Release Date: October 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Konecranes Oyj (KNCRF, Financial) reported a 12.5% year-on-year increase in orders in comparable currencies, indicating strong demand.
- The company achieved an all-time high EBITA margin of 13.4% for the third quarter, driven by pricing strategies, higher volumes, and strong strategy execution.
- Excellent cash flow was reported at EUR 187 million for the quarter, showcasing effective financial management.
- Port solutions showed a strong order intake, with a 43% increase year-on-year, driven by mobile harbor cranes, straddle carriers, and automated guided vehicles.
- The service segment saw a 4.5% increase in order intake and a 7.2% increase in sales year-on-year, with growth in all regions and both field service and parts.
Negative Points
- The industrial equipment segment experienced a 2.7% decline in external orders year-on-year, particularly in process cranes due to delayed decision-making.
- The order book decreased by 12% year-on-year in comparable currencies, indicating potential future revenue challenges.
- Sequential decline in profitability was noted, despite strong overall performance, highlighting potential volatility.
- The Americas and APAC regions saw a decrease in order intake, which could impact regional performance.
- Interest rates are impacting customer decision-making, particularly in process cranes, leading to order delays.
Q & A Highlights
Q: Can you provide more color on pricing trends and raw material impacts, especially in the equipment divisions? Are you continuing to increase prices, and what are the raw material trends?
A: Anders Svensson, CEO: Our main ambition with pricing is to compensate for inflation levels. We don't adjust prices continuously unless necessary. We saw some raw material benefits in Q2 and Q3, particularly in ports and industrial equipment. We believe we are in a price-leading position and will continue to adjust prices to compensate for inflation.
Q: What are you seeing in the service segment regarding the utilization of your installed base across regions?
A: Anders Svensson, CEO: We use Truconnect to measure equipment utilization globally. In the industrial sector, we see fewer moves compared to last year, while ports show more moves, aligning with increased container throughput. Despite this, we've maintained strong service order intake and sales, indicating potential market share gains.
Q: Regarding the port side, can you discuss the revenue outlook for 2025, considering the book-to-bill ratio and backlog?
A: Anders Svensson, CEO: We don't disclose specific order book details until after Q4. The order book is 400 million below last year, mainly due to fewer long-term projects. However, this might not significantly impact 2025 deliveries. The mix of products and capacity adjustments are business as usual for us.
Q: Can you elaborate on your M&A strategy and the current environment for acquisitions?
A: Anders Svensson, CEO: Our M&A strategy focuses on expanding our presence, including bolt-on service acquisitions and geographical expansions. We also consider diversifying our product offerings. We have a prioritized funnel of potential targets and aim to continue with bolt-on acquisitions. The current environment may offer opportunities to acquire underperforming companies at lower multiples.
Q: How are you managing pricing in new orders compared to a year ago?
A: Anders Svensson, CEO: We are not taking orders at lower prices than a year ago. The gap between pricing and raw material costs is narrowing, but we continue to take orders that are accretive to our current pricing levels.
Q: What are the main drivers behind your strong order intake despite a challenging environment?
A: Anders Svensson, CEO: Several initiatives have improved our competitiveness, such as better lead times and market share gains. Demand drivers like digitalization, automation, and reshoring also work in our favor. The North American market remains strong, benefiting us due to our high market share there.
Q: Can you update us on the progress of setting up ship-to-shore crane production in the US?
A: Anders Svensson, CEO: We are setting up a network of partners to build ship-to-shore cranes in the US. While we haven't built any yet or received orders, we are preparing to qualify for funding as needed. Building in the US is more expensive, but we are adapting to meet customer demands.
Q: What is your outlook on wage inflation for 2025, and how are salary negotiations progressing?
A: Teo Ottola, CFO: Year-to-date wage inflation is around 5%, similar to last year. We expect it to be slightly lower in 2025 due to decreasing inflation rates. However, the exact impact will depend on ongoing negotiations in various countries.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
