22.07.2012

Cargotec profits slump

Profits at Cargotec, owner of Hiab and Kalmar have slipped 24 percent in the first half of the year as per its June 12th profit warning.

Total sales for the six months increased six percent to €1.64 billion, while order intake was up three percent. Pre-tax profits were €73.7 million a fall of over 24 percent on last year.

The second quarter saw revenues rise seven percent to €850 million, while order intake jumped 17 percent to €892 million, driven by a substantial run of orders for Kalmar port equipment. The resulting order book at the end of June was €2.4 billion five percent up on this time last year. Pre-tax profits for the quarter were down 23 percent to €39 million.

Chief executive Mikael Mäkinen said: “The market situation is challenging due to global economic uncertainty, which is also reflected in a tight competitive situation. Nevertheless, Terminals second quarter orders grew by 57 percent from the comparison period. Since profitability remained at the level of the first quarter, its improvement in Terminals and Load Handling is our priority.”

“We are building a factory for the Rainbow-Cargotec Industries joint venture and in July we announced our plans to establish a joint venture with China's leading heavy truck manufacturer. Hence, we have reached our desired strategic foundation in Asia in both Terminals and Load Handling. We continue to evaluate listing Marine on Singapore Exchange and growth opportunities in offshore.”

Vertikal Comment

This result is no surprise and is close to what the company told us to expect in early June, order intake timing appears to have played, at least a small part in the slump, while product mix was the biggest culprit. The fact that Cargotec central management has possibly been guilty of constant ‘restructuring’ over the last couple of years may or may not have also been a factor?

Looking at the order intake for the quarter and the back log, suggests that, assuming the company has the right management in place it will come good in the second half and beyond. The company is also working hard to increase revenues from service work in order to reduce its dependence on capital investment. But this is not an easy one to rush – unless you look for major acquisitions in the area.

One thing management needs to avoid is another round of restructuring. Experience shows that constant change, especially when ordered from the centre, rarely achieves the desired result and after a while also fails to keep large investors ‘on board’ either.