Konecranes: strong order intake despite challenging environment28 July 2022
Konecranes has announced its half-year financial report January-June 2022, stating that worldwide demand remains subject to volatility due to the war in Ukraine and COVID-19 having increased inflation and material availability concerns.
In Europe and North America, the demand environment within the industrial customer segments is on a healthy level; yet there are some early signs of weakening. In Asia-Pacific, the demand environment has started to show signs of improvement.
Global container throughput continues high, and long-term prospects related to global container handling remain good overall.
Since the beginning of June, Service and Industrial Equipment have been focused under the same leadership. Following this change, Konecranes has two Business Areas: Industrial Service and Equipment, and Port Solutions. Konecranes continues to report three segments: Service, Industrial Equipment, and Port Solutions.
“In Q2, Konecranes’ operating environment and performance continued similar to the previous quarter. Order intake remained high, but at the same time, profitability declined year-on-year mainly due to low sales volumes caused by component and material availability and COVID-19 related challenges. Although we lowered our full-year 2022 guidance earlier this month, our record-high orderbook and strong performance focus provide a solid foundation for future success,” said Teo Ottola, interim CEO, Konecranes.
“Despite geopolitical tensions, the pandemic and growing macroeconomic concerns, the overall market sentiment remained good in Q2, and on Group level, our order intake was not far from Q1’s record level. Year-on-year, Konecranes’ Q2 orders received grew 19.9% in comparable currencies and surpassed €1bn for a second consecutive quarter. Order intake in short-cycle products was better than expected.
“Component availability and other supply chain constraints, as well as COVID-19 related challenges affected our revenues in all three segments in Q2. Eliminating the impact of price increases, sales decreased year-on-year in comparable currencies. As a result of our continued high order intake and delivery capability issues, our order book broke again a new record and was €2,825m at the end of June.
“Our adjusted EBITA margin declined year-on-year to 7.7%, mainly driven by lower sales volume due to component and material shortage and COVID-19 related challenges as well as cost inflation. Profitability declined in all three segments.
“Service order intake improved by 8.9% year-on-year in comparable currencies. Supply chain issues and the COVID-19 related lockdowns in China impacted Service sales which remained flat year-on-year in comparable currencies. Profitability declined mainly as a result of lower productivity due to the named issues and challenges, and adjusted EBITA margin totalled 15.5%. The agreement base value grew by 3.2% from the previous year in comparable currencies.
“Industrial Equipment’s external order intake grew by 6.1% in comparable currencies. Customer delays and supply chain constraints continued, and external sales increased only slightly in comparable currencies thanks to pricing. Adjusted EBITA margin declined year-on-year and was 1.0%, mainly driven by the low sales volumes and inflation.
“Activity remained high within ports, and Port Solutions’ orders grew by 47.3% in comparable currencies and totalled €404m, including also larger projects. In addition to material availability and COVID-19 related lockdowns, sales were again impacted by timing of customer deliveries and declined 2.0% year-on-year in comparable currencies. As a result, adjusted EBITA margin decreased to 6.7%. Despite the profitability decline, project execution remained on a good level.
“We expect the market volatility caused by the ongoing war, the pandemic and other macroeconomic concerns to continue. Although the demand environment has remained good, uncertainty has increased, and we have updated our demand outlook for Q3 to reflect the current market sentiment.
“As we do not expect the situation with supply chain constraints to normalize in near-term, we lowered our full-year guidance ahead of the half-year financial report. We expect our net sales to remain on the same level or to increase in full-year 2022 compared to 2021 and our full-year adjusted EBITA margin to remain on the same level or to decline compared to 2021. However, in the second half of the year, we expect our delivery capability to improve compared to the first half and the earlier implemented price increases to start to impact our profitability.”
Looking ahead, Ottola said the company will continue to drive efficiency improvements. as previously mentioned, its Service and Industrial Equipment segments are now focused under one leadership and following this change, it has started to identify opportunities for efficiency improvement and simplification of its industrial business model.
In June, it announced that Anders Svensson has been appointed as Konecranes’ new President and CEO. He will assume his role on October 19 and joins Konecranes from Sandvik, where he is currently President of the Sandvik Rock Processing Solutions Business Area.