KCI KONECRANES PLC STOCK EXCHANGE RELEASE 14 February, 2007 10.00 a.m. 1(23)
KONECRANES IN YEAR 2006
- Orders received: 1,472.8 MEUR (+38.8 %), Q4 orders: 367,5 MEUR (+28.2%),
- Sales increased 52.7 % to 1,482.5 MEUR, Q4 sales: 460,1 MEUR (+55.5%)
- 2006 operating profit (EBIT) more than doubled to 105.5 (49.3) MEUR, EBIT
margin: 7.1 (5.1) %
- Cash flow from operations: 81.4 (48.4) MEUR
- Diluted earnings per share: 1.15 (0.42) EUR
- Dividend proposal: 0.45 (0.275) EUR per share
- 2007 sales growth target of 15 %
- New long-term Group EBIT margin target 10 %
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| MEUR | 2006 | % | 2005 | % | Chg | 10-12 | % | 10-12 | % | Chg |
| SALES | | | | | % | / | | / | | % |
| | | | | | | 06 | | 05 | | |
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| Servic | 512. | | 406. | | 26.1 | 157.3 | | 120.2 | | 30.8 |
| e | 6 | | 5 | | | | | | | |
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| Standa | 577. | | 318. | | 81.7 | 165.5 | | 94.6 | | 74.9 |
| rd | 8 | | 0 | | | | | | | |
| Liftin | | | | | | | | | | |
| g | | | | | | | | | | |
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| Heavy | 490. | | 331. | | 48.3 | 162.7 | | 111.8 | | 45.6 |
| Liftin | 8 | | 1 | | | | | | | |
| g | | | | | | | | | | |
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| Intern | -98. | | -84. | | 16.5 | -25.3 | | -30.8 | | -17.6 |
| al | 8 | | 8 | | | | | | | |
| Sales | | | | | | | | | | |
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| Sales | 1482 | | 970. | | 52.7 | 460.1 | | 295.8 | | 55.5 |
| total | .5 | | 8 | | | | | | | |
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| Operat | 105. | 7.1 | 49.3 | 5.1 | 113. | 39.3 | 8.5 | 22.9 | 7.7 | 71.8 |
| ing | 5 | | | | 8 | | | | | |
| income | | | | | | | | | | |
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| Share | 0.7 | | 0.5 | | | 0.3 | | 0.3 | | |
| of | | | | | | | | | | |
| result | | | | | | | | | | |
| of | | | | | | | | | | |
| assoc. | | | | | | | | | | |
| compan | | | | | | | | | | |
| ies | | | | | | | | | | |
| and | | | | | | | | | | |
| joint | | | | | | | | | | |
| ventur | | | | | | | | | | |
| es | | | | | | | | | | |
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| Intere | -9.5 | | -6.8 | | | -2.1 | | -2.0 | | |
| st | | | | | | | | | | |
| net | | | | | | | | | | |
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| Other | -1.6 | | -9.0 | | | -0.9 | | 0.6 | | |
| financ | | | | | | | | | | |
| ial | | | | | | | | | | |
| income | | | | | | | | | | |
| and | | | | | | | | | | |
| expens | | | | | | | | | | |
| es | | | | | | | | | | |
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| Profit | 95.1 | 6.4 | 34.1 | 3.5 | 179. | 36.2 | 8.0 | 21.8 | 7.4 | 68.0 |
| before | | | | | 1 | | | | | |
| taxes | | | | | | | | | | |
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| Taxes | -26. | | -10. | | | -9.0 | | -6.2 | | |
| | 5 | | 0 | | | | | | | |
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| Net | 68.6 | 4.6 | 24.1 | 2.5 | 184. | 27.6 | 6.0 | 15.6 | 5.3 | 76.8 |
| profit | | | | | 5 | | | | | |
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| Earnin | 1.17 | | 0.43 | | 175. | 0.48 | | 0.28 | | 71.7 |
| gs per | | | | | 3 | | | | | |
| share, | | | | | | | | | | |
| basic | | | | | | | | | | |
| (EUR) | | | | | | | | | | |
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| Earnin | 1.15 | | 0.42 | | 174. | 0.46 | | 0.27 | | 71.2 |
| gs per | | | | | 5 | | | | | |
| share, | | | | | | | | | | |
| dilute | | | | | | | | | | |
| d | | | | | | | | | | |
| (EUR) | | | | | | | | | | |
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2 (23)
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| Cash | 1.39 | | 0.86 | | 61.6 | 0.38 | | 0.59 | | |
| flow | | | | | | | | | | |
| from | | | | | | | | | | |
| operat | | | | | | | | | | |
| . per | | | | | | | | | | |
| share | | | | | | | | | | |
| (EUR) | | | | | | | | | | |
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| Divide | 0.45* | | 0.28 | | 63.6 | | | | | |
| nd per | | | | | | | | | | |
| share | | | | | | | | | | |
| (EUR) | | | | | | | | | | |
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| ORDERS | | | | | | | | | | |
| RECEIV | | | | | | | | | | |
| ED | | | | | | | | | | |
--------------------------------------------------------------------------------
| Servic | 433.8 | | 364. | | 19.0 | 119.1 | | 92.3 | | 29.0 |
| e | | | 5 | | | | | | | |
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| Standa | 612.6 | | 322. | | 90.2 | 142.8 | | 81.7 | | 74.8 |
| rd | | | 1 | | | | | | | |
| Liftin | | | | | | | | | | |
| g | | | | | | | | | | |
--------------------------------------------------------------------------------
| Heavy | 519.2 | | 463. | | 12.0 | 128.8 | | 138.6 | | -7.1 |
| Liftin | | | 3 | | | | | | | |
| g | | | | | | | | | | |
--------------------------------------------------------------------------------
| Intern | -92.9 | | -88. | | 4.7 | -23.1 | | -26.0 | | -11.1 |
| al | | | 7 | | | | | | | |
| Orders | | | | | | | | | | |
--------------------------------------------------------------------------------
| Orders | 1472. | | 1061 | | 38.8 | 367.5 | | 286.6 | | 28.2 |
| receiv | 8 | | .2 | | | | | | | |
| ed | | | | | | | | | | |
| total | | | | | | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Order | 571.6 | | 432. | | 32.3 | | | | | |
| book | | | 1 | | | | | | | |
| at end | | | | | | | | | | |
| of | | | | | | | | | | |
| period | | | | | | | | | | |
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* Board's proposal
Future prospects
Konecranes strong order book and the recent acquisitions form a strong base for
year 2007. Demand is expected to remain at a good level, and organic growth to
continue, however, at a more moderate rate than in the previous two years. The
company's target is to achieve net sales growth of approximately 15 percent
compared to 2006, and to continue improving the operating margin.
President and CEO Pekka Lundmark's comments to year 2006 performance
“Year 2006 was very promising for Konecranes. We enjoyed a unique combination of
three dynamic factors - extremely strong growth, improving operating margins and
high capital returns. I am truly proud of the some 7,500-employee team that has
made this happen. Year 2006 has put us in a great position for the future.
We have positioned ourselves as a growth company, targeting both organic growth
and value- creating acquisitions. In 2006, we consolidated the two single
biggest acquisitions in our history. The growth of both Stahl CraneSystems and
Morris Material Handling Inc, or P&H as the brand name is known, accelerated
after the acquisitions, and our expectations regarding the synergy benefits were
met.
Growth was further boosted by the organic growth of 27 percent, making total
growth in 2006 as high as 53 percent, clearly exceeding the 20 percent growth
target set at the beginning of the year. In the last two years, we have thereby
more than doubled our size. Strong demand in most of our key markets boosted our
sales growth, which clearly exceeded market growth. Our growth was also well
balanced: all Business Areas and geographical regions delivered healthy growth
numbers. Thanks to this growth, we were able to create 590 new jobs during the
year, in addition to the personnel increase that came through the acquisitions.
3 (23)
Higher volumes gave clear economies of scale, but they were not the sole reason
for better margins. Our supply chain efficiency programs improved our
productivity by 7 percent. The combination of higher volumes and productivity
increased the operating margin to 7.1 percent from 5.1 percent in 2005. All
Business Areas' operating margins improved significantly, and Service exceeded
the target of 8 percent. Standard Lifting improved from 9.1 percent to 10.6
percent and Heavy Lifting recovered from the disappointing 4.6 percent margin in
2005 to a more reasonable level of 6.8 percent.
We have paid a lot of attention to working capital management and were able to
significantly improve the working capital rotation, which, together with higher
operating profitability, resulted in a 29.5 percent return on capital employed
and 36.5 percent return on equity. These figures demonstrate our fast progress:
the corresponding returns were 17.2 percent and 16.6 percent in 2005.
In 2006, we also renewed our brand strategy and identity, and adopted a new
global brand promise - Lifting Businesses TM - to better reflect our value
proposition to customers. In addition to delivering state-of-the art lifting
solutions, we have a company-wide commitment to deliver service that helps
increase our customers' productivity and profitability, thus showing that we're
not just about lifting things, but entire businesses. We dropped ‘KCI' in our
new logo to focus on the core brand equity, which lies in the Konecranes name.
We are in a promising position for the future. Our most important strategic goal
is to provide the best customer service in the industry. This strategy is
supported by substantial R&D investment to secure our product and technology
leadership also in the future. The recent addition of straddle carriers
demonstrates the broadening of our product offering. Furthermore, we will
continue to restructure our supply chain with a goal to continuously push down
unit costs. High quality standards are of key importance in our supply chain.
This is especially important in cases where manufacturing or sourcing is moving
to lower cost countries. And finally, since our market is still highly
fragmented, our strategy is also to continue to pursue acquisition opportunities
to complement organic growth.
It would not be realistic to expect that the very fast organic growth rates we
have seen during the past two years will continue at the same pace. However, we
do expect organic growth to continue in the coming years. At the same time, we
are confident that the 7.1 percent operating margin achieved in 2006 can be
further improved. This is why we have set new operating margin targets for each
Business Area: 12 percent in Service, 12 percent in Standard Lifting, and 10
percent in Heavy Lifting. Achieving these targets would result in a Group margin
of approximately 10 percent.”
Board of Directors' Report
Year 2006 was a year of exceptional strong growth and improving profitability
for all Konecranes' three Business Areas. All geographical regions posted strong
growth.
The acquisitions of Stahl CraneSystems at the end of 2005 and of MMH Holding
Inc. in May, 2006 are the two largest acquisitions in Konecranes' history, and
they contributed considerably to Konecranes' growth in net sales, orders and
profits. Therefore this report includes both the total and the organic sales and
order growth figures in order to give a clearer picture of the development in
2006.
4 (23)
Market Review
Market demand for Konecranes' products and services developed favorably as a
result of increased industrial output, relocation of industrial production,
increased port investments and customers' continued outsourcing of crane
maintenance. Demand improved in almost all customer industries, with harbors,
primary metals, power and petrochemicals showing particularly strong growth. Of
Konecranes' main customer segments, only the pulp and paper and the automotive
industries posted weak investment demand.
All geographical regions contributed to increased demand for both standard and
heavy lifting equipment. Demand continued to improve in emerging markets,
including China and Russia, but demand growth was strongest in the U.S.A and
Germany. Service demand increased in all main areas both by geographical region
and customer segment.
Due to higher input prices, especially steel and other metals, as well as labor
costs, the market prices for cranes and crane maintenance rose during the year.
The price of products with a high content of steel rose particularly sharply as
crane producers passed on the higher cost of steel structures to customers. The
tighter labor market resulted not only in increasing costs, but also led to some
difficulties in attracting and retaining skilled labor, particularly in markets
with a strong representation of petrochemical, primary metal and mining
industries.
Based on Konecranes' exceptionally strong organic sales and order growth, the
Group was able to continue increasing its global market share in industrial
cranes. When including the acquisitions of Stahl CraneSystems and MMH Holding
Inc, Konecranes market share rose clearly.
Orders Received, Order Book and Contract Base
Order intake growth continued in 2006 with total orders received amounting to
EUR 1,472.8 (1,061) million. Order growth was 38.8 percent, of which 13.8
percentage points was organic. The year-end value of the order backlog was 571.6
(432.1) million, up by 32.3 percent. Order intake and the order backlog grew
significantly in all Business Areas. The impact of changes in currencies was
negligible in regards to the growth figures for order intake and backlog. The
service contract base rose to 263,039 (242,209) cranes and hoists. The service
contract retention rate remained at a high level.
Both the strong market and internal factors contributed to order growth. Demand
increased in all geographical regions for all Business Areas. Growth was
strongest in Germany and the U.S.A., while the emerging markets, particularly
China and Russia, continued to grow at a very good pace. Order intake in Service
was supported by orders for work on installed P&H cranes in the U.S.A.
Standard Lifting benefited from growth in the general manufacturing customer
segment both in emerging markets and developed markets. The incorporation of
Stahl CraneSystems strengthened the Standard Lifting operations, which has
achieved a clear market-leading position.
Heavy Lifting continued to benefit from strong demand for container-handling
equipment, as well as in process cranes for the metals and power customer
segments. Heavy Lifting strengthened its geographical presence and received
significant orders for delivery of both container-handling equipment and process
cranes to India, Bangladesh, Brazil, South Korea, new areas in China, Turkey and
several countries in Africa.
5 (23)
2006 Orders Received by Business Areas, MEUR
--------------------------------------------------------------------------------
| | 2006 | 2005 | Change | Organic |
| | | | percent | growth |
| | | | | percent |
--------------------------------------------------------------------------------
| Service | 433.8 | 364.5 | +19.0 | +2.4 |
--------------------------------------------------------------------------------
| Standard Lifting | 612.6 | 322.1 | +90.2 | +33.6 |
--------------------------------------------------------------------------------
| Heavy Lifting | 519.2 | 463.3 | +12.0 | +6.1 |
--------------------------------------------------------------------------------
| Internal | -92.9 | -88.7 | | |
--------------------------------------------------------------------------------
| Total | 1,473 | 1,061 | +38.8 | +13.8 |
--------------------------------------------------------------------------------
In the fourth quarter, order intake totaled EUR 367.5 (286.6) million,
representing growth of 28.2 percent. Organic order intake continued strong in
Standard Lifting. Service orders, which vary from quarter to quarter due to
sporadic large repair and modernization orders, were in organic terms at the
same level as in the corresponding period in 2005. Order intake in Heavy Lifting
also shows considerably quarterly variations, and fourth quarter orders fell
short of the relatively high level achieved in the fourth quarter of 2005. Both
Stahl CraneSystems and MMH Holding Inc showed solid order intake in the fourth
quarter.
Fourth Quarter Orders Received by Business Areas, MEUR
--------------------------------------------------------------------------------
| | 10-12/ | 10-12/ | Change | Organic |
| | 2006 | 2005 | percent | growth |
| | | | | percent |
--------------------------------------------------------------------------------
| Service | 119.1 | 92.3 | +29.0 | -0.3 |
--------------------------------------------------------------------------------
| Standard Lifting | 142.8 | 81.7 | +74.8 | +25.0 |
--------------------------------------------------------------------------------
| Heavy Lifting | 128.8 | 138.6 | -7.1 | -18.5 |
--------------------------------------------------------------------------------
| Internal | -23.1 | -26.0 | | |
--------------------------------------------------------------------------------
| Total | 367.5 | 286.6 | +28.2 | +0.3 |
--------------------------------------------------------------------------------
Sales
Net sales rose 52.7 percent to EUR 1,482.5 (970.8) million. Organic sales growth
totaled 26.7 percent. Higher input prices were successfully compensated by
higher sales prices. Higher prices, however, contributed to organic growth by
about five percentage points. Currency rate changes had only a minor
translational effect on the reported sales figure. All Business Areas achieved
exceptionally strong growth, with sales in Standard Lifting growing by nearly 82
percent.
Sales in the acquired companies Stahl CraneSystems and MMH Holding Inc rose
clearly and exceeded the levels anticipated and communicated at the time of the
acquisitions. The net sales of MMH Holding Inc. amounted to EUR 104 million
during the seven-month period it was included in the Group figures. Somewhat
over half of MMH Holding's sales are reported in Service and the remainder is
fairly equally divided between Standard Lifting and Heavy Lifting. Stahl
CraneSystems' sales are reported in Standard Lifting, and these operations
achieved approximately the same level of growth as the rest of the Standard
Lifting operations.
Service sales continued to increase steadily, but decreased in proportion to
total sales due to the exceptionally strong new equipment sales. The tight labor
market in some geographical regions resulted in somewhat higher turnover in
service personnel and increased difficulty in recruiting skilled labor, which
limited the possibilities to grow faster in Service.
6 (23)
Organic growth was strongest in Heavy Lifting as a result of the strong market,
a competitive product offering, new key customers and expanding geographical
presence.
Sales in Standard Lifting continued to benefit from good demand in the general
manufacturing and warehousing customer segments, the expansion of the CXT hoist
offering and improved competitiveness. Stahl CraneSystems contributed to the
exceptionally strong sales growth in Standard Lifting.
2006 Net Sales by Business Areas, MEUR
--------------------------------------------------------------------------------
| | 2006 | 2005 | Change % | Organic growth % |
--------------------------------------------------------------------------------
| Service | 512.6 | 406.5 | +26.1 | +9.7 |
--------------------------------------------------------------------------------
| Standard Lifting | 577.8 | 318.0 | +81.7 | +28.7 |
--------------------------------------------------------------------------------
| Heavy Lifting | 490.8 | 331.1 | +48.3 | +42.2 |
--------------------------------------------------------------------------------
| Internal | -98.8 | -84.8 | | |
--------------------------------------------------------------------------------
| Total | 1,482.5 | 970.8 | +52.7 | +26.7 |
--------------------------------------------------------------------------------
In the fourth quarter, net sales rose 55.5 percent to EUR 460.1 (295.8) million
organic growth was 26.2 percent. Both Standard and Heavy Lifting succeeded in
fulfilling challenging production and delivery volumes despite the ongoing
streamlining of the supply chain, and some scarcity of subcontracted components.
In Service, fourth quarter organic sales growth was moderate and lower than
historical growth. This was due to the difficulty to take new modernization
orders and sign new maintenance contracts during the year as a result of a
shortage of skilled service personnel.
Standard Lifting continued to grow exceptionally strongly. Record-high delivery
volumes were successfully completed towards the end of the year.
Heavy Lifting also achieved record high delivery volumes and improved
profitability despite the challenging situation created by the combination of
extremely strong organic growth and ongoing supply chain restructuring.
The operating margin in Heavy Lifting was somewhat burdened by MMH Holding's
Heavy Lifting operations and the Business Area Margin is still clearly below the
10 percent long-term target.
Fourth Quarter Net Sales by Business Areas, MEUR
--------------------------------------------------------------------------------
| | 10-12/2006 | 10-12/2005 | Change % | Organic growth % |
--------------------------------------------------------------------------------
| Service | 157.3 | 120.2 | +30.8 | +5.0 |
--------------------------------------------------------------------------------
| Standard | 165.5 | 94.6 | +74.9 | +24.7 |
| Lifting | | | | |
--------------------------------------------------------------------------------
| Heavy Lifting | 162.7 | 111.8 | +45.6 | +35.9 |
--------------------------------------------------------------------------------
| Internal | -25.3 | -30.8 | | |
--------------------------------------------------------------------------------
| Total | 460.1 | 295.8 | +55.5 | +26.2 |
--------------------------------------------------------------------------------
Profitability
The Group's operating income more than doubled to EUR 105.5 (49.3) million and
the operating margin rose to 7.1 (5.1) percent. All Business Areas increased
both their operating income and operating margin. Currency rate changes had only
a minor translational effect on operating income. The profitability of the
acquired companies Stahl CraneSystems and MMH Holding exceeded expectations and
contributed positively to EBIT growth. The impact on Group EBIT margin of MMH
Holding was neutral, and Stahl CraneSystems had a minor negative impact as
expected. The decrease in Group overheads from 2.4 to 2.1 percent of sales
supported the Group's margin expansion.
7 (23)
Service exceeded the EBIT margin target of eight percent set for the Business
Area. The main contributing factors for the profitability increase were higher
productivity, a maintained high maintenance contract retention rate, price
increases that compensated for cost increases and a higher proportion of spare
parts sales.
Standard Lifting fell 1.4 percentage points short of its margin target of 12
percent. Disregarding the margin-diluting effect of the consolidation of Stahl
CraneSystems, Standard Lifting's operating margin would have been approximately
at the targeted level. Stahl CraneSystems was, however, able to clearly improve
its profitability from the level prior to the acquisition. The main reasons for
Standard Lifting's improved margins were higher volumes through broader
geographical presence, improved productivity, synergies from the acquired
businesses and improved cost-competitiveness. Especially the restructuring
program implemented in 2002-2005 contributed to improved productivity and
competitiveness.
Heavy Lifting more than doubled its operating profit and clearly increased its
operating margin from the low level in 2005. The Business Area started a similar
restructuring program in 2004 as Standard Lifting started in 2002. These
measures contributed to the increase in profitability despite the fact that the
program is still not completed. Implementing the restructuring while growing
organically by more than 40 percent created a very challenging environment in
terms of fulfilling orders and improving profitability. The operations of MMH
Holding allocated to Heavy Lifting also weighted slightly on the operating
margin, which is still clearly below the target of ten percent.
Operating income and margin by Business Area
--------------------------------------------------------------------------------
| | 2006 | Percent of | 2005 | Percent of |
| | MEUR | sales | MEUR | sales |
--------------------------------------------------------------------------------
| Service | 43.4 | 8.5 | 29.4 | 7.2 |
--------------------------------------------------------------------------------
| Standard Lifting | 61.1 | 10.6 | 28.8 | 9.1 |
--------------------------------------------------------------------------------
| Heavy Lifting | 33.6 | 6.8 | 15.2 | 4.6 |
--------------------------------------------------------------------------------
| ./. Group overheads | -31.6 | -2.1 | -23.8 | -2.5 |
--------------------------------------------------------------------------------
| ./. Elimination of | -0.9 | -0.1 | -0.3 | -0.0 |
| internal profit | | | | |
--------------------------------------------------------------------------------
| Total | 105.5 | 7.1 | 49.3 | 5.1 |
--------------------------------------------------------------------------------
In Service, the fourth quarter is seasonally usually the strongest. This was
also the case in 2006 and fourth quarter operating profit was record high. This
seasonality has, however, decreased as the business has become more
geographically distributed. The strong growth also led to full capacity
utilization throughout the year.
Also Standard and Heavy Lifting continued their operating margin improvement and
achieved record-high operating profits.
Fourth Quarter operating income and margin by Business Area
--------------------------------------------------------------------------------
| | Q4/2006 | Percent of | Q4/2005 | Percent of |
| | MEUR | sales | MEUR | sales |
--------------------------------------------------------------------------------
| Service | 14.9 | 9.5 | 10.8 | 9.0 |
--------------------------------------------------------------------------------
| Standard Lifting | 19.0 | 11.5 | 9.4 | 9.9 |
--------------------------------------------------------------------------------
| Heavy Lifting | 14.0 | 8.6 | 7.9 | 7.0 |
--------------------------------------------------------------------------------
| ./. Group overheads | -9.6 | -2.1 | -5.8 | -2.0 |
--------------------------------------------------------------------------------
| ./. Elimination of | 1.0 | -0.1 | 0.6 | -0.0 |
| internal profit | | | | |
--------------------------------------------------------------------------------
| Total | 39.3 | 8.5 | 22.9 | 7.7 |
--------------------------------------------------------------------------------
8 (23)
Group EBITDA was EUR 128.0 (64.9) million or 8.6 (6.7) percent on sales.
Depreciations grew by EUR 6.9 million, from EUR 15.6 million to EUR 22.5
million. The increase in depreciations was mainly attributable to acquisitions.
The share of associated companies result amounted to EUR 0.7 (0.5) million.
Group interest costs (the net of interest income and expenses) were EUR 9.5
(6.8) million. The increase in interest costs was mainly due to higher net debt
during 2006, which was a result of acquisitions made at the end of 2005 and in
2006.
Financial costs (net of expenses and income) were EUR 11.1 (15.8) million. The
corresponding figure for 2005 included a loss arising from a change in fair
value of approx. EUR 7.9 million on derivates used for hedging purposes.
Other financing costs relate to currency exchange rate changes and other costs.
Group income after financing items was EUR 95.1 (34.1) million. Income taxes
were EUR 26.5 (10.0) million corresponding to an effective tax rate of 27.9
percent (29.3) for the year. The decrease in tax rate is mainly related to
structural changes
Group net income was EUR 68.6 (24.1) million. Basic earnings per share totaled
EUR 1.17 (0.43) and diluted earnings per share were EUR 1.15 (0.42). Net income
in the fourth quarter was EUR 27.6 (15.6) million or EUR 0.46 (0.27) per share.
The Group's return on capital employed was 29.5 (17.2) percent and return on
equity was 36.5 (16.6) percent.
Cash flow and balance sheet
Cash flow from operations before financing items and taxes, but after the change
in working capital was EUR 114.2 (66.5) million, representing EUR 1.96 (1.18)
per share. Higher profits and improved working capital management supported the
strong cash flow development. Fourth quarter cash flow before financial items
and taxes was strong despite a high level of accounts receivables due to
record-high sales in the quarter.
Cash flow from financing items and taxes was EUR -32.8 (-18.1) million. Net cash
flow from operating activities was EUR 81.4 (48.4) million, representing EUR
1.39 (0.86) per share.
In total, EUR 64.8 million (46.1) of cash was used to cover capital expenditures
including acquisitions. The cash-based capital expenditures in fixed assets were
EUR 17.1 (13.5) million.
The parent company paid EUR 15.8 (14.8) million in dividends.
Group interest-bearing debt was EUR 173.3 (178.4) million, and interest-bearing
net debt was EUR 128.2 (133.9) million. Gearing was 57.3 (88.1) percent.
The Solidity (equity) ratio was 28.3 (23.7) percent, and the current ratio was
1.4 (1.1).
The Group's has a EUR 200 million committed back-up financing facility to secure
running liquidity. At yearend, EUR 100.9 (23.7) million was in use.
9 (23)
Currencies
The currency exchange rate fluctuations had only a marginal translational effect
on the Group's orders received, sales and operating income development. The
strength of the euro against the USD (and USD-linked currencies) had a negative
transactional effect on operating income through export from the euro-area.
The consolidation exchange rates of some important currencies for the Group
developed as follows:
The period end rates:
--------------------------------------------------------------------------------
| | 2006 | 2005 | Change % |
--------------------------------------------------------------------------------
| USD | 1.317 | 1.1797 | -10.43 |
--------------------------------------------------------------------------------
| CAD | 1.5281 | 1.3725 | -10.18 |
--------------------------------------------------------------------------------
| GBP | 0.6715 | 0.6853 | 2.06 |
--------------------------------------------------------------------------------
| CNY | 10.2793 | 9.5204 | -7.38 |
--------------------------------------------------------------------------------
| SGD | 2.0202 | 1.9628 | -2.84 |
--------------------------------------------------------------------------------
| SEK | 9.0404 | 9.3885 | 3.85 |
--------------------------------------------------------------------------------
| NOK | 8.238 | 7.985 | -3.07 |
--------------------------------------------------------------------------------
| AUD | 1.6691 | 1.6109 | -3.49 |
--------------------------------------------------------------------------------
The period average rates:
--------------------------------------------------------------------------------
| | 2006 | 2005 | Change % |
--------------------------------------------------------------------------------
| USD | 1.2554 | 1.2441 | -0.90 |
--------------------------------------------------------------------------------
| CAD | 1.4234 | 1.5093 | 6.03 |
--------------------------------------------------------------------------------
| GBP | 0.6817 | 0.6839 | 0.32 |
--------------------------------------------------------------------------------
| CNY | 10.008 | 10.197 | 1.89 |
--------------------------------------------------------------------------------
| SGD | 1.9938 | 2.0699 | 3.82 |
--------------------------------------------------------------------------------
| SEK | 9.2548 | 9.2817 | 0.29 |
--------------------------------------------------------------------------------
| NOK | 8.0487 | 8.0124 | -0.45 |
--------------------------------------------------------------------------------
| AUD | 1.6666 | 1.6324 | -2.05 |
--------------------------------------------------------------------------------
The Group continued its currency risk management policy of hedging. The aim for
the hedging policy is to minimize currency risk relating to non-euro nominated
export and import from or to the euro zone. Hedging was mainly carried out
through currency forward exchange transactions.
Capital expenditure
The Group's capital expenditures excluding acquisitions were EUR 16.3 (16.0)
million. These capital expenditures consisted mainly of replacement or capacity
expansion investments on machines, equipment and information technology. Capital
expenditures in acquisitions were EUR 51.9 (30.3) million.
Research and development
Total direct research and development costs in the Group were EUR 12.5 (8.8)
million. The increase in R&D expenditure includes Stahl CranesSystems R&D
expenses, as well as product development projects aimed at improving the quality
and cost-efficiency of both products and services.
R&D expenditure is not allocated to the Business Areas, but reported in Group
overheads, except for Stahl CranesSystems' R&D expenses, which are included in
the Standard Lifting Business Area.
10 (23)
Personnel and personnel development
At the end of 2006, the Group employed 7,549 (5,923) persons. The average number
of personnel was 6,859 (5,087). The increase in employment relates to mainly to
the acquisition on MMH Holding and personnel increases in the Asian operations.
On average, the Group recorded somewhat over three training days per employee,
which is a slight increase to previous the year. The main corporate
wide-development program is the three-year Konecranes Academy aimed for middle
management and experts. Approximately 160 employees entered the program in 2006.
The development program for the top management was continued in co-operation
with the London Business School.
Personnel by Business Area, end of period
--------------------------------------------------------------------------------
| | 2006 | 2005 | Change |
| | | | percent |
--------------------------------------------------------------------------------
| Service | 3,923 | 2,999 | +31 |
--------------------------------------------------------------------------------
| Standard Lifting | 2,333 | 1,898 | +23 |
--------------------------------------------------------------------------------
| Heavy Lifting | 1,131 | 890 | +27 |
--------------------------------------------------------------------------------
| Group Staff | 162 | 136 | +19 |
--------------------------------------------------------------------------------
| Total | 7,549 | 5,923 | +26 |
--------------------------------------------------------------------------------
Group costs
Unallocated Group overhead costs were EUR 31.6 (23.8) million. These costs
consist mainly of common development costs (personnel, R&D, systems), treasury
and legal functions, development of the company structure (M&A), and Group
management and administration.
Group structure
On 19 May 2006, HMM Acquisition Corp., a wholly owned Konecranes Inc.
subsidiary, acquired 59.2 percent of the shares of MMH Holdings, Inc., the owner
of U.S. based Morris Materials Handling, Inc. The holding was further increased
on May 26 to 74.5 percent and on June 5 to approximately 90.9 percent. On June
7, HMM Acquisition Corp. had increased its stake to 96.7 percent and completed a
short form merger as a result of which Konecranes, Inc. obtained 100 percent of
the shares in MMH Holdings, Inc. Morris Material Handling, Inc. has over 120
years of history in crane industry and is a recognized player in the maintenance
service and overhead crane industry, especially in the North-American market.
The addition of MMH's product ranges especially for the steel and power
industries complement Konecranes' offering. The acquisition also brings new
opportunities for growth in Service through the large installed base of MMH
cranes. Through its subsidiaries MMH also has local operations in Canada, Mexico
and Chile. MMH Holdings, Inc was consolidated into the Konecranes Group figures
as of 1 June, 2006. Operationally MMH Holdings, Inc. continued as an independent
entity within the Konecranes Group.
Konecranes continued making structural changes during 2006 aimed at increasing
sales and profitability by adding flexibility in the supply chain and improving
customer service. Konecranes core activities are product development, assembly
and maintenance services.
11 (23)
Important appointments
Following the appointment of new Group Executive Board members, the Board has as
of 1 October 2006 consisted of the following members:
Pekka Lundmark, President and CEO
Business Area Presidents:
Hannu Rusanen, Service
Pekka Päkkilä, Standard Lifting
Mikko Uhari, Heavy Lifting
Region Presidents:
Pierre Boyer, Europe, Middle East & Africa (EMEA)
Tom Sothard, Americas
Harry Ollila, Northeast Asia (NEA)
Edward Yakos, Southeast Asia-Pacific (SEAP)
Function Directors:
Teuvo Rintamäki, Chief Financial Officer
Sirpa Poitsalo, Director, General Counsel
Arto Juosila, Director, Administration and Business Development
Mikael Wegmüller, Director, Marketing and Communications
Peggy Hansson, Director, Competence Development
Ari Kiviniitty, Chief Technology Officer
Litigations
Konecranes is a party to various litigations and disputes relating to its normal
business in different countries. At the moment, Konecranes does not expect any
of these ongoing litigations or disputes to have a material effect on the
profits or future outlook of the Group.
Risk management
The main purpose of the Konecranes risk management is to guarantee the
continuity of the business under all circumstances.
Risk management is part of the control system of the company. CEO and Group
management team are responsible for the risk management. The importance of risk
management has increased due to the fast growth of the Group as well as due to
the need to identify and control the risk of a more complex business
environment.
The change in the Group's operational model from traditional manufacturing to
increasingly supply chain driven activity, demands additional efforts to secure
the availability of components, materials and services. To guarantee the quality
of sourcing demands a lot of continuous quality development work from Konecranes
experts. Continuous quality training for suppliers and long term supply
agreements guarantee the steady development of our operations.
Special attention has also been paid to the risk control of new geographical
areas. Continuous control of specific contract terms for both sales and purchase
contracts ease the control of risks.
12 (23)
The Group continuously reviews its insurance policies as part of its overall
global risk management. According to the risk management principles all
insurable risk related to personnel, property and operation are covered by
insurances. In risk management the business units are responsible for financial
needs and for identifications of their financial risks. Almost all funding, cash
management and foreign exchange with banks and other external counter parties is
done centralized by Group Treasury.
Environment
Konecranes recognizes environmental management as an important aspect in its
business and strives to conduct operations in an environmental sound manner.
Environmental concerns are taken into account from the product development stage
onwards. Good examples of what this means in practice are the inverter drives
developed by Konecranes that use up to 40 percent less energy than conventional
solutions, and the fine-machined components used in our transmissions that
contribute to extended service life and significantly reduced noise levels. We
also develop crane structures that use less steel and other raw materials.
Lighter and compact designs of cranes contribute to savings in space, heating,
and operating costs in buildings and harbor platforms.
The company strives to favor products and materials that impose the lowest
possible impact on the environment in procurement choices, and to pay particular
attention to keeping energy and material consumption at a low level. Local
regulations and recommendations are taken into account in waste management and
disposal. The company prioritizes developing the environmental awareness of both
own people and partners, with the aim of making an enlightened approach to the
environment and environmental protection a natural part of day-to-day operations
in all of our activities.
Incentive Programs and Share Capital
At the end of the year 2006, Konecranes had four ongoing stock option plans
(1997, 1999, 2001 and 2003). The option plans include approximately 300 key
employees. The terms and conditions of the stock option programs are available
on our website at www.konecranes.com.
Pursuant to Konecranes' stock option plans 2,133,650 new shares (split-adjusted)
were subscribed for and registered in the Finnish Trade Register during year
2006. As a result of the subscriptions, Konecranes' share capital increased to
EUR 30,038,860, comprising 60,077,720 shares.
The remaining 1997, 1999B, 2001 and 2003 stock options at the end of the
accounting period entitle to subscription of a total of 2,050,800 shares,
thereby the share capital can be increased by EUR 1,025,400.
On 15 December, 2006, the Konecranes Board approved a long-term incentive
program directed to Pekka Lundmark, the Managing Director of the Company. The
program will be implemented by disposing of the Company's own shares held by the
Company on the basis of the authorization granted to the Board of Directors by
the AGM on 8 March, 2006.
Pursuant to the incentive program a total of 50,000 shares were sold to the
Managing Director on 22 December 2006, and 50,000 shares are to be sold in
January-February 2007 on terms and conditions defined in the terms of
subscription. The shares sold are subject to a five-year transfer restriction.
13 (23)
As part of the scheme the Company will pay a separate bonus to the Managing
Director to cover the taxes levied as a result of the arrangement.
The purpose of the incentive scheme is to motivate the Managing Director to
contribute in the best possible manner to long-term success of the Company and
increased shareholder value for all shareholders of the Company.
Own Shares in the Company's Possession
At the end of 2006, Konecranes held 792,600 of the company's own shares. This
corresponds to 1.3 percent of the company's total outstanding shares and votes.
The shares were bought back between February 20 and March 5, 2003.
Shares and trading volume
Konecranes' share price increased by 114 percent during 2006 and closed at EUR
22.30. The period high was EUR 22.33 and period low EUR 10.23. The
volume-weighted average share price during the period was EUR 15.04. During
2006, the OMX Helsinki Cap Index rose by 24 percent and the OMX Helsinki
Industrials Index by 43 percent.
At the end of 2006, Konecranes' total market capitalization was EUR 1,340
million including own shares in the company's possession, making it the 29th
largest company on the Helsinki Stock Exchange.
The trading volume totaled 114 million shares (split-adjusted), representing a
turnover velocity of 192 percent. Total trading amounted to EUR 1,715 million,
which was the 21st highest on the Helsinki Exchange. The daily average trading
volume was 365,872 shares, representing a daily average turnover of EUR 6.8
million.
Flagging notifications
--------------------------------------------------------------------------------
| Date | Shareholder | Number of | % of | Prior |
| | | Shares | shares and | flagging, % |
| | | owned* | votes** | of shares and |
| | | | | votes |
--------------------------------------------------------------------------------
| 13 Oct. 2006 | JPMorgan Chase & | 2 951 289 | 4.94 | |
| | Co and its | | | |
| | subsidiaries | | | |
--------------------------------------------------------------------------------
| 10 Oct. 2006 | JPMorgan Chase & | 3 001 262 | 5.02 | |
| | Co and its | | | |
| | subsidiaries | | | |
--------------------------------------------------------------------------------
| 14 Sept. 2006 | Fidelity | 5 982 158 | 10.02 | |
| | International | | | |
| | Limited and its | | | |
| | direct and | | | |
| | indirect | | | |
| | subsidiaries | | | |
--------------------------------------------------------------------------------
| 13 Sept. 2006 | Fidelity | 2 966 900 | 4.97 | |
| | Management | | | |
| | Research and its | | | |
| | direct and | | | |
| | indirect | | | |
| | subsidiaries | | | |
--------------------------------------------------------------------------------
| 11 Aug. 2006 | Franklin Resources | 2 774 610 | 4.99 | 9.74 |
| | Inc, funds and | | | |
| | accounts of | | | |
| | affiliated | | | |
| | investment | | | |
| | advisors | | | |
--------------------------------------------------------------------------------
14 (23)
--------------------------------------------------------------------------------
| 4 Aug. 2006 | Fidelity | 2 955 850 | 5.03 | |
| | Management | | | |
| | Research and its | | | |
| | direct and | | | |
| | indirect | | | |
| | subsidiaries | | | |
--------------------------------------------------------------------------------
| 5 Apr. 2006 | The Capital Group | 2 895 560 | 4.90 | 6.91 |
| | Companies, Inc. | | | |
--------------------------------------------------------------------------------
| 29 Mar. 2006 | Fidelity | 2 955 900 | 5.00 | |
| | International | | | |
| | Limited and its | | | |
| | direct and | | | |
| | indirect | | | |
| | subsidiaries | | | |
--------------------------------------------------------------------------------
| 2 Mar. 2006 | Fidelity | 3 021 200 | 5.16 | |
| | International | | | |
| | Limited and its | | | |
| | direct and | | | |
| | indirect | | | |
| | subsidiaries | | | |
--------------------------------------------------------------------------------
| 27 Feb. 2006 | Deutsche Bank AG, | 3 250 192 | 5.57 | |
| | and its subsidiary | | | |
| | companies | | | |
--------------------------------------------------------------------------------
| 23 Feb. 2006 | Centaurus Capital | 1 353 600 | 2.32 | 5.00 |
| | Limited and its | | | |
| | direct and | | | |
| | indirect | | | |
| | subsidiaries | | | |
--------------------------------------------------------------------------------
| 13 Feb. 2006 | Orkla ASA | 2 730 880 | 4.71 | 5.08 |
--------------------------------------------------------------------------------
*Split-adjusted
**Percentage of shares at time of notification
Dividend proposal
The Board of Directors proposes to the AGM that a dividend of EUR 0.45 per share
will be paid for the fiscal year 2006. The dividend will be paid to
shareholders, who are entered in the company's share register maintained by the
Finnish Central Securities Depository Ltd. on the record date for payments of
dividends on March 13, 2007. The actual payment of dividend will take place on
March 21, 2007.
New EBIT Margin Targets
New EBIT margin targets have been set for the Business Areas as a result of the
recent development in the company and a change in the reporting method regarding
spare parts. The new EBIT margin targets are: Service 12 percent, Standard
Lifting 12 percent and Heavy Lifting 10 percent. Achieving these profitability
levels in combination with the new target for unallocated Group costs of two
percent of sales would result in a Group EBIT margin of approximately ten
percent.
As of 2007, Konecranes-branded spare parts will mainly be reported in the
Service Business Area instead of in both Service and Standard Lifting, as has
previously been the case. This change will result in higher margins in Service
and lower margins in Standard Lifting. Based on the 2006 financial figures, the
EBIT margin in Service would have been approximately 1.5 percentage points
higher and Standard Lifting's margin 1.5 percentage points lower according to
the new reporting method. The reported 2006 quarterly figures will be restated
according to the new reporting method in Konecranes 2007 first quarter interim
report.
15 (23)
Future prospects
Konecranes strong order book and the recent acquisitions form a strong base for
year 2007. Demand is expected to remain at a good level, and organic growth to
continue, however, at a more moderate rate than in the previous two years. The
company's target is to achieve net sales growth of approximately 15 percent
compared to 2006, and to continue improving the operating margin.
Hyvinkää 13 February, 2007
KCI Konecranes Plc
Board of Directors
Disclaimer
Certain statements in this report, which are not historical fact, including,
without limitation those regarding expectations for market growth and
developments, expectations for growth and profitability and statements preceded
by "believes", "expects", "anticipates", "foresees" or similar expressions, are
forward-looking statements. Therefore they involve risks and uncertainties,
which may cause actual results to materially differ from the results expressed
in such forward-looking statements. Such factors include but are not limited to
the company's own operating factors, industry conditions and general economic
conditions.
16 (23)
The presented Financial information is construed according to the recognition
and measurement principles of International Financial Reporting Standards
(IFRS).
The figures presented in the tables below have been rounded to one decimal,
which should be taken into account when reading the sum figures.
--------------------------------------------------------------------------------
| CONSOLIDATED STATEMENT OF INCOME - IFRS | 1-12/2006 | 1-12/2005 |
| (MEUR) | | |
--------------------------------------------------------------------------------
| Sales | 1,482.5 | 970.8 |
--------------------------------------------------------------------------------
| Other operating income | 2.0 | 2.2 |
--------------------------------------------------------------------------------
| Depreciation and impairments | -22.5 | -15.6 |
--------------------------------------------------------------------------------
| Other operating expenses | -1,356.5 | -908.1 |
--------------------------------------------------------------------------------
| Operating income (EBIT) | 105.5 | 49.3 |
--------------------------------------------------------------------------------
| Share of result of associates and joint | 0.7 | 0.5 |
| ventures | | |
--------------------------------------------------------------------------------
| Financial income and expenses (1 | -11.1 | -15.8 |
--------------------------------------------------------------------------------
| Profit before taxes | 95.1 | 34.1 |
--------------------------------------------------------------------------------
| Taxes | -26.5 | -10.0 |
--------------------------------------------------------------------------------
| Net profit for the period | 68.6 | 24.1 |
--------------------------------------------------------------------------------
| Earnings per share, basic EUR) | 1.17 | 0.43 | |
--------------------------------------------------------------------------------
| Earnings per share, diluted (EUR) | 1.15 | 0.42 | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Financial income and expenses (1 | 1-12/2006 | 1-12/2005 |
--------------------------------------------------------------------------------
| Dividend income | 0.1 | 0.1 |
--------------------------------------------------------------------------------
| Interest income from current assets | 2.1 | 9.8 |
--------------------------------------------------------------------------------
| Interest expenses | -11.6 | -16.6 |
--------------------------------------------------------------------------------
| Other financial income and expenses | -0.6 | -0.8 |
--------------------------------------------------------------------------------
| Exchange rate differences | -1.2 | -8.3 |
--------------------------------------------------------------------------------
| Total | -11.1 | -15.8 |
--------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET - IFRS (MEUR)
--------------------------------------------------------------------------------
| ASSETS | 31.12.2006 | 31.12.2005 |
--------------------------------------------------------------------------------
| Non-current assets | | |
--------------------------------------------------------------------------------
| Goodwill | 54.0 | 54.8 |
--------------------------------------------------------------------------------
| Other intangible assets | 55.0 | 42.2 |
--------------------------------------------------------------------------------
| Property, plant and equipment | 67.5 | 60.8 |
--------------------------------------------------------------------------------
| Advance payments and construction in progress | 9.6 | 8.8 |
--------------------------------------------------------------------------------
| Investments accounted for using the equity | 6.3 | 5.9 |
| method | | |
--------------------------------------------------------------------------------
| Available-for-sale investments | 2.1 | 1.6 |
--------------------------------------------------------------------------------
| Long-term loans receivables | 0.5 | 0.2 |
--------------------------------------------------------------------------------
| Deferred tax assets | 24.6 | 23.3 |
--------------------------------------------------------------------------------
| Total non-current assets | 219.6 | 197.6 |
--------------------------------------------------------------------------------
| Current assets | | |
--------------------------------------------------------------------------------
| Inventories | | |
--------------------------------------------------------------------------------
| Raw materials and semi-manufactured goods | 92.7 | 73.6 |
--------------------------------------------------------------------------------
| Work in progress | 103.5 | 74.1 |
--------------------------------------------------------------------------------
| Advance payments | 30.4 | 9.2 |
--------------------------------------------------------------------------------
| Total inventories | 226.6 | 157.0 |
--------------------------------------------------------------------------------
| Accounts receivable | 324.2 | 223.3 |
--------------------------------------------------------------------------------
| Loans receivable | 0.2 | 0.2 |
--------------------------------------------------------------------------------
| Other receivables | 27.0 | 18.3 |
--------------------------------------------------------------------------------
| Deferred assets | 76.9 | 83.7 |
--------------------------------------------------------------------------------
| Cash and cash equivalents | 44.4 | 44.0 |
--------------------------------------------------------------------------------
| Total current assets | 699.4 | 526.4 |
--------------------------------------------------------------------------------
| TOTAL ASSETS | 919.0 | 724.0 |
--------------------------------------------------------------------------------
17 (23)
--------------------------------------------------------------------------------
| EQUITY AND LIABILITIES | 31.12.2006 | 31.12.2005 |
--------------------------------------------------------------------------------
| Capital and reserves attributable to the | | |
| shareholders of the parent | | |
--------------------------------------------------------------------------------
| Share capital | 30.0 | 29.0 |
--------------------------------------------------------------------------------
| Share premium account | 39.0 | 26.5 |
--------------------------------------------------------------------------------
| Fair value and other reserves | 3.7 | -4.9 |
--------------------------------------------------------------------------------
| Translation differences | -5.8 | -1.1 |
--------------------------------------------------------------------------------
| Paid in capital | 0.5 | 0.0 |
--------------------------------------------------------------------------------
| Retained earnings | 87.7 | 78.6 |
--------------------------------------------------------------------------------
| Net income for the period | 68.6 | 24.1 |
--------------------------------------------------------------------------------
| Total Shareholders equity | 223.7 | 152.0 |
--------------------------------------------------------------------------------
| Minority interests | 0.1 | 0.1 |
--------------------------------------------------------------------------------
| Total equity | 223.7 | 152.1 |
--------------------------------------------------------------------------------
| Liabilities | | |
--------------------------------------------------------------------------------
| Non-current liabilities | | |
--------------------------------------------------------------------------------
| Interest-bearing liabilities | 120.9 | 27.4 |
--------------------------------------------------------------------------------
| Other non-current liabilities | 58.7 | 61.6 |
--------------------------------------------------------------------------------
| Deferred tax liabilities | 20.0 | 18.0 |
--------------------------------------------------------------------------------
| Total non-current liabilities | 199.6 | 106.9 |
--------------------------------------------------------------------------------
| Provisions | 28.2 | 20.1 |
--------------------------------------------------------------------------------
| Current liabilities | | |
--------------------------------------------------------------------------------
| Interest-bearing liabilities | 52.4 | 151.0 |
--------------------------------------------------------------------------------
| Advance payments received | 128.9 | 81.0 |
--------------------------------------------------------------------------------
| Progress billings | 7.0 | 0.0 |
--------------------------------------------------------------------------------
| Accounts payable | 113.6 | 83.7 |
--------------------------------------------------------------------------------
| Other short-term liabilities (non-interest | 23.0 | 17.7 |
| bearing) | | |
--------------------------------------------------------------------------------
| Accruals | 142.5 | 111.4 |
--------------------------------------------------------------------------------
| Total current liabilities | 467.4 | 444.9 |
--------------------------------------------------------------------------------
| Total liabilities | 695.2 | 571.9 |
--------------------------------------------------------------------------------
| TOTAL EQUITY AND LIABILITIES | 919.0 | 724.0 |
--------------------------------------------------------------------------------
STATEMENT OF CHANGES IN SHAREHOLDERS` EQUITY (MEUR)
--------------------------------------------------------------------------------
| | Shar | Othe | Fair | Trans | Paid | Retaine | Min. | Total |
| | e | r | value | l.Dif | in | d | Intere | Equit |
| | Cap. | Rest | Reser | f. | Cap. | Earning | st | y |
| | | r. | ves | | | s | | |
| | | Cap. | | | | | | |
--------------------------------------------------------------------------------
| Equity | 29.0 | 26.5 | -4.9 | -1.2 | 0.0 | 102.7 | 0.1 | 152.1 |
| 31.12 2005 | | | | | | | | |
--------------------------------------------------------------------------------
| Options | 1.1 | 12.4 | | | | | | 13.5 |
| exercised | | | | | | | | |
--------------------------------------------------------------------------------
| Dividend | | | | | | -15.8 | | -15.8 |
| distributi | | | | | | | | |
| on | | | | | | | | |
--------------------------------------------------------------------------------
| Cash flow | | | 8.6 | | | | | 8.6 |
| hedge | | | | | | | | |
--------------------------------------------------------------------------------
| Translatio | | | | -4.6 | | | | -4.6 |
| n | | | | | | | | |
| difference | | | | | | | | |
--------------------------------------------------------------------------------
| Share | | | | | | 0.8 | | 0.8 |
| based | | | | | | | | |
| payments | | | | | | | | |
| recognized | | | | | | | | |
| against | | | | | | | | |
| equity | | | | | | | | |
--------------------------------------------------------------------------------
| Share | | | | | 0.5 | | | 0.5 |
| issue | | | | | | | | |
--------------------------------------------------------------------------------
| Net profit | | | | | | 68.6 | | 68.6 |
| for the | | | | | | | | |
| period | | | | | | | | |
--------------------------------------------------------------------------------
| Equity | 30.0 | 39.0 | 3.7 | -5.8 | 0.5 | 156.3 | 0.1 | 223.7 |
| 31.12. | | | | | | | | |
| 2006 | | | | | | | | |
--------------------------------------------------------------------------------
18 (23)
--------------------------------------------------------------------------------
| CONSOLIDATED CASH FLOW STATEMENT - IFRS | 1-12/2006 | 1-12/2005 |
| (MEUR) | | |
--------------------------------------------------------------------------------
| Cash flow from operating activities | | |
--------------------------------------------------------------------------------
| Operating income | 105.5 | 49.3 |
--------------------------------------------------------------------------------
| Adjustments to operating profit | | |
--------------------------------------------------------------------------------
| Depreciation and impairments | 22.5 | 15.6 |
--------------------------------------------------------------------------------
| Profits and losses on sale of fixed assets | -0.3 | -0.7 |
--------------------------------------------------------------------------------
| Other non-cash items | 2.0 | 1.6 |
--------------------------------------------------------------------------------
| Operating income before chg in net working | 129.7 | 65.8 |
| capital | | |
--------------------------------------------------------------------------------
| Change in interest-free short-term receivables | -69.1 | -25.8 |
--------------------------------------------------------------------------------
| Change in inventories | -48.2 | -17.8 |
--------------------------------------------------------------------------------
| Change in interest-free short-term liabilities | 101.9 | 44.2 |
--------------------------------------------------------------------------------
| Change in net working capital | -15.4 | 0.7 |
--------------------------------------------------------------------------------
| Cash flow from operations before financing items | 114.2 | 66.5 |
| and taxes | | |
--------------------------------------------------------------------------------
| Interest received | 2.1 | 7.6 |
--------------------------------------------------------------------------------
| Interest paid | -11.5 | -10.6 |
--------------------------------------------------------------------------------
| Other financial income and expenses | -1.4 | -5.0 |
--------------------------------------------------------------------------------
| Income taxes paid | -22.1 | -10.0 |
--------------------------------------------------------------------------------
| Financing items and taxes | -32.8 | -18.1 |
--------------------------------------------------------------------------------
| Net cash flow from operating activities | 81.4 | 48.4 |
--------------------------------------------------------------------------------
| Cash flow from investing activities | | |
--------------------------------------------------------------------------------
| Acquisition of Group companies, net of cash | -48.3 | -30.3 |
--------------------------------------------------------------------------------
| Acquisition of shares in associated company | -0.2 | -3.3 |
--------------------------------------------------------------------------------
| Investments in other shares | -0.6 | -2.0 |
--------------------------------------------------------------------------------
| Capital expenditures | -17.1 | -13.5 |
--------------------------------------------------------------------------------
| Proceeds from sale of other and associated | 0.0 | 2.4 |
| company shares | | |
--------------------------------------------------------------------------------
| Proceeds from sale of fixed assets | 1.2 | 0.6 |
--------------------------------------------------------------------------------
| Dividends received | 0.1 | 0.1 |
--------------------------------------------------------------------------------
| Net cash used in investing activities | -64.8 | -46.1 |
--------------------------------------------------------------------------------
| Cash flow before financing activities | 16.6 | 2.3 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Cash flow from financing activities | | |
--------------------------------------------------------------------------------
| Proceeds from options exercised and share issue | 14.1 | 4.6 |
--------------------------------------------------------------------------------
| Proceeds from (+), payments of (-) long-term | 88.6 | 25.2 |
| borrowings | | |
--------------------------------------------------------------------------------
| Proceeds from (+), payments of (-) short-term | -101.8 | 4.9 |
| borrowings | | |
--------------------------------------------------------------------------------
| Proceeds from (+), payments of (-) short-term | -0.2 | -0.2 |
| receivables | | |
--------------------------------------------------------------------------------
| Dividends paid | -15.8 | -14.8 |
--------------------------------------------------------------------------------
| Net cash used in financing activities | -15.2 | 19.7 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Translation differences in cash | -1.0 | 1.3 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Change of cash and cash equivalents | 0.3 | 23.3 |
--------------------------------------------------------------------------------
| Cash and cash equivalents at beginning of period | 44.0 | 20.7 |
--------------------------------------------------------------------------------
| Cash and cash equivalents at end of period | 44.4 | 44.0 |
--------------------------------------------------------------------------------
| Change of cash and cash equivalents | 0.3 | 23.3 |
--------------------------------------------------------------------------------
The effect of changes in exchange rates has been eliminated by converting the
beginning balance at the rates current on the last day of the year.
19 (23)
SEGMENT REPORTING
1. BUSINESS SEGMENTS (MEUR)
--------------------------------------------------------------------------------
| Order Intake by | 2006 | % of 2006 | 2005 | % of 2005 |
| Business Area | | total | | total |
--------------------------------------------------------------------------------
| Services | 433.8(1 | 28 | 364.5(1 | 32 |
--------------------------------------------------------------------------------
| Standard Lifting | 612.6 | 39 | 322.1 | 28 |
--------------------------------------------------------------------------------
| Heavy Lifting | 519.2 | 33 | 463.3 | 40 |
--------------------------------------------------------------------------------
| ./. Internal | -92.9 | | -88.7 | |
--------------------------------------------------------------------------------
| Total | 1,472.8(1 | 100 | 1,061.2(1 | 100 |
--------------------------------------------------------------------------------
1) Excl. Service Contract Base
--------------------------------------------------------------------------------
| Order Book (2 | 2006 | | 2005 | |
--------------------------------------------------------------------------------
| Total | 571.6 | | 432.1 | |
--------------------------------------------------------------------------------
2) Percentage of completion deducted
--------------------------------------------------------------------------------
| Sales by Business | 2006 | % of 2006 | 2005 | % of 2005 |
| Area | | total | | total |
--------------------------------------------------------------------------------
| Services | 512.6 | 32 | 406.5 | 39 |
--------------------------------------------------------------------------------
| Standard Lifting | 577.8 | 37 | 318.0 | 30 |
--------------------------------------------------------------------------------
| Heavy Lifting | 490.8 | 31 | 331.1 | 31 |
--------------------------------------------------------------------------------
| ./. Internal | -98.8 | | -84.8 | |
--------------------------------------------------------------------------------
| Total | 1,482.5 | 100 | 970.8 | 100 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Operating Income by | 2006 | % of 2006 | 2005 | % of 2005 |
| Business Area | Operating | total sales | Operating | total sales |
| | Income | | Income | |
--------------------------------------------------------------------------------
| Services | 43.4 | 8.5 | 29.4 | 7.2 |
--------------------------------------------------------------------------------
| Standard Lifting | 61.1 | 10.6 | 28.8 | 9.1 |
--------------------------------------------------------------------------------
| Heavy Lifting | 33.6 | 6.8 | 15.2 | 4.6 |
--------------------------------------------------------------------------------
| Group costs | -31.6 | | -23.8 | |
--------------------------------------------------------------------------------
| Consolidation items | -0.9 | | -0.3 | |
--------------------------------------------------------------------------------
| Total | 105.5 | 7.1 | 49.3 | 5.1 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Personnel by Business | 2006 | % of 2006 | 2005 | % of 2005 |
| Area | | total | | total |
| (at the End of the | | | | |
| Period) | | | | |
--------------------------------------------------------------------------------
| Services | 3,923 | 52 | 2,999 | 51 |
--------------------------------------------------------------------------------
| Standard Lifting | 2,333 | 31 | 1,898 | 32 |
--------------------------------------------------------------------------------
| Heavy Lifting | 1,131 | 15 | 890 | 15 |
--------------------------------------------------------------------------------
| Group Staff | 162 | 2 | 136 | 2 |
--------------------------------------------------------------------------------
| Total | 7,549 | 100 | 5,923 | 100 |
--------------------------------------------------------------------------------
2. GEOGRAPHICAL SEGMENTS (MEUR)
--------------------------------------------------------------------------------
| Sales by Market | 2006 | % of 2006 | 2005 | % of 2005 |
| | | total | | total |
--------------------------------------------------------------------------------
| Nordic and Eastern | 252.8 | 17 | 215.1 | 22 |
| Europe | | | | |
--------------------------------------------------------------------------------
| EU (excl. Nordic) | 462.2 | 31 | 300.5 | 31 |
--------------------------------------------------------------------------------
| Americas | 512.3 | 35 | 277.7 | 29 |
--------------------------------------------------------------------------------
| Asia-Pacific | 255.1 | 17 | 177.4 | 18 |
--------------------------------------------------------------------------------
| Total | 1,482.5 | 100 | 970.8 | 100 |
--------------------------------------------------------------------------------
20 (23)
--------------------------------------------------------------------------------
| NET INTEREST BEARING LIABILITIES | 31.12.2006 | 31.12.2005 |
| (MEUR) | | |
--------------------------------------------------------------------------------
| Long- and short-term interest bearing | -173.3 | -178.4 |
| liabilities | | |
--------------------------------------------------------------------------------
| Cash and cash equivalents and other interest | 45.0 | 44.4 |
| bearing assets | | |
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| Total | -128.2 | -133.9 |
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--------------------------------------------------------------------------------
| CONTINGENT LIABILITIES AND PLEDGED ASSETS | 31.12.2006 | 31.12.2005 |
| (MEUR) | | |
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| Contingent Liabilities | | |
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| For own debts | | |
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| Mortgages on land and buildings | 0.7 | 5.9 |
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| For own commercial obligations | | |
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| Pledged assets | 1.1 | 0.3 |
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| Guarantees | 136.3 | 117.2 |
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| Other contingent and Financial Liabilities | | |
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| Leasing liabilities | 11.1 | 10.7 |
| Next year | 26.0 | 34.4 |
| Later on | | |
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| Other liabilities | 1.0 | 0.7 |
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| Total | 176.2 | 169.2 |
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Leasing contracts follow the normal practices in corresponding countries.
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| Total by Category | | |
--------------------------------------------------------------------------------
| Mortgages on land and buildings | 0.7 | 5.9 |
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| Pledged assets | 1.1 | 0.3 |
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| Guarantees | 136.3 | 117.2 |
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| Other liabilities | 38.1 | 45.8 |
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| Total | 176.2 | 169.2 |
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| NOTIONAL AND FAIR | 31.12.2006 | 31.12.2006 | 31.12.2005 | 31.12.2005 |
| VALUES OF DERIVATIVE | Nominal | Fair value | Nominal | Fair value |
| FINANCIAL INSTRUMENTS | value | | value | |
| (MEUR) | | | | |
--------------------------------------------------------------------------------
| Foreign exchange | 279.7 | 3.0 | 304.0 | -8.9 |
| forward contracts | | | | |
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| Electricity derivates | 1.1 | 0.1 | 0.8 | 0.3 |
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| Total | 280.8 | 3.1 | 304.8 | -8.6 |
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Derivatives are used for hedging currency and interest rate risks as well as
risk of price fluctuation of electricity. Company applies hedge accounting on
derivatives used to hedge cash flows in Heavy Lifting projects.
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| INVESTMENTS | 1-12/2006 | 1-12/2005 |
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| Total (excl. Acquisitions) | 16.3 | 16.0 |
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21 (23)
KCI KONECRANES GROUP 2002-2006
--------------------------------------------------------------------------------
| Business development | IFRS | IFRS | IFRS | IFRS | FAS | FAS |
| | | 2006 | 2005 | 2004 | 2003 | 2002 |
--------------------------------------------------------------------------------
| Order intake | MEUR | 1,472. | 1,061. | 736.9 | 611.9 | 598.9 |
| | | 8 | 2 | | | |
--------------------------------------------------------------------------------
| Order book | MEUR | 571.6 | 432.1 | 298.8 | 211.2 | 206.0 |
--------------------------------------------------------------------------------
| Net sales | MEUR | 1,482. | 970.8 | 728.0 | 664.5 | 713.6 |
| | | 5 | | | | |
--------------------------------------------------------------------------------
| of which outside | MEUR | 1,396. | 883.7 | 653.5 | 599.4 | 634.2 |
| Finland | | 0 | | | | |
--------------------------------------------------------------------------------
| Export from Finland | MEUR | 519.6 | 334.2 | 273.4 | 258.9 | 256.9 |
--------------------------------------------------------------------------------
| Personnel on average | | 6,859 | 5,087 | 4,369 | 4,423 | 4,396 |
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| Capital expenditure | MEUR | 16.3 | 16.0 | 11.8 | 12.4 | 13.9 |
--------------------------------------------------------------------------------
| as a percentage of net | % | 1.1 | 1.6 | 1.6 | 1.9 | 1.9 |
| sales | | | | | | |
--------------------------------------------------------------------------------
| Research and | MEUR | 12.5 | 8.8 | 8.5 | 7.9 | 8.2 |
| development costs | | | | | | |
--------------------------------------------------------------------------------
| as % of Group net | % | 0.8 | 0.9 | 1.2 | 1.2 | 1.1 |
| sales | | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Profitability | | | | | | |
--------------------------------------------------------------------------------
| Net sales | MEUR | 1,482. | 970.8 | 728.0 | 664.5 | 713.6 |
| | | 5 | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Income from operations | MEUR | 105.5 | 49.3 | 31.3 | 24.8 | 40.9 |
| (before goodwill | | | | | | |
| amortization) | | | | | | |
--------------------------------------------------------------------------------
| as percentage of net | % | 7.1 | 5.1 | 4.3 | 3.7 | 5.7 |
| sales | | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Operating income | MEUR | 105.5 | 49.3 | 31.3 | 21.5 | 37.6 |
--------------------------------------------------------------------------------
| as percentage of net | % | 7.1 | 5.1 | 4.3 | 3.2 | 5.3 |
| sales | | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Income before | MEUR | 95.1 | 34.1 | 27.7 | 18.9 | 36.5 |
| extraordinary | | | | | | |
--------------------------------------------------------------------------------
| items as percentage of | % | 6.4 | 3.5 | 3.8 | 2.8 | 5.1 |
| net sales | | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Income before taxes | MEUR | 95.1 | 34.1 | 27.7 | 10.7 | 36.5 |
--------------------------------------------------------------------------------
| as percentage of net | % | 6.4 | 3.5 | 3.8 | 1.6 | 5.1 |
| sales | | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Net income | MEUR | 68.6 | 24.1 | 18.4 | 6.7 | 24.6 |
--------------------------------------------------------------------------------
| as percentage of net | % | 4.6 | 2.5 | 2.5 | 1.0 | 3.4 |
| sales | | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Key figures and | | | | | | |
| balance sheet | | | | | | |
--------------------------------------------------------------------------------
| Shareholders' equity | MEUR | 223.7 | 152.1 | 137.6 | 163.4 | 173.2 |
--------------------------------------------------------------------------------
| Balance Sheet | MEUR | 919.0 | 724.0 | 513.9 | 402.2 | 397.1 |
--------------------------------------------------------------------------------
| Return on equity | % | 36.5 | 16.6 | 12.5 | 7.5 | 14.2 |
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| Return on capital | % | 29.5 | 17.2 | 13.7 | 10.8 | 17.8 |
| employed | | | | | | |
--------------------------------------------------------------------------------
| Current ratio | | 1.4 | 1.1 | 1.1 | 1.5 | 1.6 |
--------------------------------------------------------------------------------
| Solidity | % | 28.3 | 23.7 | 29.1 | 42.6 | 45.5 |
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| Gearing | % | 57.3 | 88.1 | 80.2 | 27.8 | 19.1 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Shares in figures | | IFRS | IFRS | IFRS | FAS | FAS 2002 |
| | | 2006 | 2005 | 2004 | 2003 | |
--------------------------------------------------------------------------------
| Earnings per share. | EUR | 1.17 | 0.43 | 0.33 | 0.22 | 0.42 |
| basic | | | | | | |
--------------------------------------------------------------------------------
| Earnings per share. | EUR | 1.15 | 0.42 | 0.32 | 0.22 | 0.42 |
| diluted | | | | | | |
--------------------------------------------------------------------------------
| Equity per share | EUR | 3.77 | 2.66 | 2.44 | 2.81 | 3.03 |
--------------------------------------------------------------------------------
| Cash flow per share | EUR | 1.39 | 0.86 | 0.14 | 0.43 | 1.14 |
--------------------------------------------------------------------------------
| Dividend per share | EUR | 0.45* | 0.28 | 0.26 | 0.50 | 0.24 |
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| Dividend/earnings | % | 38.5 | 64.3 | 80.2 | 227.3 | 56.2 |
--------------------------------------------------------------------------------
| Effective dividend | % | 2.0 | 2.6 | 3.2 | 7.2 | 4.1 |
| yield | | | | | | |
--------------------------------------------------------------------------------
| Price/earnings | | 19.1 | 24.3 | 24.8 | 31.4 | 13.8 |
--------------------------------------------------------------------------------
22 (23)
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| Trading low / | EUR | 10.23 | 7.45/ | 6.80/ | 4.30/ | 4.95/ |
| high | | / | 10.49 | 8.88 | 7.35 | 9.21 |
| | | 22.33 | | | | |
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| Average share price | EUR | 15.04 | 8.94 | 7.70 | 5.62 | 7.19 |
--------------------------------------------------------------------------------
| Year-end market | MEUR | 1,322. | 594.1 | 458.4 | 387.6 | 333.2 |
| capitalization | | 0 | | | | |
--------------------------------------------------------------------------------
| Number traded | (1000) | 114,02 | 73,164 | 63,700 | 50,648 | 47,756 |
| | | 3 | | | | |
--------------------------------------------------------------------------------
| Stock turnover | % | 192.3 | 128.1 | 112.9 | 90.2 | 83.4 |
--------------------------------------------------------------------------------
* The Board's proposal to the AGM
CALCULATION OF KEY FIGURES
Return on equity (%) = (Income before extraordinary items - taxes) x 100 : Total
equity (average during the period)
Return on capital employed = (Income before taxes + interest paid + other
financing cost) x 100 : (Total amount of equity and liabilities - non-interest
bearing debts (average during the period))
Current ratio = Current assets : Current liabilities
Solidity (%)= Shareholders' equity x 100 : (Total amount of equity and
liabilities - advance payment received)
Gearing (%) = (Interest-bearing liabilities - liquid assets - loans receivable)
x 100 : Total equity
Earnings per share = (Net income +/- extraordinary items) : Average number of
shares outstanding
Earnings per share, diluted= (Net income +/- extraordinary items) : Average
fully diluted number of shares outstanding
Equity per share = Shareholders' equity : Number of shares outstanding
Cash flow per share = Net cash flow from operating activities : Average number
of shares outstanding
Effective dividend yield (%) = = Dividend per share x 100 : Share price at the
end of financial year
Price per earnings = Share price at the end of financial year : Earnings per
share
Year -end market capitalization = Number of shares outstanding multiplied by the
share price at the end of year
Average number of personnel = Calculated as average of number of personnel in
quarters
Note! The numbers are rounded to nearest EUR 0.1 million. The key figures are
calculated from exact data.
23 (23)
Events on 14 February, 2007
Analyst and press briefing
A luncheon presentation for media and analysts will be held at Helsinki World
Trade Center, Marski Hall at 12.00 noon Finnish Time (address Aleksanterinkatu
17).
Live webcast
A live webcast of the presentation for analysts and media will begin at 12.00
p.m. Finnish Time and can be followed at www.konecranes.com.
Dividend proposal
The Board of Directors proposes to the AGM that a dividend of EUR 0.45 per share
will be paid for the fiscal year 2006. The dividend will be paid to
shareholders, who are entered in the company's share register maintained by the
Finnish Central Securities Depository Ltd. on the record date for payments of
dividends on March 13, 2007. The actual payment of dividend will take place on
March 21, 2007.
Annual General Meeting
The Annual General Meeting 2007 will be held on Thursday, 8 March, 2007 at 11.00
a.m. at the Company's auditorium (address: Koneenkatu 8, 05830 Hyvinkää). A
press release on the decisions made at the AGM will be published upon conclusion
of the meeting.
The proposals for the AGM 2007 will be published on 14 February, 2007.
Internet
This report and presentation material is available on the Internet at
www.konecranes.com immediately after publication. A recording of the webcast
will be available on the Internet later on the same day.
Next report
Konecranes Interim Report January - March 2007 will be published on 27 April,
2007 10.00 a.m..
KCI KONECRANES PLC
Paul Lönnfors
IR Manager
FURTHER INFORMATION
Mr Pekka Lundmark, President and CEO, tel. +358-20 427 2000
Mr Teuvo Rintamäki, Chief Financial Officer, tel. +358-20 427 2040,
Mr Paul Lönnfors, IR Manager, tel. +358-20 427 2050
DISTRIBUTION
OMX Helsinki Stock Exchange
Media
