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. I would like to warmly welcome you to the events on behalf of the company. We are pleased to have the chance to discuss our key achievements as well as future ambitions here today. Before we start the usual disclaimer, all our presentations today contain forward-looking statements. Here, we have our planned agenda for today, our President and CEO, Anders Svensson, and CFO, Teo Ottola, will start the presentations. And after them, our business area presidents will give an update on their business areas. We'll end each presentation with a Q&A. And in the end of the event, we will have a joint Q&A with all the speakers. Questions can be asked either in person here in London or through the webcast chat function during the whole event. Before I let Anders take over the stage, I would like to introduce all our presenters as well as the Konecranes leadership team members, who are in person here today. So when you hear your name, please stand up and wave something like that. First, Anders Svensson, Konecranes President and CEO; Teo Ottola, CFO and Deputy CEO; Fabio Fiorino, Business Area President, Industrial Service; Marko Tulokas, Business Area President, Industrial Equipment and Konecranes Future President and CEO as of June 1; Tomas Myntti, Business Area President, Port Solutions; Minna Aila, Executive Vice President, Corporate Affairs and Brand; Claus Erickson, Executive Vice President, Technologies; Christine George, Executive Vice President, Strategy and Business Development;, Executive Vice President, People and Culture; and, Executive Vice President, General Counsel. And now Anders, the stage is yours. Welcome.

Thank you, Kiira. And a warm welcome to this Capital Markets Day also from my side. It's a pleasure to see you here in sunny London. We all arranged for you guys, of course. So pay attention to the important notice. And then I will start with a brief of Konecranes. So as you know, we are headquartered in Finland. We're active in about 50 countries with approximately 16,700 people in '24 with net sales of just above EUR 4.2 billion and we generated a comparable EBITDA margin of 13.1%. Then I move into a brief introduction on the business areas. We have 3 business areas. There are roughly 1/3 of sales in size, each of them, starting with Industrial Service. And here, we have a bit of a unique setup. We have 4,300 service technicians around the world, servicing our customers, their cranes and hoists with different brands. So here, we are clearly in the #1 position in the world. But we only have 10% market share. So there's still lots of potential. And our biggest competitor is in-sourcing at customers' maintenance departments. So the more we move towards automation, digitalization, et cetera, customers are more prone to outsourcing. So that's a good opportunity for us to grow organically but also with bolt-on acquisitions of local service companies or regional service companies. In Industrial Equipment, we are the global leader in sustainable lifting solutions. We are in the #1 market position here as well. And of course, as the technology leader, we also benefit in this side from automation and digitalization. Port Solutions, which is actually solutions not only for ports, but for container handling basically, also inland terminals, et cetera. Here, we are the Western leader in cargo handling with the widest and deepest offering in container handling. And we are in a market position 1 to 3, depending on what product line you're looking at. So we have improved our financial performance structurally quite a lot since our Capital Markets Day in 2023. So if you look at the different graphs here, you can see that the order intake looks fairly flattish on a group level. What has happened here is that in '22 and the first half of '23, we got a lot of big equipment orders within the ports business area. What has then happened since mid of '23 and going forward until today is that we have a more balanced order intake. So more of the stable, resilient businesses such as Industrial Service, Port Service and Industrial Equipment. Those areas have grown more, while ports has grown less than even shrunk a bit in terms of order intake. So I would say we are in a very healthy situation currently with the order intake. If you look then at the sales, you can see we got affected in '21 and '22 about the COVID and the supply chain disruptions. And we had a good come back, and I think the team has done excellent work to ensure that we have grown our top line in a good way. You can also see that we have the improved our comparable EBITA margin in line with what we said we should do in the Capital Markets Day in 2023. It's a mix of different things. I would say performance management with dynamic pricing, volume growth and good strategy execution. But then you also have the more of the structural changes that we have done. We're talking of go-to-market model changes, product platform harmonizations and also productification of our solutions offering. This is a favorite slide. If you follow our quarterly webcast. This is how we follow our performance versus what we said in terms of financial targets. And if I start at the group level. So we said that we will grow faster than the market, and we define the market as nominal world GDP development. And you can see that in '23, we grew 18% of sales and in '24, 7% in reported numbers. If you're doing comparable currencies, it's even more. So I will say we have delivered in terms of growth. And if you look at the profitability, we are now clearly within the target range that we communicated of 12% to 15%. If we move over to Industrial Service, here we said we should grow clearly faster than the market. And we have also managed to do that, both in actually '22, '23 and '24, and we have continued on the good history we have here with improved profitability within Industrial Service. And we are now clearly within the target range of 20% to 24%, as we communicated. If we move over to Industrial Equipment. Here, we said that we should grow in line with the market. And the reason for that as you can see is that we had some issues with profitability historically in this business, being between 0% and 3% roughly. So we focused on stability to stabilizing the fluctuating businesses and then on profitability to fix the profit of those weaker businesses within this business area. So we have grown in line with the market, and we have delivered on improving the profitability. So we are now also stable within the 8% to 10% profitability range that we communicated as a target. Port Solutions. And here, you can see we had a target to grow clearly faster than the market, and we have had tremendous top line development in Port Solutions. In '23, we grew 35%. In '24, 19%, so really strong top line development from Port Solutions. And with that, we have got good volume leverage, and we are now clearly within the target range of profitability here as well. 9% to 11%, and we are at 9.6%, rolling 12% now. So basically delivered clearly ahead of the time line we gave on our financial targets. We have also executed well on our climate agenda and raised our ambition level. So we had the science-based target for own operations and for the value chain to reduce the absolute greenhouse gas emission by 50% to 2030. That was already achieved for our own operations in 2022. So we then came out with updated target to have carbon neutral on operations instead by 2030. Our progress here is minus 56% so far against the baseline year of 2019 for our own operations. And a clear thing that we work with here is, of course, our own car fleet. That is a big contributor of this. In the value chain, we are minus 12% currently versus the baseline year of 2019. And here, our focus is, of course, on generating a good pickup of sales of our BEV vehicles, especially within the ports mobile equipment. We have almost a complete offering, and I know Tomas will cover this later. Everything else is already electrified. So getting a pickup of customers buying the BEV solutions instead of the classic diesels is important to be able to achieve our 2030 target here as well as buying low-carbon emission steels in our procurement department. But still, I think we have good progress. And we have -- in addition to this, then committed to set science-based net zero target by 2050 to complement our near-term targets, the 2030 targets. We're also proud of our sustainability ratings. We are getting really good ratings in general from all the different institutes. And this year, we are happy and proud that we also got an A-list rating from the Carbon Disclosure Project. I then move over to our safety performance. And as you can see, the long-term development is quite okay. But we have not achieved our target of being less than free in our total recordables rate. And this is not good enough. And if you look also in '24, it went the other direction. So it's basically at the same level as 2022. So that target remains also going forward. And we have done a lot of actions. But if you have worked in operations, you know that safety is culture, and it takes time to change culture because it's how we do things, it's how we think, it's how we react without thinking. So lot of things has been done, a lot of actions has been taken that will improve going forward, but it takes time. So we have, for example, increased the field presence of our HSE managers, also our supervisors. We have systematically started to move from having a blaming culture and trying who did wrong to having a learning culture and then spreading that throughout the organization. We have increased the amount of lead indicators also having a safety league tables to ensure that we understand where do we have the highest risk, where do we need to focus our actions. And having also more granular analysis of the cases that we have, focused actions, focused initiatives around vehicles, for example, around lockout, tag out, try out and those kind of things to ensure that the high-risk areas we have a lot of focus on. We have also rebuilt the HSE organization. We have a new Vice President for the group and also several HSE directors. So we are doing the right things, and we will see the effect going forward in a good way because our people is the most important asset we have. So with that, I think I have summer is a bit of the recent history since the last Capital Markets Day. And we have, as you can see then, improved our performance structurally and also through performance management control. And I'm sure that we will continue to execute in our different businesses on our strategy to make sure that we continue to grow our beautiful company and also improve the profitability of the company. And I'm confident with Marko Tulokas and the leadership team and also the whole Konecranes organization that we will continue on a great journey. We are, as it says in the headline, very well positioned for the future as a group, and we are strong and stable. So with that, I will then invite our CFO, Teo Ottola, to talk more about the attractive growth opportunities for the group going forward and also our strong balance sheet and what kind of financial flexibility it provides us. So please Teo.

Thank you, Anders. Good afternoon, everybody. Future ambition. But actually, before we move into the future ambition. So we have a couple of slides that we wanted to share with you. The first one is actually in relation to our cyclicality and the other one is in relation to our profitability. This is the slide on cyclicality. And we have been regarded and rightfully so as a cyclical company. When we take a look at the past couple of years, our resiliency towards economic cycle has actually improved. This slide is on industrial businesses. So in the pictures, the columns are our industrial businesses order intake rolling 12 months basis on the left-hand side, on a monthly basis, on the right-hand side, on a quarterly basis, but rolling 12 months order intake. The lines in the pictures are on the left-hand side, they are the PMIs, world, Europe, U.S. And on the right-hand side, it is the general utilization rates for our customers in general, both in EU and in the U.S. Tomas will happily discuss the similar kind of indicators when it comes to the Ports business in his own presentation. What does this tell us is that when you take a look at the time line early on, so the COVID impact where the macro indicators obviously declined dramatically. Our order intake also declined with a small delay. When the macro indicators, both the PMIs and the utilization rates started to improve, our order intake followed with the delay, which has usually been the model. Then somewhere there, let's say, mid '21, early '22, when the macro indicators actually started to deteriorate, our order intake did not decline, but stayed on a higher level. There can, of course, be various reasons behind this phenomena. One of them probably is that we have taken market share. The other one may be that there has maybe been pent-up demand as a result of COVID maybe longer than what people thought. But the third one may be that maybe our customers are actually accepting a lower utilization rate for their assets because of their needs for risk mitigation, say, nearshoring, getting rid of in component sources, et cetera, which might mean that you will need to build assets in more places where you have previously been as a result of then the utilization rate in the system going maybe down, but the CapEx environment is still being relatively buoyant. Of course, pricing is in -- is playing a role here. So inflation has impacted. But even if we carve that out, so the big picture still looks the same. Obviously, this is not a guarantee of the future performance. But of course, it gives a very good starting point for the next phase of the company going forward. The other topic that we wanted to show you is on the structure on profitability. This is actually a similar slide to what we presented in the previous CMD as well. So the columns again, are our sales volumes, either on group level or on the business area levels. The red line is gross margin percentage and the blue line is fixed cost to sales. And of course, if you deduct the blue line from the red line, you actually get our EBITA margin. And let's take a look at the businesses separately first. So Service, Industrial Service, a very consistent, steady, good development. Volumes have been improving. Gross margin has been increasing, and the fixed cost of sales has been decreasing as a result of that, of course, profitability has been improving on a steady pace. When we take a look at the Industrial Equipment, so the year '22 was actually a little bit difficult from the deliveries point of view, we can see a drop there. But since then, gross margin has been increasing a lot. Volume has not actually increased that much. So we have been more focused on profitability in Industrial Equipment and in the other 2 business areas. Gross margin has been improving as a result of our own optimization activities. So it is self-help internal productivity improvement. And when fixed costs have been under control, so the profitability has improved there as well. On the right-hand side, the Port Solutions. So there, '22 from the volume point of view was low. Since then, volumes have been increasing a lot. Gross margin actually has been relatively stable. It depends, of course, a little bit on the product mix as well, but fixed cost to sales has been decreasing over the years -- over the past couple of years. So this is quite a lot an operating leverage gain that we have seen in the Port Solutions. And then when you take that over to the group level on the left-hand side, so you can see the volume improvement, which has been significant gross margin improvement and then fixed cost of sales going down. Of course, pricing has supported our profitability. Net of inflation pricing has been giving benefits during '23 and '24, which is partially visible in the volume, of course, as well. Then we can actually move more into the future. And on this slide, maybe it's best to start with the right-hand side of the slide, total material handling growth between the years '24 and 2030. This is a consultancy estimate. What it shows is that the nominal GDP growth would be more than 5% and the real GDP growth would be more than 3% on an annual basis. This is, of course, the total material handling business. And not all of that is relevant to us. But if we take a look at it from the hoist and crane point of view, so we can conclude that even if the percentage estimated percentages are somewhat lower than these here. So they are still in line or slightly higher than the GDP estimates. So why is the material handling growing faster than the GDP, according to this estimate. There are megatrends that are supporting this business. We will talk about those in a while. But maybe the biggest single individual topic there is that our customers have significant productivity improvement needs. And for them to be able to get those, there is a need for automation, connectivity, and that will be driving the CapEx cycle. So that more will need to be invested so that productivity can be improved. But we will talk about those a little bit later on. On the left-hand side, we can see our customer portfolio, which is wide. And as a result of that, we feel that we are in a good position to take advantage of the growth going forward with the exposure that we have to so many different industries. Then about the megatrends. And we have listed 3 here: technological development, geopolitics, sustainability. I only mentioned a couple of words about the technological development. So the customers need to improve their productivity will lead to need for automation, digitalization, that will drive, let's say, CapEx needs going forward. On the geopolitics, so change in trade routes, change in supply chains will actually mean structural potential for material handling, because maybe factories are going to be in different places in comparison to where they have been. And maybe new train routes will need to be established to serve those factories, shipping goods from different places to maybe the places where the consumption takes place. So there is a shift happening in terms of near-shoring, train shoring, regionalization that will potentially at least support our type of businesses. Sustainability, obviously, a trend as well. We are talking about electrification, safety that are important to us, but also definitely to our customers. Electrification, of course, is linked to the technological development that is clear. And also geopolitics is in a way linked to technological development because if nearshoring means that, that factories will be taken back to higher cost locations. So of course, it only underlies the need for automization and as the productivity improvement. So these are kind of supporting each other as well as megatrends. We have 1 slide on technology development separately and then another one on geopolitics. This is the one on technology. This is a very busy one, but the key words in this one are connectivity and data. So now currently, the situation, of course, is that there are lots of connected equipment already. That is great. It helps us in doing, for example, maintenance much more efficiently. It helps us to communicate to the customers that how they are using their equipment and all of that is good. Now going forward, it might very well be that different types of equipment will need to be connected as a fleet so that these machines form a connected functional fleet. And when you have different types of equipment connected together, so then you start to receive enough data so that you can actually steer the process in the manufacturing execution system automatically with the help of software remotely, et cetera. And this is, of course, something that would be a very big productivity improvement for our customer base, and they would be looking for that kind of productivity improvement. It is clear that this requires from whoever who is going to arrange it requires system integration skills, which is definitely not easy. But we feel that as a technology leader in our own area, we are in an excellent position to help our customers on this journey. The slide on the geopolitics is at least as busy as the previous one. The main point here, there are 2 main points. Maybe one of the main points is that the exports of goods on a global scale is expected to grow. This estimate is from 22 to 32. So there is a, let's say, good real growth on an annual basis here included, and that is maybe no news. Maybe even the more exciting part of this slide is the map there in between. And these are trade routes between different parts of the world, also a consultancy estimate, obviously. And the color of the arrow or line means that if it is red, so the trade is expected to decline by 2032 in comparison to 22. Any other color means that the trade is expected to increase. And then the width of the line means that the wider it is, the bigger is the change. And if we quickly interpret this, so he is saying that the trade from China to the U.S. would be declining, trade from Europe to Russia would be declining. Trade from EU to the U.S. would be increasing significantly and particularly intra-Asia dealings would be increasing significantly. This was done before the tariff discussion. So of course, and it's an estimate, nobody knows what will happen. The reality is that companies will need to be prepared for these kind of changes and build their own resilience and flexibility in terms of these changes. Again, from this megatrend point of view, we feel that we are in a good position to take advantage of this one and to help customers in this one because we have a supply network and a presence that is global. We have listed a couple of examples what we are doing to respond to this one, as we have been discussing also earlier, we are establishing a U.S.-based manufacturing network for our Port Solutions. We also are reducing our dependency on single source components, be it in whichever country. And then, of course, as a result of the tariff discussion, we obviously have a very dynamic tariff tracking process in place. Then to the targets. And we announced the targets this morning. And Anders already actually talked about the other business targets, let's focus on the financial targets in connection to this slide. So the structure of the target setting is very similar to what we had already previously. We have a growth target and we have a profitability target. Growth target on group level is that we want to grow faster than the market, and we are defining the market as nominal GDP growth. This is the same as we had previously as well, growing faster than the market. Our EBITA margin, comparable EBITA margin target is a range between 13% and 16% as soon as possible but no later than in '29. So this range is 1 percentage point higher than what we had previously. We said previously also as soon as possible, no later than '27. So 2 years has gone since the previous CMD. So we have also added 2 years on the time line. The logic of the range, however, is very similar to what it was in the previous market setting as well. So the lower end of the range, 13% means that in a downturn, we should not be below that margin. And then the other range of the margin means that if we are higher than 16 as a result of a very, let's say, favorable market conditions, for example, it might not be realistic to expect that we could be there on a long-term basis. So exactly the same logic as we had in the previous target setting as well. Regarding the other business targets, reducing absolute scope-free emissions. This is something that Anders already talked about as well as carbon neutral owned operations and also actually the TRI rate of our target being below 3. So those continue, of course, to be within our targets going forward as well. On the capital allocation, we naturally want to make sure that we have enough funds for CapEx needs that the business requires. We also want to pay stable to increasing dividend over the cycle as has been the target in a way also earlier. And then we want to focus on bolt-on acquisitions to give more scale to the business. Then when we take a look at this target thing that was now on a group level, a little bit more on the business area level and start with service. Sales growth clearly faster than the market and an EBITA margin range between 21% and 25%. So the growth target is the same as we had clearly faster than the market. The profitability range, we have increased with 1 percentage point. So it was 20 to 24. When we take a look at the opportunity in service. So of course, we have a very good strategy. We have had very good progress. There is the outsourcing potential existing, which we can utilize to get growth. When we get growth, we can get operating leverage and also by continuing the continuous improvement that we have been also doing this for, we are comfortable in raising the margin target. When we take a look at the Industrial Equipment, sales growth in line with the market and comparable EBITA margin range 8% to 11%. So from the growth point of view, this is the same as we had to grow in line with the market. Within Industrial Equipment, we still have product categories and business units where we clearly want to focus more on profitability than growth. We do not want to grow at any cost. We want to grow profitably, and that's why we are a bit more cautious here in the Industrial Equipment growth target. The EBITA range, so we actually have increased the upper end of the range, but not the lower end. So the previous was 8 to 10. And the reason why we have not touched the lower end of the range is that in this business area, we are more vertically integrated than in the other 2. And we -- and of course, in a downturn, we will need to defend the lower end of the range, and we are not comfortable in raising that target yet, even though we are increasing the upper part or upper end of the range. Port Solutions sales growth clearly faster than the market and EBITA range 9 to 11. These are exactly the same as we had also before. Again, taking a look at the Port Solutions. So the market is maybe changing as a result of the geopolitics, nearshoring, French shoring, those kind of topics. We obviously want to take advantage of those opportunities. It may actually mean that the product mix will be more towards heavier equipment than what we had thought earlier. And as a result of that, even though there is growth opportunity, we do not think that it's the right time now to increase the margin range from 9% to 11% because of, for example, the product mix topics. We also have made this kind of comparison table, a little bit illustrate the differences from the sort of ambition level for the different businesses. Many of these topics were covered already. Maybe a couple of comments on the percentage of comparable EBITA. So this percentage service 55 industrial equipment 20 and Port Solutions 25. There's that how much of the EBITA comes from the respective businesses. Service is still more than 50% of total. However, interestingly, if we take a look at the development from '22 to '24, so the euro amount improvement comes almost equally from all of the business areas. So in a way, when you take a look at that. So of course, in '22, service was even a much bigger part of the total than what it is at the end of '24. Mandate is referring to the growth ambition in line what we discussed. So Industrial Service and Port Solutions clear growth mode. Industrial Equipment more still maybe on the profitability, even though there are businesses within Industrial Equipment, where we would definitely like to grow. But as a whole, so it could maybe be more on the profitability development side. M&A potential industrial service, just bolt-ons. Of course, we want to get geographical reach. We want to get installed base customers, technicians. Bolt-ons work well for those purposes. Industrial Equipment, it's adjacent and core technologies. When we take a look at the technological development and the need to serve our customers, for example, from this connected fleet point of view. So maybe technology is something to focus on to help us become able to offer even a wider offering to our customers. On the Port Solutions side, we have both bolt-ons as well as complementary technology. So bolt-ons could work well for port services, complementary technology. For example, if we are missing products in our product portfolio, we could clearly think of acquiring something like that. Investment appetite. So this is, of course, reflecting in a way, logically also the growth ambition high for Industrial Services and Port Solutions, maybe a little bit more focused for Industrial Equipment. But having said that, we feel that we have the adequate funds and capabilities of, let's say, investing in all of these businesses to the extent that we see fit from the business development point of view. This is actually also a similar slide than in comparison to what we showed in the previous CMD. So it's taking a look at the profitability development on a group level, a little bit further back to the history and then again also according to the target setting going forward. And if we now take a look at this from 2019 onwards until '24, so we have been improving the profitability by roughly 1 percentage point basically every year on average. Of course, there has been a little bit of volatility, but the improvement has been there. When we take a look at the target setting that we have now and even if we were aiming at the higher end of the target range, 16%, so this from now until '29 this would basically mean about 0.5 percentage point improvement on an annual basis. So this is more cautious than what we have actually materialized in the past. But there are logical good reasons for this. One of them is that when we took a look at the volume picture and the order intake in '23, '24, so we can see that from the underlying volume point of view, we have been in a good situation, which has supported our profitability and operating leverage. So that is, of course, one thing. So we have had a nice volume environment. The other one, of course, is that we have been doing a lot of efficiency improvement internally. We have optimization programs. We have been changing the product platforms. We have been fine-tuning go-to-market, particularly, of course, in the Industrial Equipment the more improvement you do, the more difficult it is to get the incremental change by doing more activities. And of course, we feel that there are opportunities still, but maybe it is tougher than what it has been. And the third one then, of course, is that as there are new opportunities in the world, we want to be ready to take advantage of those ones both organically and inorganically. And these may at least temporarily then mean that the profitability improvement pace may be slower than what it has been previously. Then we have some slides on the cash flow and balance sheet as well. And if we start with the cash generation capability of the company, this actually was also in the previous CMD package. I think what has happened since '22 is that we actually have continued to be able to have cash conversion on higher than 100%. This is good. Of course, the main reason behind this one is that our CapEx needs have been lower than our depreciation and amortization needs. We do not expect that, that would be changing in a big way in the near future, but that is, of course, the underlying reason behind that. And of course, also that the net working capital has developed well since '22. The good cash flow then, of course, has meant that our net debt has been reducing significantly. We -- at the end of '24, we are on a very low net debt level. On the right-hand side, the midterm target of net debt of gearing less than 80% is maybe only more to signal that and indicate that with our business model, with our cash generation ability, we are of the opinion that the company can easily survive of course, survive also continue to operate normally -- with a gearing target or gearing level of 80% without any issues whatsoever. The net working capital has been developing well also since '22. We had a difficult year of '22 as a result of the delivery issues. Since then, net working capital has been more on a stable level, maybe even surprisingly stable over the years and quarters. And now we are of the opinion that we would be able to operate on net working capital level of less than 10% of rolling 12-month sales. We previously said that less than 12%. Now we are tightening this target also a little bit. Having said that, of course, then it is good to remember that this is fluctuating. So it can easily be also above 10% depending on the quarter that we have, but the overall performance level that we have, we think we have been able to improve from where we were a couple of years ago. We pay a stable to increasing dividend to our shareholders as one can see in this picture. So then, of course, the payout ratio before '23 was on a high level. Now it has naturally been on a lower level as a result of the profitability increasing and improving more than what the dividend has been doing. But we have been progressing in line with the dividend policy. Then also a slide on capital allocation priorities, as already mentioned. So of course, we want to make sure that we have adequate funds for capital expenditure needs that we have. We definitely want to pay dividends according to the dividend policy and then we want to do acquisitions as well. And then, of course, in -- on top of those, we also have the other category as in this slide. So share buybacks or extra dividends. And on the right-hand side, we have then the uses and sources of cash. This is the time period between 2020 and 2024. And from that, what we can see is that actually, we have been -- of the incoming cash flow, we have been using some 10% for CapEx, some 10% for M&A. We have spent some 30% on dividends and then the remainder on so-called cash items. And these cash items then, of course, it includes net debt reduction, but it also includes lease payments, so because of the leases being categorized as a debt item according to the IFRS. Regarding the acquisitions, one can note that we have done relatively few of those over the years. We would have wanted to do more, but we also have wanted to be very disciplined with the valuation. So it hasn't been very easy to find targets where we would have been comfortable in being able to create enough accretion for us to go after those. We will continue on trying to find good acquisition targets, and our ambition is to do more acquisitions than what we have done. In case we are not successful in that one. So then, of course, we have the so-called other category, including share buybacks and extra dividends with which to return the money to the shareholders. Then I will summarize with this slide, Konecranes as an investment. So we have been talking about already many of those teams. The business area heads will be talking more about these teams, leader in technology, helping us from the megatrend point of technological development, strong market position in all of the business areas, and the gentlemen will be talking more about that definitely in their own presentations. Attractive opportunities for growth. For example, the technology as well as the geopolitics as we discussed. We just increased today the profitability target from 12% to 15% to being 13% to 16%. So that box covered by that one. Strong financial position and dividend. You can see from the balance sheet that we have flexibility. We can employ capital if we find good targets for that. And then we have a very clearly communicated long-term commitment to sustainability. I thank you at this point of time for my own presentation point of view and we will be having Q&A right after. Kiira and Anders will Join me here.

Thank you, Anders. Thank you, Teo, for your presentations. And now it's time for Q&A, as they already said. [Operator Instructions] And we have already received a few questions. But I was thinking that we might maybe start with the questions from the live audience. So would anyone have any questions? Tom, please?

Yes. This is Tom Skogman from DNB Carnegie. I would like to ask Anders, you presented at the last Capital Market Day, a route to decentralization of Konecranes. So where are we in that? What remains to be done? Have you kind of canceled some plans, some ideas? And how can investors kind of trust that this will continue when you are leaving?

Thanks, Tom. Can you hear me? Yes. Good. Yes. Thanks. Yes, we have progressed quite well on the decentralization, especially in giving authority and accountability to the businesses. I think that's the key thing. And then where people report is secondarily. We have moved a lot of people also from the sort of central functions into the businesses. And I think or I know we have a team in the leadership team who are completely united and that this is the way to run the company in the most efficient way. So I'm confident that Marko and the leadership team will continue to that journey. But it needs to be taken in the right pace so that you have leaders that can also take on the expanded responsibility, which is incorporates.

And clearly, the financial performance has been very good, but is there something that you would have liked to achieve as you are leaving now?

I think one of the key things, and I think I mentioned it also in my presentation, which I have always focused a lot about in my career is the safety target. And I'm really not happy that we haven't fulfilled that target. But I'm proud of the change that we have done in being a more performance management-based company, being able to deliver on what we promised in terms of financial targets. And at the same time, we looked at employee engagement in the team. We have a dramatic improvement of employee engagement in the last 3 years. So I think that we are really proud of what we have achieved, but we are all kind of disappointed where we are in terms of the TRI rate.

Then I think that Panu had a question here in front. Yes.

It's Panu Laitinmäki from Danske Bank. I have 2 questions. First one on the financial gets. You had above-market growth in Services and Port Solutions, which is kind of clear, but is it the same above-market ambition that you have as you had 2 years ago? I mean, do you like to grow more in ports than you expected 2 years ago and same for the services?

I would say so that it is very similar to -- in service than as what it was also earlier. It's not different in Ports either. But of course, when we take a look at the ports market as a whole, so this geopolitical discussion, the tariff discussion, the encouragement for let's say, localization of certain manufacturing, et cetera. So that is, of course, creating a new angle to this one as well, which will need to be taken into consideration. . So that there are may be more opportunities. I mean, if things go this way or that way that we can then focus on. But we have not consciously in a way defined, but now if it was x percentage, now it is y percentage above. And in Ports, in particular, we will need to remember that it is volatile from the order intake point of view, and it can then also be volatile from the sales point of view.

Just a second question on capital allocation and CapEx. So can you be more specific, what would be the CapEx level be going forward? Is there like a pressure on Port side? You mentioned more local production in the U.S. and so on.

The overall CapEx level has been fluctuating there, say, between EUR 45 million and EUR 65 million on an annual basis. Maybe it has been a little bit on the rise now during previous years. And we have a normal requirement, of course, of renewing the production equipment, et cetera. But as I said, we do not expect that we would be having a significant need or we would have a need to significantly increase the CapEx levels going forward when it comes to the so-called normal operations. Then when you are referring to the potential in domestic content, for example, and localization and those kind of things. So the primary idea is that when we go into new areas and create capability to, for example. So this would be happening with the help of partner networks. So that we would not invest significant amount of money on ourselves. We might need to do something, obviously, but not building significant -- a huge amount of new factories because the reality is that as long as you are talking about tariffs, for instance. So they can also change. They are now changing and they may change in the other direction as well. So it's not necessarily wise to tie yourself very, let's say, keenly on a model. But having said that, of course, I mean, there may be in the future, those kind of things that will require more. But we do not have those kind of things in the immediate future that we would have been deciding or would have decided or would be exactly now thinking about.

And then here in front? [ Sahal ]?

[ Sahel Ruch ] from KP Capital. Just a question on the 13% margin target in a downturn. Could you walk us through some of the assumptions as to how you'll get to 13% in a downturn, what assumptions you've made?

Well, we have done to be able to sort of conclude that one. And the models are, of course, based on, let's say, how companies usually do long-range plans, you have high scenarios, you have mid scenarios, you have low scenarios. And then you think that how your own market would be behaving and how your own sales would be behaving. And then above all, what are the, let's say, internal levers that you can utilize to adjust your capacity. And now we have done that modeling with the help of that one, we have come up with a range, what we have. It doesn't mean that if there is -- that we would be able to tolerate any downturn, I guess. And we have been talking about circa normal downturn. So -- and there is not an exact definition of that one. But of course, we are not bulletproof from the point of view that we would be able to defend in all the circumstances. But in, let's say, within normal fluctuations, we would be able to adjust own operations so that we would be able to maintain the 13%. That has been the logic. And that is also maybe a good bridge to the industrial equity, why we are not increasing the lower end there because as it is more vertically integrated. So defending and adjusting the capacity is maybe more complex than what it might be in the Port Solutions and in the service businesses.

Would that be you assume a sales about 10%, 15%?

We do not unfortunately want to give a certain percentage range. But let's say, within normal fluctuations than what we have now lately seen.

I will now take a couple of questions from the webcast chat. So the first one is for you, Teo, and it says here Teo, and it comes from Johan Eliason from Kepler Cheuvreux. So Teo, you have been with the company for a long. Why did the margin improvement happened now and not a decade ago? Was it the Demag acquisition or the inflate period, allowing for significant price hikes or Anders arriving and changing this before something else. So you get to choose.

Before you answer.

Of course, it was Anders arriving and changing everything. That is, of course, the right answer. But there may be other answers in addition to this one as well. One of the answers, which is may be relevant is that when we take a look at the MHPS acquisition that took place also relatively a long time ago, '17 or so. So we maybe could have done many of the activities that we have now ended up doing in '22, '23 and '24. So we could have done earlier. And then the reasons why we have not maybe done those earlier, so they have been referring to that we have maybe not been ready from the system landscape point of view. We were not capable of implementing our systems early enough. We have maybe been a little bit worried about the volume impact if we change product platforms, for example. But now when we take a look at the situation, what the optimization program in the industrial equipment and also service, by the way, has been looking like, so a reduction of number of platforms, streamlining go-to-market. So these are, of course, very essential sort of levers in improving the profitability. The inflatory environment and the price increases, I think that it is correct from the point of view that we have been able to make net of inflation pricing benefits in '23 and '24, definitely not in '22 because we were late in some of the price increases, but in '23 and '24, that has been the case, and it has supported the profitability. And then, of course, understanding the company and changing many things.

And then let's take another one from the webcast chat, and this is now then the last question for this Q&A. So it comes from Antti Kansanen from SEB. Your ambition is to do more acquisitions, but closing deals with reasonable valuation has been a challenge. Will you be more willing to pay higher valuations going forward? Also, how much role the business units or business areas and deciding on acquisitions versus how much is it a group level function or exercise?

I can start with the last part of it, and it's completely driven by the business areas basically. It's not driven by group at all because I don't believe in that. So it's driven by the business areas. And then Teo, you can take the first part. .

The valuation part.

We want to continue to have a disciplined approach into the valuations. That is clear. And we will just need to try harder and do our homework even better so that we can find the synergies in our plans that would then support doing the acquisitions. But what we definitely want to continue to be a disciplined recipient actor in the M&A area.

Thank you. To keep up with the time line, we need to now end this Q&A, but all the questions sent through the chat function, so they are here, and we will revisit them then maybe later on. And no, it's time for a break. So thank you, Anders, Teo. And we will continue again at quarter 2. So see you then, and that's local time quarter to 2. You gave time. .

Thank you.

Thank you. [Break]

Welcome back from the break. Our next speaker is Fabio Fiorino, Business Area President, Industrial Service. Welcome to the stage, Fabio.

Thank you, Kiira. Well, good afternoon, and on my behalf also welcome to CMD. As Kiira said, I'm Fabio Fiorino, Business Area President of Industrial Services. Once again, please note the important notice. So let's start with an introduction or maybe a reintroduction of Industrial Service. Our mission is to provide industry-leading life cycle services for all types and makes of industrial cranes and hoists to improve the safety, productivity and sustainability of our customers' operations. It's been our mission for quite a while, and I imagine it will be going forward as well. We have a diversified agreement base, meaning that half the equipment that we work on are from third parties. The other half, of course, are from Konecranes family of brands that could be Konecranes, could be Demag, it could be other brands that we may have acquired over the years. We have the largest and most extensive service network present in 50-plus countries. We're driving towards sustainable operations, electrifying our service fleet, rightsizing our service fleet, applying smart route planning as well. We have over 4,000 technicians around the world. We're also a leader in the next-generation digital services as a couple of examples up on the slide there, our Konecranes portal that we fully launched this year. It kind of brings together the various portals we had before to have a more unified streamlined digital experience. We had our Konecranes store and various other areas. Also, the predictive maintenance engine is another good example that auto generates service leads, but also, of course, it improves the uptime of our customers as well. Maybe switching gears to our financials. As you know, we've had a pretty good track record of financial performance. We are now within our financial targets. And of course, our goal is to maintain and expand that through the cycle. You could see quite clearly the EBITA margin expansion that we've had recently and that quite frankly, goes back, I believe, all the way to 2012 or 2011, we've had quite a steady expansion. It's been driven mostly by sales growth and, of course, improved margins. I think Teo showed that before as well. And underlying that is agreement-based expansion, the quality of the base has also improved, and I'll talk a little bit about that later on. We've increased agreement retention, improved customer experience and satisfaction. Of course, that, of course, helped in the retention. We've been able to apply dynamic pricing staying ahead of inflation. We've improved productivity over that period. We've been able to exercise cost control. And of course, we've had some successful bolt-on acquisitions, perhaps not as many as we would like, but they have certainly added to our business. Perhaps if we look at the financial performance from a different angle, we've also had consistent quarterly sales and EBITA growth year-over-year. While at the same time, there's been sequential quarterly figures may be affected by seasonal factors. The Q1, usually the lowest sales in the year, generally, that's when we kind of implement our annual price increases. Then Q2, we start to have the salary and wage increases and price increase to kind of take effect. Q2 generally is a little bit higher than Q1 and then Q3 and kind of Q2 in terms of sales kind of go back and forth. And there in Q3, we had the holiday period effect, especially in EMEA and also supported by lower personnel costs. And then Q4 traditionally has been our highest sales, but a little bit the mix, there is a little bit unpredictable where you get between the mix and you have project deliveries and the invoicing of the base sometimes and, of course, some end-of-year items. But the message here is that when you look at the EBITA margin expansion that we've had every year pretty consistently within the year and when you're comparing sequentially, there really isn't a real pattern. And I know we've had and the reason we also have this up here is that we've had some questions about that, sequentially, how to interpret the EBITDA margin and service. And I guess my answer to that is perhaps is not -- doesn't make a lot of sense to be too concerned quarter-to-quarter because there really is no pattern. As you can see, each year is a little bit different with the various dynamics. But over -- as you -- as we've seen before, year-over-year, we have consistently expanded the EBITA margin. Now perhaps we can talk a little bit about our operating model. As you know, we've had a single industrial BA for about 2.5 years from mid-2022 until the end of 2024. We've been quite successful with aligning getting strategic alignment between service and equipment. We've also been quite successful in bringing Industrial Equipment into the target range in terms of profitability, at the same time, continuing the great work in service. So we're all very proud of what we've been able to accomplish. We had, of course, a great team, part of that team, of course, was Marko and Tomas that are going to be following me. So we did a really good job as one industrial BA. Now it's a time that we can refocus, get some more focus into service and focus into Industrial Equipment. And we also -- we don't want -- we want to keep the good stuff that we did as one BA, and part of that is having a let's say, a single customer-centric front line that includes both equipment and service. So that's one thing that we have not changed, even though we have 2 BAs, our front lines remain to be one single customer-facing organization, both in the direct business, the Konecranes, call it Industrial Service business, what we call beta business as well as our component brands or indirect business, what we would call our Alpha business. And of course, these front lines are supported by, we call it, business unit service, which would be the product development, the product management, the parts supply procurement, the technical support, the modernizations, et cetera. And of course, we have the common business area functions that any other business would have. Some of them are dedicated to the Industrial Service BA, Others we may share with Industrial Equipment or other parts of the corporation, whatever is most cost effective, of course. Now if we switch over to the trends and underlying demand drivers. Many of these are -- remain the same. Of course, safety, productivity, sustainability. They align very much, of course, with our mission. Outsourcing, of course, is quite supportive of the Industrial Service business. Then you have a couple of a few that are more prominent now. Supply chain realignments. I think Teo spoke a little bit about that, of course, as due to the geopolitics and trade policy, we are, of course, seeing manufacturing realigning their supply chains, whether it's onshoring or french shoring or near shoring, whatever you want to call it. It can certainly be on the long term, even though perhaps the immediate situation maybe brings a little bit of a headache to us. In the long term, this could be good for the business. It could be quite supportive, especially if manufacturing moves into areas where we have a stronger presence or into areas where a professional maintenance approach is more accepted. So that's one trend that on the long term, I think, would be supportive. Digitalization, automation, of course, again, everybody is seeking for increase productivity, we can, of course, help our customers in that area in automation through either modernization of the equipment, in digitalization and connectivity, we can also do other retrofits, et cetera. So again, that's another area of opportunity. Artificial intelligence. Of course, that's an area that everybody is looking at these days, and I'll speak about that how we are applying also AI in our own business. And the last one is a little bit new from our own industry consolidation, meaning there are -- as you probably know, a couple of our large competitors are looking to get married. We also have private equity in some markets, driving consolidation in some of the frontline businesses like the crane builder, crane service business, that perhaps could be an opportunity for us down the road as well. So the trends, I would say, that are largely supportive of the business. Now if we talk about market size and market share, we have not really changed our -- the numbers in the last time I think I presented in about a year ago. It's not a perfect science to try to figure out the industrial service market or industrial service market share. So probably it's counterproductive to keep doing that over and over again. But the real message here is that we're focused on increasing share in addressable markets and most profitable market segments. Our service footprint covers the major markets. You can see that in APAC, we have the lowest, let's say, total market, but our addressable market share is much higher. There are places, of course, places like China and India, parts of Southeast Asia, where parts of them are not yet mature, they may be one day. So there are large parts of those markets that are currently not addressable due to let's say, the cost or the maintenance practices in those markets. In EMEA is, of course, much more of the EMEA market is more addressable. But of course, there are some countries there that we cannot or choose not to do business in as well. And Americas, it's probably the one that has a larger addressable market, especially in North America, and it's probably the one that we traditionally have had our strongest market. Then what is our ambition? Our ambition is to raise the benchmark among industrials. So what I mean by that, I think we are already the leading crane service company, if you would. But we compare ourselves to just crane service companies, I think, in terms of service, we want to compare ourselves and set the benchmark when it comes to Industrial Service companies at large. We're building our business on really 3 pillars: customer agreement-based focus, technology leadership and continuous improvement. We have been doing this for quite a few years, and I think we will continue to go in the same path. It has been -- has worked very well for us. So the target, as was mentioned before, is to have sales growth clearly faster than market. And as we mentioned, we have updated our EBITA target to be within 21% to 25%. So let's talk a little bit about how do we get there. As we know, the agreement base underpins about 75% or 85% of the total service volume. And what do we mean by agreement base? Agreement base includes inspections, preventive maintenance, predictive maintenance, remote monitoring. Sometimes we -- in our agreements, we may include retrofits and repairs depending on the type and size of the agreement. But that's -- the agreement base is what drives pretty much the rest of the business. 20% of sales are what we invoice of the agreement base. Then 30% come from what's corrective maintenance, the repairs that are needed that have come out of those inspections that predictive maintenance or preventive maintenance, et cetera. Those are handled by inspectors, technicians and inside sales. It's really advice based on the findings or condition monitoring. The quicker we are able to turn these around the better. We are also using AI to drive lead generation. Then another 25% of the business is from retrofits, consultation services, mods, lifting equipment. And this is a little bit more consultive selling analytics-driven lead generation, although we're also able to sell more of the retrofits now from the inside as well. And the last piece and a very important piece, 25% of the sales are spare parts and accessories. And those spare parts do include the spare parts that are sold through our indirect channel as well through what we call our Alpha brands. So how do we drive agreement-based growth? Now I think it's important to point out that the value per asset and agreement profitability are really prioritized. Not all assets are created equal, not all agreements are created equal. We want to focus on those that, that bring the greatest return for ourselves and we can best align ourselves to our customers. We've had about 6% growth in our agreement base in comparable currencies. At the same time, our agreement value per asset has grown about 8%. So that's what we mean about improving, let's say, the quality of our base. We -- there's quite a difference between an asset that's a chain or is on an asset that's a waste-to-energy crane. So how do we drive agreement growth? Well, easy. One, increased market coverage, of course, add new agreements, sounds pretty straightforward. And we do that by having a differentiated approach by customer segment. And I'll go into that and having dedicated resources by those segments. We also want to improve sales and market efficiency, be able to expand our existing agreements. We are doing that by evolving our sales model, renewing our processes. Three, we want to enhance the customer experience in order to retain more agreements. Of course, we can retain more agreements, reduce churn also that will overall then drive growth. And we're addressing that by improving our digital experience. I talked about the unified customer portal, implementing smart planning, our next-generation parts delivery. And I'll talk a little bit about that. But again, improving that overall customer experience helps retain more agreements. Last but not least, is to drive operational excellence to be able to deliver and invoice the agreements that we do have, and there it's important, of course, to have the right technician workforce focused on the recruitment and development and retention, create, improve the productivity of our technicians as well through the mobility tools we provide through the support that we provide to them, et cetera. So maybe start back with the market coverage and talk about the segmentation. Our differentiated approach by customer segment enables our growth ambition. Kind of in a simplistic way, if we look at the customer segments, we have this volume segment, right, like local companies with perhaps noncritical lifting needs. But this is a large segment. There's a lot of small companies out there. Then, of course, you talk about mid and top segment where you have regional companies, perhaps with a mixed equipment and then you have maybe large and global companies with critical equipment. A little bit of a simplistic view, but it's pretty close to reality. And we have service programs that are adapt to each one of these areas. The volume segment are really looking the inspections, preventive maintenance, get it fixed, whereas when you get into the larger, more sophisticated buyers are looking for more asset management services, they're looking for that preventive, predictive maintenance services. So the strategy is for the volume segment, simplification, right, and streamline the consultation, customer self-service, efficiency and sales and delivery, cost competitive offering. And then, of course, with the higher segments, we want to have differentiation, use the account management and dedicated resources, comprehensive agreements, digital services, predictive maintenance, tailored solutions based on the application and the industry, more about fleet asset management services, specialize more advanced services. So that's kind of how we look at the entire, let's say, market. Now if we take that thinking and look at our existing agreement base and our existing customers, and we segment them into these 4 quadrants. If we look at the screen and select what we would call here or does this large volume segment, right? 53% of the asset we have in our base belong to this just what we would call screen and select customer, these volume customers. And here, that's where we -- again, we optimize the offering and the sales and delivery process to match what those customers need. The -- on average, it's about EUR 3,000 per agreement when you're looking at that segment. Then we have a very important segment, which we call PROTECT, and those are customers that have a high current value, but perhaps not as much of a growth potential. And 12% of our assets fall into customers that we would call PROTECT. And the value of an agreement there is EUR 27,000 per agreement. You see quite a difference from this kind of volume segment. Then we have a very important segment, what you call priorities. These are priority customers. There's a high current value, but also a high growth potential. And these -- the average agreement here is about EUR 26,000 per agreement. And there's a really interesting other segment, which you would call develop. These are folks that perhaps the low -- the value today is kind of low, but have very high growth potential as well. And you can see these are EUR 8,000 per agreement. And that's about 15% of assets followed that category. So there's no reason, for example, that the EUR 8,000 per agreement shouldn't turn into EUR 26,000 per agreement or more. And our goal, of course, is to take those developed accounts and develop them by definition and turn them into priority accounts. Screen and select, there's still opportunity there, but we got to have the right to optimize the approach to sales and service delivery and to the offering. And protect, of course, we want to make sure we keep those folks happy. So there's plenty of opportunity just within the base. This is just the segmentation of our current customers. Sales and marketing efficiency. We want to continue to evolve our sales model to optimize the way that we take care of our customers from we do transactional business, we have agreement-based business, and we have more of the consultative and expert type business. On the transactional side, we want to try to keep that as much as online and use inside sales, but we're trying to leverage insight sales even more to support the outside sales force to be able to get a, let's say, more optimal and more cost-effective way to work with our customers. And all of this, of course, we underpin with sales and marketing tools, the use of AI, sales automation, lead generation, et cetera, right? And in terms of growing the agreement base, in particular, we have dedicated agreement sales folks. We also have dedicated key account folks that are dealing with these larger accounts. And of course, that cuts across as well service and equipment. And we have more expert sales force when it comes to the, let's say, the consultative-type services and the modernizations. Customer experience, I think we talked about this already. Again, we want to empower customer personnel with the right information at the right time, better the customer experience, the greater their retention. We mentioned already the customer portal, smart planning. When I have scheduled work that's aligned with technician proximity, the skill and availability, optimize the most efficient response time, then this next-generation parts supply, just in time delivery of parts. The smart planning and the parts supply go hand in hand, right? We want to get the right individual with the right skill with the right tools, the right part at the right time. And more and more, we want to be able to drop ship the parts to the customer even when we're doing that repair and installation rather than shipping it to a deep or a branch as we have, right? We're were moving more and more to the brick-and-mortar, and we're trying to deliver those parts directly to the customer or to the technician's home be able to remove that extra step of having to drive somewhere to go pick it up. It's obviously a more sustainable way of doing of operating, but also -- it also increases the productivity of our technicians, right? We want to make sure our technicians are spending time with the customer, spending time on the crane, not doing administrative work, not running around, driving around as well. So that's a lot of the part of why we're doing these things. And of course, that drives also the customer experience, right? They're getting people arriving on time with the right stuff, taking care of them first time right. And the operational excellence kind of flows through that. Tech recruitment, we have added a new talent acquisition process and system kind of brought it to this century. We're able to now do relationship management, analytics, automated candidate and job matching. So again, bringing in some new tools to be able to -- and this is -- we've done this company-wide is not just for technicians, but I think the area of technicians really benefits from new tools and our new approach, also mobility tools update. Again, the technicians live by their iPhone or whatever it might be in that country. That's how they get dispatched. That's how they get the information, that's how they connect. So the more that we can make that user experience, the more that we can bring the information to them in a timely manner, the more -- again, increases the employee experience, increases the productivity, also adding as well service technician AI assistance. So chat tools being able to give them the how to do, do the troubleshooting, step-by-step instructions, SOPs and all those wonderful things. Again, increasing tech productivity. So speaking of AI, we, of course, believe that AI will bring a new wave of productivity improvements as to many folks. And here's a few examples. In sales and lead generation, we talked before already about the predictive maintenance engine. We also want to take that to the next level and what we would call the life cycle engine. I'll talk a little bit about that. We also want to use AI in agreement renewals, in labor and travel hours estimation. And the service delivery, a good example is we're using AI to assist the product that we've had before, it's called, which does Crane runway analysis and I'll show an example quickly of that as well. We're also adding the service technician AI assistance and chat tool. As I mentioned before, that's going live in our June release. And then we have other things that are in the pipeline for AI to support service requests and optimize service planning and other wonderful things, also business support services, we're using AI and RPAs to enrich the data. We're also now launching this, again, in the June release to support our field service management and CRM users in able to and how to questions and be able to better use the tools in hand. And we've been using AI also for our voice of customer and help us go to analyze that data and point out to areas that we should be looking into. And so here, I know it's a busy slide, and I'm not going to go through all of this, but it's what we would call our life cycle engine right now predictive. Our predictive maintenance engine kind of focuses on one part of the entire life cycle of that asset and it's mostly in what I would say when something needs to be repaired or replaced, that's kind of where the predictive maintenance engine is focused on. But we can use similar tools. We could use AI gen analytics and rule-based algorithms to really look at the entire life cycle in putting together the agreement from the beginning to do it when it comes to renewals and optimizing that when it comes to the consultation services on the right retrofits to, to apply the right modernizations to automate, a lot of the quoting to suggest enhancements to agreements and so on. So this is kind of an exciting area, just taking that predictive maintenance to the next level to the entire life cycle. The other example that I mentioned was this railQ AI-assisted crane runway assessment. So the crane runs on a runway, which is basically rail on a supporting structure. And it's very important for the proper operation of the crane to have an aligned rails to be aligned to that supporting not to be worn and that's supporting structure to be in good shape. And of course, you can do an assessment of that and without using AI, but by using these more advanced tools, we have been able to reduce reporting times, improve accuracy, improve the visualization of where the issues might be. So here's another example of being applied to just one of our existing products and taking it to the next level. And I'm sure we'll be able to come up with plenty more as we go forward. So now as we can bring it to a conclusion, if we look at our service growth plan, I think actions are well underway. Of course, we want to have sales that grow clearly faster than market. And we mentioned all the pieces of the puzzle that will get us there, right? The market coverage, adding new agreements, sales and market efficiency at the expand agreements, customer experience, retain agreements, deliver on the agreements, new service products, kind of what I've shown before. And of course, we may have some bolt-on acquisitions and some geographical expansion. I think we -- we do have a proven business model. I think we've shown it for several years now. We have been driving continuous improvement. Now the key is to drive sales acceleration. So in short and in conclusion, really, we want to stay the course, but accelerate the pace. We are within our financial targets. As I mentioned before, kind of the pillars that we build on as this customer agreement base focus, technology leadership and continuous improvement. And then once again, sales grow truly faster than the market, comparable EBITA margin of 21%, 25%. And I guess now it's time for -- well, first of all, thank you, and I guess it's now time for questions and maybe some answers.

That's correct. Time for questions, and I also trust that you have the answer. So maybe we start from the live audience and Panu, I saw your hand first. So if we can get the microphones.

It's Panu Laitinmäki from Danske Bank. I have 1 question on the growth target, and yes, you said like half of the agreement base is third-party brands and half is Konecranes. How do you expect the growth -- where does the growth come from? So is it like targeting the third-party pace? Or is it from Konecranes brand? And how does that split into kind of new equipment sales turning into your service base and then targeting the Konecranes brand installed base that you cover?

The answer is yes, I guess. Yes. I mean, look, it's it is, in a sense, all of the above. We, of course, want to have a service agreement with every crane that we sell. And quite frankly, a lot of also leads of the industrial cranes also come from service because we also pursue service agreements regardless of having sold any equipment, right? We will just -- so sometimes you don't know when you're walking into an industrial manufacturing operation, what they have, right? So they may have a lot of customers. Some of them are very loyal to certain brands and some of them will just have everything. So it's -- you got to -- we kind of pursue this parallel approach, of course, pursue our own equipment and chase that. And sometimes we work together at the beginning in the front end, especially when it's customers that are the end user of the equipment and are looking for the life cycle approach and you bring that together. Others, you go after the fact, but you know where you sold it. And then there's those that we just go and look at the customer, the industry. We know they have cranes, and we may know they have some of ours. We may also know what else they have because at some point, we have quite an extensive database of installed equipment that we may not -- that may not be in our base. We've probably got just as many pieces of equipment in our database that we have -- that's outside the agreement that we know of as well. So that's another way of going after it. So the answer is it's a mix really. There's not one thing.

Okay. Can I just ask a follow-up, like if it's a mix of everything, but directionally, how much of the growth has come from converting new equipment sales to service base?

I don't have an exact number because it will vary. But really, the more -- the bigger growth comes from going after and opening up new customers or expanding in a plant rather than just our own equipment because that's, to some extent, is par for the course, right?

And then I think that Tom had his hand. And then after Tom, let's take [indiscernible].

Yes. This is Tom from DNB Carnegie. I would also like to discuss a bit about this conversion ratios into the agreement base. So is it a big difference if it's like a Konecranes branded cranes sold through your own distribution channel or if it's one of these other brands that distributors sell or if it's just that you sell components to crane builders. Do you have some numbers to provide on the conversion into the agreement base for this?

Well, the conversion really applies to the Konecranes brand because that's what we sell direct, and that's where we have that customer relationship. And the conversion there is quite high. When it comes to the other brands, we're selling through independent distributors. They are selling the crane and they're going to sell the service if they can, right? And we're, of course, selling them parts and supporting them independently. But of course, it goes back to what I was saying before, when you're looking to develop the business, you're looking at industries and you're looking at specific customers. And that's kind of how you get the various brands under there. You may be walking into a place where it has the indirect brands, the Alpha brands. We do not know where those customers nor should we where the independent distributors are selling their cranes. So when we would be servicing, let's say, a non-Konecranes or, let's say, an Alpha brand where we'll be servicing those, we do so by, let's call it, by walking into a company that has those already. So their conversion rate doesn't really apply, let's put it that way.

All right. And then the long-term trends, I mean, if you just look at the cranes you have introduced to the market the last 5 years, I mean, what -- if you skip even like a 3-year perspective. But if you look like 5, 10 years ahead when a larger share of service sales will come from these new products with more perhaps sensors and stuff, what will that mean for the service business really long term in terms of your customer loyalty pricing?

Well, the more complex the product is, the more technology that's on the product, the more there is going to be the conversion to letting the OEM or ourselves to be able to do the maintenance, right? So if that's kind of what -- where the question is leading, -- so of course, and the more cranes that we put in the market, the more that we're going to be able to have service. But I'm saying that's not just -- that's only one avenue for growth. There are plenty of other avenues for growth, like I said, going into taking agreements from existing facilities that have all sorts of things. And then you could sell them our own cranes and other -- and replace componentry and so forth in those places. I think in the past, we had given a number that after several -- if you look at after the warranty period, several years, we were running like 60-something percent.

65%.

65% of the conversion rate. .

And why is your market share higher in the U.S. than in Europe? I mean, is it relating to your installed base or legislation?

I think in the U.S., we've had acquired quite a few brands over the years as well, U.S. And the market maybe has been -- we've had a lot of focus on service from -- we probably -- I think we really entered the U.S. market really pursuing service. So I mean there's been a long history of developing service. Since at the beginning, we didn't have actually a lot of our own equipment. And a lot of the focus in the U.S. market was to build up service regardless of brand. But it's -- I mean, it's close what you're looking at there is total market, look at addressable market, they're much closer between the 2 geographies.

And then I think we had one question.

All right. It's Panu Laitinmäki from Danske Bank. I have 2 questions. First of all, it's really impressive how you're using your data flows for intelligent services and solutions for your customers, I think the product pipeline and developments are very exciting. This question comes from the perspective of something we've said many times before, which is the real competition is in-house service solutions, right? So whether it's your ability to offer elevated service offerings using your technology or whether it's your ability to target potential customers. I'm curious, how should we think about the in-house versus outsource rate in the industry to progress over the next few years given that you're armed with more tools and a much better service offering that's only going to get better over time?

Yes, thank you for the question. And that varies, of course, by country, right? There are certain countries that in certain industries that have a lot more in-house, right? I mean, steel, for example, traditionally has been one with a lot of in-house service, but those are starting to more and more open up. You get the case where, of course, there's the labor shortages, and there is the -- also the more automation where folks maybe in-house cannot service the equipment as efficiently. So a lot of these trends of the in-house will slowly start to move, I think, to outsource eventually. It will just be a different paces by different industries and by different countries, right? The places, especially in developing countries where product is simple and they're just break fix, then that may take longer. But I think overall, it's just going to keep moving in that direction. Product becomes more sophisticated, as we said before, labor is -- the labor shortages, more need for productivity and automation, all those things will continue to push. It's kind of hard to say exactly at what pace and put a number on it, but the trend certainly is positive.

We also have quite many questions for you in the webcast chat. So maybe I will take a couple from there. So I will bundle 2 questions related to predictive maintenance. So for Industrial Services, you mentioned taking predictive maintenance to the next level, but how will you monetize on this? How big is the opportunity? And what are the key hurdles to make this happen and then a continuance from another person. Does predictive maintenance enhance your profitability and contract duration? Any other decisive elements improving shareholder value?

Yes. So right now, let's take just predictive maintenance. We are certainly getting millions of -- and I won't put an exact number. We're getting millions of euros of sales that we're deriving because of our predictive maintenance engine that is creating those sales leads, and we're able to present those to our customers and close on those. So we track that really every month. And we -- of course, we can track that in real time anyways. What -- how much are predictive maintenance driving? So that is -- those are real euros that really drives shareholder value, of course. The predictive -- the life cycle engine, which kind of takes it to the next level, it will apply kind of the same, let's say, return but not just on the repair replace piece, but on the entire life cycle. So we will have let's say, more optimized agreements, right, more comprehensive agreements. When we do renewals, we will be able to support our salesperson with what exactly should they apply. What else could we add? We could create automated quoting, which creates faster speed and turnaround for -- shortens the cycle. So there's a lot of areas where you just will be able to deepen penetration, share of wallet, et cetera. So yes, again, the answer is yes.

And then another question related to Industrial Service. So there was the conversion rate currently following the warranty period that you already tackled. But then there was another one. Where are retention rates now compared to the past -- contract retention rate?

Yes. And I don't -- I'm not sure we disclose those. We have maybe a couple of times in the past. They have been improving over the past several years. Again, we've been focusing on agreement quality. We've been focusing on the customer experience, and we have been able to improve our retention rates year-over-year for a few years in a row.

Thank you. Any more questions from the audience? So thank you, Fabio.

Well, thank you, and thank you all.

And now it's time for our next presenter, our speaker, Marko Tulokas, Business Area President, Industrial Equipment and also the future President and CEO of Konecranes. So welcome to the stage, Marko.

Thank you. I'll start with some minor reorganization, and I only mean to stand here now. I hope everybody is comfortable. It was a bit chilly where I was sitting, so everybody, okay, very good. Then -- good afternoon from my behalf also. I'm going to be talking about Industrial Equipment today. There quicker thing. And what I'd like to start with is, first of all, with the important note is which continues to be equally important also during this presentation. No, we are on the right page. So I'd like to start by describing what Industrial Equipment is. We are a global leader in sustainable lifting solutions. And our model and success is built on a strong presence globally, that is by covering the indirect market with our 5 strong regional or global brand. It is by using our end-user market presence with the global presence with service and industry equipment life cycle solutions. We offer our customers the broadest offering from workstation lifting systems due to industrial warehousing and manufacturing, the demanding process applications. It is this go-to-market coverage with comprehensive, efficient product offering combined with the service and equipment life cycle approach, our strong commitment to sustainability and efficient, but flexible supply chain that has been the fundamental of our success in the past and made us the #1 choice for our customers. Our operating model today is built around ensuring that we leverage fully those strengths of our model. The indirect component brands cover more than 80 countries with our partner network, distribute the network that is more than 1,000 partners globally. The direct Konecranes brand channel operates with shared service frontlines across 3 regions in more than 50 countries. And our 2 core business units, the standard equipment and the solutions have an end-to-end profit and loss responsibility, ensuring that we have the right offering for our sales channels and for our customers. They own the product road maps and the relevant supply chains to deliver the offering to our end customers or to our distributors. The standard equipment consists of electric chain hoist, light grain systems, drives, wires and robot cranes. And the solutions business is where we have our demand in process applications, our project business and our automation and warehouse automation businesses. And of course, we rigorously drive commercial excellence across all these sales channels. And we make sure that we fully leverage the technology, common technology, investment to research and innovation and technology across the different products that we have. Now moving on to our performance. The Industrial Equipment has been strongly focusing on profitability improvement in the recent years and particularly in the last 3 years. We have simplified our go-to-market model. That means that Konecranes brand has a long sight with service focused on providing services and equipment to our direct end customer network or to our direct end customer users and the indirect brands, along with Demag are now focusing on the existing and new partner network. This has brought clarity and efficiency into our customer-facing operations. And at the same time, we have ramped down some nonefficient product platforms and noncore businesses, which have, of course, a broad focus to our product development and efficiency to our supply chain. Furthermore, we can confidently say that our pricing actions during the last 3 years, turbulent times have been rightly timed and adequately, but fairly dimensioned. And finally, these actions have allowed us to structure our operations in the regions as well as in our supply operations in a more cost-efficient manner. And we have successfully -- we have been successful in our project execution and project management. And I would also like to address the seasonality effect in the Industrial Equipment business, just as Fabio did for the service part. This is Industrial Equipment, obviously, driven mostly by the customer buying behavior, largely the European vacation period, which is our largest region in industrial equipment as well as the project nature of the business. So what typically happens is that the quarter 1 starts with lower sales volumes. That is largely due to customer behavior, but also the fact that quarter 4 is normally a very large delivery quarter. And that, of course, has an impact because we have a large supply chain to the underabsorption and therefore, the profitability. We also implemented the price increases in this business normally in the first quarter, which then turns into sales later on the component business, in particular, in the second quarter, and second quarter sees the salary and wage increases coming in, but also those components with higher prices coming in, normally higher prices coming in the second quarter. Last year's second quarter as normally good. And then because of certain kind of geopolitical trends and developments that are not normally seen in an average. The third quarter tends to be, from a volume point of view, the lowest volume or sales quarter, particularly, that's because of the European large because of the European holiday period impacting the sales, that also has, of course, a negative effect because of the under absorption. On the other hand, we have a lower personnel cost and that normally means that our profitability, relative profitability improves on third quarter towards the end of the year. And the fourth quarter is -- as it is in service, normally the highest sales month, but mix tends to be a bit unfavorable because we deliver more large projects to the end customers towards the end of the year. And therefore, the net impact comes from the higher volume with better absorption, but the somewhat more unfavorable mix. The relevant industrial lifting equipment market is estimated to be approximately EUR 10 billion and Konecranes share of that is about 15% of this. Our position is relatively stronger in standard cranes and post and in Europe, Middle East and Africa as well as in Americas, whereas our share in light lifting equipment and process cranes and regionally in Asia is lower. This leaves us with the strongest and geographically and offering-wise broadest presence in the marketplace. And at the same time, it means that we have plenty of opportunities in all areas, particularly in light lifting equipment in parts of Asia and selectively in the process cranes. While the market has significant unities for market share growth, the megatrends today are somewhat polarized. There is the ongoing -- and on the other hand, there is the ongoing demand for higher productivity, safety, sustainability by which increased demand for higher level of automation and digitalization. And today, those are enabled because of the access due to lower cost censoring connectivity and lower-cost data analytics. On the other hand, the supply chain realignment, which means the geopolitical is the consequent trade barriers, the nearshoring, french shoring or and the different blocks being generated have a different impact to the demand picture. These trends, they do require the ability to innovate both products and processes as well as resilience and agility from supply chains so that we are able to react to these changes in the world. Konecranes is relatively well placed in this environment because of our continuous investment into technology and to our processes as well as then the globally balanced presence and supply chain that we have. From a regional point of view, the short-term outlook trends is that across the bond in Americas, the supply chain realignments and increasing automation, they do drive the long-term growth as we see it. But of course, the short-term financial policies drive quite a bit of uncertainty and volatility into the picture, which I'm sure that all of you are well aware of. The European manufacturing sector recovery is expected, although there are timing-related uncertainties there. the sustainability agenda, although there are permanent slowness there for a variety of reasons that is still driving the long-term investment in power, automotive and metals. And on top of that, of course, we have the defense segment investment boom that is now prevalent in Europe also, which is certainly something that Konecranes can and the Industrial Equipment can benefit from. The Asia Pacific region, more and more drive the technological innovation also in this business and the industrialization of India, Southeast Asia supports on the other hand, our demand. The competitive environment in Asia is fierce and particularly Chinese competition drives a strong price competition in the marketplace. Next, I'll move to talk about where we want to go. Firstly, we need to be -- we want to be continuously and consistently outperforming the competition also with Industrial Equipment. The key fundamentals that meet this -- as the leader in the marketplace have not changed. That is the efficient coverage of the marketplace with our go-to-market model, the unique combination of service and equipment by unique, I mean, unique in this industry and efficient product platforms and the supply chain that we have. These have not taken us only to where we are today, but all have significant potential and will be essential also in our long-term success. As stated earlier, we have achieved our earlier target range ahead of time, and that combined with our solid plans. And the current outlook gives us the confidence to say that we will remain or can extend our target range to 8% and 11%, even during challenging market cycle. And this, we should -- we will achieve by latest 2029. Continuing on the business transition. As I stated earlier, in the last 3 years, we have been focusing on improving our profitability by the go-to-market model simplification, the rationalization of our business and product portfolio. And now from the second half of last year, we have been moving on to the next-generation launches of our core products. Those are our electric chain host and our Viropost as well as moving on very well with the digitalization of our offering alongside with service. And then working on some supply chain-related simplification and transition that we have in our plans for the next 2 to 3 years. Once we have launched the new products and completed the transition phase for the remaining supply chain-related questions, then, of course, by the second half of the decade, we are fully streamlined for growth and optimized for channel business and product portfolio and having a more simplified supply chain driven by this product portfolio simplification. That gives us the maximum leverage for -- because of the growth. Now -- well, we are now launching our products, of course, that means that we are going to be having both existing legacy products in our portfolio, while ramping up new products and that, of course, temporarily and unfortunately, usually means that you are running several product platforms in parallel in those factories, several factories where we ramp the new ones in and the old ones out, and of course, tends to be so that the new products in the beginning have a higher cost structure than the old products. And that, of course, we are working to do as quickly as possible to bring to the right level. So that means and why this graph looks like that, that this is, of course, for the relative profitability during this transition period, probably meaning that we will not continue quite in the same speed of profitability improvement that we did in the last 3 years. I'd like to elaborate a little bit more on some of the key elements in the business transition in these different phases and how they have contributed to our success and how we believe that they will continue to do so also in the future. Firstly, we have a go-to-market model that is very clearly set up in the last couple of years. This has allowed us to have more clarity in the customer interface and more efficient frontline operations. At the same time, if you look at this map, where the red countries indicate where we have our Konecranes branded end-user channels present and the dots are illustrative of our distributor network. It is easy to see that where we have the highest coverage. But at the same time, as you will see from here, we have quite a lot of opportunity to cover the market also in the global south as well as equal in the existing market, established markets where with the extension of further distributor base. We have also opportunities to grow. And that, of course, with this partner network that we have in place that not only gives us the opportunity to cover the geographical marketplace better, but it gives us the segment coverage for different applications in the same market space and different price points for that matter to us. Secondly, talk about the product portfolio efficiency, which is very important for the success and efficiency and profitability of the industrial equipment. You've seen this -- those who have been with us in the past, you've most certainly seen this slide before. The product portfolio efficiency is very important. It drives the supply chain productivity and cost, but it also allows us to focus on innovation and development resources in the right places. As you see from here, by 2024, we have executed the plan, and we have reduced a number of the platforms, and we are well on our way to continue to reduce the product platform amount towards the intended 2027 time frame. So we have launched the new electric chain platforms also for the Demag brand. We have harmonized all of our light crane systems to the legacy successful Demag KPK platform. We have launched the new S Series products in Europe last year and continuing in APAC and Americas this year. We have proceeded with our process crane platform, this modularization. And finally, we only have now 1 type of a standard crane that we offer to the marketplace. Our product launches have been initiated in EMEA as planned in 2024 and during 2025, we will expand to Asia Pacific and later to North America. And the finalization of the product rollout will follow late '26 up until to '27. And as you will see from this is the final slide regarding the product launches, which you can see is important to us and to me. And I just indicated or I want to show here that we have launched our new S series proposed in the summer of last year as planned in Europe and in Europe, both for our indirect and direct channel. And our new electric chain hoist was also launched towards the end of the year for the very important Demag brand. Both have taken off very well. The -- what is important to understand here is that the option space for such products and the local standardization requirements make this ramp-up schedule in this type of business rather extended, and that's why this is a multiyear project. The objective of this product conversion is clear. Number one, we want better products for our customers, more unique and with more digital features. Second, we are working to create a broader segment coverage for bigger market actions through these product launches. And finally, and not the least importantly, we are aiming for lower direct and indirect costs through the lower product cost and more efficient manufacturing process. Then thirdly, of course, the supply chain is important that for this business, particularly, and the efficient supply chain is naturally a key success factor for us. Due to the nature of the Crane business, standard and process cranes business and the physical size of the products, it is important that we have an efficient network of our own crane manufacturing units and our subcontractors. And we continuously assess that network so that it remains efficient and correctly based against the demand. And in the last 3 years, we have discontinued or resized for crane manufacturing unit. And at the same time, we have refocused or invested into our hybrid or component facilities in those places where we saw that fit. This regional component supply base, which you see here in this map, we have in all 3 regions. We have manufacturing of the component supplies is particularly critical when the trade barriers and the logistics challenges have taken kind of precedence over the earlier trend of consolidation or emerging market inertia. And we believe that our approach and experience not only gives us flexibility in this situation, but positively differentiates us from our competition. It serves our customers better, but it also leaves a significant improvement room in the future. These are all things that we are working right now and will roll out in the next 2 to 3 years. But as we continue to work our go-to-market efficiency, our new product launches or our supply chain efficiency improvements, we also need to keep behind our long-term technology vision. This is what I'd like to shortly illustrate by just by this one slide. And in the next 5- to 10-year time frame, of course, we -- this is why we see that the world is going in terms of industrial material handling or Industrial Equipment. We serve both partners, who built the final products using our equipment or components and then they service them. Also, we provide lifting equipment services to a range of standard over demand lifting applications to our direct end users. Regardless of the use, channel or need the future is clearly more digital. This is certainly helped now by availability and commoditization of components and further calculation power and the rise of the artificial intelligence opportunities. The material handling with these collaborative equipment going forward is something where safety is no longer passive, but it is actively supporting and steering the customer to a safer or the customers' operator to safer behavior. The customer will not also acquire technology anymore against the fixed specification that will be fixed throughout the lifetime of the equipment, but allowing customers to improve the manufacturing process or warehousing by actively monitoring, advising, adjusting or even automatically handling the loads. And you see some of those examples in this slide and from even the most current basic products or components that will be in the future something where the -- every piece of equipment will have brains on board, so to say, so that product will be preconfigured, can be trained and customized on site, has access to digital twin or real-time monitoring capabilities and is actively supporting the customer in being safe. Also, the more advanced solutions that we today provide to our customers, they will continue to be increasingly so, so that the equipment will be proactively assisting the operator or coaching the operator for higher performance and higher safety or better safety, allowing for database process improvement that with our access due to the service network and service data that we have helped us also to help the customer to improve the productivity and their processes. And of course, we have the ability to provide customers an autonomous load handling opportunities, a seamless connection to their processes and systems to the other equipment that they have. So the real machine machine-to-machine communicates. And as you can see, I'm mostly excited about the future. I think not to mean that we would not focus on the short term. But -- so we have executed to our plan since 2022 and completed most of the programs that Fabio was talking about a couple of years ago. Our focus going forward is executing the new generation product launches. And this will both bring growth and cost-saving opportunities. And it will also secondly be partly by creating a more efficient operating model and productivity through the simplification of our product platforms. And thirdly, these actions and the new product platforms will allow us to grow more or sell more to the marketplace, but also have the ability to lower our cost base. And these 3 elements are the ones where we believe that continuous profitability improvement will follow from in the next coming time frame up until 2029. So in conclusion or summarizing what I have to say. So we believe that we have the right approach and the right strategy, and we will stay, of course. It is just a matter of accelerating the pace and we will work on our -- those 3 things to the market coverage, expanding our geographical coverage, broadening our coverage in the segments with our new product offering, optimizing -- continuously optimizing our go-to-market model between our distributor and our direct network, renewing our product portfolio with the new renewed portfolio and expansion of that. Completing the new electric in hoist rollout streamlining those platforms further and then creating the modular flexible process crane offering that also provides even more solutions to those customer segments that we don't today cater so much for and then, of course, executing the future digital vision with a collaborative connected material handling. And that is, of course, supported by our supply chain resilience, having an efficient, but also agile crane and component supply network and the supply base that is resilient for this geopolitic and global changes also in the future. And that gives us the confidence to say that not only grow in line with the market, but also stay or improve our comparable EBITA range margin from 8% to 11%. And with that, I thank you for your attention. Thank you very much. And then I guess we go to Q&A. Kiira?

Thank you, Marko. You were really efficient with your . So we have plenty of time for the Q&A. Before we start to take the questions, so I have a kind request. I can imagine that people have like also nonindustrial equipment-related questions to Marko this time around. But now for this Q&A, I would ask everyone to focus on Industrial Equipment business area, and then we can take other kinds of questions in the last Q&A. So any questions from the audience? Panu? Let's start with you just a moment for the microphone.

It's Panu from Danske. I have 2, both related to the margins. So firstly, I think you said that the new product launch kind of burdens the margin initially before you have double cost and so on. So just want to kind of clarify the time lines. So where are we? Have you already seen that? And when does it go away? And then the second one is pricing. So what have you assumed on pricing by '29 because that was like a tailwind for the past 2 years?

Well, when it comes to the margins, of course, when you launch products, any products again and also our in the beginning, you will have to buy materials to the inventory with higher cost because you start, first of all, with some experimental wrong word, but there are certain first batches and you will need to do melt that stock, so that the next stock will be at a lower cost. And this takes some time, at least easily 6 months and so forth before you have that access to that lower cost or that inventory rotation with the lower cost. So that's one thing. And then, of course, our rollout happens through 3 regions in sequence over time. And that's partly because, like I said earlier, that there is different standards and requirements in 3 regions and to fulfill those standards and get all the approvals from those relevant authorities take some time. And once 1 starts to work -- for example, work for the approvals for the U.S., you will start from applying your providing your products from Europe. And that also means that for the first months or 6 months, you will do that to ramp up the product. So there is no one clear answer to your question, but it will take for 2 reasons because of the ramp-up sequence of the materials. And secondly, because of the geographic cost, it will take -- it is a multiyear program.

But the new year -- the new program launches have been ongoing already for quite some time.

And we are well on track with our assumed product cost savings or product cost targets. So that has not changed. And we knew all the time that it takes certain period a certain amount of times. .

Okay. And the second one was just on pricing and kind of the market. What have you asked on pricing? Is it neutral for the next 4 years? Or is it a tailwind? Or is there pressure?

Well, you've got to stop me if I can't say too much about pricing. But well, that's also not an easy question to give exactly because an answer to you exactly because, of course, when we produce such new offering, the intention is to offer more kind of features and more to the customers and as for a better price for that. And that's what we do obviously, and the customers are willing to pay more for this digital and smart features. So that drives the price up in a certain part of the market or certain part of the segment. At the same time, we have designed this product so that it will give us more flexibility to enter into several segments. Making sure that we are also efficient to enter a more lower cost base or price position, market segment. And of course, time will show that what is the balance of that the whole thing, but it is a balance between margin and volume for sure. Our intention is that we can enter a big part of the market also.

And then overall, not only for Industrial Equipment, but also Konecranes Group. So the intention is to push any cost inflation into the product prices.

But I get that was not, I guess, your specific question, you were talking about the new products, but it's a good addition that when it comes to the inflation-related things that generally speaking, our approach always.

Any other questions from the audience? Vivian?

It's Vivian Jon from High ground. You mentioned in the presentation, you're seeing quite intense competition in Asia. Are you seeing the competition spilling out into the other 2 regions from Chinese competitors specifically?

Yes. This industry is not immune to that, like, I guess, any other is, and it's just a matter of what -- it's a matter of time what time has come. So answer is that, yes, there is more competitive pressure, but it's not any different than it has been in the last years that continues to be so. And of course, we are well placed to defend our position in these marketplaces where we are today.

Any other questions? And we don't have any questions in the webcast chat either. So I think that's it then for this Q&A. And we'll have a break, and this break will be somewhat longer than last time around. So we'll be back at half past 3, so in 31 minutes. Take your time. See you soon. [Break]

Again, back from the break. I think we all needed a bit of flex stretching here and probably also behind the laptop screens. Our next speaker is Tomas Myntti, Business Area President, Port Solutions, and we'll hear more about what is next for Port Solutions. So please Tomas, welcome to the stage.

Thank you, Kiira, and good afternoon. It's great to be the last speaker after a long day. So thank you for that honor. So my name is Tomas Myntti. I've been with Konecranes since 2008. Up until last October in industrial side, managing different parts of Industrial Equipment and Industrial Services, been in the school of Fabio for the last few years. And since October last year, then the President of the Business Area Port Solutions. So let me excite you about all the interesting things that are going on in the world of cargo handling. So first, the same notice, still important and future-looking statements, so the disclaimer on that. So I'll take you through a little bit on who we are in Port Solutions, just like the other BAs. Then I'll again comment on our performance in the last few years. But then I will spend quite some time on the trends in the market at the moment because they do -- there's a lot of things going on that may impact our business, and I'll go through those most important trends and how we see that those could possibly affect our business. And then what conclusions we draw from that and where we see the opportunities and why we say we're going to grow clearly faster than the market in Port Solutions in the next few years. So widest -- we are the Western leader in cargo handling. And we have the widest and deepest offering in container handling equipment, and I'll go a little bit more into what we mean by that and why that's important, also when we look at then the effects of the trends going on. But in addition to that, so container handling is a big part of what we do, but we also have a complete offering for the shipyards together with our colleagues in Industrial Equipment and Service, and also a range of equipment for bulk and general cargo handling. Very importantly, that we offer software and automation solutions, whether it's for equipment level handling or management or fleet management or automated framework for handling the fleet of equipment in the operations. And of course, very important for the resilience and the continuation of the business is our service function as well than service -- serving the equipment and our solutions. So when we talk about the deepest and widest offering for container handling. So when you think about it, so what is that and why is that truth the case. So when a ship comes to the quay, of course, then the first thing to do is unload the containers from the ship. And depending then on the size of the operation, the size of the terminal, the concept used in the terminal, whether it's manual operations, semi-automated or automated, that depends on what kind of equipment you'll have. So it's either the ship to shore cranes, different sizes or then in smaller, midsized and smaller terminals, it could be a mobile harbor crane. From the quay to the container yard, there's a horizontal movement of the container. Those can be handled again depending on the chosen concept in the terminal. It could be handled by reach stackers, lift trucks or automated guided vehicles or AGVs, or straddle carriers, specifically then designed for that function. So again, depending on how you run the operations, it could be one of those. Then you have the container yard. And again, there's a choice depending on the concept you have, whether you handle the containers on the stacking with reach stackers or top loaders from the lift trucks unit or whether you use straddle carriers or rubber tired gantry cranes or automatic stacking cranes, which will then be rail mounted. And all of those could be -- RTGs or RMGs could be automatic or semi-automatic or manually operated. And then next step is you move the containers to either a train or a truck. And again, there, you can either use the ASCs, the automatic stacking cranes, or you could use, again, reach stackers or you could use RMGs, rail-mounted gantry cranes. So there's an option or there are options. And you'll see all of these -- a combination of these in our customers going forward or already. But now when we look at what's happening in the world, it's important to understand, that's what we mean by the widest offering. If you look at the sales breakdown for 2024, Service was 18% and Equipment was 82%. That percentage varies from year-to-year depending on when we do special regard cranes deals, they tend to be quite large. So depending on the timing of those, the mix between service and equipment will vary. But important, Service keeps growing sequentially year-to-year, and I'll talk about that a little bit later. Also last year, the share of eco portfolio, so fully electrified or hybrid equipment was 66% of all the equipment that we sold. So we've done really well in the last few years, really driven by what was said earlier as well that we had in the second half of '22 and the first half of '23, we had a large order intake following some pent-up demand and some long-term investments made by our customers. And we've done a really good job on executing on that order book. So really good sales execution. Also then supported by good pricing management, meaning staying ahead of inflation, and also very strict cost control and operational efficiency in the organization. And this growth has come largely from our core product offering, which is what I just described. This is, as what I call, the core product offering. And I'll show a little bit more details on those as well going forward. And not to underestimate also is the benefit we get from being part of the big group of Konecranes with very good processes and systems supporting an efficient and consistent delivery organization. So what is happening then in the world? These are some important trends that drive our potential for growth. Now we still expect long term that the container throughput volumes will continue to grow in line with GDP growth in the world. So trade continues. But as you saw from Teo's presentation, there is changes in the flows and where it will be. And right now, of course, as we all know, the T word has been mentioned here already several times. So what happens with the tariffs? What are the effects? And when -- of course, now short term have some effects on the volumes going through. But long term, that's still expected to be the underlying trend that drives our growth. Another trend that's going on and continues is the consolidation. So around 75% of all container throughput today is handled by global terminal operators. So big customers that are present around the world. And that consolidation keeps happening. They are our big customers and our key accounts. And of course, again, very important with the widest offering, that depending -- regardless of what we talk about manual, semi-automated, automated or whatever concept is used in the terminal, we have the offering for these customers. Automation keeps growing. I'll talk a little bit more about that in a separate slide and also about the GDP, but that's a trend that we see continuing. Service also more and more driven also by labor shortages. And this is different in different parts of the world. And we also see many of our customers do a lot of in-house maintenance. But that there's also a trend of doing gradually more and more outsourcing. And when that happens, we are ready to be there. And because we have the full offering very similar to the industrial side, and we can also get benefits from working together with the Industrial Service here. And then yes, geopolitics right now is really creating opportunities, but potentially also threats. So I'll talk a little bit more about that also in the slide going forward. So this is where we see it and how is our volumes compared to what's going on in the world. So the blue line here is container throughput, how it's been according to RWI and ISL and how that then correlates with our order intake. And you see the peak, so this is rolling 12 months order intake, the bars that you see here. So you see the peak there. This is what we mentioned now, the order intake in the second half of '22 and early '23. But also important to understand here is that our order intake and sales fluctuates quarter-by-quarter depending on those bigger deals when they happen, and it's really hard to predict exactly when our customers will make the decisions. So comparing the Port Solutions numbers quarter-on-quarter is difficult and you need to look at the longer trend, and that's what we say in here. And also the short-term economic cycles, which like we're going through right now, don't affect our customers' long-term plans that much. So they make long-term investment plans. But yes, in today's world, you can see a little bit of hiccup on the container throughput, but that's hopefully short term. And once the situation clears with the tariffs of where are they going to end up, that should go over. That's the assumption. Then on the automation, why do we see that still growing or growing more and more. There's a fewer things driving the need for automation or the desire for automation. Still a large part of the terminals are manually operated, but increasingly, we see automation they're coming in play. And what's driving those are a few things. One is lack of available space or real estate. So when a port grows and often, they are very close to larger cities, always, but often and the cities grow, so you run out of real estate. So you really need to be able to increase the density of the container stacks to be more efficient and to use that land. So automation enables you to stack the containers much closer to each other and higher. So you get efficiency that way. The other driver for automation is labor shortage. So finding professional operators to the cranes is difficult. You have -- a good professional crane operator will be very efficient, but it's hard to find. And then that's just getting more and more difficult going forward. Again, not the case in everywhere in the world, but this is one of the drivers for going to automation. Linked to that is improved predictability. So for our customers, speed and predictability is key. So if you reliably can move the containers quickly, you are more efficient and therefore, you can make more money, and that's what's driving the whole trend. Automation and automated crane is predictable. It does -- moves the same way and with the same speed every time. With human labor, some are faster than others, but sometimes we are sick, sometimes we're not there, sometimes find difficult to find replacements. So automation provides predictability. And also in that way, performance increases because the average performance will be the same and then it's easier to predict. Safety is also very important, because these are dangerous areas. And in automated terminals, then you don't have people moving around in the area. Therefore, it's also safer. And all of these drives the OpEx savings for our customers, of course. So those are things that drive the need and desire for automation. And this happens in all kinds of different terminals. So one, of course, if it's a greenfield new terminal being built, it's easier to go in for the automated solutions. The other big driver is large automated terminals, so where -- they're already automated, but then they expand building a new birth. Of course, it makes sense to continue with the same concept. And then it's the brownfield conversions, so where you currently today have a manual operation. Then with automation, you can increase the efficiency and usage of the space. So all of these cases exist. And the geopolitics. And here, a common saying is nobody knows what is going to happen next. And important for us that we stay on top of the situation and act accordingly to what is going to happen. We are well positioned in the sense that we have that offering. So whether we'll see larger terminals grow new or midsized, we have the offering. We're globally present. Also our supply concept for the large cranes is such that the steel structure is largely built on a networking -- subcontracting and partner network. So moving our production regionally from one place to another is relatively easy. The concept is what we do and have been doing for a long time. So in the U.S., we see then the changing operating environment. So more and more made in the U.S. requirements coming into [indiscernible], and then this has been already the case during the Biden administration, but it continues, of course, now with Trump administration even stronger. So what we've been doing, what we've said publicly also that we're setting up a partner network in the U.S. to be able to do gradually more and more of the manufacturing or starting with assembly work and then going forward, but this is based on a partner network, as Teo said, rather than investing in factories. So based on a French shoring network and then doing the assembly in the U.S., we can start immediately. And then depending on how things go now with the tariffs, we will be reacting in an agile way. What we also saw in Teo's presentation was the shifting trade flow patterns. So you'll see the manufacturing moving from one place to another. Now for us, that's an opportunity because we have the concept. So you'll see more and more consolidation. You'll see midsized and smaller terminals being created in different parts of the world. And for that, we have a concept as well. So really whichever way it goes, we have -- we are ready. And depending on then the solutions, we can provide the different equipment and service and grades of automation. Another trend that I want to bring up is the rise of intermodal. So that's been there, of course, already, and we are already present in the intermodal market, but also with the regionalization of the trade flows, we'll see more and more of those coming up as well. So those all we see as important trends for us going forward. So based on that, what's our ambition? Our ambition is to be the benchmark in cargo handling. And we do it because we have the widest and deepest offering. So from manual, whatever concept you use in the terminal, we have the offering to support. That's then supported by service offering that we have and then our path to automation. So wherever our customers are in the development phase, manual operation is fine. Semi-automated, automated, we have a path. And another ongoing trend is, of course, is also the electrification. And we are -- and I call that really part of our core offering because that's what we are. All our products are -- that's our heritage is in the electric equipment and in the diesel equipment that we have now in all our product lines, then except now still for reach stacker. We have an electric solution and the reach stacker will be introduced no later than '26. So we maintain -- this is why we say we believe we can keep growing clearly faster than the market. But in the environment we are and in the cycles we are, we also maintain the EBITA target as 9% to 11%. So then if you look at the core offering, what do we mean by that? So these are the product lines that we have in the container handling mainly. So service, we continue developing. The market is there still largely than in-house or a big part of the market is in-house, but we keep adding to that offering one and bolt-on M&As, we have an example. I'll talk about that later as we did last year. If the -- I'm sure you all memorized this slide when you saw it last time. So we had the same slide in the CMD 2 years ago. But on that slide, the ship-to-shore cranes were not on, so we've added the ship-to-shore cranes here. Now for us, as we have been in the ship market in the business line all the time, but it's been a fairly number-wise -- number crane-wise, it's still low. We are #2 and #3 in those selected markets that we operate, which is mainly Europe and the U.S. for customers who value and appreciate the value -- the life cycle value of the cranes. Now if the tariff situation in the U.S. goes to the direction that Chinese cranes will not -- or we will be more also price competitive against Chinese cranes, then this is an opportunity that opens up and which is why we have lifted it up here. I said if because nobody knows what happens, but this is one of the potential growth areas for us in the near term. Of course, ship-to-shore cranes, delivery times are around 2 to 3 years. So the effects in the sales, you will see later, but we are ready to move if this is the situation. Mobile harbor cranes has had a really good -- like this is a constant flow of orders. We've published several of them in the last 2 quarters as well, so this is going really well. Same with the AGVs and straddle carriers, so these are solid businesses that keep bringing in good orders and good delivery situation. In the yard cranes, where we combine the RTGs, the rubber tire gantry cranes and the ASCs, the automatic stacking cranes, we have had several strategic wins in the last year. We had -- on the order intake you saw on the slide, the end of last year, Q4, we had a very good order intake like as in Q1. So the order book there has been growing very nicely. A couple of examples I have here. I'll talk about London in the next slide when I talk about automation. But both of those, London and Cartagena in Colombia, these were deals in 2022 and 2023, which included conversions from third-party yard cranes where we've added up -- retrofitted our automation solutions on those and then added our own new cranes to that. So the whole automation solution or framework is then the Konecranes framework, including third-party cranes. And lift trucks, as said, we are on track with the electrification product launches with those, and we keep having a solid business in lift trucks as well. Now on the automation, as I said, there's a path. You can decide to start and go for a greenfield and go full automated operation immediately, or you can start from a manual operation, add smart features or you can go into semi-automated supervised operation, meaning that they essentially run in an automated way or you have a remote-controlled operation so they run from a remote operating room. So all of those, depending on where you are, we can provide that upgrade path step by step. So some examples on this selected case example. So Port of Virginia, first deal was done in 2006. And since then, that was the first concept of fully automated. And since then, we've had several repeat orders both from Port of Virginia but also then used the same concept in other ports around the world. Now in '22, we made a deal here in London, in London Gateway, which was the first terminal to operate different ASC automation platforms. So we sold new ASC Konecranes cranes plus retrofitted them, in this case, Kalmar cranes with our automation solution. And that was very successful. And I'm also happy to announce that just recently, DP World London Gateway placed another order for 18 ASCs with us to that same, which will be running under the same automation framework, and this deal was booked now in Q2. So this is an example of when you do it and we do it well, we typically lead to repeat orders as well, and this is the way we work with our large customers. Now a different example is then automated RTGs, so rubber tired gantry cranes, so even those you can automate. And one good example of that is with the PSA Baltic hub Gdansk, where we retrofitted our own cranes to now be automated or running in an automatic way. So these keep happening. Those are just 3 examples but there's lots of them around the world. And now I'll go through this, them all one by one. No, I won't. But the idea is there's a lot happening around the world. And you can see the same names several times and that's the same message. These are different levels of automation, whether it's from conceptual to semi-automation to automation. But you can see that they typically lead to the next case when you do it successfully once. Another path that we provide is the electrification path. So of course, the number, as I said, was 60 -- almost 70% of the orders last year from Eco portfolio. Of course, the uptake of electrified vehicles, especially on the mobile equipment is very much dependent on our customers than the uptake. Do they have the infrastructure in place? Does it make sense with the investment? We see more and more customers testing electric equipment, but our job is to provide, make sure we have the products available when the uptake is there. But of course, the volume there will be dependent on how much and how quickly our customers want to move into that space. Again, some selected examples. Our first fully battery-powered RTG was sold to Canada to Vanterm terminal in the spring. Also on the mobile harbor cranes, we delivered or sold the first all-electric sixth generation, which is the newest generation of the mobile harbor cranes to San Diego. And then we have the ongoing electrification initiative with our lift trucks product family. So I said, by 2026, we'll have a product in every product line, but of course, then there are models and we'll continue improving on those models going forward. Service, very important for us. As I said, it is like if you look at the last -- from 2022 to 2024, we had a CAGR of more than 10% -- around 10% for the Service. So even if the portion of the full sales will fluctuate according to -- with the equipment sales, Service keeps growing long term faster than the other business lines. And that's what we'll keep doing as well. So we increase similar as with industrial, the agreement base, both with our own brand, cranes and then with third-party brands, so any brands, working on the e-commerce solutions and also the digital channels and expanding our geographic footprint. And of course, here, it is that compared to Industrial Service, we have fewer customers but they are big. So our presence is then very much concentrated on where there are several customers in the same area. And then we work with partners, we work with Industrial Service, and we work with third parties then to provide service if it's a more remote location where we don't have our own operation. Bolt-on M&A. This is, of course, here also on our areas. And last year, we acquired Peinemann in Rotterdam, which gave us a large footprint in that area where many of the terminals use our equipment already, and Peinemann provides both the field service and maintenance service inspections. And they also did and do still rental of lift trucks for the customers in that area. And that's an example of bolt-on acquisitions that we are looking for. And that's not all and there is more. So in addition to all of this, as we said, intermodals are expected to grow by 3x, 3x by 2030. And all our offering is well suited also to the intermodal, whether it's lift trucks, whether it's bridge tackers, whether it's RTGs, whether it's mobile harbor cranes, that concept and combined with service, in particular, we have that solution also for intermodal and especially when we optimize the need for those terminals. So the path to port automation is valid. The path to electrification is valid. The path to service is valid. And this is one more additional opportunity for us to grow. So in summary, there are several parts at the moment depending on where the trends in the market go, and we are ready to move in an agile way to focus on where the growth will be in the timing, which makes us well positioned with the deepest and widest core offering, path to automation, service offering and path to eco lifting, plus our supply chain concept enables us to set up a regional supply chain to wherever the need is to achieve the growth. Therefore, we think we're going to grow faster than -- clearly faster than the market and remain in the same profitability window that we said before. Thank you and Q&A.

Great. Thank you so much, Tomas. So time for questions again and let's start from the live audience. Any questions from [indiscernible]. Just a moment, let's wait for the microphones in the back. Jasmina?

I'm Jasmina from WorldCargo News. I'm interested, you mentioned the supply network in the U.S. Could you please expand how will this work, especially with regard to sourcing software and components, given the cybersecurity and national security concerns? Can you supply these from the U.S. to kind of deter these concerns?

Thank you for the question. So this is -- it will be -- again, we're following what's happening and what the requirements and the demands will be. And then we'll have a phased approach so to make it more and more made in the U.S. So we will start with friend-shoring the components and then doing assembly work in the U.S. and then gradually from there, take it to do it more and more in the U.S. as required.

Thank you. And then I think we have a question here in the front. [indiscernible].

In terms of the Service business, which geography do you think there'll be the most expansion, the U.S., Europe, East Coast, U.S., West Coast? And in terms of the acquisition, what are your plans? How will you increase the profits of the Rotterdam Service business?

Well, to copy Fabio, the answer is yes and is so whether it's U.S. or Europe or the others. So it's really customer dependent on where we see, where is the appetite for outsourcing. Many have already done like we see in Rotterdam, that's an outsourced situation where Peinemann had done a lot of that. So it will depend on, is this the same drivers? Is there labor? Is there -- what is the core? How do customers see their core business? How much more automation? So I wouldn't limit it to any particular geography. With the acquisition, of course, they're already a very good operation and then there's learnings both ways, but we can -- when we bring our ways of working on systems to support and especially the support functions that will help us improve on the profitability there. But they're also doing extremely good things as well, which we can learn both ways. So not only how we increase there, of how they also -- what they are doing and the learnings from there increase our overall operations in Service as well.

Then I think we had a question from Panu.

I wanted to ask about the profitability of the potential growth in STS cranes. So how big differences do you have in margins between different products? And if you would succeed in growing the STS crane business, would it be kind of margin dilutive to the level where you are now or to the margin targets? And maybe finally, if you could also discuss the service potential in those cranes and how that impacts the profitability.

Okay. Of course, they are very large cranes and lots of steel structure involved. And this is one reason why we keep the profitability target, as we say, that if we increase the mix of larger cranes, then we want to keep the range as it is because the mix will then be less favorable from a profitability point of view. But we still -- those are taken into account when we set the targets. So we believe we can keep that range even if the STS part would increase.

Okay. But what about the service potential in the STS cranes? Is it like similar in the products you now sell or is it better or worse?

It's quite similar as the concept is, if the customer have their own strong maintenance department, they will also maintain the STS, but where it's outsourced, then that's an opportunity as well. But it's similar to existing situation.

And then Tom, next?

Tom Skogman from DNB Carnegie. I've seen that SANMA has won some orders in electric mobile equipment in Europe in particular. Can you match them in prices? Or is there a risk of a similar situation as in the automotive industry that Chinese simply get so cheap batteries and are so good at electrical equipment that it's hard for Western companies to compete?

It's a question of what technology you use in your equipment and then the whole -- how you address the value that you bring. But yes, of course, the technology is similar and a lot of battery technology is from China. Of course, on the -- we also do development in China and we build in China and we have some Chinese technology, so that will then depend on how the geopolitics play out. But we have our Chinese line and we have our European line at the moment.

But can you compete on price? Because I've seen that they sell at the same prices, electric equipment that Western suppliers sell fossil equipment at.

I can't comment on their pricing politics and how they do that, but of course, we do our best to drive our cost down.

Where are you with electric equipment, sales in mobile equipment?

Where we are?

Yes. What is the share of -- in mobile equipment, what's the share of electric?

Yes. We don't open up the different business lines shares. We just showed you the full electric share that we have of our portfolio.

And what do you refer with mobile equipment? Is it lift trucks or...

Lift trucks basically. Can you sell all products as electric versions today or where are you with electrification of these ones.

Right. As mentioned, the one -- in the one product line where we are missing a product is in the reach stackers. In the lift trucks, we have products and in the empty container handling, we have launched the product in -- but in reach stacker, we expect to launch no later than '26.

Then maybe 1 question from the chat. So from Mikael Doepel from Nordea. For Port Solutions, what is your view on the U.S. ship-to-shore crane market? How big is the unit and revenue opportunity for Konecranes in the midterm to replace other suppliers? And could it spread to other segments beyond ship-to-shore cranes?

Okay. Again, I have to answer, nobody knows. It depends on how the tariff situation then evolves and what happens. And then -- and there are other players as well. I think we are well positioned. I think we have a good product. I think we have the concept. I know we have the concept, all of this so we are in a good position. But it's hard to comment exactly now because we don't know what the situation is going to be on the STSs. On the yard cranes, we are already a market leader and very strong in the U.S. So I think that would only improve in that situation if it spreads to other port cranes as well.

And then we have another question from the chat from Johan Eliason from Kepler Cheuvreux. Would you say that Port Solutions Service business should generate a margin above or below the Industrial Service division's 21% to 25%?

Should or will? So we have always said is, okay, we don't go out with profit levels business line by business line. I think our margins in Port Services is not the -- similar levels but not the same as in Industrial Service.

And now any more questions from the audience?

Again, could you share a bit more details about the new order from DP World London Gateway? Will these ASCs be intended for new berths and maybe some technical specifications? Are they the same units as the ones ordered in 2022?

Yes, we'll be coming out shortly with more information then on a press release on those once we're ready to publish.

I guess those were all the questions for Tomas this time around, so we will be soon starting the last Q&A of the event with all 5 speakers for today. And we will do some remodeling or refurbishment of the stage here, so we'll be back in 2 minutes for the webcast viewers. So see you soon. [Break]

Okay. Now we are ready to start with all 5 gentlemen on stage with me. And maybe this time around, we start from the webcast chat because I think that all other Q&As were started from the live audience. So the 2 first questions came actually during the first presentation, so I think that they are probably addressed to Teo or Anders to some extent. So it's Mikael from Nordea. And in terms of your financial targets, did you consider a capital return target as well? And if so, why did you decide against it?

We have considered basically every time that we have been launching targets, so we have been considering a return on capital employed target. There are maybe 2 main reasons why we have gone with that one. First of all, ROCE as such is a little bit, let's say, problematic from the volume point of view because you can improve return on capital employed with lower volumes as well. And the other one is then that it is, particularly in our case, it is a lot impacted by the goodwill that we have in the balance sheet. So basically, we would have had a need to strip out the goodwill from the asset base before that to make sense. And those are the, let's say, technical complexities that we would be having. Those are the reasons why we haven't chosen that. But we are following internally return on capital employed basically every month in line with the other indicators as well.

And then another one which is related to capital allocation. So with regards to capital allocation and given the strong balance sheet, why are you not considering share buybacks?

As you saw, the share buybacks are in the so-called other category in our capital allocation priorities. And it is, of course, no secret that within the company, we are discussing the possibility of buybacks as well as we are discussing all the other ways of returning money back to the shareholders, including extra dividends. Now we also have an authorization from the AGM to Board to do share buybacks. But now so far, we haven't done any active decisions to go that way. It doesn't mean that, that would be ruled out one way or the other. Like we have always been saying, it is a tool in the toolbox. And it is, of course, possible that we, at some point of time, could be using it, depending on the other priorities that we have regarding our capital usage.

And we have more questions in the chat so let's continue soon with them. But I think that now we could take a question from the audience, if there are any.

It's Panu from Danske. Continuing with the capital allocation. So your balance sheet is getting stronger so what's your appetite for bigger acquisitions if they would -- if opportunities will arise?

We are primarily focusing on bolt-ons as we have been discussing either in core or near-core. We are not obviously outruling a possibility of a bigger acquisition either. Of course, if there are opportunities in the marketplace, we will be taking a look at those opportunities, and then we will decide on a case-by-case basis. But clearly, the focus is on bolt-ons that are either in core or very near-core technologies that are either core or very near core.

Okay. And the second one on the Industrial Equipment. In the presentation, it was mentioned that the light -- in the light cranes, there could be a growth opportunity. So do you think that's an organic opportunity or would you need to acquire something to address that?

Well, first of all, it's both. The answer is yes again. So it is -- we, of course, have particularly in the American market, we have an opportunity for organic growth. But of course, we are, all the time, look out for, just as it was stated by Teo, for the opportunity to get a core bolt-on acquisition for technology also if that opportunity presents itself.

Any other questions from the audience?

Yes. This is Tom Skogman again. I'd like to ask from Marko 2 things. First of all, is there anything in particular you would like to emphasize as the incoming CEO? Some KPIs or something that you want the company to focus more on? And then I also wonder about the Agilon product, automated warehouses. There was no slide about that. Has that been down-prioritized in your offering?

Well, first of all, I just started last week so if you allow me, I'll refrain from a lot of comments related to the future yet. So I'll come back to those after the 1st of June. But I mean, just as you heard today, we have good plans and the company is in a good place. We have a good culture and good team. So in that sense, from my point of view, there's no kind of radical need for adjustment. But of course, all the time, we can be better for sure. I take my kind of appointment from the Board also as a vote of confidence for the whole Konecranes team and the things that have been done in the past. And in that way, I take that as a guiding principle also. When it comes to the Agilon topic, that is related to our warehouse automation business that you saw in the slide. So it is there and we continue to work on the Agilon business. It is part of our offering. And there are -- particularly in the recent, let's say, 2 years, there's been improvements in the offering so that it fits better to the customers' needs. So we are still working on the Agilon area. And we have also, now since the beginning of this year, included some of the software and automation business from the Port side into the Industrial Equipment, increasing the opportunities to leverage this warehouse automation business that we have in Industrial Equipment.

Any other questions from the audience?

Yes. Just another question from my side. Could you potentially comment on the impact of the tariffs from the U.S. on Europe regarding the lift trucks? Where does U.S. -- where do you source lift trucks to customers in the U.S.? Is it from Europe or China? And how do you see this market developing?

Currently, we ship full equipment from Europe. So those will be then subject to the tariffs, just like our other competitors, except, of course, U.S. native competitors. And maybe one addition to that is that even the U.S. competitors are sourcing components from outside of U.S. So they will also indirectly be hit by tariffs in the same way.

On your capital structure, what do you see as your ideal capital structure because neither 80% nor 0% of debt is probably the sort of what your aim is with your balance sheet.

I can try again. So I think that you are probably right that neither of these is the optimal structure, and we haven't actually defined an optimal structure. But what we have internally been now lately thinking is that from the credit rating point of view, so we are not a rated company so we do not have a public rating, but from the credit rating point of view, probably a good place for our type of company could be somewhere there being a crossover or just in the investment grade, in a way, area. So that, that could maybe from the capital structure efficiency point of view, be a good position to be. Now of course, the gearing is not included in the rating agencies' criteria. Those are more like dynamic because they are usually linked to the profitability. So one cannot conclude directly from the gearing that what the optimal structure from that point of view would be. But this is -- now when I'm talking about this, this is more like theoretical thinking than something that would very actively drive our behavior. So we are not actively trying to be either at 0 or at 80% gearing. But what we are using the 80% as a benchmark in ways that we think that with our cash generation ability, the company can easily operate with at least 80% gearing without being jeopardized from the funding perspective, for example. So there is not a specific answer to the optimal structure.

More questions from the audience?

This is Tom again. So given you reported Q1 in the midst of the storm and there's now a 90-day break in these tariffs, could you perhaps give just an update on what is happening in the business just really after Q1 by the different segments?

Who wants to start?

Fabio, go ahead.

Sure. Perhaps that's the simplest one is service that we're talking about spare parts and some componentry. In such case, I mean, we have been able to pass it on in pricing generally. And so far, we haven't seen too much of a pushback from customers. I think most of them are industrial customers and they're in the same boat. They kind of understand. So it hasn't -- and of course, a lot of -- we also have in the U.S. a lot of brands that we have acquired over the years. So there is a lot of also locally manufactured spare parts and also commercial parts, et cetera. So it falls into the whole mix. And so from that perspective, we've been able to remedy the tariffs through pricing.

And I would -- the same applies for Industrial Equipment. So of course, what we've learned over this -- all these turbulence over the years with the kind of the war situation in Europe as well as also the COVID thing is to be quick and agile in these sorts of things. And therefore, we have better tools and process, the way to analyze the product cost structure implications to that. And that, of course, make us more ready for such kind of development. But what I would add to what Fabio is saying beyond the fact that we have also Industrial Equipment been working in the past the tariff inflation to the customers, and it is the same situation that there is understanding for that in the customer base. The implications to the volume and the order intake is not surprised. There is not really a negative or positive impact as such that you can see. But what can be said is maybe when it comes to the deliveries and the kind of ability to complete projects is, of course, something that where the customers also suffer from this import duty, they have a logistic type of slowness into the supply chain. And that, of course, making completing projects and sites slower. That is one implication that one sees from all this uncertainty and all the logistical and supply chain hassles.

And I guess to add also the -- most competitors are in similar situations, whether they're importing componentry from overseas or parts that go into their offering and what-have-you or they have to buy stuff from us from that perspective. So it's depending on the product line, depending the exact product, it's plus or minus. Everybody is in the same boat.

From a ports perspective, a similar answer on the spare parts side. And as I mentioned in my presentation, the -- our customers make long-term investments and not so affected by the short-term cycle. So, so far, we haven't seen really any effect.

Good. Maybe now a couple of questions from the chat. So first is related to the material presented at the previous CMD. So in the previous CMD, you presented an illustration on the various mandates you have assigned for different businesses, I guess, different business units and business areas. Could you update how many and which are the businesses that today have a clear growth mandate?

Maybe I should take that because that's my thing.

Your slide.

Yes. So we have had several businesses have moved from the stability phase into the profitability phase and further into the growth phase in the way we see the SPG matrix or SPG curve. Last time, we did not go out and mention what were the different businesses and their positions. We had anonymous positions to show where the different businesses were. So we are not going out and telling where the different, what we call business units, where they are. But of course, given the strong financial performance and stability of our results, we have had several businesses that are now in growth that were in profitability before and we have less businesses in stability. We still have businesses in stability that needs to be fixed further before they go into profitability and growth, but it has generally moved towards the right in that SPG curve. And you could see it on a high level, we said we are in growth in ports and growth in Industrial Service, and we said we are more in the profitability still in Industrial Equipment. But of course, we have great businesses, as mentioned previously, also in Industrial Equipment like our components business. Fantastic business, we're clearly in growth. And then we have other businesses which still needs more work before they are out of the stability phase and in the profitability phase.

Thank you. And then another one which is related to Industrial Equipment demand and cycle. So Industrial Equipment demand has held up better versus leading indicators despite you being a bit more selective versus before. Do you have a view where the industrial cycle for you is today or an expectation if it will be a benefit for you in the next few years? Or is the starting point already on a decently good level? Long question.

I'm not even quite sure what the question is but I'll still try to answer it. Maybe you can guide me to the right direction. I guess, overall, and as it was shown earlier, let's say, resilience towards these cycles, it has improved. And that, of course, always been, I guess, that Industrial Equipment but also for Industrial Service, what, of course, helps is that we are catering to such a wide and broad variety of different kind of customer segments that are in different cycles. And that certainly helps this in addition to the geographical natural hedging that we have in place. And that has certainly, in the last couple of years, improved even from what it used to be in the past. And I think in that way, that has not really changed. And I don't see that there is reason to believe that, that changes right now either. I mean, we are still cyclical but far less than in the past.

So I guess that from these options, maybe the starting point would be already on a decently good level. And then overall, I mean, it's very difficult to anyone say where we are at the cycle or would the gentleman want to guess?

No, I think we're not in a fantastic upturn. And as you can see from our performance, we are not in a downturn either. So we are somewhere in between. And given how the -- like Teo had in his presentation, given how the geopolitical situation will develop and there might be a drive for new supply chain routes, et cetera. And that will, of course, generate an underlying demand for us, which is above GDP growth.

And then, of course, you have question about this defense industry spending right now that is a bit abnormal situation at the moment, yet somewhat uncertain when and how much that impacts the industrial business demand.

Exactly.

Could you just comment on the defense business? Do you have much -- you sell much to all these, I mean obviously [indiscernible] and also about nuclear as well.

I can maybe comment that one. We are selling to defense but the percentage of our total sales is small. And it actually even has been so small that we have not had a separate category defense. We are building that now. So soon, we will have. So we will categorize customers, re-categorize customers so that we will define which are defense customers and we will have a more accurate information. But we are probably talking about a couple of percentage points. So...

On a group level?

On a group level, 2%. And this would primarily be actually then kind of public sector so that would be military forces of different nations. Then of course, there is a potential in industrial companies that are then delivering also to the military services and capturing all of that from our own system. So this is something now that we are sort of working on. And then, of course, going forward, also developing concepts that how do we approach the military sector customers and be it then individual companies or, let's say, public sector entities.

And nuclear, if you could comment about how you see that business developing?

Would maybe Marko or Fabio like to comment on the nuclear?

Yes, sure. I mean, nuclear, there is -- it is quite a steady business. I mean, we do several modernizations in the nuclear power plants, primarily what we're talking about. There's a way to kind of extend the life of nuclear power plants in various parts of the world. We have a very strong nuclear business, certainly in North America, both from what we had originally from the acquisition of P&H many years ago as well as to the recent acquisition of Whiting, which was also playing into the nuclear area. So that's a very strong base. And from there, we also do in Europe and in the countries that we want to be in that segment. And there is -- there are some activity in the SMR that we see popping up as well in the equipment, not to steal the thunder of Marko.

No, no. I'm [indiscernible].

And so it's an active area, let's put it that way. Some of these projects sometimes take a long time. But certainly, we are certainly seeing activity. And I think we've mentioned also in some of the quarterly reports that we've had nuclear orders and whether it's modernizations or equipment and feel that, that should continue. It's not so much affected by these cycles. I don't know if that answers your question.

You mentioned modernizations. Historically, this has been an area where there has been great successes and also some quite difficult such projects. How is that business nowadays? Is it something that's more stabilized or is it still opportunities and challenges sometimes?

Sure. I know we share a long history there, Svante. But the -- for quite a while now, and I would say for years, our Modernization business is much more stable. We have been much more selective, much better at execution and project management. So it's not an area where we're taking on undue risk, and we certainly have the technical capability, both in the engineering, in the installation and the execution of these projects. And in the nuclear area, for example, I don't think there's an equal from that perspective, given the background and the companies that we brought together in that area. So yes, we're certainly selective. We certainly do our homework ahead of time. We try to do modernizations with our own customers. And of course, the more if we can do pre-engineering and studies ahead of time, that certainly helps and reduces the risk, but we don't see that as an issue today.

And then we could take 1 question from the chat and it's related to Ukraine. So you have a plant in Ukraine in a potential peace scenario. Could rebuilding Ukraine be a significant opportunity for you?

Absolutely, yes, [ short answer ]. Yes, of course, we have a Zaporizhzhia plant, which is very close to the front line. That is still operating from time to time because our staff there is operating when they basically want to have a normal life like everyone else. So they run the company not on the critical line of deliveries, but more for sort of the backbone supply chain within the company. So maybe running 25% or so, 20%, 25% of capacity maybe from time to time. And of course, the rebuilding of Ukraine is a big opportunity. It will be massive investment, both for the Industrial side but also for the Port side to rebuild the whole ports infrastructure, which used to be quite big actually in Ukraine with the largest -- some largest crop deliveries around the world that needs to be rebuilt. And we have the full offering to support those initiatives. And it has actually already started. We have delivered cranes to some new build plants already in Ukraine.

Any other questions from the audience? If not, so then I think that it's time to conclude our CMD for today. I would like to thank you all for the questions as well as the active participation. And as this is my last event at Konecranes Investor Relations, I would also, of course, like to personally thank you for the past 7 years. I have truly enjoyed my time at Konecranes working with you all. And it's been quite eventful, too, one can say. So I wish you all and of course, Konecranes, all the best. Thank you.

Thank you. Bye-bye.