Nokian Renkaat Oyj

Ari Lehtoranta - CEO Anne Leskela - CFO Antti-Jussi Tahtinen - CMO Anne Simekki - Marketing Department

Tom Skogman - Handelsbanken Artem Beletski - SEB Kalle Karppinen - Danske Bank Alexander Hysel - Credit Suisse Thomas Besson - Kepler Cheuvreux Peter Testa - One Investments Ashik Kurian - Goldman Sachs

Good morning Helsinki and good morning also the participants online. We have here at Helsinki and lot of analysts, media investors also from our company we have here our CFO Anne Leskela supporting me as well as Antti-Jussi Tahtinen, our CMO; and then also Anne Simekki from our Marketing Department.

The presentation has been available in our Web site. I am not going to refer to the pages when I browse through the presentation because I will forget it anyway, but it should be quite straight forward for people online to follow it.

We will take the questions and answers at the end of the presentation. The presentation itself will take something like 30 plus minutes.

And I would like to remind you all to put your mobile phones in this room to silent mode. So the year definitely was not a standard -- just another year for us.

Our main market had a quite a big turmoil, and of course it had impacts to our performance there as well. Ruble devaluated during the year 60% which is quite substantial.

At the end of today however we managed the year in this circumstances very well I have to say. End of the year was quite challenging especially the fourth quarter and the Ruble, big dive connected with oil price changes.

And then also feels kind of stupid to talk about the weather about the Central Europe we don’t have any season at all basically. So that was also of course noticed by many of you who made some estimation for the fourth quarter result based on this.

What happened at the market was that we were able to gain market share basically everywhere, to compensate some of these challenge and also in Russia at the end of the day there was quite a bit banking of the products at the year-end because of the kind of tiers for price increases at the beginning of the year. I will go through qualitative results at the beginning first and then little bit about the market and then move on to the actual quantitative results, meaning the financials.

Then I will touch little bit in depth still the business units, we have three business units and show the Russia it has significant impact on our results. And then moving onto the outlook little bit giving you what kind of assumptions for the year, this year we have and then also explaining our guidance that you have may have seen from our announcement already.

Market as such especially the beginning of the year was quite positive in many sense and also of course in Russia the problem started to get bigger after the second quarter. Russia GDPs would remember it was not the kind of catastrophic year when we just look at the GDP growth.

It was about the estimations still are out there, but they were in plus minus few percentage decimals around about plus-minus zero level. Europe was slightly positive and Nordics bit better, and then North America was about the kind of only big engine for the growth at least in our environment globally, nice growth there.

New car sales very positive in the most of the markets in Russia, the decline was clearly lower than we estimated, and this was because of the devaluation, end of the year devaluation peak which basically pushed the end-users to go and buy spend their money and buy cars. And December was actually positive compared to the 2013 December in Russia.

Similar type of development in the car tyre sales and sales in volumes now, so Russia ended up slightly better than I predicted after the last quarter. We estimated at that time 5% to 10% decline but it ended up being only 3% to 5% decline.

Europe 2% up, so not drastic, not following the new car sales and the low season is the reason. Especially, the end of the year was very poor.

I think the fourth quarter market was less than 10% of the previous year. North American figures are not yet available but clearly, clearly positive development there as well, most probably something around level of the new car sales.

At the same time mentioning still on the season, North American season was almost perfect. Russian season has been quite okay, and Nordic season less than average.

And then, the Central Europe basically no season at all. Some season now, but clearly too late for 2014.

Heavy tyre segments that are specific or relevant for us they were positive except again in Russia there was a decline. Especially the forestry segment was supporting our business quite nicely.

Seldom you have a situation that all pointers in currency really go to the wrong direction in terms of impacting our results, last year they did well, the U.S. dollar at the end of the year kind of raised the nose above the water level, but very, very slightly, so we get kind of minor positive impact from Swiss franc and U.S.

dollar, but all the rest we get huge negative impact. So it was not only Russian ruble but all the others and then for us of course important us the Ukrainian currency, but then also the Nordic currencies, Canadian dollars and then so on that had huge impact for our business.

And this of course in a way is now then looking forward is positive that you particularly get other directions and other kind of supports from the currencies at the end. Car sales, sorry gross sales development was positive in Nordic’s, North America really big time positive as our Central Europe was negative even though the volumes themselves were higher to the average selling price decline that was mainly supported by the raw material cost decline that enabled the competition to lower the prices and we were force to go with that, but then the Russian, here you can see the impact from the Russian ruble, one-third of the gross sales disappeared and once again I remind you that it's not only Russia, but for us other CIS countries have been significant in the past, so there was a big impact from those countries as well.

We increased the delivered or sold numbers everywhere except Russia and CIS, but even Russia the market-share of ours slightly improved last year, so we were able to maintain our market-share position or slightly improving in the A&B segment compensates, so that of course is third proof of a strength of our product portfolio and then of course also tells something about our own sales force and expanding distribution. When we look at the some of the enablers or impactors for the profitability, I’ll start from the distribution.

We continued as planned our distribution not so much anymore equity on Vianor’s there were only few of them more very targeted kind of geographical feel -- execution six more shops there, but then the overall number of [NAD] increased 150 about, so very nice kind of sustainable enabler for the growth. And then specially the A&B, which is our network mainly for the Central Europe and then China expanded or more than doubled its number and it's now approaching already 1,000 stores when we include there about 50 entire stores in Russia which is a kind of similar type of concept between Vianor and NAD but specifically for certain purposes in Russia.

Product mix as such was negative to kind of change so they were more B segment products from us bought than A segment, mainly impacted by again the Russia and CIS, anyway it was excellent that we have this product credit because that was very perfect for this market situation there. Country mix with country mix we mean that even if the sales are similar number of products that we sell them in those countries where traditionally our average selling price has been lower, that impacts again the kind of sales and then we get more business relatively from North America and Central Europe where traditionally the average prices have been somewhat low.

Raw material cost huge, really huge to up 16.5% for passenger car, I think it was even slightly more than that, so oil price drop at the year-end and further boost this -- I remember estimating that it would start leveling off already in the fourth -- during the fourth quarter, but it did not further and went down and we got more than 60 million kind of tailwind from that, fix cost naturally in values they were lower than last year that supported us. Currency impact as much as 100 million, so I would it was 130 million lower last year, overall so 100 out of that came from currency impact.

And then if you take the CIS countries and volume impact there that’s another 30 million, so then it means basically that the ASP decline was impacting and we were able to compensate it else, I’ll come back to the impact on the profit little bit later. Production went up, so as we produced slightly more units than we did last year, productivity continued to improve as well, so this is also significant in that respect that we have the material cost, but also this productivity is again kind of huge enabler of the continued profitability.

Then going to the finance sales starting with the summary there and then explaining little bit about the kind of split change of the sales to different geographies and then specifically I have took up here now the raw material cost development. So these are the results, now in this environment the results are good, if I start say few words about the fourth quarter so fourth quarter sales decline was less than the full year before that, also the profitability drop, it was 2% point units lower than the quarter before, but slightly less than the whole year was it ended up about 3% points lower with the lower operating profit.

So in this situation 22.2 I think can still be considered the good result. Then all of you remember why this profit for the period looks so positive, we booked this tax dispute amounts last year to our books and then that means that the profit EPS therefore looks very positive for the year, 1.56 is the earnings per share for the full year with the 13% growth.

Equity ratio remained at about the same level 67.5 and then maybe the kind of biggest positive thing here is the cash flow where we have now almost 0.5 billion positive cash flow and this is a kind of a about the same figure than we have in free cash at the moment in Anne's pocket sitting here in Finland so that that's a nice -- really nice results and this tells quite a lot about this that what kind of learning’s we took when the crisis hit Russia last time. So this time there were no problems with the receivables, there were no bad debt cases, we were able to collect the money and bring it home.

We are clearly closer to our customers than we were last time 2008 and '09. And then gearing therefore clearly on the negative two-digit side.

So in a way positive results though there is a decline from 2013 that is to be noted is average selling price drop is important which we believe it's temporary, will return back in these markets when the purchasing power gets back and the situation stabilizes there, market share everywhere improving and then we have this trouble of course helping us on the cost side as well good though remember that the raw material is clearly the bigger chunk of the cost for the tyre than the labor cost. Distribution expanded nicely both business units Vianor and heavy tyres improved the profitability.

Cash flow and at the end coming-out out of the year with stronger competitiveness than before and this is how then it resulted in our geographical split for the sales so naturally the Russia and CIS part of our sales is now clearly lower than year ago and in a way if you want to find kind of positive things about this challenges we had last year with the Russia and CIS market the fact is that we are now less sensitive to that one market and it's not only the size of the but also the average prices are now closer to our corporate averages so we are kind of less sensitive in that respect. And this was nicely split to almost all other areas North America now approaches two-digit share of the sales, all Nordic countries improved their part of the sales and then Central Europe now notable here now starts to be quite close to Russia and CIS in terms of sales.

There is a big opportunity for growth there both in terms of volumes but also in terms of our premium position and like I have said to many of you that this is the this is how it happens when we go to the market we start with the kind of lower position but when people and our customers get to know us better the premium position starts to increase as well and our Central Europe's kind of prices are now also closer to the corporate averages. Raw material impact especially strong now in the fourth quarter full year being now 16.5% like I said 64 million tailwind so if we would have produced this units that we did this year with average prices of 2013 we would have spent 64 million more.

We are estimating here 5% so clearly lower positive -- further positive impact for 2015 it will be higher in the first half but then we believe that it's going to be stabilizing and then the U.S. dollar which is quite often the currency that the raw materials are linked to will have a kind of negative impact on the pricing development.

It's however now very difficult as you have seen from the oil price devalue, but it's very difficult to give a precise and accurate estimation and here that things can be quite big kind of easily plus minus 5% around this figure. Okay and then moving on to look at the business units separately.

So here again all these things coming from Russia and CIS they mainly hit our passenger car tyre business unit and there the sales decline was close to 12% and EBIT about the double of that 22.8% drop in the EBIT. EBIT margin still close to 30%, so is still good business.

A share of the sales now -- that business units share of the sales, comes slightly below 70% to 68% as Vianor and heavy tyres have increased their share. Our target has not being to increase that Vianor equity owned part and therefore only couple of units more we are increasing there the service business and therefore the profitability as well at the same time.

Heavy tyres now EBIT margins very nice improvement 16.5% we believe we will be able to increase this further. This year we had kind of own caused problems especially in the first half and in the second half was very, very positive.

Vianor now on positive EBIT margin. Now real growth change of the sales, absolute sales values of course to heavy tyres that’s also impacted by Russia and CIS had quite a lot of sales coming from there and that impacted then was compensated with the growth elsewhere.

On passenger car tyres I think I have already said most of the things here I will come back to this magazine test and the products in a second EBIT percentages I said there was more than four percentage points drop for the business unit. We did of net that assets still on 23% good level.

Net sale was just slightly over 1 billion for the business unit. Market share development and brand image was positive and then of course we have never had such a successful year what comes to recognition, not only from the magazine test but also from our customers.

We have been now traveling and meeting customers in all of the corners of the world. It’s really remarkable how they love the product.

And I would advise some of you who are analyzing us that you really cannot be perfect in your work before you have your Hakkapeliittas under your cars, then you know. So we can go and check your cars afterwards.

So we've been winning constantly well on this winter tyre side, traditionally strong there. We continued winning especially in our kind of new growth areas where strength building is extremely important.

So Central Europe and then also China we winning there the first best win now for the winter tyres and then what pleases me very much is this success on the summer tyre side. So there as well we are winning increasingly a bigger chunk of the tests with our new babies.

And this is now a reminder of you of the list of the different applications that we have available for different markets. This is now a tradition because this is now already my second time and I will continue doing this for the rest of my professional life.

I always pickup something from the products because they are important in our case and this is now one good example of the innovation we have. The designs and already started deliveries specifically for BMW i3 the new electric car.

You can see here the tyres in the picture on the right side upper corner; here they look like motor cycle tyres. This is very kind of specific for the electric cars that they get bigger in terms of the size go ahead and then the width gets smaller.

And this is because of the rolling resistance, so you get more range for the car with this kind of concept. And with the tyre we were able to now beat the other main big global competitor by 30% in the rolling resistance and this is really remarkable and you can because tyres take about or make about one-fifth or one-sixth of the overall rolling resistance of the car or energy consumption improvement.

So that means that if we are able to take a same benefit for example to Tesla cars with the 500 kilometer range is every chance we’ll give you 30 more kilometers through the life cycle of the whole car. That is really remarkable just by the tyres.

We are now starting to deliver for the sporty version of the electric car this i8 which is a very successful car and deliveries are starting while we speak. The main development here is the material we have developed the new eSilica compound for the winter tyre, this is a friction tyre.

So the tyre itself is extremely comfortable to drive and it is excellent in terms of grip and then additionally you get this range expansion for the electric car. We are launching the similar features for the rest of the Hakkapeliitta to friction tyre range in the future.

Then Russia, car sales -- quite often when we read this depressive news about Russia we think that is totally dead, it’s now totally dead. 2.7 million Cars sold there, more than 1 million, about 1.2 million new cars in the car pool, so even if the car sale we predict to decline quite drastically still this year there will be more cars still in the traffic more cars than the drop of new car sales will be there in absolute terms.

Purchasing power must decline and therefore the mix ended up being something like 30-70 between the A&B segments like we communicated already after third quarter results our market share levels increasing for the A&B segment combined sales the average price declined here again totally from the mix and currency. So we did not of course reduce the ruble prices there.

So base for the future is still good there is a demand for winter tyres increasingly. So, and the replacement market is growing.

Ukraine of course was almost kind of dead, so very little happened there. Heavy tyres frostily segment I mentioned was very positive, also here raw materials supported us, raw material has of course has been picking back up for the big tyre.

We integrated our two separate business units for the truck and bus tyres and then this hit real heavy tyres that together with some production projects impacted the first half, but like I said the second half looked very promising. Here as well some impact on the average selling prices partially because of the currencies and partially because of the raw material decline.

And again one product from here there has been quite a lot of press now here especially in Finland here this winter about the trucks going out of the roads causing accident and it's no wonder. We don't have a proper winter tyre regulation for trucks here in Finland, you can come from Central Europe with all kinds of kinds of slicks and then you can still drive here legally and that's why they block the traffic and that's why they cause accidents, that's why they are out of the road all the time.

It should not be like that I mean we hope that the regulation in Finland and in Russia will follow what has been happening already for example in Norway. And that development is going on, we firmly believe that that will come in place here as well.

And then you will need real true professional tyres -- winter tyres that keep your car on road and this is our latest product with one of the only ones with real snow flake testing approval meaning that it really is not only kind of slightly designed for the winter tyre market which is when you are able to put the stamp and M+S stamp, but it really is tested and it fulfills the requirement. This will reduce accident rates quite drastically when they get this to the trucks.

Vianor -- maybe the high of the Vianor, I will come back to distribution numbers that's of course an important part of this Vianor story but then but keeping it here I think this strategy of increasing the service part is going ahead quite nicely we increased the service revenue by 6% in the car service as much as 23%. And with this we're now stabilizing the work load throughout the year better and therefore improving the profitability.

Profitability was actually hit quite big time by the currency -- negative currency impact from our big equity Vianor countries Norway and Sweden and despite that we were able to come with a positive EBIT for the chain -- equity chain -- good result as such. Network is strong, we have the strongest distribution network in Russia and CIS countries strongest in Nordic countries and increasingly good in the Central Europe and then also in China we already have 58 shops selling our products.

This entire adds here last year we added 50 -- more than 50 units in Kazakhstan and Russia for the distribution pretty much the same concept when you analyze that kind of how much you increase your tyre sales with this additions so you can use the same kind of figures for both this entire -- NAD and Vianor, [sports] as well. Almost now approaching quite close to 1,000 soon in 80 stores.

Moving on then to the outlook. I start with the assumptions, we estimate that the car sales now going up in Europe continue to go up in North America as well the kind of official car sales figure estimation from the authorities for next year minus 24% and we also believe that it will be somewhere the 20%, 30% level is what we believe is the present understanding.

But again it can be a bigger kind of range negative range it can go -- if the things go worse it can go to 40%, 50% our assumptions are based on this. Currency still remain weak against euro and then there will be further shift not anymore, so drastic but some shift from the A&B segment from A to B and then from B to C in Russia.

Raw material cost decline as I said earlier 5% further boost from there, investments will stay. Last year they were just slightly over 80 million they were little bit on the higher side, there were some investment that we postponed this year.

But we will be making that 100 million -- in our terms is the kind of lowest figure, typical figure when we don’t have any capacity increases in our plans. Passenger car tyre markets will continue to grow in North America and Central Europe, Nordic should stay quite stable, Russia and CIS will in terms of volume decline.

The inventory situation as such is nothing drastic in any of the markets. We don’t see any kind of big problems with the selling our sellers -- with sale in - sale out balance.

Heavy Tyre markets remain quite stable for our key core segments, we should be able to increase the market-share in those segments further, financial position we don’t see any big changes in our strength there. So, we will improve our position in the markets and basically all business units rising environment will be quite tough because of the raw material further reduction I think that we will -- you’ll see that will -- certain part of that will move to the consumers.

However, the profitability will be supported by our cost production, we naturally benefit from the low ruble in terms of both production in the Russian market but then also the export, market we export 60% of our production from Russia to other countries. And then to the guidance, we are guiding that the net sales and operating profit will decline slightly.

Many of you remember from our kind of official adjectives means 5%, up to 5% stable exchange rate means here not of course stable to last year, but stable to this levels where we are today, so kind of the January 2015 levels. The first quarter will be looking worse and we announced our winter tyre prices clearly later, in January earlier we have been announcing them in the earlier year already.

Old competitors have increase the prices like we have and it take some time for the customers to make the orders, they are coming in already now and they will be coming in but the sales and the orders will partially slip to next quarter. And then of course we have also the currency impact, quite a strong currency impact.

Last year's first quarter, we booked Russian sales was clearly different ruble levels than we did this year. Despite this first quarter, we don’t see that as indicated in the first bullet point and in this guidance for the full year we don’t see that impacting the full year result.

It's a timing issue. So that must result the kind of things -- impacting the results and then our outlook and guidance for the year, this enable us now to propose and Board has decided to propose a kind of stable dividend 1.45 clearly our distributor put all funds and then cash flow allows us to continue this dividend policy.

So in this situation we’ve been doing good business in Russia, we will be staying with our customers, we will be supporting them, for us they are customers like any other customers and everywhere we will support them to go through this challenging year, we have the skills and knowledge to do it and we have the funds to do it. Therefore, I believe that when the situation capitalizes, instead of doing good business we will continue doing excellent business in Russia.

At the same time we improve everywhere else and then compensate some of the annual challenges or temporary challenges of the Russia this year. Portfolio looks very good, we are further announcing some new nice, really nice products in coming weeks and months for the next winter season and operations in both business units besides the passenger car Vianor and Heavy tyres are in good shape and sales force is excited and customers really I think that they are closer to us than they have been before.

Therefore, I look very positively to the future and I am very sure that our success will continue. Now, we will take questions, we will start from this row and then move to the line questions.

This is Tom Skogman from Handelsbanken. I have a couple of questions.

I think I'll take them one by one. First of all, can you open up the distribution inventories at the moment given the winter that we've had and the Russian situation by market?

So the question was to little bit tell more about distribution in winter as by market, Russia the situation is such that because of the year-end kind of tanking of the products, the inventories are some tyre than last year same time maybe about 10%, U.S. the situation is in a way excellent in that sense that they have a perfect season behind.

So perfect for our customers means that they not only have the right number in their stores, but they have the right price as well so they were able to clean nicely the products where the only challenge -- bit of a challenge is that the Chinese suppliers tanked or banked their products last year when they were kind of anticipating this higher duty so there is a little bit of those products in some of the warehouses, but the warehouse situation is I will tell that it's good in North America, Central Europe as well very surprisingly good situation so the customers there as well they are already kind of prepared. They don’t order the warehouses full because the season can be very different and they know that we for example we are able to support them during the season depending on the kind of strength of the season, so there as well this past season luckily we didn’t destroy this season and Nordics situation is normal so not that bad at all.

And then kind of a question of in a worst-case scenario when trade borders even would be close to Russia, I think you exported 7 million tyres from Russia last year and you could ramp up the Finnish capacity by 3 million - 4 million tyres. Do you have any kind of a backup plan today for instance with Bridgestone or any -- that is your main owner that could help you in a worst-case scenario?

Naturally there will be possibilities to take this kind of off take that will take a little bit of time but that's one possibility however the fastest will be this double of the capacity from our Nokian factories naturally we can too depending on how the borders would close first, of all we don’t estimate at all we don’t believe that they will be closed. There are various important reasons to keep the borders open but in case unlike case of those borders getting closed, you need to then understand how do they get closed.

Is the raw materials coming in, we believe that the tyres if there would be situation the tyres would not be allowed to export there would not be tyres coming in either for sure and therefore we would be able to dominate the Russian market. So our market share would get the hike there and we would be able to sell some of the products there so there would be an impact to certain set of our customers and naturally we would make some selections that which customers we would sell at that point and which would maybe suffer.

However, I believe that the borders will stay open none of our customers at the moment take this up actively at all.

And then I hope you could give us kind of full run-through about the FX implications as they are so significant for Nokian and also whether you -- I mean I assume all transactional exposure is hedged, but how is hedging going at the moment in Russia and is it too pricey to hedge or how do you feel about that and then also the gain of exporting from Russia?

So I said in the sales we had an impact of 100 million and maybe it was something like 70 a bit less than 70 million was from the Russia itself, so the rest come from the other places hedging as well has been beneficial but costly naturally and then of course we have this interest rate the different we have interest, we have loans, loans to our subsidiary in Russia and interest rate is so huge at the moment so we pay quite -- the financial cost there just slightly below 50 million.

But please help us to understand this now when you sell tyres in the first quarter to Russia and you get paid in October for these tyres, how will this work out in the P&L? You will hedge when -- because you have no clue where the ruble will be in October I assume, so you will hedge -- at what kind of cost will you hedge this and is that going to -- and how big part of the EBIT is eaten up by the hedging cost?

What was the hedging it was not that significant for the year …

It has to be clarified now we are talking about sales in Russia, which is exposure in Russia which means that of course the sales in Russia is not hedged by the group because we have all the -- it -- the cost basis in Russia the changes coming in Russia so the only difference is at what rate is actually 10 times per the euros, so as such that is not hedged because it's internal like exposure in Russia then we're talking about the financial items as such there of course the main point is the loan which the parent company has given to the Russian entity and that hedging of course is expensive it's little bit more than 300 million and of course whether the interest difference is like 10% to 20% at the moment there is their hedging cost which is actually accruing last year being represented to 3 million and it's going to be the same this year. Otherwise the normal like position and how the hedges are done in Nokian Tyres is that, all the sales companies other than Russia are of course deliver the tyres as per their own currencies so in Sweden they are delivered in Swedish crowns so all that other exposure is in the parent company which has been 100% hedged.

And the cost of producing in Russia compared to Finland, how much? You have increased this ratio over the year, so what -- where is it standing at the moment compared to one and two years ago?

Yes the difference is somewhat bigger now because of the ruble devaluation, naturally we have all the other kind of things going on at the same time including the kind of productivity improvements in the Nokian factory but the difference is somewhere around 15 euros.

Hi, Artem Beletski from SEB. What comes to Russia and the expectation for this year?

Could you maybe walk us through what kind of assumptions you are seeing there? So basically looking at pricing for example, what kind of price increases are your targeting in Russia?

And maybe also in terms of mix, how much do you expect it to weaken this year compared to last year? If I remember correctly you have been talking about 30-70 split between A and B segment?

The price increase that has been announced, they vary in the market between 10% and 16%, so that’s the ball part of that. Of course we will [indiscernible].

The mix change will not be any more drastic there will be some percentage point differences maybe 5% change, so 25-75 maybe an estimation for the mix change. GDP estimation for us they vary between kind of 3% to 4% negative as much as 8%.

And of course if it goes towards the 8% then the figures would look different.

And maybe just coming back to the same question what Tom asked about FX impact. So if you were to get hedges and debt investments in Russia.

What is a net impact of ruble devaluation by 10% for you, given the translation impact and then costs in Russia?

I’ll maybe use last year’s example. So from the Russian ruble impact we were able to compensate about half with our benefits from our cost side.

And then there is another positive impact in these kind of downwards going material prices. Even if our contracts in Russia they are in rubles but they are the price lists are connected to U.S.

dollars and for most of the materials. Typically of course this means that you have a delay before the new prices come in.

So you benefit from this delay and that was quite significant as well. It took maybe 30% - 40% compensation a cut of half of the ruble impact was compensated by the cost benefits then from the rest of the half maybe 30% 40% delay able to compensate, that this delay in fact of raw material price increases.

And maybe that’s the best that I can say about this.

Maybe just one on your guidance. So is it fair -- so basically implicitly if I calculate your assumptions about Q1 so you really -- is it true that you really expect that your earnings start to grow after this seasonally weak Q1 quarter?

And maybe if you can talk about what key drivers there will be?

Like I said, for us this is a timing issue. For us we don’t talk about reducing volumes with this first quarter, kind of impact.

We estimate there clearly two digits decline in volumes in Russia this year whole year and that of course partially impact that volume as well the first quarter. But then there is currency impact ruble is quite a significant one for the first quarter.

We closed the first quarter last year we with a clearly lower ruble rate and then we used -- for the full year results we used the average rate and therefore the currency impact will dilute towards the year-end and provide that the extension rates remain about the same level as what they do.

Hi, Kalle Karppinen Danske Bank. Two questions about sales prices.

Can you give some indication where the different markets are now relative to group average Russia, Central Europe and Nordic countries? And then the second question about raw material costs, looks like your forecast has raw material costs for 2015 clearly higher than Q4 of 2014.

So what is driving this increase?

So first question was about this, if I start from the raw material question. So, we believe that the U.S.

dollar will start impacting us negatively and this delays now I guess will positive impact of the delays will go away. So therefore we have this negative impact in the latter part of the year.

And then this average price question. There first of all the positive thing is that the variance now between the lowest prices and highest prices is clearly smaller than it is average price.

We simply look at the units and the average prices, we are not able to look at really the apple-to-apple comparison because we are selling different products in different markets and they will be always. Therefore even if the price level as such would be for the same there would be a difference because of the sizes are different.

But If I try to look at now especially after the U.S. dollar now increasing its value, there is no such significant different anymore between the prices.

Traditionally, the Nordic tyres that are the most demanding ones most difficult to make, they are slightly higher in terms of prices, as well as the Russia still is with the price increases.

[indiscernible] and I have heard it so many times before that the Nokian Tyres takes market share, it comes almost too easy. Could you little bit elaborate what are the factors behind, why you can take market-share?

Of course it's not easy to -- it requires excellent perk from our R&D to prepare the product that are best in the market and that they also really get the praise from the customers. When I ask from our people, when I travel there and what will you do if you would have a 1 million more for the marketing?

They always say the same; I will take more customers to Evolve because there are customers really understand why the products are the best. So it comes from the products, its starts from the products.

Being able to market when we go to new places like China now for example, they don’t what at all us. Everybody has got their first phone, it's a Nokia phone, so they cannot have the connection, it's just not negative at all in China, but they don’t know our tyres.

So it takes an investment, we need to be present online, we need to be present in the professional press there, we need to work together with the customer and then distribution is an important part, then you have a distribution network increasing typically almost get an automatic increase of your market-share in those markets. So that’s how it goes.

In Russia specifically big boost comes if you are able to work and help, work together with your customers and help them, they in that culture you will be benefiting it in the future, like as visible in our figures when the last crisis went away and then the growth started. Okay, now we can maybe take some online question, one more from the audience here and then we go for the possible questions from the line.

One more question auto export restriction from Russia might be unlikely, but have you seen European consumers make any push back to expensive products let's say Made in Russia on them?

No, we haven’t and then maybe I talk little bit more about this possible sanctions and repeating in this kind of situation we have seen actually that in Russia all the operations as such is kind of easiness that improves and that’s has been also the situation now a days and then getting some logistics arrangements done, working with authorities is at the moment easier than it has to be in some other times in past.

My first question is coming back to your guidance and taking only individual statements that you made; just on the raw materials, the tailwind or the support is 50 million less and given indication of slight you mean 5%, that means basically that your underlying core profit is growing by around 30 million to 35 million year-over-year. Is this purely coming from better pricing on a year-over-year comparison because you've indicated Russia should be down and Europe more or less slightly up?

So assuming flat volumes or up to 1% volumes, are you implying positive price mix of 200 basis points to 300 basis points year-over-year?

Naturally we of course, we are making price increases in Russia though, that’s one element. Like I said that the most of the markets we typically tend to improve our price position or let's say the premium position while we have more years and experience with the both customers and the end users.

Naturally there are so many elements impacting the profitability including for example the productivity improvements including different type of things what is happening on your back provisions or whatever. So situation in that respect looks pretty positive, so that we don’t expect any kind of or we don’t see any kind of negative things coming from there.

My second question, going the run rate for the first quarter you said significantly assuming you make like 30 million, 40 million in the first quarter, is this a fair assumption so that we see this run rate accelerating to 90 million then from the second quarter onwards?

When the slide in our kind of official adjective list is 5% significant as much as 50, 50%.

So just -- sorry again for the currency, I do understand that in the first quarter you have -- because year-over-year you have some massive devaluation, but if I look on the ruble in the second quarter and third quarter 2014, we have also been below 50 versus the euro. So it is fading, but there is still a negative -- a bit negative from the currency or is my assumption then wrong that it's fading, but you still will be impacted from the second quarter and third quarter on the Russian ruble?

That’s true but then you increment the price increases that are coming in and in our case there will be also some kind of further increases already now announced for the second quarter so that will partially also help on this.

And sorry, lastly on the raw materials, this 50 million that your guidance indicated, it should be first-half loaded. Assuming this 50 million is fully booked in the first half, do you see any incremental gains in the second half or is it even possible that you see a negative from the raw mats in the second half?

I think that we can see that there is a possible negative impact from the raw material for the second half, full year being at about that 5% level, unless you're having a kind of better boost and then less in the second half.

I have a few questions please. Can you tell us where you stood in 2014 in Russia with the share of business which is related to the new cars sold please?

If I understood correctly, you kind of ask that was the impact of the new car sales for our special business in Russia and new car sales has clear impact to us in Russia and luckily we get customers from all segments even if the car buyers buy cheap cars still some of them by our tyres, but naturally more kind of mid and hire segment cars are bought then our market-share for those car users increases also. And naturally in this situation we have the negative impact to our business, not only from the 10% reduction of the new car sales, but there was also a mix change in that purchasing number of units.

There were more lower segment cars but then higher segment cars and that had the negative impact for us.

Can you give us a figure for the share of your tyre business related to the new cars registered in 2014 please?

No, I cannot, I don’t have that figure.

You used to give us as well -- at least your predecessor used to give us an outlook for the Russian tyre markets by segment for the forthcoming years. It has been removed from the presentation.

When do you expect the Russian tyre market to start picking up significantly and when should we expect to be back to some ‘12 level? Is that in ‘16, ‘17, ’18; is that in your foreseeable result?

Yes, I don’t -- nowadays I don’t even start to predict anything, that’s the kind of shortest sport in our environment is just we can’t really estimate when the return back to the growth starts. We have seen so big swings in the market in oil prices in the ruble and it takes only a kind of one kiss by [indiscernible] the cheek of [Merkel] one morning and then we go up and then very fast.

And of course the situation there is quite critical because it's now a combination of both economical and then the political crisis and therefore, we don’t see any growth definitely starting this year. But next thing are in the coming quarterly announcements whether we are able to start getting any clarity better estimate you are able to make by reading the newspapers everyday than I am.

Another quick question please. Russia has declined in terms of its share of your business and you explained it's reducing the sensitivity of your Company to Russia, but it's still 25%.

Just getting back to the previous question from Alexander, if we look at 50% devaluation for the year in average, likely 20%, 25% decline in new cars sold, it's hard to see how your -- whether you at Group level can decline by only 5%. Are you assuming a mid-single-digit increase for the rest of your business to get to your guidance of less than 5% revenue decline in 2015?

What am I missing in -- when I'm just making a very simple math from your Russian business?

It's now good to remember also that this price increases that we’re implementing or we have been implementing already they have a significantly impact then, the ruble helps us in all of our labor cost, fix costs for the both internal sales in Russia and also export, we get still in the first-half, we get this delay -- positive delay impact from the implementation as the new ruble based raw material prices. And then we look at increasing volumes from the other markets, we have a very good situation, strong situation in other markets and then we estimate a good market-share growth in to continue in other markets.

And then naturally you have element slight productivity, 5% productivity improvement already is a significant post the EBIT line as well.

I was talking about the top line.

Well like I said, ruble increases, price increases and the market-share gains in the other markets that’s whether where this is coming from. Also naturally it's based on this -- someone could say quite conservative raw material change estimation naturally if the raw materials will decline more than that will have most probably impact also on the sales side, not so much on the profit side, but of course then the cost will increase as well.

Just three questions please. The first one just kind of going on from the points you were making.

Can you talk a bit about how you see the benefit of a Russian production base in your exports into Central Europe and the extent to which you think this will help you on margin and volume?

Well the fact is that all the labor and we don’t have a small number of labor in Russia of course we will get the benefit from the low ruble when we turn it to the euros. There are other cost elements all the kind of running costs and so on so we have the raw materials there I explained that we will still get some benefits we will buy smaller part of the materials that we use in our factory we buy locally in local currencies and then we will get naturally some benefit and then the biggest chunk is even if we buy it in Russia it's based on the U.S.

dollar but there we get this delay benefit of the kind of before the higher prices get in so we get quite a nice economic boost from the ruble for our production there.

But you are expecting to take this mostly in terms of margin, or do you also think you will be using this in terms of being able to be more aggressive in sales and marketing and other ways of inducing volume growth?

No this doesn’t impact the pricing at all because we are in most of the markets beside Russia and Nordics we are not the kind of dominant player or one of the big players there so we cannot start dictating the prices. Our products and our sales force our distribution is in a good shape so we are able to keep or increase the premium position even if there is some kind of benefit the extra benefit on the cost side.

So we are not planning to use this at all it doesn’t belong to this kind of companies who are selling we're working on the premium segment it doesn’t work like this but if you get the kind of temporary benefit for your production that you immediately move it to your customers we work from the market and we are happy that the customers see the value of safety, safety of themselves and safety of the family members and are ready to invest.

And then you talked about on costs a 5% productivity and if I understood correctly there's also some continued lag in terms of the raw materials pricing to fully translate the dollar pricing into ruble raw materials price. Can you give some sort of understanding as to how these -- maybe quantify this in terms of what sort of profit benefit you expect to get after these two factors?

Sorry now I did not get your question, could you repeat it?

You've talked about two things on cost. One was on productivity, roughly 5% productivity improvement.

And the second, I think there was a comment on the timing in which the raw material pricing in rubles reflects the actual US dollar exchange rate. There seems to be maybe quite a long lag, and I was trying to understand if you could give us some view as to how those two factors would affect the P&L in '15?

Regarding this raw material price kind of impact delay I already explained that if you have the 70 million -- less than 70 million impact in euros from the ruble currency we compensate half of it from the kind of lower cost and then 30% - 40% from the rest the compensated raw material kind of this price, delay that's as much as I can say about this. I'm not able to quantify this productivity improvements but that of course calls to the production site and the further kind of price per tyre price per kilos that we are able to produce with less manpower less cost and that -- I'm not able to quantify in terms of euro.

And then just the last thing was just on the Russia and CIS markets and if you look at the pricing you are taking now, can maybe you just try to understand two things. One is to the extent to which you think increasing price may also provoke decreasing mix in a difficult economic climate as clients basically say they have a certain amount to spend and so they would take mix down.

And related to that, maybe if you could give a sense in terms of average ASP increase you need to achieve to offset issues on raw materials and so on in the Russian market to maintain your Russian margins?

Yes I see now several things and then maybe not giving you a full absolute concrete answer. So I start from the CIS and there of course we don’t expect any big growth.

They have gone so low however that if the situation stabilizes there we will see a faster growth at some point of time, however our assumptions for this year do not include kind of big growth of the CIS markets. Then this local prices we have the biggest distribution network in Russia we are closest to all of the big customers and naturally when we make these decisions we make them quite often together for some key selective customers so we are extremely -- at this moment we are pretty good at guessing what's the impact of the different changes in either prices or contractual commercial terms is and unlike I said our assumption now based on this price changes that we are making we don’t expect them to make a big impact.

Those price changes itself to the mix you still have this people and a number of them who really appreciate the safety and are ready to pay to the get the best tyre -- safest tyres on the market there. Overall there will be a mix change because of the overall purchasing power situation in Russia and there we talked about this kind of up to 5% mix chance.

Sorry, I lost the line at the end. Can you repeat the last bit please?

I was just saying that this mix change is not impacted; we don’t believe that it will impacted by the price change that the kind of differences between the segments doesn’t really change. We make pretty equal price increases throughout the product range, the mix change will mainly come from this further weakening of the purchasing power that will lead to the clearly lower volumes and mix change as well.

Okay, but then understanding what sort of price increases you think you needs to achieve to offset the ultimate impact on material cost from the change of the dollar into ruble?

Quite often the price decisions are different and the cost decisions -- like I said we are in the premium spots, we need to make the price decision based on the markets and purchasing powers and then things like this I explained that we are going to make 10% to 15%, minimum 10% to 15% price increases.

I've just got a couple of clarifications on your guidance. So when in your guidance where you expect sales to decline slightly, what sort of volume growth are you factoring in?

Do you expect volumes to be up or do you expect the volumes to be down slightly too?

We estimate the volumes to be pretty much stable.

And then next on the -- you've spoken a lot on the FX, but if I can just ask again, when I look into 2015, when I take your Russian revenues versus the ruble cost-base, is ruble going to be a net long position or a net short position for you in 2015?

[Indiscernible] Russia expose is like its long and not [position].

It's a net long, so you will still have a negative impact on your operating profit from the ruble devaluation?

As explained already before to audience and [indiscernible] explain their result.

And lastly, is there any guidance you can give on your tyre margin, or expect both sales and operating profit to be down, but given the favorable ruble cost-base, can you keep your tyre margin flat, or you are expecting a decline in your tyre margin in ‘15?

Yes, the margins will be staying on about the same level. Our sales -- if our sales decline slightly then we estimate operating profit to decline slightly as well.

I think we have used time. Thanks for quite the many and good questions.

Like I said, kind of sensitiveness of the 2015 is on the Russian situation is quite a lot of variance between estimations. However, even in those cases our situation looks very good, solid with the strong balance sheet and then excellent organization and good caring customers.

So thank you very much for your interest and have a good rest of the week.