Good afternoon, ladies and gentlemen, and welcome to Cargotec's Q1 2021 results call. Please pay attention to the disclaimer in the presentation. Just a kind reminder that we cannot discuss any merger-related topics in this presentation due to the U.S. securities laws. Cargotec's Q1 orders were strong. Orders received increased by 43%, and also our profitability improved. Service orders received increased by 11%. We also announced during the Q1 that we agreed to sell our Navis software business for enterprise value of EUR 380 million. The transaction is expected to be completed by the end of Q3 this year. Earlier today, we also announced our aim to reduce CO2 emissions in our value chain by 1 million tons by 2024. Today, the earnings will be presented by our CEO, Mika Vehviläinen, and CFO, Mikko Puolakka.
We will first go through first quarter 2021 highlights, followed by market environment and group level development. Our CFO, Mikko Puolakka, will go through the business areas, finances, and outlook. Mikko, please go ahead.
Thank you, Aki. Good afternoon from my behalf as well, and thank you for joining the Cargotec Q1 2021 call. Obviously, the highlight of the Q1 2021 is the strong order intake we had. Orders increased by 43%. The strong demand we have seen starting from the September 2020 onwards in Hiab and Kalmar mobile equipment continued during the first part of the 2021. We also see a remarkable improvement in Kalmar automation as well as in MacGregor demand. In Kalmar automation, the orders came from the replacement business within the existing customers. The Q1 orders did not yet include any significant automation orders. In MacGregor, the improving market sentiment was already slightly visible in the improving order intake in MacGregor, both on Q on Q, as well as on year on year. Sales decreased by 15%.
This was coming almost solely from the fact that as the order intake during the Q2 and most part of the Q3 2020 was low, our cycles mean that we will see the strong order intake starting really from September 2020 onwards, impacting our Q2 and onward revenues for this year. The Q1 revenues did not have any material impact from component shortages or shipping issues. I am also very happy about the service sales being very resilient. Considering that the comparable period last year did not yet have significant COVID-related impact in our operations. The share of our Eco portfolio was 20% down from the Q4. This was primarily coming from the lower revenues coming from the Kalmar automation electric-driven vehicles. Very satisfied for the fact that the comparable operating profit improved despite the lower revenues.
This was primarily coming from the good cost control, especially in Hiab and MacGregor, where both results improved. The Kalmar decline in operating profit came from the lower revenues. We continue to follow up the online real-time information we get from our equipment activities, and we have really seen the recovery despite the very difficult COVID situation globally continuing in the economic and logistics activities around the world. Especially in Hiab, if you compare this one. This is now a comparison towards the Q4 last year. If you remember Q4 last year, our equipment activity actually started to be at the same level or slightly exceed the pre-COVID activity levels of Q1 2020. These numbers are fairly comparable on a year-on-year basis as well.
We have seen a significant improvement in activity in Hiab, 18% up compared to Q4 in Hiab in North America, and more than eight percent up in European markets. In Kalmar logistics equipment, we have seen improving activity levels both in North American markets as well as in European markets. The slight decline in China is actually explained by the Chinese New Year during the Q1 this year. The same is obviously visible in most of the economic indicators. The container traffic was growing very strongly in Q1. I'm sure most of you are aware of the logistics and congestion issues in the ports at the moment. That strong growth is expected to continue throughout the whole year.
At the same time, we expect the construction activity to actually accelerate, both in North American as well as the European markets throughout the years with significant growth numbers in both markets. Also, MacGregor market seems to be now turning. Clarksons has updated their estimates to be about 1,000 ships ordered during the 2021. It's good to remind ourselves that this is still significantly below the average year of about 1,700 ships, but a clear improvement, obviously, from previous year. The ship orders during the Q1 were already exceeding 300 vessels, clearly up from that Q1 last year, and the current run rate obviously already is ahead of the Clarksons estimate for this year. There has been an improved activity somewhat in the offshore oil and gas field as well, and we see the strong demand continuing in offshore renewables, primarily on offshore wind-related vessels and construction.
The orders increased in all businesses, and MacGregor slight increase. It's good to remember that with MacGregor cycles, the increasing order activity in vessels should be visible in MacGregor equipment order in roughly 6 - 12 months after the ship order, and then the related revenue another 6 - 12 months after our equipment order. Increasing vessel activity should actually start to be visible in MacGregor on the second part of this year, and then the revenues should be then impacted favorably from 2022 onwards. A strong order intake coming from Kalmar mobile equipment, and also we saw a strong order recovery on automation and project business coming, as I already said, primarily from the replacement business within the existing customers.
The higher order intake was another record, this time actually without any significant government-related orders as we saw in Q4, coming really from multiple deals and a strong activity across all the customers. It's also very quite likely that there is an element of catch-up in order intake during the Q1, as well as a pre-buy element of that one coming really from two factors. We have done a number of significant pricing increases in the beginning of the year, and that's probably causing some pre-buy as well as obviously customers' concerns related to supply chain difficulties that are visible across the different industries at the moment. The underlying market is solid and, as already discussed, many of the economic indicators still look very favorable.
The order book increased by 22%, and actually the combined Kalmar and Hiab order book is at the record high at the moment. Obviously, MacGregor is very far away from the sort of strong years it has seen in the past in the higher cycles, but the order book is now heading to the right direction, and this was the first positive book-to-bill quarter for MacGregor since 2019. Sales really were burdened by the low order intake we saw in Q2 and most part of the Q3, and due to the production cycles we have, we were expecting a lower revenue in Q1. The Q1 revenues were not materially impacted by component shortages or shipment issues. However, we obviously see risks related to those issues when we move towards the rest of the year. Also very satisfied with services performances.
Again, let's remember that comparison period did not have material COVID-related impact in our key markets. Despite that one, both the Kalmar as well as the Hiab were actually able to increase slightly their services revenues. MacGregor services revenues were down quite clearly, and this was driven by the low activity in dry docking, again, caused by the COVID pandemic situation in many of the developing markets. Also, it's good to see that the order intake was actually strong up already during the Q1, also including the MacGregor services order intake. The services and software were 40% of our total sales. Obviously, this is partly driven not only by the good job in the services, but the lower equipment revenues during the Q1. As a part of our annual cycle, Cargotec has also refined its vision and its strategy. Our breakthrough objectives are sustainability and profitable growth.
Our vision is to be the global leader in sustainable cargo flow. In concrete terms, Cargotec aims to reduce our CO2 footprint or emissions in our total value chain by 1 million tons by 2024. This reduction will be, of course, very significant considering our global footprint today, at the same time, a fantastic business opportunity for us answering to the customer challenges regarding sustainability. The success of our strategy execution is measured by our financial reporting, leadership index, and Eco Portfolio sale of sales, which we have already reported in our reporting in the past as well. In the future, we will also report CO2 emission reductions, as well as our customer Net Promoter Score development. With that one, I'd like to hand over to our CFO, Mikko Puolakka, who will discuss the business areas in detail. Thank you.
Thank you, Mika, and good afternoon also from my side. Let's start with Kalmar, where we had an excellent quarter from the order intake point of view. Strong growth in orders in mobile equipment across all product categories, as well as in all geographical regions. Good demand for services. Orders for cranes like straddle carriers were also increasing in quarter one. Like Mika indicated, this kind of replacement type of investment market picking up. We did not have any bigger orders in Q1 . When looking at the sales were down by 20%. The sales for mobile equipment and also larger cranes, crane revenues declined in total 29%, this is stemming from the very low order levels in Q2 and quarter three 2020. The supply chain-related constraints did not affect our deliveries in Q1 .
Like Mika also said that there can be certain risks in the upcoming quarters as we experience, for example, semiconductor-related bottlenecks as well as transportation-related bottlenecks. The service sales were up by five percent, and this was very much driven by the various services especially for the cranes. Kalmar profitability declined, and the decline was very much driven by the lower sales. We have reduced somewhat our costs, but for example, we have kept our R&D investments in Kalmar on last year's level, in the spirit of supporting our long-term strategy for more sustainable solutions, like electrified and fully automated mobile equipment. We signed Navis divestment agreement in March, and the target is to complete the transaction by the end of Q3 . Looking Hiab where we had basically with all parameters a very good quarter.
Very strong demand in all product categories as well as in services across all regions. Like Mika also said earlier, here in Hiab, we anticipate that there is certain pent-up demand coming up from the low orders or investment activity in the middle of last year. Then some pre-buying ahead of price increases, as well as anticipation of certain component availability. We did not book any bigger orders in Hiab for Q1 . Sales were down by five percent. This is, like in Kalmar's case, very much coming from the low orders in quarter two and quarter three. Despite five percent lower sales, we were able to improve significantly the comparable operating profit. This is coming from the strong cost management and the productivity measures which have been taken in Hiab. Overall, a very good performance for Q1 .
In MacGregor, the improving market activity is also visible in orders. We had EUR 100 million of orders in Q4 last year. Now EUR 161 million coming to great extent from the merchant vessel market as well as from services. We booked, for example, good spare part service orders as well as certain other services like the Cargo Boost vessel optimization services. Quarter one sales were impacted by the low order intake in 2020. Services sales were down by 18% due to the low dry docking activity. Despite the sales decline, we were able to improve the profitability from -EUR 2 million - +EUR 3 million now in Q1 . This is coming from two drivers. Firstly, from the cost or restructuring and integration of the TTS and offshore businesses. We have had a very smooth project execution during quarter one, supporting also the profitability.
Despite a strong cost reduction, we also continue with the cost savings actions in 2021, and our target is to reduce fixed costs in MacGregor by EUR 13 million compared to last year's level. Few words about our financials overall in quarter one. Despite our sales decline by 15%, we have been able to improve the comparable operating profit by 14% from EUR 45 million - EUR 52 million, and also the operating profit margin has improved by 180 basis points. There were basically two drivers for this positive development in comparable operating profit. Firstly, our gross profit percentage improved from 22% - 25%, and this comes from the better mix. We had higher portion of Kalmar mobile equipment and Hiab sales, as well as services being 40% of the total revenues.
We have done material cost savings and also in all areas, basically price increases already last year, which now start to become visible. The second reason is that our costs have decreased by EUR 16 million. This is coming pretty much from two areas. Firstly, we have implemented permanent cost savings. Our headcount has reduced from last year's level. We still have some temporary cost savings active like, for example, traveling is currently still on a very low level. We had EUR 27 million of items affecting comparability. The biggest items here were the EUR 13 million cost booking, which we took to establish a new joint venture for MacGregor in China with the world's largest ship builder, CSSC. This is a very positive development for MacGregor because this will strengthen MacGregor's addressable market and operations also in the coming quarters in China.
Related to MacGregor, we had a positive one-time booking of EUR 7 million. This is related to the TTS final purchase price settlement in the beginning of the quarter. We booked in total approximately EUR 8 million integration-related costs concerning the Cargotec Konecranes merger. We had approximately EUR 10 million of restructuring costs, mainly in MacGregor and in Hiab. Our cash flow improved from last year's level, being EUR 51 million. The main driver for this was the improved networking capital efficiency. Our inventory days were approximately three days better or lower than last year. This contributes approximately to EUR 25 million in our cash flow. Cargotec's financial position is very strong.
Our gearing was 59% at the end of Q1 , and it has increased from Q4 , and the main reason for the increase was the EUR 70 million dividend payment, which we booked at the end of March. Without the IFRS 16 lease liabilities, gearing was 45%. Liquidity is on a good level or strong level, EUR 864 million, and we do not have any major debt repayments upcoming this year. Last but not least, our outlook for 2021. We reconfirm our guidance for this year and expect the comparable operating profit to improve from last year's level when it was EUR 227 million. With those words, I would then hand over back to Aki for further questions.
Thank you, Mikko, and thank you, Mika. Just a reminder that we do not take any merger-related questions in this Q&A. With that, operator, we are ready for the Q&A.
Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. We'll now take our first question. Please go ahead. Your line is open.
Good afternoon. That's Artem from Credit Suisse. Thank you very much for taking my questions. My first question is about your comments and reports on some pent-up demand in Q1. I just wanted to kindly check if that only relates to Hiab or that's also fair for Kalmar, maybe you could also try and quantify the impact in Q1. I appreciate this could be very hard for you to do, but maybe you could talk about what you're seeing so far in Q2 on a sequential basis in terms of the magnitude of maybe moderation in demand. That's my first question.
Thank you for that. If I take that one, first of all, obviously, we see the underlying market demand to be very solid. If you look at the economic indicators and also the customer activity is also visible in our equipment activity. There is probably an element of that pent-up demand both in Hiab as well as in Kalmar mobile equipment. Less so obviously in the automation and project-related, which has its own set of dynamics. The other issue we have had is that we introduced a number of pricing increases in early part of this year that are coming into force now. That together with potential concern of the deliveries, because of course, everybody's aware of the supply chain issues in industries.
There could be an element of sort of pre-buy on that one. I would say that underlying market demand and the activity remains to be strong as well. There is probably some hike in exceptionally good orders in Q1. It's really hard to quantify that in detail.
Sure. At least in April, are you already seeing maybe your daily or weekly orders starting to moderate versus Q1, or that's not yet what you see at the moment?
We have seen the strong demand to continue into April as well.
We'll then take our next question. Please go ahead. Your line is open.
Hi, Mikko. Aki Mages from UBS. A couple of questions from me. Could you comment a bit on the mix in Kalmar and how much headwind on the margins you saw there? I think you mentioned a couple of percentage points in prior quarters. Was that the same still? Now with obviously a very strong pickup in the mobile equipment, do you expect these two percentage points that we talked about sort of to reverse through the course of this year? Is that sort of the quantum we can expect in step-up from mix in 2021?
Mikko, would you like to take that? Yeah, in Kalmar, if we look Kalmar Quarter One, we had actually more favorable mix already in Quarter One due to the fairly low automation deliveries due to the low order intake last year. The more favorable mix was offset still by the quite significant sales decline in the mobile equipment, which we kind of consciously did not fully offset with the cost reduction. As I mentioned, that we continue to invest, for example, in the R&D activities to support our strategy.
Upcoming quarters.
so far, no.
Yeah, for the upcoming quarters, we saw good order development happening actually both in the automation and projects within the replacement, also in mobile equipment. I would say that the mix is from stable to a slightly favorable for the rest of the year.
Okay. You're not willing to quantify anything around that regarding the step-up as we saw sort of adverse in this year in the percentage points?
No, we don't see an adverse effect coming from that one this year.
Okay. Also, could you help us put some color on how much impact we should see in EBIT bridging Q2 from the reversal of temporary cost measures taken last year? Any color on that would be very helpful.
In general, I would say that, last year we implemented the temporary cost savings, those generate approximately, or generated approximately EUR 10 million monthly cost savings. Our ambition last year has been to compensate most of those this year, at least to great extent with permanent savings. We have still, as I mentioned earlier, we have some temporary savings ongoing. I would estimate that perhaps from those temporary savings last year, approximately 50% are still in quarter one temporary, and the other 50%, we have kind of implemented permanent savings.
Okay. Perfect. You don't expect any sort of meaningful reversal into Q2 that will come later when traveling comes back and so forth in that case?
Yeah, traveling most probably will continue still despite the vaccination. Traveling continues to be most probably still on a fairly low level also in Q2 . More perhaps service-related traveling, but other parts still on a fairly low level.
Okay. Got it. Thank you.
We'll now take our next question. Please go ahead. Your line is open.
Hi, Mika. It's Aurelio from Morgan Stanley. Thanks for taking my questions. I've got two. I'll take them one at a time if possible. I guess the first question is, kind of you mentioned that the underlying demand in Kalmar or the order intake in Kalmar was mainly driven by mobile equipment and replacement in automation projects. We've obviously seen CapEx announcements from some of the port operators, DP World among others, basically going for a strong increase in CapEx in 2021. I guess, are you seeing that in the market at the moment? When should we expect to see new, bigger brownfield projects being signed off or maybe even some greenfield projects out there?
We clearly have seen an increased activity than typical, as we have discussed in the past. The sort of stronger traffic growth is usually followed by within 12 - 18 months from an increase in CapEx as well. We have increased planning activities around that one, but it's really difficult to forecast the exact timing of those potential orders. There will be probably some of them landing already in this year, but the exact timing is still uncertain.
Typically, the brownfield opportunities, what we see, even though when fully kind of automating the terminal, those could be EUR 100 million plus of transactions. These brownfield investments are done in bits and pieces, meaning that those could be some EUR tens of millions when customers make the decisions.
Okay. That's helpful. I guess in terms of your cash generation, this quarter was very good. I think you mentioned that you had a positive impact from, I think inventories, that you reduced days by three days. I guess the question is, given that you have obviously seen very big increase in orders, especially in Hiab and Kalmar mobile equipment, which is more in four out than maybe some of the projects. I guess my question is this level of working capital is sustainable, or we should expect some natural build-up over the year as you prepare for I guess a heavy delivery schedule in the latter part of the year?
Yeah, like you saw from our order book, we have EUR 2.2 billion order book, which we aim at delivering prudently during the remaining part of this year to great extent. That requires, of course, some increase in the net working capital in inventories, for example. In absolute terms, net working capital is expected to increase in anticipation of the upcoming revenues. We continue to improve the relative performance, so continuously working, for example, with the suppliers to minimize the inventory days at our end.
If I compare the situation where we saw the last demand peak was in 2017, 2018, especially in Hiab and compared to the current status, our internal processes have clearly and significantly improved regarding our own in-house and factory-related processes and also our interaction and process development together with our suppliers has also significantly improved. It doesn't mean that we would not face some of the challenges, overall, I would say that our capabilities are in a much better shape than the last time we experienced such a peak in orders.
Okay. That's all. Thank you very much. I will go back to the queue.
We'll now take our next question. Please go ahead. Your line is open.
Yeah. Hi, it's Antti from SEB. A couple of questions from me. Firstly, would be a backlog situation and lead time in Hiab and Kalmar Mobile Equipment. You've seen now quite robust recovery and very high levels of backlog. What are the lead times currently, and if we reflect your delivery capabilities, should the previous peaks be a good comparison point? Mika, I guess you mentioned that your processes have improved, but on the other hand, you have also cut costs. How should we think about the revenue recognition out of backlog?
Yeah, the cost cuts have not been primarily around our production capacity or related factors. Those have been more temporary, and obviously we are drawing back those in terms of the temporary labor, so short-term weeks to enable us to hike up our production. I would say at the moment, our capability to ramp up our own production is pretty good. The question mark is obviously still around component shortages. My main concerns would be around higher specification diesel engines, where the microchip shortages might impact that one as well, and those would probably be visible some in Q2, but probably also very much and maybe a single largest challenge is around the Q3 this year. We have not yet seen a significant lengthening of the lead times. Typically, again, in Hiab, they are around that six months, and in Kalmar Mobile Equipment, 6 months-12 months.
The potential lead time changes would be primarily coming from then the availability of the components if we see material shortages in there.
Okay, that's fair. Secondly, you've been active on price increases, I guess now you're seeing component shortage and some raw mat inflation. How should we think about the gross margin, what you have in backlog and orders going forward? Are you seeing more pressure from the cost side, or is the price hike trend still continuing?
We are clearly seeing more pressure from the cost side. The shipping costs have actually had a significant hike. Obviously, a lot of our customers are doing better as a result of that one, but it's visible in our cost level. Obviously, the raw material component pricing is also facing pricing pressures. Against that one, we have done a number of pricing changes in most of our businesses now in the early part of this year. Our estimate at the moment is that overall, the impact would be neutral. We would not see a reduction, but nor would we see expanding gross margin as a combination of those two factors.
Okay
a more favorable mix.
Okay, that's clear. Lastly from me regarding Kalmar and the demand there. How is the external port congestion that we are seeing globally impacting your customers' decision-making and your demand? They have hands full with bottlenecks right now, so is this postponing long-term planning and bigger investment decisions? On the other hand, does it support the short-cycle mobile equipment demand?
We saw really a strong demand improvement, actually, and ordering both in mobile equipment and the mobile equipment really, of course, is driven a lot by strongly increased logistics activities actually in all of our key markets. Obviously, the increase in traffic in ports and the port congestion will lead into the further CapEx investments as we already discussed on that one. Although right now in Q1, pretty much all the large automation-related and project-related orders were actually replacement orders for existing port capacity. We have not seen the expansions orders coming in yet.
All right. Thanks so much. All from me.
We'll now take our next question. Please go ahead. Your line is open.
Yes. Hi, Tomi from DNB. Still coming back to the pent-up demand, I tried to ask it another way. Have you seen an improvement in the pipeline? In other words, what orders have you been booking? Have those in a way exceeded what you have been taking in as new quotes?
Yeah, it's been visible actually since really from September onward, both in terms of the actual orders, but also if I look at out of 90 days or 360-day sales pipeline in businesses. We've seen the expansion in the pipeline, and we have actually still today, when you look at that one, is that the pipeline remains strong.
Thanks.
We'll now take our next question. Please go ahead. Your line is open.
Hi, Mika and Mika. This is from Andreas Koski. One from me, this one goes to Mika. About EUR 10 million savings per month in 2020. EUR 30 million per quarter and 50/50 temporary and permanent. Am I right that this still applied in Q1 this year? Going forward, does the 50%, i.e., EUR 15 million savings per quarter, that should be permanent also in Q2, Q3, Q4 this year?
Yeah, like I said, roughly 50% of last year's EUR 10 million temporary savings have been converted to permanent. The other 50% there depends very much on how the societies are opening and how do we increase, for example, the traveling activity.
It's fairly safe to assume that in Q2.
EUR 15 million per quarter would be permanent. All right.
Approximately, yes. Like I showed in the previous slides, we have reduced approximately EUR 16 million costs now in quarter one. A good part of that is permanent, as we did not have in quarter one last year, yet temporary cost savings in place. Those started in April.
Okay. Thank you so much.
And we'll now take our next question. Please go ahead. Your line is open.
Hi, this is Johan at Kepler Cheuvreux. I'm just a bit curious on Navis. A few years ago, you said the business was at break even because you were investing in new software development, but in two to three years it should be at the normal software margin of 20%-30%. Is that where you arrived at this year for Navis?
The Navis has been and is a slightly profitable business for us. Again, you have to remember that includes PPA as well. The EBITDA level on Navis has actually been in a pretty good level throughout this.
Okay, good. You're obviously getting a fair share of cash for this now at an EV to sales multiple, which basically, of course, I can see well above your group valuations. Ahead of the merger, that basically means you're entering the merger with a significant more cash than investors knew about when the merger was announced. We know that Konecranes shareholders get compensated for the bigger market cap at the time by an extra dividend. Shouldn't Cargotec shareholders get some extra dividends as well ahead of the merger?
None has been planned. Obviously, we have made a decision regarding the dividends for 2021, obviously a new company would then decide on the dividend policy, assuming that we close at the end of this year and start as a new company. It would be the new board that would make then the decision regarding the dividends for the new company for 2022 then. This strong balance sheet, of course, puts us in a good position to drive for further growth, both in terms of investments in the new technologies as well as then inorganic growth as well.
No value creation extra for the existing Cargotec shareholders. Is that?
I mean, the parameters of the merger, of course, have already been decided and agreed between the parties.
Excellent. Many thanks.
And we'll now take our next question. Please go ahead. Your line is open.
Yes. That's Artem from Credit Suisse. For some reason, the operator muted my line before I finished asking the questions. Thank you for taking my follow-ups. The first one which I have is on Volvo diesel engines. Could you help us to quantify how many days of production do you have covered with your existing backlog of diesel engines? Maybe what share of your products use those engines in Kalmar? That's my first question.
Wow. First of all, we use different diesel engines in different products, and the diesel engine in question where the microchip production has the biggest impact is so-called Stage V diesel engine. Not all of our products use a Stage V diesel engine, depending on the end market. I don't know honestly the details. Its primary concern is around the Stage V at the moment, and it's a certain part of the production, but not all of the production at all. As I said, a lot of that depends now, of course, on the K-bed, the ramp-up. It will not necessarily have a significant impact for us on Q2, but I think the risks are higher depending how that develops regarding Q3 deliveries on that specific engine time.
Sorry, just to clarify. That comment in terms of no specific, no significant in Q2, that basically incorporates the two - four-week shutdown at Volvo, and then if there is a longer shutdown at Volvo, then your Q3 will be impacted. Is it the right way to interpret this?
There are many parameters, and it's maybe too early yet to speculate around the Q3. It's also good to note that we are not the sole supply situation with Volvo. We have also other manufacturers' diesel engines we use as well.
Okay. That's very clear. Thank you. My second question was around MacGregor Services. When would you expect that business to come back to a stronger growth?
The order intake was up, Mikko. How much was it again? 11%, if I remember correctly.
11%, yeah.
11% up on services in MacGregor. Overall, it looks promising, but obviously the concern is still around the COVID situation in many of the markets which are the primary destinations for dry docking. Looking at the situation, that's probably going to continue for some while. At the same time, as you know, the shipping market as such at the moment is doing very well, and the usages are very high. The customers are actually quite profitable at the moment, so I'm sure that will favorably impact the fact that you're able to invest in the shipping business again, and obviously higher usage means more utilization, more spare part there. I would say that overall, we would see a favorable market on that one, question mark remains on how long will be the dry docking market. It will be limited on that one.
There are, of course, MacGregor has also other services like not only spare parts, like I mentioned, for example, Cargo Boost, which enables the customers to increase the capacity of an existing vessel, can be a fast solution in case customer needs more capacity without ordering a new ship.
Understood. Thank you. My last question is about automation and specifically retrofitting automation. I've been reading, looking at interesting products which were introduced a couple of years ago by some of your competitors, which essentially allow to very cheaply automate terminal tractors, with a payback of officially one year. I guess two questions. Firstly, do you think that there are now more incentives or it makes more economic sense at the moment to retrofit automation than maybe a couple of years ago with all those new products? Secondly, what are the major products you're developing to maybe make retrofitting automation more accessible and attractive? Thank you.
Yeah, that's a good question. If you look at a port yard, the most common automation is around the stacking area. Even there, the penetration is still relatively low, and I'm sure the automated stacking cranes will be taking more and more share of that one as it's relatively, simple would be maybe, relatively easy to automate as well. Automated terminal tractors relates what's called a horizontal transportation. That's when you take the container from the key crane next to the ship into the stacking area. There are a number of alternatives there. The so-called AGV market has been active for a number of years. Today, we see actually increasing interest towards automated straddle carriers, which has a benefit of actually being more flexible as a configuration or an architecture compared to the AGVs.
We will also see, I think, the automated terminal tractors taking part of that market. The automated terminal tractors fit to a certain configurations and certain conditions, and I'm sure they will also play a part on that one. Obviously, we are the market leader in terminal tractor market, and automating those terminal tractors is obviously in our focus point as well, and we already have a product in those and so the pilot's going on that area as well.
Okay. Thank you very much.
We have no further questions at this time.
Okay. Thank you for good questions and good answers, Mika and Mikko. Our Q2 results will be published on 28th of July. See you then.
Thank you.
Thank you.