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Cargotec's financial statements review 2016: Operating profit excluding restructuring costs continued to improve, strong cash flow

CARGOTEC CORPORATION, FINANCIAL STATEMENTS REVIEW, 8 FEBRUARY 2017 AT 8:30 AM EET

Cargotec's financial statements review 2016: Operating profit excluding restructuring costs continued to improve, strong cash flow

- Strong quarter for Kalmar
- New product launches boosted Hiab's orders in the fourth quarter
- Challenging market situation continued in MacGregor

The figures in this financial statements review are based on Cargotec Corporation's audited 2016 Financial statements. 

October-December 2016 in brief: Strong cash flow

  • Orders received totalled EUR 822 (824) million.
  • Order book amounted to EUR 1,783 (31 Dec 2015: 2,064) million at the end of the period.
  • Sales declined 4 percent and totalled EUR 933 (977) million.
  • Sales of services totalled 231 (230) million, representing 25 (24) percent of consolidated sales.
  • Operating profit excluding restructuring costs increased 17 percent and was EUR 61.0 (52.1) million, representing 6.5 (5.3) percent of sales.
  • Operating profit was EUR 21.3 (45.0) million, representing 2.3 (4.6) percent of sales.
  • Cash flow from operations before financial items and taxes totalled EUR 152.0 (87.3) million.
  • Net income for the period amounted to EUR 12.2 (35.4) million.
  • Earnings per share was EUR 0.20 (0.55).

January-December 2016 in brief: Profitability improved

  • Orders received decreased 8 percent and totalled EUR 3,283 (3,557) million.
  • Sales declined 6 percent and totalled EUR 3,514 (3,729) million.
  • Sales of services totalled EUR 872 (883) million, representing 25 (24) percent of consolidated sales.
  • Operating profit excluding restructuring costs increased 8 percent and was EUR 250.2 (230.7) million, representing 7.1 (6.2) percent of sales.
  • Operating profit was EUR 197.7 (213.1) million, representing 5.6 (5.7) percent of sales.
  • Cash flow from operations before financial items and taxes totalled EUR 373.0 (314.6) million.
  • Net income for the period amounted to EUR 125.3 (142.9) million.
  • Earnings per share was EUR 1.95 (2.21).
  • The Board of Directors proposes a dividend of EUR 0.94 per class A share and EUR 0.95 per outstanding class B share be paid.
Outlook for 2017

Cargotec's operating profit excluding restructuring costs for 2017 is expected to improve from 2016 (EUR 250.2 million).

Cargotec's key figures

MEUR Q4/16 Q4/15 Change Q1-Q4/16 Q1-Q4/15 Change
Orders received 822 824 0% 3,283 3,557 -8%
Service orders received 222 215 3% 889 880 1%
Order book, end of period 1,783 2,064 -14% 1,783 2,064 -14%
Sales 933 977 -4% 3,514 3,729 -6%
Sales of services 231 230 1% 872 883 -1%
Sales of services, % of Cargotec's sales 25 24   25 24  
Operating profit* 61.0 52.1 17% 250.2 230.7 8%
Operating profit, %* 6.5 5.3   7.1 6.2  
Operating profit 21.3 45.0 -53% 197.7 213.1 -7%
Operating profit, % 2.3 4.6   5.6 5.7  
Income before taxes 14.2 36.9   169.1 186.2  
Cash flow from operations 152.0 87.3   373.0 314.6  
Net income for the period 12.2 35.4   125.3 142.9  
Earnings per share, EUR 0.20 0.55   1.95 2.21  
Net debt, end of period 503 622   503 622  
Gearing, % 36.0 46.4   36.0 46.4  
Personnel, end of period 11,184 10,837   11,184 10,837  

*excluding restructuring costs

Cargotec's CEO Mika Vehviläinen:

2016 was a good year for Cargotec: operating profit excluding restructuring costs was the highest in Cargotec's history, operating profit margin continued to improve and we had a strong cash flow. Hiab in particular had a very good year. Hiab successfully launched a number of new product innovations and outgrew its competitors. Profitability improved also in Kalmar. We made significant investments in the software business, among other things, to enable future growth. Considering MacGregor's challenging market conditions, the year was satisfactory and new measures to ensure profitability were implemented quickly. 

Cargotec's strategic areas of focus are digitalisation, services business and leadership excellence. We made noticeable progress in all three areas. To promote digitalisation, we established the Cargotec IoT Cloud platform as a solid foundation for our digital solutions. The first products to utilise the platform have now been launched. The number of products we connect to analytics platforms is strongly increasing. The Navis software business is one of our key enablers of future growth. We supplemented its offering through the acquisition of the INTERSCHALT software company, which provides products for stowage planning, equipment management and vessel monitoring. Key players in the shipping and harbour industry started testing our XVELA collaboration platform for the performance optimisation of terminals and vessels. During the year, we invested over EUR 90 million in product development.

We have significant growth potential in the services business. In 2016, Hiab's services business developed favourably, Kalmar's performance improved towards the end of the year and MacGregor suffered from the weak market conditions. 

I am very satisfied with our progress in developing our leadership. We have engaged over 200 key leaders already, and an intensive people leader development continues in 2017, through which we aim to establish a more uniform performance-based leadership culture at Cargotec.

We continue to develop services business, digitalisation and leadership excellence in 2017. These are key factors for the achievement of market leadership in intelligent cargo handling. I believe that our investment in the development of operations will improve our operating profit also in 2017.

Alternative performance measures (APMs) used in Cargotec's financial reporting

New ESMA (European Securities and Markets Authority) guidelines on Alternative

Performance Measures (Alternative performance measure (APM) = financial measure other

than financial measure defined or specified in IFRS) are effective as of 3 July 2016. The new guidelines have had no impact on performance measures used by Cargotec, but in accordance with the guidelines, Cargotec publishes the explanation of use, definitions as well as reconciliations of its APMs to IFRS financial statements.

APMs are used at Cargotec to better convey the underlying business performance and to enhance comparability from period to period. APMs are not substituting the performance measures stipulated by IFRS, but are instead reported as complementary information.

The alternative performance measures used by Cargotec are: 

  • Operating profit excluding restructuring costs = Operating profit + restructuring costs
  • Operating profit excluding restructuring costs, % of sales = (Operating profit + restructuring costs) / Sales * 100
  • Interest-bearing net-debt = Interest-bearing debt - interest-bearing assets +/- Foreign-currency hedge of corporate bonds

Restructuring costs include restructuring provisions, asset impairments and disposals, expenses for vacant premises and other restructuring-related expenses in case of a significant restructuring programme of Cargotec or its business area. In the financial statements review, the reconciliation of operating profit excluding restructuring costs to operating profit of the statement of income is presented in note 3. Reconciliation of interest-bearing net debt to interest-bearing liabilities and assets is presented in note 6.

Press conference for analysts and media

A press conference for analysts and media, combined with a live international telephone conference, will be arranged on the publishing day at 9:30 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 9:00 a.m. EEST.

The telephone conference, during which questions may be presented, can be accessed using the following numbers with access code Cargotec/2609290:

FI: +358 9 7479 0404

SE: +46 8 5065 3942

UK: +44 330 336 9411

US: +1 719 457 2086

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) is a leading provider of cargo and load handling solutions with the goal of becoming the leader in intelligent cargo handling. Cargotec's business areas Kalmar, Hiab and MacGregor offer products and services that ensure our customers a continuous, reliable and sustainable performance. Cargotec's sales in 2016 totalled approximately EUR 3.5 billion and it employs over 11,000 people. www.cargotec.com