The number of containers handled at ports is estimated to have increased by approximately one per cent. Thus, the growth in 2016 was slower compared with previous years. Interest in efficiency-boosting port automation solutions continued to be high, but it resulted in only a few new decisions to invest in automation solutions. Because of the uncertainty caused by the strong consolidation of shipping companies, customers are careful with their decisions concerning major projects and automation solutions. Demand for container handling equipment was satisfactory, and demand for services was at the previous year’s level. In the United States, the load handling market was strengthened by the strong construction activity. The U.S. truck market was still on a good level, even though fewer trucks were registered compared with the previous year. In Europe, the market activity improved, but activity levels varied between countries. Demand for services was good and improved from the previous year. The market for marine cargo handling equipment continued to decline in 2016, with a significant drop in the number of new orders. The challenging market conditions may lead to increasing centralisation, restructuring and bankruptcies in the industry. The risk for order postponements and cancellations is still high. In the offshore industry, the slightly increased oil price did not yet support investment activity in the latter part of 2016. We will probably see centralisation also in the offshore sector. Demand for services has decreased, while various players in the field are also minimising their maintenance and service costs.

Orders received and order book

Orders received in 2016 decreased by eight percent from the comparison period and totalled EUR 3,283 (3,557) million. Compared to the comparison period, currency rate changes had a one percentage point negative impact on orders received. 52 percent of the orders were received by Kalmar, 31 percent by Hiab and 17 percent by MacGregor. In geographic terms, the Americas’ share of all orders was 30 (31) percent. Asia-Pacific’s share of orders decreased to 23 (28) percent. EMEA’s share of orders received increased and was 47 (41) percent. The share of service orders was 27 (25) percent of all orders received. The order book decreased from the 2015 year-end level, and at the end of 2016 it totalled EUR 1,783 (31 Dec 2015: 2,064) million. Kalmar’s order book totalled EUR 900 (877) million, representing 50 (42) percent, Hiab’s EUR 286 (305) million or 16 (15) percent and that of MacGregor EUR 598 (883) million or 34 (43) percent of the consolidated order book.

Sales

Sales in 2016 decreased by six percent from the comparison period and totalled EUR 3,514 (3,729) million. Compared to the comparison period, currency rate changes had a one percentage point negative impact on sales. In geographic terms, sales declined in Asia-Pacific and remained at the comparison period level in Americas and EMEA. Asia-Pacific’s share of consolidated sales decreased to 27 (32) percent, whereas EMEA’s share increased to 42 (40) percent and the Americas’ to 31 (28) percent. Sales of services remained at the comparison period level in all market areas. Sales of services amounted to EUR 872 (883) million, representing 25 (24) percent of sales.

Financial result

Operating profit for 2016 decreased from the comparison period, totalling EUR 197.7 (213.1) million. Operating profit includes EUR 52.5 (17.7) million in restructuring costs. EUR 19.7 (2.5) million of the restructuring costs were related to Kalmar, EUR 1.2 (0.9) million to Hiab, and EUR 31.6 (14.3) million to MacGregor. Operating profit for 2016, excluding restructuring costs, was EUR 250.2 (230.7) million, representing 7.1 (6.2) percent of sales. Excluding restructuring costs, operating profit for Kalmar amounted to EUR 135.3 (129.9) million, Hiab EUR 140.0 (100.5) million, and MacGregor EUR 17.9 (30.1) million. The costs of corporate administration and support functions increased to EUR 42.9 (29.7) million, primarily due to weaker results of associated companies compared to the comparison period as well as digitalisation costs and costs related to leadership development. Net interest expenses for interest-bearing debt and assets in 2016 totalled EUR 20.4 (20.6) million and net financing expenses totalled EUR 28.6 (26.9) million. Net income in 2016 totalled EUR 125.3 (142.9) million, and earnings per share EUR 1.95 (2.21).

Acquisitions

In September, MacGregor acquired the share majority of Flintstone Technology Ltd, UK. The company specialises in advanced technology and products for mooring and fluid handling. The results of Flintstone Technology Ltd has been consolidated into MacGregor business area results as of 1 October 2016. In September, MacGregor signed a joint venture contract with China State Shipbuilding Corporation’s (CSSC) Nanjing Luzhou Machine Co Ltd (LMC) to form CSSC Luzhou MacGregor Machine Co Ltd. Subject to all relevant authority approvals, expected within 2017, LMC will own 51 percent and MacGregor 49 percent of the new joint venture company. The joint venture is expected to strengthen MacGregor’s market position and local connections in China. In March, Cargotec completed the acquisition of INTERSCHALT maritime systems AG. The results of INTERSCHALT’s software business have been consolidated into Kalmar business area results and services business into MacGregor business area results as of 1 March 2016. More information on acquisitions is available in Note 5, Acquisitions and disposals.

Operational restructurings

In October, Cargotec announced that it will launch a programme to achieve cost savings of approximately EUR 25 million in MacGregor. The global employee co-operation negotiations resulted in the decision to reduce 230 person-years. The measures will particulary affect operations in China, Finland, Norway, Singapore and Sweden. In addition, MacGregor has made an agreement to sell its production facility in Uetersen, Germany to a newly founded company Uetersener Maschinenfabrik GmbH. The deal was closed on 30 December 2016, and 79 employees working in production transferred to the new company on the same date. In September, Cargotec announced plans to re-organise the maritime software company INTERSCHALT operations in Germany, USA and China. Re-organisations would affect tens of employees. The savings resulting from these activities are expected to amount to approximately EUR 2 million annually from 2017 onwards. During the third quarter, MacGregor completed a workforce reduction process in Norway that was started in April. The process led to a reduction of 85 employees by the end of the third quarter. The cost benefits of the reduction are estimated to amount to approximately EUR 2 million in the last quarter of 2016 and EUR 7 million annually from 2017 onwards. In July, Kalmar completed the employee cooperation negotiations announced in March, in Lidhult, Sweden. As a result, Kalmar will transfer the production of forklift trucks from Sweden to Poland, invests in new, state of the art premises in Sweden and transforms the operations in Southern Sweden into a Business, Innovation and Technology Centre. The change in Lidhult will lead to a permanent reduction of 160 employees and gradual operational closing. The restructuring costs associated with the transfer are estimated to amount to approximately EUR 18 million, 6 CARGOTEC FINANCIAL REVIEW 2016 out of which EUR 16 million were booked in Cargotec’s results in 2016 and EUR 2 million will be booked in 2017. Approximately EUR 13 million of the restructuring costs are cash effective. The total benefits of the activities are expected to amount to approximately EUR 13 million annually from 2018 onwards. The above measures will result in cost savings of approximately EUR 27 million in 2017 and further EUR 13 million in 2018 for Cargotec, compared to the cost level of 2016.

Full Report

Source: MacGregor Group