And welcome to the NikkenRacket Q4 2020 Interim Report. Throughout the call, all participants will be in listen mode only. And afterwards, there will be a question and answer session. Today, I'm pleased to present Pavi Antola. Please go ahead with your meeting.
Thank you. Good afternoon from Helsinki, and welcome to Nokia and Tyres Q4 and full year 2020 results conference call. My name is Taivi Antola. I'm the Head of Investor Relations in Nokian Tyres. And together with me in the call, I have Mioka Moistioth, the President and CEO and Teemu Kangas Karki, the CFO of Nokian Tyres.
In this call, we will go through Q4 and full year results followed by a Q and A. But Before going to the results more in detail, Jokka, 2020, it was an interesting year. How would you summarize it?
Thank you, Paivi, and good afternoon on my behalf as well and welcome. Yes, indeed, I think that interesting is Maybe one way to characterize eventful or unprecedented, as we say in our presentation. Nevertheless, obviously, Towards the end of the year, things started to become clearer and also actions and Policies, etcetera, by the governments, they're not so much on the Quick reaction mode, but more consistent what to do with the COVID and how to get out of the COVID situation with vaccination and lockdowns, Selected lockdowns and so on. And I have to say that, of course, during this demanding year, when we first reacted to COVID, I believe that we said that we will focus on cost. We will make sure that we maximize the cash flow and also that we will not increase our inventories and we will make sure that the company will be in a good shape by the end of the year.
I think that in many ways that was achieved, our team did well. We paid attention to safety, operated All factories quite well. Also in terms of LTIF, accident frequency, we reduced that Quite significantly achieved a good cash position, made sure that the costs were under control and so on. This in many ways shows the resilience of our team and the company. And I'm very, very pleased and proud that we achieved all those targets that we set out in the early part when the virus hit us and hit economies throughout the world.
We ended the year with a strong balance. It's quite important in terms of net debt, in terms of inventories, etcetera. So we did achieve all those targets we set out to do. And also, meanwhile, we Advanced many actions to build the company for 'twenty one and beyond. 1 is date on ramp up.
So we hired the 2nd shift and started to ramp up the production. Also now we announced in the early part of this year, we announced the 3rd and 4th shifts, so that Ramp up in Dayton continues consistently. Also in Nokia, we agreed direction and took actions accordingly and Also launched a number of new products during the course of 2020, but also in the beginning of 'twenty one. And I'll come later to our flagship product, Nokli and Hakka Pelita 10, which was announced in early January and we gave a peak information already in December about the product. So very pleased.
End it well. Eventful year, interesting year. I think our team did well. So I'm quite proud. I'm very proud of it.
So many good achievements despite the circumstances. Thank you, Jukka. And let's now move on to the actual official presentation and start with Q4 results. Jokka, please.
Thank you, Paivik. So now on the presentation on Page 2, Q4, and we had impact from COVID and delayed volumes, seasonal net sales were €413,000,000 versus €475,000,000 in 2019. In comparable currencies, there is a decline of 7.1%. Most of that decline is actually in passenger car tires in terms of top line heavy tyres and Vianor performed reasonably well. Operating profit at €80,000,000 versus €107,000,000 2019 final quarter.
Again, the impact is coming from passenger tire sales. We'll see when Teemu will talk about the profitability of the businesses. You will see that nevertheless, the operating Profit margin in passenger car tires despite lower sales was at the last year level. Tailwind came from lower raw material unit costs. I move now to Page 3, reflecting the full year.
Then reiterate that our team did a very good performance in terms of resilience, safety, delivery of the agreed targets, while continuing to to achieve and build programs for the future, especially completing and improving the investments that are in the pipeline when we started the year. Net sales were €1,300,000,000 versus €1,58,000,000 in 20 19, 13% decline in comparable currencies. Most of that decline was in comparable currencies in the early part of the year. We had a relatively strong Q3 and then a slightly weaker Q4. These volumes were impacted, of course, as Mentioned by COVID, also measures taken in Russia to reduce the sell in in order to reduce the distributed on our old inventories and also mild winter of 20 nineteen-twenty 20.
Segment's operating profit full year level at €190,000,000 versus €337,000,000 in 2019. Again, the same culprit, COVID, also measures in Russia and then because of low demand, the low factory Utilization, most of that factory low factory utilization took place in the Q2. They even came from raw materials and cost cutting measures, same mode. The switch then reaction, cost cutting was a reaction to COVID as well as also we had a similar reaction to maximize the cash flow. The Board proposes a dividend of €1.20 per share and to be paid in 2 installments during the course of 2021.
I move to Page 4, and I want to call out a couple of items, which I haven't really discussed yet, one is the cash flow. So in quarter, Q4, the cash flow from operating activities was €429,000,000 versus €398,000,000 in 2019. And on a full year level, we had a €422,000,000 versus 2 €20,000,000 in full year. You see one important topic is the capital expenditure. So we Spent €32,000,000 in the final quarter versus €65,000,000 a year ago.
And in the full year, our Capital expenditures were slightly below €150,000,000 versus €290,000,000 in 2019. Ballasted is in a strong situation, so equity ratio is 65% And net debt is minus €17,000,000 which means that we are slightly cash positive at the end of the year compared to having a net debt of €41,000,000 a year ago. So despite low profitability, despite headwinds, etcetera, We ended up the year with debt free balance sheet, which shows that the strength of the cash generation. And I hand over to Teemu to talk about the passenger car tires. So Teemu, please go ahead.
Thank you, Jukka. Starting with the passenger car tires and looking our net sales development. In the 4th quarter, our Net sales decline on comparable currencies 9.8%. On a full year basis, the decline was on a level of 18%. Looking our segment operating for the 4th quarter on a level of €66,000,000 And our profitability was almost on a same level than in comparison periods.
One reason for that, despite the lower volume, was the fact that we were running our 2 factories In Russia and in Finland on a higher load compared to Q4 2019. Then in terms of average sales prices, which declined on a comparable currencies, while the product mix improved, There, we should remember that our customer base is most likely less fragmented than our peers. So one reason to drive this development was the customer and country mix. If we then move to To the next slide where we can see the quarterly changes for net sales. As I said, The Q4 price mix was driven by customer and country mix, this negative development.
And then what clearly stands out here is the currency development, which has been going to the wrong direction in terms of sales and profit. And the main driver is naturally The weaker ruble, which started to deteriorate in the 3rd quarter and then continued in the Q4. Then moving to the next slide, where we can see the full year bridge. And if I focus on the segment operating profit, There we can see the volume impact and the tailwind from materials and lower Factory load in the factories on full year basis. And maybe one of the key Topics from this slide is the currency impact.
So you can see that in the passenger car tires, we had a Headwind from mainly from weaker ruble about 26,000,000 for the full year. And if you look on a quarterly basis, you can see that in our earlier slides and in the appendix that we had a headwind of about SEK10 1,000,000 in the 3rd quarter and additional €10,000,000 in the 4th quarter. If we look how the Ruble has developed in the past years. You can see that In 2019, the ruble was on a level of €72,000,000 against euro. And then in 2020 on a level of 82,000,000 and in January this year, It is on a level of 90 or we are on a level of 90.
And if we would take a look to the future. So I would say that the good proxy, if the ruble stays on this level, That we could get €10,000,000 headwind in the Q1 and in the 2nd quarter depending on the volume and the currency. So if you would take a Base year from 2019 and then taking the second half From last year and then anticipating the first half of this year, you could anticipate a significant decline or impact from the currencies. Then moving to the Heavy Tyres. In the 4th quarter, the net sales On a comparable basis, grew 0.9%.
On a full year basis, The net sales declined 1.8%. Looking to the segment operating for the 4th quarter was on a level of €5,000,000 decline from Q4 'nineteen, which was on a level of €10,000,000 And factors impacting this decline in segment operating profit was the planned production shutdown Now, Nokian factory in Finland and then maintenance work related to the Investment and shutdown that we took already into Q4 in order to be in a good position this year. And moving then to Vianor Business Unit. So the Top line was declining on a comparable currency, 2.4 percent segment operating profit On a level of €10,000,000 And just as a reminder, 2019 Q4, we had €2,000,000 profit from sale of real estate, so the decline was smaller on a comparable basis. Some highlights In sustainability that we are proud of, we are the 1st in the tire industry to have the science based targets to reduce CO2 emissions, those were approved last year.
Safety is our priority And our lost time injuries frequency has been declining. And last year, we were on a level of 3.7. We are continuously fighting against the climate change and the rolling resistance of our tyres have been going down from 2013 level about 8.5%. And we continue to innovate in order to make progress in this front. And we are also happy to be part of the sustainability indexes.
And This is the testimony of our good work that we have been doing and continue to do in the future as well. Going back to you, Jukka.
Thank you, Teemu. Then moving on Page 11 and 21, we focus on growth and cash flow. Moving on to Page 12 and the immediate priorities. So we and have been launching a number of new products, and we expect them to generate excitement and volumes in addition Our existing product offerings and we will then keep on improving our go to market activities to ensure that indeed we are close to our customers and consumers in introducing the new products. Important to look at the cash flow.
We will protect that by prioritizing investments, we expect that the capital expenditure in 2021 will be below what we reported in 2020, so below €150,000,000 Also, when we look at the market, we expect that the It's likely to happen. So from 2019 to 2020, roughly the market went down in terms of volume. DC is about 12%. And we expect that when we look at the market studies and various sources that anywhere between 5% to 9% recovery expected in 2021 depending on the market. So that would suggest that 2 thirds of the decline that happened between 'nineteen to 'twenty will be possibly recovered in 2021 and then potentially full recovery in 2022.
This is of course subject to many parts and ifs, but this is the best market outlook that is Available out there right now. Some of the products that we are launching this year, so we have a Product for all season in North America, Nokian Encompass, which is exclusively available to discount tire, so that is something we do want distributor. Then we have launched already Nokia Tyres 1, which is introduced in the early part of this year. We have launched the Nokia Nordman 8 and Nokia Nordman 8 SUV And also in the autumn of 2020, we launched Nokia and Hakka Green 3, which is then targeting to '21 summer season. Most important launch is Nokia Felipe 10, which is essentially the New next generation winter tire, so it's been introduced a week ago to internal and external audience, Important to look at the various dimensions of that.
So we have a more studs superior wintercrip. We also have a comfort and reduced noise level, good and better on road stability and Silent Ride technology, which then allows also So silence and noise canceling features of the tire, especially for the electric vehicles. So we have this Hakka deleted into cars, SUVs and electric vehicles and over 140 products. And it is expected to go into production this spring for the season of 2021 winter. Also new products in heavy tires, Nokian Tyres Intuiti, which is a smart tractor tires, gives On time information to driver about temperature and air pressure also gives the same information to us via Cloud, we have the Noklion Ground King number of new products there, also Noklion E Truck, which is a pilot range for Delivery trucks and then we have Care Semi Slick, which is the backhauls in railroad operations.
So number of new products coming to the market, and this is very important for us because we have a capability and we are building the Manufacturing in the U. S. And also seek to fully utilize Russia and then build Nokia towards heavy tires step by step, but also keeping the premium tire, Passenger Car tire manufacturing in Nokia. When we then look at the outlook for 2021, here on Page 16, I have some key assumptions or we have some key Sumsums, one is that the demand for replacement car tires is expected to increase, driven by a stronger demand and increase in new car sales. Demand for heavy tyres, corporate was estimated to increase.
We also recognize that uncertainties Due to COVID pandemic remain, especially the introduction of vaccination and reduction of Local lockdowns and similar that how will that evolve, but we can consider for COVID that help is on the way, Then the help will help and is something that we need to look market by market and quarter by quarter. There, we'll talk about the Russian ruble and Clearly, the weakness of Russian ruble in January 2021 will have a headwind to our Net sales and net profitability, as mentioned by Teemu. We also expect that because of the recovery, the raw material unit costs are likely to increase. And also as we all have read in the newspapers that indeed the logistics costs are quite fragile at this point of time, early part of the year that may stabilize throughout the year. But in this At this time, the cost of containers and cost of transportation likely to be on the high side.
However, the guidance for 2021 is that our net sales and comparable currencies and segments operating profit are expected to grow significantly. And we expect that global car and tire demand is expected to pick up, but the COVID pandemic continues to cause uncertainties for the development. This is formally our guidance. And then I end our prepared presentation here. And I hand back to Paivi to lead the Q and A session, please.
Thank you. Thank you, Teemu. So operator, now we would be ready for questions from the audience, please.
Thank
Our first question comes from Gabriel Adler from Citi. Please go ahead.
Hi, thank you very much. It's Gabriel from Citi. Could I start please with the outlook? Could you help us better understand how to interpret Your expectations of significant growth in both revenue and operating profit. Can you offer any more specific color maybe on the For 2021 because it's very difficult to interpret significant growth as a metric when we're coming off such a low base in 2020.
So that's my first question.
So
we expect, as I said, significant increase and for us significant means double digit and we will specify the guide along the year and we are not giving and more detailed guidance at this point of time. But as stated already a couple of times, Want to highlight the effect of Russian ruble exchange rate to our top line and profit.
Okay, understood. Two more questions, please. 1 on raw materials and then one on all season tires. So on raw materials, Clearly, big benefit this year likely or seems to reverse next year. Can you talk a little bit about how much of this you think you can offset With price mix, given that your price mix has remained negative for several quarters now and also whether you put any price increases through perhaps already in January February Like we've seen in other tire manufacturers.
And then my last question on all season ties is just, I guess, a slightly Broader question about how structural perhaps you think this shift is from winter to the whole season that we're seeing at the moment. How much of the volume decline can you attribute to the winter season being weak and how much of it is pointing towards more structural shift from your customers towards all season tires underway from winter. Thank you.
If I start with the raw materials guidance. So in the fall, we expected or we had an outlook that the raw materials would Increased by 2% to 3%. Now our view is that it's going to be on a level of 4% to 5%, but That is clearly dependent on the overall demand and current view for us is around 5% increase in raw materials For this year.
Okay. And talking about the all season. So All season is a category, especially in Europe, that grew in demand also in 2020 despite the fact that there's a 12% Overall decline in overall tire demand. We expect that The category actually gains both from winter and summer tires, and I believe that it becomes a category in between. So that On the other hand, some people from summer will upgrade to all season and then some people from the winter will Also go down to all season, and we expect that, that will carve out the position between those 2.
Which one will lose more? Of course, probably Continental Central European Winter is something that may shift more towards all season. What we do see is that in the Nordics, So where you have a clear winter seasons and so on, you still rely on winter tire Studied or non studied, maybe a friction tire, and then you have a summer tire. So that evolution is mostly in the Continental Europe at this point of time.
Okay. Thank you very much. Could I just follow-up please with on raw materials, your point around assuming a 5% increase, Do you expect to offset any of that with pricemix next year?
So there is a Clear pressure to increase prices.
Typically, the industry has been quite disciplined in doing that. And especially now when there's a Demand recovery, we believe that there is good momentum to ensure that raw material Increases are also in the selling prices.
Okay. Thank you.
Our next question comes from Ashut Kakar from JPMorgan. Please go ahead.
Thank you. Akshat from JPMorgan. 3 from my side, please. The first one, again, on pricing. You are still seeing some pricing pressure on a low comp from last year.
I'm keen to hear your thoughts on what are you seeing specifically in Russia and Europe going into the 1st few months. That's the first one. The second one is The impact of the weak ruble on profitability, can you just help us understand again how should we think about the drop throughs On an EBIT level, don't you have a natural offset between the translation impact from lower revenues, but an Set from the transaction impact in terms of the cost structure, a majority of which is in Russia. That's the second one. And the third one is an update on the ramp up of Dayton.
How many units do you plan to produce in 2021? And what are the U. S. Factory ramp up costs that you expect for the year versus the SEK 27,000,000 that we had in 2020? Thank you.
I'll start with the pricing in Russia and Europe in early part of this year. So when we Went into the year, we expected that raw material prices go up. And so therefore, our pricing is also done accordingly. Remember, also, maybe important to remember, in 2020, we did in Russia especially Commercial actions to ensure that the inventories distribution inventories and so on would go down and therefore, we supported the sell out with various commercial We don't see similar need for commercial actions in 2021. So therefore, we expect that the pricing We'll be more attractive to us.
I'll take also the Dayton. So we are ramping up Dayton. So we We hired the 2nd shift in latter part of 2020, and we are starting now with 2 shifts. And we've announced that we will also hire the 3rd and 4th shift by the summer and therefore ramp up the factory to continuous operations. And expectation is that it will produce more than 1,000,000 tyres in 20 'twenty one and the run rate towards the end of the year will be above 1,000,000 tyres per annum.
And then We'll take it from there when we go to 'twenty two that what additional actions needs can be taken needs to be taken to further ramp up the factory.
And in terms of the Russian ruble impact, as you probably Remember, since 2018 Capital Markets Day, I have been communicating the fact that we benefit from Strong ruble and weak ruble on the other hand is a headwind for us. And now last year, when there is a Significant change in the Russian ruble in the 3rd Q4 that Became visible to all of us. And as said, it's a good proxy Looking from last year that we had a €10,000,000 headwind from mainly from Russian ruble in the Q3 and in the Q4. And I said, In Q1 and Q2, if the ruble stays on this level, You can make a proxy of €10,000,000 for the 1st two quarters of this year. So this shows you the sensitivity piece in my opinion.
Thank you. Just following up the I think the question on pricing in Europe was still left and the second one on the expected ramp up costs for Dayton in 2021. Thank you.
Yes. Okay. So Dayton, we expect that we go to EBITDA positive clearly in 2020 1, with the anticipated shifts and ramp up and then European pricing, the same story as in Russia that We don't see any pressure to reduce prices. We have a contrary situation that new products improvements in pricing.
Understood. Thank you.
Our next question comes from Matthias Holberg from DNB. Please go ahead.
Thank you. A question on your Russia guidance. Can you help us understand a bit how you Or what metrics you look at to produce this forecast? I'm just reflecting that AEB earlier this year published The forecast saying they saw roughly 2% growth in Russia car sales in 2021 and your forecast is obviously a bit higher than this. I'm just curious to hear what you're based this on.
You were asking the Russian nuclear sales Forecast or did I hear you correctly? Yes. So that is our own Expectation in Russia and as you remember from the earlier years, our own view has differed from the official Estimates.
And one more question also on On Dayton, I read in the report that you see that the ramp up was a bit slower in 2020 due to COVID-nineteen, but I'm not Certainly, if that refers to the later part of the year or earlier part, can you just clarify if
this is an
issue you've had in the latter part of the year or an old issue?
It's basically delay in the early part of the year, and we actually hired the 2nd shift after the summer when the Clarity and situation with COVID became more predictable, and then we decided that it's quite time to continue to ramp up, The early part of the year was a time when we had a delay. Now we don't have any delays at this moment or going into 2021.
Thank you.
Obviously, it takes time to hire the shifts. Great. Thank you.
Our next question comes from Thomas Benson from Kepler Cheuvreux. Please go ahead.
Thank you very much. I have a few questions as well, please. First, I'd like to come back to the new products you're launching. So the Hakapeliitta 10 or the Nonman 8. Could you remind us how much it accounts for the overall volumes or revenues of the Passenger car business, these combined studded wind saucer products that are going to be replaced over the next, What, 12, 18 months or just over the next 6 months?
And also, when you introduce that new generation, Talk about the price points at which you launched it versus the Hakapeliitta 9 or the Nordman 7, please?
Okay. So the first question is, what's the share of the winter production now lineup. And all in all, the winter tires are about 7%. And obviously, Nordmann is a bigger category And Hakka Belinda, but nevertheless, in combination, they are about 70%.
Okay. And do you mind talking about the price point at which Going to be introduced versus the previous generation, please?
Yes. Hakkapler 10 is going to be the new premium point and then Hakka Belit 9 and Nordmann's are lined up below that price point.
Okay. So It's a fair comment, you can't say that these products are going to be more expensive than the previous generation or not?
Hakka Volita 10 is going to be more expensive than At the predecessor, yes.
Okay.
But of course, it's a market by market, but now we talk about the Nordic, Russia and also in North America.
Okay. Thank you for that. I'd like to come back to the guidance. I understand you don't necessarily want to specify it, but We have a consensus figure for 2021 of about €1,500,000,000 and a consensus figure of somewhere around 265 €1,000,000 of adjusted EBIT. What I call adjusted EBIT is after the element that are reclassified Somehow, is your guidance consistent with that?
Or do you believe analysts are too optimistic for 2021?
We see no reason to comment it up or down. We are confident saying that Having talked about all headwinds and tailwinds, we expect that we have a significant top line and profitability growth in 2021. And we but we promise that we will specify the guidance as the quarters continue so that clearly, we understand that COVID is one element, when the lockdowns will be eased and when the vaccination will help and so on. So there are a number of uncertain elements. But nevertheless, we are confident when we go into the year at this moment That we have a significant improvement in both the segment operating profit and top line.
That's very clear. And I agree on the answer, Sati. I make another try on the pricing question. You are the price setter for the Nordics and for Russia. Have you planned to raise prices in March, April for the next summer season?
Or is it something you Do not comment before doing it.
Basically, The basic idea behind new products is that they command a premium and we start from that angle. And then We obviously look at the pricing of the competitive products and our novelty product and we go from there. Of course, the ambition is to ensure that the newest Products are commanding of premium pricing. At the end of course, step by step every market we make the launches and we make the price list and We talk with distributors and customers.
Okay. And I have a last one, please. Is it fair to believe that you were very strongly pushing inventories down in your distribution channels in the Nordics and in Russia because you were going to introduce these new products, so to make room and not to disturb the pricing Initially of these new products or it's not related at all?
I think that we set out in early part of the year to ensure that we do not build any extra inventory and so on. And we agreed that we will then reduce the inventories in the distribution channel. But obviously, these things go hand in hand that when we go into the next winter season, it's easier to go to winter season when the Pipeline is relatively well managed and there is no excess production in the pipeline. And that At the end, it helped us to make sure that the distribution stocks and our own inventories are low at the end of the year. It also makes sense for our distributors, but it also helps and surely secures a better launch of new products.
So they all go hand in hand, but which one is chicken and which one is egg. I think that this time the chicken was really the COVID That started the whole program, but obviously, we also recognize the benefits of helping our new product launches.
Okay. Thank you very much.
Our next question comes from Arshan Nalenski from SEB. Please go ahead.
Yes. Hi, this
is Artem from SEB.
Thank you for taking my questions actually. Have 3 to be asked. So maybe what comes to demand and volume outlook, appreciate your comments stating that Maybe twothree of market declines in last year will be restored this year. How do you see, so to say, your volumes in light of these comments, given the fact that you are indeed having quite a few new products introductions impacted by winter and also I made some inventory adjustments in Russia. The second one is relating to late winter.
So I guess it had some negative impact in Q4. What is the situation now at the start of 2021, given that we had quite snowy Winter conditions and the third one is relating to non IFRS exclusions, which have been indeed Quite substantial last year at €70,000,000 Could you provide us with some guideline what is likely to be the level for this year?
I'll take this market expectation and so on. So clearly, we rely on market estimates and so on that what will be the likely recovery compared to the decline from 2019 to 2020 and Expect somewhere around 2 thirds will be recovered this year and then full recovery expected assuming that things go well in 2022. Some benefits may come from the fact that the for volume that, of course, the pipeline and our inventories are These are relatively low, so I thought there may be that kind of an help, which may then allow higher volumes to be higher than the market growth and then mark some market share gains with the new products. And that's basically our volume expectation. And based on that, we Say that the top line is likely to grow significantly.
And as you pointed out, the delay Winter season in May markets had an impact in the Q4. Now in January, The winter has been good in other markets, so it should have a positive impact for the full year when Inventories are cleared out. Then your third question relating to the non IFRS exclusion related to date. And so the proxy is about €20,000,000 this year As it was last year as well.
Yes. And other non IFRS exclusions that we had in 2020, we don't expect In 2021.
All right. Very good. That's very helpful. Thank you.
Thank you. Our next question comes from Michael Jackson from Bank of America. Please go ahead.
Hi, good afternoon. Thank you for taking questions, I've only got one that hasn't been answered before this already. Just with regards to volume drop through into EBIT, It seems as if the drop through into EBIT on the passenger tire side was something like around 51% to the downside for this year. Would it be fair to expect a similar rate of drop through in 2021 as volumes recover? Or are there other factors that we need to take into consideration when looking at the slide item.
Thanks.
I would Reiterate my earlier comments during the call and you can do them the math. So the comments about €10,000,000 in Q3 and Q4 and the proxy for Q1 and Q2. So that's the level that I'm commenting at this point of
time. Okay. Thank you. Maybe just one more question, if I may. It's a bit of an evolution from one of the prior questions.
Just in terms of the late winter, what sort of stock levels were the dealers holding Towards the end of Q4, are you expecting significant catch up in the dealer selling as well? Or were they already holding stocks ahead of the winter. Thank you.
We think that the inventory and the pipeline situation is quite good across So we would not expect that there is any inventory issues anywhere as far as we can tell.
Thank you very much.
Thank you. Our next question comes from Edward from 1 Investments. Please go ahead.
Afternoon, gentlemen. Just one for myself, if you don't mind. It's just looking at the new Product launches you've got versus a historic level of new product launches, just to quantify that. And then just the pricing architecture that you'll be hoping to achieve in 'twenty one versus 'nineteen, Looking again at the new product mix and your comments around premiumization, would you expect to actually be able to back to a similar price index of 'nineteen in For 'twenty
one. New product launches, I think I'll take that one. We've looked at the pipeline, and we have calculated the number of new products and new product launches and modifications. At At this point of time, our assessment is that we are all time high. So in terms of as a company, how many new products we launch.
And this is, of course, a development Of many years of programs. So this is not something that happened just last year, but there is a consistent Evolution and indeed, many of the products are targeted towards Continental Europe and North American markets, These are new markets for us and an area where we want to expand and grow in years to come. And so therefore, obviously, These new products and new modifications are quite important. At the same time, it's normal that we revitalize our Into tire offering continuously, of course, technologies developed, studying technologies improve and also Lots of the electric vehicles and similar are being introduced, and it's important that we are up to date in that product offer. And about the margin demo.
The pricing architecture, as you pointed out. Clearly, one of the main tasks for this year is to have focus on the pricing and drive price increases in all areas where we see opportunities. As commented in our release, product mix impact was positive Last year and what I've been also commenting that in our business, if you look our customer portfolio, The market and customer mix have most likely a bigger impact than in our peers. So For you to draw direct conclusion about the pricing per se is difficult. Then just to commenting the net ASP and the Russian impact, Because the Russian ruble has weakened significantly From the level of 2019 and that will have an impact on our reported numbers.
So we shouldn't forget that point.
We had a significant decline in the Russian volume from 2019 to 2020, and Again, when we go to 2021. So obviously, we expect, as we said, that significant recovery and that includes Russia as well.
Okay. And just a second question actually. I apologize if you answered this earlier, my line broke up. But just on the Russian volume recovery, I think it's like 10%, 15%. What are the underlying assumptions behind that?
In our sell in, obviously, we reduced artificially our sell in in 2020 in order to clear out inventories and the distribution channel. Part of that is just going back to normal volumes in Russia.
Okay. All right. That's great. Thank you very much indeed.
Our next question comes from Panu from Danske Bank. Please go ahead.
Yes, thank you. I have a couple of questions. First one is actually on this Russian Market selling guidance, so you expect 10% to 15% market growth, but is the assumption that your own revenues will grow more than that?
We expect our own revenues to develop at market or higher, yes.
Okay. Thank you. Then secondly, on the North American revenues, the declining local currencies was the biggest In that region of your region. So why was that was there something specific in North America in Q4?
It is in line with our comment from the Q3 where we also said that there are some shifts between the quarters and that applies also to to Q4.
Okay. Thank you. My final question is on the Dayton factory. I think you have earlier commented That the factories would be at EBIT breakeven as a run rate at the end of this year. Can you still give that comment?
I think the rework basically when we go to 3rd and 4th shift is that we go first to EBITDA and then we target positive EBITDA and if we achieve that run rate by the end of the year, it's possible. We will see how it happens, but of course, introducing the 3rd and 4th shift and if they are fully up and running and we have a volume which is competitive towards the end of So higher than 1,000,000 tyres per year annualized, then it is totally possible to get to that number. We will keep everybody updated.
Can I just ask a follow-up? I think you earlier mentioned that you would need like €2,000,000 or even more volume to reach breakeven and now you talk about €1,000,000 So is the calculation changed?
No, it's a breakeven means that as we said that we do not we need to regret at the EPS level, the factory. That was maybe the story at the time, and we talked about it. But then step by step, when we operate that industrially. So 1st positive EBITDA, then positive EBIT and then finally a neutral achievement at DBS level, Step by step, so you could move down to P and L.
All right. Thank you.
Thank you.
Our next question comes from Edoardo Espana from HSBC. Please go ahead.
Thank you. I have 2 very quick questions. 1 on the CapEx. I just wanted to ask for the next couple of years, 2021 2022, the development, is the D and A a good proxy for the level of investment? At the moment, I think you are running a 15% above D and A.
Is that something that we should look for 'twenty one and for the all year? Or should we think that will increase? Can you guide a little bit about the future? And the second question is on the tax rate, if you can comment on whether the current events are affecting the tax rate going forward and if
you can share the profit level. Thank you. So the capital outlays, we've given guidance that they are expected to be below in 2021 below 2020 level and at about D and A level or thereabouts. Going into 'twenty two, We come to a point that if the Dayton ramp up continues well, then we are in a situation that we have the opportunity to Consider the next stage expansion, which may then trigger capital outlays in 'twenty one 'twenty two or 'twenty three. Beyond that, the major investments are behind us.
And so therefore, we can enjoy a couple of years with the competitive capital expenditure level. And the thing that may happen is that if we accelerate then the date on to next level. But that is dependent on our run rate this year and late this year and during the course of 'twenty two as well as on the revenue plan and tax rate demo.
Yes. Just reiterating what I've been commenting earlier. So on a level of 19%, 20%, that's a good proxy.
Thank you.
Thank you. Our next question comes from Pasi Vaissen from Nordea. Please go ahead.
Thanks. This is Pasi from Nordea. Coming back to this Dayton issue, I mean, To be honest, I mean, the ramp up in the North America unit looks more or less quite slow. So is there any other problems in the underlying demand other than COVID-nineteen? Or is there some problems related to contracts With distributors in the area and when you are going to reach this €4,000,000 target on our capacity into new unit?
And maybe lastly, could you please say something about average sales price in the Dayton unit in the entire area? Thanks.
Thank you. Yes, we think that, yes, it was slow in 2020. And Indeed, in the early part of the year, as discussed, it was slow and we are clearly speeding it up right now. So Think about our hiring second shift in the latter part of 2020 and then already now going for the 3rd and 4th shift as well as then seeing that possibly we can discuss about the expansion to 4,000,000 with their decisions and investments in 2022 and then they would be up and running sometime in 'twenty three during the course of the year and then achieving That capability by the end of 'twenty three or early 'twenty four. Yes, it depends if you I think that that is slow.
We should speed it up and we see what we can do. But clearly, right now, I think that this is a very measured Way of ramping it up because new factory requires, of course, skilled people to run and we believe that Quality is quite important and we have no issues in terms of suppliers or anything in at the factory. It's more to do it in a measured way. Clearly, what does not help is that we cannot get trainers from, for example, from Russia or Nokia to help people in Dayton. So Clearly, there are some things that we need to do via our teams and so on.
But I think that under the circumstances, we are progressing quite well. ASP North America.
I would say If we compare the net ASP development against the original plan, they are broadly in line with the plan, so no major changes there. And then you were asking about the demand picture. So that's not a reason for the ramp up? No.
Okay, great. Thanks.
Thank you.
And now operator, we would Still have time for one additional question and then I'm afraid we are running out of time.
So our next question comes from Edward Dunbe from One Investments. Please go ahead.
Ladies and gentlemen, thank you. Just going to your appendix on Slide 23 on your cost development, raw mats. What is the phasing of raw mat pricing inputs versus your re pricing yourselves? Just what is I apologize, my knowledge of your company is very limited. Just to give me an idea of how that phases through.
So we are setting our prices more or less according to the season. So now we have, For example, in Russia, set the prices for winter season and it varies by the market. And then in terms of raw material prices, there we have A lack of 3 to 6 months
more or less. In Heavy Tyres, we have with certain large OE customers, we have escalation, de escalation mechanisms, so that Our prices reacted a lot, raw material up or down, which is particularly typical when you have a long term contracts.
Right. Okay. Very helpful. Thank you.
Thank you. I would now hand it back to the speakers for any other concluding remarks.
Thank you. Now at this point, I would like to thank the audience and also Jukka and Teemu here with me in the call. Thank you for the questions. This ends today's conference call. Thank you for participating, and have a good day.