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Cargotec’s interim report January–March 2024: Comparable operating profit margin improved in all business areas

Cargotec’s interim report January–March 2024: Comparable operating profit margin improved in all business areas

  • Sequentially stable demand in Hiab and Kalmar, Hiab’s orders amounted to EUR 386 million and Kalmar’s EUR 402 million
  • MacGregor’s merchant and services businesses’ good performance continued, challenges remain in offshore projects
  • Hiab’s comparable operating profit margin was 16.6 (14.2), Kalmar’s 13.5 (13.0) and MacGregor’s 6.0 (0.4) percent
  • All business areas improved their cash flow, combined cash flow from operations before finance items and taxes totalled EUR 174 (26) million
  • Demerger is progressing according to the plan

Continuing operations’ January–March 2024 in brief: Comparable operating profit increased

  • Orders received increased by 11 percent and totalled EUR 653 (588) million.
  • Order book amounted to EUR 1,799 (31 Dec 2023: 1,788) million at the end of the period.
  • Sales increased by 5 percent and totalled EUR 617 (589) million.
  • Service sales increased by 3 percent and totalled EUR 207 (200) million.
  • Service sales represented 33 (34) percent of consolidated sales.
  • Eco portfolio sales decreased by 6 percent and totalled EUR 174 (186) million.
  • Eco portfolio sales represented 28 (32) percent of consolidated sales.
  • Operating profit was EUR 70 (42) million, representing 11.3 (7.1) percent of sales. The operating profit includes items affecting comparability worth EUR -2 (-8) million.
  • Comparable operating profit increased by 43 percent and amounted to EUR 71 (50) million, representing 11.5 (8.4) percent of sales.
  • Profit for the period amounted to EUR 47 (24) million.
  • Basic earnings per share was EUR 0.73 (0.37).
  • Cash flow from operations before finance items and taxes totalled EUR 174 (26) million.1

Outlook for 2024 unchanged

Cargotec estimates2 Hiab’s comparable operating profit margin in 2024 to be above 12 percent, Kalmar’s comparable operating profit margin in 2024 to be above 11 percent, and
MacGregor’s comparable operating profit in 2024 to improve from 2023 (EUR 33 million).

Kalmar is presented as discontinued operations due to the proposed demerger

As announced in a stock exchange release on 1 February 2024, the Board of Directors of Cargotec Corporation (“Cargotec”) has approved a demerger plan concerning the separation of the Kalmar business area into an independent listed company (the “Demerger”). The planned completion date of the Demerger is 30 June 2024. The Demerger is subject to approval by the Annual General Meeting of Cargotec to be held on 30 May 2024. Certain major shareholders of Cargotec, including Wipunen varainhallinta oy, Mariatorp Oy, Pivosto Oy and Kone Foundation, holding in the aggregate approximately 41 percent of the shares and approximately 75 percent of the votes in Cargotec, have indicated their support for the proposed Demerger.

Due to the proposed Demerger, Cargotec presents the Kalmar business area as discontinued operations under IFRS 5 Non-current Assets held for Sale and Discontinued operations starting from the first quarter of 2024 and published restated quarterly financial information on its 2023 financials on 8 April 2024. These restated financials constitute comparative information for Cargotec when the Kalmar business area is presented as discontinued operations.

Under IFRS 5, the result from discontinued operations is reported separately from continuing operations’ income and expenses in the consolidated statement of income. Comparative periods are restated accordingly. The consolidated balance sheet is not restated. The presented discontinued operations include revenue and operating expenses directly related to the Kalmar business area and other income and costs related to continuing operations that are not expected to continue after the Demerger, or would have been avoided without the Demerger. As a result, financial information presented for Cargotec as continuing and Kalmar business area as discontinued operations do not reflect the past or future profitability of either business on a stand-alone basis before the Demerger or after it.

Contrary to the presentation method according to IFRS 5, in the presented segment information, Kalmar’s profit is still reported according to the normal calculation method, taking depreciation and amortisation into account.

Cargotec’s President and CEO Casimir Lindholm: Fifth consecutive quarter with good results, demerger progressing according to the plan

The first quarter of 2024 provided a strong start for the year. Hiab, Kalmar and MacGregor all improved their comparable operating profit margins. All businesses combined our comparable operating profit amounted to EUR 137 million, and we delivered the best first quarter in Cargotec’s history. This was the fifth consecutive quarter with good results, despite complex business environment. Solid execution continued across business areas and the results were also supported by cost saving actions we launched in October last year. The actions are now to a large extent implemented and we foresee EUR 60 million annual savings for Cargotec in total in 2024 instead of the original estimate of EUR 50 million.

In Kalmar, strong profitability continued and demand was stable for the third quarter in a row. Kalmar’s orders received amounted to EUR 402 million. Demand for mobile equipment used in industrial operations and small- and mid-sized terminals remained good and we continue to see delayed decision making in larger orders and destocking in the distribution customer segment. Kalmar’s sales declined by 10 percent from the previous year and amounted to EUR 439 million, impacted by lower order intake in the second half of last year. However, Kalmar’s comparable operating profit margin increased to 13.5 percent as cost saving actions announced in October last year offset the decline in sales. Kalmar’s comparable operating profit amounted to EUR 59 million.

In Hiab, the quarter was the sixth quarter in a row with a stable level of demand and orders received amounted to EUR 386 million. Hiab’s sales decreased slightly to EUR 415 million while service sales continued to grow. Despite lower sales, Hiab’s comparable operating profit increased by 12 percent and amounted to EUR 69 million, corresponding 16.6 percent of sales, driven by successful management of inflationary pressures and tight cost control.

MacGregor’s merchant and services businesses continued to perform well. Orders received increased by 29 percent to EUR 267 million. Orders included a sizable order with a value of almost EUR 50 million. MacGregor’s order book continued to increase and now exceeds EUR 1 billion. MacGregor’s sales increased by 29 percent to EUR 203 million, driven by increased deliveries to merchant vessels, leading the comparable operating profit to improve to EUR 12 million, representing 6.0 percent of sales.

MacGregor’s core businesses merchant and services performed well and, excluding the offshore business, MacGregor’s comparable operating profit margin in the first quarter would have been around 11 percent. However, we still have challenges in approximately 10 loss making offshore pilot projects containing advanced technologies. In addition, MacGregor has an ongoing dispute related to one monopile installation vessel project. We have not been committing to any new pilot projects in the past quarters and we have been executing a restructuring programme to turn around the offshore business. At the end of the first quarter, MacGregor’s offshore equipment related order book has been reduced to EUR 87 (134) million.

All segments combined, we generated a strong operative cash flow of EUR 174 million, leading to a reduction of our net debt to EUR 57 million. Hence, our gearing is only 3 percent, giving an excellent foundation for our businesses in their planned standalone future.
The planned separation of our core businesses Kalmar and Hiab into two world-leading standalone companies is progressing according to the plan, and we are expecting to reach major milestones this year. The completion date of the demerger is expected to be 30 June 2024. Alongside the separate listing of Kalmar, we will focus on finding a solution for MacGregor and preparing Hiab to become a standalone company.

Cargotec’s Board of Directors approved the demerger plan on 1 February. Since the approval of the plan, we have proceeded steadily. On the first day of April, Sami Niiranen started as President of Kalmar. We have also published notice to our Annual General Meeting to be held on 30 May where the formal decision on the transaction will be taken. Certain shareholders, representing approximately 41 percent of the shares and approximately 75 percent of the votes in Cargotec, have already indicated their support for the proposed demerger.

The AGM will also elect both Cargotec’s and Kalmar’s Boards of Directors. There would be no overlap between the Boards of Cargotec and Kalmar. Furthermore, a Shareholders’ Nomination Board would be established for Kalmar.

Due to the high certainty of the transaction, Kalmar is reported as discontinued operations since the beginning of the year. Hence, the combined financial targets set in November 2022 for Kalmar and Hiab are no longer valid. Cargotec’s climate target to reduce greenhouse gas emissions in all three emission scopes by at least 50 percent by 2030 compared to a 2019 baseline remains valid. The target is validated by the Science Based Targets initiative. We plan to publish new long term performance targets for Hiab and Kalmar in May. The prospectus, which discloses more details on the standalone Kalmar, is also planned to be published in May ahead of the AGM.

Hiab’s and Kalmar’s Capital Market Days will be held on 28 and 29 May and I warmly welcome you to follow the events virtually.

Full Report

Source: Cargotec

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