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Press Release

Cargotec's Interim Report for January-September 2007

18/10/2007

 
  • Orders received during January-September 2007 totalled EUR 2,892 (1-9/2006: 2,194) million. During the third quarter, orders received were record strong at EUR 1,028 (7-9/2006: 603) million.
  • The order book continued to grow and totalled EUR 2,552 (December 31, 2006: 1,621) million on September 30, 2007.
  • Sales grew in January-September by 13 percent and amounted to EUR 2,151
    (1-9/2006: 1,900) million. Half of this growth was organic. During the third quarter, sales were EUR 713 (7-9/2006: 625) million.
  • Cargotec completed 14 acquisitions during January-September.
  • Operating profit was EUR 156.6 (1-9/2006: 181.9) million. The comparison period includes a EUR 17.9 million capital gain from divestment of property. Operating profit from operations in the third quarter was EUR 52.5 (7-9/2006: 52.1) million.
  • Cash flow from operating activities before financial items and taxes totalled EUR 138.8 (1-9/2006: 178.8) million.
  • Net income for the reporting period was EUR 109.5 (1-9/2006: 126.8) million.
  • Earnings per share were EUR 1.72 (1-9/2006: 1.97) with EUR 0.55 (7-9/2006: 0.81) attributable to the third quarter.
  • The number of personnel at the end of the reporting period was 11,081 (September 30, 2006: 8,313). Acquisitions completed during the reporting period increased the number of personnel by close to 1,900 people.
  • General market activity is expected to continue healthy with the exception of the U.S. load handling market. In accordance with its plans, Cargotec continues growth and efficiency related investments, which burden the 2007 result. Thanks to the record value of orders received so far in the year the estimate for full year 2007 order intake growth has been raised to close to 30 percent. The sales growth estimate for 2007 is unchanged at approximately 15 percent, which implies strong sales growth for the final quarter. Due to the growth operating profit in euros will improve from the previous quarters. Operating profit margin for the final quarter is estimated to remain at the third quarter level.
Cargotec's President and CEO Mikael Mäkinen:
 
"The value of orders received during the third quarter exceeded a record level of 1 billion euros. It is a signal on one hand of healthy market activity and on another hand of our success in product development and in expansion of our global market presence. We continue our investments in strengthening Cargotec's presence and market position also the remainder of the year. I am especially pleased with the strong sales growth in Asia as well as the healthy order intake in our offshore division acquired in spring. Despite the current weak demand for load handling equipment in the U.S. we believe also that market longer term offers us significant growth opportunities."
 
Analyst and Press Conference:
 
The analyst and press conference hosted at Cargotec's head office, Sörnäisten rantatie 23, Helsinki, will be combined with a live international telephone conference on October 18, 2007 at 2:00 p.m. Finnish time. The whole combined event will be in English. 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 conference can also be viewed as a live audio webcast through the internet pages at www.cargotec.com starting at 2:00 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 11,000 people and operates in close to 160 countries. Cargotec's class B shares are quoted on the Nordic Exchange, Helsinki.
 
www.cargotec.com

Operating Environment
 
Demand for Hiab's load handling equipment remained very buoyant in Europe and Asia Pacific in July-September. Markets grew, particularly in Central Eastern Europe, Russia and China driven by growing demand for equipment from the construction, transport and recycling industries. The U.S. markets remained weak, with new truck registrations clearly below their 2006 levels and no signs of recovery in demand from the construction industry, which declined in the late spring. This market decline affected particularly demand for Hiab's truck-mounted forklifts, tail lifts and loader cranes.
 
Demand for Kalmar's container handling equipment was healthy. In particular, demand for reachstackers, rubber-tired gantry (RTG) cranes and empty container handlers was clearly higher year on year. Kalmar has been able to significantly improve its market position in RTGs globally. Demand for straddle carriers continued healthy although the overall market is not at the strong level of 2006. Demand for heavy industrial handling equipment continued to be lively in Europe and stable elsewhere.
 
Demand for MacGREGOR's marine cargo flow systems and offshore solutions continued very high in the third quarter. The increasing number of new vessel orders in shipyards around the world boosted demand for MacGREGOR's solutions. The markets for ship cranes, hatch covers and offshore solutions were strong. With respect to RoRo equipment for PCTCs (pure car and truck carriers), the markets remained strong while those for bulk handling equipment strengthened in Asia Pacific.
 
Demand for services developed positively during the reporting period. In Europe, there was strong demand for load handling services due to the increased number of installed equipment and high utilisation rates. In U.S. demand for load handling services weakened from the previous year. The market for container handling services continued healthy in Europe and stable elsewhere in the world. Demand for marine services remained at a healthy level in Europe and Asia. The increasing number of vessels to be delivered is positively influencing the market for services.
 
Orders Received
 
Orders received by Cargotec in January-September totalled EUR 2,892 (1-9/2006: 2,194) million. The value of the orders secured during the third quarter was record high at EUR 1,028 (7-9/2006: 603) million. The high value of orders received is especially due to orders for long ship series received by MacGREGOR, the deliveries of which extend for a period of several years.
 

 
 
Hiab
 
Of all the orders received in January-September 2007, Hiab accounted for EUR 731
(1-9/2006: 706) million. The orders received in July-September totalled EUR 223 (7-9/2006: 207) million.
 
In the third quarter, Hiab received numerous small orders. During the reporting period Hiab received among others orders for cranes suitable for defence use from China and the United States. Furthermore, Hiab received a significant order for 45 loader cranes which will be delivered to Mexico.
 
In July, Hiab and SAWO, Hiab's importer in Denmark, secured an order for 133 hooklifts and 22 loader cranes from the truck manufacturer, MAN. The hooklifts and loader cranes to be supplied to the Danish Army will be installed by SAWO. The deliveries will start in 2007 and continue into 2008. The order value will be booked evenly over the duration of the contract.
 
Kalmar
 
Of all the orders received in January-September 2007, Kalmar accounted for EUR 1,083
(1-9/2006: 955) million. The orders received in July-September totalled EUR 324 (7-9/2006: 258) million.
 
In August, Kalmar received an order for 10 E-One RTGs from Saigon Newport (SNP) of Vietnam. The environmentally friendly E-One RTGs will be equipped with the Smartpath® container position verification system and delivered during the autumn of 2008 to SNP's container terminal. This order is a continuation of an order placed by SNP in May for 10
E-One RTGs.
 
In August, Kalmar also received an order for 30 straddle carriers from the Italian company, Medcenter Container Terminal SpA (MCT). The straddle carriers will be delivered in 2007-2008 to MCT's terminal in Gioia Tauro in Southern Italy.
 
In June, Kalmar received significant straddle carrier orders from German MSC Bremerhaven and Australian Patrick Corporation. In 2007-2008 10 straddle carriers will be delivered to MSC Bremerhaven and 15 straddle carriers to Patrick Corporation to the ports of Melbourne and Sidney.
 
In June, Tangier Medgate S.A. ordered 11 E-One RTGs from Kalmar. The equipment will be delivered during the first half of 2008 to the port of Tangier Mediterranean in Morocco. The RTGs will be fitted with twin-lift spreaders and the Smartrail® automatic steering and container position verification system.
 
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. The RTGs will be fitted with the Smartrail® automatic steering and container position verification system developed by Kalmar and delivered to the port of Santos at the turn of 2007/2008.
 
MacGREGOR
 
Of all the orders received in January-September 2007, MacGREGOR accounted for EUR 1,080 (1-9/2006: 535) million. The orders received in July-September totalled a record high level of EUR 483 (7-9/2006: 139) million.
 
In the third quarter of 2007, MacGREGOR received a large number of ship crane orders from China, with Shanghai Shipyard ordering 32 ship cranes to be delivered in 2009-2011 and the Yangzijiang Shipyard ordering 88 ship cranes for bulk, general cargo and container vessels. 48 ship cranes will also be delivered to the Wenchong Shipyard in 2008-2012. Furthermore, 40 ship cranes and hatch covers will be delivered during 2009-2010 to ten general cargo vessels ordered from China by the German ship owner Herman Buss.
 
In September, MacGREGOR also secured a RoRo equipment order from the Korean shipyard, Hyundai Mipo. The equipment, which includes different kinds of ramps, hoistable cardecks and doors, will be delivered during 2009-2011.
 
In August and September, MacGREGOR received significant offshore equipment orders from China, Europe, the USA, Canada, Malaysia and India. The equipment, which includes, for example, mooring winches, knuckle boom offshore cranes and deck machinery equipment, will be delivered during 2008-2010.
 
MacGREGOR secured a large number of ship crane orders also in the second quarter. A total of 318 ship cranes were ordered to China, India and Taiwan for delivery in 2008-2011. In June, the company received an order for hatch covers and 16 ship cranes from the Chinese shipyard, COSCO Dalian. The equipment 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, the largest of their kind in the world, will be delivered in 2007-2008.
 
In June, the company signed a contract on the delivery of RoRo equipment for 15 vessels under construction in Korea. The equipment will be delivered in 2008-2010. In March, the RoRo division also secured contracts from several shipyards in Germany, Japan and Croatia.
 
Cargotec Services
 
Cargotec strengthened its services operations during the reporting period by a new Cargotec Services operating model. The aim is to speed up services growth by better focusing resources and service knowhow between Cargotec's business areas. The majority of the services business within Hiab, Kalmar and MacGREGOR will organizationally continue as earlier. Cooperation in service concept development, spare parts sales and training of service people will be strengthened by a matrix organization, where Cargotec Services acts as an internal centre of expertise. Special focus in the operating model will be put on total maintenance of container and bulk terminals as well as significant refurbishment and conversion projects. Harald de Graaf, member of Cargotec's Executive Board, is President of the Cargotec Services.
 
In September, the Norwegian company Fred Olsen Marine Services contracted MacGREGOR to modernise the valve system of the world's largest tanker. MacGREGOR's Service division will upgrade the remote controlled valve system and provide crew training in its operation.
 
In the second quarter, MacGREGOR signed a three-year maintenance agreement with the Italian company, Grimaldi Group. The agreement covers the maintenance of MacGREGOR RoRo equipment on board 26 of Grimaldi's RoRo vessels.
 
During the first quarter of 2007, Kalmar signed long-term agreements covering the rental, servicing and customer financing of its equipment in Sweden with Setra Group and Wallhamn AB, Sweden's largest private port. Kalmar will rent, maintain and finance 31 forklift trucks that will be delivered to 12 of Setra's sawmills in the spring of 2007. The agreement with Wallhamn AB consists of the lease of several units of Kalmar container handling equipment. In the same connection, the parties agreed on the maintenance of Kalmar and other suppliers' equipment.
 
Order Book
 
Cargotec's order book totalled EUR 2,552 (December 31, 2006: 1,621) million on September 30, 2007. Of the order book, Hiab accounted for EUR 255 (215) million, Kalmar EUR 684 (593) million, and MacGREGOR EUR 1,614 (813) million. A considerable part of MacGREGOR's order book is for delivery in 2008-2012.
 

 
Sales
 
Cargotec's sales grew in January-September by 13 percent and totalled EUR 2,151
(1-9/2006: 1,900) million. Half of the growth was organic. The sales impact of acquisitions completed in the past 12 months was approximately EUR 130 million in January-September 2007.
 
Despite the continued tight component situation, Cargotec's business areas have succeeded in achieving the targeted growth in assembly capacity. However, the strong demand for trucks in Europe has resulted in delivery times for trucks lengthening considerably, which in turn delays installation schedules. This has an adverse effect on the delivery time of Hiab's products to end customers and limits Hiab's sales growth.
 
Cargotec's sales for July-September 2007 amounted to EUR 713 (7-9/2006: 625) million.
Hiab's sales in the third quarter amounted to EUR 202 (7-9/2006: 208) million, Kalmar's sales were EUR 326 (290) million and MacGREGOR's sales EUR 187 (127) million.
 

 
 
Sales for services increased by 28 percent on the corresponding period in 2006 and amounted to EUR 537 (1-9/2006: 418) million, which is 25 (22) percent of total sales. Services accounted for 16 (1-9/2006: 15) percent of sales at Hiab, 30 (26) percent at Kalmar, and 27 (27) percent at MacGREGOR in January-September 2007.
 
Financial Result
 
Cargotec's operating profit from operations for January-September 2007 was EUR 156.6
(1-9/2006: 164.0) million, representing 7.3 (8.6) percent of sales. Operating profit from operations for the third quarter was EUR 52.5 (7-9/2006: 52.1) million, equal to 7.4 (8.3) percent of sales. Hiab accounted for EUR 13.7 (17.4) million of third quarter operating profit from operations, Kalmar for EUR 27.8 (27.5) million, and MacGREGOR for EUR 15.0 (9.9) million.
 
Hiab's result was weakened by a significant underutilisation of capacity resulting from the weak demand situation in the U.S. In Europe, profitability during the year has improved but the July-September result was affected by the holiday season. Kalmar continued to make product development investments according to plan, which affected the result compared to the previous year. However, compared to the second quarter, Kalmar's profitability clearly improved during the third quarter. MacGREGOR's offshore division result in the third quarter was burdened less than anticipated by the cost impact of the purchase price allocation treatment.
 
Operating profit for January-September includes a EUR 4.6 (1-9/2006: 1.8) million cost impact from the purchase price allocation treatment of acquisitions, with EUR 2.2 (7-9/2006: 0.9) million attributable to the third quarter. The full year estimate on the cost impact of the allocation treatment on Cargotec's operating profit remains at approximately EUR 10 million.
 
Operating profit during the reporting period was EUR 156.6 (1-9/2006: 181.9) million. The comparison period includes a EUR 17.9 million capital gain from divestment of property.
 
Net income for the period was EUR 109.5 (1-9/2006: 126.8) million and earnings per share were EUR 1.72 (1.97).
 
Balance Sheet, Financing and Cash Flow
 
On September 30, 2007, Cargotec's net working capital amounted to EUR 249 (December 31, 2006: 209) million. Tangible assets on the balance sheet were EUR 255 (218) million and intangible assets EUR 755 (581) million.
 
Cash flow from operating activities before financial items and taxes for January-September 2007 totalled EUR 138.8 (1-9/2006: 178.8) million and that for July-September EUR 55.5 (7-9/2006: 65.8) million.
 
Net debt on September 30, 2007 was EUR 365 (December 31, 2006: 107) million. Total equity/total assets ratio was 40.2 (47.6) percent while gearing was 41.6 (12.3) percent. The purchase of own shares during the third quarter for close to EUR 40 million raised gearing.
 
Cargotec had EUR 467 million of committed credit facilities on September 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-September 2007, Cargotec's research and product development expenditure was EUR 33.2 (1-9/2006: 22.1) million, representing 1.5 (1.2) percent of sales.
 
During the reporting period, Hiab introduced two new loader crane models. The HIAB XS 211 loader crane complements the mid-sized loader crane range, for which demand is highest in most markets. The company also introduced the HIAB XS 1055, the largest Hiab loader crane by capacity, which provides users with the longest reach and highest lifting capacity delivered by any HIAB crane in the marketplace today.
 
Kalmar continued the development of large cranes and automation solutions. The acquisition of the Dutch ACT B.V. strengthened Kalmar's software knowhow, technology base and resources considerably. Work continues to develop environmentally friendly hybrid solutions in a second two-year terminal tractor development project, which is run together with the U.S. Environmental Protection Agency in the ports of New York and New Jersey.
 
MacGREGOR introduced in the third quarter a new lift-away, multi-panel hatch cover model enabling the user to lift five hatch covers at a time, instead of lifting them one by one. Furthermore, the company continued the joint product development of its RoRo and offshore solutions.
 
Capital Expenditure
 
Cargotec's capital expenditure for January-September, excluding acquisitions and customer financing, totalled EUR 38.0 (1-9/2006: 30.8) million. Customer financing investments were EUR 23.5 (14.5) million.
 
Hiab has decided to combine its loader crane and forestry crane product lines as of January 2008. This organisational change will improve and strengthen the use of shared resources in crane product development, manufacturing and marketing. The Crane product line comprises the manufacturing of loader cranes, forestry cranes and recycling cranes in five production units in Europe and Asia.
 
Hiab has adapted the operations of its load handling equipment production units in the United States and Ireland due to weakened demand in the U.S. markets.
 
During the third quarter, MacGREGOR continued to develop new cooperation partners to meet the significant growth in its ship crane order book. Building work for a hatch cover production facility is ongoing in Nantong, China together with a local partner.
 
 
Acquisitions
 
Cargotec completed 14 acquisitions in January-September 2007. In February, a contract was signed to acquire the Indian company, Indital Construction Machinery Ltd. The acquisition was finalised in April and gives Cargotec a manufacturing presence in India while supporting the sales activities of all three of Cargotec's business areas in the region. Cargotec has a 95 percent holding in Indital.
 
As part of strengthening Cargotec's presence in India Kalmar bought the remaining shares
(49 percent) in Kalmar India in September 2007.
 
In December 2006, Cargotec announced its plan to acquire the Italian company, CVS Ferrari. The German competition authority announced in August 2007 that it had ruled against the acquisition on the basis of it being anticompetitive. Cargotec is investigating the opportunity to appeal the decision.
 
Hiab's Acquisitions
 
In July, Hiab signed an agreement to acquire a service company in Florida, USA. Bay Equipment Repairs Inc. is a long-term service partner of Hiab, and most of its customers are Hiab customers. Bay Equipment Repairs had sales of approximately EUR 1 million in 2006 and the company employs 13 persons.
 
In May, Hiab signed a contract to acquire the Estonian company, Balti ES, which manufactures steel structures and components. Balti ES employs approximately 600 people and posted sales of approximately EUR 14 million in 2006. Finalised in June, the acquisition supports both Hiab's and Kalmar's increasing demand for components.
 
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 acquisition was finalised in May. The annual sales of the acquired operations are approximately EUR 16 million, and the units employ approximately 75 people.
 
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 deal was finalised in February. The company employs approximately 100 people and had sales of approximately EUR 20 million in 2006.
 
Kalmar's Acquisitions
 
In August, Kalmar made an agreement to acquire Advanced Cargo Transshipment B.V. (ACT), an automation and software producer based in the Netherlands. The acquisition will increase Kalmar's resources in automated port terminal R&D. ACT specialises in developing and marketing equipment navigation control and terminal operation control hardware and software.
 
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. This acquisition strengthened 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 is enabling 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 was finalised in February and has strengthened 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.
 
In December 2006, a contract was signed to acquire Kalmar's Spanish distributor, Kalmar Espana. The acquisition was finalised in April.
 
MacGREGOR's Acquisitions
 
During the first half of the year, MacGREGOR expanded its operations into the offshore segment.
 
In March, MacGREGOR agreed to acquire Norwegian Hydramarine AS and Singaporean Plimsoll Corporation Pte Ltd. The acquisitions were finalised in April. Hydramarine specialises in the development of sub sea load handling equipment such as cranes. In 2006, Hydramarine had sales of EUR 63 million and employed 150 people. Plimsoll Corporation Pte Ltd is the leading supplier of equipment for oil drilling and gas vessels and other types of ships in the Asia Pacific region. Plimsoll's sales in 2006 totalled approximately EUR 43 million. The company employs approximately 600 people. MacGREGOR acquired 90 percent of both Hydramarine and Plimsoll with the remaining shares being owned by the employees.
 
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.
 
In May, a contract was signed to acquire Vestnorsk Hydraulikkservice AS (VNH) of Norway. VNH specialises 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 finalised in June.
 
Personnel
 
At the end of the reporting period, Cargotec employed 11,081 (September 30, 2006: 8,313) people. Acquisitions during the period increased the number of personnel by close to 1,900 people. Hiab employed 4,405 (3,615) people, Kalmar 4,431 (3,543) and MacGREGOR 2,162 (1,109).
 
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 11 percent, Asia Pacific 22 percent and the rest of the world 1 percent of total employees.
 
Shares and Stock Options
 
Cargotec's share capital on September 30, 2007 was EUR 64,137,138 (December 31, 2006: 64,046,460). The share capital was increased during the reporting period through stock options. On September 30, 2007, the number of Cargotec's listed class B shares totalled 54,611,049 while that of its unlisted class A shares totalled 9,526,089. The remaining 2005A and 2005B stock options may be used to subscribe for a further 271,872 class B shares, thereby increasing the share capital by EUR 271,872.  Of that amount a total of 2,850 class B shares were subscribed in September 2007 which will be entered into the Finnish Trade Register by October 31, 2007.
 
During January-September 2007, the trading volume of Cargotec class B shares totalled around 51 million at a total value of approximately EUR 2,167 million. The closing price for class B shares on September 30, 2007 was EUR 34.46. The highest price during the reporting period was EUR 49.83 and the lowest EUR 33.15. The market capitalisation, 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 2,151 million, excluding class B treasury shares held by the company.
 
Shares directly or indirectly owned by Cargotec's Executive Board members has increased during the year. As of September 30, 2007 the Executive Board owned 136,314  class B shares, which represent 0.2 percent of the shares of the company.
 
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 started at Cargotec on September 1, 2007. Kalmar's previous 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.
 
In the third quarter, a total of one million own class B shares were repurchased. Altogether, Cargotec holds 1,704,725 class B shares in treasury.
 
Short-term Risks and Uncertainties
 
Cargotec's principal short-term risks and uncertainties are related to the U.S. economic development and availability of components.
 
The present U.S. economic uncertainty and the sharp decline in construction activity in the U.S. are reflected in the demand for Cargotec's load handling equipment. If the economic uncertainty continues there is a risk of it spreading more widely to the U.S. economy, which could have an impact on other Cargotec customer segments as well.
 
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 tight. Additionally, the high demand for trucks in Europe can have an adverse impact on the delivery schedules of Hiab products during the remainder of the year.
 
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 a degree of uncertainty.
 
Outlook
 
General market activity is expected to continue healthy with the exception of the U.S. load handling market. In accordance with its plans, Cargotec continues growth and efficiency related investments, which burden the 2007 result.
 
Thanks to the record value of orders received so far in the year the estimate for full year 2007 order intake growth has been raised to close to 30 percent. The sales growth estimate for 2007 is unchanged at approximately 15 percent, which implies strong sales growth for the final quarter. Due to the growth operating profit in euros will improve from the previous quarters. Operating profit margin for the final quarter is estimated to remain at the third quarter level.
 
 
Helsinki, October 18, 2007
Cargotec Corporation
Board of Directors
 
 
This interim report is unaudited.

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

* Excluding gain on the sale of property after taxes

CONDENSED CONSOLIDATED BALANCE SHEET
 
ASSETS

 
EQUITY AND LIABILITIES

 
1) Included in interest-bearing net debt

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
 


CONDENSED CONSOLIDATED CASH FLOW STATEMENT

 
KEY FIGURES

 

SEGMENT REPORTING

 

 

 

 

 

 

 

 

 

 

 

NOTES
 

 

 

 

 
ACQUISITIONS 2007
 
In January-September 2007 Cargotec made several acquisitions in line with 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 finalised in February. In January, Hiab also 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 acquisition was finalised in May. In May, Hiab signed a contract to acquire the Estonian company Balti ES. The acquisition was finalised in June. In July, Hiab signed an agreement to acquire Bay Equipment Repairs Inc, a service company based in Florida, USA.
 
In January, Kalmar signed agreement to acquire Tagros d.o.o., a Slovenia-based service company. In January, Kalmar signed also agreement to acquire Truck och Maskin i Örnsköldsvik AB, a Swedish company. The acquisition was finalised in February. In February, Kalmar made an agreement to acquire 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 finalised in April. In April, Kalmar signed a contract to gain full control of Kalmar Asia Pacific Ltd by acquiring the remaining minority share. In December 2006, a contract was signed to acquire Kalmar's Spanish distributor Kalmar Espana. The acquisition was finalised in April. In August, Kalmar made an agreement to acquire Advanced Cargo Transshipment B.V., an automation and software producer based in the Netherlands. In September, Kalmar acquired the remaining minority share (49 percent) of Kalmar India Pvt. Ltd.
 
In March, MacGREGOR agreed to acquire 90 percent of the Norwegian Hydramarine AS. The acquisition was finalised in April. In March, MacGREGOR also signed a contract to acquire 90 percent of the Singaporean company Plimsoll Corporation Pte Ltd. The acquisition was finalised in April. The accounting of these two business combinations includes also the minority share with the redemption obligation. The debt-free acquisition price of these two business combinations was approximately EUR 122 million and the goodwill recognised according to the preliminary calculations was EUR 115 million. In May, a contract was signed to acquire Vestnorsk Hydraulikkservice AS of Norway. The acquisition was finalised in June.
 
Management estimates that the consolidated sales for January 1-September 30, 2007 would have been approximately EUR 2,190 million, if the acquisitions had occurred on January 1, 2007.
 
The table below summarises the acquisitions in January-September 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 finalised.
 
 

 
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 annual financial statements of 2006. All figures presented 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 starting in January 1, 2007
 
Starting from January 1, 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 taken into use in annual financial statements of 2006. Derivative instruments, for which hedge accounting is applied, and for which the underlying cash flow matures after twelve months, are included in non-current assets and liabilities, other derivative instruments are included in current assets and liabilities. In previous financial statements all derivatives have been included in current assets and liabilities. The comparative figures of September 30, 2006 have been restated accordingly.
 
Retrospective adjustment of final accounting of the acquisitions
 
In financial statements of 2006 the impact of final accounting of the acquisitions of 2005 were recognised retrospectively for the period January 1-December 31, 2006. The comparative figures of September 30, 2006 have been restated accordingly.
 
Share-based payments
 
The share-based incentive scheme for top management that was approved by the Board of Directors in 2005 has ended in March 2007. The members of the scheme received 20,660 Cargotec 2005B-option rights and in cash 65,000 synthetic option rights. 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 an 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 September 2007, the earnings period 2007-2008 involves 67 persons. If they were to receive the maximum number of shares in accordance with the scheme, a total of 148,925 Cargotec's class B shares, their shareholding obtained via the program would amount to 0.1 percent of the total voting rights of Cargotec'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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