CEO Panu Routila : delivering a profitability improvement

Konecranes has managed to increase profits on lower sales and orders in the second quarter as market caution continues to hamper equipment purchase decisions.

The Helsinki-listed group is reporting an operating profit of EUR28.6 million (USD31.4 million), up from EUR16.3 million (USD17.91 million) in the same quarter of 2015. However, the profit calculation includes a significant number of adjustments: restructuring costs, transaction costs related to the terminated merger plan with Terex and proposed acquisition of Terex MHPS, unwarranted payments due to identity theft and fraudulent actions in the third quarter of 2015, and insurance indemnity related to identity theft and fraudulent actions in the second quarter of 2016.

The order intake was EUR480.2 million (USD527 million), down 2.1% from EUR490.3 million (USD538.5 million).

In its discussion of the results, Konecranes says customers are cautious about investing because economic growth has decelerated across the globe. Companies operating in emerging and commodity markets are particularly under pressure to save costs.

It also notes market uncertainty in North America, while it says the demand situation in Europe has somewhat improved. The decline in the global container throughput has led to slower decision-making among container terminal operators.

Konecranes is predicting that sales in 2016 will be approximately at the same level as in 2015.

President and CEO Panu Routila says: "We managed to deliver a profitability improvement in the second quarter driven by robust performance in both Service and Equipment.

"In the second quarter, we continued cost savings actions related to restructuring, which supported our gross margin and lowered our fixed costs in both Service and Equipment," he points out, adding that the group's headcount decreased by 443 employees in the first half of 2016, 165 of them in the second quarter.

"Equipment has reduced its manufacturing capacity in China, India, Brazil, and the US. In addition, both business areas and corporate functions have streamlined their support resources."

Routila describes May 16 as "a milestone in building our future as we signed an agreement to acquire from Terex Corporation its Material Handling & Port Solutions business".

"This acquisition will prove crucial to improving our position as a global partner in services, industrial lifting and port solutions. The combination makes it possible for us to realise a long list of synergies, it opens new growth opportunities in the service business and creates critical mass for future technology development."