Sentiments from Shanghai - Chinese markets in the spotlight at Finnish Industrial Days

First of all, I wish to thank all the analysts and investors who attended our presentations during the event. My own personal feeling from the discussions we had was that in general there is a good understanding of the quite different market situations and maturity levels that our business areas have in China. We had presenters from Kalmar, Hiab and MacGregor explaining recent development, market conditions and plans for the future. I wanted to share some of the highlights from their presentations, which can also be found in our presentation materials.

Shushu Zhang started off the event by giving a thorough presentation covering general market conditions and Kalmar’s development. As a background, China’s EUR 86,3 million sales in 2018 was about 5,3% of Kalmar’s total sales. The key message here was that China is an extremely tough market, but has growth potential. Tough in the sense that there are lots of uncertainties in the air such as cost pressure, the trade war and some delays in investment decisions. That said, it is still the largest market in container handling. The total container throughput is constantly growing: for example, China’s total import and export increased 3.9% year-on-year during the first half of 2019. However, the growth speed seems to be declining.

Hiab has a different situation in China compared to our other business areas, as China accounts for only about 1% (EUR 13 million in 2018) of its global sales. Hiab’s addressable markets in the area are small, and although the market in general is growing, we are expecting only gradual growth during the next several years. Thomas Nothdurft explained that features like electric controls and connectivity do not have the same demand as in European or US markets yet, although the price-driven Chinese market is slowly becoming more sophisticated in their demand for higher technological requirements. Hiab and Effer are already stronger in areas such as Hong Kong.

MacGregor continues to experience strong headwinds in the short term, also in China, which in 2018 accounted for over 16% (EUR 86,8 million) of MacGregor's total sales. Clarkson Research forecasts merchant recovery from 2020-2021, but as Jane Chen pointed out, the market as a whole is expected to remain challenging. Positives included an update on the ongoing TTS integration, whose marine and offshore businesses we acquired during the summer. Together with TTS we will have an even stronger set of capabilities and market exposure, while TTS’s Chinese joint ventures provide a unique position on the Chinese market.

In sum, I think it is important to understand that the Chinese market offers different kinds of potential, challenges and also current economic impact to our business areas. Whereas MacGregor received over 16% of its sales from China in 2018, the figure for Hiab was only 1%. The three are also in different places regarding how much of the potential market they are able to address. Good collaboration with local authorities, joint ventures and other stakeholders is important for all of our business areas in order to maintain and grow their market access. General trends, such as gradually increasing awareness of topics like safety and demands for higher performance and availability, have potential on providing tail-wind in the long-term.

Hanna Maria Heikkinen
Vice President, Investor Relations at Cargotec