Nokian Renkaat Oyj (OTCPK:NKRKF) Second Quarter 2022 Earnings Conference Call August 2, 2022 8:00 a. m. m. ET
Participating companies
Päivi Antola – Boss, IR
Jukka Moisio – President and CEO
Teemu Kangas-Kärki – Chief Financial Officer
Conference Call Participants
Giulio Pescatore – BNP Exane
Thomas Besson – Kepler Cheuvreux
Artem Beletski – SEB
Christoph Laskawi – Deutsche Bank
Panu Laitinmäki – Danske Bank
Michael Jacks – Bank of America
Pasi Väisänen – Nordea
Peter Testa – An investment
Akshat Kacker – JPMorgan
Raulí Juva – Inderes
Pierre-Yves Quémener – Stifel
Operator
Welcome to the Nokian Tyres Q2 [sic] 2022 report. During the call, all participants will be in listen-only mode and then there will be a Q&A session.
Now I will give the one to the leader of RI, Päivi Antola. Continue.
Paiví Antola
Hello from Helsinki and welcome to the call of Nokian Tires’ second quarter earnings convention. My call is Päivi Antola and I am guilty of investor in Nokian Tyres. And with me on this call, I have Jukka Moisio, president and CEO of the company, and Teemu Kangas-Kärki, CFO of Nokian Tyres.
In this call, we will review the effects of the current quarter and an update on the progress we see in Russia with the new capability and our target in the coming quarters. And all this will be presented through Jukka and Teemu and will be followed through a Q
So Jukka, please go ahead.
jukka moisio
Thank you, Päivi, and welcome from me as well.
I would like to review the notes prepared in the presentation, and the name is, The war in Ukraine eclipsed H1.
And I’m going to turn to page 2, a little quick mind before moving on to the monetary numbers. Exiting Russia’s start-up, therefore, the Board of Directors has made the decision to initiate a controlled exit from Russia because it is no longer imaginable or sustainable to continue operations. Right now, right now, we’re comparing other options. We have hired outside experts and are in discussions with potential applicants at this time.
As a component of this process, there was impairment and impairment of approximately €300 million in the results for the current quarter. Actions to increase capacity outside Russia are underway, so we are expanding the capacity of Finnish and American factories of passenger car tires. These systems were already introduced in 2021 and have continued 2022 and we are still adding investments and apparatus in the last component of this year, to be used for preparation for 2023, and also as discussed about the preparation of the American plant for 202four, and now we will achieve a capacity of four million tires in the United States and between five and 6 million in Finland.
Investment in a new plant in Europe continues. We also have a list of imaginable places in the place. We do the evaluation. The engineering has been done and we are finalizing the steps to take the resolution to launch the investment.
Outsourcing functions are also being developed. So, we’re going to have select suppliers to help us while building capacity in Europe and also developing those outsourcing features.
I turn to page 3, I have the culmination of the figures for the quarter of the moment. Net sales increased by 7. 4% at constant exchange rates. We recorded €482 million in profit compared to €416 million in 2021 in the same quarter. Demand for tyres has remained smart and volumes are decreasing due to our company’s source constraints. The operating environment was increasingly challenging due to war and more difficult sanctions.
Segment operating revenue stream of €86 million compared to €89. 6 million in the second quarter of 2021. The accumulation of tariffs to combat tariff inflation and leading to an accumulation in the average net selling price.
Our team behaved incredibly well. It was not an easy quarter in terms of the effect of the sanctions, as logistics have become increasingly complicated to bring raw fabrics to Russia and ship tires from Russia to other markets. And in those circumstances, I must thank our team and also congratulate them because it has been a very not easy environment and they have done well in this environment.
Turning to page 4. We have a solid balance sheet. Cash was affected through our current capital. I list some key figures in the financial statements. Net sales increased by 7. 4%, as mentioned, and since the beginning of the year, we are at around 14% in constant currency compared to last year. so about 900 million euros in the first nine months, the first six months compared to 758 million euros in 2021.
Operating profit percentage for the quarter was 18% compared to 21. 5% a year ago. And since the beginning of the year, we are at 17% versus 18. 5% in 2021 and 19% in 2021.
Earnings consistent with the consistent percentage of segments before depreciation and so on is €0. 55 versus €0. 51 a year ago, and in the first six months €0. 93 versus €0. 80 in 2020.
On the right, return to the contracted capital at 15. 2% before depreciation. Our capital index, adding punishments, is 64%. So, it shows that we have a solid balance sheet and that, despite the punishments, it continues To be strong, evidently currencies and other macros have an effect on that, but still an equity index of 64%.
Cash decreased and we committed higher current capital, inventories were higher due to more expensive raw materials, accounts receivable were also higher due to net sales and also currencies impacted our current capital through the expansion of the absolute amount of Capital Working Europe.
Leverage of 14. 8% and net financial debt at the end of June of 243 million euros, compared to 140 million a year ago.
Capital investments amounted to €18. 7 million in the quarter and €33 million year-to-date, both below last year’s figures. However, as we have said, we will begin to incur greater capital investments for the new plant in this last component of the year.
And with that, I moved to Teemu to communicate about the finances and profitability of the segment. Teemu, please.
Teemu Kangas-Kärki
Thank you Jukka.
Let’s go over some key figures across the business unit and starting with The Touring Pneumatics. In the current quarter, our net sales reached a point of €335 million. Net sales increased and demand for tires remained at one point. However, segment operating profit decreased by one component due to the lack of a tire source that had an impact, namely our business in Central Europe.
We are pleased that our average selling price has increased. We have been especially increasing prices in all of our markets. And as a result, we were able to offset the increase in raw drapery prices and other costs in the current and first quarter quarter. of the year.
Our stocks in the pneumatic touring business at a point higher than that of the comparison era for a greater source in the current part of the year. As we all know, we can no longer find Russian buyers.
Next, let’s move on to the evolution of our net sales consistent with the quarter and focus on the value mix. Here you can see how it evolved in the first quarter and the current quarter. And if we exclude Russia, you can see from the legend message that the value increases without Russia were around 9% in the first quarter and around 20% in the current quarter, meaning that values are emerging in Russia, Asia was exceptionally high in the first half, which also had an impact on our absolute profit at the time quarter.
Then, if you look at our bridges and focus on the operational advantage component of the segment, here, if you look at the combined value component, we see that we had a positive progression of €87 million from €58 million in headwind of valuable curtains. So we were able to make up for that. And then the negative progression of the origin chain of 20 million euros and most of it comes from the accumulation of logistics prices because we have taken ordinary measures to get the tires out of Russia. We have fewer boats and full trains. So, in addition to charging inflation, this price point has reached an extremely high point, which deserves to take advantage of us a little at the time of the component of the year to sell volumes.
Next, let’s move on to the Heavy Tyres functionality in the current quarter. You can see that our net sales for the current quarter were €74 million and the source of operating income for our segment was approximately €16 million. the relative return that was at a point of 21%, an accumulation since the comparison period. This is the functionality that is reflected in the strong demand in all product segments. And we have also been able to boost our production and, as a result, the evolution of profits has been in line with the figures I highlighted earlier. In Heavy Tyres, stock market grades are at historic lows, unlike the Passenger Car Tyre sector, indicating that demand has remained at a smart spot and we have not been able to accumulate stock titles in Heavy Tyres.
Finally, vianor’s business unit, in the current quarter, had a smart sales season that lasted longer than usual, so the profit was 99 million euros and the source of operating profit of the segment just under 10 million euros. of our prices and, therefore, it has an impact on our profits and profitability.
Let’s move on to the assumptions for this year. As we have previously communicated, Russia’s exit from control will have a negative effect on our supply capacity, specifically affecting our activities in Central Europe and raw fabric prices and logistics are expected to have a negative effect also in the current part of the year. However, demand for passenger car tires and heavy tires is expected to remain strong.
Our direction for this year has not changed, which means that our net sales are expected to decrease or be at the point of last year and the segment’s source of operating income is expected to be particularly minimised compared to 2021.
And to you, Jukka.
jukka moisio
Thank you Temu.
And to continue, is that we continue to build the new Nokian Tyres, so anything old, anything new. The old thing and the important thing is that we have a solid line of long-term innovation because some of the key products on page 12 that they are launching. Hakka Blue for the summer in the Nordic countries. Nokian Tires Outpost AT also introduced the R5 Hakkapeliitta friction tire and the new Nokian Tires Hakka Truck Coach. , et cetera, et cetera. This is anything Array anything old, and will continue to review our protocol for our product pipeline.
This coming season, next autumn, we will have Hakkapeliitta R5, it is a new flagship product for studless Nordic winter tyres that will be presented and available to consumers this autumn. It includes one-third of the tread compound from renewable and recycled materials. It also has Hakkapeliitta R5 SUV with Aramid Strong Sidewalls and Hakkapeliitta R5 EV with silent driving at a very low noise point with SilentDrive technology. This product will reach 160 SKUs and will be available to consumers from autumn 2022 and the main markets will be the Nordic countries and North America and this product will be manufactured on Nokian.
Priorities for the coming quarters, anything new, we will develop new capabilities, so we are working on the final site selection, the final engineering and we are also preparing for the commissioning of the assignment and the commissioning of the real construction. We will continue to leave Russia, so the procedure will continue with our external advisers and potential candidates. We will also maintain strict control and temporarily protect our money flow, especially in the current quarter, due to the ordinary measures we have taken and the fact that we are building a kind of stock of ready-to-use products, we had superior current capital, we look forward to this step by step, step by step, we will use the money from current capital.
Business sets and spaces to implement their express plans, in the Nordic countries, North America, Central Europe and heavy tires and we will continue to supply consumers with world-class products and maintain our line of operational innovation and look to the future to present R5 in autumn. We are convinced that it will be a very, very successful product. Therefore, in the future, we will concentrate on the construction of the new Nokian Tyres.
These are the notes ready for the presentation. Päivi, I pass to you.
Paiví Antola
Thank you Teemu. Et now operator, we would be in a position to respond to the public inquiry, please.
Q&A session
Operator
Our first comes from the Giulio Pescatore line of BNP Exane. Continúe. Su line is open.
Julio Pescatore
Hello, thank you for accepting my question. The first on its profit in the automotive segment. Can you give us an indication of the segment’s percentage of operating income source similar to your operations in Russia?And I guess that’s the key as we move into the second half because of the lack of supply, because it turns out that most of its operating profit on cars came from Russia. So any color you can give us would be great? And then go on to lose the flow of money. Cash inflow in the first part of the year was significant, also considering the fact that CapEx has not yet accumulated, I perceive it at this time. But can it help us fill, perhaps what we deserve to expect for the whole year?, we deserve the opposite current capital or we are — we deserve what we anticipate in H2 and how much do we deserve for CapEx accumulation?Any color would be very useful. Thank you so much.
Teemu Kangas-Kärki
If I start with the coins and there, we have to stay in the brain at least two issues, first of all, is this general seasonality, which means that we burn coins, in the first nine months, and then the coins come in the fourth trimester. And we don’t anticipate any major adjustments to this general seasonality.
Then, in the quarter of the moment, we took ordinary steps to secure the source and logistics outside of Russia, so some of that is already visual in our earnings. And the component of the moment is the one that is visual in our money and balance. due to the fact that we now have higher inventories, as discussed in my ready notes, not only for finished products, but also for uncooked curtains. And the component of uncooked curtains, we will consume it in the coming quarters being at a more general point then, after the end of the year.
Then, your inquiry about Russia and profit and profitability, as I showed in the average net sales consistent with the quarter, was visual that, especially in Russia, we were able to significantly increase costs, in other markets we also increased considerably. Costs, this also indicates that we had a strong generation of benefits in – in Russia, and then those ordinary logistical measures that we have taken those costs are visual outside of Russia. So those could be some comments to give them a little color.
Operator
The next one comes from the line of Thomas Besson of Kepler Cheuvreux. Please continue. Your line is open.
Tomas Besson
Good afternoon. So, I have some questions, please, if you agree, I would like to answer them one by one. First of all, could you perceive the timing of the board’s resolution and communication of your next strategy?
jukka moisio
It is ok. So the timing of the strategy and the resolutions will be, as lately we’re executing those projects and we expect that from the final effects in the third quarter, without delay after the effects in the third quarter, we’ll have — monetary policy objectives that we’re going to have, we can talk about, most likely. And then, at that time, we have a plan and a resolution to invest and other people can also see how this exit from Russia will continue, because it is evidently, not entirely in our hands. It also takes into account the fact that other parties are involved in this process. our expected monetary functionality in 2023, 2024 and beyond.
Tomas Besson
Maybe I think it had record inventories at the end of the current quarter. This was discussed in the ready comments, and also, more or less, in the previous question, but in the magnitude of the construction in terms of what I wanted to ask. if, despite everything, you overproduced in Russia in the current quarter or if you can still use this asset to secure potential income in H2 or so it is, this is not the case and your activities in S2 depend on your functions outside the gates of Russia?
jukka moisio
Our functions outside Russia are basically those catering to the markets of Western Europe, North America, etc. , as well as kidnapping, etc. , which will then attend in 2023, so that Russian capability can work for Russia.
Tomas Besson
So in the current quarter you didn’t overproduced in Russia for sales that will be positioned in the third quarter, do you already have a smart external profile that you can use to sell outside of Russia?
jukka moisio
Yes. We have imported ready-made products from Russia to European and North American inventories.
Tomas Besson
Can you give us a concept of the magnitude of the number of new companies that have already been taken out of Russia to sell in S2?
Teemu Kangas-Kärki
Without being specific, just to give it a little color, more stock with, in a way that gives us benefits at the moment, in the third quarter. But this doesn’t replace the general picture that we’re missing buyers right now. part of the year.
jukka moisio
Oui. Si looking at the evolution of volumes quarter by quarter, you see that volumes from one year to the next have decreased, especially in the current quarter. But if you look at the end of the announcement, production volumes increase in the first quarter. part of the year.
Tomas Besson
Yes, it was understood. When, until you make the decision, can you help us perceive what you are going to prefer between passenger tires and truck tires because it will be difficult for you to manufacture either in sufficient quantities?tires because lately they are considered positive margins or you will prefer winter tires with studs. How do you evaluate priorities well?
jukka moisio
When we have an expansion plan in place at Heavy Tyres, of course this will continue. And then the top priority at this level is to make sure that passenger car tyres get new capacity, either in factories that are already up and running or also in a new plant, and then it will be supplemented through levies in the coming years.
Tomas Besson
It is ok. Thank you. I have one last question. I mean, I noticed that some transactions in Russia get accounts receivable in Russia. How do you pay well in Russia, on the one hand?And how do you get paid for your tires in Russia given the sanctions?
Teemu Kangas-Kärki
So, now that the Russian company has to work on its own. Therefore, we cannot make any invoices or obtain cash from Russia. And then, how to get the cash out of Russia, it is part of the exit control procedure. design the imaginable deal to get the money out of Russia.
Operator
Now, the next one comes from the lineage of Artem Beletski at SEB. Continúe. Su line is open.
artem beletski
Hello and thank you for answering my questions. In fact, we will ask you for one through one and one element, of course, pass to Russia. And maybe it can provide us with the best color related to its load structure and, in fact, how it was distributed between Russia and necessarily other countries thinking, for example, about the levels of SG.
Teemu Kangas-Kärki
So, as you know, the load level, and now if you are talking about the production charge of SG ventilation.
artem beletski
It is ok. And perhaps the other query is that he talked about the mentors of the team and the expansion on this side. Could you also comment on industry accounts receivable?There were about 40% of them from one year to the next. Do you see any kind of peak uncertainty regarding this type of debt?Or do you see that the scenario is as general as in previous years?
Teemu Kangas-Kärki
How to put it in a way that, with the data we have, I would say that there is no main threat with the comment that the scenario may be another tomorrow, because we have noticed this year that what we say may be completely another tomorrow.
artem beletski
It is ok. Is that clear. And then the last one on my side, just thinking about his recommendation for this year. I think the last quarter provided some kind of additional color in terms of declining EBIT in the segment for this year and making a comparison to the grades it reached. in 2020. Could you give a little color, the prospect of benefits for the total year also at this stage?
jukka moisio
I do not think that beyond this recommendation that we have, it is complicated to give many mobile portions and so on. So let’s say it’s going to be a year similar to the COVID year.
Operator
The next one comes from the line of Christoph Laskawi of Deutsche Bank. Continúe. Su line is open.
Christophe Laskawi
Hello, thanks for answering my questions too. I would like to start with an exit procedure from Russia essentially. So the first one there, could you prospectively take back machines and move them to Finland to build your capacity? I assume this is part of the negotiations, but I wonder if you would like to make a percentage comment on the likelihood of this happening? And in the event that all negotiations fail, would you consider running the factory on a site-by-site basis? And as you just explained to us how complicated it is to repatriate cash from Russia to Europe. And you still have, I think, in what you said about 400 million euros of net assets that you have in Russia and Belarus. How sure are you that you actually make money from it? And also component of the negotiation, so is there a way to pass it to you? And then I appreciate you offering post-third-quarter financial goals for 2023 and 2024, but is there any comment you can make recently about what the potential post-exit length might look like on passenger car tires? Would it be fair to assume around 30% of capacity and what could be the extent of outsourcing discussed in the slide given there is not as much available capacity as I am thinking of outsourcing as well? And finally, although I appreciate you not just commenting on the margin profile of the PASCAR plan [ph] in the US and Finland to give us a rough approximation. Thanks.
jukka moisio
Maybe if I start with the apparatus, today it is transparent that it is not imaginable one day to take the apparatus out of Russia. And so, apparently, when we stick to the process, and this may be just one and one of the parameters that we take into account in the agreement, adding also what Teemu discussed about the repatriation of cash in this regard. So, it is evident that there are several tactics to paint the agreement and then you will see what the end result is. In any case, what will have to happen is for Russia to locate. So, it operates locally and that would be the only way forward and then allow any transaction to take place. So, right now it’s falling.
And then the monetary issues, I appreciate your consultation — ask and so on, yet a lot of things are moving at this point, we’d like to come back when we have more clarity on — excuse me, site selection, outlook, and long-term plans for our volumes. And then we have all of that available, so we’d love to pass them out and communicate them to all investors about it. And as I said, until the end of the year, after the third quarter and as soon as possible, so we will be in a position to do so, however, at this time it would be too early to communicate it because many elements are in motion at the moment. Teemu, do you have more comments?
Teemu Kangas-Kärki
Perhaps to this, the advent of cash, I think is one of the basic elements to structure the imaginable transaction, and so far, what we have noticed and heard deserves to be imaginable.
Christophe Laskawi
Just a follow-up, if I may, of their suppliers and I mean, in general, they also sourced from Russia for their footprint, in part from Europe. Have the suppliers ever approached you and asked you about the conversion conditions?, given that your footprint will be smaller and there may be prices related to this also or so far or as was the case before and there are no major changes?
jukka moisio
So far, without major changes, things continue normally with the exception of Russia, of course, which is not normal, as perhaps it is dead to say here.
Operator
The next one comes from Danske Bank’s The Panu Laitinmäki line. Continúe. Su line is open.
Panu Laitinmaki
Yes. Thank you. I have two questions about your new capacity projects. So, first, can you give a color about the brevity of the features it has?I perceive that it has not taken a resolution related to the color of the product, that Do you think it is a Greenfield or an active formula or what length deserves us to look for?That would be very helpful. And the second, how much do you think you’ll charge, deserves us to use the U. S. plant?Do you have a kind of consultant of what you would charge and do you think it can be done without new capital?Those are my questions. Thank you.
jukka moisio
It is ok. So let me comment on the roles and Teemu will now communicate about the planned charge and investment. So we have already gone through the functions because this procedure obviously some time ago. So we went through several countries and functions. And we approach a few to a few. And of the few, we’re going extra [indistinguishable] even now, and we essentially have strong applicants on this and it’s going to be virgin land, so it’s not going to be commercial land or a joint venture, it’s going to be virgin land. Temu?
Teemu Kangas-Kärki
And then in terms of financing, investment, lately I think we can make the investment without new capital. And then, the American factory is an indicator of the total amount of investment. And in the U. S. , the way we do that is two plus two million stages at the new CE plant. Lately we plan to do this in 3 plus 3 million tire stages.
Panu Laitinmaki
Thank you, it’s very clear. Can I request a single follow-up? So, can we use the plant structure in the U. S. ?As an indicator of how long it will take for the festival to get the cars out of the factory?
jukka moisio
The concept is a little different because we leave with the ambition to start generating as soon as possible. So, we replaced the order of the apparatus a little bit and started with — without a combination branch. And so build with tire structure and we start with that so we can get the tires to market faster. And then we bring in a Harvester from Nokian and build the combine branch at the same time we’re in the factory. This gives us the most productive time to market from the factory.
Teemu Kangas-Kärki
And this is the playbook we use in Russia. So we do it in Finland, then we move to the Russian site.
jukka moisio
The U. S. is too far from doing that, but Europe is close enough to keep blends and have a faster time to market.
Operator
The next comes from the lineage of Michael Jacks of Bank of America. Continúe. Su line is open.
michel jacks
Hello, good afternoon. Thank you for responding to my inquiries. The first, if we can, please go back to the stock balance. Can you give us a concept of the percentage of accumulation due to accumulation in uncooked curtains and logistics prices in comparison?to the accumulation of finished products, obviously, because we will get advantages from the income in the current part of the year. The other would have an effect on margins. That’s the first consultation, maybe I’ll prevent there and make my consultation after that.
Teemu Kangas-Kärki
Maybe I’m starting to respond slightly differently. I think the main component is the top point of load that is visual in our balance sheet. And as you can read in our press release, the year-over-year buildup is more than 40%, which has a significant effect on our stock balance. So basically, for finished products and raw materials, I would say that a smart indicator is somewhere between 50 and 50.
michel jacks
You’re bien. Merci. Et just to stay on top of that and how has that distribution been replaced from last quarter?
Teemu Kangas-Kärki
Last quarter, we expanded our purchases when war broke out. Therefore, stock levels were at a low point in the first quarter and now, at the end of the current quarter, inventories of raw fabrics and finished products are at a high point compared to the first quarter.
michel jacks
It is ok. So the ratio between finished products and uncooked carpets is, in other words?
Teemu Kangas-Kärki
I can’t memorize what the point is: at the end of the first trimester right now, I’m sorry to comment on it.
michel jacks
It is ok. Merci. So, I guess as a result of that, I guess you’ll see some pretty significant headwinds on costs, as you mentioned, in the moment part. Do you expect the costs to be enough to offset this at the time of the year?
Teemu Kangas-Kärki
We continue to increase costs and will naturally take advantage of the costs that are already accumulating compared to last year in the current part of the year. We see a positive progression continuing.
jukka moisio
Therefore, it is also vital to note that we also have a new product for the winter season, the R5 friction tire and the Hakkapeliitta [indistinguishable] were introduced last year. So, this allows us to take a look at the prices.
michel jacks
It is ok. Thank you. It’s clear. Last consultation of mine. In Dayton alone, are there any concepts that potentially turn some of the capacity there into tires?
jukka moisio
Not at this time. We’re actually looking to introduce more of our own tires because, if you remember, when we started speeding up the factory, we had sales to other customers, but now we’ve brought more of our own tires to date, and then ramped up that day. But those are tires that we manufacture so far at Nokian and this capacity is enough at this level to serve the Nordic and North American market, especially for studded winters. It remains to be noticed the friction tires, we will see how that, the initial technology, the initial device to move Dayton to North America at this point is not operationally intelligent. It is better that they stay where they are and head completely to the existing location.
Operator
The next one comes from the lineage of Pasi Väisänen of Nordea. Continúe. Su line is open.
Pasi Väisänen
Super. Thank you. I’m Pasi from Nordea. So, just to confirm, if I perceive correctly, this announcement related to the Greenfield assignment will be published in the coming months before the announcement of the third quarter results. He’s still thinking about the outsourcing model, which can really have effects on European sales volumes that are missing during an era where he’s building his own factory, because he’s really saying he decided on Greenfield, not the joint venture, but that’s what he does. exclude the subcontractor? And if you are using, in a way, a capital gap for European production, are you targeting the whole of the EUR 5 to 6 million for this gap?And what could be the profitability of this imaginable outsourcing there?Thank you.
jukka moisio
Thank you Pasi. Thank you for the question. Therefore, we are working with the new location in a professional manner and will make the announcement as soon as possible. We expect this to happen before the effects of the third quarter of the year. And then, about the update, yes, we will have and it will help fill the missing volume gap in Central Europe. Obviously, what’s important is to take a look at that use and make sure there’s enough money to make it sense. it is obviously a criterion that we are looking for. But under the criteria of some, yes, we will have an update and close the hole as much as is financially justifiable. So, all the factories we talk about are valid and continue as planned and announced or discussed.
Pasi Väisänen
So, can you measure your market percentage and your dominant market percentage with your profitability in this regard?
jukka moisio
We need to stay current in the market because nokian Tyres is applicable and a logo that other people recognize and appreciate, and therefore, we do this work while expanding new features and functions, because then we release anything in the market is much less difficult than when there is popularity and positions in the market.
Pasi Väisänen
And what’s the point of a year or a date for this style 3 plus 3 in this new Greenfield?So what is the year we are talking about to get 6 million euros in cash?
jukka moisio
We’ll come back to that when we communicate about the monetary targets, 2023, 2024, 2025 and investments in CMD, actually CMD if I miss the targets, some time after the third quarter results.
Pasi Väisänen
Oh, then it will have to be 2025, because if it is included in its kind of [indistinguishable]?
jukka moisio
That’s your conclusion. Yes.
Pasi Väisänen
It is ok. Yes. Thank you.
Operator
The next one comes from the line of Peter Testa of One Investments. Continúe. Su line is open.
Pedro Testa
Hello thank you. Maybe just following Pasi’s question. Can you tell us a little bit about the practical facets of high-volume outsourcing, thinking about the molds, the quality of your product compared to the outsourcing you’ll have and maybe if they come from other regions, just to perceive the framework around that, please?
jukka moisio
Again, maybe if we leave this to CMD after the third quarter, then we have the plans, volumes, and expectations available. And then, we would be much more qualified to communicate about those expected volumes and profitability. It’s that we can’t communicate about that now. We have internal information, but this is not the time to reveal it.
Pedro Testa
Yes well. And then at the end, in your press release and it’s in your component, you communicate about the investment that has been substantially cemented. I wonder if he ever ordered apparatus or signals, the obligatory apparatus for molds, I mean, maybe for mixing installations. Have you already made those decisions and started ordering or are you destined to come?
jukka moisio
Then we already took the first steps, and the balance of the year, in our CapEx, will be visible, our invoices from the center to boost recent deliveries.
Pedro Testa
And then, just a question, just so that maybe we can perceive the profitability of your existing organization. And if you look at the Array as a direct percentage of sales, plus logistics comparing Nokian to Russia, can you give us a concept of the difference between the two in an overall year?
Teemu Kangas-Kärki
So, to give you an idea of the effect of our Russian factory compared to others, we have discussed the recent reasons for this approximate difference of € 10 depending on the tire produced in Russia or outside Russia. That gives you a high-level indication of the headwinds we are constantly facing, as we have now lost russia’s source to other markets.
Pedro Testa
And would you expect to do more than Nokia in a new acceleration installation or at least similar because Nokia is more depreciated or what would you think of a new installation compared to Nokia?
Teemu Kangas-Kärki
There, I would like to return to CMD from 2018, where we scaled the 3 factories, Russia, Nokia and Dayton, because that is a comparison applicable also today. We indicate that from the point of view of production efficiency, there are no primary adjustments between factories. The natural scale is one of the points that influence the load level. Therefore, depending on the length of the plant it will decrease the load according to the tire sold, and above all, today, electrical energy or power has a factor. And let’s see how this will expand its effect in the coming years.
Pedro Testa
It is ok. So the last question, please, is correct if maybe you can give us a breakdown between the next mainstream capital in general between Russia and Russia outdoors, even by order of magnitude.
Teemu Kangas-Kärki
So, before the crisis, our main finished goods warehouse, or one of the main warehouses in Russia, and then raw fabrics were in Russia in that order, Russia played a vital role. And in the long run, I would say that the current capital component, of course, we no longer have any in Russia. And this is divided in the short term between two places. And then, in the long term, between 3 production sites plus general area warehouses in select markets.
And then if I continue with the accounts receivable of the industry, because it’s a key thing that will definitely have an impact on our current capital in the coming years, it’s because in Russia we’ve had this style of appropriation charge, which means we’ve funded on secure terms. , our consumers now, when in the future, we will not have Russia in our portfolio, our industry receivables are transmitted, that is the assumption of making plans.
Pedro Testa
And is there a breakdown of notable receivables in Russia, so I only have the two Finnish comments [ph] on current capital?
jukka moisio
Can you repeat?
Pedro Testa
Is there an existing accounts receivable department between Russia and the old Russia, which means that this kind of concept about stocks and how things are, how I wonder about the general picture of accounts receivable at the moment?
jukka moisio
We have not disclosed this information, but Russia is a domain in which we have a small debtor.
Operator
The next one comes from the akshat Kacker lineage of JPMorgan. Continúe. Su line is open.
Akshat Kacker
Yes. Thanks. Akshat from JPMorgan, two to the left of my side, please. The first about loose money in the future. If we exclude investments in the new European plan you talked about and the seasonality of current capital, do you think that the underlying operations to date can generate all that loose money?And at the time of consultation do you consider the existing annual production rate for the Dayton and Nokia fleets?And where do you think it will happen at the end of 2022? Thank you.
Teemu Kangas-Kärki
If I start with the money and my previous comment, do we want a new equity to finance the investment?As I said, our existing view is that we don’t want new equity to fund moneyArray. So maybe that’s the observation I want. to do at this point and let’s get back to that after the third trimester in our mini CMD.
jukka moisio
And then the production speed passed, so he said we headed to Nokia with the hardware that we’re installing right now and in the coming months and so on between 5 million euros to 6 million euros in 2023 and 2024, and we headed towards four million euros in Dayton and we said about a million euros last year, then linear in four million euros as we said more capital, hunting in this line the same factory.
Operator
The next one comes from the lineage of Rauli Juva d’Inderes. Please continue. Your line is open.
Rauli Juva
Hi, Rauli d’Inderes here, my initial consultation was well covered previously, but perhaps a major one on heavy tires. Can you? Perhaps if it’s running at full capacity right now, then how is CMD’s expansion investment going there?Thank you.
jukka moisio
Oui. Il is operating at full capacity right now is very low. So, in fact, whatever we do, we sell the capacity increases of the new lines that come as we talk, prepare them and install them once they reach volumes. step by step, our production volumes.
Operator
Our last one comes from the line of Pierre-Yves Quéméner du Stifel. Continúe. Su line is open.
Pierre-Yves Quémener
Yes. Good afternoon. Pierre-Yves Quémener with Stifel. I have one left, please. It achieved €152 million in Russia and Asia in the current quarter in terms of revenue. What we think about this group in the third quarter and fourth quarters declined markedly, particularly in the third quarter, however, once it leaves Russia, will this region disappear?absolutely and outside of our disclosure? Thank you.
jukka moisio
What will happen with Russia is that, while we are in the localization and the operations continue, this Russia and then when we get to a point where the procedure comes to an end in terms of signature, then, obviously, it will disappear. It is very complicated to say when this will happen, etc. , but until the transaction is concluded, Russia, the localization will continue in the coming months and quarters.
Pierre-Yves Quémener
It is ok. But you may not be able to monetize anything since the region is under a transparent sanction, so we seem to have profits eventually in the third quarter, but you may not be able to challenge Russia’s money, right?
jukka moisio
As Teemu said earlier, as a component of the transaction and discussion with possible components in this process, monetize the coin component of these coins that accumulates on the balance sheet and accounts receivable, etc. it’s part of that discussion. And as Teemu says, it is imaginable to monetize it through this type of transaction. And that’s what we’re doing.
Operator
Merci. Et as there are no questions at this time, I will give the ground to our speakers for closing remarks.
Paiví Antola
Thank you so much. As there are no more questions, here ends the call for today’s convention. Thank you all for your participation and have a good day.
Teemu Kangas-Kärki
Thank you so much. Have a day.
jukka moisio
Ok thanks.