Kalmar Oyj B

Good morning everyone and welcome to CalMars Q3 results webcast. My name is Kamilla Maikola and I'm from CalMars 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 Kamilla and good morning everyone. I'm pleased to share with you CalMars Q3 2024 results, which demonstrate continued progress in our journey as an independent public 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 CalMars team and I want to thank everyone for their efforts in the quarter. In September we reached one last major milestone in the demurge 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 .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 eco 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 .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 -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 reed 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 -on-year and -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 -in-class commercial performance and cost-efficient company. So thank you everyone, and now I will hand over to Sakari.

Thank you. 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 -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 -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 2024, 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 .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 euros 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 euros. We estimate the total cost to be a maximum of 45 million euros at the end of it. And 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 I 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.

Thank you. Thank you.

I guess we are ready for the Q&A and handing over to the operator.

If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad.

The next question comes from Antikansenen from SEB. Please go ahead.

Good

morning, guys. It's Antikansenen

from SEB. Congrats on a great quarter and a couple of questions from me one by one. First is on the equipment orders. It was the best number in a couple of quarters now despite Q3 usually, I guess, being a bit seasonally weaker. So was there any specific timing impacts on any larger deals here? I guess you're still kind of talking about stable underlying demand. So any color on that front would be appreciated.

Thank you for the question. Yes, when it comes to equipment orders, yes, there are always timing matters. And of course, if you look back to the past five quarters, we have had a very stable around 400 million order intake, of course, including equipment orders as well. So, yes, this quarter we were happy and we are happy with our order intake. But the situation has not changed really drastically from the previous quarter, for instance. So the demand is stable, as you could see it also on the couple of slides with operating hours as well as the market environment.

So it's a bit... Yeah, maybe a

follow up.

Yeah, just to continue what Sami was saying. So there's of course always an element of some orders falling into a certain quarter and that may then cause some fluctuation between the quarters.

Okay. And then maybe follow up on that. I wanted to a little bit better understand kind of the backlog conversion because as you mentioned, the backlog is stabilizing and book to bill is close to one. And you have roughly eight months of sales on the equipment side on the backlog. So is it a fair assumption that if the demand is stable now, then any kind of improvement on demand would be reflected on your sales, not until maybe back half of next year?

Yeah, I think it's a fair reflection and maybe repeating exactly the stable five quarters in the past. And then our order book gives a visibility for the next two to three quarters, we could estimate exactly. So, yes, I think it's quite a fair judgment.

And then of course it depends on the mix a little bit because the lead times, they vary between three and 12 months. So that's good to take into consideration.

Okay, noted. And then the second topic was on the profitability and especially kind of the margin expansion on services. I mean, quite strong both sequentially and year over year. So is there any kind of a mix impact in play here or is it underlying improvement? And then also, I mean, you flag that you don't expect margin expansion going into Q4. I mean, you've had margin expansion for a number of quarters despite any sales fail with. So why is this stalling for Q4?

I think if I start with service, yes, we are quite happy with .3% profitability, of course, and especially, of course, the trend that has continued now for the last couple of quarters. So we have an improving trend with service profitability. But of course, it depends on the mix as well within the service segment, between the spare parts sales service agreements and so forth, of course. And but the trend is right. And of course, this is building up on our long term work. This is not just one quarter result, of course, but a long time we have been focusing on improving our service revenue as well as profitability. And we are heading into the right direction there. Then when it comes to overall profitability, yes, we we we specified and mentioned that the Q4, we are not expecting that to improve from Q3. It will be it will be lower in profitability. And that depends also on the mix. And it might be the mix between between the segments equipment and service. And then, of course, within the segments as well within service, as well as within equipment, plus, of course, the regional distribution of our sales.

All right, makes sense. And then the last one from me is to Sakari. It's a question on your networking capital levels and cash conversions where you are right now and looking perhaps for 12 months going forward. Is there any any reasons to expect any drastic changes on either one of those?

Well, the I would say that, of course, to some extent, it's volume related. So, you know, if you look at the rotation of working capital, then then I would say that I don't expect a change in that. But then depending on on how volumes develop, then, of course, in absolute terms, when you grow, you tie up some more working capital. But there's no other change.

I guess the outlook is fairly stable for for, let's say, next couple of quarters. So then the kind of the working capital to sales levels, there's no extraordinary. In either direction right now where we are. That's

a fair assumption.

All right. That's all from me. Thank you very much. Thank you.

The next question comes from Pony Leighton-Markey from Danske Bank.

Please go ahead.

Hi, thank you. I have three questions just going back to the Q4 comments. So, I mean, you indicated that it's due to mix, but is it also due to volume? So do you expect Q4 revenue to be lower than Q3?

I think there are several factors and the mix definitely is one of the major ones there. And then, of course, we try to, you know, let's say, perform as good as possible when it comes to revenue generation. So, but I think it's a factor of a factor of or result of many factors.

Okay, thanks. Then on the kind of demand or the market outlook. So, can you tell about the North American de-stocking situation? So it's been continuing for a year or so. What is the kind of inventory situation? Do you have any visibility? How long that would continue? Is it over in Q4 or could that kind of prevail also in 25?

Yeah, good question. And of course, we are following our inventories and the dealer inventories on a monthly basis. So we have a pretty good visibility on that. Then we are also following up on the operating hours as we could present today. The inventory levels have been decreasing, we can say that. But we don't expect a very quick recovery now in Q4 for the de-stocking. But it will be prolonged to end of this year, at least. So in Q1, in the beginning of next year, we are wiser on that situation. So that's how we see it. So the softening or the softer North American market really related to the distribution and customer segment has continued for quite a long time already now.

And as some of you remember, that this has really been prolonging from our communication previously. So in that point, the situation has remained the same for quite some time already.

Okay, thank you. My final question is just on capital allocation. So you have a pretty strong balance sheet already and good cash flows would make it even stronger. So what are your thoughts on this like due dividends? But what else could you do with the cash that you will get?

I'll take that one. So I don't think we have anything new on that. So I think what we've said before is that we, of course, want to support our strategy, both in terms of sustainable innovation and growing services. So it's on R&D spend. It's on things like Sami was talking about, the test center now in Jungby. So capital will be used to support our strategy. And I think there's not much new to say about that otherwise. All right, thanks.

The next question comes from Mikhail Doppel from Nordea. Please go ahead.

Thank you. A couple of questions here. Coming back to the U.S. dealer inventories, you mentioned that you cover or follow those on a monthly basis. I guess you have fairly good insights on where they are currently across your products. I was just wondering if you could specify a bit what you see now in terms of dealer inventories compared to normal levels across your products?

Yes, the dealer inventories that we are following up regularly, of course, they have been decreasing during the year. So that's the trend that we have seen there. But still, it has not affected the softer terminal tractor business in the North American market. So of course, we will continue following up on the order pipeline inventories activities in general. And what we can say now is that this softening or de-stocking will continue at least up until the end of this year.

Okay, let me rephrase. So do you see dealer inventories, how much higher are they today in percentage terms compared to historical averages, for example? And does this only apply to the terminal tractors or do you see dealer inventories elevated across some other products as well?

I think the major impact has been on the terminal tractors, definitely, in that customer segment there. So I don't have in my head now the historical data on the inventory levels exactly. But if you look, let's say, 12 months backwards for the last year, of course, there is a reduction taking place. But still, we are not seeing, let's say, ease up of this de-stocking during this year.

Okay. And you said that this mainly relates to interest rates or what will kind of drive this down, do you think?

Yeah, I think it goes a little bit back in the history, a couple of years, two, three years post pandemic, when there were a lot of investments by the end customers in that particular distribution and customer segment. And then the dealers filled up their inventories and we produced machines with high volumes as well. And when this chain reaction started to release, basically, so then, of course, our end customers had enough equipment, our dealers had a high stock and then we had quite full production as well. So that's what has continued during the last, let's say, one and a half years. So it's coming from the post pandemic investment cycle, basically. And then, of course, a particular feature in the North American and US market specifically is that we have a high number of dealers there. So there are three different players, of course, in the value chain. And

then when we talk about terminal tractors, of course, they are less tailor-made to the end customers than then our heavy, for example, reach stackers and so forth. So that's also part of the pattern, what has happened in the past.

And how big are terminal tractors of your total portfolio?

Excuse me, can you please repeat your?

I'm just wondering when you mentioned the terminal tractors specifically, just wondering, you know, how big part of your total orders or sales does that represent on your equipment?

What we are reporting on a quarterly basis is the segment split between services and equipment that you have seen today as well. We are not exactly opening up between different divisions internally when it comes to when it comes to terminal tractors and counterbalance and so forth. But what we can say, of course, is that terminal tractor business is a very important business for Calmer.

And then, of course, you can see the regional split in our secondary segment reporting. And there you see the Americas region and especially North America, of course, terminal tractors are a substantial piece of that.

Right. OK. My

second question relates to demand overall. I was wondering if you could give a bit of color on what you see across the various segments and regions, or what you saw basically in Q3 and what you see when you go into Q4. I mean, we talked about terminal tractors in the US, we talked about the distribution segment being weak there. But beyond that, if you think about other segments and regions, how would you describe the situation?

I think overall we have seen a stable demand for the last year, for this year. And then, of course, let's say the other end customer segments like ports and terminals performing well, but then heavy logistics also performing well or stable. And then even manufacturing, despite some slowness in Europe, for instance, that has been performing well. So basically the softening and the slowdown has been in the distribution and customer segment. When it comes to different regions, you can see in our order intake, for instance, that we have a very strong position in Europe as well as in EMEA, which has really grown. So the weakness is on the North American side there.

And then finally on price versus cost, I mean, we can see that in the waterfall chart that you showed, there seems to be some clear benefits still. So I'm sure from that, how do you expect this trend going forward? Should we expect this benefit to fade into next year so that's a margin tailwind then? Or do you expect to be able to maintain this kind of tailwind from this situation? I

think if I start with pricing, yes, we have done quite substantial pricing increases in the past two years ago, for instance. So we don't see that continuing. So we are on the normal pricing adjustment level nowadays. So nothing major in Q3, nothing major in Q4 expected either in that front. But of course, active pricing management is one of our strategic initiatives going forward in long term and medium term. And then when it comes to cost side, of course, we have a very high focus on sourcing activities and reducing and optimizing our product costs. So that work continues as we speak. So it's one part of the driving excellence efficiency improvement initiative as well.

Okay. And then there's a follow up on the price commentary there. So have you had to give up pricing on some segments or in some regions given a tougher market or would you say that you have kept your pricing or even raised your prices in Q3 or

Q4? Yeah, if I refer back to my previous comment, no major substantial adjustments in any direction in Q3, for instance. So it has been pretty stable across the board.

That's

all for me. Thank you very

much for the answers.

The next question comes from Tommy Rehlow from DNB.

Please go ahead.

Hello, it's Tommy from DNB. A couple of follow ups. Maybe if you can help us to understand the pipeline situation and the talks, of course, assuming that you have some good orders now booked for the third quarter, is there a left project potentially for the fourth quarter? What is the reasonable kind of assumption? I hear that the activity is stable, but in order to kind of not to build too high expectations on the fourth quarter, is it kind of sensible to maybe deduct a little bit on the third quarter order levels and take a little bit more on the average levels, what you saw before third quarter? Any comments on the pipeline activity and using the

fourth quarter? Good question. Yes, it has been very stable, I would say, year to date and even for the past five quarters, as mentioned a couple of times already. So we are moving around at 400 million per quarter order intake level per quarter. So that has been the run rate. And then, of course, when it comes to different quarters, there are timing effects, as we have mentioned, also that quarters are not exactly look alike. So now this quarter, we happen to have a couple of, let's say, more major orders, which we also some of them have reported in the presentation. So that's how we see the situation. And if you look at the market environment, operating hours, I think it supports that picture as well. And then maybe referring back to our earlier comment on having a flatter market in 2024-2025, I think our order intake for the past quarters, I think it reflects well, actually, with that statement as well.

Still on the pipeline, do you see still small, medium sized, bigger prospects in the pipeline? Yeah,

small and medium sized equipment here to date have been performing well. And then we have had in different quarters, we have had some delayed decision making in larger investment packages, for instance, and then the softening or softer North American terminal tractor market as well. So that is mainly the picture. And when it comes to pipeline, let's say customer activities, I think it's on a stable level as of today. Compared to the beginning of the year as well.

And as Sami already stated earlier on there, if you look at the geopolitical tensions in the world, so that gives a little bit of kind of unpredictability into the situation. So that's why we also need to be cautious.

OK, and then another follow up. I didn't really get the clarity on the fourth quarter volume sales assumption. Is there seasonality or delivery timings stable from the third quarter levels?

Well, we haven't actually said. Seasonality is not really. Seasonality is not something that impacts us very much. So I don't think seasonality is a factor, but we haven't actually guided on the sales. So the indication is the profitability that we've we've alluded to.

OK, thank you.

The next question comes from Tom Scogman from Carnegie. Please go ahead.

Yes, hello, this is Tom from Carnegie.

I think we have a bit of an uncertainty going into next year when it comes to kind of margin expectations. I think it would be wise just to wipe out because now you say that the margin will be lower sequentially in Q4. So what is happening to the order book margin compared to what you have delivered? Is it so that this kind of weakness should also be, you know, I mean, you have a good quarter now, but is it so that you have had exceptionally high margin orders that you have delivered this quarter?

We thanks for the question. When it comes to Q4, of course, we talked about the mix effect between the segments within the segments as well and the regional distribution of the order. So there are many factors, of course, affecting Q4. And then when it comes to our order book, yes, we do. We are at around 900 million level there, so which gives a visibility for the next two to three quarters, we can say, of course. But then if you look backwards, our order intake, of course, yes, it has been very stable at around 400 million per quarter level. So I think that gives some kind of indication on the previous quarters.

Sorry. The question was about the order book margin and how terminal practice, for instance, will be a smaller and smaller part of the order book. So if the order book EBIT margin or sales margin, is it very different from what you have delivered this year? Because we know that you had exceptional price hikes in the aftermath of the pandemic and now it's been like normal business more and more quarters. So I just wonder what is happening to the margin of the order book compared to what you have delivered so far this year?

Yeah, that's what I tried to explain a little bit on the mix and that effect, of course. But in volume, of course, our order book or intake level has been stable during the past quarters at around this 400 million. And then we can see, of course, the share of service sales in the overall revenue, which has increased, of course, over the last quarters as well. And it's now at 33 percent of our revenue. So that has improved.

OK. And if there's some segments like terminal practice where you are scared to have very low utilization ratios in certain factors or so that will impact the margin negatively next year?

Yeah, I think different equipment, they are, let's say, operated in different ways. But I think overall we have a strong position in all kinds of equipment when it comes to different divisions. So the portion of terminal tractors, what we aim to be, of course, is to be sustainably profitable with every single equipment type, of course. So then it may vary between the divisions. Of course, how much are we selling terminal tractors? How much are we selling some other machines?

And of course, we quite quickly adjust on the direct labor side if we have lower delivery volumes. So that's something, of course, that we can do.

And then about electrification, that's 10 percent of your orders. Can you confirm that you're certain that you have at least a high market share in electric products,

in fossil

engines?

Let's say, of course, when it comes to electric portfolio, as well as our eco portfolio that we launched already back in 2017, we have been strong in that front. But we have been strong on the diesel engine equipment as well. So I would say that across the portfolio, we have a strong share of the market as of today. But we are very happy. We are very happy with, of course, with the progress of the fully electric equipment so far. And we are very happy with the eco portfolio development, especially with this already 40 percent of our revenue.

And it's important to note that the fully electric equipment, when customers place the first time orders on fully electric equipment, it's a long process before it comes from the decision to the order for the customers because they need to redo their operations. And there we see kind of a different kind of sales way to the customers than with the traditional diesel engines.

Does the smallest pricing in electrical equipment make you worried somehow that they would be really cutting prices on electric products?

Let's say that's, of course, what we are following up. What we have said in the past is that the fully electric machines, they have up to two times revenue versus the diesel equipment, but it's up to two times. So it really depends on the portfolio type of machine there. But there is, let's say, a tendency, of course, for, let's say, price competitiveness or cost competitiveness on the electric side. Definitely. So, but that's what we are, what we are, of course, carefully following up. And then we have a high focus on the product cost management as well. So lowering our product costs, of course, as good as possible. So that is part of the driving excellence initiatives as well.

OK, thank you.

The next question comes from Andreas Koski from BNP Paribas Exane. Please go ahead.

Thank you and good morning. Can I come back to your comment about your expectation about a flat market in 2024, 2025? Does that mean that you expect a stable order level of around 400 million also through 2025 or should we read that comment in another way?

Yeah, let's say, let's say if I again, if I start from the past and what we have delivered so far. So we have had quite exactly 400 million euro per quarter order intake for the past last five quarters, of course. And that's what we have seen with, let's say, stable demand, sequentially stable demand and overall stable demand year to date. And then earlier, of course, we have indicated 2024 2025 being a flatter market than it's well in line with our current order intake. What we have had during this year, for instance. So that's what we say. And then now today we have provided you with a little bit more information on the market environment as well. Basically splitting the market expectations for different customer segments, which is quite interesting, interesting data, which is showing a moderate, moderate growth in the different segments. And then, of course, including the GDP as well. And then, of course, what we are also really carefully following up is the operating hours of our equipment, which shows very stable development there during this year and during Q3. And now both year on year as well as quarter on quarter. Of course, we can see some, let's say, highlights there in Asia, for instance, where the operating hours have increased a little bit more. But overall, it's a very stable demand picture that we have as of today.

OK, so does that mean that you expect improvements in 2025 or didn't get what you expect for 2025? Yeah,

I tried to look to the past and then refer to the information, extra information that we have provided today as well, because not giving exactly what will be our order intake or, you know, other numbers for the next year. So that's where we are as of today. But we have a high focus on, of course, performing as good as possible during this year as well as in the years to come. And then lifting our focus towards 2028. Of course, what we have again, let's say, confirmed today is that we are fully committed with our long term targets of more than five percent annual growth over the cycle as well as 15 percent profitability by 2028. But the growth might not be linear. That's what we have also mentioned at some point.

Understood. And then on your revenue level, your backlog is now down 12 percent since the beginning of the year. And it looks like the book to bill in 2024 will be around spot 93. So is it fair to assume that it will be difficult to grow top line in 2025 and that sales will also settle at the level of around 400 million per quarter? Thank you.

I mean, it's of course logical that when you have have a order intake for several quarters of around 400 million and your your delivery times are between three and 12 months, then of course your orders and your sales will start to converge. I think the joker in the game there is then service, which we are, of course, working hard to grow, which is not a backlog driven driven business. But other than that, I would say that, of course, logically, that's how it works.

And then the last quick one, because if I go back and read annual reports, et cetera, container throughput has always been mentioned as a key driver for the demand of CalMars products and container throughput has been growing mid to high single digit levels for a number of months or even quarters now. When do you think that will translate into stronger demand for your products? Is that the key driver for you? Thank you.

Yeah, thanks for the question. I think it's one of the key drivers, definitely, because it's one of our main customer segments as well. And let's say, yeah, there are timing timing effects and there are other factors as well when it comes to those larger investment orders. But I'm happy to happy to have a couple of major orders already now reported in Q3. So, of course, there you can see some kind of evidence on on on the on that side as well in the ports and terminals in our reported orders during this quarter or during the previous quarter.

And as said, yeah, important terminals have been performing well. And what we are trying to also convey the message that there are the other drivers also not solely the container throughput and taking that into consideration when looking at the total picture.

Thank

you. The next question comes from Antti Kansenen from SEB. Please go ahead.

Yeah, thanks.

A couple of follow ups from me. First is on kind of it's very helpful that you provide the connected fleet activity changes, but I kind of wanted to better understand how much does it really vary? I mean, where is kind of on absolute term you feel that utilization rates are now? So what I'm thinking is that is this something that would kind of be a leading indicator then for the equipment demand in a sense that do we need to see these numbers being materially higher for the next couple of quarters before we can be more convinced that perhaps the equipment demand is picking up as well. So how should we understand kind of the absolute levels and how much they can vary in your clients business?

Yeah, I think yes. And we have provided two indicators basically or time wise two indicators. We have quarter to quarter or quarter and quarter comparison as well as year and year. Of course, that gives quite a good flavor on the little bit on the time perspective there as well. But what we can see from today's report basically is the stability there plus minus something. So no huge differences there. But of course, if they will start to become more green, substantially more green numbers there and the operating hours will increase, of course, it will either mean that OK, there will be more service opportunities or the customer start replacing the old equipment at some point as well. So of course, but if we are on the red side and declining with declining operating hours, of course, that is that is a bit concerning for the new equipment sales. I would say, of course, customers can still prolong the service intervals.

And I think it gives you some kind of an indication because we've been following this running hours for several years already, already during the covid the pandemic. And we could see changes, but also how stable it was in some regions. So, yes, I think it's one indicator, but of course not the only one.

What I was trying to understand better that is it by nature always stable in a sense that that your clients usually run the equipment with stable hours. OK, OK.

And we can see some details there with Asia, for instance. So it was not exactly zero. It was it was well positive there.

OK, and then the second question was on on the equipment profitability. So I just wanted to better make sure that how big of a kind of profitability differences there are within the equipment business. And I'm not trying to get any kind of exact numbers out of you, but the margin has been stable for a number of quarters. But if you think about any kind of realistic mixed changes that can happen, how big of an impact it can actually have on the margins all else equal that your volumes and pricing and whatever stay the same? Is there a meaningful kind of big margin differences?

Let's say, of course, we are striving, striving for sustainable profitability across the board, across the portfolio. And what we can say, no major differences between different divisions, I would say. So we are on a good level in our portfolio, I would say. But, of course, the differences, the mixed differences come when when, of course, we are selling to different regions, we have different size of packages. We might have 26 machines, as we reported today in one order versus a couple of machines, packets. So, of course, there the differences might occur always depending on what the mix of the equipment in that particular package or there will be. Because what we are really aiming at this is to offer our calamari solutions as good as possible, combined with aftermarket and combining all kind of portfolios that we have, of course, in our in our company. So we try to, of course, offer the, let's say, one stop or total solution for our customers.

Yeah, maybe just coming back to Tom's earlier question, I mean, we just don't want to be kind of the margin levels that you're running right now are very good. We have a certain kind of guidance from you what the volume outlook is, but we just want to avoid that you have benefited very much this year, whether it terms of mix or whether it is pricing versus cost that everything seems to be fairly normal in a sense that then what comes after this is your improvements organizationally and whatever happens with the volume. But there are not any specific mix or pricing ish benefits that you would want to highlight for for last 12 months or for 24 in general.

No, no, but of course we can highlight our fantastic continuous improvement work when it comes to pricing, active pricing management as well as product cost management, of course. And that is the work that will continue going forward as well. And it's a vital part, of course, of our driving excellence initiative.

And of course, now in Q3, the service improvement was a factor in driving up the overall margin.

All right. Thanks so much. The next

question comes from

Pony Leighton-Markey from Danske Bank. Please go ahead.

Hi, thanks for taking my follow up. I just wanted to ask on the US port strikes. So basically two questions. One is that have you seen any impact on your demand from TOS? And then secondly, given the necrosis with the unions, so if the ports would kind of agree on limiting automation, would that have any impact on your kind of plans on developing the autonomous terminal tractors?

Yeah, that's a good question. When it comes to the strike that was a couple of weeks ago, which didn't last very long this time yet, at least. So no impact on the demand in that phase. Of course, we prepared carefully for different scenarios. But so that didn't impact on the demand yet. When it comes to overall automation demand, if there will be more, let's say, strikes or kind of agreements or negotiations between different parties, of course, that's what we need to follow up. But then, of course, in the US, the country is large and there are different areas. And OK, this was specific to the eastern part. And then I think the overall automation and the shift towards more intelligent solutions will continue. But there might be, of course, some implications, side implications along the road.

OK, thank you.

As a reminder, if you wish to

ask a question, please dial pound key five on your telephone keypad. The next question comes from Tom Scogman from Carnegie. Please go ahead.

Hi, this is Tom again. I wonder about

the US tariffs. I think you make only terminal tractors in the US, but I don't know how much local production there is of your other types of products. So what impact will tariffs have and how high will they be in your type of products?

Yeah, the of course, our position in the US is strong with the with the factory terminal tractor factory in Kansas, Ottawa. And then we have a large comprehensive sourcing base as well as the whole dealer network there. I think it gives us a very good foundation for different kind of market volatility as well. When it when it comes to possible tariffs, for instance, of course, it's a little bit too early to draw conclusions on that one. But of course, we are preparing for different kind of scenarios in that front as well. And not only on tariffs, but of course, there are different kind of initiatives launched in the US as well, which might be beneficial related to environment sustainability and so forth.

But can you update us on this tariff situation? I think there are tariffs on if you import products from China, but there are no tariffs from Europe at the moment. What is the situation?

I think it varies on products because then on some of the tariffs, there are also waivers depending on what kind of products you have. And you have to take that into consideration. But it's early days to say, depending, of course, on the future of the US. And that's why we need to monitor and follow the situation very closely.

But there are no tariffs at all in your main products at the moment?

Let's say we need to come back to that later.

And your competitors, do they have local production of these large heavy forklift trucks? I mean, Kona, Craigs and Sani don't have, but I don't know about these other ones.

Yeah, and I wouldn't like to comment on competitors either. So what I can repeat, of course, is our strong position in the US with our terminal tractor factory and the whole network, sales network that we have over there.

And then a totally different question. What type of products do your dealers typically sell? I think a big part of the dealers are like Caterpillar and Toyota, like forklift truck dealers or so. But can you open up a bit more? What type of products do they usually sell?

They do sell all kinds of products. If you now talk about the US specifically, of course, we do have terminal tractors there. We have counterbalanced products. I mean forklifts, reach stackers, empty container handlers, as well as then those large straddle carriers as well. So and then, of course, the service part, spare parts and service, of course, that's what they are responsible for as well.

But I'm kind of more wondering what other type of products they use. Are they usually selling construction equipment or light forklift trucks, their volumes are high? What is a typical dealer and do they have any adjacent product categories that you could be interested in acquiring at some point that they sell, etc.?

Yeah, OK. Let's say it depends on the dealer. It really varies between different types of dealerships. But of course, they do have their specific focus areas. So there might be some, let's say, heavy machinery equipment that they have in their portfolio. But of course, our intention and the target in Calmar is, of course, to make sure that we will get the best possible attention for us with those dealers. And then let's say maybe confirming our organic growth strategy that we have launched for 2028. So we really focus on organic activities by growing services and focusing on R&D and investing in the sustainable innovation. So M&A activities, basically, of course, we are following up what's happening in the market, but they are not our priority asset today.

OK, and then a final question, a detailed one to Sakari. So the question is, is all of the depreciation on intangible assets, is all of that to be seen as PPAs or because I don't find the separation in the report?

Tom, let's come back to that.

OK, thank you.

So I have understood we have no more questions. So I want to thank you all for joining today and we will get back during the end of this year with our Q4 earnings call and with financial calendar for 2025. So thank you all.