Below is an article by Ilkka Sinervä on how Columbus McKinnon’s billion-dollar merger could make it a tough challenger for Konecranes in industrial cranes.
The number one player in U.S. industrial cranes, Columbus McKinnon, has completed a merger worth approximately $2.7 billion, nearly ten years after Gustavson’s operations.
Over a year ago, Columbus McKinnon announced the acquisition of Kito Crosby, an industrial crane and lifting technology company from major private equity investors, which at the time had a turnover of approximately one billion dollars.
On Friday, a large block trade was executed with Konecranes shares. A premium of approximately 12% was paid, meaning the shares were bought at a price of €30.42, while the market price on Friday was around €27. There is no clarity on the buyer yet, but I would imagine this will support the share price and gradually push it up towards that premium price level.
Order intake increased by 13.2% to EUR 1,241.0 million (1,096.8). On a comparable currency basis, order intake increased by 13.4%. Order intake grew in all business areas.
Sales decreased by 3.1% to EUR 1,019.5 million (1,052.4). On a comparable currency basis, sales decreased by 2.8%. Sales increased in Industrial Equipment but decreased in Port Solutions and Service.
Comparable EBITA decreased to EUR 129.5 million (150.3), and the comparable EBITA margin decreased to 12.7% (14.3%). The comparable EBITA margin decreased in Service to 21.2% (22.6%) and in Port Solutions to 10.8% (12.6%), but increased in Industrial Equipment to 6.9% (6.3%).
The company is the market leader in the utilization of automation. Is this being fully priced in? Automation systems are not easily replaced, which means that new replacement investments are made with the same company. In my opinion, the market is shifting more and more from just hardware towards automation, which results in more stable revenue streams.
Our revenue was 1.02 billion euros in the second quarter, representing a decrease of 2.8 percent year-on-year on a comparable currency basis. This was mainly due to the timing of the order book. The impact of the Middle East conflict remained limited, and the situation has not affected new customer deliveries. We have seen upward pressure on our fuel and freight costs, but we have managed to offset these pressures through our own actions.
The company’s comparable EBITA margin was 12.7 percent in the second quarter. Our profitability was weaker than in the previous year, primarily due to lower volumes. Profitability improved in Industrial Equipment, but weakened in Industrial Maintenance and Port Solutions.
In the report and the earnings call, management assured that the decline in profitability was purely due to the timing of deliveries/order book. Management indicated that in the second half of the year, the company’s profitability will return to a normal level, supported by the timing of the order book and the historically high order book. In the project business, profitability always fluctuates a bit in the short term, and on the other hand, the 13% growth in order intake at least shows that customers are interested in the company’s products and services.
In my opinion, Konecranes’ Q2 miss looks worse than the raw numbers suggest if you also take the order intake trends into account.
Revenue missed the consensus by approximately 69 million euros, and comparable EBITA missed by about 24 million euros. At the same time, orders received exceeded expectations by around 150 million euros, and the order book grew significantly. This was a major beat.
If that order volume—which exceeded expectations—later generates revenue at an EBITA margin of about 15–16%, the calculated earnings potential is roughly 23–24 million euros. That corresponds almost directly to the Q2 EBITA miss.
So, I personally see this as a buying opportunity. Consequently, I added a small batch of 350 shares.
Here is an article by Jorma Erkkilä from SalkunRakentaja regarding Konecranes following their Q2 results.
Regarding the near-term outlook, Tulokas described demand from industrial customers as remaining at a good level and container traffic as busy. He noted that uncertainty related to geopolitics and trade policy remains high. The impact of the Middle East conflict on deliveries has so far remained limited.
Konecranes reiterated its full-year guidance. The company expects net sales to remain roughly unchanged or grow, and the comparable EBITA margin to remain roughly at last year’s level.
A strong order backlog provides support for the remainder of the year, and Tulokas anticipates “higher deliveries” for the second half compared to a year ago. The company promised more information on the direction of its strategy at the Capital Markets Update event to be held on October 23, the same day as the third-quarter interim report.
Subheadings:
Industrial Equipment kept profitability afloat
Acquisitions take Konecranes into the Japanese wire rope hoist market
Konecranes updated its financial targets, including dividend policy, with more details in the press release and on the Oct 23 CMD
Net sales growth of 7% (CAGR1) (previously: net sales growth faster than the market)
Comparable EBITA margin of 15-17%, by 2030 at the latest (previously 13-16%)
Capital allocation and updated dividend policy
Konecranes’ use of capital reflects its targeted faster growth and long-term value creation for shareholders. The company aims to maintain a strong financial position and reiterates its target of a gearing of maximum 80%.
As part of normal business operations, Konecranes ensures that it invests sufficient funds in its own operations, technological capabilities, and innovation.
Konecranes is updating its dividend policy to tie it more closely to its earnings performance. According to the updated dividend policy, the target is a 40-60% payout ratio over the cycle, excluding exceptional gains or losses. Under the previous dividend policy, the company aimed to pay a stable or growing dividend over the cycle.
Konecranes aims to increase the use of capital for M&A.
After funding innovations, investments, dividends, and organic and inorganic growth initiatives, the company will distribute excess capital to shareholders via share buybacks.
