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Cargotec: Record quarter for services

Cargotec Corporation published audited 2021 financial statements:

October–December 2021 in brief: Record quarter for services

• Orders received increased by 9 percent and totalled EUR 1,051 (963) million.
• Order book amounted to EUR 2,847 (31 Dec 2020: 1,824) million at the end of the period.
• Sales increased by 4 percent and totalled EUR 910 (873) million.
• Service sales increased by 10 percent and totalled EUR 289 (262) million.
• Service and software sales represented 33 (35) percent of consolidated sales.
• Operating profit was EUR 8 (18) million, representing 0.9 (2.0) percent of sales. Operating profit includes items affecting comparability worth EUR -37 (-52) million.
• Comparable operating profit decreased by 35 percent and amounted to EUR 45 (70) million, representing 5.0 (8.0) percent of sales.
• Cash flow from operations before financial items and taxes totalled EUR 60 (196) million.
• Net income for the period amounted to EUR -8 (7) million.
• Earnings per share was EUR -0.13 (0.10).

January–December 2021 in brief: Gain from Navis sale increased the operating profit considerably

• Orders received increased by 42 percent and totalled EUR 4,427 (3,121) million.
• Order book amounted to EUR 2,847 (31 Dec 2020: 1,824) million at the end of the period.
• Sales increased by 2 percent and totalled EUR 3,315 (3,263) million.
• Service sales increased by 7 percent and totalled EUR 1,076 (1,005) million.
• Service and software sales represented 35 (36) percent of consolidated sales.
• Operating profit was EUR 356 (70) million, representing 10.7 (2.2) percent of sales. The operating profit includes items affecting comparability worth EUR 124 (-156) million. The operating profit increased mainly due to gain from the Navis software business sale.
• Comparable operating profit increased by 2 percent and amounted to EUR 232 (227) million, representing 7.0 (6.9) percent of sales.
• Cash flow from operations before financial items and taxes totalled EUR 169 (296) million.
• Net income for the period amounted to EUR 247 (8) million.
• Earnings per share was EUR 3.82 (0.13).

Outlook for 2022
Cargotec expects its comparable operating profit for 2022 to improve from 2021 (EUR 232 million).

Cargotec CEO Mika Vehviläinen: Strong demand throughout the year, supply chain challenges continued during the second half of the year

The year 2021 was twofold. The improving market situation and increasing economic activity boosted our orders received to a record level, and our main demand drivers – number of containers handled at ports globally, construction activity, new vessel contracting – grew significantly. However, as the year progressed, component shortages and global logistics challenges proved to be more difficult than what we had estimated, causing delays to our deliveries. Due to the coronavirus pandemic, market predictability was exceptionally challenging.

In 2021, orders received increased by 42 percent compared to the comparison period. The order increase was particularly noticeable in short-cycle products (Hiab and Kalmar’s mobile equipment) but also the project business orders increased clearly both in Kalmar and in MacGregor. Our order book grew by 56 percent and, as an example, Hiab’s order book nearly doubled when compared to the previous year. Strong demand and extended short-cycle product delivery times affected the growth of our order book.

Despite the strong demand, our sales increased by only 2 percent due to lower project deliveries in Kalmar and MacGregor as well as the sale of the Navis business. In addition, component shortages and global logistics challenges limited growth in Hiab and in Kalmar mobile equipment. We estimate these factors to have affected our sales by approximately EUR 80 million during the fourth quarter. We work in close cooperation with our suppliers to ensure component availability but estimate that component and logistics challenges to continue in 2022.

Cargotec’s comparable operating profit increased by 2 percent to EUR 232 million, driven by higher comparable operating profit in Hiab. Challenges in the delivery chain and added costs thereof impacted Kalmar’s result in particular, causing its comparable operating profit to decrease by 5 percent. Despite MacGregor’s positive market development, due to one-time cost overruns related to new product developments in offshore wind energy vessel projects during the last quarter, MacGregor’s result for the whole year turned negative.

Our service business reached a new record when services sales increased by 7 percent and services orders received by 18 percent compared to the previous year. Examples of good progress in services include Kalmar’s multi-year service agreements with Outokumpu’s Tornio stainless steel plant in Finland, and with Holmen Iggesund’s mill in Sweden. Service and software business sales constituted 35 percent of our total sales in 2021.

The eco portfolio sales represented 19 percent of Cargotec’s total sales. The customer interest towards eco-efficient equipment is increasing. As an example, more than a quarter of the forklift truck orders in 2021 were fully electric. Going forward, we will be able to better meet the growing demand for electrical equipment, as Kalmar introduced three all-electric solutions in December. With these launches Cargotec can offer electric products in all of its product categories.

Cargotec refined its vision and strategy in April. Our vision is to become the global leader in sustainable cargo flow and our strategic breakthrough objectives are sustainability and profitable growth. Practical examples of executing the strategy in 2021 include the development of the fully electric offering as well as our agreement with SSAB to work on the introduction of fossil-free steel to the cargo handling industry. In concrete terms, Cargotec aims to reduce the CO2 emissions of its value chain by 1 million tons by 2024.

During the year we completed the sale of the Navis business, which had an approximately EUR 230 million positive impact on our operating profit. The proceeds enable R&D investments in the fields of electrification, digitalisation, robotisation and automation, and further investments in acquisitions. As an example, Hiab acquired the demountables manufacturer Galfab in the US and, to speed up the development and launch of robotic solutions across the mobile equipment offering, Kalmar signed a joint development agreement with Coast Autonomous Inc. in the US.

On 1 October 2020, Cargotec Corporation and Konecranes Plc announced their combination agreement and a merger plan to combine the two companies through a merger. Extraordinary general meetings of Cargotec and Konecranes held on 18 December 2020 approved the merger. Competition authorities in the EU, UK, and US, among others, are reviewing the proposed transaction. In August, Cargotec and Konecranes received an unconditional approval from the State Administration for Market Regulation, the competition authority in China, for their planned merger.

As previously communicated, Cargotec and Konecranes have continued their dialogue and cooperation with relevant competition authorities to find satisfactory ways to mitigate concerns raised by the competition authorities to secure approvals to complete the merger of Cargotec and Konecranes. Based on ongoing dialogue with the authorities, the remedy requirements are more complex than expected.

Cargotec and Konecranes have discussed remedies with relevant competition authorities based on a commitment offered to the European Commission to divest Konecranes’ Lift Truck business and Cargotec’s Kalmar Automation Solutions. Both companies consider the offered remedy package as sufficient and feasible. Further investigations regarding the proposed remedies and negotiations with relevant competition authorities regarding antitrust concerns continue.

Cargotec and Konecranes are awaiting the authorities’ decisions and continue to work towards the merger being completed by the end of H1 2022. Until all merger closing conditions are met and the deal is completed, both companies continue to operate fully separately and independently. More information about the merger is available from the web address www.sustainablematerialflow.com.

I would like to thank Cargotec employees for their work and dedication during the year 2021 as well as our customers, shareholders and partners for the trust and cooperation.

Source: Cargotec

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