Kalmar Oyj (XK2.F) Earnings Call Transcript & Summary

 Good morning, and welcome to Kalmar's Q3 Results Webcast. My name is Camilla Maikola, and I'm from Kalmar's Investor Relations. Today's results will be presented by our President and CEO, Sami Niiranen; and CFO, Sakari Ahdekivi. The presentation will be followed by a Q&A. Please pay attention to the disclaimer, as we will be making forward-looking statements. And now over to you, Sami. 

Thank you, Camilla, and good morning, everyone. I'm pleased to be here today to share with you Kalmar's third quarter's performance, which was a solid quarter in many ways. I'll start with highlighting the fact that we delivered a record high comparable operating profit margin of 13.8%, which was driven by services and improved efficiencies. Despite persistent global market uncertainty in decisiveness and delayed decision-making among some customers, we did ensure a solid performance. The market activity in the quarter was in line with our previous expectations of a slightly softer environment in the second half, especially in the Americas. Orders received declined by 10% to EUR 375 million. Services orders increased by 12%, while equipment orders decreased by 20%, which I will cover more in detail in the next slides. With 1 quarter left in the year, we keep our guidance unchanged, and we expect our comparable operating profit margin to be above 12% in 2025.  Moving into orders received. Firstly, zooming out a bit from the quarter and the drop in total orders by 10% compared to last year Q3. I would like to point out that year-to-date, we are at EUR 1.3 billion versus EUR 1.2 billion last year in orders received, and that is up with 9%. As mentioned, we have a positive momentum in services. Service orders were strong across the portfolio with an increase of 12%, while equipment orders decreased by 20% from last year. The decrease in equipment orders was mainly affected by timing of larger orders and delayed decision-making. The underlying demand remained mostly stable. However, it was subdued in Americas. Tariffs are causing further uncertainty and as mentioned, was dampening decision-making, meaning that our customers, especially in the U.S. and Latin America, have remained cautious. The order book remained on a good level.  Let's now focus on the regional development. The order development was mixed across different geographical regions and segments. In Europe, the order intake has been strong year-to-date, up 11%. The decline in Q3 was explained by timing of larger orders. In Americas, we saw some growth year-on-year despite trade policy-related uncertainty. The growth was primarily driven by the distribution end customer segment and can be explained by a weak comparison period 2024. EMEA's order intake year-to-date has been stable. In regards of our 2 segments, the Services segment's orders have been strong across all the regions, which is key for us, of course.  Then moving on to our sales performance. Our sales in the third quarter were EUR 436 million. The sales continued to grow by 3% and in constant currencies, 5%, which is the result of strong operational execution. Sales in equipment was flat and increased in services by 8% from last year. Services share of sales continued to grow and was 34% in the third quarter. Then let me guide you through how our sales has developed in different regions. Geographically, in this quarter, there are differences depending on the region and end customer segments as well. The sales overall in Europe was stable with variations by end customer segment and country. The decrease in sales in Americas continued and is explained by a lower order book in the distribution end customer segment. In EMEA, the sales performance has been strong, especially in the Ports and Terminals end customer segment.  As you well know, we have a well-diversified business with our 4 strong customer segments. And as already covered, the Services segment share of sales was 34% in Q3, which is providing resilience to our overall revenue. Eco portfolio share of sales is continuing to develop positively and increased to 46%, which is showing the strong interest towards our sustainable solutions. And on the people side, let me highlight our 5,298 passionate employees and teams worldwide. Together, we are dedicated to managing this dynamic environment while diligently executing our strategy.  Let's now look at the whole year 2025 from a macroeconomic standpoint, which is one of the hot topics at the moment. The current macroeconomic uncertainty driven by geopolitical tensions leads to increased volatility in economic data, making it difficult to provide long-term forecasts. However, as this data shows, based on external indicators, the market in 2025 has been more resilient than previously anticipated. IMF increased its global GDP forecast again in October compared to July 2025. Drewry has again upgraded its container throughput forecast for 2025 to almost 5% and for 2026 to 1.3%. And Oxford Economics has also upgraded the global manufacturing forecast upwards for 2025 and 2026 in June.  Then building on the previous slide and looking at the development from a fleet activity point of view. Here, we have our fleet activity development of our 14,500 connected equipment around the world. We get a good picture of the activity in the different regions by following this. Overall, we see a positive development trend both year-on-year and quarter-on-quarter, which is indicating increased activity at our customer sites during the third quarter. As we see here, the activity in the U.S. has decreased, which is in line with the softer market we have experienced. However, our global footprint is an important driver, which provides us resilience in turbulent times. Even though the market might be softer in one part of the world, as we see here, the overall development in the fleet activity is positive and provides us opportunities for the future growth.  Our ECO portfolio continues on a positive development trend. The ECO portfolio share of total sales has remained high and increased to 46%. ECO portfolio share of order intake was also high at 43% in Q3, which is demonstrating our customers' strong interest towards electric and hybrid solutions as well as sustainable service solutions. The fully electric machine share of equipment orders for the last 12 months increased to 11%. We continue to see significant potential with electrification, and our focus has been on innovations enabling this transition. As an example, we have, during the third quarter, launched our next-generation lithium-ion battery technology for our counterbalanced equipment portfolio.  Continuing on the positive side, we have been pleased to announce some orders booked in the third quarter, including the 3-year Kalmar care maintenance contract for Noatum Ports Malaga terminal in Spain, 5 hybrid straddle carriers, including MyKalmar INSIGHT performance management tool to Rotterdam Shortsea terminals in Netherlands, and 14 hybrid AutoStrad machines to Patrick Terminals in Australia.  And then to one of my favorite topics, yet another quarter of good momentum and progress in strategic actions. During Q3, as a few examples, we kicked off the 5-year Move2Green program with a successful launch event in our innovation center in Finland. We also commenced with the construction work of our new test center in Ljungby, Sweden. Additionally, we were proud to be awarded with an EcoVadis gold medal, which is placing us in the top 5% of all rated companies in terms of sustainability performance of the company and its supply chains. Additionally, as part of our commitment to sustainability, Bromma has manufactured the world's first crane spreader made from fossil-free steel to be delivered to DP World Sokhna in Egypt this fall.  And then shortly, a few highlights from our business performance before handing over to Sakari. The performance was solid in the third quarter despite continued market uncertainty. The services margin was strong at 18.5%. The equipment margin was at a solid level; however, affected by the product mix and tariff impacts, which Sakari will come back to. The order book is on a good level in both segments. In other words, I think we are well-positioned to drive growth and deal with the volatile market environment.  On my last slide here, I would like to remind you about our performance targets 2028, which we are fully committed to. Now I will hand over to Sakari. Thank you for now.

Thank you, Sami, and good morning to all of you also from my side. I will start off with our traditional slide on our financial profile and where we are, and a couple of highlights from that. Our financial profile has remained strong, which gives us excellent possibilities to target growth and execute the kind of actions that Sami was mentioning that we have been publishing also during this quarter. If you look at the relationship between the orders and sales, you can see that over the last 12 months, we have booked clearly higher orders than what we have had in terms of sales. So even though we had a slightly weaker quarter in terms of orders in Q3, I think this should be viewed a little bit longer term. That leads us to having an order book at a healthy level of around EUR 1 billion. Our business performance has been successful, and our comparable operating profit margin for the last 12 months shows a slight uptick to 12.7% now as a result of the strong performance in Q3. Our leverage continues to be low. And maybe a lowlight from the financial profile is that our cash conversion now has dropped to below 100% due to the weaker cash flow in Q3 and is now at 75%, still pretty strong though. I will then go into the segments a little bit more in detail. So as Sami mentioned, the Equipment segment's orders received decreased by 20% from last year in the quarter. However, when you look at the year-to-date number, it's still showing a healthy growth of 11%. In terms of the order book, that remains on a good level. Sales was flat in the quarter, and profitability was at a very good level at 12.7%. And that was, of course, sales was on a good level, driven by successful project deliveries. We did have a temporary four-week delay in forklift deliveries to the U.S. due to the new tariffs announced in August and also the related documentation requirements, which has some impact on the quarter. However, Equipment segment's profitability was at a solid level in Q3, 12.7%, supported by our continued solid commercial performance and driving excellence program actions. Although we had some impacts from tariffs and also the product mix impacted the profitability in the quarter to some extent. Through proactive measures, the majority of the tariff impact was mitigated, though with a slight negative impact on the margins in the Equipment segment. One of the highlights of the quarter definitely is the services performance overall, with an orders growth of 12% in the quarter, 7% year-to-date, which means we're growing faster than the market in services, strengthened order book, which provides resilience and sales up 8% in the quarter and 6% year-to-date. And then also the profitability at 18.5% in the quarter. The 18.5% profitability was driven by higher sales and strong commercial performance. The U.S. spare parts distribution center relocation, which had some impact to our Q2 profitability in services is very much on track now and is supporting our services growth now and going forward. Our tariff-related mitigation actions taken during the quarter supported the services margin resilience in a good way. And now let's dive into the topic of tariffs. I think the key message here is that the full impact remains unclear. And of course, we are dependent on the same external information as everyone else, and the trade policy landscape is still fluid. What is clear, though, is that Kalmar has taken actions in regards to the tariffs, mitigating the tariff impacts with price increases, supply chain actions, and other operational excellence initiatives, as well as working on fulfilling the documentation requirements. As you know, our U.S. factory in Ottawa Kansas, produces terminal tractors mainly to the U.S. market and then also to Mexico and Canada. And from our Poland factory in Stargard, Poland, we sell reach stackers, forklifts, and straddle carriers to the U.S. market. It is worth mentioning that to our knowledge, no player is manufacturing straddle carriers in the U.S., and our factory in Ipoh, Malaysia, produces Bromma spreaders, which are sold globally. And as you can see from this slide, our factory in Shanghai, China sells nothing to the U.S. So that is not impacting. When it comes to the spare parts, components, and steel of Chinese origin, they represent a low double-digit percentage share of Kalmar's total portfolio. I think that's an important thing to note. Then to our driving excellence program. The execution of our driving excellence initiative is ongoing very well. And as you know, we are planning to reach EUR 50 million of gross efficiency improvements by the end of 2026. During the first three quarters of '25, we have progressed with the implementation, and a run rate of approximately EUR 24 million of annualized gross efficiency improvements have been secured. The majority of the improvements so far originate from commercial excellence actions, primarily around sourcing, but with impacts from operational excellence actions starting to materialize from things like process development. Then to the balance sheet side. Our return on capital employed in the third quarter was 20.8%, so very stable. And as before, it's worth noticing that the items affecting comparability, which mostly are deriving from the demerger and listing process in the previous year, still have an impact on the Q3 ROCE, and the impact is about 1.7 percentage points. So normalized for that, we would be somewhere around 22.5% in ROCE. Our leverage is at a strong level of only 0.3x, and our gearing is around 13%. Then a few words about the cash flow, which was a bit of a low light in the quarter. Of course, cash flow always has some quarterly fluctuations, and this time, we hit a number of EUR 26 million. This was impacted by increased working capital. This increase was driven by inventories and largely explained by the tariff-related issues, as well as our deliberate action to improve spare parts availability, so carrying somewhat higher spare parts inventory. In addition, of course, the high level of HD orders that we've been seeing in the previous quarters is, to some extent, also impacting our work in progress. So all-in-all, that then resulted in some buildup of working capital in the quarter. And our cash conversion for the last 12 months was at 75%, as stated previously. And then as Sami already mentioned, our guidance for 2025 remains unchanged, and we expect our comparable operating profit margin to be above 12%. All right. That's all from the presentation side, and I welcome my colleagues back to the stage.

So we are now ready for the Q&A. And moderator, can you please open up the line? 

The next question comes from Mikael Doepel from Nordea. 

I have 2, please. I can take them one by one. So firstly, on the service orders. So very strong growth in the quarter, as you mentioned, double digits here. Just wondering if there was anything exceptional there, any larger modernization deals, something else, maybe a weaker comp, and how we should think about this trajectory going forward? Do you have any early indications for Q4, for example, on the connected unit--

Thank you, Mikael. That's a good start. So yes, we are happy and I'm happy with the services performance overall. And we announced one service or maintenance contract during the quarter as well. So okay, that was visible there. But overall, I think it was a strong performance across all the regions in service. And of course, the product mix within the services was quite favorable as well. I mean, good parts and logistics business we had. 

And any indications on the connected unit trends there continuing as you saw in Q3 or something else into Q4? 

You mean connected versus our performance. No, I think overall, what we see with our connectivity and fleet activity, of course, it has been mostly green. It has been quite positive year-to-date and during this year. And of course, apart from the Americas region, which has been slow. But otherwise, of course, that there is a correlation, of course, to the service performance as well. And when the fleet activity is on a good level, of course, that provides us with opportunities to offer and sell our services solutions.  And then Q4, the quarters, they are not equal to each other, as we normally say in different means. So that applies to services as well. But of course, services, growing services, is one of our strategic pillars, maybe the most important strategic pillar. So definitely, there will be a high focus on growing services going forward as well. That's what I can promise. 

And then secondly, on the U.S. So looking at the orders in the quarter, I mean, they didn't seem to weaken much sequentially in Q3, if I look at Americas, and I'm assuming that's mainly reflecting U.S. Would you regard these levels as some sort of a floor level here? Or should we expect some further weakening? Just wondering what you're seeing in the market right now and discussing with the customers. And just to be clear, I'm talking about the absolute numbers here. And I know I realize that the tough comp in Q4. But any color on that would be great.

And that's a very good question. As well, of course, as we mentioned in the report as well as presentation, there are lots of uncertainties still around in Americas, not only related directly to the U.S., but the surrounding countries as well. But we have had, I think, still not on a very high level, but at least a little bit better level than what we had in 2024, the performance in the U.S. market. And of course, it's a little bit building from the fact that we have a strong presence in the U.S. market.  We have a factory there. We have a fantastic services business and the dealer network and the supply chain, and so forth. And of course, so it's building from many, many of those cornerstones there. So, how it will evolve going forward, again, visibility is not very far in the U.S. market. So we trust that we have right actions in place. We are managing the situation well with tariffs, with price increases, and so forth. And we are actively, of course, visiting and talking to our customers as well as dealers to find new businesses as well. So the U.S. market, it's very large. So we see opportunities there as well.  So let's say, the Q3 landed on, let's say, on a quite similar level as Q2, as you rightly said. 

And of course, the comparison quarter from last year is very weak. So, although we show growth compared to that, that's maybe not so relevant. 

And talking to the front lines as late as yesterday. So customers are still making CapEx plans for next year despite the uncertainty. So I think that's one message. 

The next question comes from Panu Laitinmäki from Danske Bank. 

I have a few questions. Firstly, continuing on the market kind of topic, you have this comment that it looks maybe kind of a bit better than expected. Are you referring to Drewry and all these external forecasts? Or is this referring to kind of what you saw in Q3 and onwards, compared to what you said after Q2, kind of speaking about more subdued market? 

Let's say, we can look at it from different angles. Yes, absolutely, based on the external reports and certain KPIs coming from Drewry. Oxford and so forth. Of course, their indications and the KPIs, they have been adjusted slightly upwards compared to the previous reporting in July, Q2 reporting. So that is one building block there, of course.  And then we can look at the fleet activity, which I mentioned already, which is, I think, on a healthy level and showing green, showing good development there apart from Americas region. I think that is one way to look at it as well. And then the overall, I would say, underlying demand has been mostly stable in Q3. Okay. How will that develop towards Q4? I don't know. Maybe no major changes expected on the underlying demand unless some radical things happen.  And then I think overall, if you look at the order intake, for instance, okay, we can always look at one quarter at a time. But as we quite often say that quarters are not equal to each other, it's sometimes good to zoom out a little bit and look at the year-to-date order intake, where are we with those numbers, and then divide it by 3. So basically, you get some kind of average per quarter then. 

All right. Then secondly, on Europe more specifically. So you mentioned like timing of larger orders there. What kind of timing are we talking about? So, is this like you have a sales pipeline where you expect larger orders, and they didn't come in Q3? Or is this kind of customers delaying decision-making in large orders once again? So what should we kind of expect going forward? 

It can be both reasons that you mentioned there. But yes, large orders and then the quarter is only for 3 months’ time period basically. So of course, some of the orders might slip to the next quarter and so forth. But of course, in some cases, the decision-making might be a little bit slower due to different reasons as well. So I think it's a combination of these things. And yes, and that was the main reason compared to previous quarter, for instance, that we had a couple of timing effects there. 

I think it also makes reference to the previous strong quarters where we had, of course, larger orders and also more order announcements than we had now in Q3. So I think it also should be thought through that kind of perspective. 

Any indications what is the kind of pipeline for larger orders in Q4 if things go as you kind of hope? 

Let's say we have good activities with our customers overall and on the larger orders as well. And we can look at the external report and those parameters, how container throughput, for instance, that's where we quite often have those a little bit larger orders as well. So, how that is developing now in 2025? We talk about 5% growth again, and last year was really good as well. So I think, yes, we have a healthy pipeline even going forward. 

My final question is on tariffs. So just to kind of make it simple, do you expect Q4 impact from tariffs to be more negative than you had in Q3? Or is it similar, or is it smaller if we are talking about kind of earnings and margins? 

Very, very difficult to say. There are so many moving pieces there, as we can read from the news as well, and it's changing on a daily basis, basically. So too early to predict what will happen in Q4. What we know is, of course, Q3, which you partly explained as well. 

Yes. And of course, it depends on whether things stabilize or whether there's further turbulence because then when there's changes in turbulence, it always take some time to adjust.  But in a stable environment, of course, over time, that helps.

And as you see from the Q3 also that in services, it's been more straightforward. And then in equipment, there are more moving kind of parts when it comes to understanding the tariff requirements.

I kind of meant that if the environment is stable, are you kind of having any kind of lagging negative cost impacts or anything like that because we have seen a lot of different kind of dynamics from companies during this earnings season, with some getting a bit of a tailwind and some getting kind of headwind. So, just wondering what's your expectation for Q4?

Yes, let's -- reflecting a little bit back to what Camilla just said on the parts and service side in general, the situation is a little bit more dynamic, and we can manage the situation in a better way. So when it comes to equipment, okay, there might be some differences there. Even there, we have been managing the situation very well, but we can see some kind of impact there. So if it's exactly similar type of level of tariffs Q4 versus Q3, so maybe we can expect similar type of behavior.

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

Firstly, can I drill a bit further into the large order situation? So what did your large orders approximately amount to in Q3? And how does that compare to what you consider a normal level or the historical average level? I just try to understand if this quarter is on a normal level and that previous quarters have been inflated, or is this the other way around?

Yes. What we can say on the large orders, let's say, this quarter, Q3 was on a low level, I would say. And you can see it in our publishments or announcements as well. We had one large order that we published now in Q3. And in the previous quarters, even last year, you know some of the quarters, we had much more of those. So this was on the low side, I would say, in Q3.

And do you want to share any thoughts about 2026 already now? Because you referred to, I think, Drewry who expect container throughput to increase by more than 5% this year. And then I think you mentioned around 1%, 1.5% next year. How to translate that into demand for your products? Does that mean that we should expect a substantial slowdown also in the demand for your product in 2026 as the container throughput will decelerate?

Yes. But let's say that, of course, those KPIs, they give an indication, and we need to look at it with a bit of grain of salt as well and through the fingers. That gives some kind of understanding of the underlying demand. And the positive thing here is really that all of those indicators, they are on a positive side. None of these are negative and they have been even adjusted a little bit upwards since 3 months ago, basically. So that's how we look at it. Then we combine it with the fleet activity. How many equipment do we have, 68,000 all over the world, and 14,500 connected, and they are providing very valuable data for us. Then we also, of course, add on the customer activities, our pipeline discussions for different areas and portfolios. And when we put everything together, then we get some kind of idea of, of course, 2025 as well as maybe towards next year. But I think overall, how you should perceive the next year, I think it's good to look at these graphs here and which provides us with a moderately positive outlook for 2026. That's how we look at it. But on the other hand, these are changing quite rapidly. We were experiencing much lower 2025 forecast in the past during this year, and now they have been adjusted upwards. So they are quite volatile depending on what happens in the macroeconomics and geopolitical situation. So the visibility is not very far. That's also very much true.

And I guess it's fair to say that the only reference that can be made is to these external indicators at this stage for '26. So we'll need to come back to that at a later stage.

And then lastly, on your comparable operating profit, the other line was minus SEK 4 million, which compared to the quarterly average in the first half of around minus SEK 8 million. So, have you been able to lower your overhead cost to the extent that we should expect mid-single digits going forward? Or what is the sort of guidance for the other line or the overhead cost going forward?

I think I'll give guidance. But you're right, it has supported the quarter by a couple of million. And of course, we are constantly working on our cost base as part of our driving excellence, and that's where also some of the process improvements that we are doing are showing are, of course, in the admin line in general, and some of that is in the group cost.

Level should be sort of sustainable?

Yes, I would say that, of course, costs don't jump up and down so much. So I think clearly, it's in the right direction.

The next question comes from Antti Kansanen from SEB.

Just 2 questions from me. I'll start with the Americas orders on the third quarter, up a little bit from last year. Was there a notable impact from pricing, whether it be tariff-related or other price increases, on a year-over-year basis?

Yes. Thanks, Antti. Yes, there was an impact on pricing and especially on the services side in the U.S.

Is there any way to quantify how much that was or anything else?

Well, in general, yes, we have given some indication of the price increases. They are more or less, of course, the target is to match the impacts from any tariff impacts.

Yes. Earlier, we talked about 5% to 10%, now we expanded a little bit towards maybe 5% to 15% on price increases.

And is the 5% to 15% price increases referring to the services side the load, or also on the equipment in U.S.?

Basically, everything, it's a combination of both equipment and services.

And then I wanted to continue. I mean, there's been a little bit of a discussion already on the bigger orders and the pipeline. Maybe a question on kind of seasonality. In some cases, it seems that Q4 tends to be quite a busy month. Some of the clients want to sign the agreements before year-end. And if I remember correctly, Q4 last year was quite active in terms of the bigger deal. I'm just trying to figure out this year, is the Q3 order level now more reflective on what should we expect from last quarter? Or is there some type of a big order pent-up pipeline that could be released before year-end? Is there any - this type of a seasonality in any of your product groups?

Not really seasonality or cyclicality there. And as I said in the previous question that, okay, Q3, that was a little bit on a low level. But we have good customer activity, and we have a good pipeline. Then we will see when some of those orders will land. We don't know exactly, of course, when.

And maybe if you look backwards a lot, then when we had more bigger project-related businesses, then you could see a seasonality towards the end of the Q4 in a much larger extent than now when we are talking about mobile equipment.

Yes, I don't think we regard this as a seasonal business as such.

No. Yes. Yes. Okay. Maybe that was what I was remembering then. So last year, Q4 was quite active. If you're referring this Q3 now being kind of on a low level, maybe Q4 was then the mirror image of that. Am I correct?

Difficult to say, let's say, the underlying market demand has been mostly stable in Q3, similar to Q2. And as I alluded to a little bit, okay, if nothing radical changes, it might be on a similar level for Q4 as well. Then it's a matter of when some of the larger package orders will land.

But it's true to say that, of course, there were quite a few larger orders in that last quarter last year. 

And even though the releases don't give a total picture, so if you flip back and look at the order releases from the different quarters, they give you some kind of an indication. 

[Operator Instructions] The next question comes from Tomas Skogman from DNB Carnegie, Research Division. 

We have discussed a lot about orders geographically, but perhaps you could also open up a bit in different end markets and customer industries. Do you see any big differences? 

Yes. That's a good question, Tom. I would say, as we can see even in the external reports on the container throughput, I think the ports and terminals end customer segment has been performing well throughout the year, and in Q3 in general as well. So that has been on a good level. Then when it comes to heavy logistics, heavy industries, I mean, as well as manufacturing, I think they have been on a rather stable level as well.  And where we have had, let's say, the slowest performance or the market activity that has been at the distribution end customer segment. And then I mean very much the logistics centers and warehouses that are located in the U.S., for instance. So out of those 4, that has been the slowest so far. 

Then I would like to understand how big share of the market Chinese companies have in your type of products in the U.S. To me, it's very unclear what kind of a market position, for instance, SA and other companies have in the U.S. 

Yes. Very difficult to answer. And normally, we are not commenting the competitor activities either. So, what we can talk about is, of course, our actions and our strategies in the U.S., and we have a full focus there definitely, and we want to gain even more market share going forward. So unfortunately, you have to ask somebody else, Tom. 

But I'm just looking at kind of a potential for you to gain market shares when you have these high tariffs on Chinese companies. I think it's very relevant just to understand how big share they have more or less. 

Yes. I don't know if there are any external reports published openly on the indications on the machine volumes and that sort of thing. So that might be the source of information, of course, for that question. 

Then about electric machines. So, at the Capital Market Day, I think you said that 50% of the market will be electric by 2030. Do you still kind of expect this? And do you expect then that you will also have 50% of machines being electric in 2030? 

Yes. Let's say, overall, of course, electrification is one of the megatrends or market drivers, and it's growing fast. And that's what we see. And you can see it in our numbers as well when we report the Eco portfolio, where there are a couple of electric hybrid machines as well. And then if you look at the electric share, electric machines, there are 11%. So, we are climbing from 9%, 10% a while ago, and now towards 11%. So, it is growing.  And in different parts of the world in different portfolios, and so forth. And that's what we believe in. And we talked about 28% annual growth, which would result in 40% by 2028. And then, interpolating a little bit longer, of course, we talked about maybe 50% by 2030.  We believe in electrification, and we have a full focus on that one in different parts of the organization, absolutely. And then the customer interviews and even research that indicates that a vast majority of our customers are planning to invest in low-emission equipment and solutions in the years to come. 

Yes. And we have fresh reports, NPS studies, and so forth from customers. And when we ask about the indication. So, it's really strong when the customers are looking forward on what they will do. So, 2/3 of them will invest in low-emission equipment going forward. 

Can you give out some specs about your new electric machines? How much cheaper are they than the previous generation? What is the price of them more or less compared to fossil alternatives, for instance? 

Yes. Earlier, I think at the Capital Markets Day, we talked about the pricing up to 2x revenue versus the diesel, okay, we are not -- I think we have come down from those levels. So, it's a little bit closer to the diesel. But let's say, we talk about substantial premium still on the electric machines.  But I think it's important to understand how and what we are selling and offering to our customers is the solutions, basically, not only the piece of equipment where there is a price tag on, but we are offering the combination of the superior electric performance together with the machine itself, including the services, including maybe some other technologies, and so forth.  So that's what we are offering. And therefore, rather than talking about the machine price itself, exactly, we talk about the TCO and total cost of ownership, where we can see a clear benefit for our customers after 5 years of operations or 7 years of operations already with the lower TCO, for instance. But I think it's frank to say that, yes, the price tag of the new batteries and technologies, they have come down a little bit.  And that's what we are harvesting as well, when now in Q3, mentioning this next-generation battery, lithium-ion battery solution on our counterbalance, I mean, forklift reach stacker empty container handler products as well. So that is very important part of that development. 

What is the big difference in your third generation of machines compared to the second? What is that? 

I think it's a combination. The whole solution, basically their performance, of course, cost competitiveness, I mean, the cost is one piece out of that as well. So, it has a lower product cost, absolutely. 

And where do you source the batteries going to products aimed for the U.S. market? 

Let's say, we have a couple of suppliers for our electric components, key electric components, it's only batteries, it's several other products as well. And yes, let's say, the major ones are coming from China to the U.S. market as well. But of course, we are working on the dual capabilities constantly and looking at the best possible solutions and options for our equipment going forward. 

And my final question on this. Are you confident that you are as competitive in these machines in the fulfill machines? Given everyone are scared of cheap Chinese products. We have seen what has happened in the car industry. 

Yes. We are confident, as confident as at the Capital Markets Day, which you referred to earlier. So now that we have a strong position. If you look at our portfolio, the width of the portfolio, including electric options, including the eco portfolio options, I think we need to put that one in the picture as well, because we want to make the transition towards electrification as smooth as possible for our end customers.  And then when we combine it with technology part, the intelligence, the skills that we have in our organization all over the world, and then services, I mean, the aftermarket capabilities as well, which we are constantly developing further. So, I'm confident that we will be competitive going forward. And we are competitive already as of today.  And then even maybe the fourth layer or dimension is the customer feedback as well. So, when talking to the customers who have been operating our equipment, electric equipment in different parts of the world, not only in one country. So, it's basically everywhere. So very positive feedback as well. 

But of course, it requires a constant development of our offering as well as our supply chain also going forward. 

And it's an evolution, not a revolution because it takes quite a long time for the customers also to transform into fully electric operations. 

The next question comes from Panu Laitinmäki from Danske Bank A/S. 

I would have 2. Firstly, just to clarify on the price hikes and service growth. So, if it was 5% to 15% price hike, does it mean that it kind of explains 2% to 3% of your service growth in Q3? 

Not fully. I mean in the U.S. market, yes. Yes, that's basically where mainly the growth is coming from. But the other regions there, we have organic growth as well. 

Yes. I meant that maybe U.S. is 20%, 30% of your service base for revenue. 

Yes, U.S. is it's an important market for us in service, but so are the other regions as well. So, we have had a very good performance both in South and North Europe as well. 

Okay. Then secondly, just on this efficiency improvement program where you now achieved EUR 24 billion out of EUR 50 million. How should we think about the earnings impact from that if you are now at a certain run rate? Are you kind of getting some earnings uplift afterwards? Or how should we think about '26 margins compared to '25 based on this program? 

Yes. I think you should think about it in a way that we talk about gross efficiency and run rate. So of course, run rate always means that it's where we are traveling at the end of Q3, and some of it translates into P&L positive impact this year, and then you have the full year impact from that in '26.  And then, of course, our target is to hit the EUR 50 million run rate of gross efficiency improvements by the end of next year. But we have also stressed that it's a gross efficiency improvement. So, some of it is reinvested into R&D and other activities to support our strategy and our growth. So, it's not all then visible directly in the bottom line.  And then there's a lot of other things happening at the same time, of course, with the tariffs and prices and other things. But some of it is in the P&L in our sourcing savings already in the actuals. 

Okay. Is it possible to kind of quantify it, even in rough terms, how much is gross and how much is net? So, it's like you get half to bottom line or less? Or what should we expect? 

We haven't actually stated that. But if you take our run rate from the different quarters that we've been showing, I think you can somehow model it from that. 

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

Thank you. Thank you all for joining today, and we will get back again with our Q4 results on 13th of February next year. Thank you. 

Thank you.

Thank you.