KONECRANES PLC INTERIM REPORT JANUARY-MARCH 2020 APRIL 29, 2020 9:00 A.M. EET
FOCUS ON SAFETY AND CUSTOMERS’ MISSION CRITICAL OPERATIONS
This release is a summary of Konecranes Plc’s Interim Report January-March 2020. The complete report is attached to this release in pdf format and is also available on
Konecranes’ website at www.konecranes.com.
This report contains comparison to Konecranes’ historical figures which are Konecranes’ stand-alone financial information as reported for 2019. These do not include figures for MHE-Demag as the acquisition of MHE-Demag was completed in January 2020. The combined operations of Konecranes and MHE-Demag started on January 2, 2020.
To provide a basis for comparison, this Report contains under separate headings comments to the financial performance of MHE-Demag for the year 2020.
Figures in brackets, unless otherwise stated, refer to the same period a year earlier.
FIRST QUARTER HIGHLIGHTS
- Order intake EUR 737.0 million (848.1), -13.1 percent (-13.4 percent on a comparable currency basis), driven by order intake decline in Business Areas Industrial Equipment and Port Solutions, partly offset by growth in Business Area Service. Excluding MHE-Demag, order intake declined 17.4 percent
- Service annual agreement base value increased 11.4 percent (13.1 percent in comparable currencies) to EUR 281.9 million (253.1). Service order intake EUR 266.1 million (255.4), +4.2 percent (+3.4 percent on a comparable currency basis). Excluding MHE-Demag, the annual agreement base value increased 6.5 percent while order intake in Service declined 2.9 percent
- Order book EUR 1,961.3 million (1,877.6) at the end of March, +4.5 percent (+5.4 percent on a comparable currency basis). Excluding MHE-Demag, the order book declined 2.6 percent
- Sales EUR 769.6 million (758.2), +1.5 percent (+1.2 percent on a comparable currency basis), driven by growth in Business Areas Service and Port Solutions. Excluding MHE-Demag, sales declined 1.3 percent
- Adjusted EBITA margin 2.7 percent (6.4) and adjusted EBITA EUR 21.1 million (48.3); the decrease in the adjusted EBITA margin was primarily due to an estimated cost overrun of EUR 18 million related to the execution of a port crane project in Business Area Port Solutions, as well as further costs incurred in closing the process crane project which affected our profitability in Q4. Excluding MHE-Demag, the adjusted EBITA was EUR 20.8 million and the adjusted EBITA margin was 2.8 percent.
- Operating profit EUR 7.8 million (27.3), 1.0 percent of sales (3.6)
- Earnings per share (diluted) EUR 0.14 (0.17)
- Free cash flow EUR 53.8 million (28.0)
- Net debt EUR 771.3 million (649.0) and gearing 61.7 percent (53.8), increase resulting mainly from the acquisition of MHE-Demag
DEMAND OUTLOOK
The worldwide demand picture remains subject to significant volatility.
Due to the Coronavirus (COVID-19) pandemic, the demand environment within the industrial customer segments is deteriorating in Europe and North America compared to Q1. While China is showing early signs of improving demand conditions from early 2020, demand environment in the rest of Asia-Pacific is weakening.
Global container throughput has declined sharply and many port operators are postponing decision-making in the current environment. However, long-term prospects related to container handling remain good overall.
FINANCIAL GUIDANCE
Due to the rapidly evolving situation as a result of the Coronavirus (COVID-19) pandemic, Konecranes considers that it is too early to make reasoned estimates or provide financial guidance for 2020.
KEY FIGURES
| January - March | |||||
| 1-3/ 2020 | 1-3/ 2019 | Change % | R12M | 1-12/ 2019 | |
| Orders received, MEUR | 737.0 | 848.1 | -13.1 | 3,056.2 | 3,167.3 |
| Order book at end of period, MEUR | 1,961.3 | 1,877.6 | 4.5 | 1,824.3 | |
| Sales total, MEUR | 769.6 | 758.2 | 1.5 | 3,338.2 | 3,326.9 |
| Adjusted EBITDA, MEUR 1 | 46.0 | 72.1 | -36.2 | 347.1 | 373.2 |
| Adjusted EBITDA, % 1 | 6.0% | 9.5% | 10.4% | 11.2% | |
| Adjusted EBITA, MEUR 2 | 21.1 | 48.3 | -56.4 | 247.8 | 275.1 |
| Adjusted EBITA, % 2 | 2.7% | 6.4% | 7.4% | 8.3% | |
| Adjusted operating profit, MEUR 1 | 12.1 | 42.2 | -71.4 | 220.3 | 250.4 |
| Adjusted operating margin, % 1 | 1.6% | 5.6% | 6.6% | 7.5% | |
| Operating profit, MEUR | 7.8 | 27.3 | -71.5 | 129.2 | 148.7 |
| Operating margin, % | 1.0% | 3.6% | 3.9% | 4.5% | |
| Profit before taxes, MEUR | 16.1 | 18.3 | -12.1 | 116.3 | 118.5 |
| Net profit for the period, MEUR | 11.5 | 13.2 | -12.7 | 81.1 | 82.8 |
| Earnings per share, basic, EUR | 0.14 | 0.17 | -14.7 | 1.00 | 1.03 |
| Earnings per share, diluted, EUR | 0.14 | 0.17 | -14.7 | 1.00 | 1.03 |
| Interest-bearing net debt / Equity, % | 61.7% | 53.8% | 52.6% | ||
| Net Debt / Adjusted EBITDA, R12M 1 | 2.2 | 1.9 | 1.8 | ||
| Return on capital employed, % | 6.2% | 6.3% | |||
| Adjusted return on capital employed, % 3 | 11.1% | 12.7% | |||
| Free cash flow, MEUR | 53.8 | 28.0 | 174.3 | 148.5 | |
| Average number of personnel during the period | 17,023 | 16,024 | 6.2 | 16,104 | |
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
President and CEO Rob Smith:
The world changed dramatically during the first quarter of 2020. Directly or indirectly, every country and business around the world has increasingly felt the impact of the COVID-19 coronavirus pandemic. Our focus is on the safety of our employees and on supporting the essential mission-critical operations of our customers worldwide. Our unwavering focus on these objectives ensures that our employees, our customers and our business emerge from this unprecedented period safely and in excellent health.
As the virus rapidly spread around the world, countries began to impose extensive restrictions on the daily conduct of people and businesses. The global economy has suffered as a result, with no clear consensus on what the recovery will look like; many countries have yet to see a peak in the number of infections, and many forecasts are measuring a recovery in terms of years. We have been preparing for multiple recovery scenarios with an intense focus on ensuring our cost base is fully aligned with the reduced and uncertain demand environment.
In Q1, many of Konecranes’ customers limited access to their premises, affecting our ability to perform on-site work and making it especially challenging to deliver and install new equipment and perform on-site service operations. While our reported sales increased slightly year-on-year due to the inclusion of our recent MHE-Demag acquisition, comparable sales versus a year ago declined approximately 1.3 percent. In Q2, we expect the coronavirus impact on sales to be particularly negative.
Our own operations also have been affected by the pandemic. Material deliveries have become more challenging. Also, some of our factories were interrupted during parts of the first quarter. At the end of April, our factories in India, Malaysia, Philippines and South Africa are shut down. At this point we expect the impact from these disruptions to our global supply operations to be limited, largely as our European component factories have continued to run without interruptions.
The pandemic is impacting the demand for Konecranes’ products and services. In Q1, Group order intake including MHE-Demag declined approximately 13 percent year-on-year. While the coronavirus impact was particularly clear in our industrial businesses, the decline in Business Area Port Solutions was primarily due to the large Hadarom greenfield automation deal booked in Q1 2019, making it a tough year-on-year comparison. Due to the crisis, we expect order intake in Q2 to decline sequentially in all of our three Business Areas.
Konecranes is playing a vital role in safeguarding the continuous flow of food, medical supplies and other essential materials as we fight this crisis. In Service, some customers who have slowed their own factory operations are scheduling larger overhauls. As a bright spot in Q1, on a comparable currency basis, the annual value of the agreement base grew 8.1 percent year on year excluding MHE-Demag. We have not seen cancellations of significant orders in any of our Business Areas, and while many port operators are postponing decision-making, thus far we have not seen cancellations of planned port investments.
While the coronavirus pandemic is weighing on profitability, in Q1 the Group adjusted EBITA margin was mostly affected by one-off cost items in Port Solutions and Industrial Equipment. The Group adjusted EBITA margin of 2.7 percent was down from 6.4 percent in the year-ago quarter. Port Solutions had an estimated one-time cost overrun of EUR 18 million in a port crane project in the US. The profitability in Industrial Equipment was weighed by further costs incurred in closing the process crane project which affected our profitability in Q4.
We expect a significant sequential sales decline in Q2 and are adjusting our cost base across all elements of our business to be aligned with the reduced sales levels and uncertain demand. These actions will benefit us already in Q2 and we expect the adjusted EBITA margin to improve quarter-on-quarter.
Beyond Q2, turning around the process crane business and improving the profitability of the Industrial Equipment business is one of my key focus areas. Additionally, we are concentrating on supply chain operations performance, delivering manufacturing efficiencies and driving procurement savings, both direct and indirect.
Konecranes is the global leader in our industry with an unparalleled original equipment and service offering in terms of technology, footprint and market position, giving us a unique competitive advantage.
As we navigate our way through the crisis, the safety and well-being of our employees and supporting the essential mission-critical operations of our customers are our highest priority. We have a healthy balance sheet and liquidity position and will emerge from this crisis the same way we entered it: as the industry leader.
ANALYST AND PRESS BRIEFING
A live international telephone conference for analysts, investors and media will be held on April 29, 2020, at 11:00 a.m. Finnish time. The Interim Report will be presented by Konecranes’ President and CEO Rob Smith and CFO Teo Ottola.
Please see the press release dated April 15, 2020 for the conference call details.
NEXT REPORT
Konecranes Plc plans to publish Half Year Financial Report January-June 2020 on July 24, 2020.
KONECRANES PLC
Eero Tuulos
Vice President, Investor Relations
FURTHER INFORMATION
Eero Tuulos, Vice President, Investor Relations, tel. +358 (0) 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 2019, Group sales totaled EUR 3.33 billion. Including MHE-Demag, the Group has around 18,000 employees in 50 countries. Konecranes shares are listed on the Nasdaq Helsinki (symbol: KCR).
DISTRIBUTION
Nasdaq Helsinki
Major media
www.konecranes.com