Hiab Oyj Unsp/Adr

Welcome to Cargotech's first quarter results call. My name is Aki Vesikallio. I'm heading Cargotech's investor relations. Today's results will be presented by CEO Mika Vehviläinen and CFO Mikko Puolakka. The presentation will be followed by a Q&A session. In the first quarter, we saw solid profitability despite supply chain challenges. Some of the highlights in the quarter included our refocus strategy, which was announced on 30th of March. We aim for higher financial performance through sustainability and profitable growth. In the first quarter, excellent progress in services and in high-up continued. Although uncertainty on deliveries is expected to continue. So please pay attention to the disclaimer in the presentation. So going through the content, so first Mika will cover the group level development and market environment, as well as highlights from the refocus strategy. Then Mika will go through the business areas and the financial development of the group. With that, over to you, Mika.

Thank you, Aki. Good afternoon from my behalf as well, and thank you for joining the Cargodec Q1 2022 call. Quarter 1 2022 was a quarter to remember for us in Cargodec. We saw a terrible war breaking out in Europe. We see the escalating COVID situation in China. We announced the cancellation of merger with Konecranes, and then we announced a new refocus strategy for Cargodec. Against that backdrop, I have to say that I'm quite satisfied with the performance in Cargotech. We had another very strong order quarter, exceeding again 1 billion euros of orders, and the market remains strong in all of our segments. Our revenues increased by 17%, despite the operational challenges that continue in our supply chain. and our comparable operating profit increased by 26%, really driven by the increases in the revenue. Looking at the activity around the globe through our connected equipment, we saw very high utilization rates continuing across our different segments and markets. We saw some slowdown in the high-up sector in US, really driven by the slowdown of the construction activity, although it still remains at the very high level. This is really driven primarily by the capacity limitations regarding the labor availability and the material availability. However, at the same time, we actually saw a record new housing starts in the US markets as well, so the underlying market remains to be strong. Also, we are starting to see the impact of the COVID measures and lockdowns in China as well in equipment utilization. We can get a lot of different insights and sort of information regarding our equipment. And here is another example. This is looking at the high loader crane operating times versus our expected modeled utilization. So we actually have a lot of information available and we can project where we would expect the utilization rates going. This is an indexed information, 100 is actually the expected volume. Interestingly, you can see from the chart that the activity level in Europe has been at a very high level over the sort of projected material, except of course the eastern break that is very visible in the data. In the US, actually the activity level started somewhat at the slower level probably due to the issues I discussed earlier about the construction activity, but we have seen actually the activity level picking up and actually exceeding the projected volumes and also very visible that very clearly in US the eastern is not such a holiday as in Europe. Market environment continues to be strong in all of our business segments. The container traffic continues to grow. We see continuing sort of difficulties with the congestion in the port. And I'm sure that the current situation in Chinese ports due to the COVID restriction is not helping out the situation moving throughout this year. We see a continuing high level of activity in the construction market. As I already said, we actually saw another record level of US housing starts happening again in the last quarter. In McGregor, the market also remains to be strong. Kallaxson is estimating a slight decline from the last year, which was a very high year with over 1,700 vessels, but the 1,300 vessels is still about double what we have seen in the previous years as well. The decline is probably mostly due to the shipyard capacity starting to be quite full and the new-build prices going up quite strongly as well. It's also good to note that offshore activity is picking up very clearly. The change in energy situation in Europe, for example, is seeing increased activity again in oil and gas sector. And of course, the renewable sector around offshore wind is remaining very strong. As I said, another very strong order quarter, and in our core businesses in Haiab and Kalmar mobile equipment, we saw a further increase in our order intake. The McGregor orders declined slightly from the previous year. Primarily last year, we had a very strong sort of service project order in there. However, we see the pipeline to be quite strong and already have seen an increased order activity during the Q2. The strong order activity is obviously visible in our order book that is now exceeding 3 billion euros. About 80% of that order intake is in our core businesses in Hajab and Kalmar mobile equipment that, of course, sets us well for the coming quarters. Our lead times start to be close to 12 months at the moment, and the order backlog now extends beyond 2022. Despite the challenging operational environment, we saw actually revenues increasing and a lot of hard work has gone into that one. In certain areas, we actually have seen the component situation to sort of lighten up somewhat and number of critical suppliers for our businesses actually decreased somewhat during the Q1. However, while there is progress happening in many areas, the war in Ukraine together with the COVID situation in China is casting quite a lot of doubts and uncertainty, and the visibility for the supply situation for the rest of the year is quite difficult, and the situation remains to be quite fragile at the moment. very happy with our services business that continues to go from strength to strength and we had another great quarter almost at the record level at the moment and services actually improved and grew in all of our businesses altogether by 12% being 33% of our total revenues. A few words about the refocus strategy that we announced at the end of March. This is a great start for the new refocus strategy. In our new core focus businesses, our revenues actually increased by 23% and we had a comparable operating margin exceeding 10% in those businesses also during Q1. As said, we will be focusing on higher financial performance, faster growth, leveraging our capabilities in sustainability and services. Our strategic direction remains the same, aiming for profitable growth and improving the sustainability in the logistics industries. Again, to recap the strategy, we will further aim to accelerate the growth in HIAB. In Kalmar, we will be focusing towards the mobile solutions and selected number of product groups and will exit the heavy port grain business. And we have also announced that we are now starting the evaluation of strategic options for MacGregor. Our business will highly be focused on customers supporting their operations through improving lifecycle services. We have significant opportunities to drive further growth in our services business, both in terms of quite clear self-help measures, such as spare part capture rates, maintenance contract capture rates, et cetera, as well as more and more advanced services based on our technology and digitalization. We have a great starting point Our market positions are very strong. We are either number one or very strong number two in all of the core business areas. We have an excellent sort of high value brands in those areas and our technology position remains to be very strong. We keep on investing and again this quarter we increased our investments in our R&D, leveraging our capabilities and driving for electrification, robotics and digitalization. The demand for eco-friendly and sustainable products is clearly increasing, and a good example of that one was the 38% growth in our eco-portfolio during the Q1. Actually, if you would exclude the NAVIS numbers from the Q1 last year, which is also classified as an eco-portfolio, the growth in our eco-portfolio during Q1 would have exceeded 60%. What's happening next? Again, the strategic evaluation of McGregor business has started. We have appointed an investment bank to help us in evaluating the different options. And we plan to exit the heavy crane business in Kalmar. We have put the business in hold now. We are not taking any further orders and we expect to come to a conclusion regarding which is the best way to exit that business by the Q3 this year. We keep on reviewing the operational model to support the refocused group and what's the best way of setting up our operations, for example, in group level to enable that one. Our capital allocation priorities are around accelerating our M&A pipeline even further, continuing investing in R&D around electrification, robotics and digitalization, and maintaining a strong focus on mission climate actions. Our current strategy is clearly getting traction. We are growing in adjacent businesses and markets. And as I already said, the Eko portfolio grew by 38% during the Q1. And overall, our core businesses grew by about 23% in Q1. We will be solving our customers' problems around sustainability. Another good example of that one is the announcement of the first in the world electrified reed stacker coming out of Kalmar, and we already see a strong demand for that solution as well. We are investing further in that one. Again, our electrified range is expanding continuously. We've been first in the world in bringing into market truck-mounted electrified truck lifts, and we already have a third product coming out of that one, and one good example of actually the demand for that one, we announced a new record order for electric truck mounted in Europe value about 5 million euros. So very clearly we see across the board a strong demand towards more sustainable solutions, and we are in a very strong position to fulfill that demand as well through our technology offering and development. With that one, I'd like to hand over to Mikko Puolakka, who will cover the business areas. Thank you.

Thank you, Mika, and good afternoon also from my side. Let's start with Kalmar, where we had quite a nice development in the order intake. The core businesses, meaning the mobile equipment and the straddle carriers, as well as services, order intake increased compared to last year. The heavy grains, like Mika said, we have not been taking any new orders recently, and the heavy grains orders declined compared to last year. It's also good to remember that we had Navis still in quarter one last year, and excluding Navis orders from the comparison period, actually Kalmar orders would have been on last year's level. Like Mika said, we have had good traction in the environmentally friendly solutions. 30% of our forklift orders were coming from the fully electric versions and we now sold also the world's first fully electric reed stacker to Norway. As you can see from our order book, we are accumulating the order book due to the fact that the component availability in various component categories is very poor, and this is leading to extremely long lead times, extending beyond 12 months, especially in the terminal tractors. Our sales growth is coming from mobile equipment and services, And like in orders, also in sales Navis was approximately 25 million euros in Q1, and excluding Navis, the Kalmar sales growth would have been 24%. Despite the sales growth, Kalmar deliveries are still very much constrained by the limited availability of different components. Just to mention few examples like axles, hydraulics, electrical components, wire harnesses. Volume growth was the primary driver for Kalmar's profitability improvement. And if we look at the core profitability of Kalmar, i.e. excluding the heavy grains, the profitability would have been slightly above 10% in Q1. Then moving to high up, where we had an excellent performance in all financial parameters. We had a couple of larger orders in quarter one, like the 25 million euros truck mounted forklift order in the US, as well as some orders coming from the German Rheinmetall deal, which we did a couple of years ago. Sustainability is very strongly on our customers' agenda also in HAIAP, like in Kalmar's case. An example there are those fully electric truck-mounted forklift orders, including a five-year service contract. Service sales grew across all product categories, but especially in the loader cranes and demountables, as well as in services. However, like in Kalmar, also in HIAP, the component shortages, as well as lack of truck chassis, are limiting our delivery capabilities and also leading in HIAP to extraordinarily high lead times and high order book. Looking HIAP's profitability, that improved significantly, and this is coming very much from the volume growth, but also HIAP has executed a very rigorous cost control during quarter one. When looking at McGregor, despite the improved vessel contracting activity, the orders declined slightly. Some merchant vessel orders were postponed from quarter one to quarter two. We saw improvement in RORO or merchant vessel orders, however, especially in the RORO segment, but then the offshore and services orders declined. Service order decline was because of the quite sizable one of type of service modernization orders won in quarter one last year. McGregor sales growth is very much driven by services, as well as then the delivery of merchant vessel orders, which we have won during 2021. Profitability for McGregor was low at breakeven. The merchant vessel profitability, as well as services, improved in this year's Q1, but unfortunately still the offshore projects were making losses in Q1. When looking at the overall picture, like Mika already illustrated, we have a very high order book, extraordinarily high order book. The book to build has been for Kalmar mobile equipment as well as for Hayab already for several quarters, more than one. When we looked at profitability, nice improvement in comparable operating profit from 52 million to 65 million euros, primarily driven by higher sales. We had 28 million euros items affecting comparability. The biggest items here are the 9 million euros related to the merger. And then we did a 10 million impairment for Russian business related assets in quarter one. The full kind of reported operating profit was 37 million euros, a 53% improvement. And we doubled our net income during quarter one from last year's level. Cash flow was disappointing. The reasons are quite explainable. The negative cash flow, 70 million euros, negative cash flow is coming from the increase in inventories, mainly working progress in Kalmar and in Hajap. due to the component availability. And then we have been increasing also our spare parts inventories in order to support the growth in orders and sales, what you have seen. Our balance sheet has remained strong. Gearing was 38% that has increased by 11% units from last year's level. Half of that increase is coming from the dividend payment, 70 million euros, what we did in March. And then the other half is coming from the working capital increase, primarily inventories. Our so-called committed liquidity is 650 million euros. And on top of that, we have a 260 million euros credit facilities coming from commercial paper programs and overdue. So our overall liquidity is 900 million euros. Of course, giving a nice possibility for executing acquisitions if such become available. We don't have any major debt repayments coming before mid 2023. And our guidance for 2022 is unchanged. We estimate the comparable operating profit to increase from last year's 232 million euros. So that concludes the presentation, and we can move then to Q&A.