Tough quarter for Hiab
Cargotec, owner of Hiab, Kalmar and MacGregor, has issued its half year results. The group as a whole saw revenues for the six months decline nine percent to €1.61 billion, with a pre-tax loss of €8.4 million, compared to a profit in the same period last year of €87.7 million.
Moving on to Hiab, which achieved half year revenues of €544 million, 19 percent down on the same period last year. Although order intake for the six months was 24 percent lower at €519 million, leaving the order book at the end of June at €373 million, eight percent below where it was at the start of the year and 18 percent down on the year. Operating profit for the half year was €46.4 million, a drop of 42 percent on the same period last year. The company says that “comparable operating profit” was €54.4 million or 35 percent down on the year. We are not quite sure what exactly makes up the ‘comparable’ operating income, but clearly it aims to eliminate some of the direct additional costs involved with dealing with the pandemic.
In the second quarter Hiab sales declined 32 percent to €243 million, with order intake down 34 percent to €223 million. Operating profit was 62 percent lower at €18 million, in ‘comparable’ terms the operating profit was €24.3 million, a reduction of 52 percent.
Reach stacker and marine handling equipment manufacturer Kalmar saw half year revenues fall nine percent to €754 million with order intake down 33 percent to €627 million, leaving an order book of €885 million 16 percent lower than at the start of January. Operating profit was €11 million, an 83 percent reduction on the year, but in ‘comparable’ terms it was just 20 percent lower at €55.9 million.
In the second quarter revenues were down 18 percent on the year at €350 million with an operating loss of 13.1 million compared to a profit in the second quarter 2019 of €34.6 million. In comparable terms the profit was €30.3 million, a fall of 20 percent .
Cargotec chief executive Mika Vehviläinen said: “The second quarter began in a very exceptional situation with the rapid spread of the coronavirus in our main market areas. The virus, and in particular the resulting regulatory restrictions, had a strong impact on our business in the beginning of the second quarter. However, the operating environment improved as the quarter progressed. The operating hours we collect from our connected equipment also show that customers’ activity levels have been clearly rising since the drop in the beginning of the quarter.”
“Increased uncertainty and restrictions caused by the pandemic affected orders received, which decreased by 27 percent from the comparison period. Especially larger automation orders have been postponed. However, the orders received improved month by month after a weak April, which provides reason to believe that the bottom was reached in the second quarter for orders received.”
“Our ability to deliver products to customers was impacted by closures of our assembly units and lower utilisation rates of the assembly lines caused by the safety regulations as well as production downtime at our suppliers. However, the situation in our supply chain is normalising and all our assembly sites were back in operation by June. Our service and software sales were resilient despite the market circumstances. The Covid-19 crisis has also further increased customer interest in remote maintenance services.”
“Our determined investments in asset light operating model and developing the service and software business enabled us to keep comparable operating profit margins in Kalmar and Hiab at a reasonable level despite lower volumes. MacGregor's comparable operating profit improved from the comparison period but is still negative. I am confident that ongoing actions in MacGregor will improve the business area’s result also going forward. In these exceptional circumstances, our prompt response to the crisis, combined with our temporary savings measures, helped to keep our comparable operating profit reasonable at €43 million.”
"Despite the crisis, we systematically continued to execute our strategy. We increased our investments in digitalisation and projects to improve the cost and eco-efficiency of our products. During the quarter, we also continued to develop our supply chain and organisation with the divestment of our share in the RCI joint venture in China and closing down our assembly unit in India."
“In May, we introduced our climate ambition to be a 1.5 degree company. According to the commitment, we aim to reduce the CO2 emissions of raw material sourcing and product use phase by at least 50 percent from the 2019 levels by 2030. In addition, we aim to be carbon neutral in our own operations by 2030. In terms of electrically powered equipment, we are the forerunners, which gives us great business opportunities. Sales of our eco-efficiency portfolio increased slightly in the first half of the year compared to the previous year and accounted for 23 percent of our total sales.”
“Our strategic direction is correct, which is also reflected in our results. Our investments in the services and software business paid off also in the second quarter. Our software sales increased from the comparison period. The service and software sales share of our consolidated sales increased to 37 percent.”
“We start the second half of the year in a stable position. Our financial position is strong and at the end of the quarter, Cargotec’s total liquidity was €970 million. In addition, our order book is still at a good level. I would like to thank our employees, customers and partners for their excellent work in these exceptional circumstances.”
It is hard to comment on the second quarter, with most companies sideswiped by the rapid spread of Covid-19 and the resulting Lockdowns. Given that the company says that business was moving back to a more stable position by the end of June, this seems to be a pretty good result. However the next 12 months will remain uncertain and almost certainly depressed, but that applies to almost everyone.