Cargotec as an investment

In the port: Kalmar

End markets: Ports, terminals, distribution centers

Market position: 1st / 2nd

Key drivers and supporting megatrends:

• Global trade growth driven by globalisation and growing middle class
• Container throughput growth, larger ships require investments in ports, ports need to increase efficiency via automation, increasing importance for safety

Competitive advantage:

• ​Recognized premium brand
• Leading market position in software
• Full automation solution offering (equipment, software and automation, service)
• Asset light business model

On the road: Hiab

End markets: Construction, distribution, forestry, defence, waste and recycling

Market position: 1st / 2nd

Key drivers and supporting megatrends:

• Construction growth via population growth and urbanisation
• Changing distribution patters and models
• Increasing penetration in developing countries

Competitive advantage:

• One of the two global players with scale
• Diversified product range
• Asset light model, efficient assembly operation

At the sea: MacGregor

End markets: Maritime transportation and offshore industries

Market position: 1st / 2nd

Key drivers and supporting megatrends:

• Global trade growth driven by globalisation and growing middle class, oil price

Competitive advantage:

• Asset-light model
• Technology leader
• Closeness to customers (shipyards and shipowners) globally
• Industry competence

Cargotec strengthens MacGregor by acquiring marine and offshore business from TTS Group (8 February 2018)

Presentation of the acquisition

Link to the release

MacGregor receives clearance from the German competition regulator for the acquisition of the marine and offshore business of TTS (Link to release on 6 Nov 2018)

MacGregor, part of Cargotec, has entered into an agreement to acquire the major businesses from TTS Group, a global provider of cargo handling equipment and services for merchant and offshore ships for an enterprise value of EUR 87 million. The combination of two highly complementary businesses will produce greater scale and diversification and will strengthen MacGregor's portfolio and market position in key markets for cargo and load handling equipment. Based on preliminary estimates, potential cost synergies are estimated to be around EUR 30-35 million on annual level and are expected to be reached within 3 years from closing.

Cargotec’s M&A strategy is focusing on bolt on acquisitions. In Kalmar, the focus is on service footprint expansion and software offering. Hiab is focusing on expanding geographical presence and product offering, whereas MacGregor is looking for M&A opportunities on distressed assets and software as well as intelligent technology.

By choosing the year from left the can find announced orders published as stock exchange or press releases, excluding smaller order releases. You can access the original release via the link in the first column.

 
All releases can be found in here.

*Excluding restructuring costs

* 2017 EPS figure has been restated according to IFRS 15
** Board proposal to AGM

* Software sales defined as Navis business unit and automation software

2017 figures have been restated according to IFRS 15 and calculated by using the new definitions for the equipment, service and software businesses announced in March 2018

*Figures have been restated according to IFRS 15

Container throughput (Driver for Kalmar)

Construction output (Driver for Hiab)

Source: Oxford Economics: Industry output forecast  9/2018

Merchant shipping and offshore markets (Drivers for MacGregor)

The following external organizations provide relevant and useful information about the markets of Cargotec and the business areas. You may access the material below via the links which direct you to the website of each organisation.

Drewry - Information and analyses of shipping industry, e.g. estimates on future global cargo volumes.

Oxford Economics - Leader in global forecasting and quantitative analysis. For instance, analyses of construction industry in different geographical areas.

Clarksons - World’s leading provider of integrated shipping services. Clarksons provides forecasts of e.g. merchant ship and offshore unit numbers.

IHS Markit - Useful analyses of Maritime & trade or automotive industries.

R&D investments focus on digitalisation as well as improving competitiveness and cost efficiency of products.

Research and product development expenditure in 2018 totalled EUR 89.0 (92.5) million, representing 2.7 (2.8) percent of sales. EUR 0.5 (0.5) million was capitalised.

R&D in business areas in 2018

Kalmar

Product launches

• First application key for Kalmar Key, the terminal industry's only automation platform with open interfaces.
• The first solution to Kalmar's eco-efficient Eco Range product range. Kalmar Eco Reachstacker substantially cuts the fuel consumption and costs, and lowers carbon emissions
• Kalmar Ottawa Electric Terminal Tractor with a fully electric powertrain produces zero emissions at source
• FastCharge Automated Guided Vehicle (AGV)  features an eco-efficient electric power system that uses the latest lithium-ion battery technology

 Other actions

• A new innovation centre opened in Ljungby, southern Sweden, that will focus on the digitalisation and development of mobile cargo handling equipment and related maintenance services
• Kalmar announced its commitment to reduce emissions in cargo and material handling operations by fostering eco-efficient technologies. According to the commitment, Kalmar's full offering will be available as electrically powered versions by 2021.

Hiab

Product launches

• The portfolio of JONSERED recycling cranes was extended with four renewed and two new models, the 1250RZ and 1500RZ.

• In services, Hiab rolled out it’s ProCare™ Total Repair & Maintenance (R+M) programme globally. At a fixed monthly price, customers benefit from increased equipment uptime and reduced total cost of ownership, with their equipment value maintained with Hiab original parts.

• Hiab rolled out its connected service HiConnect™. HiConnect enables businesses to gain real-time insights into their fleet and load-handling equipment utilisation and operation, enhancing uptime, productivity and safety.

• Hiab launched its renewed HIAB light range loader cranes with a capacity from 4 to 11 metric tonnes.

• Hiab launched the new MOFFETT M5 NX truck mounted forklift which is especially designed for medium to heavy-duty tasks.

• The new MULTILIFT COMMANDER container handling unit was also presented to the markets. This application is new for the commercial hooklift market, enabling handling containers safely and efficiently in locations where no infrastructure exists to load or unload containers from the truck. 

Other actions

• Hiab opened Vision Lab, the latest addition to the Test and Innovation Centre in Hudiksvall, Sweden. The new facility enables testing the latest technologies with imaging, visual and object recognition under different conditions. 

• Hiab’s production units were awarded new, stricter ISO certifications for quality assurance, sustainability and safety, replacing earlier Hiab-wide ISO certifications. 

• Hiab continued to expand its spare parts web shop which now covers 46 countries.

• Hiab launched the MULTILIFT hooklifts for the US market.

• Hiab opened a new installation and competence centre in Meppel, the Netherlands.

MacGregor

• Finland–Singapore Maritime innovation camp, held in September in Singapore, sought ways to improve stevedore working conditions. MacGregor was one of the event’s corporate partners together with PSA Corporation.
• MacGregor introduced a new breakbulk cargo stowage solution, the Breakbulk Optimiser, which enables operators to rapidly and optimally plan the stowage of many different types of cargo, increasing vessel utilisation rates significantly and therefore improving business performance.

• MacGregor developed a unique new system for improving port and voyage efficiency for RoRo vessels. 

• MacGregor and China State Shipbuilding Corporation's (CSSC) Nanjing Luzhou Machine Co., Ltd. (LMC) celebrated the opening of their first joint venture in China. 

• MacGregor and SeaFocus announced a collaboration agreement that will support companies in creating new cooperation models to benefit maritime trade and drive industry innovation.

According to our knowledge the following analysts have regular coverage on Cargotec Corporation. The list may be incomplete. The listed analysts follow Cargotec on their own initiative. Cargotec is not responsible for their views.

You can find the consensus estimates here.  

Sustainability is a great business prospect for Cargotec as the inefficiencies in the industry are clear. Only the moving of empty containers cause 19 million CO₂ equivalent tonnes annually while some calculations show that the inefficiencies in cargo handling chain cause EUR 17 billion costs to the industry. We see the need for increasing efficiency in the industry as a major business potential, while at the same time it means decreasing emissions. The future growth in our business comes from increasing demands for operational efficiency, the proliferation of lifetime solutions and from increasing cargo volumes.

On the other hand, we need to ensure transparent and fair corporate governance, efficient environmental and health&safety management practices, efficient non-compliance programme and clear supplier management processes to have a license to operate in a more sustainability-driven market.

Increased efficiency for customers with our offering for eco-efficiency

For Cargotec, the willingness to increase more sustainable cargo flow is not only a sentence. We have created a product group which demonstrates the solutions which can benefit customers’ operational, emissions or resource efficiency. In environmental industries, our products and solutions can enhance the industry efficiency. Increased growth in offering for eco-efficiency is driven by R&D and digitalisation investments.

Customers benefit from using our products and solutions as they enable

• decreased fuel consumption,
• reduced emissions,
• improved competitiveness with heightened operational efficiency,
• fewer container moves in cargo handling and minimised environmental impact per moved container.

Cargotec’s eco-efficiency product group sales during 2018 was about 21 (2017: 18) percent of the  total sales.

• Visibility to identify inefficient use of resources and fuel
• Software and design system

• Offering to support the operations in environmental industries
• Cargotec solutions for environmental industries

• Technology to enable fuel and emission efficient offering
• Products with features to decrease fuel usage and avoidance of maritime hydraulic oil emissions

• Service enabling the extended usage of products or new applications
• Product conversions and modernizations

Safety, supply chain management and high ethical standards

Three most important areas to manage in our own operations during 2018 are safety, supply chain management and increased usage of renewable energy. Additionally, we will continue our extensive work around anti-corruption practices, employee engagement and Offering for eco-efficiency development.

We monitor our sustainability performance closely on various areas and set annual sustainability targets to ensure development. You can read more about our targets from Our sustainability work and targets section.

Cargotec's board of Directors has confirmed the updated financial targets for Cargotec Corporation, announced on 5 September 2017.

Updated targets are the following:

• Grow faster than the market (unchanged)
• Cargotec operating profit margin 10% in 3-5 years
• Service and software sales 40% of net sales, minimum EUR 1.5 billion in 3-5 years
• Increasing dividend in the range of 30-50% of EPS, dividend paid twice a year
• 15% ROCE in 3-5 years
• Gearing below 50% (unchanged)

The updated financial targets reflect Cargotec’s increased profitability and stability. Cargotec’s must-win battles - Build world-class services offering, Lead digitalisation, Build world-class leadership - continue to form the core of the company’s strategy. With the must-win battles, we aim to become the global leader in intelligent cargo handling.

Development on financial targets

Operating profit margin and ROCE

ROCE (return on capital employed), annualised *) Excluding restructuring costs

Dividend

* 2017 EPS figure has been restated according to IFRS 15
** Board proposal to AGM

Gearing and net debt

*Year 2017 figures have been restated according to IFRS 15

The year 2018 was twofold at Cargotec. Orders grew strongly in all our business areas, but we fell behind our target to improve our result. Kalmar’s operating profit improved, but the weaker results for Hiab and MacGregor led to a lower operating profit at group level compared to the previous year. Although the demand for Hiab’s equipment and services continued to grow strongly, its operating profit declined, particularly as the US dollar weakened against the euro, but also due to challenges with the supply chain and related additional costs. MacGregor’s market environment was still challenging, which led to a lower sales and operating profit, excluding restructuring costs. Kalmar’s operating profit improved, thanks to measures that improved productivity.

Throughout the year, Kalmar received several orders that benefit from advanced automation technology solutions. We also moved in the right direction with our software and digital solutions. In line with our strategy, we will continue to invest in the development of digitalisation solutions. We believe that the value chain for container handling can be significantly enhanced and we want to help our customers fully exploit these opportunities.

Our service business continued to develop positively and, at comparable exchange rates, its sales increased by six percent compared to the previous year. Our goal is to increase the sales of our service and software business from the current approximately EUR 1.1 billion to EUR 1.5 billion over the next two to four years. Service solutions that utilise digitalisation are increasingly emerging alongside traditional service methods in our offering.

The Board of Directors proposes to the Annual General Meeting to increase the dividend to EUR 1.10. This would be the fifth consecutive year in which our dividend has risen compared to the previous year. Although our results were lower than in the previous year, our order backlog is now 27 percent higher than it was one year ago. This gives us a good starting position for the year to come. We are committed to continuing to develop Cargotec from a good company to great one and in connection to this we will continue to sharpen our competitiveness and improve our productivity.

Here you can find some frequently asked questions about Cargotec as an investment. Questions are divided to categories which can be accessed from the navigation list. In case you have other questions, please contact Investor Relations team.

General information

1. What are Cargotec’s financial targets?

Cargotec’s financial targets, confirmed by the Board of Directors:

• Grow faster than the market
• Cargotec operating profit margin 10% in 3-5 years
• Service and software sales 40% of net sales, minimum EUR 1.5 billion in 3-5 years
• Increasing dividend in the range of 30-50% of EPS, dividend paid twice a year
• 15% ROCE in 3-5 years
• Gearing below 50%

Read more about Cargotec's financial targets and the development towards the targets here. 

2. Which are Cargotec’s business areas?

Cargotec’s business areas are Kalmar, Hiab and MacGregor. Kalmar offers industry shaping cargo handling equipment and automated terminal solutions, software and service; Hiab is the global market leader in on-road load handling, and MacGregor provides world-leading engineering solutions and services for offshore and marine industries.

3. What are Cargotec’s main customer segments?

All business areas serve different customer segments. You can find the main customers by business areas here. 

4. What is Cargotec’s geographical presence like?

Cargotec operates in more than 100 countries all over the world. In 2018, 49 percent of sales came from EMEA, 31 percent from Americas and 20 percent from APAC.

5. When was Cargotec founded?

Cargotec Corporation was formed in June 2005 when Kone Corporation demerged into two companies to be listed, Cargotec and KONE. However, the history of Cargotec did not start that year but over 100 years ago when Kalmar, one of Cargotec’s three business areas, started its operations.

Read more about Cargotec’s history.

6. How many people does Cargotec employ?

Cargotec employed 11,987 people at the end of 2018.

7. How much of Cargotec’s net sales is allocated to R&D?

In 2018, R&D expenditure totalled EUR 89.0 million, representing 2.7 percent of sales.