Kalmar Oyj B

Good morning, everyone, and welcome to Kalmar's Q2 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. And 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 proud to share with you Kalmar's second quarter's performance, showing a continued strong order intake and a steady progress in our key strategic initiatives. 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. Our orders received increased by 20% from last year and overall demand was favorable in Q2. Sales returned to modest growth and increased by 1%. We delivered a resilient profitability of 13.1%, which was supported by the strong equipment profitability. However, there is an increased level of market uncertainties today affected by, for example, new tariff announcements and geopolitical tensions, which is posing a potential risk of slower global growth in the second half of 2025. We keep our guidance unchanged and we expect our comparable operating profit margin to be above 12% in 2025. As mentioned, our orders received in the second quarter increased by 20% compared to last year and totaled 450 million euros, reflecting positive activity and growth in both equipment and services. The order book remained on a good level. Despite prevailing uncertainties, the demand picture overall was favorable during the quarter. In ports and terminals, the demand remained strong globally and was reflected in some larger equipment orders, such as straddle carriers. Overall, we saw strong growth in Europe and solid performance in EMEA. However, the U.S. distribution and customer segment demand was hampered by increased market uncertainty. Then moving on to our sales performance. Our sales in the second quarter were 420 million euros. The sales returned to modest growth and was 1% and in constant currencies 3%. The softness in the Americas was visible in sales and Europe was clearly the largest region, representing 44% of the sales. The book to bill was positive in both Europe and EMEA. Moving on, this slide provides us an overview of our well-diversified business with four strong customer segments. The services segment share of sales was 34% in Q2, which is providing resilience to our overall revenue. Equo portfolio share of sales remained high at 44%, which is showing the strong interest towards our sustainable solutions. With an installed base of 68,000 machines globally and a strong presence in over 120 countries for sales and services, our extensive reach remains a significant asset. This robust foundation fuels our active acceleration of future service growth through innovative offerings and digital solutions. As a highlight and in line with Kalmar's strategy of growing services, we have invested in relocating and outsourcing its genuine parts warehouse from Ottawa, Kansas to Greenwood, Indiana. In addition to the relocation of the US distribution center, we have decided to relocate our European distribution center to a new facility in Metz, France. Both these relocations will consolidate operations, improve efficiency and support our long-term service growth. And today we have over 1,400 own service technicians around the globe and four factories, which are located in Poland, the US, China and Malaysia. While the Q2 performance was strong, the global landscape continues to be volatile. The world today presents an increased level of uncertainties related to tariffs, ongoing geopolitical tensions and the global growth outlook. It's still difficult to draw definite conclusions on how these factors will affect our industry, the demand environment and global trade. However, we are monitoring the situation closely and have implemented tariff surcharges or tariff related price adjustments across divisions to a majority of our customers. We are prepared to continue to act swiftly if needed. Due to the uncertainties, the market environment is currently expected to be more subdued in the second half of the year. So let's then take a closer look at our large base of over 14,500 connected equipment around the world. By following the activity of the connected fleet, we get a good view of the activity and demand in different regions. Overall, we see a positive development trend both year on year and quarter on quarter, which is indicating increased activity at our customer sites during the second quarter. However, at the same time, we have to remember that there are now more uncertainties in the market, and the softness in the US can also be seen in the connected fleet activity in North America compared to last year, Q2. The ECO portfolio share of total sales has remained high and increased to 44%. ECO Portfolio's share of order intake was also 44% in Q2, which is demonstrating our customers' strong interest towards electrical and hybrid solutions as well as sustainable service solutions. The fully electric machine's share of equipment orders for the last 12 months remained flat at 10%. Despite a slightly sluggish development, we continue to see significant potential with electrification. We have announced five orders booked in Q2, including eight heavy terminal tractors to Kaliari RoRo terminal in Italy, two empty container handlers to Depot Management in Finland, 11 hybrid straddle carriers and MyCalmar inside to SeaYard in France, 14 hybrid straddle carriers to Hanseatic Global Terminals in France, and four hybrid automated straddle carriers to Victoria International Container Terminal in Australia. We have been pleased to announce some steps towards sustainable growth during the quarter. We have further expanded our automation offering by continuing to develop new and advanced automation solutions. An example of this is Automation as a Service, a subscription-based model designed to ensure successful and efficient deployment of automation in marine container terminals and intermodal sites. We also introduced a flexible and scalable Kalmar One automation system as a standalone solution. With this, Kalmar is responding to the increasing demand from customers for a modular OEM and equipment type agnostic fleet management solution that allows them to choose what to automate in their terminal operations and how to do it. We have also launched a digital application on the MyCalmar customer platform called Inspector, which helps to streamline daily equipment inspections. The application is compatible with both Calmar and third-party equipment. In addition, we were proud to announce that the Science-Based Targets initiative has approved Calmar's near- and long-term science-based emissions reduction targets, verifying our net zero target by 2045. These ambitious targets align with the Paris Agreement, solidifying Kalmar's commitment to limiting global temperature rise to 1.5 degrees. Our business performance was good in the second quarter. The equipment margin was strong. The services margin was burdened by temporary impacts, which Sakari will come back to. And the order book has strengthened in both segments. On my last slide, I would like to remind you about our performance targets 2028, which we are fully committed to. So thank you all for now, and next I will hand over to Sakari.

Thank you Sami, and good morning also from my side. I will start with our traditional slide on our financial profile. Financial profile has remained strong and this gives us excellent possibilities for future growth. The highlight I would like to point out is the last 12 months orders received, which is now at 1.8 billion euros. And we have a significant positive book to bill ratio if you compare that to our sales on the back of the three strong order quarters that we have had. So our order book has significantly strengthened from the level that we had one year ago. Our profitability, when looking at it through both gross profit and comparable operating profit margin, is on a good level, 12.7% now on an LTM basis for the comparable operating profit margin. Our balance sheet continues to be strong with a leverage of 0.4 times EBITDA and our return on capital employed is now at 20.7%. Cash conversion slightly below 100% at 95% now for the LTM period. Then diving into the segments a little bit more in detail. On the equipment side, all of our equipment divisions performed well in terms of orders received in the second quarter. Our equipment segment orders increased by 28% compared to the same quarter last year. The global overall demand environment remained good, however, somewhat subdued in the Americas towards the end of the quarter especially. And as Sami mentioned, the global landscape continues to be volatile and there is an increased level of uncertainties going forward. The profitability of the equipment segment was very strong in Q2 at 13.9%. We have seen continued solid commercial performance with stable gross margins in equipment And our driving excellence program is supporting the margin development in the equipment segment, especially. On the services side, we saw an orders growth of 7%. So services continues to be on a good growth track. And this is driven by, especially by smaller contracts and also our spare parts. There are, of course, some variations across the regions related to the trade tensions and the US market is a bit softer at the moment and this is also impacting our service segment. When we look at the profitability, as Sami mentioned, this was burdened in the quarter by a couple of things to be mentioned here. One was the impact of tariffs whereas we did of course implement the price increases and adjustments related to the tariffs. There is a time lag in implementing those and that impacted about half of the second quarter before the price adjustments actually came into force. The other thing we did in the second quarter is we have relocated and outsourced our warehouse activity of our spare parts in the U.S., and this had some impact on our operations during the second quarter, but these are of temporary nature. I would say that when combining the impacts of these two mentioned things to the profitability of service, we are talking about slightly over one percentage point of margin. The execution of our driving excellence initiatives is ongoing and we are planning to reach 50 million euros of gross efficiency improvements by the end of 2026. During the first half of 2025, we have progressed with the implementation and a run rate of approximately 60 million euros has been reached in terms of annualized gross efficiency improvements. To date, the majority of the improvements originate from successful sourcing activities, and in addition to that, certain efficiency activities in process development in our functions. Our return on capital employed in the second quarter increased to 20.7%. Again, as before, it's worth noticing that the items affecting comparability, especially deriving from the demerger and listing process last year, have an impact on the 12-month rolling ROCE number. This impact is about 2.2 percentage points, so the normalized level would be at around 22%. Our leverage is at a strong level at only 0.4 times EBITDA and our gearing is approximately 15%. To be noted is that of course during the second quarter we paid out dividends of 64 million euros which impacts the net debt position in the second quarter. Our maturity profile, you can see there on the right hand side of the page, no major maturities in 2025. Our cash flow was not particularly strong in the second quarter, only 22 million of cash flow from operations before finance items and taxes. We have had a very strong cash flow in the previous three quarters. And of course, there are always some timing impacts from larger orders, the advances received and how the working capital is built up as a result of starting to execute those orders. But over a 12-month period, our cash conversion is still very strong at 95%. So this is more timing related when looking at one single quarter. And then I will finish off. Sami already mentioned this, but our guidance for 2025 remains unchanged. We expect our comparable operating profit margin to be above 12% in 2025. Thank you. And that concludes the presentation.

So we are now ready for the Q&A. So moderator, can you please open the line?

If you wish to ask a question, please dial pound key 5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key 6 on your telephone keypad. The next question comes from Mikael Dopel from Nordia. Please go ahead.

Thank you, and good morning, everybody. Thanks for taking my questions. I would like to start with kind of the market outlook, where you said that you expect more subdued market in the second half of the year. So I'm wondering where that kind of estimate comes from. If you look at your development within your sales funnel, for example, and your customer quotations, have you seen any changes there most recently that would indicate that we can demand an order in the second half? That would be the first question.

Thank you for the question. Yes, that's what we indicated, more subdued in the second half. And especially, of course, because the tariff landscape, it's not fully clear yet. There are indications in different directions. So uncertainties exist. And that's basically the basis behind having, let's say, a little bit more cloudy view towards the end of the year. And then America's market, as we could see already in Q2 as well, of course, you know, is one of those more uncertain areas, I would say. And there's a couple of surrounding countries there as well in South America. I think it's mainly because of that. And then I would say, like we discussed in the previous quarter, this indecisiveness is still existing with our customers.

Okay, but would you say, for example, in the US that the demand has kind of expected to go incrementally weaker into Q3? I mean, obviously the tariff has remained more or less throughout the whole of Q2 already.

Yeah, let's say if you look at the U.S. and especially the distribution segment, which is a big segment, an important segment for us, it started off quite well, I would say. In the beginning of the year, we talked about the gradual improvement, which now slowed down in Q2, we can say that. And that is expected to continue on a quite, I would say, slow basis. and low level, I would say. And then, of course, quarters, large orders, quarters, they are not equal to each other as well. So we have been successful now in Q1 and Q2 with materializing a couple of large orders as well. So I think the sentiment, it's a combination of different factors.

okay okay and then kind of on the same topic then related to your to your service business i'm thinking about the connected fleet activity are there any changes there most recently that would signal uh some weakness i had i mean you had quite strong orders at the end of the day in the quarter actually but but just wondering if there's any any kind of science that you see there that things could slow down

No, I think in Q2, as we could see, we had a good fleet activity still. We were uncertain in the beginning of the quarter, as you remember, but then it turned out quite well. But there is this one indication, of course, compared to the last year, Q2 in the U.S., that was on the red-collar side over there. But I don't know if you have anything from the last couple of weeks, you know, any indications of that?

Not from July, but June, there was a little bit of a slowness also, indicating that people are hesitating and the activity level is somewhat lower, which can be seen in the comparison to the previous year's Q2 also. And then if you look at the container throughput index, there is quite a lot of volatile from Drury, for example. From month to month, they change the forecast on the container throughput. So that gives us the uncertainty and the potential kind of impact on the slowness in the second half.

And there's also a dependency between the new equipment sales and the spare parts, for example, in the U.S. in distribution, where you sell... less equipment, there's also an impact on the spare parts. So that would be something that we could see.

Okay. Well, that makes sense. And then just to clarify on the comment on the June weakness in fleet activity, I guess that was on a year-over-year basis, I would assume. And was this for US only or globally?

That was US.

And globally?

Globally, as far as I recall, it's fairly stable. So it's really the U.S. part.

Okay. That's very clear. Thank you very much. Thank you.

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

Yeah, hi guys, it's Antti from SCB. I wanted to continue with the same theme as before on the demand side. So could you talk a little bit about your outlook on second half in Europe? I mean, for second quarter you flagged strong growth, and I guess the themes that you have been talking about regarding the more subdued demand seem to be more impacting the US and Americas broadly. So what's your outlook for European demand coming into second half of this year?

That's a good question. So yeah, Europe so far in the first part of the year, first half of the year, I think it has been very stable and performing very well. And of course, some indecisiveness in certain areas, certain customers maybe in Europe, but otherwise, overall, both equipment and services have been performing well in Europe. But when it comes to the next couple of months or two next two quarters of course this tariff discussion which is not fully clear yet between European Union and the US of course that is impacting with uncertainties as well so that's what we see so the visibility is not that long even in Europe but of course we have a full focus on you know different countries in europe and and focusing on services equipment and i think there is a lot of business opportunities in europe so we have good expectations on on keeping europe on a good level even towards end of the year okay that's that's good to hear and then maybe digging a little bit deeper into the us side i mean did i understand correctly that you you kind of saw softening demand in u.s also within

the second quarter so it kind of not only compared to how you started the year because start of this year was quite active if I remember correctly and I guess the second end of second quarter was all sorry end of first quarter was already a bit weaker so I wanted to understand maybe a better what's your analysis on your on your client's behavior are they just uncertainty on their own business outlooks is it more uncertainty on the pricing environment that the equipment is going to be regarding the tariffs what do you think will kind of need to happen for your clients to become a little bit more less hesitant to invest and more optimistic on on expanding their fleets and replacing equipment

Yeah, it's all that what you mentioned, basically, and especially in the distribution segment, the destocking is on a relatively good level. I mean, the inventories at our dealer sites. So that is not the big issue at the moment. It's this uncertainty around the tariffs, landscape, price increases. Of course, we have implemented some of them as well. And, you know, where is the market heading to and what kind of tariff deals and things and an agreement you know will be established in the next couple of weeks for instance so I think it's that uncertainty that delays the orders and that's what we saw in the distribution segment for our terminal tractors now in Q2 so and even of course on the service side we had a bit of a hiccup there when it comes to tariffs but okay that was a temporary one in Q2.

And you're quite confident that the softness is not you losing competitiveness or market share, that it's the entire market. And when the demand comes back, you will be kind of there to address it.

Yes, we are ready to act and address it absolutely. And now lately, as you remember, we have launched our electric terminal tractor called Phoenix as well. So we are ready with that product as well once the market will pick up. And the US market has been slow since 18, 24 months back even. So now it was picking up a little bit in Q1 and now it's slowed down again. in Q2. But we are ready there. And as one example, of course, on the services side, we are now relocating, outsourcing our warehouse distribution center there. And the whole target is, of course, to grow services even more. So we want to be ready with both support as well as equipment.

Okay. And then the last...

Yeah, I was just going to add that overall what we really see is the tariff discussion in America, in the surrounding countries, as Sakari also was mentioning. So there the hesitation and the indecisiveness is kind of waiting to get a decision on the tariffs.

And then there's a dependency on overall economic activity as well. So how the U.S. economy develops will also drive the freight activity and therefore also the demand for the product.

Okay, then the last question is then on profitability. And I mean, looking at the equipment business, at least in my opinion, very strong margins that you have been now generating. Would it be fair to say that when you're moving towards the 15% target, that it's more about kind of getting the margins clearly on a higher level on the services side, rather than having a major improvement potential on the equipment from the current close to 14% that you are running in Q2? Any comments on that one?

That's a fair statement, absolutely. There is more room for improvement on the services side. We are happy with the equipment margin, absolutely, which is a result of higher volumes and driving excellence initiative, good cost control and so forth. But definitely, we want to improve our services much more.

I think we've been consistently saying that that's where the potential is. And of course, now the second quarter, as I mentioned, was a little bit exceptionally low due to the reasons that I explained.

Yeah, that's clear. But then also, if we reflect the gross efficiency program that you are flagging on the presentation, would it then be also fair to assume that the remaining benefits are mostly visible on the services segment from here onwards on margins there?

I wouldn't say that. I think the program is, of course, targeted to benefit both equipment and services.

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

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

Hi. Thanks for taking my questions. I have three. Firstly, continuing on the service, Martin, so would you say that the issues that you mentioned were Q2 specific or will you see any impact from those in Q3? I think you mentioned warehouse chains in Europe as well.

Yeah, they are Q2 specific in terms that the tariffs that came into force, we reacted with price adjustments, but there's a grace period before those come into force. So therefore, with that delay, there was a kind of a half a quarter impact. So that's temporary in that way. Of course, if there are changes in tariffs again, that might happen again in the same way. But at the current tariff levels, it's a temporary impact. The other part was then related to this warehouse move. So we both outsourced and relocated the warehouse. And there was some operational impacts from that. And that then is also a temporary impact.

And the difference with the European move, it's not an outsourcing, it's only a relocation. But in U.S. it was both outsourcing and relocation.

So to answer your question in a simple way, yes, Q2 specific.

Okay, thanks. Then on the equipment, Martin, so going into second half, do you expect any exceptional stairs? So it's more like this was a run rate that you can generate and then it's about volumes and your operational excellence or should we impact any kind of lacking impact from tariffs that we didn't see in Q2 yet?

Yeah, depending on the magnitude of the tariffs, of course, and we don't know everything yet. And now we have been living with this 10% tariff landscape in the U.S., which is a little bit mixed picture. And somewhere, you know, we have been succeeding to penetrate still, but with some customers, you know, there has been... But when it comes to equipment margin, I think the quarters are not equal to each other. So it very much depends on the mix, the different type of equipment within the quarter. And last year, if I remember now right, our equipment margin was close to 12.9% or something. Four years. for the full year and now it was substantially higher than that one so overall I would say if our equipment margin is you know 12 or 13 percent or something like that I'm pretty happy with that so more room for improvement on the services side.

Okay, thanks. My final question is on the delivery times and how soon will the orders that you have been taking in the past quarters turn into revenues? So could you talk about that? I guess there is a bit of difference in straddle carriers and the smaller

Yeah, I think we still talk about three to 12 months lead times. And the mentioned Australia carriers, they are on this longer edge or end there closer to 12 months, I would say, because the demand has been good and we have been winning nice businesses there. Whereas the terminal tractors, for instance, if the market at some point picks up, of course, we have much shorter lead time. So the smaller the equipment,

the faster the lead times are basically but three to twelve months I think that gives an indication and of course the larger orders that we've seen quite a few of now in the last three quarters they are longer delivery time so closer to this as well so if I ask you so that the strong first half orders will mostly impact next year and not second half revenues

Yeah, depending on the equipment, type of equipment, I would say. But the big, large orders for straddle carriers, some of them, if they came in in Q2, for instance, they might be invoiced next year.

But of course, we had strong orders in Q4 last year as well. And those, of course, would be then mostly 2025 deliveries.

Okay, thank you. Thank you.

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

Yes, good morning. This is Tom Skogman from D&B Carnegie. I just wonder about these kind of surcharges you have for tariffs in products sold in the US. Is the feeling really that customer accept this or have you been forced to to kind of have open risks in part of the deal you know if tariff percentage would surprise and the background here is of course that you face local competition so customers can avoid you know these potential tariff surcharge if they go for a u.s made product instead yeah

Good question, Tom. So, yeah, I think it has been accepted, but the picture is a little bit mixed, of course. Depending on the customer, depending on the dealer, of course, in the US, we have a lot of dealers there. And then, of course, we have been implementing price increases or price adjustments as well. So the same thing there, of course. It requires discussions, explanations, close collaboration with both dealers and customers. So I think overall... What we have seen, they have been quite well accepted, I would say. And then, of course, depending on the tariff levels in the future, we will act accordingly. And then, of course, we have even the third option is the delivery terms. In some package deals, for instance, we might have the delivery terms where the tariffs belong to the customer straight away, according to those terms. So there are different variations in these price adjustments, I would say.

So to understand this a bit better, is it so that the customer can now choose, you know, between, let's say, a 10% price hike in the U.S. or alternatively to include a clause, you know, where the price could go up even more if the tariffs are even higher? I think it's just important to understand this so we don't have, like, bad earnings in Q3 or Q4 just surprising tariff percentages.

Depends on the equipment, depends on the type of business that we have. Certain divisions, I mean Kalmar division that we have counterbalanced, horizontal terminal tractors, they act in a little bit different way. So therefore, as in the presentation we said, we have implemented both surcharges as well as price adjustments. But when it comes to surcharges, of course, if the tariffs were removed completely, of course, then we will act in another direction. And on the spare parts side.

You don't feel that you have a... open risks for Q3, for instance, now that you have promised to tell us the price and then you just bet that the tariff is a certain percentage?

No, we don't see any immediate risk with this one.

And I was going to say that on the spare parts side, it's been pretty straightforward with the price increases. So there it's been quite successful.

Okay. And my second question is, you know, the share of Electric equipment that you are selling, how is that developing and how is your electric portfolio now priced compared to Sani products? Is there a major difference between your pricing and Sani?

Yeah, first of all, of course, we are not talking about the specific competitors. We can talk about competition as such. And there's a lot of interest for electric products, as I mentioned in the presentation as well, and also for our ECO portfolio, which is a combination of different different solutions. So the interest is there. We have been performing well, and especially we have been performing well, I would say, in Europe. But it's frank and honest to say that, of course, the EMEA market is quite a price competitive market. There we need to do more and of course as one example that we reported in today's presentation as well, we are and have introduced the second generation batteries which are more cost competitive batteries on our equipment. So we are taking actions as we speak, but the market is attractive and it's developing in the right direction. Then on the terminal tractor side, of course, quite recently, a couple of months ago, we released our electric terminal tractor and we have high hopes and expectations, of course, to sell that in the US market and later on elsewhere as well.

So can you confirm that you have similar market shares in fossil and battery powered vehicles in Europe?

Yeah, I think if you zoom into Europe, I don't have that analysis in front of me exactly here, but we have been successful in Europe overall, I would say, from the equipment to services, including ECO, including electric machines and the diesel equipment as well. Okay, thank you. Thank you.

As a reminder, if you wish to ask a question, please dial pound key 5 on your telephone keypad. There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.

Thank you all for the questions. And lastly, as a reminder, we will be hosting a site visit at our Stargard factory in Poland on 17th of September. So if you are interested and like to attend, then please register via our web page. And thank you all for joining today. We will get back on 31st October when we publish our Q3 results. Thank you.

Thank you.

Thank you.