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Stock Exchange Release

Cargotec's opening balance sheet for 2019 in accordance with new accounting principles and restated 2018 financial information in accordance with new definitions

04/04/2019

CARGOTEC CORPORATION, STOCK EXCHANGE RELEASE, 4 APRIL 2019 AT 9.30 AM EEST

Cargotec's opening balance sheet for 2019 in accordance with new accounting principles and restated 2018 financial information in accordance with new definitions

In this stock exchange release, Cargotec discloses the transition impacts of the new accounting principles for the consolidated financial statements (IFRS 16, IFRIC 23), the refined definition of service business, and changes to alternative performance measures, as well as publishes the resulting opening balance sheet for the financial year 2019 and, where applicable, the restated financial information for financial year 2018.

The changes do not affect Cargotec's outlook for 2019. Cargotec reiterates its outlook published on 8 February 2019 and expects its comparable operating profit for 2019 to improve from 2018 (EUR 242.1 million).

Transition impacts of the new accounting principles


Cargotec applies the new accounting standard IFRS 16, Leases, and the new interpretation IFRIC 23, Uncertainty over Income Tax Treatments, starting from 1 January 2019 and discloses the financial impacts of the transitional adjustments related to their adoption.

The adoption of the new accounting principles resulted in a decrease of EUR 24.6 million in Cargotec's equity in the opening balance 2019, including the following adjustments:

  • IFRS 16, Leases, was adopted by applying the modified retrospective transition method. Majority of the lease agreements Cargotec reported as operating leases in 2018 were converted as lease agreements recognised on balance sheet on the adoption of IFRS 16. The transition adjustments related to adoption of IFRS 16 resulted in a net decrease of EUR 9.9 million in retained earnings based on increases of EUR 178.1 million in interest-bearing liabilities, EUR 163.9 million in property, plant and equipment, and EUR 3.1 million in deferred tax assets, and a decrease of EUR 1.1 million in non-interest-bearing liabilities. The weighted average discount rate applied to determine the present value of lease liability was 4.3% on the date of transition.

  • IFRIC 23, Uncertainty over Income Tax Treatments, was adopted prospectively with the allowed transitional reliefs. The interpretation clarifies how to apply the recognition and measurement requirements of IAS 12, Income taxes, when there is uncertainty over income tax treatments. The interpretation provides guidance to determine whether uncertain tax treatments should be considered separately or together as a group. The approach that better predicts the resolution of the uncertainty should be followed. The interpretation also clarifies how to consider assumptions about the examination of uncertain tax treatments by taxation authorities and measurement methods of uncertain tax positions. The reassessment of current and deferred taxes in accordance with IFRIC 23 resulted in a reduction of EUR 14.6 million in retained earnings at transition due to decreases of EUR 13.9 million in the income tax receivables and EUR 0.7 million in deferred tax assets.


Additional information regarding the transitional adjustments is disclosed in Cargotec's Financial review 2018 under the section Accounting principles for the consolidated financial statements.

Refined definition of service business


Cargotec has refined the definition of service business for Hiab and MacGregor from the beginning of 2019 and discloses the restated comparison period figures of 2018. Accessories sold after the delivery of the equipment at Hiab as well as RoRo conversions and CargoBoost projects at MacGregor were transferred to service business.

Due to the refined definition of service business, Cargotec's service orders received in 2018 increased by EUR 46 million to EUR 1,031 million, and service sales increased by EUR 47 million to EUR 980 million. EUR 35 million was restated from equipment sales into service sales at Hiab and EUR 12 million at MacGregor in 2018.

Changes in alternative performance measures


Cargotec has made changes to alternative performance measures it uses and discloses the restated comparison period figures for 2018.

In accordance with the announcement in the financial statements review 2018, starting from 1 January 2019, Cargotec replaces the alternative performance measure of "operating profit excluding restructuring costs" with "comparable operating profit" for measuring business performance in the financial reporting. Comparable operating profit does not contain items significantly affecting comparability. In addition to restructuring costs, these items mainly include capital gains and losses, income and expenses related to business acquisitions and disposals, impairments of assets and reversals of impairments, insurance benefits, and expenses related to legal proceedings. Cargotec's comparable operating profit for 2018 was EUR 242.1 million. In 2018, only MacGregor had other items affecting comparability in addition to restructuring costs.

In addition, the calculation methods of return on equity (ROE) and return on capital employed (ROCE) have been changed in order to improve comparability between periods. Going forward, the figures are calculated by using last 12 months' income instead of annualised income. The average balance sheet value is calculated from the ending balances of the current reporting period and the reporting period ended 12 months earlier, whereas earlier it was calculated from the ending balances of the current reporting period and the previous financial year.

Outlook for 2019 unchanged


Cargotec reiterates its outlook published on 8 February 2019 and expects its comparable operating profit for 2019 to improve from 2018 (EUR 242.1 million).

The interim report for the first quarter of 2019 will be prepared in accordance with the new accounting principles. The interim report will be published on 25 April.

The restated financial information is unaudited.


For further information, please contact:

Mikko Puolakka, Executive Vice President and CFO, tel. +358 20 777 4105
Hanna-Maria Heikkinen, Vice President, Investor Relations, tel. +358 20 777 4084

Cargotec (Nasdaq Helsinki: CGCBV) enables smarter cargo flow for a better everyday with its leading cargo handling solutions and services. Cargotec's business areas Kalmar, Hiab and MacGregor are pioneers in their fields. Through their unique position in ports, at sea and on roads, they optimise global cargo flows and create sustainable customer value. Cargotec's sales in 2018 totalled approximately EUR 3.3 billion and it employs around 12,000 people. www.cargotec.com


Restated financial information

Consolidated balance sheet


ASSETS, MEUR 31 Dec 2018 IFRS 16 and
IFRIC 23, transition effect
1 Jan 2019
Non-current assets      
Goodwill 970.9 - 970.9
Other intangible assets 278.6 - 278.6
Property, plant and equipment 308.7 163.9 472.6
Investments in associated companies and joint ventures 99.8 - 99.8
Share investments 0.3 - 0.3
Loans receivable and other interest-bearing assets* 36.0 - 36.0
Deferred tax assets 137.3 2.4 139.8
Other non-interest-bearing assets 9.5 - 9.5
Total non-current assets 1,841.1 166.3 2,007.5
       
Current assets      
Inventories 688.8 - 688.8
Loans receivable and other interest-bearing assets* 1.8 - 1.8
Income tax receivables 56.0 -13.9 42.1
Derivative assets 17.4 - 17.4
Accounts receivable and other non-interest-bearing assets 822.5 - 822.5
Cash and cash equivalents* 256.3 - 256.3
Total current assets 1,842.8 -13.9 1,828.9
       
Total assets 3,683.9 152.4 3,836.3



EQUITY AND LIABILITIES, MEUR 31 Dec 2018 IFRS 16 and
IFRIC 23, transition effect
1 Jan 2019
Equity attributable to the equity holders of the parent      
Share capital 64.3 - 64.3
Share premium account 98.0 - 98.0
Translation differences -44.2 - -44.2
Fair value reserves -13.5 - -13.5
Reserve for invested non-restricted equity 58.5 - 58.5
Retained earnings 1,262.5 -24.6 1,237.9
Total equity attributable to the equity holders of the parent 1,425.6 -24.6 1,401.0
       
Non-controlling interest 3.0 - 3.0
Total equity 1,428.5 -24.6 1,404.0
       
Non-current liabilities      
Interest-bearing liabilities* 717.1 141.9 859.0
Deferred tax liabilities 28.1 0.0 28.1
Pension obligations 92.3 - 92.3
Provisions 10.7 - 10.7
Other non-interest-bearing liabilities 58.6 - 58.6
Total non-current liabilities 906.8 142.0 1,048.8
       
Current liabilities      
Current portion of interest-bearing liabilities* 168.4 36.1 204.5
Other interest-bearing liabilities* 44.5 - 44.5
Provisions 86.7 - 86.7
Advances received 190.3 - 190.3
Income tax payables 39.6 - 39.6
Derivative liabilities 5.8 - 5.8
Accounts payable and other non-interest-bearing liabilities 813.5 -1.1 812.3
Total current liabilities 1,348.6 35.0 1,383.6
       
Total equity and liabilities 3,683.9 152.4 3,836.3
       
*Included in interest-bearing net debt.
       
       


Key figures

Impact of IFRS 16 standard and IFRIC 23 interpretation on key figures

    31 Dec 2018 IFRS 16 and
IFRIC 23, transition effect
1 Jan 2019
Equity / share EUR 22.16 -0.38 21.78
Total equity / total assets % 40.9% -2.4% pp 38.5%
Interest-bearing net debt MEUR 625.5 178.1 803.5
Interest-bearing net debt / EBITDA, last 12 months   2.3 0.7 3.0
Gearing % 43.8% 13.4 pp 57.2%

Return on equity and capital employed figures for 2018 according to the new calculation method

    31 Mar 2018 30 Jun 2018 30 Sep 2018 31 Dec 2018 1 Jan 2019*
Return on equity (ROE), last 12 months % 9.4% 6.9% 7.2% 7.6% 7.6%
Return on capital employed (ROCE), last 12 months % 9.4% 8.0% 7.9% 8.0% 7.8%

*Key figures in accordance with the IFRS 16 standard and the IFRIC 23 interpretation

 

Quarterly key figures

Key figures in accordance with the refined definition of service business, and the new alternative performance measure, comparable operating profit, by quarters


Cargotec   Q1/2018 Q2/2018 Q3/2018 Q4/2018 2018
Service orders received MEUR 256 258 251 265 1,031
Service sales MEUR 237 247 239 257 980
Service and software sales, % of sales % 35% 34% 35% 33% 34%
Operating profit MEUR 53.2 21.3 54.5 60.9 190.0
Operating profit % 6.9% 2.6% 6.8% 6.7% 5.8%
Comparable operating profit MEUR 57.5 57.2 57.8 69.6 242.1
Comparable operating profit % 7.4% 7.0% 7.2% 7.7% 7.3%
             
Kalmar   Q1/2018 Q2/2018 Q3/2018 Q4/2018 2018
Service sales MEUR 110 112 111 116 449
Comparable operating profit MEUR 28.7 25.2 38.6 51.0 143.6
Comparable operating profit % 7.7% 6.5% 9.3% 11.5% 8.9%
             
Hiab   Q1/2018 Q2/2018 Q3/2018 Q4/2018 2018
Service sales MEUR 75 77 75 83 309
Comparable operating profit MEUR 36.1 39.4 24.2 34.9 134.5
Comparable operating profit % 13.1% 13.4% 9.3% 11.0% 11.7%
             
MacGregor   Q1/2018 Q2/2018 Q3/2018 Q4/2018 2018
Service sales MEUR 52 58 53 59 222
Comparable operating profit MEUR 0.7 3.5 1.0 -6.8 -1.6
Comparable operating profit % 0.6% 2.6% 0.8% -4.6% -0.3%
             
 

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