Konecranes Plc Ord

Hello, all, and welcome to follow Conecranes' Q1 2026 results webcast. Apologies for the small delay. We had some technical issues here at the studio. My name is Linda Häkkilä. I'm the head of investor relations here at Conecranes, and with me today as our main speakers, we have our president and CEO, Marko Tulokas, and our CFO, Teo Ottola. Before we continue, I would like to remind you about the disclaimer, as we might be making forward-looking statements. As usual, we will first start with our presentations, both from the CEO and CFO, and after that, we're happy to answer your questions through the conference call lines. But now, without any further comments, I would like to hand over to our CEO.

Thank you, Linda, and good afternoon, everybody. Good afternoon. I'd like to start by describing the first quarter operating environment and some of the key parameters to this first quarter. First of all, as we all have obviously seen, that there's quite a lot of geopolitical uncertainty, and this first quarter, it of course continued in the form of the conflict in the Middle East. This has created some uncertainty and apprehension amongst our customers, but also some supply chain discrepancies. But what we are very happy about, and what I'm very happy about, is that we managed to end the quarter with very good orders. If we look at our demand environment in general, there are many segments that held very, very well, but others also slowed, and the same is valid for the different regions and business areas. What I'm particularly happy about is that our relative profitability held very well, improved and actually was the first, the best quarter one ever in ConnectGrain's history, despite the lower volumes of this first quarter. So that really speaks for ConnectGrain's team's ability to execute the price and apply cost control also under such circumstances. In the next coming slides, we'll talk more about that. So again, if you look at this order intake development, that was really a good start to the year, and that's considering the environment very satisfactory. So our order intake grew almost 4% year on year with comparable currencies. At the same time, Sales volumes we are less happy about. There are a few reasons for that, to be specific, and we'll talk more about that. But as a result of these two things, of course, our order book grew to a very satisfactory 3.2 billion euros. That is actually the highest level in the last three years, and it is a good starting point for the rest of the year. So our order book is, in fact, 100 million higher in the end of quarter one this year as it was previous year for the deliveries of all the 2026 sales. Also, what we are... very happy about that our comparable EPT margin increased to 11.6%. That is the highest ever quarter one margin as I already stated. It improved in the industrial services and port solutions, but slightly decreased in industrial equipment and particularly in industrial equipment because of the lower volume in quarter one. These improvements were mainly driven by very good execution. favorable mix, as well as pricing and applying cost control. Now, let's move on to look at the key operating environment parameters for first quarter, and there's two things that I'd like to talk about here, which are the most obvious ones, and the first one is the conflict in Middle East, and the second one is the U.S. tariffs, which have been with us now for the last four quarters. Let's start with the Middle East conflict. First and foremost, Connect Grains operates in four countries in Middle East. We have roughly 180 Connect Grains team members in that region. That is approximately 1% of our whole organization or our workforce. And the most important thing for us, of course, is the safety of our team members. And I'm really happy to say that our team has been safe and out of harm's way the whole duration of this conflict. ConnectGrain sales to Middle East is less than 5% of group sales. And the impact on the first quarter to our sales Related to this conflict is approximately 50 million euros or somewhat less than that. We also have seen some freight and fuel costs rising. But that has been for quarter one result fairly limited impact. And we are managing those cost pressures either with our long-term hedging arrangements as well as our pricing actions and logistical rearrangements. Secondly, related to the U.S. tariff situation, there's also been some changes, so the Section 232 tariffs, they do remain in place, but as I'm sure many of you have seen and heard from the other polls also, There is changes to the calculation methodology and at the same time there are changes to the reciprocal tariffs replacing the 15% with new tariffs of 10%. As a net effect of those both changes, our analysis shows that the net effect is negligible or non-material. And finally, the tariff to the Chinese made port equipment, there's no material change and they do remain in place. So in that respect, our operating environment opportunities have not changed. Now moving on to our demand environment in the next coming slides. And I'd like to start with the industrial service and industrial equipment as usual. So when we look at our usual key indicators and to start with the capacity utilization, what can be seen here is that for our two largest regions, Europe and U.S., the manufacturing capacity utilization has been approximately flat for the last 12 months, with some improvement in EMEA and slight decline in the in the U.S., and that also reflects somewhat how our panels look, but I can generally speaking say that our sales panels in the industrial business remain solid, and we see good activity in many segments. but it is obvious and it's necessary to say that particularly in such a situation the customer's hesitation and let's say somewhat nervous reactions to these changes or different uses of course visible and the decision making therefore is slower or more difficult to anticipate than maybe usually it would be. Now if you look at the same, environment from the manufacturing demand indicator or the confidence PMI point of view. It is obviously the same picture, fairly flat development in the last year. What is noteworthy here is that EMEA is showing expansion. It's actually the four year high and also now showing confidence or expansion in the EMEA region. That is of course good news and long waited, and as I said earlier, our funnels also in that respect are in good order. The other thing I'd also like to say about this, of course there's been some decline in the Indian manufacturing PMI, visible in this slide also as the graph on the top. From our point of view, the India market continues to be a very solid market, and the manufacturing activities is very buoyant, and there are good funnels in place. There is no material change to that from our point of view. Now moving on to the four solutions. Container throughput index, the main indicator here, continues to be on a good level. In fact, it's actually... for the first part of this year or first quarter of this year has been very good solid development with the container throughput with minor decline in or slowing in the growth rate in the last month of previous quarter and that can be contributed to the Middle East story but it is still a very positive sentiment. And as always here, it is important to remember that the long-term drivers for this container handling business and the investment to container handling is very positive. So there is the automation trend the geopolitical trend of repatriation of volumes, the consolidation trend in the industries, and the sustainability electrification trends, and then of course demographics, which all drive long-term positive demand or investment in the container handling industry. Looking at the volumes once again, As I stated, solid order intake, that is an increase, particularly industrial equipment. We did have one large process grain order industrial equipment. Also, there is some decrease in industrial service, but we continue to expand our agreement base, which is, of course, the most important thing in our growth engine going forward. And we had a good quarter in port solutions, but didn't quite make the same level as we had last year, first quarter, which was also a very, very solid quarter. Increase in the Americas region and Asia-Pacific, but slight decline in EMEA regionally looking at things. And on the sales side, it was a slower quarter, and that was actually in all business areas and in all regions. And there are basically three core reasons for this. First of all, seasonality, typically quarter one is a slow quarter, particularly in the industrial business side. Timing of deliveries reflecting to our project businesses in ports as well as the process grain in industrial side. And then, of course, the Middle East impact, which was somewhat less than 15 million. And these three contributed to the somewhat slower volumes on first quarter compared to last year. But I'm also very happy about that book-to-bill ratio continues to be positive and has been more or less for the last one year. And that, of course, means that we have a very strong order book that is on its highest level in three years since quarter three of 2023. at 3.2 billion euros. It's an increase in industrial equipment and port solutions and a slight decrease in industrial service. And we had also a sequential growth of this order book of 6.3% from the previous quarter. And finally, Such a solid developing quarter one for our profitability, particularly when we had somewhat lower volumes, is something that builds confidence on us also that we are very well on track further for our long-term financial targets, as you see from this particular graph. So I'd like to now ask Theo Ottola to join me next, and then I'll come back shortly for the demand outlook and the guidance. Thank you, Marko.

And let's actually continue with the profitability where Marko already started. So our comparable EV day margin improved from 11.1% to 11.6% in a year-on-year comparison. Despite the improvement in the margin, the comparable EBITDA in euros declined by 3 million euros. And we can next take a look at some of the factors behind these changes with the help of the EBITDA bridge that you can see on the right-hand side of the slide. So if we start with the pricing, so pricing impact in a year-on-year comparison was something like 3% or so. And when we combine that information with the fact that the sales declined by almost 5% in comparable currencies, we are actually taking a look at quite a significant underlying volume decline in a year-on-year comparison, which is obviously creating a negative impact to the EDTA comparison against the one of 25%. On a more positive note, so the net of inflation pricing impact continued to be positive. Also, product mix was more favorable now than what it was a year ago, but particularly performance, so execution, was better than what it was a year ago, and this creates a positive delta to the EBITDA bridge. The difference primarily comes from board solutions, actually. when it comes to the execution. Further, when we take a look at the fixed costs, so fixed costs were well under control, like Mark already mentioned, we actually had slightly lower fixed costs in Q1 now in comparison to the situation a year ago. However, then the currencies, and this is the translation impact that we are seeing here, translation impact was negative in the amount of roughly five million in a year-on-year comparison. So as a summary, the EBITDA was burdened by lower underlying volumes, but then on the other hand, it was supported by good execution, good cost control, and net of inflation price. Then we can move to the business areas, and let's start with the service as usual. Service order intake with comparable currencies was almost 1% up in a year-on-year comparison. In this slide, we can very clearly see that now in Q1, the FX differences have been quite big, so the order intake declined by almost 4% in reported currencies. Now the bullet points in the slides, so they are with reported currencies, as they should be. But of course, now that the FX differences are big, so this cues some of the underlying development. For example, now in service, when we take a look at the different parts of the businesses, So we actually grew both in parts as well as in field service when we take a look at the situation in comparable currencies. Of course, more in parts than in field service. And then correspondingly in the regions, when we take a look at those, so with comparable currencies, we grew in the Americas as well as in EMEA, but there was a decline in ETAG. Agreement rates continued to grow nicely, 4.6% year-on-year with comparable currencies, whereas the order book was slightly dull. Going into the sales, so we have roughly similar underlying, let's say, comparable currencies growth as in the order intake, a little bit less than 1%. And again there, when we take a look at the regions, so actually we had growth in the Americas, stable in EMEA and decline in APAC when we take a look at the comparable currencies. And of course, the Americas in particular looks different when we take a look at that with the reported currencies. EBITDA margin improved by 0.2 percentage point to 20.4%. This is five Summersluggish volume development. The reason is primarily operational improvements that we have been able to do over the past 12 months or so. And in practice, it is visible as very good cost control in the service business. Then industrial equipment, where we had good order intake growth, 11%. in comparable currencies, if we take a look at that by business units, so we had very good growth in process grains. We had a decline in components and standard grains in reported currencies, and then again when we go and take a look at the same with the comparable currencies, so both of these were pretty flattish in an year-on-year comparison. Sequential comparison, which is also interesting in many cases, so sequentially we actually grew in all of the major BU's, so in comparison to the fourth quarter. Regions, year on year, we did well in the Americas, APAC grew as well, whereas there was a decrease in IMEA against fairly tough comparables. order book grew by approximately 10% in a year-on-year comparison. Sales are completely flat in comparable currencies, no growth, no decline. When we take a look at that with the business units, so we had a decline in process grades, but then the other two main business units were more flatties from the sales point of view. Comparable EBITDA margin declined by 0.4 percentage point to 4.2%. The main reason behind that is the lacking volume, so there was no volume growth. This was partly offset by positive net of inflation pricing and cost control, but obviously only partly as the EBITDA dropped both in percentages as well as in euros. Then both solutions where the order intake declined by 3.8% in a year-on-year comparison with comparable currencies, We had good order activity in the ASC RMG cranes. When we take a look at the more short cyclical product categories, so lift trucks, for example, year on year, we had growth in the order intake. Q and Q, it was a little bit down. And then again on port service, year on year growth, and in a sequential comparison, flat to slightly down in comparable currencies. Sales came clearly down by 13%. In an year-on-year comparison, this is primarily as a result of the order book timing, but it is also partially as a result of the Middle East conflict and the delays in deliveries as a result of that. So the group-level delays in deliveries were something like 15 million in the first quarter as a result of the crisis, The vast majority of that is visible in the POTS solutions. So it is partially explaining, but the timing of the order book is clearly a bigger factor here. Comparable EV-day margin improved very well, 1.6 percentage point to 9.9%, despite the underlying low volume. So we had very good execution during the quarter, as already mentioned. which was more than offsetting the negative development in the volumes. We also had a little bit of a one-time gains in a way provisions that were canceled in a way during the first quarter. But the clearly bigger explanation is the underlying good execution in the post business. Then a couple of comments on the balance sheet and cash flow topics. Networking capital that continues to be on a good level, a little bit higher than at the end of the year, 7.6% of the rolling 12-month sales, well, within our target area of being below 10% of rolling 12-month sales. We had a little bit more inventories at the end of Q1 than at the end of the year. And consequently also the cash flow, free cash flow for the quarter was not as good as it has been during the previous quarters, but still when we take a look at the rolling 12 months free cash flow, it is on a good level and cash conversion continues to be clearly above 100%. Then EPS, the EPS numbers have been adjusted for the share split. The return on capital employed is on this slide as well, which continues to be between 22 and 24%, depending on whether one takes a look at the reported official return on capital employed or the comparable one. And on the right-hand side, we then have the net debt, or in this case, net cash. Actually, we have net cash in the amount of 185 million at the end of Q1. This one is, though, missing the dividend payment that took place in the month of April, and the dividends roughly, let's say, in the ballpark of 180 million, a little bit less than that. And with these comments, I will then hand over back to Mark.

Thank you, too. How... Looking at our demand outlook, our demand outlook remains unchanged as I already said earlier. So the environment generally for industrial customer segments remains on a healthy level. And our port customers containers throughput is and was on a high level. And of course the long-term prospects for container handling as also earlier stated, they remain good and there's no material change as a result of the recent developments due to these things. But of course, the uncertainty related to geopolitics and trade policies is not at least nothing less than it was a quarter of course, so it does remain high and that of course we have to keep in mind when we look at the demand and that translating to our order intake. Now, a financial guidance, we reiterate our financial guidance. So we expect our net sales to remain approximately on the same level or to increase in 26 compared to 25. And our EDT margin to remain approximately on the same level compared to last year. So that means we remain confident about the future, but realistic about the uncertainties in the environment. And with that, I thank you all. And now we move to Q&A. I welcome Linda back here.

Thank you for the presentations. Now we are ready to start the Q&A session. So operator, please, you can open the conference call lines.

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 Daniela Costa from Goldman Sachs. Please go ahead.

Hi, good morning. I actually have three questions, if possible. Maybe I'll ask them one at a time. Just the first one, just to go back to, I think you've mentioned the sort of up to $50 million impact on the revenues from the Middle East. Shall we expect that to be all resolved and to deliver on those revenues entirely within 2Q?

Just to be clear, it's 15, 1, 5, not 5, 0. I'm not sure what you're doing actually, but 1, 5, and maybe you can continue from there.

Yeah, 1, 5, so 15, and like I said, the majority of that is within the ports and smaller amounts within the other two business areas. We are expecting at least majority of that to be delivered during the second quarter. The bigger case is that we have there, so they have not been delivered as of now, but the expectation is that during the second quarter, that would be the case, that they will be delivered.

Got it. Thank you. And then just to follow up on service, on being sort of slightly weaker year on year, given what we have seen, I think you mentioned you had it in our presentation, the PMIs and manufacturing capacity utilization has not really deteriorated in any region. And you put pricing through, which I guess is also reflected in there. So was there any specific subsegments? Do you think that was also some excitation on servicing and that's coming back?

in q2 how how should we think about the underlying reason why this is weaker now one comment on the q2 but uh say what i mean of course the quota one picks away comes to service was i mean of course as you correctly stated there is some positive development in the pmi indexes and also we do see uh higher activity in the customers when we measure through connect or remote service connections compared to last year. But it is somewhat early to say that that increased activity has not been yet reflected in or the increased manufacturing activity and therefore also the needed service is not really reflected directly in the volumes yet.

Thank you. And then just finally, I mean, you've, I think, in the remarks have said it wasn't a very big number, but nonetheless, you mentioned the whole freight and fuel costs within the statement. Can you just remind us, does that, in your, like, pass-through clauses, we know you kind of pass through for raw materials, but do the clauses include any of these, and it's just more a matter or a lag of time, or freight and fuel costs are... kind of dealt with that spot and they're not in inflation clauses that you pass on to customers.

Okay, so if we start with the freight, which is actually a much bigger topic for us from the cost mass point of view. So if we have project deliveries and then we have other freight costs, and if we take a look at the project delivery, so in most of those cases, the pricing has already been agreed when the, let's say, transportation has been ordered. But then when we take a look at the rest of it, which is clearly a bigger part of it, so we do not have generally those kind of pass-through clauses that we could automatically push forward. So in case there are very sudden changes, So it is of course possible that it will burden our cost base but then over time of course this will be taken to the customer prices and then at the end of the day it is a question of the pricing power then unlike so many other inflatory topics. When we take a look at the fuel or energy, so we are not really hedged against fuel changes, but we are primarily, for the most part, we are hedged against the other energy costs, so electricity and gas and those kind of things. hedges in place. The fuel, there are, in some cases, surcharges that we can use, but there is maybe the same thing as well, so that over time, these kind of changes will then be taken to the contracts, and we take it from there.

Got it. Thank you. The next question comes from Daniel Leighton-Mackey from Dansky Bank. Please go ahead.

Hi, thanks for taking my questions. I wanted to ask about the guidance for flat or higher sales. Could you talk about the assumptions behind that and especially the higher sales? Where would that come from? I understand book to bill was positive in Q1, but how do you see the delivery from order book for the remainder of this year compared to what you had a year ago?

As I stated also earlier, the order book starting this year and also at the end of quarter one, it is positive compared to last year, about 100 million in the end of quarter one. more to deliver this year. There is, of course, the uncertainty related to the prevailing situation and how fast we can push the deliveries out. And we have in most of our businesses with at least a quarter due to sell and the sales funnels are quite robust. So there is, of course, the opportunities to also exceed sales or then if there is a further headwinds, then of course we're confident that we can stay on the same level as we had last.

Maybe additionally on that front, so the sales funnels continue to be in good shape. The number of new cases has been during the first quarter quite okay. The order book is there. It is higher than what it was a year ago. And then of course what we don't know is that if there are disturbances to your political stuff or other that how it will be impacting to the future order intake. But like I said, the funnel values and the number of new cases, at least regarding the Q1, have been in a fairly good shape.

Okay, thank you. Then secondly, on the tariffs, so you said that, or I understood that the change in 2.32 tariffs doesn't change much for you, but I was thinking about the impact on your P&L, especially going to the later part of this year, as a year ago, you mentioned like tailwind from tariffs that you increased pricing before you got any impact on the cost side. So, How should we think about tariffs impacting your profitability going forward this year?

Yeah, you're correct. We were stating more or less three quarters last year that there has been tailwinds in tariffs, but we also said at the same time that we expect that to level off towards the end of the year and this year, and that is more or less what has happened. So we don't really see a tariff tailwind, nor do we see a significant headwind at the moment either, at this time, from the tariffs specifically.

Okay, thank you. Maybe a final one on capital allocation. I guess this is a topic that we discuss often, but do you have anything new to update us on the M&A pipeline or thoughts around that?

Now, when we have new to update, you will hear some with the others also. But, I mean, just jokes aside, of course, it's something that we continue to work on, and it's a timing-related issue when we are able to materialize. In that sense, the situation hasn't changed. It continues to be in our focus also. Okay. Thank you.

As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. The next question comes from Michael Dople from Nordia. Please go ahead.

Thank you. Good afternoon, everybody. So a couple of questions here. So firstly, on the demand, maybe you could talk a bit more about that. I mean, we're already into the second quarter of the year. The war continues. You mentioned some uncertainties. Maybe you could just provide a bit more color of what you see here, for example, with industrial customer segments. What do you see there? Anything that sticks out in any way now heading into Q2 compared to Q1? And also on the port side, I mean, short cycle orders were down sequentially. I think they were up in Q4. How has that been trending into Q2? Just trying to understand, you know, Are you seeing kind of incremental or sequential weakening now given increased uncertainties, or would you say that, you know, things are holding up very well?

Well, starting from the industrial business side, adding color to what was earlier said about, by Teo and myself, that the funnels are in a healthy level. That is, but what I said earlier about... some, let's say, agitation or nervousness, there is changes to how the customer will behave, maybe on a shorter notice than there was earlier. But that is just something that with our tools and the presence that we have, we are confident because we have the ability to react to such changes quite quickly. Maybe the segment-related or industry-related picture, I mean, there isn't really a big change in terms of how it looks between the quarter, but it is also visible that the defense segment, the power segment, as well as the aviation segment What we also have discussed earlier were quite robust on the first quarter also, and the defense segment related opportunities visible in the funnel, they have materialized and started to materialize in the fourth quarter and the first quarter of this year. So the segment differences I stated in my first slide, they are maybe even more far apart or more differentiated from each other than it was before. on the industrial side now. We discussed with Daniel, I was asking about the service earlier. I hope that addressed that service related question, but now if we move to both solutions, for solutions picture overall as stated earlier, there is no big material change in the demand pictures as several times of course earlier discussed is a lot of big projects and that of course is something that influences the how these orders actually appear in the quarterly ordering date. But from a final point of view, there are number of bigger and smaller opportunities in the heavier or larger port equipment side, but also in the salt cycle business that we have on the lead trucks side too. So it is not really that way, a lot different picks.

Okay, okay. And then I think, Theo, you mentioned that the tithing was still positive net of inflation in the quarter. And I think you've been talking about this kind of effect, you know, fading away, but it's still there. So I'm just wondering, you know, how do you see this trend from here? Should we expect that positive effect to remain, or how do you do it?

Well, our standard answer to this one is that we should not expect at least any big net of inflation pricing gain going forward. We did have that now to some extent still during the Q1, and I think that it's good to separate here the tariff impact and the other pricing impact. So now, like I guess Mark already pointed out, so the We did not have a tariff-related tailwind now in the first quarter, but there was other, let's say, pricing, net of inflation pricing impact that was positive. Maybe not to the extent that it was during the last year, but to some extent anyways during Q1. And even if we would not advise to expect a continuous net of inflation positive impact, so the idea of course continues to be that we will be pricing inflation into the customer prices. including, of course, also the inflation that may arise as a result of the recent developments that there are. The timing of those is then, of course, something that requires a little bit of management. And then maybe one of the things regarding which is pricing related to some extent is then the euro-dollar FX rate. So that one is obviously very important. let's say, difficult to price in, and we are not actually, in a way, putting that into the same basket of pricing. So the effects, particularly in the IE side, industrial equipment side, now had a negative impact to the margin in Q1 versus a year ago.

Okay, that's clear. Then just finally, if we can ask on the competitive environment that you see out there, I mean, We are hearing at least some of your peers talking about increased China competition and presence. We're listening to some of your Chinese peers being quite vocal of increasing their presence in production in EMEA and elsewhere. I'm just wondering how you see this impacting your business and your position, and what's your take on those kind of developments overall?

Of course, I mean, this is not a new thing or this is something that has been a topic for quite a long time and we very acutely was aware of that and making our actions also to counter such a development from the Chinese competition. When it comes to the recent development, it's obvious that pressure in the home region or possible limitations to deliver to some parts of the world create new pressure due to those that are still available for the Chinese competition and that has changed the balance of the competition to some extent but that's not uniform in any way between different segments that we operate in and it's not in any way significantly more or accelerated in the last months or quarters as far as we see this steady development and as we've discussed in this course but also in the individual ones of course our approach is not only to make sure that our technology stays competitive. We are close to where the innovation happens, including China, but also make sure that our life cycle approach as well as our market reach with our distribution channels, well-known brands, they stay in good order and continue to be a competitive advantage that, of course, differentiates us positively from the Chinese competition. In the end, those are the most important things as far as I am concerned. So, shortly, I mean, long answer to your question. Yes, there is pressure from the Chinese competition as there is also from other areas, but it is not in any way significantly increased, and we are aware of it, and we are taking our actions due to countries.

That's it. Thank you very much.

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

Thank you very much, operator. Thank you, everyone, for following our event today and sending your questions. Before we close the event, I would like to remind you that ConnectFrance will publish its Q2 results on July 24th. But until that time, have a lovely spring.

Thank you. Thank you.