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Further cost-cutting planned at Konecranes unless volumes increase

Further cost-cutting planned at Konecranes unless volumes increase

Konecranes has announced that further cost-cutting measures will be taken in its equipment business unless volumes increase.

Speaking at the company’s second quarter results presentation, CEO Pekka Lundmark said that the company wants to increase its equipment business profit margin from 4% to 8%, while its service business aims for a profit margin of 12-13%.

He continued to say that the €30m (US$32m) cost-cutting programme announced in December 2014 and scheduled to be completed by the first quarter of 2016 would not be enough, unless volumes increase.

“Since we are not really seeing any credible evidence of volume growth and there are a lot of uncertainties in many parts of the world, we have started preparations or a study to identify possibilities for more radical structural changes for this [equipment] business to lower the cost base of it,” he said.

Twelve-month rolling operating profit in the equipment business has decreased from the €90m (US$98m) to the €50m (US$54m) range, he said, even though two previous cost-reduction programmes have lowered costs from €1.4bn (US$1.5) to €1.2bn (US$1.3bn).

On the other hand, Lundmark said that sluggish growth in global container throughput was not worrying in the short-term as the company’s orderbook covers most of the 2016 deliveries, at least for the first part of the year.

On top of this, he said, container terminal trends such as automation, the growing size of ship and the replacement of older cranes, are driving demand.