Kalmar president Olli Isotalo

Cargotec has adjusted its previous estimate on project cost overruns for its Kalmar business area.

For its first quarter interim report, Cargotec stated that the majority of sales of the large projects sold in 2011/12 have been recognised as revenue. In the same context, it was stated that significant cost overruns related to one ship-to-shore crane project sold in 2012 were found.

However, an analysis has found that completion of the project will result in a higher-than-expected cost overrun for Kalmar.

Cargotec says it will book approximately EUR40 million (USD54.4 million) in project cost overruns in Kalmar's second quarter operating profit, in addition to the EUR 9 million (USD12.24) booked in the first quarter. This is estimated to cover the costs for finalising project deliveries.

"Management of the ship-to-shore crane project has been replaced and resourcing strengthened, and tightened internal controls have been introduced to secure project delivery according to plan. In addition, co-operation negotiations have been started to reorganise the ship-to-shore crane business," the company notes.

Kalmar president Olli Isotalo will take over the operational responsibility of the automation and projects division responsible for project sales and delivery in addition to his current responsibilities.

Despite the project cost overruns, Cargotec states that Kalmar's ongoing profitability improvement program, targeting a EUR40 million (USD54.4 million) run-rate improvement by the end of this year, is proceeding according to plan.

Cargotec's outlook for 2014 is unchanged. Sales are expected to grow from 2013. Operating profit excluding restructuring costs is expected to improve from 2013.

Separately, Eric Nielsen, member of Cargotec's executive board and president of MacGregor business area, is resigning from Cargotec due to personal reasons. President and CEO Mika Vehviläinen will take over as interim president of MacGregor. Nielsen joined Cargotec in September 2013.

From 12 June 2014, the members of Cargotec's executive board are: president and CEO Mika Vehviläinen; executive vice president and chief financial officer Eeva Sipilä; senior vice president, strategy Mikael Laine; senior vice president, human resources Mikko Pelkonen; and business area presidents Olli Isotalo (Kalmar) and Roland Sundén (Hiab). Senior vice president, general counsel Outi Aaltonen serves as secretary to the board.

Cargotec's sales totalled approximately EUR3.2 billion (USD4.35 billion) in 2013 and it employs approximately 11,000 people.