Kalmar Oyj B

Good morning everyone and welcome to Kalmar's Q4 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 fourth quarter and full year 2024 results, which demonstrate solid financial performance driven by our focus on operational and commercial excellence. We managed to generate stable revenues and a resilient margin by successfully leveraging Kalmar's leading position in the market and driving excellence in our operations, even though we have faced slower market activity and a lower order book compared to previous year. We advanced our strategy towards sustainable growth and focused on building upon the strong foundation. We delivered a resilient profitability in both Q4 and the full year 2024, and the orders received reached a record high quarterly level in two years. The strong performance reflected the great achievements of the entire Kalmar team, and I want to thank everyone for their efforts. There is a lot to be proud of when looking back at our first year journey as an independently listed company. Demand has remained stable overall, with some fluctuations in different geographical markets and segments. And I will come back to this shortly. In addition, the board has proposed a dividend of one euro for each Class B share and 0.99 euro for each Class A share. We have also communicated our guidance for 2025, and Sakari will get back to this in his presentation. As mentioned, our orders received in the fourth quarter reached the highest quarterly volume in two years and were 486 million euros, which is a 20% increase compared to last year. The fourth quarter's orders received included relatively many large orders related to straddle carriers, and the timing of large orders can affect fluctuations on quarter-to-quarter level. Demand in ports and terminals remained good globally, While dealer stock levels in the US have come down and the situation is gradually improving, demand has still remained subdued in the distribution customer segment, and we don't foresee any short-term significant improvement. Europe remains our largest region in terms of orders, representing 42% of our fourth quarter's order intake. And our order book remains at the healthy level, and we are confident in our ability to reach our long-term targets. So then moving on to our sales performance. As you can see here, our sales in the fourth quarter were 440 million euros, and the sales have been on a stable level throughout the year 2024. Europe was clearly the largest region, representing 44% of the sales. We have a well diversified business with four strong customer segments. Our services share of sales was 33% in 2024, and our eco-portfolio share of sales remained high at 41% for the full year, showing the continued strong interest in hybrid and electric solutions among our customers. We have a strong footprint in our three main markets, which are Europe, the Americas and EMEA. As visible on this page, we have a leading sales and service network in our industry, with sales in over 120 countries. Today, we have over 1,400 owned service technicians around the globe and four factories, which are located in Poland, the US, China, and Malaysia. We also have a strong dealer network, and in 2024, approximately 34% of our sales came via dealers. Let's then take a look at the overall market environment. Market indicators are showing modest growth overall. However, there are uncertainties related to tariffs in the US, inflation and geopolitics. The global container throughput has grown more than expected in Q4 and is expected to grow by 2.8% in 2025. Indicators for GDP, manufacturing and retail and wholesale are estimated to grow by with roughly 3% this year. And if you then take a closer look at our large base of over 14,500 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. Year on year, we see mostly positive or neutral activity development in our main markets, Europe and the US, reflecting the stable demand picture overall. The quarter on quarter developments from Q3 to Q4 are affected by relatively many bank holidays in Q4, such as Christmas and Thanksgiving, which is visible especially in the US numbers. The ECO portfolio share of total sales has remained high and was 41% in the full year 2024 compared to 35% in 2023, which is demonstrating our customers strong interest towards electrical and hybrid solutions as well as sustainable service solutions. The fully electric machine share of equipment orders were 9% in 2024. We see significant potential for electric equipment, but the order growth has been sluggish towards the end of the year. Last year, 2024, was a year of sustainable innovations with many launches related to electrification. We introduced a new range of electric empty container handlers, which are designed to minimize energy losses and optimize energy accumulation, We also started a pilot project of the electric reed stacker at APM Terminal Suez Canal Container Terminal with the goal of advancing the electrification of terminal operations across the industry. Additionally, we unveiled our new Kalmar Ottava T2 electric terminal tractor, which is now available for sales. In 2024, we also decided to expand our innovation center in Ljungby, Sweden. by building a world-class test center, and we announced our partnership with Elon Road to build a 200-meter electric road at our Jungby Innovation Center to pilot dynamic charging of electric vehicles. Additionally, we introduced our new Kalmar 2.0 digital platform for Kalmar equipment owners, and we have implemented a wide-scale installation of our Kalmar collision warning system on straddle carriers of key customers. Worth mentioning also that in 2024, our total R&D spend was 3.1% of our total sales. So to summarize, both our equipment and services segments performed well in 2024. Demand has remained stable in both segments for almost two years now, and profitability in both segments was at the good level in 2024. 12.9% in equipment and 17.5% in services. 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. So thank you all for now. And next I will hand over to my colleague Sakari.

Thank you Sami, and good morning to everyone also from my side. So, I am pleased to report to you that our financial profile has remained strong, which gives us excellent possibilities to target growth as we move forward. Our order book is at a healthy level of 955 million euros. If we think about the orders received during 2024, it continued on a stable level around 400 million euros per quarter for the first three quarters, with then a strong uptick in Q4 as several larger orders reached decision points and we were successful in winning those orders. Our business performance has been successful and we are pleased to deliver a 12.6% comparable operating profit margin. This is up slightly from the 12.4% in 2023 and this is despite 16% lower sales. Our leverage is low at 0.3 times, and our cash conversion has been strong at 104%, and this is defined as the operating cash flow before finance and taxes compared to EBITDA. Our equipment demand has remained sequentially stable for almost two years, and this is still the case for the underlying demand. However, the equipment division ended the year on a very strong note in terms of orders, with relatively many large orders won in Q4, as I said before. Equipment segments profitability remained at a good level. However, the product mix and volume have had some impact in the fourth quarter. The profitability has remained very good despite the lower sales and this is thanks to successful commercial performance both on the sales side as well as on our sourcing side. Services fourth quarter was also very good. The order book orders received and sales all reached the highest quarterly levels in the last two years. Service sales have remained stable level with previous year, which is providing resilience both in terms of sales and profitability. We are strongly focused on growing our service business and have already made significant progress in 2024 through new partnerships and investments into sustainable growth. And of course, in Q4, we saw a very nice order intake growth of 15%. The service segment's profitability has also improved significantly if you compare the fourth quarter with the same period in the previous year. We reached 17.5% compared to 14.6% in the previous year. Here it has to be said, though, that there were a few one-off restructuring costs in Q4 and 23, which a little bit skews the comparison. Services profitability for the full year was also 17.5%, which is a good level, but we do see room for further improvement in services. We have been able to perform well despite the lower sales volumes, mainly thanks to improved business performance, including sales mix, price management, and direct cost improvements on our sourcing. as well as a cost structure in the fixed cost, which we adapted already earlier to the anticipated lower sales volumes. If we look at the operating profit, this included 42 million euros of items affecting comparability, of which 32 million were related to the demerger and listing process, and the rest of the around 11 million euros were related to the Lone Star write-off. The total costs related to the demerger and listing recorded during the years 23 and 24 totaled 45 million euros. No further costs related to this are expected as we move forward. And as I said, we continue to invest in improved profitability and driving excellence in line with our long-term targets. The return on capital employed in the fourth quarter over the full year was 18.7%. This is slightly down from previous levels, but it is worth noticing that this includes items affecting comparability, which I explained previously. And these had an impact on the ROSI of about 4.1 percentage points. So excluding the IACs, we would have been at a ROSI of close to 23%. As a result of our continued good cash generation, our leverage is strong at 0.3 times and our gearing stands at 12%. Our loan maturity profile shows the major maturities in 2026 and 2027, but no major financing due in the year 2025. Cash flow remained strong, resulting mainly from the profit generation, but was further supported by reduction in net working capital through lower inventory levels. If we look a little bit further back in the first half of 2023, our cash flow was burdened by exceptionally high increases in inventories and other working capital items, followed then by very strong cash generation in the second half of 2023 and throughout 2024. And as said, our cash conversion rate was 104% in 2024. The Board of Directors proposes to the Annual General Meeting that of the distributable profit, a dividend of 99 euro cents for the Class A share and one euro for the Class B share to be paid for the financial year 2024. In total, this equals to 64 million euros. And the effective dividend yield is therefore 3.1%. This is in line with Carmar's dividend policy of 30% to 50% payout ratio. And then finally, we announced our guidance for the year 2025. We expect our comparable operating profit margin to be above 12% in the year 2025. And this is in line with our long-term target of reaching 15% margin in comparable operating profit by 2028. Thank you all. And now I hand over to Camilla.

Thank you. So now we are ready for the Q&A and I will invite Sami back to the stage as well as Karina Gebertheir, who is heading our investor relations. So moderator, we are ready.

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 6.

On your telephone keypad.

As a reminder, if you wish to ask a question, please dial pound key 5 on your telephone keypad. The next question comes from Mikhail Dopal from Nordia.

Please go ahead.

Thank you, and good morning, everybody. I missed the presentation earlier, so apologies if you already addressed these questions. But first of all, I would like to ask about the US distribution segment. I think you mentioned that there is still a destocking going on there, and it remains a bit of a challenge, although it is a bit improving now. Just to be able to frame the whole thing, so could you tell us how big part is the distribution customer segment of your total sales or deliveries both globally and in particular in the US. Let's start there.

Okay, thank you for the question, Mikkala. And let's say, of course, distribution segments as such, as we have visualized in our presentation, is one of our key customer segments with around 20 percent share globally of the addressable market that we have. We haven't specified exactly what kind of share is it in different countries, but of course, keeping in mind that we have our fantastic factory in Ottava, Kansas, which is manufacturing terminal tractors mainly for the U.S. market. And a lot of those are going to the distribution segment, of course. U.S. distribution segment is one of our major segments. And as you rightly said, and what we repeated in the presentation as well, it has been a soft year during 2024, definitely. And we don't expect any significant quick recovery, but what we see and foresee with the distribution segment in the US market is a gradual recovery during 2025.

Okay, but you still see inventory levels too high, so the destocking is still going on, I would assume.

Yeah, let's say throughout the whole 2024, we saw quite a remarkable reduction in inventories. So the inventory reduction has continued throughout 2024, which in other words can be called destocking as well. And yes, but I think it's much more on a healthier level as of today compared to a year ago, for instance, and therefore we are let's say, we can open up a little bit and say that we see some kind of a gradual recovery in 2025. Okay.

Good. And then also, again, thinking about your exposure, would you say it's fair to say that around 50% of your equipment business relates to reach stackers and forklifts globally? If you think about the equipment business.

On the equipment side, we have the portfolio of reach taggers, forklifts, terminal tractors, Bromma spreaders, as well as straddle carriers. If you look at the volumes, volumes there, of course, in the volumes, quite big part, yes, relates to reed stackers and the forklifts. But when it comes to forklifts, of course, it's the matter of the size. So we are not that present in the smaller segment of the forklifts. But of course, we have a strong position in the medium and heavy part there. But volume-wise, yes, it's a big portion by not exactly specifying the percentage.

Okay, that's fair. And then just finally, from my side, I'm going to get back in the queue, but thinking about your guidance, I think you're saying it's going to be above 12%. I would assume that you see this kind of as a floor level, that this is what you will definitely reach even if sales declines this year. Is that the way to look at it?

Yeah, I think we have given you guidance this last year as well, and it's the same philosophy what we apply here as well. Of course, over 12% or 12% is the floor. That's what we have communicated as well. But of course, 12% is an ambitious target and guidance, of course, with all the uncertainties around, you know, in the geopolitical context, for instance. But that's how we have narrow it down to 12%. And of course, if you look back to Q4 result, for instance, or Q3, I think it's pretty much in line with those as well.

Okay. Well, that's fair. Thank you very much. Thank you.

The next question comes from Tommy Raylo from DNB.

Please go ahead.

Hi, it's Tamek from BNB.

Very strong orders indeed for the quarter, and as you highlighted, we have seen some order announcements larger. Can you just maybe talk a little bit about the pipeline and customer decision-making and levels of orders for the coming quarter, maybe first quarter and first half, what you're seeing?

Yeah, let's start with Q4, which was, of course, a positive highlight as well, that 486 million euros in orders, the highest number in two years. And of course, yeah, it varies quarter to quarter, but I think we were successful and can be proud of actually of our actions, winning those orders and market share gains, you know, expanding our our territories and portfolio of course is one part of our strategy so I think in Q4 we could see a little bit that as well and overall the market demand is pretty much the same as it has been so no major change is there but I think quarter on quarter it varies. Going forward or looking forward 2025 we see a modest growth with uncertainties though in different regions, in different customer segments. So we talk about two to three percent growth if you look at those market indicators or market environment indicators that we showed in the presentation as well in different areas. Container throughput is coming down from quite high levels in 2024 down to 2.8, 2.9 percent in 2025.

Okay, thank you.

As a reminder, if you wish to ask a question, please dial pound key 5 on your telephone keypad. The next question comes from Ponu Leighton Markey from Danske Bank. Please go ahead.

Hi, thank you. I have a question on the equipment business profitability. So it seems that EBIT margin came down from Q3 while revenues were quite on the same level. So the question is, why did it decline and Is this explained by mix, or what was the reason?

Thank you for the question, and you answered it, I think, quite well already. It's about the mix, and I think what we guided or specified in Q3 as well, that we didn't expect exactly the same profitability in Q4 compared to Q3, and of course, we had quite a good visibility that time already towards Q4, and for the equipment segment as well. It's still, I would say, a healthy level at 12.1 and I would like to maybe broaden it up a little bit and look at the whole year 2024. 12.9% was the profitability for the equipment segment, which is a good foundation to build on further.

And also, if we think about, Panu, if we think about the 12.1% overall in the last quarter, I mean, we talk about small differences here because, you know, 2 million is half a percent. So I wouldn't read too much into that, but yeah.

Yeah. Maybe a follow-up. I mean, which quarter then had, like, more normal mix? Was Q3... a bit better than usual and Q4 bit kind of lower and also like what is causing it like different type of equipment that you are selling if you could kind of go into more detail with that

Yeah, it's about different kind of equipment. I mentioned our main portfolio, reach stackers, forklifts, terminal tractors, spreaders and horizontal transportation. So it's the mix between those, of course, and then the mix within those specific portfolios as well. And then even brought up to the regions, of course, there might be some variations between different geographies as well.

Okay, thank you.

The next question comes from Mikael Dopel from Nordea.

Please go ahead.

Yes, hi. Just a couple of follow-ups. Sorry, I didn't quite catch what you said previously about demand into 2025. Did I hear correctly that you said that you expect some mortgage growth by 2% to 3% for the full year reflected in your orders? Was that the comment?

When it comes to the market environment indicators that we presented there, you can see in different customer segments, retail and wholesale and continent throughput, it's around two, two and a half, three percent growth, modest growth expected in those areas basically. And the same applies to the different regions as well. Maybe Europe is a little bit on the lower side, closer to two percent, whereas EMEA the US can be close to three percent. So that is the overall market environment and not indicating as such what will be our orders received or sales development. But of course it indicates on GDP growth a bit more than three percent expected for 2025 as well.

And we don't guide on the expected orders? No.

No, of course not. But how would you describe that? Yeah, sorry. Modest growth with uncertainties, I would say. That's how we put it.

And as we've said, the demand has sequentially been really stable for quite a while already. So in that way, we don't foresee kind of a huge change in the demand picture.

How would you describe the sales funnel and the quoting activity with your customers right now? Have you seen any changes there across the regions or the products in the recent course?

Yeah, that's a good question. And yes, and I think we have opened it up as well with a little bit quicker decision making in large investment packages or investment orders, mainly related to straddle carriers, I would say. And that is visible in our Q4 order intake numbers as well. So that is something that we have seen now in the last couple of months. And then also, of course, to repeat our, let's say, estimated gradual recovery in the terminal tractor business towards end of the year 2025 or during 2025. So that is maybe something that we see as well, that this destocking hopefully now is coming to, let's say, much smaller levels.

Okay, that's fair. Then a second question on pricing. How do you see your selling prices trending currently? Do you plan for additional price increases into 2025 still or do you see pricing up? in some regions, down in others? How would you describe the overall pricing trends into 2025?

I would describe it as normal type of adjustments. Nothing extraordinary, I would say, that we experienced during the last couple of years, 2022 and so. But of course, it varies between different portfolios and different divisions. that we have in our company service. For instance, services, of course, they do implement price increases, but pretty much on a normal level. And so do the capital equipment, machine divisions as well. Then, of course, we might have some specific product launches, of course, or introducing new features on the products that might initiate some kind of pricing action as well. So it's a little bit mixed picture, but I would say we are on the pretty much normal levels. I would say similar to 2024. Okay.

And in 2024, just remind us, I mean, what kind of price, average price increase did you push through?

Yeah, it's two things, of course, what we push through or what we indicate and then what will be the final materialized number. But we talk about a few percentage points depending on the portfolio and the division.

And then, of course, one thing to add is that it's not only about price, it's also about our cost base and what we can do on the sourcing side, which is the other side of the margin equation.

Yeah, of course, I was just actually coming to that. So how do you see, actually two parts to that question, so how do you see underlying costs overall trending if you if you consider your key cost items like personnel components logistics what have you how do you see that trending into 2025 is it an increase of an average of two to three percent as well there or more or less and also could you remind us of your cost initiatives and your savings initiatives and what kind of a year-over-year delta we should assume from those in 2025 compared to 2024?

Yeah, if I start with the Obvious one. I mean, as I said, we had the fixed cost reduction program that was initiated in Q4 2023, which we carried out at the end of 23 and the beginning of 24. And there we achieved the 35 million of cost reduction on our fixed cost base. But then, of course, we have our driving excellence program where we are targeting the the gross savings or improvement of 50 million over the next few years. So that is of course ongoing and on track.

Yeah, and this 50 million cost efficiency program, of course, we have mentioned it before as well, that it's building from a couple of areas. Sourcing, that is the biggest part, I would say. And then we have the process improvement side. We have the operating model reviews, which partly has been implemented with factories already. And then, of course, the commercial side, I mean, the active pricing management is also in that 50 million cross. efficiency improvement program.

And out of that, how much would you expect to achieve in 2025? And did you have any gains in 2024 already coming through?

We are well underway. It's proceeding according to the plan. And what we have said, and the same is still valid, is that 50 million cross efficiency improvements by 2026. So in the next two years. And of course, we started our actions already in Q3, Q4 last year. So we will come back to you actually on a little bit more details on that in our Q1 reporting during this year.

And then on the underlying cost?

Well, underlying cost, I would say that On the salary side, of course, there's an inflationary component there. And then if we just think about the market for the components that we source in, of course, there's inflationary pressures there as well. But then to counter that, then we have our sourcing actions. And then the end result is then the sum of those two. So it depends on how successful we are with driving excellence and the sourcing part of that program.

Okay, good. Many thanks for your help.

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

Good morning, guys. It's Antti from SCB. A couple of clarifications from me. And sorry if I missed part of the early part of the presentation. But on the demand and order side, especially on the equipment side, I mean, you talk about sequentially stable demand and kind of a stable market outlook. But if we just look at the second half, I mean, there's a clear sequential step up from the first half order. So I kind of wanted to Clarify still a bit that is there some type of a seasonality in the business? Is it something to do with potential price increases turn of the year? Or how should we read this kind of a, I think it's a little bit of a difference between the growth numbers and what you are talking about on being sequentially stable.

Yeah, let's start with the demand and yes, it is overall stable and I think it's quite well in line actually with our last year statement of having a flatter market 2024-2025 compared to the previous year 2023, so we are still there. What I mentioned in the beginning is that I'm happy with our actions and proactive actions on winning orders and the decision making on the larger packages has quickened. So that was obvious, and maybe that is part of the reflection on the Q4, higher order intake as well. So of course these larger packages, their value is of course remarkable, so they will affect of course our order intake, but overall the demand picture. is pretty much the same as before but of course in our growth journey and growth strategy that we are implementing and executing as we speak towards 2028 of course market share gains being more active in different areas with different products of course that is part of it the other parts are related to electrification and service growth of course And then maybe on the orders in Q4, good to remember a good performance also on the service side, I would say. And there are some contracts included in that order intake as well.

But just to be kind of mindful on what you guys can do on the following quarters on the equipment order side, is there any seasonality? Would Q4 be somehow more active on getting decisions through from your client and or Or how should one think about that?

I forgot to answer that. No seasonality as such. And no clear, let's say, cycle effect either, because of course we have four main customer segments. They are quite diverse. And then we do have different regions and geographies as well. So we don't see that. So no correlation to, let's say, Christmas time or end of the year. type of phenomenon.

So basically two things in Q4 and if you look at Q4 and Q3 we say a little bit quicker decision making and we now can say that the gradual improvement in the kind of distribution customer segment so I think those two things if you read those into the comments you see a little bit of a difference.

And then a couple of these larger ones and service also with a maintenance contract. Yes.

Okay, and then the last one is on these larger package deals that you are referring. Are these something that the deliveries stretch multi-year or is this still expected to deliver during 2025? What do you book on Q4?

Yeah, it varies a little bit, but I would say the majority, if you look at Q3, Q4, larger deals, for instance, the majority of them will be delivered during 2025.

Okay, good to know. Thank you very much.

Thank you.

The next question comes from Ponu Leighton-Maki from Danske Bank. Please go ahead.

Hi, thanks. I just wanted to ask about the write-down related to the Lone Star acquisition that you made in 23. So why did you do that and did something kind of change in the acquired businesses?

Well, at the time, the acquisition was made to strengthen our electric portfolio and to speed up our advances in that area. So that was the rationale for that. And now the write-off was done purely for financial reasons.

Okay, thanks.

There are no more questions at this time, so I hand the conference back to the speakers.

Thank you all for joining today, and we will get back to you on the 29th of April again when we will publish our Q1 results. Thank you all.

Thank you.