Earnings call transcript: Nokian Tyres sees stock surge after Q2 2025 results

Nokian Tyres reported its second-quarter 2025 earnings, showing robust financial performance with a 6.9% increase in sales year-over-year. The company’s earnings per share (EPS) were not explicitly provided in the earnings call summary, but the market reacted positively, with the stock price surging by 10.91% to reach €7.22. This movement comes in response to strong financial results and strategic initiatives, despite a lack of detailed earnings forecasts in the provided data.

Key Takeaways

• Nokian Tyres’ Q2 sales increased by 6.9% year-over-year.
• The company achieved a 22% growth in segment EBITDA.
• Stock price increased by 10.91% following the earnings announcement.
• Expansion in North American and Central European markets is a key focus.
• CapEx significantly reduced compared to the previous year.

Company Performance

Nokian Tyres demonstrated strong performance in Q2 2025, with significant growth in key financial metrics. The company reported a 6.9% increase in sales to €343.7 million, and a 22% rise in segment EBITDA to €57.2 million. Operating profit also saw a notable increase of 31% year-over-year. These results are attributed to strategic market positioning and operational efficiencies, particularly in North America and Central Europe.

Financial Highlights

• Revenue: €343.7 million (+6.9% YoY)
• Segment EBITDA: €57.2 million (+22% YoY)
• Segment Operating Profit: €26.3 million (+31% YoY)
• CapEx: €89.7 million (significantly lower than previous year)

Market Reaction

Following the earnings announcement, Nokian Tyres’ stock price increased by 10.91%, reaching €7.22. This surge reflects investor confidence in the company’s robust financial performance and strategic initiatives. The stock’s current price is closer to its 52-week high of €8.98, indicating positive market sentiment.

Outlook & Guidance

Nokian Tyres expects continued net sales growth and an improvement in segment operating profit percentage. The company forecasts volume growth below 10% and anticipates fewer exceptional items compared to the previous year. Strategic focus remains on expanding the sales network in North America and Central Europe, supported by local manufacturing developments.

Executive Commentary

CEO Paolo Pompe emphasized the company’s strategic focus, stating, "We are focusing on profitable growth more than only growth." He also highlighted the importance of local manufacturing, noting, "We are a local for local player, 85% of our business is made in US for US."

Risks and Challenges

• Potential market uncertainty due to tariffs.
• Changes in consumer behavior in North America.
• Dependence on international supply for the North American market.
• Economic fluctuations impacting raw material costs.
• Competitive pressures in the premium tire segment.

Q&A

During the earnings call, analysts inquired about pricing strategies and market dynamics. The company confirmed that pricing actions are aimed at compensating for raw material costs and emphasized a focus on profitable growth over sheer volume. Analysts also showed interest in the company’s strategic positioning in North America and Central Europe.

Full transcript - Nokian Renkaat Oyj (TYRES) Q2 2025:

Sanu Kangaria, Investor Relations, Nokian Tyres: Good afternoon from Helsinki, and welcome to Nokian Tyres Q2 twenty twenty ’5 webcast and conference call. My name is Sanu Kangaria, and I’m working at Nokian Tyres Investor Relations. Together with me in this call, I have our CEO, Paolo Pompe and Interim CFO, Jari Hofdanen. As usual, we will start the webcast by first reviewing the financial results and some other topicals from the quarter and then we will have Q and A session. So the floor is yours, Paolo.

Paolo Pompe, CEO, Nokian Tyres: All right. Thank you very much, Anuka, and good afternoon, everyone. Thank you for joining our call this afternoon. Obviously, it is summertime. It’s a beautiful week here in Finland, so we appreciate even more for those who are located in Finland your participation to this call.

But let’s start today with the headline, which is a strong operating profit improvement in the second quarter and and, of course, action ongoing to further strengthen the financial performance. Moving to slide, number two. Yes. This is the agenda that is, related to the financial performance in quarter two. Then we will talk.

Yari will support us in describing the trend of the business unit. And then, of course, we will end with the assumptions and the guidance for the year end. But let’s start with the quarter two and the financial performance. So we move to page number four. We had a strong quarter, as we say, that we had a strong, sales.

We had a good sales growth of approximately, 6.9% in quarter two. Our operating profit improved significantly by almost 31%. And, of course, this is also the result of the ongoing action that we are putting in place to improve our financial performance at the moment. The ramp up of the operations in Romania is proceeding according to to the plan. And, some good news also from the sustainability side point of view, we are obviously, ranked among the world’s most sustainable companies by the Time magazine.

We will tell you something more later on. And, of course, we will also talk about tariff that are creating some uncertainties in the short term. And, of course, we have in place mitigating actions in order to, reduce the potential impact. Moving to slide number five. Let’s talk specifically about the performance.

As I said, the sales were going up by 6.9% up to €343,700,000, And our segment EBITDA was up by 22%, up €57,200,000. The segment operating profit was €26,300,000. That was, 7.7% in relation to sales and up by almost 31% compared to previous year. The increase was mainly driven by the passenger car tire segment that was well supported by price increases and lower manufacturing and supply chain cost in quarter two. Moving to Slide number six, you will see that we were able to outperform any market, also in term of market share development.

We were growing in The Nordics. We were growing nicely also in Central Europe considering all the actions that we have in place, but also we were growing two digit in the North American market. As you know, this is a very important growth area for us, and we are very pleased about the performance in the second quarter in a market that is pretty stable at this stage. Moving to slide number seven, I would like to highlight a few items of this slide. First of all, I will focus on the growth year to date, which is, 9.3%, And I would like also to focus your attention of the segment EBITDA that is up by 18% year to date and segment operating profit that is up by 56% year to date.

But also bottom left, you will see that our CapEx, as expected, are going down, and we are at the moment at €89,700,000 invested in our business, significantly lower than previous year when we had, obviously, the heavy investment, in particular, in Oradea in developing our new manufacturing facility in Romania. In quarter two, also, the cash flow had a strong improvement as a result of better control of the working capital, but also as a result of lower CapEx. Moving to slide number eight. This is our guidance in term of CapEx for this year remain as it was. We will be, between, 180 and €200,000,000, so everything is going according to plan also from the CapEx point of view.

But what I would like to highlight once again is that we are ending a strong investment cycle that was necessary to rebuild the footprint of Nokian Tyre in Europe as well as to build to extend the one in North America. So at the moment, we are estimating to be perfectly in line with our guidelines in term of CapEx. And, of course, the, the CapEx level from, after 2025 is expected to go back to a normal level, more or less in line with the depreciation. Moving to, slide number nine. As I’ve mentioned at the beginning, obviously, we continue to focus on our imp the improvement of the financial performance.

I was very clear also during the closing of quarter one that this is going to be very important to focus on profitable growth, and this is where our guidance is coming from. Of course, we have three important focus areas that are, extremely, important for our future development and for our profitability development in the next future. Obviously, one is the commercial area. We are, as I told you already in quarter one, accelerating our effort to gain premium market share, in the North American market. And, of course, the key opportunity is in the enlarging in enlarging the sales network in United States.

In Central Europe, we have similar challenges even though we are a little bit more mature in this market. We are expanding at the moment our existing network, and we are also entering new markets. And we are also implementing consistent price realization in line with the premium branding positioning. This is a long journey that we will carry on, from now on because, obviously, this is the position that we want to have in both the Central European and the North American market. In The Nordic, we are doing pretty well at this stage.

We are managing very well the pressure that is coming from the raw material increase. And, of course, we keep protecting our premium position and our, strong product portfolio, utilizing Veanor as a strong asset of the company to accomplish our objective. From the operational point of view, we are also working at 360 degrees. Obviously, the ramp up of our factories in Oradea and in Dayton are supporting economy of scale, consequently, better absorption of the fixed cost. We are moving in the direction of driving higher efficiency across across the organization because we need to improve our efficiency and our productivity in our own factories.

And, of course, you will see later on more and more the importance of our, development in Romania in term of ramp up because, obviously, this will give us a competitive base for our future development in Central Europe. Last but not least, we are working very hard in improving our efficiency when we talk about supply chain, and our local for local business model will give us the opportunity to become more efficient in managing our working capital and our inventory. We said also at the beginning of the year that we want to also, improve from the procurement point of view, enlarging our supplier portfolio and, obviously, become more efficient in the way we spend our money. And this is what we are doing at the moment, and we see already an important improvement in our p and l in quarter two also in this dimension. All the three dimensions are delivering good results at this stage, and all the three dimension have contributed to the good improvement that we had in quarter two.

Moving to slide number 10. Obviously, this this this job, this, this continuous improvement plan is requiring a clear structure. Of course, our new operating model is helping to have a stronger focus on the p and l and in some way, the keep KPI ownership that we have built around organization has been driving to better accountability of our own business. Of we have, in place at the moment a lot of different work stream that are working in a systematic way to follow-up, and and they’re giving us the possibility to follow-up and to have a clear reporting of our practices, but also about our result. And then, of course, today, we have an organization with an enlarged management team that is giving us, the possibility to be more agile and to react quickly to any, business opportunities or challenge.

Moving to slide number 11. We had also some good news on the sustainability side. Nokian was recognized with to be one of the top 500 most sustainable company in the world by the Time magazine. Actually, we were number 98 in the list made by the Time magazine. This is obviously rewarding our effort in becoming a more sustainable company, reducing the c o two emission, increasing the level of renewable and recyclable material, and, of course, being a a socially responsible player in the industry.

And we will carry on this effort, and this effort has been recognized not only by the time, but as you can see by many other organization. And, of course, I would like to highlight again our ECOVATIS platinum, status is one of the also best indicator to tell how good is our effort at this stage of our history. Moving to slide number 12, I will ask kindly Yari to take the control of the presentation.

Jari Hofdanen, Interim CFO, Nokian Tyres: Okay. Thank you, Paolo, and good afternoon from my side as well. Starting from passenger car tires, in the second quarter, we reported higher sales and improved margins. Our net sales was 206,000,000 comparing to prior year $101,139,000,000. Net sales increased in comparable currencies by 11.3%.

Average sales price with comparable currencies improved as well as the share of higher than 18 inches tires increased significantly. Segment operating profit was 15,900,000.0 or 7.7% of net sales. Comparing to last year, 7,100,000.0 or 3.7% of net sales. Profitability improved in passenger car tires mainly due to higher sales and price increases which were implemented in the first quarter. Also, our manufacturing and supply chain costs were lower comparing to prior year.

In the first half, we have been able to improve our inventory rotation in passenger car tires. In the next page, we can see passenger car tires bridges in the second quarter net sales and segment operating profit. In net sales, we can see that both sales volume and and price mix component developed well. Sales volume impact was 12,000,000 and price mix 9,000,000. Currency, we had some headwind coming mainly from USD and Canadian dollar.

In segment operating profit side, sales volume impact was 5,000,000. Price mix in impact plus 9,000,000. Still in material cost, we had some negative impact minus 4,000,000. However, I want to highlight that it’s good to see that price mix component is now clearly higher than the material cost. So, basically, we have been able to offset the higher higher cost in the second quarter.

Supply chain component plus 3,000,000 coming mainly from manufacturing, sales rates, and and warehousing. SGA cost somewhat 3,000,000 negative comparing to prior year. And in what comes to currencies, the impact is very close to neutral, minus 1,000,000. Going to page passenger car tires net sales, here we can see quarterly changes by our our sales components, sales volume, price mix, and currency. Here, I I want to highlight price mix in the second quarter, which was plus 4.9% coming from both higher sales prices and also better sales mix comparing to last year.

Then to continue to heavy tyres, in the second quarter we had solid sales development however weak market affected to heavy tyres margins. Net sales was 61,000,000 comparing to last year 60,000,000. Change in comparable currencies was plus 1.3%. In heavy tyres, net sales increased in all regions driven by aftermarket sales. Segment operating profit was 6,000,000 or 9.9% of net sales comparing to last year 7,600,000.0 or 12.7% of net sales.

Profitability decreased in heavy tires mainly due to weaker product mix in sales. And in heavy tires, finished goods inventories are on a lower level comparing to prior year. Moving to Vianor. Vianor second quarter, we reported stable sales development there. Net sales, 98,000,000 compared to last year, 96,000,000.

So net sales with comparable currencies increased by 11.2%. Segment operating profit was 7,100,000.0 or 7.2% of net sales versus last year 7,500,000.0 versus 7.8% of net sales. Segment operating profit was slightly lower year on year mainly due to cost inflation in in Vienna business. In Vienna, Finnish goods inventories remained stable in first half. Then handing over back to you, Paulo.

Paolo Pompe, CEO, Nokian Tyres: Thank you, Yari, and thank you very much for explaining the performance in the single business units. Now we go through the guidance. And from the market point of view, we don’t see major changes in the market. Of course, there is a lot of uncertainty related to the market development in North America due to the tariff situation. We will watch this very carefully.

But in general, we can see the market the aftermarket where we are a play strong player will, we’ll see at the moment to remain pretty stable both in Europe as well as in North America. The Avatar business is down or will be down. We are expecting that we remain down in the second half of the year at this stage, also looking at the market development in both the replacement and in the OE segment. When we talk about North America, of course, as we mentioned already during the closing of quarter one, we will keep a pretty, flexible strategy. What I mean is that we are a local for local we have a local for local business model.

And, fortunately, we are not exposed heavily at all to the tariff, in particular when we talk about US. We are, basically, 85% of our business is made in US for US, so we don’t see this issue. But, of course, we will need to be ready to look at any kind of opportunities in the month to come based on the negotiation between Europe as well as US and Canada because, obviously, we are also exporting Canada. I remind you that all the winter tire business that we sell in Canada, which is obviously an important part of our business, is made in Finland. Consequently, we should not be exposed on that side.

So we are at the moment looking at different options and scenarios. There will be some uncertainty that is more related to the consumer behavior than, uncertainty relating from the manufacturing side, so we will need to carefully watch the development from the consumer side, and this is really my main message today. But we are well equipped from the pure manufacturing point of view to face any kind of ending scenario. Moving to slide number 21, we keep our guidance for the year where net sales are expected to grow and segment operating profit as a percentage of net sales, will improve. We are expecting, as we say, the demand to remain in line with previous year level.

And then, of course, the global economy as well as the geopolitical tray, trade and and tariff are creating some uncertainty that we are watching day by day in order to understand better the business development. Of course, we have an important opportunity having our capacity moving up in Romania in particular, and, and this obviously supporting better viability of finished goods and, at the same time, better sales. I would like to take this opportunity also to drive your attention to the following quarters. Last year, we had a very high level of exclusions of in in our in our p and l due to exceptional item that were coming on the agenda last year. This this year, we are forecasting by far lower exclusions.

So when you build a model, you please look at the improvement of the EBIT, of the profit level more than segment operating profit because this is very important to understand the development of the company for the future for the future months. We will have obviously, we guided less exclusions for the next couple of quarters. We have also today announced three important changes in our management team. We welcome, we welcome Christos Strander, who has been a board member, who is today still a board member of Nokia entire team. He will step down from the position as a board member and also as a leader of the investment committee, and and he will join the management team starting from the September 1, leading the North American team as a senior vice president of passenger car tire in North America.

He will replace Lauri Arme, who has accepted the challenge to lead our Vianor network starting from the same day, as a senior vice president of Vianor. Lauri has an extensive experience in the company and also in managing services of her service operations. So I’m sure it will do a great job also managing, Vienor as a senior vice president for the years to come. At the same time, we are promoting Tron as a senior vice president passenger car tire for The Nordics. Donald Trump has been in the company for many years.

He knows the company very well. He will join the management team, and he will have his expertise and his knowledge, commercial knowledge to the management team supporting our future growth and expansion in the commercial commercial area. Are now at the time of the Q and A.

Sanu Kangaria, Investor Relations, Nokian Tyres: Yes, thank you.

Moderator: The next question comes from Akshat Kaker from JPM. Go ahead.

Akshat Kaker, Analyst, JPMorgan: Afternoon. Paolo Akshat from JPMorgan. I have three questions please. The first one is actually on pricing. Can you talk about all the pricing actions that you have taken specifically in Europe and North America?

Is this specifically related to playing catch up on raw materials and other inflation costs? Or are you also being opportunistic in the North American market given your positioning there? The second question is on overall volume growth. You have told us multiple times that a lot of the volume growth that you’ve seen is supply linked for Nokian because you are in a unique position. I’ve seen that number relatively slow down.

It was at 21% in Q1, 6% in Q2, and the comps get more difficult in the second half. So could you just give us a broad expectation of what you’re expecting for Nokian volume growth in the second half, please? And the third one is just a general question on the marketplace. I would be very interested in understanding what are you seeing in both Europe and North America since the month of May, since U. S.

Tariffs have come into force? Could you just talk about general inventory levels in these markets, probably product flows coming in from Asia and how the competitive landscape looks like in general? Thank you so much.

Paolo Pompe, CEO, Nokian Tyres: Thank you very much. Three important question. I would like to start answering to the first one that is really about prices. As I explained very also in quarter one, in quarter one, as you may remember, we lost margin also because we were not increasing the pricing. Prices are covering the raw material cost increase that we had in quarter one.

There is always a a sort of time gap between the raw material increase and the pricing, but, obviously, this was, for us, an important action to put in place in order to compensate the loss margin in quarter one, that were coming from the higher raw material and stable prices. At the same time, of course, I also delivered the important message that it’s import that is crucial for us to position Nokian Tyre as a premium player in the Central European and North American market. And this is a journey that obviously starting, this year and will carry on in the in the years to come. So, we will always compensate raw material, but we will always try, obviously, to raise our position in term of pricing to, be well positioned in the premium market. About the volume growth, this is also very important.

I mean, there is no joy in life to grow without, increasing the profit, obviously. So we say that we were focusing on profitable growth more than only growth. At this stage of our history, extremely important, as well that whatever additional tire we sell, it will be profitable. It will generate profit and value for our shareholders. So this is what we are doing at the moment.

So we are accepting. We accept it to be a little bit slower in generating growth, but we want to have a profitable growth for the years to come. Last is about the scenario of the tariff. I mean, the situation in Europe, the market was pretty stable in the second half. Actually, it was down for the European player, and and and, of course, there was a lot of tariffs coming from Asia too.

The same is happening in North America. It happening was at the beginning of the second quarter when the tariff were just announced. There was a large number of tires arriving in United States from Asia, in order to anticipate or to reduce the impact of the duties. I see two, effect. I think the market will stabilize.

In Europe, it will be pretty stable for the months to come, while in North America, the only question mark is about the general economy and the consumer behavior related to the GDP development of the country. Clearly, less purchasing power from from the consumer will, deliver, decisions in term of what to buy. The market is not self sufficient in term of tires. What I mean is that in the North American market, half of the market is supplied from abroad. So this also can be a problem, but an advantage for us being a local player.

But we will we’ll observe the dynamics, and we will see where where we land. Just to remind you that we are pretty small in North America, so, obviously, we watch the market day by day. But we have our own agenda, and we need to grow based on our own capabilities, accepting that there will be up and down based on the on the GDP growth in the in the local market.

Akshat Kaker, Analyst, JPMorgan: Thank you so much. And just a question left on your own Nokian tires volume growth expectations for the half, please?

Paolo Pompe, CEO, Nokian Tyres: The guidance is that we will grow. So meaning that we are guiding a growth below 10%.

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

Moderator: There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

Sanu Kangaria, Investor Relations, Nokian Tyres: Thank you. It seems that everything was very clear this time. And if there are no further questions, it is time to end this webcast. Thank you all for participating in this call, and thank you, Paolo and Yarini.

Paolo Pompe, CEO, Nokian Tyres: You. Nice

Sanu Kangaria, Investor Relations, Nokian Tyres: rest of the day and summer.

Paolo Pompe, CEO, Nokian Tyres: Thank you very much also from our side, and have a wonderful summertime.

Jari Hofdanen, Interim CFO, Nokian Tyres: Thank you.

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