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Press release

Cargotec's Interim Report for January-June 2007

7/19/2007

 
 
  • Orders received during the first half of 2007 totaled EUR 1,864 (1-6/2006: 1,591) million. During the second quarter, orders received were EUR 949 (4-6/2006: 786) million.
  • The order book continued to grow and on June 30, 2007 totaled EUR 2,244 (December 31, 2006: 1,621) million.
  • Sales in the first half of the year grew by 13 percent and amounted to EUR 1,437
    (1-6/2006: 1,275) million. Close to half of the sales growth was organic. During the second quarter, sales were EUR 743 (4-6/2006: 661) million.
  • Cargotec completed 12 acquisitions during January-June. The most important acquisitions were Norwegian Hydramarine and Singaporean Plimsoll, which together form the MacGREGOR Offshore division.
  • Operating profit was EUR 104.1 (1-6/2006: 111.9) million with EUR 46.2
    (4-6/2006: 61.0) million attributable to the second quarter.
  • Cash flow from operating activities before financial items and taxes totaled EUR 83.4 (1-6/2006: 113.0) million.
  • Net income for the reporting period was EUR 74.9 (1-6/2006: 74.7) million.
  • Earnings per share were EUR 1.17 (1-6/2006: 1.16).
  • The number of personnel at the end of the reporting period was 10,962
    (June 30, 2006: 7,970). Acquisitions increased the number of personnel by 1,835 people.
  • General market activity is expected to continue healthy and order intake to grow by close to 20 percent in 2007. Together with the strong order book this will enable Cargotec to clearly exceed its growth target this year. Sales growth for 2007 is estimated to be approximately 15 percent. Cargotec is, in accordance with its plans, focusing in 2007 on growth and efficiency related investments, which burden this year's result. The investments are expected to enable profitable growth as per the five year strategy. Cargotec's operating profit margin for the remainder of the year is expected to stay below 8 percent.
 
Cargotec's President and CEO Mikael Mäkinen:
 
"We are extremely pleased with the continued strong order intake. The focus on services continues to pay off as the business is growing at a rapid rate. Many of the development investments initiated are reflected as costs in the second quarter result. However, I believe that the coming two quarters will show improved profitability. We are firmly committed to building a geographically stronger and expanded presence for our business."
 
An Analyst and Press Conference:
An analyst and press conference (in Finnish) will be arranged on July 19, 2007 at 2:00 p.m. Finnish time at Cargotec's head office, Sörnäisten rantatie 23, Helsinki.
 
An international telephone conference for analysts and investors will be held at 4:00 p.m.
Finnish time. The presentation material will be available on the Company's internet pages by 2:00 p.m. Finnish time.
 
The conference call phone numbers are the following:
+1 866 966 5335 (if calling from the U.S.)
+44 20 3023 4412 (if calling from rest of world)
 
The telephone conference can also be viewed as a live audio webcast through the internet pages at www.cargotec.com starting at 4:00 p.m. Finnish time. The archived webcast will be available on the internet pages later the same day.
 
Sender:
Cargotec Corporation
 
Kari Heinistö
Senior Executive Vice President and CFO
 
Eeva Mäkelä
SVP, Investor Relations and Communications
 
For further information, please contact:
Kari Heinistö, Senior Executive Vice President and CFO, tel. +358 204 55 4256
Eeva Mäkelä, SVP, Investor Relations and Communications, tel. +358 204 55 4281
 
Cargotec is the world's leading provider of cargo handling solutions whose products are used in the different stages of material flow in ships, ports, terminals, distribution centers and local transportation. Cargotec Corporation's brands, Hiab, Kalmar and MacGREGOR, are market leaders in their fields and well-known among customers all over the world. Cargotec's sales are EUR 2.8 billion. The company employs over 10,000 people and operates in close to 160 countries. Cargotec's class B shares are quoted on the Helsinki Stock Exchange.
 
www.cargotec.com

Operating Environment
 
The European market for Hiab's load handling equipment remained extremely strong during the second quarter in all product groups. Demand increased particularly in Central and Eastern Europe and in Russia. The market for Hiab's products in Asia Pacific was good. The demand in the United States weakened mainly due to the market downturn in the construction industry. Furthermore, a decline in U.S. new truck registrations compared to the previous year affected the demand for Hiab's tail lifts and truck-mounted forklifts. Demand for services continued healthy particularly in Europe.
 
Demand for Kalmar's container handling equipment was healthy. Lively market activity continued despite a somewhat lower number of major project decisions during the second quarter. Demand for rubber-tired gantry (RTG) cranes increased in South America and remained stable in Europe. Demand for reachstackers remained strong while the market for straddle carriers was below the previous year's level. The market for terminal tractors in the Americas remained healthy. The heavy industrial forklift market in the United States weakened slightly in the second quarter due to a decline in demand in the construction and forest industry. Demand in Europe remained strong. Demand for Kalmar's services remained lively in all market areas.
 
Demand for MacGREGOR's solutions was very strong in all market areas during the reporting period as lively activity continued in the shipbuilding industry. Demand for cargo handling solutions for bulk and general cargo vessels was strong. The number of orders for particularly ship cranes was high in the second quarter. Demand for RoRo equipment for PCTCs (pure car and truck carriers) was very good and orders for container ships also picked up clearly. The market for offshore equipment was very lively while bulk handling equipment demand was healthy. Demand for MacGREGOR's services remained stable.
 
Orders Received
 
Orders received by Cargotec in the first half of the year totaled EUR 1,864 (1-6/2006: 1,591) million. The value of the orders secured during the second quarter was EUR 949 (4-6/2006: 786) million.
 

 
Hiab
 
Of all the orders received in January-June 2007, Hiab accounted for EUR 508 (1-6/2006: 498) million. The orders received in April-June 2007 totaled EUR 244 (4-6/2006: 232) million.
 
In the second quarter, Hiab received numerous smaller orders. Despite the weaker U.S. market situation Hiab received a substantial order for truck-mounted forklifts. Furthermore, an order for load handling equipment to be used by the defense forces was received from Canada.
 
During the reporting period, Hiab received a high number of orders from Europe and Asia Pacific region. In China a contract was signed on the delivery of 24 loader cranes to China Railway Construction Corporation. The loader cranes will be delivered during 2007 to a railroad construction site between Wuhan and Guangzhou in China.
 
Kalmar
 
Of all the orders received in January-June, Kalmar accounted for EUR 760 (1-6/2006: 697) million. The orders received in April-June 2007 were EUR 367 (4-6/2006: 346) million.
 
In June, Kalmar received an order for ten straddle carriers from MSC Bremerhaven of Germany and an order for 15 straddle carriers from Patrick Corporation of Australia. The straddle carriers to be delivered to MSC Bremerhaven are environmentally friendly EDRIVE® products equipped with twin-lift spreaders. The straddle carriers of both MSC Bremerhaven and Patrick Corporation can be fully automated if necessary. The straddle carriers will be delivered in 2007-2008.
 
In May, Kalmar received an order for ten E-One RTGs from Saigon Newport (SNP) of Vietnam. The cranes will be equipped with the Smartpath® container position verification system and delivered in the spring of 2008 to SNP's container terminal near the city of Ho Chi Minh.
 
In the second quarter, Kalmar received an order for 24 pieces of container handling equipment from JSC Sea Port St. Petersburg of Russia. The equipment will be delivered by the end of September 2007.
 
In the second quarter, the company also received an order for 21 terminal tractors from Turkey. The terminal tractors ordered by Yliport Container Terminal will be delivered to the Izmit Bay container terminal near Istanbul in October 2007.
 
In March, Kalmar signed a contract with the DP World port operator regarding deliveries of 84 terminal tractors to the Jebel Ali port near the city of Dubai.
 
In January, Kalmar signed a contract for the delivery of 12 E-One RTGs to the Brazilian company Santos Brasil S/A operating in the port of Santos. The RTGs will be fitted with the Smartrail® automatic steering and container position verification system developed by Kalmar.
 
MacGREGOR
 
Of all the orders received during the reporting period, MacGREGOR accounted for EUR 597 (1-6/2006: 396) million. The orders received in April-June 2007 were EUR 338 (4-6/2006: 208) million.
 
In June, MacGREGOR received orders for RoRo equipment for 15 PCTCs and RoRo vessels under construction in Korea. The equipment will be delivered in 2008-2010.
 
In June, the company also received an order for eight ship cranes for heavy loads and eight standard ship cranes from the Chinese shipyard COSCO Dalian. The order also includes the design and component delivery for hatch covers. The ship cranes and hatch covers will be delivered in 2008-2009.
 
In May, MacGREGOR received an order for four ship board twin cranes from the Polish-Chinese shipowner Chipolbrok. The units will be the largest of their kind in the world. The cranes will be delivered in 2007-2008 for four vessels built in the 1990s.
 
MacGREGOR received during the second quarter orders for 276 ship cranes from China and India. The ship cranes will be delivered during 2008-2011 for 74 bulk carriers.
 
Furthermore, orders for 42 ship cranes for vessels to be built in China and Taiwan were received in the second quarter. The equipment will be delivered in 2008-2010 for vessels ordered by COSCO of China, Peter Döhle of Germany and Cido Shipping of Hong Kong. Furthermore, delivery contracts for ship cranes were signed for 26 bulk ships ordered by Setaf Saget of France and 12 bulk ships ordered by Essar/ABG of India. Heavy lift ship cranes will also be delivered for four general cargo ships ordered by Chipolbrok and eight general cargo ships ordered by COSCO.
 
In the second quarter, MacGREGOR signed several contracts for the delivery of bulk handling equipment. The equipment will be delivered for vessels transporting cement and iron ore.
 
MacGREGOR signed a three-year maintenance agreement with the Italian company Grimaldi Group in the second quarter. The agreement covers the maintenance of MacGREGOR RoRo systems on board 26 of Grimaldi's RoRo vessels. The maintenance agreement corresponds to the highest level of the MacGREGOR Onboard Care concept, Total Onboard Care.
 
In March, MacGREGOR received substantial orders for RoRo equipment from several shipyards in Germany, Japan and Croatia. The equipment will be delivered in 2007-2009 for RoPax vessels and PCTCs.
 
In the first quarter, MacGREGOR received substantial ship crane orders, which further increase MacGREGOR's market share in ship cranes.
 
Order Book
 
Cargotec's order book totaled EUR 2,244 (December 31, 2006: 1,621) million on June 30, 2007. Of the order book, Hiab accounted for EUR 238 (215) million, Kalmar EUR 693 (593) million, and MacGREGOR EUR 1,314 (813) million. Inclusion of the offshore business in MacGREGOR's figures increased the end of June order book by approximately EUR 250 million. A considerable part of MacGREGOR's order book is for delivery in 2008-2012.
 

 
 
 
 
Sales
 
Cargotec's sales for the first half of the year grew by 13 percent and totaled EUR 1,437
(1-6/2006: 1,275) million. Close to half of the growth was organic. Approximately EUR 40 million of the growth in the reporting period was attributable to the sales impact of acquisitions completed during January-June. The sales impact of acquisitions completed in the second half of 2006 was over EUR 50 million in January-June 2007. Sales for the second quarter amounted to EUR 743 (4-6/2006: 661) million.
 
Hiab's sales in April-June amounted to EUR 245 (4-6/2006: 237) million, Kalmar's sales were EUR 330 (309) million and MacGREGOR's sales EUR 169 (116) million.
 

 
Sales for services increased by 29 percent on the corresponding period in 2006 and amounted to EUR 353 (1-6/2006: 274) million, which is 25 (21) percent of total sales. The increase was particularly attributable to strong demand for spare parts and maintenance agreements, as well as completed acquisitions. Services accounted for 15 (14) percent of sales at Hiab, 30 (25) percent at Kalmar, and 28 (27) percent at MacGREGOR in January-June.
 
Financial Result
 
Cargotec's operating profit for January-June 2007 was EUR 104.1 (1-6/2006: 111.9) million, representing 7.2 (8.8) percent of sales. The result was weakened by the growth and efficiency related investments made during the reporting period. Operating profit for the second quarter was EUR 46.2 (4-6/2006: 61.0) million, equal to 6.2 (9.2) percent of sales. Hiab accounted for EUR 16.6 (23.4) million of second quarter operating profit, Kalmar for EUR 24.0 (31.0) million and MacGREGOR for EUR 11.4 (10.2) million.
 
The operating profit for January-June includes a EUR 2.4 (1-6/2006: 0.9) million cost impact from the purchase price allocation treatment of acquisitions, with EUR 1.7 (4-6/2006: 0.5) million attributable to the second quarter. Projects initiated during the beginning of the year to develop the services business and strengthen the knowledge base increased the corporate administration costs.
 
Hiab's second quarter operating profit includes a cost reserve of approximately EUR 4 million due to the transfer of the of truck-mounted forklift production in Oude Leije in the Netherlands to Dundalk in Ireland. The demand for Hiab load handling products in the U.S. was weaker in the second quarter than in the beginning of the year. The improved profitability in Europe was not able to fully compensate for the impact of the U.S. demand. Kalmar profitability was burdened by higher than expected R&D and operational costs related to expanding presence in the markets for big cranes and automated solutions. MacGREGOR's result includes the cost impact from the purchase price allocation treatment of the offshore acquisitions included as of the second quarter. MacGREGOR's operational result developed positively in the first half of the year.
 
Net income for the period was EUR 74.9 (1-6/2006: 74.7) million and earnings per share were EUR 1.17 (1.16).
 
Balance Sheet, Financing and Cash Flow
 
On June 30, 2007, Cargotec's net working capital amounted to EUR 240 (December 31, 2006: 209) million. Tangible assets on the balance sheet were EUR 253 (218) million and intangible assets EUR 747 (581) million.
 
Cash flow from operating activities before financial items and taxes for January-June 2007 totaled EUR 83.4 (1-6/2006: 113.0) million and that for April-June EUR 31.3 (4-6/2006: 72.4) million.
 
Net debt at the end of the reporting period was EUR 344 (December 31, 2006: 107) million. Total equity/total assets ratio was 40.4 (47.6) percent while gearing was 39.0 (12.3) percent.
 
Cargotec had EUR 467 million of committed credit facilities on June 30, 2007. These facilities were unused. The EUR 225 million (USD 300 million) Private Placement placed in December 2006 with U.S. institutional investors was funded in February 2007. 14 U.S. institutional investors participated in the transaction. The placement has been hedged through Cross Currency and Interest Rate Swaps into a fixed interest rate euro loan. Its interest rate varies between 4.525 and 4.756 percent depending on the maturity, which varies between 7 and 12 years.
 
New Products and Product Development
 
In January-June 2007, Cargotec's research and product development expenditure was EUR 23.1 (1-6/2006: 15.1) million, representing 1.6 (1.2) percent of sales.
 
Hiab introduced a new XR 26 hooklift system specifically used in heavy 4-5-axle truck applications for waste management and recycling industries. The new MOFFETT M4 truck-mounted forklift model was introduced in the European market. The model has been ordered particularly for short-range local transports and for the gas industry. In U.S. Hiab launched a new truck-mounted forklift, Princeton PB 45 that replaces the model produced earlier in Europe. This truck-mounted forklift is typically used for supplying lightweight building materials and transferable lawn.
 
In the second quarter, Kalmar introduced a remodeled E-One+ RTG crane. The environmentally friendly E-One RTGs were introduced in 2005. They are electrically operated and do not have any hydraulics. The new E-One+ model brings improvements to maintenance, operating safety and assembly of the unit. A stabilizer system for container spreaders, Max Stable, was also introduced to the market. It speeds up spreader movement and increases its precision. Furthermore, the company introduced a new generation of terminal tractors with the CAN-BUS monitoring system. It combines the functions of terminal tractors onto a single monitor screen. The CAN-BUS system speeds up the operation of terminal tractors. In May, Kalmar completed a project in Port of New Jersey where 183 straddle carriers of Maher Terminals were fitted with the Smartpath® container position verification system and Fleetview monitoring system developed by Kalmar.
 
MacGREGOR continued the development of a new control system for ship cranes. The first installations of the control system will take place in early 2008. The first electronic operated ship crane was installed onboard a ship into use during the reporting period.
 
Capital Expenditure
 
Cargotec's capital expenditure for January-June, excluding acquisitions and customer financing, totaled EUR 20.7 (1-6/2006: 25.1) million. Customer financing investments were EUR 15.4 (9.4) million.
 
In May, Kalmar opened a new automation development center at Tampere, Finland. The center tests the functionality of intelligent solutions developed by Kalmar before the equipment is delivered to the customer. Furthermore, the center has a simulator for training machine operators on Kalmar's remote monitoring systems. The development center's first testing project is the automatic stacking crane system ordered by HHLA, the largest operator in the port of Hamburg, Germany.
 
Hiab agreed during the reporting period to centralize its European truck-mounted forklift production to the Dundalk unit in Ireland. The Oude Leije production unit in the Netherlands will be converted into a technical center serving European customers.
 
MacGREGOR's Offshore division is investing in a new production unit to be built in Tianjin, China. The production unit will start operating in the end of 2007. A new production unit for hatch covers is under construction with the Vietnamese company Vinashin and is scheduled to start operations in the second half of 2008. Vinashin and MacGREGOR established a joint venture early in the year.
 
Acquisitions
 
Cargotec continued the strategic growth plan by completing 12 acquisitions in the first half of the year.
 
In February, a contract was signed to acquire the Indian company Indital Construction Machinery Ltd. based in Bangalore. The acquisition creates manufacturing presence for Cargotec in India and supports the growing sales activities of all three of Cargotec's business areas in the region. The company employs approximately 60 people and its sales are approximately EUR 8 million. Cargotec has a 95 percent holding in Indital. The acquisition was finalized in April.
 
Hiab's Acquisitions
 
In May, Hiab signed a contract to acquire the Estonian company Balti ES. The company is based in Narva and manufactures steel structures and components. The acquisition supports Hiab's and Kalmar's increasing demand for components and reinforces the supplier network and price competitiveness of both companies. Balti ES employs approximately 600 people and posted sales of approximately EUR 14 million in 2006. The acquisition was finalized in June.
 
In January, Hiab signed an agreement of intent to acquire the sales, service and installation units of its current distributor Berger in the Czech Republic, Slovakia, Hungary and Croatia. The annual sales of the operations are approximately EUR 16 million, and the units employ approximately 75 people. The acquisition was finalized in May.
 
In January, a contract was signed to acquire a majority holding in BG Crane Pty. Ltd., the Australian importer of Hiab equipment, previously an associated company. The company employs approximately 100 people and had sales of approximately EUR 20 million in 2006. The deal was finalized in February.
 
Kalmar's Acquisitions
 
In April, Kalmar signed a contract to acquire the remaining minority share in Kalmar Asia Pacific Ltd. Kalmar now fully owns the company.
 
In February, Kalmar acquired the U.S. based service company Port Equipment Service, Inc. (PES). PES employs 56 people and had sales of approximately EUR 4 million in 2006. The acquisition strengthens Kalmar's service business particularly in ports and railroad terminals on the U.S. East Coast.
 
In January, Kalmar acquired the Slovenian service company Tagros d.o.o. Tagros services container handling equipment and forklifts. This acquisition enables Kalmar to build up its service and sales activities in Slovenia and the Northern Balkan Peninsula. Tagros employs approximately 35 people and had sales of approximately EUR 2 million in 2006.
 
In January, the company also agreed to acquire Truck och Maskin i Örnsköldsvik AB in Northern Sweden. The acquisition strengthens Kalmar's sales and service network for industrial customers in the wood handling segment. Truck och Maskin employs approximately 100 people and had sales of approximately EUR 14 million in the accounting period that ended on April 30, 2006. The acquisition was finalized in February.
 
In December 2006, a contract was signed to acquire Kalmar's Spanish distributor Kalmar España. The acquisition was finalized in April.
 
MacGREGOR's Acquisitions
 
During the reporting period, MacGREGOR expanded its operations into the offshore segment through three acquisitions.
 
In May, a contract was signed to acquire Vestnorsk Hydraulikkservice AS (VNH) of Norway. VNH specializes in the maintenance of hydraulic systems and turnkey deliveries of offshore solutions for oil drilling support vessels and other types of ships. VNH's sales amount to approximately EUR 5 million. The company employs 21 people. The acquisition was finalized in June.
 
In March, MacGREGOR agreed to acquire the Norwegian offshore and sub sea load handling system supplier Hydramarine AS. Hydramarine specializes in the development of hydraulic and electrical deck machinery equipment such as cranes. In 2006, Hydramarine had sales of EUR 63 million and employed 150 people. MacGREGOR acquired 90 percent of the company with the remaining shares being owned by the employees. The acquisition was finalized in April.
 
In March, MacGREGOR also signed a contract to acquire the Singaporean company Plimsoll Corporation Pte Ltd. It is the leading supplier of equipment for oil drilling and gas vessels and other types of ships in the Asia Pacific region. The product range includes among others winches and cranes. Plimsol's sales in 2006 totaled approximately EUR 43 million. The company employs approximately 600 people. MacGREGOR acquired 90 percent of the company with the remaining shares being owned by the employees. The acquisition was finalized in April.
 
In June, MacGREGOR established a new division, MacGREGOR Offshore. The division consists of Hydramarine and Plimsoll and concentrates on achieving synergy benefits and expanding the business. The new division employs more than 700 people. The offshore division enjoyed a healthy order intake during the second quarter of 2007. The equipment ordered will be delivered during 2007-2010 for ship yards building offshore vessels in Norway, Singapore, China, Malaysia, Japan and Middle East. The operations of the service companies Vestnorsk Hydraulikkservice and Grampian support the new division.
 
Personnel
 
At the end of the reporting period, Cargotec employed 10,962 (June 30, 2006: 7,970) people. Acquisitions during the period increased the number of personnel by 1,835 people. Hiab employed 4,483 (3,617) people, Kalmar 4,341 (3,378), and MacGREGOR 2,066 (927).
 
Of Cargotec's total employees, 14 percent were located in Finland, 22 percent in Sweden, and 30 percent in the rest of Europe. North and South American personnel represented 12 percent, Asia Pacific 21 percent, and the rest of the world 1 percent of total employees.
 
Shares and Stock Options
 
Cargotec's share capital on June 30, 2007 was EUR 64,118,679. The share capital was increased during the reporting period through stock options. At the beginning of the year, the share capital was EUR 64,046,460. On June 30, 2007, the number of Cargotec's listed class B shares totaled 54,592,590 while that of its unlisted class A shares totaled 9,526,089. The remaining 2005A and 2005B stock options may be used to subscribe for a further 290,331 class B shares, thereby increasing the share capital by EUR 290,331.
 
During the first half of the year, the trading volume of Cargotec class B shares totaled around 26 million at a total value of approximately EUR 1,197 million. The closing price for class B shares on June 30, 2007 was EUR 45.67. The highest price during the reporting period was EUR 49.60 and the lowest EUR 40.69. The market capitalization, with the unlisted class A shares valued at the average price of the class B shares on the last day of the period, amounted to EUR 2,900 million, excluding class B treasury shares held by the company.
 
The amount of shares owned by the Executive Board either directly or indirectly grew significantly as Moving Cargo Oy, a company jointly-owned by the Executive Board, acquired 84,354 shares during the second quarter of 2007. The ownership of the Executive Board on June 30, 2007 totaled 0.2 percent of all Cargotec shares.
 
 
 
 
Cargotec's Financial Targets and Incentive Program for Key Managers
 
In January, Cargotec published its new financial targets and a share-based incentive program for the key managers for the years 2007-2011. The purpose of the program encouraging share ownership is to align the interests of key managers to Cargotec's strategy and financial targets as well as contribute to making them long-term shareholders of the company. The incentive program covers some 60 individuals. The program offers key managers a possibility to earn a reward in Cargotec class B shares based on accomplishment of set targets.
 
Cargotec's financial targets are the following: annual net sales growth exceeding 10 percent (incl. acquisitions), raising the operating profit margin to 10 percent, and maintaining the gearing below 50 percent. The targets have been set for the years 2007-2011.
 
The incentive program consists of four earnings periods, of which the first is two years and the following three periods one year each. The Board of Directors decides on the target group of the earnings period and their maximum reward at the beginning of each earnings period.
 
Potential rewards from the incentive program during 2007-2011 are based on achievement of five-year net sales and operating profit targets as defined in Cargotec's strategy. The rewards will be paid during 2009-2012 in both class B shares and cash. The cash portion is dedicated to cover possible taxes and tax-related payments resulting from the reward. The shares distributed as reward will contain a prohibition to hand over or sell the shares within one year of the end of an earnings period with the exception of the final earnings period when no prohibitions are included. The maximum amount to be paid out as shares is 387,500 class B shares currently held by the company as treasury shares.
 
Changes in Cargotec's Executive Board
 
Pekka Vauramo, M.Sc. (Eng.) was appointed Kalmar's President as of October 1, 2007. Vauramo will start at Cargotec on September 1, 2007. Kalmar's current President Christer Granskog will retire by the end of 2007 in accordance with his service contract.
 
Decisions Taken at Cargotec Corporation's Annual General Meeting
 
Cargotec Corporation's Annual General Meeting was held on February 26, 2007 in Helsinki. The meeting approved the financial statements and consolidated financial statements. The meeting granted discharge from liability to the President and CEO and the members of the Board of Directors for the accounting period January 1-December 31, 2006.
 
The Annual General Meeting approved the Board's proposal of a dividend of EUR 0.99 for each of the 9,526,089 class A shares and EUR 1.00 for the 53,815,646 outstanding class B shares. The meeting also approved the remuneration of the Board members as well as that of the auditors.
 
The number of members of the Board of Directors was confirmed at six according to the proposal of Cargotec's Nomination and Compensation Committee. Carl-Gustaf Bergström, Henrik Ehrnrooth, Tapio Hakakari, Ilkka Herlin, Peter Immonen and Karri Kaitue were re-elected as members of the Board of Directors.
 
Authorized public accountants Johan Kronberg and PricewaterhouseCoopers Oy were elected as auditors according to the proposal of the Audit Committee of Cargotec Corporation's Board of Directors.
Authorizations Granted by the Annual General Meeting
 
The Annual General Meeting authorized the Board of Directors of Cargotec to decide to repurchase the Company's own shares with assets distributable as profit. The shares may be repurchased in order to develop the capital structure of the Company, finance or carry out possible acquisitions, implement the Company's share-based incentive plans, or to be transferred for other purposes or to be cancelled.
 
Altogether no more than 6,400,000 own shares may be repurchased, of which no more than 952,000 are class A shares and 5,448,000 are class B shares. The above-mentioned amounts include the 704,725 class B shares already in the Company's possession. This authorization remains in effect for a period of 18 months from the date of decision of the Annual General Meeting.
 
In addition, the Annual General Meeting authorized the Board of Directors to decide on the distribution of any shares repurchased. The Board of Directors is authorized to decide to whom and in which order the shares will be distributed. The Board of Directors may decide on the distribution of repurchased shares otherwise than in proportion to the existing pre-emptive right of shareholders to purchase the Company's own shares. The shares may be used as compensation in acquisitions and in other arrangements as well as to implement the Company's share-based incentive plans in the manner and to the extent decided by the Board of Directors. The Board of Directors has also the right to decide on the distribution of the shares in public trading at the Helsinki Stock Exchange to be used as compensation in possible acquisitions. This authorization remains in effect for a period of 18 months from the date of decision of the Annual General Meeting.
 
Organization of the Board of Directors
 
In its organizing meeting Cargotec's Board of Directors elected Ilkka Herlin to continue as Chairman of the Board and Henrik Ehrnrooth to continue as Deputy Chairman. Cargotec's Senior Executive Vice President and CFO Kari Heinistö continues to act as secretary to the Board of Directors.
 
The Board of Directors re-elected among its members Ilkka Herlin, Peter Immonen and Karri Kaitue as members of the Audit Committee. Karri Kaitue was elected to continue as Chairman of the Audit Committee. Board members Carl-Gustaf Bergström, Tapio Hakakari, Ilkka Herlin and Peter Immonen were re-elected to the Nomination and Compensation Committee. Ilkka Herlin was elected to continue as chairman of the Nomination and Compensation Committee. Board members Tapio Hakakari, Ilkka Herlin and Peter Immonen were elected to the Working Committee. The Board elected Ilkka Herlin as chairman of the Working Committee.
 
Share Repurchases
 
Cargotec's Board of Directors decided to exercise the authorization of the Annual General Meeting to repurchase the Company's own shares.
 
The maximum amount of repurchased own shares will be less than 10 percent of the Company's share capital and total voting rights.
 
Class B shares will be purchased at public trading in the Helsinki Stock Exchange at the market price. Class A shares will be purchased outside the Stock Exchange at the price equivalent to the average price of class B shares paid in the Helsinki Stock Exchange on the purchase date. Share repurchases will be published on the transaction days through stock exchange announcements.
 
No shares were repurchased during the reporting period.
 
Short-term Risks and Uncertainties
 
Cargotec's principal short-term risks and uncertainties are related to availability of components and the U.S. economic development.
 
Cargotec has outsourced a significant proportion of its component production and part of its assembly operations. Cargotec strives to anticipate its component needs so that subcontractors can flexibly meet demand. Due to generally high demand for many of the components used by Cargotec their availability remains critical.
 
The U.S. economy especially affects the demand for Cargotec's load handling equipment. At present, load handling equipment demand from the building materials supply industry is clearly below the 2006 level. The market development remains uncertain, but is not expected to improve for the coming few months.
 
Cargotec has made a significant number of acquisitions during the past 12 months. Although these acquisitions are relatively small in size and geographically dispersed, integrations always involve uncertainty factors.
 
Events after the Reporting Period
 
In December 2006, Cargotec agreed to acquire the Italian company CVS Ferrari. The German competition authorities are demanding remedy actions, which Cargotec believes are disproportionate to the impact the contemplated transaction would have on the competitive environment. Cargotec and CVS Ferrari are cooperating in order to find a satisfactory solution in order to finalize the acquisition. However, for the time being both Cargotec and CVS Ferrari continue to be independent competitors pursuing their own business.
 
Outlook
 
General market activity is expected to continue healthy and order intake to grow by close to 20 percent in 2007. Together with the strong order book this will enable Cargotec to clearly exceed its growth target this year. Sales growth for 2007 is estimated to be approximately 15 percent.
 
Cargotec is, in accordance with its plans, focusing in 2007 on growth and efficiency related investments, which burden this year's result. The investments are expected to enable profitable growth as per the five year strategy. Cargotec's operating profit margin for the remainder of the year is expected to stay below 8 percent.
 
Helsinki, July 19, 2007
Cargotec Corporation
Board of Directors
 
 
This interim report is unaudited.
 

CARGOTEC'S INTERIM REPORT FOR JANUARY-JUNE 2007
 
CONDENSED CONSOLIDATED INCOME STATEMENT

* Excluding gain on the sale of property after taxes

CONDENSED CONSOLIDATED BALANCE SHEET
 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
 

 

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

 
KEY FIGURES

 

SEGMENT REPORTING

 

 

 

NOTES
 
Taxes in income statement

 
Commitments

 

 

 

ACQUISITIONS 2007
 
In January-June 2007, Cargotec made several acquisitions supporting its strategy. These acquisitions were individually immaterial.
 
In January, Hiab made an agreement to acquire the majority of its Australian importer, BG Crane Pty. Ltd. The acquisition was finalized in February. In January, an agreement of intent was signed to acquire the sales, service and installation units of Hiab's current distributor Berger in the Czech Republic, Slovakia, Hungary and Croatia. The acquisition was finalized in May. Hiab signed a contract in May to acquire the Estonian company Balti ES. The acquisition was finalized in June.
 
Kalmar acquired Tagros d.o.o., a Slovenia-based service company in January. Kalmar signed also an agreement in January to acquire Truck och Maskin i Örnsköldsvik AB, a Swedish company. The acquisition was finalized in February. In February, Kalmar acquired the assets and business of Port Equipment Service, Inc., a U.S. based service company. In February, a contract was signed to acquire the Indian company Indital Construction Machinery Ltd. The acquisition was finalized in April. In April, Kalmar acquired the remaining minority share of Kalmar Asia Pacific Ltd. In December 2006, a contract was signed to acquire Kalmar's Spanish distributor Kalmar España. The acquisition was finalized in April.
 
In March, MacGREGOR agreed to acquire 90 percent of the Norwegian Hydramarine AS. The acquisition was finalized in April. In March, MacGREGOR also signed a contract to acquire 90 percent of the Singaporean company Plimsoll Corporation Pte Ltd. The acquisition was finalized in April. The accounting of these two business combinations also includes the minority shares, which include a redemption obligation. The debt-free acquisition price of these two business combinations was approximately EUR 122 million and the goodwill recognized according to the preliminary calculations was EUR 111 million. In May, a contract was signed to acquire Vestnorsk Hydraulikkservice AS of Norway. The acquisition was finalized in June.
 
Management estimates that the consolidated sales for Jan 1-Jun 30, 2007 would have been EUR 1,480 million, if the acquisitions had been completed on Jan 1, 2007.
 
The table below summarizes the acquisitions completed in January-June 2007. The business combinations were accounted as preliminary as the determination of fair values to be assigned to the assets, liabilities and contingent liabilities were not yet finalized.
 

ACCOUNTING PRINCIPLES
 
The interim report has been prepared according to the International Accounting Standard 34: Interim Financial Reporting. The accounting policies adopted are consistent with those of the 2006 annual financial statements. All figures in the accounts have been rounded and consequently the sum of individual figures may deviate from the presented sum figure.
 
Adoption of new or revised IFRS standards and interpretations in 2007
 
In January 2007 Cargotec has adopted the following new and amended standards and interpretations by the IASB published in 2006:
 
- IFRS 7, Financial Instruments: Disclosures
- IAS 1 Amendment, Capital Disclosures
- IFRIC 10, Interim Financial Reporting and Impairment
- IFRIC 11, IFRS 2 - Group and Treasury Share Transactions
 
The adoption of the new and revised standards and interpretations does not have a material effect on the interim financial statements.
 
Reclassification of balance sheet items
 
Division of derivative assets and liabilities into current and non-current has been applied in the 2006 annual financial statements. Derivative instruments, for which hedge accounting is applied, and for which the underlying cash flow matures after twelve months, are booked as non-current assets and liabilities, other derivative instruments are booked as current assets and liabilities. In previous financial statements all derivatives have been included in current assets and liabilities. The comparative figures of June 30, 2006 have been restated accordingly.
 
Retrospective adjustment of final accounting of the acquisitions
 
In the 2006 financial statements the impact of final accounting of the acquisitions of 2005 was recognized retrospectively for the period Jan 1-Dec 31, 2006. The comparative figures of June 30, 2006 have been restated accordingly.
 
Share-based payments
 
The share-based incentive scheme for top management approved by the Board of Directors in July 2005 ended in March 2007. The members of the scheme received 20,660 Cargotec 2005B-option rights and in cash 65,000 synthetic option rights. The fair value of a synthetic option was EUR 28.22 at payment day.
 
In January 2007, Cargotec published a new share-based incentive scheme for the company's key managers for the years 2007-2011. The rewards will be paid during 2009-2012 in both class B shares and cash. The cash portion is dedicated to cover possible taxes and tax-related payments resulting from the total reward. Shares distributed as reward will contain a prohibition to hand over or sell the shares within one year of the end of the earnings period with the exception of the final earnings period when no prohibitions are included. The shares will be lost if the holder leaves the company before the prohibition period ends. At the end of June 2007 the earnings period 2007-2008 involves 61 persons. If they were to receive the maximum number of shares in accordance with the scheme, a total of 149,150 shares, their shareholding obtained via the program would amount to 0.08 percent of the total voting rights of Company's class A and B shares. The incentive scheme is booked and valued according to the Share-based payments accounting principle presented in the annual financial statements of 2006.

CALCULATION OF KEY FIGURES
 

 

QUARTERLY FIGURES

* Excluding gain on the sale of property

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