Konecranes sees growth both in equipment and service

The company says demand for maintenance services is expected to continue to be above last year’s level due to higher capacity utilisation of equipment by customers.

In his report, President and CEO, Pekka Lundmark, explained that growing demand will support sales and profitability during the second half of 2010. However, due to low first half year sales it is expected that full year 2010 sales will be lower than those of 2009. Operating profit for 2010 is also expected to be lower than last year, before restructuring costs.

Figures for the first nine months (January to September) showed order intake at €1,058.3m, an increase of 7.1% compared to last year, with service orders increasing by 19.8% , while equipment dropped by 2.5%

Sales in the same period stood at €1,076.9m, a drop of 13.3% on the same period in 2009. This again showed service operations remaining strong, showing only a 0.1% reduction, compared to equipment sales dropping by 20.6%.

Operating profit, before restructuring costs of €2.7m, stood at €69.2m, compared to €91.6m for 2009.

“We are pleased with most aspects of our third quarter. The market situation is slowly improving, which is visible both in the number of enquiries and orders received,” said Lundmark.

“Most of the signs we are receiving from our customers are encouraging but the current situation still calls for cautiousness. Even though the recovery in delivery volumes is modest at best, we can be reasonably satisfied with our profit development.”

He said that despite being still slightly below the 10% EBIT margin target in Q3, the company is “on the right track”, particularly as it had been able to defend its sales margins in what he called “this fragmented industry, where there is still a lot of overcapacity”. He added that where price erosion had occurred, Konecranes had mitigated this by lower costs.

“Our main strategy is to grow organically. We are increasing our R&D investments to widen our offering and systematically entering new markets,” continued Lundmark.

On acquisitions, he said that the first priority are bolt-on acquisitions to either widen the company’s service business presence, or to further improve its equipment business position, especially in emerging markets.

Commenting on Konecranes’ recent approach to Demag Cranes AG with a non-binding proposal to discuss the possibilities of a “business combination”, Lundmark said that the resulting steep increase in Demag’s share price had reduced the likelihood of such a combination.

He added, “We remain convinced that a consolidation of our industry is necessary to create companies with a critical mass much needed in a globalised economy”.