautious in spending money due to different reasons, including currency fluctuations. We, as an Okean tire, we are very well equipped to manage the future with a flexible supply chain, having the possibility to leverage our European factories, but at the same time, being well located in North America to support the North American market with our new, brand new factory in in Dayton. Now to Nico, the, introduction of the guidance.

Nico Harvist, CFO, Nokian Tyres: Yeah. Thank you, Paulo. So so the guidance we have kept unchanged, I. E, we we we are expecting our sales to grow and and operating profit as a percentage from the net sales to improve compared to that of last year. And and and this is it regardless of the tariffs that that’s, imposed now.

We we see that that the guidance will remain as it was when we gave it in the beginning of of February this year. And with that, I hand back over to to Anuka.

Annok Gangaria, Investor Relations, Nokian Tyres: Thank you, Paolo and Nico. And operator, we are ready for the questions.

Conference Operator: The next question comes from Akshat Kaker from JPM. Please go ahead.

Akshat Kaker, Analyst, JPMorgan: Thank you for taking my questions. I have three, please. The first one on your North American business. So starting off on the tariff side, could you please quantify the tariff impacts on the P and L that you saw in Q1? And how do you expect that gross impact to change as we go into Q2 specifically, given your exports from Nokia into The U.

S. As well as, as you mentioned, from U. S. Into Canada? And secondly, in terms of your North American local capacity, could you remind us what are your planned production levels for 2025?

And how quickly could you increase local capacity in that market? And what kind of investments would that entail? That’s the first question broadly around North America tariff capacity. The second question is generally on the marketplace. Could you broadly comment on the channel inventories in Europe and North America and if you still expect positive sell in trends to continue going into Q2?

And the final question is on pricing. Is it possible to quantify the extent of price increases that you’re looking at, again, in both the markets, please, and North America? Thank you so much.

Paolo Pompei, President and CEO, Nokian Tyres: I will take this one. I mean, about the tariff impact in quarter one, obviously, the tariff were not really in place in quarter one. So, the effect of the tariff will be visible in quarter two. Obviously, we we don’t disclose the impact, but this will, require, what I can say, a lot of discipline from our side. If there are, if there is inflation, obviously, we will need to face the inflation as well.

Akshat Kaker, Analyst, JPMorgan: I think

Paolo Pompei, President and CEO, Nokian Tyres: the second market was about the capacity in North America, which we don’t disclose in term of number of pieces, but we can clearly say that, we are reaching, this year approximately, 80% of our capacity in North America. So we’re well positioned to support to support our our growth. I think one of the question was about price. Of course, we don’t comment about the price increase for, competitor law, reasons, and, we cannot comment about that. And, I think the last question was really about the, growth outside of North America, if I’m correct.

And, of course, we are expecting growth as we said in our guidance, and this growth is obviously provided by all our markets and all the markets where we operate. And, Nico, please complement, if I missed anything in in this answer.

Annok Gangaria, Investor Relations, Nokian Tyres: Nico, you are muted.

Nico Harvist, CFO, Nokian Tyres: Yeah. Sorry. Yeah. But, but, generally, same same answers to Paul, and and it was about the the market inventories that that are at the dealer level. So so so we see that they are healthier level and the the sell in as such, will will continue.

And it’s mainly in the Europe side. Then to North America, we went through what is the situation there. But but I think those covered, Akhtar, your your your questions.

Akshat Kaker, Analyst, JPMorgan: Thank you so much. Just one quick follow-up. In terms of your overall capacity in The US, could you remind us how quickly could you increase capacity at your Dayton facility, and what kind of investments will that entail, please?

Paolo Pompei, President and CEO, Nokian Tyres: As I said, we we are, at the moment, planning to reach more or less 80% of our capacity, this year in our US factories. This, of course, will be strictly linked also to the tariff situation. Investing in expansion of capacity, obviously, is not something that is happening in one day. So if there will be a need to go beyond 100%, meaning that we need to invest even more for our future growth, then, of course, we will need that we will need to estimate, that this will not happen immediately, which will happen in in some time. But at the moment, we are still space for growth.

And, of course, we believe that then whatever is happening, we’ll be able to face, obviously, our growth for at least the next the next couple of years.

Nico Harvist, CFO, Nokian Tyres: Yeah. The the the land plot and the layout would would would allow us to triple the capacity capacity there, but it’s not something that we are planning at this moment.

Akshat Kaker, Analyst, JPMorgan: Thank you so much.

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

Artem Beletsky, Analyst, SEB: Yes. Good afternoon and thank you for taking my questions. I have three in total. So the first one is maybe on pricemix versus raw materials outlook for the full year. How do you expect it to look like?

Should we think about neutral or positive pictures there? Then the second one is relating to ramp up costs and basically non IFRS exclusions. So the number was a bit more than €70,000,000 in Q1. Are you able to provide some full year estimate numeric one? So I know that it should be coming down year over year.

And the last one is just relating to net debt development and also working capital during the year. So net debt was roughly €800,000,000 So where do you expect it to peak this year? I guess it should be happening in Q3 as normally.

Paolo Pompei, President and CEO, Nokian Tyres: Thank you. I suggest I take the first one, which is about price and mix. As we said and as we commented, obviously, we didn’t fully compensate the raw material cost increase in quarter one, and we have implemented actions to compensate the raw material cost increase already starting from, this quarter. So, we are expecting a positive development of price and mix already starting from quarter two. I will suggest, Nico, that you take the number two and number three.

Nico Harvist, CFO, Nokian Tyres: Yeah. So in terms of the ramp up cost, they were, 70,000,000 as Artem, you pointed out. We haven’t disclosed that, but if if if I give some type of a ballpark figure, as of today, we are seeing that it will be something between 50 to €60,000,000 in total this year. But then depends on how we are ramping the the Oradia up, but that’s the kind of the ballpark. Nothing that that we we we have printed out, but that’s the ballpark number.

Then on the net debt development, so so, as you pointed out, once again, so it will reach its its peak in in in q three. And then q four, we have the the major, inflows from the receivables coming in. So so it will then then start to low lower towards towards the more more desirable levels as well. And, of course, we are doing utmost with the networking capital as such, but but but q three is the peak in terms of net debt.

Artem Beletsky, Analyst, SEB: Okay. That’s clear. Thank you.

Conference Operator: The next question comes from Pasi Vaisanen from Nordea. Please go ahead.

Pasi Vaisanen, Analyst, Nordea: Thanks. This is Pasi from Nordea. When looking at kind of the profitability, well, the first question is related to your supply chain. So what is exactly a problem there on your supply chain and now creating more costs than expected? I mean you have been buying raw materials quite a long time and prices would not be a surprise.

And secondly, well, when looking at this situation into North America, so how many tires you are actually shipping from Dayton to Canada? So would it be even over 1,000,000 tires on annual basis? And lastly, regarding your financial targets, so would it be possible to reach this 15% EBIT margin by having this EUR 3,000,000, 3 million offtake agreements still ongoing with Chinese tires? Thanks.

Paolo Pompei, President and CEO, Nokian Tyres: Thank you for the question. Obviously, the first question is about our supply chain, which is including, obviously, the manufacturing cost. I I think this is part of the journey that we need to consider. Again, we had completely lost our manufacturing footprint two years ago, two, three years ago, and then, of course, we started to rebuild our supply chain from the beginning. It’s true that we didn’t do it at the speed that where we that we were supposed to do it, especially when we talk about building the growth in North America.

But, of course, now I believe we are on the right track really to, follow follow this, this this growth. Our supply chain costs are really also related to the fact that we are, working very hard on different dimensions. The, growth in in Dayton, which is extremely good growth in quarter one, of course, is, in some way increasing our average cost. And you mentioned about the raw material. Of course, we we knew about the raw material coming, and now, obviously, we have implemented actions to compensate the the raw material.

The second question is about Dayton to Canada. We we don’t disclose exactly. We just say that the old season tires that we sell to Canada today are made in, Dayton. It is, I would say, part of the business, but we have, in this case, two possibilities. In case Canada and US will find an agreement, obviously, everything will run as normal.

In case Canada and US will not find an agreement, we can leverage our European manufacturing sources direct delivering tires to to Canada. The third question is about the financial target. I I will leave it to to Nico to to follow-up on this question.

Nico Harvist, CFO, Nokian Tyres: Yeah. So it was was that are we able to to generate the 15% EBIT market? So so this is our view today on on the longer horizon, I e, we haven’t changed the the long term, financial guidance So so we are targeting the €2,000,000,000 sales and then the plus 23 to 25% EBITDA and 15% EBIT have and and at the same time, between one to two times net debt to EBITDA. So so so so so that that those those are all all intact, and and and that’s what we believe in.

Pasi Vaisanen, Analyst, Nordea: Yes. I hear you. But coming back to this Chinese offtake agreement, are the volumes something between 2,000,000 to 3,000,000 for this year?

Paolo Pompei, President and CEO, Nokian Tyres: The the volume are lower than 2,000,000 at this stage. And then, of course, we disclose that we will keep always, a percentage of offtake in our product portfolio that is around 10% because we believe our suppliers will be able to compensate us the gaps that we have in our manufacturing development as well as, be be able to support us in the production of product line that we believe is not strategic or convenient to keep in house. But at the moment, we can say that the volume are just below 2,000,000 2,000,000 pieces.

Pasi Vaisanen, Analyst, Nordea: The

Conference Operator: next question comes from David Shaw from Tire Industry Research.

David Shaw, Analyst, Tire Industry Research: Hi, and thanks for taking my call. I’ve got a couple of questions. The first one was about a spurious announcement about the EU potentially imposing tariffs on car and truck tires from China, an investigation starting later on this week. Can you tell us any more about that? And the second question is about manufacturing flexibility.

As I understand it, you were due to install in Russia a very flexible modern manufacturing system, and that is now potentially available to go into Romania. Again, can you comment on that, please?

Artem Beletsky, Analyst, SEB: Okay. Great. Thank you.

Paolo Pompei, President and CEO, Nokian Tyres: About the first question about the tariff, study made by the EU, obviously, this is true. This is, potentially ongoing, but, obviously, we are not influencing those things. And and and, of course, I don’t think we we we we can comment about it. I mean, this is an initiative. As you know, there are already some duties on the truck tires, and, I think, the authorities are simply investigating, if, in k, there is any any activities or any dumping activities in in this direction, but we are not able really to comment about it.

About the flexibility of our operations, I want to be clear aloud that when we talk about Romania, we are talking about an extremely advanced manufacturing facilities. I’ve been myself twenty eight years in the business, and I can tell you that the investment we made in Romania is really, status of the art, not only giving us an extremely high level of automation and at the same time keeping extremely sustainable, operations with zero c o two emission, but it’s also a factory that is providing us the same flexibility, of course, in a in a lower scale at this stage that we had in that we had in Russia. So we really count on, what we built in Romania. We really believe it’s a great asset for the company to develop our future growth, our positioning, and obviously, business expansion.

Akshat Kaker, Analyst, JPMorgan: Thank you.

Conference Operator: The next question comes from Rally Juva from Indiers. Please go ahead.

Rally Juva, Analyst, Indiers: Yes. Hello. It’s Rally from Indiers. Two more questions left from my side. So firstly, coming back to the North American production platform.

Regarding the volumes you are now shipping from Europe to The U. A, what kind of investments and time frame would it require for you to actually produce those in The U. S. Sector as well? And then the second question is just technicality on the depreciation.

Was the Romanian plant already kind of fully in the depreciation figures for Q1? Or will there be a step up in Q2 as the shipment started in late March? Thanks.

Paolo Pompei, President and CEO, Nokian Tyres: Thank you for your question. I mean, about North America, the volume that are going from Europe to US are extremely limited. So we don’t see really this issue when we talk about the flow from Europe to US. Of course, there are some product segments where, that are still supported by Europe. But, again, we don’t see that as an issue, and they can be relatively quickly implemented in Dayton in in North America in in cases needed.

About the depreciation, Nico, can you please answer to this one?

Nico Harvist, CFO, Nokian Tyres: The the the depreciations, we didn’t include depreciations in q one in terms of Romania.

Rally Juva, Analyst, Indiers: Alright. And can can you give any any ballpark what will be, like, the the depreciation in in q two once once the the I guess, the there will be now all the depreciation for the for the equipment installed as of now?

Nico Harvist, CFO, Nokian Tyres: I I don’t want to give a number now. I will come back to to q with the q two numbers that that what is that? It’s still under under investigation, so to say.

Rally Juva, Analyst, Indiers: Okay. All right. Thank you. That’s all for me.

Nico Harvist, CFO, Nokian Tyres: Thank you.

Conference Operator: The next question comes from Thomas Besson from Kepler Cheuvreux. Please go ahead.

Thomas Besson, Analyst, Kepler Cheuvreux: Thank you for taking my question. Apologies if I ask about things that have been mentioned on the call. Was listening to another call until very recently. Can you please confirm your annualized capacities at the March for each of your plants? And what you do expect to have in terms of annualized capacities at the end of twenty twenty five?

And as a result, also confirm the planned offtake volumes for both ’25 and ’26 and remind us the origin, at least the geographic origin of the target you’re using in the offtake contracts? That’s the first question. The second, could you confirm the CapEx for 2025? I think, I remember you were talking about EUR 150,000,000, but you spent EUR 52,000,000 in Q1. Is that still EUR 150,000,000?

Or should we count on a bit more than that with tariffs and potential adjustments in local capacities? And lastly, your cash and cash equivalents kind of melted substantially. Can you remind us where you well, what kind of liquidity position you feel comfortable with? Remind us your key maturities and remind us how much flexibility you have with your balance sheet and your net debt going up, apparently, still until the end of Q3. Thank you.

Paolo Pompei, President and CEO, Nokian Tyres: Thank you very much for your question. I will take the first two questions. First one about capacity. Obviously, we don’t disclose externally our total production capacity. We have disclosed a few important information for you to give you some guidance.

The first one is that in Oradea, we will be able to produce 6,000,000 pieces by the February. So you can clearly see that, obviously, we have an important addition in term of capacity compared to the today’s situation that is coming from from Oradel. We also disclosed that we keep more or less 10%, of our total volume, in offtake, again, supporting, the gaps where we believe it’s more strategic for us, to to use external partners more than produce internally specific product line. I kindly ask Nico to answer about the CapEx and and the cash. Yeah.

Nico Harvist, CFO, Nokian Tyres: In terms of the in terms of the CapEx, we have guided 200,000,000 gross. I’d once again repeating myself, so not including the potential part of the hundred million euro stay date from from Romania. So so €200,000,000 is the is the the the CapEx that we see for for for this year. And then in terms of the net debt asset that it will peak in in in in, highest number in in in q three. And, to as a backup facilities, we have the commercial paper program and then the committed credit limits, and those credit limits are not not in use.

So so in terms of the cash position or liquidity, we are on the on the safe side, so to say.

Thomas Besson, Analyst, Kepler Cheuvreux: Okay. Thank you. Can I ask just a quick follow-up? Your Passenger car margins in absolute and in percentage term deteriorated further. And I think this Q1 was the weakest quarter you’ve ever posted.

Can you give us an indication on when we are going to see the lowest figure in absolute or in percentage term for passenger car margins as much as you’ve indicated that peak debt would be end of Q3? Thank you.

Paolo Pompei, President and CEO, Nokian Tyres: Yes. I mean, the main issue, I will say, in our margins in quarter one was the ratio between price and mix and raw material as it is visible from from our bridge. We had the the raw material increase coming in, and we were not compensating the raw material increase. However, we have initiated actions to, compensate, this, this gap in quarter two and following in in h two two thousand twenty five. So I will say that this quarter was in some way, an exceptionally quarter, where, obviously, we had also to follow many other priorities at the same time.

So I’m pretty confident that you will see the margins moving up in, in the second half of, of the year.

Thomas Besson, Analyst, Kepler Cheuvreux: Okay. Thank you very much.

Conference Operator: No more questions at this time. So I hand the conference back to the speakers for any closing comments.

Annok Gangaria, Investor Relations, Nokian Tyres: If there are no further questions, it is time to end this webcast. Thank you, Paolo and Nico and all the participants on the line. And we wish you a nice rest of the day. Bye.

Paolo Pompei, President and CEO, Nokian Tyres: Thank you very much for participating to the call.

Thomas Besson, Analyst, Kepler Cheuvreux: Thank you.

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