Release Date: October 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Nokian Tyres PLC (NKRKF, Financial) reported a 14% increase in net sales in Q3, reaching EUR 314 million, driven by improved passenger car tire availability.
- Segment operating profit improved significantly to EUR 30.4 million, with a margin of 9.7%, up from 6.1% the previous year.
- The Romanian factory is progressing on schedule, with the first tire manufactured in July and a grand opening in September.
- The company secured a EUR 150 million loan from the European Investment Bank to finance the Romanian factory.
- Nokian Tyres PLC (NKRKF) expects net debt to decrease and cash flow to turn positive from 2024 onwards as the investment phase concludes.
Negative Points
- The overall car and tire market remains weak, making it difficult to predict future market and consumer behavior.
- The company faced a EUR 11 million inventory write-down due to contract manufacturing delays, impacting profitability.
- Net debt reached EUR 800 million, the highest level expected, indicating significant financial leverage.
- The heavy tire segment experienced a decrease in net sales, primarily due to a weak OEM market.
- Inflation and a weak business-to-business market negatively impacted the Vianor segment's operating profit.
Q & A Highlights
Q: Could you explain the supply chain improvement and assumptions for raw material costs for the next two quarters?
A: The supply chain improvement, valued at EUR8 million, is mainly due to reduced reliance on external warehouses, particularly with the new finished goods warehouse at the Dayton factory. Regarding raw material costs, they are expected to moderate, with some fluctuations tied to oil prices. For 2025, there might be a slight increase due to certified natural rubber costs, but it should remain moderate. (Niko Haavisto, CFO)
Q: What are your expectations for working capital improvement in Q4 and the full year?
A: Receivables are high due to sales being tilted towards the end of the quarter. We expect most accounts receivables to be paid in December, improving cash flow. Net debt is at its peak post-Q3, but we anticipate it will be well-managed moving forward. (Niko Haavisto, CFO)
Q: Can you provide expectations for volumes from the Romanian plant in 2025?
A: The Romanian factory began commercial production in 2025, focusing on winter and all-season tires. The current installed capacity is about 3 million tires, and we aim to ramp up production progressively throughout 2025 and beyond. (Jukka Moisio, CEO)
Q: How has the winter tire season started in Europe and North America, and what are your expectations for Q4?
A: The winter tire season shows good momentum in the Nordics and Canada, with the US being more weather-dependent. Preorders were strong, but the season's success depends on weather changes. For Q4, we expect volume development similar to Q2 and Q3, with continued market share gains. (Jukka Moisio, CEO)
Q: Could you clarify the contract manufacturing write-down and its future role?
A: The inventory write-down was approximately EUR11 million, due to summer products arriving late. Contract manufacturing remains part of the plan while the Romanian plant ramps up. (Niko Haavisto, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
