Nokian Renkaat Oyj

Ari Lehtoranta - President & CEO

Artem Beletski - SEB Kalle Karppinen - Danske Markets Thomas Besson - Kepler Cheuvreux Nikhil Bhat - J.P. Morgan Alex Hysel - Credit Suisse Austin Earl - Marshall Wace Gaetan Toulemonde - Deutsche Bank Paul Hartley - Bank of America Merrill Lynch Tom Skogman - Handelsbanken Philp Watkins - Citi

Okay, good morning everybody. Once again welcome to Nokian Tyres quarterly result call we have in Helsinki and we have a room full of honorable professionals from finance institutes and media present.

And behind the lines we have few hundred people, similar types of professionals plus few Nokian Tyres and competitor people as well. My presentation should take about 30-40 minutes and then we reserve the rest for your questions.

The material has been available in our website from the morning. I'm not going to go again, I'm not going to be able to remind on which page we are all the time going, but it should be quite easy to follow the presentation behind the lines anyway with the material that you have in hand.

And once again I remind you to turn your mobiles to at least to the silent mode. I will go through the market situation, start with the market situation and kind of general scorecard for our performance, moving then onwards to looking at our financial results and then a deep dive again to our business, three different business units and then specifically for Russian operations.

And then remind at the end about our guidance and outlook. By the way, this picture now where we have this agenda for the day is quite a nice picture.

It's a good illustration that these tyres really are not just black circles. In this few centimeters picture, there are 10 different innovations which makes our product so specific.

So 10 different innovations including this kind of bare palm that supports the road-wear and the stud as well. If you want I can give you a little bit more education afterwards.

So let's go now to the market overview for the first quarter. North America, even though here the actual GDP growth looks small, North America is the engine for many industries including our industry and the growth there continues very nice, both in Canada and U.S.

In North America, new car sales as well as in Europe in overall has been in quite nice shape. And then growth 6% respectively in North America and Europe, including Nordics 8%.

Here the car tyre sale in figure for North America is little bit misleading because last year as you remember, there was a big boost for Chinese suppliers to fill in the warehouses waiting for the penalty import duties and that now impacts the market. We believe that the sell-out for the A and B segment tyres have been positive also in North America.

In Europe tyre, both the new car sales and tyre business have been quite okay. We are estimating here couple of positive percentage growth for the tyres in our segments.

In Nordics, there is a specific kind of seasonality reasons why the figure looks high for the tyre business. This is a sell-in -- I remind that this is a sell-in figure.

The sellout figure is much more modest and we believe that our market share has actually grown also on the sellout side. On our heavy tyre business, all the segments where we are playing were reasonably favorable, especially the forest segment where the pulp industry is boosting it and all the forestry machinery producers are having quite a good time and we together with them also.

I'm very happy to report that this time not all currencies were against us like last time when we met. This time we had basically a situation that Russian ruble, of course when we compare it to the first quarter last year, had a big negative impact.

Over €30 million in our revenue comes from that, but then all the rest basically compensate each other. We had still the Nordic currencies working against us, also the Ukrainian currency, but then the North American currencies were basically compensating those.

And then when looking at our performance in this market, of course let's start from the Russia; big impact from the currencies and also from the fact that like we predicted that winter tyre sales for us, there will be a one-month delay. We have been the only one who have been selling winter tyres basically in the first quarter in Russia in the past and now the whole market because of our winter tyre sales going more towards the second quarter, whole market was impacted by that and also our market share therefore for the first quarter.

But this does not mean anything for the full year. We still believe that our market share will increase in Russia for the full year.

Sales in Nordics improved nicely. Because of the specific seasonality sell-in of some of the competitors, our market share there in sell-in in Nordics did not grow, sellout we believe it did.

For the whole Europe we improved -- meaning Central Europe we improved our market share. And then of course what sticks out here is the North American figure, almost 50% growth.

Really, really nice to see these kind of figures. And then of course this now means a clear market share increase.

Our market share still there in North America is very modest meaning that we have still a lot of good room for growth there in the future. But very, very good result.

Also specific now is the kind of analysis for the average selling prices. It did drop again, but this time it was only because of the currencies.

And this is of course good news. Now the mix and the price changes impacted selling prices positively.

Big portion on the pricing side was the local increases that we did in Russia at the beginning of the year. Like we informed we increased bit more than 10% our prices there and this is visible in the profitability side as well.

But then also in the other markets there were some reductions still kind of supported by the raw material decline which was as high as over 15% still year on year. But then the mix was quite specific and supportive for us.

And I want to spend a little bit more time on that now. So in the Russian side, still the phenomenon that once again we predicted to you earlier, continued meaning that the premium part of the sales declined from 30% towards 25%.

We believe it will be this year somewhere between 30% and 25%. But then in summer tyres, very, very pleasing for us is that the tyres that we launched last year, meaning our excellent SUV new summer family is really making big impact in the market and we are getting increasingly bigger share of the premium sales in the summer tyres.

These results are coming now in a situation that because of this delay in Russian winter, winter tyre sales, our winter tyre share of the sales dropped from 62% to 58%, so quite a remarkable change. That again will come back when the Russian tyres start to ship out.

Besides the SUV tyres, also our van, commercial van tyres improved. And of course in this premium summer segments, the margins are supporting us.

And this success in the SUV and van tyres, this is of course very, very important for the future and the growth. SUV or Suvi [ph] like we say in Finland means actually summer, summer here in Finland, so we start to be the king of not only winter, but summer in the future.

Currency effect in net sales close to €30 million which is exactly the same as our drop in sales. So in a kind of high level you could say that the currency dropped our sales on volumes which were lower, there was another drop, but then this impact on the mix and pricing boosted it back so that the impact was only about that currency for the whole sales.

And now I include the heavy tyre segment to this analysis as well. Volumes both in production and sales dropped about 10%.

Productivity, also very pleasing to see we have been having now this good trend of improving productivity, even with the situation of lower volumes which is little bit untypical that we are able to improve the productivity when the volumes go down. And what is not visible here is that the quality has remained on an excellent level, so once again when I look at the future, this makes me feel quite nice.

And then of course distribution summary, I'll come back to this distribution later on in the summary, is that there is again about 100 new shops with trained people who are able, capable of selling Nokian tyres in different parts of the world. Okay, I then move and look at the final sales.

Of course, you have mixed feelings when your operating profit drops 30%, you can't be too pleased about it. But then when you look at the reasons and you of course look at the expectations, then you actually can be somewhat more positive about it.

So a 30% drop in the operating profit from the 10% drop in the sales. Operating profit level 17.2% which is not of course something that we are happy to, we want to be there clearly over 20% and maybe then it's again good to explain this very special phenomenon, the profit before tax and then profit before the period.

So there was this cancellation by the Finnish tax authorities for this tax dispute that we have. Again, like we predicted, it was €100 million that we booked into our results 2013 and out of that €100 million, €20 million was of different types of interests or financing costs and then the rest of the €100 million, meaning €80 million were the actual taxes.

And they have been now put in the results and therefore the profit before tax and profit before the period looks so good for this quarter. Equity ratio remains on a very nice high level, over 70% and then gearing for the first quarter is quite good that it still remains on a negative side.

So balance situation is in a very good shape. Cash flow, for various reasons is worse than last year, but kind of no basic changes to the situation.

The cash flow will be good for the year. Behind the figures, there were these things that I explained already in the previous slides.

Heavy tyres showed excellent growth both for the sales and then profit; Vianor equity part keeps on growing as well with nice figures and I'll come back to this in a while. Fixed cost remained on a lower level than last year supported by the low ruble of course.

I move now to look at this geographical split of the sales and then this is of course now looks extremely different than it did few years ago when we basically had Russia, we had the Nordic countries. 2008 basically you would not have seen the Central Europe and North America, but now here they are -- over one-third of the sales is coming from the Central Europe and North America.

And remarkably North America this quarter now exceeded some of our main hold countries in Nordics. Only Finland remained larger than North America for us.

So in a way this kind of -- in all challenges, you always find -- have positive things and the positive thing in this Russian situation is that our present revenue is in a clearly more stable situation. And then looking at the growth opportunities for the future, this looks now good and balanced.

Naturally, this Russian share will enter -- in the coming quarters will grow. North America was not only boosted by the volume growth, but also by support from both U.S.

dollar and the Canadian dollars. Raw material cost impact was positive as much as 15.4% quarter on quarter, but likely predicted -- again the cost level was already 10% higher than the fourth quarter last year.

So the prices are on a higher level when translated to the euros. So our prediction for the full year, this minus 5% is very valid still.

Second quarter still will be kind of a cost reduction year-on-year comparison, but then we start to eat that from the third quarter onwards and specifically on the fourth quarter. Therefore for the level of €91 in this index table is our correct estimation and the same that we had when we started the year.

Estimated tailwind for the year will be €15 million in our bottom line. Okay, I then move on to the business units.

In Russia, here is the overall situation and again here may be worth looking at this split for the specifics quarter because of this winter tyre sales. Again the share of passenger car tyres fell from 75% to 69% and then because that is our most profitable -- relatively most profitable unit, that of course impacted then full profitability levels as well.

It should return bit more to the higher side in coming quarters. For heavy tyres also the comparison quarter was quite bad for last year.

So 69% coming from the passenger car tyres and then both Vianor and heavy tyres increased 3% their share of the sales, 18% and 13% respectively. I'll come back to each unit separately, so I'm not going to go through the figures here on this slide.

When I look at the passenger car tyres, the portfolio especially is very, very pleasing. Our grip, what we have on the Russian market in this sensitive situation is -- I'm very happy for that.

Magazine tests wins continue supporting us. I will show you one example later on.

And then of course the material cost, the biggest consumption of raw materials is in the passenger car unit. Sales in Russia was the main reason for the decline.

We now went below the 30% level in EBIT which is a level where we start to feel quite bad about it, but still of course close to 30% is a good level. EBIT dropped exactly €20 million from the last quarter.

I repeat, summer tyres, very positive news and is that the mix and price impacts were now this time positive. Excellent news from the product side; we were able to launch the first winter tyre with this European AA labeling, meaning that the fuel consumption and the kind of water grip, wet grip are in best possible levels.

Difficult to get this combination, but we were able to do it with the winter tyre now. We expect quite a lot of this.

What we are expecting hugely in the future is this new Central European winter tyre family that we launched for both passenger cars and then for the vans. Extremely good results both from the tests and from our customers.

Clearly we expect lots of magazine test wins from this and a lot of commercial success in the coming season. We also launched our all-season all of weather-proof product which is a winter tyre based full-year product.

Always want to make this difference that this is not the kind of typical all-season tyre which is let's say the dangerous summer tyre based all-season tyre that can be used everywhere maybe, but except on areas where there is winter. Again, you can see from the pictures that there are lots of details and innovations that make these products so specific.

This time in the picture you see this block optimized siping feature. Magazine tests continued.

First quarter is typically the summer tyre tests that are there where we have not been in the past so successful, but this time we start to be as successful there as we are typically with the winter tyres. And I took one recent example from very respected Magazine auto motor und sport Magazine, this is now the Norwegian version where they test the premium SUV tyres.

And this kind of news now start coming in that we are competing against the big names like here; you can see all our big global competitors and we are not only the best here, but we are the best with a clear distance. This really is remarkable.

This is really remarkable that in this kind of competitive environment with this premium tyres, we can produce this kind of excellent world-best products. Russia, you have all followed the Russian situation on a daily basis.

Reasonably calm first quarter, but again nobody can predict still that what's going to be the rest of the year. If the political situation would start kind of escalating again, then we would go up and down with the valuations of the currencies and the GDPs and so on.

First two months especially were exactly as bad as everybody expected, maybe even bit worse, but then the March started to already produce some little bit, let's say, the weak positive signals. Industry output was clearly better than expected.

The unemployment was better than expected. The inflation itself in March was better than expected and so on and so on.

So anything can happen. In our estimations, we believe that the currency could still weaken some from where it is at the moment.

Of course the oil prices have little bit stabilized during the quarter as well. The car sales have dropped as much as 36%, so really hugely.

But again the comparison quarter was still quite strong last year in Russia first quarter. So that explains some of it.

Why we still believe that the full-year drop will be only 20% to 25% is due to this comparison that all the rest of the quarters were already clearly worse, especially second and third quarter last year. Then there is now a support system in place for the car loans or that the car loans percentages are not anymore 20%-plus, but they are closer to the base rate levels and the base rate itself have been now lowered with a couple of steps in Russia.

And then this recycling program will start to also boost and bring some 100,000 to 200,000 cars into the market. That's why we maintain our estimation on 20% to 25%.

Could go to 30% in a worst case, but then not maybe more than that. The GDP estimations, you remember it was quite a big fork at the early part of the year.

Now one quarter behind and then reasonably stable situation, I would say that the range can be still maybe the same, but more on a lower side. We believe that we will be maintaining our strong position in the market and increasing our share.

Our estimation of the tyre market is that 20% is most probably the level where the market will go down in volumes and our volume should go less than that down. Car park itself keeps on growing.

It's a big market and not to be forgotten and worth investing. Heavy tyres, you can see EBIT going up by 50%.

The team is doing good work. Our products, especially for the forest segment and then for the agri segment, the first winter tyres, dedicated winter tyres for the agri segment are really successful.

We estimate a good performance for the full year, but like I said, the first quarter last year the comparison is -- was kind of a lower side. It's not going to be as high for the full year.

But this is now supporting our full-year estimations quite nicely. Our operations as such now are in the good level, so that the quality, the productivity and the kind of delivery capabilities are in good shape.

Forestry machinery makers, they are in a situation that they have problems getting stuff from their suppliers at the moment, the demand because of the pulp is quite high. Then Vianor and again remind you that the numbers here that you see are related to our equity, our own owned Vianor outlets where we reconsolidated the figures to our books.

Quite strong growth and this is not only coming from the kind of seasonal changes. We are truly growing.

We have been acquiring both kind of tyre companies and then also the car service companies that are boosting our market share increase. The seasonality, I don't think that there are so big differences between the last year and this year.

I feel very positive for the full year for Vianor as well here. Last year we were able to go a little bit to the positive side and I believe that we should be doing better this year.

We have been investing strategically on the services side, so I want to make sure that the season is not only time when the Vianor makes business, but we would be making business in Vianor also between the seasons and specially on the car service side and the services grew by 9% for the quarter and the car services themselves even more, 13% inside this figure. Season is ongoing; if I now remind you about the seasons which have quite a big impact for us.

In North America, quite specifically, I think first time for many, many years the spring season didn't really started in the first quarter. So we expect quite nice boost on the second quarter.

Here in Scandinavia, the season start and the timing has been kind of about the same, some changes between the different countries. Central Europe, they did not have really a winter season.

So there it's again very specific spring season, but the spring season still is coming there. And we discussed with some of you that of course when you have a bad season typically, you run your old winter tyres to the end and you are forced to change them in the next season anyway.

And then looking at the whole distribution network, branded distribution network, where we have both our own and then the franchised networks, again, 100 stores, 16 to Vianor brand and the rest to the NAD and eNTYRE chains. Almost 100 new stores.

We have now close to 1400 Vianor shops and close to 1000 Nokian authorized dealers and eNTYRE shops. And once again state that we have the strongest distribution network both in Russia, in CIS countries and in the Nordic countries, so increasingly improving in Central Europe.

Okay, moving on then to look at the future itself. So basically we reiterate our guidance of the EBITDA and profit to decline slightly compared to last year.

It's based on the assumptions that you see in this slide which is basically no big change, new car sales about the same levels what we have predicted in the past, the quantitative easing in Europe; the oil prices are -- continue supporting kind of Europe doing a reasonable growth. Currencies remain weak for the full year for Russia and especially CIS relative negative impact to our figures in the first quarter were even worse than Russian impact and you -- for example, the new car sales in some of those countries dropped by 80% from already quite low figures from last year.

Raw material cost decline, I already mentioned 5% for the full year. Investment levels are going to be on that €100 million which is our kind of normal non-capacity increase year.

Passenger car tyre market should do quite well in most of the other areas except Russia and CIS. Productivity will continue improving and our market share will improve.

In this prediction, it will improve in all markets. So this was my presentation and now we open the floor for your questions.

We start from this room and then we go for the audience behind the lines.

Artem Beletski, SEB. A couple of questions on Q1 and you mentioned this exceptional mix in Russia.

So you sold more of summer tyres than normally and then what comes to summer tyres there has been good mix of SUV. Is it this -- on net, is this impact so to say or has it been abnormally good mix if you look at full year or is it so to say balanced due to the fact that normally summer is lower margins than winter tyres for you?

I think that it's going to be balanced, but there will -- there's vectors pointing to different directions. The winter tyre share for the second quarter will definitely be higher than in the first quarter, but then this success on the summer tyres will continue also on the second quarter which is a good summer tyre season.

And then of course not to forget the van, even though the volumes are lower, but they are also big kind of premium type of tyres as well.

And there what comes to these price hikes in Russia, so 10% in the beginning of this year, has it been impacting completely Q1 or was it implemented at the end of Q1 and fully impacted.

We started from the 1st of January, so it impacted the full quarter. Now of course the situation is different.

We actually were planning to have another increase. Now that the Russian ruble has strengthened, we are now considering the [indiscernible] next.

So that's still open, whether there will be further increases or stable prices now for the remaining winter tyre season mainly. Summer tyre prices were already set and the summer tyre season for us starts to be over quite soon.

And maybe just in terms of profitability in different regions, I guess ruble strengthening year to date has changed the picture quite a bit. Is it fair to assume that your profitability in Russia is now again above Group average and --

The Russian situation is at about the Group average level. Of course we have -- it's good to remember that we are producing there and the currency changes impact also the cost side and especially the raw material cost on local rubles have increased quite drastically.

We are exporting about 54% of our tyres. We've been exporting from -- in first quarter about 54% of our production in Russia.

Nokian Tyres has increased market share quite long time already and you have built a new distribution and test success has been also quite continuous. How you do describe this dynamics on market share increase, i.e., how slowly or how quickly it can improve?

Typically in all businesses, the market share improvements happens in a gradual way. You can't make very big difference in this kind of industry where you have the distribution there, you have the trained people, you have the warehouses, you have the pipes full of tyres, you don't make big changes in a short period.

You can of course lose your market share very drastically if you make stupid things or you lose your quality or something like this. So I'm not expecting kind of huge improvements, but we are aiming at constant steady increase of the market share, especially on those markets where we start from the low levels, like in North America we still are so small.

Kalle Karppinen, Danske Markets. Can you go into the reasons of the weaker Q1 cash flow a little bit?

Well, several reasons. Of course we have the profit that is lower than last year.

There was an excellent collection in Russia at the year-end, so last year, end of the year cash flow was extremely positive, so little bit of timing issues as well. CapEx was few million higher than last year, things like this and currencies impact also somewhat.

Okay, one question here.

Nowadays you seem to have 13 production lines in Russia. What do you think in the coming years, let's say next year and the year after that, how many lines you're going to have in those years?

We have space -- in our present factory, we have space for only one more new production line and we are going to implement that and increase the mixing capacity as well and we are preparing plans for our next factory. We will need a third factory at some point of time like I have explained.

And we are now -- this springtime, we are looking at the proper timing. We don't need to make a decision now, but we are making our plans ready for the future.

But you haven't said anything about the location of the factory?

I have said quite a lot about the location. What I haven't said is the decision, but we have been looking at the situation -- location based in Eastern Europe, somewhere in Eastern Europe supporting the growth that we have in the Central Europe.

You can see that Central Europe is already a significant part, about one-fourth of the revenue comes from that area this quarter. But then of course, this North American situation and understanding the logistic costs and the duties for that market, that if our growth in North America would be sustainable, it might make sense to put it there.

And then you have in Asia which is a kind of a standard consideration for the location for most of the industries nowadays to look at that as well. And we are looking at our actions to also get a kind of new leg from Asia.

Asia for us is very, very small and again there is a good future market opportunities there as well. Location decision will be made somewhere in the first half of 2016.

Okay. Maybe at this point we will take some questions from the audience behind the telephone line, if there are any.

I have two questions please. Starting with a follow-up on your answer on the cash flow, can you comment on your working capital development in Q1 please, in particular on the inventory side?

Can you just make qualitative comments on the number of tons you have in stock given that the absolute [indiscernible] month seems to be close and you had a big currency negative impact. So as a percentage of sales, your inventories have increased sharply.

Yes, the inventory levels if I comment that the inventory levels are higher than last year due to this reason that we have postponement in the winter tyre sales in Russia. So one could say that somewhere in the same ballpark then the sales decline in volumes have been.

Another question, typically Q1 is the weakest quarter for Nokian, but given the big swings in Russia -- of Russia in your revenues and earnings, how would you qualify Russia of Q1 in full-year earnings for this year? Do you think it is going to be like more 15%-20% less, more than that?

Could you make a comment on that topic please?

Well, it's quite easy to calculate if we estimate kind of a maximum 5% decline compared to last year and you look at what EBIT we made now in the first quarter, then you can calculate how big share that is from the full-year estimation. No --

On the tax dispute and your decision to put back on your accounts the amount that has been debated, can you explain us -- I'm French, I don't know precisely the rules for tax issued in the Nordic countries -- when do you expect a decision to be taken on this matter and can you effectively decide that because you have this first decision, it's enough to bring that back on your balance sheets?

And I should have actually explained it a bit more in my presentation already. By the way, we don't know even the Finnish tax rules.

We thought that we know them, but we clearly don't know them. I don't know that the authorities know them either, but anyway the decision was cancelled.

So this is a little bit of different situation, so it was not kind of a delay or something like this. So then therefore we did not have any other option but to put it back to our result.

There is no decision that we could base any other kind of estimation that should we leave some money aside. We believe that the process will continue, but how, that remains to be seen.

It's good to note that this result we put back fully into our profit and loss statement. However, there are over €40 million that the taxmen already collected as -- even though there was a hold for the tax collections put in place, taxmen used this VAT returns momentum and withdrew some €40 million plus from our moneys.

We expect that that money will be returned to us soon with the interest. That's at least how the taxmen typically works the other way around.

And then there is another element on this tax dispute is that basically now the first two years of this tax disputes, they should be now considered as not valid anymore. The time has expired for any new decisions based on those and then -- those years and then those years constitute about €60 million out of this €100 million.

And maybe the final part is that we have then another smaller part about €10 million dispute still not decided at all that we booked into our results last year first quarter. So that's still open and in our books.

Okay. So you don't have any information on the timing of this -- any potential settlements for that?

No, no, we have had problems getting any estimations throughout the whole process.

Okay. On another topic on distribution, can you confirm the number of fully-owned shops at the end of the first quarter please in Vianor?

195.

195? Can you comment as well on your view about Internet [indiscernible] distributions?

I mean your predecessor Kim Gran mentioned that he had looked at this topic and made no decision. We are seeing now Michelin buying into this in France and the UK.

Can you give us your view on this topic? Do you think it makes sense for a tyre maker like you that owns a distribution network to also own some Internet distribution or you think it's irrelevant or not useful?

Okay, excellent question again. So my understanding and my belief on the e-commerce in tyre business is that if I forget now the commerce part, but the overall Internet, more and more the decisions are done in Internet or based on the information coming from the Internet.

So Internet for us is extremely important. E-commerce as such has remained quite small part of the overall business and especially in our segments where the seasonality and the service is an important part.

It might be a bit different for the kind of basic summer tyres segment. However, we don't estimate that part of the sales increase drastically.

So it's not going to be 100% at any time in the future, there always will be this physical element. Maybe there will be some more combination of the kind of decisions and then purchasing done on the Internet, but then combined with the physical visits to the shops.

However, what I don't believe is that I don't believe on single supplier-owned e-commerce sites and there I would not follow the same strategic route that Michelin has now decided to do. However, they -- of course their business mix is totally different and it might make more sense for them.

Okay, I have one last question please. You said in your presentation that tyre volumes in Russia were down 20% in Q1.

So I guess they're down a lot more than what a lot of us assumed. What's your full-year outlook for tyre replacement given in Russia?

Is it still 20% down or do you think the rate of decline is probably going to ease as economic growth starts recovering a bit?

We are making our estimations now based on about that 20% decline for the full year.

And you don't think it's too conservative?

Well, it's good to remember that at the end of the last year, there was this big sprint to buy tyres when people were afraid of the price increases that actually came in place at the beginning of the January. And we can't base our estimations that there would be similar type of run for filling the warehouses at the end of the year.

I just have two questions. First one was on how do you expect your average selling price to play out through the year, I mean especially given the effect of mix coming from higher summer tyre sales and pricing pressures that probably you're seeing on lower raw material cost?

And my second question is regarding a comment you made on your report saying that Russian customers are moving away from Nokian to buy cheaper branded tyres. I was wondering if you expect this trend to continue going forward or how do you see this progressing?

Those are the two questions.

Okay. So I think this currency impact will remain throughout the whole year.

Of course that is now difficult to estimate. But if it remains on the same level, there will be some negative impact from the currencies.

We believe that this raw material cost decline stop will force the industry to stop also, giving the cost reductions to the end-users. So we believe that the price level should start stabilizing.

When looking at our portfolio, we believe that we will be doing well on premium segments. Summer tyre success will continue now most probably during this quarter.

And then I expect quite a lot from this excellent new Central European winter tyres. So winter tyre premium segment I think should do quite well for the rest of the year.

Already in the first quarter actually, besides the Russian situation, our balance in the winter tyre side between the medium and premium segment was already positive. Second question was about this Russian purchasing behavior about this C segment.

The fact is that in this kind of economic situation, the C segment benefits, also the B segment benefits. On the kind of cost of A segment, we believe that a similar situation what we have at the moment in the Russia most probably will continue throughout this economic challenging situation and then will start easing up back towards more positive situation for the premium.

It will never go back to the 50% that it has somewhere be, but the 30%-35% it will go back.

I have a couple of question coming back to Russia again, can you give us little bit of an indication of the mix? I mean, you were indicating like 30-70 A versus B tyres, but is the profitability of the summer tyres close to the A tyre segment on average or to the B tyre segment?

That would be my first question.

Yes, what I said was that the whole premium segment share went from 30% towards 25% in Russia and that includes also the summer premium. The summer tyres typically are with lower margins and prices than the winter tyres.

But naturally the premium segment of the summer is already better than the lower part of the winter tyres.

You've mentioned the regional margins in Russia. Did you say that Russian margins on average are on Group level right now on the domestic market?

That's about it, yes.

Because if I remember right, in the past you were indicating or your predecessor, between 40% and 50% margins. What do you see given the mix changes you've just mentioned in Russia that this is the new norm in Russia, where you settle in terms of margins around 20%-25%?

Or do you see margins going down further in Russia given import tariffs coming from 17% to 10%? Is this some kind of new norm that you see in Russia or you see an acceleration again in terms of margins expansion?

At the present situation, this cannot be a new norm. It's so sensitive and so volatile, the market, that there definitely will not be any norm.

What the margins will be, I believe on high margins still in the future. Definitely not go into those low levels that you mentioned they would be -- they would be meaning reasonably total disaster for our product portfolio competitiveness and the kind of distribution chain control that we have.

They are on the Group level and they will do now okay. We are doing, like I have said in many situation that even in this situation we are doing in Russia very good business and we will be doing excellent business when the situation starts to calm down and then the growth starts to come in again.

By the way, the import duties now are not on 17%, they are 16% and they will gradually go towards the 10%. Let's see now in this situation will those steps, will they be made.

Did you see any changes in Russia in terms of market share given your competitors ramping up capacity with new plants? Or is it really just that the imports go down and that's just changes imports versus locally-produced or are you seeing market share shifts?

There are quite significant shifts in -- basically in all quarters, but also in the first quarter there has been some significant shifts. Some individual Asian players have used the price card and then gained market share.

All the big global ones, they have gone down in volumes about the same or even more than us. Of course the local suppliers, not because of the OE as such, but because of these Chinese players disappearance from the C segment, they have been benefiting on the market share on the C segment side.

There are couple of big local suppliers. And then Pirelli of course have -- is part of this local supply and their volumes have stayed in a better level as well because of this local C segment production.

My second question would be on the Group level on price cost versus raw materials, when I take your chart on the raw material cost development, if you take for the Group level price mix versus raw materials spread, should it get more negative in the coming quarters or more positive given your costs go up and assuming that pricing remains stable?

That's really in all industries that if the situation goes like this, then the whole industries need to start thinking about the prices at some point of time. Presently our situation with these changes are as we have predicated and the situation should stay pretty good.

We -- our business model is such that the raw material increases actually, we don't feel too bad about those because that will stop the industry lowering the prices. Instead they will -- the people will be forced to go back to the increases.

And with our profitability level when we are able to follow the price increases, we are able to improve the profitability and not only compensate the cost.

Do you expect any price hikes in Europe let's say in the second half of this year? Is this something you have in your scenario?

No, not in our kind of forecast, but I wouldn't be surprised about the price increases if this present trend with the raw materials will continue. But of course the competition is tight.

There is a tight competition with the new Asian players, with the older Asian players and their willingness to come to Europe. So the price pressures will remain tight for the full year.

My third question is really on the inventory situation on winter tyres in Europe given the relatively weak sellout last year. What do you expect for European sell-in market this year on the winter tyres?

Well, it will be based on the season. The inventory levels are on a higher side, but with certain customers in certain countries, not overall, because in many countries the customers are used to bad seasons already and they don't stock tyres because of it.

And that's the same situation with us that it's few customers who have this challenge, but not overall. If the proper season will come again, we will see good growth.

My last question will be on volume. Sorry if I didn't get it during the presentation.

Can you give us an indication what your unit volumes have been in Russia in the first quarter? And your revenues are down 40% which is pretty much the currency devaluation.

Would you say that your volumes have been stable in Russia?

They have not been stable. I said that the industry has gone down 20% and our market share has declined.

That's what I said.

Yes. I have a few questions, if I can perhaps take them one by one.

The first is just regarding the raw materials. If I've understood for the year you're guiding that there could be a €15 million benefit.

Should I assume that that's something in the order about €10 million of that €15 million was in the first quarter?

Even slightly more than that. And we are expecting still we go clearly over this €15 million for the first half and then start eating that benefit in the coming quarters.

Okay, got you. And then just a different question, it was just in terms of the Vianor, the acquisition that was made, have you said what the revenues of that business where and when was it consolidated?

We've been doing so small kind of various smaller ones, so we don't even report the size of this. They don't really -- there are one or two that have some kind of millions of euro impact in the annual revenues, but not more than that.

There's not significant individual cases, but the chain of small ones all the time.

And I mean all together you're just saying it just is €1 million to €3 million, something like that?

Excuse me, can you repeat?

Yes. In total what you're saying is that the total amount of revenues acquired would be in the very low single-digit millions?

For the ones that we have been acquiring for example for the first quarter, it would be few millions overall annual revenue; €3 million to €4 million to €5 million.

And in terms of exports from Russia, I think you said it was 54% in the first quarter. Could you -- would you be able to tell me what it was Q1 of 2014 and then for the full year 2014?

If I remember correctly, full year 2014 was about 60%. I can't remember the first quarter last year, but 60% was the full year.

Okay. But I mean do you think that the exports were up or down compared to the first quarter of last year in percentage terms?

No big difference most probably. Or maybe there is because of this Russian winter tyre market.

But I would say that, no, it doesn't have a strategical importance, that difference for us. We estimate that the share of the exports should remain about the same level this year than they were last year.

Maybe even more the success seems to be pretty good in Central Europe and North America.

Okay. My last question is just regarding the points you were making about the average selling price of the summer tyres versus the winter.

I didn't -- wasn't quite sure, would you -- are you talking about your summer tyres having a higher price than the low-end of your winter tyres?

What I said was that typically when you have summer tyres, you have a very big range of different types of the summer tyres. SUV tyres, first of all they are bigger and by default they are also more expensive.

And then in the summer tyres, you have also the similar type of A and B segment that -- you have your medium segment and you have your premium segment. And what I said that the kind of higher end of the summer tyre segment goes above the medium -- lower part of the medium segment in the winter tyres.

By the way the same goes for the van tyres, that in the summer van tyres you also have the similar type of kind of segments and also the sizes are quite much bigger.

I have a few questions. The first one is going back to Russia, when you've given an indication that you expect the market to be down 20% this year, I remember in the past you were giving us some break-down within the different segments.

And that minus 20%, how you would break it down roughly speaking between A, B and C segment?

It's bit more for the A and B segment together. Not however hugely more some percentages points and then respectively it will be little bit less for the C segment.

Okay. The second question, I was a little bit confused in the previous answer to Alex regarding the Q1 in Russia.

You said that the market was down 20% which I got and you said that you lost market share, is it correct?

Yes, because now good to remember that the comparative quarter, we had the winter sales. Now when we push our winter sale -- or our winter tyre sales is more towards the second quarter, the whole market will go down and then because it's mainly caused by our winter tyres, then our share will go down as well in the first quarter when we talk about the sell-in.

Okay, because where I'm a little bit confused is that if your revenue decline is more or less equivalent to the FX impact, at the same time you have price increase and you have volume decline, I'm a little bit lost. Can you break it down a little bit better between the volume pricing and the mix?

It's a quite complex situation because now we have more summer tyres as part of our sales in the first quarter than we had last year, but then we have an increased premium sales of the summer tyres in the Russian first quarter sales. So overall -- including this van tyre, so overall we get this result what we have.

Okay. So that means that when you were talking about market share loss, it was exclusively on winter tyre and because you have the ramp-up of the summer tyre which offset a little bit that, is that correct?

Yes.

Last question regarding the North American market, can you remind us a little bit what is the winter tyre market in North America, the size of the market and the market share of Nokian?

Yes. Our market share in the real winter tyre states both in Canada and U.S.

is already quite high. It goes from -- some states from 10% to as high as 25% in some of the states.

The overall North American winter tyre market -- now by the way it's a bit difficult to say what is the winter tyre market because they have this all-season and increasingly now this all-weather segment which is a all-season tyre with the winter tyre features, what we have been launching there together with some of our key customers last year, so the winter tyre market is about the same as what some of the biggest European markets are.

Just two questions from my side. The first one is on North America which has seen good growth for you in Q1.

Given the increasing exposure here, could you talk a little bit about your product mix in the market and how that affects profitability versus the passenger car division average? My understanding is that the multi-season tyres are much more popular in the North American market than in Europe.

They are. The all-season tyre segment is surprisingly big in North America, it's something like 100 million tyres and we haven't been playing too much on that one.

For us, we are a winter tyre specialist in North America at the moment, so very heavily based on that. But increasingly we see that -- and this is typical for our market entries that we go in with a reputation and kind of greatness of our winter tyres and when the customers get to know our brand, they get to know how good the products are, then the summer tyres will start to sell as well.

And this is the phenomenon that we will see also in North America. By the way, if you allow I'll come back to this previous question and I explain one specific thing that impacted our ASP in Russia.

Like I said, it's a bit complicated. We had actually two different products for the medium segment.

In the winter tyres, we have the Nordman 4 and 5. And what we did now is that we withdrew the Nordman 4, so the oldest medium segment tyre from the market.

So even though in numbers the segment itself had the kind of similar phenomenon than all the other segments, the average price inside that segment improved because of this withdrawal of the older and lower price Nordman 4.

And then my second question, just leading on from your answer there is, it's on the passenger car side of the business. You've had sales down about 16% year on year and FX at the Group level at least was a 9% headwind.

Assuming similar in passenger car, that leaves around 6% to 8% decline in revenue split between volumes and price mix. Could you give us an idea of the magnitude of each of those two drivers?

I'm assuming both are negative given comments previously made on the call, but an idea of magnitude there would be helpful.

Okay, I'll give you the ballpark, I'm not going to give the exact numbers. But the currencies took the average prices down more than two digits or two-digit figures and then the -- both the mix and the price impact was positive.

And several -- took the prices upwards several percentage points.

And volume therefore was single-digit percentage negative it seems?

Can you repeat? I didn't hear that one.

I'm sorry. Just taking the price of mix comments together there with volume just to make up the delta versus the reported decline since volumes down a single-digit percentage?

Volumes were down, I said the ballpark was about 10%.

So I have two questions. First of all, can you specify a bit more why you decided to hold back winter tyre sales in Russia?

I understand the pricing element is one thing, but as the market leader, you should probably be the one showing the price increases and leading that route.

We are the ones who are coming out with the prices way earlier than anybody else. We -- what happened, it's good to now remember that what kind of year end there was last year.

There was almost a panic related to Russian ruble and its valuation that went -- in few weeks it went up or down several 10s of percentages. And then the customers started to buy basically anything that they could with the rubles, including white goods and cars and also tyres.

Then what we have in Russia is also that they have the winter holiday season at the early part of the January. So we decided that there is no point in this time to go because it was -- nobody was able to make any decision.

We decided that we will not go out with the prices because it doesn't just make any sense. For our full-year result it doesn't really impact because the winter tyres will be needed only when the winter season starts.

So we decided to kind of control the situation which was exactly the right thing. The situation stabilized, we went on out with our prices, we were able to make a more educated guess for the right price decisions and it paid off.

We also made some changes for the commercial terms with our customers. And we needed to call them through in a calm and timely manner with our customers and then really explain what does it mean to them.

We made even some fine-tuning for the terms based on some feedback that we got. And then we had this concept accepted by the customers and the sale started.

It was really the right decision too. And like I have said a few times, we are having an excellent grip of the distribution network in Russian market.

We know what needs to be done and we almost have the kind of first right of refusal to really make the final, final decisions if needed if there are certain quick changes in the market.

Do you have a feeling that some of your competitors have taken advantage of this and the field distribution inventories earlier than perhaps otherwise and that you will lose more market shares throughout the year as a consequence of this, that there is at least a risk of it?

We don't feel the same.

Okay. And then a final question, your sales growth geographically in Q1, it is clearly better than you expect for the market growth; for instance, in the Nordics you had 7% growth and you expect a flat market at least.

I realize you might gain some market shares this year as well. But is there any reason to be scared that you have used kind of early distribution filling in the other markets if you exclude Russia where you have decided to be late in filling the inventory channel?

I feel actually more positive than in some of the other quarters related to this particular topic. We haven't been forcing our tyres into the distribution with any kind of discounts like in -- maybe in some other quarters in the history.

So the situation for us is quite healthy. We are doing what is best for the market, what is the best for the customers.

And even without doing any kind of aggressive moves, for example on pricing side, we've been able to achieve the results what we have. And therefore I feel pretty confident about the full year and our guidance.

It was just really a bit more on North America, obviously a very good result and I'm sorry if I missed this earlier, but could you give us an indication of what the volume growth was there and what it could be really for the remainder of the year? And going forward, what's the potential there or what's the sort of an unusual impact from the very cold and snowy winter that they had?

There was not any more impact of the cold weather in the first quarter. Of course we had maybe a bit lower comparative quarter last year.

Last year we grew about 20% and we have estimated that a similar type of the growth should be there for this year.

20%. And then going forward, I mean you continue to build market share, would that be through pricing or just product predominantly?

We have improved our product portfolio, so we have new types of tyres that we can sell. We have new customers there to whom we can sell.

We start from the low levels. We still are in a low level even after this kind of a five-six nice quarters behind.

So there is a big room for improvement still. And I expect this could grow to continue also, not only this year, but in the coming years.

Okay. I think we start running out of the questions and we have used now already 1 hour 10 minutes.

So I thank you for the audience. And then we will meet many of you now already today and then in the coming sessions, one-to-one sessions in the coming weeks.

So thank you very much for your participation and good, excellent questions. And have a good rest of the week.