Hiab Oyj Unsp/Adr

Welcome to this news conference regarding Cargotech's Q1 results. COVID-19 situation impacted our orders, operations and visibility already during Q1. The good news is that we have started the actions to safeguard our operations and our financial position is strong. Also our services, business and software business performed well during Q1. Today our CEO Mika Vehviläinen will go through group level development and give an update regarding the COVID-19 situation. Then our CFO Mikko Puolakka will continue with the business areas, financials, and then Mika will be back to comment on the outlook. Please, Mika.

Thank you, Hanna-Maria. Good afternoon, ladies and gentlemen, and welcome to the Cargotech Q1 announcements. As Hanna already said, I will cover shortly the group-wide developments and sort of what's happening regarding the COVID-19 crisis. Mikko Puolakka, our CFO, will cover the business area, specific financials, and then some of the other financial numbers, and I'll discuss the outlook and the situation early April in the end as well. Overall on Q1, orders received decreased by 24%. First of all, it's good to recognize the fact that the Q1 2019 was an exceptionally high comparison period for us. The primary reason for the reduction in order intake is that we effectively lacked any large project orders, especially in automation during the Q1 this year. Very clearly, the practical issues related to closing the deals and also the uncertainty within the customers have slowed down the order intake in that one. However, the automation project pipeline still looks strong, and I believe in the long term, this will further enhance the demand for such solutions. Also, we saw some slowdown in other business areas towards the end of March, as well caused by the COVID-19. The sales remained on a strong level. We obviously have a very strong backlog at the moment, and this will help us also throughout the rest of the year. Our comparable operating profit also decreased from the last year. The biggest reduction being in Kalmar. Mikko will discuss this more in detail, but it's primarily driven by the change in mix. A larger part of the delivery is coming from the project deliveries and even within the project deliveries from heavy grain side, where we had lower margins and we have had some cost issues also regarding our supply chain in China. Hayab profitability decreased also, but this was almost solely driven by the fact that we had some last minute shipment issues and some of the larger shipments towards the end of March were not delivered until April. Without those shipment misses, Hayab would have actually exceeded last year's profitability. Even though MacGregor result was still negative, I'm actually pleased with the progress we are making. We are heading to the right direction. MacGregor is in the plan and we expect the business to improve from the last year overall. Obviously, the current situation with uncertainty and the financial market being in disruption, we have put a strategic assessment regarding the Navis business on pause at the moment, and we will return into that one later in the year when the situation is more clear. Regarding the COVID-19 impact, first of all, obviously, early part of the year, we saw some disruptions in our business in China, both in terms of the supply chain, our own factory operations, and customer demand. This has actually significantly improved during the Q1, and our operations in terms of supply chain are back in full force, and we have also seen the customer demand coming back strongly towards the end of the quarter as well. Obviously, with the spread of the COVID-19 virus, we saw some further impact then in our businesses in Europe and North America towards the end of the quarter. The increasing uncertainty and the restrictions by the different authorities is clearly slowing down the decision making, and this was most visible in our order intake, where we didn't land any of the expected larger automation orders during the Q1. As said, however, we still see a strong pipeline in there, and if anything, the demand for more automated solutions will certainly increase as a result of the learnings from this crisis. We had challenges in our supply chain coming from the different suppliers and closer of their factories as well. And that affected some of the deliveries and obviously impacted the profitability also during the Q1. Regarding our own manufacturing facilities, our assembly units in Italy, Spain, Malaysia, and Ireland had been closed at some stage during the March. Some of these factories are already back in operations, and I would expect all of these manufacturing facilities being back on stream during the May time. However, there will be capacity limitations with the safety precautions we are taking in our manufacturing units. Obviously, we have had delays in delivery schedules and caused partly by the supply chain issues, but also for the fact that quite a lot of the shipment capacity has been taken out as well, and this causes delays in the shipments as well. The other issue we are dealing with is, of course, access for our customer sites, whether they are shipyards, ports or other sites as well. And this is impacting the project deliveries, commissioning, and obviously also for the specialists and services that are required actually physically on the sites. The visibility regarding the rest of the year is obviously weak. We do not know how the COVID-19 is going to sort of spread what restrictions there will be by the different authorities and how the customer demand will sort of behave towards the end of the year as well. Our focus very much is of course on the safety of our people, safeguarding our business, business continuity and our capability to serve our customers with the right services and on-time deliveries, cash and cash position that Mikko will discuss more in detail, and then adjusting our cost structure into this crisis situation. We have reacted very rapidly into this one by taking temporary measures in many parts of our organization. About 6,000 of our employees are now in a short week, four-day work team or respective salary reductions at the moment. And most of that has been effective from the April onwards. Also, I'm very proud of the fact that about 200 of our top executives have voluntarily agreed on 20% salary reduction across the board, and that has also become effective 1st of April. We have cut down our external services in different parts of operations, we have frozen our recruitments for the time being, and obviously our travel is minimized, also of course by the restrictions, but overall we are not traveling at this stage. We expect that these temporary saving actions have about 10 million saving effects per month for the time being. Obviously, we continue to monitor the situation and take further cost structure adjustments if required. The market environment Q1 is of course shifting very rapidly at the moment and what we see actually in terms of container traffic is sort of surges and drops in different places. With the strong consolidation of the container liners, we actually have seen about 20% capacity reduction in early part of the Q2, but that has enabled to maintain the cost or the pricing of the shipments at relatively high level. We also see different routing with the low fuel and bunker fuel prices at the moment, and all of those have different sort of impacts now in terms of container movements in other locations. For example, in US many ports we saw first low volumes in the beginning of the year, caused by the supply chain issues in China. We have now seen a surge of those volumes when the Chinese supply chain is coming back, and then incapability of some of the ports to actually deliver those containers further, so we have congestion happening in other locations, so quite a lot of things shifting very rapidly as well. The construction output remained at the high level in Q1, and at this stage it's quite difficult to project how that will develop in US and Europe throughout the rest of the year. Where we clearly have seen already a strong move is, unfortunately, a further slowdown of the ship order and ship contracting, where we see an impact actually for the drastic reduction both in merchant side as well as in the offshore side, and offshore side, of course, not being helped by what we see happening with the oil prices at the moment as well. As said, orders decreased somewhat in MacGregor, We saw a sort of slowdown in order intake in high up towards the end of the March. And again, the lack of large orders in Kalmar clearly impacted the project ordering. And in terms of the mobile equipment, we saw actually still a strong order intake in the sort of intermodal, smaller container handling equipment. The logistics sector, especially in US, was fairly slow, but actually has now shown some sign of light when we move into Q2. And especially e-commerce related deliveries actually are running at a very high level at the moment. The industrial side was relatively okay in Europe, but we have seen quite a rapid deceleration in some of the industrial segments in Europe at the beginning of April in there. However, our order book remains strong and this of course gives us a very good basis for the rest of the year as long as we can get this supply side and our own manufacturing units back in operations as we expect during the May. The sales remained high, helped by the big backlog, and as I said, some early issues in China, and then a little bit slowdown towards the end of March, partly driven by the issues with the shipments, ship capacity, and different constraints in the logistics chains as well. I'm particularly happy about our performance in services. Our services and software increased and continued to sort of grow during the Q1. In Kalmar, relatively flat, as well as in Hajab, and the demand continued at good level. In MacGregor, the 24% increase comes primarily from the inclusion of the TTS services. Without TTS addition, the MacGregor services would have been flat, but I'm happy to see that Good demand in our services business has continued, despite the practical issues related, for example, to site access, etc. Software sales increased still in Q1, primarily driven by the deliveries of the automation software as well, and the services and software constitutes about 35% of our sales during the Q1 2020. Then I hand over to Mikko Puolakka, who will cover the business area financials for us.

Thank you, Mika, and good afternoon also from my side. So, as usual, let's start with Kalmar. In Kalmar, our orders were, in quarter three, 334 million euros, a decline of 35%. This decline came mostly from the Kalmar automation-related projects or orders where we had quite high orders in the comparison period. In general, there is a good demand for automation solutions, but customers are postponing investment decisions in this kind of uncertain market environment. We continue to see also a certain weakness in smaller mobile equipment, especially in that kind of mobile equipment which is used in industrial applications like wood processing, steel industry or car industry. Kalmar sales were 404 million euros, staying on last year's level. The sales for the automation and project business grew in Q1, and this is very much supported by the good orders that we have received during 2019. The sales for smaller mobile equipment declined due to the weakness in orders in the previous quarters. As Mika already referred, Kalmar comparable operating profit declined from the comparison period. It was 26 million euros, 21% decline. And this decline is due to two reasons. The first reason is that we had now during quarter one higher share of project revenues or revenues coming from larger projects where typically the relative margin is lower than in smaller equipment or in services. And then, as Mika also referred, we have had some challenges in project business-related supply chain in China, and that was burdening also our Kalmar margins in Q1. Then, looking high up, In high-up, our orders were 296 million euros, decline here 13%. Basically, we saw decline in all kind of equipment-related orders, and in all regions. Positive thing is that high-up service orders grew by 13% in quarter one, so showing there a nice development. High-up sales declined with €302 million. And also, like Mika referred earlier in his part, due to the coronavirus-related delivery or logistics chain delays, we were not able to deliver all planned deliveries during March, but those will be then delivered in Q2. And higher operating profit for quarter one is 30 million euros, and this was very much impacted by the decline in sales. Then in MacGregor, where basically, in general, we have been progressing according to our plans and restructuring activities, what has been already announced earlier. In McGregor, the orders for quarter one were 151 million euros. This is an 8% decline. We saw a decline in the merchant ship orders, driven by the very low new-build orders by the shipyards. Our offshore related orders grew, and this is very much driven by the orders received in the sustainable energy area. McGregor service orders grew by 20%, and this has been supported by the TTS acquisition. Excluding TTS, the organic order growth would have been flat. McGregor sales were 153 million euros, here a 10% increase compared to the previous year, quarter one, and the comparable operating profit was minus 5 million euros. Despite being a negative operating profit, it was according to our expectations for quarter one. There are basically two drivers for the loss-making quarter one, the low capacity utilization in certain offshore as well as in merchant product lines, and then also the very low order activity and the tight competition concerning deals available in the market. We announced already in 2019 significant restructuring actions in MacGregor, and we are targeting to achieve 15 million euros cost reductions during this year. So far in Q1, we have achieved 3 million cost savings. Then Cargotec Total Financials. Our order backlog is 1.9 billion euros. Like Mika said, offering a very good basis for the coming quarter's revenues, assuming that we can deliver that backlog in this corona environment. Comparable operating profit, 40 million euros. We had 13 million euros items affecting the comparability between the periods. And in this 13 million euros, we have a one 5 million euro booking related to the rainbow heavy industries associated company where we reduced our ownership from 8% to 6%. The net income for the period was 11 million euros, earnings per share 0.18 euros, and the rolling 12-month ROESI in Q1 was 6.5%. Our cash flow for Q1 was 23 million euros. This is slightly lower than in the previous year's Q1, mainly driven by the lower profitability. Our net working capital has increased. That's quite typical in the beginning of the year when we start to build the equipment for customers' orders. Of course, in this kind of situation, we need to monitor very closely our inventory as well as also the accounts receivable development. Our debt portfolio is well balanced. Our gross debt is approximately 1.1 billion euros. And here it's good to note that 83% of our debt portfolio or outstanding debt is long-term, so maturing after one year or later. Our gearing was 57%, and when we exclude the IFRS 16 lease liabilities, roughly 180 million euros, the gearing was 44%. Our liquidity position is very strong. At the end of March, we had 281 million euros of cash and cash equivalents in our possession. On top of that, we have a fully unused, committed 300 million euros revolving credit facility. We have 183 million euros of loans maturing in the next three, sorry, in the next four quarters. So the total net liquidity at the end of March was almost 400 million euros. On top of these 400 million euros, we have 150 million euros commercial paper program, of which we have utilized at the moment 50%, and then we have roughly 130 million euros of unused bank overdraft facilities. In early April, we raised, in addition to the previously mentioned facilities, 200 million euros, two years bank loans. So overall, in the beginning of April, we had 800 million euros liquidity. And as you can see from the right side here, we don't have any major repayments coming up in the near future. The board proposes a dividend of 1.20 euros per B-share, and basically the dividend would be paid in two installments. The first installment, 0.60 euros per B-share, would be paid directly after the approval of the AGM. In practice, the payment would happen in the early part of June. In addition, the board is proposing to the AGM an additional approval or authorization for an additional installment of 0.60 euros per B-share. And this dividend would be paid based on the board's evaluation later However, the authorization would be valid until the next AGM. The 1.2 euros maximum dividend proposal represents approximately 55% dividend payout ratio when we calculate the EPS excluding the items affecting comparability. And with those words, I would invite Mikko back to talk a bit about the outlook.