Cargotec Corporation

2021 results call. My name is Aki Vesikallio. I'm from Cargotex Investor Relations. Today's results will be presented by our CEO, Mika Vehviläinen, and our CFO, Mikko Puolakka. This call is about to discuss Cargotex results, and please pay attention to the disclaimer in the presentation as we will be making forward-looking statements. With that, over to you, Mika.

Thank you, Aki. Good afternoon from my behalf as well, and thank you for joining the Cargodeck Q4 and 2021 results. A couple of highlights first from the year. It was another exciting year for Cargodeck, really characterized by a strong demand in all of our main market segments, delivering strong record orders and a very strong order backlog. It was also a record year for our services business that developed very well. However, the results were affected really by two factors. First of all, the supply chain difficulties and related logistic issues reduced our revenue potential during the Q4 by approximately 80 million euros, having about 24 million impact on our revenues. Furthermore, we had an offshore related one-off project, sort of a write-off in MacGregor, that had a result impact of approximately 27 million euros, and those two factors negatively impacted our Q4 profitability. Also after the Kalmar Q4 announcement related to the electric portfolio, I'm very happy and proud for the fact that Cargotech can now offer an electric product in all of our product categories across the whole company. In today's presentations, I will cover some of the 2021 highlights, discuss the market environment that we see in front of us, take up some of the group level developments, and then our CFO Mikko Puolakka will cover the business areas and the financial results, as well as the outlook for 2022. As I said, strong demand actually really crossed all of our business segments delivering a very strong order intake, record order intake and record order backlog for us. Orders increased by actually 42% and it was obviously a clear improvement in all of our main product and business areas. Sales, however, increased only by two percentage points, and that was really caused by two different factors. Revenues declined both in McGregor as well as in Kalmar project and automation business, and this was due to the fact that 2020 order intake in those businesses was clearly lower, and that, of course, with the long cycle nature of the businesses, resulted to a lower revenue in 2021 as expected. In Kalmar Mobile Equipment, the revenue increased, but the increase was limited by the supply chain bottlenecks that actually intensified towards the second half of the year. The comparable operating profit improved. We declined about 6 million euros in Kalmar. Without the Navis impact, the Kalmar profitability would have been roughly at the same level as in 2020. Hayab was able to leverage the good market environment and the sales increase drove a 37 million euro improvement in the profitability. McGregor actually made good progress pretty much almost in all of its product areas, and despite the lower revenues in 2021, improved its profitability in the merchant business as well as in services. However, unfortunately, in one of the business lines in offshore segment and the offshore wind related programs, a new project implementation with new technology resulted in the implementation challenges and 27 million write-off in project profitability. We see this as a one-time charge against the difficult technical issues we have had in that project. If I look at overall the picture, our equipment utilization and market activity within our customers continued at the high level during the Q4. We saw clear improvement in equipment activity further sequentially from Q3 to Q4 and also on year-on-year basis, both in HAJAB as well as in Kalmar mobile equipment space. Overall, the market environment continues to be strong. The container traffic grew by roughly seven percent from 20 to 21 and is expected to grow somewhat over five percent also from 21 to 22, really by the strong global trading and sort of merchant activity as well. Also in construction, which is one of the main drivers for HIAB, we saw again a sort of increasing activity, for example in building permits in US towards the end of the year, and also the European construction activity is at the high level. The growth is really limited primarily by the material availability and the workforce limitations at the moment. Also in shipping, 21 was a very encouraging year, where we saw the ship contracting going up significantly. We saw some softness towards right at the end of the year and early this year, but this is, to our opinion, really sort of caused by the fact that the shipyard capacity starts to be full. New build prices have gone up quite significantly. We still see the sort of long-term prospects for the shipbuilding to continue at the strong level moving into the 22. As said, record high orders, especially driven by the strong activity in Kalmar mobile equipment, as well as in Hajab, and a very strong order intake growth and record orders in those businesses. This obviously resulted to a record high order book as well. So we go into the 22 with an extremely favorable order backlog. Obviously, within the order backlog, we also have started to see the sort of the pricing increases that we actually implemented multiple times during the 21 to start to have a more positive impact on the margin when we move throughout the 22. The sales were growing more modestly, and as I already said, really caused primarily by the expected decline in McGregor and Kalmar project businesses because of the low oil intake in 22, then affecting the revenues in 21. And with the strong market demand in Hajab and Kalmar mobile equipment, the limiting factor really was the supply chain and logistic issues in there that limited the growth in that one. The impact was very strong during the Q4. We estimate that the impact for the revenue was roughly 80 million euros negative on that one. very satisfied with our performance in the services business. Another record year for that one, 7% growth in revenues and roughly 18% growth in orders in services and really growing in all of our business segments. McGregor sales revenue was somewhat lower and this was really primarily driven by the very high activity in the shipping. They're obviously with the sort of very positive and profitable sort of environment for the ship owners are reluctant to put the ships up for maintenance and servicing work with the highly favorable market conditions at the moment. But considering that the COVID restrictions are still somewhat limiting the services activities, a very good performance from all of our services businesses. We are also very satisfied with the work we are doing with our strategy implementation, aim to be the global leader in sustainable cargo flow with the key targets around sustainability impact we can have in our own operations, but especially to our customer operations and then the profitable growth. Good examples on concrete actions we were able to deliver during 2021 and during the Q4 in our strategy implementation. In HIAP, we are continuing to grow both organically and inorganically, and acquired GulfUp, one of the leaders in the demountable market space in USA. And we see good opportunities in HIAP to continue both organic growth as well as multiple opportunities to also grow inorganically, looking at adjacent businesses and local champion type of companies such as GulfUp. also very proud about the fact that we have now launched the full electric portfolio and in Cargotech all of our product categories are now available also as an electric solutions and we expect a lot of sort of demand going into electric portfolio moving forward also throughout the 2022 We also keep on investing, in addition to electric, to our robotics and automation solutions. One example of that one was the Cargotec investment and Kalmari investment in the Coast Automative Inc., a startup company that is helping us to sort of develop further our robotic and autonomous operations in our mobile equipment space. And again, very satisfied with our performance in services with the strong growth in the business segments. With that one, I'd like to hand over to Mikko Puolakka, who will cover the business areas.

Thank you, Mika, and good afternoon, ladies and gentlemen, also from my side. Let's start first with Kalmar business area, where we had strong orders, the strong market demand continued, and we had also very good performance in service delivery during quarter four. When we look at the orders, the large grain replacement market continued to be active. also in mobile equipment as well as in services. However, large automation activity has remained fairly low during 2021, and we got only one automation order during the year earlier in 2021. Now, when we look at our order book, 1.3 billion euros, we start the year with a sizeable order book. It's good to remember, however, that the delivery times are longer than usual. In Kalmar mobile equipment, for example, we have approximately 12 months delivery times at the moment. Our sales were 430 million euros. This was up by 5%. We were able to grow the sales despite the component shortages in the mobile equipment. Service sales were up by 7% year on year. The large grain sales declined due to the low order intake back in 2020. We had approximately 30 million euros mobile equipment deliveries postponed from quarter four to 2022 due to missing components. Kalmar profitability improved by 19 percent, even when we did not have any more in Q4 the NAVIS results part of the Kalmar business area. Growth in profitability is coming from higher sales as well as good large grains project execution. NAVIS impacted or the divestment of NAVIS had roughly 7 million euros profit impact in quarter four. So in quarter 420, NAVIS contributed roughly 7 million euros to our profitability. And this previously mentioned 30 million euros delays in our deliveries had approximately 9 million euro impact on Kalmar profitability. With those 30 million euros we could have made approximately 9 million euros more operating profit. Then looking high up. In high up we had a mixed code. The customer activity continued at a good level. Orders were 384 million euros. Like in Kalmar's case also in HIAP, the year starts with extraordinary high order book. And in HIAP's case, we are talking even up to nine months delivery times at the moment due to the component shortages. In high up, we had a good growth in sales, sales were up by 15%. However, I would say that the quarter 420 sales were still to certain extent impacted by the low order intake from early part of 2020. So perhaps the comparison point is also not entirely kind of apples to apples. In HIAP, we had a very good performance in services, in spare parts, in installations, as well as in maintenance. In HIAP's case, we had approximately 50 million euros deliveries postponed from quarter four to 2022. And this is very much coming from also missing components, as well as availability of truck chassis. HIAP's full-year profit was 166 million euros, or 13.3%, a very nice 29% improvement year on year. However, the Q4 profit declined slightly, and one of the reasons for this is the 50 million euros delays in deliveries. That caused lower productivity, 50 million euros delays had approximately 15 million euros impact on operating profit. In HIAP's case we have also added certain costs in selected areas to support the growth in services, mergers and acquisitions as well as in our assembly operations. Then in McGregor, I would say that otherwise good development, but we had significant cost overruns in the offshore wind product line. The order intake growth in McGregor was very much driven by the merchant and service divisions. Order book has continued also to improve. Roughly 75% of our McGregor order book is merchant related and 25% offshore. Sales declined by 16%. This was more or less expected due to the low order intake back in year 2020. Service sales were up by 15%. McGregor's quarter four profitability was disappointing. The key driver, as described earlier by Mika, is the 27 million euros cost overruns in our offshore wind projects. This is first of its kind technology. We have needed to do more extensive design for the project. Also, the manufacturing of components is more expensive. Good to remember that in quarter four, as well as on full year level, the merchant and service divisions have improved profitability in MAC record. And the TTS integration is progressing according to the plans. We have made approximately 13 million euros savings in 2021. Then a few words about our key figures. We start the year with 2.8 billion euros order book, roughly 1 billion euros higher than a year ago. Good to remember, like said also earlier, the delivery times are substantially longer than in a normal supply chain situation. Comparable operating profit was 232 million euros and below that we had 124 million euros positive items affecting comparability. Here the largest positive item was the Navis divestment, 230 million euros sales gain. And then we had the merger related costs, 50 million euros as a negative item. The other restructuring costs have declined from 2020. Earnings per share were 3.82 euros and if we eliminate the positive items affecting comparability, EPS would have been 2.37 euros. Our ROC is now 14.5% and Navis had a big contribution to this improvement. Looking at the cash flow, quarter four and full year 2021 cash flow was weaker than in previous year. The key driver here is the inventory increase, and this inventory increase comes from missing components. We have more semi-finished goods currently in our stocks. Our inventories have grown 36%, while sales grew only 2%. Despite the lower cash flow, our balance sheet has continued strengthening during 2021. Our gearing was 27%, and excluding the IFRS 16 lease liabilities, it was 16%. We have also prepaid a €150 million bond, which would have matured in Q1 this year, but we prepaid that in December 2021. and basically now we do not have any major debt maturities coming until mid 2023, so in the next 18 months. So we are in a very good position to support both organic and inorganic growth from our balance sheet point of view. Our board is proposing a dividend of 1.08 euros for each B share. This is the same as in 2020. This dividend payment amounts approximately to 70 million euros, And this is in line with the combination agreement between Cargotech and Conecranes signed back in 2020. This 1.08 euros for each B-share is approximately 28% dividend payout ratio, excluding the one of items, it would be 46%. Our dividend policy is to pay 30 to 50 percent payout ratio, and the dividend payment would be made on 28th of March 2022. And then the guidance for this year, as discussed already earlier, we start the year with the high order book. However, the operating environment is still volatile. The COVID restrictions may impact us and our suppliers, and also the component availability is going to be a constraint throughout the year 2022. Based on these assumptions we estimate that the 2022 comparable operating profit improves from 2021 and thus is higher than 232 million euros. With those words, I would then hand over back to Aki.

Thank you, Mikko. Good presentation. Let's invite Mika Vehviläinen back to the screen. When he's here, we are ready for the questions.

Thank you. Ladies and gentlemen, if you wish to ask a question, please press 0 and 1 on your telephone keypad. If you wish to withdraw your question, you may do so by pressing 0 and 2 to cancel.

There will be a brief pause while questions are being registered. The first question we've received is from Magnus Gruber.

UBS, please go ahead. Your line is now open.

Hi, Mika, Miko, Aki, Magnus with UBS. A couple of questions from me. And obviously, I want to start with a 27 million overrun that you discussed. And is this project completed? I mean, what's the nature of the project? And is there any risk we could see more costs coming from this?

Thanks for the good question. The project is still ongoing. We have assessed the project at the end of the year, made the provisions based on the best understanding, based on the current engineering estimates, based on the current manufacturing estimates. We expect to deliver the project during this year.

Type of engineering work?

This is related to offshore wind, and these cost overruns are related to engineering work, and also to a certain extent, the component manufacturing.

So some kind of wind installation vessel?

It's a solution which is supporting the windmill installation.

Thank you so much. And then if we could talk a little bit about net price impact going into 22, I guess, as you commented through that presentation, you see pricing filtering through the backlog as we speak. So how do you see the balance between cost inflation across the varying types as well as your pricing? Do you see any sort of air pocket opening up in the first half of 2022 with respect to the relative impact of pricing and cost.

In general the pricing environment has been quite challenging this year in that sense that we have been increasing the prices by double digit for example in Kalmar mobile equipment and in high up and Of course, we continue to monitor also the component price as well as the labor inflation development during this year. And if needed, then we could implement further price increases. What comes to project related pricing, there we typically price based on the current raw material costs and then reflect that cost level also to our customer contracts.

Yeah, maybe if I add on that one, if you look at, we did about, vary slightly from product area to another, but multiple pricing increases starting from very early on 2021 and last major price increases roughly by summer 2021. And altogether, as Mikko was saying, double digit pricing increases. So obviously, when you look at the lead times at the moment, you would estimate roughly sort of nine up to 12 months lead time from those product increases. So effectively, What we will be delivering in the first half of this year is primarily products that are still ordered on the first half of last year, and the price impact should be coming fully through on the second half of this year then. Obviously, in the same way, some of our component deliveries and component prices have been also increasing gradually. So overall, I think those two are expected to match each other fairly well during the first half. And then depending a little bit on the price development in the component area on the second half, let's see if we can create some pocket there or not.

Okay, so no obvious mismatch between the timing of the price increases hitting the P&L and the cost in the first half as you see it now.

No, thankfully, obviously, also the price increases coming from our suppliers are happening gradually, obviously. With a little caveat, of course, that in some cases you are forced to go to the spot market where your price increases for particular components could be considerably higher. And the other thing that is obviously eating slightly into the margin is the transportation costs that are up, obviously, considerably again. It's not a huge impact, but it has some impact as well.

And on top of that, of course, certain lower productivity in cases where we are missing some components and cannot finish the product, so some unoptimal production flows. And those are, of course, then kind of staying in our books, those costs.

Got it. Absolutely. Just one final question also. We still have a sustained solid momentum And any chance you could help us quantify the mix impact that we potentially could see into 2023 on the back of that?

In terms of the electric portfolio, now that we can offer fully and start to take orders for all the equipment, maybe as an example, give you the area where we have had a product available for longest time, which is the heavy forklift trucks in Kalmar Mobile equipment. Roughly about a third of those equipment is now in electric format. We expect a similar development to start to happen on also other products. There clearly is a market demand coming from the regulatory pressures, customers' own sustainability strategies. And effectively, the electric format starts to be a better and better business case for our customers as well.

And when it comes to sort of profitability mix into 22 in Kalmar, how do you think it could be impacted by the solid momentum in mobile equipment?

I think overall first of all quite a large deal of the revenue is already in the backlog if you look at the and in some cases we can still take orders to be delivered within this year but most of the I think the orders coming now on q1 onwards are starting to be in the 23 orders a lot of the back and back the pricing is in the backlog at the moment and then as I said I think right now it looks like that the there is a sort of some of the component pricing increases could be easing off when we move to the second half and at this stage got it thank you so much get back in line

The next question is from Aurelio Calderon, Morgan Stanley. Please go ahead. Your line is now open.

Hi, good afternoon, Mika and Meiko. Thanks for taking my questions. I've got three. I'll dig in one at a time. The first one is around the 80 million that you mentioned that you've missed this quarter due to supply chain issues. I guess my question is more around why the impact was so great in high app in terms of margins. And when you look at Kalmar, which also lost like 30 million, the impact seems quite low in the bottom line. So if I can start with that one, please.

Yeah, maybe I'll start and Mikko can fill in. In Kalmar, the miss was larger in Q3, but actually when what happened is some of the Q3 miss was actually delivered in Q4. Then there was a sort of some build-up of inventory from Q2 to Q3 that we were able to deliver in Q4 that then sort of lowered somewhat the gap in Kalmar. That's probably the number one explanation on that one. And as such, Supply chain issues, I think, have been prevalent in Kalmar actually through the whole year, because a lot of the products are fairly similar to the truck industry, and hence the component shortages have been well known there. I think the high-up situation actually, as you can see from the numbers quoted, sort of deteriorated slightly. towards the end of the year some of the hydraulic components but also number of different sort of negative surprises there in terms of deliveries also I think the Omnicron started to have certain impact in there even though from kind of the health impact point of view the Omnicron looks like to be a lighter variant it still causes sick leaves and absences and that's impacting our some of our own operations but also of course in our supplier operations and the other thing that is slowing down somewhat the high up deliveries is the fact that as Mikko mentioned already the customers are not getting the track chassis so they are effectively not necessarily in a hurry to receive our equipment either I see thank you my second question is around kind of the potential that you have to catch up next year because obviously you've mentioned that you have a very solid order going into

2022, but you've also been flying that the order book is maybe longer in terms of lead times than it used to be. So what is sensible to assume in terms of order book conversion, i.e. is the lag that used to be six months now nine months and the lag that used to be 12 months now 18 months, or how should we think about backlog conversion?

Yeah I mean if you look at as Mikko was saying that if you would use maybe an average about nine months right now for high up and we used to be considerably shorter cycles at some states up and as low as three months at this stage and actually as such it's not as large concern as as much because right now the bottleneck actually is within the truck deliveries as well and that's like as long as we can match that one we are kind of okay but we hopefully start to catch up on that one but I would say that when you look at the high up sort of backlog and Kalmar mobile equipment backlog you would expect majority of those ones to be delivered within this year a very large majority of that one okay that's helpful and maybe if you can kind of touch on again on Magnus's question around the 27 million one-off

I guess if my math is correct, that business is around 100 million, kind of the offshore business within McGregor. What is the confidence that we're not going to see more of this one-offs in other projects and what is going to be a growth area for you like offshore wind vessels?

Yeah, this particular project was a very high value project, but also first a sort of breakthrough technology, first of its kind implementation related into sort of mission critical construction vessel and where we deployed offshore wind turbines as such and we have now gone through that project in a large very large detail and done the renewed the project estimates and that of course resulted to the 27 million losses but it is a new technology and the project is not yet finished so but this is now our best estimate based on the information we have okay thank you very much I'll go back thank you

next question is from aunty canonson seb the line is open please go ahead yeah hi thanks for taking my my questions from sab uh coming back to the mcgregor project still uh is there other similar technology projects in the backlog currently and then if we look at the impact for mcgregor in In 22, what's kind of the sales magnitude? I would assume that that will be now delivered with basically zero gross margin and should dilute the earnings in McGregor in 22. Could you comment on those ones?

First of all, it's a POC project where a large deal of the cost, I don't think it would have a significant impact. It will be sort of in low tens of millions in that sense at the most. And we do see of course that with the current order intake starting to happen, we start to see the order intake as well the revenue ramp up the good news of course in mcgregor is that the merchant side profitability developed very favorably over the last year despite the fact that actually the revenue still declined in mcgregor so it's in a very good place for for the sort of take up the demand coming from the very hot shipbuilding market and during the 20 21 as well and also outside this wind area we see also increasing activity levels in the sort of I would say the regular offshore oil and gas projects with the sort of high oil and gas prices right now driving the demand in there as well but if we look at your backlog or even your sales

kind of a pipeline. Is there now similar type of activity that you kind of need to revisit the price level, the margin assumptions that you are entering in those projects? Are there any broader implications of this one going forward?

This particular project that we took the large hit, it's one of the kind, it's a first of its kind. We do not have any similar projects at the backlog. We still expect that market to be actually attractive for us, but obviously we need to take the lessons learned on that one. Thankfully, that's the only of its kind that is in our backlog at this stage.

Okay, thanks. And then the second question is on Haie, but I want to clarify something that you said, that the lead time is currently around around nine months. So I would assume that kind of the current backlog should be delivered in Q1 to Q3. But then you also mentioned that the price increases will kind of hit the P&L, not until the second half. So am I interpreting right that perhaps the first half, two-thirds of the backlog is coming at a perhaps lower price level, maybe slightly lower margins, and we will kind of need to wait until the second half to see how I am kind of getting back to those mid-teen margins that we've seen historically?

Yeah, I think the first half and I think what you most likely will see this year is probably a fairly larger than normal deviation between the first and second half and the first half is really impacted by two factors and this is true both for Kalmar mobile equipment as well as Hayab one is exactly as you prescribed that some of the deliveries still especially in the Q1 will be actually at the sort of lower side of the price range coming primarily from orders on Q1 Q2 last year the other issue is that i don't think that these supply chain issues are magically going to disappear over the new year and with the omnicron still being very present in the in the market as well and in within the supply chain as well i do think that the supply chain situation is going to continue to be the bottleneck at least for the first half of the year and i guess on mcgregor it's also kind of the orders that you have taken will gradually start to provide

revenues and profits. So it's a quite back and loaded year for all three divisions. Am I assuming right?

I think that's our assumption as well.

Okay.

Thanks guys. All for me. The next question is from Johan Eliasson, Kepler Chaudhry.

Please go ahead, Johan. Yeah.

Hi, it's Johan here. I must come back to the MacGregor project miss we've discussed it in and out obviously remembering that when you arrived Mika there were a lot of project overruns in those days and you promised that project structures and similar should should be straightened out so we shouldn't see this again and seven million is still a pretty big number have they forgotten it or what what was really going wrong in this case. You mentioned new technologies, but I guess there will always be new technologies coming. Should we sort of expect that these things can happen again going forward?

Yeah, I guess there's always the first time. We haven't had anything on this magnitude in McGregor in the past, and we did have a number of issues, especially on my early years in Kalmar. I'm actually quite satisfied on the progress we have done in project management side in Kalmar, and as Mikko was discussing, the Kalmar automation and project business actually had a nice profit improvement actually from 20 to 21, and the project sort of cost estimates were in a pretty good shape throughout the whole year. This is clearly a risk when you venture into the new technologies and obviously a sort of, how would I say, education fee you ended up paying on this one, where the complexity of the project was underestimated by the organization. We need to take the lessons learned on that one and improve from here on.

Is it in any way sort of related to the TTS acquisition with a different project background or is it the old traditional MacGregor business?

I wouldn't make a difference anymore between the kind of TTS and MacGregor. The units are nowadays pretty well mixed up and reorganized. So it's really sort of the combination of capabilities from both companies that is participating in this project.

Okay, good. Then on MacGregor, obviously we saw all these big container ship orders some time ago. Would you say that you have now seen most of it in the organ intake in MacGregor, or should we expect more to come in 2022?

No, I don't think we have seen most of that today. I mean, again, it's good to remember that it takes about six to 12 months from the ship order to McGregor order. And actually, one indicator you can always look into is that the way that when ship is ordered, the shipyard actually places the orders for different main components of the ship in the different time and usually what happens is that one of the first part that is ordered is actually engines so if you look at the ship engines and you probably can look at the Wärtsilä for example on that one that probably gives you an indication and they tend to be a sort of three to six months usually ahead of us and the deck equipment and the loading solutions tend to be the last part of the ship that is ordered so we tend to be at the sort of tail end of that order intake coming from the particular ship.

Yeah good unfortunately for Wärtsilä they don't sell engines to the big container ships anymore but we can look elsewhere. Then on Hayab I think we have been on this subject already but listening to Your southern competitors profit warning, they seem to sort of allude to that earnings for their business at least in 2022 should be sort of flat over 2021, basically implying that the first half will be down a lot and then they will regain it in the second half. Is that, I mean, you talked about probably a more H2 tilted margin or profit level in EM as well, but Are you rather talking about flat earnings year over year? You think that's sort of a realistic scenario or is HIAB also part of your overall guidance for earnings to grow in 2022?

The guidance we have given is that we would expect as a group to sort of improve from 2021. Well, I probably would go as far as to say that I would expect actually that the improvement come to cross all of the three businesses at the same time as well. It's good to remember that when you look at the high-up, we have invested, I think, quite successfully on the pricing management there for last sort of 18-24 months. And high-up was fairly aggressive and the forefront of the pricing increases. number of pricing increases typical normal price increase in January then within another round in sort of March time frame by summer time our prices were double digit up from the sort of early part of the year and I don't think that our competitors have necessarily followed us up so some of there is I think the catch-up to be done with some of them in terms of the pricing

And if we look at HIAP's full year results, 166 million euros profit, 13.3% operating profit margin. So good development there.

Now, one of the issues, the profit warning from your competitors included was that They blame these delays on deliveries, leaving them unmatched between the price and the cost inflation, seemingly indicating that the hedging had run out when they finally delivered those projects. That is not an issue for you?

Mikko, maybe you can say a few words about the currency impact on Hayabefi?

I mean, in Hayab's case, we are, of course, fully hedging the net cash flows. And actually, we have not seen a major negative currency impact. We saw something, a smaller low single digit impact in quarter four. But on the full year level, I would say that in our case, at least the currency impact was rather minimal in Hayab.

Yeah, I don't think they were referring to the currency hedging. It was sort of more on the steel prices and that sort of thing that their contacts had sort of run out when they eventually sort of manufactured and delivered it.

Okay, I get that one. I mean, obviously same for us as well. We are not immune for the increasing cost and also our case, of course, the old contracts, they're running out and the new contracts in many cases are at the higher prices. But at the same time, we've been also very diligent and fairly upfront with our own pricing developments. And overall, we have increased our prices by sort of mid-21, our prices were up by double digit percentages in high-up. So that certainly helps us to sort of take that hit coming from the increase in component and material costs as well.

Yeah, excellent. Many thanks. The next question is from Erkki Reisema in the Rush.

The line is now open. Please go ahead.

Thank you. Hi, Mika Mikkohan. Same question Antti made, but regarding Colomar. Is it so that Colomar price increases you have recently made, they will gradually have an impact from the second half of 2022 onward? And do you expect this to fully neutralize the margin impact by component price increases as we reach the end of the year? I mean, is it a kind of rolling impact and a year from now we should be back to normal logic levels at Colomar? Or am I missing something?

No I don't think you're missing something the exact timing of course depends on our capability to deliver and again there are a number of uncertainties still in our delivery capability within this year and especially I think in the early part of the year is still going to be quite a challenging environment if you look at what's happening in supply chains and also with the Omicron sort of beating down the sick leaves and others in our own operations and our supply chain as well. But I think I would say that certainly when you go to the sort of start of the 23, those variants have been matched on that one. how that pacing goes through this year has a certain level of uncertainties. I think the Hayabi is proportionally somewhat in better proportion in terms of the sort of the pace of the pricing increases and also with somewhat shorter delivery times compared to Kalmar mobile equipment where the delivery times are getting close to 12 months in average.

Okay, that's very good. Thank you. The next question is from Massimiliano Serpi.

Hi, thanks for taking my questions. I have just two. So the first one would be on the mix within Kalmar. I appreciate the comments on the eco fleet, but as we go into 2022, how should I think about the split between mobile equipment and the project businesses? Should I expect similar to 2021 or some change between the two?

Yeah, if I comment this, so if we look at the order intake in Kalmar this year and the order book composition, so it's definitely, I would say, more weighted towards the mobile equipment. So quite high share of the mobile equipment business in the total Kalmar order book. as the Kalmar automation and project orders have been, yes, those have been growing, but the growth rate has been much lower than in the mobile equipment.

So because if I'm not wrong, in 2021, sales were tilted towards mobile equipment more than usual. So for 2022, it's even more than 2021.

Yes.

Okay, thanks. And my second question would be on the price increases that you did before the summer when you got to double digits. First question would be in January and March, did you do low single digit increases or were they higher than this?

In the early part of last year, we did low single digit. It was more our typical sort of pricing increasing policies. Those decisions were, of course, done end of sort of 20 already. And in 21, we did what we would recall normal pricing increases round. It became obvious for us very clearly fairly early already on that year that that's not going to be enough. We did another round roughly in March timeframe, and then clearly seeing the inflation sort of still coming strongly, sort of third pricing round roughly in sort of June, July timeframe, this time considerably higher hikes almost across all the product portfolio.

Okay, perfect. So the first price increase, you are already seeing the benefits in Q4, I guess, in Q4 sales.

Some of that one was visible towards the end of Q4, but it would be visible in the Q1. But then again, our cost situation is different than it was in Q1 previous year as well. Clearly, the component prices are also going up.

Yeah, no, clearly.

No, perfect. That's all. Thank you very much. The next question is from Magnus Kuva, UBS.

Please go ahead. Your line is open.

I just wanted to ask you if you could quantify how large the total accumulated overhang from undelivered orders is in Hieb and Kalmar at the moment. Is it fair to say it's the same as we saw accumulating in the fourth quarter, like 30 million for Kalmar and 50 for Hieb? Is that sort of what remains to be delivered, shall we say?

Yes, that's correct. So basically those delays, what we reported in quarter two and quarter three, those we have been able to deliver during 2021. And basically this 80 million, 50 for Haiap and 30 million for Kalmar, those were the kind of overhangs or deliveries which will flow from quarter four to first half of 2022. Perfect.

Thank you so much. And maybe it's the final one on here, but I mean, you had a very solid order growth here in 2021, obviously, for various reasons. But how do you see the outlook for demand into this year, given that the market remains healthy, but dynamics were a bit different in 2021, obviously, not a normal year?

Yeah, it hasn't been a normal year for a while, and who knows what 2022 will bring with it as well. The early part of the year has been continuing at the same strong pace, so we see the demand so far continuing at the same pace. Obviously, there are a number of uncertainties regarding 2022, so it's really difficult to estimate where we'll end up, but looking at the customer activity, looking at the key indicators, construction activity, e-commerce, sort of general material deliveries, the underlying market environment remains strong.

Got it. Thank you so much. And yes, maybe one final one. What do you expect in terms of labor inflation for this year? What are you budgeted for?

I think it varies considerably from market to market and from the position to position. We have seen fairly strong labor inflation, especially in blue collar type of manufacturing and services technicians. And sort of, I would say sort of plus minus 5% really depending on the market. Some markets clearly about 5% as well.

Perfect. Thank you so much.

Thank you. There are no further questions at this time. I hand back to you, Mikko.

Okay. Thank you for the great questions and for the great answers, Mikko and Mika. So with that, we can conclude the call. Carcatex Q1 results will be published on 27th of April.