Nokian Renkaat Oyj (OTCPK:NKRKF) Q2 2024 Earnings Conference Call July 19, 2024 7:00 AM ET
Company Participants
Paivi Antola - Investor Relations
Jukka Moisio - President and Chief Executive Officer
Niko Haavisto - Chief Financial Officer
Conference Call Participants
Miika Ihamaki - DNB Markets
Boleslaw Lasocki - Thomson Reuters
Thomas Besson - Kepler Cheuvreux
Rauli Juva - Inderes
Akshat Kacker - JPMorgan
Artem Beletski - SEB
Pierre-Yves Quemener - Stifel
Pasi Vaisanen - Nordea
Michael Jacks - Bank of America
Paivi Antola
Good afternoon from Helsinki and welcome to Nokian Tyres Q2 2024 Results Conference Call. My name is Paivi Antola, I am heading the Investor Relations in Nokian Tyres. And together in this call I have Jukka Moisio, the President and CEO of the company and Niko Haavisto, the CFO.
As usual, in this call, we’ll go through the results and talk about some other topics as well, and these will be presented by Jukka and Niko followed by a Q&A.
So Jukka, floor is yours.
Jukka Moisio
Thank you, Paivi. Welcome on my behalf and indeed we'll talk about the results and some of the recent highlights that have happened in the company, but we will go through the presentation. I go through the presentation called improved tire availability driving sales growth in a challenging environment dated on July 19 and I move to page one which is the Romanian factory in progress. And we reported on July 1 that the first tire was manufactured at Oradea factory in Romania.
We want to remind that the commercial production is expected to start in early 2025. However, the 60-member launch team has been trained in Finland and they are now ready to start the preparations for the commercial production. And we are also saying that the investment is in budget and on schedule, and indeed this is the first zero CO2 emission tire factory in the world. And so in that sense we are making history. And you see the team, and you see also the first tire made in Romania on page two.
And then I move to page three which is just an aerial picture of the Romania factory, the site in June 2024 and on the left-hand side you see the mixing building which is being prepared right now. You see in the middle the production building and also on the right-hand side the small office which is part of the production building and then on the right-hand side finished goods warehouse. And as you see at the end of June, the site has been prepared, the buildings are being prepared and we are very much on schedule to have the ribbon cutting in September and then to have the full commercial production in early 2025.
Then I move to page four, which is a similar aerial picture of our factory in the US, Dayton and we have now completed the investments in Dayton. So all the hardware, all the investments have been done and also the finished goods warehouse, which can house up to 600,000 tires, have been opened during the month of June. And indeed now the site is complete in terms of the capability to produce. And we will produce there all season tires and all weather car tires for North American markets. And also we started the light truck tire production this year.
The plan was originally when this factory was decided in 2017 that some of the light truck tire production would have been in Russia and then they would have supported the North American market ramp up and so on. However, as you all know, who have been following the company for some time, that indeed we needed to sell the Russian factory in 2022. And we made a change in the production schedule in Dayton factory. And this change has now been completed and is coming to the market during the course of 2024. So this says that the investment phase has been completed in the US. And the aerial picture, compared to Romania, they look very similar in terms of layout and in terms of aerial footprint.
I move to page five and that is progress in the renewable material which can potentially replace carbon black in tires. So we made the first ever concept tire with the renewable lignin-based material made by United Paper Mills, a Finnish biomaterials company. It's called UPM BioMotion RFF trademark. And that is a product that United Paper Mills will be making in their factory in Germany.
It has a potential to replace a significant part of our carbon black and reduces the need for fossil materials and lowers the carbon emissions in tire itself and in tire manufacturing. And as a reminder, our target is to increase the share of recycled or renewable materials in tire to 50% by 2030. And this again is one step on that way.
You may remember that earlier this year we also made an agreement to buy recycled carbon black that can be used in tires. So, two ways to improve the sustainability of tires and tire making.
And now I move to page six, which is the net sales and segments operating profit in quarter two. Net sales increased by 11.2% with comparable currencies. That was driven by the improved tire availability and in especially Central Europe, which was the biggest growth area, strongest growth area, and that was achieved by better availability, especially with the offtake tires.
Our segments EBITDA at EUR46.8 million versus EUR41.3 million in 2023. There was an improvement there. Obviously, we had the issue of political strikes in Finland in the first half of 2024. And we have already earlier said that the impact is roughly about EUR20 million in EBITDA, out of which more than half was in quarter one and then less than half in quarter two.
We started the quarter two in the month of April. The first eight days were impacted by political strikes so that we couldn't produce anything in Nokian and neither could we ship anything in the first eight days.
Segments operating profit at EUR20.1 million versus EUR15.2 million in 2023. And higher sales and lower raw material costs helped our profitability improvement.
I move to page seven, which is reminding that we have a strong balance sheet despite the fact that we are investing heavily. So, our capital expenditure is EUR159 million in the first six months. Lion's share, a clear majority of those investments are related to Dayton warehouse, Dayton factory completion, as well as, of course, the Oradea factory buildup. And that number EUR159 million is clearly higher than EUR87 million that we invested in capital expenditure in 2023.
This is also the time when our interest-bearing net debt is at its highest, because we are investing significantly and our generation of EBITDA is still not at the level where we aim for. And the reason being that the factories that we are building are not yet delivering any EBITDA. First six months sales EUR561 million versus EUR529.5 million in 2023. And as just a reminder, EUR20 million impact from the political strikes in the first half on our EBITDA.
And then I will hand over to Niko to talk about the profitability in more detail. Niko, please go ahead.
Niko Haavisto
Thank you. I will go through the segments a little bit in more detail. So, in the Passenger Car Tyre segment, we have the higher sales and improved our profitability. And especially the sales increase was driven by the Central Europe. And in total the net sales being EUR189 million, there is a growth of little bit more than 24% in comparable currencies. Also, the ASP with comparable currencies increased slightly. So, there is a better mix and price mix and lower cost as well. The segment's operating profit was in Q2 EUR7.1 million.
In the page nine, there is the passenger car tires bridge. There you see that the volume growth is plus 22%, EUR33 million price and mix positive with EUR4 million. And the currency is not playing that big of a role in Q2.
In the segment's operating bridge, I would like to highlight there the supply chain cost. So, it was increased largely due to the offtake imports as well as Jukka pointed out, the Red Sea crisis as well as the political strikes here in Finland.
On the page 10, in the middle column there, the price and mix. So, both were slightly positive in terms of development there. So, the 2.4%. This will moderate towards or during the H2 when we have more products and sales volume in the Central Europe. Of course, the winter tires will flatten that little bit as well, but especially the Central Europe now being playing a bigger role. It will moderate going forward.
Page 11. On the Heavy Tyre segment, the market demand, especially in the OE, was weak, as we said already in Q1, that we saw that during H1, it will be weak demand in the OE. Yet, we had the sales of EUR60 million, so there was a decrease of some 10%. But at the same time, I'm proud that we were able to keep the segment's operating profit at around 13% level. So that is a good achievement in that business and in this market environment.
And then finally our Vianor business. So, in terms of sales, we were at last year's level. The operating profit decreased by EUR2 million. And there, we continue to say that the inflation, to put that fully into the pricing, we have some difficulties there, but we are doing our best as we speak.
And in terms of guidance, we kept that unchanged, i.e. that our net sales and segments operating profit is expected to grow significantly compared to last year. And there the kind of the premises as well, that we see that the raw material costs are expected to start gradually increase during the second half of this year.
And with that I hand back to you to Jukka to wrap it up.
Jukka Moisio
Thank you, Niko. So, we continue our journey towards EUR2 billion net sales and strong profits. We are on the investment phase. We are halfway, so we started 2023 and we complete at the end of 2025.
We've done the capacity increase in Finland. We've completed now the US factory and now our operational focus in Dayton. So, throughput, waste reduction, higher volume, all that, but no investment required anymore as we completed the warehouse.
New factory in Romania, the first tire has been produced. However, we keep on installing and making sure that the equipment are fully available and fully capable. And we have ribbon cutting in September. Then we make the products for testing. And then we are ready for the commercial production in early 2025. And on growing contract manufacturing, so compared to 2023, our contract manufacturing volumes that have helped us to achieve higher volume in Nordics, as well as especially in Central Europe, are there. And they help us to ensure that market position net sales develop favorably and they will be then part of our long-term future as well.
Then we move to the growth phase 2026/27. And then we have a look for the increasing market penetration, so of finished products, increased capacity, and improved and enhanced operational capabilities.
In Heavy Tyres, we expect to continue to grow above market level. And then in Vianor, we have the distribution excellence in the Nordics. And we target to have EUR2 billion of net sales, and this is our journey.
At this point of time, we are happy in the investment phase. However, we can report positive things in terms of completing the US factory investment. Also that we are very much on schedule and under budget in Romania and -- or in budget in Romania, even slightly below budget. And then we look forward to start the production in 2025.
So, this is where we are. So, I hand over back to Paivi for questions and answers.
Paivi Antola
Thank you, Jukka. Thank you, Niko. So, it's time for the Q&A. Before that, maybe in order to say one question from the audience, a couple of words about the European Commission's ongoing antitrust inspection in tire companies initiated in January.
Nokian Tyres doesn't have any new information on the outcome of the inspection, and we can't comment on an ongoing investigation. Nokian Tyres is fully cooperating with the authorities.
And now we are ready for the questions, please.
Question-and-Answer Session
Operator
[Operator Instructions]
The next question comes from Michael Jacks from Bank of America. Please go ahead.
Michael Jaques, Bank of America, your line is now unmuted. Please go ahead.
The next question comes from Miika Ihamaki from DNB Markets. Please go ahead.
Miika Ihamaki
Hi, this is Miika from DNB. Thanks for taking my question. You're expecting raw materials to increase in the second half of the year. Can you quantify in absolute basis how much higher this would be year-over-year?
And then secondly, do you expect to offset these costs with higher prices?
Niko Haavisto
We are not quantifying that, but we are expecting to moderate. But, of course, there is a lot of fluctuation currently with the raw material prices. But I don't think we see the similar type of price decreases that what we've seen. So, the expectation is that they will moderate going forward.
Miika Ihamaki
Thank you. And second question, if I may. With now US facility fully ramped up, what is your capacity utilization at the moment out of the roughly EUR4 million nominal? And is it right to assume that there will be no further ramp-up related costs from the US?
Niko Haavisto
Yeah. So, we've said that the ramp-up is done there. We are meaning that all the equipment and the facilities are done, i.e. the warehouse being the final one. There will be still during this year some exclusions. And those are related to those products that we are still running kind of as a first-time products there. And we will have the full capacity available going to 2025.
Miika Ihamaki
Okay. Thanks.
Operator
The next question comes from Boleslaw Lasocki from Thomson Reuters. Please go ahead.
Boleslaw Lasocki
Hello. My question would be about the recent concerns over tariffs on Chinese electric vehicles. What I am wondering about is what kind of impact, if at all, that could have on Nokian Tyres. Do you expect the tariffs to affect somehow your production? Or on the other hand, do you expect any actions from China that could hurt the performance of Nokian Tyres?
Jukka Moisio
We don't expect any immediate impacts on our performance as we are in the replacement tire market. But obviously we need to pay attention to what is happening in the political and the legislation, so that there are future decisions or impacts that will come our way. But at this moment we don't see any -- that will influence us or impact us.
Boleslaw Lasocki
Thank you.
Operator
The next question comes from Thomas Besson from Kepler Cheuvreux. Please go ahead.
Thomas Besson
Thank you very much. I guess it's me. It's Thomas from Kepler Cheuvreux. I have a few questions, please. I'd like to ask them one by one, if that's okay. Firstly, can you give us a broad indication, not a precise number, on the amount of contract manufacturing volumes you are projecting now for 2024/2025, given the state of the markets you're operating in? And is there any risk that your contract manufacturing volumes may be eventually impacted by some changes in import duties? That's the first question.
Jukka Moisio
So, we said initially that when we went in contract manufacturing, that it was somewhere up to 3 million tires. And we are somewhere between 2 million and 3 million at this moment. So, depending, of course, on how the market and how the demand will evolve, we are either at the higher end or we are at the mid-range of those contract manufacturing. So -- and then when we go into 2025, obviously we expect that our volumes go up. And so part of that will come from what are the commercial production. And then we will see which part and how much will come from the contract manufacturing. But it's clear that this virtual factory contract manufacturing will remain part of our future strategy.
And also just to remind that in the Heavy Tyres, we also rely on contract manufacturing in bus and truck tires, as we don't manufacture them ourselves. So, we have two sources or two revenue plans where we have contract manufacturing helping us.
Thomas Besson
Thank you very much. Second question, can you share with us your latest projection for CapEx in 2024 and in 2025? If you're slightly above the half-mark for EUR300 million for the year. How much do you see that for the year unfolding eventually next year?
Niko Haavisto
Yeah. The CapEx for this year is roughly EUR350 million. And we've spent roughly EUR160 million in H1 so far or during H1. And then it will be a little bit north of EUR200 million next year to CapEx.
Thomas Besson
Thank you very much. Last question, please. Jukka, you've announced you're going to retire sometime this year. I wanted to know if there was any progress achieved on trying to find a replacement for you at some point in the second half?
Jukka Moisio
Yes, indeed. I've announced that I will retire during the course of this year. But the Board will work on this successor solution and so on. And I will also indicate that I am, of course, taking care of and in the position until a successor plan has been announced. So obviously, there will be no gap between my plans and what the Board will announce.
Thomas Besson
Okay. So for the time being, no progress to talk about?
Jukka Moisio
The Board has not announced anything. So that's all I can say.
Thomas Besson
Perfect. Very clear. Thank you very much, Jukka. Thank you for your answers.
Jukka Moisio
Thank you.
Operator
The next question comes from Rauli Juva from Inderes. Please go ahead.
Rauli Juva
Hi, Rauli from Inderes here. I would like to follow up on the US factory. Could you say that are you ramping up to production kind of as fast as you can at the moment towards the EUR4 million next year? Or is the limiting factor more for the supply or the demand, if you put it that way.
Jukka Moisio
It's basically such that we have a new equipment and we have a little bit new production plan. Because as I mentioned in the early part of the presentation, that early on we had a plan to do certain tires in Russia and then support the US markets. But now we've changed that and we've installed new capability in the US and we are ramping up those equipments. So, we will be actually focusing on operations only.
So, all the equipment are installed and they are bolted on the floor. So, it's all about capability to produce and efficiency and scrap reduction and all that. And we are basically able to sell everything we produce in Dayton. So, it's really up to us to make sure that the throughput and the productivity improves. We expect that we are on full speed at the end of the year.
Rauli Juva
Yep, that's clear. And then another question. Given your sales, especially in the winter season, fell short of the initial expectations. Do you have a meaningful amount of winter tires in the inventory that you could actually sell more volumes this year than you are producing?
Jukka Moisio
We have a good availability of tires and obviously, we've been able to secure offtake tires. Unfortunately, we lost certain days of production in Nokia for tires. So, this is something that we need to catch up. But we are quite optimistic about the winter tire volumes in the second half. And this is, of course, something that is seasonal for us. And at this point of time, we still are strongly seasonal. But we are in a good position. Unfortunately, there is a political strike, but other than that, we are really fine.
Rauli Juva
Yep, that's clear. Thank you. That’s all for me.
Operator
The next question comes from Akshat Kacker from JPMorgan. Please go ahead.
Akshat Kacker
Yes, good afternoon. Thank you for taking my question. The first one, sorry to come back to contract manufacturing. You mentioned you expect 2 million to 3 million tires from contract manufacturing this year. Could you just clarify how much of that was already done in the first half, please?
Jukka Moisio
No, we don't disclose how they are split between the winter, all season or summer. But you can assume, of course, that the major part of the Central European growth is based on contract tires. And then to a lesser degree in Nordics, where we have a strong manufacturing of premium tires in Nokian. And then the contract tires are complementing the premium tires of the category and so on. And, of course, then we have the whole bus and truck, which is in the Heavy Tyres that comes from contract manufacturing.
Akshat Kacker
That's helpful. Thank you. The second one on Passenger Car Tyres. You highlighted very strong growth in Central Europe in the first half of the year. Could you just talk about your expectations around the second half? You mentioned you are optimistic around winter tire sales. If you could just give us some comments around the overall inventories that you see in the market and the sell-out demand that you're seeing in Europe, please.
Jukka Moisio
Yeah. We expect that when we look at the market, the evolution, of course, in 2023 was a very soft market. And there was, of course, inventory pipeline and all that. So, therefore, the selling was quite soft to run the inventories by the end of the year and early part of 2024 came to a normalized level. And when we look at the demand overall in this year, we see positive numbers in various months. There were maybe one or two months where there was a little bit on the red side, the replacement tire demand. But overall we see positive developments and we expect that to continue.
Obviously from our point of view, what is important is that a year ago we pretty much had only the winter tires for the offtake. This year we have, of course, summer tires, all season and winter tires in addition to increased capability in both in Nokian and in Dayton. So, obviously, these are the facts that where we have our optimism based on. But the overall market we see positive numbers in the demand.
Of course, again when we go into the latter part of the year, let's see how it evolves. But so far the outlook is positive. Not a significant growth, but clearly positive.
Akshat Kacker
Understood. The very last question on again the competitive environment in Europe. If you take a step back, could you just remind us on where we are in terms of competition from imported tires or cheap imports in Europe? Do you see a trend of those imports now picking up? And if you could just talk about your assumptions on what you're seeing in the market in terms of pricing kind of linked to both those questions.
Niko Haavisto
Yeah. I think in the pricing kind of I think we've said there that we applied to marketplace based pricing. In terms of the competition, especially from Asia, we see that growing, but we are in the premium segment. So, we need to keep a good look on that, but we are not too worried at this point as well that we have the tires available in our inventories.
Akshat Kacker
Thank you.
Operator
The next question comes from Artem Beletski from SEB. Please go ahead.
Artem Beletski
Yes, good afternoon and thank you for taking my questions. Actually, the last one by one and the first one is really starting with Passenger Car Tyres. And could you maybe provide some type of indication in terms of volume development in the second half of this year putting it into a context of 60% growth in the first half?
In H1, given the fact that there have been disruptions related to strikes and the Red Sea situation and we are ramping up production. So, could you provide us with some more details on this front?
Jukka Moisio
We can basically say that obviously a year ago when we went into the second half, we did not have offtake, we only had the winter tires and so we didn’t have the all season tires, neither did we have a number of product categories that were supportive of our premium tires. So, clearly the availability is better and also there are obvious markets or market segments which we did not address at all or didn't have a chance to do that.
So in that sense, we have opportunities which are based on availability and based on targeting historical volumes that where we can grow. And we see that -- as we said that the outlook and we reiterated the outlook we expect that the growth continues. But it's also based -- simply based on the fact that the product availability is much better.
Artem Beletski
Okay, that's clear. And then maybe one aspect what you mentioned in Q1 is this Red Sea situation and it was impacting deliveries of offtake tires. Has those tires basically been delivered to customers or has the situation so to speak normalized on that front?
Niko Haavisto
Yeah. I think some of them are delivered, but of course, there were also summer tires and those are not delivered to the customers. But I don't see that as a big issue as right now in terms of our guidance. But clearly some of them are in our inventories.
Artem Beletski
Okay, that's clear. And maybe the last one from my side is really related to ramp-up or preparation related costs. Is the guidance for this year of roughly EUR40 million still valid and do we have some thoughts in terms of '25 when you will be starting commercial production at Romania?
Niko Haavisto
So the roughly EUR40 million is a correct number what we are guiding. At this point, let's see at the end of the year what it will be. We don't give a guidance related to 2025 in terms of the ramp-up expenses. But there will be those from Romania, but not from the US anymore.
Artem Beletski
All right. That's clear. Thank you.
Operator
The next question comes from Quemener from Stifel. Please go ahead.
Pierre-Yves Quemener
Good afternoon. This is Pierre-Yves Quemener with Stifel. I've got three questions, if I may. Coming back to the raw material increase in the prepared comment, you said that you would expect a significant increase in raw material in H2. But I'm not sure I understood the comment you made about the magnitude of that impact in H2 from raw material. That would be my first question.
Niko Haavisto
Yeah. I didn't say a significant, but I said that they are moderating the raw material. So, we've seen a decrease in the raw material prices, but at this point we see that that decline is not continuing, but they are kind of more flattening also. So that's our estimation for the H2.
Pierre-Yves Quemener
Okay, great. Thank you for the clarification. Second question would be on the price/mix which was I would say significantly positive in the second quarter. I've got two questions on that one. How should we think about price/mix into the second half of the year? Is it going to be in the magnitude of 2% plus tailwind? And was it more price or mix in the second quarter? Thank you.
Niko Haavisto
I think it's rather somewhere around 0,1. It's not the plus as we see right now for the H2. So 0 is a better guess at this point.
Pierre-Yves Quemener
Right. And any indication for the second quarter? Will it be more price or more mix for the plus 2.4 in the Passenger Car Tyres operating profit?
Niko Haavisto
We will, of course, see how the raw materials evolve and we have a market that is rising as such. Obviously, what will happen is that we have a volume of 2% plus. We need to be centrally European driven more so we have more all season tires and such that they are not in the mix with the [indiscernible]. But in price we expect that the market will evolve. I'll get the raw materials soon.
Pierre-Yves Quemener
Okay. Understood. Thank you.
Operator
The next question comes from Pasi Vaisanen from Nordea. Please go ahead.
Pasi Vaisanen
Great. Thanks. This is Pasi from Nordea and I do have two questions. First one related to this new factory in Romania. So, what could be the expected sales volumes coming out from the Romania factory next year?
And secondly, when I look at the market consensus EBIT for this year, I think it's close to EUR98 million. So, are you truly confident about this full year consensus, especially regarding you already reported EUR5 million from the first half of this year? So, would it be possible that you actually reach 12% EBIT margin later on this year? Thanks.
Jukka Moisio
So, we stick with our guidance and we cannot comment the consensus, as you know, Pasi. But when we look at the volumes in Romania, so we have a ramp-up plan which is significant. But, of course, we will not comment the exact volumes when we go into the budget of next year. Then we can talk about a little bit what the contribution of Romania is. But we are prepared to service the European markets based on volumes out of Romania factory, and we have about slightly less than 100 SKUs that we will make in Romania in 2025. And those will account significant part of our volume in Central Europe. But on top of that we will have offtake volumes and offtake products that complement our revenue plan in Central Europe. But maybe more about that when we come into budget time and we talk about 2025 performance.
Pasi Vaisanen
Okay. Thanks. I understand. But regarding the full ramp up in Romania. So, should we expect that the full run rate to reach in 2027 or even 2026?
Jukka Moisio
It should be ready in late 2026 and we should see a good volume in 2027. We installed certain machines during the course of 2025 and early 2026. And we expect that they are fully capable and fully placed by the end of 2026. And then productive and up and running totally in 2027.
Pasi Vaisanen
Yes. I hear you. Thanks. That was all.
Operator
[Operator Instructions]
The next question comes from Michael Jacks from Bank of America. Please go ahead.
Michael Jacks
Hi. If you can hear me, it's Michael Jacks from Bank of America. I just have two questions remaining. First one just perhaps on Dayton. Could you share any color on how demand for the Nokian brand is developing in the US? Particularly for summer and all season categories. Any areas that are worse than expected? And would you say that the volume here is defined currently more by demand or availability of supply from Dayton?
And secondly, do you have any update for us on the government subsidy expected for the Romania plant? Thank you.
Jukka Moisio
In North America, so we have the all season, all weather and winter tires and no summer tires really. And then light truck is a new entry in 2024. So those are things.
Our volumes in North America are today defined more by the availability and our production capability and focus of our factory rather than the demand. So, this is the situation today and therefore, the most important job for us is to make sure that the productivity and throughput will improve.
And then Niko about...
Niko Haavisto
Yes. The Romanian State aid. So, we have applied that and it's subject to the European Commission approval. And as I said earlier, we are expecting some results hopefully during Q3 this year.
Michael Jacks
Understood. Thank you. And maybe just one more question if I may. Shipping costs, shipping rates are obviously becoming a headwind for the broader industry already since Q2 and the Red Sea crisis. Is this something that could be an incremental headwind for you for H2, or is this something that is already in the base in Q2? Thank you.
Niko Haavisto
If they continue to increase like that then -- so then it is a headwind. But at this moment, we are okay with it.
Jukka Moisio
We had quite a bit of headwind in the first half it had been inventories and high inventory levels in Finland, for example, because we couldn't ship anything and had to stop the production and all that. So, we had a lot of supply chain headwind in the first half. So that will -- or a big part of that will go away. But then, of course, if these shipping rates are significantly higher then they may create additional headwind.
Michael Jacks
All right. Understood. Thank you very much.
Operator
The next question comes from Boleslaw Lasocki from Thomson Reuters. Please go ahead.
Boleslaw Lasocki
Hello again. I just have a question about the United States and the possible impact of the presidential elections in there. What kind of impact do you think there could be if at all? I'm talking about tariffs, for instance.
Jukka Moisio
Yeah. That is something that we need to assess and wait and see. But obviously what is important for us is that we have a fully invested factory in the US and therefore, we are able to service the market locally. And then whatever things will come with the tariffs or imports and so on, so we need to assess. Obviously, a big part of our winter tire imports go to exports from Europe go to Canada and therefore most of the North American and the US market is being served by the local factory.
This is a good situation to be in, but as your question implies there may be surprises and there may be things that come all the companies way in the future. But so far we are quite pleased of the position that we are in.
Boleslaw Lasocki
Thank you.
Operator
The next question comes from Thomas Besson from Kepler Cheuvreux. Please go ahead.
Thomas Besson
Thank you for taking my follow up question. I love the way your machine pronounces the EU [indiscernible] in French whatever. First follow up question, please. Can you comment on the proportion of winter tires tariffs that have been shipped already in Q2 to wholesale or to retail distribution? We were used for almost 20 years to the fact that Nokian was already shipping a decent amount of winter tires mostly because of your Russian exposure. So, is it fair to assume that there was a low amount of winter tire volumes shipped in Q2 and most of it will be in Q3 or you already had a decent proportion in Q2?
Jukka Moisio
If you look at the mix we had reported in the first six months the winter tires were about 45% of our total shipments. So that's a pretty normal level, isn't it? So not really a whole lot of advanced shipments, neither late shipments. So, we are pretty much on a normal course at this point.
Thomas Besson
Okay, thank you. May I ask you at what point and at what level you expect Nokian's net debt to peak over the next 12, 18, 24 months, please?
Niko Haavisto
I think interest bearing will be peaking by this year-end so that is the highest as Jukka said, as well in this presentation. So, during this year we are at our peak.
Thomas Besson
Thank you. Last question. I understood that maybe I misunderstood at Q1 stage that you are going to give a more precise guide for the year at Q2 stage. Did I misunderstand or do you want to wait until the Q3 stage to precise your guidance?
Niko Haavisto
Yeah. I think we need to wait and see until Q3 in terms of guidance, but still we've said that we've kept the guidance as such and let's see in Q3 are we able to give more precise guidance for the full year then.
Thomas Besson
Understood. Many thanks.
Operator
The next question comes from Miika Ihamaki from DNB Markets. Please go ahead.
Miika Ihamaki
Thanks. This is Miika from DNB. Still to clarify the raw materials and prices here. So, do I now understand right that for the whole year raw material picture expected to moderate, but they still will be a headwind for the second half?
And then, you mentioned that flat or zero contribution into H2 from price/mix, so doesn't this imply a headwind to margins?
Niko Haavisto
So still what I said that the raw material prices how we are seeing that are moderating, i.e. that we see some slight increases there as we speak. But I also said that in earlier calls that we guaranteed some part of that volume and the prices and also the more unknown there is this recyclable and renewables, but that's more towards next year. But still we see that they will moderate, i.e. that this decrease is not continuing and there will be a headwind from that in our H2 as well.
Jukka Moisio
And then when you look at the price/mix, so the mix will be probably a negative component because we have more Central European volumes available this year compared to prior year. However, the price we expect that we match the price with the raw material development.
Miika Ihamaki
Okay, that's clear. Thank you.
Operator
There are no more questions at this time. So, I hand the conference back to the speakers.
Paivi Antola
Thank you. If there are no additional questions, it's time to finish the call. Thank you all for participating and wishing you all a nice summer. Thank you.
Jukka Moisio
Thank you. Have a nice summer.
Niko Haavisto
Thank you.