Konecranes Plc (KCR) Earnings Call Transcript & Summary

Good morning and welcome to Konecranes Q1 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. Before we start, I would kindly note that our presentation contains forward-looking statements. Next Anders and Teo will walk you through our Q1 results. Anders will start by presenting the group results, after which, Teo will walk you through with our business segments. The presentation is followed by Q&A as usual. Please Anders, the stage is yours.

Thank you, Kiira. And a warm welcome from my side as well to this first quarter result review and webcast for Konecranes in 2023. The first quarter in this year was a fantastic quarter with a strong result in all business segments. We had a record-breaking Q1 in every part of the result. So order intake was nearly EUR 1.3 billion and that is an all-time high for Konecranes in any quarter as an order intake. The demand environment remained good despite weakened macro indicators. Our orders increased in all 3 business segments and also in all 3 regions. The sales grew 33% on a year-on-year basis in comparable FX and our delivery capabilities continued to improve during the year. Even though we delivered a shorter invoicing in the first quarter than we did in the fourth quarter in the previous year, but that's not connected to our capability to deliver, it's more connected to timing. And we have an excellent achievement I must say in all areas despite our supply chain still being fragile especially when it comes to products that contains integrated circuits. The strong order intake led to positive book-to-bill. And at the end of the quarter, our order book was EUR 3.281 billion and that's also a record high order book for Konecranes. And this resulted in a record high quarter 1 comparable EBITA margin at 10.6%. This was mainly driven by higher volumes, but also positive price impact compared to the previous year. We also held a tight cost control during the quarter. The profitability improvement was across all the 3 business segments. And as a summary, I'm very happy with the start of the year 2023. I'm now moving into the market environment and I'll start with the Service and Industrial Equipment. If we look at the manufacturing capacity utilization in the EU, we can see that it declined both sequentially but also year-on-year with 1.5 percentage points. If we look at the manufacturing capacity utilization in the U.S., we can see that sequentially it was actually up versus the end of last year, but year-on-year we were down 1.7 percentage points. If we then move into the manufacturing PMIs and I start with the global one, it was down or in contraction for the seventh consecutive month and it ended the quarter at 49.6. If we look at the same manufacturing PMI in the Eurozone, it ended the quarter at 47.3 in March and that was the lowest month in the last 4 months so moving in the wrong direction. If we instead look at the U.S., it ended the quarter at 49.2 and that was actually up versus February so good traction upwards there in the U.S. If we look at emerging markets, we could see that India was clearly in expansion clearly above 50 while China was flat at 50 and Brazil remained below the 50 points so signaling contraction. Also when we talk about these KPIs and indicators, I normally mention our utilization rate of connected sold equipment and the last quarter I talked about that we saw a decline in utilization of the connected equipment. That turned about half or midway in the first quarter turned upwards again in utilization and that has continued then in April to improve. I now move into the demand environment for Port Solutions and the key indicator we follow here is container throughput index. We can see that we started the year at historically strong level, but year-on-year we were minus 2% at the end of February versus the previous year. But if you look at the long-term trend, still very strong level for Port Solutions market. I now move into group order intake and net sales. And I start with our order intake, which ended at EUR 1.290 billion and, as I mentioned, that's an all-time high for any quarter for the Konecranes Group, and we were up 17% year-on-year in comparable currencies. We saw an increase in all 3 business segments where Industrial Equipment was the strongest followed by Port Solutions and then Service. We also saw an increase in all 3 markets where we had APAC having the strongest growth followed by EMEA and Americas on a tied second place. If we then move into the net sales. So we had the strongest net sales for a first quarter for Konecranes ever, it was up 33% and ended at EUR 899 million. Also here we saw an increase in all 3 segments where Port had the strongest increase, but also the weakest comparable from the previous year followed by Industrial Equipment and then Service in a strong third position with 16% growth year-on-year in comparable currencies. Also here we saw an increase in all the regions and the strongest increase was in EMEA followed by APAC and then Americas. The really strong record-breaking order intake gave us a positive book-to-bill. And at the end of the quarter, our order book had grown to EUR 3.281 billion and that's then 33% up year-on-year in comparable currencies. The increase was seen in all 3 segments with Ports having the strongest increase at 49% followed by Service at 17% and Industrial Equipment at 15%. Also mentioning sequentially from end of year last year, we had a growth of the order book of EUR 380 million. I now move into our profitability and our comparable EBITA, which ended at EUR 95 million and that was then an increase from the previous year of EUR 44 million, an increase of 116%. So very strong delivery on comparable EBITA, which gave us a margin of 10.6% and that was then 400 bps up versus the 6.6% that we had for Q1 in the previous year. The comparable EBITA increase was across all the 3 segments, but we had by far the strongest improvement in Industrial Equipment side where we had an improvement year-on-year of 900 bps. The comparable EBITA increase was mainly attributable to higher sales volumes and also to pricing and good cost control. And here maybe we should remember that at the start of the last year in the first quarter, we had a fairly weak sales which made the sales volume go up EUR 223 million and if you then think that pricing is roughly 10% around EUR 90 million, there's an underlying volume increase of about EUR 130 million between years. We can also remember that in the beginning of 2022, we had issues to compensate inflation with pricing since we were late on our price increases in the second half of 2021. So that's good to carry with us here when we see the good improvement. Also mentioning here that the gross margin improved slightly on a year-on-year basis for the group. I now move into the second quarter demand outlook and the worldwide demand picture remains subject to volatility and uncertainty. So I'll start with the industrial customer segment. We say that at our demand environment within industrial customer segment has remained good and continues on a healthy level despite the weakened global macro indicators and some signs of weakening in the 3 regions. And here we have seen the macro indicators weakening for the last sort of 6 to 9 months. And when we talk about some signs of weakening in all 3 regions, what I mean here is that we see longer decision times with our customers and I don't mean that our sales funnel is getting smaller in terms of number of cases or in terms of value. It's purely related then to decision-making time with customers. So within ports customers, we say that the global container throughput continues high and long-term prospects related to global container handling remains good overall. Then I move into the financial guidance for the full year of 2023 and here we haven't changed this. So net sales is expected to increase in full year 2023 compared to 2022. Comparable EBITA margin is also expected to improve in full year 2023 from 2022. And overall, I'm very pleased with our first quarter performance from all the business segments and I think it reflects well our capabilities as a company and an organization and puts us in a good position to deliver on our full year target for both sales growth and profitability expansion. And with that, I think it's time for our CFO, Teo Ottola to dive deeper in the financials and in the segment view. Teo, over to you.

Thank you, Anders. Good morning on my behalf as well. Like Anders mentioned, segments in more detail. But before that, let's take a look at the comparable EBITA bridge. This is a little bit continuation to what Anders already talked about EBITA change. We actually showed this slide already regarding the fourth quarter. Now it looks a lot better because the year-on-year comparable EBITA change is actually more than EUR 50 million. And when we take a look at the ingredients of the change. So the positive contribution comes from the combination of volume, pricing and mix, which you can see in the slide. The biggest contributor there is pricing. Like Anders already mentioned, our customer prices are maybe 10% or slightly more than 10% higher than what they were a year-ago. However, this one is also complemented by the operating leverage impact. So now we have a very good underlying sales increase in comparison to the previous year. And unlike in '22 when we all the time basically had a situation that every quarter our underlying volumes were below the previous year, now our underlying volume is clearly above the previous year. And this gives us a gross margin improvement, which we are actually showing in this volume, pricing and mix bucket as well. The third element, which is mix. was actually slightly negative as a result of cross-segment mix, but to a much lesser extent than the other 2 positive contributors. When we then take a look at the variable cost so this is essentially the inflation impact from direct materials and direct labor and then when you take a look at the balance of those 2, so it's highly positive. Unlike during the fourth quarter when these were more like in balance with each other, now the difference is clearly positive and it comes from the leverage, So higher sales volumes underlying bringing additional gross margin and then also the pricing impact. Like Anders mentioned, Q1 '22 we were a little bit behind the curve when it comes to pricing. Now we have compensated for that and the pricing impact is visible in this one as well. Another way of taking a look at the operating leverage is obviously through fixed costs, which we have there next. This EUR 14 million year-on-year increase, more than half of that is inflation. So actually, the underlying fixed cost increase is very minor. And this then means on other hand that the gross margin increase as a result of the underlying volume improvement comes more or less directly into the profitability and that's why it explains a big part of the comparable EBITA improvement of more than EUR 50 million year-on-year. If we then move into the segments, Services here first as usual. Maybe at this point of time good to remind that we have changed the order intake definition so that agreement base sales are now visible also in the order intake. So this basically makes sales and orders, particularly for Service, more comparable to each other on a quarterly basis. The historical numbers have been restated so quarters are comparable with each other as well. The order intake for Service was EUR 379 million, that is an 8% year-on-year improvement in comparable currencies. When we take a look at the improvement year-on-year and actually Q-on-Q so it quite evenly comes from all the regions; maybe APAC change in percentage wise is the highest, but otherwise quite equally across the regions. Agreement base number reached EUR 311 million, that is 4.2% improvement year-on-year in comparable currencies. And still regarding the order intake so taking a look at it like regionally so as said, basically good development in all of the regions. Net sales, EUR 354 million. That is a 16% improvement year-on-year. We had sales growth in both field service and parts. There was no significant price -- product mix change one way or the other. We also had increase in all of the regions; Americas, EMEA and APAC. Our delivery capability improved, which the 16% improvement is an indication of. However, order intake was very good as well and as a result of that, the order book continued to grow and reached EUR 461 million at the end of Q1. Comparable EBITA EUR 66 million, 18.7%. A very good level. The comparable EBITA increase mainly comes from the sales growth, which is driven by pricing and underlying volume improvement even though the gross margin also increased slightly in a year-on-year comparison. Then when moving into the Industrial Equipment, very good order intake EUR 465 million. Here the external orders on comparable currencies are about 24% higher than a year-ago. When we take a look at the year-on-year improvement, basically all of the major business units; standard cranes, process cranes, components; order intake increased maybe more modestly in standard cranes than in the others. And then also sequentially in comparison to the fourth quarter, order intake increased in all of those business units. And particularly, component order intake during the first quarter of '23 was very strong. Orders increased in Americas and EMEA whereas they declined in APAC in a year-on-year comparison. Sales were EUR 331 million. That is as much as 37% higher than a year-ago. Taking a look at the external sales with comparable currencies, which is from the profitability point of view the most relevant one. We had increase in all of the business units once again as well as in all of the regions. Order book kept going upwards as a result of the very good order intake even if sales improvement was also very good at this 37%. Then when we take a look at the comparable EBITA so that reached EUR 23 million or 6.8%, an extremely good improvement year-on-year, which is explained by at least 3 different factors. One of them is of course the sales leverage as already discussed and 37% improvement in sales creates a lot of additional gross margin. The other one is pricing. Like discussed in Q1 '22 as well as in Q2 '22, we were still suffering from being late in some of the price increases. Now this has been corrected, it's visible in the profitability. And the third topic is the industrial optimization program that we have been having ongoing and it is actually yielding positive results already now during the first quarter of '23. And of course consequently, gross margin increased. Then when we take a look at the Port Solutions, an extremely high order intake EUR 513 million, 20% improvement year-on-year. Q1 '22 was also an excellent order intake quarter and as we can see from this picture, so we now have had 6 quarters in a row where order intake has been on an excellent level. Order intake improved year-on-year across the regions, also across most of the business units within Port Solutions. If we take a look at the short cycle products; lift trucks order intake was more or less on the same level as a year-ago, Port service order intake continued to improve in a year-on-year comparison. Sales, EUR 273 million. That is even a higher improvement than in Industrial Equipment, 57% actually in comparable currencies. A couple of things to remember. Like Anders also said, comparables are easier in this one. We did cancel some of the Russia related POC sales in Q1 '22, which mostly is in Ports. So Q1 '22 is artificially a little bit lower than what it otherwise would be. And then the order book timing or delivery timing in Q1 '22 was not in our favor. But given both of these, so it's still a fabulous achievement that the sales improvement is 57%. Order book obviously has continued to grow here as well as the difference between order intake and sales is very big and order book is more than EUR 1.8 billion. When we take a look at the comparable EBITA margin so it is EUR 18 million or 6.5%. This improvement year-on-year basically comes from the volume so it is operating leverage. Gross margin was approximately flat in a year-on-year comparison. Then a couple of comments on the cash flow as well as the balance sheet starting with the net working capital. We have actually changed the definition for the net working capital as well so that it better matches the cash flow statement definition of net working capital. So we have excluded tax related topics as well as other financial assets and liabilities, which derivatives related topics. The pattern of the picture is exactly the same as it was also before, but these changes mean that the net working capital number has come down by almost EUR 100 million, which in relation to rolling 12-month sales means something between 2.5 percentage points to 3 percentage points. So this is maybe good to take into consideration when checking the old presentations. These numbers obviously have been restated so these quarters are comparable with each other. Net working capital declined or decreased a little bit from the end of '22, which is good. Inventories actually continued to go up. But our advance payments were in a good level increased and as a result of that, the overall net working capital is decreasing. This one is by the way adjusted for the dividend payment as well as the acquisition advance payment that we had at the end of Q1. So Q1 is comparable to Q4 from that point of view. Free cash flow was good in the first quarter EUR 116 million. This of course comes partially from the net working capital factor, but primarily the driver is the good profitability in the first quarter. And then finally gearing and return on capital employed. Net debt EUR 586 million, gearing 42%. These numbers obviously before the dividend cash outflow. And then capital employed, which has been quite stable is now taking a good step upwards, 16.1%. As a result, of course capital employed, but primarily this one as well, the very good improvement year-on-year on the profitability. And with these comments, we are ready for the Q&A.

Thank you, Teo. Thank you, Anders. So we are ready to take the questions. You can either send them to us through the chat function or then call by telephone. So let's please take the first question from the line.

[Operator Instructions] The next question comes from caller from Goldman Sachs.

It's Daniela Costa here from Goldman. I have 2 questions if possible, some clarifications to things you've said before. But can you talk about -- when you talk about like in your near-term outlook a healthy level, how should we interpret this? Obviously you had an exceptionally strong 1Q with some really large projects. Sort of when you say healthy level, you're thinking about sort of like more underlying demand or this is the new healthy level means sort of continuation of very strong large orders as we've seen recently? And then my second question, I think you alluded in the presentation for EUR 130 million underlying improvement when you were talking about the margins year-on-year. I couldn't quite understand if that was referring to the quarter only or more a rolling figure. But can you talk through like these unprecedented high 1Q margins that you have now to help us break it down. What was the pricing? What are some of the savings coming through? What is just more pure volume so that we think about how to build margins from here? That would be my 2 questions.

Should I start, Teo, and then you can complement?

Yes, please.

So when it comes to the near-term outlook, I mean we give more of an industry demand prognosis more than we give any sort of order intake guidance. So what we can say is that in the first quarter, we had quite strong short-term orders like the lift trucks, the components, et cetera and those were driven by different things. In Industrial Equipment for example, we had pricing increase in February so we got some order intake before that pricing increase, which drove sort of the short-term short cyclic order intake there. We also had some changes in our offering so we will phase out some legacy products. We also had some orders on those. So that drove sort of an uptick in Industrial Equipment. When we talk about weakening macroeconomic indicators so that has been going on for the last 6 to 9 months. We have seen sort of both the manufacturing capacity index going down and we've also seen the PMIs being below 50 now for the seventh consecutive month on the global PMI. So those are the kind of indicators that normally filters through to order intake over time. We haven't seen that yet, but that's why we mention this as then potential weaknesses or signals of weakening markets overall. There we have also seen the longer decision making time, which is also an indicator then and that's normally something that happens in a higher capital cost climate as we're having now with interest rates, et cetera. So that's more what we are saying. Otherwise we are saying -- we are forecasting that the market outlook is similar as it was in the first quarter. Then if I go into what I said regarding the EUR 223 million uptick in comparable sales, then we have mentioned that about 10% is related to price increases. So on our EUR 899 million, that would then be around EUR 90 million give or take and that will give an underlying volume increase of roughly EUR 130 million. So that's what I meant with that. And on that volume, you get a good leverage on gross margin especially as we manage to keep our fixed cost fairly constant in the quarter. Do you want to...?

Just on that because I guess I was wondering on the EBIT, if you could give sort of how much was net on the pricing because you also have cost inflation on the other side? So can you bridge it from sales to EBIT margin maybe?

Our main target with price increases is then to compensate for inflation. We were not successful of doing that in the first half of the last year. During the second half of last year, we started catching up and now you can say we are compensating fully for inflation with price increases. It's not the same in all areas; some areas like ETOs might be little bit behind, some other areas might be little bit in front. But we are overall compensating inflation with pricing.

Maybe another way of taking a look at the same topic is that if we take it from the pricing point of view. So that now this in a way year-on-year comparison, of course what is relevant is that in Q1 '22 we were in a way behind the curve. So we had been late with certain price increases and therefore, we were suffering a little bit from the net of inflation pricing challenge in a way in Q1 '22. Now like Anders said, we have been correcting that during '22 and already in Q4, but particularly in Q1, the situation has become more normal. And as a result of that, pricing is obviously a positive delta particularly in the Industrial Equipment business even though we by and large would be saying that we have been compensating inflation with pricing. But in Q1-Q1 comparison, there is a positive delta as a result of that one. And maybe then another way of taking a look at the margin development and if you try to figure out that what is the impact of leverage and what is the impact of the other topic. So if you compare our Q1 now to the numbers that we had Q3 last year, so they are actually not so far from each other. So if you take a look at the sales and then you take a look at the EBITA and EBITA margin so they are fairly close to each other. So from that point of view, one can also conclude something. And of course it is clear that the operating leverage in a year-on-year comparison is a big indicator. Q1 and Q2 last year were weak-ish from the deliveries point of view because of the component challenges, because of our own issues. Now we have been able to in a way fix many of those topics and the delivery volumes are better like we can see.

The next question comes from Panu Laitinmäki from Danske Bank.

I just wanted to ask about the fixed cost development after Q1. So how do you see this developing? Any guidance on what is like the labor cost inflation headwind for this year and how does it kind of timing-wise impact you?

When we take a look at the cost inflation or labor cost or salary cost in particular. So we can now see for Q1 that the cost inflation is somewhat higher than what it has been previously so in a way it is accelerating like we have been commenting. We are now maybe somewhere 5%, 5.5% in a year-on-year comparison. Previously we have been at 5% or slightly below. The expectation is that the cost inflation may still accelerate slightly not necessarily significantly. But of course then at some point of time, we are already in a year-on-year comparison of course having comparables that are in a way very different from the inflation point of view. But at least Q1 has seen a slight acceleration there. Like we have been commenting, this is of course something that the idea is that we would be moving into the customer prices. And I guess that from the fixed cost overall [ control ] point of view, the idea is that we will take good care of the fixed cost going forward. Going forward as well I think, Anders, that would be fair to say.

That's fair to say.

Okay. Then secondly, just on the order intake which was pretty good. I mean can you kind of try to quantify or describe how much was like exceptionally large orders and how much was something else just to get an idea like how much? Was there anything exceptional that you just happened to have in Q1?

Yes. We can comment on maybe 2 things that were quite exceptional. In Industrial Equipment, we had a large jib crane order for U.S. Navy and that was valued at around EUR 45 million, which was a very positive contributor to the order intake in Industrial Equipment. And also at the end of the quarter, we had a large order intake from Port of Savannah with 55 hybrid Rubber-Tired Gantry cranes and that was valued around EUR 150 million. So those 2 were sort of what you can say more exceptional bulky orders that we got in the first quarter.

Okay. Maybe a follow-up. Like what do you see in the pipeline? Do you see lot of very large ones and then the timing is an issue or is it like -- can you describe what do you have there?

Yes. So in the sales funnel, we see it being constant in both -- or to some extent sometimes growing, sometimes going down a bit; but over time being quite constant in both number of sales cases we have in there and also the total value of the portfolio and it's a good mix between large potential orders and more repeat orders of more normal size and we don't see that changing. Of course within Ports, you don't know. Like this order we got now, you don't know; will we get the whole order, will it be given in next quarter or will it be divided in several orders over time? So it's very difficult to look forward from that perspective.

The next question comes from Antti Kansanen from SEB.

It's Antti from SEB. Couple of ones on mainly Industrial Equipment. If we look at the margin level right now, how would you describe? Should we be a bit cautious on the development going forward? What I'm trying to get is that are you now achieving, let's say, exceptionally high earnings leverage on deliveries as you are kind of perhaps shedding some of the old backlog that has been sitting on your factory for some time? And should we be a bit concerned that the gross margin development will ease off going into back half of this year and into '24 not taking into account anything what happens with volumes?

There are no positive sort of one-offs like the ones you are mentioning that would stick out significantly and contributing. I would say the main contributors here is that we have a volume leverage on our fixed cost and are hence getting good pull through from gross margin not increasing our fixed cost that much. And then like Teo mentioned, it's the price compensation versus inflation that we were lacking sort of in last year. And on top of that, we have some really good initiatives with the optimization program within Industrial Equipment and Service that is starting to contribute. And we said we upgraded that to it will contribute with EUR 40 million to EUR 50 million positive EBITA from 2025 and onwards and some of that is already now filtering through. We had some good contribution with a couple of millions already in the first quarter here, but still there is room for improvement in Industrial Equipment. Our engineered to order products with long lead times are still not contributing positively. They are still in the reds. So there is a lot of initiatives ongoing within Industrial Equipment to enable further growth. But you shouldn't expect 900 bps going forward towards the previous year.

So maybe adding on that one and like Anders said, there definitely is improvement potential going forward as well. But if you take a look at these different segments in particular now regarding the Q1 so maybe and there is of course we have a typical seasonality pattern within all of those businesses. So maybe I'm not saying that one should be concerned, but maybe one can be a little bit at least consider that maybe regarding the Industrial Equipment now that the Q1 was very good as a result of shedding some of the delayed backlog or delivering it. So maybe the seasonality pattern is not quite as strong as it normally would be in the Industrial Equipment business in particular. Not necessarily saying that the concern would be in gross margins, but just because the volume improvement in IE has been so good in Q1.

Okay. And then if you look at kind of your workload situation and lead times for standard cranes and components, I mean how long are you kind of covered regarding manufacturing and where are your lead times currently standing at roughly?

Yes. So if we start with lead time then in Industrial Equipment. So on components, we normally have within 1 quarter. I would say that's probably more 2 quarters now given the high order demand. If you look at CTOs, that's normally within 2 quarters I think we can do that and then ETOs is longer than 2 quarters generally. And if you look at our on-time delivery, we had difficulties with supply chains both internal and external during large parts of the last year; COVID-related, war-related, et cetera; but we are now seeing that improving. And from October basically last year, we have started to see on-time delivery precision increasing so that's positive. And at the same time from basically beginning of this year, we have also seen lead times starting to reduce and that's because we have been able to improve our supply chains, ramp up our internal capacity as well as our external capacity.

All right. And then the very last question from me still on the industrial demand and if we exclude the 1 large jib crane order and perhaps a little bit about the prebuying that you mentioned earlier, seems that you're still up year-over-year perhaps even excluding pricing. So I mean this is for me at least a bit surprising given kind of the macro indicators. So any further color on why is the demand staying so resilient? What are your clients actually doing? What is kind of strong for you guys? Any explanation on that one would be appreciated.

Well, I think we have a strong offering that we are renewing as well. We are changing some of the go-to-market channels, et cetera, enabling us to be more focused on our customers. And we have a high focus on really serving our customers and being customer-centric rather than maybe more what we have been in history more product-centric. So there is a lot of focus in the organization to really pull through and serve our customers and having the best products to do so, that normally rewards you over time.

Demand has been very resilient. So that is true. And I guess that we can say that we have been positively surprised by the demand and order intake in general, including Industrial Equipment, in this quarter as well. So customers continue to prepare for new projects. They are believing in their own future. They are pushing for orders and it seems to be happening quite widely. These concerns that the overall economy has like higher interest rates, et cetera. So it is in the discussions to some extent and it may be one of the reasons why decision making times have been getting longer. But like we commented regarding the fourth quarter as well so it still seems to be so also that within the sales pipeline that the cases actually continue to move on, which then means that the decisions are then done at the end of the day anyways. And this is also like we have been discussing. So it is very true regarding the short cycle products as well. In longer lead time products, it's maybe logical because you have started the preparation early on. But customers do have the belief in the future even in the current situation.

And short-term products was up both sequentially and year-on-year and I think that's your strength.

But it seems to me that you are taking a bit of market share as well. Would you agree on that?

I mean it's difficult to say when you are in it. So we normally measure market share in hindsight. But it feels like we're not losing market share at least.

The next question comes from Erkki Vesola from Inderes.

Erkki from Inderes. Still on the Industrial Equipment EBITA margin. I mean Palfinger just talked about the importance of own price increases versus raw material and component price decline when they talked about their Q1 profitability rise. Did you see any of that price decline in IE in your own sourcing? I mean were you really in a sweet spot in terms of own prices versus material prices? That's the first one.

What has been delivered now, we bought quite a long time ago. So even though raw material prices both in terms of steel and copper are down year-on-year, we didn't buy this material at this point in time of course. So that's difficult to draw that parallel now. Should it remain like this over time, that would of course be a positive contributor. What I will say is what we are sort of benefiting from to some extent is probably the lower logistics costs that we are seeing currently.

Okay. My second question was just about the margin sustainability on what you know about your own pricing versus material pricing dynamics? Teo already talked about something, but could you repeat?

We are quite comfortable with the order book pricing in a year-on-year comparison in particular because still 1 year-ago we had in the order book deals that were with so-called old prices and now the order book is from our point of view healthier from that point of view. Maybe not a significant difference to end of Q4, but in a year-on-year comparison the order book margins are in a better shape.

Sorry, I mean this 6% to 7% EBITA is not an anomaly, but it's something that we could look forward to as well.

There is nothing that's indicating that this should be a one-off.

The next question comes from Tomi Railo from DNB.

This is Tomi from DNB. Couple of follow-ups. Is it possible to try to quantify the prebuying activity you mentioned? Is it couple of tens of millions or is it just the millions?

No, we would maybe rather not start to quantifying that. Of course we can conclude deduct things from our own front line, but these are not scientifically accurate numbers. The topics that Anders was talking about, the platform changes and these kind of things, so they may cause prebuying and I think it's good to recognize that it can be there. But the euro number we would be uncomfortable in disclosing.

And any comment on the price increase level you did in February?

We have been increasing prices. Price increases have been lower than what they were a year-ago, but still in a way increases that can be called price increases let's put it so something else than nominal.

All right. And then, Teo, you mentioned that the components were really strong in the first quarter. Was that something particular big impacting that and how has it started in April if you could comment?

Regarding the component like in many cases so these price increase cycles may be impacting this. It may be part of the prebuying in a way and we did have price increases in the first quarter. This may have been triggering some extra buying regarding the componentry as well as some of the changes that we are doing in the product offering, et cetera. Regarding the order intake beyond the end of the quarter so we would rather not give the volumes.

Okay. And then, sorry, if I have missed this, but how much was the Service agreement reclassification impacting the Service orders in the first quarter?

The overall annual volume is EUR 300 million. And now what it exactly was for the first quarter so we would need to go and I would need to go back to the release that we made because there we have actually the quarterly changes. I do not recall the number by EUR 1 million or so, but it can be found there.

All right. Okay. And final question. One of your dear competitors announced a split of the company yesterday. Have you ever considered to split Port Solutions from the company?

I'm not sure we are the right ones to answer that. But that's not something that we are discussing now and there are no such discussions what we are aware of and we wish them luck.

We have a couple of questions through the chat function. I think that the prebuying was already covered. But then there was a question on seasonality. So do we expect seasonality to be as strong in '23 as it has been in the past? And I think this probably now refers both to sales and profitability seasonality.

I think Teo already answered that to some extent. We expect maybe the seasonality to be less transparent in this year than previously.

I think particularly in the Industrial Equipment, but probably also on a group level because of the very good sales deliveries in the first quarter.

So those were all the questions for today. And just as a reminder, so we will host our Capital Markets Day on May 10. And the registration for the webcast is still open so if you are interested, please go and register yourself for the event. And then our Q2 interim report will be issued on July 26. Thank you all for participating and have a great day. Thank you.

Thank you.

Thank you.