Good afternoon from Helsinki, and welcome to Nokian Tyres Q2 2025 webcast and conference call. My name is Annukka Angeria, and I'm working at Nokian Tyres Investor Relations. Together with me in this call, I have our CEO, Paolo Pompei, and Interim CFO, Jari Huuhtanen. As usual, we will start the webcast by first reviewing the financial results and some other topics from the quarter, and then we will have a Q&A session. The floor is yours, Paolo.
All right, thank you very much, Annukka, and good afternoon, everyone. Thank you for joining our call this afternoon. Obviously, it is summertime. It's a beautiful week here in Finland, so we appreciate even more for those who are located in Finland your participation to this call. Let's start today with the headline, which is strong operating profit improvement in the second quarter, and of course, action ongoing to further strengthen the financial performance. Moving to slide number two, this is the agenda that is related to the financial performance in quarter two. We will talk, Jari will support us in describing the trend of the business unit, and we will end with the assumptions and the guidance for the year-end. Let's start with the quarter two and the financial performance. We move to page number four.
We had a strong quarter, as we say, that we had a strong sales. We had a good sales growth of approximately 6.9% in quarter two. Our operating profit improved significantly by almost 31%. This is also the result of the ongoing action that we are putting in place to improve our financial performance at the moment. The ramp-up of the operations in Romania is proceeding according to the plan. Some good news also from the sustainability side point of view, we are obviously ranked among the world's most sustainable companies by Time magazine. We will tell you something more later on. We will also talk about tariffs that are creating some uncertainties in the short term. We have in place mitigating actions in order to reduce the potential impact. Moving to slide number five, let's talk specifically about the performance.
As I said, the sales were going up by 6.9%, up to EUR 343.7 million. Our segment EBITDA was up by 22%, up EUR 57.2 million. The segment operating profit was EUR 26.3 million. That was 7.7% in relation to sales and up by almost 31% compared to the previous year. The increase was mainly driven by the Passenger Car Tyres segment that was well supported by price increases and lower manufacturing and supply chain costs in quarter two. Moving to slide number six, you will see that we were able to outperform any market also in terms of market share development. We were growing in the Nordics. We were growing nicely also in Central Europe considering all the actions that we have in place. We were also growing two-digit in the North American market.
As you know, this is a very important growth area for us, and we are very pleased about the performance in the second quarter in a market that is pretty stable at this stage. Moving to slide number seven, I would like to highlight a few items on this slide. First of all, I will focus on the growth year-to-date, which is 9.3%. I would also like to focus your attention on the segment EBITDA that is up by 18% year-to-date and segment operating profit that is up by 56% year-to-date. In the bottom left, you will see that our CapEx, as expected, is going down. We are at the moment at EUR 89.7 million invested in our business, significantly lower than the previous year when we had obviously we have investment, in particular in Oradea, in developing our new manufacturing facility in Romania.
In quarter two, the cash flow also had a strong improvement as a result of better control of the working capital, and as a result of lower CapEx. Moving to slide number eight, this is our guidance in terms of CapEx for this year. It remains as it was. We will be between EUR 180 million and EUR 200 million. Everything is going according to plan, also from the CapEx point of view. What I would like to highlight once again is that we are ending a strong investment cycle that was necessary to rebuild the footprint of Nokian Tyres in Europe, as well as to build and to extend the one in North America. At the moment, we are estimating to be perfectly in line with our guidelines in terms of CapEx.
Of course, the CapEx level after 2025 is expected to go back to a normal level, more or less in line with the depreciation. Moving to slide number nine, as I mentioned at the beginning, we continue to focus on the improvement of the financial performance. It was very clear during the closing of quarter one that this is going to be very important to focus on profitable growth. This is where our guidance is coming from. We have three important focus areas that are extremely important for our future development and for our profitability development in the next future. One is the commercial area. As I told you already in quarter one, we are accelerating our effort to gain premium market share in the North American market. The key opportunity is in enlarging the sales network in the United States.
In Central Europe, we have similar challenges, even though we are a little bit more mature in this market. We are expanding at the moment our existing network, and we are also entering new markets, and we are also implementing consistent price realization in line with the premium branding positioning. This is a long journey that we will carry on from now on because obviously, this is the position that we want to have in both the Central European and the North American market. In the Nordic, we are doing pretty well at this stage. We are managing very well the pressure that is coming from the raw material increase. Of course, we keep protecting our premium position and our strong product portfolio, utilizing Vianor as a strong asset of the company to accomplish our objective. From the operational point of view, we are also working at 360 degrees.
Obviously, the ramp-up of our factories in Oradea and in Dayton is supporting economy at scale, consequently, better absorption of the fixed cost. We are moving in the direction of driving higher efficiency across the organization because we need to improve our efficiency and our productivity in our own factories. Of course, you will see later on more and more the importance of our development in Romania in terms of ramp-up because obviously, this will give us a competitive base for our future development in Central Europe. Last but not least, we are working very hard in improving our efficiency when we talk about supply chain, and our local-for-local business model will give us the opportunity to become more efficient in managing our working capital and our inventory.
We said also at the beginning of the year that we want to also improve from the procurement point of view, enlarging our supplier portfolio, and obviously, become more efficient in the way we spend our money. This is what we are doing at the moment, and we see already an important improvement in our P&L in quarter two also in this dimension. All the three dimensions are delivering good results at this stage, and all the three dimensions have contributed to the good improvement that we had in quarter two. Moving to slide number 10, obviously, this job, this continuous improvement plan is requiring a clear structure. Of course, our new operating model is helping to have a stronger focus on the P&L, and in some way, the KPI ownership that we have built around the organization has been driving to better accountability of our own business.
Of course, we have in place at the moment a lot of different workstreams that are working in a systematic way to follow up and are giving us the possibility to follow up and to have a clear reporting of our practices, but also about our result. Of course, today we have an organization with an enlarged management team that is giving us the possibility to be more agile and to react quickly to any business opportunities or challenges. Moving to slide number 11, we have also some good news on the sustainability side. Nokian was recognized to be one of the top 500 most sustainable companies in the world by Time Magazine. Actually, we were number 98 in the list made by Time Magazine.
This is obviously rewarding our effort in becoming a more sustainable company, reducing the CO2 emission, increasing the level of renewable and recyclable material, and of course, being a socially responsible player in the industry. We will carry on this effort, and this effort has been recognized not only by Time, but as you can see, by many other organizations. Of course, I would like to highlight again, our EcoVadis Platinum status is one of the also best indicators to tell how good is our effort at this stage of our history. Moving to slide number 12, I will ask kindly Jari to take the control of the presentation.
Okay. Thank you, Paolo, and good afternoon from my side as well. Starting from Passenger Car Tyres in the second quarter, we reported higher sales and improved margins. Our net sales was EUR 206 million comparing to prior year EUR 189 million. Net sales increased in comparable currencies by 11.3%. Average sales price with comparable currencies improved, as well as the share of higher than 18 in tyres increased significantly. Segment operating profit was EUR 15.9 million or 7.7% of net sales, comparing to last year, EUR 7.1 million or 3.7% of net sales. Profitability improved in Passenger Car Tyres mainly due to higher sales and price increases which were implemented in the first quarter. Also, our manufacturing and supply chain costs were lower comparing to prior year. In the first half, we have been able to improve our inventory rotation in Passenger Car Tyres.
In the next page, we can see Passenger Car Tyres' spreadsheet in the second quarter, net sales and segment operating profit. In net sales, we can see that both sales volume and price mix component developed well. Sales volume impact was EUR 12 million and price mix EUR 9 million. Currency, we had some headwind coming mainly from USD and Canadian dollar. In segment operating profit side, sales volume impact was EUR 5 million, price mix impact + EUR 9 million. Still, in material cost, we had some negative impact - EUR 4 million. However, I want to highlight that it's good to see that price mix component is now clearly higher than the material cost. Basically, we have been able to offset the higher cost in the second quarter. Supply chain component + EUR 3 million coming mainly from manufacturing, sales rates, and warehousing. SGA cost somewhat - EUR 3 million comparing to prior year.
In what comes to currencies, the impact is very close to neutral, - EUR 1 million. Going to page Passenger Car Tyres' net sales, here we can see quarterly changes by our sales components, sales volume, price mix, and currency. I want to highlight price mix in the second quarter, which was + 4.9%, coming from both higher sales prices and also better sales mix comparing to last year. To continue to Heavy Tyres, in the second quarter, we had solid sales development. However, weak market affected to Heavy Tyres margins. Net sales was EUR 61 million comparing to last year, EUR 60 million. Change in comparable currencies was + 1.3%. In Heavy Tyres, net sales increased in all regions, driven by aftermarket sales. Segment operating profit was EUR 6 million or 9.9% of net sales, comparing to last year, EUR 7.6 million or 12.7% of net sales.
Profitability decreased in Heavy Tyres, mainly due to weaker product mix in sales. In Heavy Tyres, finished goods inventories are on a lower level comparing to prior year. Moving to Vianor, Vianor second quarter, we reported stable sales development there. Net sales are EUR 98 million, comparing to last year, EUR 96 million. Net sales with comparable currencies increased by 1.2%. Segment operating profit was EUR 7.1 million or 7.2% of net sales versus last year, EUR 7.5 million versus 7.8% of net sales. Segment operating profit was slightly lower year- on- year, mainly due to cost inflation in Vianor business. In Vianor, finished goods inventories remained stable in the first half. Handing over back to you, Paolo.
Thank you, Jari, and thank you very much for explaining the performance in the single business units. Now we go through the guidance, and from the market point of view, we don't see major changes in the market. Of course, there is a lot of uncertainty related to the market development in North America due to the tariff situation. We will watch this very carefully, but in general, we can see the market, the aftermarket, where we are a strong player, will see at the moment to remain pretty stable both in Europe as well as in North America. The Heavy Tyre business is down, will be down. We are expecting that we remain down in the second half of the year at this stage, also looking at the market development in both the replacement and the DOE segment.
When we talk about North America, of course, as we mentioned already during the closing of quarter one, we will keep a pretty flexible strategy. What I mean is that we are a local for local, we have a local for local business model, and fortunately, we are not exposed heavily at all to the tariff, in particular when we talk about the U.S. We are basically, 85% of our business is made in U.S. for U.S., so we don't see this issue. Of course, we will need to be ready to look at any kind of opportunities in the month to come based on the negotiation between Europe as well as U.S. and Canada because obviously, we are also exporting Canada. I remind you that all the winter tire business that we sell in Canada, which is obviously an important part of our business, is made in Finland.
Consequently, we should not be exposed on that side. We are at the moment looking at different options and scenarios. There will be some uncertainty that is more related to the consumer behavior than uncertainty related from the manufacturing side. We will need to carefully watch the development from the consumer side, and this is really my main message today. We are well equipped from the pure manufacturing point of view to face any kind of ending scenario. Moving to slide number 21, we keep our guidance for the year where net sales are expected to grow and segment operating profit as a percentage of net sales will improve. We are expecting, as we say, the demand to remain in line with the previous year level.
The global economy as well as the geopolitical trade and tariff are creating some uncertainty that we are watching day by day in order to understand better the business development. Of course, we have an important opportunity having our capacity moving up in Romania in particular, and this is obviously supporting better availability of finished goods and at the same time, better sales. I would like to take this opportunity also to drive your attention to the following quarters. Last year, we had a very high level of exclusions in our P&L due to exceptional items that were coming on the agenda last year. This year, we are forecasting by far lower exclusions.
When you build the model, please look at the improvement of the EBIT of the profit level more than segment operating profit because this is very important to understand the development of the company for the future months. We will have, obviously, we guided less exclusions for the next couple of quarters. We have also today announced three important changes in our management team. We welcome Chris Ostrander, who has been a board member, who is today still a board member of Nokian Tyres team. He will step down from the position as a board member and also as a leader of the investment committee, and he will join the management team starting from the 1st of September, leading the North American team as a Senior Vice President of Passenger Car Tyres in North America.
He will replace Lauri Halme, who has accepted the challenge to lead our Vianor network starting from the same day as a Senior Vice President of Vianor. Lauri has extensive experience in the company and also in managing service operations, so I'm sure he will do a great job also managing Vianor as a Senior Vice President for the years to come. At the same time, we are promoting Tron Gulbrandsen as a Senior Vice President of Passenger Car Tyres for the Nordics. Trond has been in the company for many years. He knows the company very well. He will join the management team, and he will add his expertise and his knowledge, commercial knowledge, to the management team, supporting our future growth and expansion in the commercial area. We are now at the time of the Q&A.
Yes, thank you, Paolo.
If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Akshat Kacker from JPM . Please go ahead.
Good afternoon, Paolo. Akshat from JPMorgan. I have three questions, please. The first one is actually on pricing. Can you talk about all the pricing actions that you have taken specifically in Europe and North America? Is this specifically related to playing catch-up on raw materials and other inflation costs, or are you also being opportunistic in the North American market given your positioning there? The second question is on overall volume growth. You have told us multiple times that a lot of the volume growth that you've seen is supplying for Nokian because you are in a unique position. I've seen that number relatively slow down because at 21% in Q1, 6% in Q2, and the comps get more difficult in the second half. Could you just give us a broad expectation of what you're expecting for Nokian volume growth in the second half, please?
The third one is just a general question on the marketplace. I would be very interested in understanding what are you seeing in both Europe and North America since the month of May, since U.S. tariffs have come into force. Could you just talk about general inventory levels in these markets, probably product flows coming in from Asia, and how the competitive landscape looks like in general? Thank you so much.
Thank you very much. Pretty important question. I would like to start answering to the first one that is related about prices. As I explained also in quarter one, in quarter one, as you may remember, we lost margin also because we were not increasing the prices covering the raw material cost increase that we had in quarter one. There is always a sort of time gap between the raw material increase and the pricing, but obviously, this was for us an important action to put in place in order to compensate the lost margin in quarter one that were coming from the higher raw material and stable prices. At the same time, I also delivered the important message that it is crucial for us to position Nokian Tyres as a premium player in the Central European and North American market.
This is a journey that obviously is starting this year and will carry on in the years to come. We will always compensate the raw material, but we will always strive, obviously, to raise our position in terms of pricing to be well positioned in the premium market. About the volume growth, this is also very important. I mean, there is no joy in life to grow without increasing the profit, obviously. We say that we were focusing on profitable growth more than only growth. At this stage of our history, it's extremely important as well that whatever additional tire we sell, it will be profitable, it will generate profit and value for our shareholders. This is what we are doing at the moment. We accepted to be a little bit slower in generating growth, but we want to have a profitable growth for the years to come.
Last is about the scenario of the tariff. The situation in Europe, the market was pretty stable in the second half. Actually, it was down for the European player, and there were a lot of tariffs coming from Asia too. The same is happening in North America. It was happening at the beginning of the second quarter when the tariffs were just announced. There was a large number of tires arriving in the United States from Asia in order to anticipate or to reduce the impact of the duties. I see two effects. I think the market will stabilize. In Europe, it will be pretty stable for the months to come, while in North America, the only question mark is about the general economy and the consumer behavior related to the GDP development of the country.
Clearly, less purchasing power from the consumer will deliver decisions in terms of what to buy. The market is not self-sufficient in terms of tires. What I mean is that in the North American market, half of the market is supplied from abroad. This also can be a problem, but an advantage for us being a local player. We will observe the dynamics, and we will see where we land. Just to remind you that we are pretty small in North America. Obviously, we watch the market day by day, but we have our own agenda, and we need to grow based on our own capabilities, accepting that there will be up and down based on the GDP growth in the local market.
Thank you so much. Just a question left on your own Nokian Tyres volume growth expectations for the second half, please.
The guidance is that we will grow, meaning that we are guiding a growth below 10%.
Thank you so much, Paolo.
As a reminder, if you wish to ask a question, please dial the pound key five on your telephone keypad. There are no more questions at this time. I hand the conference back to the speakers for any closing comments.
Thank you. It seems that everything was very clear this time. If there are no further questions, it is time to end this webcast. Thank you all for participating in this call, and thank you, Paolo and Jari.
Thank you all.
Thank you. Have a nice rest of the day and summer.
Thank you very much also from our side, and have a wonderful summertime.
Thank you.