Kalmar Oyj B

Good morning, everybody, and welcome to Kalmar's second quarter results call, the first of its kind as a standalone company. My name is Karina Geberteir, and I'm heading the IR Marketing and Communications at Kalmar. Today's result will be presented by Kalmar's President and CEO Sami Niiranen and CFO Sakari Ahdekivi. The presentation will be followed by a Q&A session in the end. Also, please pay attention to the disclaimer. And with that, I would actually like to invite Sami to the stage. Welcome.

Good morning and afternoon, everyone. My name is Sami Niiranen. I'm proud to be here presenting the first financial results of the new stock listed Calamart. During quarter two, Kalmar delivered solid profitability as demand in many markets has stabilized compared with the high levels of 2023. A key highlight of the quarter was the successful listing of Kalmar. After several months of preparations, we are now ready for the next phase of our sustainable, profitable growth strategy as a publicly listed company. We noted that a mixed demand picture across the business continued in the second quarter, with stable demand in services, but some softness, especially in the North American distribution customer segment. Despite the continued complex macroeconomic and geopolitical landscape, we managed to deliver a good quarter with a solid financial performance. We also continue to make solid strategic progress with detailing our Driving Excellence initiative, and I will go through this in more detail shortly. As mentioned, this quarter is a real landmark for Kalmar, as the demerger of Carcotech was carried out at the end of June, followed by the successful listing of Kalmar on the 1st of July 2024. And as an independent company, we are now fully committed to execute our growth strategy and focus on capital allocation in the best interest of Kalmar and our shareholders. In the second quarter, approximately 40% of the value of our total sales was attributed to our ECO portfolio, underscoring our commitment to sustainable innovation. Today, approximately one third of our sales come from services. Our extensive and active installed base of 65,000 machines globally provides a solid foundation for significant services growth, fueled by our innovative offerings. We continue to see a mixed demand picture in the second quarter with regional variations. Demand for smaller sized equipment used in ports continued to be solid, while delayed decision making continued in orders requiring larger investments. De-stocking was prolonged in distribution customer segment due to a softer North American market. Kalmar's demand is also impacted by the number of containers handled at ports globally, which is estimated to have increased by 3.4% during the second quarter and increased by 4% in 2024, according to Drury's latest estimates. Examples of major orders received during quarter two included 14 hybrid straddle carriers, as well as three heavy terminal tractors. Our order book totaled 925 million euros at the end of the second quarter. The order book is on a healthy level and provides a good visibility for the second half of 2024. Our cost structure has already been adjusted to the lower order book level, which is evident from our continued strong profitability. Our sales totaled 417 million euros in the second quarter, which was impacted by a slower market activity and the lower order book. Almost 80% of our sales come from geographies where the market drivers are most prominent, which provides a real opportunity to drive our initiatives, especially in these markets. Kalmar has been focusing on its eco portfolio for many years with the purpose to contribute to the climate change mitigation and economic activities that can be considered environmentally sustainable. The share of our eco portfolio sales has been steadily growing and in the second quarter it accounted for 40% of Kalmar's total sales. For Kalamar, the increasing interest in electrification and sustainable innovations promotes profitable growth, embodying commercial and operational excellence on top of customer satisfaction. Our comparable operating profit continued on a solid level, driven by improvements in both commercial and operational excellence. our cost structure has already been adjusted to lower sales largely, which partly offset the drop in sales volume. The comparable operating profit was around 52 million euros, leading to a margin of 12.6%. This quarter, we have gone from a business area of Carcotech to a standalone publicly listed company, reporting financial based on our two segments, equipment and services. To enhance transparency, we now provide comparable operating profit levels and other key financials for both reporting segments. The good business performance coupled with improved cost structures due to measures implemented last year and early this year has made us deliver on the strong profitability this quarter. And Sakari will provide you with more details about the two segments performance. So next, I would like to recap and update you on our strategy that we presented in the Capital Market Days in May. As you well know, Kalmar's strength lies in our global leadership in the mission-critical heavy material handling market. We have built a trusted reputation by partnering closely with our customers, consistently delivering solutions that make a real difference in their operations. As we look to the future, our strategy is clear to drive sustainable growth by leading the industry towards greater innovations, such as electrification, to accelerate service growth and to drive business excellence. We are fully committed to our long-term performance targets, which include a 5% annual sales growth over the cycle, 15% comparable operating profit margin, and over 25% return on capital employed by 2028. This will be delivered whilst maintaining a strong capital structure and committing to ambitious sustainability targets. The Driving Excellence initiative is a crucial step towards achieving Kalmar's long-term performance targets. Detailed planning has advanced and Kalmar is planning to reach approximately 50 million Euro cross-efficiency improvements by the end of 2026, in line with the aim of reaching the previously communicated 15% comparable operating profit margin by 2028. These efficiency improvements also enable enhanced investments in sustainable innovations and service growth, the other two strategic pillars. The main measures are related to actions in commercial and operational excellence that include active pricing management, supply chain and process optimization, and continuous focus on competitive operational cost base and faster decision making. So now coming to my last slide, I'm also very pleased to see how our close collaboration with our customers translates into a strong innovation pipeline. During the quarter, we launched the Kalmar electric empty container handler and unveiled the Kalmar Ottava electric terminal tractor. In addition to that, we introduced the myKalmar 2.0 digital ecosystem that provides access to all the fleet details, machine cards and contracts. Single point of entry to digital tools such as the store function with parts and equipment upgrades as an example. the insight function with performance analysis and data-driven actionable insights, as well as intelligent solutions taking a step towards the predictive maintenance to ensure operations continuity and top efficiency. So this ends my part of the presentation. I'll now hand it over to my colleague Sakari. So thank you very much.

Hello, my name is Sakari Ahdekivi. I am the Chief Financial Officer of Kalmar. I'm very pleased to be here to present and to go a little bit deeper into the figures of the second quarter of the standalone Kalmar company. I will start my presentation with an overview of our performance on an LTM basis, similar to what we did in the Capital Markets Day. I will then drill deeper into the two segments, equipment and services, and then cover the comparable operating profit a little bit deeper in terms of a bridge, and also discuss the balance sheet and the outlook. I think it's important to remind the audience that, of course, this is a bit of an exceptional quarter still in terms of how we present the figures of Kalmar. The P&L is a carve-out basis P&L, and the balance sheet is now the demerger balance sheet as of the 30th of June at the moment of the demerger from Cargotech. This, of course, means that while the P&L comparables are, or the prior year numbers in the P&L are comparable and have been restated, the comparables in the balance sheet are, of course, not useful because the demerger balance sheet looks very different from the carve-out balance sheet that we have presented in the comparable periods. With those words, let's dive into the numbers. And on an LTM basis, our orders received are slightly below the 1.6 billion euros as a result of the 375 that we booked in Q2. But more or less, I would say that the orders have been hovering around the 400 million mark or close to for several quarters now. Leading to the order book of 925 million euros, as Sami explained, which is still on a good level and supports our second half of 2024 very well. On an LTM basis, the gross profit is 25.5%, and we have a comparable operating profit margin over the last 12 months of 12.5%. Sales LTM at 1.868 billion euros. And then the leverage based on the demerger balance sheet at 0.6 times EBITDA. And this is very close to the figures that we presented in the Q1 pro forma balance sheet. And also the gearing at 27.3 percent is very close to the pro forma Q1 gearing that we presented earlier. Return on capital employed remains on a good level at 20.2 percent. And over the last 12 months, we have generated a very, very healthy and strong cash flow. Cash conversion during the last 12 months has been 148 percent. So, although the cash flow in the second quarter was clearly lower than in the recent quarters, the cash generation over the 12-month period is very, very healthy. Now diving then into the equipment segment. Equipment segment orders decreased by 21%, and the order book then in the same direction, 29%, and sales decreased 28%. The demand picture continued to be mixed with softness, especially in the North American distribution customer segment, and also some decision-making delays still in the larger equipment. Fully electric equipment contributed to 14% of the orders received in the second quarter. Profitability, however, despite the decline in sales, remained very strong due to the successful commercial performance as well as the cost-saving actions executed earlier. Service segment orders received have been stable with an increase of 2 percent compared to the second quarter in 2023, amounting to 137 million euros in the quarter. And sales were stable slightly, very slightly down compared to last year in the second quarter, and the order book was stable. Profitability in service has grown steadily during the last quarters and was now at 17.3% and showing a good track of improvement now sequentially. Growing services is one of our key focus areas going forward and we see a significant growth upside from our large installed base and our innovation enabled offering. In addition, we will take advantage of the move to electrification and to deliver value through data-driven solutions in service. The good operational performance and the cost structure that we adjusted already earlier has largely offset the effect of the declining sales when we consider the comparable operating profit margin. The cost savings announced in connection with the Q3 2023 report are visible and delivering approximately 20 million euros already in the first half of 2024. As you remember, back in Q3 we announced cost savings target of 20 million, which we then reiterated or actually increased the target level to 30 million later on. So this is clearly supporting our profitability in the first half year, which is shown here in the bridge on the left hand of the slide. The operating profit includes items affecting comparability, which were €16 million in the second quarter and €25 million for the first half of 2024. These are all related to the demerger costs from Cargotech. The total costs recorded related to the demerger during 2023 and 2024 until the end of June were 40 million euros. The estimated total costs are 45 million euros, so 5 million more to come. However, this estimate may be subject to change. R&D expenditure in the first half year was 25 million, representing 2.9 percent of sales. Colmar's return on capital employed remained on a very good level and supports and enables long-term growth for the company at 20.2%, although slightly lower than in the recent quarters. And as mentioned, the gearing is 27.3% and the leverage at the end of June 0.6 times. And finally, then, from my side, we reiterate our outlook for 2024. So, the outlook for 2024 is unchanged. As published on the 1st of July 2024, Kalmar's comparable operating profit margin as a standalone company is estimated to be above 11% in 2024. And that completes my presentation, and we can move over to the Q&A. I invite my colleagues back to the stage. Thank you.