Cargotec Oyj (FRA:C1C1) (Q4 2024) Earnings Call Highlights: Navigating Challenges with ...

GuruFocus.com
13 Feb
  • Order Intake: Improved by 3% year-over-year, reaching EUR 1.509 billion.
  • Revenue: Declined by 8% year-over-year.
  • Profitability: Improved from 14.1% to 14.9%, despite the decline in sales.
  • Cash Flow: Improved by more than EUR 100 million, with operative cash flow at EUR 323 million for the year.
  • Return on Capital Employed (ROCE): 30.5% for Hiab.
  • Gross Profit Margin: Improved by 2.2 percentage points.
  • Net Debt: Would have been minus EUR 290 million if MacGregor sale had completed by year-end.
  • Dividend Proposal: Total of EUR 2.77 per B share, conditional on MacGregor divestment.
  • CapEx Investments: Approximately EUR 25 million planned for factory and customer support center investments.
  • Warning! GuruFocus has detected 3 Warning Signs with FRA:C1C1.

Release Date: February 12, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Cargotec Oyj (FRA:C1C1) reported strong full-year 2024 results with positive book-to-bill ratios and robust profitability and cash flow.
  • Hiab achieved its best result ever, despite an 8% drop in the top line, showcasing strong operational efficiency.
  • MacGregor had its best year since 2014, indicating a successful turnaround and strong performance in a challenging market.
  • The company successfully completed the separation and listing of Kalmar, demonstrating effective execution of strategic initiatives.
  • Hiab's order intake improved by 3%, driven by growth in the Americas and key account customers, contributing to a sequential increase in the order book.

Negative Points

  • Cargotec Oyj (FRA:C1C1) experienced an 8% decline in revenues year-on-year, primarily due to a decrease in European sales.
  • The demand environment remains challenging, with high financing costs and softness in the construction segment affecting order intake.
  • The company incurred EUR15 million in non-repeating costs, impacting quarterly profitability, with significant restructuring expenses in Italy.
  • MacGregor's divestment is expected to yield only EUR220 million in cash inflow, significantly lower than its enterprise value, due to balance sheet adjustments.
  • The outlook for 2025 indicates a comparable operating profit margin above 12%, suggesting potential pressure on margins amid uncertain market conditions.

Q & A Highlights

Q: Can you explain the moving parts in the 2025 margin guidance, particularly regarding restructuring actions and potential one-off costs? A: Mikko Puolakka, CFO, explained that the 2025 margin guidance is based on the current order book and the EUR20 million cost efficiency program implemented last year, which is expected to yield positive results, especially in the second half of the year. The order book covers roughly five months of sales, and the company is prepared for both flat and potentially declining demand scenarios.

Q: What is the expected cash inflow from the MacGregor divestment, and why is it different from the enterprise value? A: Mikko Puolakka, CFO, stated that the expected cash inflow from the MacGregor divestment is approximately EUR220 million. The difference from the enterprise value of EUR480 million is due to the treatment of advance payments in MacGregor's balance sheet, which are considered as debt.

Q: How is the demand environment across different markets, and are there any signs of recovery in Europe? A: Casimir Lindholm, CEO, noted that the demand environment remains uncertain, with geopolitical unrest and high financing costs affecting smaller customers. North America shows stronger demand compared to Europe and APAC. In Europe, demand remains stable, with some positive indicators, but no significant recovery is observed yet.

Q: Should we expect one-off items to occur regularly, and why are they not excluded from comparable operating profit? A: Scott Phillips, President of Hiab, explained that the one-off items in the last two years were coincidental and related to cost-saving programs. These items are not excluded from comparable operating profit as they are part of the company's strategic adjustments to improve efficiency.

Q: What is the outlook for acquisitions, and is Hiab prepared to pursue them now? A: Casimir Lindholm, CEO, mentioned that Hiab is well-prepared for acquisitions, supported by a strong balance sheet. The company has been actively working on potential targets even during the transition period, and resources will be available for M&A activities once the MacGregor divestment is closed.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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