Nokian Renkaat Oyj

Good afternoon from Helsinki and welcome to Nokian Tyres Q3 2020 Results Conference Call. My name is Päivi Antola and I am the Head of Investor Relations in Nokian Tyres.

And together with me in this call, I have Jukka Moisio, the President and CEO of the company; and Teemu Kangas-Kärki, the CFO. You've now been some five months the CEO of Nokian Tyres what are your key impressions so far.

Thank you Päivi for the question and first of all on my behalf also welcome to this results call. So what are my feelings or thoughts right now?

I would say that we are very much on track on doing things that we set out to do. So first of all to try to sell more tires and focus on that and also launch new products because that is a lifeline of the company and allows than the future volumes and better price points.

But at times like these when COVID is been around and hasn’t disappear it's really important that we have been focusing on cost and cash flow and I think that the important continued focus in that area will help us also in the fourth quarter and fairly into 2021. But my summary is that we are very much on track and doing things and executing the actions that we set out to do.

And then let's move on to Q3 and I’ll start with the presentation what we have prepared and then continue with the Q&A. So Jukka please go ahead.

Okay. Yeah, thank you Päivi.

So, I move to page 2 on our presentation and just reflect on the sales development. So our net sales at slightly below €350 million, somewhat behind 2019 third quarter.

But if you take comparable currencies, we are about 3.5% ahead of prior year. Obviously, the market developed minus 2% in the third quarter in Europe.

And when we went into the quarter, we didn't quite expect that our revenues and net sales would develop so favorably. In fact when we thought about the second half in, in the connection of the second quarter results announcement, we were expecting that the volumes and the revenues will not recover to a level that we achieved in 2019 in the second half.

And even though we had a very strong quarter in the third quarter, we are still quite cautious about the full second half and the season hasn't really started yet. So obviously there are number of uncertainties in the air in terms of what to expect from the fourth quarter.

But having said that, we are pleased on the second quarter performance. Passenger car tire growth was driven by North America, Central Europe and we had a relatively good performance in all business units in this volatile environment.

Also in the third quarter, what was helping our net sales development was that some of the sales that we had in 2019 in the second quarter shifted into third quarter in 2020. So there's some tailwind in the third quarter which came from the second quarter 2020.

Operating profit at €69.3 million, segment’s operating profit was €74.9 million, slightly behind in 2019 performance and obviously we had some help from the raw materials. Clearly a strong manufacturing performance and then cost cutting helped our cost side and then currencies providing some headwind and also the big volumes in Russia.

Also of the quarter the board decided the payment of a second dividend installment of €0.35 per share. If I move to page 3 there is a summary of our financial performance.

So things to point out from here is that cash flow from operating activities was positive €7.1 million versus €89 million negative in 2019 and also been he's on to achieve that you see below capital expenditure in the quarter €31 million versus €88 million in 2019 and very good development of segments operating profit under the circumstances at 19.8% in the quarter versus 21.1% in 2019 and top line advancement in the third quarter 3.3% in constant currencies. And as I said just to want to reiterate that than we went into the second half of the year we didn't quite expect that the volumes would recover so strongly still of the opinion that when we look at the fourth quarter there are lots of uncertainties in the area and so therefore we of the opinion that the second half is unlikely to be stronger than the previous year.

But obviously still the final quarter is ahead of us. So uncertainty is there and we will see what we can do but obviously aim for the best possible performance.

From our point of view, of course, the, the key to achieve results and to performance right now is to focus on cost. Surely, we sell as many tires and want to save as many tires as possible and be focused on the revenue plan.

And then working capital cash flow is something that is very, very important in this year. It’s essentially the summary of financials, and I, now I hand over to Teemu -- okay, I have still, sorry, the page number 4, where we have little bit of the statistics in terms of the new car sales, car tire sell in and heavy tire segments.

And I still look at, through the various geographic areas, it is the first nine months of 2020 and negative development. As I mentioned, the car tire sales in the third quarter was minus 2% in volume versus 2019 and power brokers was 2.3%.

That's in the summary, the financial and the market. And I hand over to Teemu to talk about the business segments.

Go ahead, Teemu.

Thank you, Jukka. So starting with [indiscernible] and looking our comparable net sales, the net sales increased close to 5% in the third quarter on a comparable currencies and asset strong performance in North America, Central Europe and also in, in the Nordics.

In Russia, the net sales declined as planned because of the measures reducing the carryover stocks in the distribution channels and now the stock level in the distribution in Russia has decreased and continue – and we are expecting that to continue to decrease in the fourth quarter this year. Then moving to our segment operating profit, we were on a level of €72 million, a couple of millions behind last year period where Russia is the main driver to that on top of the negative currency impact; and then, lower raw material unit cost then was partly offsetting the negative headwind.

Then in terms of our production in Russia, the September was a record high production volume. So, we start to reach the normalized level in our Russian factory, then steel in Finland we have adjusted the production according to the demand of steel in the third quarter.

Then moving to the net sales quarterly changes; and if we focus to the price mix development, or in the third quarter, our price mix was negative about minus 0.3%. There, we had a favorable mix effect.

And then, our price effect was negative. And then, the aggregate number is then slightly below last year in the price mix component.

Currency in the third quarter had a major effect and as we all know for example the Russian Ruble is significantly weaker and then on top of that, other currencies in the third quarter are like weaker like Norwegian Krone, USD as well as Canadian Dollar. And then moving to their passenger car tire, rich impact on the segment operating profit here you can see the biggest two components in terms of absolute Euros the material tailwind contributing about €11 million for the third quarter results positively and then the same amount we lost in the currency headwind.

So, all in all BCT of segment operating profit €4 million down compared to the period last year. Then we'll be put the Heavy Tires business unit, in the third quarter the comparable net sales development was minus 2%.

And there, the OEM sales meaning the forestry was clearly down as we all know how that industry has been developing in the recent months, then the positive side into heavy tires in the third quarter was the good truck tire sales, now when we are heading to the winter season that then offset the negative development in forestry and agri side. The segment operating profit in the third quarter was almost in the same level than previous year's quarter on a level of €8 million.

And then our third business unit, Vianor. We had a good performance in a typically low season as we all remember the seasonality of our business there.

Net sales was slightly down on a level of €67 million and in percentages about 1% on the computer currencies. Nevertheless, the segment operating loss was smaller than in third quarter 2019, on a level of minus €3 million.

And there we have been able to adjust our seasonal workers in a good way in order to offset the declining top line. And as a reminder, the diversity in US, our small Vianor network with 10 service centers that was completed in August time and we now continue to sell the tires in the same service centers, but we are not operating those by our self.

That was in brief the three business units in the third quarter.

Thank you, Teemu. And I move to final page to summarize our priorities on page 10.

So clearly it's important that we keep on launching and developing new products and we have a very strong pipeline. So every month in coming quarters we hope to introduce new products and launch them successfully, at the same time it's important we focus on the key core competence and area where we can make a difference which is to sell more tires, but also if we think about the environment and the uncertainty related to COVID and so on equally important it is that we keep costs still in control and also that we protect our cash flow by making sure that we only invest what is necessary and at the same time manage our working capital well.

Some activities are not necessary right now so we can delay them and make sure that in that sense our organization focuses on the key activities and somewhat the development activities and so on we can delay and maybe do next year if and when things look better. Season is still ahead of us.

So clearly the final quarter is season dependent. We are well-prepared for the season, but it hasn't really started some snow in Finland other countries and surely we've seen demand picking up a little bit but it's still not yet winter and so therefore some excitement still ahead of us.

But in summary we can say that Q3 was good. We are pleased about that and it was better than we expected when we went into the quarter and in that sense at this moment, we are in a good position to enjoy what we will come in the fourth quarter and clearly we focus on cost, we focus on cash flow and we will make of course most of the season, when it comes.

This is summary of where we are.

Thank you, Jukka. Thank you, Teemu.

And now operator, we would be ready for questions from the audience please.

Hi. Thank you for taking my questions.

Akshat from JPMorgan. The first one on the temporary layoffs in Finland, is it possible to quantify how much benefit do you have from this temporary actions in Finland this year, for the first nine months or the third quarter specifically?

And how should we think about this going into the fourth quarter and going 2021? How much flexibility do you still have on these programs?

That's the first one. The second one is on Dayton and recruitment of the second shift there.

Does this expand capacity to 1 million tires and what is the associated cost of this ramp up that you're forecast going into next year? And when do you plan to hedge the 2 million units?

And from what I remember that were planned on pre shifts? The third question is on the eBid Bridge for passenger cars.

Can you detail out what is exactly within the minus €9 million bucket linked to supply chain impacts in the quarter please? Thank you.

All right. So, thank you for the questions.

Let me start with the temporary layoffs in Finland. So obviously, the Finland is a particular country where you can be – you can do that, we still have flexibility in the final quarter if the demand is weak and so on we still have flexibility to do the temporary layoffs if needed.

We will see how the demand continues. We are not talking about significant millions here.

So my guess and I, this is not scientific in the range of €3 million max what they can get out of this one. And then you asked about Dayton, the second shift is being hired right now.

So as we speak, we hope to be fully on two shift operations starting 2021. And then the final €2 million capacity will require three shifts.

And we expect that during the course of 2022 assuming that the demand evolves that we will be there and then we have the question that at which point, we trigger expansion equipment so that we can actually move from €2 million to €4 million. But this is something that needs to be decided during the course of 2021-2022, and that is certainly time when we get to that for €4 million tires.

What the cost the impact of that is, is a sense solely in direct employee, less than €5 million I would say. But then of course, there are other operating costs and so on.

Then we should take the…

The bridge question and regarding that the supply chain block there. As you all know, the supply of the cost piece in general that represents the biggest cost item for Nokian tires.

And then if we take away Nokian Tyres. And then if we take away raw material unit cost, which is then included in the €11 million positive development.

And then looking other components in the bridge like the volume, price mix, SG&A and currency, then the residual is in that supply chain pocket. And there, you can see, for example, that part, one part of the explanation is that Nokian Tractor is under absorption in the third quarter.

But there are also other supply chain related costs.

Understood. If I could just follow up on the temporary benefits, I think you said you expect a maximum of €3 million in the fourth quarter.

Is it, is it, is that about right? And...

Yeah. Full-year levels, maximum €3 million.

Okay. The full-year level in terms of temporary benefits.

Yeah. Because the temporary lay-offs are not as such, I mean they are an efficient way to regulate the capacity.

But in terms of how much you save in cost, it's not a significant cost, right. It will help for its part but it's not in absolute euros.

It's not significant.

Thank you. Hello, everyone.

And so, on the raw material side, we see in the bridge, and as you mentioned that, and the prices and costs are down quite considerably. But there you seem to have been able to keep this for yourself for not having to let that pass through to your own pricing.

Is this the result of a lag or do you believe that you will be able to maintain these lower prices yourself?

So, in our forecast for the our forecast for the quarter fully quarter – fourth quarter is that the raw material prices continue to be on a level as in the third quarter and then in terms of pricing of the prices are more or less fixed for this year and then going to next year that's than a different story and maybe for us to share with you the current year of the raw material prices in 2021, BIH expecting to see an increase in raw material prices in 2021.

Great. And a second question for me on the dividend just to be clear, I read in the statement that it could be the sort of the remaining €0.79 that was discussed earlier this year could be made in one or several installments.

So just to be clear this €0.35 announced today is that sort of the final or could there be an additional installment beyond this?

I believe that this is final, so there is no additional installments this year. This is…

Thank you very much, Thomas Besson of Kepler Cheuvreux. I have two questions please.

The first one is on your North American performance in Q3. Your volumes seem to have jumped dramatically more than the market while in the first half they had underperformed the market.

Can you explain if that's part of what you were talking about in terms of elements shifting from Q2, Q3 and elaborate on whether there's any one-off linked with these Q3 volumes and whether you expect the similar development in Q4 in North America as in Q3. So, basically explain a bit more this very substantial jump in the region?

The second question is about the bad debt you reported, I think, €4 million in Q3, can you talk about that whether you believe [indiscernible] sort of in Q4 and in 2021 or whether this is well under control and we have seen most of it now? Many thanks.

So, the first question was regarding the North American sales, and you rightly pointed out that partly is the shift from Q2 to Q3. And then, it's also good to remember what I've been saying in earlier discussions that our customer base is more concentrated than maybe in other companies’ customer base, so when they are doing their internal decisions, how they want to stop that will influence our sales.

So those are a couple of reasons explaining the North American sales development. Then in terms of the second question the bad debt development, so as discussed in the Q2 call, these are the bad debt provision that we foresee, so they are not yet realized bad debts, but now when all the companies have introduced since 2018, the IFRS 9 approach where we need to start providing bad debt provision according to the IFRS approval.

So this is the fact that we have seen now this year increasing the bad debt provision and most likely it continues in the fourth quarter as well.

Yes. Hi, this is Artem from SEB.

Three questions from my side. So first of all you've talked about some sales shift from Q2 to Q3.

Would it be possible to maybe quantify what has been the magnitude of it? The second question is relating to mix, mix side of your operations, so you stated that your mix improved year-over-year.

Is it fair to assume that your mix will be also improving going forward as you are talking quite a lot about new product introductions. And maybe just a number if you could provide on how much the mix improved in Q3.

And lastly regarding, so it’s big focus on working capital and cash flow of the company, so in Q3, your inventories went down by 20%, I think trade receivables more than that. Do we see much of a potential, those are basically improve your working capital in the company?

Okay. So I'll take that shift from Q2 to Q3.

So clearly there was some, it's difficult to quantify but I would say the single digit percentage of the total volume to talk about, but there was some shift. Scientifically it's difficult to quantify, but just to let everybody know that that did happen.

Mix is improving because we obviously have less sales in Russia than other markets obviously have a less sales in Russia and then other markets with higher value, higher ASP and that's how the mix improvement is also visible. Currency of course is another one which we than see as an item which was discussed.

In terms of launching new products I think that we are in the moment of launching them so many of them will be introduced for the summer next year or season next year or and so on so many of those launches don't have an impact right now. But they will have an impact in coming quarters.

And in terms of working capital efficiency, so clearly that will be our focus area also not only in the short term but also mid-term because maybe in the past the working capital component hasn’t been that actively managed. But now it is the core of our focus.

And that's part of the story that we move into return on capital employed for the target that's why the working capital and the asset velocity and all those matters are quite important. And so address them and of course the bench team has started to work with our business teams quite intensively on these matters.

Hi, thanks Gabriel Adler from Citigroup. My first question is on Russia, could you help us understand the level of winter tire inventories in the distribution channels in Russia following I think you've made normalized stock levels because you mentioned further declines will be require in Q4.

Well there's been a similar level of declines that we saw in Q3 or we're getting close now to normal levels of inventory in the channels there? And my second question is on the comment of top line being the priority to the company, can you comment please on what this means for margins in the coming years?

Because clearly margins in Q3 were very strong, but do you think mid-term the business is able to recover to say, 20%-plus margin while at the same time prioritizing top line growth? Thank you.

Yeah, I think if you start with Russia, so we had a plan when we went into the year that we get to normalized inventory level in the pipeline, and then we are very much on track to do that. And clearly, they've made progress in the previous quarters and we expect that by the end of the year, of course this assumes that the season is relatively normal.

It's not – doesn't have to be aggressively positive, but if it's strongly negative, so it also has an impact. But basically, we are on track to achieve the target level by the end of the year.

When it comes to the margin profile then obviously we said earlier and we haven't gone really looking into strategic targets at this point of time. So, we believe that 20% margin can be achievable.

We haven't done a lot of work at these times on that one, we will revisit the targets in 2021 when the situation with COVID hopefully is behind us and we can go back to normalized operation. But at this point of time, we set the bar at the level that 20% can be achieved, but that it will be and it needs to be confirmed in 2021.

Yeah. Hi, good afternoon.

Thank you for taking the question. I just have a clarification really when in your opening remarks you said that you are still not sure or you in fact you expect that the second half this year will still remain, so the second of last year now.

It’s good of course to see you match the volumes virtually of last year exceed them quite significantly in the US and some regions outside of Russia. I think Teemu also said that pricing should be okay in the fourth quarter.

So I was hoping we could just explore a little bit more where your reservations lie. Obviously the winter season last year is in a very difficult comp.

You're saying you're ready to take opportunities when the season comes. So is it really just fully attributable to uncertainty around how cold and snowy the winter will be or are there any particular regions or product segments where your reservations are mainly attributable?

Thank you.

Hi, Henning. We are basically looking at the environment and of course very careful about the COVID and the environment.

Obviously the season hasn't started, so that is always, but it's every year with us. So therefore of course everybody knows that this is something that will come either strong or weaker or normal.

But at this point of time when we went into the second half, we expected that the volume will not fully recover to 2019 level. We are really pleased with the third quarter performance.

And what we are saying is that still nevertheless we would be happy to be pleased with the fourth quarter performance, but it's not achieved yet. So we have a number of weeks and months to a couple of months to make it happen and it's sufficient to be careful at this point simply because the uncertainty in terms of the demand picture is there.

Are we ready to grab the opportunities? Yes, we are.

Do, we have a cost competitiveness? Yes, we have.

Do we focus on cash flow? Yes, we do.

But nevertheless, the uncertainty and that is around us and having said that again I just want to emphasize that we are very pleased with the third quarter performance.

Maybe €1 million…

Yeah. And maybe building on what Jukka said, we shouldn't be expecting any kind of similar shit from Q3 to Q4 like we did in Q3 from Q2, so…

That is debate take into account.

Sorry. That would have been my other question, so when you talked about your customer concentration this wasn't meant to indicate that there was possibly a bit of a pull forward when our – your concentrated customers have not taken a lot of the selling and will potentially be taking a little bit less into Q4 and turn that.

That's not what you were implying, does it?

Not we tried to run in normally, so we have no extra push or anything of the volumes. So we run as the customers run, so we match our own our customers.

Yes. Good afternoon to you all.

Pierre-Yves Quemener with MainFirst. I would need to come back on the price mix versus the raw material development of the full year, over the first quarter three quarter the year you have a price a very minimal price mix headwind of Minus €4 million that you had a significant raw mat tailwind, a cumulative one-off €20 million over the first nine months, I just struggle to understand how that it’s possible to maintain and to carry over into the next quarter into next year?

Don't we have to expect at some point that some of the two – one of the two buckets needs to give either on the price mix that needs to go down or either or the raw mat that needs to go up or be a headwind? That would be my only question.

Thank you.

Didn’t you draw the conclusions. I mean, I understand what you were saying.

But didn’t you draw the conclusion as well? But on the other hand, of course, it's important that the pricing of our products and markets is aligned with the market pricing, and then we operate and have a competitive raw material cost, so part of that is our on-sourcing, part of that is currencies, and part of that is where we operate and make the products, and of course a significant part of our products are in Russia where the currency is soft.

All right. So, if I understand correctly what trade raw mat will be – should become a headwind at least for the first part of 2021.

Correct?

So, my comment was for the full-year 2021.

Full-year 2021. All right.

Yes.

All right.

So far it’s difficult to say, yeah, what will happen, I think then we are saying that later part of this year will be competitive and then early part of next year, we will see, but then in full-year 2021, assuming that the next year, we will see, but then whole year 2021 assuming that the economies recover, there will be increased raw material.

Over the period.

Yeah. Yeah.

At Dayton…

Just one. Okay.

May not happen with these…

Okay. Just one last, just squeeze in if I may, because the other surprising bucket in your bridge has been obviously volumes at least for me and but obviously consensus as well, can we be sure that there has not been any inventory building in the third quarter into the network explain the very strong 5.5% volumetric.

No inventory building there. Nothing it should be concerned about.

Think that this is probably one of the areas where we have tried to be very careful, extraordinary concerned, but it’s not shipping into pipeline of inventory and spin lot of the most important things that we paid attention throughout our system that the inventories in the pipeline should be quite competitive and at good level.

Okay. Thank you, Jukka.

Thank you, Teemu.

Oh, yeah. Hi.

Would it be Pasi Väisänen in Nordea, but, but can you please say something regarding the market demand and now in October. So how has it been about the same than already seen in September or maybe a bit weak in October which actually could be the reason for your cautious speed for the third quarter.

And how this in October now is compared to a year earlier period in last year and maybe if I may, couple of more related to the third quarter, I mean we had any kind of, kind of extra items related to corona. So have you actually received some corona support from the state in the third quarter, and if they were, what cost the figure?

And lastly regarding the dividend payment I mean I hear that you're saying that no further dividend payment is going to be there before the year-end. What is their kind of a technical kind of a chance to pay something before the next stage James deal after the year change.

Thanks.

The two last questions, I can respond. The answer is on the dividend, no and also any support for corona cash is no, they are more October.

So, and that I will say that in the fourth quarter the November is also a key, key sales month. So I wouldn't like to comment one specific month within the quarter.

Hi, just a couple questions, please. One is on Central Europe.

If you could just talk a bit about the good performance in Central Europe for you and the extent to which this is a broader distribution or you know how the product mix is worked on there and whether you're getting any comment on reorders or sell through as you serve your sort of Central Europe. And then the second question is just on working capital you had quite a good move in payables helping the cash flow this quarter and you've had you've brought inventories down from a year ago.

If you could just give a sense on what you're you think you can you can achieve working capital wise as we go into the year end. And then lastly just if there's any comment you can make on the mark-to-market of FX just to take that uncertainty out as people try and understand the FX of current rates.

Thank you.

Yeah so working capital -- and you mentioned the payables study scenario where we have been focusing this year in order to improve that the payment terms and that still continues, so we are in the beginning of the, of the journey. And then in terms of working capital, as you know we have the high seasonality there and especially our trade receivables, will go down towards the yearend when the payments are due.

So there, there is a clear change.

Then you asked about the Central Europe business behind the good volume so obviously what happened was that we historically didn't have such a good product offer. So obviously, now when some of the products have been launched prior, past year and even before, those are now carrying us today.

And based on the work we've done with focusing and improving our activities in the sell-out and helping our customers having to get distributions in sell-out has helped our volumes as well. We are quite pleased with the performance and we expect that the Central European performance continue at a strong level.

So in that sense, of course, there was some shift from the second quarter, the first quarter but overall the improvements that we have done in our Central Europe with, under the leadership of [indiscernible] who joined in late 2019, those improvements and benefits are now starting to come visible in our performance.

Especially in the OpEx?

Eastern Europe so clearly Poland and Czechia and so, those very good performance.

All right. And then on the OpEx is there any mark-to-market you can give just so you've got some, you can just take that out of the bridge and don't have the uncertainty?

Thank you for there. I think that the Russian ruble is the biggest swing factor and I don't want to comment where the product is going.

Sure. Obviously the ruble is related a little bit on the oil price and so on.

So yes that if the oil price going up, so it will look at stronger and so, but it's really difficult to anticipate. Maybe the best is to anticipate that they at the level where they are right now?

That's how I tend to be that I don't try to guess in the coming quarters or months.

No indeed. That was my question.

And if you take the current levels, just so we understand what it is here and then whatever happens, but at least as people try to model the FX impact if you knew if they were where we are now and the ruble were to stay what that would mean for FX in Q4?

Smallest what you see is put us at the current levels.

Thank. I understand you don't want to talk about monthly developments, but when we look at Q3 it seems that July and August developed smallest as everybody expected and then September was phenomenal.

Is that true for you as well or is that has it been development? We would say that from our point of view the development has been more linear than in previous years.

So quite linear development, but yes typically there historically has been quarter end push but now there was some more linear development in July, August, September and that helps of course…

With the supply chain in terms of cost and so on. But not ideal but improved.

If I can please just go back to the discussion around raw materials and working capital. Notwithstanding the improvement in cash flow from operations against the comparative period, can you please just try to help unpack the seemingly low cash conversion in Q3?

I'm struggling to reconcile the working capital outflows in the cash flow statement with you know fairly substantial decreases in inventories and trade receivables. So if you could please provide some color on that.

And then my second question is just in relation to the disposal of the US unity deal. Can you just give us an indication of what sort of contribution this made to group EBIT in 2020 year-to-date?

Thank you.

Yeah, so the receivables in the third quarter as you know the pattern that receivables are peaking at the end of Q3 and then going down into Q4 when we collect the money And then, this year what has impacted our receivable development is naturally our sales which is slightly different than in prior years. So I don't know if that answers your question, but I'll take note, then I will continue.

That’s it on the raw material question. And if I could just ask it another way.

And should we then expect a much stronger cash flow from operating performance in Q4 relative to the operating profit result, i.e., will there be some catch up from Q3?

So we are expecting to have a strong cash flow development was there and.

Yeah. Thank you very much.

Yeah. Typically, we collect receivables towards the yearend.

That's why it's also beneficial to pay the dividend in December.

Yes. It's Panu Laitinmäki from Danske Bank.

I have three questions. So firstly just to understand why the volumes increased in Q3.

Can you talk about what products actually where that you sold in Q3. Was it summer, all season or winter pre-orders?

And then secondly if it was winter that was driving volumes up as I believe based on your mix, then what's your view, why did you perform better than your peers who have generally commented that demand for winter tires is lower, especially in Europe this year and then thirdly in Russia, I believe there is a change in the tire marking regulation that they’ll be implemented quite soon. What’s your view on, on the impact on the markets from this?

Thanks.

If I start with, with the niche development, as we commented in our release that the share of winter tire sales decreased means that, means that then the summer and all season were increasing. And that is the case both summer and all season increased.

And then in the winter, there was a mix between rates and so. Russia was down and then North America was up even though the absolute volume in winter was then flat.

And then you were asking about the competition talking about the winter season and so on. So obviously, those companies were early, they made earlier so I think that that's something that half day sort of market development.

Really at this point of time because the season hasn't really started so we haven't really seen any strong weakness or any strong upside in the winter. So, we are prepared to take the opportunity when it comes.

You surely have, expect to have availability in case it comes in strong and so on, cannot, cannot comment on the competitors behalf that, about their availabilities and so on. But we are relatively well positioned for winter.

Okay. And then you had the question regarding the biomarking in Russia.

So yes, that is coming into force in a few weeks’ time. And – and even though mid-term, as we have said that, it’s, it is a positive thing for the established players.

But at least in the beginning, it will be a operational headache for all of the players because of the new regulations up to now, and how we can implement those.

Yeah. More work to shift the tyres to distribution and customers.

So, you don’t expect much benefit for this season yet from that or how should we think about that like in terms of reduced competition and reduced exports to the country?

Maybe not – maybe not immediately. I think immediately is probably to get the shipments and the volumes and then maybe later on in the certain competitors or people cannot meet the regulations.

And then, there may be a benefit, but immediately no.

All right. Thank you.

Yes, hi. One follow-up from my side.

So as you are talking about second half been weak compared to last year, could you maybe clarify whether you are talking about volume development or basically EBIT level versus 2019?

Talk about the volume development first and then we look at the EBIT with cost and raw materials and prices and so on. But really what we talk about is the market momentum that how did we see the market momentum when we went into the second half, and so, in the second – in the third quarter, the market was about minus 2% versus prior year?

We will see how that evolves in the final quarter.

Okay. Very clear.

Thank you.

Thank you everybody for participating in this call.