KONECRANES PLC HALF-YEAR FINANCIAL REPORT July 26, 2017 at 09.00 EET
ORDER INTAKE GROWTH AND ADJUSTED EBITA IMPROVEMENT CONTINUED, STRONG CASH FLOW
This release is a summary of Konecranes Plc’s Half-Year Financial Report January-June 2017. The complete report is attached to this release in pdf format and is also available on Konecranes’ website at www.konecranes.com .
Figures in brackets, unless otherwise stated, refer to the same period a year earlier.
SECOND QUARTER HIGHLIGHTS (COMPARISON TO COMBINED COMPANY FIGURES*)
- Order intake EUR 790.2 million (761.6), +3.8 percent - Order book EUR 1,605.9 million (1,538.1) at end-June, +4.4 percent - Sales EUR 797.2 million (787.3), +1.3 percent - Adjusted EBITA EUR 51.2 million (42.6), 6.4 percent of sales (5.4)
JANUARY-JUNE HIGHLIGHTS (COMPARISON TO COMBINED COMPANY FIGURES*)
- Order intake EUR 1,524.7 million (1,418.5), +7.5 percent - Sales EUR 1,480.2 million (1,503.6), -1.6 percent - Adjusted EBITA EUR 81.9 million (51.3), 5.5 percent of sales (3.4)
JANUARY-JUNE HIGHLIGHTS (COMPARISON TO HISTORICAL KONECRANES FIGURES*)
- Order intake EUR 1,524.7 million (905.3), +68.4 percent - Order book EUR 1,605.9 million (1,043.3) at end-June, +53.9 percent - Sales EUR 1,480.2 million (987.4), +49.9 percent - Adjusted EBITA EUR 81.9 million (52.8), 5.5 percent of sales (5.4) - Operating profit EUR 256.1 million (28.9), 17.3 percent of sales (2.9) - Earnings per share (diluted) EUR 2.68 (0.19) - Free cash flow EUR 172.6 million (3.3) - Net debt EUR 542.4 million (258.7) and gearing 43.0 percent (64.4)
* This Report contains comparisons to both the Konecranes’ historical figures and the combined company figures. Historical figures relate to Konecranes’ stand-alone financial information as reported for 2016 (including the divested STAHL CraneSystems business).
To provide a basis for comparison, this Report also contains, under separate headings, the comparisons to combined company’s financial information on an unaudited basis estimated by the management for 2016. This financial information has been prepared to reflect the financial results of the combined company as if it had been operating as such for the full financial year 2016. The comparable combined company’s operations comprise Konecranes’ operations without the divested STAHL CraneSystems business, but include the acquired MHPS business. See “Basis of preparation for comparable combined company” for further information.
Comparable combined company’s financial information applies an assumed situation and does not therefore reflect the true financial position or the result of the company during 2016. The previous year’s order book for MHPS included deliveries for the next 12 months only.
MARKET OUTLOOK
Economic indicators related to manufacturing industries have strengthened, which appears to improve the customers’ willingness to proceed with their investment plans. Demand situation in Europe is gradually improving within the industrial customer segments. Business activity in the North American manufacturing industry remains mixed. Demand in Asia-Pacific is showing signs of bottoming out. Global container throughput growth has improved and the prospects for the small and medium-sized orders related to container handling have strengthened.
FINANCIAL GUIDANCE
The sales in 2017 are expected to be close to or lower than the comparable combined company sales in 2016 (EUR 3,278 million). We expect the adjusted EBITA to total EUR 205-225 million in 2017 (comparable combined company’s adjusted EBITA was EUR 184 million in 2016).
The comparable combined company’s operations comprise Konecranes’ operations without the divested STAHL CraneSystems business, but include the acquired MHPS business. See the stock exchange releases published on April 10, 2017 and April 13, 2017 for further financial information including the basis of preparation for comparable combined company.
KEY FIGURES (comparisons to historical figures)
| April – June | First half year | |||||||
| 4-6/ 2017 | 4-6/ 2016 | Change % | 1-6/ 2017 | 1-6/ 2016 | Change% | R12M | 2016 | |
| Orders received, MEUR | 790.2 | 480.2 | 64.6 | 1,524.7 | 905.3 | 68.4 | 2,540.1 | 1,920.7 |
| Order book at end of period, MEUR | 1,605.9 | 1,043.3 | 53.9 | 1,038.0 | ||||
| Sales t otal, MEUR | 797.2 | 528.8 | 50.7 | 1,480.2 | 987.4 | 49.9 | 2,611.1 | 2,118.4 |
| Adjusted EBITDA, MEUR 1 | 71.0 | 49.6 | 42.9 | 119.5 | 76.7 | 55.8 | 234.4 | 191.6 |
| Adjusted EBITDA, % 1 | 8.9% | 9.4% | 8.1% | 7.8% | 9.0% | 9.0% | ||
| Adjusted EBITA, MEUR 2 | 51.2 | 37.1 | 38.3 | 81.9 | 52.8 | 54.9 | 173.8 | 144.8 |
| Adjusted EBITA, % 2 | 6.4% | 7.0% | 5.5% | 5.4% | 7.0% | 6.8% | ||
| Adjusted operating profit, MEUR 1 | 41.4 | 36.0 | 14.9 | 62.2 | 50.8 | 22.5 | 152.2 | 140.8 |
| Adjusted operating margin, % 1 | 5.2% | 6.8% | 4.2% | 5.1% | 5.7% | 6.6% | ||
| Operating profit, MEUR | 30.2 | 28.6 | 5.4 | 256.1 | 28.9 | 785.3 | 312.0 | 84.9 |
| Operating margin, % | 3.8% | 5.4% | 17.3% | 2.9% | 18.4% | 4.0% | ||
| Profit before taxes, MEUR | 14.0 | 22.4 | -37.6 | 235.7 | 15.4 | 1,435.5 | 282.4 | 62.1 |
| Net profit for the period, MEUR | 14.5 | 16.0 | -9.1 | 207.4 | 10.9 | 1,803.1 | 234.1 | 37.6 |
| Earnings per share, basic, EUR | 0.17 | 0.27 | -35.7 | 2.68 | 0.19 | 1,344.0 | 3.13 | 0.64 |
| Earnings per share, diluted, EUR | 0.17 | 0.27 | -35.7 | 2.68 | 0.19 | 1,344.0 | 3.13 | 0.64 |
| Interest-bearing net debt, Equity, % | 43.0% | 64.4% | 29.1% | |||||
| Net Debt / Adjusted EBITDA, R12M 1 | 2.3 | 1.5 | 0.7 | |||||
| Return on capital employed, % | 23.2% | 10.3% | ||||||
| Adjusted return on capital employed, % 3 | 12.6% | 19.2% | ||||||
| Free cash flow, MEUR | 84.6 | 10.2 | 172.6 | 3.3 | 253.2 | 83.9 | ||
| Average number of personnel during the period | 14,867 | 11,647 | 27.6 | 11,398 | ||||
KEY FIGURES (comparisons to combined company figures)
| April-June | First half year | |||||||
| 4-6/ 2017 | 4-6/ 2016 | Change % | 1-6/ 2017 | 1-6/ 2016 | Change% | R12M | 2016 | |
| Orders received, MEUR | 790.2 | 761.6 | 3.8 | 1,524.7 | 1,418.5 | 7.5 | 3,131.5 | 3,025.3 |
| Order book at end of period, MEUR | 1,605.9 | 1,538.1 | 4.4 | 1,507.7 | ||||
| Sales total, MEUR | 797.2 | 787.3 | 1.3 | 1,480.2 | 1,503.6 | -1.6 | 3 ,255.0 | 3,278.4 |
| Adjusted EBITDA, MEUR 1 | 71.0 | 61.4 | 15.5 | 119.5 | 88.3 | 35.3 | 290.1 | 258.9 |
| Adjusted EBITDA, % 1 | 8.9% | 7.8% | 8.1% | 5.9% | 8.9% | 7.9% | ||
| Adjusted EBITA, MEUR 2 | 51.2 | 42.6 | 20.4 | 81.9 | 51.3 | 59.7 | 214.7 | 184.1 |
| Adjusted EBITA, % 2 | 6.4% | 5.4% | 5.5% | 3.4% | 6.6% | 5.6% | ||
| Average number of personnel during the period | 16,914 | 18,126 | -6.7 | 17,760 | ||||
1 Excluding adjustments, see also note 12 in the summary financial statements 2 Excluding adjustments and purchase price allocation amortization, see also note 12 in the summary financial statement 3 ROCE excluding adjustments, see also note 12 in the summary financial statements
President and CEO Panu Routila:
“Our second-quarter financial performance exceeded our expectations, particularly in terms of profitability and cash flow. Our order intake and sales grew moderately on a comparable combined company basis, while our adjusted EBITA clearly exceeded the previous year’s level. On July 18, 2017, we upgraded our 2017 EBITA guidance, whereas the 2017 sales guidance was slightly lowered. The upgrade in the EBITA guidance related to the better than expected sales mix and higher than expected cost savings. The downgrade in the sales guidance related mainly to the recent depreciation of the USD against the EUR.
The comparable combined company orders received in the second quarter increased by 3.8 percent on a year-on-year basis. Similar to the first quarter, the order intake growth was strongest in Business Area Port Solutions. We are pleased that its orders received grew across the product portfolio and that the cross-promotion of our extended offering seems to work. Order book for most of our new Konecranes Gottwald and Konecranes Noell products has increased as our MHPS acquisition brought continuity to these businesses. Order intake growth in Business Area Industrial Equipment was led by the crane component business in EMEA and the Americas. We are very grateful for the trust that our customers and distributors have placed in us. There are also signs of increased investments within the process industries including steel, paper, and waste-to-energy.
In the second quarter, Group sales were 1.3 percent above the previous year on a comparable combined company basis. Sales growth related to the successful deliveries and strengthened order book in Business Area Industrial Equipment. Business Area Service sales were close to the previous year’s level, which actually matched our expectation for the second quarter. The slight decrease in Business Area Port Solutions sales related to the timing of deliveries.
The second-quarter comparable combined company adjusted EBITA increased to EUR 51.2 million (42.6) and the adjusted EBITA margin improved to 6.4 percent (5.4). In Business Area Service, the adjusted EBITA margin increased by 1.4 percentage points thanks to the positive sales mix, better productivity and lower fixed costs. In Business Area Industrial Equipment, the 3.8 percentage points’ improvement in the adjusted EBITA margin related mainly to the cost-saving measures implemented in 2016-2017, as well as successful deliveries. The adjusted EBITA margin in Business Area Port Solutions, down 0.2 percentage points on a year-on-year basis was affected by slightly lower sales.
In the second quarter, free cash flow remained very strong at EUR 85 million thanks to improved profitability and positive change in the net working capital. Our interest-bearing net debt amounted to EUR 542 million at the end of June, although we paid dividends of EUR 82 million in April.
The integration of MHPS is running somewhat ahead of our expectations. While maintaining the targeted EBIT level synergies of EUR 140 million p.a. by the end of 2019, we now expect to implement EUR 45 million (earlier EUR 35 million) synergies on a run-rate basis by the end of 2017. We are in process of optimizing our industrial crane manufacturing in several countries including Austria, Canada, India, South Africa, and Switzerland. In addition, a potential closure of our lift truck factory in Italy is being discussed with the employee representatives and local authorities. While there is still much work left to do for the rest of 2017, we are already planning our integration activities for 2018.
The key macroeconomic drivers are increasingly supportive in our end-markets. Coupled with our determined actions to boost our own financial performance, we look forward to posting a solid second-half performance.”
ANALYST AND PRESS BRIEFING
An analyst and press conference will be held at the restaurant Savoy’s Salikabinetti (address: Eteläesplanadi 14) on July 26, 2017 at 11.00 a.m. Finnish time. The half-year financial report will be presented by the Konecranes’ President and CEO Panu Routila and CFO Teo Ottola. A live webcast of the conference will begin at 11.00 a.m. at www.konecranes.com . Please see the stock exchange release dated July 5, 2017 for the conference call details.
BASIS OF PREPARATION FOR COMPARABLE COMBINED COMPANY
The comparable combined company financial information is based on management’s estimates and is for illustrative purposes only. The comparable combined company financial information gives an indication of the combined company's key figures assuming the activities were included in the same company from the beginning of 2016.
The comparable combined company financial information is based on a hypothetical situation and should not be viewed as pro forma financial information as the differences in accounting principles have not been taken into account. The unaudited comparable combined company financial information is based on Konecranes Group’s financial statements for the financial year 2016 (adjusted for restructuring costs, transaction costs and received insurance indemnity) according to IFRS and Terex Corporation’s (“Terex”) MHPS segment unaudited special purpose carve-out financial information for the financial year 2016 (adjusted for non-recurring items such as restructuring costs and impairments of goodwill and trademarks) according to USGAAP. The corporation allocations of Terex Group have been adjusted in MHPS income statement to illustrate the situation as the Group had been combined at the beginning of 2016.
Since the financial information for MHPS has been prepared on a carve-out basis, this does not necessarily reflect what the results of its operations would have been had MHPS operated as an independent company and had it presented stand-alone financial information under IFRS during the period provided. Moreover, the carve-out financial information may not be indicative of the MHPS’s future performance of the operating activities aggregated within Konecranes.
Konecranes is unable to present a reconciliation of the comparable combined company financial information as the MHPS’ financials have been calculated according to USGAAP and using different accounting principles than Konecranes and because Terex has categorized MHPS as a discontinued operation in 2016.
KONECRANES PLC
Miikka Kinnunen Vice President, Investor Relations
FURTHER INFORMATION Mr. Panu Routila, President and CEO, tel. +358 20 427 2000 Mr. Teo Ottola, Chief Financial Officer, tel. +358 20 427 2040 Mr. Miikka Kinnunen, Vice President, Investor Relations, tel. +358 20 427 2050 Mr. Mikael Wegmüller, Vice President, Marketing and Communications, tel. +358 20 427 2008
Konecranes is a world-leading group of Lifting Businesses™, serving a broad range of customers, including manufacturing and process industries, shipyards, ports and terminals. Konecranes provides productivity enhancing lifting solutions as well as services for lifting equipment of all makes. In 2016, Group (comparable combined company) sales totaled EUR 3,278 million. The Group has 16,800 employees at 600 locations in 50 countries. Konecranes class A shares are listed on the Nasdaq Helsinki (symbol: KCR).
DISTRIBUTION Nasdaq Helsinki Media www.konecranes.com
