Konecranes reports record profits in face of Covid constraints
Konecranes has reported its fourth consecutive quarter of record profitability, powered by solid sales growth and high performance across the whole organisation. Strong orders in the first half of the year, together with continuing traction from strategic initiatives have given Konecranes good momentum for the latter half of the year.
President and CEO Rob Smith said, “Overall market sentiment continued to improve in Q2 compared to the previous quarters, though Covid-19 related market volatility is not over. Activity remained high in the port sector and continued to improve with our industrial customers and, at end-June, our order book was at a record high. Sequentially, orders received in the quarter increased by over €43 million and totalled €806.7 million. Year-on-year, Konecranes’ Q2 order intake grew 41.1% in comparable currencies, as last year’s Q2 marked the peak of the Covid-19 pandemic and lockdowns from a global perspective. We saw once again good order growth in our short-cycle products.
“Component availability and other supply chain constrains continued to affect sales in Q2, with a quarterly impact of approximately €35 million. However, sales still grew by 10% year-on-year in comparable currencies and increased in Port Solutions and Service but remained at the previous year’s level in Industrial Equipment. As a result, and in line with our expectations for the full year, H1 sales exceeded last year’s H1 sales in comparable currencies and were 0.7% behind last year’s level in reported currencies.
“Our Q2 adjusted EBITA margin was 8.6%, marking the fourth quarter in row with an all-time high adjusted EBITA margin for the quarter in question. This is an excellent achievement given the pandemic is still disrupting many countries, and there are global component and other supply chain issues. I would like to thank our employees for their hard work, and our suppliers and customers for their close collaboration during the quarter.”
Smith said that Covid-19 and the global component shortage were not the only events impacting operations. “Two weeks ago, one of our biggest factories, Wetter, was affected by the flooding catastrophe in Germany. While no employees were injured, there was some physical damage at the site, and we expect to close the production gap within a month. We have many employees living in the region, and our thoughts and sympathies are with them, their family members and communities.”
In Q2 of 2021 Service order intake improved by 26.2% year-on-year in comparable currencies, and orders grew in all three regions. Despite year-on-year sales growth, component shortages and logistics delays impacted Service sales and also the sales mix and, as a result, the adjusted EBITA margin was 16.8%, a decrease of 0.4 percentage points versus a year ago.
Industrial Equipment’s external order intake grew by 48.4% in Q2. Net sales were impacted by supply chain constrains resulting from Covid-19, component shortages and logistics delays. The good profitability trajectory continued: Industrial Equipment’s adjusted EBITA margin was 2.1%, improving by 0.4 percentage points from the previous year, mainly driven by the favourable sales mix as well as continued good progress with strategic initiatives, especially in the process crane business.
In Port Solutions, the previous quarters’ good order momentum continued, and order intake grew 47.9% from the previous year in comparable currencies. lift trucks, straddle carriers, solutions and port service had a strong order intake. Port Solutions’ adjusted EBITA margin increased by 0.7 percentage points to 7.1%, driven by higher sales and our project management excellence initiative.
Smith contunued, “While we expect market volatility to continue due to the pandemic, we have updated our demand outlook for Q3 to reflect the current market sentiment. We reiterate our full-year guidance for 2021 despite the supply chain challenges which impacted net sales in H1 and continue to impact operations in Q3. We expect to overcome these challenges, with net sales to increase in full-year 2021 compared to 2020 and, given our performance track record and the ongoing positive impact of our strategic initiatives, we expect our full-year adjusted EBITA margin to improve from 2020.
“Our announced merger with Cargotec is progressing well – merger control filings and integration planning teams are making good headway. At the beginning of July the European Commission opened a Phase II merger control review, which is a common step for sizeable global transactions. Shortly after that, the UK Competition and Markets Authority (CMA) referred the planned merger for a Phase II investigation under its fast track procedure. Phase II will enable the European Commission and the CMA to consider the merger in further detail, and Konecranes and Cargotec continue to closely cooperate with all relevant authorities to demonstrate the rationale of the planned merger. Both companies continue to operate fully separately and independently until all merger closing conditions are met and the deal is completed.
“The merger is fully aligned with Konecranes’ strategic plans and growth ambitions, and we are confident that the merger will be completed by the end of H1 2022. Together with Cargotec we will create a global leader in sustainable material flow.”