19.07.2018

Profit plunge at Cargotec

Hiab and Kalmar owner Cargotec has reported flat first half sales, and a steep fall in profits, but strong order intake.

The group as a whole, which also includes MacGregor, posted first half revenues of €1.59 billion, down two percent on the same period last year. This due to steep falls in Asia Pacific a more modest decline in North America, largely due to exchange rates and an 11 percent increase in Europe and the Middle East. In terms of order intake both North America and Asia Pacific posted strong growth.
Pre-tax profits however plunged 36 percent to €62 million due to write downs, restructuring costs and lower profits from all three divisions.

Hiab achieved first half revenues of €571 million up three percent on the last year, although order intake was seven percent higher at €608 million. Operating profit however slipped 10 percent to 75.5 million due to a variety of factors including: “a weakening of US dollar compared to the Euro and higher investments in sales and service capabilities and digitalisation.”

In the second quarter sales were five percent higher at €295 million, with order intake improving eight percent to €301 million. Operating profits fell 11 percent for the same reason given for the six months. The order book at the end of June was up 12 percent to €337 million.

Kalmar posted first half revenues of €769 million, roughly the same as last year, while order intake was 18 percent higher at €953 million. Operating profits were 10 percent lower due to “restructuring costs and a less favourable business mix.”

In the second quarter sales were two percent lower at €389 million but order intake jumped 43 percent to €550 million, thanks in particular to large automation contracts in Australia and Norway. Operating profits for the period were 22 percent lower at €24.5 million. The order book at the end of June was 20 percent higher at €947.

Cargotec chief executive Mika Vehviläinen said: “Cargotec's second quarter was strong with regard to orders received. Orders received grew in Kalmar and Hiab in the second quarter and were 23 percent higher than in the comparison period. Our sales were almost at the previous year's level, but restructuring costs had a significant negative impact on earnings per share. We proceeded according to our strategy in shaping our portfolio by divesting Kalmar Rough Terrain Center and Siwertell, both of which are outside Kalmar's core areas.”

“We continued to implement our strategy with determination. I am particularly pleased with the service business development in the second quarter, as we were able to increase the orders received there by 16 percent. The performance supports our key strategic goal of achieving €1.5 billion service and software sales in three to five years. We also progressed with digitalisation and leadership, our two other strategic focus areas. During the second quarter, we developed a number of solutions that utilise artificial intelligence, as well as advanced analytics to improve eco-efficiency, preventive maintenance and crane balancing, for example. In leadership, we took steps to continuously improving team climates.”

“One of the highlights during this quarter was Kalmar's agreement to deliver an advanced automation solution to Sydney, Australia, valued at approximately €80 million. The order is particularly significant as it is the world's first fully automated intermodal solution for an inland terminal. In addition, Kalmar will deliver a unique digitalised container handling solution with fully autonomous equipment, software and services to Yara's Porsgrunn facility in Norway.”

“During the quarter, we took major steps also in sustainability. In May, we announced Kalmar's commitment to reduce emissions in cargo and material handling operations by fostering eco-efficient technologies. According to the commitment, Kalmar's full offering will be available as electrically powered versions by 2021. We believe that our strong investments in eco-efficient technologies will give us a significant competitive advantage in the future, when both our customers and legislation increasingly require low-emission solutions.”

Vertikal Comment

In terms of sales and order intake Hiab has done OK, although the profits are a little surprising, given that it does not involve any exceptionals. The company has invested heavily though in new facilities that could/should increase its momentum going forward, such as the Vision Lab test and innovation Centre in Hudiksvall, Sweden and its new installation and competence centre in Meppel, the Netherlands. Obviously some of these costs were expensed in the first half.

If this is the case it is good to see this happening as the company does need to focus on more than just the current year, not to mention one quarter, as it operates in a highly competitive, fast changing and technically advanced market in which its main competitor is more closely held, giving it a little more freedom to sacrifice short term profit growth for longer term gain.

Kalmar is also making strong progress in the more advanced aspects of its product and service offerings, all of which should put it in a strong position for the future and should help add some stability during market doldrums when capital expenditure for new machines is postponed. It also helps tie customers in for the longer term.

All in all a more positive result that at first it seems.