Good afternoon and welcome to Nokian Tyres CEO's 70-day webcast. My name is Annukka Angeria, and I'm working in Nokian Tyres Investor Relations. Together with me in this call, I have Nokian Tyres' President and CEO, Paolo Pompei, and Nokian Tyres' CFO, Niko Haavisto. Welcome, Paolo and Niko. Good afternoon. Welcome also our participants. You will soon have an opportunity to ask questions directly from Paolo and Niko. Before we open the lines, I would like to ask you, Paolo, a few questions. It is now been 70 days since you joined Nokian Tyres. What is on your mind right now? Good afternoon from my side too. Of course, thank you for taking the time for joining our call today. Looking at Nokian Tyres, of course, I can say that the first 70 days were really dynamic and productive at the same time. Of course, I knew the company, so my introduction to the company was a little bit easier and faster. When looking at Nokian Tyres, I can say that we need to look back at the last couple of years when the company has decided, has taken a responsible and strategic decision to leave Russia, where we were producing tires. It was actually mainly the main production source with probably 70%-80% of our production output coming from that region. The company did an extremely good and challenging job in the last couple of years, resetting the manufacturing footprint, taking the decision to leave Russia and move, obviously, outside of Russia, building a new manufacturing footprint. As you know, we are building a new state-of-the-art factory in Romania. Obviously, we have also developed our manufacturing capabilities in North America. This, obviously, has taken some time, and it has been forcing the company really to take important decisions in the short term. When we look at the last couple of years and we see where we stand today, we can clearly say that today we were able to build for the future a much stronger platform, less vulnerable and extremely agile, closer to our key customers. This will, obviously, generate a lot of benefits in the future development of the business. So far, my feeling is really a good feeling about our future directions. I think the strategy is strong. Of course, the road was bumping and is still bumping. We are still transforming the company at this stage when I'm talking. I guess we are really on the right path. Good. This morning, we published a press release where you shared your thoughts and the company's short-term priorities to drive profitable growth. If you look at these priorities more closely now, first, what can you tell about the situation in Romania? Right. In Romania, we are about to start commercial sales. I think we made very good progress in the last few months since, we are producing tires for regular production since quarter four, 2024. In a few days, we should receive the commercial license and start to sell those products in the market. We are very excited because we are well in plan when we talk about manufacturing output, but also because last week we had the opportunity to release our first commercial product and to present to our customer our first commercial product, the Nokian Seasonproof 2, which in some ways represents not only the first commercial product made in our new factory in Oradea, but is also representing an important milestone when we think about sustainability because this product will have up to 30% of renewable and recyclable material content. This is perfectly in line with our roadmap to reach 50% renewable and recyclable material content by 2050. The product will be released in a few days and obviously, the main sales will happen during springs. Finally, after working hard on the development of the Oradea factory, we will be able to see the first commercial sales in the next few weeks. We said clearly that this year we will reach approximately 1 million pieces and we are well on track to release 1 million pieces. Okay. Let's then move to North America. What can you tell about the situation there and especially in light of the planned tariffs? Yes. I mean, also when we talk about North America, before we talk about tariffs, we need to remember that North America was clearly affected too by the change of strategy moving out from Russia because some of our products that were sold in the North American market were produced in Russia. The last few months, in particular during 2024, we had to really reorganize our production facility and the new production mix that was required to meet the local demand. We just completed actually the step two investment that will give us additional capacity in the next month in H2 2025. The situation about the duties is in some way under development. As you know, things are changing every day. This can be an advantage when we talk about U.S. production, considering what is going on at the moment. To be local for local for the U.S. market is becoming extremely important and strategic. We have a solid and strong manufacturing footprint now that can support the local market. Canada, obviously, is also an important market for us. We supply the most valuable part of our range, which is the winter tire, from our factory in Finland. This part of the business will not be affected. We will need, obviously, to play different cards depending on the development of the tariff when we talk about supplying Canada from the U.S. We have actually the option to support it from the U.S. or, if things are not changing, obviously, to support it from Europe. At least today we have a very flexible go-to-market approach that can give us the possibility to play in different directions. Good. You also talk about improving efficiency and productivity in the release. Can you give any concrete examples of what this could mean in practice? This is also very important. Again, setting up the new footprint, we did not really have time to focus a lot on the efficiency and the productivity of our own operations. Now it is really time to start to do that. First of all, we need to start working on our supplier base. We need to enlarge our supplier base. We need to renegotiate our own existing contracts, not only in terms of cost, but also in terms of payment terms. We need to become a little bit more flexible and more agile while approaching our suppliers. This is valid for anything we do, including manufacturing, buying raw materials in particular, but also supply chain in general. Also, we have changed our business model and our organization recently. This has given us the possibility to think, to leverage synergies across the organization, having central functions that are taking care about the whole business, eliminating duplicated functions, and giving the possibility to the company to work on continuous improvement plans when we talk about developing our business in our manufacturing facilities or in our centralized functions. This is very important because it's given us also the opportunity to look at our SG&A structure, as we ar e doing at the moment, and see wherever we can become more efficient. As I say, eliminating duplicated costs and at the same time also putting together projects that are leveraging the existing automation and existing digitalization to become more efficient and more effective in anything we do. Those are just a few examples. Of course, there is a lot we can do in order to improve our cost base at this stage. Nokian Tyres has a strong brand in the Nordic countries, but there is still a lot to do in other key markets. What do you think about this? This is absolutely true. Again, the appointment in the management team of the leaders that are today managing Central Europe as well as North America is going in the direction to reinforce the focus of the company on those two strategic development markets for us. The growth in those markets will happen not only through the additional production capacity that we have built and we are going to build in the next couple of years, but will come also from the release of new important products and strategic products for this new market. As I mentioned before, the new all-season product line that we just presented last week is one of the several new product lines that you will see out of our factories in the next few years. Also investing more in branding and communication. This is very important to reinforce the value proposition of our brand and at the same time to make sure that we increase our visibility in the market, generating demand from the consumers. It is a strategic part of our development plan since obviously increasing brand awareness and increasing the value reputation, the value proposition of our brand will give us also the opportunity to leverage better pricing for the future too in those two strategic regions. Nokian Tyres has invested significantly during the past couple of years and we will be in the investment phase still this year. Do you want to comment on the CapEx for this year? Yes, of course. I mean, we have given a guidance of CapEx for this year of EUR 200 million. Obviously, this is including the further development of our manufacturing facility in Oradea. We are well in the guidance. We are really confident with this guidance. Of course, we believe that moving in 2026, we will have a more ordinary budget when we talk about CapEx. Niko, feel free to add any comments about it. No, I think as Paolo you said, we are well in our guidance, i.e. the EUR 200 million this year in terms of CapEx. In total, we have said and disclosed earlier that between 2023-2025, it will be close to EUR 800 million that we are investing into the new production capabilities. Okay. Last, before we open the lines for the audience, if you then consider a longer-term horizon, how do you, Paolo, see the company's long-term financial targets that were set in 2023? Consider the financial targets valid. Of course, we will give you more updates during the year, in particular towards the end of the years. As I said at the beginning, and it's very important, we've been living in a bumping journey, and we are still setting the company for our future growth. I think the long-term plan is clear and the strategy is solid. We have today really a platform that can deliver the financial targets as we announced before. Thank you, Paolo, for the responses. We are now ready for the questions from the audience. If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Artem Beletski from SEB. Please go ahead. Yes, hi. Thank you for taking my questions. In general, I think that this is a very good idea to arrange this type of call. It is helpful to us. The first question I have is really related to North America. You have highlighted issues there towards the end of last year, and some uncertainty still prevailing. Could you maybe elaborate more? What are the issues there? Is it really production ramp-up- related topics? Is it demand picture or what has been really happening there? This is question number one. The second question is still relating to North America and your Dayton factory. You mentioned, Paolo, that you are looking at step two investment during the second half of this year. If I heard correctly, could you elaborate more what is happening there? Okay. Thank you. Thank you very much for the question. Very clear. I mean, as we explained very well, the exit from Russia was not only affecting the business we had in Europe, but it was also affecting the business we had in North America because obviously many important production lines and products that we were selling in North America were obviously replaced by we had to replace them in North America. This has been requesting a drastic change of the mix. In our business, this is not happening simply moving balls from one side to another, but we had to completely readjust the manufacturing facility in order to make sure that we were able to meet the local demand with products that were before coming from Russia. This has gone through and has been a strong, actually, transformation that was affecting our actual results in 2024. Finally, now we were able to develop this capacity and the necessary capabilities to approach the North American market from our own factory in Dayton. Secondly, when you were asking about the investment, we are just completing what we call step two of the investment process that was actually part of the original plan, obviously meeting the new requirements. As we speak at the moment, we are installing the last production line that is necessary to support the full capacity, the full saturation of the capacity in North America. Again, it is very important to me to communicate it. I mean, the exit from Russia was affecting North America too because of the mix of product we were making in North America that we had completely to readjust to the new situation, to the new setup. I think we are in a good way forward. The KPIs improving. Of course, the next challenge now will be to build additional demand from the consumer, from the customers, enlarging our sales network in North America, in particular in the U.S., because we have already quite a good position in Canada and extending our dealer and wholesaler network in that region. I hope it answered your question. Yes, absolutely. Very good, Paolo. Just the housekeeping question, if I can finish with that one. Could you maybe comment what is your sales split within North America when it comes to the U.S. and Canada? Is it roughly 50/50 right now because as we are thinking about tariffs, it is quite important? We do not disclose the sales split within North America. North America today is representing more than 20% of our total sales. This is something we disclosed, but we do not disclose the split within North America for obvious reasons. Okay. This is clear. Thank you. Thank you. The next question comes from Akshat Kacker from JPMorgan. Please go ahead. Thank you for doing this call. Hi, Paolo. Hi, Niko. Akshat from JPMorgan. I have three questions, please. The first one is on the ramp-up of the Romania factory. I think you clearly highlight in the press release that you're focusing on a fast ramp-up. I just wanted to ask you on the visibility that you have on the production profile as of now and the ramp-up curve of this plant. In terms of your current planning, what are you thinking about total annual capacity in 2025, 2026, and 2027? If you could give us some visibility into that ramp-up, please. The second question is on cost actions. I think you've clearly mentioned a near-term focus on improving productivity and efficiency. You've talked about a new finished product warehouse in the U.S. and some focus on SG&A as well. Across all of those elements in terms of fixed costs or structural costs on the P&L, could you just help us quantify that impact or the impact of all of those efficiency actions on the P&L as we think about 2025 and 2026, please? The last question is on, again, Dayton and your U.S. capacity. Obviously, it has been a while for those who have been looking at Nokian Tyres since a few years. You had the groundbreaking back in 2017. Could you just let us know in terms of total planned output from this plant in 2025, how many units do you expect to produce in Dayton, and how much can you increase production if needed and use it as a contract manufacturing facility if there are tariffs on other players in the markets? These three questions, please. Thank you. Okay. Thank you very much for your question. I start from the first one that is related to Romania. As we said, we disclosed that by the end of this year, we will produce 1 million pieces, and the factory has been set to produce 6 million pieces in 2027, 2028. Of course, this is what we have communicated. The ramp-up is progressing quite well. Obviously, as I said, this year we see the target. We are perfectly in line with the target from what we see at this stage. You were asking about SG&A. We will be more specific later on because we just started with a new organization from the 1st of March. Of course, there is a lot going on in the company in order to quantify and give a value of all the activities that we are putting together. We will be able to give more details about that later on in the year. As capacity, as I said, first of all, I would like to underline that the starting point was not 2017, but really 2019, 2020 when the factory started to produce tires. We are reaching full, we are targeting full capacity already by the end of next year in terms of saturation. Here, we cannot talk really about pieces because obviously, as I said, we are changing the mix. We are going to an average weight that is higher. I think in terms of tons, I'm not sure we disclosed, and Niko, please help me. I'm not sure we disclosed in the past the capacity of the North American plant. Not really, but I think at last year, we were something to give some flavor at the level of some 65% of the capacity. Saturation. In terms of tons, during this and next year, we will reach the full capacity in terms of tons. Thank you so much. If I can just follow up on--got it. Thank you. Just if I could follow up on the cost actions, could you just talk about the different areas of the organization that you're focused on in terms of taking out costs and specifically on the finished product warehouse in the U.S.? How much does it save you in terms of lower inbound freight costs or logistics, please? Because that was something that was mentioned in one of the quarter calls last year as well. The big box when we talk about saving are, of course, related to procurement. As I said before, leaving Russia in very few weeks, we did not really focus on developing our supplier base in an efficient way. At the moment, the big box is really on the procurement side and on the supply chain side, as you mentioned. The factory in North America, obviously, and the warehouse in North America is giving us the opportunity to have a much more efficient supply chain. We did not really disclose exactly what is the saving that we will get from those operations, but you can imagine that for the North American market, it is an important step forward in order to become more efficient in our shipments. In general, procurement, it is a big area. SG&A is all about defining and eliminating duplicated costs that we have in the organization through a centralized function-based organization that is taking care about global procurement, global supply chain, global HR, global manufacturing in particular. I mean, this will give us the possibility, as I said, to implement a continuous improvement plan and obviously to leverage synergies and best practices through the organization in order to become more efficient. Thank you very much. Thank you. The next question comes from Tomi Railo from DNB. Please go ahead. Hi, it's Tommy from DNB on behalf of Mika. I got two questions. Following on the U.S. situation, can you comment if U.S. production was loss-making in the fourth quarter and still maybe further what kind of actions are needed to make it profitable if the demand doesn't come back this year? Niko, would you like to comment on the profitability? Yeah, we are not commenting on single factory profitability in Q4 or any other quarters. Of course, we need to have the volumes there. That's clear to make it real profitable. As you know, all the factories need to be running almost with full capacity in order for us to be really profitable. I think that's what we can say in terms of the data factory. Got it. Thank you. Maybe on the question on outsourcing, is there any changes or views if you want or plan to change the outsourcing model, or how long are you going to use the kind of outsourcing model going forward? Outsourcing was really important, as you can appreciate, in the last couple of years in order to be able to develop our business and to keep our brand visible in the market. We learned a lesson from that. We will keep, obviously, a certain percentage of outsourcing product in our total portfolio to become more flexible, to cover the gaps, to produce those product lines that do not make sense to produce internally or are not efficient to produce internally. We will leverage for the future also a part of outsourcing. Clearly, key strategic products for the company will be produced in-house, and the majority of our production will be made in-house as any premium brand. We would like to keep, and we want to keep for the future, a certain percentage of support coming from our partners because this is really needed to cover the gaps that we eventually have on our journey. Thank you very much. Thank you. The next question comes from Rauli Juva from Inderes. Please go ahead. Yeah, hi. It's Rowley from Inderes here. I wanted to ask just one question. A few years ago, you gave out the kind of strategy outlook for the five-year period and the financial targets for 2027. Basically, since then, your financial performance in 2023 and 2024 has been clearly below what you indicated or targeted back then. What have been the main reasons for those negative surprises or more weak development on the financial side? Thank you very much for your question. I think this is a very important question, and I want to reply. Also, as a newcomer in the company, it's really important to me that we clarify this part. The target was obviously referred to five years from 2023, so we are talking about really 2028. This company came out from a storm because when we are taking the responsible decision to leave Russia, we are taking the decision really to say goodbye to 70% of our production output that at that time was coming from Russia. I believe the company was excellent in maintaining a good business level, but at the same time, obviously, building our future platform. We should not be surprised if really in the last couple of years and in some way also today, the company is not delivering the financial targets already. We see in this roadmap a clear opportunity to get there because we are in the middle of the journey. We made fantastic steps. The team has been great really in building in a relatively short time a new state-of-the-art factory in Oradea, in Romania. I can tell you by my experience, I've seen probably 150 factories in my career, and this is one of the best platforms I've seen in my life. The team has been great in building this platform. This platform, finally, in the next few weeks, will start to deliver. I mean, at the moment, the commercial sales from the new platform in Oradea are equal to zero until probably we will start in the next few days. This has been absorbing a lot of focus and, of course, has been always also affecting, as I explained before, the production output in North America. The progress was great. I feel really strong about our future development because now, finally, as I said, we have a business model that is by far less vulnerable than what we had before when we had a production facility in a high-risk country. Today, really, we have a local-for-local business model, local factories serving local customers. We are much more agile, and we can be much more flexible. This is finally step- by- step coming into place. The financial target that we announced will not be achieved this year. That has to be clear. We are well on track to reach the financial target as we announced by 2028. I hope this answers to your question. Yeah, yeah. I was referring also to the kind of indications you gave for the years in between. If I read you correctly, maybe to summarize that is that the rebuilding of the company has perhaps been more costly and kind of more challenging than maybe thought two years ago. Is that the right interpretation? Costly, I would say it takes time. It is obviously building such a big platform. I mean, we invested a lot of money, as Niko highlighted before. It required that, obviously, you need to synchronize with different suppliers around the world, make sure that you put together the plan. More than costly, I would say that because we are well on budget in terms of cost, it is really about timing. We gave guidance for this year that we will grow and we will improve our margins. I think this is the best guidance we can give at this stage considering our agenda. Of course, we will deliver continuous updates during the year. Niko, I do not know if you want to comment on this as well. Yeah. Hey, Rauli, been discussing with you quite a few cases. Yeah, it's like Paolo said, everything is easy when you put it in Excel. Once you really need to do it, it's a little bit different story. We have maintained the budget in terms of what we have done in Oradea, so no worries there. Also looking forward to that EUR 100 million state aid from the Romanian government, which is not included in our numbers. None of that yet. It will be netted against the investment and then will be visible in our P&L via small depreciations. Also, one needs to understand that in reality, we actually were ramping up three factories, i.e., Nokia was producing much less than it is today, then the U.S., as Paolo went through, and then Romania on top of that. I need to admit and raise my hand as well that we have not been good in the communication. That is something that we need to be better going forward to facilitate your comments and needs as investors and analysts as well. Okay. That's very understandable and clear. Thank you. The next question comes from Don Detore from Tire Business. Please go ahead. Don Detore from Tire Business, your line is now unmuted. Please go ahead. Thank you, gentlemen. In lieu of the issues with the Russian plant and the difficulties in North America, Paolo, I'm wondering what your message might be to the North American tire dealers who sell your product going forward. What would you like them to know about the company as you readjust to the realities going forward? I think the message is very clear. For them, I think it's a very good message because now they can really rely on a local supplier, in particular when we talk about the U.S., that has a full range of products to deliver and to support them during their daily activities in the market. This is a local supplier. As you can appreciate, many of the suppliers that are not based in North America will probably struggle in the next few years not being there and not being able actually to be effective and in some way penalized by the tariff. We are there now with a full product range so we can support the development of the sales in the North American market and give them a better service through our local operation and better lead time as well in anything we do. I think it's a great move. I can see that our customer base is really pleased about what we have done because they see day- by- day that we are now able really to give them a better service and a very nice product range to promote in the market. To follow up on that, you talked a little bit about brand awareness. What is the key to increasing brand awareness in North America and particularly in the U.S. market? First of all, we need to develop the network. Having limited capacity, having limited supply, we were not able to develop the sales network as we wanted because obviously we had to support our existing customers at this stage. Now, actually, we are able to extend our geographical presence and extend our sales also having the access to a wider customer base. New products, for instance, we just released a few weeks ago in the North American market, the SORPAS 801, AS01, that is for ultra high performance application. Of course, a lot of communication. Nokian Tyres is number one, I would say, when we talk about safety and sustainability. Those two core characteristics of our own value proposition are really important for our customer and consumer. We will need to communicate a lot, and we'll need to improve our sales and marketing effort in raising the value of the brand and, in particular, making the consumer aware about our superior product performance and at the same time about our innovation capabilities. It's a long journey. It's not a journey that we develop in one day. I think we are, I would say we are doing quite well. We are growing fast now in terms of sales, having additional capacity, more capacity we will be able to add, more sales we will be able to generate, and consequently, more profitable growth. Thank you very much. Thank you very much, Rauli. The next question comes from Akshat Kackar from JPMorgan. Please go ahead. Thank you. I have a couple of follow-up questions, please. The first one on the European business. As you said, post-Russia exit, you've had a couple of years where supply in the region has been below the previous demand. That has led to the right sizing of your European business footprint and the cost position that you have in the region. I'm just wondering, as you ramp up your sales effort in the region in the next few years, should we think about additional upfront costs or investments that you might need in Europe? That's the first question. The second question is on your 2025 outlook. It's obviously been five weeks from when you reported your full year results. Could you just give us a very quick update on the market environment, winter tires? How do you think about the European consumer and overall inventory situation in the business, please? Thank you. Thank you very much. Answering to the first question about additional investment and additional capacity, at this stage, I think our agenda is quite full for the next two to three years in developing and harvesting the job that we did in building our new manufacturing facility. I do not see the need to add additional investment at this stage in the next couple of years because obviously, we need to complete, first of all, the first phase of our new development project. About the second question, sorry, can you remind me the second question was about? It was about kind of the market environment. If I may try to answer as well to Akshat's question, I think if I understood correctly, you also asked that whether we are kind of increasing our sales force and presence kind of as such. Exactly. The question was more around the sales marketing efforts in the region. I think, Paolo, if you answered that, I think you have a clear answer to that one as well. Thanks a lot. Thanks a lot, Niko. Yes, of course. Obviously, we are investing in our sales force and sales network, extending our presence in all the key markets in Europe and also in new markets. This is very important to support our growth. I would say this part is developing quite well at the moment. We are very pleased with what we achieved even last year. When we think about last year from the sales side, we were able to grow by more than 10%. In terms of organic growth, we were one of the companies in the tire industry that was growing faster than anybody else. Of course, we come from a low base after the exit from Russia. I think in terms of guidance, we were well on track in delivering a two-digit growth in 2024. The market, as you know, is pretty stable in the aftermarket and is obviously declining on the U.S. side, but we are much more exposed to the replacement market. Of course, we need to follow our own plan at this stage. This is why we say that we are confident on growth, and we are still confident on growth as we can see at the moment. The guidance is well respected from this perspective. We need to do our own work at this stage independently from the market because obviously we need to regain the lost business after the exit from Russia. Yeah. Thank you. All the best. Yeah. Just to conclude there, in terms of the SG&A, we have also disclosed that we need to be close to that 15% from the sales, which is benchmarked towards our peers. Last year, we were 17 percentage points something. Clearly, the 15% is something that we are targeting on exiting the 2018 in order to receive the 15% EBIT margin as well. Thank you, Niko. The next question comes from Mika Karppinen from Danske Bank. Please go ahead. Yeah, hi. I have one question related to labor availability in the U.S. factory. Have you found all needed resources to your production, and what kind of employee turnover you have had in the U.S. plant compared to other plants you have? Thank you, Mika. The situation is stabilizing, obviously, as you know, especially after COVID. The labor turnover was extremely high. COVID has been in some way disruptive when we talk about labor availability immediately after the COVID phase. We do not disclose, obviously, the turnover rate, but I can tell you that it is now much more stable. This is giving us actually also an additional element to stabilize our own operation and to move in the right direction. Okay. Good. Thank you. There are no more questions at this time, so I hand the conference back to the speakers for any closing comments. Annukka, you are on mute. You are on mute. Exactly. Sorry about that. I was going to say that thank you, Paolo and Niko and all the participants on the lines. Just a reminder that the recording of this webcast will be available on our website later on. Now, I wish you a nice rest of the day. Thank you very much once again for joining us in this call, and looking forward to meeting you soon in the near future. Thank you. Thank you. Bye-bye. Thank you.