Kalmar Oyj (KALMAR) Earnings Call Transcript & Summary

Good afternoon from Helsinki, and welcome to our second quarter 2026 Earnings Call. It's July, which is supposed to be the peak of our summer, but it's very chilly outside today. The finish summer is short, but at least we have not much snow. So while we might be missing on the sunshine outside, we are happy to shed some light on the Kalmar result for this quarter. My name is Carina Geber-Teir, and I'm heading the Kalmar Investor Relations. Today's result will be presented by our CEO, Sami Niiranen; and CFO, Sakari Ahdekivi. We will have a Q&A session at the end of the call. And I would like to remind you that this webcast is recorded. It will be available on Kalmar's Investor Relations website later. And please pay attention to the disclaimer as we will be making forward-looking statements. We are now ready to start the presentation, so I will hand over to you, Sami.

Thank you. So thank you, Carina, and good afternoon, everyone, from Helsinki. It's my pleasure to present Kalmar's Second Quarter 2026 results. I'm starting with an overview of the quarter. Overall, our performance was steady with strong sales growth and cash flow. And this goes for both segments and for different regions. Customer demand remained relatively stable, and our order intake was in line with the comparison period at EUR 449 million. And our sales grew by 14% to EUR 480 million. Our Eco portfolio sales grew strongly by 27%, and there was also improvement in the order intake for fully electric equipment. I will revert to this in a bit. Our comparable operating profit improved, and in our Services segment, the performance improved sequentially. Our Driving Excellent, Sakari will cover this in more detail in his part of the presentation. Operating cash flow for the quarter was strong, and our balance sheet remains strong. Looking at 2026, we keep our guidance unchanged. We expect Kalmar's comparable operating profit to be above 12.5% in 2026. Let's now have a closer look at the orders received. As I mentioned, overall demand for our equipment and services was relatively stable across different end customer segments. Orders received were essentially on the same level as in the second quarter of 2025. Order intake was resilient, although [indiscernible] in the second quarter of 2025. Equipment segment were in line with the comparison period. And in services, order intake decreased slightly. We'll have a look at the geographical breakdown of orders received now on the next slide. At the end of June, our order book was a little [indiscernible], changes in currencies had no impact on orders received in the second quarter, and direct impact of the ongoing conflict in the Middle East remained limited. Here, you can see the geographical split of orders across our reporting segments. EMEA, 43%; the Americas are with 39% and APAC, 18% of orders received. In Americas, the gradual recovery in the distribution end customer market in the U.S. continued and our order intake grew by 38% year-on-year. On the other hand, services customers are still cautious. In EMEA, order intake decreased 20% year-on-year because there were sizable orders in the comparison period. And in APAC, order intake was on the level of the comparison period increasing in Oceania. Looking at the overall demand environment, customer demand has been remarkably resilient in these times and remained relatively stable across different customer segments. In the second quarter, our sales grew by 14% compared to the second quarter of last year, thanks to several [indiscernible]. In the Equipment segment, sales grew by 17% year-on-year and in services by 10%. Services share of sales remained at [indiscernible] at 33% of total sales. Let's then have a look at the geographical distribution of sales. As you can see, there was strong growth in EMEA. This was driven by sizable order deliveries throughout the equipment portfolio, but also by services. In Americas, gradual improvement in the Equipment segment continued and sales grew in North America. In APAC, although sales grew in [ Norceania ], it was offset by a decrease in equipment sales in Asia. Then to our Eco portfolio that contains our low carbon solutions, including fully electric and hybrid solutions as well as sustainable services. In the second quarter, the sales of our Eco portfolio reached a record level and was EUR 233 million. And this is a growth of 27% -- portfolio share of sales is already 48% of total sales. In the second quarter, we secured a number of notable fully electric equipment orders, and fully electric machine share of equipment orders for the last 12 months was 10%. And in the second quarter, it was 12%. Let's then have a look at the profitability in the second quarter. In absolute terms, comparable operating profit improved year-on-year. And as you can see in the graph on the right, this was mainly driven by the growth in volumes. Comparable operating profit margin was slower than in the second quarter of 2025. This was mainly due to the product mix in the Equipment segment. Moving on. This slide gives an overview of our well-diversified business with 4 strong customer segments. The Services segment's share of sales was [indiscernible] which is providing resilience to our overall revenue. Eco portfolio share of sales grew to 48%, which is showing the strong interest towards our sustainable solutions. The current macroeconomic uncertainty driven by geopolitical tensions leads to increased volatility in economic data, making it difficult to provide long-term forecasts. IMF has slightly downgraded the 2026 forecast and global GDP is still expected to increase at 3.0% in 2026. [indiscernible] upgraded its 2026 and 2027 forecast following the U.S. Iran Pace deal. The forecast for 2026 is now 3.0% and for 2027, 4.2%. Oxford Economics has released an update regarding their manufacturing and retail forecasts and key takeaways for the 2026 outlook are as follows. In manufacturing, the 2026 growth forecast has been slightly revised downward to 3.0%. The growth rate is expected to slow slightly compared to 2025 levels. Metals output is expected to increase 1.9% in 2026 and wood products to decrease minus 2.9%. And in retail, the 2026 forecast has been downgraded to 2.4%. Building on the external market estimates from the previous slide, let's look at the current demand outlook for Kalmar, where we anticipate that the total market demand for the next 6 months remains approximately at the similar level as in the previous quarters. With the [ Cavite ] that trade centers and geopolitical instability could have an impact on our markets and the demand from our 4 end customer segments. Next, an update on the status of Kalmar's connected fleet. In the second quarter, our connected fleet activity stayed on a stable level. Our installed base has grown steadily to over 70,000 machines from 68,000. At the end of 2025, we had over 16,800 connected equipment globally compared to 14,500 equipment at the end of 2024. And then I'm very happy to see our actions to develop our electric portfolio, resulting in concrete orders. Here, you can see the new orders announced and added to the Q2 order book. We received orders from customers in China. The Netherlands and Germany for a total of 7 Kalmar electric reached the frame agreement covering the potential procurement of up to 9 machines from Port of Helsingborg in Sweden. We also received orders for a total of 9 Kalmar electric empty container handlers from customers in Brazil and France. Beyond our electric portfolio, these orders announced and added to our Q2 order book perfectly showcased our well-diversified business. Firstly, we received an order of 10 Kalmar hybrid straddle carriers and 12 hybrid Kalmar autorack machines for Patrick terminals in Australia. We also signed an extension to Kalmar care service and maintenance agreement with [indiscernible] in Sweden and secured our first customized training simulator order from SSAB special steels in Sweden. Moving into a short summary of financial highlights before handing over to Sakari. All in all, despite continued trade tensions and geopolitical uncertainty, we maintained a steady performance across both segments and in the different regions. Orders received in the quarter were essentially in line with the comparison period at EUR 449 million, which is a resilient result given that the prior year included several sizable orders in EMEA. Sales in the second quarter grew by 14% to EUR 480 million. And both the Equipment and Services segments contributed to this growth. Comparable operating profit held up well in absolute terms and increased by 9% to EUR 60 million, representing a margin of 12.4%. The improvement was driven mainly by higher volumes. And the Services segment showed an encouraging early recovery, and we remain focused on growing services, improving spare part capture rates and building recurring revenue, all of which are key levers for reaching our long-term targets. And here is a reminder of our performance targets for 2028. We remain committed to our strategic priorities and driving sustainable growth by leading the industry with innovations towards automation and electrification, expanding our services business and presence and pursuing operational excellence to ensure long-term value creation in line with our 2028 targets. And here is a reminder about the forthcoming changes in our leadership team that we announced in the spring. As you know, Sakari Ahdekivi will leave his position as the CFO as of 30th of September 2026. Katri Hokkanen has been appointed CFO and a member of the Kalmar leadership team, no later than first of October 2026. Sakari will remain with Kalmar until the end of this year to ensure a smooth transition. There will also be a change in the Services division. Thomas Malmborg will step down from the role of President of Services and a member of the Kalmar leadership team, and Tamara de Gruyter was appointed President of Services and a member of the Kalmar leadership team as of 1st of September 2026. So she will be joining Kalmar soon. I look forward to the energy and experience she will bring as we continue to grow this essential part of our business. Thomas Malmborg will remain with Kalmar until the year-end to ensure a smooth transition. So once again, I thank both Sakari and Thomas for their contributions for Kalmar and the future growth of the company. So I will now hand over to Sakari. So thank you for listening.

Thank you, Sami, and good afternoon also from my side to everyone on the line. I'll start with our traditional slide and to show our financial profile, which has remained strong, providing us a solid basis for future growth. Our order book has stayed healthy at around EUR 1 billion. Our orders received for the last 12 months were approximately EUR 1.8 billion. Due to the good operational execution and successful management of costs at the end of June, our comparable operating profit margin on an LTM basis was 12.7%. Our balance sheet continues to be strong. At the end of June, our leverage ratio was 0, which is well below our long-term goal of a maximum of 2x. And our return on capital employed was 24.1% at the end of June. Finally, our cash conversion on an LTM basis was 99%. Let's then dive into the segments and starting with the Equipment segment, where we had stable development. Order intake was on the same level as in the comparison period, although we had fewer sizable orders in the quarter compared to the comparison period and there was some slowness in the customers' decision-making, which we experienced during the quarter. It's also good and also pleasant to note that we received several notable orders for fully electric equipment during the second quarter, as Sami explained. And finally, the Equipment segment, sales grew by 17% year-on-year to EUR 321 million. In terms of profitability, Equipment segment's performance can be described as resilient. Comparable operating profit margin increased driven by higher sales volumes and the majority of tariff impacts were successfully mitigated, although there was some impact still left. And then the comparable operating profit margin was somewhat below the previous quarters and especially the comparison quarter of Q2 '25, which was perhaps exceptionally high. The main reasons for the slightly lower COP margin was product mix and also some cost headwinds, most notably freight costs and also, to some extent, oil products, EV components and then also tariffs still. Then looking at the Services segment. There was a small decrease in orders received in the second quarter compared to last year same period. This was because there were no larger orders for bigger service projects in the period -- in the second quarter this year. Also, the customers in the U.S. have remained cautious on the -- with their orders. Sales, on the other hand, increased by 10% year-on-year and totaled EUR 158 million. The Services segment showed signs of early recovery in terms of profitability, thanks to cost optimization and sales growth actions. Comparable operating profit improved by 11% year-on-year and amounted to EUR 27 million. This was thanks to volume growth and a successful mitigation of tariff impacts. And the comparable operating profit margin of the Services segment was 17.0%. Then a brief look at the tariff landscape. There was a ruling by the U.S. Supreme Court that the tariffs imposed under the IEEPA were unlawful. Consequently, we have started to receive refunds, but the refunds had no impact on the second quarter results. Also, the tariff rate for forklifts and associated spare parts is lowered to 15% from the earlier 25%. We continue to monitor this landscape closely. As in the previous quarters, our responses to tariffs have included mitigating actions with price increases, supply chain actions and other operational excellence initiatives in our operations as well as some documentary requirements. Then a reflection on our driving excellence initiative. As you well remember, our target is to reach EUR 50 million of gross efficiency improvements by the end of this year. And the initiative is proceeding very well and the status at the end of the second quarter is that we have achieved approximately a run rate of EUR 49 million of annualized gross efficiency improvements. So we are very close to the target already at this stage. As we have said before, the majority of the improvements secured originated from successful sourcing activities. Then a quick look at our return on capital employed. ROCE in the second quarter reached 24.1%. And as you can see from the graph, there has been a stable upward trend since the beginning of 2025, and we are very close to our target of 25%. Our balance sheet was further strengthened during the quarter. Our leverage was 0, well below our long-term target of 2x and our gearing stood at 1.8%. The decrease in interest-bearing net debt, which improved our leverage ratio was primarily a result of solid cash generation from operations. Our maturity profile of our loans remains unchanged and our liquidity position is strong at EUR 480 million, and it includes an undrawn EUR 200 million revolving credit facility, which will mature in 2030. On this slide, you can see our quarterly cash flow, which remained strong also in the second quarter and our cash flow from operations before financing items and taxes amounted to EUR 82 million. And as said before, our cash conversion for the last 12 months was 99%. And finally, Sami already mentioned in the beginning of his presentation, our guidance for 2026 remains as follows: Kalmar expects its comparable operating profit margin to be above 12.5% in 2026. And here, you can see a summary of our half year report and maybe to still lift up a couple of highlights. Orders received in line with the comparison period. Comparable operating profit increased and guidance remains unchanged. That will conclude my presentation. Thank you for your attention, and let's now move over to Q&A.

Thank you, Sami and Sakari. Before we head into the Q&A, I would like to present an update on our Capital Markets Day invitation. So the CMD will be held on the second of November, but the location will be Helsinki. And the preliminary schedule is such that we will start in the afternoon with the registration and then followed by the presentations and then also networking and dinner with the management. We will publish a more detailed agenda later on and our website. And then as a reminder, it will also be a virtual so you can both attend in person and via webcast. The registration is now open. So I wish you all warmly welcome to our Capital Markets Day. And by that, I think we are ready to open the lines and start taking your questions. Thank you.

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

A couple of questions from me on the bond side and related to Americas, where you've had quite a strong order growth, both on the second quarter and first half of this year and reflecting to the comments that you are making about gradual recovery and still kind of a cautious service market. So what is actually driving that kind of a high growth that you are seeing on the Actual Americas orders?

Yes. Thank you, Antti. So yes, basically, the demand in Americas, it's a little bit a mixed picture. So on the equipment side and especially in the distribution and customer segment. And then I'm referring to our terminal tractor business. So that is developing positively. And there, we have seen the gradual improvement continuing now in Q2 as well. Whereas the spare part business is still bit of [indiscernible].

But I'm just thinking about 38% year-over-year growth, suggest more than a gradual recovery. So is there a contribution from larger deals in Q2 or first half of this year, specifically?

Yes. I would say if you look at the Q2 orders there with -- for terminal tractors, I think the orders have been coming from different customers and different dealers, I would say. So there are a little bit more sizable orders as well, but nothing extraordinary, I would say.

And the comparison period was really low. So you have to keep that in mind, too.

Okay. Fair enough. Then the second question is more on the geographical sales mix going forward. So kind of the sales and order trends are quite [indiscernible] EMEA decline in orders [indiscernible] strong sales growth, Americas vice versa. So will the mix shift in, let's say, that the share of Americas grow. Will that have a material impact on your profitability? I mean you are flagging some of the cost elements related to tariffs and logistics and things like that. So is the profitability profile materially different for your Americas business versus EMEA, especially on the equipment side?

Yes. Let's say, if you look at the variation there and of course, quarters, they always different to each other. And now, of course, if you look at the sales or if you look at the -- or if you look at the orders in EMEA, for instance, of course, we didn't have so many sizable orders this time there. When it comes to Americas business side, it really -- it differs from different customer segments there as well, whether it's ports and terminal customer or whether it's a distribution customer. So -- but of course, the highest uncertainties as such with tariffs, of course, they are more prominent in the American market. But otherwise, I think overall, we have a solid profitability throughout the different regions.

And from production point of view, is it a concern that the book-to-bills are quite different in terms of EMEA? I mean it looks that it's below 1 there, while Americas is growing. So from a production point of view, will this drive some imbalances from your production footprint?

No, I think we have a good utilization in different factories that we try to balance them. And of course, the largest factory that we have that is in Poland, and that is multi-machine factory manufacturing different kind of equipment to different markets as well. So I think we can drive with our footprint by having 4 factories and a couple of smaller partnerships in different parts of the world. I think we are able to drive our production in an efficient way. But of course, not all the factories are full at the moment, which is natural, of course, because we have had a bit of a slowdown in the distribution and customer market in the past. But okay, luckily now it's picking a little bit.

And of course, the lead times also differ between the different types of equipment. And if we've had large orders, for example, in the horizontal side earlier, which, of course, in a longer lead time and therefore, fill up the factories for a longer time.

Okay. And then the last one was still on because you mentioned the equipment margin or sales mix impact on the equipment margin that a year ago, it was maybe extraordinary strong and now a little bit weaker. So what is this kind of comment referring to which product type?

Yes. First of all, as I already alluded a little bit to is the quarterly fluctuation. It's quite visible in our type of business. So in Q1, for instance, we had lower sales and then we had relatively better margin there. And now in Q2, it's a little bit different. So I think the equipment margin, it's 2 things basically behind that one, it's the product mix, and it's about maybe larger deliveries that we were able to deliver during the quarter. That might be one reason there. But then it's about the cost headwind as well. And with the cost headwind, of course, we mean the basically material costs as well as logistics related costs, freight and so forth as well as tariffs. So that's a little bit a larger area, I would say. So -- but it was a combination of those 2, some product mix, between different divisions, between different portfolios, I mean, product types as well and then the cost side.

And out of the cost, probably the most prominent is the logistics, cost of freight.

Correct.

The next question comes from Panu Laitinmäki from Danske Bank.

I have 2. Continuing on the margin topic. So you said that the improving excellence program has been more or less kind of completed, but your margin was down from and on a kind of last 12 months basis, it's about the same as it was a year or 2 ago. So how should we think about the levers going forward to the 15% margin target. So what will kind of drive you there if the excellence program is completed or will you get kind of some kind of lagging impact to P&L from access you have already done?

Yes. Thank you for the question. So completed, maybe I wouldn't use that -- that were because, of course, it's a continuous improvement. And now we are at EUR 49 million level there. And then of course, we continue our actions and the whole driving excellence program, it's about focusing on sourcing. I mean the product cost side, it's about improving processes. It's about pricing and it's about operating model. So of course, there are more in credits there, even though Sakari rightly said that, okay, so far, most of the savings have been coming from sourcing activities there. So of course, that will continue and the whole focus there. Then we will be, of course, focusing on the cost side as well, whether it's a part of the driving excellence or some other initiatives. Of course, that is important as well. So we need to look at both as well as our running costs in operations. And then, of course, pricing, as I said, that is very crucial as well because we have the tariff headwind in the Americas region.

And still on the driving excellence. I mean one thing, of course, is that we're not going to stop at EUR 49 million because we are close to the target we continue pushing. And the other thing is that, of course, we talk about run rate costs. So it means that those costs, which -- where we completed the actions in the second quarter, actually didn't hit the second quarter. They will come with a lag and the full year impact will, of course, continue into '27.

And maybe we have -- previously, we have commented on what kind of portion could have materialized basically out of this EUR 49 million. We say that less than a half so far, of course. So there is this time line naturally. And then we have had tariffs, of course. So some of the dilution is going there.

And since you were asking for the levers, I think it's important to remember that nothing has changed on kind of sales growth and driving the service growth to and adding those to the driving excellence then important parts of...

Improving service profitability.

Okay. Secondly, I wanted to ask about the tariffs. So you mentioned that it actually decreases for the forklift and some other equipment. So how material that will be for you as a tailored?

Yes. I would say Q2 of the previous quarter, it was pretty similar in terms of percentage of tariffs for different products in Q1. So no major differences there. And I think a little bit too early to say now in the middle of July, if that will change. But we think that the overall tariff landscape or the percentages they will remain within similar levels than what we have had so far in the year. No major changes expected there. But must say that the situation and guidelines and instructions and policies and processes, it's quite fluid still. So there are different regulations coming back and forth. But we are prepared to manage that situation in a good way.

The next question comes from Mikael Doepel from Nordea.

So just coming back to your discussion previously on the U.S. demand. Just a couple of questions there. First of all, I mean, obviously, the orders are recovering there. I'm just wondering if you see these trends continuing into Q3 or if it was more on the equipment side or if it was more of a some bigger orders booked in the quarter? And the second question is on the spare part demand in the U.S., which you say sluggishness has been sluggish for a couple of quarters. Why do you think that is? Is there anything you can point to the dealer destocking, some certain areas, regions? Any more color you can give on that and what you expect going forward?

Good question. So, no destocking there any longer. I think we talked about it in the previous quarter as well. I think there is -- even there -- between the activity and the parts -- spare parts activity, there might be some time lags there as well. So they don't go exactly hand-in-hand. When we get the equipment orders, if that is picking up gradually on the same day or quarter even there might not be parts orders coming up. So that time lag might explain something. And then I think one indicator of KPI that we are following very carefully is the cash rate and is basically explaining the material movements in the country and in U.S. So I think, okay, there has been a bit of positive development from very low levels in the beginning of this year, but it's not reflecting the part business yet. So that has some kind of linkage to the parts business there. But on the equipment side and especially terminal structure side, as you rightly said, that has been developing more politically. And we are happy with that, that we finally, after 1.5, 2 years in a very slow period, I think now we are able to at least show some kind of gradual improvement there. It's a very crucial business for our American market.

Okay. The line was breaking there a bit, sorry if you just repeat what was the second reason? I mean, you talked about the time lag between spare parts and equipment, but then you said something else also as a reason for U.S. being sluggish. I missed that. If you just briefly repeat it?