09.02.2019

Higher sales lower profits at Hiab

Hiab and Kalmar parent Cargotec has published its full year results with a more positive fourth quarter.

Looking at the full year numbers, Hiab achieved revenues of €1.15 billion, up six percent on 2017. Order intake fort the year ran ahead of this, rising 13 percent to €1.26 million, leaving the order book at the end of December at €453 million 51 percent higher than at the same point a year earlier. However, operating profit for the year fell 15 percent to €133.8 million. This apparently due to problems with the manufacturing supply chain hitting productivity and increasing costs, while a stronger Euro also hit margins as local currencies translated into fewer Euros, while costs are largely euro based.

Kalmar revenues were just one percent higher at €1.62 billion with order intake rising 23 percent to €1.92 billion leaving the order book 29 percent higher at just over a billion euros. Operating profit was up nine percent to €138.1 million.
Cargotec as a whole, which also included MacGregor, reported revenues of €3.36 billion, up two percent on 2017. Pre-tax profits dropped 15 percent to €161.1 million.

Looking at the fourth quarter Hiab revenues were 13 percent higher at €318 million, with order intake rising 24 percent to €357 million, operating profits were still depressed though declining 14 percent to €34.4 million.
Kalmar revenues slipped five percent to €444 million, while order intake increased 22 percent to €450 million, while operating profit was 18 percent higher at €47.1 million.

Chief executive Mika Vehviläinen said: “Strong order book creates a solid foundation for 2019. The year 2018 was twofold at Cargotec. Orders grew strongly in all our business areas, but we fell behind our target to improve our result. Kalmar's operating profit improved, but the weaker results for Hiab and MacGregor led to a lower operating profit at group level compared to the previous year. Although the demand for Hiab's equipment and services continued to grow strongly, its operating profit declined, particularly as the US dollar weakened against the euro, but also due to challenges with the supply chain and related additional costs.”

“MacGregor's market environment was still challenging, which led to a lower sales and operating profit, excluding restructuring costs. Kalmar's operating profit improved, thanks to measures that improved productivity.”

“Throughout the year, Kalmar received several orders that benefit from advanced automation technology solutions. We also moved in the right direction with our software and digital solutions. In line with our strategy, we will continue to invest in the development of digitalisation solutions. We believe that the value chain for container handling can be significantly enhanced and we want to help our customers fully exploit these opportunities.”

“Our service business continued to develop positively and, at comparable exchange rates, its sales increased by six percent compared to the previous year. Our goal is to increase the sales of our service and software business from the current approximately EUR 1.1 billion to EUR 1.5 billion over the next two to four years. Service solutions that utilise digitalisation are increasingly emerging alongside traditional service methods in our offering.”

“Although our results were lower than in the previous year, our order backlog is now 27 percent higher than it was one year ago. This gives us a good starting position for the year to come. We are committed to continuing to develop Cargotec from a good company to great one and in connection to this we will continue to sharpen our competitiveness and improve our productivity.”

Vertikal Comment

While the profitability issue is a major issue, it is almost certainly a short term issue, and temporary setback. The currency has stabilised, and one assumes that the company will be looking to add a little more balance into the supply chain to closer match the geographic sales mix? Higher sales are also likely to contribute to improved profitability during 2019 and beyond.

The key thing is that senior management avoids any knee jerk action plans to restructure the entire business as it did on the increasingly distant past. Yes the production needs help to solve the problems it has experienced this year, but the company is clearly on a positive roll and focusing on the longer term will pay off.

All in all a mostly positive set of numbers.