logo

Hiab Oyj

Q32020

10/22/2020

speaker
Hanna-Maria Leppänen
Head of Investor Relations

Welcome to this news conference regarding Cargotex Q3 2020 results. I kindly ask you to pay special attention to disclaimer. This call is to discuss Cargotex Q3 2020 results. Securities laws in the United States and in other jurisdictions restrict Cargotex from discussing or disclosing information with respect to the contemplated merger with Connecranes. Information regarding the contemplated merger can be found at sustainablematerialflow.com. Until the completion of the merger, Cargotech and Konecranes will carry out their respective businesses as separate and independent companies. The information contained in this presentation concerns only Cargotech. The merger and the merger consideration securities have not been and will not be registered under U.S. Securities Act and may not be offered, sold or delivered within or into United States except pursuant to the applicable amount of or in transaction not subject to the U.S. Securities Act. Then moving to actual Q3 report. Mika will start with group level development and after that our CFO Mikko Puolakka will continue with business areas and financials. Please, Mika.

speaker
Mika Vehviläinen
President & CEO

Thank you, Hanna. Good afternoon from my behalf as well, and thank you for joining the Cargodec Q3 presentation. Overall, I'm satisfied with our performance in quarter three, considering the market situation. The recovery in our businesses continued throughout the Q3, and especially demand in HIAB and in Kalmar mobile equipment developed well throughout the quarter. The services have stayed stable throughout this crisis and are actually down only 4% year to date, and that decline is primarily coming from Kalmar grain upgrade projects and HAJAB installations. The core services have actually fared very well throughout this crisis. Our relative operating margin stayed actually at the same level as last year. This is primarily thanks to the savings, primarily the temporary savings that we have put in place. And those temporary savings are now more and more moving towards the permanent savings as we move towards the Q4. Also, the good margin development in all of our businesses continued, and this is thanks to the sourcing activities we have been able to do throughout 2019 and 2020, as well as the pricing efforts we have done in all of our businesses. Also, the stability of our core services maintenance spare parts has helped to maintain the profitability at the good level. This also shows that we are able to manage the company throughout the crisis without sacrificing too much of our profitability. I'm also very happy to see MacGregor back in black numbers and the great effort that has been done by the MacGregor team heading towards the profitable business again. Despite the many savings we have done to ensure our profitability, it's good to note that we have continued to invest into our R&D and our R&D expenses are up again year on year in driving our eco-efficient product portfolio, electrification, robotics and automation. It's also good to note that despite the decline in many of our product areas, our eco-efficient product portfolio has actually grown more than 8% this year. As said, the relative operating profit stayed at last year's level, and we have seen a good profitability development continuing throughout this year. The coronavirus pandemic impact was clearly less significant already for us during the Q3, The temporary savings have continued throughout the Q3 and to a large extent will continue also throughout the Q4. And also we are moving from more temporary savings to more permanent cost savings in many of our businesses. Also behind the good result is the continuous productivity improvements we are doing in all of our businesses and our headcount has declined so far year to day with more than 800 persons. We see a good demand recovery happening, especially in HIAB and in Kalmar mobile equipment. Customers are still clearly cautious about the larger investments such as the port automation. And our delivery situation is back to almost normal situation with no major issues with our component suppliers nor our own manufacturing units. In terms of the activity, today obviously we have a very large number of connected equipment that gives us real-time online visibility on the activities in the different sectors of the logistics. The activity increase has continued throughout the Q3, and in many areas we are today close to the pre-COVID crisis. The red balloon here shows the Kalmar mobile equipment activity level, and the blue, the Hayab crane activity and truck activity. in these areas, and as you can see, the development has continued. We are still overall somewhat short from the pre-COVID crisis and last year levels, but that varies from one sector to another and country to another. In some areas, we are already over the activity levels that we had pre-COVID, and in certain areas, we are still well below those activities, so quite a lot of variation in that activity level, but overall, direction is clearly up in all of these areas. In terms of the market environment, obviously the Q3 was still a difficult one in many areas. A number of containers handled and the container flow was still obviously down in Q3, but is expected to increase already in Q4. And the estimates are that the next year container traffic volumes will grow roughly seven percentage points. Obviously, also construction activity has been down, but now we are seeing signs of turning. And for example, in the US, the housing market index in September was at the record high level. In Europe, the construction activity is fairly mixed back today with the large variation between different countries. The market environment in McGregor continued to be a difficult one, and we have seen almost record low number of new ships ordered so far. However, the market is expected to start to recover with Clarkson estimating about 900 ship orders next year, which is still well below our normal year level. The orders received have bottomed out during the Q2, and especially good development we have seen in Hayab, especially towards September, which was a strong order month, as well as in Kalmar mobile equipment. And the recovery we also started to see clearly in the US, especially during September, where we had a good order intake happening both in Kalmar as well as in Hayab, also in the US market. Also, good to note that Hayab order backlogs has now actually turned back to growth. In Kalmar, the mobile equipment order intake has developed well, but we have seen postponements in the larger investments, primarily around the port automation. However, the backlog and the pipeline in port automation is solid. We have not seen any cancellations on those ones, but we have seen slowdown and postponements on some of those decisions with the buildup in the pipeline happening as we speak. And in MacGregor, obviously, the low market situation has caused the backlog to go down, but we still have more than one year delivery of equipment in the backlog in MacGregor as well. As said, operating profit trend has been good. We have seen clear absolute operating profit improvement quarter on quarter this year, and we've been able to maintain a comparable operating profit margin at the same level as last year. The service business has been very resilient throughout this one, and even though we have seen some decline in there, in Kalmar that decline has almost solely come from larger crane upgrade projects, and the core services have actually maintained their good level in there as well. Also in high up, the service decline has primarily come from the installation and ancillaries, which are related to the new equipment and truck deliveries as well, and the core services have maintained a good level in there. We have seen decline in McGregor services, and this is primarily related to the access for the ships and the capability to maintain them, as well as the low level of the dry docking activities there as well. However, overall, the services and software have maintained a good level. We saw some decline in software sales. This was primarily related to large license deals in Navis and the timing of them, where we actually saw a number of relatively large deals in Q3 last year. And this year we didn't land any, but we saw good opportunities to actually close some of the license agreements throughout the Q4 this year. With that one, I'd like to hand over to Mikko Puolakka, who will cover the business areas.

speaker
Mikko Puolakka
Chief Financial Officer

Thank you, Mika, and also good afternoon from my side to all you on the lines. Let's go first to Kalmar, where the mobile equipment was nicely supporting the overall Kalmar financial performance. Kalmar orders were down by 17% year on year. This was mostly coming from automation and projects division, where customers were holding back bigger investment decisions. As Mika mentioned, no order cancellations, but customers cautious in making big investment decisions. Looking Kalmar orders further, so in mobile equipment, we saw actually very small decline in the orders and actually the mobile equipment orders were improving nicely from the low Q2 levels. Kalmar sales were down by 14%. The automation and project division sales grew very much supported by the orders which we have won in 2019 and which we are now delivering. The sales in mobile equipment services and software declined. But also like a bit like in orders, also in those businesses sales, the decline was clearly smaller in quarter three compared to quarter two. So also there an improvement visible. The Kalmar absolute comparable operating profit declined very much driven by the sales decline of 60 million euros. And then we had some costs related to the Kalmar automation and project division operating model reorganization. But when we looked at the comparable operating profit margin in Kalmar, it was almost 9%, and very much supported by the strong mobile equipment performance in Q3, and then also the continuous productivity improvements that we have done in Kalmar, as well as the cost reductions. Then looking high up, also there order decline, but again, very similarly to Kalmar, the order decline in quarter three was much smaller than what we experienced in the second quarter. In the second quarter, the orders went down by some 30%, now 11%. uh sales were declining uh 17 percent but also here in in high up's case the decline was clearly smaller than what we saw in the second second quarter year-on-year comparison high up delivered a strong comparable operating profit, despite a 53 million euros sales decline, only 3 million euros decline in the comparable operating profit. And also the comparable operating profit margin clearly increasing from last year's levels to 12.2%. The comparable operating profit margin improvement is very much coming from the continuous productivity improvements also in HIAP as well as cost reductions. And currently we have approximately 480 persons smaller headcount in HIAP compared to last year's situation. Then looking at MacGregor, where the heavy actions that we have done in TTS integration as well as overall MacGregor restructuring are bearing fruit. Markets, like Mika showed earlier, are already still weak. Customers are optimizing their cash, which is very much visible in the orders as well as in sales. The bright spot in MacGregor is clearly the comparable operating profit, which is now 2 million euros for the third quarter. And also, they're very much coming from the heavy actions restructuring TTS integration. We have approximately 340 persons, smaller headcount in MacGregor compared to the situation 12 months ago. The TTS integration and the restructuring is progressing actually better than what we anticipated in the beginning of the year. And due to this, we have increased the savings target for this year from the original 15 million euros to 20 million euros. And out of these 20 million euros, we have now already so far delivered 14 million euros in the first nine months. A few words about our key figures. Our total sales are 777 million euros for the third quarter. This is 124 million euros lower than a year ago. This kind of sales decrease has led to approximately 40 million euros lower cross-profit. To kind of offset this cross-profit and sales decline, we have then reduced our SG&A costs by 24 million euros. And this has enabled us to maintain the comparable operating profit more or less on the same level compared to last year's quarter three, 7.3%. We had 11 million euros of items affecting comparability. These are mainly related to the previously mentioned restructuring programs in MacGregor, in HIAP and in Kalmar. Our net income, despite the 124 million euros sales decline, net income was almost on last year's level, 27 million euros, and earnings per share was 0.41 euros per share. Cash flow was strong in quarter three, very much supported by the good performance, both in HIAP as well as in Kalmar, especially in the mobile equipment. And in addition to that, we have been able to reduce the networking capital from the quarter two levels, especially in inventories as well as in receivables. Our financial position is strong and liquidity is on a good level. Our gearing was 66%. This is 12% units higher than at the end of last year. Roughly 9% of this increase is coming from the dividend payments, what we have done during this year. And the liquidity is at 830 million euros, so very strong for the current situation. No major changes in our debt portfolio. If we look at our outstanding debt maturities, we don't have any major debt repayments coming up in the next 18 months' time. And then our outlook, if we consider the current market environment, as well as the supply situation, we expect that the second half comparable operating profit increases from the first half when it was 82.9 million euros. Then I hand over to Hanna-Maria.

Disclaimer

This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.

-

-

Investor presentation