Kalmar Oyj B

Good morning everyone and welcome to Kalmar's Q3 results webcast. My name is Kamilla Maikola and I'm from Kalmar's Investor Relations. Today's results will be presented by our President and CEO Sami Niiranen and CFO Sakari Ahdekivi. The presentation will be followed by a Q&A. Please pay attention to the disclaimer as we will be making forward-looking statements. And now over to you, Sami.

Thank you very much, Camilla, and good morning, everyone. I'm pleased to share with you Kalmar's third quarter 2024 results, which demonstrate continued progress in our journey as an independent publicly listed company. This quarter was robust. We delivered strong profitability and advanced our strategic initiatives, further solidifying our position as a global leader in heavy material handling solutions. The strong performance reflected the great achievements of the entire Kalmar team, and I want to thank everyone for their efforts in the quarter. In September, we reached one last major milestone in the demerger and listing process, when the separation of all the IT systems was successfully completed. I'm incredibly excited about the opportunities that lie ahead as a standalone company. We reached a record high profitability of 13.5% in the third quarter, despite the lower sales volume. Services segments comparable operating profit margin continued to improve and reached 18.3%. Demand has remained stable overall, but the softness in the North American distribution customer segment has been prolonged. We have also specified our outlook, and Sakari will cover this later in his presentation. We have a well diversified business with four strong customer segments. Our services share of sales was 33% in the third quarter, and our Echo portfolio share of sales remained high at 40%, showing the continued strong interest in hybrid and electric solutions among our customers. So let's then take a look at the overall market environment. Market indicators are showing a mixed picture. However, all indicators for the different segments are showing moderate growth for the coming years. The global container throughput is expected to grow by 4.8% this year, while the indicators for GDP, manufacturing and retail and wholesale are estimated to grow with around 3%. That being said, geopolitical risks have increased in recent months, adding uncertainty to the macroeconomic outlook. Our orders received in the third quarter were 416 million euros, which is a 6% increase compared to the third quarter last year. Demand has remained sequentially stable with some variation regionally and by end customer segment. Europe and EMEA have remained stable, while the softness in the North American market has continued. Some of our customers are still in a wait-and-see mode, especially when placing larger orders. Europe remains our largest region in terms of orders, representing almost half of our third quarter's order intake. our sales pipeline remains healthy. And while quarterly order intake can fluctuate depending on the timing of customer decision-making, we are confident in our ability to meet our long-term goals. That being said, we are not expecting our profitability to improve sequentially in Q4 versus Q3. In Q3 we had several bigger orders, of which these six were separately announced. These included one major order of 26 hybrid straddle carriers to GMP Le Havre in France, one large order of 13 forklift trucks and an eight-year service contract to Australian Blue Scope. a large order of six reach stackers and two empty container handlers to super-terminize in Brazil and three smaller orders of heavy terminal tractors, empty container handlers and electric forklift trucks. So let's take a closer look at our large base of around 13,000 connected equipment around the world. By following the running hours of these equipment, we get a good view of the activity and demand in different regions. Both year-on-year and quarter-to-quarter, we see mostly positive or neutral activity development in our main markets, reflecting the stable demand picture overall. Then moving on to our sales performance. As you can see, our sales in the third quarter were 425 million euros, impacted by the slower market activity and our lower order book compared to last year. However, it's important to note that services segment share of sales increased to 33% from previous year, which is helping to build resilience in our overall revenue. The ECO portfolio share of total sales has remained high and was 40% in the third quarter compared to 35% one year ago, which is demonstrating our customers' strong interest towards electrical and hybrid solutions. On an LTM last 12 months basis, the fully electric machine share of equipment orders were 10%. We have also continued to work towards our sustainable growth target during the third quarter, and we have been pleased to announce some great achievements, including a collaboration with Volvo Penta concerning a framework agreement to service engines, and a new partnership with CES, an Italian manufacturer of supersized heavy-duty material handling equipment, which will enable us to offer our customers an even more comprehensive range of solutions. We communicated already in the spring that we are committed to the SBTI targets, and today we were pleased to announce that the science-based targets initiative has approved our commitment in the beginning of October. Additionally, we have made a decision to expand our innovation center in Ljungby, Sweden, by building a world-class test center, which will enable us to conduct more comprehensive testing and development of our equipment and technologies. We have also launched the production of our heavy forklifts in our Shanghai factory to better serve our customers worldwide. As you can see here, both our equipment and services segments performed well in the third quarter. The services segments profitability improved to a good level of 18.3% and also equipment segments profitability was strong at 13.6%. Demand has remained stable in both segments and both have performed well during the last quarters. And we are fully committed to our performance targets for 2028, which include a 5% sales growth per annum over the cycle and a 15% comparable operating profit margin. Driving excellence is one of our key strategic pillars. And as part of this and our 15% comparable operating profit margin target, we have communicated that we plan to reach approximately 50 million euros cross efficiency improvements by the end of 2026. We have also communicated that as part of the operational excellence initiative, there were some changes in the composition of Calamar's leadership team as of 1st of October. We actively continue our work towards a best in class commercial performance and cost efficient company. So thank you everyone. And now I will hand over to Sakari.

Also from my side. Sami already covered a lot of ground, but let's add a few points to what was already said. So what I will cover this morning is recapping where we are now with our financial profile in terms of LTM numbers, dive a little bit more deeper into the reporting segments, and then also have a look at our balance sheet, cash flow, and then the outlook finally. Our financial profile has remained strong, which gives us an excellent possibility to target growth further. As Sami already mentioned, our order book is at a healthy level of 905 million euros. If we look at the LTM orders received, we are almost exactly at 1.6 billion euros now from the last four quarters, sales being then higher at 1.79 billion euros. Orders received have continued on a stable level and has been give or take around 400 million euros per quarter for several quarters now. Our business performance has been successful and we have been pleased to deliver a 12.5 comparable operating profit margin on an LTM basis and the year-to-date figure is 12.8. Our leverage is low at 0.4 times EBITDA and our cash conversion has been strong at 126% over the last 12 months. Then having a look at the equipment segment. Our equipment demand has remained sequentially stable for the fifth quarter in a row. Of course, now on a year-on-year comparison, we were able to show growth in our orders. The profitability of equipment increased from the last quarter sequentially and was at 13.6 in the third quarter of 24, presenting a strong level despite the lower sales. This was mainly driven by successful commercial performance and the cost savings actions executed earlier. The service segment profitability improved for the third quarter in a row and reached 18.3% in the third quarter. This was driven by the successful cost management actions as well as sourcing activities. The order book and sales have been stable for several quarters already, which provides resilience. Growing services is one of our key focus areas. Our extensive installed base of 65,000 machines globally continues to provide a strong foundation for service growth going further. And we are further accelerating this through innovative offerings and digital solutions. We have been able to perform well despite the lower sales volumes, mainly thanks to the improved business performance, including sales mix, price management and direct cost improvements, as well as cost structure improvements, which were earlier adapted to a lower sales volume. The operating profit included items affecting comparability of €4 million in the third quarter, which were all related to the separation and listing of Kalmar. The total costs related to the separation and listing recorded during 2023 and 2024 by the end of September have amounted to €41 million. we estimate the total cost to be a maximum of 45 million euros at the end of it. Maybe still to cover that in line with the previously communicated 30 million euro annual cost savings, approximately 25 million euro are now visible in the year-to-date Q3 numbers in both the sales general and admin costs, as well as production indirect costs, which are part of cost of sales. Our return on capital employed in the third quarter was 19.3%. It's worth noting that the ROSI number, of course, includes the one-off costs related to the separation and listing somewhat affecting them. And then as an additional point, research and development expenditure in the first nine months of this year has totaled 38 million euros, which represents 3% of sales. Our leverage is strong at 0.4 times as I previously said. And as you can see, it has actually improved in Q3 thanks to the positive cash flow generation in the quarter. And our gearing now stands at 16% compared to the 27 at the end of Q2. And then we have also included here on the right hand side of the slide, the maturity profile of our debt structure as it stands today. So mainly maturing in the years 25, 26 and 27. And you also see here the sources of funding. As said, cash flow remains strong. We've actually had now five quarters of positive cash flow generation. And in the third quarter, this was mainly supported by the strong profit impact. There was also a minimal positive impact from networking capital. And then as a note, our financing costs are very low, which of course then supports the profit generation. Then finally, as a result of the continued solid business performance in Q3, we have now specified our guidance and estimate our comparable operating profit margin to be above 12% in 2024. However, we are not expecting our profitability to improve sequentially in the fourth quarter compared to the third quarter this year. This completes my section of this presentation, so we are ready for Q&A, so I will invite Sami as well as Karina onto the stage with me.