Cargotec’s half year financial report January–June 2020: Solid performance in an exceptional environment

CARGOTEC CORPORATION, 2020 HALF YEAR FINANCIAL REPORT, 17 JULY 2020 AT 2:00 PM EESTCargotec’s half year financial report January–June 2020: Solid performance in an exceptional environmentDemand and our delivery capability improved during the course of the quarterService and software business resilient Rapid reaction to the COVID-19 crisis visible in comparable operating profitStrong financial position, total liquidity at EUR 970 millionWe introduced our climate ambition to be a 1.5 degree companyApril–June 2020 in brief: Demand and our delivery capability improved towards the end of the quarterOrders received decreased by 27 percent and totalled EUR 637 (872) million. Order book amounted to EUR 1,822 (31 Dec 2019: 2,089) million at the end of the period.Sales decreased by 17 percent and totalled EUR 756 (911) million.Service sales decreased by 8 percent and totalled EUR 239 (259) million.Service and software sales represented 37 (33) percent of consolidated sales.Operating profit was EUR -20 (53) million, representing -2.6 (5.8) percent of sales. Operating profit includes items affecting comparability worth EUR -63 (-11) million.Comparable operating profit decreased by 33 percent and amounted to EUR 43 (64) million, representing 5.7 (7.1) percent of sales. Cash flow from operations before financial items and taxes totalled EUR 4 (41) million.Net income for the period amounted to EUR -36 (29) million.Earnings per share was EUR -0.56 (0.45).January–June 2020 in brief: Service and software sales at comparison period’s levelOrders received decreased by 25 percent and totalled EUR 1,417 (1,894) million. Sales decreased by 9 percent and totalled EUR 1,614 (1,767) million.Service sales decreased by 2 percent and totalled EUR 499 (508) million.Service and software sales represented 36 (33) percent of consolidated sales.Operating profit was EUR 7 (104) million, representing 0.4 (5.9) percent of sales. Operating profit includes items affecting comparability worth EUR -76 (-18) million.Comparable operating profit decreased by 32 percent and amounted to EUR 83 (122) million, representing 5.1 (6.9) percent of sales. Cash flow from operations before financial items and taxes totalled EUR 26 (72) million.Net income for the period amounted to EUR -25 (60) million.Earnings per share was EUR -0.39 (0.93).
Outlook for 2020Visibility towards the end of the year is still weak. In the current exceptional situation Cargotec estimates that it is not able to give guidance for the year 2020. During the second half of the year, Cargotec estimates its business and operating environment to develop as follows:The recovery of market activity continuesThe delivery capability of Cargotec and its supply chain continues to improveProductivity improvements support profitability in the future as wellCargotec’s key figures*Software sales include the strategic business unit Navis and automation software
**Last 12 months’ EBITDA
***Cargotec has refined the treatment of the interest rate component of currency forward contracts in the calculation of return on capital employed at the end of the financial year 2019. As a result, the return on capital employed increased by 0.5 percentage points in the second quarter of 2019.   Cargotec’s CEO Mika Vehviläinen: Solid performance in an exceptional environment, we continue executing our strategyThe second quarter began in a very exceptional situation with the rapid spread of the coronavirus in our main market areas. The virus, and in particular the resulting regulatory restrictions, had a strong impact on our business in the beginning of the second quarter. However, the operating environment improved as the quarter progressed. The operating hours we collect from our connected equipment also show that customers’ activity levels have been clearly rising since the drop in the beginning of the quarter.Increased uncertainty and restrictions caused by the pandemic affected orders received, which decreased by 27 percent from the comparison period. Especially larger automation orders have been postponed. However, the orders received improved month-by-month after a weak April, which provides reason to believe that the bottom was reached in the second quarter for orders received. Our ability to deliver products to customers was impacted by closures of our assembly units and lower utilisation rates of the assembly lines caused by the safety regulations as well as production downtime at our suppliers. However, the situation in our supply chain is normalising and all our assembly sites were back in operation by June. Our service and software sales were resilient despite the market circumstances. The COVID-19 crisis has also further increased customer interest in remote maintenance services.Our determined investments in asset-light operating model and developing the service and software business enabled us to keep comparable operating profit margins in Kalmar and Hiab at a reasonable level despite lower volumes. MacGregor’s comparable operating profit improved from the comparison period, but is still negative. I am confident that ongoing actions in MacGregor will improve the business area’s result also going forward. In these exceptional circumstances, our prompt response to the crisis, combined with our temporary savings measures, helped to keep our comparable operating profit reasonable at EUR 43 million. Despite the crisis, we systematically continued to execute our strategy. We increased our investments in digitalisation and projects to improve the cost and eco-efficiency of our products. During the quarter, we also continued to develop our supply chain and organisation with the divestment of our share in the RCI joint venture in China, and closing down our assembly unit in India.In May, we introduced our climate ambition to be a 1.5 degree company. According to the commitment, we aim to reduce the CO2 emissions of raw material sourcing and product use phase by at least 50 percent from the 2019 levels by 2030. In addition, we aim to be carbon neutral in our own operations by 2030. In terms of electrically powered equipment, we are the forerunners, which gives us great business opportunities. Sales of our eco-efficiency portfolio increased slightly in the first half of the year compared to the previous year and accounted for 23 percent of our total sales.Our strategic direction is correct, which is also reflected in our results. Our investments in the services and software business paid off also in the second quarter. Our software sales increased from the comparison period. The service and software sales share of our consolidated sales increased to 37 percent.We start the second half of the year in a stable position. Our financial position is strong and at the end of the quarter, Cargotec’s total liquidity was EUR 970 million. In addition, our order book is still at a good level.I would like to thank our employees, customers and partners for their excellent work in these exceptional circumstances.Reporting segments’ key figuresOrders receivedOrder bookSalesOperating profitComparable operating profitTelephone conference for analysts, investors and mediaA live international telephone conference for analysts, investors and media will be arranged on the publishing day at 3:00 p.m. EEST. The event will be held in English. The report will be presented by CEO Mika Vehviläinen and Executive Vice President, CFO Mikko Puolakka. The presentation material will be available at www.cargotec.com by the latest 2:30 p.m. EEST.The telephone conference, during which questions may be presented, can be accessed by registering here. The registration opens 15 minutes prior to the event. The event conferencing system will call the participant on the phone number provided and place the participant into the event.The telephone conference can also be accessed without advance registration with code 529921 by calling to one of the following numbers:FI +358 (0) 9 7479 0360DE +49 (0) 69 2222 13426SE +46 (0) 8 5033 6573UK +44 (0) 330 336 9104US +1 323-794-2095The event can also be viewed as a live webcast at https://cargotec.videosync.fi/2020-q2-results. 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 in 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, Executive Vice President and CFO, tel. +358 20 777 4105
Hanna-Maria Heikkinen, Vice President, Investor Relations, tel. +358 20 777 4084AttachmentCARGOTEC CORPORATION, 2020 HALF YEAR FINANCIAL REPORT