Cargotec Corporation

Welcome to Cargotech's third quarter results call. My name is Aki Vesikallio. I'm from Cargotech's IR. Today's results will be presented by our CEO, Mika Vehviläinen, and CFO, Mikko Puolakka. After the presentation, there will be a Q&A session. And please pay attention to the disclaimer in the presentation as we will be making forward-looking statements. Strong performance continued in our core businesses Kalmar and Haiab. And we achieved again all time high comparable operating profit. Also orders received increased in all business areas. But on the other hand, we expect that supply chain challenges and market uncertainties will continue also going forward. As we already achieved our 2021 comparable operating profit level, we specified our outlook for 2022, and we now estimate that our comparable operating profit will improve by 88 to 118 million compared to 2021. With that, over to you, Mika.

Thank you very much, Aki, and good afternoon from my behalf as well, and thank you for joining the Cargotech Q3 2022 call. As Aki said, our strong performance continued also during the Q3. As you know, the Q3 is typically the weakest quarter for us in the year due to the seasonal fluctuations, and being able to deliver such high revenues as well as a record operating profit during the Q3 was a very good achievement from us. I'm especially happy to see the strong performance in our services business, where the strategic focus is clearly delivering results for us, and our services business has grown by 22%. Even more delightful is the great progress we are making in our eco-portfolio. The eco-portfolio revenues have actually now increased by almost double, 97%, and are already representing 27% of our revenues. The investments we have done into technology and services to drive the sustainability in our industry, together with the fast-changing landscape where our customers are more and more under pressure regarding sustainable solutions, is clearly delivering results for us. Looking at the market overall, first of all, what we see from our operating equipment data connected all over the world, the high capacity utilization is still continuing. We saw a slight decline sequentially from Q2 to Q3, which is, of course, partly explained by the seasonal variation. Overall, we see the stabilization of the data also year on year. obviously a lot of the equipment is now running at the capacity, and as we are now able to deliver more and more new capacity on stream, we accept those running hours to stabilize at the relatively high level at this stage. Overall, obviously, the market uncertainty is increasing there. If I look at some of the key indicators for us, the container traffic is still growing. The container shipping traffic is still actually almost at the full capacity utilization. We still see congestion continuing in the ports. Overall, we expect that the container traffic is still growing during Q4 as well as during the next year. We start to see some slowdown in the building sector and construction activity at the moment, and obviously such as housing starts. I think it's also important to remember that when you look at some of these statistics and we start to see potentially some decline in some of the indicators as well, we start to decline from historically high levels. So if you look at the absolute numbers now in number of the indicators over the last six, seven years, We are still operating at very high market activity in many of the segments as well. In ship side, we see slowdown in ship contracting. This was to be expected. The shipyard capacity starts to be full due to the very high contract activity in 21 and early part of 22. And that together with the higher prices and inflation in, for example, steel prices, is clearly slowing down the ship orders there as well. Our orders increased in all businesses and the new record high as well. Now, putting that in context, one needs to remember there is some positive impact there coming from currencies and also from the inflation now. Overall, one would estimate that our equipment pricing is about 10% higher than it was in the respective quarter in 2021. So overall, in terms of the volume of the equipment, one starts with the stabilization of order intake, but the order and the demand is still continuing at the strong level. When I look at our sales funnels forward and the performance year to day, we still see the strong demand curve continuing at this stage. This strong order performance is bringing a new all-time high in terms of our order book, which now stands at 3.7 billion, and obviously this gives us an excellent starting point going into the next year. We see no activity in terms of cancellations at the moment. I think the capacity utilization runs still very high, and obviously the increase in prices and the inflation is also giving us some protection in terms of the cancellation. together with the different contracts that we are renewing, including penalty clauses, etc. Again, as I said, Q3 tends to be our lowest quarter in a year, and the fact that we were able to deliver such a strong performance in terms of revenues and profitability owes a great thank you for all the people in Cargotech who have worked very hard to be able to make this happen, despite the continuing challenges in our supply chain. We still see those supply chain issues continuing into the Q4, and at least to the first half of next year as well. So we are in no way sort of out of the woods in terms of those challenges, but we are working very hard to enable those deliveries to happening. very satisfied with the services. This, of course, has been our strategic focus area for a number of years now, and very clearly the high equipment running in ours, and especially the work we have done in terms of self-help, driving higher spare part capture rates, better services performance, better utilization is delivering results for us, and the sales, strong sales growth was visible in all of our different business areas. The Cargotech strategy focus remains in solving and being the global leader in sustainable cargo flow for our customers. We are solving the logistics industry's sustainability issues by investing in technology and delivering better services for our customers. Now, exactly almost six months ago, two quarters ago, we announced a refocused strategy, and we are now actually executing on that one. The refocused strategy had three elements on that one. Strategic evaluation of McGregor business, plan to exit the heavy crane business in Kalmar, and review the operational model to support refocused group. Now, already last quarter, we were able to announce the strategic exit from the heavy crane business in Kalmar, and we are now in the final phase of asset transfer in there. The deal is effectively now done from our side. During the Q2 and Q3, we were able to conclude a review in our operational model to support the refocused group. The work in McGregor's strategic evaluation is continuing and progressing, and we will update the market when we have any conclusions from that one. Regarding the operational mode changes, we are actually making our businesses more independent, owning more of the capabilities in-house to be able to drive focused strategic performance and deliver results. As a result of the changes in operational mode, we are moving more than 100 persons from the group focus areas into the business areas. In Cargotech, we have very successfully developed and driven our digitalization and technology developments, partly through the central capabilities in our group level. Now we believe that our development is mature enough to be able to move all of those assets, and especially the great talent we have in our digitalization and technology capabilities, directly into businesses where the alignment and integration into our customer-facing activities will be even better. We are also moving all sourcing activities, including direct as well as indirect sourcing, into the business areas for them to be able to drive that more effectively. And sustainability and technology functions are also moving to a great extent into the business areas. Now, from Group point of view, this means that Cargodec will be more and more focused only on the listed company duties, as well as then providing the back office services and processes for our business areas. The investments that we have done in technology and development and services are now clearly yielding results, as you can see from our numbers. And we keep on sort of going down that road. Our R&D investments grew again about 7% in Q3. A couple of examples of that one. In HIAB, we are really looking to sort of go into the new application areas as well to sort of build more resilience in the business. And one important breakthrough for us has been a rail segment that has been not been a strong point for Hayab in the past, and we have achieved major breakthroughs on that one. In solving our customer climate challenges, we are delivering increasingly market-leading capabilities, for example, more than 500 Kalmar hybrid straddles. Just to give you an example, those 500 hybrid straddles now operating are yielding more than 400,000 tons of CO2 savings in our customer operations. And we keep on investing in the innovation and transformation and be very focused on providing sustainable solutions. A great example of that one is that the first in our industries, Hayab has now introduced the first products that are built from the fossil free steel. Last but not least, our services are performing very well, and we keep on adding and driving more advanced services. An example of that one is the new high-performance services that enables us to drive sort of the customer optimized performance and help them to be even more effective and even more sustainable in their operations. And with that one, I'd like to hand over to Mikko, who will cover the financials and the business area performance. Mikko.

Thank you, Mika, and good afternoon also from my side. Let's first have a look on Kalmar, where we had an excellent performance in quarter three. Solid demand continued in quarter three, even when taking into account that we were still partially limiting our terminal tractor order intake during the quarter. Kalmar orders grew by 12%, and it's also good to remember that we had last year in Q3 roughly 25 million euros heavy grains orders. So on like-to-like basis, Kalmar Q3 order growth was as high as 19%. This is also the first quarter for a while when Kalmar order book declined slightly from the previous quarter, thanks to good delivery volumes. Kalmar sales grew by 40% year on year. Deliveries progressed well in all divisions, including also services, despite continuing challenges in getting components on time and in needed volumes. We have seen also delays in transportations. If we clean the currency impact from sales growth, the quarter three sales growth would have been 33%. Out of this 33% in Kalmar, roughly one third comes from price increases and two thirds from volume growth. So strong, strong deliveries in quarter three. Kalmar's profitability improvement was very much driven by volume growth. And then if we look to kind of new Kalmar setup, so excluding the heavy grains, Kalmar quarter three comparable operating profit was close to 11%. Then moving to high up, which delivered also a very good quarter, despite quarter three being often seasonally the lowest quarter within the year. Like in Kalmar, demand in Hayab was robust across all Hayab divisions. Like Mika mentioned, Hayab launched also some new products during Q3, like the rail loader cranes, and these have been attracting also good demand from the market. Hayab sales was up by 23%. Here the currency impact was approximately 5% units. In HIAP, we were able to deliver both equipment and services reasonably well, despite the continuing component and truck chassis availability issues. And in HIAP also the profitability improvement was very much driven by the higher delivery volumes. Moving to MacGregor, which had another good quarter in the order intake after the 301 million of orders, which we won in the second quarter. In MacGregor, the orders growth was very much driven by merchant vessels like car carriers, as well as then services had a good quarter as well. McGregor order book starts to be now on a very good level. It's already 57% higher than a year ago. However, the quarter three sales was still a fairly small number or low number due to the fact that the past quarters higher orders start to generate revenue more or less starting from the second half of 2023. Merchant vessel and services profitability improved year on year, while the low margins in certain offshore wind projects still continue to dilute the overall MAC record results. If we look at MacGregor year-to-date September comparable operating profit, that was minus 1.1%. However, when we exclude the offshore wind business, which has been very low profitability, MacGregor year-to-date comparable operating profit would be 4.2% positive. Couple of highlights from quarter three. Our order book continued to increase, and like Mika said, this 3.7 billion euros will provide a good basis for our 2023 revenues. We start to have a sizeable eco portfolio revenues, almost 700 million euros year to date. This is 51% year on year growth. Our comparable operating profit has developed nicely, up by 31%, very much driven by the good performance in our core businesses, Kalmar and High Up. The core businesses' Q3 comparable operating profit was 10.6%. It's good to remember that this number includes also all Cargotech Group overheads, so taking a very prudent view on that profitability. We booked, unfortunately, still 43 million euros items affecting comparability in quarter three. 11 million of this is related to the heavy grains exit, which we announced in the second quarter. And in that connection, we also said that in the third quarter, we would book certain costs still related to that exit. This 11 million is related to project related liabilities. Additionally, in order to be prudent, we have booked in McGregor a €18 million provision. This provision is related to McGregor's US government-related business. Our Q3 cash flow was good, and this was very much driven by mainly Kalmar and McGregor orders related advance payments. Despite the good cash flow, our net working capital is still very much higher than it should be for the current volume levels. Inventories, especially working progress, as well as goods in transit, those have been the biggest reasons for abnormally high net working capital. These inventory items have been very much impacted by component shortages as well as earlier mentioned transportation delays. Despite having a higher networking capital than normally, we have a good liquidity situation. At the end of September, our cash was 432 million euros and committed long-term unused credit facilities were 300 million euros. Our gearing has continued to improve, now 30%, very much driven by good cash flow, and this is very well within our 50% target. The average interest rate on our loan portfolio was 1.3% at the end of September, and we do not anticipate this dramatically to increase due to the fact that approximately 60% of our debt is with fixed interest rates. Due to the strong quarter three, we have specified our full year outlook. We expect the full year to be at 320 to 350 million euros comparable operating profit. This would mean that our full year result would improve by 88 to 118 million euros from 2021. We have a relatively wide range in our guidance, and this is simply due to the fact that we do not anticipate any improvements in the supply chain compared to previous quarters. Therefore, the deliveries to customers may be delayed with the short notice, and if we don't get the needed components. And naturally, should these kind of delays come, those could have a direct impact then to our profitability. So a short reminder about our capital markets day before we finalize. So we have a capital markets day on 15th of November and warmly welcome to that event.

Thank you, Mikko. And thank you, Mika. So operator, we are ready for questions.

Thank you, sir. As a reminder, if you'd like to ask a question, please press star one on your telephone keypad. To withdraw your question, please press Start to. We'll take our first question from Maximiliano Severi from Credit Suisse. Your line is open. Please go ahead.

Yeah. Hi. Hi, everyone. Thanks for taking my question and congrats for the quarter. My first question would be on the Calmar business and printed again, 9.7% margins. I was wondering whether now the price-cost issues that you had in the past are fully normalized or there are still some pricing that has to come through. And secondly, if you could maybe comment on how much of the large cranes orders are left to be delivered after Q3.

Yes, in Kalmar, I would still say that, like I said, the Q3 performance was very much driven by very high volumes or improved volumes. We have been increasing prices, but in Kalmar, we still have fairly long lead times for the product. So I would say that we have been able to maintain the kind of cost and customer price relationship ratio on a healthy level, but it's a kind of continuous, constant kind of catching up and fighting against inflation. What comes to the Kalmar Heavy Cranes order book, we are talking about roughly 80 million euros of order book. We expect to deliver most of that during next year.

Perfect, thank you. And my second question would be more at a company level, so both Kalmar and Hiab. You mentioned the price increases of around 10% year-on-year. I was wondering whether you could comment on the price increases that you actually see in your backlog. So what could we additionally see going into Q4 and Q1 in terms of pricing?

Overall, if I look at our pricing from 21 to a year to date now at the moment, we have increased our prices roughly about 20% in our equipment business. As Vikko was saying, at the same time, we see continuous inflationary pressures. And at some stage, I guess I at least was expecting that some of that would start to ease off when we move to the second half of this year. But very clearly, we still, despite the raw material decreases, there are other drivers that are still driving the pricing pressures for our component higher. And we have now actually done already a number of pricing increases since Q2 to sort of answer those ones. So to a large extent, we've been able to defend our margins on that one. The other aspect in the margin is the sort of inefficiency in our operations, because due to the supply chain issues, you have not been able to deploy, for example, all the direct staff all the time. So the indirect cost has also sort of increased somewhat, and that has had a slight negative impact on the margin. We've been able to sort of counteract those pressures also by delivering higher volumes.

Perfect. Thank you. I'll go back in the queue.

We'll take our next question from Magnus Gruber from UBS. Your line is open. Please go ahead.

I'm staying with Kalmar and the margins there. I mean, it was a very strong quarter, obviously, in Q3. But how do you see that? I think in Q2, you commented about adverse mix going into Q3. Did that materialize at all? Or is it something we should expect to see more into Q4?

And I think it didn't materialize quite as badly as we maybe were expected. The deliveries overall in Q3 were higher than we expected. There were, for example, one large 20 million delivery that was expected to be materializing in Q4, and we were able to slip that already in Q3. But it's good to remember that the core Kalmar business going forward has actually delivered over 10% operating margin for the last six, seven years. overall and there are a number of measures taking place to be able to drive that to a higher level going forward as well so when the proportion of the heavy crane business is declining now quite quickly as Mikko was pointing out with the backlog declining one should expect overall calm margin to sort of start to clearly improve as well okay got it so there was some negative impact but not as bad as anticipated and going forward it should get better

In Kalmar's case, like mentioned, if we exclude the heavy grains in Q3 results, Q3 comparable operating profit would have been almost 11%, so heavy grains was diluting to certain extent Kalmar results, and that continues still to be for some while until we have delivered that order book.

Okay, got it. Thank you. And then just generally, I mean, Q3 again, solid quarter. How should we think about seasonality into the fourth quarter?

It's a very good question, because it was in a way an odd Q3 for us. Typically, as you know, we don't deliver such a strong Q3, but with the backlog and a lot of very hard work from the organization, and I would say maybe a slight easing off of some of the supply chain issues, but they're still considerable, and that helped us a lot. And you saw now our guidance for Q4 as well. And as you saw, the guidance was actually fairly wide in that sense. And I think that tells you the story about the uncertainty and the fragility of our supply chain at the moment. So I think we will land somewhere between those numbers, but it really depends on how well are we able to deliver and especially how well are we able to receive the components during the Q4.

Absolutely. Got it. Thank you so much.

We'll take our next question from Johan Eliasson from Kepler. Your line is open, please go ahead.

Hi, it's Johan here at Kepler Chevre. Just a question. You mentioned service orders were up 20% in the quarter. I guess there's currency impact on that. Could you just sort of indicate what the service growth excluding currencies would be? And then on McGregor, obviously a good order level, but slightly down sequentially. Now you mentioned car carriers being big orders. We know that orders are lumpy for McGregor, but it's clearly so that the good order intake right now is quite important considering the divestment process you are in. Are we still seeing it? a very solid pipeline from the huge container shipping boom of last year or what's the outlook for McGregor order intake coming quarters?

Johan takes the second question first and Mikko takes the numbers on the services. Yes, I mean the large order boom on the 21 and also the sort of large level of orders in the beginning of this year will carry the McGregor. The time from the ship order to our equipment order has been longer than we expected and for a number of reasons. I think we will still see a good order uptake regarding the containers, and as we already said, a good demand with the car carrier fleet as well on that one. As also Johan pointed out yourself, it's a lumpy business, so you never know how every quarter will, but I would say there is still quite a few miles left from the large order boom in 21, 22 to turn into our orders. Additionally, I would say that the offshore activity very clearly is up at the moment. It did not materialize into our orders. The orders were, I think, four-fifths of the orders were in services and in the merchant side at the moment. But I think there is a material chance that we see improvement in the offshore demand as well moving into the next year. Mikko, the services question.

Yes, coming back to your services question, so the currency impact on services, orders and revenues is approximately 5% units during quarter three.

Okay, excellent. Thank you very much.

We'll take our next question from Paanu Laitinlaki from Dansk Bank. Your line is open. Please go ahead.

Thank you. It's Paanu from Dansk Bank. I just have two questions from MacRecord still. Firstly, on the profitability, I think you have had these problem projects burdening profitability. What is the state of these? Do you expect them to kind of end when we go into next year? And then secondly, about this provision that you made, just wondering what is this, and is there a risk that the provision wouldn't pay enough and this could somehow escalate?

Yeah, if you look at the MAC record, I think it's first good to note that the revenue is still at the extremely low level, I mean, historically low levels at the moment. So the order intake we have now started to see coming, it has not turned into revenues. And the fact that we are able to deliver black sort of comparable operating number with such a low revenue is a good achievement and that's coming really from the good progress we have made in services and also the fact that the merchant marine is improving despite the fact that the revenues in there are still level and as you said the challenges are clearly in offshore side those projects are sort of progressing and I think their impact into the next year will be significantly lower than it has been for this year Simply, I think we will start to see a different mix, and as Mikko was pointing out also, we will start to see the revenue improvement moving into the 2023 coming from the order backlog as well. So I think it will be less of an issue clearly moving into the next year. Regarding the potential penalty fee, it's related to a US government project. There were some issues regarding the document handling of that one. This is our prudent estimate of that one, and at this stage, that's our best understanding of the potential penalty level.

Okay, thanks. Can I talk about these projects? Is this kind of an obstacle for the divestment, so that you need to complete projects first before kind of trying to sell the asset or how do you think about it?

No, it's not actually. The project itself is, I think, fairly far down the road. It's not a particularly large project, but in these kind of issues, the penalties are not directly tied into the size of the project actually. So we expect to sort of either have it solved or covered as a part of the potential exit of the MAC record then.

All right.

Thanks. We'll take our next question from Antti Kansanen from SEB. Your line is open. Please go ahead.

Yeah, hi, guys. It's Antti from SEB. Just one question on demand, and obviously the volumes regarding orders are still holding up on a fairly high level, and you mentioned that you are still pushing through some price hikes. So if you look at the businesses which you would yourself think that react first to a downturn, Are you seeing any kind of a negative sequential or within the quarter weakening? And have you seen any kind of pressures on getting the price increases through to your customer base? So any cyclical weakness that you are seeing at the moment?

We are still seeing the strong demand continue. Now, of course, it gets a little bit more tricky, because the inflation is kicking in. So, as I already indicated, actually, kind of on the actual volume, the Hayabhan and Kalmar order increases, a little bit less moderate, but still a very strong demand obviously there. If I look at our internal indicators and what we see, we see no signs of decline actually. For example, in Kalmar, the 90-day sales funnel is actually continuing to be at a very high level. So obviously we are fully aware of the market uncertainties, as everybody is, but it's not visible in our own demand. The second question is a very good one. We do start to see more pushback in pricing increases, I think, and it's a little bit funny situation because obviously people start to see the raw material pricing declines already happening, for example, in steel. Then again, the energy costs are going up, the labor costs are going up at the moment, but clearly the acceptance for the marketing price increases in the last couple of months has been The resistance has been higher than it has been in the past, but we are still able to push them through.

All right. And then I guess you mentioned kind of the supply chain issues. You expect them to continue with the first half of next year. So is this more kind of a broad level assumption or... kind of what are you seeing there and should we also think that this will kind of continue with the same with the inflation that even though the price increases are improving the delivery mix, you're still kind of seeing volatile and increasing costs throughout the first half of next year.

Yeah, I wouldn't at least trust on improvements on that one at the moment. As I said, if you want to be on an optimistic side, you probably see there's slight easing off on the supply chain. And obviously, you see our revenue numbers. But to a great extent, it's still a very fragile situation. And from day to day and from component to component, the situation can change quite dramatically as well. There is still COVID impacting our supplies. For example, you have labor shortages coming from that, but another labor shortage issues. I think the energy situation in Europe might have some sort of surprises for us this coming winter as well. Not directly for us. I think our energy situation and supply seems to be pretty well guaranteed. But again, the supplier base is probably more under sort of threats there as well.

Sure. And then perhaps last housekeeping question regarding kind of the one of costs. What's the guidance for Q4? How much is left on the things that you have guided from before?

For the full year, we estimate that our restructuring costs would be approximately 65 million euros from the ongoing communicated initiatives. So for quarter four, we anticipate the lower costs on these initiatives. This does not include any strategic evaluation related possibly related costs if if we have a conclusion on that during quarter four all right thank you we'll take our next question for Maximiliano Severi from Credit Suisse your line is open please go ahead

Yeah, hi, thank you for taking my follow-up. My follow-up would be on the cancellation side. And you mentioned that you didn't really see an uptick in cancellations in the quarter. I was wondering if you could maybe comment on, first, how much of your backlog contains cancellation clauses? And secondly, if historically you could comment on how many cancellations did you see during pass-down terms across Kalmar Mobile Equipment and Hiab.

I would say generally speaking, when I look through the different situations we've been through, including the financial crisis, looking at the COVID, we don't actually see significant changes in Kalmar and Hayab in terms of cancellations. What was visible during the financial crisis was the heavy cancellation business in the shipping side, but we have not seen significant cancellation waves going through with the Kalmaran haja business. If you started the haja, it's good to remember that usually the haja product is attached to the truck. The truck is also ordered. It usually serves specific service or business in there. And I think people are waiting for that one at the moment. Also, as I already said, the inflation is a pretty good sort of safeguard on that one as well. We have introduced increasingly more cancellation clauses in our contracts as well at the moment. I can't give you an exact number on that one.

If you could comment just maybe on the magnitude, would it be more than 50%, less than 50%, just to give me a broad understanding?

Yeah, difficult to give an exact percentage. I mean, also during the past, we have had cancellation clauses in our contracts, also in Hayap and in Kalmar. What has happened now during these last 18 or more than 18 months when the prices have been picking up, inflation has been picking up and the demand has been picking up, we have been strengthening or kind of making those cancellation clauses even stricter. meaning that there are higher penalties in monetary terms for cancelling the orders.

I think generally when you look at the indicators, one thing, of course, to watch out when you start to be potentially more worried about those ones would be, for example, the ready-made products inventories and for our dealers. And when you look through our dealerships at the moment and dealers, the yards are empty, unless in some high-up cases they are waiting for the truck to be delivered. So everything we are able to deliver goes into the operations right now.

Okay, thank you. Very clear. And maybe my second follow-up would be on the services business of Kalmar and Hayab. And I was wondering if you could give us a sense of how different the margin for services compared to equipment. Would I be looking at something like 20% for the margin of the service business or is it more similar to the divisional level overall?

I'd like to keep you in excitement on that one. So if you are joining Capital Market Day, we might give you a little bit more light on that.

Okay, so I'll be waiting. Thank you.

Thank you. We'll take our next question from Johan Eliasson.

Your line is open. Please go ahead. Hi, it's Johan here again. I'm just curious about this statement you said. You have moved 100 employees into the business lines and making them more independent, etc. I mean, the business line, Carmen, they are very strong businesses on their own with global market leading positions, decent profitability, etc. I'm sure they would be of interest for industrial buyers out there. Is this sort of preparing for the next step to totally dismantle the conglomerate before you retire, Mika? Or how should we see it?

I think, really, if you look at our refocus strategy, I think we have very clear milestones for the next four quarters related to the McGregor exit, potential exit of that one, and the other sort of things that I described in terms of operating profit. And I think we are now very focused on executing on that strategy.

Okay, thanks. We will take our next question from Erki Vesola from Inderes. Your line is open. Please go ahead.

Thank you. Hi, Mika. Mikko, it's Erki from Inderes. Could you please help us solve the pricing currency and volume triangle regarding Q3 order numbers as well in both Kalmar and Hiep? You previously talked about Q3 sales alone, I assume. What I'm actually after is, did we see volume drop in Kalmar and Hiep order? intake in Q3?

We did not see volume drop, but we didn't... I would call it stable at this stage. This is very round numbers, of course, but let's call it 10% roughly the pricing impact on equipment side. And then Mikko was stating the currencies, you can repeat that again.

Yeah, it's approximately, it varies a bit between Hayab and Kalmar, but we are talking about 4-5% in orders and in sales, what the currencies provided us tailwind during quarter three.

In both Hayab and Kalmar?

Correct, yes.

Okay, very good. Thank you so much.

We'll take our next question from Magnus Gruber from UBS. Your line is open. Please go ahead.

Hi, thanks for taking my follow-up. I think in Q2, you closed your books a bit for terminal tractors for a couple of months. Did you see any catch-up on orders there in Q3 as you opened the books? We saw such quite a strong effect on trucks in North America in September, for example, when demand came back as truck makers opened the books. Did you see anything similar on the tractors?

We had our books closed during the Q3 to a certain period of time as well. And we are quite focused now on trying to sort of serve the customers who have direct operational requirements in terms of deliveries, for example, dealers. are not prioritized effectively at this stage on that one. It's good to remember when you look at the Kalmar orders, as Mikko was saying, we still had a closed order book for terminal tractor business for the significant period of the time during Q3. Then there was 125 million heavy crane order that we are not offering anymore a year ago. If you take those into account, it was quite a significant order increase still in the Kalmar side as well.

Yeah, if we take those into account, it's 19% growth on comparable basis, excluding the heavy grains orders from quarter three last year, 19% growth. And then if we think that it's approximately 5% currency impact, so we are talking about a 14% growth still in orders.

Okay, so I'm not sure if it's possible to adjust for the period you have closed books on the tractors, but approximately how much headwind do you think you saw from that?

Well, last year we did not, and we probably should have, but we did not have to. We had order books open throughout the whole, so that probably has a fairly significant impact on material impact, I would say.

Okay, got it. Thank you. And then I think in the last quarter you said you expected the EAB tailwind from US dollar FX to be visible more in 2023. Do you have any sense for what this impact could be at this point? I remember in the past it has been a quite significant tailwind.

In HIAP's case, unfortunately, we have not seen a tailwind from the currency in operating profit in a big sense at the moment, yet due to the fact that lead times in HIAP products are extremely, extraordinarily long. We are talking about nine months delivery time still at the moment, and also in certain product categories, it is even longer due to the component availability as well as transportation delays. So from that point of view, we expect that that would be more visible in 2023 and onwards.

In terms of the magnitude, should it be sort of less sensitive than in the past?

I wish I would have the crystal ball for the US dollar development, but, I mean, if we look high up, just the kind of translation impact for quarter three results, so we are talking about roughly 1% tailwind or kind of currency impact in high up profitability growth. So quite a small number still this year. Okay, got it. Thank you so much.

Once again, ladies and gentlemen, if you want to ask a question, please press star one. We'll pause for just a quick moment to allow everyone an opportunity to signal for questions.

Okay, if no further questions, so thanks for the great questions and great answers, Mika and Mikko. And please remember to sign up for the Capital Markets Day. The virtual participation is still possible on 15th of November and our full year results will be published on 2nd of February 2023. So stay tuned.