Cargotec Corporation

Welcome to Cargotech's third quarter 2021 results call. My name is Aki Vesikallio. I'm from Cargotech's investor relations. Please note that today we are not allowed to discuss any topics related to Connecranes merger due to the securities laws, for example, in the United States. The results will be today presented by our CEO, Miika Vehviläinen, and our CFO, Mikko Puolakka. The presentation will be followed by a Q&A session. With that, I'll hand over to Mika.

Thank you, Aki. Good afternoon from my side as well, and thank you for joining the Cargodeck Q3 2021 call. The robust demand in our business is continued through the Q3 as well, and we recorded nearly 1 billion euros of orders, one of the highest quarters in the Cargotech history. Service orders also developed and service business overall very well, with the service orders increasing by 18%. The longer delivery times are very visible, really driven by the global component shortages, as well as the logistic challenges, and that was visible in our revenue development, especially in Kalmar business unit. Very pleased with the good performance in Hayab again during the Q3, which was the all-time record at Q3 for Hayab. Also very pleased to see that the strong demand shift towards the electric vehicles is continuing. And for example, in our forklift truck, the orders increased already to 27% of the total demand as well. Also, due to receiving the payments from the navies exit, our balance sheet is in an excellent position at the moment. It's gearing down to 31%. I will be covering some of the highlights of the Q3, talk about market environment and the group level developments, and then Mikko Puolakka, our CFO, will cover the business areas and some financial details and the outlook of the CardiDec. As said, the robust demand really continued throughout the Q3. This was the second highest Q3 order intake in Cargotech history. Year-to-date, our orders are up by 57 percentage points. The orders are up across all the different businesses at the moment, but especially strong in Hayab and Kalmar mobile equipment. But at the same time, the outlook for the longer cycle businesses in MacGregor and Kalmar Automation and Project is looking also brighter. Sales increased by 6%, really limited by the component shortages and the logistics availabilities. As such, our factory capacity is able to cope with increasing demand. The share of the ECO portfolio was 17% of our revenue, slightly down, caused by the fact that Navis, who was recorded as an ECO portfolio due to digitalization, is now, of course, not part of the group anymore. And then some of the heavy electric train revenues have declined compared to previous year due to the low order intake during 2020. The comparable operating profit developed well in Hayab, and also pleased with MacGregor, even though the operating profit declined slightly, but this was still a positive result with extremely low revenue, and we have now seen the bottom of the revenue in MacGregor's current shipping cycle. The Kalmar result was slightly disappointing, really driven by the delivery issues and increasing costs, and Mikko Puolakka will cover that a little bit more in detail. Our data from our running equipment showed very clearly that there is a holiday impact, and as we have said repeatedly, the Q3 is always seasonally weaker for us. We saw the impact in some of the running hours, but actually after the holiday season now in September, running into October, we are against a very high utilization rate across the board in all of our equipment. And this is obviously also visible in strong order intake and demand for our equipment. And this is obviously also good news for our services with high equipment running hours and wear and tear coming from that one. The market environment looks positive in all of our key segments. The global container throughput has increased strongly this year, is expected to show strong growth in Q4, and also analysts expect next year, 2022, also showing strong growth figures in global container throughput. Also, the construction output both in the United States, as Europe has continued strongly, somewhat we would expect that to slow down, primarily due to the material and labor availability moving into the next year. The bright picture is also very visible in the shipping segments, where we have seen orders going up very strongly, and especially merchant ship. And what's really important for us is that this is happening in the key segments. McGregor operates in container ships, bulk ships, and rural ferry segments as well. And clearly, this will be visible moving into the McGregor orders into the 22. Despite the higher oil and gas prices, we have not seen any increased capex in the oil and gas sector. However, the renewable segments really driven by the offshore wind is showing very strong growth and a lot of prospects for the MacGregor in that segment. As I said, the strong underlying demand really continued both in Kalmar and especially in the mobile equipment side and in HIAB, but also in automation and project as well as in McGregor, the orders started to improve. We have, of course, done a number of pricing increases. The last price increase we did was in July this year. However, we have seen the strong order intake continuing beyond the pricing increases and really driven by the underlying strong market activity at this moment. The high demand and longer delivery times are obviously very visible in our order book, which is at record high level and consisting of an excellent quality of the sort of backlog in there, especially from the high up side, which now represents nearly three quarters of revenues, and then in Kalmar, primarily coming from the mobile equipment side as well. We have also now started to see the McGregor book to build turning positive again, and we start to see the slow buildup of the backlog in McGregor as well. However, we do expect that the biggest impact in order intake for McGregor coming from the strengthening shipping cycle will only be visible in 2022. Despite the many actions we are doing, we are still suffering from lower than we would like to see revenues. We fell short about 50 million euros compared to a situation where we would not have seen the limited issues with the logistics and component availabilities. This is especially visible in the Kalmar mobile equipment, which is sort of very close in terms of the type of equipment for the automotive and truck industries as well, but also visible in Hayab. Our own factory capacity at this moment is not an issue. This is really depending almost entirely on the component availability, where there are multiple fronts and multiple suppliers that are sort of struggling to ramp up the capacity for us. Obviously also the different logistics issues in terms of the truck availability, shipping availability and port congestion are somewhat also limiting the revenue growth. I'm very pleased with the good progress that continues in our services business. Orders increased by 18% and services sales increased actually across the board in Kalmar, Hayab and in McGregor. The services growth is still somewhat limited by the COVID restrictions, but at the same time, the high utilization rates is also helping as well. Obviously, the software sale is now heavily impacted by the fact that Navis is not part of the portfolio anymore, but it's good to note that despite the Navis now missing from portfolio, the services, which is now the big bulk of the revenues and software represents 34% of our sales. We continue our strategy execution. It's very clear that pressure from the government, end users, different regulators is driving for our customers to look for more sustainable ways to handle their cargo flow. And we are in an excellent position in terms of our market reach, product offering and technology investments to cater for that requirement. In practical terms, our strategy execution progressed in many fronts during the Q3. We finalized the disposal of Navis by 1st of July this year. We are accelerating our growth in high-up by doing Bolton acquisitions. A good example of that one was the acquisition of the Gulf Up in US, which gives high-up a better reach on the demountables market segment in US and able to leverage a new product portfolio into the existing high-up services and distribution channels. Also in U.S., we expanded our capacity to start the truck mounted forklift production in U.S. This will obviously help us to meet the stronger demand. It also helps us to meet the sort of current U.S. dollar exposure we have in Hayab by having more dollar based production and supply chain available for that market. And Cargotec together with its business areas, Kalmar and Hayab, has announced a cooperation with SSAB, where we are the leading partner with them to look at the usage and utilization of carbon-free steel in the cargo handling industry. Our electric portfolio is expanding and will be covering the whole range of Kalmar mobile equipment by the end of the year. And it's good to see that the offering is also meeting market demand. Here are some examples of the ECO portfolio orders during the Q3. 50 medium electric truck forklifts for SEAC in France. As said, already 30% of the forklift orders is actually in electric format, and we have seen that continuously increasing. 18 hybrid shuttle carriers for the Port of Virginia in US. six automatic stacking cranes for the VICTL in Melbourne, Australia, and then a number of zero-emission products into the port in Indonesia as well. So we can see that this is not limited only for the European and US-based customer, but the demand for ecotype of products is actually sort of covering the whole global demand at this stage. Also, we came out with the announcement today in connection of the Q3, announcing some leadership changes in the Cargotech team. Michel van Roosendaal, who has very successfully steered the McGregor through very difficult times for the last six years, is now taking over to Kamos. And Michel, with a strong background in many of the high-quality businesses, including Danaher and United Technologies, is well positioned to take the Camus performance now to the next level, as well as the Kalmar mobile equipment. Leif Byström will then be succeeding MacGregor. Leif has been the COO for the MacGregor business and has been serving MacGregor for many years as well. So I congratulate both and am very excited about the new appointments and making our team even stronger as well. And with that one, I think we move into the business areas, and I hand over our CFO Mikko Puolakka.

Thank you, Mika, and good afternoon also from my side. Let's have a first look on Kalmar, where we had a mixed quarter. We had a good demand in various solutions, but then our operations were impacted by component shortages. In mobile equipment, we had good growth in orders in terminal tractors, as well as in forklift trucks, and as Mika elaborated earlier, 27% of forklift orders were for electric versions. Also in the large grains, we got orders for replacement investments, for example, for straddle carriers. And we announced also one automation deal. This was in Australia, and it was for expansion of existing terminal operations. And also the services demand continued to grow, driven very much by the good utilization of the equipment. Kalmar sales increased by 3%. And it's good to remember that we closed the Navis divestment on 1st of July. So excluding Navis or kind of with the comparable basis, Kalmar growth would have been 10% excluding Navis. We had approximately 30 million euros of sales in quarter three, which has been delayed to quarter four and latter quarters due to the component shortages. Service sales improved by 9% in Kalmar. Despite the growing revenues, the profitability declined, and there were a couple of reasons for this. We had lower productivity in our assembly operations due to the component shortages. So we had to move products back and forth as the components are coming in and we can then finalize the product. And this is impacting our productivity. We have had also higher freight costs as well as component costs. And for example, during quarter three, the freight costs impacted approximately one percent unit in Kalmar comparable operating profit. So without that, Kalmar comparable operating profit would have been nine percent. And then we continue with the investments in electrification, automation and robotization. And we are having several product launches in the coming months and quarters. Then moving to high up where we had an excellent performance in quarter three, despite the challenging supply chain situation. Orders grew very nicely, and if you compare HIAP's Q3 orders, those were more or less on the same level as in Q4 2020 or Q1 2021, as well as 30% higher than in Q3 2019. So, demonstrating the strong market activity what we experience at the moment. Backlog is exceptionally high for the high-up type of business. Now, like Mika indicated, representing nine months of sales. High-up sales grew very nicely, 21%, services 9%. In high-up, we had also delays in sales and deliveries due to the component availability, and approximately 20 million euros of sales were postponed from quarter three to latter quarters. Comparable operating profit improved very nicely. And as Mika also mentioned, this is in absolute terms, as well as in relative terms, the highest ever quarter three operating profit for HIAP. And we completed the GulfUp acquisition in quarter three in September. And on the right hand side, you can see also a typical product for that business. Then, MAC record, where the positive market development contributed nicely to the order development. Actually, we saw growth in all three product or service divisions, in merchant, in offshore, as well as in services, and the growth came quite equally in orders for these three divisions. In the merchant business, especially the RO-RO and cargo vessel related orders were the key contributors to the growth. McGregor sales were down by 14% and this is very much coming from the low order intake in 2019 and 2020. But we believe that this should be the lowest point in McGregor's trend here and supported by the By the third quarter, when we have had good orders, that should contribute also to the growing revenues in the coming quarters. Profitability was slightly down compared to Q3 last year, but we have been able to offset this 14% sales decline by higher service portion. So our service sales in McGregor accounted for 46% of total sales, while it was 37% a year ago. And then we have continued also with the cost savings. This year, we target 13 million euros cost savings compared to last year. Then a few highlights about our key financials. If we look at quarter three profitability, we had a very large positive one time impact from the Navis divestment. So in the items affecting comparability, we booked 230 million euros sales gain from the Navis divestment. other kind of large items in the items affecting comparability we had approximately 16 million euros one-time costs related to the merger between cargo tech and connect grains thanks to the navis divestment also our effective tax rate for quarter three was fairly low it was 20 percent And that was very much coming from the Navis divestment. And also contributed by the Navis divestment, our ROSI was now 14.3%. And as a reminder, our target is to be at 15% in the long term. Looking at the year-to-date numbers, very strong development in orders, 57% higher than a year ago. key contributors coming from mobile equipment, high-up, as well as services in our all three businesses. Also, our comparable operating profit is 19% higher than a year ago, and here the key contribution is coming from high-up. We had fairly modest cash flow in quarter three, and this is to great extent coming from the component shortages. So when we have missing components, we have had higher working progress and this has increased the inventories and impacted our cash flow. At the moment our inventory days are approximately 116 days, while it was 102 days at the end of last year. And these roughly 14 days means approximately 100 million euros in our inventories as well as in cash flow. We have a very strong financial position. Our gearing improved to 31% driven by the Navis divestment and the one-time profit from there. Also, the 380 million euros sales proceeds from the Navis divestment supporting there. Excluding the IFRS 16 lease liabilities, our gearing is at 20%, and our net debt to EBITDA ratio is at the moment 1.0. We are not having any major debt repayments coming up in the coming years, so fairly balanced maturity profile. The financial position offers a good position, for example, for M&A. And we reiterate our guidance for 2021 and estimate that comparable operating profit for this year improves from 2020, when it was 227 million euros. And with those words, I would hand over back to Aki for Q&A.

Thank you Mikko and thank you Mika for the presentation. With that operator, we are ready for the Q&A.

Thank you. If you would like to ask a question, please press 01 on your telephone keypad. If you wish to withdraw your question, you may do so by pressing 02 to cancel. There will now be a brief pause while questions are being registered. The first question comes from Magnus Kruber from UBS. Please go ahead, your line is open.

Hi, Mika, Mikko, Aki, Magnus from UBS. Just a couple of questions from me. So first, it was kind of you to quantify how much of the 50 million came in the different business areas. But have you commented on how much you had in the second quarter from this, if any? And also, if you did, could you let us know what sort of the year-to-date overhang would be from undelivered orders related to supply chain issues?

Yes, thanks for the good question. We had 20 million euros in quarter two, quite equally distributed between Kalmar and Hayab. And that has been kind of catched up now during quarter three. And in quarter three, we had in total 50 million euros, roughly 30 million coming from Kalmar and then 20 million from Hayab.

Perfect. That's very clear. Is it fair to assume the EBIT impact from these delays is... Can we assess that with the gross margin, perhaps?

It would be approximately 15... From this 50 million, we would have roughly 15 million euros EBIT impact.

Perfect. Thank you. And then, finally, could you talk a little bit about the demand outlook that you have seen through the quarter in the mobile equipment, in Kalmar in particular, and also a little bit on Hieb. What do you see that would be very helpful?

What we have seen, I mean, since the pricing, last round of fairly heavy pricing increases we did in the July, we have seen continued strong demand in there, and also looking at the early part of the Q4 now, we have seen that same demand continuing, both in the mobile equipment as well as on the on the high up side and obviously the outlook right now for the McGregor is clearly brighter not necessarily realizing that much in Q4 but certainly should be visible next year we also see in the port side on the heavy investments the pipeline getting stronger I think we should not expect any larger automation orders because the so-called brownfield automation is really prohibited by the huge congestion in the ports at the moment that actually prevents customers of closing down parts of the operation. But what we are seeing in our pipeline and sort of the VICTL example of that is further port expansions that are in the pipeline at the moment.

Brilliant. Thank you so much. Thank you.

Thank you. The next question comes from Johan Eliasson from Kepler Chevro. Please go ahead. Your line is open.

Yeah, thank you for taking my call. I mean, obviously, the order development in HIAB you didn't compare with Q2. I guess there was a fair amount of pre-buying in the order intake for HIAB in Q2. But you say the demand is still strong there. I mean, what sort of level should we compare with when you think about Q4? It's typically a seasonally stronger quarter than Danks. Do you think that still be the case now when pricing is impacting pair tracing behavior as well?

I think the Q3 number was exceptionally good for Q3. I mean, if you look at past in the history, overall, the high-up performance, as we said, this was the all-time high Q3 for high-up. So that's a very robust order intake. The seasonal impact usually is quite clearly visible in there. And as I already said, overall, the close to one billion orders across the whole company was the second highest Q3 we've ever seen. We had one in 2007, I think, when the McGregor demand was exceptionally high. So for Q3, I think overall a very robust situation. The underlying market is still very strong, but when you look at the sort of order intake of 57% up here today so far, and very strong demand we have seen in high up, I would not be surprised if we start to see that rate slowing down.

some somewhat when we move into the q4 but so far it it's shown to sort of continue across across the different businesses at the very very robust level now into the q4 as well and you mentioned i mean the the backlog is record high now for here i mean is there when when customers come in and ask for for a crane or a truck what are you saying in delivery times can they get it you know in within the normal one quarter or two quarter, we're talking half a year now.

Yeah, it varies from one product to area, but if you look at kind of the high level math at the moment and with 900 million of backlog, and if you make an assumption of 100 million plus revenue on a monthly basis, we are sort of effectively covered until Q3. Next year, what actually is in a way favorable for Hayabat at the moment is that customers as such necessarily don't require the equipment at the faster rate. And the reason for that one is that the truck delivery dates at the moment are sort of 40 to 50 weeks in many cases. So there is no point actually trying to deliver, for example, cranes any faster as then the customer would end up waiting for the truck delivery on that one.

And do you see some risk that there might be some cancellations eventually because of the situation when they are pre-ordering left and right?

Yeah, I would say that I'm not too particularly worried. One reason, obviously, is that after a number of pricing increases, if you cancel order today and then you would need the equipment later on, you would end up paying more than 10% more for the equipment. So there's a certain built-in incentive if your order is sort of coming from the late last year, early part this year, to hold on to that. that order we have also introduced more and more across our different customer segments and products cancellation fees for our products as well so trying to sort of keep up with changing situation we have done couple of things in a contractually with our customers we have shortened our price increase notices from in some cases 60 even 90 days to 30 days across pretty much the whole product portfolio on customer set and then we have introduced quite a bit of sort of in our contracts cancellation fees as well so the combination of cancellation fees and higher pricing for the new equipment I think I'm not particularly concerned about the cancellations at this stage excellent and then on that Greg I mean it's been many years now when they've been struggling around breakeven and now finally

We see firm evidence out there that there's a big amount of container ship orders to come. Are you still believing this business can sort of get back to 10% margin level when these equipment orders materialize and come into revenues, let's say 2023 or so?

Absolutely. I think when the market is there, I see no reason. We are actually in a much better position than we were during the last cycle. And if you look at our cost base, it's considerably lower. We have moved quite a lot of our engineering and support resources from high cost countries to lower cost uh countries in poland and china so we can ever leverage the demand from lower cost base the services is much better shape actually as as mikko was saying and nearly half of the revenue now come came from services services have been growing and very clearly now with the high utilization and the fact that shipping lines actually now can afford to maintain us i think there's a real opportunities to sort of improve our maintenance revenues moving into next year as well. So I'm very optimistic that once the orders start to come in, we will start to see the MacGregor heading into the double digit numbers. Again, it's a long cycle business, so orders will come next year and most of the revenue will only start to realize in 2023, but it's certainly looking very good.

Excellent. Thank you very much.

Thank you.

Thank you. The next question comes from Aurelio Calderon from Morgan Stanley. Please go ahead, your line is open.

Hi, Mika. Miko, thanks very much for taking my questions. I've got three, if I may, please. The first one is around the 50 million that you said you've lost in terms of deliveries in 3Q. How much do you think you are going to still miss in 4Q? And when do you think you can catch up with those sales? I know it's a little bit of a crystal ball exercise, but when do you think that this supply chain issues and bottlenecks are going to ease at least for you?

It's a good question and I wish we would have the crystal ball. It's not kind of sure that it's possible that we can miss also in quarter four as we at least currently see that the component situation is not getting any easier during quarter four. Similar kind of development can happen also in quarter four. And it's very difficult to predict in advance. Like this 50 million euros, we were expecting higher sales for quarter three, but due to the component shortages, those deliveries will be realized later in quarter four, perhaps even in quarter one.

is a help on the way when you talk to our suppliers people are adding capacity at the moment the question only is that how fast will that actually start to be visible so we do expect that the supply situation will remain difficult in q4 we do see number of efforts to sort of alleviate the situation in there but how much of that will actually come to and help in and during the q4 is still a big question mark

Okay, that's helpful. Thank you very much. And I guess my second question is around the services business. And I know that 3Q is usually sequentially weaker, but if you look at the order intake, it seems to have declined sequentially quite a bit. I wonder how much of this is you think just written by people that maybe did some pre-buying kind of increases or kind of extending lead times on something like spare parts and how much of this you think is just a normal seasonality in the business?

I think just the seasonality, again, if you would look back a number of years, also in services, the activity lowers in Q3. There are a number of holiday days and others that will affect that one as well. So I think one needs to remember that the activity level started to increase quite a bit already in Q3, and especially the September was already fairly strong in last year. So in that sense, the year-on-year comparison starts to be a little bit more valid in Q3 also. So we do see that the underlying activity is driven. The COVID restrictions are still there, but there are less of those ones. And of course, the high level of equipment activity will help us, but also very much the underlying self-improvement work we have been doing and continue to do in our services is helping us as well.

Okay, and just one last question from my side. I think you've mentioned, back in Turkey, you mentioned that you were expecting maybe a little bit of a slowdown in high up, given that you were putting out prices again and today the print seems to be quite robust here and so the question is a are you putting more price increases in in high up or in general across the business and two if you think that this is going to have an impact on order intake or you think that customers are really really appreciate that you you need to put up prices given that input costs are rising for everyone

First of all, we actually have not seen any slowdown so far, even with the relatively hefty price increases we did in July. Typically, we do pricing reviews towards the end of the year, and we plan to do so this year as well. So I do think there will be further price increases in storage, and we have not seen that to hamper the demand so far.

Okay, thank you very much.

The next question comes from Magnus Gruber from EBS. Please go ahead, your line is open.

Hi, and thanks for taking my follow-up. I just wanted to ask you about the labour cost inflation, what you're seeing there. I think we discussed already in Q2 difficulty to access skilled labour and how is that developed in Q3? And do you have an assessment on the labour inflation that you anticipate over the next months and years?

I think the labour inflation is most visible in the blue-collar working, especially I would say manufacturing side in US, somewhat also on service technicians, but one needs to put it in context as such. The portion of the labour context in typically now total manufacturing cost is about five percentage points. So it's relatively small part because of the type of operations we do as such. So there will be probably some impact moving forward, but it's not going to have a significant impact on that one. And now, of course, remains to see what will happen overall in the inflation environment and the white-collar work as well. But what we have seen so far is the kind of labor shortages and the labor inflation, especially in the blue-collar manufacturing and somewhat also in the service technician area.

Got it. Much appreciated. Thank you so much.

Thank you. The next question comes from Max Yates from Credit Suisse. Please go ahead. Your line is open.

Thank you and good afternoon. My first question was just on the 100 basis points of margin impact that you mentioned in the CalMar division. How should we think about this sort of going forward? Is this a sort of temporary dislocation between The costs that you're facing, have you kind of now tried to reflect these in your price or in additional price increases or perhaps sort of price escalators on some of the contracts? Or should we think that kind of actually you've done everything that you can on pricing to reflect the raw materials? And this is just something that until sort of container ship rates and shipping capacity increases, this is something that you will have to take within your margins going forward. How should we think about that?

Yes, 1% unit in Kalmar in quarter three. We have introduced certain transportation surcharges in Kalmar, so we expect that this should gradually compensate going forward this higher transportation of freight costs.

Kalmar in terminal tractor business, we had a dealer event this week in US where we introduced an $1,800 surcharge for the deliveries. That's actually also applicable for the existing orders as well. And that certainly will compensate on that one. But overall, I would say that the proportion of the freight cost that has been relatively low on that one can be as high as three percentage points in some of the Kalmar equipment at the moment. We do expect that that situation will sort of remedy itself.

And just, sorry, could you mention that number again in the US? So the surcharge that you put on? $1,800.

Yeah, per equipment, yeah.

Okay, that's helpful. And then just my second question would be on kind of what you were seeing competitors doing on price, because obviously you've talked about kind of pretty notable price increases through the year. And I just want to check kind of what your feeling is that the competition is doing out there. And I mean, is there anyone out there who is kind of willing to take kind of perhaps lower margins and given the price increases everywhere, maybe using this as an opportunity to try and chase volume? So how are you seeing the sort of broader pricing discipline of the industry?

I think what we see, and obviously us being the market leader in most of the segments we operate, we tend to be also kind of pricing leader. We have seen competition following up, our pricing increases, not necessarily the same extent as we have discussed on that one. But obviously with the current supply environment, it's quite difficult to chase the volumes. And if we have our own fair share of sort of

supply and component availability challenges the smaller players certainly will not have an advantage of that one because generally they are even lower down in pecking order in terms of the prioritization of our suppliers as well uh okay that's helpful just my my final question is is given the um the very strong or i guess the slightly unusual mix of ship orders this year with with container ships being as strong as they have been as a proportion of the total Could you just remind us of sort of how your ship mix looks in McGregor? So any sort of rough guide to how we can think about kind of the percentage of your business that is container ship, percentage row row, bulk or maybe other, how you tend to split that? That would be helpful to know.

In terms of rough numbers over the cycle, I think the way it would look like, and this is rough numbers, about maybe 40%, 40 to 50% would be containers, another 40% also on bulk ships, and about 10 to 15% on the ferry, row-row ships. And to our delight, of course, right now, if you look at the ship types that are in demand, it's exactly those three types of ships. At this stage, the row packs or row-row car ferry market is smaller, but the proportion in our deliveries and value per ship is higher. So it's relatively attractive segment for us at the moment. So we have seen very strong order intake in the container side, as you said, but we see increasing demand actually coming now in the bulk side as well. And that I think start to be visible in ship orders as well.

And it's just funny, is there anything we should think about whether it's kind of, obviously, I think quite a lot of people look at sort of absolute ship numbers rather than necessarily the size of the ships or anything like that. But just if we're thinking versus kind of previous cycles, is there anything we should be aware of in terms of content per vessel, size of the ship that may look or looks different when you look at kind of what's happening in the market versus previous up cycles, i.e. when you used to do a billion? Is there anything that is markedly different in content or ship size or anything like that that would affect your business this upcycle?

I don't think anything as such is different. Typically what happens is when the cycle is low, the shipyards try to manufacture a larger part of the content themselves. So typically if you take a container ship, if the shipyard has capacity, it might do most of the steel structures itself. And then our delivery would be limited into the engineering and key components. So roughly speaking, it would be a few million euros per container ship. Typically, what happens when the shipyard capacity starts to fill up, which it certainly is doing at the moment, the shipyard tries to sort of compensate that by placing further bigger parts of the ship into the subcontracting. And typically, we then start to do also not only the engineering key components, but also some of the structural work and deliveries on that one. Then the value per ship can go to, say, 10 million or 15 million per ship, sort of. as a typical number. Obviously, your gross margin is not quite on the same level as it is in the key components and engineering, but still your overall margin and revenue per ship is increasing. So when you start to see ship numbers growing up, I think you first of all start to see a higher revenue coming from that one. And then probably there should be an acceleration element as well, because our scope per ship will also increase.

Yeah, that's very interesting. Thank you very much. Thank you.

Thank you. Just a reminder that if you would like to ask a question, please press 01 on your telephone keypad. There will now be a further pause while any further questions are being registered. We have no more questions, so I will pass apologies. We've just had one more come in from Tommy Rilo from DNV. Please go ahead. Your line is open.

Hi, this is Tommy from BNP. Just checking, did I hear correctly that there was a negative overall impact of 15 million in earnings in the third quarter? If I calculate 1% in the Kalmar business, that's more like 4 million. Just to get clarity on this.

On the overall, of course, it depends on the mix which is included, but approximately from this 50,000,000 sales delay, 1515 EBIT impact.

Thank you. That's clear.

Thank you. We have no further questions, so I will pass back to the speakers.

Thank you for the great questions and great answers, Mika and Mikko. So our financial calendar for next year is also published today. Our financial statements will be released on 3rd of February 2022. So stay tuned.