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Cargotec is a technology leader with strong market positions in all business areas, Kalmar, Hiab and MacGregor. We have leading brands in markets with long term growth potential and several megatrends, such as urbanisation and growing middle class, support our businesses.
Our aim is to transform from an equipment provider into a leader in intelligent cargo handling. We will achieve this by focusing on our four strategic must-win battles: customer centricity, services, digitalisation and productivity.
In 2020, our long-term strategy proved to be more valid than ever before. The COVID-19 pandemic affected our business especially during the first two quarters, but we acted decisively, securing our profitability whilst making good progress in our strategy execution.
Business area performances varied
The pandemic situation had a clear impact in all our business areas, and orders received decreased by 16 percent compared to the previous year. The situation improved steadily throughout the second half of the year. In fact, the orders for Hiab solutions and Kalmar mobile equipment increased year-on-year in the fourth quarter. In the uncertain environment, customers still hesitated with larger investments, which was visible in MacGregor and in Kalmar’s automation and project business where we saw postponements.
Our order backlog was strong as we entered 2020, which helped us cope with the pandemic crisis early on. In fact, sales increased in Kalmar’s project business and in MacGregor. Sales declined in Hiab and Kalmar’s mobile equipment, where the lead times are shorter. This was a result of the drop in their orders received in the first half of the year. We enter 2021 with a healthy order backlog especially in Hiab and Kalmar’s mobile equipment business.
I am pleased with the robust performance of our service business, producing 31 percent of our sales. The sales of our eco portfolio increased as well, totalling 24 percent of our sales in 2020. Our target in 2021 was to double the sales growth in our eco portfolio compared to traditional products, and we achieved that ahead of schedule. It is evident that our customers are increasingly moving towards sustainable solutions, preferring our electric and hybrid solutions over internal combustion engines.
Decisive actions to ensure profitability and strategic direction
Our comparable operating profit decreased due to decrease in sales. Nevertheless, during the pandemic crisis we have defended our profitability and kept our comparable profit margin at a healthy level. Supported by a successful TTS synergy and restructuring work, MacGregor returned to black numbers in the second half of the year.
To minimise the effects of the pandemic, we initiated temporary cost savings in April–August, which produced ca. EUR 10 million monthly savings. This was also a powerful demonstration of how our processes and tools allow us to quickly change our ways of working and safeguard our employees and our financial performance. Towards the end of the year, we shifted our focus from temporary measures to more structural savings. In fact, our headcount at the end of the year was approximately 1,000 lower than one year ago.
In 2020, we initiated a strategic evaluation of the software solutions and services provider Navis to support its future development. In December, the Board of Directors decided to initiate the actual sales process of the Navis software business. During the year, we also sold our share of Rainbow-Cargotec Industries Co., Ltd joint venture in China, completed the TTS integration with MacGregor, and – to strengthen our customer access, local presence and competitiveness in China – established a joint venture with CSSC Nanjing Luzhou Machine Co., Ltd. These actions support our strategic direction going forward.
Merger with Konecranes will create a global leader in sustainable material flow
In October, we announced the plan to combine Cargotec and Konecranes through a merger. In December, the extraordinary general meetings of both companies resolved to approve the merger, which was the unanimous recommendation of the Boards of Directors of both companies.
Cargotec and Konecranes are well positioned in their markets – in industries, factories, ports, terminals, road and sea-cargo handling. Together with Konecranes, a company with a similar profile and shared ambitions, we will have the opportunity to make an even larger impact on global material flows.
The work to finalise the merger continues in 2021. Completion is expected in January 2022, provided that all conditions for the completion are being fulfilled.
Progress in strategic targets
We refined our strategy for the period 2019–2021 with services, digitalisation and productivity as the main drivers in 2020. The COVID-19 pandemic slowed our progress, but we held fast to our targets and saw robust development in digitalisation and services in particular. All in all, service and software sales accounted for 36 percent of our consolidated sales.
In 2020, we continued to increase our research and development investments (105 million euros vs. 102 million euros in 2019) and extended our service offering further towards intelligent solutions. This enables us to serve our customers on a wide scale throughout the lifespan of their solutions.
We have made good progress in developing our digital service offering. Our equipment data provides valuable insight to our customers on how their equipment is performing in the field. This makes it possible to pinpoint and schedule service operations exactly where and when needed. The equipment data also gave us a good idea of the activity levels of cargo flows and logistics in different segments and geographical locations. This was valuable when estimating how our industry was coping in the midst of the COVID-19 crisis, for example.
The importance of sustainability and safety increases
The strategic importance of sustainability continues to increase at Cargotec. In May, we committed to the UN Global Compact Business Ambition for 1.5°C campaign. We aim to reduce our CO2 emissions from raw material sourcing and product use phase by at least 50 percent from the 2019 levels by 2030, and reach carbon neutrality in our own operations by 2030. With these actions, we strive to make the logistics industry more sustainable and enable a lower-carbon economy.
We received several orders that highlight the sustainable capabilities of our offering. MacGregor received its largest single vessel order to supply a mission-critical system on an offshore wind foundation installation vessel. In June, Kalmar got an order for eco-efficient mobile equipment from Australia and, in September, an order for 20 hybrid straddle carriers from the US.
We are dedicated to safeguarding the health and safety of our personnel. Even in the midst of the pandemic crisis we paid special attention to ensuring safe working conditions both to our customers and our own employees.1 I am glad to note that we did not have major COVID-19 outbreaks at any of our sites. We also achieved our IIFR targets for 2020, bringing down the injury rate at many of our assembly sites.
I would like to thank all Cargotec employees for their hard work during this extraordinary year. It delights me to see that, despite the challenges during 2020, our Compass employee satisfaction survey showed healthy improvements in many areas.
I would also like to thank our shareholders for the trust they have placed in us and Cargotec’s Board of Directors for its continuing support during these unprecedented times.
In many ways, 2020 was exceptional for the whole world and also for Cargotec. The rapid spread of Covid-19 and related regulatory restrictions closed our own and our suppliers’ production units and caused unprecedented uncertainty on the market. On the other hand, our actions during the year proved our strategic direction to be correct. Our investments over the years in services, digitalisation and research and development, as well as in our asset-light operating model brought about good results.
Market uncertainty affected customers’ decision making especially in the second and third quarter and our orders received decreased by 16 percent from the previous year. Customers considered carefully their larger investments in, for example, port automation and new vessels. On the other hand, the pandemic has further strengthened interest in automation. However, it is still too early tospeculate when customers start making investment decisions. MacGregor’s market situation is expected to remain challenging, but for example new contracting of wind turbine installation and service vessels is expected to grow. After April and towards the end of the year, demand for Kalmar’s mobile equipment business and for Hiab increased strongly. In terms of orders received, Hiab’s fourth quarter was its best ever. Our year-end order book increased compared to the end of the third quarter, which gives us a good start for 2021.
Our sales decreased from the previous year. However, the decline was partly offset by an increased share of the stable service and software business. Customer interest towards our eco-efficiency solutions increased in all businessareas despite the crises. The eco portfolio sales increased to almost a quarter of our total sales. Our electrified equipment is included in the portfolio, for example.
Despite the exceptional year, our profitability remained at a satisfactory level. Ourcomparable operating profit amounted to EUR 204 million. Comparable operating profits in Kalmar and in Hiab decreased due to lower sales whereas comparable operating profit in MacGregor increased. Thanks to synergies from TTS integration and other restructuring actions, MacGregor posted positive comparable operating profit in the second half of the year. Our rapid reaction to covid-19 pandemic as well as cost saving actions also supported our profitability. The full year comparable operating profit margin decreased and amounted to 6.2 percent. However, the margin improved to 7.3 percent during the second half of the year, which was close to the level of the second half in 2019 (Q3–Q4/2019: 7.4 percent). In addition, we enhanced our productivity with structural measures with our permanent headcount reductions amounting to approximately 1,000.
Our operative cash flow was strong and, thanks to net working capital reduction measures, our net debt was reduced especially in Q4. We continued determined investments in research and development. Our R&D investments increased by three percent and were particularly focused on themes supporting our climate ambition such as digitalisation, electrification and automation as well as projects that aim to improve the competitiveness and cost efficiency of products. Year 2021 will mark a considerable milestone for Kalmar as its entire portfolio becomes available as electrically powered.
In May, we introduced our climate ambition to be a 1.5 degree company. According to the commitment, we aim to reduce the CO2emissions of raw material sourcing and product use phase by at least 50 percent from the 2019 levels by 2030. In addition, we aim to be carbon neutral in our own operations by 2030.
We are constantly developing our business structure. In 2020, we sold our stake in RCI joint venture in China and started the sales process of Navis business. On 1 October, we announced the plan to combine Cargotec and Konecranes through a merger. Extraordinary meetings held on 18 December by each of the companies resolved the resolution to approve the merger. The implementation of the merger is subject to obtaining the necessary approvals from the competition authorities. More information about the merger is available from the web address www.sustainablematerialflow.com.
Health and safety of our employees, customers and partners are our top priorities. Despite the challenging year, the results of our operational safety and Compass employee satisfaction survey improved from the previous year. I want to thank all our employees for their contribution during this exceptional year and our customers, partners and shareholders for the trust they have placed in us.