KONECRANES PLC INTERIM REPORT JANUARY-SEPTEMBER 2019

Corporate press releases

Solid performance in service and port solutions, weak profitability in Industrial equipment.

This release is a summary of Konecranes Plc’s January-September 2019 interim report. The complete report is attached to this release in pdf format and is also available on Konecranes’ website at www.konecranes.com.

Konecranes has applied IFRS 16 Leases standard since January 1, 2019. The figures for comparison period 2018 have not been restated. Please refer to note 4 for more details on the implementation of IFRS 16 standard and other significant accounting policies.

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

THIRD QUARTER HIGHLIGHTS 

- Order intake EUR 715.3 million (716.5), -0.2 percent (-1.4 percent on a comparable currency basis), growth in Business Area Service and Port Solutions offset by weakness in Industrial Equipment.

- Service annual agreement base value increased 9.1 percent (+6.4 percent in comparable currencies) to EUR 263.4 million (241.5). Service order intake EUR 256.4 million (241.9), +6.0 percent (+3.6 percent on a comparable currency basis).

- Order book EUR 1,923.2 million (1,624.6) at the end of September, +18.4 percent (+16.5 percent on a comparable currency basis).

- Sales EUR 841.3 million (800.2), +5.1 percent (+3.8 percent on a comparable currency basis), driven by Business Area Port Solutions and Service.

- Adjusted EBITA margin 8.6 percent (9.3) and adjusted EBITA EUR 72.4 million (74.5), reflecting mainly lower sales volumes, weaker product mix and temporary operational costs in Business Area Industrial Equipment.

- Operating profit EUR 17.9 million (48.5), 2.1 percent of sales (6.1), restructuring costs totaling EUR 48.3 million (16.6).

- Earnings per share (diluted) EUR 0.04 (0.41).

- Business Area industrial Equipment launched three significant lifting products in September, refreshing and reinforcing its industry-leading portfolio: an innovative all-new S-series standard crane with a synthetic rope; a new highly modularized and compact M-series process crane; and a new higher-performance C-series electric chain hoist.

 

JANUARY-SEPTEMBER 2019 HIGHLIGHTS

- Order intake EUR 2,386.0 million (2,160.5), +10.4 percent (+9.0 percent on a comparable currency basis).

- Service order intake EUR 765.1 million (737.2), +3.8 percent (+1.2 percent on a comparable currency basis).

- Sales EUR 2,393.6 million (2,245.2), +6.6 percent (+5.2 percent on a comparable currency basis), growth driven by Business Area Service and Port Solutions.

- Adjusted EBITA margin 7.8 percent (7.6) and adjusted EBITA EUR 187.8 million (171.5), reflecting sales growth and synergy cost-saving measures.

- Operating profit EUR 83.2 million (114.3), 3.5 percent of sales (5.1), restructuring costs totaling EUR 86.0 million (29.1)

- Earnings per share (diluted) EUR 0.46 (0.79)

- Free cash flow EUR 115.7 million (-3.3)

- Net debt EUR 674.2 million (620.5) and gearing 54.8 percent (49.9), the impact of the implementation of the new IFRS 16 standard on net debt was approximately EUR 120 million at the end of September.

 

SIGNIFICANT EVENTS AFTER THE END OF THE REPORTING PERIOD

The Board of Directors of Konecranes Plc has appointed Rob Smith as President and CEO of Konecranes effective February 1, 2020. Since October 7, 2019, the company's CFO, Teo Ottola, who also serves as Deputy CEO, has been acting as the interim CEO and will do so until Rob Smith starts in the position. With this change, the previous President and CEO, Panu Routila, left the Konecranes Group on October 7, 2019.

 

DEMAND OUTLOOK

Within the industrial customer segments, the demand environment in Europe continues to soften. The demand environment in North America is on a higher level compared to Europe but has started to show signs of weakening. Asia-Pacific continues to be stable overall.

Global container throughput continues on a good level and the prospects for orders related to container handling remain stable overall. That said, there is hesitation in the decision-making among some port customers.

 

FINANCIAL GUIDANCE

Konecranes expects sales in full-year 2019 to increase 5-7 percent year-on-year. Konecranes expects the adjusted EBITA margin to improve in full-year 2019 compared to full-year 2018.

 

KEY FIGURES

 

January - September

Third quarter

 

 

1-9/ 2019

1-9/ 2018

Change %

7-9/ 2019

7-9/ 2018

Change %

R12M

2018

Orders received, MEUR

2,386.0

            2,160.5

10.4

715.3

      716.5

 

-0.2

 

3,315.8

 

3,090.3

Order book at end of period, MEUR

1,923.2

1,624.6

18.4

 

 

 

 

 

1,715.4

Sales total, MEUR

               2,393.6

2,245.2

6.6

      841.3

      800.2

 

5.1

 

3,304.4

 

3,156.1

Adjusted EBITDA, MEUR 1

261.4

223.8

16.8

96.7

91.1

 

6.1

 

363.3

 

325.7

Adjusted EBITDA, % 1

10.9%

10.0%

 

11.5%

11.4%

 

11.0%

10.3%

Adjusted EBITA, MEUR 2

187.8

171.5

9.5

72.4

74.5

-2.8

273.3

257.1

Adjusted EBITA, % 2

7.8%

7.6%

 

8.6%

9.3%

 

8.3%

8.1%

Adjusted operating profit, MEUR 1

169.2

143.4

18.0

66.2

65.1

1.7

245.4

219.6

Adjusted operating margin, % 1

7.1%

6.4%

 

7.9%

8.1%

 

7.4%

7.0%

Operating profit, MEUR

83.2

114.3

-27.2

17.9

        48.5

-63.0%

135.1

166.2

Operating margin, %

3.5%

5.1%

 

2.1%

6.1%

 

4.1%

5.3%

Profit before taxes, MEUR

55.2

86.8

-36.5

9.0

44.0

-79.6

107.1

138.7

Net profit for the period, MEUR

37.0

62.5

-40.9

3.7

31.9

-88.4

72.8

98.3

Earnings per share, basic, EUR

0.46

0.79

-42.7

0.04

0.41

-90.6

0.95

1.29

Earnings per share, diluted, EUR

0.46

0.79

-42.7

0.04

0.41

-90.6

0.95

1.29

Interest-bearing net debt, Equity, %

54.8%

49.9%

 

 

 

 

 

42.5%

Net Debt / Adjusted EBITDA, R12M 1

1.9

1.9

 

 

 

 

 

1.7

Return on capital employed, %

 

 

 

 

 

 

6.1%

7.9%

Adjusted return on capital employed, % 3

 

 

 

 

 

 

  13.2%

12.5%

Free cash flow, MEUR

115.7

-3.3

 

81.3

21.8

 

192.2

73.1

Average number of personnel during the period

16 081

16 289

-1.3

 

 

 

 

16 247

 

1 Excluding adjustments, see also note 11 in the summary financial statements

2 Excluding adjustments and purchase price allocation amortization, see also note 11 in the summary financial statements

3 ROCE excluding adjustments, see also note 11 in the summary financial statements

 

Interim CEO Teo Ottola:

We ended the third quarter with mixed performance. On the one hand, we saw order intake in Business Area Service return to a growth path and Business Area Port Solutions record yet another solid quarter. On the other hand, however, the performance in Business Area Industrial Equipment was increasingly affected by the deteriorating macroeconomic environment, along with temporary costs related to the optimization of our manufacturing footprint in Vernouillet, France and Wetter, Germany.

Beginning with Service, the annual value of the agreement base grew 6.4 percent year-on-year in comparable currencies, well in line with our targets. While project-related order intake continued to track below its long-term average, orders overall grew 3.6 percent from the previous year on a comparable currency basis. The adjusted EBITA margin of 16.2 percent remained approximately flat both year-on-year and sequentially.

In Port Solutions, strong demand for Straddle Carriers boosted order intake in Q3. On a comparable currency basis, the year-on-year order growh in the business area was 3.9 percent. The general sentiment among port customers continues on a good level despite hesitation in the decision-making among some port customers. The demand for Lift Trucks among our industrial customers started to level out. Year-on-year sales growth in Port Solutions exceeded 16 percent in Q3, and the orderbook remained above EUR 1 billion at the end of September. Volume growth helped to boost the adjusted EBITA margin to 8.2 percent in the quarter.

Moving to Industrial Equipment, we had a challenging quarter. Weakening macroeconomic conditions were reflected in external orders, which fell 9.7 percent from the year-ago period in comparable currencies. On a comparable currency basis, external sales fell 6.1 percent and the adjusted EBITA margin declined to 2.9 percent in Q3. The weakness in profitability was driven primarily by lower volume, weaker product mix and low productivity at our factory in Vernouillet, along with lower efficiency as a result of changes that are currently being implemented at our factory in Wetter. In addition, market softness has begun to limit our ability to fully absorb cost inflation with price increases.

We expect the profitability in Industrial Equipment to remain on a low level also in Q4, and see it as unlikely that the adjusted EBITA margin in Industrial Equipment would improve in full-year 2019 compared to 2018. Consequently, the adjusted EBITA margin improvement will slow down in full-year 2019 when compared to the improvement pace of the past couple of years.

To build a better long-term foundation for Konecranes, we continue to drive further efficiencies throughout the company, and in Business Area Industrial Equipment in particular. Many initiatives are already underway and we booked a further EUR 48 million of one-time costs related to ongoing activities in Q3. Together with the EUR 17 million restructuring costs recorded in Q2, the total restructuring amount stands now at EUR 65 million. We expect the corresponding run-rate savings to reach EUR 37 million by year-end 2020 and the amount to fully benefit our P&L by the end of 2021. The clear majority of these costs relate to Vernouillet and Wetter. The high restructuring amount booked in Q3 weighed heavily on EPS, which came down to EUR 0.04 for the Group.

On a more positive note, Business Area industrial Equipment made three significant product launches in Q3: an innovative all-new S-series standard crane with a synthetic rope; a new highly modularized and compact M-series process crane; and a new higher-performance C-series electric chain hoist. The new products will cover a substantial part of Industrial Equipment’s sales and include 20 patented key innovations that bring tangible safety and productivity improvements to our customers. Sales of the new products have already started, with a gradual roll-out across regions taking place in the coming quarters. The new products are planned to replace our current offering in the next two years, allowing us to reduce the number of product platforms from 20 down to 14. We expect the new products to strengthen our leading market position and act as a key driver in our pursuit for long-term profitable growth also in Business Area Industrial Equipment.

 

ANALYST AND PRESS BRIEFING

An analyst and press conference will be held at the restaurant Savoy (address: Eteläesplanadi 14, Helsinki, 7th floor) on October 24, 2019, at 11.00 am Finnish time. The Interim Report will be presented by Konecranes’ Interim CEO Teo Ottola.

A live webcast of the conference will begin at 11.00 am at www.konecranes.com. Please see the stock exchange release dated October 10, 2019 for the conference call details.

 

NEXT REPORT

Konecranes Plc plans to publish Financial statement release 2019 on February 6, 2020.

KONECRANES PLC

Eero Tuulos
Vice President, Investor Relations, tel. +358 20 427 2050

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 2018, Group sales totaled EUR 3,16 billion. The Group has 16,200 employees in 50 countries. Konecranes shares are listed on the Nasdaq Helsinki (symbol: KCR).
 

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www.konecranes.com