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Edited Transcript of NRE1V.HE earnings conference call or presentation 5-Feb-19 1:00pm GMT

Q4 2018 Nokian Tyres plc Earnings Call

NOKIA Feb 6, 2019 (Thomson StreetEvents) -- Edited Transcript of Nokian Tyres plc earnings conference call or presentation Tuesday, February 5, 2019 at 1:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Hille Korhonen

Nokian Renkaat Oyj - President & CEO

* Päivi Antola

Nokian Renkaat Oyj - VP of IR & Corporate Communications

* Teemu Kangas-Kärki

Nokian Renkaat Oyj - CFO

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Conference Call Participants

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* Akshay Katkar

* Artem Beletski

SEB, Research Division - Analyst

* Ashik Kurian

Jefferies LLC, Research Division - Equity Analyst

* Edoardo Spina

Exane BNP Paribas, Research Division - Analyst of Automotive & Financial Analyst

* Henning Cosman

HSBC, Research Division - Analyst

* Kai Alexander Mueller

BofA Merrill Lynch, Research Division - Associate and Analyst

* Mattias Holmberg

DNB Markets, Research Division - Analyst

* Panu Laitinmäki

Danske Bank Markets Equity Research - Senior Analyst

* Pasi Väisänen

Nordea Markets, Research Division - Senior Analyst of Utilities and Energy

* Thomas Besson

Kepler Cheuvreux, Research Division - Head of Automobile Sector

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Presentation

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Operator [1]

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Hello, and welcome to the Nokian Tyres Q4 and Full Year Results 2018. (Operator Instructions) Speakers, please begin your meeting.

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Päivi Antola, Nokian Renkaat Oyj - VP of IR & Corporate Communications [2]

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Good afternoon from Helsinki, and welcome to Nokian Tyres 2018 and Q4 Results Conference Call. My name is Päivi Antola and I am the Head of Investor Relations in Nokian Tyres. Together with me in the call I have Hille Korhonen, the President and CEO of Nokian Tyres; and Teemu Kangas-Kärki, the CFO.

We will start the call with a brief presentation by Hille and Teemu and then continue with a Q&A. So Hille, please go ahead.

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Hille Korhonen, Nokian Renkaat Oyj - President & CEO [3]

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Thank you Päivi, and good afternoon and thank you for joining us today. I'm very pleased with the work and results our team has been achieving in 2018. The underlying operating performance of Nokian Tyres was very good. We had strong growth both in North America and Russia, although when you look at our reporting numbers you see significant headwind from currencies.

2018 started with very strong first half, and business sentiment changed especially in Europe during second half of the year. It almost looked like 2 different years and during the coming 10 minutes I will explain the drivers behind more in detail. On the group level, the growth was mainly driven by passenger car tires. It's also worth mentioning the 10% currency-neutral net sales growth in Heavy Tyres which were supported by increase in production output.

As you know, we continued to be capacity-limited in Heavy Tyres and our priority is to serve our OE customers and focus on growing in our core segments, forestry and agri products. Our operating profit improved during full year despite of significant negative currency impact. During the year we have been investing in building the business platforms focusing on (inaudible) IT systems and processes which will be taken into use in Dayton factory. We have also been further developing our branded distribution network.

I'm very satisfied with the profitability improvement in Vianor which is actually realizing now 1 year ahead of the original plan. So driven by our good financial performance, our Board of Directors is proposing to increase our dividend to EUR 1.58 per share.

I will now spend couple of minutes to explain the key drivers behind our strong growth in North America and Russia, as well as the market situation in Europe during the second half '18. In Nordics, as we already announced before the fourth quarter, the new car sales is one of the important drivers for sales of winter tires. So when people buy new cars, they also buy a set of new winter tires and as the new car sales declined in whole Europe during second half of the year due to poor implementation of for example the [WLTB], it had an impact on our sales. In Norway, key driver for the new car sales was lack of electric and hybrid vehicles to fulfill the market demand and we are expecting that to improve slightly in 2019.

Replacement tire sell-in were showing overall growth in Nordics in 2018 with (inaudible) segments growing more. In Central Europe, the competitive situation was getting tighter in the replacement tire market due to several reasons, for example, declining OE business and situation in Turkey. The replacement tire market growth was more related to growth in budget segment with increasing imports of tires outside Europe, while the premium segment was clearly declining.

I would say that when we look at the year 2019, the visibility to the market is still very low at this point of time. In Russia, the new car sales was increasing by 13% as we estimated earlier, which is about 1.8 million new cars being sold.

The summer tire inventories continued to be on a higher level than normal and we are expecting that situation to normalize towards end of 2019 which means that it will be normal after the next summer season. Overall, our estimates for Russian market regarding 2019 are for new car sales 8% to 12% driven by the deferred demand from previous years, but having impact from lower consumer purchasing power.

And the replacement tire sell-in is expected to grow between 5% to 7% and that's driven by the low number of new cars sold 3 to 4 years ago coming to the replacement cycle and also lower new car sales. In North America, the replacement market was growing in 2018 and we continued to grow together with our existing customers.

In the second half of 2018, several tire manufacturers announced price increases, as we also did. When we look at the fourth quarter in 2018, the sales in Central Europe was slowing down as explained due to the lack of winter conditions and aggressive pricing in the market. At that point of time, we decided to allocate more capacity to the Russian market where we were actually selling more summer tires than expected due to competitive commercial terms and good availability. Overall when we look at the full year 2018 we were clearly over-performing the Russian market.

So we continue to implement our strategic ambition supported by investments in Dayton factory in U.S.; in testing center in Spain; and capacity increase in Heavy Tyres. This also means that in 2019 we will carry extra cost for starting the Dayton factory ramp-up. We will be recruiting people, implementing IT systems and starting the production process to be ready for the commercial production beginning of 2020.

At the same time, the products that we are selling in North America will be produced and shipped from Russia. We will also have extra cost for Heavy Tyres capacity increase as we are running the production in parallel through having the project ongoing.

In Spain, we will start part of the testing activities during this year. All of this is fully inline with what we have communicated in Capital Markets Day in November. In order to support our strategy and ambition, we have also reorganized our business areas beginning of the year in order to have even better focus in Central European market and to be able to utilize better synergies between Nokian Tyres, Nordics and Vianor chain.

I will now hand over to Teemu to go through the figures in more detail. Please go ahead Teemu.

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Teemu Kangas-Kärki, Nokian Renkaat Oyj - CFO [4]

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This slide is a reminder of our financial targets that we announced last year in our Capital Markets Day. In moving to the year 2018, and if I start with Q4 performance on comparable currencies, our top line growth was negative, minus 1%, reaching the operating profit of EUR 117 million. Looking the full year performance on a comparable currencies, we were able to increase our top line 5.7%, being at the level of EUR 1.595 billion for the full year.

The operating profit reached a level of EUR 372 million. Looking our return on capital employed, you can see that we were able to perform strongly in this respect. The cash flow from operating activities was strong, especially at the end of fourth quarter we were able to collect really well trade receivables contributing positively to reaching the level of EUR 537 million. There we need to keep in mind that during the year we got this EUR 148 million from the tax authorities.

The CapEx level for the full year was EUR 226 million, and our 3 strategic projects Dayton; Heavy Tyres; and Spain, they were in line with the original plan and compared to the earlier guidance we were short of some investments in Russia and in Nokian factory.

Then looking to the Passenger Car Tyres at the full year level, the top line was EUR 1.150 billion with a comparable currency growth of 6.1% and the operating profit was almost at the previous year's level of EUR 357 million. We had a good volume growth and positive price mix effect on top line.

Last year we announced that we will increase the capacity in Finland and now we will plan to adjust the utilization rate as the Central European car tire market is not as robust as we estimated a year ago.

Then moving to the bridge where you can see in detail the performance of our net sales and EBIT and looking at the net sales development, you can see that the currency impact on top line was close to EUR 60 million and on a operating profit level, the negative impact was around EUR 31 million. Volume and price and mix contributed well to the bottom line, and then production and other cost were increased. And one explanation for that increase was the added production line in [Vsevolozhsk] at the end of '17, having the full impact last year in 2018.

With regards Heavy Tyres, as commented by Hille, strong growth continued there especially in agricultural tires and forestry tires. And the operating profit was on a level of EUR 29 million, which was lower than in 2017, and it was decreased due to the currency impact, inventory valuation and the increased cost related to the ongoing ramp up of new production capacity. As planned, the production capacity in Finland will be increased in the coming 2 years and the project is proceeding in line with the original plan, having the full impact in year 2021.

Vianor was able to grow the top line. With the comparable currencies, the growth was close to 2% and reaching a positive operating profit on a full year basis. As we have communicated earlier, Vianor had the target of reaching the 3% EBITDA by the end of 2019, but we were able to reach that target already in 2018, so good, excellent performance in Vianor. The operating profit improvement was driven by the better sales management and increased operational efficiency.

Then going to the outlook for 2019. We are expecting our net sales with comparable currencies to grow and our operating profit to be approximately at the level of 2018. And as communicated in our Capital Markets Day, we are having investments programs ongoing to support the growth and therefore in 2019 we will have additional operating cost visible in our result 2019.

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Päivi Antola, Nokian Renkaat Oyj - VP of IR & Corporate Communications [5]

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Thank you Teemu. Thank you Hille. And now, operator, we would be ready for questions from the audience please.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question is from the line of Mattias Holmberg from DNB Markets.

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Mattias Holmberg, DNB Markets, Research Division - Analyst [2]

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So you write in the report and you talk a bit here as well in the presentation that you intend to adjust the planned capacity increase in Finland as the Central European core tire market is not as robust as you earlier estimated. So my question is, does this new insight have any implications on your ambition to increase sale in Central Europe by 50%?

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Hille Korhonen, Nokian Renkaat Oyj - President & CEO [3]

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No, this is only a timing issue. So the ambition level increasing the sales by 50%, we see still valid and we continue to pursue that target.

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Mattias Holmberg, DNB Markets, Research Division - Analyst [4]

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And just a follow up on the timing here because you write in the report as you look forward to increase sales by as said 50% in Central Europe and double North America in the next 5 years. And I simply just wanted to clarify what 5 year period that you're referring to given that you -- or I thought that 2017 was the base year given that these targets were stated already in the 2017 annual report. But as I read the report today or in your released, it seems like it would be 5 years from today. So I would just like to clarify what 5 year period you're referring to?

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Hille Korhonen, Nokian Renkaat Oyj - President & CEO [5]

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Well, you are right that 2017 was the baseline and base year for that ambition and of course we have to take into account what is happening in the marketplace. But then of course when looking forward it's even more challenging target for us.

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Mattias Holmberg, DNB Markets, Research Division - Analyst [6]

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So should I think of it as a 5 year target with 2017 as the base or as 2018 as the base?

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Hille Korhonen, Nokian Renkaat Oyj - President & CEO [7]

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2017 as the base, yes.

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Operator [8]

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Next question is from the line of the Thomas Besson from Kepler Cheuvreux.

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Thomas Besson, Kepler Cheuvreux, Research Division - Head of Automobile Sector [9]

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I have a few questions for you and if that's okay, I'll ask them one by one. First, I would like to come back to the bridge you give us for the passenger tire business on please. It's different from what we had in the past. Can you explain why FX is having such high impact on your earnings in 2018? And can you say whether this had a very positive impact in 2017 if we were to use the exact same bridge?

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Teemu Kangas-Kärki, Nokian Renkaat Oyj - CFO [10]

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So in 2018 all our major currencies were against us and the major currency headwind we got from Russian ruble. But then also the Swedish krona and Norwegian krone and U.S. dollar had a headwind in our -- effect in our operating profit.

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Thomas Besson, Kepler Cheuvreux, Research Division - Head of Automobile Sector [11]

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Could you give the equivalent effect in 2017 please?

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Teemu Kangas-Kärki, Nokian Renkaat Oyj - CFO [12]

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2017 now I don't have the figure in my head, but if I remember correctly we had a positive impact from the currencies in 2017.

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Thomas Besson, Kepler Cheuvreux, Research Division - Head of Automobile Sector [13]

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If I move on to the next question. Could you clarify whether there is still remaining positive impact to expect in 2019 from the tax disputes you have with the -- your tax authorities? And in any case indicate what tax rate we should assume for 2019 please?

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Teemu Kangas-Kärki, Nokian Renkaat Oyj - CFO [14]

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So the tax dispute is still ongoing and we are expecting to get an answer from the high administer court in the coming months. And if that is positive to us, then the case is closed, but unfortunately we cannot give you any exact timing when we get that information. And then going forward for the next 3 years, I would say that you should assume a tax rate around 19%-20%.

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Thomas Besson, Kepler Cheuvreux, Research Division - Head of Automobile Sector [15]

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Can you remind us how much there is left for the case where you expect the high court to give you a final judgment?

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Teemu Kangas-Kärki, Nokian Renkaat Oyj - CFO [16]

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So the amount that we got last year from the tax authorities was EUR 148 million. So that is the amount that we are now waiting the decision from the high administrative court -- higher administrative court to know that is this tax case over or not. And that relates to the year 2007 and 2011.

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Thomas Besson, Kepler Cheuvreux, Research Division - Head of Automobile Sector [17]

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Last question for me please. You've indicated that 2019 and 2020 will also be heavy years in terms of investments between the Dayton plant; the Spanish -- this track; and the capacity in Heavy Tyre. Is it fair to assume that the peak year in terms of CapEx is going to be 2019? And that we should be EUR 40 million or EUR 50 million higher than in 2018? Or is 2020 going to be the peak year for CapEx?

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Teemu Kangas-Kärki, Nokian Renkaat Oyj - CFO [18]

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As communicated in the Capital Markets Day, the peak year in terms of CapEx is 2019.

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Thomas Besson, Kepler Cheuvreux, Research Division - Head of Automobile Sector [19]

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And at what level please?

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Teemu Kangas-Kärki, Nokian Renkaat Oyj - CFO [20]

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That is approximately on a level of EUR 300 million.

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Operator [21]

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Next question is from the line of Akshay Katkar from JPMorgan.

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Akshay Katkar, [22]

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Two questions please. First on your selling expectations for Nordics in 2019. As the OE market should still be weak in the first half, what are you expecting overall for 2019 for Nordics, that's the first one? And the second one is on Russia. If I heard you correctly you still see high channel inventories and you're expecting sell-in to be up around 5% to 7% for the full year. So when should we expect a rebound in volumes as such in 2019?

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Hille Korhonen, Nokian Renkaat Oyj - President & CEO [23]

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So regarding Nordics, as we have estimated the overall market is not growing and as we are in the A and B segment, that part of the market is remaining quite flat. However, there are some positive signs of increasing the new car sales slightly, but the timing of that is still not clear. And what comes to Russia, the channel inventories of summer tires, they are still on a higher level. And after the next summer season, they should be coming down to normal level. So that's why we are stating that the replacement tire market growth will be between 5% to 7% less in the summer tires and more in the winter tires.

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Akshay Katkar, [24]

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And overall growth higher in the second half versus first half of 2019 Russian volumes for you?

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Hille Korhonen, Nokian Renkaat Oyj - President & CEO [25]

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The visibility to the full year is more clear than between the different quarters or between the first half and second half. So I would not confirm any specific volumes at this point of time.

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Operator [26]

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Next question is from the line of Artem Beletski from SEB.

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Artem Beletski, SEB, Research Division - Analyst [27]

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This is Artem Beletski from SEB, so I have also a couple of questions, so let's do those one by one. And the first is relating to your 2019 guidance, just a clarification relating to sales growth and EBIT being flat, is it basically in local currencies the development what we are expecting or in euros?

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Teemu Kangas-Kärki, Nokian Renkaat Oyj - CFO [28]

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So we are giving the guidance on comparable currencies total, that means in local currencies.

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Artem Beletski, SEB, Research Division - Analyst [29]

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Very clear. And then the second question is relating to Finnish production. As you mentioned you won't be ramping it that much as thought 1 year ago. And then you have been talking about increase from 3 million to 4 million units. Could you provide some number what we should be expecting? Will it still go up from last year levels or would it be flat basically?

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Hille Korhonen, Nokian Renkaat Oyj - President & CEO [30]

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So it should go up from last year levels, but to what extent, that's very much depending on the need. So we will be reacting to the forecast -- forecasted volume and adjusting the capacity utilization accordingly.

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Artem Beletski, SEB, Research Division - Analyst [31]

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And then one question relating to inventory situation in winter tires. I know that season is not really over yet, but could you provide some color on what is the situation you're seeing in different key geographies?

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Hille Korhonen, Nokian Renkaat Oyj - President & CEO [32]

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Well, our understanding at the moment is that in different markets the winter tire inventory situation is on a normal level. When we look at the Russian market, the premium segment is a bit on a higher level compared to mid or budget segment.

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Artem Beletski, SEB, Research Division - Analyst [33]

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Very clear. And the last one from my side is relating to volume development in Q4. So as I do some calculations, it seems that volumes also declined in Q4 by roughly 5% year-over-year. Could you maybe explain whether it's basically demand-driven or capacity limitation of what you had in Q4 of this year, which was driving basically low volumes?

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Hille Korhonen, Nokian Renkaat Oyj - President & CEO [34]

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Well, we have been selling according to the demand. So we do not have any capacity limitations in Passenger Car Tyres.

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Artem Beletski, SEB, Research Division - Analyst [35]

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Very clear.

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Operator [36]

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Next question is from the line of Panu Laitinmäki from Danske Bank.

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Panu Laitinmäki, Danske Bank Markets Equity Research - Senior Analyst [37]

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I just wanted to ask about Central Europe. So basically in Q4, when your sales were down, how much of this was due to the late winter season and how much kind of other market weakness? And then on to this '19, if the outlook is slightly worse than you expected earlier, kind of how much has changed as you are still saying that the market is expected to increase slightly? What was your earlier expectation? And could you talk a bit more about that, kind of what are you seeing in the market?

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Hille Korhonen, Nokian Renkaat Oyj - President & CEO [38]

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So in the fourth quarter as you mentioned, the winter season did not start practically at all. So all the snow was coming only after Christmas time. And that of course has an impact on the sales because when the season is on, people are not coming back to the tire shops to change their tires. And when we look at the market, the overall replacement market was growing, but it was growing mainly in the budget segment as there were quite a few Chinese tires coming to the market. So that part of the market was growing, but not the premium segment. So -- and additionally there was a lot of competition due to the fact that as the OE demand has been going down, the OE producers, they have been forcing the volumes to the replacement market in order to build their capacity. So that's very natural market reaction. When we have been looking at the forecast for 2019, we were also assuming stronger fourth quarter. So that is explaining part of the kind of gap we see in the overall situation in 2019.

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Panu Laitinmäki, Danske Bank Markets Equity Research - Senior Analyst [39]

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That's clear.

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Operator [40]

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Next question is from the line of Henning Cosman, HSBC.

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Henning Cosman, HSBC, Research Division - Analyst [41]

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My first question was also regarding Europe. I was hoping you could maybe elaborate some of the points you made in your initial statements about visibility remaining quite poor and also what you said just now about competition and growth and favor of the budget segment and not so much premium. I was under the impression that Conti, but also Michelin and Pirelli had recently made indications that they were quite happy with the winter tire business in the fourth quarter. Is it maybe pricing also then on part of your premium competitors, is it the offset you referred to as OE producers where competition has increased? If you could please elaborate on that a little bit? And whether the focus maybe also on repercussions for 2019 inventory levels and pricing levels and so on? That is my first question please.

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Hille Korhonen, Nokian Renkaat Oyj - President & CEO [42]

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Yes. So you are right about the pricing. So when there is tough competitive situation, it means that the prices are going down. And that was not what we did. We did not take our prices down during the fourth quarter. And -- but comes to 2019, we are now clearly seeing the big players coming up with price decreases. And it means that the market will be very competitive in 2019 as well.

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Henning Cosman, HSBC, Research Division - Analyst [43]

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So that's what you mean with visibility, right, that we don't quite --

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Hille Korhonen, Nokian Renkaat Oyj - President & CEO [44]

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Yes.

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Henning Cosman, HSBC, Research Division - Analyst [45]

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-- know yet the dynamics between price and volume --

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Hille Korhonen, Nokian Renkaat Oyj - President & CEO [46]

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Exactly.

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Henning Cosman, HSBC, Research Division - Analyst [47]

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-- and which players is going to play which strategy?

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Hille Korhonen, Nokian Renkaat Oyj - President & CEO [48]

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Exactly. Exactly.

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Henning Cosman, HSBC, Research Division - Analyst [49]

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And then secondly I wanted to ask about the capacity expansion in Finland. So I think you are proceeding with that as planned, adding that 1 million additional unit. I wasn't sure if I understood you earlier when you were asked about capacity utilization. Are you prepared to give a number for capacity utilization in '18 and how that's developing? And with respect to the expansion in Finland, can that be at passenger car division profitability? Or is the fact that you have these higher production cost in Finland, does that naturally mean that it can't be at existing profitability and it would be slightly less profitable if you ramp that up?

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Hille Korhonen, Nokian Renkaat Oyj - President & CEO [50]

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So we have been adding a number of people in the Finnish factory in order to be prepared for the growth and to be able to support our ambition in different markets. Now when we look at 2019 and have lower visibility to what is happening for example in Central Europe, we are ready to exhaust the capacity utilization accordingly as the Finland production cost is much higher than what it is in Russia. So that's the natural place for us to have the flexibility.

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Henning Cosman, HSBC, Research Division - Analyst [51]

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Is it -- I mean is it fair to say that your capacity constraint to a certain extent in Passenger Car Tyres, say to a volume growth of 5% or so under the current setup?

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Hille Korhonen, Nokian Renkaat Oyj - President & CEO [52]

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We are not capacity-limited at the moment. Only in Heavy Tyres, not in Passenger Car Tyres.

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Operator [53]

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Next question is from the line of Pasi Väisänen from Nordea.

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Pasi Väisänen, Nordea Markets, Research Division - Senior Analyst of Utilities and Energy [54]

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This is Pasi from Nordea. Regarding these ramp-up costs related to Dayton plant, so which probably are also included to the full year guidance, so could you actually kind of elaborate amount of these costs you are actually including? Is it EUR 5 million or EUR 15 million? And secondly regarding this utilization ratio adjustment you are going to make in Finnish factory, so are you also able to adjust costs in line with the lower utilization ratios or is it going to hurt the margins?

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Teemu Kangas-Kärki, Nokian Renkaat Oyj - CFO [55]

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With regards to the Dayton ramp-up costs, I can refer to our communication in the Capital Markets Day where we said that the impact in year 2019 will be between 1 percent points to 2 percent points from the passenger car net sales.

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Operator [56]

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Next question is from the line of Ashik Kurian from Jefferies.

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Ashik Kurian, Jefferies LLC, Research Division - Equity Analyst [57]

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I've got three. The first one is just a confirmation on your guidance. At the Capital Markets Day, you mentioned your net long the ruble and shot the dollar. If I look at spot rates today for what it implies for 2019, you should have transaction and headwinds on both the ruble and the U.S. dollar. So when you guide for flat EBIT, is that factoring into these transaction headwinds? Or is the flat EBIT not taking into account any headwinds that you have from currency?

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Teemu Kangas-Kärki, Nokian Renkaat Oyj - CFO [58]

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Our guidance in terms of EBIT takes into account the current exchange rates.

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Ashik Kurian, Jefferies LLC, Research Division - Equity Analyst [59]

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You mean as of today and maybe not in line with 2018?

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Teemu Kangas-Kärki, Nokian Renkaat Oyj - CFO [60]

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As of January 2019.

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Ashik Kurian, Jefferies LLC, Research Division - Equity Analyst [61]

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The second question is in terms of your sales and production that you show on the revenue bridge, you show volumes up 5% and then on the slide you show production up 6%. Are these like-for-like? And then in that case, did you end up producing more than you sold or we should not be comparing these 2 numbers?

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Teemu Kangas-Kärki, Nokian Renkaat Oyj - CFO [62]

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Yes, directionally you are right with your thinking.

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Ashik Kurian, Jefferies LLC, Research Division - Equity Analyst [63]

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And then the last question. When I compare the EBIT bridges that you've shown for third quarter and for the full year, it seems like you've had a bit of a tailwind in terms of fixed cost for fourth quarter. Is that completely driven by the lower volumes in the fourth quarter or was there any level of lower investments or cost-cutting that you did in the fourth quarter to reflect this low amount?

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Teemu Kangas-Kärki, Nokian Renkaat Oyj - CFO [64]

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Clearly already earlier of the year when we were seeing shortening top-line growth and as a prudent leaders, we managed also our cost-base with the view of our top-line development.

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Ashik Kurian, Jefferies LLC, Research Division - Equity Analyst [65]

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To add like when we look at for 2019, would everything in the fixed cost line be reflecting the 1 percentage point to 2 percentage point headwind that you flagged in terms of the North American ramp-up? Or would there be some offsetting cost measures that you will have too? On other words, would the fixed cost line in your full year 2019 bridge, will it be just the 1% to 2% margin headwind or will it -- or can it be substantially lower than that?

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Teemu Kangas-Kärki, Nokian Renkaat Oyj - CFO [66]

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The communication in the Capital Markets Day, that was the net of all the activities that we do at the Passenger Car Tyre business.

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Operator [67]

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Next question is from [Sasha] (inaudible) from Credit Suisse.

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Unidentified Analyst, [68]

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I just have a couple of follow-ups. On the CapEx question, I understand that you guide for EUR 300 million for this year, but I think you were guiding for EUR 250 million for last year. You spend a little bit less, maybe you can explain why you spent less and why it's not kind of added to '19, so it's the kind of a net saving on some investments. And then the second question would actually be on the Nordics. Can you give a rough indication of how much from your sales is kind of directly linked to OE sales in the Nordics?

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Teemu Kangas-Kärki, Nokian Renkaat Oyj - CFO [69]

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So in terms of the CapEx guidance for this year, which I earlier in the call said that that is about EUR 300 million, so we are managing all the time every year the overall CapEx level and some investments were postponed from this year -- from last year to this year, but it then means that we cannot implement everything that was originally planned for this year. So we will have a rollover effect to 2020. But the amount for this year is at the level of EUR 300 million.

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Hille Korhonen, Nokian Renkaat Oyj - President & CEO [70]

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Well, I don't have the Nordics-specific car dealer business figure because we are looking at that business as a whole for whole of Europe and Russia. So we are --

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Unidentified Analyst, [71]

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What would that be for the whole business?

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Hille Korhonen, Nokian Renkaat Oyj - President & CEO [72]

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Well, we -- sorry, we are not disclosing that figure.

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Operator [73]

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Next question is from the line of Kai Mueller from Bank of America Merrill Lynch.

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Kai Alexander Mueller, BofA Merrill Lynch, Research Division - Associate and Analyst [74]

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Just coming back to Ashik's point on your guidance, just to understand a little bit, when you say approximately in the range of last year at current FX, what do you mean with approximately in terms of quantities, is it plus minus 3% or what do we -- how do we have to think about that?

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Teemu Kangas-Kärki, Nokian Renkaat Oyj - CFO [75]

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So we are not defining this in more detail, so it is approximately at the level of 2018.

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Kai Alexander Mueller, BofA Merrill Lynch, Research Division - Associate and Analyst [76]

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And then so I think I missed that because I was just off the queue, but in terms of your sales growth at constant FX, when you say to grow, can you give some sort of quantification what that means?

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Hille Korhonen, Nokian Renkaat Oyj - President & CEO [77]

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Well, the growth is in line with our long-term financial ambition level. So we would be talking about single-digit growth numbers.

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Kai Alexander Mueller, BofA Merrill Lynch, Research Division - Associate and Analyst [78]

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That's very clear. And then just to come back as well, when you were at the Capital Markets Day, you talked about this 22% level. Would you say this is a trough or this is still what you say the average over those 3 years of the plan?

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Teemu Kangas-Kärki, Nokian Renkaat Oyj - CFO [79]

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So -- well, we discussed it --

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Kai Alexander Mueller, BofA Merrill Lynch, Research Division - Associate and Analyst [80]

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You said you'll meet it, yes.

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Teemu Kangas-Kärki, Nokian Renkaat Oyj - CFO [81]

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So what we discussed at the Capital Markets Day was that we are saying at least at the level of 22% and it can be slightly higher or slightly lower.

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Kai Alexander Mueller, BofA Merrill Lynch, Research Division - Associate and Analyst [82]

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And then is there sort of some cost savings that you did in Q4 leading to your better margin that could spill into 2019 as well despite the market is still somewhat weaker, despite your costs that you are putting in for the new factory?

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Teemu Kangas-Kärki, Nokian Renkaat Oyj - CFO [83]

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So in Q4 we didn't do any extraordinary thing, so it was just a prudent way of managing the business.

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Operator [84]

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And next question is from the line of Edoardo Spina from Exane BNP Paribas.

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Edoardo Spina, Exane BNP Paribas, Research Division - Analyst of Automotive & Financial Analyst [85]

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I have 3 quick questions. The first one is on 2018 for Passenger Car Tyres. You show a price mix that is positive. Can I ask if you can give an indication what if mix itself without price was positive? I try to get just an indication. Was mix growth higher than price growth for Nokian?

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Teemu Kangas-Kärki, Nokian Renkaat Oyj - CFO [86]

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So we are communicating that as one figure, so we are not separating the price and mix effect in our communication.

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Edoardo Spina, Exane BNP Paribas, Research Division - Analyst of Automotive & Financial Analyst [87]

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For 2019, I think you mentioned that the -- you expect some pressure -- further pressure from the market on pricing. Does it mean that also Nokian Tyres would expect price decline for your own business?

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Hille Korhonen, Nokian Renkaat Oyj - President & CEO [88]

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We are in different situations in different markets, depending on our market position. And in the Nordics, we are the market leader; also in Russia. And there we have strong -- stronger pricing power. And for example in Russia, we have been already increasing prices for the summer tires as we have started to sell those already in the fourth quarter in 2018. What comes to other markets like North America and Central Europe, there we always look at the market leaders and then make our decisions regarding the prices based on that and the overall market situation of course.

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Edoardo Spina, Exane BNP Paribas, Research Division - Analyst of Automotive & Financial Analyst [89]

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Can you just give us a bit color on this pressure that you mentioned for the market? Does it focus on specific segments like premium or maybe the low-end market? Or would you say it's across the board, a similar level of pressure for 2018?

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Hille Korhonen, Nokian Renkaat Oyj - President & CEO [90]

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Well, yes, it looks to us that it's across the board, that there is pressure also from the market leaders to reduce the prices and they have been announcing price decreases.

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Edoardo Spina, Exane BNP Paribas, Research Division - Analyst of Automotive & Financial Analyst [91]

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And a very final one on the Heavy Tyres. Considering that you said that you are capacity-constrained, should we expect the level of profitability for this business to improve in 2019?

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Teemu Kangas-Kärki, Nokian Renkaat Oyj - CFO [92]

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So we are not giving any guidance on each business area. But clearly this ramp-up phase that we are having in the Heavy Tyre business, it will have a impact on the profitability during the coming 2 years.

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Operator [93]

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(Operator Instructions) We do have a question from the line of Gaetan Toulemonde from Deutsche Bank.

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Unidentified Analyst, [94]

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It's (inaudible). Deauthorization of a right issue, it's just a mechanical one you do regularly? Or do you have something in mind beyond that? That's my first question and I have a second one afterwards.

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Hille Korhonen, Nokian Renkaat Oyj - President & CEO [95]

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This is exactly in line what we have been doing earlier, so nothing extraordinary.

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Unidentified Analyst, [96]

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Now I want to have a little bit of clarification about the pricing environment when you talk about pricing initiated by most of your competitors. In the end, what are we talking about? Are we talking about minus 1% order of magnitude or it's something more severe than that? That's a little bit the perception I have when I talk to the industry.

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Hille Korhonen, Nokian Renkaat Oyj - President & CEO [97]

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Well, I would not maybe go into that level of details, but what we have been seeing is that many of the big players have been reducing their prices.

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Operator [98]

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And there are currently no further questions registered. I'll hand the call back to the speakers. Please go ahead.

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Päivi Antola, Nokian Renkaat Oyj - VP of IR & Corporate Communications [99]

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Thank you. Hille, before we finish the call, would you like to summarize Nokian Tyres 2018?

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Hille Korhonen, Nokian Renkaat Oyj - President & CEO [100]

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Thank you Päivi. As a summary, I would like to state that our underlying operative performance is solid and we continue implementation of our strategy and growth ambition supported by the investments in North American factory and Heavy Tyres. All our key projects, they are proceeding on time and on course targets and of course this is very energizing for the whole organization. So we are looking forward to completing these projects.

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Päivi Antola, Nokian Renkaat Oyj - VP of IR & Corporate Communications [101]

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And this ends today's conference call. Thank you for participating and have a good day.