Cargotec’s interim report January–September 2020: Performance improved from the second quarter

CARGOTEC CORPORATION, Q3 2020 INTERIM REPORT, 22 OCTOBER 2020 AT 2:00 PM EEST

Cargotec’s interim report January–September 2020: Performance improved from the second quarter

• Orders received, sales and comparable operating profit improved from Q2/2020 but remained below the comparison period
• Cost savings and productivity improvements enhanced profitability
• Cargotec expects its comparable operating profit for H2/2020 to increase compared to H1/2020
• Cargotec and Konecranes announced plans to merge on 1 October. The merger is subject to the obtaining of merger control approvals, among other items.

July–September 2020 in brief: Relative profitability at the comparison period’s level

• Orders received decreased by 14 percent and totalled EUR 740 (858) million.
• Order book amounted to EUR 1,751 (31 Dec 2019: 2,089) million at the end of the period.
• Sales decreased by 14 percent and totalled EUR 777 (901) million.
• Service sales decreased by 9 percent and totalled EUR 244 (269) million.
• Service and software sales represented 36 (35) percent of consolidated sales.
• Operating profit was EUR 46 (58) million, representing 5.9 (6.4) percent of sales. Operating profit includes items affecting comparability worth EUR -11 (-10) million.
• Comparable operating profit decreased by 17 percent and amounted to EUR 57 (68) million, representing 7.3 (7.6) percent of sales.
• Cash flow from operations before financial items and taxes totalled EUR 74 (81) million.
• Net income for the period amounted to EUR 27 (30) million.
• Earnings per share was EUR 0.41 (0.46).

January–September 2020 in brief: Service business remained stable in an exceptional environment

• Orders received decreased by 22 percent and totalled EUR 2,158 (2,752) million.
• Sales decreased by 10 percent and totalled EUR 2,391 (2,669) million.
• Service sales decreased by 4 percent and totalled EUR 743 (777) million.
• Service and software sales represented 36 (34) percent of consolidated sales.
• Operating profit was EUR 53 (162) million, representing 2.2 (6.1) percent of sales. Operating profit includes items affecting comparability worth EUR -87 (-28) million.
• Comparable operating profit decreased by 27 percent and amounted to EUR 140 (190) million, representing 5.8 (7.1) percent of sales.
• Cash flow from operations before financial items and taxes totalled EUR 101 (153) million.
• Net income for the period amounted to EUR 1 (90) million.
• Earnings per share was EUR 0.03 (1.39).

Outlook for 2020

Cargotec expects its comparable operating profit for H2/2020 to increase compared to H1/2020 (EUR 82.9 million)

Cargotec’s key figures

MEUR	Q3/20	Q3/19	Change	Q1-Q3/20	Q1-Q3/19	Change	2019
Orders received	740	858	-14%	2,158	2,752	-22%	3,714
Service orders received	229	262	-13%	723	803	-10%	1,079
Order book, end of period	1,751	2,251	-22%	1,751	2,251	-22%	2,089
Sales	777	901	-14%	2,391	2,669	-10%	3,683
Service sales	244	269	-9%	743	777	-4%	1,062
Software sales*	38	44	-12%	122	122	0%	168
Service and software sales, % of Cargotec's sales	36%	35%		36%	34%		33%
Operating profit	45.8	57.9	-21%	52.8	162.0	-67%	180.0
Operating profit, %	5.9%	6.4%		2.2%	6.1%		4.9%
Comparable operating profit	56.6	68.3	-17%	139.5	190.0	-27%	264.4
Comparable operating profit, %	7.3%	7.6%		5.8%	7.1%		7.2%
Income before taxes	38.3	50.0	-23%	29.9	137.7	-78%	145.9
Cash flow from operations before financing items and taxes	74.1	80.8	-8%	100.5	153.1	-34%	361.1
Net income for the period	26.6	29.7	-11%	1.4	89.7	-98%	89.4
Earnings per share, EUR	0.41	0.46	-11%	0.03	1.39	-98%	1.39
Interest-bearing net debt, end of period	851	927	-8%	851	927	-8%	774
Gearing, %	65.8%	64.5%		65.8%	64.5%		54.2%
Interest-bearing net debt / EBITDA**	3.8	2.8		3.8	2.8		2.5
Return on capital employed (ROCE), last 12 months, %***	2.8%	9.0%		2.8%	9.0%		7.3%
Personnel, end of period	11,758	12,742	-8%	11,758	12,742	-8%	12,587

*Software sales include the strategic business unit Navis and automation software
**Last 12 months’ EBITDA
***Cargotec has refined the treatment of the interest rate component of currency forward contracts in the calculation of return on capital employed at the end of the financial year 2019. As a result, the return on capital employed increased by 0.4 percentage points in the third quarter of 2019.   

Cargotec’s CEO Mika Vehviläinen: Merger with Konecranes announced

Even in an exceptional operating environment, Cargotec's strategic direction has proved to be the right one and yet again we managed to make a reasonable result despite the pandemic situation. Visibility was still weak at the beginning of the third quarter but the recovery in the market environment that started after April eventually continued throughout the third quarter.

Our delivery capability returned back to normal during the quarter, and the same goes for our supply chain. On the other hand, the data collected from our connected equipment tells us that the activity levels of our customers have been rising closer to last year’s levels. In addition, for example Drewry's statistics on the number of containers handled in ports show that the reduction has so far proved to be less dramatic than what the forecasts predicted.

Following the strengthened confidence along the quarter, Cargotec's Board of Directors decided in August on the second instalment of the dividend to be paid in accordance to the original proposal. In mid-September, as visibility improved, we also gave a financial outlook for the third quarter.

In accordance with our guidance, orders received increased compared to the second quarter, although decreasing by 14 percent from the third quarter 2019. Demand for Kalmar's mobile equipment and Hiab's solutions recovered in particular from the decline caused by the coronavirus pandemic. Regarding larger automation orders, uncertainty and pandemic restrictions still slowed down the customer decision making, and the situation in the offshore oil and gas as well as merchant ship markets remain challenging. However, MacGregor received a significant order during the quarter to supply a mission-critical system in an offshore wind foundation installation vessel. This is the largest single vessel contract secured by MacGregor.

The recovery trend in sales from the second quarter also continued and our services business remained stable. However, sales remained below the comparison period’s level, which was also reflected in a decrease in comparable operating profit. Productivity improvements and cost savings helped our relative profitability to still remain close to the comparison period’s level and, in accordance with our guidance, the comparable operating profit increased from the second quarter. Despite volumes being lower than in the comparison period, Kalmar's and Hiab's results were satisfactory and MacGregor's comparable operating profit rose to black numbers. In terms of cost savings, our focus is shifting from temporary measures to more permanent actions.

Our focus on product development and sustainability continues. Our research and development investments as well as sales of our eco-efficiency portfolio increased in the first nine months 2020.

On 1 October, we announced the plan to combine Cargotec and Konecranes through a merger.   The merger is subject to the obtaining of merger control approvals, among other items. More information about the merger is available from the web address www.sustainablematerialflow.com.

Reporting segments’ key figures

Orders received

MEUR	Q3/20	Q3/19	Change	Q1-Q3/20	Q1-Q3/19	Change	2019
Kalmar	328	396	-17%	955	1,329	-28%	1,776
Hiab	274	307	-11%	793	988	-20%	1,310
MacGregor	139	156	-11%	410	437	-6%	630
Internal orders	-1	0		-1	-1		-1
Total	740	858	-14%	2,158	2,752	-22%	3,714

Order book

MEUR				30 Sep 2020	31 Dec 2019	Change
Kalmar				834	1,049	-21%
Hiab				386	406	-5%
MacGregor				532	633	-16%
Internal orders				-1	0
Total				1,751	2,089	-16%

Sales

MEUR	Q3/20	Q3/19	Change	Q1-Q3/20	Q1-Q3/19	Change	2019
Kalmar	364	424	-14%	1,119	1,252	-11%	1,723
Hiab	254	307	-17%	799	982	-19%	1,350
MacGregor	158	170	-7%	474	436	9%	611
Internal sales	0	0		-1	0		-1
Total	777	901	-14%	2,391	2,669	-10%	3,683

Operating profit

MEUR	Q3/20	Q3/19	Change	Q1-Q3/20	Q1-Q3/19	Change	2019
Kalmar	31.4	47.5	-34%	42.4	113.3	-63%	154.4
Hiab	25.9	30.3	-14%	72.3	111.0	-35%	159.3
MacGregor	-0.7	-9.8	93%	-35.6	-23.4	-52%	-83.3
Corporate administration and support functions	-10.9	-10.1	-8%	-26.4	-38.9	32%	-50.4
Total	45.8	57.9	-21%	52.8	162.0	-67%	180.0

Comparable operating profit

MEUR	Q3/20	Q3/19	Change	Q1-Q3/20	Q1-Q3/19	Change	2019
Kalmar	32.3	47.8	-32%	88.2	117.8	-25%	161.8
Hiab	30.9	34.1	-9%	85.4	118.4	-28%	170.2
MacGregor	1.6	-5.8	> 100%	-7.3	-15.6	53%	-28.2
Corporate administration and support functions	-8.2	-7.7	-6%	-26.7	-30.5	12%	-39.5
Total	56.6	68.3	-17%	139.5	190.0	-27%	264.4

Telephone conference for analysts, investors and media

A live international telephone conference for analysts, investors and media will be arranged on the publishing day at 2:30 p.m. EEST. The event will be held in English. The report will be presented by CEO Mika Vehviläinen and Executive Vice President, CFO Mikko Puolakka. The presentation material will be available at www.cargotec.com by the latest 2:30 p.m. EEST.

The telephone conference, during which questions may be presented, can be accessed by registering here. The registration opens 15 minutes prior to the event. The event conferencing system will call the participant on the phone number provided and place the participant into the event.

The telephone conference can also be accessed without advance registration with code 933290 by calling to one of the following numbers:

FI +358 (0) 9 7479 0360

DE +49 (0) 69 2222 13426

SE +46 (0) 8 5033 6573

UK +44 (0) 330 336 9104

US +1 646-828-8199

The event can also be viewed as a live webcast at https://cargotec.videosync.fi/2020-q3. The conference call will be recorded and an on-demand version of the conference will be published at Cargotec’s website later during the day.

Note that by dialling in to the conference call, the participant agrees that personal information such as name and company name will be collected.

For further information, please contact:
Mikko Puolakka, Executive Vice President and CFO, tel. +358 20 777 4105
Hanna-Maria Heikkinen, Vice President, Investor Relations, tel. +358 20 777 4084

THE MERGER AND THE MERGER CONSIDERATION SECURITIES HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT AND MAY NOT BE OFFERED, SOLD OR DELIVERED WITHIN OR INTO THE UNITED STATES, EXCEPT PURSUANT TO AN APPLICABLE EXEMPTION OF, OR IN A TRANSACTION NOT SUBJECT TO, THE U.S. SECURITIES ACT.

Cargotec (Nasdaq Helsinki: CGCBV) enables smarter cargo flow for a better everyday with its leading cargo handling solutions and services. Cargotec's business areas Kalmar, Hiab and MacGregor are pioneers in their fields. Through their unique position in ports, at sea and on roads, they optimise global cargo flows and create sustainable customer value. Cargotec's sales in 2019 totalled approximately EUR 3.7 billion and it employs around 12,000 people. www.cargotec.com

Attachment

• Cargotec Corporation Q3 2020 interim report

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