29.10.2020

Profit rebound for Konecranes

Port crane and material handling manufacturer Konecranes has reported a strong growth in profitability on lower revenues.

Total revenues for the nine months to the end of September were €2.24 billion, just 6.3 percent below last year’s levels. Pre-tax profit jumped more than 70 percent to €94.1 million, while net debt increased from €1.9 to €2.2 billion.

In the third quarter sales declined 8.7 percent to €768 million while pre-tax profits almost quadrupled to €35.6 million. The order book at the end of the quarter was €1.74 billion , down 9.4 percent on last year.

Chief executive Rob Smith said: “In the third quarter Konecranes reported a record high quarterly adjusted EBITA margin of 10.4 percent despite the challenging market environment thanks to excellent employee commitment, strong teamwork and high performance. While we continue to expect market volatility and fluctuations due to the Covid-19 pandemic, our second and third quarter performance and our ongoing strategic development give us the confidence and capability to overcome future challenges.”

“The third quarter started in a more positive environment, however it became evident during the quarter that the pandemic is far from over. This was reflected in the overall market uncertainty. Despite the improving macroeconomic indicators, global demand has not returned to pre-pandemic levels, and our business is known for being rather late cyclical. As a result, our third quarter order intake was approximately 19 percent lower in compared to a year ago, including MHE-Demag.”

“Despite the better overall situation, completing instalments in the midst of ongoing travel restrictions and strict quarantines has been quite challenging, and I would like to give special thanks and recognition to the commitment of our employees as well as our customers to enabling safe and timely deliveries, installations and on-site service work.”

"Service order intake was impacted by the lower industrial activity due to the Covid-19, especially in South-East Asia and the Americas. However, sales declined only two percent year on year, and we succeeded in growing the agreement base value almost 11 percent, including MHE-Demag. Service achieved a record high adjusted EBITA margin of 18.7 percent - a clear sign that our robust service business model, digital service platform and focus on productivity are delivering exciting results.”

“In terms of execution, Industrial Equipment had an excellent quarter. While we still have much work to do, we have made good progress with our process crane business turnaround some of which is visible in our third quarter profitability. To further improve our productivity, we decided to close production at our Glasgow site and started co-operation negotiations with the aim to centralise process crane related personnel resources in Finland and in Germany.”

“Port Solutions order intake remained at a low level. Customer’s decision making continues to be slow and planned investment projects are being postponed. Due to the global nature of the business, travel restrictions and quarantines impact Port Solutions the most of our three businesses.”

“Before concluding, I would like to mention the merger with Cargotec that was announced on 1 October. The merger is well aligned with our strategy and our growth ambitions. The merger remains subject to regulatory approvals and other conditions to closing, and the two companies will continue as independent and separate entities until the completion of the merger.”

Vertikal Comment

The turnaround in the pre-tax profit line on these results is quite remarkable and suggests that there was a fair bit of fat and waste in the business before. But also product mix has a major impact, with margins varying wildly dependent of where a big mobile port crane is sold or a relatively small overhead crane or marine fork lift or parts and service.

Will be interesting to see how the merger with Cargotec might work out.