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

*Excluding restructuring costs

*) 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

Sources: figures 2014, 2019-2021 Drewry: Container forecaster Q3 2017
2015-2018 Drewry: Container forecaster Q4 2017
2012-2013 Drewry Global Container Terminal Operators Annual Report 2013

Construction output

Source: Oxford Economics: Industry output forecast  12/2017

Merchant shipping and offshore markets

Long term contracting 2012-2016
Merchant ships > 2000 gt (excluding offshore and misc)

Long-term contracting 2014-2023
Mobile offshore units

Source: Clarkson, September 2017

The following external organizations provide relevant and useful information about Cargotec's and business areas's markets. 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.

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.

 
Updated 4 April 2018. All releases can be found in here.

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

Research and product development expenditure in 2017 totalled EUR 92.5 (90.8) million, representing 2.8 (2.6) percent of sales. EUR 0.5 (2.3) million was capitalised.

R&D in business areas in 2017

Kalmar

Product launches

• Launch of the Kalmar DCG50-90 range of light diesel forklifts

• New Kalmar Essential Range of mid-sized products in Americas and Europe

• Kalmar Key, industry's first automation platform with open interfaces

• Kalmar Rail-Mounted Gantry Crane (RMG), a highly adaptable, automation ready crane solution suitable for both intermodal and container terminal operations.

• Fully electric medium-range forklift that will help customers reduce the environmental impact of their operations

Other actions

• Rainbow-Cargotec Industries’ new jetty in China, which supports Kalmar’s business growth in APAC

• Revisited vision for Port 2060

• Pilot project of fully electric powered Kalmar FastCharge™ Shuttle Carrier at DP World London Gateway Port

Hiab

Product launches

• New ZEPRO tail lift which is lighter than the previous model and easier as well as faster to install

• New DEL tail lift model with Power Closure opening feature, which enables the opening and closing of the heavy-duty, steel column lift platform without manual effort

• New robust ZEPRO folding lift for flexible distribution

• The semi-automatic folding (SAF) feature for folding and unfolding the crane with a single control level

• In demountables, new visual service indicator that is specifically designed to monitor MULTILIFT equipment movements and the time spent in operation. The service indicator alerts the operator proactively when it is time for regular maintenance

• Renewed SkipTopTM automatic load coverage was introduced for MULTILIFT Futura skiploaders.

• HiConnectTM solution, which is a new connected service offering enhancing the productivity of Hiab equipment for fleet operators by enabling real-time insights via web-based dashboards showing the utilisation, condition, and operation of their connected Hiab equipment

• Continuous slewing on Hiab’s 30 to 40 metric tonne range of loader cranes. Continuous slewing has previously been available for the biggest HIAB loader cranes with capacity of over 50 tonne metres. Continuous slewing makes the work in construction and transport faster, smarter and safer especially in risky positions.

• World’s first electric powered MULTILIFT Futura skiploader in partnership with the Dutch electric vehicle manufacturer EMOSS

• New MULTILIFT Futura 18 skiploader, which has the capacity of 18 tonnes and which offers the operator increased productivity with decreased fuel consumption as fewer trips are needed to haul the same load

• New oil tank using cyclone technology which reduces oil usage, weight, need for space and running costs. This patented technology is the first of its kind in the industry and works with most Hiab crane models.

Other actions

• Delivery of the first forestry crane equipped with the camera-based HiVisionTM control system to a customer in Sweden

• Investments in digitalisation and services by developing connectivity in the products to ensure that by the end of 2018 Hiab equipment are connected and able to communicate with other systems and devices

• New 4,000m2 regional distribution centre for Hiab spare parts outside of Indianapolis, United States, into operation.

• Open innovation challenge called CargoHack 3

• Expansion of Hiab Webshop, opened in 2016, to new markets

MacGregor

• Winning of Offshore Support Journal’s innovation of the Year award for MacGregor’s retrofit device, a 3D motion compensator

• MacGregor launched a new crane compensation system for offshore ship-to-ship load transfers

• Signing a Memorandum of Understanding to collaborate with Rolls-Royce on research and development in autonomous cargo ship navigation and cargo systems on board container ships

• New virtual reality training facility in Arendal, Norway

• Agreement to jointly develop and test autonomous discharging feature on bulk handling cranes.

• Acquiring the rights for a software to increase the efficiency of RoRo operations.

• Joint research project with the Technical University in Hamburg to develop an augmented reality-based system to support maintenance and service activities on ships

• Collaboration project in Germany to work together with industry partners to enable remote-controlled harbour tug operations by 2020

• Commence of piloting a customer interaction platform in order to establish a channel to provide a better access to relevant documentation and equipment insights as well as recommended actions to the customers. The platform will eventually serve as a tool for future MacGregor digital service offering.

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. 

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 program 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.

Our sales of eco-efficient products accounted for around 19% of total revenue in 2017.

• 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 Sustainability roadmap 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

Dividend

Gearing and net debt

"2017 was as a year of changes in our industry. We saw large-scale consolidation, as shipping lines formed alliances and reorganised cargo handling routes. The shipping market was still recovering from severe overcapacity. The on-road load handling market was strong both in the US and in Europe.

In terms of orders received, the year was twofold for us: orders received declined in Kalmar and MacGregor, but the strong development in Hiab continued. In Kalmar, the development in the project business did not meet our expectations. MacGregor’s orders grew during the second half of the year. The activity improved in the merchant ship markets, but remained well below historical averages. Hiab’s orders received grew in all our main markets supported by the good level of construction activity, and the development was strong especially in Europe.

Also the sales declined in Kalmar and MacGregor but grew in Hiab. The delivery volumes were in line with our expectations in the fourth quarter. We are satisfied that we were able to grow our operating profit despite the sales being lower than in the previous year. We expect that our operating profit, excluding restructuring costs, will improve also in 2018.

Strategy implementation, driven by our three must-win battles – digitalisation, services and leadership – progressed well. A number of new digital products were introduced during the year. We have an ambitious approach to development and to delivering our promise to be the leader in intelligent cargo handling in 2020. In addition to our product and system level digitalisation initiatives, we have launched several projects that focus on utilising robotics and artificial intelligence both internally and in our commercial offering.

In services we took decisive steps to improve and expand our offering as a lifecycle partner to our customers. At Kalmar, the main service business developed well, although the project-based services faced some challenges. Hiab introduced new service concepts which increased its service sales by four percent. MacGregor services suffered from weak market conditions, especially in the offshore business.

Our leadership development serves as an enabler for our transformation as a company. We have now focused on this area for three years, and measure our leaders’ behavior and effectiveness on a regular basis. This has clearly improved our working climate, employee satisfaction and performance.

During the year, we were also able to agree on three interesting acquisitions. Argos is one of Brazil's leading loader crane manufacturers. With the acquisition, Hiab will extend its operations to the Brazilian market. MacGregor agreed to acquire Rapp Marine Group in order to strengthen its offering for the fishery and research vessel segment. In addition, Kalmar acquired the port services business of Inver Engineering in Australia. Our balance sheet is strong, enabling further acquisitions."

Updated 8 February 2018

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

Presentation of the acquisition

Link to the release

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.

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, are the following:

• 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. 44% of sales comes from EMEA, 32% from Americas and 24% 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 11,251 people at the end of year 2017.

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

In 2017, R&D expenditure totalled EUR 92.5 million representing 2.8% of sales.