Konecranes Plc Ord

Good afternoon everyone and welcome to Konecranes Q1 earnings conference. My name is Kiira Fröberi 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 the actual presentation, I have a bit of commercials here. So I would kind of like to remind you about our Capital Markets Day, which will be arranged in London on May 20. The registration has been opened for the event, and we welcome, of course, all analysts and investors to join us in person in London. The registration for the in-person attendance is still open until next Wednesday, so please go and register yourselves as soon as possible. We look very much forward to the event and welcome everyone there. And now, before going into the numbers and details, the usual disclaimer. Just so you remember, the presentation contains forward-looking statements. Agenda is our usual one. Anders will start by the group figures, after which Teo will talk more about the business area numbers. And then we will of course have the Q&A in the end, as always. And now Anders, please, it's your turn.

Thank you, Kira. And a warm welcome also from my side to this first quarter Webcast 25. We had a good start to the year, and our demand environment held up really well throughout the quarter. Our orders were up 17% year on year, and we saw an order intake improvement in all three business areas. Sales execution was also strong, almost 1 billion euros, and that was up 8% compared to the previous year. The Q1 profitability and that EBITDA margin was 11.1, and that's the same level as we had a year ago, which was then record high. Year-on-year pricing is slightly positive, but execution and sales mix was slightly weaker than the previous year. And profitability improved in industrial service and import solutions, but decreased within industrial equipment. We now look into the market environment, and we start with our industrial segments. And despite the weak macroeconomics and also the geopolitical situations with tariffs, threats, et cetera, our demand environment held up really well, and also we can see that in a strong order intake within the industrial side. Import Solutions continued good activity, and we can see that container throughput index, which is the main indicator here, up 6% year-on-year, signaling quite strong markets. And we can also see that in our order intake and also in our sales funnel and discussions with customers. So continued on a very good level with Import Solutions. If we then look into our order intake a bit further, so we can see that we delivered 1,062,000,000, up 17% versus the previous year. Here we had an increase in all three business areas. And in the geographical markets, we saw an improvement within EMEA and also within the Americas, while we saw a decrease in APAC. Looking at sales, so a strong sales execution continued, 984 million delivered and that's then equivalent to 7.7% improvement over the previous year. And here we saw an improvement within all three business areas and also an improvement within all three regions. Our order book grew for the second quarter in a row and ended the quarter at 2 billion 942 million euros. And even if that's a slight decrease versus the previous year, we believe that it's a very strong order book seen in a longer historical perspective. And if you remember going into 2025, we had roughly 60 million euros less to deliver in the year than we had going into 2024. But with the strong short cyclic orders and service orders, we believe that our financial guidance in this perspective is still very much in line and we are performing well towards that. the group comparable EBITDA. And here we delivered 109 million euros, and that's equivalent then to 11.1% margin, which is very close to what we had in the previous year. Like I said, that was a record year. The margin increased in industrial service and port solutions and decreased in industrial equipment, mainly related then to productivity and also a negative mix. So slight positive addition from pricing in the quarter, but also for the group, then the execution and the sales mix was weaker. Also from a BA perspective, the mix was weaker. And gross margin decreased on a year-on-year comparison. I then move into our progress towards our financial targets. And we did have a good start to the year. And as you can see, all our businesses, including the group, is clearly within the profitability range that we have communicated as the targets. If I start with the group, so we then had a 7.7% growth over the previous year. And that's clearly faster than nominal world GDP growth. So we are in line with our sales growth targets. And as you can see, we had a slight decrease on a 12-month rolling basis to 13%, but still clearly within our target range. And we are confident that we have the activities and the strategy execution in place to continue our journey, which we are on to improving our profitability. Moving them into industrial service, and here we had a growth which was maybe less than we expected, 3-4%. But however, we had a very strong order intake, so that is good for future sales. And as you can see, we improved our profitability here on the rolling 12 basis as well. So industrial service is progressing according to plan. Industrial equipment, more growth in line with the market, as we also target to do. We had a bit weaker profitability in the first quarter than we had in the comparison period. And that was, as mentioned, related to performance and also related to the product mix. But it's nothing that is worrying for the long-term profitability within industrial equipment. Port Solutions, and here we grew very quick. We had a much higher growth than we did in the market, so 17% or so. And that is, of course, a strong delivery from the ports team. And with that stronger delivery, you also get a good margin for the first quarter over the comparison period. And you can now see port is also clearly within the profitability range at 9.6%. Moving into the demand outlook and start with the industrial customer segments. So our demand environment within the industrial customer segments has remained good and continues on a healthy level. That said, the demand related uncertainty and volatility due to geopolitical and trade policy tensions have increased compared to the previous quarters. And the demand here continues to be good, as we saw in the first quarter, and we expect it to continue on that level. We have, however, seen some hesitation on decision-making, a bit like previous, where we had high interest rates, but now also, of course, connected to tariffs, and maybe more geared towards North America than previously. We have a very strong sales funnel. in a historical perspective, and we also see new cases coming into the final at a good pace, even though maybe slightly down year on year, but quarter on quarter up in number of new cases. When it comes to our TrueConnect, our productive measurements of connected equipment, so here we saw some low single digits, lower productivity than in the previous year, but very close to flat. With imports customers, we say that global container throughput continues on a high level and long-term prospects related to global container handling remains good overall. And here we have a very strong order pipeline that we are working on. We know that fluctuating order intake by quarter is the nature of this business since it's very much related to customer decision making time in their projects. But we had a good order intake in the quarter. We have several active discussions on projects of different sizes and that looks good also then going forward for the airports business. Our financial guidance for 2025 is net sales is expected to remain approximately on the same level in 2025 compared to 2024. Comparable EBITDA margin is expected to remain approximately on the same level or to improve in 2025 compared to 2024. And so we had a good start to the year despite the macro economy and the volatility around us. And I think that shows stability from Konecranes. And I think with the execution we are doing in our strategy we are able to continue our journey going forward. And we are happy also that we have the capital markets day on 20 May in in a month from now basically, where we will be able to update you more on the strategy execution in our different businesses. And with that, I will invite our CFO Teotola to dive more into the details of the finance.

Thank you Anders. And let's move on to the business areas. And as usual, before going into the business area numbers in more detail, so let's take a look at the comparable EBITDA bridge Q1 2025 versus a year ago. And as Anders was explaining, so the comparable EBITDA margin 11.1 is basically unchanged from the situation a year ago. In euro terms, so in monetary terms, we made some 7 million more profit than what we did a year ago. And when we unpack this difference a little bit, so we can start by discussing the pricing a little bit. So the price increases in a year-on-year comparison are maybe 3% or a little bit more than that. When we take a look at the sales growth with comparable currencies, that was almost 7%. So this obviously gives us a good underlying volume improvement of 3.5 to 4% range. This of course then gives us operating leverage into the P&L as well. Net of inflation pricing impact, so how much positive delta the pricing gave to the margin, as Anders already explained, so it was a positive contribution, but less than during the previous quarters we have had. So pricing was in a way positive in the P&L, but less than it has been in the recent past. Mix impact was slightly negative and also productivity was negative of execution performance, whichever term one wants to use, primarily because of the industrial equipment business. fixed costs actually increased in line with inflation, so they continue to be well under control in the Q&Q comparison. All in all, with all these pluses and minuses, so the end conclusion is that the profit improvement is basically as a result of the operating leverage, so higher volume in Q125 versus a year ago. And then going into the business area, so industrial service first, order intake there 409 million euros. That is a little bit more than 4% higher than a year ago in comparable currencies. We actually had an increase both in field service as well as in parts of the regions. We had increase in the Americas and EMEA, but a decrease in APAC. Taking a look at the agreement base, so we had growth there also 4.9% in a year-on-year comparison. Sales 380 million, that is 2.5% higher than a year ago, and again of the regions we had increase in IMEA as well as in APAC, but a decrease in the Americas. Book to bill for the quarter was actually higher than one, but in a year-on-year comparison order book declined slightly or by 3.5 percent. Comparable EBITDA 20.2%. This is an improvement in a year-on-year comparison despite the somewhat lowish volume in the quarter. The improvement in margin primarily came from pricing, but also the product mix was a little bit better within service now in Q1 2025 as a result of the higher share of spare parts in sales. Then industrial equipment and their order intake, 358 million euros, that is 13.5% higher than a year ago. Of the business units, we had increase in standard grains and process grains in a year-on-year comparison, but the components had a decrease in comparison to the first quarter of last year. Of the regions, increase in IMEA as well as in the Americas, but a decrease in APAC. And then sequential comparison, which is of course interesting and important as well. We had an increase in standard grains as well as in components, but a decrease in process grains when we take a look at the comparison to the fourth quarter of last year. Sales 294 million euros, so this is up 2.9% in a year-on-year comparison. Order book is almost exactly on the same level as it was one year ago. Comparable EBITDA, 13 million euros or 4.6%. There is a clear decline in a year-on-year comparison. So this is attributable to lower productivity and also weaker mix within industrial equipment. With productivity, what we mean is that we had quite good deliveries towards the end of last year. As a result of that, we had a little bit, let's say, capacity utilization issues in the first quarter in some of our locations. And also some of the projects did not go as well as they did one year ago. So it's an overall performance topic that was not on the same level as it was one year ago in Q1. Port solutions, order intake 343 million euros, as much as 37.5% higher than a year ago. We had good order intake in various product categories, actually, mobile harbour cranes, RTGs, automated guided vehicles, also port service. When we take a look at the shorter cycle products, for example, lift trucks, lift trucks were down in a year-on-year comparison, more or less flat in a sequential comparison, and they continue to be, in a historical perspective, on a relatively low level. Port service, on the other hand, did increase in a year-on-year comparison and also in the sequential comparison, almost flat to slightly up. Sales 351 million euros, good deliveries, sales growth as high as 16.5%. The order book is down in a year-on-year comparison, but continues to be on a good level of more than 1.5 billion euros. There is an improvement in EBITDA, 8.3%, and of course this is primarily as a result of the underlying volume improvement, so deliveries were very good, sales was good, and also to some extent as a result of net of inflation pricing. Then some comments on networking capital and cash flow, as well as balance sheet as usually. Networking capital, 372 million euros. This is very much on the same level as it was a year ago. 8.7% of rolling 12-month sales, so slightly better than a year ago. Actually, inventories are now on a lower level than a year ago at the same time, so are advanced payments as well, so that these are balancing each other quite well. Free cash flow was close to 60 million. This is higher than what it was a year ago, but not on the level that we were towards the latter half of last year. But when we take a look at the rolling 12 months free cash flow, so it continues to be on a very good level and the cash conversion on a rolling 12 month basis is still clearly above 100%. Gearing on a low level, 8%, net debt about 141 million euros. This one is of course missing the dividend payment as it took place in the second quarter, but still, even including that, the leverage is on a modest level. Return on capital employed continued to go up, now maybe in the first quarter a little bit more as a result of the lower capital employed than a near improvement in the profitability, but higher than 22% now on a comparable basis at the end of Q1. We actually have usually been going into the Q&A at this point of time already, but now we have one more slide before going into the Q&A, describing a little bit our exposure to US tariffs. So with this slide, we are showing the internal trade flows from China and Europe to the US. And if we focus on the industrial businesses first a little bit, so industrial service and industrial equipment, so basically the annual volume from China to US is very low, only about 5 million annually. The volumes from Europe to the US are significantly higher, so here industrial service we are saying less than 50 million, industrial equipment around 100 million, so anyways clearly above 100 million as a whole, so we are of course having their spare parts, we are having hoists and hoist components. So this is in a way the big volume. Then when we take a look at the ports business, so we have port services there also from Europe to the US, 30 million roughly. So this would be mostly spare parts. And then when we take a look at the port solutions bigger equipment, so we are mainly shipping fully assembled port cranes as well as lift trucks. And there the idea is that primarily and mainly the tariff responsibility would be at the customers. So that's why we have excluded those from this picture. Now what we have done regarding this one is that we have basically increased prices in all of the impacted product categories in the US. For instance, we have included tariff clauses in offers as well as in contracts. We are of course monitoring very closely that what is the customer acceptance to the price increases that we have done. And then obviously we also need to monitor that how the legislation, rules and regulations are changing because they are of course changing as well. Now overall, when you take a look at these flows and given the high volume from Europe or EU to the US, so of course, tariffs between Europe and US are not a good thing. At the same time, if we are comparing ourselves to the competition, we do not think that we would generally be in a weaker situation than our competition. Reason obviously being that other companies do not have a fully US supply base either, so everybody basically needs to import goods. There may be product categories where we are better off than the competition, there may be product categories where we are slightly worse off than the competition, but overall, generally, we don't feel that we would be in a worse situation. With these comments, we are ready for the Q&A.