KONECRANES PLC HALF-YEAR FINANCIAL REPORT JANUARY-JUNE 2019
KONECRANES PLC HALF-YEAR FINANCIAL REPORT JANUARY-JUNE July 25, 2019 at 9:00am
KONECRANES PLC HALF-YEAR FINANCIAL REPORT JANUARY-JUNE 2019
CONTINUED IMPROVEMENT IN GROUP ADJUSTED EBITA-%, SYNERGY SAVINGS PROGRAM COMPLETED AHEAD OF SCHEDULE
This release is a summary of Konecranes Plc’s January-June half year financial 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.
SECOND QUARTER HIGHLIGHTS
- Order intake EUR 822.7 million (760.9), +8.1 percent (+6.9 percent on a comparable currency basis), growth driven by Business Area Port Solutions.
- Service annual agreement base value increased 5.9 percent (4.9 percent in comparable currencies) to EUR 254.4 million (240.1). Service order intake EUR 253.2 million (256.8), -1.4 percent (-3.4 percent on a comparable currency basis).
- Record-high order book EUR 1,967.8 million (1,647.5) at the end of June, +19.4 percent (+18.9 percent on a comparable currency basis)
- Sales EUR 794.0 million (772.2), +2.8 percent (+1.7 percent on a comparable currency basis), growth in all Business Areas.
- Adjusted EBITA margin 8.4 percent (7.7) and adjusted EBITA EUR 67.0 million (59.8), reflecting synergy cost saving measures.
- Operating profit EUR 38.0 million (42.0), 4.8 percent of sales (5.4), restructuring costs totaling EUR 22.9 million (8.5).
- Earnings per share (diluted) EUR 0.25 (0.28).
- Run rate synergy-saving target of EUR 140 million achieved in the second quarter with cumulative one-time restructuring costs of EUR 139 million.
- Activities for further efficiency improvements already started, having created EUR 17 million in restructuring costs by the end of June, mostly relating to our factory in Wetter, Germany.
JANUARY-JUNE 2019 HIGHLIGHTS
- Order intake EUR 1,670.8 million (1,444.0), +15.7 percent (+14.1 percent on a comparable currency basis).
- Service annual agreement base value increased 5.9 percent (4.9 percent in comparable currencies) to EUR 254.4 million (240.1). Service order intake EUR 508.7 million (495.3), +2.7 percent (+0.1 percent on a comparable currency basis).
- Sales EUR 1,552.3 million (1,445.0), +7.4 percent (+6.0 percent on a comparable currency basis), growth in all three Business Areas.
- Adjusted EBITA margin 7.4 percent (6.7) and adjusted EBITA EUR 115.4 million (97.1), reflecting synergy cost-saving measures and sales growth.
- Operating profit EUR 65.3 million (65.8), 4.2 percent of sales (4.6), restructuring costs totaling EUR 37.8 million (12.5)
- Earnings per share (diluted) EUR 0.42 (0.38)
- Free cash flow EUR 34.5 million (-25.1)
- Net debt EUR 743.5 million (641.6) and gearing 60.5 percent (52.9), the increase resulting mainly from the implementation of the new IFRS 16 standard on leases, the impact of which on net debt was approximately EUR 120 million at the end of June.
DEMAND OUTLOOK
Within the industrial customer segments, the demand environment in Europe, particularly in Germany, is showing signs of weakening. The demand environment in North America is stable and continues on a healthy level, while Asia-Pacific continues to be stable.
Global container throughput continues on a good level and the prospects for orders related to container handling remain stable overall, but there are signs of hesitation in short-term 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
| April – June | First half year | |||||||
| 4-6/ 2019 | 4-6/ 2018 | Change % | 1-6/ 2019 | 1-6/ 2018 | Change % | R12M | 2018 | |
| Orders received, MEUR | 822.7 | 760.9 | 8.1 | 1,670.8 | 1,444.0 | 15.7 | 3,317.1 | 3,090.3 |
| Order book at end of period, MEUR | 1,967.8 | 1,647.5 | 19.4 | 1,715.4 | ||||
| Sales total, MEUR | 794.0 | 772.2 | 2.8 | 1,552.3 | 1,445.0 | 7.4 | 3,263.4 | 3,156.1 |
| Adjusted EBITDA, MEUR 1 | 92.6 | 77.5 | 19.5 | 164.7 | 132.7 | 24.1 | 357.7 | 325.7 |
| Adjusted EBITDA, % 1 | 11.7% | 10.0% | 10.6% | 9.2% | 11.0% | 10.3% | ||
| Adjusted EBITA, MEUR 2 | 67.0 | 59.8 | 12.0 | 115.4 | 97.1 | 18.9 | 275.4 | 257.1 |
| Adjusted EBITA, % 2 | 8.4% | 7.7% | 7.4% | 6.7% | 8.4% | 8.1% | ||
| Adjusted operating profit, MEUR 1 | 60.9 | 50.5 | 20.6 | 103.0 | 78.3 | 31.7 | 244.4 | 219.6 |
| Adjusted operating margin, % 1 | 7.7% | 6.5% | 6.6% | 5.4% | 7.5% | 7.0% | ||
| Operating profit, MEUR | 38.0 | 42.0 | -9.6 | 65.3 | 65.8 | -0.8% | 165.7 | 166.2 |
| Operating margin, % | 4.8% | 5.4% | 4.2% | 4.6% | 5.1% | 5.3% | ||
| Profit before taxes, MEUR | 27.9 | 31.4 | -11.0 | 46.2 | 42.8 | 7.9 | 142.1 | 138.7 |
| Net profit for the period, MEUR | 20.1 | 22.4 | -10.1 | 33.3 | 30.6 | 8.6 | 101.0 | 98.3 |
| Earnings per share, basic, EUR | 0.25 | 0.28 | -10.9 | 0.42 | 0.38 | 8.4 | 1.32 | 1.29 |
| Earnings per share, diluted, EUR | 0.25 | 0.28 | -10.9 | 0.42 | 0.38 | 8.4 | 1.32 | 1.29 |
| Interest-bearing net debt, Equity, % | 60.5% | 52.9% | 42.5% | |||||
| Net Debt / Adjusted EBITDA, R12M 1 | 2.0 | 2.1 | 1.7 | |||||
| Return on capital employed, % | 7.8% | 7.9% | ||||||
| Adjusted return on capital employed, % 3 | 13.1% | 12.5% | ||||||
| Free cash flow, MEUR | 6.5 | -22.9 | 34.5 | -25.1 | 132.7 | 73.1 | ||
| Average number of personnel during the period | 16 035 | 16 265 | -1.4 | 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
4 See also note 4 in the summary financial statement for additional info
President and CEO Panu Routila:
The second quarter marked a key milestone in the integration of Terex MHPS. We reached the target of EUR 140 million in run-rate cost synergies, six months ahead of our original plan. The related restructuring costs landed at EUR 139 million, in line with our guidance, and the restructuring-related CAPEX at EUR 15 million, which is clearly below our earlier estimate of EUR 30 million. This completes the synergy savings program, which started at the beginning of 2017.
While the original synergy savings program has come to an end, we continue to drive further efficiency improvements. Some of these activities are already ongoing, having so far created approximately EUR 17 million in restructuring costs. We expect the annual savings to equal the related restructuring costs, and we expect these to benefit our P&L from Q4 onwards, with a full bottom-line impact by mid-2021.
The majority of the above-mentioned ongoing efficiency improvements relate to our factories in Wetter and Vernouillet. We made good progress at both sites in Q2: In Vernouillet, we have now reached an agreement with local employee representatives on the closing of the factory in 2020. In Wetter, we expect a significant part of the planned headcount reductions to take place during the second half of 2019.
Turning to the result, Group adjusted EBITA increased to EUR 67 million in Q2, up by 12 percent year-on-year. The Group adjusted EBITA margin improved year-on-year by 0.7 pp to 8.4 percent, mainly due to Business Area Service, where the adjusted EBITA margin increased 1.6 pp to 16.1 percent. We have improved the Group’s adjusted profitability consistently throughout the integration period and expect the margin expansion to continue going forward. In full-year 2019 the rate of improvement will be slightly lower than in the past couple of years, primarily due to two reasons.
First, despite having reached the agreements in both Wetter and Vernouillet, the ongoing reductions are likely to impact our output and profitability until the end of 2019. This will weigh on our sales and profitability mainly in Business Area Industrial Equipment, but also in Business Area Service.
Second, the global macroeconomic environment showed signs of deterioration as the second quarter progressed. The Group’s comparable order growth was approximately 7 percent year-on-year in Q2, driven by Business Area Port Solutions. On the industrial side, however, weakening PMIs and continued uncertainty in the global economy began to impact our customers’ investment appetite, especially in EMEA – and Germany in particular. This will affect both our operating leverage as well as mix, primarily within Business Area Industrial Equipment.
In Industrial Equipment, total external orders declined year-on-year in Q2, mainly due to lower order intake for components globally. This will impact our mix in the coming quarters. In addition, order intake for standard cranes declined primarily in EMEA, where order intake was particularly low in Germany. However, order intake for process cranes continued strong in the second quarter. Furthermore, we continued to record solid order growth for standard cranes in the Americas.
In Business Area Service, on a comparable currency basis, the annual value of the agreement base grew in Q2 by nearly 5 percent year-on-year, showing the success of our strategy execution. However, the overall order intake declined year-on-year as orders for modernization projects fell across all regions, particularly in EMEA. Order intake excluding modernizations grew both in the Americas and APAC but was approximately flat in EMEA.
We expect the order intake of Service to return to a growth path in Q3, but the lower level of modernization projects will make it challenging to accelerate our comparable currency order growth rate from 2018. The full-year sales growth with comparable currencies is expected to outpace the growth rate recorded last year. Moreover, the long-term growth opportunity in Service following the acquisition of MHPS has not changed.
In Business Area Port Solutions, the prospects for orders remain stable, despite hesitation in short-term decision making among some of our customers. In Q2, the order intake growth in Port Solutions was over 30 percent year-over-year, thanks to good order intake across several product categories.
We remain committed to reaching our post integration target of 11 percent Group adjusted EBITA margin. However, given that the macroeconomic uncertainty is likely to be a headwind to us also in the coming quarters, it can become a challenge to reach the target already in 2020. While the margin performance of Service and Port Solutions has been well in line with our expectations, we are behind our targeted profitability in Industrial Equipment. Furthermore, weakening mix as a result of lower relative share of components will weigh on the adjusted EBITA margin of Industrial Equipment next year. Consequently, we will continue to drive further efficiency improvements in Industrial Equipment and remain confident in our ability to further improve the profitability of each Business Area.
ANALYST AND PRESS BRIEFING
An analyst and press conference will be held at the restaurant Savoy’s Salikabinetti (address: Eteläesplanadi 14, Helsinki) on July 25, 2019, at 11.00 am Finnish time. The half year financial report will be presented by Konecranes’ President and CEO Panu Routila and CFO Teo Ottola.
A live webcast of the conference will begin at 11.00 am at www.konecranes.com. Please see the stock exchange release dated July 11, 2019 for the conference call details.
NEXT REPORT
Konecranes Plc plans to publish January-September Interim Report 2019 on October 24, 2019.
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 16,100 employees in 50 countries. Konecranes shares are listed on the Nasdaq Helsinki (symbol: KCR).
DISTRIBUTION
Nasdaq Helsinki
Major media
www.konecranes.com