Capital Markets Day 2022 – Cargotec is prepared to continue its profitable growth

Cargotec’s CEO Mika Vehviläinen opened the day by highlighting Cargotec’s determined steps to shape its strategy from product leadership (2013) to sustainability leadership through empowered businesses in the future. Mika also gave further insight to Cargotec’s refocused strategy that was introduced in March, showing how the company has already reached significant milestones in realising the new strategy.

Performance targets combine financial and sustainability targets
Prior to the CMD, Cargotec had published new performance targets for its core businesses Hiab and Kalmar. The four performance targets include two sustainability targets, and two for profitable growth:

• Eco portfolio sales: double the growth compared to traditional products
• Reduce CO2 emissions in Cargotec’s value chain by 25% by 2025 and by 50% by 2030
• Sales growth faster than market
• Comparable operating profit (COP) 12% by 2025 and 15% by 2030

The CMD provided insight to all these points. Mika pointed out how one of the major drivers for growth is Cargotec’s eco portfolio, for which there already is a growing demand. Services and recurring revenue are other important elements that enable growth. The availability and development of sustainable solutions will grow in importance as Cargotec aims to reduce the CO2 emissions in Cargotec’s value chain steadily towards the targets years 2025 and 2030.

Hiab and Kalmar - raising value with performance
Hiab’s President Scott Phillips laid out Hiab’s way of generating profitable growth. Global megatrends like urbanisation as well as growing GDP and population support Hiab’s demand-driven growth, and it can support its customers to increase their productivity, providing solutions for urban areas and reducing carbon emissions and improving safety, for example. Scott also pointed out Hiab’s track record of growing by 6 percent over the last 10 years and consistently delivering double digit returns over the past 8 years.

Kalmar’s President Michel van Roozendaal stated how Kalmar is the only player in its field who can provide a fully electric portfolio for its customers. That achievement is a result of commitments which Kalmar has made a number of years ago. With its strong solution and service portfolio, and with the eco portfolio solutions therein, Kalmar has a leading market position in all its core segments, preparing for steady growth, and with its mobile equipment focused portfolio its focus will increasingly shift towards medium and small terminals which will provide a higher profitability profile.

Focusing on core businesses will take Cargotec’s profitability to the next level
Cargotec’s CFO Mikko Puolakka highlighted how, with the refocused strategy, Cargotec has the building blocks to take Cargotec to the next level and raise the comparable operating profit margin above the 10 percent level. Based on the last 12 month’s financials, the core businesses Hiab and Kalmar have constituted over 80 percent of Cargotec sales, and they already are highly profitable with almost 11 percent comparable operating profit margin. These businesses have a lucrative service business with further growth potentials, and a quarter of their sales comes from eco portfolio solutions and services. This is important, as sustainable solutions will be one of Cargotec’s key growth drivers in the future.

Mikko also provided more information about how Cargotec will reach the targeted comparative operating profit margins. Concrete steps will include the exit from Kalmar heavy cranes - already practically completed - and divesting MacGregor, which will take place when the time is right. Also the product and service sales margins and productivity will be improved.

Breakout sessions highlighted services, sustainability, innovation and technology
Cargotec's VP Sustainability Päivi Koivisto described Cargotec’s way forward to reach its sustainability targets. The main things to remember are that, first, Cargotec has set really ambitious targets for sustainability and especially ambitious targets for the climate part of it - we want to be the industry leader in the ESG standards. Second, we have the data in place and we have also identified actions about how to best move towards those targets. Finally, achieving those goals will not be easy; the targets we have set are indeed challenging, and it also depends on the world at large as well as markets around us. "But we strongly believe that this is our way to profitable growth and success in the future," said Päivi.

Michaël Bruninx, SVP Services division, Hiab and Thomas Malmborg, SVP Services division offered the keen audience an overview of the service business of the Hiab and Kalmar. Of particular interest was the service capture, about which also several questions were raised from the audience. Kalmar has an installed base of about 65,000 machines on the market, over 3,700 contracts and around 1,300 service technicians in 35 countries.

Additional business opportunities for Kalmar rise from increasing the spare parts capture rate in the future. Connectivity is another growing area at Kalmar. It will support the customers in their operations, portraying equipment behaviour, and helping with the predictive maintenance. It also helps customers to build new business models. The forecasted capture rate in 2025 is 37 percent.

At Hiab the installed base is about 175,000 units excluding tail lifts, with about 24,000 of those being connected. The forecasted capture rate for Hiab services in 2025 will be above 50 percent. Both Hiab and Kalmar also provide a strong e-commerce service with spare parts etc. that is already thriving and will grow further in the future.

Advancements in innovation and technology has given Cargotec the first-in-market position in terms of offering the industry-first fully electric product portfolio, and is definitely a topic of interest among customers. As an example, the eco portfolio sales in Q3 2022 almost doubled from the comparison period, constituting 27 percent of the consolidated sales. Connected equipment is also supporting customers to supervise their fleets and maintain them with proactive measures.

At Kalmar, the key technology and innovation areas for investments are digitalisation, robotics and green energy, especially electrification. Tommi Pettersson, Kalmar's Vice President of strategy, sustainability and technology, explained that the maturity and market demand varies by geographical area, customer segment and product segment. On the digitalisation front the situation is quite mature, robotics is mainly in early phases, and electrification is booming. Tommi provided various examples about what Kalmar can support the customers with, from cargotec’s own inhouse IPR IoT pipeline and analytics to electric and/or hybrid straddle and shuttle carriers.

Hiab has 24,000 connected units that can provide online information about their actions and activities. Like Pekka Mikkola, Director, Autonomous technologies at Hiab noted, the data is collected to the cloud and Hiab can provide insights to customers, if there is something that the customer should be made aware of. The remote monitoring can enable the customer to rest assured that - should a spare part be needed - the part will be there at the right time with the service workforce available. All this is combined under the Hiab HiPerform offering.

Site visit to Raisio
On the next day after the CMD, 15 participants climbed on a bus and took a ride to Raisio, Western Finland, to see and hear about Hiab business area’s assembly unit activities there. The Raisio unit focuses on assembling Hiab’s world leading Multilift hooklifts, a demountables solution. Read the story here.