Release Date: July 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Record high comparable EBITDA margin of 14.3% across all business segments.
- Sales increased by 13% year-over-year, reaching over EUR 1 billion.
- Strong order intake in service and industrial equipment segments.
- Improved profitability driven by higher volumes, price inflation management, and strong strategy execution.
- Positive market outlook with stable demand in industrial customer segments and strong global container throughput for port solutions.
Negative Points
- Order intake down 11.5% compared to the previous year, despite being the strongest in the last four quarters.
- Manufacturing capacity utilization rate down in the EU and flat in the US on a year-over-year basis.
- Decrease in order intake for process cranes due to longer decision-making times influenced by high interest rates.
- Net working capital increased, leading to lower free cash flow for the quarter.
- Order book down 12% year-over-year, indicating potential challenges in maintaining future sales growth.
Q & A Highlights
Q: How should we think about the evolution of free cash flow in the second half of the year?
A: Net working capital increased from Q1 to Q2, generating lower cash flow for the second quarter. This is in line with normal fluctuations. The target is to stay below 12% of rolling 12-month sales, and we are currently at 11.2%. There are no major changes in terms and conditions with customers, so no structural change is expected. The balance between inventory and advanced payments will depend on project timing.
Q: Do you think the current pricing level is sustainable, and do you have major raw material benefits that might not be repeated going forward?
A: We expect to maintain a small positive delta from net inflation pricing impact. This has been the case for several quarters and should continue. The second quarter saw a better mix, particularly in ports, which may not be repeated exactly. Raw material costs have been going down, providing some benefit, but this is not a structural gain and will even out over time.
Q: Will the slower orders on process cranes versus components and standard cranes have a major positive mix impact on margins going forward?
A: The mix change in order intake will not have a significant effect on margins going forward. The effect gets diluted due to longer lead times. For ports, the mix is more about the type of deliveries in each quarter, which will vary. The underlying continuous business remains stable.
Q: What were the main reasons behind the guidance upgrade in June?
A: Several factors contributed, including good volume leverage, positive mix, favorable price inflation situation, and a clean quarter with no performance issues. Additionally, a legal case decided in our favor added EUR4 million to the result. We expect improvement year-on-year for Q3 but not at the same level as Q2.
Q: How do you see the number of employees evolving next year given the current order book and new modular products?
A: We are not generally increasing the number of employees. The increase seen is aligned with acquisitions. We have shown significant internal efficiency improvements. The order intake is lumpy, especially in process cranes and ports, but we are positive about the second half of the year.
Q: Do you expect any meaningful change in the mix in revenues in the second half of this year compared to Q2?
A: We expect a similar mix for the rest of the year as in Q2. The mix was slightly positive for the group, flat in service, slightly down in industrial equipment, and positive in ports. There will be no significant changes.
Q: What is the impact of the newly announced 25% US tariffs on SDS cranes on your business?
A: The tariff applies from August 1, 2024, and affects deliveries from China to the US. The cost related to this is 100% taken by the customer according to our contracts. We can produce similar products in other regions to avoid the tariff, putting us in a competitive position.
Q: How much of the targeted earnings improvement from the efficiency improvement program in industrial business have you achieved?
A: The program aims for EUR40 million to EUR50 million profit improvement by the end of 2025. In 2022, we achieved EUR1.5 million, in 2023 EUR11 million, and we estimate another EUR11 million this year. The rest will follow in subsequent years.
Q: How do you see the end market conditions and any particular strengths or weaknesses?
A: North America is performing very well, Europe is somewhat improving, and APAC is competitive but stable. Strong sectors include power, logistics, general manufacturing, automotive, aerospace, green steel, and defense. Pulp and paper have been weak but show some signs of recovery.
Q: How do you see the short-cycle product demand going forward?
A: The environment is expected to remain stable, similar to current conditions. No major changes are anticipated. Short-cycle products in ports show mixed trends, but overall stability is expected.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
