Konecranes Plc (KCR) Earnings Call Transcript & Summary

Good afternoon, everyone, and welcome to Konecranes Capital Markets Day. My name is Kiira Froberg, and I'm the Head of Investor Relations at Konecranes. It's been more than 5 years since our last Capital Markets Day, and we are really excited to discuss our strategic focus areas and financial targets with you today. Before we start, just a kind reminder, today's presentations contain forward-looking statements. Here, we have our preliminary agenda for today. First, our President and CEO, Anders Svensson, will give you an overview of Konecranes' updated strategy, afterwhich our CFO, Teo Ottola, will talk about our new financial targets. We'll end the first session with a Q&A with both Anders and Teo. Questions can be asked either in person here at Pikku-Finlandia or through the webcast chat function during the presentations. Now Anders, the stage is yours.

Thank you, Kiira, and a very warm welcome from my side as well to this Konecranes Capital Markets Day 2023. And like Kiira said, this is the first Capital Markets Day we host since 2017. So we are quite eager to tell you about our updated financial targets and also our strategic enablers that will take us to those targets. But before we do that, I just want to mention our new purpose that we launched also today. shaping next-generation material handling for smarter, safer and better world. So I will start with just a snapshot of what is Konecranes today or actually what was it 2022. So we had net sales of almost EUR 3.4 billion with a comparable EBITDA margin of 9.5%. We had orders intake of EUR 4.2 billion, and we ended the year with an order book of EUR 2.9 billion. We are active around 50 countries with our approximately 16,600 employees. And those numbers are at the end of Q1. So our sales in service represents 44% of group sales and equipment represents 56% of group sales. Our geographical split is EMEA, 51%; and then in the Americas, 36%; and in APAC, 13%. So we have a really solid platform with leading market positions to build on in all of our 3 segments. If we start with service, here, we have an unparalleled global service network, and we see ourselves as the leading market position holder. And service represents 38% of sales. In Industrial Equipment, we have a technology leadership position, and we also see us here as the market leader. And industrial equipment represents 34% of our sales. In Port Solutions, we have the widest and deepest offering in the industry, and we rate ourselves as a top 2 to 3 position in different areas. And Port Solutions represents 28% of group sales. And you should remember also in Port Solutions sales, we want to have port service, which represents roughly then 6 percentage points out of those 28. We have a broad customer base, and that provides us both with the stability and also an opportunity for growth. So we are represented or we have customers represented in all these industry verticals. All the way from fast-growing areas like warehouse and distribution, where it's expected to grow sort of 10-plus percent CAGR in the coming 5 years to a more modest growth within the general engineering, which is expected to grow 2% to 3% CAGR in the coming 5 years. And you can see here on container handling, we have an N/A. It's because we don't have a forecast for the next 5 years. We have a forecast that this year, we'll have modest growth. And then in '24, we will be back to a growth of about 4%. So being present in all of these customer segments really provides us with the stability. Should one segment go down, we have other segments that we can then continue to grow in. And the opportunities is that we are not equally strong in all these customer segments and all geographies. So no matter if we have a stronger or less strong position, there's opportunities basically everywhere, both geographically and in the different industry verticals. I'll then move into the megatrends that are shaping our market and providing also a business opportunity for us. So starting with sustainability, and sustainability is the norm for most businesses in the world nowadays. And not only for your own business, you need to focus on the whole value chain. In here, we as Konecranes, we enable decarbonized circular and safer world by embedding sustainability in everything we do from our own operations, but also to the offering that we provide from our customers to enable them to achieve their targets. Next one is digitalization and automation. And here, it's about productivity and seamless operations. So more and more achieving productivity in seamless operation is depending on automated solutions and digital solutions. And here, Konecranes provides automated, intelligent and more complete material handling solutions to really boost our customers' productivity. We also have geopolitics and macroeconomics. So here, political issues are really changing the dynamics in the world, and also in the global flows of both goods and information. And macroeconomic changes or challenges like we have now and have had with interest rates high and inflation being really high, really provides economic uncertainty in the world. So Konecranes contributes to this by improving data management, and also improving the resilience of global supply networks. So the material handling market offers possibility to capture growth. We are especially strong in cranes and hoists and services. And within cranes and hoists, we also here include the port cranes. But we also have presence in other areas such as industrial trucks and lifts with our lift truck business. And also with our Agilon business in automated storage and retrieval systems and also our AGVs and other businesses. So we have presence in many areas. And our focus is to remain with our core businesses, but at the same time, look at adjacent businesses that can provide us with growth opportunities, but also to support our customers with a broader material management or material handling needs. So we have a clear strategy to execute in all of our 3 business segments. We're starting with service, it's to deliver service growth. And here, we have renewed service programs that are more tailored towards different customer segments to enable our agreement base to grow. We also have enhanced customer experience. And here is about sort of being easy-to-do business with. Commercial and operational excellence, equivalent parts for third-party equipment to enable our unrivaled network of service technicians to really also be able to capture share of wallet on equipment installed base. Data-driven sales is more and more important to know when and where we should really support our customers. And also here, we have bolt-on acquisitions for our service business. And this has been a point where we have been extremely strong in history. Now we have had a period for a couple of years, 5 years or so, where we have been less strong in bolt-on acquisitions. But we're happy now to announce that we have also started again with the announcement of the Whiting acquisition at the end of last quarter. Improving Industrial Equipment profitability is the next segment. It's about simplification of go-to-market models, renewed and standardized offerings, platform harmonization, operational excellence, optimized portfolio and stabilizing and fixing profitability in our process cranes. Then we are generating profitability in -- profitable growth in Port Solutions, sorry. It's about focusing on our core business with the best growth opportunity. In growing our port service business, there's a tremendous opportunity within port service, also for outsourcing initiatives from customers going forward. Capture and automation opportunities. We have a really strong technology platform. And here, we can really leverage catching automation, digital solutions, et cetera, going forward. Operational excellence and maybe you could also include project management excellence within that, making sure that we can deliver these large projects on time to cost to our customers, and launched a sustainable offering. And here it's about electrification of all of our offerings. And now especially Mika and his team are working on lift truck electrification. And you will see more deep dives in these areas from Mika and Fabio during the day. As a group, we focus on profitable and high-growth offerings and geographies. We also intend to leverage our technology leadership through automated and digital solutions, but also to provide sustainable solutions for our customers going forward. And we're also focused in on markets and customer segments that really appreciate the added value that we bring and also are ready to pay for that. Pricing leadership is important for us. At the same time, we need to manage our costs so that we are still competitive in the world markets and working more with internal efficiencies, such as filling our factories optimal make or buy decisions and also SG&A efficiency, or fixed cost efficiency. Now we come to an important slide. So this is our updated ambition. It is to become the world leader in material handling solutions, creating value for everyone. And with everyone, we mean ourselves, employees, customers, investors, the world, next generation. So it's quite broad. But this is our ambition. Financial targets. So we start with sales growth, and we want to have sales growth faster than the market. And here, we define the market as nominal world GDP growth according to IMF. The second target is then to achieve a comparable EBITA margin of 12% to 15%. We want to achieve this as soon as possible but no later than in 2027. And with a range of 12% to 15%, it means that through the cycle, we should be within this range. So if we have a down cycle, we should not go below 12%. And if that would happen, we need to take continuous measures to get above 12% again. And it also means if we are in the cycle, above 15%. You should understand that, that's probably not sustainable over the whole cycle, but it can happen, of course, and we want it to happen a lot. We're also updating or actually launching a dividend policy today. We've had sort of -- we have been very strict following a typical pattern in how we do dividends, but now we actually have a policy also here to go with that. It is to pay a stable to increasing dividend per share over the cycle. So how do we intend to do this then? Well, we have selected 5 strategic enablers that will drive our business forward towards our ambition and towards our financial targets: the first one is deepening customer focus; the second one is accelerating efficiency; then we have scaling technology innovation; advancing responsible business; and enhancing our winning culture. And we will do this with an operating model with clear authorization and accountability in our organization. So I will now go through these 5 areas with similar slides like this one, talking a bit of some of the key initiatives and examples. And then on the right-hand side, you see example of key metrics. This does not mean that these are all the metrics we have, and we have a lot more metrics but this is some typical examples of how we follow if we are tracking towards where we need to be. And then the second slide in each area will then be sort of a deep dive example of one of the initiatives within each area. So deepening customer focus. Key initiatives here are, for example, providing the best customer experience. And here, one example is that we -- we will work with a decentralized operating model where we empower the organization, the customer-facing organization, so that we really can service our customers in the best way possible. Co-creation with customers. This is consultative and collaborative approach based on standardized offering. It does not mean that we will go and make sort of one-off solutions for all of our customers. It's like LEGO. It's based on standard offering, but we are flexible to work with our customers to create the best solution for them. Service excellence. I already mentioned the renewed service program, Fabio will talk more about that going forward. Targeted acquisitions to strengthen our core Critical here is bolt-on acquisitions, especially within in service, where we have a well-working machine setup that we then can just bolt-on acquisitions using the same processes, tools, et cetera. So the deep dive here is then a bit what I mean in terms of decentralization. So we place the needs of our customers at the heart of decision-making every day. And to be able to do that, we need to empower our front line, our customer-facing organization, meaning our business units and regions to be empowered with the authority decision-making, but also to hold the accountability for delivering close to the customers. And that will make much quicker in going back to customers coming out to answers to customers and taking decisions and informing customers. Our business areas will then more work on implementing common policies and tools, systems and also, of course, govern the performance of the business units and regions. And the performance management will be a key theme for us going forward. If we're off track, we will have initiatives to get back on track. The group will then work on common strategic initiatives also developing common processes, policies, tools, systems, et cetera. And our job will also be to performance manage our business areas and making sure that we track according to where we need to be. The group will also then manage capital allocation between the different businesses. This does not mean that we from now on, we'll start working in silos in all our different business units and regions. We have smart people, and smart people collaborate, which means that we will collaborate across -- within a segment, within a business area within the group when it adds value for us and for our businesses. We will not force all businesses to depend -- to participate in all in is accelerating efficiency. And here's about supply chain efficiency, optimizing of manufacturing operations, footprint make-or-buy strategies, et cetera, simplification. This is a key one, simplification of go-to-market models, our platforms, systems, organization, reduction of matrixes and all of these kind of things to really enable our organization to be quick. Operational excellence. This is, for example, the Konecranes Way, which is our Lean initiatives, also project management excellence. And I think Mika will talk about that a bit later as well. portfolio optimization, which is where we evaluate and potentially divest some of our noncore or nonperforming businesses. And this we also did at the end of the first quarter, where we divested MHE Industrial Products. So this is a picture then of our supply footprint. So the red ones are common supply production sites -- components supply production sites, sorry. The light red ones are then hybrid factories between cranes and component supply factories. And the black ones are crane factories. In crane factories, you need normally to have regionally. That's why you have them spread out. This is where basically fabrication shops and assembly centers that put together a crane that doesn't travel well. That's why it needs to be regional. And the sea green color is then our ports factories. So we are continuously then optimizing our operations, our footprint, driving simplification of how we do things, maximizing efficiency throughout our businesses. And it might not seem so but a lot has happened. So if you go back to the last Capital Markets Day in 2017, since then, we have reduced more than 15 factories globally. If you go back 2 years, we have reduced 5 factories. So we are continuously working active with our supply footprint. The next area is then scaling technology innovation. And here, we have renewed offering. It's about simplification, standardization of offerings. We also include here our core uplifting offerings, which is our home designed solutions for components. I will come back to that in the next coming slides. Automation and electrification, and it is about electrifying our full offering, digitalization is about using data for insights and predictions, even generating new business models for us going forward. And then we have technology expansion for targeted acquisitions and corporations. It could be key technologies, close to our core businesses, but it could also be that we venture into adjacent businesses. So this is a little bit about our core of lifting and it comprises of purpose-built and integrated packages of gearbox, motor, control system and connectivity. And these are then defining this and creating sort of the core components internally, provides our cranes with a more optimized solution. And that creates longer lifetime, optimized performance for customers and cost as well and then increased safety and productivity. And when we embed sensors in this and software, it provides our customers with real-time data updates and also enables process optimization and predictive maintenance and failure predictions and all those kind of features going forward. So that's really an advantage we have over many other competition that we have purpose-built componentry, we use technology innovation and digitalization and put that together to a package, which is optimized for cranes and lifting motion. The next area is in advancing responsible business. Here, we have our climate action and circularity and key initiatives here is our ambitious climate agenda. Then we have safe solutions and operations. Basically, we want everyone to go home every day safe after full days of work, be it Konecranes employees or our customers' employees. So we want to be the one that really puts the best solutions in place to do whatever we can that this will be reality. Inclusive and fair working conditions, it's about expecting human rights in our own operation, but also throughout the value chain. We embraced the broader sustainability agenda and supports our customers in achieving their ESG targets. So within our sustainability strategy, we have 4 commitments: the first one is that we deliver safe, secure material handling solutions; the second one is we enable a decarbonized and circular world, and that's the environmental part of this then; we create fair, inclusive, diverse and engaging working environment, and that's also included in the human rights perspective; and then we have the last one that we expect high ethical standards of ourselves but also from our business partners. So our sustainability work has already been recognized with leadership ratings from institutes and organizations. So from MSCI, we got an AA rating from CDP, we got an A- rating. And we got again a gold medal from EcoVadis and ISS ESG rated us prime. And not on the picture, but adding Sustainalytics rated us as a low-risk company recently. And we've actually rated as company #7 out of 549 within the Machinery segment. So that's top 2%. Konecranes has been a signatory member of the UN Global Compact since 2010, and we are fully committed to the UN Sustainable Development Goals, all 17. We have hence selected the 9 that impacts us the most and where we can make the biggest contribution and working really tight with those, also including a sustainability agendas and commitments. It does not mean that we don't work with the other 8, just to be clear. I will not go through all the highlights from 2022 because there is quite a lot, actually. But I will mention that at the end of the year, all our factories were powered 100% by renewable energy or renewable electricity. So we have made great progress already towards our climate targets. We are a member of the science-based target initiative, and our climate targets have been validated as in line with the ambition of limited global warming to 1.5 degree Celsius. And in this initiative, we then made 2 targets or 2 commitments. The first one is to reduce our own operations, absolute greenhouse gas emission by 50% from 2019 to 2030. This target we already fulfilled for 2022, so 8 years ahead, and we are quite proud of that. The second target was then regarding our value chain reducing 50% of greenhouse gas emissions, absolute from 2019 to 2030, and that's encompassed in use of sold products but also steel-related purchases. And that represents approximately 75% of our total greenhouse gas emissions. We have progress here as well, looks very nice, 26%, we have done a lot of initiatives here. So we're proud of that, but this is also fueled by a lower sales volume in 2022 versus 2019. So with sales increasing, some of that will come back. So we have a lot to do yet in this area, and we will continue relentless, but now I will focus on our own operations. Since we already achieved the target, we need to raise the bar a bit. So in 2022, all electricity and manufacturing operations is renewable. In 2023, we had the first -- it's by the end of 2022, just to be clear, it's not the full year. So 2023, the first carbon-neutral manufacturing site, and that's actually here in Finland, Hämeenlinna they have done enormous amounts of investments, working really hard to reducing energy consumption within the factory and using renewable electricity, changing everything they can to save. However, there's still some parts we haven't been able to reduce. So we have bought carbon credits for those. That's not a future strategy for us to buy ourselves out. We will continue to work to take those emissions away. But this is a way to bridge where we aim to achieve. So our new commitments is sent by 2027, we should have a carbon-neutral manufacturing network in Konecranes. By 2030, we should have a carbon-neutral fleet. And here, we mean cars and service vehicles. The next one is then enhancing our winning culture. Here is about workforce planning and talent acquisition. It's really important for us to have efficient talent acquisitions. We need really high competence within automation, digitalization, electrification, but also and maybe even more important, service technicians. We need great service technicians all over the world. Next step is talent and leadership development. So it's about continuous learning. It's about providing the kind of long-term development areas for our employees that forms commitments and loyalty, and that's also where we achieve talent retention. Talent retention is much more efficient, much cheaper than talent acquisition. So this is really critical for us to be successful in. Developing company culture and ways of working. This is a huge one. This is how we do things. So this is embedding profitability growth mindset throughout our organization. It's about implementing authority responsibility and accountability close to the customers, so we can be agile in serving our customers and quick in decision-making. Leveraging technology for culture building. It's about having online forums, online trainings, et cetera. And we have quite a lot of this already coming into the organization. I saw quite a lot of this, and I was quite impressed. We need to continue with that because that's really something that is valuable. So coming into this organization, I, of course, had my experiences, my background, then I combine that with what we are doing within Konecranes today. And I saw things which I thought was maybe a bit of a gap compared to where I want us to be, not that we were really bad at it, but we had potential for improvements. So we have then embedded our winning attitude and growth mindset. A winning attitude is something I want to get into this company. Engaging culture, really important to get all of our employees to feel a part of this. We are a big puzzle, and everyone is one piece of the puzzle. It doesn't work if we don't all commit to the same thing. We have different roles, but we're all on the same thing. So engaging culture, getting us to be one. Engaging values, and we are now working with our values updates, not because we have bad values, our values are 27 years old and the world is changing, those around us and our company is changing. So we will review and make sure that it's up to date and is valued today and it engages our organization. We need to have a competitive mindset. And this is both internally and externally. We need to be in the internal lead tables, we need to want to be on top. We need to want to be the best service organization in U.S., the best factory in EMEA, the best sales team in APAC. We want to be on top. That's what we need to get into this. And that also then transpires externally so that we are go gather externally. We need to deliver on what we promise. We need to have a sense of urgency when we do things because we need to understand that we are blocking our colleagues if we are not having a sense of urgency. We are stopping our customers' business if we don't tell a sense of urgency. We need to understand that it needs to be fixed now. If we can't fix it now, we need to have an open and proactive communication. We need to inform people internally, externally customers. You get less peer staff if someone informs you what's happening. We need to be easy to do business with. All of our customers want someone who is easy to do business with. If we are complex, difficult to do business with, much more difficult to gain market share. We need to performance manage what we intend to do, follow-up through the organization, all layers. If we are off track, we need to take actions to be back on track. This is the only way to run a decentralized organization if we have a strong performance management. We need to work with continuous improvements. This is not a revolution that we are trying to make. This is a great company, 100 years of experience in heritage. This company is fantastic. We have leading market positions in everything we do. We have the best products. We have the best services. We don't need a revolution within the evolution, and we need to develop on how we do things, how we prioritize things. So that's what we are working mostly on. So when it comes to managing performance. So we will manage our businesses in a way that we give them mandates. So if you have a mandate for stability, you have a mandate for profitability, and you have a mandate for growth, that means different things. If you are in the stability phase, it means that your result is not good. You are not competitive in terms of profitability. Your result is fluctuating, you don't control your risks, then you need to focus on fixing that first, creating stability in your business, managing the risk exposure in your business, then you get the mandate to fix profitability, then you need to get your profitability up to industry leadership preferably. And after that, you get your mandate to grow. And that's both organic growth and inorganic growth. And you will not also get the capital allocation to be able to do so. So we will have a more active portfolio management going forward than in history. And we will not shy away from fixing, turning around, growing or exiting businesses. And this is more of an illustrative picture like you see here of where our different businesses are. So we have some businesses that are clearly in growth, and we have some businesses that need to improve profitability and others that still needs to fix the basics. So a bit of a summary of my section here. So our purpose, shaping next-generation material handling for a smarter, safer and better world. We have a really strong platform heritage to build on, and we have a clear plan to execute in our different businesses. We have great people, great competence, capabilities, et cetera. We have leading market positions in services and equipment. We have a broad customer base, provides us stability and opportunities. We have an unrivaled global service network, enabling us to capture more of our own installed base service sales, but also capturing competitive installed base service and also add on bolt-on acquisitions. We have technology leadership that will help us to lead development going forward, especially when it comes to these demand drivers and trends in the market regarding sustainability, productivity, and seamless operations, et cetera. We have plenty of market opportunities, and I've tried to illustrate that in the presentation. I believe now that we have an inspirational purpose and ambition as well, and clear strategy for developing our businesses. And this will take us to the next level in terms of growing our sales faster than the market, where market is defined as nominal world GDP and achieving our comparable EBITA margin target of 12% to 15%, where we are not below 12% in a downturn in the cycle. And if we are above 15%, it's probably not sustainable over the cycle. We will deliver on our climate targets, and we will achieve improved resilience through our service growth. It's really critical for us to do that. And we will do this by having fun, and we will increase our employee engagement. And that will also get retention in the organization, pride in the organization and that makes you give 110%. So thank you. That was my section.

Thank you, Anders. And now it's time to hear more about Konecranes financial targets. So please, Teo, the stage is yours.

Thank you, Kiira, and welcome also on my behalf. My presentation today actually is comprising of 3 different themes. We will first be taking a look at the historical Konecranes financial performance a little bit. Then we will be taking a deep dive on the segment financial targets like already discussed. And then finally, a couple of comments on balance sheet, cash flow and capital allocation. On this slide, what we have done actually that we have taken to the same picture, orders, sales, comparable EBITA margin for a period starting from 2017 and ending at Q1 '23 rolling basis. Like already has been mentioned, our previous CMD was in 2017. You may recall that we had targets also at that time, 5% annual sales growth and 11% comparable EBITA margin. If we take a look at this picture, so we actually have been able to improve profitability, not exactly to the line of 11%, but improving anyways, whereas sales growth has been basically missing. So our sales are more or less on the same level as they were in 2017. This lack of sales growth, obviously, also is one of the key reasons why profitability has not reached the targeted 11% level. So the lacking sales leverage, operating leverage is the main reason. Now if we take a look at '22, in particular, the order intake was excellent in '22. It was not really visible in our sales, maybe apart from Q1 '23 to a certain extent, but by and large, not within the sales, and this, of course, gives us an excellent order book at the end of '22 as well as at the end of Q1 '23, which again then supports us in reaching our financial targets going forward. So the order book strength is there when we start this next 5-year period. This slide is very busy, but I will try to explain. Here, we have taken to the same picture group and all of the 3 business segments so that we have sales, gross margin and fixed cost as a percentage of sales in the same picture. And now the bar is the sales. Gross margin is the red line and fixed cost to sales is then the grayish line. These are actually the pictures are comparable with each other. So the scaling is the same, even though we are not really disclosing the gross margin percentage as such, but this can be compared to each other. And then, of course, essentially, if you take a look at gross margin and you deduct the fixed cost as a percentage of sales from that one, you basically end up with comparable EBITA margin that is. And if we take a look at the left-hand side, first, it is the group numbers. So the gross margin line has been maybe even surprisingly stable over the years, given everything that has taken place, whereas fixed cost of sales has been decreasing as a trend, and that has been supporting the profitability improvement that we saw on the previous slide. There is more volatility if you take -- if you go into the segments. And service first, this is, of course, also the secret behind the profitability improvement within service. Our gross margin has been increasing and our fixed cost to sales have been decreasing, even if we have not had a massive sales improvement in service either. And these improvements obviously are as a result of the continuous improvement activities that we have been doing and that Fabio will be referring to in his presentation today as well. Industrial equipment. So there also, again, I mean, trend-wise, fixed cost of sales has not actually been the issue. The gross margin, however, has been fluctuating and has not been trending in the right direction. And now the latest dip in '22 is the thing that we have been also talking about. We were late in price increases in certain product categories, which impacted our 22% gross margin within industrial equipment. And then on the port side, so there is volatility in the gross margin. That is primarily as a result of the product mix topics. And there is also a certain volatility in the fixed cost to sales, but that is primarily as a result of the sales volumes. Maybe a couple of additional comments on this one. First, if you take a look at the industrial businesses. So we have the fixed cost to sales is almost on the same level in Service and Industrial Equipment, even though, of course, gross margin is significantly higher in sales. So when you take a look at this and think about our industrial optimization program, which is primarily targeted at improving industrial equipment. So it's no surprise that Fabio is talking about simplicity and streamlining business models because the more complex environment you have from the business model point of view, the more likely you are to have also high fixed cost to sales, start with the service and service growth. Clearly, faster than the market is our target for sales growth in service. There are a couple of reasons behind that. Industrial equipment. We have certain product categories where profitability is very good, and we would, of course, like to grow there. At the same time, we have some models the same topic as for growth. Port service, profitability is higher than the profitability for the equipment businesses on average. And of course, it will be supporting further the margin target. On the right-hand side of the slide, we can then see that how far we are from to the trajectory that we would be having to reach the, say, midpoint of the target profitability range, so the rate of improvement into the balance sheet and cash flow topics. And we have some other, let's say, targets here in these slides as well, and let's start with the gearing. So we are maintaining our target of being below 80% in gearing. When we take a look at this slide. So also gearing has been actually surprisingly stable throughout the year and net debt, given all the changes in the marketplace. The mix of our rolling 12-month sales. The previous target that we had was 15%. However, we also changed the net working capital definition, so actually, the 15% with the old definition is actually very close to the 12% with the new definition. So there is no significant change of ambition level here, this 12% is a little bit more ambitious apples-to-apples comparison than the previous target. It's a cash conversion in another way. In this line, we have taken the free cash flow, excluding net working capital change, which is the grayish bar and comparing that to net profit, which is the red one, and what we can see here is that the free cash flow actually every year has been higher than the net profit. The only exception to this is 2017, and this most likely continue in the near future. Then jumping into the loan portfolio and the maturity profile. On the left-hand side, we can see how the maturity profile of the debt portfolio is. '23 bar is very, very small. So we have basically refinanced whatever needs to be refinanced for '23, but there will be refinancing to be done in the coming years as well as we can see the profile as such is quite okay. No problem there. This picture is on drawn money. So it is actually excluding revolving credit facility, which is due in '24 and it's a committed one. And we obviously want to refinance that as well. And the expectation is that we would be refinancing that still during this year, most likely during the summer. But it's not in a way now included in the columns and the bars in the picture. On the right-hand side, we then have net debt to comparable EBITDA, which is another very commonly used indicator of indebtedness. We are primarily using gearing, but it's very healthy to take a look at this one as well. It has been trending downwards quite nicely. If we were to take a look at this with official EBITDA so not the comparable one. So the volatility obviously would be bigger. But at the end of the curve, so basically at Q1 '23, we would be almost on the same level. So the difference from the indicator point of view would actually be very small. Then jumping to the dividend payments. This is also something that was in Anders' presentation already. We have been paying stable to increasing dividend in the past, the only exception here again is the year '20. When we agreed with at that time, merger partner that a certain euro amount of dividends would be paid. Otherwise, we have been paying stable to increasing dividend. And as the dividend policy says, we intend to continue doing that stable to increasing dividend per share over the cycle. And then as a final slide, then a couple of comments on capital allocation priorities. On the left-hand side, we have the priorities capital expenditure, of course, on a very high priority here. We want to make sure that our manufacturing machinery is in good shape. We want to be competitive going forward as well, and we want to serve our customers well. Like I said, it may be good to assume that the CapEx levels will increase from the current level slightly, but no, not necessarily a step change needed there. Dividends have been a high priority. And like the -- and of course, we will continue to pay dividends in line with the dividend policy. Acquisitions is there next, strengthening the business with both bolt-on acquisitions, particularly those, but also adjacent acquisitions provided that there are good opportunities, and they did well with the strategy. Debt repayment, of course, there as well. We are not mentioning share buybacks, specifically in this slide, but share buybacks have been in the toolbox, not that we would have used those very often, but have been in the toolbox and obviously will continue to be in the toolbox going forward as well. But the primary way of, let's say, returning money back to the shareholders would be dividends at least in the near future. Then if we take a look at the right-hand side, so there we have the, let's say, free cash flow accumulation and how it has been allocated between different categories, capital expenditure, dividends, acquisitions. And then this cash portion, this slide is actually very difficult to put together now that the leasing payment accounting practice has been changed within the period. But anyways, it gives a big picture on how these have been. The share of dividends, obviously, is quite high also when taking a look at it from the cash flow point of view. If any changes to be expected this kind of percentage division, maybe we would like to spend a little bit more on acquisitions, given that we have again reactivated ourselves in finding more, let's say, actively targets that would be fit well to our business portfolio. This is actually -- this was actually the last slide of the presentation. And I think that we now move into the Q&A.

Thank you, Teo. So like said, now it is time for the Q&A. Any questions from the audience? Maybe we start with -- just a moment, the microphone is coming. I think, Panu, you are the first one.

It's Panu Laitinmäki from Danske Bank. I have 2 questions. First one is on the industrial equipment. You mentioned that you have higher margin products and then some lower margin ones and we want to grow the higher profitability ones. But what does it mean in practice? Are you kind of open to exiting some areas where you are? And when you look at your portfolio, what kind of criteria you apply when you decide whether you keep something or divest something? And then the second question is on the decentralized organization that you mentioned in the presentation, just wondering kind of where are you now where -- compared to where you want to be? So is it quite centralized currently? Or are you already decentralized and you just want to continue on that? And is this a big driver for you towards the targets overall?

So I'll start with the industrial equipment question. I think we will see more maybe when Fabio has his presentation next after the break. But in general, we have different businesses that are in different stages. Even if you are on a stability stage and even if you're loss-making, if you have potential, we are not going to divest the business, we, of course, are going to fix it. So it's more if you have businesses that are noncore or over a very long time loss-making or doesn't have the prospect of generating growth, et cetera. Then we might consider divesting that business. But it's nothing that we will say now that we are divesting. The one we did was already the MHE industrial products. It was both noncore and also nonperforming. That's why we divested that business in the end of the last quarter. When it comes to the decentralization or a better word is empowering the customer-facing organization maybe to control both their top line, their costs, and hence, their profitability and also their net working capital. It is mainly to give authority to service the customers, decision-making power to service the customers but also to be able to demand accountability and not having to ask 5 people for the accountability of not performing in cost. So it's giving people the full mandate basically. Of course, there will always be some allocations, et cetera. We are in many of our businesses already far come. I mean if we look at the Port Solutions business, it's managed and has been managed largely in that direction. Of course, we will push it further going forward. But it's a journey that we will take starting basically in this year. We will not make revolution here either. It's evolution because we are not planning to go all the way and be extreme in some direction. We are planning to make it as far as it suits our company and adds the most value for our company.

Maybe if I may add on the -- if the question regarding the divestment was particularly on process grades, which has been a little bit problematic from the profitability point of view in the past, so Fabio will be presenting the plan regarding that one. But in essence, it is less tailor-made solutions, more standardization and simplifying the business model as a result of that and thus improving the profitability. But Fabio has a part of that in his presentation.

It's Erkki from Inderes. A couple of questions from me, if I may. First, that you showed the historical trajectory in our profitability improvement. Wasn't it so that 2017-2019 A lot of that improvement came from the MHPS synergies. So would you agree that it will be much more difficult from now on to remain on that trajectory?

I would agree with the comment that much of that improvement came from the MHPS synergies. And then I would not necessarily agree with the comment that improving further would be significantly more difficult. Because we have to remember that the 5% per annum sales growth that we were aiming at did not really materialize and sales have been more or flat. So with the sales growth and the operating leverage as a result of that one, I think that the trajectory makes complete sense.

Okay. And then...

Maybe adding to that as well. I mean, with the empowerment of our business units and regions, they will also be responsible for driving cost efficiency. And if you give that to a business, they normally find efficiencies. And we will, at the same time, also have SG&A or fixed cost efficiency initiatives in the group, and not with the ambition to maybe cut from where we are in terms of absolute cost but to make sure we don't increase as much as you would normally do when you grow your top line.

Okay. And then secondly, will the improvement be I would say, more front or back-end loaded, I mean, on your path to the target zone or have you already identified a number of quick fixes in profitability that will show in the next 12 months or so?

Yes, I think we have already shown some quick fixes already in Q1. And of course, this is not a hockey stick, if that's what you're asking. So this is initiatives and Fabio will talk about his sort of initiative in Industrial Equipment, mainly. It's also a bit in the service side. And that will also yield EUR 40 million to EUR 50 million EBITA by the end of 2025. But already now, that is contributing quite significantly in the quarter in Q1. And I mean this -- if we don't add costs to our fixed base as we're now starting to get out more of sales, you will see a quick effect on the fixed cost out of sales percentage. We're also working with a lot of simplifications and efficiency measures, removing complexities like we have internally outside the program that Fabio has and you will see effect from those as well. So this is not a hockey stick.

Then Tom here in the front row.

This is Tomas Skogman from Carnegie. In the last strategic period, we saw a lot of EU items and factory closures. And now you show the map with all your assets. Is it so that we should not expect kind of significant EU items in this kind of strategic period that you're happy with the kind of setup that you have? Or are the targets based on further large closures, which typically cause a lot of costs and headaches as well or will it be more smoother?

If you look at what we have said as targets here, they don't have a factor in that we should do a lot of big one-offs. Not saying that we won't have one-offs in the future. For sure, that will happen. We need to optimize our footprint and our operations always as any company. But to achieve our targets, none of those large sort of factory closures, et cetera, are incorporated in to be able to achieve those targets.

Christian Nygaard, Pareto Asset Management. I have a question regarding the lack of sales growth over this period of time that you showed us. Nominal GDP has grown quite strongly over that period of time. So why have you not been able to grow? Or has that been sort of a deliberate strategy not to grow in order to sort of trim the portfolio or something like that? And related to that, to quote you on the first quarter call, you said that most indicators point down, but still orders grew strongly. And I think that was on top of first quarter last year, which also showed very strong growth. So both these elements move the opposite direction compared to what you would have expected. So please enlighten us.

Do you want to start with the history?

I can start with the history. And it has not been a conscious strategy of not growing. So that is not what it is all about. But there have been priorities that the company has taken, and now sorry, Fabio, I am taking part of the comments from your presentation because I know that it happens to be there as well. But if we take a look at the beginning of this, let's say, '17, '18, maybe even '19, to some extent, so obviously, we were focusing on profitability and getting the -- our app together after the MHPS acquisition, which was in our standards, a very, very big one because it increased the size of the company a lot. So we were focused on efficiency and setting the systems and the ways of doing together. And that hampered growth. And then when we were basically ready for the, let's say, growth phase, so we had pandemic which definitely didn't help, particularly in the service business where this kind of, let's say, agreement sales, for example, is extremely difficult without having physical contact to the customers. So these kind of things are there. And now when we take a look at the current situation and hopefully no new, let's say, catastrophes arise globally, but we are ready to go to the growth phase, particularly in service, but also in the other businesses. And now when we take a look at the order intake in '22 and for example, regarding Port Solutions. So the order intake, obviously, has been on a fantastic level already. So there is indication that the growth will come.

Okay. So that means that, I mean, even in a flatter world, you sort of now -- the engine is now -- the Konecranes engine is now working better?

Yes. I mean, our view is that we are focused -- becoming more customer focused. We are making it easy for customers to do business with us. We are driving decentralization, so that we have an empowered organization that meets customer. They don't need to ask 5 levels up for approval to do something. They can support the customers today, installing a sense of urgency from our fast response. That's what gets customer loyalty. And then we have, like I had in my presentation, a technology leadership within the areas that are sort of the market trends going forward that will also help us. We have our service network that we can take more of our own sort of installed base. Also with fabulous initiatives, equivalent parts, we will also be able to take even more of competitive installed base adding acquisitions to that. And then our winning culture, becoming more competitive and becoming winners. So we have under -- we have an engine in the company that will deliver going forward.

I think Antti was next.

Antti Kansanen, SEB. First question on growth, and you mentioned that perhaps the industrial production hasn't grown in line with the GDP. But now we are talking a lot about building back manufacturing base in U.S. and Europe near-shoring and things like that. So if that occurs, how do you look at your product portfolio on the industrial side? You mentioned the adjacent emerging product groups, which are perhaps not under your core? Is it something that you want to build up bigger organically make acquisitions? Or do you think this kind of a near-shoring trend would also be a positive driver for your parts and core industrial product groups.

Yes, I think this is an opportunity for us, nearshoring. As when you build new sort of setups, that's, of course, an opportunity for us for new builds. At the same time, when you go into the ports, if the ship goes for 24 days or 1 day, it doesn't really matter. It's how many lifts you do, right, in the port as long as you can't replace it with trains or trucks or similar. So I think there is an underlying demand. And I think that question would be suitable also to take when we have talked -- when we listen to our segment presentations. I think it sits well in there regarding our future strategy for products, et cetera. But we don't see that we will exit a lot of things currently. And if we were, we wouldn't, of course, be able to communicate anything until the decision was taken with unions, et cetera. But we are constantly evaluating our portfolio and we will become more active sort of portfolio owners internally.

Near-shoring opportunity, I guess that if you take a look at that as a phenomenon. So it probably would be beneficial for us because if you move production from one place to another one, typically, you do not bring the old cranes with you. So in a way, you will need to do new builds. And this would, of course, be a business opportunity for us. This is for industrial business. And then if you take a look at it from the port's point of view. So if the trade routes change, so of course, new capacities may be needed in new places, and that would structurally be a good thing from our point of view.

Okay. And the second question is on the margin target and kind of the cyclical range that you have in there. Just to get your ambition level right, if we compare the around 10%, 11% that you are making today, is that a comparison period? Is that a good comparison for the 12% or 15%?

Quick answers, please. We are running out of time.

Our company is a bit cyclical. As you know, we normally Q1 is not our strongest quarter. That might change a little bit, so you won't see the same cyclicality going forward. But I mean, that's something that is difficult to exactly say if it's representative to where we are over -- if that's the middle of the cycle or not. So you are wondering if it's 2% or if it's 4% up from existing levels. I guess we'll have to deliver a couple of more quarters and then you will be able to adjust the models correctly.

Thank you. In order to keep the time line, we now need to conclude the Q&A, but we will host a longer Q&A at the end of the event. And all the questions through the chat function have been received. So don't worry, they will be taken also later. Now it's time for a 15-minute break. So let's be back around half past 2. Thank you, Teo. Thank you, Anders.

Thank you.

Thank you. [Break]

Welcome back from the break. Our next presenter is Fabio Fiorino, Head of Business Area Industrial Service and Equipment, and he will tell us more about what's next to our Industrial businesses. Please, Fabio, the stage is yours.

Thank you, Kiira. And once again, good afternoon, and welcome. It's great to be back live. Alive, too. Yes, thank you. Now for the next exciting topic, delivering service growth and improving equipment profitability in the business area, Industrial Service & Equipment. Perhaps we should start just with a quick overview of the 2 segments, starting with Service. We provide industry-leading life cycle services for all types and makes of industrial cranes and hoists. The foundation of the business is our agreement base. Our goal is to improve the safety, productivity and sustainability of our customers' operations. And as mentioned, the foundation is agreement base. We have quite a diversified agreement base. It is, I think, good to point out that about 55% of that base is made up of assets of third-party manufacturers and not our own. We also have the largest and most extensive service network in our industry, and we are a leading provider of next-generation digital services. Now switching over to Industrial Equipment. We are a global leader in sustainable lifting solutions, covering a full range of industrial applications. It's worth pointing out we have dual channels to market, our Konecranes brand for direct to end-user business. We also have an indirect channel, a distribution channel that we go to market with several well-known and world-leading regional brands. It's also good to underscore that 60% of our hoist volume goes through the indirect channel, which really underpins the importance of this indirect channel. We have a very comprehensive offering. It allows us to have economies of scale. We have deep industry expertise and application knowledge. About 80% of what we do of our volume is standard and about 20% is specialized equipment. We have also embedded sustainability, both in our product portfolio, in our features, and in our design, but as well as in our manufacturing. As we saw 100% of renewable energy in our manufacturing sites. We also have seen that one of our finished sites is now carbon neutral as of this year as well. So again, embedded sustainability. Now we switch over to megatrends and underlying demand drivers. As mentioned before, safety, productivity, sustainability, certainly are key to our customers. And digitalization, automation is one area, or one of the means that our customers are trying to achieve these targets. Regulations and compliance, that area always gets to become more complex. There are more regulations related to safety, of course, sustainability. And that's another area where we can help our customers. That certainly also helps us. Then aging workforce and outsourcing, those kind of go hand in hand. Again, those support as well our business goals and trajectory. And last but not least, we're all painfully aware of the world geopolitical situation and what's going on, especially in the past couple of years. And that is also driving this rethinking the supply chain and supply chain and alignments -- or realignments. As was mentioned before, whether it's a friendshoring or near-shoring. Again, we are where our customers are today. We're also where our customers may want to be tomorrow, and we can certainly help our customers in that transition and realigning their supply chains. And of course, if they move more towards the let's call the Western world or other areas where we are -- we have a stronger footprint, it, of course, helps us, as was mentioned before. So it is a trend that would be beneficial to us, as I believe Teo mentioned before. Now switching over to market share and market size. We are a global leader, but we are -- we have plenty of opportunity for market share growth. We look at the total industrial market size, about EUR 20 billion to EUR 25 billion. EUR 10 billion to EUR 15 billion of that would be in service and about EUR 10 billion in equipment. When it comes to market share and service, in the Western markets, we're about 15% market share. When it comes to APAC, less than 5%. And that's primarily driven by some of the larger economies in Asia, of course, China, Japan, South Korea, where we don't have large penetration today. When we look at Industrial Equipment markets, we're certainly a leader in standard cranes and wire rope hoist, 20% to 25% market share, but not as much in the light lifting equipment, and that's an area there's plenty of growth opportunities, and we talk about the different segments in Industrial Equipment, where we can grow. And certainly, outside of Europe, especially in North America and in APAC, we have a smaller market share than we do in Europe in light lifting equipment. And when it comes to process cranes, we estimate our market share is 5% to 10%. Again, that's a lot driven, too, by the emerging markets and the heavy process industries like steel, in some of those markets. We also have quite a diversified customer base across industries and across geographies. Our largest segment is general manufacturing, but general manufacturing in of itself is quite broad and diversified, for example. And our second top area is governments, EPCs, A&Es and general contractors, and that's a primary focus area for the Equipment business. And of course, the equipment ends up in the other industries as it is bought through these general contractors or EPCs. When it comes to our customer base, it is also quite diversified. Our top 100 customers make up roughly 15% to 20% of our volume. So we do have a really long tail of customers, well over 70,000 customers in the Industrial business. So there's plenty of opportunity to increase penetration share of wallet with existing customers, whether it's at an existing site, whether it might be across various sites of the same customer or it might be across different customers within the same industry. We may do very well with a particular customer in a certain industry, but not as much with a competitor of theirs or another customer in that industry. So there's a lot of opportunity in short, across both industries, customers and geographies. Now switching gears a little bit and looking at our financial performance over the years. And if we start with service, we've certainly had a pretty strong track record of strong performance and proven to be quite resilient even through the difficult times. If we look back, a little bit in history, 2017 to '19, that was kind of our post-Demag acquisition, post-MHPS acquisition. And really, I think that was kind of covered a little bit before, the focus there was on this integration, delivering the synergies that we had promised. And also, we were in the middle of what we call our oneKONECRANES deployments, our business transformation, digital transformation at the time as well. So there was a lot of focus in bringing in those businesses, getting the systems in place and delivering the synergies, which we did actually quite quickly in the Service business. And then by 2020, we were ready to pivot to growth. Unfortunately, the world told us otherwise, we had to shift gears and really focus on business continuity, the safety of our people, taking care of essential industries, cost flexing, rapid adoption of digital technologies. And also, at the same time, the beginning of 2020, we had made the MHE-Demag acquisition in Southeast Asia Pacific. So quite frankly, we had to do that integration through the pandemic, which was quite a challenge. So now we're at 2023, and our focus, once again, turns to growth, certainly expanding our agreement base, renewing our offering, sticking to our continuous improvement trajectory, digital services ecosystem, and of course, bolt-on acquisitions. We had a great example here shortly of -- recently, in Whiting in North America. So we're switching gears in service now towards growth. Looking back in the performance of Industrial Equipment. We've had quite a strong orders recovery, while the focus now remains on improving profitability. And going back in history, very similar to Service, if we look at 2017, 2019, again, the focus there was on the Demag integration. The elimination of some overlapping operations and so forth. And really, there was a lot of process crane project cost overruns back in those days as well. Then, of course, 2020, '22, the pandemic hit, supply chain constraints, inflation and all those other wonderful things was quite challenging for the Industrial Equipment business. But of course, we also focused there on safety and cost flexing. We had the MHE-Demag integration as well affecting equipment. It was about 50-50 in terms of volume between Service and Equipment. And as mentioned, we navigated the supply chain challenges and inflation challenges. Now we're at 2023, and our focus in Industrial Equipment is on profitability. Simplifying the go-to-market strategy, as was mentioned before. And already, we had stated this from our industrial assessment that we will start to simplify our business, starting with our go-to-market strategy. Price management, commercial excellence, completed platform harmonization, rationalization we had started way back from the MHPS or Demag acquisition. And as was mentioned also, we had just done a recent divestment of the MHE Industrial Products. Again, it wasn't quite a core -- didn't quite fit our core business, but it was also not performing to the level that we would have expected. Q1 was also -- was quite promising. It certainly set us up for a good start to our focus on profitability. Perhaps a few words on bringing Service and Equipment together. I think it does benefit all stakeholders, including our customers, our people as well as shareholders. It does bring an enhanced customer and employee experience. First of all, having this one team, one face in front of the customer is certainly helpful. It also brings a lot of clarity in some of the things we're doing in the simplification and a lot of focus. So it's very good for the customer and employee experience. And it's been quite, I think, already well received, both by customers and internally. So it's been a very good step. The other good point is that it allows us to really have a fully aligned Industrial strategy. Having 2 BAs, 2 different leadership teams, while as much as we can work and collaborate together, it is not as easy as having 1 leadership team to be able to have a fully aligned Industrial strategy, and that is the case today. So we have put together the 2 teams, the 2 leadership teams. We have now the best of the best working together in one direction. It also allows us to have a simplified organization operating model, which allows us to be much more agile, decentralized and also be much more focused on the customer. With all that said, we have not abandoned our segment focus, if you would, our end-to-end focus on the different businesses, whether it's service, whether it's equipment. We very much want to make sure we continue to have that focus to drive profitability, end-to-end, by segment. We're not putting everything into one bucket. So we're striking the, let's say, the balance between the best of both worlds, if you would. So maybe we dig a little bit deeper into this operating model. And as I said, we've done this to strengthen focus on customer centricity, on efficiency and growth, right? And to, again, be agile, be more decentralized. If we look at our operating model, we really have 2 frontline organizations. I'd like to say 2 customer-centric frontline organizations. We have one organization that's really focused on the end user business, what we internally call BETA business, the direct business, right? Konecranes Industrial Service & Equipment, using the Konecranes brand. And there, the primary purpose is the customer ownership, sales, service and equipment delivery, and that's a regional organization across the world. And then we have another customer-facing organization. But in this case, it's a distribution business, an indirect channel, right? And their focus is on building a distribution network, distributor development, distributor support, right? And that's more of a brand organization with well-known brands across the world. So through these 2 channels, we are basically delivering, promoting and selling the various services and products, right? Service, which is field service, spare parts, et cetera. We have standard equipment, which could be light lifting equipment, it could be standard cranes, wire rope hoist. And then we have what we call solutions. And those were process cranes, nuclear cranes, type of equipment that's much more integrated into the customer's process, a lot more heavier automation and a lot more integration. It could be, for example, automated die handling cranes for the automotive industry, could be waste-to-energy cranes. It could be automated paper roll storage in the paper industry. So that is our, what we call our solutions business. And then last but not least, we have this Warehouse Automation business, certainly much, much smaller than the other 3. It is based around our Agilon product line. And we have -- kind of we're now in the process of relaunching let's say, the Agilon product line with some cool new features and some real new upgrades in that area. So that is another segment or area that could have some potential for the future. Now across these products and services, we have teams that are dedicated to the commercial and business development to business process and systems, supply operations, product management, development and support as well as the traditional support functions, finance, HR, legal, et cetera. So this is our new operating model. We've been building the team since the middle of last year. We're in pretty good shape. We continue to evolve it, continue to push that decentralization, as Anders mentioned, continue to -- on this path of being much more agile. And again, I want to emphasize this balance between driving the product line, the business line end-to-end versus also sharing that customer experience and that one face to the customer as well as being able to share resources in the support functions across and be able to coordinate across the different businesses as well. So it's quite a, I think, a good balance that we think we're achieving. And again, the best of both worlds, I think this model brings us. So what is our ambition? We're certainly the leader in this industry, but we also want to set the benchmark among industrials. I'll reiterate our guidance here in service sales growth clearly faster than the market and comparable EBITDA margin of 20% to 24%. And equipment comparable EBITDA margin of 8% to 10% and sales growth in line with the market. Again, focus on growth and service, focus on profitability and equipment, customer centricity above all. Anders already introduced the strategic enablers, and I think these strategic enablers allow us to -- or guide us with our key business area initiatives. So if we look at deepening customer focus, for example, one of our key initiatives under that umbrella would be simplification. And we've been on this journey for already a couple of -- at least, let's say, in the past year or so. Again, simplification in go-to-market, simplification in our operating model, in our offering, again, being much easier to do business with, right? I mean that's what we're talking about here. Making it easier for our own people, giving them much more clarity and focus and then making it much easier for our customers to do business with us. The other aspect is commercial excellence and a lot of focus on the customer experience and the customer journey, whether that's a digital customer journey or otherwise. So that's another area that's commercial excellence, another initiative that we have been also working on for a while. Then under the accelerating efficiency umbrella, we have several initiatives going on. Operational excellence, that's been quite a while, especially in service, we've been focusing on the end-to-end optimization of the end-to-end processes, right? And I'll mention a few of them. I'll go deeper into these here in the service section. Supply chain efficiency. We talked about footprint optimization. We talked about the Konecranes way or lean in our operations, supplier diversification, et cetera. A lot of good stuff there. Portfolio optimization, shedding the things that are dragging us down, as was mentioned, the Industrial products and adding the things that will enhance our operations, enhance our ability to be more efficient as well as to sell more. And then scaling technology innovation. We are in the midst of renewing our offering, both in the Service side of the business as well as on the Equipment side of the business. And again, I will go much deeper into that in the respective sections of Service & Equipment. And underpinning all of this, of course, advancing responsible business and enhancing our winning culture. So now let's dive a little bit deeper, starting with service and our focus on growth. So our agreement base is the key platform for growth and asset management throughout the life cycle. So perhaps we start with what is our agreement base. Well, our agreement base is made up of inspections, preventive maintenance and predictive maintenance, perhaps a little bit of corrective maintenance. It makes up about 20% of our overall Service sales. So that's kind of the foundation of the entire business. That agreement base drives what we would call corrective maintenance. So corrective maintenance in simple terms is repairs. Repairing the things that, through the preventive maintenance, the predictive maintenance and the inspections we have found. So those 2 very much go hand in hand, and that represents about 30% of the business. So pretty much 50% of the business is built really as a machine, if you would. So these processes are very much intricately tied and very highly digitized. So we have really built this machine in terms of being able to deliver the preventive, predictive maintenance tied to the corrective maintenance. Then on top of that, there are perhaps some more value-added products and services, whether we would be retrofits, which, replacing componentry and machinery, improving ergonomics, safety, et cetera, productivity. Some consultation services that would drive us to do larger modernizations or larger projects, modernization of themselves, lifting equipment, et cetera. And here, we may use, this may be a little bit more of a consultative sale, and then perhaps we do need sometimes our service sales or field sales force to be able to close these type of sales. But very much supported by inside sales. And sometimes, a lot of this is very much analytics driven. We have a good grasp for both our agreement base on installed base, and we have a good idea where -- when some of these assets are in need of modernization or may need a retrofit, et cetera. So we can drive a lot of this promotion of these services by doing data analytics on the asset base. And this is about 25% of sales. And a large portion of that is tied, again, to the agreement base as well. The last 25% of sales are basically spare parts and accessories. And these are spare parts that are not installed. They're basically sold without labor, right? And the -- here, the key to this is making it easy, convenient, transactional, easy to identify, et cetera. So about 50% of those spare parts are sold through e-commerce. The other 50% is basically through inside sales. And that 25%, the customers are either agreement customers, could be non-agreement customers, it could be resellers. And a good percentage of that is actually our distributors from our Alpha brands that would be part of that 25%. So how do we achieve organic service growth? I would like to say it's as easy as 1, 2, 3. Expand the agreement base that certainly drives the entire business as we just saw. One of the ways that we're going to do that is we are renewing our Service program to be -- Service programs to be much more targeted, and I'll get into that in a second. Continue our focus with comprehensive agreements for critical production assets with larger accounts. This is kind of our sweet spot. The larger accounts, multi-sites, perhaps they have operations across continent, across the world. More complex operations, they're looking for asset management, et cetera. Those are the folks that really appreciate what we do, really appreciate our value proposition. And that's where I think we would see the bulk of the growth coming from these accounts. And then enhanced customer experience driving customer retention. Again, if we increase our retention rate, reduce that churn, we're also able to grow faster as well. Let's call it basic math. But we have been focusing much more, in the past few years, in the profitability of our agreement base, right, in that to just drive the growth indiscriminately. And in fact, we have been focusing on those larger accounts and the folks that bring us the higher profitability, and we bring the highest value, too. The other areas continuously improve sales efficiency planning and service delivery. And this is getting a larger share of wallet of those customers in the agreement base, be much more efficient, much quicker, much better at servicing them. And this, again, goes back to fine-tuning our machine in a sense. And things that involve here are sales model evolution, leveraging much more inside sales and customer support, some of the digital tools, creating a much better customer experience, so what we call smart planning, automated quotations, configurator enhancements. We are rolling out next-generation field mobility tools, are making our field people much more effective and efficient in dealing with the customers, and I'll go a little bit into detail there. And the last piece is to expand focus on third-party equipment. As mentioned before, 55% of our agreement base is third-party equipment. Much larger percentage of the non-agreement world or the installed base out there is, of course, third-party equipment. One of the key initiatives here is equivalent replacement parts. These are replacement parts that we either reengineer, manufacture or source ourselves rather than buying them from the third-party supplier of that equipment. That, of course, allows us to perhaps provide a better offering to the customer, a little more cost effective and at the same time, allows us to improve our margins as well. Hoist and component replacement, retrofits and modernizations. Of course, when we have the maintenance agreement, and it is time to upgrade the equipment to optimize that equipment, we do so with our own technology. If the hoist on that crane needs to be replaced, we, of course, offer that to be replaced with our own equipment. Same thing for controls, same things for major modernization. So having our hands or eyes or ears on the customers' equipment and being at their site, allow us to really transform their equipment and bring them -- introduce our technology and our platforms across their entire operations. And of course, the other part is just totally new equipment, whether it might be light lifting equipment that our service salespeople can sell on the spot or replace or it could be lead generation for cranes that -- and we get a lot of our lead generation for our equipment from our service personnel. And again, that's quite highly digitized and the process is very, very much integrated through our platforms. So let's talk a little bit about this renewed Service Programs. It's not like we didn't have Service Programs before, we have. But we have tweaked them a little bit. And what have we done? We're trying to tailor them a little bit better to the different customer segments. So if we start with this condition program and the condition -- the target of the condition program is really smaller accounts or those accounts that don't have -- they may have many assets, but they're not that critical. And they're really looking for make sure it is safe, make sure I'm compliant and if it's broken, fix it. Otherwise, I don't want to hear from you. So this is about doing -- being easy to do business with, with the folks that really -- their hoists and cranes are not that critical to their entire operation. So this is where we've had more of the churn in the past because our focus has been more on an asset management. So what we've done is we have tailored that condition program. We've added routine maintenance to the inspection. So we can do just about what they need in one stop shop. But we have streamlined the sales and service delivery process end to end. Much more automated, we have taken out some of the consultative approach that we have for those higher customers. So we've created the sale and delivery of that program to be much more cost effective, much more efficient, which allows us to do -- to deliver that program in a profitable way. And then the customer gets to deal with a world-class maintenance company, they get the type of services that they need and are looking for. So that should address reducing the churn on the lower end of the market, let's say. Most of that, we're driving towards being evergreen agreements. So again, very highly automated in the entire process. Then of course, we are doubling down on our care program. And this, again, goes back to these larger accounts, multiple sites, larger Fortune 500 companies, regional companies that really are very much concerned about their equipment. They're looking for asset management. They're looking for that safety. They're looking for improved productivity, sustainability. They're looking for the whole life cycle approach, which, of course, we are the leading provider when it comes to that segment. And we continue to invest in the digital and advanced services to support this predictive maintenance to be able to have the fleet view that the customers require, to have the consultative approach, both people on the ground and be able to meet with all levels of the organization and be able to jointly plan their operations, et cetera. So that is really kind of our sweet spot, and that's where we do really well. And we will continue to build. And from the care program, of course, we can continue to expand the outsourcing to what we would call commitment, which would includes full-scale outsourcing of maintenance all the way to complete, which would include also some operation of the equipment, if necessary. Now digital enablers in Service, they have always helped us enhance the customer experience and deliver services more efficiently. Perhaps to dive into a few of these unified customer portal, I think this is important to point out, now that we have Service & Equipment and we're bringing them together, we have a lot of wonderful online tools and some award-winning tools, right? We have our yourKONECRANES portal. We have our Konecranes store. We have crane adviser when it comes to equipment. What we're doing is we're bringing all of these pieces together for a unified customer experience. A lot of these self-service tools for quicker contact and support, make sure our customers have full relationship view. Again, this is one of the benefits, I think, in bringing a Service & Equipment together. It's not that we couldn't have done it before, but it's a lot easier now to get these things done and a lot more efficient. So that is one big piece. We're doing the same thing with our own people. So making sure that our own people have the full view of the customer that are able to help the customers end to end, whether it's Service or Equipment or something -- or anything else in between. And we're investing in customer engagement tools, sales enablement tools, offer configuration tools. Again, empowering our people to better serve our customers, improve that customer experience, improve that retention and also improve our employee experience, which also translates to a better customer experience. A couple of other areas that are more focused on Service, smart planning, as we call it. It is to -- be able to schedule work that's really aligned with technician proximity, skill and material availability, making sure we're optimizing the way we dispatch our technicians, our field force, making sure that they're not spending their time driving. They're not spending their time looking for parts, they're not spending their time doing admin tasks, et cetera, making sure we send the right person with the right tools with the right information with the right part to the right place. Sounds simple, but it's all about the execution, right? So again, there's a lot of opportunity here. This whole continuous improvement in Service, there's a lot of runway left. Hand in hand with that goes our next-generation mobility tools. We call it our mobility app slim. So now we're on Slim 2.0. We just launched this year, 10% of our workforce is now on the next-generation tool. It has been extremely well received. It really improves the employee experience of our technicians. It helps them -- helps guide them in their work. It gives them information on what they're to do in terms of being able to have standard operating procedures, videos, like tech support. It helps them with improving our data quality when it comes to our assets and everything is driven by data quality on the end-to-end process. So this is really an exciting next generation here, we are going to really accelerate the deployment, starting actually this month. We kind of went through the first few months to really do the trial and make sure that the back end was robust. We're now ready to step on the gas. And over the next few months, all our Service -- entire Service workforce will be on the next-generation mobility tools. We also believe we have an unmatched offering and leading technology and service. Again, we talked about these equivalent parts a few times. Both these parts can be used in our corrective maintenance offering, right? We can offer them in terms of when we're repairing ourselves, the equipment, but it could also be offered online or in other means to other resellers, to end users, et cetera. So we continue to build a number of items that we have in this equivalent parts offering. Truconnect our remote monitoring platform and offering and -- which, of course, supports predictive maintenance. We continue to invest in that platform. We also have some pretty popular digital services, CheckApp for daily inspections. It allows the operator to do the daily inspection that in most jurisdictions are required, but it's good idea anyways. That also brings that operating into the ecosystem. It also brings in that data that usually gets on a piece of paper and probably gets lost into our ecosystem as well. And then again, also that's helping the customer with compliance, right, making sure the records are there. So that's a great tool. Another worth mentioning is this Digitized Slings and Accessories, a sling basically is between the hook and the load, right? This -- there's clearly thousands of these attachments in every plant. Very hard to keep track of. They still need to be inspected. They're part of the load path. We're applying RFID tags to these, so we can track them. We're also bringing, again, into our reporting ecosystem both for compliance and also ease of doing those inspections. So just some good examples of what the exciting stuff that we are doing. Now if we switch gears to inorganic growth. There are plenty of acquisition opportunities across various sectors. Of course, we are very excited about bolt-on acquisitions. Targeting -- bringing in an installed base, right? That's -- again, it adds to the agreement base, bring service opportunities, maybe bring other customer segments, bring in new technicians, new technical resources. That's another great part of a bolt-on acquisition. And we're able to quickly integrate these acquisitions, creating significant synergy potential. We have the infrastructure, we have the business model, we have the systems. So we could easily bring in the sales and the technical workforce and onboard them, and we don't need the existing infrastructure per se of the acquisition target. Recent case, Whiting, again, a company has had over 100 years of history, already pretty much well integrated into our operations in North America. Then we're also looking for new technologies and capabilities, a lot about industrial automation, systems integration, material flow simulation, an opportunity to bring a more holistic approach to our customers. New market entry expansion. There are some significant markets that we could be much bigger in. And those are areas that we could continue to evaluate. And of course there may be some other complementary products and services that we do sell today, but maybe it's an opportunity for some, let's say, vertical integration or to be able to sell more of some of these products. But of course, bolt-on and the technologies are very, very interesting to us. Technicians, of course, are at the heart of our success and are key to our growth. We're, of course, in a war of talent. We always get very, very good feedback on our technicians in our voice of customer. Usually, we get our highest marks when it comes to our technicians. So we're very proud of that. And again, they are really key to our success. So we -- of course, in order to grow, we need more of them. And we're doing different things to address that. Number 1 is, of course, let's improve their productivity. Let's make them more efficient. A lot of the things that we talked about is to make sure that they're either with customers or working on the assets and when they're working on the assets, they do so much more efficiently and more effectively, able to spend less time looking for information, looking for the tool, looking for the part, driving to the place, et cetera. So again, you can -- we may need less technicians and we can make the ones we have much more productive. Safety is another piece, right, reducing lost time. That's another area that we can address. Of course, increasing retention, same concept as with the agreement base. Let's increase the retention when it comes to our technicians. So again, the employee experience is very important. A lot of the things that I talked about. And we're, of course, obviously, actively recruiting technicians, and we're hiring on a daily basis, and we never have enough technicians. And that's something that we continue to do. We are spending and investing into employer branding. People may know us in our industry, but we do need to go out and get folks from other industries. We're also looking at more diversified talent pools. We're hiring much more -- many more female technicians, for example. There's 50% of the population that we can tap into. So there's a lot of areas that we can continue to help ourselves. And more and more in the future, we'll have to grow our own technicians, whether it's through training programs, though apprenticeships, through trade school cooperation, et cetera. So perhaps let's summarize the Service growth plan. We, of course, have a proven business model. I think we've shown that. We have continuous improvement in our DNA and there's plenty of runway still left there. Country by country, but even in the countries that are at the top of our list, there's still a lot of improvement opportunity. And now the time is towards sales acceleration. And where that's going to come from? There are many areas that we talked about, right, commercial excellence, agreement retention, large account penetration, very important, but also reducing the churn on those small accounts with the optimized offering. And as mentioned, renewing our service programs, evolving our sales models, account management, especially for those large accounts, this continuous improvement of the sales and service delivery end-to-end process and the customer experience and journey. Then you add to that some of the new service products that are either out or in the pipeline and then the bolt-on acquisition and geographical expansion will take us to that sales growth that's clearly faster than the market. So now let's switch gears once again. Now let's talk about Industrial Equipment and focus on profitability. As mentioned before, we are simplifying our go-to-market strategy to be more agile and efficient. Dual channels to market with shared equipment platforms, ensure market coverage. They drive economies and scale and enhance profitability. Now you may say, well, that's nothing new to Konecranes, right? I've been around Konecranes for quite a while. We've always had dual channels to market. So what is different today? Two things, very important. One, we are using a single global brand, Konecranes for end users. Post-Demag acquisition, the Demag brand kind of straddle both channels. Demag brand today is, by far, the largest distribution brand already. But in many markets, it is also an end user brand. That has -- brings some confusion to the market, has brought some inefficiencies. So that's part of the simplification is to transition the Demag brand to fully to be a distribution brand. They're already quite there already, but it's to bring it all the way in all markets around the world. And we're not doing that overnight and flipping a switch. We're very much doing that in a very systematic way to make sure that our customers are with us and see that transition. But there's a lot of opportunity in that. The second piece that's just as important, perhaps more important is shared equipment platforms. Today, we do not have shared equipment platforms between those 2 brands. There's a lot of inefficiencies when it comes to the equipment platforms. I know we've talked about that in the past, but we haven't quite got there yet. So now it's time to execute. And I'll explain a little bit that in more depth. So we'll have focused including defined sales channels, brands and offerings with dedicated teams to direct and indirect. But if we talk a little bit about this product harmonization, using core of lifting purpose-built components to make us more competitive and to drive economies of scale. We look at electric chain hoists. Today, we have 3 global platforms for electric chain hoists. The goal is to go to one. We're already on our way, but it will take us 1 to 3 years to get it all done. So there is a huge opportunity there. Light crane systems were down to one, but we have not extended the full range or the full options across multiple brands, including to the Konecranes brand. So this was almost simpler. We have it there. We need to do some extension of that offering. Standard wire rope hoist, we have 4 -- or we had 4 global platforms. We're in the process of ramping down 2. That's already started. By the end of the year, we'll be down to 2 with the possibility then going forth to have a unified single global platform. Winches kind of the same story. Winch is just a big hoist. Then cranes, standard cranes. We have 2 platforms, 2 different hoists, different componentry and different design, different processes that make it even worse, different systems. We're now moving to one platform. That's already started. So this is quite big. You may say it's the same thing that we said in the past, but the reality is that we're making it happen. So then this next generation of products, next-generation light lifting help us to deliver growth opportunities, enhance profitability. A full range offering from basic through advanced and premium shared mechanical platforms. We're expanding the light crane system offering. Very important here, it's -- areas that there is a growth opportunity. I won't go through all the different details, but there is a lot of product expansion going on, both in features and range and other things that we have in the pipeline for the light cranes systems. And again, this is an area more ergonomics, more assembly and manufacturing, et cetera. There's a lot of trends that support the light lifting equipment growth and has been for years. Then we're going to set a new standard of lifting in wire rope as we've done in the past. Our current platform is wonderful. We've had it for over 20 years. It's served us extremely well. but it's time to also take the next leap. By the end of the year, beginning of next year, we will be launching what we call our S-Series Low-Headroom Hoist, which will now set the standard in the industry once again, higher performance. It will be future proof when it comes to the norms and standards of the future, more eco-efficient, over-the-air upgradeable features, very much a scalable platform from base mechanical offering to a much more advanced when it comes to controls and automation and other things. We have -- we'll have connected smart features added to that. And interestingly enough, lower production costs as well. So this is our next generation when it comes to wire rope hoist. We're well on our way to getting this launch. So bits and pieces and technologies are already out there. So it's not totally new. But this should be a game changer as well for the wire rope business. Process cranes. I know there's a lot of questions regarding process cranes, sometimes refer to ETO. We're improving process crane profitability, primarily through productization, but also through commercial and project management excellence. So what do we mean by that? We look before the multiple winch platforms. So first of all, these winches that are used in process cranes, we are rationalizing, harmonizing those platforms, and there are many other technologies that go along with process cranes that need to be rationalized and harmonized. But if we look at today, 20% of that offering is productized. 55% is tailored, 25% somewhere in between. We're going to turn that upside down, where 40% of that offering is productized. So what we would call ETO or Engineer To Order, we're going to turn that into configured to order. That 40% is basically addressing general industries, just higher list, maybe higher speeds, a little higher duty, et cetera. It's nothing magical. Then there is these industry-specific applications. I mentioned the automated die handling in the automotive industry, paper roll storage, waste-to-energy, et cetera. We are productizing those. We're in the midst of making those much more productized. So it's -- so we're not starting from scratch per se. And then even on the tailored side, which we will only -- get to be only 20%, we're going to still use existing Lego blocks, the core of lifting gears and motors and control systems, et cetera, to put them together for these tailored offerings. So that is the secret sauce and how to get process cranes profitable. You add that some commercial excellence and then price management and focusing on the right segments and risk -- proper risk management and project management. And we will have, I think, a very profitable business, and we're starting to -- on that path. Very -- I think good to point out, process cranes provide significant life cycle management opportunities. We talk about the entire business, including Service. And they are an essential part of the offering when it comes to large customers. So again, those very important large customers, we are the global leader. We're Konecranes. They expect for us to also have an offering in those areas, whether it be automotive companies, et cetera. The manufacturing footprint, I think we've addressed that a little bit already. It has been -- we have been rationalizing and developing it over the years. It's good to break this up into 2 pieces, crane manufacturing, which is really steel fabrication and final assembly of cranes. This is not perhaps a factory or a plant as we would imagine, nothing too complex or -- and there, you need to be close to the customer. It's not easy to be shipping large steel cranes across large geographies, especially when we're talking standard equipment. So there, we have plants that are close to the customer, but we supplement that with subcontracting network. And we're continuously looking and evaluating that. When it comes to the components or the core of the crane, that's the -- lifting the machinery, the winches, the wire rope, light lifting equipment as well. There, we have a bit of a different strategy, where we're centralizing those into global and regional hubs. Somebody may ask well, why don't you put them all into one, into a low-cost country and ship it across the world, we would not have the delivery times necessary to be competitive in that market. So we do need these regional hubs. We can certainly balance loading between them. We can certainly have global supply chains in cost-competitive countries, but that final assembly that needs to be closer to the customer. It cannot be just in one place in the world in case somebody was wondering. Then if we look at the equipment profitability plan. As we already have gone out with this EUR 40 million to EUR 50 million business optimization, I'd like to call business transformation plan, very much the pieces that I spoke about, right? The operating model, go-to-market, simplification, the sales evolution, the platforms, the footprints, intra-logistics is a big area in some of our plants, divestitures, et cetera. So that will get us a good way there, and that's -- that plan should take us through 2025. And then some of the next-generation products that I mentioned would allow for some nice gross margin improvement. They're much more cost effective. They're also much more competitive, and they also allow us to sell into other markets as well as we're adding features and other things and expanding the product line. And of course, there could be some sales leverage and lower cost structure to get us to the final piece. So that is the equipment improvement plan. Now perhaps we can summarize and conclude. We are pretty confident that working as a one customer-centric team, Industrial Service & Equipment is well positioned to deliver this plan. In summary, Service, the salient point Service Program renewal, we talked about and tied to the agreement-base expansion, the enhanced customer experience and journey, commercial excellence, price management, this continued optimization of the sales and service delivery that we've been on, equivalent parts or third-party equipment, bolt-on acquisitions. Those are the key points in delivering service. And again, service sales growth clearly faster than market. Comparable EBITDA margin, 20%, 24%. In Equipment, we just went through them, go-to-market, operating model simplification, this platform harmonization, rationalization of the platforms, the commercial excellence, the price management, renewed offering, the supply chain and operational excellence, portfolio optimization, bringing us to a comparable EBITDA of 8% to 10% and sales growth in line with the market. That's it. I guess time for -- time to say thank you and time for questions.

Thank you, Fabio. Maybe you can take the next slide, too. So we have time now only for a couple of questions. So maybe 1 question per person. You can then start, just the moment. The microphone is coming.

I guess there's been a lot of talk about the product harmonization now over the years. Why has that not been too successful in the past?

I think, perhaps, there was hesitation as to what impact it may have in the market to some extent. Some of it might have been lack of execution. Some of it, of course, to be fair, there was a lot to do and a lot has been also done over the years. And then we hit pandemic, supply chain issues, merger and all these other things that maybe were a little bit of a side distraction. But I'd rather not concentrate on the past. I've been on the equipment side now for, let's say, a year, and I'm here to execute on the plan. So whatever happened in the past happened, now we move forward and we get it done. Simple as that.

Well, if there are any other questions from the audience, so please, you can take your second question and then speak after you. Okay.

Yes. Right. My name is Stig Gustavson. I'm a fairly large shareholder at the company. And as many of you know, the past CEO and Chairman also. First, a comment. When we looked at Teo's figures a couple of years ago, there was a merger talks with this company was involved in. And of course, that had some impact on the performance of the company. And that's why we had a little bit sort of lost focus during those years. I'm happy that the German -- that the merger failed. But of course, it created resistance, not only inside the organization, but also with our clients. And I really have to say thank you so much for the boys and girls who took us through that without too much disturbance at all. And a special thanks to Teo who was the interim CEO 2 times -- 2 periods, actually. The second comment goes to Anders and Teo about growth. I mean, you, Fabio, very clearly commented on acquisitions, and that's typically a growth pattern for Service. There are small acquisitions, but there needs to be a lot of them. And I think you are quite under attack. However, on the connections map there are also quite a number of white spots. And that's also in this kind of mature business, one way of expanding into those areas is also through acquisitions. Now we all know that those acquisitions, not all of them are attractive, but we should be open for that as well. And it will be good for also the CEO in this kind of Capital Markets Day environment to state that those are also of interest for the company. That has been the traditional way of Konecranes to go into new territories. And I think we should not be able to -- we should not forget about that. They take time. The Whiting acquisition. The first talks were held in early 1990. Denmark took 2 years. So we have to be over to that. But I understand fully that it's not very easy to comment on those, officially, in an environment like this. And I hope that you will also remember that. My third point and question goes to Ukraine. We all know that Konecranes has a fairly big factory in Wrzburg, 350 employees, if I remember correctly, and also service operations along the Black Sea Coast. I would like to hear what has happened to that. And also, we all know that after war comes peace. There are very good signs already the Americans are moving into Ukraine for -- and we're getting ready for the period after the war because there will be a lot of restructuring, a lot of rebuild to happen. Konecranes has a very good position already in Ukraine connections and is also founding member of the East office Finnish Industries, and the East office has already now established its first foothold in Kiev. I think, that I would like to hear your thoughts about further expansions into that future interesting area.

Well, thank you, Stig. Good to see you again. Okay. First of all, maybe just to quickly address the market entry or expansion into the white spots. And certainly, it is one of our target areas. There are certain significant countries that we could certainly be either much more active in or we could enter, not always the easy ones, but there are some significant countries out there still to look at. And some of that was, again, going back to the -- you mentioned the merger, some of that was being looked at, but then we had to take a pause during that period. So thank you for pointing that out Stig, absolutely. Then when it comes to the Ukraine, well, we haven't -- we certainly still have the facility there. There has been operations here and there, the folks that want to work and then sometimes have a surprisingly produced products throughout this war, and they never cease to amaze me how the resilience and the courage of the Ukrainian people. So we stand behind them as well. We have continued to support the people there. And when things stabilize, we can certainly get back to work. When it comes to Service, the Industrial Service operations weren't big operations. But certainly, ports were much bigger, and I think some of that continues. And unfortunately, I think some of those are under-occupied areas today. But if the tide changes, we could certainly -- if and when, I should say, when perhaps, we could certainly get back to business. So there's nothing that's stopping us from doing that. So hopefully, that answers your questions.

Thank you, Fabio. Let's now again, try to keep with the timeline. So we will have the last Q&A and all the 4 presenters will join me for that. So Fabio will also be available for more questions then later. And now it's again time for a short break, 15 minutes. So let's be back around 3:45. Thank you.

Thank you. [Break]

Welcome back from the break again. Our next presenter is Mika Mahlberg, Head of Business Area Port Solutions, and he will tell us more about what's next in our Ports businesses. Stage is yours, Mika.

Thank you, Kiira, and a warm welcome from my side as well, and I'm happy to share or Port Solution is going to generate profitable growth in the future. So Port Solution is the leading Western supplier in container handling and ports industry. We have the deepest and widest offering in the competition environment. And we are industry-focused organization with well over 10,000 assets and all the latest ones, which is roughly 2,500 are remotely connected. We have the best knowledge, technical knowledge and operational knowledge of the container handling in our organization, if you think about the competition environment. We can bring that knowledge to our local use and for the customers benefit with our vast service network and with our lift trucks distribution network. And we have a clear sustainability road map to meet our customers' needs. If we look at the market development, you probably all know that the container traffic through the terminals is the common driver for the industry. In the time before pandemic, the growth was typically twice of the GDP. Then when the pandemic came, there was a drastic drop in the container volumes and then very fast jump back to the high numbers. If we look at the numbers today, we're still on the historical high numbers and comparable to pre-COVID times. '22, there was a modest growth, about 0.5% point. And this year, '23, the prediction is that is a similar 0.5% growth. Then when we move after '23 to '24, then the prediction is, like Anders said, somewhere 4%. And it seems that we are on the soft landing right now. And people are talking that the second half of '23 is the time when the traffic will start picking up. It is good to understand that our customers, especially when they make investment plans and decisions they look over the cycle. So they don't necessarily follow the traffic on the terminals. Of course, when you look transactional business, that may be true. But with the bigger investments, there are also other factors on those decisions. The container traffic volume on the terminals is not the only source of growth and it's not only -- the only way that we look at our opportunities to grow. So our customers are looking ways of removing waste from their processes, and they use digital tools. They also look how they can be more productive, improving the productivity, and they typically use or they go into the automation discussions. Konecranes is in very good position to offer these digital and automation solutions. E-commerce has been fueling on the pandemic. So that was when people started to use money because there were no services available. This means that our customers' customers or shipping lines and other companies that are in the logistics they are looking for end-to-end integrated logistics solutions, meaning from factory to the door. And this is meaning that there is a lot of activity for building inland terminals, distribution centers and warehouses. And with our current offering, we are in very good position to take that growth opportunity as well. Sustainability is very important. Our customers and customers' customers, so terminal operators, shipping lines have similar sustainability commitments as Konecranes has. And this does not only mean increased sustainable equipment sales, but also our customers are looking how to intensify the footprint of their terminal. So how can they do that? And that means that there are these automation opportunities, which are basically spanning from the sustainability needs. And we are very well aligned with our customer needs in sustainability offering. Labor shortage is a global phenomenon and our customers are suffering from that. And they typically look automation solutions in order to mitigate that problem. And last, geopolitical issues, we all know and we have discussed about the war in Ukraine and increase in tension between the U.S. and China and all that in-sourcing, nationalist protectionism and all that. How we think it is that we are the leading Western suppliers, so we have a certain competitive advantage and also our asset-light global supply network that we are having globally in many continents is something that we can use as a competitive advantage in this kind of protectionism or by America type of movements where people are looking for local manufacturing. Then if we look at the markets. First is the equipment market, so Equipment market with all kinds of Equipment in ports, container handling or unitized or other type of handling is roughly EUR 10 billion to EUR 15 billion. We hold about 10% market share of that. If we look the stronghold offering that we are having then in those segments, we say that we have roughly 25% market share. This market is driven by the Global Terminal Operators. So they have roughly 2/3 of the volume. So they are the ones who are making the decisions, they are driving this market. Automation segment itself grows roughly twice as fast as the manual equipment segment. And then like I said, the hinterland, as is typically called in this industry offers a lot of opportunities, and there is a lot of new build opportunities. Then when we look at the Port Service market, this is EUR 8 billion to EUR 9 billion, and we hold 5% market share. However, this is slightly different than in our Industrial Service. So the majority of this market is in-house or in-sourced. So it's not very common in maritime terminals to outsource a lot of service operation. In inland, it's much more common. However, we expect that step by step, this will change. We see customers that wonder what is the core capability or core advantage that they are having and those who say that service is not, they are more ready to outsource that business as well. So Konecranes is in very good position to capitalize all these growth opportunities. We have the widest and deepest offering, full line of equipment, services, solutions, automation solutions and software. We can be or we are the sustainability and automation solution provider, and we can support the customer throughout the lifetime, they are having assets. And the knowledge that we are having sets us apart, and we can extend or we can reach our customers with the local operation that we are having. Here's a bit of historical financials. So if I look at the -- starting from 2017, this is the time when the Business Area Port Solution was formed. The 3 years until '19 was mainly we focused on integrating the organization, optimizing the footprint. We closed 3 factories, and we were also combining the product platforms. Development was nice. Then 2020, when the pandemic came and you saw from the volumes, the order intake drastically went down. It improved a little bit in '21, but not significantly. And then in '22, it started to boom. With the COVID time material availability issues and with the capacity issues or lockdowns in many countries, we were not able to capitalize all those orders, and now we see the sales increasing in Q1 '23. However, if you look at on the right-hand side, where we have the order book and these numbers are from the end of the year. So end of '22, we have -- we had EUR 1.6 billion order book, which is fantastic. Now if you have seen the Q1 numbers, we have EUR 1.8 billion order book. And if you look at the bars, they are telling that a lot of that order is going to be sales not this year, but next year and even beyond. So we have very good basis to leverage the good and healthy order book that we are having. This is our Port Solutions operational model. This has been in use since 2017. So we have 6 business units, which are end-to-end responsible for global business. They have certain offering that they are having. They are profit and loss responsible, and they are facing the customers. And the advantage of this type of operating model is, of course, that we have business-responsible people, and we have people who are next to the customers, and they are making all the decisions next to the customer. So it's very lean, very direct and good in this respect. Then of course, they are supported with agile functions, which are there on the left-hand side. In Port Solutions, we also hold a very unique repeat business model where the customer is in the focus. So when we do sales, deliver and support our customers, our target is always the next order. So whatever we do, we always think that we do so well that when the customer thinks about next order, let it be equipment or service, Konecranes is in the pole position in their thoughts. And this is very important in this type of a business, which is relatively small and kind of a manageable, and same people are moving from one customer to the other. So what is our target? So we aim to be the world #1 in our core offering. And the financial targets, we went through a couple of times, but let's repeat. So sales growth, clearly faster than the market. Like I said, before COVID, it used to be twice or 1.5x the GDP. So I'm sure that we can reach that. And then the profitability comparable EBITDA to be between 9% and 11%, depending on the cycle. And how are we going to do that? So basically, we have listed the main actions there. So we are going to focus on the core offering. We have a specific program to grow both services. We are going to go after automation and sustainable offering and opportunities. And we are focusing certain excellence -- operational excellence things, which are internal topics. So if we look at this, the market opportunities from the product perspective, these are the main products. And if you look at the market size, then clearly, Service has the biggest market; then the so-called yard cranes, so ASCs and RTGs and ARTGs have a fairly big market as well; lift trucks are having a big market. And then if you look at our global position, we are mostly either #1 or #2 in most of these cases. And then looking at the market trends, which are the piece of equipment or equipment system, that is increasing kind of proportionally because these systems are fighting against these other sometimes. Then the most attractive are service ATVs and then the yard cranes and lift trucks. It's also noticeable that some of our customers have exited from this space even from the growing market segments. And this has, of course, helped us to increase our order intake and sales, and we believe that we have clearly taken market share in certain areas. So here are the things that we -- or the product areas that we're going to focus on. So Service, no brainer. We're going to accelerate the growth as well as lift trucks. We want to be going with a bigger market share, and we want to accelerate the growth. Then the yard cranes, automatic stacking cranes, RTGs, ARTGs, we continue the good growth that we are having today. And then the rest, we want to focus those as well, AGVs, mobile harbor cranes, straddle carriers. But if you saw the market size, these are not going to offer such a potential to grow. However, in here, we want to be as strong as we -- or stronger than what we are today. So improving, of course, the market share and improving the profitability especially. Then if we go to the strategical enablers, and I will go through a couple of topics which are the most important when we look at the profitable growth. I have picked up the service excellence, project management excellence, automation and electrification. And I will explain a little bit closer about these topics. So port service growth. I mean, port service, first of all, more profitable typically than equipment business. It makes sense to grow this one. It also ensures customer happiness is very important from the repeat business concept point of view that we can be next to the customer, making sure that they are happy and they buy again. So very important. Increasing own and third-party fleet. So with the current order book, we will substantially increase our assets. And of course, that is the basis for the coming years. When we started 2017, we started by purpose only looking Konecranes fleet. So we wanted to take kind of a first step so that we concentrate on the Konecranes fleet, but now we have added a third-party fleet as well. So that gives growth potential. We are boosting e-commerce and other channels so that it's easier to buy from us. We are expanding geographical footprint. This typically means that we establish our operation, specifically port service operation, in a location, and we are looking constantly. Last year, for example, we established this in Mexico and a couple of other places. Data-based offering. This is similar to what Fabio was explaining, so we will use data for predictive maintenance and that type of activities. And then retrofits for automation and sustainable products. These are very important because we have good products from the years ago that we have delivered. And customers love them, but they want to retrofit them, get more sustainable product, for example, or automate. And our products are perfect for that purpose. And we have also the bolt-on acquisitions in our mind. Then if we look at the port automation. So there are may be 35 automated, semi-automated terminals globally. And if you look at all these, Konecranes is -- has delivered either equipment or software to 2/3 of those. So we have been in many of those projects. And there is the reference list. You don't need to read all that. There's a lot of small font, but we are all over. We have a lot of references, good references. As a matter of fact, we were not even able to update all that. I hope that some of you have noticed that. Last week, we [indiscernible] 36 automatic rail-mounted gantries to Virginia, the Virginia Port Authority, to NIT terminal. We already have there, I think it's 86 units and 30 units in another terminal so it will be having more than 120 Konecranes units, even more. So fantastic EUR 130 million order. Another example is that -- which is not on the list yet, is PSA, so Singapore Port Authority and Sines Portugal that they bought 6 ARTGs to an existing terminal that they are expanding. So they are in the process of turning the manual RTG operation to automated RTGs. But this gives a good basis for expansions and replacement. So this is very important that we maintain -- and again, the repeat business model is very important so we can benefit the replacement and expansions. And this is mainly for ATVs and ASCs and equipment control system. Then if we look at the different sizes of terminals. Large terminals, yes, most of them are automated today from the very beginning. And they are typically looking for AGVs, ASCs or ARMGs. Sometimes [ ASA ] are not really sold, but there's kind of a planning phase. And of course, equipment control system always goes with that. Then the medium-sized container terminals, typically, like Sines, they're looking for -- or they are most probably RTG-driven, so they have a handling system with RTGs, and they're looking for automating those. So that's typical for medium-sized terminals. And then for the small-sized terminals, we don't see a lot of opportunities there. So it's mostly for us, large and medium sized. Inland terminals are built more. Like I said, they will come with the automation, not necessarily today, but they will go into a process where they start looking for productivity, predictability and all that, which is happening with the automation. This will boost our service contracts, of course. Typically, in these terminals, we have SLA kind of a service level agreement. We have remote connections. We have local people. So that is a good [ phase ] to add also that in Service business. And these brownfield conversions are more common today than the greenfield. I think we were predicting that already 2017, in the previous CMD, and then that has happened. So most of these cases are -- like I said, these 2 examples, those are existing terminals. And these brownfields are normally from straddle carriers to ASCs and from RTGs to ARTGs. And we have also selected retrofits non-Konecranes equipment for automation. So we are also looking at those opportunities. So a lot of opportunities for automation. This is the way how we discuss and think the automation with our customers. So it's a stepwise process. Customer has the possibility to have a -- they can choose the risk appetite and the level of automation. So we do stepwise automation approach. They can have smart features to help the operation. They can have a supervised operation where the operator is still on board or they can go to full automation or they can have a remote operation. And the beauty of this is that with our current product design, we can start selling the manual equipment and all that -- all these phases can be done with the Konecranes equipment in the future later on. Core of Lifting technology platform is very important to us. We saw some presentation already in the beginning, but basically Konecranes designed, mostly also manufactured component, mechanical, electrical control systems. But now why I'm having it here is the power option. So we do a lot of electrification of the mobile equipment. Konecranes heritage is coming from the electrical side. So it's very easy for us to add that into our Core of Lifting technology platform because we are coming from the crane side where electric is very common. So what we are doing now is we add the power options to our Core of Lifting platform. And to complement that, of course, we have the remote connections to each of our assets that we are selling. And then we have the capabilities at the local level with our service. And then we have a centralized knowledge that we can use in the benefit of our customers locally. So that's the whole system, what we are using as a technology platform. And we want to, of course, utilize this as widely as we can with our offering. Here, we have our eco portfolio road map. So the gray line on the top illustrates the portfolio availability, so what is available, and that's in relation to our sales. So today, we have 80% of our offering if that was sold with the current sales numbers is eco-efficient platform already. We intend to complete that by 2026 when we electrify the rest of the lift trucks that we still have. And then if you look the red line, which is on the lower, that is the actual sales of our eco-efficient equipment. Now we are talking about -- only about equipment in this illustration. And we are now on the level of 60%. Now going forward, we have a kind of estimation for the coming years, but we believe that by 2030, we would be somewhere over 80%. This, of course, depends not only on us, but on the regulators, governments and the appetite and the commitment that our customers are having. But of course, we do our best so that we hit the upper limit of the scale. Hydrogen is something that has been discussed quite a lot. I thought that it would be -- maybe good to have just an update on this one. So basically, hydrogen can be used even today by mixing it with the diesel, then you reduce the emissions or you can have a combustion engine, which is using hydrogen. And then the last is the fuel cell system, which is pretty much having an electrical vehicle or electrical mobile equipment. And you just replace the big battery with a smaller battery and with a fuel cell and a tank, which is supplying to hydrogen. Of course, there are technical issues here, but this is more about the global production of clean hydrogen. So that is the kind of topic here more than the technical thing that these technicalities could be done easily. It's not that complicated, but the amount of green or -- hydrogen which has been done with the clean energy or electricity does not exist that much. And you need a lot of low-priced electricity because the efficiency of making hydrogen is lower than using it in electrical vehicle directly. But it's coming, and we are working with -- in Germany with one of our customers with one mobile equipment to test this so that we are ready to take that to the market when time is right. Here's an example of one product development that we are doing with a technology partner together. So this is called automated high-bay container storage. This can be used in maritime terminals, but mostly in the hinterland. So basically, this is a storage for containers where you can easily store containers. And the beauty of this system is that it's really in a reduced footprint. So it doesn't require that much space. And you can take any container out of it. So they are not stacked on top of each other, but they are separately in the rack, and you can access those independently. We have done several studies and we are in discussions with several customers and hope that, of course, that we can conclude a deal in the coming quarters. There is also a very good sustainable aspect on this one. So in most of these studies that we have done, if you put solar panels on top of this structure, you can basically generate in most of the places enough electricity to run the whole system, which is fantastic. But this is something for the future, and this is especially for the inland use in warehouses and distribution centers where containers are typically stripped and stuffed, and they are in the end of the kind of road. Then we focus on operational excellence. These are the things that we do internally. So active price management, of course, this is very important. We have been able to push all the inflationary price increases, labor inflation, material inflation, transportation, of course, all these volatilities quite well into our prices, and we continue to do that. We have a prudent cost management, and we run comprehensive procurement actions to make sure that we have a good cost base. There is a good need to have a good key account management because of this repeat business model. So you kind of see the customers many times over and over again. And of course, the performance matters, but it's very important that we work with the key account management, also the global terminal operators. As you know, they may have 70 terminals or 50 terminals, then the decisions are made either on the local level or in the head office, and the balance between these 2 depends. And of course, we need to understand that. We favor asset light and flexible supply. So this means that in big structures, we only do subcontracting. So we are not looking for having a lot of factories. Also the mobile equipment distribution or distribution model is also asset light. So we are not having monies tied into local operation, but the third-party distributors are taking care of that. Then project management excellence, very important to us. A big part of our business is project business. And here, we look the competencies of our project managers. We certify them, we improve our processes, and we look IT systems. And we have been doing this several years already. And then finally, we like standardized offering, and we want to use the Core of Lifting platform with all the benefits. So when we look at this from the profitability improvement perspective, the biggest amount we see in the profitability improvement will come from the port services; then the automation, electrification and the rest of the Core of Lifting -- core offering; and then on the internal operational excellence and efficiency improvements; and then some new business concepts. But we are confident that we can reach that kind of profitability in -- or by '27 latest. So we are -- we have a very good plan. We are confident that we can do it. And just to summarize, we will use our widest and deepest offering to increase the market share. We have a clear plan for the port service to grow, improving the profitability of the overall business. We have the automation sustainable offering that will meet the customer needs. We continue to improve our efficiencies and internal stuff, and then we have very strong order book for the coming years, which will support this. So thank you very much.

Thank you, Mika. Now it's time for Q&A with Mika. I will this time around start from one question from the chat, and I noticed that there we have some questions. So ship-to-shore cranes, weren't mentioned at all. Have you left them? Or is it just too small a market?

It's not part of our core offering. So what is outside is the ship-to-shore and manual RMGs. We run that kind of business, but we are very selective. We look only if we can make a lot of money on those, then we are ready to offer and sign a deal.

Thank you. Then Tom?

This is Tom from Carnegie. I have 3 questions. First, you mentioned that a big part of the margin improvement will come from service, but can you indicate, is the Service margin now similar to the industrial crane service business? And the sales split also in Service, is it pretty similar?

I mean, overall, pretty similar profitability. But the -- if you open up, it's slightly different than in the industrial service. So we probably have more spare parts and retrofits. And this is coming from the reason why I said that the maritime terminals have not opened up the outsourcing, which means typically field service as much as the other industry.

But the margin is pretty similar, yes. And then the spreader market, I don't think you mentioned it at all. So what is your position in spreaders?

We don't have spreader. We only do spreaders for our own purposes. So for example, for straddle carriers, we build spreaders, but we don't sell them as external business.

And why?

Well, this is a selection that we have made.

Okay. And then finally, on lift trucks, you say you are #3 there. I think Kalmar and Xiamen are #1 and #2 there. And Kalmar has a big factory in Poland and Xiamen in China, of course. And you manufacture the bulk of these in Sweden with lower volumes. So I just wonder how sustainable this is and what you can do to make sure that you are competitive in the long term in this business.

Right. So we have 2 factories: 1 in China, 1 in Sweden. The volumes in China has been -- they have been increasing all the time, almost reaching the Swedish factory volumes, but not entirely. The amount of hours that we are using, because this is only final assembly, is quite low per unit. So I mean this is not a competitive -- such a huge competitive advantage to have those hours somewhere else. So we are not talking about big number of hours.

So you will, in the long term, also keep production in?

This is the plan today, yes.

Other questions from the audience?

It's Antti from SEB. Just a question. You kind of illustrated the throughput levels historically. And I mean we haven't been that much of a higher level than pre-COVID. Your order intake was very sustainably EUR 1.1 billion, and now you're at EUR 1.7 billion. So I'm assuming your prices are up. But could you talk about where the growth has really come from? How much is this just the timing of some of your core clients making big investments? How much is kind of sustained market share gain that you referred earlier? So maybe open up with that.

Well, I believe that there is the latter, so we have taken market share. These bigger orders, very difficult to say that -- how much does that play. We always have them, I mean, almost every year. And you can see from the quarterly order intake that some of those are spiking up. But I would -- I think we have progressed in all of these segments and clearly taking market share in some of those.

Okay. And then second question is kind of the market and market share graphs that you showed. I assume they are global ones. But could you talk a little bit about your position in U.S. and Europe individually and kind of how much of your sales today go into those 2 markets?

We are -- the strongest markets are in the U.S. and Europe or North America and Europe. And of course, they are fairly big markets as well.

And your sales exposures to those 2?

I don't have any market shares, and we don't typically split the market shares, I mean, between the continents. It's basically global business from our customers' perspective as well.

And as you, Antti, know, we don't disclose our regional sales data for business segments.

Then the last one is referring to kind of the EBITA margin improvement bridge that you showed. And I mean you're targeting clearly above-market growth in sales. I mean your backlog should ensure that in the near term, but how much of those actions that you kind of showed or profitability improvement actions are already visible in that business that is sitting in your backlog today?

I mean some of these actions we have been doing all the time. It's a continuous improvement. These are not kind of something that you start from the scratch and then you do -- immediately result. It requires quite long-term development. But of course, some of these, like I said, the project management excellence is typical continuous improvement. We started that 3 years ago. So we have seen those results coming after maybe a year, 1.5 years and clearly see them today.

It's Panu from Danske. I have 2 questions. Firstly, what are the main synergies between the Port Solutions and industrial business? And how much kind of shared technology do you use between those 2?