Hiab Oyj (HIAB) Earnings Call Transcript & Summary

I will cover quickly the quarter 1, kind of recollection of that, and then also a couple of words about the quarter 2 releases, which we have published to date. And then like Aki said, we have some time for Q&A. So in quarter 1, the demand picture, especially in late February and also throughout March, was quite a lot dominated by the escalating trade tensions. Like in many companies, uncertainty about the tariff outcome impacted our customers' decision-making in the U.S. That was quite visible in the Americas order intake, what you will see a bit later. Other regions, EMEA and APAC, grew nicely in quarter 1, and they were mostly offsetting the U.S. decline in order intake. And as a consequence, our order intake for quarter 1 was EUR 378 million versus the EUR 386 million for the same period last year. We have had the last 10 quarters quarterly order intake roughly at the level of EUR 370 million, plus/minus some tens of millions of euros, depending a bit on the quarter and also a bit on the period of the year, from the seasonality point of view. Our rolling 12 months order intake has been fairly stable and remained also in quarter 1 on the level of EUR 1.5 billion. Our order book stands now at EUR 601 million at the end of March. This is 22% below the comparison period quarter, and this represents some 5 months of sales. So this kind of 3 to 5 months' lead times, that's fairly normal to our business. When we look further into the geographic split of our order intake in quarter 1, we saw an improvement in EMEA as well as in APAC, while Americas declined. Americas' decline is very much attributable to the U.S. customers' behaviors. EBITDA improvement was supported by a good activity in the Defense segment. We saw also an improving activity in large European markets like Germany. Construction, we see also gradually improving. But it's good to remember that we are still on a very -- or we are starting on a very, very low levels compared to the past years. We have not seen any order cancellations and we have also not seen any kind of preordering in the U.S. before the tariffs came into force. As the order intake has been fairly stable in the past quarters, like you saw in the previous page, also Hiab's revenues were flat in quarter 1 compared to the past quarters, as you can see on the left-hand side. Our supply chain, i.e., for example, the subcontractors, component manufacturers, that has been performing. And we did not have any delivery delays or postponements during the first quarter. The share of Services increased slightly as Services revenues were flat, while the Equipment revenues declined by 1%. Our rolling 12-month sales were, at the end of quarter 1, EUR 1.64 billion. This is slightly below last year's comparable number. The current sales levels and the rolling 12 months' revenue curve reflects also the normalization of our order book as especially still in 2024, we delivered the remaining so-called COVID excess order book, which was stemming from, for example, the truck lead times back in 2022 and '23. When looking at the geographical sales split, so we have 4 to 6 months' lead time from booking of the order until delivery and invoicing the order. And therefore, still during quarter 1, we were delivering still orders which were stemming from, for example, quarter 4 last year. And the result of this, so Americas revenues grew still in quarter 1, while EMEA and APAC declined. This pattern is likely to change in the coming quarters as a result of the geographical split of the quarter 1 order intake, as you saw in the previous slides where, for example, the U.S. order intake declined by 20% year-on-year. Our ECO portfolio sales constituted 35% of total sales in quarter 1. And our ECO portfolio offering includes solutions which contribute to basically 2 sustainability objectives. The first objective is to mitigate the climate change. For example, products like loader cranes, which are able to reduce the fuel consumption of the truck on which the loader crane is installed. And the second objective is related to the transition to the circular economy. And here, we have products like spare parts in Services. When we look at the profitability, our profitability was very good in quarter 1 despite the 7% decline in sales. We did not have any exceptional items during quarter 1, not positive ones nor negative ones. The profitability in quarter 1 is a result of, for example, successful sourcing actions during 2024, and these actions have enabled us to improve the cost of goods sold. Both Equipment and Services delivered solid profitability in quarter 1, 15.7% and 23.7%, respectively. And thanks also to good profitability and decline in net working capital, operative return on capital employed was 30% in March. When it comes to outlook for 2025, so we maintain our outlook for year 2025. Continuing operations in practice stand-alone, Hiab's comparable operating profit, we expect to be above 12%. So this is the kind of floor for our comparable operating profit for 2025. We have defined this outlook already in early 2025 and, at that time, taking into account the potential uncertainties in the U.S. related to tariffs and also any possible ripple effects also outside the U.S. and obviously, from the trade tensions. So then if we look at the announcements during quarter 2, so we have announced a EUR 19 million investment in expanding and modernizing our Raisio demountables production assembly factory here in Finland. This factory is specialized in the assembly of our MULTILIFT ground products, and this product is delivered both for commercial and defense logistics customers. And this investment will spread out mainly over the next 3 years, mainly in 2026, 2027. And with that one, then I think we have the floor open for any questions.

Thank you, Mikko. And as you know, the practice is please raise your hand in the Google chat, and I'll give you turn. You can also write to the chat or I also take questions from the telephone lines. And the fastest one today was Antti Kansanen from SEB. So Antti, please go ahead.

Yes. Obviously, just coming back to the demand situation in the U.S. And if you remind a little bit how kind of you ended the Q1 and any kind of comments on how the second quarter has started. I mean the truck registration data has been really volatile and quite weak. That doesn't necessarily contribute, kind of correlate to your business. But has kind of the uncertainty meant that a lot of your clients have been hesitant? Or have they kind of pulled forward investments? Any comments on the current situation?

Thank you, Antti, for the question. I would say, in general, the quarter 2 has started in a very similar manner from customer activity point of view. What we saw in the latter part of the quarter 1, so still hesitation in investments. It does not mean that the customers have completely stopped investing, but a very similar kind of behavior, what we experienced already at the end of quarter.

And obviously, kind of when the U.S. order volumes are coming down and the rest of the world is coming up, the delivery mix changes quite a lot on the second half geographically. Does it have a big impact on your Equipment profitability on where the order is coming from?

Well, in general, our U.S., at the moment, our U.S. business is perhaps more kind of direct route to market, so through our own sales and service operations, while outside the U.S., we have perhaps a higher mix of dealers. So that has a certain impact. And then it, of course, depends -- the second half profitability depends also on how fast the European volumes can compensate the U.S. decline, so do those kind of increases in Europe and decline in the U.S. go hand in hand or is the U.S. revenues declining faster than the European or APAC revenues are going up.

Okay. I guess then it's logical to ask about the European kind of recovery. How does it look like? Where do you see it? Is it construction-driven, Central Europe accelerating? Any color on that one?

Well, firstly, we have seen good activity in the defense sector as many European countries are increasing their defense budgets. So their customer activity has been on a better level than what we have seen, for example, 12 months ago. And then in these large economies like Germany, we see gradual improvement. However, we are coming from very low levels still in the activity, for example, construction. So it takes still a while before we are on those kind of controlled levels like we used to see even perhaps before COVID times. But yes, gradual improvement in construction as well, but coming from very low levels.

Thank you. So do we have any questions from the telephone lines at the moment?

Maybe I can ask a question, if you can hear me.

Yes.

It's about, say, the leverage or organic drop-through because you delivered a very strong margin in the first quarter. I think it was explained by a relatively high revenue level as well. If we would see sales coming down towards the order level of around EUR 370 million, EUR 380 million, we would have a revenue delta from Q1 to Q2 or Q3 or whenever that will happen of around EUR 30 million, EUR 40 million. Is it fair to assume that we should expect a drop-through of 30%, 35% on that revenue drop? Or how to think about the margin progression if sales come down in the coming quarters towards the order intake levels that we have seen?

Thanks for the good question. We communicated in quarter 1 that our gross profit margin has been roughly 30% to 31%. But below that gross profit margin, we have the SG&A costs, selling and marketing; R&D and admin costs, which dropped, let's say, flex very easily, at least in the short term. Of course, in the long term, we can do various kinds of restructuring activities there. And then above the gross profit margin, we have certain factory overheads also, which are fairly, let's say, fixed irrespective of the volume. So I would say that it's fair to say that for each euro in the top line, at least one should calculate, based on quarter 1, at least some EUR 0.31 kind of drop-through on the profit line.

Understood. And then the second...

We lost your voice. Still silent here. He might come back. So meanwhile, do we have any other questions from the telephone lines? Tom, please go ahead.

I was wondering about the MacGregor divestment. Will it be now booked in Q2? Or will it be booked in the third quarter? And are there more details we should know about this?

Yes. Still, our aim is to close the transaction by the end of quarter 1 -- sorry, end of quarter 2. So that's still the plan that we will have it closed by this month, in the next few weeks' time.

Implying all cash movements will be in Q2 as well? Any update on that?

That's the ambition, whether it's on the last day of this quarter or the first day of next quarter, but within those days.

And how big will the cash inflow be now?

We have indicated that the sales price will be approximately EUR 220 million.

Yes. But adjusted for the cash position, I mean, now you know pretty well what the cash position will be in 2 weeks' time.

Yes. We have not basically disclosed anything else than what we had at end of March.

Okay. Let's see if we have Andreas back on the line for any questions if the microphone is working. If not, we have a question just from Jonathan on the M&A. Do we have any news on the M&A front?

Yes, we have been engaging actively on potential M&A targets. Of course, sometimes it takes time to kind of develop the M&As to that kind of stage where we would be able to tell a bit more about potential targets in both Americas region as well as in EMEA region. I would say typically, bolt-on type of acquisitions, for example, allow us to have a geographical access to certain markets like we have done in the past, ranging from, say, few tens of millions of euros, say, EUR 50 million to EUR 400 million.

Thanks, Mikko. Do we have any further questions coming through from the chat or from the telephone lines? I'll give you 30 seconds time to think. Mikko, if you go to next page because I would like to take the opportunity to still advertise our upcoming site visit in Poland, 18th of September. We have sent the invitation to you last week. So if you did not receive that, so please reach out to us. It will be a nice event organized together with Kalmar Corporation. And our results will be published 23rd of July. If we don't speak before that, have a nice summer break, if you have a possibility to take one before we start reporting. Thank you, and have a nice day.

Thank you.