Cargotec January–June 2022 financial report sees 14% sales increase

21 July 2022

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Cargotec has announced a record quarter in its half-year financial report January–June 2022: despite supply chain challenges and market uncertainty, which is expected to continue

Between April–June 2022 orders received increased by 9% and totalled €1,390m and sales increased by 12%, totalling €959m. Between January–June 2022 orders received increased by 6% and totalled €2,525m and sales increased by 14%, totalling €1,810m.

The decline in forecasts has been influenced by, for example, Russia's attack on Ukraine with its negative economic effects, global supply chain challenges, as well as increased inflation and weakened consumer confidence.

In regards to Kalmar, the number of containers handled at ports globally, is estimated to have increased by 1.2% during the first half year and increase by 2.3% in 2022.

Major orders received by Kalmar during the second quarter of 2022 included: 62 Kalmar Hybrid AutoStrads to the United States; 23 semi-automated hybrid shuttle carriers to Morocco; seven Kalmar light electric forklift trucks with a five-year Kalmar Complete Care service agreement to Sweden, and three Kalmar Eco Reachstackers to China, the first Eco reachstackers to be delivered by Kalmar to a customer in the North China region.

“The second quarter was successful for Cargotec. Our personnel did an excellent job in a challenging operating environment, making our good performance possible. Our orders received, order book and comparable operating profit reached all-time records. Also our sales grew significantly compared to the comparison period,” said Mika Vehviläinen, CEO, Cargotec.

“Despite the cost level increases, our margins have remained at a good level which demonstrates our business agility and effective pricing. We again made price increases required by the market situation during the second quarter and continue to monitor the situation. The success was particularly prominent at Hiab, which reached record high sales and comparable operating profit in the second quarter.

“We published our refocused strategy during the previous quarter. We have progressed determinedly with the strategy, taking the first important steps on it. In May, we announced plans to combine the strategic business units Kalmar Mobile Solutions and Kalmar Automation Solutions. After the reporting period, we announced that Kalmar and Rainbow Industries Co. Ltd. (RIC) have entered into an agreement whereby Kalmar would transfer heavy cranes’ related intellectual properties and assets to RIC in China. The agreement would strengthen Kalmar’s strategic transfer to focus on offering industry shaping, eco-efficient cargo handling equipment. Further, Kalmar continues to offer crane automation and crane related services for its customers globally.

“As part of our refocused strategy we also initiated the evaluation of strategic options of MacGregor including a potential sale of the business. MacGregor’s second quarter result was still burdened by the investments made to the offshore segment, low sales and delays in the service’s spare part deliveries as well as the weak profitability of the first offshore wind power projects. Despite low sales, MacGregor business has been profitable in the merchant sector and services. During the quarter, MacGregor’s orders received increased by 78% to €301m, reflecting the strong demand of the merchant vessels.

“In accordance with our strategy, we continued to focus on R&D during the second quarter. Our R&D investments increased by over 10% compared to the comparison period. We launched several eco-efficient products during the quarter and, in response to the logistics industry’s growing demand for electric solutions, invested in expanding the Kalmar manufacturing plant in Kansas, USA. Our eco portfolio sales increased by 25% from the comparison period.

“The service business growth continued as well with sales up by 13% and orders received by 9%. In the second quarter service sales constituted 32% of our total sales.

“Our starting position for the latter half of the year is good. Even though market forecasts have been cut during the quarter, our markets are still estimated to grow. Despite the surrounding uncertainty, we enter the second half of the year in a good position with a strong balance sheet and a record order backlog. The supply chain challenges are expected to continue also during the second half of the year. In Cargotec’s business the third quarter is typically less active than the second quarter. We also anticipate the third quarter sales mix to be slightly weaker than in the second quarter.”

Cargotec's sales to Russia, Belarus and Ukraine have been low. In 2021, approximately 1% of Cargotec's net sales and order backlog came from sales to these countries. Cargotec’s equipment and spare parts are not sold to Russia, and Cargotec complies with the sanctions imposed on Russia. At the end of June, Cargotec employed approximately 50 people in Russia. Cargotec does not have a direct representation in Ukraine; however, some of its suppliers have used Ukrainian steel, among others.

“Russia’s condemnable and unjustified attack on Ukraine and the Western countermeasures against Russia have exacerbated the existing and created new market disruptions. Disruptions in supply chains, problems with the availability of raw materials and energy, accelerating inflation, weakened consumer confidence, as well as increased uncertainty are slowing down economic growth and could lead to recession. As the crisis continues, its effects can become more widespread,” the report states.

“The current situation has hampered Cargotec's operations. Problems with the availability of raw materials and components, as well as logistics, have slowed down our assembly operations and may cause production downtime if the situation worsens. The extension of delivery times has had a negative effect on Cargotec's net sales and gross margin. Due to new availability problems, prices have continued to rise, increasing the challenges to control costs and passing them on to the prices of end products. Interest rates are also expected to continue to rise.

“The Covid-19 pandemic can have direct and indirect impacts on Cargotec’s business. In some areas, such as in China, safety measures and travel restrictions may limit Cargotec's business prerequisites, hamper the selling, operating and delivering of Cargotec's solutions, and complicate the global component shortage. Ensuring a safe working environment for Cargotec personnel may be challenging. The amount of personnel sick leaves may also increase.

“In a changing market situation, customers may also try to postpone or cancel orders. Deterioration of the global economic outlook and access to finance can lead to economic and financial difficulties among Cargotec’s customers. In some cases their financial position may deteriorate significantly or even lead to insolvency. The turnover, availability, and cost of skilled personnel can create disturbances to Cargotec and its supplier operations.

“Container traffic growth rate and a possible slowdown or contraction in global economic growth may in the longer term have an effect on the demand of Kalmar's cargo handling solutions. Kalmar’s project executions face risks related to schedule, cost and delivery guarantees.”

In March 2022, Cargotec announced its refocused strategy. As part of the strategy, Cargotec plans to exit from Kalmar’s heavy port cranes business, evaluate strategic options of MacGregor, and review its operational model.