Cargotec’s Financial Statements Review 2022: Record Year for Kalmar and Hiab

Source: www.gulfoilandgas.com 2/2/2023, Location: Europe

? Orders received, sales and comparable operating profit at record-high level
? Service and eco portfolio sales at record-high level
? MacGregor’s portfolio rationalisation had a significant negative impact on operating profit

October–December 2022 in brief: Comparable operating profit increased
Orders received increased by 13 percent and totalled EUR 1,190 (1,051) million.
Order book amounted to EUR 3,541 (31 Dec 2021: 2,847) million at the end of the period.
Sales increased by 36 percent and totalled EUR 1,239 (910) million.
Service sales increased by 22 percent and totalled EUR 354 (289) million.
Service sales represented 29 (32) percent of consolidated sales.
Eco portfolio sales increased by 61 percent and totalled EUR 268 (166) million.
Eco portfolio sales represented 22 (18) percent of consolidated sales.
Operating profit was EUR -29 (8) million, representing -2.3 (0.9) percent of sales. The operating profit includes items affecting comparability worth EUR -117 (-37) million.
Comparable operating profit increased by 95 percent and amounted to EUR 89 (45) million, representing 7.2 (5.0) percent of sales.
Cash flow from operations before finance items and taxes totalled EUR 147 (60) million.
Profit for the period amounted to EUR -68 (-8) million.
Basic earnings per share was EUR -1.04 (-0.13).
January–December 2022 in brief: Strong growth in eco portfolio sales

Orders received increased by 10 percent and totalled EUR 4,862 (4,427) million.
Order book amounted to EUR 3,541 (31 Dec 2021: 2,847) million at the end of the period.
Sales increased by 23 percent and totalled EUR 4,089 (3,315) million.
Service sales increased by 17 percent and totalled EUR 1,264 (1,076) million.
Service sales represented 31 (32) percent of consolidated sales.
Eco portfolio sales increased by 54 percent and totalled EUR 964 (626) million.
Eco portfolio sales represented 24 (19) percent of consolidated sales.

Operating profit was EUR 106 (356) million, representing 2.6 (10.7) percent of sales. The operating profit includes items affecting comparability worth EUR -226 (124) million. The decrease in the operating profit is mainly due to the sales gain of the Navis software business divestment in the comparison period.
Comparable operating profit increased by 43 percent and amounted to EUR 332 (232) million, representing 8.1 (7.0) percent of sales.
Cash flow from operations before finance items and taxes totalled EUR 231 (169) million.
Profit for the period amounted to EUR 23 (247) million.
Basic earnings per share was EUR 0.37 (3.82).
The Board of Directors proposes to the Annual General Meeting that a dividend of EUR 1.34 for each class A shares and EUR 1.35 for each outstanding class B shares be paid.

Outlook for 2023
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

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

2) 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 4 million in the core business and EUR 12 million in MacGregor in 2022. Comparison figures have been calculated based on the new definition. Restatement for 2022 figures will be published before Q1/23 result announcement.

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

In the calculation of the balance sheet related key figures, the assets held for sale and liabilities related to assets held for sale are included in the applicable account groups, even though in the balance sheet they are presented on one row.

Cargotec’s CEO Mika Vehviläinen: Successful and eventful year with many nuances
The year 2022 was excellent for Cargotec. Several global crises characterised the year; however, Cargotec's orders received, sales and comparable operating profit were at a record level.

The execution of the refocused strategy, published in March, has started successfully. The exit from Kalmar heavy cranes business is finalised, and the changes in the operating model, aimed at increasing the independence of the business areas, have been taken into use. Regarding the evaluation of strategic options of MacGregor, Cargotec’s Board of Directors decided in November that, in the future, MacGregor would no longer be part of Cargotec’s portfolio.

Cargotec’s comparable operating profit margin was around 8 in 2022, when in the core businesses Hiab and Kalmar the comparable operating profit margin was over 11. The positive development of Hiab and Kalmar continued, and their excellent performance in the seasonally strong fourth quarter ensured that Cargotec's comparable operating profit for 2022 increased to a record level of EUR 332 million.

MacGregor’s result was a disappointment. Its comparable operating profit was negative by EUR 31 million in the fourth quarter, due to investments in offshore wind power projects and cost overruns, as well as MacGregor’s portfolio rationalisation which had a significant negative impact on its operating profit. We have taken the necessary measures to ensure the best possible shareholder value when divesting MacGregor. Despite the disappointing result, MacGregor's business in the merchant ship segment and service business has progressed well, and has been profitable. Excluding the offshore wind business, MacGregor's comparable operating profit margin in 2022 would have been around 3 percent.

In 2022, we published new performance targets for our core businesses, thereby highlighting our strategy to grow profitably by solving our customers' sustainability challenges. The targets are faster-than-market sales growth; comparable operating profit of 12 percent in 2025 and 15 percent in 2030; double the eco portfolio sales growth compared to traditional products; and a reduction of greenhouse gas emissions in the value chain by at least 50 percent by 2030 from the 2019 level. Although our emissions intensity decreased in 2022, compared to the 2019 level, the increase in CO2 emissions in the core businesses Hiab and Kalmar was 15 percent, and in the entire Cargotec value chain it was 5 percent. Having sustainability and financial targets together demonstrates how essential sustainability is in Cargotec's strategy.

We continued to invest in product development to support our customers' business and promote environmental solutions. As examples, Kalmar started serial production of fully electric reachstackers while Hiab now provides an electric version of all its truck mounted forklifts. These and many other of our eco-efficient solutions have been very well received by our customers, and the eco portfolio sales increased by 54 percent compared to the previous year, amounting to EUR 964 million. In the core businesses, the portfolio sales increase was in line with our announced targets, i.e. double compared to traditional products.

In addition to strong technological know-how, the services business is one of our strengths as well. Its excellent development continued in 2022 with orders received increasing by 11 percent and service sales by 17 percent to a record number of EUR 1,264 million. Services represented 31 percent of our consolidated sales. The profitability of our services business is at an excellent level and still has plenty of growth potential, for example by increasing the spare parts capture rate. This supports our goal of increasing our recurring revenues.

In December, I informed Cargotec’s Board of Directors of my intention to retire from Cargotec during 2023. The Board has initiated a search for a successor. In 2023, it will be ten years since I started in my position. I believe this is the right time to welcome a new CEO to lead the financially and operationally strong Cargotec into its next development phase. It has been a pleasure and a privilege to lead the transformation and development of Cargotec together with so many committed and talented colleagues, customers and partners.

Cargotec goes into the year 2023 with a record order book. However, current economic forecasts and the global situation, as well as price increases and availability challenges of materials and components still create uncertainty. We are well prepared and able to react to rapid market situation changes. In addition, our financial position is strong, especially as only a small number of our loans will mature this year.

I thank our employees for their work efforts as well as our customers and shareholders for their trust in the year 2022.


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