Cargotec's interim report January–September 2023: Growth continued in sales and profitability

CARGOTEC CORPORATION, INTERIM REPORT JANUARY–SEPTEMBER 2023, 26 OCTOBER 2023 AT 9:00 AM (EEST)

Cargotec's interim report January–September 2023: Growth continued in sales and profitability

• Orders received totalled EUR 914 (1,147) million in Q3, impacted by delayed customer decision making
• Sales increased by 6 percent and comparable operating profit by 48 percent in Q3
• Actions planned to target EUR 50 million cost savings
• Planned separation of Kalmar and Hiab progressing according to plan, Pekka Ala-Pietilä no longer available as the proposed Chair of the standalone Kalmar Board due to personal reasons

July–September 2023 in brief: Continued high profitability

• Orders received decreased by 20 percent and totalled EUR 914 (1,147) million.
• Order book amounted to EUR 3,065 (31 Dec 2022: 3,541) million at the end of the period.
• Sales increased by 6 percent and totalled EUR 1,102 (1,041) million.
• Service sales increased by 3 percent and totalled EUR 334 (323) million.
• Service sales represented 30 (31) percent of consolidated sales.
• Eco portfolio sales increased by 13 percent and totalled EUR 367 (325) million.
• Eco portfolio sales represented 33 (31) percent of consolidated sales.
• Operating profit was EUR 140 (50) million, representing 12.7 (4.8) percent of sales. The operating profit includes items affecting comparability worth EUR 9 (-39) million.
• Comparable operating profit increased by 48 percent and amounted to EUR 131 (89) million, representing 11.9 (8.6) percent of sales.
• Cash flow from operations before finance items and taxes totalled EUR 184 (116) million.
• Profit for the period amounted to EUR 107 (29) million.
• Basic earnings per share was EUR 1.66 (0.45).

January–September 2023 in brief: Record profitability and cash flow

• Orders received decreased by 19 percent and totalled EUR 2,972 (3,672) million.
• Order book amounted to EUR 3,065 (31 Dec 2022: 3,541) million at the end of the period.
• Sales increased by 18 percent and totalled EUR 3,375 (2,850) million.
• Service sales increased by 13 percent and totalled EUR 1,024 (910) million.
• Service sales represented 30 (32) percent of consolidated sales.
• Eco portfolio sales increased by 24 percent and totalled EUR 1,111 (896) million.
• Eco portfolio sales represented 33 (31) percent of consolidated sales.
• Operating profit was EUR 395 (135) million, representing 11.7 (4.7) percent of sales. The operating profit includes items affecting comparability worth EUR -7 (-97) million.
• Comparable operating profit increased by 74 percent and amounted to EUR 402 (232) million, representing 11.9 (8.1) percent of sales.
• Cash flow from operations before finance items and taxes totalled EUR 252 (84) million.
• Profit for the period amounted to EUR 287 (91) million.
• Basic earnings per share was EUR 4.46 (1.41).

Outlook for 2023 unchanged

Cargotec estimates its core businesses’¹ 2023 comparable operating profit to improve from 2022 (EUR 384² million) and MacGregor’s comparable operating profit in 2023 to be positive (EUR -47² million).³

Cargotec’s key figures

* Last 12 months’ EBITDA

Cargotec changed the definition of the alternative performance measure comparable operating profit starting from 1 January 2023. The restated comparable operating profit will also include the impacts of the purchase price allocation, which amounted to EUR 16 million in 2022. Of these items, EUR 1 million were related to Kalmar, EUR 3 million to Hiab, and EUR 12 million to MacGregor. Additional information regarding the changed definition is presented in the stock exchange release published on 4 April 2023.

Cargotec’s eco portfolio criteria has been revised and the 2022 eco portfolio sales has been restated accordingly.

Cargotec has revised its second quarter 2023 eco portfolio sales. Initially reported EUR 362 million has been revised to EUR 397 million which represented 33 percent of Cargotec's consolidated sales in the second quarter.

Cargotec’s President and CEO Casimir Lindholm: Robust execution continued in the third quarter in an increasingly complex business environment

In the big picture, the third quarter was a continuation of the first half of the year. We are operating in an increasingly complex business environment due to geopolitical uncertainty, high interest rates and low consumer confidence. With larger investments in particular, we saw our customers postpone their investment decisions. Our orders received decreased to EUR 914 million, a 20 percent decline from the comparison period. We kept harvesting on our large order book collected in the past two years when the order intake was exceptionally high. Our operational execution was at a good level and sales increased by 6 percent to EUR 1,102 million. Eco portfolio sales continued to grow faster, by 13 percent, representing 33 percent of total sales in the quarter. Driven by higher sales and successful management of inflationary pressures and costs, our comparable operating profit improved by 48 percent to EUR 131 million.

In Kalmar, the demand picture was mixed and orders received declined by 17 percent. Demand for smaller mobile equipment used in small and midsized terminals and industrial operations remained at a good level while our distribution-related product categories were impacted by destocking. With larger equipment, the customer decision making remained slow. Kalmar’s sales decreased by 4 percent to EUR 503 million. The sales decline was however more than offset by a more favourable sales mix, successful management of inflationary pressures and reduced heavy cranes related losses with comparable operating profit improving by 41 percent to EUR 71 million.

In Hiab, orders received continued to be affected by delayed customer decision making, stemming from high inflation and interest rates as well as extended truck chassis delivery times. Hiab’s order book remained at a good level. Hiab’s sales increased from the comparison period by 11 percent to EUR 420 million, driving its comparable operating profit up by 24 percent to EUR 62 million.

In MacGregor, the demand was healthy in merchant and service businesses. Despite orders received decreasing by 16 percent against a strong comparison period, MacGregor's order book increased to EUR 993 million. The strong order book is gradually starting to convert into sales and in Q3, sales increased by 31 percent to EUR 179 million. MacGregor’s turnaround is progressing and Q3 was another quarter with positive comparable operating profit and improved profitability, especially in merchant and services businesses. However, we still have challenges related to offshore projects we have committed to in the past. We continue to look for a solution for MacGregor in 2024.

Separation of our core businesses Kalmar and Hiab into two world-leading standalone companies is progressing according to the previously communicated plan. We will provide more details on the progress of the planned demerger earliest in conjunction with the full year 2023 result release.

We are fully focusing on executing our business. In the past two years, our main focus has been on delivering the order book, which reached an all-time high level a year ago. We have been working with continuous profitability improvements, invested in R&D, eco portfolio development and in the service business growth. We have also updated our action plans to be ready for different market scenarios.

In the past quarters, our orders received have returned back to pre-COVID levels and our order book has declined by EUR 500 million. Hence, we are planning to initiate new cost saving actions in Cargotec group, Kalmar and Hiab to achieve EUR 50 million annual fixed cost savings in 2024. Half of the cost savings would come from a reduction of a maximum of 350 roles globally. The planned actions play a part in funding our growth journey based on helping our customers to solve their sustainability challenges with our innovative, high quality solutions. By embracing these actions, we would emerge stronger and more resilient.

Despite prevailing market uncertainty, I feel confident about our future. We have made significant progress in many areas and with the cost saving actions, combined with continuous improvements and investments, we aim to safeguard our profitability and keep our core businesses' comparable operating profit above 10 percent even in challenging market conditions. For 2023, our outlook is unchanged. We estimate that core businesses’ 2023 comparable operating profit improves from 2022 (EUR 384 million) and MacGregor’s comparable operating profit would be positive (EUR -47 million).

Reporting segments’ key figures

Orders received

Order book

Sales

Operating profit

Comparable operating profit*

*Cargotec changed the definition of the alternative performance measure comparable operating profit starting from 1 January 2023. The restated comparable operating profit will also include the impacts of the purchase price allocation, which amounted to EUR 16 million in 2022. Of these items, EUR 1 million were related to Kalmar, EUR 3 million to Hiab, and EUR 12 million to MacGregor. Additional information regarding the changed definition is presented in the stock exchange release published on 4 April 2023.

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 10:00 a.m. EEST. The event will be held in English. The report will be presented by President and CEO of Cargotec, Interim President of Kalmar Casimir Lindholm, CFO Mikko Puolakka, and President of Hiab Scott Phillips. The presentation material will be available at www.cargotec.com by the latest 9:30 a.m. EEST.

To ask questions, please join the teleconference by registering via the following link:
https://palvelu.flik.fi/teleconference/?id=1009462. After the registration, the conference phone numbers and a conference ID to access the conference will be provided. Questions can be presented during the conference.

The event can also be viewed as a live webcast at https://cargotec.videosync.fi/2023-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 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, CFO, tel. +358 20 777 4105

Aki Vesikallio, Vice President, Investor Relations, tel. +358 40 729 1670

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 has signed the United Nations Global Compact Business Ambition for 1.5°C. The company's sales in 2022 totalled approximately EUR 4.1 billion and it employs around 11,800 people. www.cargotec.com

¹ Hiab and Kalmar excluding heavy cranes and including corporate administration and support functions.

²  Cargotec has changed the definition of the alternative performance measure comparable operating profit starting from 1 January 2023. Comparison figures have been calculated based on the new definition. Additional information about the definition is presented in the stock exchange release published on 4 April 2023.

³ The outlook for 2023 does not include the comparable operating profit of Kalmar's heavy crane business which will be discontinued.