Adjusted EBITA improved in 2017, successful year of integration

Konecranes Plc Financial Statement Release 2017

ADJUSTED EBITA IMPROVED IN 2017, SUCCESSFUL YEAR OF INTEGRATION

This release is a summary of Konecranes Plc’s Financial Statement Release 2017. The complete report is attached to this release in pdf format and is also available on Konecranes’ website at www.konecranes.com.

Figures in brackets, unless otherwise stated, refer to the same period a year earlier.


FOURTH QUARTER HIGHLIGHTS (COMPARISON TO COMBINED COMPANY FIGURES*)

- Order intake EUR 732.6 million (921.5), -20.5 percent
- Order book EUR 1,535.8 million (1,507.7) at end-December, +1.9 percent
- Sales EUR 910.0 million (971.0), -6.3 percent
- Adjusted EBITA EUR 79.9 million (85.7), 8.8 percent of sales (8.8)


FULL-YEAR 2017 HIGHLIGHTS (COMPARISON TO COMBINED COMPANY FIGURES*)

- Order intake EUR 3,007.4 million (3,025.3), -0.6 percent
- Sales EUR 3,136.4 million (3,278.4), -4.3 percent
- Adjusted EBITA EUR 216.2 million (184.1), 6.9 percent of sales (5.6)


FULL-YEAR 2017 HIGHLIGHTS (COMPARISON TO HISTORICAL KONECRANES FIGURES*)

- Order intake EUR 3,007.4 million (1,920.7), +56.6 percent
- Order book EUR 1,535.8 million (1,038.0) at year-end, +48.0 percent
- Sales EUR 3,136.4 million (2,118.4), +48.1 percent
- Adjusted EBITA EUR 216.2 million (144.8), 6.9 percent (6.8) of sales
- Operating profit EUR 318.3 million (84.9), 10.1 percent of sales (4.0)
- Earnings per share (diluted) EUR 2.88 (0.64)
- Free cash flow EUR 224.4 million (83.9)
- Net debt EUR 525.3 million (129.6) and interest-bearing net debt to equity 41.1 percent (29.1).
- Dividend proposed by the Board of Directors is EUR 1.20 (1.05) per share

*This Report contains comparisons to both the Konecranes’ historical figures and the combined company figures. Historical figures relate to Konecranes’ stand-alone financial information as reported for 2016 (including the divested STAHL CraneSystems business).

To provide a basis for comparison, this Report also contains, under separate headings, the comparisons to combined company’s financial information on an unaudited basis estimated by the management for 2016. This financial information has been prepared to reflect the financial results of the combined company as if it had been operating as such for the full financial year 2016. The comparable combined company’s operations comprise Konecranes’ operations without the divested STAHL CraneSystems business, but include the acquired MHPS business. See “Basis of preparation for comparable combined company” for further information.

Comparable combined company’s financial information applies an assumed situation and does not therefore reflect the true financial position or the result of the company during 2016. The previous year’s order book for MHPS included deliveries for the next 12 months only.


DEMAND OUTLOOK

Demand situation for industrial cranes, hoists and service in Europe is stable within the industrial customer segments. Business activity in the North American manufacturing industry remains mixed. Demand in Asia-Pacific is showing signs of improvement. Global container throughput growth has improved and the prospects for the small and medium-sized orders related to container handling have strengthened.


FINANCIAL GUIDANCE

The sales in 2018 are expected to be approximately on the same level or higher than in 2017. We expect the adjusted EBITA margin to improve in 2018.


KEY FIGURES (comparisons to historical figures)
 

KEY FIGURES (comparisons to combined company figures)

¹ Excluding adjustments, see also note 12 in the summary financial statements
² Excluding adjustments and purchase price allocation amortization, see also note 12 in the summary financial statement
³ ROCE excluding adjustments, see also note 12 in the summary financial statements
⁴The Board’s proposal to the AGM

President and CEO Panu Routila:

“2017 was an eventful year for Konecranes. The highlight of the year was obviously the successful completion of the MHPS acquisition back in January 2017. We were very well prepared from Day 1 of the combined operations of Konecranes and MHPS. We have had a fully-fledged integration program set up, incorporating altogether 400 initiatives with a rigorous system for follow-up. In 2017, we achieved cost synergies of approximately EUR 20 million related to the MHPS acquisition.

We have been able to maintain customer focus and I am proud to say that our day-to-day operations have not been too much distracted. We have also seen the first signs of cross-promotion of the expanded product offering boosting Port Solutions order intake. Its orders received increased from 2016, despite the comparison year including the over EUR 200 million order from the USA. Our result improvement was strong in 2017 – the Group’s adjusted EBITA rose from 184 million to EUR 216 million on a comparable basis – as the restructuring actions in 2016 and the MHPS synergy benefits supported profitability as expected. The adjusted EBITA margin for full-year 2017 was 6.9 percent (5.6). The focus of the management and the Board has been on the improvement in EBITA margin, in particular.

Our fourth-quarter result came in line with our expectations. While the clear profitability improvement continued in Business Area Industrial Equipment, Business Area Port Solutions faced tough comparisons in terms of the adjusted EBITA. Coupled with negative currency exchange rate effect in Service, the Group’s adjusted fourth-quarter EBITA of EUR 79.9 million was slightly lower than the previous year’s EUR 85.7 million as we expected. However, the adjusted EBITA margin remained stable at 8.8 percent on a comparable combined company basis.

The comparable combined company orders received in the fourth quarter decreased by 20.5 percent year-on-year. This was driven by Business Area Port Solutions as the comparison period included the order from the Virginia Port Authority worth over EUR 200 million. Excluding the aforementioned item, Port Solutions order intake increased. The small decline in Business Area Service and Business Area Industrial order intake was attributable to negative currency exchange rate effect. It was positive to note that Business Area Service order intake grew by 3.3 percent at comparable currency exchanges rates. Furthermore, our crane component orders grew strongly in the Americas and EMEA.

The Group sales in the fourth quarter were 6.3 percent below the previous year on a comparable combined company basis. As expected, the decrease in the Business Area Port Solutions’ sales related to the timing of deliveries and exceptionally high sales of certain products in the comparison period. The sales in Business Area Service and Business Area Industrial Equipment were affected by negative currency exchange rate effect, similar to order intake.

In the past months, we have been laying the ground for growth initiatives for 2018. Group’s order book was up 1.9 percent, or up 6.1 percent at comparable currency exchange rates, at the end of 2017. On the other hand, assuming that the current spot currency exchange rates will prevail for the rest of 2018, we expect a negative impact of approximately 3 percent on sales from the currency exchange rate changes.

We expect the incremental MHPS acquisition-related synergy benefits of EUR 40-50 million to be visible in the P&L in 2018. At the same time, we are planning additional spending of approximately EUR 15 million in IT and R&D to enable harmonized processes within the company and secure our long-term competitiveness. On the other hand, we expect savings of EUR 12 million in net interests related to financing facilities as a result of refinancing the loans that was carried out in 2017.

In conclusion, I think we have a good starting point to improve our performance further in 2018 and to make progress towards our financial targets for 2020. While delivering the synergy benefits of the MHPS acquisition remains our top priority, we are now increasingly geared up for growth.”

BOARD OF DIRECTORS’ PROPOSAL FOR DISPOSAL OF DISTRIBUTABLE FUNDS

The parent company’s non-restricted equity is EUR 940,141,378.51, of which the net income for the year is EUR 65,162,549.32. The Group’s non-restricted equity is EUR 1,176,766,000.

According to the Finnish Companies Act, the distributable funds of the company are calculated based on the parent company’s non-restricted equity. For the purpose of determining the amount of the dividend, the Board of Directors has assessed the liquidity of the parent company and the economic circumstances subsequent to the end of fiscal year.

Based on such assessments, the Board of Directors proposes to the Annual General Meeting that a dividend of EUR 1.20 be paid on each share and that the remaining non-restricted equity is retained in shareholders’ equity.

A PDF version of the Konecranes’ full audited financial statements, including the report of the Board of Directors, and corporate governance statement will be available on the web on March 2, 2018, and the printed version during the week commencing on Monday March 19, 2018.


Analyst and press briefing

An analyst and press conference will be held at restaurant Savoy’s Salikabinetti (address Eteläesplanadi 14) on February 8, 2018, at 11:00 a.m. Finnish time. The Financial Statement Release will be presented by Konecranes’ President and CEO Panu Routila and CFO Teo Ottola.

A live webcast of the conference will begin at 11:00 a.m. at www.konecranes.com. Please see the stock exchange release on January 15, 2018 for the conference call details.


Basis of preparation for comparable combined company

The comparable combined company financial information is based on management’s estimates and is for illustrative purposes only. The comparable combined company financial information gives an indication of the combined company's key figures assuming the activities were included in the same company from the beginning of 2016.

The comparable combined company financial information is based on a hypothetical situation and should not be viewed as pro forma financial information as the differences in accounting principles have not been taken into account. The unaudited comparable combined company financial information is based on Konecranes Group’s financial statements for the financial year 2016 (adjusted for restructuring costs, transaction costs and received insurance indemnity) according to IFRS and Terex Corporation’s (“Terex”) MHPS segment unaudited special purpose carve-out financial information for the financial year 2016 (adjusted for non-recurring items such as restructuring costs and impairments of goodwill and trademarks) according to USGAAP. The corporation allocations of Terex Group have been adjusted in MHPS income statement to illustrate the situation as the Group had been combined at the beginning of 2016.

Since the financial information for MHPS has been prepared on a carve-out basis, this does not necessarily reflect what the results of its operations would have been had MHPS operated as an independent company and had it presented stand-alone financial information under IFRS during the period provided. Moreover, the carve-out financial information may not be indicative of the MHPS’s future performance of the operating activities aggregated within Konecranes.

Konecranes is unable to present a reconciliation of the comparable combined company financial information as the MHPS’ financials have been calculated according to USGAAP and using different accounting principles than Konecranes and because Terex has categorized MHPS as a discontinued operation in 2016.


KONECRANES PLC

Miikka Kinnunen
Vice President, Investor Relations



FURTHER INFORMATION
Mr. Panu Routila, President and CEO, tel. +358 20 427 2000
Mr. Teo Ottola, Chief Financial Officer, tel. +358 20 427 2040
Mr. Miikka Kinnunen, Vice President, Investor Relations, tel. +358 20 427 2050
Mr. Mikael Wegmüller, Vice President, Marketing and Communications, tel. +358 40 776 2314

Konecranes is a world-leading group of Lifting Businesses™, serving a broad range of customers, including manufacturing and process industries, shipyards, ports and terminals. Konecranes provides productivity enhancing lifting solutions as well as services for lifting equipment of all makes. In 2017, Group sales totaled EUR 3,136 million. The Group has 16,400 employees at 600 locations in 50 countries. Konecranes shares are listed on the Nasdaq Helsinki (symbol: KCR).

DISTRIBUTION
Nasdaq Helsinki
Media
www.konecranes.com