Hello, and welcome to the Nokian Tyres Q2 2021 Interim Report. Just to remind you, this conference is being recorded. Today, I am pleased to present Pavi Antalah.
Queue. Good afternoon from Helsinki and welcome to Nokian Tyres Q2 2021 results listen. My name is Paivi Antola, and I am the Head of Investor Relations in Nokian Tyres. And together with me in to the call, I have Jokka Moisios, the President and CEO of the company and Teemu Karmaszkarki, the CFO of Nokian Tyres. In this call, we will go through the Q2 results, followed by a Q and A.
So Jukka, please go ahead.
Listen. Thank you, Baivi, and good afternoon on my behalf. Welcome to Nokian Tyres' results call. I'll start of the prepared notes, and I move to Page 2. And just to reflect the highlights of this quarter.
Listen. So net sales and operating profit increased significantly. Net sales were €460,000,000 about 55% up with comparable currencies compared to 2020 Q2. That was driven by strong demand in all markets listen and also all the business units and business areas contributed to growth, keeping in mind that Q2 in 2020 was particularly hit by COVID pandemic. Segment's operating profit was at €89,600,000 up listen to the call from €24,400,000 in 2020 Q2.
The biggest impact came from increased sales volume. And then we had some headwind from the mid-twenty 19. I move to Page 3, listen to some of the financial highlights, call out some key numbers. As mentioned, the top line up and segment operating profit up. Listen.
The percentage in segment operating profit was 25 1.5% versus 9% in to the Q2 2020 and segment's earnings per share of $0.51 versus $0.09 a year ago. Particularly good development in cash flow despite the fact that we increased quite a bit of receivables and working capital as the business picked up compared to 2020. Nevertheless, we delivered a positive cash flow in the quarter. Capital expenditures in the quarter were below prior year, and this reflects the fact that some of the major investments that we were still completing in listen to the 2020. These programs are now behind, and we are working to get the benefit from those to mention particularly listen to the Dayton factory and as well as Spanish test track of the 2 investments that we've completed listen since the Q2 2020.
Half year numbers, top line is up by 41.5% in constant currencies. Listen to the segment's operating profit at 18.5 percent in 6 months versus 7.4% a year ago and segment's EPS at 0.80 euros per share versus 0.16 dollars a year ago. Return on capital employed at this point of time, stock more rolling is at 13.9% versus 10 listen to the call and equity ratio after 6 months, strong 66%, as well as gearing low at 9.4%. Interest bearing net debt at this moment after 6 months is €140,000,000 and capital expenditures year to date, 6 months is slightly below €40,000,000 With Felmont rolling, our net sales are now at listen to the 1,000,000,000 versus 1,300,000,000 in full year 2020. Listen.
This will now hand over to Teemu, our CFO, to talk about the financial results of the segments and other financial details. Teemu, please go ahead.
To the call. Thank you, Jovka. Starting with the Passenger Car Tyres business unit, key figures and highlights. Listen. Our net sales grew with comparable currencies almost 75%, listen driven by strong growth in Russia, followed by North America, Central Europe and listen.
All main markets clearly increased the net sales. Our average sales price decreased due to the in listen to the increased share of Russian volume, which was the case already in Q1. And our operating profit listen only. Yearly increased because of the sales volume, and we were able to record segment operating profit close to €71,000,000 and our segment operating profit for the period was on a level of 25%. Listen.
In U. S. And in Finland, we have added new ships in listen to increase the production due to the fact that the demand is strong in all markets. Listen. If we move then to the next page where we can see the breakdown of our listen.
Net sales and segment operating profit. And starting with the net sales, we can see that listen. Clearly, volume is the main driver and then the price mix is listen. Minus 1% negative and then you had a headwind from listen. I repeat the same comment that I made in the Q1 call, listen.
Where I stated that regional, the business area mix impact coming from Russia listen It's about 3% negative and then the net price mix is about 1% listen for the passenger car tires. Then moving to the segment operating profit. Here, listen. Maybe highlighting the material impact or the increasing or decreasing listen to the material cost in the Q2. And for the full year, just reiterating listen to our guidance that raw material prices are increasing for the full year.
In Q1, our estimate was about listen. 9% now our estimate has increased to the level of 12%, meaning that in the second half, We will have a strong headwind from material unit costs. So meaning that if the full year guidance is 12% and for the first half we are Small positive impact, then simple math indicates that in the second half, the impact is negative around 24%, 25%. And in order to offset that factor, listen. We continue to increase our prices as we have already done in the first half, in the second half in order listen to be in a better position to protect the profitability of our passenger car tire business unit.
Listen. Then if we look at other aspects in the segment operating profit, you can see that Currency headwind, SG and A being closer to the normal level listen after the last year when we cut the costs, and then we haven't recorded any bad debt provision in the listen. Let's move then to the Heavy Tyres, where the listen. Net sales and segment operating profit continued to grow. Our comparable currency net sales listen.
Growth was on a level of 53%, in absolute terms on a level of listen to the nearest NOK 63,000,000 and our segment operating profit close to NOK 12,000,000. And the segment operating profit for the period was listen to the level of 18.8%. The volume development listen. It was driven by the customer strong production levels and also the new product launches listen in listen within the Heavy Tyres business unit. And if we look at first half listen.
Operating profit for heavy tires, we recorded all time high segment operating profit. Listen. The inventories are at low level in heavy tires despite the fact that we do listen to produce whatever we can to serve our customers in the best possible way. Listen. Then moving to Vianor.
The performance listen. In all countries recorded top line growth with comparable currencies, listen. 8%, in absolute terms, close to NOK 92,000,000 and the segment operating profit listen to the level of 10,000,000 and the profitability being on a healthy level of 11%. Listen. The operating profit improvement for the business listen.
Has continued to be strong supported by stable operations that we do in the service centers. Listen. As we have highlighted, listen. The focus for this year, it's about growing the top line listen and focusing on the cash flow. And therefore, we have recorded a strong cash flow for the 1st the 6 months as commented by Jokka.
Moving to our assumptions. There are listen to no major changes. The demand is strong both for the replacement car tires and for our debit tires core products. Listen. Russian ruble is always a key factor in our listen.
And then one addition that we wanted to include in our assumptions at this point is the logistic cost that we clearly see pressure listen. And the full year impact is about high the single 1,000,000 coming from the logistic costs. We have not changed our guidance due to the fact that the assumptions have not changed. And therefore, listen. We state that our net sales with comparable currencies and segments operating profit are expected to Anibal, back to you, Jukka.
Thank you, Teemu. And I wanted to just remind that listen. We have an all time high number of new launches, new product launches and want to draw your attention to Hakka listen to the Litter10, which is our flagship Litter range that will be available to consumers in the fall of 2021, and that will in listen to safety and SKUs for passenger cars, SUVs, hybrids and EVs, a very comprehensive size selection and also good benefits in winter grade comfort and listen to the reduced noise level, better on road stability and silent drive technology. This is simply to highlight our key product, but also keeping in mind that we have been launching late 2020, early 'twenty one, and we continue to launch record number of new products, and this is an important driver for our top line and also in terms of getting higher and better price points for our products. Also to listen.
Remind that we are committed to safe and sustainable manufacturing. So in the quarter and this year, we've been included in the European Climate Leaders 2021 list for significant greenhouse gas emission reductions. Listen. Our U. S.
Factory also earned ISO 14,001 certification in May and lead listen to the level 4 super certification in March. The Finnish factory earned ISO 45,001 certification for occupational health and safety in January, and we inaugurated the solar power plant on the Finnish Logistics Center in June. Listen. These are some of the highlights in our sustainability and that is an important part of our operation and in listen to the important part of our commitment going forward. I move to Page 13, our priorities for second half twenty twenty one.
We want to drive the growth with new product launches and continuous improvements in go to market activities, so volume growth. Listen. We want to protect our cash flows by prioritizing investments and capital outlays and also manage our working capital carefully. Listen. We'll take mitigating actions to reduce the impact of cost inflation.
These mitigating actions consist of price increases, which we've done in the early part of the year. Listen to the second half. And as Dan was pointing out, there's significant raw material cost, logistic cost increases in the pipeline. We will counteract them with price increases. And also, we want to keep the cost under control.
So this is the second mitigating listen. So there are 2 things to protect our profitability and cash flow against the cost inflation. Listen. And we believe that with our value brands, strong expertise and strong production capacity, we are well positioned to develop and meet those expectations in the second half. So this completes my prepared remarks.
I want to remind everybody that we have a Capital Markets the scheduled on September 9, 2021, starting at 1 The invitation to this Capital Markets Day went out today. So please put that on your listen. And keep in mind that at this moment, when we talk about the long term, medium term targets and ambitions. Listen. Now I open and hand over back to Paivi and we open for Q and A.
Paivi, please.
Thank you, Jocca. Thank you, Teemu. And listen. Now we would be ready for questions from the audience, please.
Thank you. The lead times now to enter the queue. Once your name is announced, you can ask your question. If you find it's answered before it's your turn to speak, you can dial 2 to cancel. Our first question comes from the line of Akshay Kashyap of JPMorgan.
Please go ahead. Your line is open.
Listen. Thank you. Good afternoon. Akshat from JPMorgan. The first one on pricing, please.
Can you comment on the price increases that you have implemented in your core markets listen. As of now, Nordics and Russia as well as the price increases in Europe and North America to offset the different elements of cost inflation that you spoke about raw materials, the logistics, etcetera. It will be helpful if you could quantify the net increases that you've been able to pass through in different markets. That's the first one. Listen.
The second one is on the Russian market. You've obviously seen some very strong volume growth coming in the first half and you've also won market share in somewhat an all season tires. Can you just share your expectations for rest of the year in terms of what are you seeing on market dynamics? Just talking about different elements like inventory levels, pricing and overall consumer sentiment as you look into the second half. Listen.
And the third one is on Dayton. Just saw limited mention of Dayton in the prepared remarks. Listen. Has there been any change in the ramp up plans of the plant looking out beyond 2021? Those are the 3.
Thank you.
Listen. If I start with the price increases by region, listen. As I said, we have implemented price increases in listen to all of our markets. Clearly, highest increases are in Russia, where they are Significant in terms of percentages, then in Central Europe and Nordics and North America. They are listen to the question.
The question is, listen to the price increases and the impact for the calendar year listen only. We cannot fully we cannot offset the calendar year impact because the raw material listen. Prices are increasing, but on a rolling basis, that is the ambition to fully offset the input cost price increases. Listen.
If I continue with Russian market, so obviously, listen. We have had a good trading in Russian market. Why that happens is that we are strongly dedicated to Russia. It's an important market listen. We also see that some of the competition may not prioritize Russian market the same way we do.
So therefore, we've gained market share. Listen, and we continue to see that momentum strong throughout the year and also into 2022. Listen. Inventory levels in Russia, from our perspective, are healthy. So therefore, there is we don't see any excess.
We see a strong sellout listen as well as strong sell in our pipeline. And as Teo was talking about the price increases, so we've implemented price increases in Russian market, which are offsetting the raw materials and aiming to offset listen also into 2022, keeping in mind that the environment is the cost increases are coming. But we are quite pleased of the Russian momentum, and we expect to enjoy good and strong volume into 2022. Listen. No change.
We continue to ramp up. We started the 3rd shift during the quarter. And after the quarter in July. We started the 4th shift and we continue to ramp up. In terms of just a general comment about the production, listen.
Essentially, we are running flat out in all our factories. We have had a short summer break in late June, early July, but listen to the they're loaded and our main important task is to find additional capacity and capability, which we can mobilize in order to supply the market. And this is the situation. So in terms of data, no change. We keep on ramping up and our ambition is to go into higher volumes in 2022.
Thank you. One quick follow-up, if I may, on price increases. Is it possible to split out the price mix the impact in Q2. Can we separate price and mix, please?
As I have the set earlier in terms of going into the specifics within the price mix. In listen. In our case, we should look at long term trends not to only look at listen to the 1 quarter or even first half due to the fact that our customer listen. Portfolio is more condensed than with our competitors. So there are swings that are not
Yes. And if you look at our mix in at the macro level, then winter tires, about half of the volume listen and then summer tyres or season is the other half. And that typically is not the case. Typically, we have more winter tyres to what we have had this year in the 1st 6 months.
Yes, I was just trying to get to the underlying positive price impact in that number.
Listen. Understand
that. Thank you. Maybe just
listen. To reiterate what I said earlier in the call that the region of the BA mix impact, listen. The negative impact is about 3%. So taking that into account, the price mix is
listen. Thank you, both.
Listen. Thank you. Our next question comes from the line of Thomas Peson of Kepler Cheuvreux. Please go ahead. Your line is open.
Listen. Thank you very much. It's Thomas Viswan, Kepler Cheuvreux. I have a few questions as well. Firstly, I'd like to comment listen to a few comments on your new range that is going to support your market share and profitability in the next 2, 3 years, particularly in the second half.
Could you discuss the level of interest from your dealers and the level of orders already in the 1st part of the year for this occupancy range, please. That's the first question. Listen. The second question is more on the bridge. You report for the 2nd consecutive quarter in a row listen because of a reversion of provisions for bad debt of €5,000,000 so that's €8,000,000 for the first half.
Listen. Could you indicate if there is more of that to come in the second half or if you've already reversed everything that could be reversed in the first half. And thirdly, I'd like to get a few comments, in listen. Is that possible? On the level of profitability, which is achieved in Dayton in 2021 compared with your plan, listen.
Are you ahead, thanks to the unusual pricing environment in the NASPA? Or are you just in line with plan in North America?
Maybe if I start with the Dayton and profitability. Listen. We are basically on our plan, so there's no change in that. Obviously, we will see then at the end of the year because the bigger part of the volume is in the second half simply based on the fact that we had more shifts and they become operative as we speak. Listen.
So therefore, of course, the volume and the profit generation is expected to be strong in the second half. Now most of the profitability improvements in the 1st 6 months coming from strong loading of Russia and also improved loading and heavy tire listen. If we talk about the Hakka Belitur ten expectations, so it's in the early the stages and shipments and so on. And I believe that the performance of the tire is very good. So we are very pleased with the performance as we tested that and so on.
Obviously, what is important to see is that what is the external tests and what they listen to the feedback they give and those will be available in the early fall. But so far, we see a good demand on that. And I think in listen, especially this time we have a very good and strong offering in winter tires throughout the Nordic, Russia and also Canadian, the northern part of the U. S. Territories.
And especially, for example, in Russia, when we have Hakkavelit 10, Hakkavelit 9, Nordmann 8, we have quite a strong lineup of wind. Listen only mode. The same applies to Nordics and North America. And as this is made very important for us, We've also taken enough capacity and enough focus to make sure that we are capable to deliver for that season. Listen.
That's all I can say at this point of time. I believe that when we have a 3rd quarter behind us and during the 3rd quarter, there will be test results and similar available that externally you can also verify that this is a high performer as a product. Listen.
Then you have the question regarding the bad debt provision. It's good listen. So think that in the light of the events that we faced last year due to COVID and therefore listen. The picture was more gloomy than it is at the moment. And therefore, we listen provided with our best estimate about debt provision last year.
Currently, naturally, the outlook is better, and therefore, we haven't booked any status provision year to date.
Yes. Strong performance throughout the listen to the value chain, including ourselves, our distribution and so on.
Sorry, thank you for the repairs. I was asking if there are going to be more releases of bad debt provisions from last year in H2 or whether you've released everything you had because it's been a different boost in H1.
So these are not releases. This is the delta between last year listen. And this year, so last year we booked for some
of this year. Yes, I understand. So is there going to be again a gap between last year H2 in listen. In this year's H2 or are we seeing all the benefits of that difference for the year?
As I commented, the outlook listen. It's more positive than a year ago, but hard to comment in advance listen to the bad debt provision, but at least how it seems today, I'm optimistic about the second half.
Listen. Thank
you. Our next question comes from the line of Matthias Holmberg of in the
Will you be able to fully compensate with price increases this year? Or should we expect it to be a negative?
Listen.
As I commented for the calendar year, listen. I'm not expecting to offset raw material price increases fully, but on a rolling basis, listen. That's our ambition level in local currencies to offset the impact of increased
listen only. We watch this raw material evolution carefully. And obviously, as we have seasonal pricing and continued listen to the discussion of the listen. We understand that the cost inflation is there and that the important thing is to take actions to mitigate that. And the actions are really twofold.
1 is to increase prices. The second one is to contain costs. And with these 2, we listen to the liquidity development, but this is an environment that is not going to stop. But most likely this year, listen to the cost as inflation will continue well into 2022 is our expectation. So therefore, working on that continuously is vitally important.
Listen. Thank you. Maybe I'm just not smart enough, but can you please explain sort of what's Preventing you from simply adjusting your prices to cover the costs at this point and why you need a longer time listen to compensate.
As we said, this is our ambition that we offset, but listen. Obviously, it takes a little bit time to work. So you don't work step by step, but the field work a little bit with heavy tires. We have escalation, de escalation, which have slight lag. And then in the other the places we work as quickly as we can.
Understood. And finally for me, you mentioned, I think, single digit €1,000,000 in higher logistics costs for the full year. Would you be able to specify How much of that you've seen in H1 or if at all is sort of an H2 issue?
Listen.
I would say that if you split that by 2, then you are closing up listen. Because it has started already in the beginning of the year.
Yes. It was clearly visible in the second quarter that logistic cost and the availability of containers and such at higher price was visible and also experienced by us. Listen.
Great. Thank you.
Thank you. Our next question comes from the line of Sascha Gommel of Jefferies. Please go ahead. Your line is open.
Thank you very much for taking my questions. I've got a few items. Firstly, on the guidance, we're now halfway through the year, but you still remain listen. Fairly vague about your 2021 performance. Any particular reason why you're not more listen.
Kind of detailed in your guidance for this year?
No particular reason. We believe that we provided the guidance early in the year and listen. I don't see any need to change that because it covers our expectation of the full year.
I see. Okay. Listen. And then my second question would be on the mix impact in the second half of the year. Is it fair to assume that the negative impact from kind of the Russia improvement and will be lower.
And then the new products will drive a positive product mix. Listen. Is that the right way to think about the second half of the year?
Especially our expectation is that listen. The negative impact will be smaller in Q4 due to the fact that Q4 was already a strong the quarter in Russia. Therefore, the growth expectation for Russia in the 4th quarter is lower than listen.
And the new products, obviously, when they go to market and are being delivered, then they listen to the order existing, and this is, of course, something that we expect to help our second half. Listen. And as mentioned, this is something that is important for us, but also all the other new products.
Listen. Perfect. Understood. And then my last question is on working capital. Your payables remain flat versus Q1, but your receivables went up.
And then you had quite a significant increase in other payables. So I was just wondering if you can help me reconcile those numbers a little bit.
Listen. So clearly, the receivables are increasing because of listen. The sales increase, then in payables, listen. I think that is the action of or the result of all the actions that we have listen in order to improve it and this is the end result listen. And then the third point is the dividend that we recorded in our payables in this quarter listen That will be paid in December due to the fact that the Board already decided listen.
And therefore, we took it away from the equity and it is in payables. So the path of
the dividend is basically in the unpaid, but it's away from equity. And so equity is a little bit artificially lower. And therefore, this booking actually has an impact on that.
Makes sense. And one follow-up on
the payables. Shouldn't the payables number also go up in light of the growing top line? Or And authorizing raw match, should that have a positive impact on your payables?
Listen. It has an impact, but as I said, it also impacts the timing listen of our purchases and the inventory levels. So 1 quarter is too short period to look at it. Listen
to more in the quarter 3 and quarter 4 based on the expectation of the raw material. Listen. Understood. Thank you.
Thank you. Our next question comes from the line of Artem Beletski of Please go ahead. Your line is open.
This is Pavel Salden from SEB. Thank you for taking my questions. I Actually, I have two questions relating to product mix. Could you maybe first comment on to what extent actually new products listen to the Q2 numbers. So looking at, for example, Russia, so growth there was clearly more than 100%.
Listen. So there is also products like Hakalita have been impacting the quarter already. Then looking at full year product mix, listen. So still a quite high share of summer tires what you have been selling also in Q2. Is it fair to assume that on full year basis the mix, so basically portion of summer tires should be in line with history of basically roughly 20% of the total.
And the last one is relating actually to heavy tyres with record sales in the quarter. Is it basically, so let's say, maximum volume what you can deliver on quarterly basis within this segment, just keeping in mind all these capacity increases, listen to what we have been doing over the past year. So are those basically completed now? Thank you.
Thank you. So about product mix, I listen to the full year is similar to our past history when we then come to the end of the year, listen, including then the full calendar year becomes comparable. Obviously, what is important is that the all season volumes Have increased and the share of all season is likely to go up and that comes to is in addition so that, that percentage is probably higher. But then overall, the volumes go up so that the share of various products listen. We'll remain roughly at the same level as in the past.
So therefore, you can expect that strong deliveries of winter tires. Listen. Yes. We've shipped a lot more summer tires and all season in the first half, and we hope to catch up based on what I said, hope to catch up listen to the mix will be normalized by the end of the year.
And then your question regarding the Heavy tires production output. That is right. At the moment, we listen to everything that we can produce. And therefore, I made the comment earlier that also our inventories are at a low level, listen because we are not able to increase the inventory levels because of the high demand.
Listen. Overall, as a comment that we are really tight on capacity. So we see capacity opportunities left and right, and listen. That is important. That has been in the end of Q2 and going into Q3.
That is the situation. So clearly, listen to the very important operative job for us to make the availability and production run well.
Listen. Yes, very clear. And maybe just on the topic of basically new products being visible in Q2 mix. Is it fair to assume that you have been shipping already Hakka 10 for example on Russian market or has there been already some impact there?
Some of that, yes. But I think that basically, it's coming along as we speak. So obviously, the Hakaten listen. Production is and studying and so on is ongoing, importantly, as we speak. Listen.
Okay, very clear. Thank you.
Thank you. Our next question comes from the line of Panu Leitkenbaki call of Danske Bank. Please go ahead. Your line is open.
Yes, thank you. I have two questions. Firstly, on the raw material cost inflation, listen. Can you kind of repeat the expected inflation in terms of percentage? And do you have a number in terms of euros for the second half, listen, like you mentioned, for the logistic costs.
And then secondly, given all the inflation and mitigation actions and what have you, do midst. Do you expect the second half EBIT margins to be up year on year?
So if I help you in the math, so I said that 12% roughly, give or take, for the full year. First half, we have seen a listen to the gain in material unit costs. So in percentages, if you just multiply that by 2, you are on a level of 24%, 25%. In listen. In euros, you can see that in our bridge, we have shown a positive number of €5,000,000 meaning that then the second half should be listen.
Negative if the full year impact would be on a level of 40, gain of 5, it means that the second half Should be on a level of 45, give or take, 1,000,000.
All right. Thanks. Listen. And then on
the EBIT margins, do you have an expectation that you could share with us?
Do you
expect the margin expansion to continue to
listen. I have a view, but unfortunately, we are not disclosing that.
Okay.
That's fair. Thank you.
Listen. We understand what needs to be done and we work diligently to achieve.
All right.
Listen. Thank you. Our next question comes from the line of Pasi Faissenin of Nordea. Please go ahead. Your line is open.
Listen.
Great, thanks. This is Basi from Nordea. Firstly, about the markets. I mean, listen. What is the current status when looking at the market recovery and the sales follow-up?
So kind of when this current inventory restocking and the pent up demand peak will be over and when you are going to see an ordinary kind of growth figures in Nokia tie years. And secondly, about your guidance, so well, would it be a kind of a reasonable assumption that significant sales growth actually means over 20% or not in on a full year basis. And maybe lastly just to confirm, so should we then expect about €1,000,000 annual volume increase in Dayton the land for coming years. Thanks.
Okay. So the market recovery, I think that if you look at the replacement tire market to the 1st 6 months of 2021 versus the 1st 6 the mid-twenty 20, but 2019. I think we are still behind that 2019 level in 20 the 1st 6 months. So therefore, in order to get the recovery to 2019 level, there's still some way to go. And then, listen.
Of course, what is also missing is then the potential or likely growth that this has not materialized in listen from 2019 to 2021. So there are a couple of elements that still will help the volumes most likely. Our expectation is LMC expectation that the listen that the markets will recover between from 2020 level listen quite a bit, but not maybe achieving exactly 2019 level in 2021. So that 2022, we believe that then listen. The recovery is full and maybe the momentum to continue growth will happen in 2022, so that actually those volumes would be higher listen or at the same level or higher than 2019.
Significant listen. Yes. I think that, that is an interpretation that obviously we see a strong momentum in our net sales. And listen. Year to date, constant currency growth in 6 months is about 40 plus percent.
And so listen. That is what we have right now. In order to anticipate what will happen in the second half, some recovery probably, but then the final quarter already. 2020 was a strong recovery quarter. So momentum of 40% will not continue the full year.
Listen to the very plans, difficult to anticipate at this point of time. And what was the third listen. On the Dayton volumes, yes, we are basically working with the Dayton volumes so that we get to 4 shifts and then we are also adding the lines to be able to build and cure 4,000,000 buyers. And listen to the program's ongoing, including the necessary expansions on the factory. And so we can expect that the volumes go up this year and next year and the year after we start installing the lines.
And so step by step, we achieved €4,000,000 Probably it's a good proxy to think that it's not a linear €1,000,000 per year, but there is a plan to go to €4,000,000 We come a little bit listen back on that at the CMD in about 1 month's time and then we talk about the expectation and the volumes that listen to the next question. This is our midterm target across all the factories in passenger car tires as well as in heavy tires.
Listen.
Our next question comes line of Eduardo Quillen of HSBC. Please go ahead. Your line is open.
Good afternoon. Thanks for taking my two questions. The stage. The first is on production versus sales. I think you're producing at elevated rates now, almost flat out, I understand, in listen, but also selling very high volumes.
Can you comment on the whether the production levels were adequate to the sales? Do you expect keep producing at very high levels for the second half of the year. A bit of commentary on that would be great inventory levels for the passenger car division. And The second question is on the raw materials. I think it will be very interesting to understand how you think about the current inflationary environment.
Listen for demand if there is any positive impact on Russia per se. But also secondly, given your growth strategy for volume, listen. Are you happy that there is a raw material inflation? Does it help you in being more opportunistic to push the volumes that you want? Thank you very much.
First question was about the production and running at elevated rates. So obviously, in listen. In the event into this year, the recovery was quite strong. And so therefore, we increased the capacity and the run rates of the factories listen very quickly. Also added shifts in data and in Nokia and some of those benefits will come in the second half.
We are running listen to the full utilization of the available capacity. We expect that to continue till the end of the year and listen. We will see how 2022 and preorders for 'twenty two will happen. But at this point of time, the added capacity, added volumes are needed and we will go with the plans to listen to how much more capacity we can add. So we are well loaded or fully loaded if you want.
And it is the same story.
Can you repeat the second question?
Yes. The second question is on the raw material. Listen. I think that the raw material price is growing. So I wanted to ask if you see any benefit in Russian demand, if there is any good oil price support to Russian demand, but also on the strategy because you want to grow volume very much.
Is it helpful for you that raw material prices are growing because competitors are increasing the pricing. So I just wanted to ask if internally you are happier that the raw material prices are going up. Would it be better for you that the raw material prices were going down?
So if I give you the role of the thumb in the industry that has been present here. Listen. So when the raw material prices have been going up, it has been beneficial for the whole industry. And if this listen. Rule of the time still applies.
This is a good situation for us and for the industry.
And I believe that the price increases are being executed in the industry, not only by us, but also by competition. And you've in listen only. We've certainly seen that commentary from the competition as well as from us that the price increases in the inflationary cost environment
listen to the Okay. Thank you. And this is not a problem for the volume growth listen, maybe even almost I don't know if it's better for the volume growth, but there are material pricing, is it a problem for
listen. Not at this point of time because the matter is mostly availability that how do we make how can we make enough tires to meet the demand.
Listen.
Thank you. We currently have one further question left on the Q and A in listen. And that question comes from the line of Pierre Kie Minert of Stifel.
Listen. Just one last for me. Regarding your spending, they have been quite low in the first half in the cash flow. We had a CapEx the 30 9,000,000. Is it a new normal or shall we expect a catch up in the soon half and
in next year? Thank you.
Listen. Basically, the capital outlay at this point of time is in the early part of the year, clearly below what we spent in 2020. Obviously, 2020 included some of the listen to major plans that were in the execution at that time. The new normal is below 2020 full year level, so €150,000,000 listen. Most of our capital expenditure at this point of time goes into new modes and productivity improvements and such, listen and then also increasing the capacity in Dayton.
And we believe that in round numbers, we will be below that 150,000,000 listen in years to come. There may be some a year that they might be higher, but listen. On the macro level, €150,000,000 or below will be enough for us to maintain the growth momentum and to listen to the CMD. We'll come back to that also at the CMD. But basically, on the background of that is that major investments have taken place in the past couple of years, 3 years, and that it's time to get the benefit out of those and therefore the capital requirements in in listen to the major plans.
It will be limited. However, there will be, of course, listen to the productivity equipment here and there and especially the new product related moat investments that will take place every year.
Listen. Okay. Thank you, Jukka. Just a follow-up on that one. Should we expect CapEx to be above the triple digit threshold this year, above €100,000,000 right?
Yes. We think that we when we went into the year, we anticipated somewhere in the €120,000,000 the €120,000,000 €130,000,000 level.
Many thanks. Helpful.
Thank you. And as there are no further questions in the queue at this time, I'll hand back to our speakers for the closing comments.
Listen. So if there are no additional comments, it's time to finish the call. And as Jokka mentioned earlier, the next listen. The event will be our Capital Markets Day on the 9th September, where we will focus on Nokia and tariffs' midterm growth ambitions. Listen.
The CMB will be an online event, and you will find more information about the event on the release, which we published earlier today listen as well as on our website. And this ends today's conference call. Thank you for participating, and have a good day.