Cargotec as an investment

The market recovery from the pandemic as well as the increase in economic activity that started at the end of 2020 supported the demand for our solutions in the third quarter. Our main demand drivers - number of containers handled at ports globally, construction activity, new vessel contracting - continued to grow strongly.

Our orders received increased by 33 percent with all business areas improving their orders received from the comparison period. Our order book continued to grow and is now on a 48 percent higher level than at the end of 2020. In addition to continued strong order intake, longer delivery times expanded our order book.

Our sales increased by 6 percent from the comparison period. Component shortages and global logistics challenges still limited our ability to meet the increasing demand. We estimate these to have affected sales by approximately EUR 50 million during the third quarter. We work in close cooperation with our suppliers to ensure the best possible component availability. We estimate the component and logistics challenges to remain largely at the same level also during the last quarter of the year.

During the quarter, also the raw material and product components as well as freight prices were at a high level. However, we are confident that we will be able to largely offset the increased costs with the price increases we made during the first half of the year.

The good progress of our service business continued in the third quarter. Compared to the comparison period, the service orders received increased by 18 percent and sales by 9 percent. Combined service and software business sales constituted 34 percent of our total sales.

Cargotec’s comparable operating profit increased by 4 percent, driven by higher comparable operating profit in Hiab. MacGregor’s comparable operating profit decreased slightly. Challenges in the delivery chain and added costs thereof impacted Kalmar’s result in particular and its comparable operating profit decreased by 14 percent

Reducing the carbon footprint of the logistics industry is a significant business opportunity for us. Sustainability and profitable growth are at the core of our strategy and, during the third quarter, we continued our determined actions to execute our strategy. We completed the sale of the Navis business to Accel-KKR, a Silicon Valley-based investment firm for an enterprise value of EUR 380 million. The transaction had an approximately EUR 230 million positive impact on our third quarter operating profit. The proceeds enable further investments in acquisitions and R&D investments in the fields of electrification, digitalisation, robotisation, and automation. Demand for electrified products is estimated to grow strongly in the future. As an example, in the third quarter, electrified equipment accounted for more than a quarter of our forklift truck orders.

We also announced our agreement with SSAB to work on the introduction of fossil-free steel to the cargo handling industry in the future. This is a significant milestone in moving toward a sustainable development and a fossil-free product offering.

During the third quarter, Hiab strengthened its position in the US by acquiring the demountables manufacturer Galfab. To meet the increasing demand for truck mounted forklifts, Hiab will also expand manufacturing to the US and increase the production capacity in Dundalk, Ireland.

On 1 October 2020, Cargotec Corporation and Konecranes Plc announced their combination agreement and a merger plan to combine the two companies through a merger. Extraordinary general meetings of Cargotec and Konecranes held on 18 December 2020 approved the merger. Various competition authorities in the EU, UK, and US, among others, are currently reviewing the proposed transaction. In July, The European Commission and Competition and Markets Authority in the UK opened a phase II review in connection with the planned transaction. Cargotec and Konecranes are actively cooperating in these investigations with the aim to mitigate some of these concerns raised by some competition authorities.

In August, Cargotec and Konecranes received unconditional approval from the State Administration for Market Regulation, the competition authority in China, for their planned merger. Both Cargotec and Konecranes are confident that the remaining approvals are received to allow completion of the transaction by the end of H1/2022. Until then, both companies will operate fully separately and independently. More information about the merger is available from the web address www.sustainablematerialflow.com.