Hiab Oyj Unsp/Adr

Welcome to Cargotex Q2 2021 conference call. My name is Aki Vesikallio. I'm from Cargotex Investor Relations. The results will be presented today by our CEO, Mika Vehvilainen, and CFO, Mikko Puolakka. After the presentation, there will be a Q&A session. Please pay attention to the disclaimer in this presentation. And remember that due to the securities laws, for example, in the US, we are not allowed to discuss the merger with Connect Race in this call.

Thank you, Vaki. Good afternoon. for joining the Cargodec Q2 2021 conference call. Before I start, a small personal note, actually. Tiina Aaltonen, who has been or is the assistant for the finance department and investor relationship, is having her last workday today. And she's been with us for 16 years, and that's more than 60 quarters. So thank you, Tiina, for great work and all the best on your future retirement as well. And now to the actual quarter itself. So it's been a roller coaster ride for the last 12 months. Obviously, we had probably the shortest sort of down cycle in the history. And as you know, from September onwards, we have seen a strong demand returning. Really now highlighted at the record orders we have taken in both in Kalmar and in Haia, but overall also highest order intake ever in Cargodex history. Looking at the highlights on that one, strong demand, especially in Hayab and Kalmar mobile equipment. We also improved order intake in our automation solutions, as well as in MacGregor, but to a lower level as such, and the quarter did not include any major automation orders as such. Sales increased by obviously stronger demand by 13%, and it's good to see that the services business is returning back to growth. The COVID restrictions are still impacting the services growth, but it's good to see that despite the somewhat difficult environment, we are able to return on that, but obviously one driver is the increasing usage of the equipment and required services there as well. Also, operating profit increased together with the revenue. Very happy with the MacGregor. Despite the fact that they had lower revenues than a year ago, we were able to improve the operating profit, and obviously this is driven by the efficiency efforts we are taking in MacGregor. And I have to say that looking at the market outlook now for MacGregor, we are in a good place to take benefit of the market growth with the good financial performance underlying that one. Also, excellent performance from Hajabe. We were able to turn good demand into positive operating profit development. Less so in Kalmar, where we had a number of issues related to the supply chain as well. Mikko will go through some of the details in his part of the presentation as well. Equipment running hours, this is again comparing the Q1 now to Q2. As you see that there is still some modest growth, but when we actually now looked into the details of this one, we start to see that a very large part of the equipment is now operating at the capacity. So we are not expecting to see major running hour numbers moving forward here and where this actually is ending up as visible in our orders of course is that more capacity is required in market in terms of the new equipment as a lot of the equipment is now operating at the maximum capacities in its respective operations. Market environment actually was strong pretty much throughout all of our segments. Container traffic grew by 13%. We expect the whole year to show strong growth, and also we expect that growth to continue into 2022. Also, construction output, both in Europe as well as in North America, has been at a strong level. We expect that growth to somewhat sort of slow down towards the second half, as the labor shortages and material shortages are slowing down the excellent growth rates we have seen. And this is obviously having a clear positive impact for Hayab, as are the other economic activities, such as the distribution, et cetera, as well. In MacGregor, the market has clearly shown a turnaround in there. So far this year, we have seen 735 merchant ships ordered. That's actually more than the whole last year together. And I think it's quite clear that looking at the current Clarkson estimate of 1,065 ships, that's probably going to be a higher number, and Clarkson obviously will update their estimates in September. The offshore oil and gas market is still actually relatively low, but we see very strong activity increases in offshore wind, and it's quite interesting to see actually that about half of the ships ordered in offshore segment are now actually into the offshore wind applications as such. So good growth there, and we are in a very strong position to take advantage of that growth in McGregor as well. As said, record-breaking orders both in Kalmar as in High Up. We broke the old record in actually Q4 in High Up. We broke the record again in Q1, and we got to the new sort of 100 level with more than 500 million of orders in High Up. Really driven by the very strong underlying market activity and then the price increases. Both in Kalmar mobile equipment and in High Up, we have driven a number of price increases most cases two, in some cases even third price increase already within this year. Overall the price levels have increased about 10 percent from the beginning of the year. Obviously not all of this will be visible in this year, as the delivery times are extending into the next year. However, we believe that the current price increases will actually be adequate to cover any increased cost in components and other material costs visible for us at the moment as well. And obviously, we will see a big part of the benefit coming through then on 2022, where the price level increases are in full effect. McGregor has also seen an increase in orders. This is not yet materially impacted by the good order volume intake in merchant ships. That will be most likely visible earliest at the end of this year, most likely during 2022, but the offshore wind is showing good positive development as well as the McGregor services there as well. This obviously has resulted into an extremely good order book of more than two billion and it's good to note that this order book is of exceptionally good sort of mix in the terms of the Hayab and Kalmar mobile equipment having a lion's share of the order book now moving forward. Sales and comparable profit improved. When I look at our supply chain situation, we estimate that we missed about 20 million in top line due to the supply chain situations. Overall, our own processes and factories and systems are actually working without any major limitations at this stage. There are some COVID-related restrictions in certain factories, but that has not been an case for us. In the supply chain side, on component availability, we do not see any major single issues there as such, but there is a wide range of smaller problems and they tend to sort of vary from one to another, from week to week as well, and that's slowing us down somewhat. Some of the engine availabilities and a very wide range of materials impacting that somewhat. But overall, a relatively good performance considering the circumstances, and no major particular concerns at this stage. Good to see the services returning despite the COVID restrictions and service orders actually increased by 27%, an excellent number as such. And when you look at the business area, specific, of course, the high-up numbers stands out. The year-on-year comparison, of course, is partly driven by the fact that in Q2 2020, The COVID impact had a major impact on higher installation volumes and accessories, and obviously that market has now returned and is partly helping. But also we see obviously with the high equipment activities, a demand for services growing and the demand for spare parts also moving to the good direction. We continue to execute our strategy. It's very clear that the sustainability is becoming a main driver or major driver for our customer segments as such. We keep on investing into the right technologies and the strong financial position we are in today, especially after the exit of the Navis, enables us to continue our strong investments into the right technologies to serve our markets in robotization, automation and electrification. And overall, we see the market demand for that kind of solution developing very favorably for us. A good example of that one is Kalmar. Today, for example, in electric heavy forklifts, already more than 30% of the demand is now electric, and we see the same development happening in there. In some of the products, we are already in second generation of electric vehicles, and all of our equipment will be fully electrified by the end of this year. Also, we announced a cooperation to sort of lead the market and technology research together with SSAB in terms of the carbon free steel development and very happy to sort of look into opportunities in that market as well. With that one, I'd like to hand over to our CFO Mikko Puolakka, who will cover the business areas.

Thank you, Mika, and good afternoon also from my side. Let's start with Kalmar, where we had really a very extremely strong quarter, like Mika said, a record quarter for quarter two. The demand was strong, very much driven by the macro outlook, also the announced price increases. We have done several price increases this year, as well as customers' anticipation for the longer lead times. Growth came to great extent from mobile equipment and more specifically, especially from terminal tractors, but also other container handling equipment and also forklift trucks and services were performing very well. We did not book any major or basically any automation orders in quarter two, but in the automation and project division, we got certain replacement type of investments. For example, straddle carriers to manage the existing capacity in the larger cranes. Looking at sales development, the supply chain and logistics bottlenecks were impacting to a certain extent Kalmar Q2 sales. Mika mentioned earlier on Cargotech level approximately 20 million euros. Roughly half of this is related to Kalmar. So missing components, certain logistics bottlenecks prevented us to deliver all the planned deliveries in quarter two. Those will be made in quarter three and quarter four this year. The sales growth was very much driven by the mobile equipment orders, which we received in the second half of last year. The automation and project division sales declined due to the low order intake during the last 12 months. Services sales development was very good. Looking at Kalmar profitability, it was flat year on year. And here the main drivers were the extra costs related to handling the missing components, lower productivity due to missing components as we have to move products from place A to B, kind of interim warehouses, and then back to the production when the missing components have been received. Also, the transportation is more expensive nowadays compared to six months ago. Also, the lower Navis sales impacted our Kalmar profitability to a certain extent as less license deals were booked and recognized as revenue in quarter two. We have also accelerated the investments in our R&D activities, and this is related to robotization and electrification, like also Mika described in the previous slides. We completed the NavVis divestment on 1st of July. So NavVis numbers will be consolidated into Cargotech and Kalma results as of 1st of July. The enterprise value was 380 million euros, and we will book in quarter three a 240 million euro operating profit impact, a positive operating profit impact from this transaction. This will also have a positive impact on our gearing in quarter three. Then looking high up where we had basically a very excellent quarter in all metrics. Orders developed very nicely. This was an all-time high in HIAP's history. Strong demand in all product categories as well as in services driven also by the high utilization rates. If we are looking at the geographical development, the strongest demand was in the USA and Europe coming in the second place. Looking at HIAP's order book, also I would say extraordinarily high. This represents more than 2.5 quarters of sales, also very much reflecting the supply chain situation, where we have had longer lead times due to the suppliers' ability to cope with rapidly increasing volumes. HIAP sales increased by 30% year on year, And also there we have had some delays, approximately also 10 million euros in HIAP due to the missing components and also transportation delays. We expect to catch up this also in the coming quarters. And then looking at HIAP's profitability, very good development, operating profit up by 82%, and strong development also in the relative profitability, driven by the volume increase, as well as the productivity improvements, which we have done in 2020. And then moving to MacGregor. where we have seen now recently positive development arising from the market activity improvements. McGregor has had now two consecutive quarters where the book to bill has been above one, also illustrating the market development. Strong development in all divisions, in merchant, in offshore, as well as in our services. Looking at the sales, sales declined, and this is coming from the fairly modest 2020 orders, as the markets were quite low that time. Service sales increased now 10%. If you remember our quarter one, Service sales were down by 18%, and now the improvement is very much coming from the high utilization activity rates at our customers. So the shipping lines are running at a very high capacity utilization, and the services are needed for that. Good development in operating profit. Fourth positive quad now in the row. and the improvement here is coming very much from the good service performance, as well as the cost reduction activities, which we have done basically during the last couple of years. We still continue with the cost reductions, and our objective is to reduce fixed costs by 13 million euros this year compared to last year, and we are progressing well with this plan. A few highlights about our key figures. If we look at the first six months, our orders are now almost €1 billion higher than last year. Despite our sales being 2% below last year's level, we have been able to improve the operating profit, including all items affecting comparability significantly. And the items affecting comparability amounted 52 million euros, significantly lower than last year. The biggest items in this line were the merger-related costs, approximately 17 million euros, the purchase price amortization, 8 million euros, and Navis divestment-related transaction costs, 5 million euros. Our net income was 60 million euros better than during the first six months of 2020, which is of course very visible also in the earnings per share. And now, even though our ROC is still fairly low, we are in an upward trend there as the operational performance has been improving. Looking at our cash flow, 13 million euros for Q2, improvement from last year's Q2. We had a strong contribution to cash flow from the profitability from EBITDA, approximately 73 million euros. But then our networking capital increased by 60 million euros. And here the biggest component has been the inventory development, especially working progress, where we have had some semi-finished products because of the missing components. These will be delivered in the latter part of the year. Balance sheet has remained strong. Our gearing in quarter two, more or less on the quarter one level. And also the liquidity has remained on the same level as in quarter one. As I mentioned earlier, the Navis divestment will have a positive impact on our gearing. If the Navis divestment would have taken place at the end of June, our gearing would have been approximately 30% instead of 60%. So significant impact from this transaction. We have also refinanced the majority of our 2022 maturing debt, and we have only one bond amounting to 150 million euros maturing next year. So from that point of view, also nice debt maturity profile. And for the outlook for this year, we estimate that this year's comparable operating profit will improve from last year's level when it was 227 million euros. And then with those words, I would hand over back to Aki.