Konecranes Plc (KCR) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to Konecranes' Q4 Earnings Conference. My name is Kiira Froberg, and I'm the Head of Investor Relations at Konecranes. Here with me today, I have our President and CEO, Anders Svensson; and our CFO, Teo Ottola. This time around, we have slightly renewed our presentation. I hope you like it. Before we start, I would kindly remind that our presentation contains forward-looking statements. Next, Anders and Teo will walk you through our Q4 results. Anders will start by presenting the Group numbers, after which, Teo will focus on our business segments. The presentation is followed by Q&A, as always. Anders, please go ahead.

Thank you very much, Kiira, and a warm welcome from my side as well to the Konecranes Q4 2022 webcast. I will start with some highlights of the quarter. The demand -- the solid -- we had a solid closing to the 2022 year and the demand sentiment remained solid throughout the quarter, despite market uncertainty that continued and macroeconomic indicators that were signaling weakening market conditions. Our order intake continued good. We delivered EUR 879 million, which was 1% less than the comparison period in the previous year. Our delivery capability improved in the quarter. We had more component availability. And in several material categories, it improved. It's not over, however, the component availability challenges, especially within electronic components continues. And our supply chains remained fragile in the quarter, but held up well. So we managed to deliver above EUR 1 billion, at EUR 1.21 billion for net sales. That was 8% up versus the comparison period in the previous year. And that made us close the year with an order book of EUR 2.9 billion and that's 42% up on the previous year. We delivered EUR 118 million of adjusted EBITDA versus the previous year of EUR 113 million. That was down from 11.9 percentage points of adjusted EBITDA to 11.6. And I think this is a good achievement given the circumstances in the world with the Ukraine war, with the inflation, with material availability issues and with the COVID situation that continued. And the Board proposal for dividend for 2022 is EUR 1.25 per share. I'll move into the market environment. So we follow a couple of macro indicators and we'll start with the capacity utilization rate in Europe. And it declined during the quarter and declined both sequentially but also year-on-year with 1 percentage point. And if we move into the U.S. capacity utilization rate, it ended the previous quarter at 80% and now we ended at 77.5%. So -- and that's the manufacturing utilization rate then. So it declined both sequentially but also year-on-year with 1.2 percentage points. If we move into the manufacturing PMIs, it's not on the slide, but measuring the European one as well. It reached a low point in October and then increased during the quarter, but ended the year still below 50%. And that's the 6 months in a row then with below 50%, meaning market contraction. The same for U.S., but ended the third quarter at 52% signaling market expansion, but had a steep decline during the quarter and ended the quarter at 46.2%, so also signaling market contraction. If we go into Brazil, India and China, China remained solid below 50% throughout the quarter, while Brazil started being far above the 50% mark, but had a steep decline and ended below 45% at the end of the quarter. India remained strong and were above 55% at the end of the quarter. And moving to the demand driver then for Port Solutions. And here, we measure and follow the seasonally adjusted container throughput index. The index declined in the beginning of the quarter and that was driven by lower activity then in Europe, but had a strong ending at the quarter and that was driven by China, but also recovery within Europe. I will now go a bit into the Group financials, and I will then leave to our CFO, Teo Ottola, to continue more with the segments and the balance sheet. So as I previously said, we managed to deliver EUR 879 million. We couldn't follow up the 3 quarters above EUR 1 billion, but we think that EUR 879 million for the quarter was a solid performance. And that's a 1.5% negative versus the previous year and 4.5% negative then in comparable rates versus the previous year. We had a decrease in service order intake and an increase in Industrial Equipment and Port Solutions. The decrease in service was related to a strong comparable in the previous year. And there, we had an order intake of a nuclear modernization order of USD 59 million. So if you strip that out of the comparison, actually, we had a growth also in order intake for service on both reported and comparable rates, but also for the Group on both reported and comparable rates. Moving into net sales. So we managed to deliver EUR 1.21 billion for the quarter, good to be above EUR 1 billion mark. And here, we were at 7.6% above previous year and 4.4% then above in comparable rates. The increase was in Service and Industrial Equipment, while we had a decrease in Port Solutions, and that was expected due to the delivery schedule within Port Solutions. If we look into the markets, so when it comes to the order intake side, we had a decrease in the Americas, and that was then related to the nuclear modernization order. Otherwise, that was an increase. It was flat in EMEA, and it was a decrease in APAC. And on the net sales side, we had an increase in EMEA, that was actually a strong increase in EMEA, but the decrease in Americas and APAC. And to say here, maybe it should be stated as well that we had had some challenges in APAC in the quarter, mostly related then to COVID effects, affecting both people working on site, being off on sick leave, but also the suppliers and we also had a close down for suppliers, et cetera and also for ourselves. So it's been difficult in APAC in the quarter. I'll move forward then to the Group order book. We ended the year on a EUR 2.9 billion order book. And here, you can see represented by different colors, the relative size of the different businesses. So Service is the red one and Industrial Equipment is the gray one and the blue green one represents Port Solutions. The EUR 2.9 billion was up 42.2% on reported rates versus previous year, while it was up 41.1% in comparable rates. And we had an increase in all 3 segments, and it was driven then by the largest increase in Port Solutions, as you can see also on the slide. It was somewhat lower, about EUR 150 million versus the Q3 period. So it's positive that we start to deliver on our order backlog. I'll move in to our adjusted EBITA. So we delivered EUR 118 million for the quarter. That was EUR 5 million up versus the previous quarter of EUR 113 million. The margin, however, declined from 11.9% in the previous year to 11.6% in this year. So that was a decline of 35 basis points. The profitability increased in Service, we had a slight decrease in Industrial Equipment and a more solid decrease in Port Solutions. That was primarily related then to lower underlying sales volume. And when I mean -- when I talk about lower underlying sales volume, I mean that we had a growth for the Group of 4.4% in comparable rates, but our pricing components is larger than that. So the actual volume growth was negative compared to the comparison period. We also had a slight decrease in our gross margin and that was driven by Industrial Equipment, not fully compensated for the inflation with increased prices. We have taken the measures. They are in the order book, but they haven't filtered through to invoicing yet fully. We have updated our first quarter 2023 demand outlook. The world demand picture remains subject to volatility and uncertainty. Within the industrial customer segment, we say, despite the weakened global macro indicators, our overall demand environment within industrial customer segment has remained good and continues on a healthy level. That said, we have started to see some signs of weakening within all 3 regions. Within ports customers, we say, global container throughput continues high and long-term prospects related to global container handling remains good overall. So the financial guidance for full year 2023. Net sales is expected to increase in full year '23 compared to '22 and the adjusted EBITA margin is expected to improve in full year 2023 from 2022. And with that, I will then leave over to our CFO, Teo Ottola, to continue with the presentation. Go ahead, Teo.

Thank you, Anders. Welcome also on my behalf. And as usual, let's take a look at the performance by business segments. Before that, however, we have added one new slide in the presentation, and we could start this section with that slide, actually. So it's an adjusted EBITA bridge between the fourth quarter of '22 and then the fourth quarter of '21, where we are actually dividing or splitting the different change factors, different deltas into various categories. So like Anders already explained, the adjusted EBITA in the fourth quarter of '21 was EUR 113 million and in the fourth quarter of '22, EUR 180 million. There are 4 different categories where we are splitting the delta. The first one of them is volume, pricing and mix combined. So we have combined all of these in one bucket. The other one is variable cost, which is of course, excluding volume impact because that's already in the first category. This is basically inflation and so-called performance in comparison to the previous year's corresponding period. The third one is fixed cost, which is basically the cost level below the gross margin. And then we have translation impact as a result of the FX changes. And if we then take a little bit deeper look on these different buckets. So the volume, pricing mix, altogether, EUR 103 million positive. So our, let's say, understanding and our view on the pricing in a year-on-year comparison is that our prices were around 10% higher than they were a year ago. And that is, of course, with the sales that we have roughly EUR 100 million difference by itself. The volume impact in the fourth quarter of '22 in comparison to a situation a year ago is a negative one, exactly like Anders already explained. Our pricing is 10% -- having a 10% impact and sales grew by 4.4% with comparable currencies. So the volume impact to the EBITA from that point of view is negative. However, our product mix was actually positive also both within the business segments as well as between the business segments. And this product mix positive impact almost compensated for the volume difference that we had in comparison to the situation a year ago. When we take a look at the variable costs, like I said, this is inflation and then of course so-called performance in a year-on-year comparison. Inflation obviously is creating a negative variation. We are compensating that by inflation -- sorry, by price increases, like this picture also explains. The so-called performance component was a little bit negative in a year-on-year comparison due to project execution, due to inefficiencies caused by component shortages and other supply chain issues. The fourth quarter of '21 actually was a very clean quarter from those -- that point of view, like was the third quarter of '22 also, but a small negative deviation in a way in a year-on-year comparison to -- from the performance part. Fixed cost, minus EUR 8 million, tells that our fixed costs are that much higher than what they were in the fourth quarter of '21. And this -- in this context, basically mostly comes from inflation. So actually, the underlying growth within the fixed expenses or fixed cost is very, very modest, but the inflation is impacting this one as well. And then the translation impact, a relatively big number this time, EUR 6 million as a result of the currency changes, of course, euro-dollar impacting quite a bit here as well. So this is in a way of summary of the bridge that we have now put into the presentation. Then if we take a look at the segment performance and start with Service, as usual, order intake, EUR 283 million. That is a decline both in reported as well as comparable currencies for the reason that Anders also already explained, a very big modernization order 1 year ago. Excluding that one, we would have seen growth in the Service order intake. There was actually growth both in field service and parts in a year-on-year comparison. We had a decrease in the Americas from the regional point of view, then we were approximately flat in EMEA and APAC in a year-on-year comparison. If we take a look at it sequentially, the order intake declined there as well. So Americas and APAC were declining, whereas EMEA was more or less on the same level as in the third quarter. Agreement base, the number of the value of the agreement base EUR 307 million roughly at the end of the year, 3.4% growth with comparable currencies, good to remember that the Russian business agreement base is not included in this number. And adjusting for that, we would have seen maybe a percentage point higher growth for the agreement base in a year-on-year comparison. Sales were EUR 376 million. That is up 7.7% with comparable currencies. There was increase both in field service as well as in parts and also in all of the regions. Adjusted EBITA is on a very good level. The euro number is EUR 79 million and 21.1%. There is actually an increase in a year-on-year comparison, a very small increase, but an increase anyways, which is driven by higher sales, higher sales obviously driven by pricing, as already discussed during this call. And the gross margin also slightly increased within the Service business. So a very solid performance from the Service business. Industrial Equipment, an order intake, EUR 306 million. This is 7.8% higher than the corresponding period a year ago. And then the -- maybe the most meaningful number from the order intake point of view, external orders year-on-year with comparable currencies, plus 2.9%. We had, in a year-on-year comparison, increase in standard cranes and components. The process crane order intake declined in a year-on-year comparison. From the regional point of view, increased in Americas and EMEA, whereas APAC decreased. Then if we take a look at sequentially. So sequentially, order intake declined from the third quarter. The explanations are very similar to what they are in a year-on-year comparison. So actually standard crane orders even increased in a sequential comparison, process crane orders declined and component orders, this short-cycle product category, was more or less flat in a Q3, Q4 comparison. Sales EUR 377 million. That is an increase of 9.2% year-on-year, also external sales with comparable currencies 9.2% and increase in all major business units as well as in all regions. Order book, of course, on a good level -- on a high level, as was already visible in Anders' presentation as well. Adjusted EBITA, EUR 22 million, that is 6%. There is a slight decline in the margin. The volume development has been quite good. But then as Anders explained, so the cost inflation is still impacting the price increases that we have done during the first half of last year are impacting, but maybe not to the full extent yet during the fourth quarter and we had -- we still have a little bit of the, let's say, negative delta as a result of price inflation relationship in the fourth quarter of '22. Port Solutions order intake was EUR 356 million. That is almost exactly on the same level as it was a year ago. From a regional perspective, in a year-on-year comparison, there was an increase in Asia Pacific. There was a decrease in Americas and EMEA. If we take a look at it by business units within the ports business, so actually lift trucks and automation parts did very well in an year-on-year comparison. Sequentially, the order intake declined from the very good level that we have been having in the third quarter. And again, if we take a look at the short-cycle product categories within ports business, so lift truck orders declined in a sequential comparison, whereas port service was more or less on the same level, both in Q3 and Q4. Net sales declined 2.6% with comparable currencies. This was primarily as a result of timing of the deliveries. So project timings impacted. That way, it of course then also means that the order book continues to be on a very good level, EUR 1.6 billion, 60% -- more than 60% up year-on-year. Adjusted EBITA, EUR 21 million, 6.5%. So there is a decline both in euros as well as in margin. The main reason clearly for the decline is volume. So the underlying volume is quite a bit lower than what it was a year ago. But then also a little bit performance topics from the project execution point of view. Like I said, the comparison period was very clean from that point of view as was the third quarter. Now we had a little bit more of that, nothing dramatic, an indication of which is that we are here stating that the gross margin actually increased within the Port Solutions. So the issues within the execution by no means are massive, but a little bit, let's say, to the negative in comparison to the situation a year ago. Then finally, before going into the Q&A, a couple of comments on the net working capital and cash flow. Net working capital was at the end of the year, EUR 581 million. That is 17.3% of rolling 12 month sales. The net working capital has been increasing during the year, as we can see from the slide. There was a very small increase from the third quarter to the fourth quarter as well. But as we can see, so the rotation in a way, improves the relation between the rolling 12-month sales improved. Inventories declined during the fourth quarter. And of course, then the -- in a way, the same deliveries then moved into the AR at the end of the year. Cash flow in the fourth quarter was positive, EUR 91 million, of course, as a result of the relatively good result. And that was barely enough to make the cash flow -- free cash flow positive for the full year as well. So EUR 25 million on a cumulative basis at the end of '22. Of course, the main reason for the low cash flow still continues to be the net working capital accumulation. Gearing and net debt. So net debt decreased from the third quarter level slightly to EUR 688 million. That corresponds to gearing of 48%, which also, of course, came down from the previous quarter's level. And then finally, the return on capital employed on an adjusted basis, say, very stable on the level of 13.4%. And I guess that with these comments, we can then move into the Q&A.

Before we turn the line on, we have a couple of questions through the chat. So maybe we could start by them. First one is regarding Industrial Equipment. So this is not now my words, but Industrial Equipment is the black sheep of the company. What we can expect on that area?

I think in Industrial Equipment, we have had a difficult time since the inflation started to really compensate for the -- with the prices for the increased inflation. We have now taken all the right measures, and looking forward, we are compensating for that. So we are recovering. And we are also with easing of our supply chain issues, getting up the productivity within Industrial Equipment. And we shouldn't forget, without Industrial Equipment, our service wouldn't have the kind of growth that we have had. We are sort of populating the market with our equipment and then we are servicing our equipment. We're also servicing third-party equipment, of course, but our own equipment is critical as well in this. So if you look at it integrated, it's actually a very nice business.

Maybe worth adding to this one is that when we have been talking about the efficiency improvement activities within the industrial segment or industrial business area, consisting of 2 segments, Service and Industrial Equipment. So we have been talking about an efficiency improvement targets of EUR 30 million to EUR 35 million within the next 3 years. And of course, this is combined for the Service Industrial Equipment business area, but a clear majority, a very big deal of this expected efficiency improvements will be taken -- would be taking place within the Industrial Equipment sector. And the actions that we have been discussing regarding those ones are in relation to product platform changes and go-to-market changes, among other things, but those are maybe some of the most relevant ones here.

Then we have another question, which is related to the Russian write-offs. And this question actually came in while you were, Teo, discussing the EBITA bridge. So what impact did the Russian write-off accumulated to? And there, I think we need to now remember that all Russian-related write-offs, so they have been adjusted for, so they are not included in the bridge. But perhaps, you can share with...

That is correct, like Kiira said. So these corrections that we have done, so they have been adjusted from these numbers. However, if we take a look at the brief summary of that one, so at the end of the year, the adjustments in relation to the Russia-Ukraine crisis and Russian business are altogether in the ballpark of EUR 38 million. There is also a sales impact because we have, in a way, canceled POC sales that were already in the books. And the sales impact is slightly smaller amount. It's about EUR 30 million, EUR 32 million or so, but the P&L impact is EUR 38 million within the adjustments. So that is basically impairment of the assets in Ukraine or impairment of the majority of the assets in Ukraine and then the impact of the canceled projects that we are not delivering to and in Russia. In addition to that one, of course, the overall decision of withdrawing from the Russian business or not taking new orders and sales is, of course, having its own impact to these numbers as well in the way that the business does not exist anymore. We have not been giving the actual profitability numbers. We have been referring to the Russian business having been around 2% of our total Group turnover. And then maybe as we have been discussing also earlier, so the -- we cannot utilize the Ukrainian manufacturing facility, obviously, in the way that we earlier planned. And this has created a need to manufacture crane structures elsewhere. And this has created a cost of approximately EUR 1 million per quarter, which is also visible in these numbers that we can see in this slide. So that has not been adjusted for.

Okay. I think that we could now open the line for questions, please.

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

It's Antti from SEB. A couple of questions regarding Industrial Equipment. I mean, on the outlook comments, you are flagging some signs of weakness on the demand. But then if we look at what's happening kind of the short-cycle business components and standard cranes are doing better than the process cranes. So what does this tell you kind of where we are in the cycle? And how do you kind of -- where are you actually seeing the signs of weakness?

I think if you start with the macro indicators that are showing sort of declining utilization in both Europe and in the U.S. And we have our True Connect, where we can follow utilization of equipment. So we also see in our connected equipment that are utilized to a somewhat lower level than previously. Then we have our sales funnel within Industrial Equipment in the industrial segment, where we can see that we have slightly fewer cases in the funnel and also the value of the funnel is slightly less than previously. We have also seen that decision-making is somewhat longer than previously. So it hasn't hit us in any way so far, but we see signs of weakening in the different regions.

Then back to your question about what can you conclude about the process cranes being in a way weaker than the standard cranes or the componentry, of course, you are absolutely right. So that is not according to the model. So it's -- but I would say that it is rather a coincidence than anything else. So I wouldn't really conclude anything on the position where we are regarding the cycle based on that one. And the key thing is still just to take a look at the development within the components, within lift trucks, standard cranes to some extent and try to conclude it there. As we discussed, so the components were more or less flat in a sequential comparison, lift trucks came down, service number is visible, as we can see it. So there are signs of weaker demand, which have not really massively at least been, in a way, materializing in the order intake.

And then the second question is on the sales guidance for this year. Could you a little bit talk about how do you see that divisionally and also price versus volume? And I'm quite interested on the port side, how much of that big backlog you are kind of scheduling to deliver during '23?

I think we are not really giving any more details on how we see that. But what we can say is that we go into the year with an order book, as you can see, which is very strong at EUR 2.9 billion, and a large part of that to be delivered in 2023. If you compare, we have EUR 500 million more going into 2023 being delivered in the year than we had going into 2022. So I think the -- we are fairly confident that we go in with a strong backlog and we have done the pricing changes, et cetera, needed to keep our profitability going forward. We already did that earlier in 2022 and that are reflecting into the later half of 2022, but also now more into 2023. But we are not giving any guidance on specific sales development per segment, et cetera, going forward.

And then perhaps on the EBITA guidance, it's a very nice bridge chart that you provide for Q4. So could you kind of conceptually talk about '23 profitability improvement in the same terms?

I think if you look here at the different businesses, I mean, it was mentioned by Teo as well, in the Service, we have improved our profitability from 21.0% to 21.1%. And we have seen sort of an underlying performance improvement also driven by pricing, as Teo mentioned, and not by volume. But Service is a volume business. So the more we can get our componentry business in line, of course, there's an opportunity to drive additional productivity. Also, the productivity in Service is driven when we don't have supply chain constraints hindering us from doing the right sort of planning of our Service technicians, et cetera. So there is potential going forward. There's nothing that doesn't say that we could keep the development that we have had within that area. When it comes to the port side, we have been challenged by lower volumes in the year, as mentioned, and that impacts our profitability. And we now see we go in with a very strong order book and improved delivery capabilities. So even though we also had some project-related performance challenges within ports, that is not something which will follow us into 2023, what we believe. And in the Industrial Equipment, we have already talked about the compensation of pricing versus inflation. And also here, we have had, like Teo mentioned, impacts from the war with EUR 1 million per quarter related to not being able to operate our [indiscernible] plant. We have also seen here COVID effects of lack of availability impacting our business and our ability to plan in our different production facilities also closing due to COVID in Asia. So there's an underlying -- we go in confident with that in our pockets.

Maybe regarding the product mix comment that we have been discussing earlier as well a little bit regarding the future. So there maybe one can conclude that if we take a look at the current situation, for example, in the fourth quarter, and it applies for the full year, so the mix impact has been positive. So it most likely will not be that positive in '23. The mix between the segments will probably change to the worst. And it is maybe even so that also, at least within ports, the mix most likely will change to the worst. So I guess, this is something that one can in a way conclude from the order book that we have at this point of time. Then I think that the overall margin development very much boils down to what Anders was saying about the order book being much higher than a year ago and then that what is the delivery schedule of that one. And how are we constrained by component availabilities or other topics within this year.

The next question comes from Massimiliano Severi from Crédit Suisse.

My first one would be on Port Solutions and execution challenges that you mentioned. I was wondering, first of all, if these projects are already ongoing or have they been finished? And if -- and so if I should think about -- how should I think about these execution challenges potentially affecting also 2023? And maybe which measures have been taken to avoid these execution challenges in the future?

When we take a look at the challenges, as we have been talking about them, so like I already said, so there is no reason to exaggerate the impact of those because the gross margin is basically up year-on-year even with these challenges. There are -- these are primarily projects that are at the very, let's say, towards the end of the period of those projects. So they are not -- I cannot say that they would be completed, but they are to be completed. We feel that adequate measures have been taken. And we are not expecting any kind of, let's say, trend-wise weakening of the performance as a result of project execution. I would rather maybe say even so that this is kind of normal fluctuation and volatility. Like I already said, Q4 '21 was very clean from a project execution point of view. Q3 '22 was also very clean. We even had within the ports a small positive one-off there in the third quarter. And this now in comparison to those 2, this is maybe weaker performance in a way, but it doesn't mean that there would -- that we would be having any massive issues in this respect.

So just to clarify, it's not really related to maybe cost inflation hitting the margins on your backlog. This is more of a one-off and you do not generally see any larger than usual issue on cost inflation on your backlog in projects?

This particular challenge that we are talking about here now is not pricing-related. So this is more like project timing execution-related topic. When we talk about the order book margins, so as already discussed, so I think that it applies to all of the businesses. And of course, the order book is picking, Industrial Equipment and Port, in particular in those. So we are quite comfortable with the margin levels that we have within the order book.

And my second question is going back to the topic of process cranes and the turnaround. I was wondering if you can give us an update on whether process cranes were profitable in 2022? And if they're not profitable, how would you think about 2023 and process cranes turnaround continuing to be somewhat of a tailwind for Industrial Equipment going forward?

So I think Teo mentioned it a bit in his part of the presentation, but process cranes are unfortunately still in the red for us. We have a lot of initiatives ongoing. And we have communicated around these as well, what we do in terms of our different platforms and go-to-market models, et cetera. And we also communicated that that will in 2025 then contribute with an EBITA improvement of EUR 30 million to EUR 35 million and it will come at a cost of EUR 30 million to EUR 35 million. And we are executing on that plan and proceeding according to our own plan. And most of that related cost will then be taken within the first 12 months of announcement, which was basically one quarter ago.

Taking a look at the '23 and from the process crane point of view, in particular. So I think that it would be fair to say that the war impact that we were now discussing in connection to the 2022, so this EUR 1 million per quarter, so unfortunately, it will not completely go away. We were not intending to update on the number every quarter, because of course, the impact has been there on '22 as well. But I mean, it will not be vanishing just like that. So I think that it will continue to burden the process crane profitability. And hence, it's not at all guaranteed that it would be with black numbers in '23. Obviously, we are working the best we can to make it happen. But of course, these extra costs may impact that plan to some extent. Of course, we can probably comment the process crane profitability then on a quarterly basis going forward as well, maybe not with the number, but whether we are on the black or on the red.

And we have -- you could probably add as well that the lead time to filter through from the price increases has also been longer in ETO cranes and process cranes than in the short-cycle products. And that would then help us a bit during 2023 as well.

My very last question would be, again, on the order book of Port Solutions, if you could maybe comment. I would expect it right now to be more tilted maybe towards mobile equipment than it has been historically because of supply chain issues. I was wondering whether it is the case? If you can help us provide more or less the split between short-cycle equipment and then large cranes. And more or less, in terms of the mix of 2023, how much do you expect to be able to sell in terms of revenue generation capacity? And I don't know if you can provide any color at all about how much could be large cranes versus mobile equipment?

We would maybe rather not talk about the numbers exactly, but I think that your underlying question is that is the order book tilted more towards the shorter-cycle product offering within the port. So I would not necessarily draw that conclusion. And the reason is that we have definitely longer delivery times when it comes to the mobile equipment than what we have been having previously. But the same applies to many other product categories. And of course, the order book in a way, is basically quite long when it -- longer than usual regarding most of the product groups that we have. The key question then from the mix point of view, which I think that you are after, is then that what is the delivery capability regarding all of those business units, in particular product groups. And that is what we'll be decisive then from the P&L point of view in '23. We are a bit cautious on commenting that in any more detail because the future is an uncertain thing after all.

The next question comes from Tomi Marcus Railo from DNB.

It's Tomi from DNB. A couple of questions. Firstly, I respect you have the outlook, but can you say anything how the year has started, especially for the short-cycle business? Are these fourth quarter levels a good proxy where we start the year with the comment that demand is overall healthy in terms of components and services as well?

Basically, we don't go in and comment within existing quarters. But if you read and listen to what we say in our outlook, it continues on a healthy level. And we haven't seen anything that would deviate from continuing, as we said, that flat or increasing quarter-on-quarter or year-on-year, as Teo mentioned previously, on the short-cycle products. And if something would have changed in the last weeks, we would have mentioned that.

And then have you seen any order cancellations or signs of that?

There are always order cancellations to some extent, but we haven't seen more order cancellations than we do in -- have done historically in previous quarters. So no sort of escalation in any cancellations and not within any projects such as specific projects that we couldn't sell to others more as we normally have within price list products that we then can sell to another customer. But nothing that's indicating any sort of increased cancellations.