Hiab Oyj Unsp/Adr

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

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

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