Konecranes Plc Interim Report January-September 2017
KONECRANES PLC INTERIM REPORT OCTOBER 25, 2017 at 09.00 EET
PROFITABILITY IMPROVEMENT CONTINUED, PORT SOLUTIONS ORDER INTAKE STRONG
SALES GUIDANCE SLIGHTLY REDUCED
This release is a summary of Konecranes Plc’s Interim Report January-September 2017. The complete report is attached to this release in pdf format and is also available on Konecranes’ website at www.konecranes.com.
Figures in brackets, unless otherwise stated, refer to the same period a year earlier.
THIRD QUARTER HIGHLIGHTS (COMPARISON TO COMBINED COMPANY FIGURES*)
- Order intake EUR 750.1 million (685.3), +9.4 percent
- Order book EUR 1,656.6 million (1,467.9) at end-September, +12.9 percent
- Sales EUR 746.2 million (803.8), -7.2 percent
- Adjusted EBITA EUR 54.4 million (47.1), 7.3 percent of sales (5.9)
JANUARY-SEPTEMBER HIGHLIGHTS (COMPARISON TO COMBINED COMPANY FIGURES*)
- Order intake EUR 2,274.8 million (2,103.8), +8.1 percent
- Sales EUR 2,226.4 million (2,307.4), -3.5 percent
- Adjusted EBITA EUR 136.3 million (98.3), 6.1 percent of sales (4.3)
JANUARY-SEPTEMBER HIGHLIGHTS (COMPARISON TO HISTORICAL KONECRANES FIGURES*)
- Order intake EUR 2,274.8 million (1,325.6), +71.6 percent
- Order book EUR 1,656.6 million (987.7) at end-September, +67.7 percent
- Sales EUR 2,226.4 million (1,505.0), +47.9 percent
- Adjusted EBITA EUR 136.3 million (91.7), 6.1 percent of sales (6.1)
- Operating profit EUR 262.9 million (53.9), 11.8 percent of sales (3.6)
- Earnings per share (diluted) EUR 2.62 (0.46)
- Free cash flow EUR 166.4 million (29.7)
- Net debt EUR 566.4 million (183.5) and interest-bearing net debt to equity 45.1 percent (44.0)
*This Report contains comparisons to both the Konecranes’ historical figures and the combined company figures. Historical figures relate to Konecranes’ stand-alone financial information as reported for 2016 (including the divested STAHL CraneSystems business).
To provide a basis for comparison, this Report also contains, under separate headings, the comparisons to combined company’s financial information on an unaudited basis estimated by the management for 2016. This financial information has been prepared to reflect the financial results of the combined company as if it had been operating as such for the full financial year 2016. The comparable combined company’s operations comprise Konecranes’ operations without the divested STAHL CraneSystems business, but include the acquired MHPS business. See “Basis of preparation for comparable combined company” for further information.
Comparable combined company’s financial information applies an assumed situation and does not therefore reflect the true financial position or the result of the company during 2016. The previous year’s order book for MHPS included deliveries for the next 12 months only.
MARKET OUTLOOK
Economic indicators related to manufacturing industries continue to be strong. Demand situation in Europe is stable within the industrial customer segments. Business activity in the North American manufacturing industry remains mixed. Demand in Asia-Pacific is showing signs of bottoming out. Global container throughput growth has improved and the prospects for the small and medium-sized orders related to container handling have strengthened.
NEW FINANCIAL GUIDANCE
The sales in 2017 are expected to be lower than the comparable combined company sales in 2016 (EUR 3,278 million). We expect the adjusted EBITA to total EUR 205-225 million in 2017 (comparable combined company’s adjusted EBITA was EUR 184 million in 2016).
The comparable combined company’s operations comprise Konecranes’ operations without the divested STAHL CraneSystems business, but include the acquired MHPS business. See the stock exchange releases published on April 10, 2017 and April 13, 2017 for further financial information including the basis of preparation for comparable combined company.
PREVIOUS FINANCIAL GUIDANCE
The sales in 2017 are expected to be close to or lower than the comparable combined company sales in 2016 (EUR 3,278 million). We expect the adjusted EBITA to total EUR 205-225 million in 2017 (comparable combined company’s adjusted EBITA was EUR 184 million in 2016).
The comparable combined company’s operations comprise Konecranes’ operations without the divested STAHL CraneSystems business, but include the acquired MHPS business. See the stock exchange releases published on April 10, 2017 and April 13, 2017 for further financial information including the basis of preparation for comparable combined company.
KEY FIGURES (comparisons to historical figures)
| Third quarter | January - September | |||||||
| 7-9/ 2017 | 7-9/ 2016 | Change % | 1-9/ 2017 | 1-9/ 2016 | Change% | R12M | 2016 | |
| Orders received, MEUR | 750.1 | 420.3 | 78.5 | 2,274.8 | 1,325.6 | 71.6 | 2,869.9 | 1,920.7 |
| Order book at end of period, MEUR | 1,656.6 | 987.7 | 67.7 | 1,038.0 | ||||
| Sales total, MEUR | 746.2 | 517.6 | 44.2 | 2,226.4 | 1,505.0 | 47.9 | 2,839.7 | 2,118.4 |
| Adjusted EBITDA, MEUR 1 | 72.0 | 50.1 | 43.7 | 191.5 | 126.8 | 51.0 | 256.3 | 191.6 |
| Adjusted EBITDA, % 1 | 9.7% | 9.7% | 8.6% | 8.4% | 9.0% | 9.0% | ||
| Adjusted EBITA, MEUR 2 | 54.4 | 38.9 | 40.0 | 136.3 | 91.7 | 48.6 | 189.4 | 144.8 |
| Adjusted EBITA, % 2 | 7.3% | 7.5% | 6.1% | 6.1% | 6.9% | 6.8% | ||
| Adjusted operating profit, MEUR 1 | 44.7 | 37.9 | 18.0 | 106.9 | 88.7 | 20.6 | 159.0 | 140.8 |
| Adjusted operating margin, % 1 | 6.0% | 7.3% | 4.8% | 5.9% | 5.6% | 6.6% | ||
| Operating profit, MEUR | 6.8 | 25.0 | -72.7 | 262.9 | 53.9 | 387.7 | 293.9 | 84.9 |
| Operating margin, % | 0.9% | 4.8% | 11.8% | 3.6% | 12.2% | 4.0% | ||
| Profit before taxes, MEUR | -4.8 | 21.3 | -122.7 | 230.9 | 36.6 | 530.2 | 256.3 | 62.1 |
| Net profit for the period, MEUR | -4.2 | 15.8 | -126.8 | 203.2 | 26.7 | 659.7 | 214.0 | 37.6 |
| Earnings per share, basic, EUR | -0.06 | 0.27 | -121.6 | 2.62 | 0.46 | 475.7 | 2.81 | 0.64 |
| Earnings per share, diluted, EUR | -0.06 | 0.27 | -121.6 | 2.62 | 0.46 | 475.7 | 2.81 | 0.64 |
| Interest-bearing net debt, Equity, % | 45.1% | 44.0% | 29.1% | |||||
| Net Debt / Adjusted EBITDA, R12M 1 | 2.2 | 1.0 | 0.7 | |||||
| Return on capital employed, % | 23.2% | 10.3% | ||||||
| Adjusted return on capital employed, % 3 | 12.6% | 19.2% | ||||||
| Free cash flow, MEUR | -6.2 | 26.5 | 166.4 | 29.7 | 220.5 | 83.9 | ||
| Average number of personnel during the period | 15,307 | 11,509 | 33.0 | 11,398 | ||||
KEY FIGURES (comparisons to combined company figures)
| Third quarter | January - September | |||||||
| 7-9/ 2017 | 7-9/ 2016 | Change % | 1-9/ 2017 | 1-9/ 2016 | Change% | R12M | 2016 | |
| Orders received, MEUR | 750.1 | 685.3 | 9.4 | 2,274.8 | 2,103.8 | 8.1 | 3,196.3 | 3,025.3 |
| Order book at end of period, MEUR | 1,656.6 | 1,467.9 | 12.9 | 1,507.7 | ||||
| Sales total, MEUR | 746.2 | 803.8 | -7.2 | 2,226.4 | 2,307.4 | -3.5 | 3,197.4 | 3,278.4 |
| Adjusted EBITDA, MEUR 1 | 72.0 | 65.3 | 10.2 | 191.5 | 153.7 | 24.7 | 296.8 | 258.9 |
| Adjusted EBITDA, % 1 | 9.7% | 8.1% | 8.6% | 6.7% | 9.3% | 7.9% | ||
| Adjusted EBITA, MEUR 2 | 54.4 | 47.1 | 15.6 | 136.3 | 98.3 | 38.6 | 222.0 | 184.1 |
| Adjusted EBITA, % 2 | 7.3% | 5.9% | 6.1% | 4.3% | 6.9% | 5.6% | ||
| Average number of personnel during the period | 16,882 | 17,944 | -5.9 | 17,760 | ||||
1 Excluding adjustments, see also note 12 in the summary financial statements
2 Excluding adjustments and purchase price allocation amortization, see also note 12 in the summary financial statement
3 ROCE excluding adjustments, see also note 12 in the summary financial statements
President and CEO Panu Routila:
“The adjusted EBITA margin improvement continued strong during the third quarter of 2017. The comparable combined company adjusted EBITA margin expanded by 1.4 percentage points on a year-on-year basis, despite the sales that were lower than a year ago. The profitability improvement continued in Business Area Service, while the turnaround progressed in Industrial Equipment and Port Solutions. This indicates that the integration of MHPS is proceeding successfully and therefore improves our efficiency.
The comparable combined company orders received in the third quarter increased by 9.4 percent on a year-on-year basis. Similar to the first half of the year, the order intake growth was driven by Business Area Port Solutions. Once again, its orders received grew across the product portfolio suggesting that the cross-promotion of our extended offering seems to work well. The order book for most of our new Konecranes Gottwald and Konecranes Noell products continued to strengthen. However, the Business Area Ports Solutions’ order book for deliveries scheduled for the fourth quarter of 2017 is approximately EUR 50 million lower compared to the corresponding situation a year ago.
The order intake in Business Area Service and Business Area Industrial Equipment was lower than a year ago as we continued to prioritize focus on laying the foundation for the combined operations. This meant consolidation of operations in several countries and even discontinuation of some underperforming businesses. Moreover, the appreciation of the EUR/USD and severe weather in the U.S. affected the reported orders to some extent.
Group sales in the third quarter were 7.2 percent below the previous year on a comparable combined company basis. The decrease in the Business Area Port Solutions’ sales related to the timing of deliveries and exceptionally high sales of RTG cranes in the comparison period. The sales in Business Area Service and Business Area Industrial Equipment were affected by similar factors as the order intake, prioritizing the margin improvement through integration activities over the growth.
The third-quarter comparable combined company adjusted EBITA increased to EUR 54.4 million (47.1) and the adjusted EBITA margin improved to 7.3 percent (5.9). In Business Area Service, the adjusted EBITA margin increased by 1.2 percentage points thanks to the positive sales mix, better productivity, and lower fixed costs. In Business Area Industrial Equipment, the 3.4 percentage points’ improvement in the adjusted EBITA margin related mainly to the cost-saving measures implemented in 2016-2017, as well as successful deliveries. The adjusted EBITA margin in Business Area Port Solutions, up 1.5 percentage points on a year-on-year basis, was supported by cost-saving measures implemented in 2016-2017, improved delivery execution leading to better-than-expected margins from some completed projects, as well as sales growth in certain products.
The integration of MHPS is running ahead of our expectations. While maintaining the targeted EBIT level synergies of EUR 140 million p.a. by the end of 2019, we now expect to implement EUR 50 million (previously, EUR 45 million) synergies on a run-rate basis by the end of 2017. In the third quarter, we made progress in optimizing our manufacturing operations in several countries, most notably in India, Italy, and the U.S. Also, the combined organization is now well in place. In addition to finalizing the actions planned for the rest of 2017, we are working hard to build a good starting point for our integration activities in 2018, and to lay the ground for the growth initiatives that will be started gradually during 2018.”
ANALYST AND PRESS BRIEFING
An analyst and press conference will be held at HTC Keilaniemi (address: Keilaranta 15 B, Espoo) on October 25, 2017, at 11.00 a.m. Finnish time. The January-September Interim 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 a.m. at www.konecranes.com. Please see the stock exchange release dated October 4, 2017 for the conference call details.
BASIS OF PREPARATION FOR COMPARABLE COMBINED COMPANY
The comparable combined company financial information is based on management’s estimates and is for illustrative purposes only. The comparable combined company financial information gives an indication of the combined company's key figures assuming the activities were included in the same company from the beginning of 2016.
The comparable combined company financial information is based on a hypothetical situation and should not be viewed as pro forma financial information as the differences in accounting principles have not been taken into account. The unaudited comparable combined company financial information is based on Konecranes Group’s financial statements for the financial year 2016 (adjusted for restructuring costs, transaction costs and received insurance indemnity) according to IFRS and Terex Corporation’s (“Terex”) MHPS segment unaudited special purpose carve-out financial information for the financial year 2016 (adjusted for non-recurring items such as restructuring costs and impairments of goodwill and trademarks) according to USGAAP. The corporation allocations of Terex Group have been adjusted in MHPS income statement to illustrate the situation as the Group had been combined at the beginning of 2016.
Since the financial information for MHPS has been prepared on a carve-out basis, this does not necessarily reflect what the results of its operations would have been had MHPS operated as an independent company and had it presented stand-alone financial information under IFRS during the period provided. Moreover, the carve-out financial information may not be indicative of the MHPS’s future performance of the operating activities aggregated within Konecranes.
Konecranes is unable to present a reconciliation of the comparable combined company financial information as the MHPS’ financials have been calculated according to USGAAP and using different accounting principles than Konecranes and because Terex has categorized MHPS as a discontinued operation in 2016.
KONECRANES PLC
Miikka Kinnunen
Vice President, Investor Relations
FURTHER INFORMATION
Mr. Panu Routila, President and CEO, tel. +358 20 427 2000
Mr. Teo Ottola, Chief Financial Officer, tel. +358 20 427 2040
Mr. Miikka Kinnunen, Vice President, Investor Relations, tel. +358 20 427 2050
Mr. Mikael Wegmüller, Vice President, Marketing and Communications, tel. +358 20 427 2008
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 2016, Group (comparable combined company) sales totaled EUR 3,278 million. The Group has 16,600 employees at 600 locations in 50 countries. Konecranes shares are listed on the Nasdaq Helsinki (symbol: KCR).
DISTRIBUTION
Nasdaq Helsinki
Media
www.konecranes.com