Welcome to the Nokian Tyres Q1 2022 interim report. Throughout the call, all participants will be in listen-only mode, and afterwards there'll be a question and answer session. I'll now hand the floor to Head of IR, Päivi Antola. Please go ahead. Thank you. Good afternoon from Helsinki, and welcome to Nokian Tyres' Q2 result conference call. My name is Päivi Antola, and I am the head of investor relations in Nokian Tyres, and together with me in the call, I have Jukka Moisio, the President and CEO of the company, and Teemu Kangas-Kärki, the CFO of Nokian Tyres. In this call, we will go through Q2 results and an update on the progress with the exit from Russia, with the new capacity and our focus in the coming quarters. This all will be presented by Jukka and Teemu, and followed by a Q&A. Jukka, please go ahead. Thank you, Päivi, and welcome on my behalf as well. I would like to go through prepared notes in the presentation where the heading is War in Ukraine overshadows H1. I move to page 2. Some quick reflections before I go into the highlights of the numbers. Exit from Russia initiated. The board decided to initiate a controlled exit from Russia as it's no longer feasible or sustainable to continue operations. Right now, at this moment, we are evaluating different options. We've hired external advisors, and we are in discussions with possible candidates as we speak. A part of the process, impairment and write-down of about EUR 300 million, they are recorded in quarter two results. Actions to increase the capacity outside Russia are ongoing, so we are increasing capacity at the Finnish and US factories for passenger car tires. These programs were initiated already in 2021, and they have continued throughout 2022, and will still include investments and equipment in the latter part of this year so that they will be installed readiness for 2023. Also, as mentioned about the US factory, readiness for 2024, and we are on our way to achieve 4 million tires capacity in the US and between 5 and 6 million in Finland. Investment in new factory in Europe is proceeding. We have shortlisted possible locations in place. We are doing the evaluation. Engineering has to be done, and we are finalizing the steps to make the decision to start the investment. Outsourcing options are also being developed, so we look to have alternative suppliers to help us during the time when the capacity is being built in Europe and these offtake options are being developed currently as well. I move to page three. Have a highlight of the numbers of quarter two. Net sales increased by 7.4% in constant currencies, so we recorded EUR 482 million in net sales versus EUR 460 million in 2021 in the same quarter. Tire demand continued good and volumes were down due to supply constraints in our company. Operating environment was increasingly more challenging due to the war and by the sanctions. Segment operating profit at EUR 86 million versus EUR 89.6 million in quarter two 2021. We increased prices to combat cost inflation and that led to higher net average selling price. Our team performed extremely well. It was a demanding quarter in terms of sanctions having an impact as well as the logistics becoming increasingly more difficult to take raw materials to Russia and also ship tires from Russia to other markets. Under these circumstances, I want to thank our team and also congratulate them because it has been a very demanding environment, and we did well in that environment. I move to page four. We have a strong balance sheet. Cash flow was impacted by higher working capital. I call out some key numbers in the financials. Net sales up by 7.4% as mentioned. Year to date we are about 14% in constant currency ahead of the entire year, so at about almost EUR 900 million for first six months versus EUR 758 million in 2021. Operating profit percentage in the quarter was about 18% versus 21.5% a year ago. Year to date we are at 17% versus 18.5% in 2021 and 19% in full year 2021. Segments earnings per share, so before the write-off and so on, EUR 0.55 versus EUR 0.51 a year ago and in the first six months, EUR 0.93 versus EUR 0.80 in 2021. Return on capital employed at 15.2% before the write-offs. Our equity ratio including write-offs is 64%, so that shows that we have a strong balance sheet and despite the write-offs continues to be strong. Obviously, the currencies and various other matters are impacting that, but nevertheless, 64% equity ratio. Cash flow was weaker, and we incurred higher working capital. Both the inventories were high because of the more expensive raw materials. Also, the receivables were higher because of the good net sales, and also the currencies impacted in our working capital by increasing the absolute euro amounts of working capital. Gearing at 14.8% and interest bearing net debt at the end of June at EUR 243 million was EUR 140 million a year ago. Capital expenditures are EUR 18.7 million in the quarter and EUR 33 million year to date, both below last year numbers. However, as we've said, we will start incurring more capital expenditures towards the new factory in the latter part of the year. With that, I hand over to Teemu to talk about financials and segment profitabilities. Teemu, please. Thank you, Jukka. Let's go through some key figures by business unit and starting with the Passenger Car Tyres. In the second quarter, our net sales was on a level of EUR 335 million. Net sales increased, and the tire demand continued on a good level. However, the segment operating profit declined partly because of lack of tire supply impacting especially our business in Central Europe. We are happy our how our average sales price has been developing. We have been able to increase prices in all our markets strongly and therefore we have been able to offset higher raw material and other cost inflation in the second quarter and the first half. Our inventories in the Passenger Car Tyres business are on a higher level than in the comparison period in order to safeguard better supply in the second half. As we all know, now we cannot get any tires from Russia. Moving to look our net sales development by quarters, and let's focus on the price mix. Here you can see how it has been developing in the first quarter and in the second quarter. If we exclude Russia, you can see there in the callout box that the price increases without Russia has been on a level of some 9% in the first quarter and around 20% in the second quarter. Meaning that the price increases in Russia, Asia has been exceptionally high in the first half, impacting also our absolute profit for the second quarter. If you look at our bridge and focusing to the segment operating profit, part, here if we look the price mix component, we see that we have had positive development of EUR 87 million versus the material headwind of EUR 58 million. We have been able to offset that one. The supply chain bucket, a negative development of EUR 20 million, and there majority of that is coming from increased logistics costs because we have been taking extraordinary measures to get the tires out of Russia. We have leased ships and full trains. Therefore, on top of the cost inflation, the cost level has been on an extraordinary high level, which then should benefit us a little bit in the second half in order to sell the volumes. Moving to the Heavy Tyres performance in the second quarter. There you can see that our net sales for the Q2 was on a level of EUR 74 million, and our segment operating profit close to EUR 16 million. If we then also look at relative profitability, that was on a level of 21% year-over-year increase from the comparison period. The performance is a result of strong demand in all product segments, and we have been also able to improve our production efficiency and therefore the profit development was according to the numbers that I highlighted earlier. In Heavy Tyres, the inventory levels are on a low level unlike in Passenger Car Tyres business, and this is the indication that the demand has continued to be on a good level, and we haven't been able to increase the inventory levels in the Heavy Tyres. Lastly, the Vianor business unit, the second quarter had good seasonal sales which lasted longer than normal. Therefore, the net sales was on a level of EUR 99 million and the segment operating profit little bit below EUR 10 million. Because of the longer season, it also increased some of our costs and therefore it has an impact on our profit and profitability. Moving to the assumptions for this year, as we have been communicating already earlier, the controlled exit from Russia will have an adverse effect on our supply capacity, impacting especially our central European business. The raw material and logistics costs are estimated to have an adverse negative impact also in the second half. Nevertheless, the demand for passenger car tire and heavy tires is estimated to continue strong. Our guidance for this year is unchanged, meaning that our net sales are expected to decrease or to be at previous year's level, and segments operating profits is expected to decrease significantly compared to 2021. Back to you, Jukka. Thank you, Teemu. Moving on, it's important that we continue building the new Nokian Tyres, so something old, something new. The old and important thing is that we have a strong innovation pipeline for the future. Look at some of the key products on page 12 that we've launched. Hakka Blue for summer in Nordics, Nokian Tyres Outpost AT also introduced, R5 Hakkapeliitta friction tire and new Nokian Tyres Hakka Truck Coach. These are following a succession of product launches last year like Nokian Tyres Hakkapeliitta 10, Seasonproof, et cetera, et cetera. This is something important, something old, and this will continue to renew our product offer and product pipeline. This coming season, coming autumn, we will have Hakkapeliitta R5. It's a new flagship for Nordic non-studded winter tires that will be launched and will be available to consumers in this autumn. It includes one third of the tread compound of renewable and recycled materials. It also has a Hakkapeliitta R5 SUV with Aramid strong sidewalls and Hakkapeliitta R5 EV with ultra-low sound levels, silent drive with SilentDrive technology. This product will come with over 160 SKUs and available to consumers as of fall 2022, and the main markets will be Nordic and North America, and this product will be made in Nokia. Priorities for the coming quarters something new. We will build new capacity, so we are working on the final site selection, final engineering, and also preparing ourselves for starting the project and the actual building. We will continue exiting Russia, so the process will continue with our external advisors and potential candidates. We will also keep costs and strict control and protecting our cash flow temporarily, especially in quarter two because of the extraordinary measures we took and also that we build inventories of ready-made products. We have a high working capital. We expect that step-by-step we release money from the working capital. Business units and areas will implement their specific plans in Nordics, North America, Central Europe, and Heavy Tyres. We will keep on providing customers with world-class products and services, and we will keep our innovation pipeline up and running, and we'll be looking forward to introducing R5 in the autumn. We are highly confident that this will be a very, very successful product. Going forward, we will focus on building the new Nokian Tyres. These were the prepared notes for the presentation. Päivi Antola, over to you. Thank you, Jukka. Thank you, Teemu. Now, operator, we would be ready for the question from the audience, please. Thank you. Our first question comes from the line of Guido Pescatore of BNP Paribas Exane. Please go ahead, your line is open. Hi. Thanks for taking my question. The first one on your profitability for the car segment. Can you give us any indication of how much of the segment operating profit was linked to your operations in Russia? I mean, I guess that's key as we move into H2 because of the lack of supply. Because it looks like the majority of your operating profit in cars did come from Russia. So any color you can give us on that would be great. Moving to free cash flow, the cash burn in H1 was quite significant, also considering that the CapEx are yet to increase. I understand the movement. Can you help us maybe bridge maybe what we should expect for the full year to a working capital reversal? Should we anticipate in H2, and how much should the increase in CapEx be? Any color on that would be super helpful. Thank you very much. If I start with the cash flow, there we need to bear in mind at least two topics. First of all is the normal seasonality, which means that we are burning cash in the first nine months, and then the cash is coming in the fourth quarter, and we don't expect any major changes to this normal seasonality. In the second quarter, we took some extraordinary measures in order to secure the supply and the logistics out of Russia and therefore part of that is already visible in our profit. The second part is that which is visible in our cash flow and balance sheet due to the fact that we have now higher inventory, as mentioned in my prepared notes, not only for finished goods, but also for raw materials. The raw material part, we will consume that in the coming quarters, being on a more normal level than after the year-end. Then your question regarding Russia and profit and profitability. As I showed in the net sales bridged by quarters, it was visible that especially in Russia, we were able to increase prices significantly, even though in other markets we also increased prices strongly. That also indicates that we had a strong profit generation in the... in Russia. Then these extraordinary logistical measures that we took. Those costs are visible outside Russia. Those are maybe a few comments to give you some color. Thank you. Our next question comes from the line of Thomas Besson of Kepler Cheuvreux. Please go ahead. Your line is open. Good afternoon. It's Thomas Besson. I have a few questions, please. If that's okay, I'd like to ask them one by one. First, could you help us understand the timeline for the board decision and the communication of your strategy ahead? Okay. Timeline of the strategy and the decisions will be such that we are working right now on these initiatives, and we expect that by third quarter results, immediately after third quarter results, we will have new financial targets that we can talk about most likely. By that time, we have a plan and decision to invest, and also we will then see how this exit from Russia will continue, because obviously this is not totally in our hands. It also takes into account that there are other parties involved in that process. Basically, our plan is that by the end of this year, we have new financial targets in place, and we've updated our expected financial performance in 2023, 2024 and beyond. Very clear. Thank you. You had record inventories at the end of Q2. It's been discussed in the prepared remarks and in answers to the previous question. I mean, the extent of the increase is such that I wanted to ask whether you have eventually overproduced in Russia in the second quarter, where you could still use that asset to secure potential revenues in H2, or it's not the case and you effectively fully rely in H2 on your capacities outside Russia? It's our capacities outside Russia when we serve the markets in Western Europe, North America and so on. Also, offtake and so on will then help in 2023. The Russian capacity can operate and produce for Russia. In the second quarter, you have not overproduced in Russia for sale that will take place in Q3. Thus you have already put outside Russia and that you can use for sale outside Russia? Yes. We have brought ready-made goods outside Russia to European and North American inventories. Okay. Can you give us an idea of the magnitude of the number of cars that have been effectively already taken out of Russia for being sold in H2? Not to be precise, but just to give you some color. We have increased the inventories in a way that it will give us some benefit in the third quarter. Mm. It doesn't change the overall picture that we lack tires in the second half. Understood. Yeah, if you look at the volume development, quarter by quarter, you see that especially in the second quarter, year-on-year volumes were down. If you look at the fine print of the announcement, the production volumes were up in the first half. Yes. That's what I understood as well. Until you take the decision, can you help us understanding what you're going to privilege between passenger cars and Heavy Tyres because it's gonna be difficult for you to make both in sufficient numbers. Are you gonna continue to make Heavy Tyres because right now they are 20% plus margins, or are you going to privilege studded winter tires? Or how do you effectively assess the priorities? Well, we have an ongoing growth plan in Heavy Tyres, so that will of course continue. The most important priority at this point of time is to ensure that the Passenger Car Tyres will get new capacity both in those plants that are already ongoing, but also the new factory, and then complemented by offtake in coming years. Okay. Thank you. I have a last question. When you still have some operations in Russia, receivables in Russia. How do you effectively pay your operations in Russia on one side, and how do you get paid for your tires in Russia given the sanctions? Now the Russia business need to operate in itself, so we cannot do any payments or receive money from Russia. Then how to get the money out of Russia, it's part of the controlled exit process, how we structure the possible deal to get the money out of Russia. Okay. Yeah. Thank you very much. Thank you. Our next question comes from the line of Artem Beletski at SEB. Please go ahead, your line is open. Yeah, good afternoon, and thank you for taking my questions. Actually will ask one by one. One element, of course, sort of the HD in Russia, maybe you could provide us with some sort of color relating your cost structure, how it has been distributed between Russia and basically other countries. Just thinking about, for example, SG&A levels last year, administration costs and the depreciation. All the color would be much appreciated. As you know, the cost level. Then now if you talk about excluding the production cost of the SG&A breakdown, if you were asking that one. Majority of our costs are outside Russia. The Russia SG&A level is clearly on a different level than outside Russia. Majority of the costs are in the West. Okay. Maybe the other question is really you spoke about inventories and growth on that side. Could you also maybe comment on trade receivables? I think growth there was some 40% year-over-year. Do you see some sort of, say, elevated level of uncertainty relating to this kind of receivables, or do you see the situation as normal as during previous years? With the information we have at hand, I would say that there is no elevated risk with the comment that situation might be different tomorrow, as we have been seeing this year, that what we say today might be totally different tomorrow. Okay. That's clear. Then maybe the last one from my side, just sort of thinking about your guidance for this year. I think last quarter you provided some sort of additional color in terms of segment EBIT declines for this year and making some comparison towards sort of the levels that you made in 2020. Could you sort of provide color around sort of full year earnings outlook also at this stage? I don't think that beyond this guidance we have, it's difficult to give many moving elements and so on. Say that this is gonna be a similar year to COVID year, so. Okay. Very good. That's clear. All from my side. Thank you. Thank you. Our next question comes from the line of Christoph Loscalzo of Deutsche Bank. Please go ahead, your line is open. Hey, thank you for taking my questions as well. I'd like to start with the process from exiting Russia essentially. The first one of that will be, could you potentially recover machinery and move it to Finland to increase your capacity? I guess this is part of the negotiations, but I'm wondering if you would like to share any comment how likely that will be? In case all the negotiations fail, could you consider running the plant as local for local? As you just elaborated on how difficult it is to repatriate cash from Russia to Europe, and you still have, I think, in the release you said around EUR 400 million in net assets that you have in Russia and Belarus. What's the confidence in that you really get the cash in from that? Also part of the negotiations, or is there a way to channel it to you? I appreciate that you will provide financial targets post Q3 for 2023 and 2024. Is there any comment you could currently give on what the potential size after the exit might look like on the passenger car side? Would it be fair to assume about 30% of the capacity? How big could outsourcing, which you mentioned on the slide, really be, given that there's not that much available capacity, I think, to outsource to? Lastly, even though I appreciate you might not comment, just the margin profile of the passenger car plants in the U.S. and Finland, to give us a rough proxy. Thank you. Thank you. Maybe if I start with the equipment that clearly today, getting equipment out of Russia is not possible. One day it may be, and therefore, obviously, when we go through the process, then that could be one and might be one parameter that we factor into the deal, including also as Teemu was mentioning about the cash repatriation, all that. Obviously there are multiple ways of working on the deal, and we will see how then what the final outcome is. In any case, what has to happen is that Russia becomes localized, so it operates locally, and that will be the only way going forward and then make it possible for any transaction to happen. That is ongoing right now. The finance targets, appreciate your asking and so on, but many moving elements at this point of time. We would love to come back when we have more clarity about the site selection, the outlook and long-term plans of our volumes. Then when we have all that available, then we would love to come out and talk to all the investors about that. As I said, by the end of the year, hopefully after quarter three, ASAP, so we will be ready to do that. This point of time would be too early to talk about that because too many moving elements at this point of time. Teemu, any additional comments you have? Maybe to the repatriation of the cash. I think that's one of the fundamental element in structuring the possible transaction. So far what we have been seeing and hearing, it should be possible. Yeah. Thank you. Just one follow-up, if I may, on suppliers of yours and, I mean in general, you have been sourcing for your footprint in Russia as well, partially from Europe. Did suppliers already approach you and have been asking for a change in conditions, how they supply you, given that your footprint will likely be smaller? Could there be any cost associated to that as well, or so far or as it was before and no major changes? So far, no major changes. Things continue quite normal. With the exception of Russia, of course, which is not normal as may be unnecessary to say here. Yeah, indeed. Thank you. Thank you. Our next question comes from the line of Panu Laitinmäki of Danske Bank. Please go ahead, your line is open. Yes. Thank you. I have two questions related to your plans on the new capacity. First, can you give any color on the shortage of options that you have? I understand you haven't made the decision, but any color on kind of whether you would think it's a greenfield or an acquisition or what size should we be looking at? That would be very helpful. Second, what do you think this will cost? Should we kind of use the US factory as a kind of guide of what it would cost? Do you think this can be done without new equity? Those are my questions. Thanks. Let me comment about the options, and Teemu Kangas-Kärki will talk about the cost and expected investment amount. Options we've been through already because obviously this process started quite some time ago. We've been through multiple countries and options, and we zoomed in on few. Out of those few we are doing deeper DD right now. We have necessarily strong candidates on that, and it's gonna be greenfield. It's not gonna be brownfield or joint venture, it's gonna be greenfield. Teemu Kangas-Kärki. In terms of financing the investment, my current view is that we can do the investment without new equity and then the U.S. factory is a good proxy for the total investment amount. In the U.S., how we are doing it is 2 + 2 million phases in the new CE factory. We are currently planning to do it in 3 + 3 million tire phases. Thank you. That's very clear. Can I just ask one follow-up? Can we use the US kind of building of the factory as a proxy of how long will it take from decision to getting tires out from the factory? Yeah. The concept is slightly different because we go with the ambition that we start producing as quickly as possible. Therefore, we change a little bit the order of equipment, and we start without the mixing department. We actually build with the tire building, and we start from that end so that we get tires faster to market. We bring a mixer from Nokian and build the mixing department concurrently when we are running the factory. That gives us a fast time to market from the factory. That is the playbook that we used in Russia. We made the mixes in Finland and then moved them to Russian site. America is too far away from doing that, but Europe is close enough that we can take mixes from Nokian originally and then have a faster time to market. All right. Thank you. Thank you. Our next question comes from the line of Michael Jacks at Bank of America. Please go ahead. Your line is open. Hi. Good afternoon. Thanks for taking my questions. The first one, if we can please just go back on the inventories balance again. Can you please give us a sense for how much of the increase is contributed by higher raw materials and logistics costs versus the finished goods build up? Obviously, because one will benefit revenues in the second half, the other one would have an impact on margins. That's the first question. Perhaps I just stop there, and I'll ask my follow-up after that. Maybe I start to answer this slightly different. I think that the one big portion is the higher cost level that is visible in our balance sheet. As you can read in our release, the year-on-year increase is over 40%, which is significant impact on our balance sheet in inventories. The split between finished goods and raw materials, there I would say that a good proxy is somewhere between 50/50. Okay. Thanks. Maybe just as a follow-up to that, how has that split changed relative to the prior quarter? The prior quarter, we started to increase our purchases when the war started. Inventory levels were on a lower level at the Q1. Now at the end of Q2, I said both raw materials and finished goods inventories are on a high level compared to Q1. Okay. The proportion between finished goods and raw materials is similar, in other words? I cannot recall by heart what was the level in- Mm-hmm at the end of Q1 at the moment. Sorry to comment. Okay. Thank you. Maybe I guess following on from that, I guess you are going to see some pretty significant cost headwinds as you mentioned coming through in the second half. Do you expect pricing to be sufficient to offset that in the second half? We are continuing to increase prices and naturally we will get the benefit of already increased prices compared to prior year in the second half. There we see a positive development continuing. It's also important to keep in mind that we have relatively new product offering now for the winter season, both the friction tire R5 as well as the Hakkapeliitta 10 studded winter tire, which was launched last year. Therefore, Okay Obviously that allows us to look at the pricing. Okay. Thank you. That's clear. Last question from my side, just on Dayton. Are there perhaps any thoughts as to potentially converting some of the capacity there to winter tires? Not at this point of time. We surely are looking to introduce more our own tires rather than because if you remember when we started to ramp up the factory, we had some offtake to other customers. Now we introduced more our own tires to Dayton and ramp it up that way. Winter tires so far will be made in Nokia and that capacity sufficient at this point of time to service Nordic and the North American market, especially for studded winter tires. Friction tires it remains to be seen. We will see how that will evolve. The studding technology, studding equipment to move them that to North America at this point of time is not operationally clever. It's better that they stay where they are and are fully utilized in their current location. Okay. That's very clear. Thank you very much. Thank you. Our next question comes from the line of Pasi Väisänen of Nordea. Please go ahead. Your line is open. Great. Thanks. This is Pasi Väisänen from Nordea. Just to confirm, do I understand right that this announcement regarding the greenfield project is going to be kind of coming out in the coming months before the third quarter earnings announcement? Are you still thinking about this subcontracting model, which actually could affect the missing European sales volumes for a period you are building up your own plant? Because you actually said that you have selected the greenfield, not the joint venture, but does that exclude the subcontracting? If you are using a kind of capacity bridging for the European production, are you targeting at the full 5-6 million for that bridging? What could be the profitability of that possible outsourcing deal? Thanks. Thank you, Pasi. Thank you for the question. We are working with the new location in a professional way, and we will make the announcement as soon as possible. We expect that will happen before the Q3 earnings. About the offtake, yes, we will have that, and that will help to bridge the gap in missing volume in Central Europe. Obviously, what is important is to look at that offtake and ensure that there is money in it enough that it makes sense. No clever business decision to sell volumes and not make money. Obviously that's a criteria that we look into. Within that criteria, yes, we will have offtake and we will bridge the gap, as much as is financially justifiable. All the plans that we've talked about are very much valid and continue as planned and as announced or as discussed. You are able to keep up your market share and you are preferring the market share over your profitability in that sense? We want to remain relevant in the market because it's important that Nokian Tyres is relevant and a brand that people recognize and value. Therefore this is important that we do that work while we are building the new capacity and capability because then launching and bringing that into the market is far more easier when there's recognition and important market positions. Yes, precisely. What was the target year or date for this 3 + 3 model in this new Greenfield? What's the year we are talking about to reaching 6 million tires? We will come back to that when we talk about the financial targets, 2023, 2024, 2025, and the investments and CMD or mini CMD and financial targets, hopefully soon after Q3 results. Oh, it must be 25 because if it's included in your kind of storage period, then that's just. That's your conclusion. Yes. Okay. Yeah. I hear you. Thanks. Thank you. Our next question comes from the line of Peter Kester at Kester Capital. Please go ahead. Your line is open. Hi. Thank you. Maybe just following on from Pasi's question. Can you talk a bit about the practicalities of getting high volume outsourcing, thinking about molds, the quality of your product versus the outsourcing available and maybe whether they would have to come from other regions, just so we can kind of understand the framework around that, please. Again, maybe if we would leave that to CMD in after the third quarter when we have the plans and volumes and expectations available, and then we would be far more qualified to talk about these expected volumes and profitabilities. Right. It's very much work in progress right now. We have internal information, but this is not the time to disclose. Yeah. Okay. In the latter part of your release, in the fair value part, you talked about the investment has been substantially commenced. I was wondering if you had already ordered equipment or signed for the necessary equipment for molds and maybe mixing facilities. Have you already made those decisions and started ordering or is that still to come? We have already made the first steps and during the balance of the year in our CapEx will be visible our down payments in order to accelerate the equipment deliveries. Right. Okay. Just a question on just so we can maybe get some understanding of profitability in your existing organizations. If you look at the direct labor as a percentage of sales plus logistics comparing Nokian to Russia, can you just give us some sense as to what the difference is between those two in a normal year? To give you a flavor about the impact of our Russia factor versus others, what we have been discussing on recent calls is EUR 10 rough difference per tire produced in Russia or outside Russia. That gives you a high-level indication of the headwind that we are getting when we now have lost the supply from Russia to other markets. Okay. Would you expect to be able to do better than Nokian in a new ramped up facility, or would it be similar because Nokian is, you know, more depreciated? How would you think about a new facility versus Nokian? I would like to go back to CMD from 2018 where we put to scale the three factories, Russia, Nokian and Dayton, because that is the relevant comparison also today. There we indicated that from the production efficiency point of view, there are no major changes between the factories. One factor impacting the cost level is the pure scale. Depending what is the scale of the factory, that will reduce the cost per tire. And then on top of that, nowadays the electricity or the energy as a factor and let's see how that will develop in the coming years. Thank you. Last question, please. It's just if you could maybe give us a split of the net working capital in total between Russia and outside of Russia? Mm. Even in order of magnitude. Before the crisis, our main finished goods warehouse, or one of the main was in Russia, and then the raw materials were in Russia. In that order, Russia played a significant role. Going forward, I would say that the working capital component, naturally, we don't have that in Russia anymore, and that is then split short-term between two locations and then in the future between three manufacturing locations on top of the normal sales warehouses in selected markets. And this- If I continue with the trade receivables, because that is a key factor impacting positively to our working capital in the coming years, is that because in Russia we have had this classic consignment model, meaning that we have been financing with the certain terms our customers. Now when in the future we don't have Russia in our portfolio, our trade receivables should come down. That is the planning hypothesis. Okay. Is there a split of current receivables in Russia? Sorry, just to help with the Finnish comment on the working capital. Can you repeat? Is there a split of the current accounts receivable between Russia and ex-Russia? Just you gave the kind of concept on inventory and how things are held. I was wondering about the complete picture on accounts receivable currently. We haven't been disclosing that information, but Russia has been a significant area where we have trade receivables. Yeah. Okay. Thank you very much for all the help. Thank you. Our next question comes from the line of Akshat Kacker at JPMorgan. Please go ahead. Your line is open. Yes, thank you. Akshat from JPMorgan. Two left from my side, please. The first one on free cash flow going forward. If we exclude investments in the new European plant that you've been talking about and the working capital seasonality, do you think the underlying operations as of today can generate positive free cash flow? That's the first question, please. And the second question is on the current annual production run rate for both Dayton and Nokian, please, and where do you expect this to be at the end of 2022? Thank you. If I start with the cash flow and my earlier comment about do we need new equity in order to finance the investment. As I said, my current view is that we don't need any new equity in order to finance the cash flow and therefore, maybe that's the comment I want to make at this point, and let's come back to that after Q3 in our mini CMD. Teemu, on the production run rates, we said that we are heading to Nokian with the equipment that we are installing right now and in the coming months and so on, between 5-6 million in 2023-2024, and we are heading towards 4 million in Dayton, and we said that about 1 million last year and then a linear into 4 million as we install more equipment. We're working on that plan, still the same plan. Thank you. Thank you. Our next question comes from the line of Rauli Juva of Inderes. Please go ahead. Your line is open. Yes. Hello, Rauli Juva from Inderes here. Actually, my original question was well covered earlier, but maybe one on the Heavy Tyres. Can you elaborate if that's running on full capacity utilization at the moment, and how's the capacity growth investment proceeding there? Thanks. Yeah, it's running at full capacity at this moment. Costs are very low, so we actually whatever we make, we sell, and the capacity increases are, the new lines are coming as we speak, so we are preparing and installing them, and so they will help step by step the, volumes, our production volumes. Very good. Thank you. Thank you. Our final question comes from the line of Pierre-Yves Quemener of Stifel. Please go ahead. Your line is open. Yes. Good afternoon, Pierre-Yves Quemener with Stifel. One last from me, please. You made EUR 152 million in Russia and Asia in the second quarter in terms of revenues. How should we think about that bucket into the third quarter and the fourth quarter? Obviously, it should significantly go down in the third quarter, but once you exit from Russia, would that region completely disappear out of your disclosure? Thank you. Yeah. What will happen with Russia is that, as we work on to localize then, the operations continue, but they serve Russia. Then when we get to a point that the process comes to completion in terms of signing and closing, then obviously it will disappear. It's very difficult to say when that happens and so on. Until the transaction is being made, Russia localization will continue running in the coming months and quarters. You won't be able to monetize anything since the region is under clear sanctions, but we appear in revenues possibly in the third quarter, but you won't be able to channel cash out of Russia, right? As Teemu was saying earlier, that part of the transaction and discussion with the potential partners in this process, the cash component monetization of that money that is accumulating in the balance sheet and receivables, so on, is one element in that discussion. As Teemu was saying, it appears to be possible to monetize it through that kind of a transaction. This is what we work on. Thank you, Jukka. Thank you, Teemu. Thank you. As there are no further questions at this time, I'll hand the floor back to our speakers for the closing comments. Thank you very much. As there are no further questions, this ends today's conference call. Thank you all for participating and have a good day. Thank you very much. Bye-bye.