Konecranes Plc Ord

Good morning, everyone, and welcome to Konecranes Q1 earnings conference. My name is Kiira Fröberg, and I'm the head of investor relations at Konecranes. Here with me today, I have our president and CEO, Anders Svensson, and our CFO, Teo Ottola. Before we start, a kind reminder, this presentation contains forward-looking statements. Next, Anders and Teo will walk you through our Q1 results. Anders will start by discussing our group figures, after which Teo will focus on business segments. The presentation is followed by Q&A, as always. Anders, I think it's now your turn.

Thank you very much, Kira, and welcome also from my side to this webcast for the first quarter of 24. Our demand, or we can start with the headline of the quarter, actually. It's record high Q1 profitability. And our demand environment remained healthy in the first quarter, despite being down versus the previous year due to very strong comparables. Our sales was 913 million, and that was up year on year with 2.5%. And we posted a record high comparable EBITDA margin of 11.1% for the first quarter. I also want to mention an operational highlight here. We are releasing our new crane, the Konecranes X-Series in March in Lågemat this year. And it's a new product that will then replace our CXT model cranes. And it comes with a full suit of smart services and is upgradable over the air. And we expect to see good demand of this product across different industries and also in general manufacturing. So it will be a key product for Konecranes going forward. The product will be released in the EMEA during the autumn and then rolled out in other regions. So in summary, we had a very good start to the year and we believe it set us up for good performance for the full year. I will move into the market environment and starting with our industrial segments. So here we look at some key macro indicators. It's the manufacturing capacity utilization rate and you can see in EU it was down year on year and also sequentially down. US is more flat year on year and also sequentially flat. If we look at the global manufacturing PMI, it was above 50, so that was the strongest reading since June 2022. EU is still in contraction, but US is in expansion, just like China, India and Brazil. If we then move into the macro environment for our ports segment, here we look at the global container throughput index. And as you can see, it's up 9% on a year-on-year comparison. And the positive here was also that we could see that the ports within the European Union is also improving in terms of container throughput. And that's very positive for our business, of course. Then I move into the financials, and we posted an order intake of 909 million, and that was in line sequentially with the previous quarter. But of course, versus the record quarter of the first quarter of last year, we were down 29% on comparison. We had a decrease in import solutions in industrial equipment, but service showed strengths, and we had an increase year on year. we had a decrease in all the three regions on a year-on-year comparison. We posted a net sales of 913 million euros, and that was up 2.5% in comparable currencies versus the previous year. And we saw an increase in both service and port solutions, but a decrease in industrial equipment versus strong comparables. We saw an increase in Americas and a decrease in the other two regions, EMEA and APAC. The group order book is the next. And if you look at book to bill for the quarter, it was basically one. And we can see that our order book is now above 3 billion, despite being down 7% versus the previous year. We had an increase in our service order book, but a decrease in industrial equipment and import solutions. Moving into the profitability, so we posted 102 million euros in comparable EBITDA, and that is equal to a margin of 11.1%, and that was up 50 bps versus the previous year. And the comparable EBITDA margin increase was in service and import solutions, while we saw a decrease in industrial equipment. And the margin increase is mainly attributable to improved productivity and pricing. The gross margin improved also on a year-on-year comparison. Next, we will look a bit about our performance towards our financial targets, starting with the Group. So the Group had a stronger first quarter than we did in previous years. So you can see the rolling 12 has an uptick to 11.5. So we are inching towards our profitability corridor. On the service side, we had a strong first quarter and here we are now within our corridor at 20.1 on rolling 12 basis. In industrial equipment, as I said, we had a tougher volume comparison, so the volume was down due to a strong comparison last year, but also due to some delivery challenges in this year due to strikes in Finnish ports. So here we posted a lower margin for the first quarter, and then the rolling 12 went down to 6.8. In Port Solutions we had a good volume development and also posted a stronger result. So here we went up to 7.6. So all in all we had good progress and we are still confident about our communicated financial targets. Now we're moving to the demand outlook and starting with the industrial customer segments. So our demand environment within industrial customer segments has remained good and continues on a healthy level. And here we have seen some slight improvement and that continues also in this quarter. Our sales funnel is good and healthy and also in terms of number of cases, but also in terms of monetary value. Moving into our port segments, so global container throughput continues on a high level, and long-term prospects related to global container handling remains good overall. In here, our funnel contains both short-circuit products, but also projects of all different sizes. And as you know, by nature, this business is lumpy in terms of order intake. And we should also remember here that in the fourth quarter, we mentioned some early order intake for the fourth quarter, and that was, of course, helpful for the fourth quarter, but is then negative for the first quarter order intake imports. Moving then into our financial guidance for the year. So net sales is expected to remain approximately on the same level or to increase in 2024 compared to 2023. And the comparable EBITDA margin is expected to remain approximately on the same level or to improve in 2024 compared to 2023. So we continue to remain positive regarding the 2024 outlook. And we think that it was a good start to the year with our first quarter. And now I invite our CFO Teotola to go more into the financial details.

Thank you Anders. And actually before going into the segment financials, so let's take a brief look at the Q1 comparable EBITDA bridge, as we usually have done. When we take a look at the Q1 profits and compare that to the situation one year ago, so we actually have an EBITDA improvement of slightly more than 6 million euros. This is clearly less than what we have had the monetary improvement, for example, during most of the quarters in 2023. And there is one particular reason behind that one, and it is coming from the two first columns, volume price mix and variable cost combination, because the net in this quarter in comparison to the previous is 23 million positive, whereas when we take a look at the year 23, so basically we were 35, 40 million positive with this balance in the previous quarters. And there are, of course, a couple of reasons behind that one. The first one is the underlying volume. As Anders mentioned, our sales increased by 2.5%. The pricing impact was more than three. So actually the underlying volume development in an year-on-year comparison has been negative, unlike during 2023, when basically during all of the quarters, we had about 10% underlying volume improvement. So this is one reason. The other reason is pricing. We do have and we continue to have positive net impact of pricing, so net of inflation pricing, but it is less than what it was on average during 2023. Of course, partially as a result of catch-up and of course also the inflation slowing down. On the positive side then, when we take a look at this part variable cost, so we actually had a good productivity development during the quarter, and our operational efficiency slash productivity was on a better level than a year ago, and this created a positive impact into this comparison table. Also mix was slightly positive, but this productivity impact was clearly more than the mix impact. Then when we take a look at the fixed costs in this slide, so the fixed cost increase in a year-on-year comparison is in line with what it was also during the third quarter as well as the fourth quarter. And then if we jump to the segments and, as usual, start with the service business. So service order intake, €388 million. That is up 3.7% in an year-on-year comparison. We had increase in field service and parts. In both of those, we had increase in the Americas. America's performance was very strong, actually. Also in APAC, a small decrease in EMEA. Then when we take a look at the agreement base, so we had growth there as well, more than 5%, and Americas was very strong on the agreement base growth area as well. Sales number 367 million euros, that is up a little bit more than 5% with comparable currencies. We had an increase in field services, a slight decrease in parts, Normally we would be saying that this would mean a negative mix in an year-on-year comparison. Now this time modernizations actually compensated for that and we believe that the mix was more or less unchanged in an year-on-year comparison when we then talk about margin later on. When we take a look at the sales increase in Americas and EMEA, but a decrease in Asia-Pacific. Order book, like Anders mentioned, slightly up, and book-to-bill, for example, now for the first quarter, continues to be positive. EBITDA 73 million euro, 19.9%, a very good margin. It's more than one percentage point up in an year-on-year comparison, coming both from productivity and pricing. So we had a smooth quarter from the operational excellence, operational performance point of view. This is partially also helped by the fact that the first quarter of last year was not particularly good. So the comparables from that point of view are maybe a little bit easier than usually. And then also net of inflation pricing helped us. Gross margins increased as a result of those things. And then, of course, also consequently the EBITDA. Jumping on to the industrial equipment, our order intake was 313 million euros. It's a clear decline, almost 30% year-on-year, but against very tough comparables, as we can also see from the picture. So, Q123 orders were on an exceptionally high level. In a year-on-year comparison, we had decrease in basically all of the major business units as well as in all of the regions. But then if we take a look at the Q&Q comparison, so we are actually compared to say Q3 and Q4, so we are on the same level or higher now in our order intake in the first quarter. And when we take a look at the business unit there, so particularly components did very well, so we have a very high sequential increase in the order intake for components, whereas standard and process grains were a little bit lower in a sequential comparison. Taking a look at the sales, 283 million euros. This is down in a year-on-year comparison by 7% with comparable currencies. Decrease in process grades as well as standard grades. Increase in components. and decrease in basically all of the regions. A couple of reasons. One of them was that the first quarter of 2023 was pretty good from the sales execution point of view as well. We were still delivering so-called late backlog during the beginning of 2023. This impact we did not have this year, now in 2024. And then, of course, the strikes in Finland impacted our sales on group level, 15 to 20 million, most of that actually in the industrial equipment. So these are then visible in the comparison when it comes to sales. Order book slightly down, but also here book to bill on a quarterly level better than or higher than one. EBITDA, 18 million euros, 6.5%. This is down year on year. The reason is lower volume, as discussed regarding the sales. Cross-margin actually increased thanks to the pricing, but thanks to also our optimization program. Also, mix was slightly positive as a result of the high share of components, so that those actually supported the margin. But the volume was the thing that then meant that the margin declined slightly. Port solutions, order intake there 248 million euros, also here a significant decline year-on-year and as in industrial equipment against very very tough comparables Q123 was excellent. Of the business units we had basically year-on-year order intake decline in most business units except for mobile harboucranes, which is mentioned here on the slide as well. Then if we take a look at the order intake in a sequential context, so we were between Q3 and Q4 of last year from the order intake point of view in ports. And then if we take a look at the business units that one could consider being maybe more early cyclical, lift trucks did decline year on year, but sequentially went up. And then port service also was sequentially quite flat or on the same level. Sales 300 million, we had a good sales quarter, 10% increase. Most of the business units performed well from the deliveries point of view. And then order book still on a good level, even though down here, unlike in the industrial businesses, so here the book-to-bill is below one. Comparable EBITDA, €21 million, 7.1%. This is an improvement in an year-on-year comparison, coming primarily from the volume, but also we have had an R&D support subsidy, in the amount of slightly more than 2 million, which is then impacting the numbers in the first quarter also positively. Before going into the Q&A, a couple of comments on the networking capital, cash flow and balance sheet in general. Our networking capital was 374 million euros, that is 9.4% of rolling 12-month sales. We had an increase in comparison to the end of the year in inventories. So networking capital development from that point of view was a little bit in the wrong direction. However, we are still clearly within our target range of being below 12% of rolling 12-month sales. Free cash flow consequently went down also in comparison to the previous period and to the end of the year, 49 million euros free cash flow. It's a cash conversion of approximately 80% given that we had an extremely good cash conversion during the whole of 2023. Still this achievement taking a little bit longer view is very good. And then on the next slide we have the gearing net debt as well. Net debt 335 million euros, 22% gearing. This is obviously now excluding the dividend payment, so that took place in April. So that has to be taken into consideration, of course. And then finally, return on capital employed on the right-hand side of the slide. Comparable return on capital employed, 18.9%, and good development there as well. This was the last slide of the presentation, and now we can move into the Q&A.