Konecranes Plc Ord

Hello everyone and welcome to Conecranes Q3 earnings conference. My name is Kiira Fröberi and I'm the Head of Investor Relations at Conecranes. Here with me, I have today our usual people, our CEO Anna Svensson and CFO Teo Ottola, of course. Before we go into more details, just a kind reminder that the presentation includes forward-looking statements. And the agenda is as usual. First Anders will talk you through the group results, after which Teo will focus more on the business segment data. But I guess now... Oh, we have the Q&A, of course, too. And I guess now, Anders, it's your turn to take over. Please go ahead.

Thank you Kira and a warm welcome from my side as well to this webcast for the third quarter results. The headline of the quarter is continued strong performance and our demand environment held up really well in the third quarter. The orders were up 12.5% year-on-year in comparable currencies. And sales were strong in the execution and we delivered almost 1.1 billion. And that was up 6.8% in comparable currencies versus the previous year. That gave us an all-time high margin for the third quarter with an EBIT of 13.4%. EBITDA of 13.4%. The year-on-year profitability improvement was driven by pricing versus inflation, by higher volumes and strong strategy execution. Profitability improved in all of our segments and we had an excellent cash flow at 187 million for the quarter. Looking at our market environment, and I start with our industrial segments, and the operating environment was challenged by, as you can see, the macro indicators, both when it comes to manufacturing capacity utilization, but also manufacturing PMIs. They were really challenged in Europe, US, and also in China. But despite that, we managed to hold up a strong order intake for the quarter. Moving then into our port solutions. And here we follow the container throughput index, which has remained strong at up 8% on a year-on-year comparison. And we can also see that in our order or sales funnel in the port side, it becomes very strong. Moving then into the group order intake. And we delivered 956 million euro order intake for the quarter, and that is up 12.5% versus the previous year in comparable currencies. and the increase was driven by service and port solutions, while we saw a decrease within industrial equipment, and that was then driven by the process crane lower order intake, while standard cranes and components were above the previous year. We saw an increase in EMEA and a decrease in Americas and APAC. In net sales, as I said, strong sales execution, we delivered 1 billion 70 million euros. And that was an increase of 6.8% versus the previous year in comparable currencies. And here we saw an increase in all our segments and also in all our geographies. The strong sales execution gave us an order book or a book to build in the quarter below one. And the order book was at the end of the quarter, 2 billion 850 million roughly. And that is then 12% down versus the previous year in comparable currencies. If we then move into our profitability, And we saw here a sequential decline in profitability, just like we discussed in the quarterly webcast after the second earnings report. But still, we delivered a strong performance, 143 million euros, and that's equivalent then to 13.4%. And as I mentioned, it's an all-time high for any third quarter. We had an increase in all of the segments. And the increase was mainly then driven by price versus inflation, increased volume and a strong strategy execution. Also the gross margin improved on a year-on-year comparison. If we then look at our progress towards corner trends financial target that we communicated in the capital markets days of 2023. So we can see that given the strong performance in both the first and second and now third quarter of this year, we can see that both group and service and industrial equipment are performing within the target profitability range. And we can also see that port solutions are getting closer to the target range as well, at 8.8 rolling in 12 months. If we then instead look at this a bit year-to-date performance, So year to date, we start with the volume then for the group. We're up 7.4% in comparable currencies. And that's clearly faster than the estimated nominal world GDP development for 2024, which I think is around the 4.5%. So good performance in sales. If we look at the profitability then for the group year to date, it's 13.0%. Moving into service, and here we have a growth of 7% also here, clearly faster than the defined market. And then the profitability is 21.2% year to date. Industrial equipment, where we targeted to focus on profitability and not focusing on growth. Here we have a 2% growth year on year, year to date. And if we look at the profitability then, it's 8.8% year to date. In port solutions, very strong sales execution, a growth year-to-date of 13% versus the previous year. And here, if we look at the profitability, we can see that port is actually at 9.2% year-to-date. So also here, then ports would be within the target profitability range. We go then to our demand outlook. So we start with the industrial customer segments. And here we say that our demand environment within industrial customer segments has remained good and continues on a healthy level. And we have seen that throughout 2023 and also the first three quarters now of 2024, that despite the weakening macro indicators, we are managing to deliver a strong order intake. And we believe that the situation as it is will continue within the industrial segments. I mentioned last time that interest rates are impacting customers' decision-making process, especially here on the process cranes, which is then delaying orders. We don't see any cancellations in the order book, and we have an influx of new cases into the order funnel as well, but it's delaying the decision-making. We don't see that effect when it comes to standard cranes and components. If we move then into our port customer segment, here we say that global container throughput continues on a high level, and long-term prospects related to global container handling remains good overall. And we have seen here that our order pipeline is strong, both when it comes to short-cyclic products, this activity, but the funnel is strong when it comes to projects of all different sizes. But as you know, and as we have discussed many times, this is a lumpy business. It's a project business. So we get the order intake when customer has matured the project into a decision-making time, and that's when we can get the order intake if we are the provider. So that will continue to be fluctuating also going forward. That's the nature of a project business. We still believe that Q3 of last year was the trough when it comes to order intake regarding ports. And this quarter actually was the strongest order intake in the last five quarters for the imports. And if we look at our funnel, here we have interesting discussions on several projects also going forward. But you never know... in what month or even quarter these projects will then materialize into a decision-making stage where we can get the order intake. But the funnel looks strong, as said. I then move into the financial guidance for the rest of the year, or for the full year. Net sales is expected to increase in 2024 compared to 2023, and the comparable EBITDA margin is expected to improve in 2024 compared to 2023. And as a summary, we had then a quarter with very healthy order intake, strong sales execution that enabled us to deliver an all-time high profit margin for a third quarter. And complemented with that was the free cash flow that was on an excellent level. And we, of course, aim going forward also to continue our journey on improving our profitability and keeping our streak of now seven quarters in a row with year on year EBITDA margin improvement. So with that, I will welcome our CFO, Theo Atala, to go more into the segment financial details. So please, Theo.

Thank you Anders. And actually before going more into the segment level data, So we could take a look at the comparable EBIT A bridge on a quarterly basis. So Q3 24 versus Q3 23. And when we take a look at the EBIT A between those two quarters, so we actually made 20 million more EBIT A now in the third quarter of 24 than one year ago. If we unpack this one a little bit, So first we can comment that the pricing impact in a year-on-year comparison was roughly 5%. Now, as Anders mentioned, our sales grew a little bit less than 7% with comparable currencies. So this does give us an underlying volume improvement, but the volume improvement is quite modest, somewhat a little bit less than 2%. This 2% underlying volume improvement, of course, gives us an operating leverage, positive operating leverage into the result. but not as much as, for example, in the second quarter. We did not have a meaningful mixed impact in the quarter, but we did, of course, have efficiency improvements as a result of, for example, the optimization program, as was already mentioned. But when we combine all of this and take a look at the profitability improvement of 20 million So vast majority of this one comes from the net of inflation pricing. So the price increases of 5% have been more than the corresponding inflation when we take the weighted inflation between material as well as labor. Fixed costs are increasing in a year-on-year comparison broadly in line with what we had, for example, in the second quarter as well. Overall, there was nothing very specific or extraordinary in a way in the third quarter of 24 in comparison to the situation a year ago. And then if we take a look at the segments and start with service as usual, so service order intake 372 million euros, that is an increase of 4.5% with comparable currencies year on year. We actually had an increase in field service and parts, and we had an increase in all of the regions. We have a small decline sequentially, but as we already commented regarding the Q2 earlier, so that was actually a very good quarter also from the volume point of view when it comes to the service business. Our agreement base actually continued to grow more or less in line with the order intake growth. Our agreement base grew 4.7% year-on-year with comparable currencies. Then when we take a look at saves, 392 million euros, that is 7.2% year-on-year improvement with comparable currencies. and also their increase in all regions as well as then both in field service as well as parts. Order book came down a little bit by some 7% to 444 million euros. Then if we take a look at the EBIT-A, good performance continues, the 85 million euros or 21.6%. There is a 0.7 percentage point improvement in an year-on-year comparison, which comes from higher volumes as well as from pricing and cross-margin naturally improved as well. In a sequential comparison, we have a small decline in comparison to the second quarter. The main reason being that also the second quarter was good from the volume point of view. It was also very good from the execution point of view and just was a very good quarter from the service business point of view. So nothing more extraordinary in that small decline either. Then if we go into the industrial equipment and again start with the orders, 289 million euros. Actually, when we take a look at it from the external orders point of view and comparable currencies, we have a decline of 2.7%. Here, of the business units, we had increase in standard grains as well as components, but we did have a decrease in process grains. And as Anders already mentioned, there's been slowness in the decision making within that subcategory of products that has continued now also during the third quarter. Again, if we take a look at the sequential comparison within the industrial equipment, so actually component orders were more or less on the same level as they were in the second quarter. Standard crane orders came down a little bit from the second quarter. Sales, 317 million euros, 6.1%. Again, external sales with comparable currencies, improvement there. Increase in standard grains and processed grains, but a decrease in components in a year-on-year comparison. Order book down here as well by about 11% to approximately 870 million euros. And then EBITDA, a very good result, 31 million euros or 9.8%, more than two percentage point improvement year on year. Of course, driven again by volume growth, pricing, also the optimization program that has been mentioned. This is also a very good result in a sequential comparison, because as you may remember, we had some one-time gains in the second quarter that did not now repeat themselves in the third quarter. And yet we have the margin on the same level as we had in the previous quarter. So then moving on to the port solutions, order intake 334 million euros, that is as much as 43% higher than what we had in the previous year, Q3, we had actually good order intake in mobile harboucranes, straddle carriers, AGVs, as well as port service. And actually the order intake now includes one bigger deal, particularly in AGVs. And bigger deal meaning we have been using, let's say, a definition that more than 80 million euros So that is now included into the order intake numbers in the third quarter. Then when we take a look at the sales number, so 401 million euros, that is 6.6% higher than what we had a year ago. Also here order book down by 16% to approximately 1.5 billion. And then finally EBIT A, good result here as well, 39 million euros. This is a margin of 9.6% and an improvement of more than 1 percentage point in a near-on-ear comparison. Here the improvement primarily comes from pricing and cross-margin increased in port solutions as well. Then a couple of comments on the balance sheet and cash flow. Networking capital about 400 million at the end of the third quarter, so it's 9.6% of rolling 12-month sales. So there is a decline in a sequential comparison from the second quarter. It primarily comes from inventories, which is good, obviously. And then this is also visible in our free cash flow. So we had an extremely good free cash flow, as Anders already mentioned. Of course, driven by the good result, but also then by the release in the net working capital. And our cash conversion in a near-to-date basis is again close to 100%, where it has then typically also been. And then as a final slide regarding the presentation, gearing and return on capital employed. So, of course, the good cash flow is visible on this slide as well. Our net debt is now 267 million euros. That is a gearing as low as 15.4%. And then our overall capital employed has continued to be quite high. We also have a lot of cash at hand, but still the return on capital employed is improving or let's say flat to improving in comparison to the previous quarter. And we are reaching 20.4%. And this one basically concludes the presentation. And before we go into the Q&A, Kiira probably has a small announcement to do.