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Mixed fortunes for Konecranes

Wednesday, 6 Nov 2019 ( #948 ) - Hyvinkää, Finland
News Story
Teo Ottola
Konecranes ended the third quarter with mixed performance, according to interim CEO Teo Ottola.

"On the one hand, we saw order intake in Business Area Service return to a growth path, and Business Area Port Solutions record yet another solid quarter. On the other hand, however, the performance in Business Area Industrial Equipment was increasingly affected by the deteriorating macroeconomic environment, along with temporary costs related to the optimisation of our manufacturing footprint in Vernouillet, France and Wetter, Germany."

The latest Konecranes results show a 6.4% growth in annual value of service agreements, reaching EUR263.4 million (USD291.70 million).

"While project-related order intake continued to track below its long-term average, orders overall grew 3.6% from the previous year on a comparable currency basis (in this sector)," Ottola says.

"In Port Solutions, strong demand for straddle carriers boosted (the) order intake in Q3. On a comparable currency basis, the year-on-year order growth in the business area was 3.9%. The general sentiment among port customers continues on a good level, despite hesitation in decision-making among some port customers.

"The demand for lift trucks among our industrial customers started to level out," he adds.
Ottola notes a challenging quarter for the Industrial Equipment business unit."Weakening macroeconomic conditions were reflected in external orders, which fell 9.7% from the year-ago period in comparable currencies … The weakness in profitability was driven primarily by lower volume, weaker product mix and low productivity at our factory in Vernouillet, along with lower efficiency as a result of changes that are currently being implemented at our factory in Wetter. In addition, market softness has begun to limit our ability to fully absorb cost inflation with price increases."
Ottola is flagging low profitability in Industrial Equipment for Q4, but points to the company efficiency drive which should "build a better long-term foundation for Konecranes".

He also highlights three significant product launches in Q3: an innovative all-new S-series standard crane with a synthetic rope; a new highly modularised and compact M-series process crane; and a new higher-performance C-series electric chain hoist. "The new products are planned to replace our current offering in the next two years, allowing us to reduce the number of product platforms from 20 down to 14.

"We expect the new products to strengthen our leading market position, and act as a key driver in our pursuit for long-term profitable growth also in Business Area Industrial Equipment."

Looking ahead, Ottola predicts that the demand environment in Europe will continue to soften. "The demand environment in North America is on a higher level compared to Europe but has started to show signs of weakening. Asia Pacific continues to be stable overall," he explains.
"Global container throughput continues on a good level and the prospects for orders related to container handling remain stable overall. That said, there is hesitation in decision-making among some port customers."

Therefore, Konecranes expects sales in full-year 2019 to increase 5-7% year-on-year.
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