Konecranes Plc Interim Report

KONECRANES PLC INTERIM REPORT April 26, 2018 at 9:00 am

STRONG improvement in group adjusted EBITA, solid growth in group sales and service orders with comparable currencies

This release is a summary of Konecranes Plc’s Interim Report January-March 2018. The complete report is attached to this release in pdf format and is also available on Konecranes’ website at www.konecranes.com

Konecranes applied the full retrospective approach in IFRS 15 transition, and the numbers for the periods in 2017 have been restated. Please refer to note 4 for more details on the implementation of IFRS 15 and other significant accounting policies.

Figures in brackets, unless otherwise stated, refer to the same period a year earlier.

FIRST QUARTER HIGHLIGHTS

- Order intake EUR 683.1 million (734.5), -7.0 percent (-2.6 percent on a comparable currency basis)
- Service order intake EUR 238.5 million (246.3), -3,2 percent (+4.5 percent on a comparable currency basis)
- Order book EUR 1,575.8 million (1,604.5) at the end of March, -1.8 percent (+2.7 percent on a comparable currency basis)
- Sales EUR 672.8 million (684.1), -1.7 percent (+3.9 percent on a comparable currency basis)
- Adjusted EBITA EUR 37.2 million (31.1), 5.5 percent of sales (4.5)
- Operating profit EUR 23.8 million (226.4), 3.5 percent of sales (33.1)
- Earnings per share (diluted) EUR 0.11 (2.51)
- Free cash flow EUR -2.2 million (88.0)
- Net debt EUR 524.3 million (535.6) and gearing 43.8 percent (42.8)

DEMAND OUTLOOK

The demand situation in Europe is stable within the industrial customer segments. Business activity in the North American manufacturing industry is starting to improve. Demand in the Asia-Pacific region continues to show signs of improvement. Global container throughput growth continues at a high level, and the prospects for the small and medium-sized orders related to container handling remain stable.

FINANCIAL GUIDANCE

The sales in 2018 are expected to be approximately on the same level or higher than in 2017. We expect the adjusted EBITA margin to improve in 2018.

KEY FIGURES

Konecranes applied the full retrospective approach in transition of IFRS
15 and thus the comparables for the periods in 2017 have been restated.

IFRS 15 adjustments included in the selected 2017 key figures⁴

¹ Excluding adjustments, see also note 11 in the summary financial statements
² Excluding adjustments and purchase price allocation amortization, see also note
11 in the summary financial statements
³ ROCE excluding adjustments, see also note 11 in the summary financial statements
⁴ See also note 4 in the summary financial statements for additional info

President and CEO Panu Routila:

"The first quarter was a good start to the year in several ways. To begin with, the integration of MHPS progresses well and according to our plan, which gives us additional confidence that we will reach our planned EBIT-level run rate synergies of EUR 140 million at the end of 2019. As of end-Q1, approximately EUR 63 million of the targeted run rate savings has been implemented. Our progress is clearly visible in our Group adjusted EBITA-margin, which improved 1.0 percentage point to 5.5 percent year-on-year.

USD has depreciated close to 15 percent against the euro compared to the year-ago period, and as a result, foreign exchange fluctuations had an adverse impact on our reported volumes in the period. With that as context, our underlying financial performance turned out in line with our expectations.

On a comparable currency basis, Business Area Service recorded solid growth in order intake, largely due to an increase in modernizations. Also, our service agreement base value grew 2.3 percent from the end of 2017, demonstrating progress with the execution of our service growth strategy. External orders fell on a comparable currency basis in both Business Area Industrial Equipment and Business Area Port Solutions. In Port Solutions order intake decreased largely due to the timing of projects in the quarter. In Industrial Equipment, component orders grew sequentially, continuing the positive trend from Q4. This is an encouraging signal also for industrial cranes when looking ahead further into the year.

Although the weakened US Dollar pushed the reported Group sales 1.7 percent below the previous year, on a comparable currency basis, Group sales increased 3.9 percent. Comparable sales grew in all business areas and regions. The sales growth was mainly attributable to Business Area Port Solutions, which benefitted from a strong order backlog.

We were able to expand our adjusted EBITA margin, mainly due to the actions we have taken to lower fixed costs in all business areas, improve productivity in Service, and restructure manufacturing operations and consolidate country level support organizations in Industrial Equipment. In Port Solutions, the improvement was mainly driven by sales growth. Material and salary Inflation were absorbed by customer price increases, and the gross margin improved in Service and Industrial Equipment.

The global economy still looks strong, especially in the US, where key macroeconomic indicators continued to improve. That said, Europe has started to show signs of slowing growth, as capacity constraints have begun to hinder general economic activity.

Our demand outlook reflects the improved conditions in the North American manufacturing industry and stabilizing prospects related to container handling overall, and we are confident about the quarters ahead. Therefore, we have today reiterated our guidance for the full year: the sales to be approximately on the same level or higher than in 2017 and the adjusted EBITA margin to improve in 2018.

Based on the current FX rates, we continue to expect a negative impact of approximately 3 percent on sales from foreign exchange fluctuations. Our expectation for incremental P&L level synergy savings in full year 2018 remains at EUR 40-50 million. Furthermore, we continue to expect EUR 12 million net interest savings related to the debt refinancing activities we did last year.

Finally, I am very pleased with the progress we have made recently on R&D. Our pipeline includes several projects that will significantly advance our technological leadership. Speeding up some of these projects, in addition to investments in selected key IT initiatives, is the reason we are investing EUR 15 million more in these areas in 2018, as we guided for last quarter.

With artificial intelligence, for instance, we are developing new applications that use AI to predict the renewal of service agreements. Another example of our recent R&D achievements is Work Zone, a suite of location-based services for Lift Trucks, that uses GPS-based geofencing to create virtual fences around real-world areas for improved safety.

Regarding the additional spend on IT, the projects include a new product lifecycle management tool, a new HR system, an updated eCommerce platform, as well as investments needed to meet the requirements of the European Union’s new general data protection regulation. We are making these investments to improve efficiency and to secure our competitiveness and long-term success. We have some truly exciting R&D projects in the pipeline, and I look forward to informing you more about those over the coming 12 months.”

ANALYST AND PRESS BRIEFING
An analyst and press conference will be held at the restaurant Savoy’s Salikabinetti (address: Eteläesplanadi 14, Helsinki) on April 26, 2018, at 11.00 am Finnish time. The Interim Report will be presented by Konecranes’ President and CEO Panu Routila and CFO Teo Ottola.

A live webcast of the conference will begin at 11.00 am at www.konecranes.com. Please see the stock exchange release dated April 12, 2018 for the conference call details.

NEXT REPORT
Konecranes Plc plans to publish its January-June 2018 interim report on July 25, 2018.

KONECRANES PLC

Eero Tuulos
Vice President, Investor Relations, tel. +358 20 427 2050



FURTHER INFORMATION
Mr. Panu Routila, President and CEO, tel. +358 20 427 2000
Mr. Teo Ottola, Chief Financial Officer, tel. +358 20 427 2040
Mr. Mikael Wegmüller, Vice President, Marketing and Communications, tel. +358 20 427 2008


Konecranes is a world-leading group of Lifting Businesses™, serving a broad range of customers, including manufacturing and process industries, shipyards, ports and terminals. Konecranes provides productivity enhancing lifting solutions as well as services for lifting equipment of all makes. In 2017, Group sales totaled EUR 3,136 million. The Group has 16,200 employees at 600 locations in 50 countries. Konecranes shares are listed on the Nasdaq Helsinki (symbol: KCR).


DISTRIBUTION
Nasdaq Helsinki
Major media
www.konecranes.com

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