CARGOTEC CORPORATION, FINANCIAL STATEMENTS REVIEW 2018, 8 FEBRUARY 2019 AT 8.30 AM EET
Cargotec's financial statements review 2018: Strong year in orders received, profit below our target
Kalmar's orders received and operating profit increased
Hiab's demand continued to be strong, but operating profit declined
MacGregor's orders received increased, but the market environment remained challenging
The figures in this financial statements review review are based on Cargotec Corporation's audited 2018 financial statements.
October-December 2018 in brief: Orders received continued to develop strongly
Orders received increased by 26 percent and totalled EUR 991 (784) million. Orders received grew in all business areas.
Order book amounted to EUR 1,995 (31 Dec 2017: 1,566) million at the end of the period.
Sales increased by 3 percent and totalled EUR 910 (886) million.
Service sales increased by 2 percent and totalled EUR 243 (238) million.
Service and software sales represented 32 (32) percent of consolidated sales.
Operating profit was EUR 60.9 (54.7) million, representing 6.7 (6.2) percent of sales.
Operating profit excluding restructuring costs increased by 2 percent and amounted to EUR 73.5 (72.0) million, representing 8.1 (8.1) percent of sales.
Cash flow from operations before financial items and taxes totalled EUR 86.0 (112.4) million.
Net income for the period amounted to EUR 34.1 (27.7) million.
Earnings per share was EUR 0.53 (0.42).
January-December 2018 in brief: Orders increased, profit below last year
Orders received increased by 18 percent and totalled EUR 3,756 (3,190) million.
Sales increased by 2 percent and totalled EUR 3,304 (3,250) million.
Service sales increased by 3 percent and totalled EUR 932 (907) million.
Service and software sales represented 33 (33) percent of consolidated sales.
Operating profit was EUR 190.0 (222.1) million, representing 5.8 (6.8) percent of sales. Operating profit includes EUR 53.8 (36.5) million in restructuring costs.
Operating profit excluding restructuring costs decreased by 6 percent and amounted to EUR 243.8 (258.6) million, representing 7.4 (8.0) percent of sales.
Cash flow from operations before financial items and taxes totalled EUR 125.8 (253.5) million.
Net income for the financial year amounted to EUR 108.0 (132.7) million.
Earnings per share was EUR 1.66 (2.05). The decline in earnings per share was mainly related to an impairment loss of EUR 30 million of the associated company Jiangsu Rainbow Heavy Industries, recognised in the second quarter of 2018.
The Board of Directors proposes to the Annual General Meeting convening on 19 March 2019 a dividend of EUR 1.09 per class A share and EUR 1.10 per outstanding class B share be paid. The Board also proposes that the dividend shall be paid in two instalments, in March and October 2019. The dividend for class A shares would be paid in EUR 0.55 and EUR 0.54 instalments. The dividend for outstanding class B shares would be paid in two EUR 0.55 instalments.
Outlook for 2019
Cargotec expects its comparable operating profit for 2019 to improve from 2018 (EUR 242.1 million).
New alternative performance measure - Comparable operating profit
Cargotec uses alternative performance measures (APMs) to better convey underlying business performance and to enhance comparability from period to period. Starting from 1 January 2019, Cargotec replaces the alternative performance measure of "operating profit excluding restructuring costs" with "comparable operating profit" for measuring business performance in the financial reporting. Comparable operating profit does not contain items significantly affecting comparability. In addition to restructuring costs, these items mainly include capital gains and losses, income and expenses related to business acquisitions and disposals, impairments of assets and reversals of impairments, insurance benefits, and expenses related to legal proceedings. Cargotec's comparable operating profit for 2018 is EUR 242.1 (2017: 258.6) million.
Cargotec's key figures
From the beginning of 2018, Cargotec applies the new IFRS 15 and IFRS 9 accounting standards as well as the amendments to the IFRS 2 standard. More information on the new standards is available in Note 2, Accounting principles and new accounting standards. Cargotec has also aligned the definitions of the equipment, service and software businesses from the beginning of 2018. The data for the comparison period 2017 has been restated accordingly. Cargotec has published a stock exchange release on 28 March 2018 regarding the changes.
|Service orders received||254||221||15%||984||896||10%|
|Order book, end of period||1,995||1,566||27%||1,995||1,566||27%|
| Service and software sales, |
% of Cargotec's sales
|Operating profit, %||6.7%||6.2%||5.8%||6.8%|
|Operating profit**, %||8.1%||8.1%||7.4%||8.0%|
|Income before taxes||52.2||47.0||11%||161.1||189.2||-15%|
|Cash flow from operations before financing items and taxes||86.0||112.4||-23%||125.8||253.5||-50%|
|Net income for the period||34.1||27.7||23%||108.0||132.7||-19%|
|Earnings per share, EUR||0.53||0.42||25%||1.66||2.05||-19%|
|Interest-bearing net debt, end of period||625||472||33%||625||472||33%|
|Interest-bearing net debt / EBITDA***||2.3||1.6||2.3||1.6|
| Return on capital employed |
(ROCE), annualised, %
|Personnel, end of period||11,987||11,251||7%||11,987||11,251||7%|
*Software sales include Navis business unit and automation software
**Excluding restructuring costs
***Last four quarters' EBITDA
Cargotec's CEO Mika Vehviläinen: Strong order book creates a solid foundation for 2019
The year 2018 was twofold at Cargotec. Orders grew strongly in all our business areas, but we fell behind our target to improve our result. Kalmar's operating profit improved, but the weaker results for Hiab and MacGregor led to a lower operating profit at group level compared to the previous year. Although the demand for Hiab's equipment and services continued to grow strongly, its operating profit declined, particularly as the US dollar weakened against the euro, but also due to challenges with the supply chain and related additional costs. MacGregor's market environment was still challenging, which led to a lower sales and operating profit, excluding restructuring costs. Kalmar's operating profit improved, thanks to measures that improved productivity.
Throughout the year, Kalmar received several orders that benefit from advanced automation technology solutions. We also moved in the right direction with our software and digital solutions. In line with our strategy, we will continue to invest in the development of digitalisation solutions. We believe that the value chain for container handling can be significantly enhanced and we want to help our customers fully exploit these opportunities.
Our service business continued to develop positively and, at comparable exchange rates, its sales increased by six percent compared to the previous year. Our goal is to increase the sales of our service and software business from the current approximately EUR 1.1 billion to EUR 1.5 billion over the next two to four years. Service solutions that utilise digitalisation are increasingly emerging alongside traditional service methods in our offering.
The Board of Directors proposes to the Annual General Meeting to increase the dividend to EUR 1.10. This would be the fifth consecutive year in which our dividend has risen compared to the previous year. Although our results were lower than in the previous year, our order backlog is now 27 percent higher than it was one year ago. This gives us a good starting position for the year to come. We are committed to continuing to develop Cargotec from a good company to great one and in connection to this we will continue to sharpen our competitiveness and improve our productivity.
Reporting segments' key figures
|MEUR||31 Dec 2018||31 Dec 2017||Change|
|Corporate administration and support functions||-13.2||-20.1||34%||-77.7||-56.3||-38%|
Operating profit excluding restructuring costs
|Corporate administration and support functions||-9.4||-12.0||21%||-34.4||-42.2||19%|
Press conference for analysts and media
A press conference for analysts and media, combined with a live international telephone conference, will be arranged on 8 February at 10.00 a.m. EET at Cargotec's head office, Porkkalankatu 5, Helsinki. The event will be held in English. The report will be presented by CEO Mika Vehviläinen and Executive Vice President, CFO Mikko Puolakka. The presentation material will be available at www.cargotec.com by latest 9.30 a.m. EET.
The telephone conference, during which questions may be presented, can be accessed with access code 029318 using the following numbers:
FI: +358 (0)9 7479 0360
SE: +46 (0)8 5033 6573
UK: +44 (0)330 336 9104
US: +1 323-794-2095
The event can also be viewed as a live webcast at www.cargotec.com. An on-demand version of the conference will be published at Cargotec's website later during the day.
For further information, please contact:
Mikko Puolakka, Executive Vice President and CFO, tel. +358 20 777 4105
Hanna-Maria Heikkinen, Vice President, Investor Relations, tel. +358 20 777 4084
Cargotec (Nasdaq Helsinki: CGCBV) enables smarter cargo flow for a better everyday with its leading cargo handling solutions and services. Cargotec's business areas Kalmar, Hiab and MacGregor are pioneers in their fields. Through their unique position in ports, at sea and on roads, they optimise global cargo flows and create sustainable customer value. Cargotec's sales in 2018 totalled approximately EUR 3.3 billion and it employs around 12,000 people. www.cargotec.com