Hiab Oyj (HIAB) Earnings Call Transcript & Summary

Welcome to Cargotec's Full Year 2024 Results Call. My name is Aki Vesikallio. I'm from Cargotec's Investor Relations. Today's results and the final results for Cargotec will be presented by Cargotec's CEO, Casimir Lindholm; Cargotec and Hiab's CFO, Mikko Puolakka; and Hiab's President, Scott Phillips. Please also pay attention to the disclaimer in the presentation as we will be making forward-looking statements. With that, over to you, Casimir.

Thank you, Aki. And also welcome on my behalf to this webcast. It's a historic one. It's the last one for Cargotec. It's the 79th quarter reporting Cargotec figures since 2005. All in all, the Q4 and '24 were strong. Orders were really good in Hiab, and Scott will come back to that a bit later. Book-to-bill was positive in Q4 and a really strong full year profitability and cash flow. And this goes for both Hiab and MacGregor. I think that Hiab did the best result ever, keeping in mind that we have a roughly 8% drop on the top line. And also MacGregor performed on a very good level. It's the best year for MacGregor since 2014. So really good and strong performance continued. And this is the eighth quarter in a row when we have strong and stable profitability in the company. We also managed to sell MacGregor during the fourth quarter that was signed in November, and I will shortly come back to what we are doing now to go from signing to closing of MacGregor. We had 3 main focus areas in 2024, and we delivered on all of these areas. We continued the strong business performance in a not very favorable market. So that is, again, a strength that has been shown by both Hiab and MacGregor performing in a softer market. And we also completed the separation of Kalmar. So 14 months after the announcement of the demerger, that was then on the 27th of April in 2023. 14 months after that, we separated and listed Kalmar on the 1st of July in '24. And 16 months from the announcement, Kalmar was already operationally operating a total separate company also from an IMIT perspective. Then the story around MacGregor, of course, a lot of work to turn the company around and then start the sales process, and again, we signed the agreement with Triton on the 14th of November, and I will shortly come back to where we are in that process. But all in all, a very strong year, both from the business performance perspective and also delivering on all the items that were set 2 years ago by the Board regarding the demerger and separation of the 3 companies. So regarding MacGregor, the deal was signed in November. We are now working on going from signing to closing. The closing expected in latest 1st of July. I'm a bit more positive here in this area that we will be able to do it sooner than that. But that's the, let's say, the target that we have. There are a lot of technicalities and legal aspects in this process going from signing to closing, but everything has worked according to plan so far. And of course, MacGregor has reported discontinued operations, and we will not go through MacGregor results today in any detail. But as mentioned before, a very strong year for MacGregor in 2024. Then the last mile in the transformation and on the transformation journey is, of course, to have Hiab as a stand-alone company as planned on the 1st of April. The AGM invite is now out, and it's -- the name change is on the agenda there. And then, of course, also part of that, Scott will then later introduce the management team for Hiab. And at the same time, the management team for Cargotec is stepping down on the last of March. And on top of these changes, we also are then implementing, of course, subject to AGM approval, a governance model change for Hiab, a similar one that we introduced for Kalmar then last spring, where Hiab will have a nomination Board as in a normal stock-listed company. So the journey is on the last mile, and I'm confident that we can close the matters that we have left on the table, most of them as part of the AGM and then the closing of MacGregor. And again, I'm a bit more positive that we can be faster than what we have anticipated here as the last date. With that, thank you all for the journey. This is my last quarterly report as CEO of Cargotec. And with that, I will give the word to Scott, who will now go through then Hiab and later on Mikko Puolakka, the numbers of Hiab for the fourth quarter and 2024. Over to you, Scott.

Thank you, Casimir. And good morning, everyone, from my side. I look forward to guiding you through the fourth quarter and the full year financial results for Hiab as a business area. We'll provide a bit more color on the financials later in Mikko's presentation as a stand-alone entity. And in many respects, as Casimir mentioned earlier, '24 was an excellent year for Hiab despite the continuing rough demand environment and the high level of uncertainty that we face. In addition to improving on our relative earnings, we were able to improve on all key business area level 1 KPIs for the year as order intake improved by 3% as well, our cash flow improved by more than EUR 100 million, and this has enabled us to continue investing in creating incremental profitable growth and improving upon our business resiliency, which I'll come back to in later detail. So looking further into the order intake. On a full year basis, the business area improved year-over-year from EUR 1.466 billion to EUR 1.509 billion, driven primarily by the Americas as a geography, our larger key account customers and our Defense Logistics segment. For the quarter, we also had a 3% positive variance, but the demand situation I would characterize as the ninth straight quarter, quite on a stable level, still driven by the factors that we've shared earlier, high cost of financing, our Construction segment still remains soft, and we have overall a low level of demand still in some key geographies in Europe and increasingly in South Korea. However, our order book grew sequentially, which is good news. Now turning our attention to revenues. As Casimir mentioned, we had an 8% decline year-on-year as well as quarter-on-quarter. As our order book continues to normalize, the decline came primarily from Europe as the Americas region was up versus prior year, and APAC was relatively flat year-over-year. Our service sales continue to develop nicely as we had an all-time high in revenue for both the quarter and the full year. So our long-term targets for the service revenue remain valid. Of course, a lot of this will depend upon the development of the market demand and how the new equipment deliveries go over the next 2 to 3 years. Now we're really proud about the fact that despite the 8% decline in sales, profitability improved year-on-year from 14.1% to 14.9% as a business area, which is an all-time high as we had on the headline and Casimir mentioned. The result came as a consequence of executing on our plans to improve operational efficiency and our product cost base. For the quarter, our profit was flat year-on-year despite the decline in sales and was affected by approximately EUR 15 million in non-repeating costs. And as we highlight here, if you look at the underlying profitability level, we highlight that as well as the reported profitability level. Of the EUR 15 million non-repeating costs, they were associated with primarily with 4 different cost buckets. The bulk of the cost, and I'll highlight this in just a second on another slide, we had EUR 11 million that was a consequence of shrinking our footprint in Italy from 3 to 2, and that's going to help secure a much better long-term profitability, which we should already see the impact within this year. The second area was 2 other restructuring exercises that we did, all of which is related to the EUR 20 million of cost savings that we announced prior quarter. Those added up to EUR 1 million each in both areas. So that's another EUR 2 million. And then finally, the last EUR 2 million came from investment that we made to increase our management bandwidth so that we could execute simultaneously on several exercises that would help us improve our product cost, and that comprises the bulk of -- or comprises the EUR 15 million in the one-off cost. So on a relative basis, our profitability improved by 100 basis points versus comparable period last year, which is a strong result. Our return on capital employed remained above our target of 30.5% and the profitability, combined with reductions in our net working capital resulted in EUR 323 million of operative cash flow for the year. So overall, I'm really pleased with the results our team delivered in executing on our strategy and building a business that's much more resilient than at any other time. So I would like to highlight 3 investments that we were able to make in the quarter that will result in incremental cash flows from operations in the future. I talked a bit about this when I was taking you through the profitability bridge that we invested as a result of being able to optimize our supply chain in our Heavy and Super Heavy business in Italy. This is going to help significantly improve our gross margins that we should start to see towards the second half of the year. The second investment is related to our Truck-Mounted Forklift business, which has grown substantially over the past several years in which we will create a purpose-built facility in Dundalk. This will allow us to grow the business more efficiently and provide a better experience for our customers and our colleagues. The third investment is in the U.K. related to a new service and installation center in Wrexham, replacing the existing facility that does not allow us for growth. And again, we can give more color with regards to the details around the financials. In total, between the factory and our customer support center investments will require approximately EUR 25 million of CapEx within this year. And as I mentioned earlier, I'm proud of our global team successfully executing on our strategy that we shared with you last May. We have signed relative to our North American piece, we've signed 7 new distributor agreements, and that will enable us to better service our customers in more geographies where we are currently subscale, 2 of which we've highlighted on the page. So we agreed a distribution agreement with Ring Power in 2 parts, both -- one covering our Loader Crane business, the other covering Truck-Mounted Forklifts. We're really excited about this as they're an outstanding full service provider for sales and service with scale in parts of the U.S. where we are currently subscale. In addition to the distribution agreements that we've signed, I'm proud to represent the team and telling you that we introduced 45 new solutions last year, of which 41 are relative to our Equipment business, 4 relative to our Service business. So it sets us up quite nicely to deliver on our long-term strategic targets. So just taking you -- guiding you through those, the 7% growth over the cycle remains the same as well as our return on capital employed as well as our sustainability ambitions. What did change with the technical adjustment now that we have a good view in terms of the additional cost as a stand-alone entity, our long-term comparable operating profit target is at 16%, and I'll take you through the details of that in the next slide. Additionally, we've added the gearing ambition, which we aim to stay on a long-term basis under 50%. There may be periods that could go above, but our ambition will be much as it has been with Cargotec. And similarly, we have an ambition to grow our dividend. We aim to stay in a range of 30% to 50% of our earnings per share. So looking into a bit more detail in terms of the long-range targets relative to our profitability bridge. If you think about where we ended at 2024, at 14.9%. The 3 elements that got us as a business area to 18% still remain the same. So we have growth that we seek in geographies and segments. We have incremental profitability that we aim to drive through our business excellence platform, and we aim to have a better business mix or sales mix with ambition to grow our Services business slightly higher than our Equipment business. That got us to 18%. Doing the technical adjustment, which amounted to 1.7% of sales in 2024, that takes the starting point to 13.2% and our targeted endpoint at this time is 16%. So as Casimir mentioned, we -- I would like to take you through briefly an introduction to the team. I'm highly privileged to lead such an international and capable team, representing 8 different countries, many of which you know from prior capital markets events and other investor touch points. And so this is the team that has delivered the excellent results and quite confident that this team will continue to do so. We've got Michael Bruninx leading our Services business; Hermanni Lyyski, who's leading our Demountables and Defense business. Barry McGrane is leading our Truck-Mounted Forklift business. Martin Saint is leading our Tail Lift business. Magdelena Wojtowicz is leading our Light and Medium Loader Crane. And as an interim leader that we go into the next time period with, we have Marcel Boxem, who's been leading our Heavy and Super Heavy business. You know Mikko quite well as our CFO. Sanna Ahonen is leading our Sustainability, Strategy and Business Excellence function. Ghita Jansson is leading our HR. Birgitte Skade is leading our Communications and Marketing; and Taina Tirkkonen is Head of Legal. We have an open position that I currently fill on an interim basis for Business Operations Development. So really excited and privileged to lead such a great team. So with that, I'll turn it over to Mikko.

Thank you, Scott, and also good morning from my side. Let's have a look on Cargotec's financials for 2024. And most of the numbers what I will be showing today are based on Cargotec's continuing operations financials. So in practice, it means that the continuing operations consists of the previously presented Hiab business area results and then also that part of the Hiab related Cargotec's group overheads. So here are the Cargotec's continuing operations financials. And as a note, basically, the orders, sales and gross profit on this page are actually the same as for the Hiab. The difference comes in comparable operating profit where there is in addition to Hiab's business area result, the Cargotec's continuing operations group overheads, which are related to Hiab. Last year, those were EUR 28 million. Eco portfolio sales was 29% of total sales. Gross profit margin improved by 2.2% units, driven by successful commercial and sourcing actions. And actually, the gross profit improvement was the biggest contributor to the overall profitability improvement in full year 2024 results. All in all, the full year comparable operating profit margin improved by 0.9% units despite the 8% decline in sales. The 12 months return on capital employed number on the bottom of this page is the only KPI where I would say that where Kalmar and MacGregor balance sheet items and P&L items are impacting still the KPI calculation. As this is a kind of rolling 12 months KPI, and we have not separated Kalmar and MacGregor from Cargotec's continuing operations balance sheet for the historical periods. The ROCE was impacted by EUR 200 million goodwill impairment in quarter 4 related to MacGregor sale. Without that booking, this ROCE would have been actually 16.2%. So as Kalmar and MacGregor will still impact our ROCE calculation also throughout 2025, I would say that it's better to follow Hiab's operative ROCE, what Scott highlighted earlier, and that was 30.5% in 2024. Cash flow was very good throughout the year, ending at EUR 582 million for the full year. It's also good to note that the cash flow statement still includes cash flow from Kalmar until end of June last year and from MacGregor for the full year 2024. The strong cash flow comes from good profitability and in total, over EUR 200 million reduction in net working capital. And the net working capital reduction is stemming mainly from accounts receivables. Those declined EUR 116 million last year, thanks to really good work from the organization to collect the cash. And then inventories, which declined EUR 92 million. Hiab will start with the very strong balance sheet after the MacGregor divestment. First of all, the continuing operations gearing, i.e., excluding the MacGregor-related cash items, that was minus 7% at the end of the year. Continuing operations had EUR 439 million of cash at the end of the year. And on top of that, there will come the cash impact from MacGregor sale, approximately EUR 220 million when the deal is closed. So if the MacGregor sale would have taken place at the end of 2024, then the continuing operations net debt would have been minus EUR 290 million. So in gearing, it would have been actually minus 28%, so very strong balance sheet. On the right-hand side, you can see also that there are no major debt repayments upcoming in this year or in the following years. And actually, we have already repaid EUR 100 million bond, which matured in January 2025. Based on the good financials, the Board of Directors is proposing a total dividend payment of EUR 2.77 per B share. This dividend would be paid in 2 parts. The ordinary dividend of EUR 1.20 would be paid on April 4, 2025. And then there would be an additional dividend of EUR 1.57 per B share. And this dividend would be conditional to MacGregor divestment and then the Board would make the decision on this dividend payment in quarter 3. All in all, this dividend payments would be EUR 177 million. In the previous year, the dividend payment was EUR 138 million, and EUR 177 million dividend payment represents a 115% payout ratio. Next, I would like to illustrate Hiab's transition from a business area to a stand-alone operations from a profitability point of view. As a business area, Hiab delivered last year EUR 245 million or 14.9% comparable operating profit. There are certain Hiab business area central costs illustrated here in the orange bar. These costs have existed already in Hiab also in the past. And in the future, these costs will be part of the stand-alone Hiab group costs. So when we dismantle the Cargotec Group, EUR 28 million of the group costs are related to Hiab in 2024. This is 1.7% units in the comparable operating profit margin. So when we look at the continuing operations 2024 profitability, including the Hiab business area results and then the stand-alone costs of EUR 28 million, it was 13.2%. And this continuing operations results gives already a fairly good approximation what the stand-alone Hiab results would have been in 2024. Well before the quarter 1 '25 results, we will also publish the restated Hiab segment information for 2024. And then we will be laying out basically the Equipment and Service segment sales and profitability in that restated segment information. Please note also that the Equipment and Services in this chart are not in scale, so it's just for the illustration purposes. And then on top of those 2 reporting segments, there will be the so-called Hiab group costs, which will consist of the previously mentioned Hiab business area overheads and then those Cargotec group costs, which will continue with Hiab going forward. As a last item, our outlook for 2025, this is defined for the continuing operations in practice for the stand-alone Hiab. And when we have been defining the outlook for 2025, we have taken into consideration the current order book, the demand environment and then also our internal development plans, be that for the operational development or commercial excellence-related activities. And based on those underlying factors, we estimate that the continuing operations 2025 comparable operating profit margin is above 12%. And as you saw from the previous page, the corresponding profit margin was 13.2% for 2024. And if you look at this outlook is actually on the same level what we guided for Hiab as a business area in 2024, if we would convert this to the kind of older business area results. And with that, then I would hand the microphone back to Aki.

Thank you, Mikko. I would like to invite Casimir and Scott back to the stage. And when the guys are ready, we are ready to take the first questions from the Q&A. Operator, please go ahead.

[Operator Instructions] The next question comes from Antti Kansanen from SEB.

I have two. First is on the '25 margin guidance. And I would wanted to better understand what type of moving parts do you have from, let's say, self-help restructuring actions year-over-year, both on a positive and a negative side as we've seen now in the past 2 years that you kind of book a one-off type of costs as well on the comparable operating side. So should we expect more of these negative items? And also what is kind of the positive contribution year-over-year terms?

Perhaps I can start. So of course, we started, as mentioned from the order book -- starting order book for this year. Our rolling 12 months order intake has been on the level of EUR 1.5 billion. We have done last year -- or implemented last year the EUR 20 million cost savings or cost efficiency program, which will yield results this year. Like Scott also said in his presentation, we expect to have positive impact from those actions, especially in the second half of this year. And then, of course, we don't have the crystal ball for the -- especially for the, let's say, next quarter's order intake. That's very much a kind of open factor, which will define then to a certain extent, our full year revenues this year. Our order book covers roughly 5 months of sales. So there is still quite a lot of sales to be done, especially in the next 2 to 3 quarters, which will then materialize as revenues for this year. Yes, anything, Scott?

Yes. No, I was going to say the same tagging along to the end of your comment, Mikko. Antti, as we have visibility out 5 months with regards to the order book coverage, just to plan for what's going to happen beyond that 5-month period, we're just operating under the assumption it stays flat to even be prepared if it were to go down because of the level of uncertainty. So that really is the case here. So no real visibility in terms of the downside risk at this point in time. But certainly, there is room for upside in the event that it develops a bit more positive than the way it is or the way it has in the prior 9 quarters, if you will.

Yes. Maybe just better understanding the fact that you are obviously targeting much higher margin in 4 years' time. So could you maybe talk about the cadence of that? Is it reasonable to assume that we're going to see some type of adjustment items kind of burdening the margin first and then the expansion will then be more tail-end heavy? Or how should we think about that?

Yes. I think that probably the first thing to note is that we're -- as we did last year, very much establishing what we think is a floor if you will, with regard to the margin. And as Mikko elaborated in his presentation, the guidance adjusted for the additional cost as a stand-alone basis is roughly in line with where we guided at the end of last year. But in terms of the recovery, it obviously has dependency upon those 3 elements that we had highlighted in the profit bridge. So when will the recovery on the demand side happen. And so far, it's developed out very much as we've modeled it. So we do anticipate a recovery at some point in time. Number two, we are building up our business excellence capability where we're getting better and better at unlocking incremental cash flows with improving our processes and our efficiency. So we've accounted for some of that. It all depends on the type of demand environment. As I've mentioned, I think, in a prior call, where more robust demand environment, we'll be able to invest more of those incremental cash flows. If demand stays muted as it's been, then we would use that as helping to increase our profitability. Then the third element, of course, is our business mix. And then as I alluded to in my presentation, on the Services side of the business, we anticipate being able to hit our targets that we had shared during the Capital Markets Day. So there was an improvement in capture rate going from 47% to 52%. There was an improvement in our overall ProCare contract coverage, reaching a higher level than what we've ended last year on. And at the same time, number three, there was then the ambition to get to roughly 90,000 connected units, and we know that's going to provide a catalyst to being able to better and better exploit the installed base over time. The variable factor there will be how quickly and how robustly the market recovers in terms of allowing us to seed the market with new equipment.

All right. Very clear. And then the second question was on cash flows and cash conversion. What kind of -- for Mikko, I guess, what should we assume for, let's say, working capital to sales levels compared to where you stand now end of '24 and also kind of CapEx outlook that you look for '25, '26?

Yes, I would say that if the revenues remain on a flat level like they have been now during the last quarter, so the cash conversion traditionally in Hiab's case has been around 100%. Like Scott said, we have operational excellence initiatives, which, of course, aim at improving the overall, let's say, lead times and throughput from order to sales, but those will not yield immediately benefits. Those are long-term developments. What comes to CapEx, I would say that in general, our CapEx has been more or less matching the depreciation. But like Scott said earlier, this year, we are anticipating that due to the factory expansion in Ireland and in the service operations expansion in U.K., we will incur roughly EUR 25 million higher CapEx than traditionally.

All right. That's very clear. And that's all for me. Obviously, best of luck to Casimir for any future challenges and thank you for the past couple of years.

Thank you, Antti. Likewise, thank you.

The next question comes from Panu Laitinmäki from Danske Bank.

I have 2 questions. Firstly, on the MacGregor divestment and the cash flow from that. So can you just clarify, did you comment that it would be EUR 220 million when it's closed? And if so, why is that if the enterprise value is EUR 480 million?

Yes, that's correct. We anticipate that roughly EUR 220 million would be the cash inflow at closing. The difference there comes basically due to the fact that how the advanced payments in MacGregor's balance sheet are treated, whether it's net working capital or whether it's debt, and in this case, it's treated as debt, and it's causing the difference between the EV and the EUR 220 million cash inflow.

Okay. Then the second question is on demand. So could you talk a bit about the different markets? And what are you seeing and what are you expecting? So when I read your market commentary, it sounds that you are cautiously optimistic, but it sounds that there's not a big change yet.

Yes, I'll get started here. On the demand environment, you're exactly right, Panu. It's due to the level of uncertainty, and I think that we see a bit more geopolitical unrest now than before. The same factors, however, are still at play, where we still have above the 10- to 25-year interest rates, so the cost of financing is still high. That seems to especially be hitting our small to midsized customers where we see the activity or at least the purchase decisions on a lower level relative to the larger key account customers. So therefore, more of the demand has been driven from the larger key account customers. As I mentioned previously, the demand environment in North America has still continued to be stronger relative to Europe and as well as APAC for us. So we actually had an increase in sales year-over-year and then a nice increase year-over-year on the order side. Having said that, though, then with the inflationary environment and the expectation that reduction of interest rates could potentially be lower, I think it's still an environment where there's a level of caution. Then in Europe, we see still nice demand on the Retail, Last Mile side. Waste and Recycling is still holding quite well. Construction is still at a low level. And so repeating the same thing I've said in prior quarters as well, we see that in the Nordics, especially acute in Germany, still on a low level in France. And then, of course, we had the additional piece of the geopolitical unrest in South Korea that impacted our demand in the last quarter there.

Can I just ask a follow-up on Europe? Your main competitor. On Friday you said that orders in Europe are recovering and they were expecting a bit better second half. So are you seeing any kind of uptick in European demand?

Yes. At least on our side, it's the same story. The upfront leading indicators are going in the right direction. The team, I think, is more optimistic, but the reality is, we're still seeing a similar demand environment. So hence, my comment to you would be we still see a stable level of demand in terms of actually getting the orders.

The next question comes from Andreas Koski from BNP Paribas Exane.

I was also going to ask about the European market, but I got that question answered already. So I would like to ask about the one-off items that you had in the fourth quarter this year. You also had one-off items in Q4 last year or 2023. So I wonder if we should expect one-off items to come more or less every year? And will they come mainly in the fourth quarter? And is this the reason why you are not excluding them from comparable operating profit?

Yes. I can start with that. So actually, it's both in the last 2 years coincidental. And if you look back at our results in '21 as well as a business area, we had a similar situation. All 3 cases are their own case. The last 2 of which were if you go back to '23, and we announced a EUR 50 million cost savings program as a group and of which we had a contribution of EUR 20 million. So the bulk of our one-offs there just happened to follow the decision taking to execute on the EUR 20 million in cost savings. So then that's why that happened to hit in quarter 4. And so a consequence of the Q3 announcement. Similar story this year when we announced the additional EUR 20 million on the basis of looking at our trailing order intake, as Mikko articulated earlier, then the bulk of the one-offs in this current -- in the prior quarter was a consequence of the decisions we take in order to adjust our cost basis and deliver on the EUR 20 million. And then the remaining EUR 2 million of that, of course, a little bit similar to last year as well where we went and sought additional management bandwidth with temporary support. Last year was more related to crystallizing our strategy. This year was much more focused or was fully focused on helping us to reduce our product cost. We ran a number of events that we did simultaneously in order to be able to execute covering a broader section of our overall direct and indirect spend. So therefore, we needed the temporary help, and that was the remaining EUR 2 million.

Yes, and if we would put things into bigger perspective, in December 2022, Hiab's order book was over EUR 1.2 billion end of last year, it was roughly EUR 650 million. So we have been adjusting the capacity as we have been kind of consuming the order book like Scott illustrated.

Maybe on a positive note, I think EUR 11 million out of those EUR 15 million that Scott referred to, I would look at that as an investment because the target is that the division involved there, the target is that in the second half of '25, that division would come up to the same high standards of operating profit like in the other divisions. So it's maybe not a classical write-down as such. It's more as an investment to bring up the profitability to the right level in that division.

Yes. Okay. And on the margin outlook for 2025, is it fair to say that you expect a margin between 12% and 13%? Otherwise, you would have said a margin above 13% if you expected a higher margin? And have you assumed any one-offs in this margin outlook?

Well, this margin outlook of 12%, that's the floor. So of course, we aim at higher. But like you have also seen in the past, we started last year with 12%, and then we specified our outlook when we knew a bit better how the full year will be turning out to -- from 12% to 14%. So we typically leave certain headroom in the outlook. So this is the, let's say, the floor level. And then as the year progresses, then we may revise it if we have a better information for the full year.

And on the one-offs, any one-offs assumed in the margin floor?

At the moment, we don't have any this kind of restructuring programs ongoing what we announced last year. So not at the moment, any that kind of outlook at least.

And maybe referring to the history, I mean, we have announced on the Cargotec level twice cost-saving programs. And already back in '23, we said that we believe that the market is developing on this level. And like Scott referred to, I mean, this is the ninth quarter in a row when we are on a roughly EUR 370 million level. So now the actions have taken and been implemented based on the communication both in '23 and '24. And then, of course, if the market changes, then we either are in a positive situation that we need to ramp up, and that's then a positive challenge if that's the case.

The next question comes from Erkki Vesola from Inderes.

It's Erkki from Inderes. A couple of questions from me. First, coming back to the margin guidance. I mean, is the guidance kind of an indication or is this a sign of preparation of sales decline in '25 versus '24, if that's the kind of full level? I mean, do you expect that the guidance can withstand a small sales decline?

Yes. I mean, like I said earlier, if we would be looking at our last 6 months or 12 months order intake, our order intake has been roughly on the level of EUR 1.5 billion. So if the markets would not improve, that would be the level more or less what we would anticipate. And for that level, we have been also looking this EUR 20 million cost efficiency program, which we started last year. So that's the basis for our 2025 outlook.

Okay. And then what's your visibility on your current order book margins, I mean, vis-a-vis 6 months ago? And what are the first half '25 drivers regarding both pricing and COGS?

Yes. We've got roughly 5 months of visibility from the order book. That has roughly been the case for most of the past 6 months. I'm suspecting 2 quarters ago, it was a bit higher. But nevertheless, it's been in the 6, 7 -- 5, 6, 7-month time frame. So we have good visibility to the margins relative to the order book coverage. And then we see a similar environment on pricing this year as we did last year. So due to the level of uncertainty and all the cost factors I talked about, still challenging, but got well included in the plans in which we provided guidance for.

Okay. So your current order book margins could -- are comparable to what they were -- where they were 6 months ago? No bigger change there?

Yes.

The next question comes from Johan Eliason from Kepler Cheuvreux.

This is Johan at Kepler Cheuvreux. Just a question on your sort of long-term targets and specifically the return on capital employed. You mentioned this is sort of operating profit over operative capital employed. In that number, is goodwill included considering that M&A is supposed to be part of your growth strategy going forward? And you obviously have a decent balance sheet to use for M&A.

That's correct. So that's why we have -- I mean, if you remember, last -- end of last year, Hiab's operative return on capital employed was 30.5%. The year before, it was 30.7% and the target is above 25%. So we have counted certain dilutive effect coming from the potential M&As for the return on capital employed there.

That's excellent because it sort of limits a little bit what you can pay. That was the question I have.

The next question comes from Tom Skogman from Carnegie.

Yes. This is Tom Skogman from Carnegie. I have a couple of questions. First of all, about incentive schemes when you change management, have they been decided and what the criteria are?

We have used in a big picture, the same incentive schemes that we implemented for Kalmar as well, and they are very much in line with the ones that have been used in Cargotec as well. So both the STI and the LTI elements are very much in line with what has been used before in Cargotec.

But is it aligned with the 2028 target somehow?

Yes, they are, of course, linked to that. And so the drivers are the same as you have seen previously in Cargotec.

Okay. And acquisitions, are you prepared to do acquisitions now? Or do you want to wait until MacGregor has been fully closed? I mean, can there -- is there even a need to prepare the organization after that, so we will not see any acquisitions before at the earliest late this year?

Maybe I can comment and Scott can continue. I think, of course, now a journey here ends, but then a new one starts. And of course, one of the elements in the whole transformation of Cargotec has been to achieve a very strong balance sheet for Hiab to support the M&A journey. And that is now delivered. So as you saw and Mikko explained that it's a super strong balance sheet with quite a lot of room to go on the M&A journey. And regarding, of course, the transition as such has taken almost 2 years. And we, of course, invested a lot of IT resources in the carve-out of, first, Kalmar, and the carve-out now of MacGregor. But as mentioned before, we are on the last mile, and I'm quite positive and confident that we can have a closing of MacGregor earlier than the 1st of July that we have said as a backstopper. And that would mean that then resources can be used on the efficiency journey of Hiab, but also on the M&A journey of Hiab going forward. And we are getting there in a couple of months that is then possible. And of course, on top of that, Hiab has worked even during the transition, worked actively on the M&A side on the division level. So there's a lot of interesting targets that Hiab has been working on even in this transition and during this transition period.

I can see that basically almost none of the all Cargotec managers are part of Hiab's Management Board. Is it true that they are leaving the group also? Are they getting some other positions?

No, you are correct. So Mikko and Scott, of course, continuing in Hiab and Leif Byström is continuing as Head of MacGregor. But regarding the Cargotec management team, both Mikko Pelkonen, Soili Mäkinen and Outi Aaltonen and Mikael Laine and myself, we are stepping down on the 31st of March according to the plan that was set 2 years ago. So the old Cargotec leadership team is stepping down and not continuing in Kalmar nor in Hiab nor in MacGregor, except for the gentlemen here and plus then Leif Byström.

And then on the price you get for MacGregor, is it right? I've estimated that MacGregor will have like EBIT of close to EUR 100 million in 2025 given the strong order backlog. If that is correct, the price seems to be very, very low. I mean, shouldn't you have considered a listing of that instead? I guess this is too late to consider now, but it just strikes me that the price is very low.

Well, first of all, I think one needs to keep in mind the history of MacGregor had quite challenging almost 10 years. And then the attractiveness of the asset, of course, gets a hit from that history. That is one part of it. The other part is financing such a deal is, of course, a topic as well because of the history. MacGregor has been part of Cargotec for many years. And then in that sense, from a financing perspective, Cargotec has covered those risks. And now as a stand-alone company, environment is a totally different ball game. Then on top of that, of course, the list of companies that could buy MacGregor, we had to exclude both Chinese money and U.S. potential buyers because of the geopolitical situation that we're living in, the filing and approval from certain countries would have not gone through with those type of buyers. So then the buyer pool was clearly limited compared to what it maybe would have been some years ago. Then, of course, looking at the starting point of the whole transition of -- and transformation of Cargotec, keeping in mind that we have a market cap increase of roughly EUR 2.5 billion over the last 2 years. And the timing is, of course, important. And it's very difficult to keep such a project live for more than 2 years. You tend to lose people and critical resources during the journey. And if you compare that to, let's say, that we would have gotten a better price in a year's time for MacGregor than we got now. Yes, that is probably correct, but the timing is critical for us. And also from, let's say, only from an IT perspective, it is more valuable for the owners of Cargotec and then now Hiab and Kalmar to close the transaction and go and support fully the M&A journey of Hiab. So this was from the starting point, the most tricky part to turn MacGregor around and find a buyer and a solution for MacGregor. And that was the way I saw it 2.5 years ago when I was at the Board of Cargotec that this would be the most tricky part and it was but you're correct, Tom, that in a year's time, yes, the price would have been higher. But let's put it that way, we could not wait for that. And we went out in the market when we had the turnaround in place and a favorable market where MacGregor is operating in now. And we all know it's a cyclical business. So that's maybe a bit of background why the transaction happened. And again, you can always have an opinion on assets price, but the real price is what you get in the market when you sell the asset, yes.

But that's why I kind of proposed an IPO instead because, I mean, then the stock market will forget about these advance payments and you would likely have a higher multiple than 2.5x EBITDA or so, I guess, in the stock market...

But then you need to put into the equation that then we would have invested some hundreds of millions in financing MacGregor as an independent company on the stock market. And again, we feel that, that money is better placed on the Hiab M&A journey than supporting an IPO of MacGregor.

The next question comes from Tomi Railo from DNB.

It's Tomi from DNB. Thank you for providing some commentary on the profitability of Equipment and Services. Just to check some math here, is it fair to assume that Services profitability improved slightly in '24 compared to '23, whereas profitability in Equipment declined somewhat year-on-year?

I would say, broadly speaking, that's the situation. Like Scott elaborated, Service revenues grew that has been supporting Service profitability, while in Equipment, the top line has declined due to low order intake. And then, of course, we had the EUR 11 million restructuring costs, which were in quarter 4, those were related to the Equipment business.

Perfect. And then a follow-up, looking at the target setting, is it also fair to assume that the main profitability improvement element is relating to the Equipment as Services profitability is already fairly high at around 23% levels?

Yes. No. For sure, we see the Equipment profitability improving exactly following on what Mikko just alluded to, Tomi, on the operating leverage on the growth. So if you think about the overall volume with the market recovery, then the segment growth that we were targeting with our 4 target segments, then we certainly expect a bit of improvement on the Equipment side. At the same time, I would say there's also room to improve on the Services business as well.

Great. And final question, was there already some benefits in the earnings from the EUR 20 million savings program in the fourth quarter? Or is it coming fully in '25?

I would say it's mainly coming in '25. So no major impacts other than this negative cost impact in 2024.

There are no more questions at this time. So I hand the conference back to the speakers.

Thank you very much for the questions and for your presentation and answers. So we will come back on 13th of April. And at that time, it will be the first Hiab stand-alone results call. So stay tuned.