Hiab Oyj (HIAB) Earnings Call Transcript & Summary

Okay. It's 2:00 p.m. here in Helsinki, 12:00 in London and 1:00 p.m. in Stockholm. So welcome to Hiab's first ever pre-silent call today, 1st of April. And we continue with the same format as we had with Cargotec. So first, there will be a short introduction from our CFO, Mikko Puolakka, and then we will start with the Q&A session. With that, over to you, Mikko.

Thank you, Aki, and good afternoon also from my side. A couple of topics, so usual disclaimer. And yes, quite many events happening in the first quarter. As of today, like Aki mentioned already earlier, the company is now called Hiab as of today. And then the trading code is simply Hiab, so easy to remember. Last Cargotec's Annual General Meeting was held last week's Wednesday. Scott Phillips, who has been the Hiab business area President since 2018 is now as of today then the Hiab Group CEO. We also published 2024 quarterly segment information for equipment and services that was published on 28th of March, 2025, and I will come back to that a bit later. And then last but not least, MacGregor separation has been progressing also according to our plans, and we are then heading towards the closing in the next few months. So what we have said earlier that we plan to close latest at 1st of July still holds. And of course, the sooner all the conditions are clear, the sooner we can then close. A few words about Hiab. So Hiab is the leader in the on-road handling -- load handling solutions. We have very, very strong brands, very long customer relationships and a very broad service coverage with over 3,000 locations worldwide. The markets we have chosen to operate in, in those markets, we are #1, #2 positioned, really attractive market sizes. The markets offer to us good growth opportunities from Hiab's perspective. If we calculate the equipment market together, it's roughly EUR 4.5 billion. And if we think that Hiab's 2024 equipment revenue was roughly EUR 1.2 billion, that would make roughly 30% equipment market share. Before we go into the segment financials, let me illustrate a bit Hiab's transition from the business area to a stand-alone company from profitability point of view. In 2024, Hiab delivered as a business area, EUR 245 million or 14.9% comparable operating profit. In Hiab's 2024 business area results, there were roughly EUR 10 million Hiab business area central costs, which are not allocated to Hiab's divisions. This is illustrated in this picture with the orange bar. In the future, these costs will be part of the stand-alone Hiab group costs, and they will also, in the future, not be allocated to the equipment and services reporting segments. Now when we have dismantled the Cargotec Group, EUR 28 million of the 2024 group costs are related to Hiab. This is approximately 1.7% units in comparable operating profit margin. As a reference, in 2023, this cost was roughly EUR 33 million. So we have done already in '24 some optimization for that cost. So when we look at the continuing operations 2024 profitability, basically the third bar from the left, then the business area Hiab results and kind of with the stand-alone costs, the profitability would be 13.2% for 2024. As of the third quarter '25 interim reporting, Hiab will be then reporting equipment and services. And for those reporting segments, we will report order intake, sales and operating profit. The equipment 2024 comparable operating profit was 13.1% and services was 21.5% for the full year. And in addition to these two reporting segments, there will be then the Hiab group costs also reported separately. And these groups costs consist of the previously mentioned Hiab business area overheads so that EUR 10 million for 2024. And then those Cargotec group costs, which continue then little bit higher. All in all, EUR 38 million for 2024. If we look a bit more in detail the equipment segment performance, equipment order intake has been fairly flat since quarter 4 2022. And here, you can see basically the '24 on a quarterly basis. Order book has been coming down as we have been consuming still in -- especially in the first half of 2024, the exceptionally high kind of COVID order book orders where the lead times have been exceptionally long. And as you can see from the picture, since quarter 2, the order book has been relatively stable. The equipment segment's profitability has been around 15% with the past quarter's sales levels. Quarter 4 was impacted by the EUR 15 million nonrecurring costs related to the EUR 20 million cost savings program because part of these nonrecurring costs are related to our Italian assembly operations streamlining and we expect that these one-off costs will yield then benefits in the second half of this year in form of better profitability for that Italian operations. When looking at services, services revenue grew 2% in 2024. Quarter 4 revenues were up by 4%. Profitability has been fairly stable throughout the quarters, as you can see around 22%. And service profitability may fluctuate during the quarters or in between the quarters due to the mix, for example, what kind of spare parts revenues and -- versus installation services we happen to have in a specific quarter. But as you can see, profitability has been fairly stable. When thinking the long-term targets, we specified the stand-alone Hiab long-term profitability target in connection with the quarter 4 2024 results announcement. So as a business area earlier, we said that Hiab aims at 18% comparable operating profit by 2028. Now as a stand-alone company, basically that target is converted to 16%, reflecting that roughly 1.7% to 2% stand-alone costs as a difference. Growth, return on capital employed and sustainability targets have remained unchanged from what we communicated in May 2024 in our Capital Markets Day. And then below these numbers, you can see also the performance against these long-term targets. So rolling 10 years growth has been 7% in sales, the last 12 months profitability 13.2% as a stand-alone company. And then the return on capital employed last 12 months have been 30.51%. As we announced also in connection of quarter 4 2024 reporting, so we are doing production optimization in Italy. And as mentioned, the major part of our quarter 4 last year one-off costs were related to this Italian production optimization. And as also mentioned, thanks to these actions, we expect then improvements in that business profitability in the second half of this year. We are investing in renewing our factory in Ireland, where we produce the truck-mounted forklifts. And then we are also renewing our customer service center for the U.K. operations. This is basically installation workshop where various Hiab equipment is installed then on the truck chassis. And due to these two investments, we anticipate to have roughly EUR 25 million CapEx spending this year. The AGM approved the dividend proposal, Board's dividend proposal on 26th of March. So the ordinary dividend is EUR 1.20 per B share, and that's payable basically this week on 4th of April. And then also the AGM approved the additional dividend, which is EUR 1.57 per B share, total EUR 100 million, and this is basically subject to MacGregor closing. And then thereafter, basically the Board is expected to make a decision on this at the end of September. This would be then payable, again, like I said, subject to MacGregor closing then in the early fourth quarter in October. We have announced already earlier the Hiab leadership team. Like I said, Scott Phillips as the CEO. I continue from Cargotec to Hiab as a CFO and then most of rest of Hiab leadership team has been actually already serving a good time in Hiab's leadership -- Hiab business area leadership already in the past. So they know the business well and the customer base very well. Hiab has over 4,000 employees and we operate in multiple countries and the headcount is also fairly equally distributed with our revenues. Last but not least, the outlook for 2025. So for the continuing operations, comparable operating profit, we expect that we deliver more than 12% comparable operating profit. And basically, the continuing operations is more or less the same as Hiab as a stand-alone.

Thank you, Mikko. Now it's time to move on to the Q&A session. [Operator Instructions] Do we see any hands up? Okay, and we have the first one from Antti Kansanen. Please go ahead.

Thanks for the information on kind of the modeling perspective. I wanted to ask a couple of details before going into the Q1 kind of a trading update. If we look at kind of seasonality in your business because we only have the comparison figures for 1 year, and there's been a little bit of a change of the backlog rotation. Is there any seasonality on the equipment deliveries? If we look at backlog, what do you have end of the quarter? Is it -- does it make a difference whether it's Q1, Q2, Q3, how much do you tend to deliver out of it?

I would say that it's still very much similar to Hiab's historical total. So quarter 3 typically is a bit lower even in order intake, but also in sales due to the fact that our -- majority of our business is in the Northern Hemisphere, and that's typically the holiday season when the customers are not necessarily taking that much the deliveries.

Okay. And the second question is on if you now have more or you will get more of these military defense kind of agreements, which are of a longer time and are more like a frame agreement based, will that be included on your backlog? I mean, should we assume that it's structurally a bit higher and a longer lead time backlog if the share of military and defense grows?

That's correct. However, even in the past, when we have had multiyear military or defense logistics deals, we have not necessarily booked the whole, let's say, frame agreement in the order book. That has been booked in -- customers have typically placed orders for 1 or 2 years deliveries, and then we have been booking those orders and accordingly, even though the frame agreement might be for 5 years. That was the case, for example, in this, if I remember correctly, EUR 180 million Rheinmetall MAN deal what we got back in 2022. And what we, in addition, tend to see nowadays is that customers, let's say, want to have the deliveries perhaps even faster and they are -- the defense customers are breaking down those longer deals into smaller pieces. So I would not say -- I would say that the defense business, should that grow, should not significantly kind of change the structure of our order book.

Okay. Makes sense. And then the last one from me is just an update on the demand conditions that you've seen during the first quarter. I mean, I guess, Europe, U.S. separately has the tariff uncertainties and I guess, uncertainty over the U.S. growth. Has that impacted on your business in any meaningful way so far?

Yes. Like we said already in the early February when we announced our quarter 4 and full year results of 2024, so the quarter has progressed very much according to our expectations. So slightly better environment in Europe and then in the U.S., tariff uncertainty is causing customers to delay some decisions. But overall, I would say that the order intake in quarter 1 has progressed pretty much according to our expectations, what we thought in the beginning of the quarter.

Thank you, Antti. And the next question is Jussi Mikkonen. Please go ahead.

This is Jussi from OP. Can you hear me?

Yes.

Yes.

Yes. Just a clarification on the MacGregor sale price. Do you have any sort of an estimate on what is the final enterprise value for the sale when it is concluded?

Yes, we anticipate that the cash flow impact from MacGregor would be roughly 200 -- EUR 220 million. The enterprise value, what we announced then in mid -- was it mid-November, was EUR 480 million. But as the buyer is wanting to treat basically the advanced payments as -- not as net working capital item, but as interest-bearing debt, basically that type of item that is reducing basically then the cash what we are getting from the divestment.

Okay. And the reason why I'm asking is that I'm looking at the wording on your Q4 report and I'd like to know what are the moving parts still left. So EUR 220 million is sort of the best estimate at the moment. So maybe a follow-up question here. Since MacGregor had around EUR 116 million of net cash, if I'm correct, will that go to Cargotec or the buyer?

Basically, we have already separated pretty much at the end of the year the MacGregor-related cash. So what you can see in our balance sheet, you can see in our balance sheet at the end of the year that represents pretty well the cash what's remaining in Cargotec and the rest will go then with MacGregor.

Meanwhile, we are waiting for more hands to be raised. So I'll now ask if there are any questions from the telephone lines. I cannot hear anything from the telephone. So Antti, please go ahead with your follow-up.

Yes, sure. It was more on the full year margin guidance and kind of the earnings outlook. If you could remind me, I mean, at least in Q4, you had a little bit of this, let's say, onetime related items, which were included on the adjusted EBIT as well. So just a clarification on was there similar items in other quarters. And if we overall think about kind of the earnings building blocks for this year, aside from volumes, what are kind of the headwinds and tailwinds for the margins?

Yes. I mean, last year, we had in quarter 4 and the previous year also, we had in quarter 4, these one-off items. It does not mean that we will have every quarter 4 these one-off items. These 2 years -- last 2 years one-off items are mainly related to the declining order book. I mean, at highest, our order book has been roughly EUR 1.2 billion, and we are now around -- or we were at the end of last year, we were around EUR 600 million. So the order book has been coming down. And then according to that, we have been reducing our cost base, which has caused these one-off costs in 2 years in a row. But otherwise, I would say that, first of all, if I take our order book, that covers roughly 4 to 5 months of sales. So we would need to collect orders in quarter 2, quarter 3 and even in early quarter 4, what we will then recognize as a revenue still this year. And then when it comes to pricing, that's fairly stable compared to 2024. We are aiming at material cost savings. So like last year, we did material cost savings. We continue in that area in order to protect our sales margins. And then on the fixed cost side, I do not foresee any major changes other than what we have done now in Italy in our operations, the restructuring, end of last year, early this year, which will, as I said earlier, will contribute then into the second half cost base.

And how much is that, the Italy contribution, on a full year basis?

Well, we have said that we are aiming at EUR 20 million cost savings. It's not only Italy, part of that is coming from other parts of the company, cost avoidance, stopping certain activities. I would say the Italy contribution is a bit less than half of that EUR 20 million on a full year basis.

Okay. Okay. And then another topic is kind of you are now still kind of in the progress of the MacGregor divestment. But if we think about the Hiab acquisitions and let's think about your capabilities to take in acquisitions and your IT systems and so forth and so forth, when are you ready to start to kind of this bolt-on acquisition strategy for Hiab from an organizational point of view, not necessarily from a balance sheet point of view, but just to have the capabilities to integrate?

I would say that almost immediately, we could start. Of course, if we would now conclude the transaction, there would be still a couple of months to close the deal. So from that point of view, I say that basically -- we could basically almost immediately sign a contract if we find a suitable candidate. And there is, of course, a good number of potential candidates, but we also want to do a proper work in the assessment and then due diligence as well and then also see that the business case is as solid as possible. But from -- I would say that from an organizational IT point of view, we should not have major constraints at the moment. We are still doing the MacGregor IT separation, but that's already in the kind of last mile at the moment.

Thank you, Antti. The next question from Johan Eliason. Please go ahead, Johan.

Just a question on the net working capital tie-up going forward. I mean we don't have a long history of tracking Hiab separately and MacGregor and also Kalmar historically had a lot of prepayments, which brought down your sort of net working capital tie-up. How should we think about it in Hiab?

I mean if we look Hiab's cash conversion, so the last 10 years, Hiab cash conversion has been in the average roughly a bit over 100%, so operative cash flow versus the comparable operating profit. So even in -- of course, when we are growing the business, then it's a bit more difficult to maintain this kind of 100% cash conversion. But it's hovering around this 100%.

And you don't have any target for net working capital to sales ratio for the current business setup?

Yes, internally, we have, but not externally communicated.

Okay. Then I was just curious about the trailing 7 months -- 12 -- 10-year 7% growth, sorry, that you now sort of set as the growth target as well going forward. If you sort of adjust for the, I guess, fairly high price compensation during the pandemic, where would you say that growth number would be? Would it shave 1 or 2 percentage points off the 7%? Or what are we talking about?

At least I have not done that kind of calculation but yes, difficult to say. It will somewhat impact the growth rate. But if you look even before pandemic, we have been delivering that kind of growth rates.

Okay. So you think it's -- but obviously, you think it's a deliverable number as you have it for the coming years as well.

Yes. I mean it's -- one key element in this growth has been that we are continuously looking at possibilities how and where our solutions can be used. So let's say, the imagination is the only kind of limit where we basically try to apply our solutions. So looking continuously new end markets, and that has been helping us tremendously to grow faster than the kind of underlying GDP.

Thank you, Johan. Do we have any further questions? Panu Laitinmäki, please go ahead.

When do you expect the MacGregor divestment to be closed? So it should be Q2, but is it quite soon or closer to July?

Latest by 1st of July.

Okay. So no further guidance on that?

No. Of course, we close it as soon as we can. And like I said, from the IT separation point of view, we are progressing well, and we are just waiting the final confirmations from some jurisdiction's competition authorities. Those are the main kind of tick the box items.

Thank you, Panu. Do we have any more questions? Mikael Doepel, please go ahead.

Just very briefly coming back to the demand question there previously. So I just wonder if you could talk a bit about the end market. I'm sorry if you talked about this in the very beginning because I joined a bit late. But just wondering if you could say some words about the various end market segments that you serve and what you see there in terms of demand trends right now?

Yes. Overall, in the -- if we look at the first geographical markets, so like we said already in February, Europe has been performing, I would say, perhaps better than last year, while the U.S. due to the tariffs, customers are more considerate with their investment decisions. It does not mean that the customers are not making orders or placing orders, but they typically have taken a bit longer time than what we have seen in 2024. But this is something what we have anticipated also in the beginning of the quarter. So what I said earlier is that our quarter 1 has progressed very much according to our expectations, what we thought in the beginning of the quarter. And if we think the -- for example, the end market, so the demand for defense logistics RFQs in that area has been on a good level. And we know the reason. As the European governments are increasing budgets in this area, customers even in some cases, are looking for commercial solutions because they see that those commercial solutions are robust enough for their purposes in the defense sector. We start to see some light in the tunnel also -- at the end of the tunnel also in the construction market here in Europe and in basically areas like waste and recycling, that has been stable. We have not seen any major hiccups in that area. And yes, those are the -- and last mile and logistics has been actually performing also well in Europe.

Thank you. And next follow-up for Johan. Please go ahead.

Yes. I just thought now when you mentioned tariffs and stuff like that. Can you just remind us the sort of export volumes for Hiab into the U.S. from Europe or elsewhere? I mean it also relates to potential weakening of the U.S. dollar, obviously.

Roughly 60% of our U.S. revenues are assembled in the U.S. So major part is assembled in the U.S. But then, of course, we get components all over the place. We get components from the U.S., we get components also from outside the U.S. And when it comes to tariffs, we are looking at different kind of scenarios at the moment, looking also alternative suppliers in countries which might not be affected by tariffs. And then also from the pricing side, we are then prepared to take actions, for example, in terms of surcharges to adjust the prices in case our type of products would be impacted by the tariffs. I would like to also highlight that most of our competitors are in a very similar situation as we. So most of the competitors are importing also products even in bigger quantities than we to the U.S. market. I think there is Maxon, which is a U.S. competitor in the tail lift business. They have some U.S. presence, but then they have also a Mexican supply chain. So I would say that everybody is pretty much impacted by tariffs if those then come.

And your transaction exposure, dollar, euro, how did it look like in '24 for Hiab specifically?

I mean the transactions or the cash flows, we hedge 100% then the translation, i.e., the U.S. results when they are converted in or consolidated in euros. Last year, we had roughly 1% unit impact coming from the currency impact if we compare U.S. dollar constant rate versus the actual.

And that's pure translation, but unhedged the transaction effect would have been.

Yes. I said basically, we hedge 100% of the net exposure. So we should not have from the transaction exposure the kind of operating profit impact.

Thank you, Johan. Okay. If we don't have any further questions, so let's move to the next slide of the presentation. So I would like to invite you to join our site visit, which is -- will be hosted in September 18 in Poland, Stargard. So this trip will be hosted together with Kalmar Corporation as they are operating an assembly site on the facility next door, and there is a fence between. So -- but still, we thought that there are some synergies. So more information to be published later, but please pencil in date in your calendars. With that, thank you for your attention and see you in a couple of weeks' time when we publish our results the last day of this month. Thank you.

Thank you.