Pandemic has significant effect on Cargotec

(Posted on 28/04/20)

Cargotec’s CEO Mika Vehviläinen:

“The coronavirus pandemic defined the beginning of the year 2020 globally, and also in Cargotec’s business. The pandemic slowed our activities in China during the beginning of the year, as factories were faced with lower capacities, and the availability of components weakened. However, the situation improved towards the end of the quarter. In January–February, the market situation in Europe and the Americas, our largest markets, appeared to be reasonable, but by the end of March, market visibility had essentially weakened. Since then, the increase in the market uncertainty and the government actions to contain the pandemic have slowed customers’ decision- making and affected orders and deliveries negatively.

Orders received decreased by 24 percent compared to the comparison period. Due to uncertainty, customers have postponed their decision-making, especially in terms of large projects. At the beginning of the year our order book was strong, and, despite the challenging market environment, our sales remained at the comparison period’s level during the first quarter.

Our comparable operating profit decreased by 31 percent from the comparison period. Operating profit decreased due to a less profitable business mix, which was caused by an increased MacGregor share in sales, as well as Kalmar’s less profitable sales mix. Supply chain challenges in Kalmar’s project business and Hiab’s lower volumes also contributed to the decline.

Our service and software business continued to develop positively. Service sales increased by 5 percent and software sales by 7 percent, together constituting 35 percent of our sales. We are progressing according to our plan with the goal of increasing our service and software business.

To minimise the effects of the coronavirus pandemic, we have initiated measures to adjust our cost structure. The office workers (ca. 6,000 employees) have shifted to a four-day working week with a corresponding reduction in salaries, subject to local legislation. Until further notice and with their consent, the salaries of the company's management have been reduced by 20 percent as of 1 April. We have also reduced the use of external services and minimised travelling. We are closely monitoring the market and global situation and are well positioned to adjust our operations further if needed.

Our financial position is strong. As the coronavirus situation began to materialise, we prepared for the potential instability in the financing markets by drawing two-year bank loans in April from our correspondent banks with a total amount of 200 million euros.

During the crisis, it has become clear that our strategic direction and will to promote intelligent cargo handling is the right one. Our service business is advancing, with main focus in increased data usage, device connectivity and remote maintenance issues - all things where we have made clear progress. In recent weeks, the interest in increasing efficiency through automation has become evident, and robotics and remote working in connection with port and terminal operations, for example, have materialised.

We take the coronavirus pandemic seriously and health and security issues are the top priority in all of our actions. The exceptional situation has required adaptability and resilience from our stakeholders. Our common task is to keep the cargo flow moving, thereby helping globally to secure, for example, the deliveries of critical necessities. I would like to thank our employees, customers and partners for their efforts towards this important goal, even during these challenging circumstances.

Cargotec's business areas Kalmar, Hiab and MacGregor are pioneers in their fields.”