Cargotec Corporation

Good afternoon, ladies and gentlemen, and welcome to Cargotec's first quarter 2021 results call. Please pay attention to the disclaimer in the presentation. Just a kind reminder that we cannot discuss any merger-related topics in this presentation due to the US securities laws. Cargotec's first quarter orders were strong. Orders received increased by 43% and also our profitability improved. Service orders received increased by 11%. We also announced during the first quarter that we agreed to sell our Navis software business for enterprise value of 380 million euros. The transaction is expected to be completed by the end of third quarter this year. Earlier today, we also announced our aim to reduce CO2 emissions in our value chain by one million tons by 2024. Today, the earnings will be presented by our CEO, Mika Vehvilainen, and CFO, Mikko Puolakko. We will first go through Q1, first quarter 21 highlights, followed by market environment and group level development. Then our CFO, Mikko Puolakka, will go through the business areas, finances and outlook. So, Mikko, please go ahead.

Thank you, Aki. Good afternoon from my behalf as well. And thank you for joining the Cargodeck Q1 2021 call. Obviously, the highlight of the Q1 2021 is the strong order intake we had. Orders increased by 43%. The strong demand we have seen starting from the September 2020 onwards in HIAB and Kalmar mobile equipment continued during the first part of the 2021. We also see a remarkable improvement in Kalmar automation as well as a McGregor demand. In Kalmar Automation, the orders came from the replacement business within the existing customers. The Q1 orders did not yet include any significant automation orders. In MacGregor, the improving market sentiment was already slightly visible in the improving order intake in MacGregor, both on Q1Q as well as on year-on-year. Sales decreased by 15%. This was coming almost solely from the fact that as the order intake during the Q2 and most part of the Q3 2020 was low, and our cycles mean that we will see the strong order intake starting really from September 2020 onwards, impacting our Q2 and onward revenues for these years. the Q1 revenues did not have any material impact from component shortages or shipping issues. I'm also very happy about the service sales being very resilient, also considering that the comparable period last year did not yet have significant COVID-related impact in our operations. The share of our eco-portfolio was 20% down from the Q4. This was primarily coming from the lower revenues coming from the Kalmar automation electric driven vehicles. Also very satisfied for the fact that the comparable operating profit improved despite the lower revenues. This was primarily coming from the good cost control, especially in Hajab and McGregor, where both results improved. The Kalmar decline in operating profit came from the lower revenues. We continue to follow up the online real-time information we get from our equipment activities, and we have really seen the recovery despite the very difficult COVID situation globally continuing in the economic and logistics activities around the world. Especially in HIAB, if you compare this one, and this is now a comparison towards the Q4 last year, and if you remember Q4 last year, our equipment activity actually started to be at the same level or slightly exceed the pre-COVID activity levels of Q1 2020. So these numbers are fairly comparable on year-on-year basis as well. we have seen a significant improvement in activity in Hayab, 18% up compared to Q4 in Hayab in North America, and more than 8% up in European markets. Also in Kalmar logistics equipment, we have seen improving activity levels, both in North American markets as well as in European markets. The slight decline in China is actually explained by the Chinese New Year during the Q1 this year. The same is obviously visible in most of the economic indicators. The container traffic was growing very strongly in Q1, and I'm sure most of you are aware of the logistics and congestion issues in the ports at the moment, and that strong growth is expected to continue throughout the whole year. At the same time, we expect the construction activity to actually accelerate both in North American as well as the European markets throughout the years with the significant growth numbers in both markets. Also, the McGregor market seems to be now turning. Clarkson has updated their estimates to be about 1,000 ships ordered during 2021. It's good to remind ourselves that this is still significantly below the average year of about 1,700 ships, but a clear improvement obviously from previous year. The ship orders during the Q1 were already exceeding 300 vessels, clearly up from the Q1 last year, and the current run rate obviously already is ahead of the Clarkson's estimate for this year. There has been an improved activity somewhat in the offshore oil and gas field as well, and we see the strong demand continuing in offshore renewables, primarily on offshore wind-related vessels and construction. The orders increased in all businesses, and a McGregor slight increase, and it's good to remember that with McGregor cycles, the increasing order activity in vessels should be visible in McGregor equipment order in roughly six to 12 months after the ship order, and then the related revenue another six to 12 months after our equipment order. So, increasing vessel activity should actually start to be visible in MacGregor on the second part of this year, and then the revenues should be then impacted favorably from 22 onwards. A strong order intake coming from Kalmar Mobile equipment, and also we saw a strong order recovery on automation and project business coming, as I already said, primarily from the replacement business within the existing customers. And the high-up order intake was another record, this time actually without any significant government-related orders, as we saw in Q4, coming really from multiple deals and strong activity across all the customers. I think it's also quite likely that there is an element of catch-up in order intake during the Q1, as well as a pre-buy element of that one, coming really from two factors. We have done a number of significant pricing increases in the beginning of the year, and that's probably causing some pre-buy, as well as obviously customers' concerns related to supply chain difficulties that are visible across the different industries at the moment. However, the underlying market is solid, and as already discussed, many of the economic indicators still look very favorable. The order book increased by 22%, and actually, the combined Kalmar and Hajab order book is at the record high at the moment. Obviously, MacGregor is very far away from the sort of strong years it has seen in the past in the higher cycles, but the order book is now heading to the right direction, and this was the first positive book-to-bill quarter for MacGregor since 2019. Sales really were burdened by the low order intake we saw in Q2, and most part of the Q3, and due to the sort of production cycles we have, we were expecting lower revenue in Q1. The Q1 revenues were not materially impacted by component shortages or shipment issues. However, we obviously see risks related to those issues when we move towards the rest of the year. Also very satisfied with services performances, and again, let's remember that the comparison period did not have material COVID-related impact in our key markets. Despite that one, both the Kalmar as well as the Hayab were actually able to increase slightly their services revenues. MacGregor services revenues were down quite clearly, and this was driven by the sort of low activity in dry docking, again caused by the COVID pandemic situation in many of the developing markets. Also good to see that the order intake was actually strong up already during the Q1, also including the McGregor services order intake. The services and software where 40% of our total sales, obviously, this is partly determined not only by the good job in the services, but the lower equipment revenues during the Q1. As a part of our annual cycle, Cargotech has also refined its vision and its strategy. Our breakthrough objectives are sustainability and profitable growth. Our vision is to be the global leader in sustainable cargo flow. In concrete terms, Cargodeck aims to reduce our CO2 footprint or emissions in our total value chain by one million tonnes by 2024. This reduction would be of course very significant considering our global footprint today, and at the same time a fantastic business opportunity for us, answering to the customer challenges regarding sustainability. The success of our strategy execution is measured by our financial reporting, leadership index, an eco-portfolio sale of sales, which we have already reported in our reporting in the past as well. And in the future, we will also report CO2 emission reductions, as well as our customer net promoter score development. With that one, I'd like to hand over to our CFO Mikko Puolakka, who will discuss the business areas in detail. Thank you.

Thank you, Mika, and good afternoon also from my side. Let's start with Kalmar, where we had an excellent quarter from the order intake point of view. Strong growth in orders in mobile equipment across all product categories, as well as in all geographical regions. Also good demand for services. Orders for cranes like straddle carriers were also increasing in Q1. So like Mika indicated, this kind of replacement type of investment market picking up. We did not have any bigger orders in Q1. And then when looking at the sales, sales were down by 20%. The sales for mobile equipment and Also, larger grain revenues declined in total, 29%. This is stemming from the very low order levels in Q2 and Q3 2020. The supply chain-related constraints did not affect our deliveries in Q1. But like Mika also said, there can be certain risks in the upcoming quarters, as we experience, for example, semiconductor-related bottlenecks, as well as transportation-related bottlenecks. The service sales were up by 5%, and this was very much driven by the various services, especially for the cranes. Kalmar profitability declined, and the decline was very much driven by the lower sales. We have reduced somewhat our costs, but for example, we have kept our R&D investments in Kalmar on last year's level in the spirit of supporting our long-term strategy for more sustainable solutions like electrified and fully automated mobile equipment. We signed the NAVIS divestment agreement in March, and the target is to complete the transaction by the end of quarter three. Then looking high up where we had basically with all parameters, a very good quarter. Very strong demand in all product categories, as well as in services across all regions. Like Mika also said earlier, here in HIAP, we anticipate that there is certain pent-up demand coming up from the low orders or investment activity in the middle of last year, and then some pre-buying ahead of price increases, as well as anticipation of certain component availability. We did not book any bigger orders in HIAP for quarter one. Sales were down by 5%, and this is like in Kalmar's case, very much coming from the low orders in quarter two and quarter three last year. Despite the 5% lower sales, we were able to improve significantly the comparable operating profit. And this is coming from the strong cost management and the productivity measures, which have been taken in HIAP. So overall, a very good performance for quarter one. In McGregor, the improving market activity is also visible in orders. We had 100 million euros of orders in quarter four last year. Now 161 million euros coming to great extent from the merchant. vessel market, as well as from services. So we booked, for example, good spare part service orders, as well as certain other services like the cargo boost vessel optimization services. Quarter one sales were impacted by the low order intake in 2020. Services sales were down by 18% due to the low dry docking activity. Despite the sales decline, we were able to improve the profitability from minus two million to plus three million euros now in quarter one. And this is coming from two drivers. Firstly, from the cost of restructuring and integration of the TTS and offshore businesses. And then we have had a very smooth project execution during quarter one, supporting also the profitability. Despite the strong cost reduction, we also continue with the cost savings actions also in 2021. And our target is to reduce fixed costs in McGregor by 13 million euros compared to last year's level. A few words about our financials overall in quarter one. So despite our sales decline by 15%, we have been able to improve the comparable operating profit by 14% from 45 million euros to 52 million euros. And also the operating profit margin has improved by 180 basis points. There were basically two drivers for this positive development in comparable operating profit. Firstly, our cross-profit percentage improved from 22% to 25%, and this comes from the better mix, so we had higher portion of Kalmar mobile equipment and high-up sales, as well as services being 40% of the total revenues. And we have done material cost savings and also in all areas, basically price increases already last year, which now start to become visible. The second reason is that our costs have decreased by 16 million euros, and this is coming pretty much from two areas. Firstly, we have implemented permanent cost savings, so our headcount has reduced from last year's level, and then we still have some temporary cost savings active, like for example traveling, is currently still on a very low level. We had 27 million euros of items affecting comparability, The biggest items here were the 13 million euros cost booking, which we took to establish a new joint venture for McGregor in China with the world's largest shipbuilder, CSSC. And this is a very positive development for McGregor, because this will strengthen McGregor's addressable market and operations also in the coming quarters in China. Also related to McGregor, we had a positive one-time booking of €7 million. And this is related to the TTS final purchase price settlement in the beginning of the quarter. We booked in total approximately €8 million integration-related costs concerning the Cargotec-Konecranes merger, and then we had approximately €10 million of restructuring costs, mainly in McGregor and in HIAP. Our cash flow improved from last year's level, being €51 million, The main driver for this was the improved networking capital efficiency. Our inventory days were approximately three days better or lower than last year, and this contributes approximately to 25 million euros in our cash flow. Cargotech's financial position is very strong. Our gearing was 59% at the end of quarter one, and it has increased from quarter four, and the main reason for the increase was the 70 million euros dividend payment, which we booked at the end of March. Without IFRS 16 lease liabilities, gearing was 45%. Liquidity is on a good level or strong level, 864 million euros, and we do not have any major debt repayments upcoming this year. And then last but not least, our outlook for 2021, we reconfirm our guidance for this year and expect a comparable operating profit to improve from last year's level when it was 227 million euros and with those words i would then hand over back to aki for further questions thank you mikko and thank you mika

Just a reminder that we don't take any merger-related questions in this Q&A. With that, operator, we are ready for the Q&A.

Thank you. If you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. And we'll now take our first question. Please go ahead. Your line is open.

Good afternoon. That's Artem from Credit Suisse. Thank you very much for taking my questions. My first question is about your comments and reports on some pent-up demand in Q1. I just wanted to kindly check if that only relates to HEOP or that's also fair for Kalmar. And maybe you could also try and quantify the impact in Q1. And I appreciate this could be very hard for you to do, but maybe you could talk about what you've seen so far in Q2 on a sequential basis in terms of the magnitude of maybe moderation in demand. That's my first question.

Thank you for that. If I take that one. First of all, obviously, we see the underlying market demand to be very solid. If you look at the economic indicators and also the customer activity, also visible in our equipment activity, there is probably an element of that demand, both in HAIAB as well as in Kalmar mobile equipment. Less so obviously in the automation and project related, which has its own set of dynamics. The other issue we have had is that we introduced a number of pricing increases in early part of this year that are coming into force now. And that together with potential concern of the deliveries, because of course everybody is aware of the supply chain issues in industries. There could be an element of sort of pre-buy on that one, but I would say that the underlying market demand and the activity remains to be strong as well, but there is probably some hike in exceptionally good orders in Q1, but it's really hard to quantify that in detail.

Sure, but I mean, at least in April, are you already seeing maybe your daily or weekly orders starting to moderate versus Q1, or that's not yet what you see at the moment?

We have seen a strong demand to continue in April as well.

We'll now take our next question.

Please go ahead, your line is open. Hi, Mika, Miko, Aki, Magnus here from UBS. A couple of questions from me. So could you comment a bit on the mix in Kalmar and how much headwinds on the margins you saw there? I think you mentioned a couple of percentage points in prior quarters. Was that the same still? And now we obviously have a very strong pickup in the mobile equipment. Do you expect these two percentage points that we talked about sort of to reverse through the course of this year? Is that sort of the quantum we can expect and step up from next in 2021?

Mika, would you like to take that?

Yeah, in Kalmar, if we look Kalmar quarter one, so we had actually more favorable mix already in quarter one due to the fairly low automation deliveries due to the low order intake last year. But that kind of mix was not, more favorable mix was offset still by the by the quite significant sales decline in the mobile equipment, which we kind of consciously did not fully offset with the cost reduction, as I mentioned, that we continue to invest, for example, in the R&D activities to support our strategy.

In the coming quarters, we have seen... Yeah, for the upcoming quarters, we saw a good order development happening actually both in the automation and projects within the replacement, also in mobile equipment. So I would say that the mix is from stable to a slightly favorable for the rest of the year.

Okay, but you're not willing to quantify anything around that regarding the step up as we saw sort of adverse in this year in two percentage points?

No, we don't see an adverse effect coming from that one this year.

And also, could you help us put some color on how much impact we should see in EBIT bridge in Q2 from the reversal of temporary cost measures taken last year? Any color on that would be very helpful.

In general, I would say that last year we implemented the temporary cost savings, and those generated approximately 10 million euros monthly cost savings. Our ambition last year has been to compensate most of those this year, at least to a great extent with permanent savings. And then we have still, as I mentioned earlier, we have some temporary savings ongoing. I would estimate that perhaps from those temporary savings last year, approximately 50% are still in quarter one, temporary, and the other 50%, we have kind of implemented permanent savings.

Okay, so you don't expect any sort of meaningful reversal into Q2 that will come later when traveling comes back and so forth in that case?

Yeah, I mean, traveling most probably will continue still, despite the vaccinations, traveling continues to be most probably still on a fairly low level also in Q2. More perhaps service-related traveling, but other parts still on a fairly low level. Got it. Thank you.

We'll now take our next question. Please go ahead. Your line is open.

Hi, Mika, Mika. It's Aurelio from Morgan Stanley. Thanks for taking my questions. I've got two and I'll take them one at a time if possible. I guess the first question is, you mentioned that The underlying demand in Kalmar, or the order intake in Kalmar, was mainly driven by mobile equipment and replacement in automation of projects. We've obviously seen CapEx announcements from some of the port operators, DP World among others, basically calling for a strong increase in CapEx in 2021. I guess, are you seeing that in the market at the moment? When should we expect to see new, bigger brownfield projects being signed off or maybe even some greenfield projects out there?

We clearly have seen an increased activity and typically, as we have discussed in the past, the sort of stronger traffic growth is usually followed by within 12 to 18 months from increasing capex as well. And we have seen increased planning activities around that one, but it's really difficult to forecast the exact timing of those potential orders. There would be probably some of them landing already within this year, but the exact timing is still uncertain.

Typically the brownfield opportunities, what we see, even though when fully kind of automating the terminal, those could be a hundred plus million euros of transactions. These brownfield investments are done in bits and pieces, meaning that those could be some tens of millions of euros when customers make the decisions.

Okay, that's helpful. And I guess in terms of your cash generation, this quarter was very good. And I think you mentioned that you had a positive impact from, I think, inventories, that you reduced days by three days. I guess the question is, given that you have obviously seen a very, very big increase, especially in in high-up and columnar mobile equipment, which is more in-for-out than maybe some of the projects. I guess my question is if this level of working capital is sustainable or we should expect some natural build-up over the year as you prepare for, I guess, a heavy delivery schedule in the latter part of the year.

Like you saw from our order book, we have 2.2 billion euros order book, which we aim at delivering prudently during this, the remaining part of this year to great extent. And that requires, of course, some increase in the networking capital in inventories, for example, but we continuously So in absolute terms, the net working capital is expected to increase in anticipation of the upcoming revenues, but then we continue to improve the relative performance, so continuously working, for example, with the suppliers to minimize the inventory days at our end.

If I compare the situation where we saw the last demand peak was in 17-18, especially in Hayab, and compared to current status, our internal processes have clearly and significantly improved regarding our own in-house and factory-related processes and also our kind of interaction and process development together with our suppliers has also significantly improved. It doesn't mean that we would not change and sort of face some of the challenges, but overall, I would say that our capabilities are in a much better shape than they were last time we experienced such a peak in orders.

Okay, that's helpful. Thank you very much. I will go back to the QIA.

And we'll now take our next question. Please go ahead. Your line is open.

Yeah, hi, it's Antti from SAP. A couple of questions from me. Firstly, it would be on the backlog situation and lead time in Hayab and Kalmar mobile equipment. I mean, you've seen now quite robust recovery and very high levels of backlog. So what are the lead times currently? And if we kind of reflect your delivery capabilities, should the previous peaks be a good comparison point. Mika, I guess you mentioned that your processes have improved, but on the other hand, you have also cut costs. So how should we think about the revenue recognition out of backlog?

Yeah, the cost cuts have not been primarily around our production capacity or related factors. Those have been more temporary, and obviously we are sort of drawing back those in terms of the temporary levels of short-term weeks to enable us to hike up our production I would say at the moment our capability to ramp up our own production is pretty good. The question mark is obviously still around component shortages. My main concerns would be around higher specification diesel engines, where the microchip shortages might impact that one. as well, and those would probably be visible somewhat in Q2, but probably also very much and maybe the sort of single largest challenges around the Q3 this year. We have not yet seen a significant sort of lengthening of the lead times. Typically, again, in high up, they are around that sort of six months, and in Kalmar Global equipment, six to 12 months, and that the potential lead time changes would be primarily coming from then the availability of the components if we see material shortages in there.

Okay, that's fair. And then secondly, I mean, you've been active on on price increases and i guess now you're seeing kind of component shortage and some rom at inflation so how should we think about the gross margin what do you have in backlog and orders going forward are you seeing kind of more more pressure from the cost side or is the price hike trend still continuing?

We are clearly seeing more pressure from the cost side. The shipping costs have actually had a significant hike. Obviously, a lot of our customers are doing better as a result of that one, but it's visible in our cost level. Obviously, the raw material component pricing is also facing pricing pressures. Against that one, we have done a number of pricing changes in most of our businesses now in the early part of this year, and our estimate at the moment is that overall the impact would be neutral, so we would not see a re-using, but nor would we see expanding gross margin as a combination of those two factors. The gross margin changes will probably primarily come from a more favourable mix.

Okay, that's clear. And then lastly, from me regarding Kalmar and the demand there, how is kind of the external report congestion that we are seeing globally impacting your customers' decision-making and your demand? I mean, they have a handful with bottlenecks right now, so is this kind of postponing longer-term planning and bigger investment decisions? On the other hand, does it support the short-cycle mobile equipment demand?

We saw really a strong demand improvement actually in ordering both in mobile equipment and the mobile equipment really of course is driven a lot by strongly increasing logistics activities actually in all of our key markets. And then obviously the increase in traffic in ports and the port congestion will lead into the further capex investments as we already discussed on that one. Although right now in Q1 pretty much all the large sort of automation related and project related orders were actually replacement orders for existing port capacity, so we have not seen the expansion orders coming in yet.

All right, thanks so much, all from me.

We'll now take our next question. Please go ahead, your line is open.

Yes, hi, Tommy from BNB. Still coming back to the pent-up demand, and I tried to ask it another way. Have you seen an improvement in the pipeline? In other words, what orders have you been booking? Have those been, in a way, exceeded what you have been taking in as new quotes?

Yeah, I mean, it's been visible actually since really from the September onwards, both in terms of the actual orders, but also if I look at out of 90 days or 360 days sales pipeline in businesses and we've seen the expansion in the pipeline and we have actually still today when you look at that one is that the pipeline remains strong. Thanks.

And we'll now take our next question. Please go ahead. Your line is open.

Hi, Mika and Mikko. This is from Indres. One from me, and this one goes to Mikko. About the 10 million euro savings per month in 2020, so 30 million euro per quarter and 50-50 temporary and permanent. Am I right that this still applied in Q1 this year? And going forward, Does the 50% ID, 15 million euro savings per quarter, that should be permanent also in Q2, Q3, Q4 this year?

Yeah, like I said, roughly 50% of last year's 10 million euros temporary savings have been converted to permanent, and then the Other 50% depends very much on how the societies are opening, and how do we kind of increase the, for example, the traveling activity.

It's very safe to assume that in Q2... So 15 million euros per quarter would be permanent.

All right. Approximately, yes. So, like I showed in the previous slides, we have reduced approximately 16 million euros costs now in quarter one, and a good part of that is permanent, as we did not have in quarter one last year, yet temporary cost savings in place. Those started in April. Okay.

Thank you so much. And we'll now take our next question. Please go ahead. Your line is open.

Hi, this is Johan at Keppe Chauvin. I'm just a bit curious on NavVist. A few years ago, you said the business was at break-even because you were investing in new software development. But in two to three years, it should be sort of at the normal software margin of 20 to 30 percent. Is that where you arrived at this year for NavVist?

The Navis has been a slightly profitable business for us. Again, you have to remember that that includes PPA as well. So the EBITDA level on Navis has actually been in a pretty good level throughout this.

Okay, good. And then you're obviously getting a fair share of cash for this now. at an EV to sales multiple, which basically goes back and see well above your group valuations. Now, ahead of the merger, that basically means you're entering the merger with a significant more cash than investors knew about when the merger was announced. We know that Cornecran shareholders get compensated for the big market cap at the time by an extra dividend. Shouldn't Corgotex shareholders get some extra dividends as well ahead of the merger?

None has been planned. Obviously, we have made a decision regarding the dividends for 2021. And obviously, a new company would then decide on that. dividend policy, assuming that we close at the beginning of, or close at the end of this year and start as a new company, it would be the new board that would make then the decision regarding the dividends for the new company for 2022 then. But this strong balance sheet, of course, puts us in a good position to sort of drive for further growth, both in terms of investments in the new technologies, as well as then inorganic growth as well.

But no value creation extra for the existing cargo tech shareholders?

The parameters of the merger of course have already been decided and agreed between the parties.

Excellent, many thanks.

We'll now take our next question. Please go ahead, your line is open.

Yes, that's Artem from Credit Suisse. For some reason, the operator muted my line before I finished asking the questions. But thank you for taking my follow-up. So the first one, which I have, is on Volvo diesel engines. Could you help us to quantify how many days of production do you have covered with your existing backlog of diesel engines? And then maybe what share of your products use those engines in Kalmar? That's my first question.

Wow. First of all, we use different diesel engines in different products. The diesel engine in question, the microchip production, has the biggest impact, the so-called stage five diesel engine. Now, not all of our products use a stage five diesel engine, depending on the end market. So I don't know, honestly, the details. Its primary concern is around the stage five at the moment, and it's a certain part of the production, but not all of the production at all. And as I said, a lot of that depends now, of course, on the capability ramp-up. It will not necessarily have a significant impact for us on Q2, but I think the risks are higher depending on how that develops regarding Q3 deliveries on that specific engine time.

Sorry, just to clarify, so that comment in terms of no specific, no significant impact in Q2, That basically incorporates the two to four week shutdown at Volvo. And then if there is a longer shutdown at Volvo, then your Q3 will be impacted. Is it the right way to interpret this?

Yeah, there are many parameters and it's maybe too early yet to speculate around the Q3. It's also good to note that we are not the sole supply situation with Volvo. We have also other manufacturers, diesel engines we use as well.

Okay, that's very clear. Thank you. My second question was around McGregor Services. When would you expect that business to come back to a stronger growth?

Well, the order intake was up, Mikko. How much was it again? 11%, if I remember correctly. 11% up on services in McGregor. So overall, it looks promising, but obviously the concern is still around the COVID situation in many of the markets that are the primary destinations for dry docking. And looking at the situation, that's probably going to continue for At the same time, as you know, the shipping market as such at the moment is doing very well, and the usages are fairly high. Also, the customers are actually quite profitable at the moment, so I'm sure that will favorably impact the fact that you're able to sort of invest into the ship maintenance again, and obviously higher usages means more more utilization and more spare part there and there as well. So, I would say that overall we would see a favorable market on that one, but the question mark remains on how long will be the dry docking market. It will be limited on that one.

As also other services, like not only spare parts, like I mentioned, for example, cargo boost, which enables the customers to increase the capacity of an existing vessel, can be a fast solution in case customer needs more capacity without ordering a new ship.

Understood, thank you. And my last question is about automation and specifically retrofitting automation. I've been reading, looking at interesting products which were introduced a couple of years ago by some of your competitors, which essentially allow to very cheaply automate terminal tractors. with a payback of literally one year. I guess two questions. Firstly, do you think that there are now more incentives or it makes more economic sense at the moment to retrofit automation than maybe a couple of years ago with all those new products? And secondly, what are the major products you're developing to maybe make retrofitting automation more accessible and attractive? Thank you.

Yeah, that's a good question. If you look at the sort of port yard, the most common automation is around the stacking area. Even there, the penetration is still relatively low, and I'm sure the sort of automated stacking cranes will be taking more and more share of that one, as it's relatively Well, simple would be maybe relatively easy to sort of automate as well. Automated terminal tractors relates what's called horizontal transportation. That's when you take the container from the key crane next to the ship into the stacking area. There are a number of alternatives there. The so-called AGV market has been active for a number of years. Today, we see actually an increasing interest towards automated straddle carriers, which has a benefit of actually being more flexible as a configuration and architecture compared to the AGVs. And then we will also see, I think, the automated terminal tractors taking part of that market. The automated terminal tractors fit to a certain configurations and certain conditions, but, and I'm sure they will also play a part on that one. Obviously we are the market leader in terminal tractor market and automating those terminal tractors is obviously in our focus point as well. And we already have a product demos and sort of pilots going on in that area as well.

Okay. Thank you very much.

We have no further questions at this time.

Okay. Thank you for good questions and good answers, Mika and Mikko. So, our second quarter results will be published on 28th of July. See you then. Thank you.