Good morning, ladies and gentlemen, esteemed investors, analysts, and other stakeholders. It is with great excitement that I welcome you to Kalmar's Capital Markets Day, first of its kind, as part of the planned de-merger process. My name is Carina Geber-T eir, heading Kalmar's Investor Relations and Communications. However, I've been part of Cargotec journey since 2018. As we embark on this historic day, I would like to express my gratitude to our dedicated team and advisors, whose unwavering commitment and relentless efforts have made all this possible. However, before we move forward, please pay close attention to the disclaimer, and also, for your safety, take a moment to locate the nearest exit, which are clearly marked through the venue.
In the lead-up today, we have diligently worked to showcase our remarkable transformation, from humble beginnings to a vision to become the forerunner of sustainable material handling equipment and solutions. Through strategic actions, we have built our portfolio of cutting-edge equipment services in our industry, positioning Kalmar as a trusted partner for our customers worldwide. Our unwavering commitment and focus on sustainable innovation and service growth has led to groundbreaking solutions and to our commitment to driving excellence. Today, as we unveil our vision for the future and our new Kalmar brand, we are confident that Kalmar is poised for even greater heights. We will discuss and provide you an overview of our business strategy, growth opportunities, and financials as a standalone company. We have also allocated time for questions throughout the session. We know that our success would not be possible with our commitment to co...
Dedicated employees. Their expertise, passion, and dedication are the driving force behind our achievements and future plans. So with me here today, I have our President and CEO-to-be, Sami Niiranen; CFO, Sakari Ahdekivi, and my great colleagues, Alf-Gunnar Karlgren, Tommi Pettersson, and Thomas Malmborg. I invite you to join us on this exciting journey as we plan to move ahead as a standalone listed company on Nasdaq Helsinki, committed to make every move count. So now it is time to invite our proposed CEO, Sami Niiranen, to the stage. Sami, the floor is yours.
Yes, thank you very much, Carina, and good morning or afternoon, everyone. My name is Sami Niiranen, and I'm thrilled to be here today as President and proposed CEO for Kalmar. For those that don't know me, let me take a moment to introduce myself. I'm a 51-year-old Finnish and Swedish citizen with over 25 years of international business experience. For the last two decades, I worked with Epiroc and Atlas Copco in various international and senior positions, with the last or latest five years being the president for the underground division in Epiroc. The reason why I joined Kalmar is because I saw significant opportunity in this business to address some key market needs. We operate in a very strong and mission-critical market, but it's facing a number of challenges.
The first is around the increasing demands for more sustainability, and the second is providing innovation and efficiencies across the logistics space. Kalmar is uniquely well-placed to address these two challenges, and that is because we have sustainable solutions delivered through an innovative approach. That is what made me join this company today, and that is what gets me excited about the future of Kalmar. As we all know, Kalmar moves goods in critical supply chains around the world. That is what we do. It is what we do well, and we make every move count. This key role delivers value for our customers. It delivers value for our business and for our shareholders. What is really important to us is that it's done in a safe and sustainable way, and this approach is in our DNA.
It's the way the business has been built, and this puts us at the forefront of that innovation. But when I say make every move count, what does it actually mean? It means making sure we are a leader in sustainable material handling equipment and services. In my introduction, I mentioned that there were multiple market drivers shaping the future of our industry. Our customers want fast electrification and more intelligent solutions with enhanced productivity and safety. Governments and corporations are focusing their efforts on decarbonization and how they can do more to hit their net zero and emissions targets. On top of this, there is a continuously changing logistics landscape due to geopolitics and the climate around us. However, with Kalmar's strong foundations of being close to our customers, a great team, and a very well-invested financial profile, we are well-placed to address these market drivers.
The opportunity in front of us is further supported by our key strategic pillars: number one, investing in sustainable innovations, number two, growing services, and number three, driving excellence. All of this will drive the future success of Kalmar, and the team and I will go into a lot more detail on this in the coming pages. That is the situation we are facing, that is the backdrop to our story, and that is the market opportunity we have in front of us that will deliver growth and profitability for our business. Let's now focus on Kalmar in a bit more detail. Kalmar is a business that is well-diversified to take advantage of all the opportunities across customer segments, geographies, and with solid profitability. You can see here how all these elements are broken down.
In terms of sales, 28% are through services, showing we already have a strong foothold in this capability. Later in the presentation, we will talk about how we will particularly grow services, which offers an attractive opportunity for our business. Our addressable markets are evenly split by customer segments, giving us balance. Our reach goes beyond ports and terminals, and we are plugged into the key segments where we can make a difference and grow. Over 80% of our sales are in geographies where the market drivers mentioned are most prominent, providing a real opportunity to drive our initiatives in these markets. Already, over a third of our sales belong to Eco Portfolio, which is a Kalmar-branded portfolio, combining our sustainable solutions and giving us real credibility in the sustainable and innovation space.
So we have a strong base from which to build, and we are going to make that number much larger. All of this means that we are in a really good position to deliver on sustainability and innovation, the two key elements that the market needs the most. So how are we going to do that, then? Well, we are going to do that by being a pure-play market leader in heavy material handling. We'll continue to focus on the five key platforms, where across the board we have a number one or number two position. I won't steal the thunder from my colleagues here. They will expand on this equipment in more detail in their respective presentations. However, it's the combination of this equipment with our industry-leading global service network, close to our customers and where they need it, that we see a real opportunity.
Going forward, we will refer to equipment and services as the two core segments of Kalmar that will deliver our business plan. But of course, as we well know, this has not happened overnight. We have been shaping the industry and making every move count for over 75 years already, transforming with the times and providing mission-critical and innovative solutions to our market and customers. Now, as an independent business, we will have a renewed focus, and to drive forward our strategy and act with speed. Cargotec has provided the incubation for us to shape our strategy, but now we are ready to fly. So how are we going to do that? How are we going to drive forward that focus? Well, we are going to take advantage of our industry-leading sales and service networks, and this gives us an edge in the market.
Our people are where our customers are, in the key locations and the largest industry hubs around the world. Our factories are where our main customers are to allow for efficient and effective communication. Our innovation centers are where we have our greatest talent to draw out the leading thinking in the market.... All of this provides a real opportunity to drive the transition to a sustainable value chain through connectivity and advanced services. When you look at this page here, you will notice that there are very few locations where we don't have a presence with our connected equipment, and that our segments are more than just ports and terminals. We provide mission-critical services in distribution, manufacturing, and heavy logistics. This demonstrates that we can leverage our strong base and drive our solutions into all areas of the market.
So I trust this gives you a sense of the market, our market, and why we strongly believe that as an independent company with a renewed focus, we are so well-placed, and there is a real opportunity ahead of us. So now I think it's worth spending a bit more time on those industry trends and how this is shaping our strategy and our way forward, and give you a bit more granularity on exactly what it is we are going to do. Kalmar is addressing a large and global market. On the left-hand side here, you can see that the global heavy material market is growing approximately at 4% per annum. This is evenly split across equipment and maintenance.
When you look at these elements by category, you can see that we will be playing in the spaces where further upsides have been identified in terms of decarbonization, electrification, and, data-driven, connected business models. Electrification itself is a market driver that is expected to grow annually 28% into 2028. One important point, and where electric vehicles have a substantial revenue, potential per unit. But one important point to mention is that many think that with electric vehicles, services are not required as much. But because of the closed and connected nature of the vehicle platforms, value-added services become much more of a requirement. Again, my colleague, Thomas, he will go into this in more detail in his respective presentation.
So these factors, along with our focus on sustainable equipment with value-added services, mean that we feel very confident on our projected growth of 5% and with significant potential for us going forward. And on top of that, there are a number of mega trends and industry transformations that are driving customer expectations. All of our customers are experiencing a changing logistics landscape, with an ever-growing focus on productivity, safety, and intelligent operations, addressing the issues caused by labor shortages. And this is combined with the greater focus on electrification. In my previous roles, I worked closely with some of these large customers that you can see here, and I know full well the extent to which they are focused on these mega trends and searching for solutions to address them. Kalmar is well-placed to provide the answer. So how are we going to do it?
We have developed a clear path to sustainable and profitable growth, built on these three pillars: investing in sustainable innovations, growing services, and driving excellence. All of which are underpinned by the strong foundations that Kalmar already has, which is the very backbone of this business. So this is core to our future growth strategy and will define our path going forward. Well, now I'm conscious that sustainability can feel slightly abstract, maybe, some of you. So, let me dive into the innovation, some of the innovation areas we are focusing on to improve and drive our customer safety and, productivity. So on this slide, you can see a range of innovation areas that the market is concentrating on to deliver improved performance. Charging service and battery life optimization, as an example, to ensure vehicles are being used, effectively and, efficiently.
Rental options, so that customers are not tied down by large CapEx items, limiting their flexibility. Driver assistance features and connected dashboard reporting, so that both users and managers can be sure they are getting the best out of their equipment. With our Kalmar Insight software, we provide a range of digital platform solutions, so that our customers have the confidence that they are optimizing their equipment, or at least they know how to do it. These truly are value-added services that deliver sustainability, safety, and productivity to our customers. What does it do for us then? Well, this really future-proofs Kalmar and ensure that we are well adapted and ready to take advantage of an increasingly complex environment. As we all know, macro factors, such as pandemic and growing geopolitical tensions, have impacted the market.
Looking forward, those macro challenges show no signs of going away. The key is to take action by investing in innovation and operational excellence to improve resilience in the future, and this is exactly what we have done. Continue investing in sustainable innovations, growing services, and driving excellence, which is the very core of our strategy. We are confident that the market will return to growth, and because of the strategy that we have in place, we are even more confident that we will outgrow the market. In order to do this, we also need the right leadership team. Here on this slide, you can see the depth of our management team and the significant experience that sits in it. These people are truly the leaders in the market and have the vision and drive to deliver it.
Today, you will meet many of us, many of our team members, and we look forward to get to you, getting to know us, even better. So to summarize and to bring this section to a close, what I trust you have a clear sense of is that the market is strong, the market is resilient, but the market needs to evolve in terms of sustainability and innovation. Because of the global leading position that we have, combined with our strong customer relations and our intelligent, electric, and sustainable solutions, we are well-placed to address this. On top of that, services continue to be a very attractive space, and through the value-added solutions that we deliver, we see significant upside from our large installed base.
And with our approach to driving excellence and our strong financial profile, we plan to provide best-in-class performance, which will deliver significant growth and profitability. So thank you very much for now, and let me hand over to my colleagues, Tommi and Alf-Gunnar.
Thank you very much, Sami. In this section, we are now to take a deeper dive into one of those growth, key growth pillars and how we are investing in sustainable innovations. Before doing that, let us introduce ourselves.
Yes. Hello, everyone. My name is Alf-Gunnar Karlgren. I'm the head of the Counterbalanced division here at Kalmar, and I'm speaking on behalf of all our 4 equipment divisions. I joined Kalmar 18 years ago, not 28, 18 years ago, as a management trainee, and I've since then worked in many parts of our business, in different functions and in different regions. Knowing the history of how our company has evolved, as well as our customers, I'm really excited about what's going on in our business right now. Because both on technology and the customer demand side, this EV trend is opening a fantastic window of opportunity for us, and we already have a solid offering in place, and we're about to make it even better. This, I'm sure, will benefit both our customers as well as our shareholders.
Hello, my name is Tommi Pettersson. I've been with the company for 10 years now, and I'm the Head of Strategy, Sustainability, and Technology. I began running the Kalmar Automation business when I joined the company, then switched the focus to the digital solutions for whole of Cargotec. Before that, I ran one of the divisions for Elcoteq, so having a management team experience on the listed company, and then I have also worked as a CEO of smaller technology and private equity companies. Now, you already heard from Sami about the sustainability initiatives that we have in place, and that's very much what I'm, I and Alf-Gunnar are going to talk about in this, in this section, and how we, as a business, enable industry decarbonization, safety, and productivity through the partnerships with our customers. Point here is that we are not working alone.
We are working in close partnerships with our customers to find the solutions to their problems, which, in the end, will bring Kalmar the business benefits and grow the business through the initiatives that are relevant to our strategy. So how we, how do we do this? We are here to solve the customer challenges. The challenges customers are facing provide us with an excellent opportunity to offer value. For example, the need to increase the productivity will give us an opportunity to sell high-quality machines. Challenges in the decarbonization provides us with the opportunity for more sales through already existing wide EV portfolio.... Change in logistic landscape provides us with the opportunities for more sales in general, but also rental sale and services. Labor shortages, that's another opportunity for us.
That allows us to deliver operator-friendly equipment, which are easy to use by less experienced drivers as well as automation in different levels. On the right, you can see that our role in the market has evolved, and it's been shaped to address these customer challenges. We are really working hard with the customers to make them successful, productive, and safe, and that's what we have done for decades. As you can see along the bottom, we are very used to solving customer challenges, and that's why we have a really good customer satisfaction and also very high customer loyalty. And we also do have repeat orders from the customers already for our latest EV portfolio. And that's done by understanding our customer needs and providing the solutions to address them. That is basis to our clear strategy.
We have already taken the lead in the market, and we are investing in sustainable solutions. We have done this by focusing on three key areas, which we believe will deliver best return on the investment. Electrification and decarbonization is an increasing need and demand from our customers. That's also what the customers are promising to their customers, and that's also demanded by their stakeholders. On top of that, we are leveraging digital solutions, and we are utilizing widely data to deliver more intelligent machines and automation. With the data analytics, customers can have better operational efficiencies and maximized uptime. Finally, we are focusing on market share capture. We already have a really good market share in several regions and many product groups, but there is always room to improve.
Combination of these three elements, along with the underlying strong market growth, provides us with the solid foundation and the opportunities to drive already existing good position in the market. So let's look at that market in a bit more detail.
Let's do. So we are operating in a market that we expect to grow steadily in the next few years, as it shifts towards more electric solutions. Here on this slide, you can see 5% growth per year, which is pretty solid and a good base to stand on itself. But what's making this market extra interesting is a super fast electric growth, 28% per year. With our already well-established EV lineup, this puts us in a very unique position to take advantage of that growth. Let's dig in a little bit more. So on this slide, you can see some data on what our customers are telling us, and that there really is a strong push for the EV, EVs.
On the left side of this slide, you can see that in 2023, 12% of the equipment orders were fully electric. In the middle, you can see that when we asked our customers about their plans for the future, 63% said that they expect to buy or ask for quotes on zero or low emission equipment over the next two to five years. On the right side, you can see that the EV market is currently estimated to EUR 1.1 billion, and is expected to grow to EUR 3.8 billion by 2028. That's a massive shift in interest for the EV equipment.
The reasons that the customers are interested in this is, number one, that there's a need for them to reduce their CO2 emissions due to pressure from higher governmental targets, as well as greater demand from their end customers. But it's not only these outside pressures that are in play here, it's also an opportunity for our customers to reduce their operational costs. It's actually a fact that in many parts of the world, you can improve your business profitability by going green, and that's fantastic. In addition, many customers and their owners have already committed themselves to the 1.5 degree target, which also puts an extra push.
For us at Kalmar and our shareholders, it's also good because we will be shipping the machines with a higher level of technology and batteries built in, which then can deliver up to 2x more revenue per unit. And all this also gives an increased potential for services for us at Kalmar, which you will hear later from Thomas. So all in all, we've got some really attractive market dynamics going on here that align very well with our own strengths, and we're in a really good place to deliver. Let me elaborate a little bit on that, on this following slide. So to start with, we have a market-proven offering that already fits well into this attractive market. We have been producing electric products since the 1980s, so we're definitely not a newcomer on the market. We know what we're doing.
We have also invested over many years to build up this knowledge, and we're now going to invest even more. Then we're, of course, a serious player, which our customers can trust, and we're always holding up the flag on safety and security. On top of having the right products available, we also have the benefit of having an already solid installed base of 65,000 units around the world, which gives us a very good access to customers, everywhere. This comes from the fact that we started to deliver products in the 1940s. Replacements, they happen on an eight-15-year cycle, replacement of these machines, depending a little bit on how much the customers are utilizing the equipment, and that gives us a really good opportunity also for repeat business.
Of course, as Tommy mentioned, we're really proud of the first repeat orders on our latest generation of the heavy electric machines that we put on the market a couple of years ago. That really shows that the newest technology has been well-received by our customers. So there you have it. The portfolio is there. It's proven. We're not the newcomer on the market. We know what we're doing, and this massive installed base and all the customer relations gives us a great opportunity to benefit from a green wave in our industry.
Thanks, Alf-Gunnar. So now you have a good idea of the electric portion of our sustainable innovation, but there are further customer challenges that need addressing, and we do have a technical expertise that can drive value for our customers. One significant growing demand is for safety, as mentioned earlier. Customers want to make sure that the platforms they operate are safe. We help our customers by making the equipment smarter and having driver assistant functionalities to improve the safety performance of the machine. Customers are always looking for productivity. We address this need through providing a greater understanding and insights of the equipment usage and how to maximize the performance and the uptime. We are also able to address the need, the sustainability need of the customer.
We ensure that our equipment runs efficiently by providing visibility to the machine operations, and that maximizes the operating time and the utilization for each piece of the equipment. These solutions not only bring benefits to the customers, but they also allow value potential to Kalmar. This is through our solutions helping. These solutions are helping us to become the preferred partner, as well as scaling up the businesses we already have. We can also see our business model evolving from transactional to more life cycle solutions, which are value-adding both to customers and to Kalmar. Let me now explain a bit more detail on the next slide, how we deliver this. Our focus on sustainable innovation has not happened overnight.
It has been a continuous focus for us with the clear priorities. It started by having an electric portfolio in each of our product groups. Since then, we have also invested into the AI, which we started seven years ago, by connecting our machines to collect the data. And now we are in a stage where we are actively analyzing huge amount of data to provide value to our customers through the operational and machine health insights we have developed. As you will be aware, we have a large variety of customer needs that require addressing. Yes, there is a lot that we can do and develop ourselves, but there are some areas that require also partnerships with other high-tech businesses and companies. So, as I said, the long-term investment has always been a focus for Kalmar.
It has provided us with a solid position in the market. As a result, we are seen as the market leader in electrified and data-driven logistics solutions. But we have also made investments to very specific and unique customer needs, which Alf-Gunnar will explain next.
Yes, thank you, Tommy. So as you should have got a good sense of by now, we at Kalmar, we love to work with our customers to solve their problems. Our machines are very versatile, and it's relatively easy to customize them to fit into almost any type of industrial or heavy logistic application. Some examples of how we innovate and customize our equipment are here on the screen now.... So what you can see here, here is machines operating in wind, in metal, and in bulk material handling. These are applications which normally would be handled by fixed installations, such as mobile harbor cranes or overhead cranes.
And what this is telling us is that, we can seek for business in areas where customers have not been using our equipment in the past, and we can provide extra value through cost-efficient and flexible solutions, which of course, also are sustainable. And now let's move to my favorite topic out of all these slides, and that is our opportunity to grow outside our home markets. And yes, we're the number one or two on almost all products, but that does not mean that we are the best one in every single part of the world. So, for example, our terminal tractors are extremely strong in North America, which is their home market, but the market outside North America is not insignificant, and we see opportunities to grow there.
And in a similar way, our forklifts and container-handling equipment is very strong in Europe, and likewise, have a good potential to grow outside that home market. With reachstackers and empty handlers, as example, we have actually had quite some success doing exactly this, and we have got a good grip on many markets outside Europe, especially, or such as APAC. And now with our forklifts, we have already taken the first steps by opening a new production line in our plant in Asia, and we started this move or this journey in December, and already a month after the start, we had filled that line with production for the first six months of 2024. So a great example of how we can grow outside our home markets.
I trust that in this section, we have given you a clear sense of how sustainable innovations are the main growth lever for Kalmar in the equipment business. This is very much based on the clear customer needs on decarbonization, electrification, digitalization, and automation, and all of these supported by great underlying market growth. Through partnering with our long-term customers, and addressing their needs, we are well-positioned to grow our position in electrified, intelligent, and sustainable market. We are a global leader in the market for mission-critical, heavy material handling. Now we are happy to take a couple of questions.
Thank you, Tommy, Alf Gunnar, and also Sami. Inviting Sami back to the stage here and opening up for a Q&A on these topics that we've covered. Now, just as a short reminder, there will be services, and there will be the financial section still after this. But let's open up for any questions that you might have, and please state your name then, so we know. Let's start with the microphone here.
Thank you. It's Panu Laitinmäki from Danske Bank. I have two questions. First one, to Sami on M&A. So how do you see the role of M&A in, in your growth and achieving the set targets?
I can say that the strategy that we are presenting to you today, that is primarily based on the organic growth, so M&A not included, but of course, we are keeping and maintaining our readiness and capabilities with M&A, should something interesting appear. But that this is, and this 5% growth that we are talking about here, is based on our organic means.
Okay, thanks. Secondly, on the electric equipment, I think you said that 12% of the equipment orders were electric. So how does that split between equipment type? So I assume it's probably higher in forklifts than in straddle carriers, but how does it look now, and how do you see the potential to increase this in different product segments?
Well, that varies, of course, between the different divisions that we have, and some divisions has a very wide portfolio and some a little bit slimmer. But the potential to grow is the same in all. It's as we show there, 63% of the customers said that they were going to buy or ask for quotes. I think that's a pretty strong indicator on where the market is going.
But you don't see any difference that the smaller equipment would be electrified first, and then the largest pieces the last, or any thoughts on that?
So the smallest equipment we have, which we call the light forklift range, and this, this is public information, is already only electric. And of course, this EV trend started with the absolute smallest forklifts, yes. But what has happened is that the technology is now so mature that you can actually apply it on even the highest, the biggest machines.
Okay, thanks.
Okay, we had many hands here. Continue to pass, passing over the microphone there.
Thank you. Andreas Koski from BNP Paribas. I have two questions about pricing on the electric machines. So you mentioned that it could be 2x higher compared to a diesel-driven machine, but what would you say the average selling price difference is today? Are we talking about a 50% uplift?
... this varies quite a lot between, from product to product, and I don't think we disclose any specific levels, but, there's, of course, a varying degree, yeah.
Okay.
Mm.
Yeah, I understand that. Then in your growth target of 5% until 2028 or over the cycle, what have you assumed in terms of the pricing development on the electric machines? If you look at personal cars, we are seeing quite big price declines right now. Are you expecting something similar, that the pricing will come down a lot on the electric machines over the next five years? Thank you.
So, pricing differs between these product groups, and it differs a little bit between the geographies as well, and I don't think we mentioned anything specifically there. But, of course, the technology is maturing, and as it is on automotive, most likely the component prices, battery prices, will go down over time as well, so... But I don't think we mentioned anything specifically in this area.
Thank you.
And continuing.
Hi, it's Erkki Vesola from Inderes. According to your graph, you showed that the services are not growing faster, or the service market, than equipment market. Is it so that the decline in EV service revenue decreases? So where does the additional service revenue come, or what are the new services provided for, for the EVs?
I can start. I think the maturity of the components between ICE, as well as service, as well as electric machines, they are the same to start with. But of course, like with personal cars, the services as well as the component, they will become more advanced, more sophisticated, so that's where the part of the growth is coming from. I think I mentioned it in one of the slides as well, but it's following actually the same path as with car industry as well.
Yeah. Of course, Thomas will deep dive into the service growth-
Yes
... a little bit later here, so.
Okay, but just as a rule of thumb, so the service revenue per one EV will remain just about the same, okay? Basic services will decline, but the new services kind of-
I, I-
... as an add-on.
I propose let's come back to that after Thomas' presentation. I think, he will have fantastic details in his-
Okay
... presentation.
Thank you.
Thank you.
Yeah.
Yes, this is Tom Skogman from Carnegie. You come from Epiroc and Atlas Copco, known for great operational excellence, and now you have spent some time with Kalmar, but where do you see the biggest opportunities to improve the operational excellence?
We will have a slide on that, which describes it quite well, but I think it's three different areas. So at a high level, portfolio optimization, that's one of them, where we have taken very good decisions already in the past. The second one is about commercial excellence. But I think there are areas with product costs, product design, portfolio optimization as well when it comes to complexity. For instance, reducing complexity. And then the third area is operational excellence, which is a combination of many factors, of course. It's about sourcing, supply chain, service excellence, manufacturing, and so forth. I think in all those areas, I see opportunities.
Also, when looking back to my previous companies, I would say, which are, of course, world-class machinery companies.
Do you think Kalmar is kind of has a suitable level of decentralization, or do you want to have more or less kind of power and decision in the head office?
I think we have a good base as of today, but of course, as with the portfolio, as with the operating model, the optimization assessments continue all the time, of course. So we are looking at the best possible model. In some areas with Kalmar, it's maybe a hybrid between decentralized and centralized, so we are looking into those areas in the weeks, months, and years to come, definitely. But I think we have a good base as of today. Go on.
Then finally, on the slide where you had on page 32, this opportunities to leverage portfolio for further growth in the different markets, could you give just a bit more numbers? It's really... It would be good for us just to understand what is your market share in terminal tractors in the US compared to Europe for the different products? If you just zoom in on Europe and the US for, you know, so we see where you are strong and where you can, you know, close the gap, basically.
There's opportunities in many of these parts, but I don't actually think we disclose the market shares on-
Yeah, I think we have to remember here that we have the prospectus-
Yeah
... and all the information that is disclosed in the prospectus. We need to follow that guidance and cannot provide you with additional details that is not disclosed in that. And there is a market section where you get an overall view on the market and what it looks like in the different areas.
Yeah, market shares, normally they are pretty sensitive, data and information, of course, but the positive thing is that, there are lots of opportunities to grow.
And then I think the other mic there, you've been waiting patiently.
So, Johan Eliason, Kepler Cheuvreux here. Just coming back to your slide 27 on electrification again. You say you're well-positioned. 12% of your equipment orders were electric last year, but at the same time, you give this data point that 15% of the market was electric, indicating that your electric share is below market average. How should we understand your positioning on the electric side?
Thomas wants to elaborate a little bit on the electrification here.
Yeah, the electrification in general, we have a huge base of an existing customer base and our existing customers for the ICE equipment, and we are starting to grow the electric portfolio. But we still have a good demand for the diesel ones, which means that our relative share in our portfolio is still growing quite fast, but it's still-
... still on the 12% on the sales are set.
Okay, and then just a clarification, the installed base you talk about on one of the slides, was that for electrical products or for your total product portfolio?
Total.
It's total.
It's total. Okay, thank you.
Thank you. Any further questions from the audience? Okay, please.
Antti Kansanen and SEB, you basically, kind of highlight that all of the growth on the market is gonna be driven by kind of the EVs. So how should we think about this transition from your production point of view? I mean, you're pretty asset light, you rely on supply base quite a lot, so does this mean you have to make a big changes on your existing supplier base? Does it impact how you work with them, how your profitability outlook, or how you produce? So how should we think about the shift from productivity and production point of view?
So what's happening is that, of course, transmissions, the engines, et cetera, those parts of the drivetrain is replaced by batteries and electric motors. But the way that we are operating, you know, we don't do any manufacturing. We are buying all components from outside, so for the production line, it's not a huge change. Of course, we need to raise the competence level on high voltage and electrics, and all of that, but thinking of it from a financial perspective, it's not going to have a huge consequence.
Is it a challenge to find the suppliers for kind of the new products or as you grow in the EVs?
No.
Okay, and then-
And then we base our design on modular as well-
Exactly
... so that we can have dual capabilities. Just want to comment on the growth side, not the whole growth. All growth is coming through electrification. That's one part. Innovation, automation, electrification, digitalization, that's one part. Growing services is a big one, and then, of course, attacking white spots.
For sure. I was referring to the market growth that you were-
Mm, mm
... presenting.
Yep.
How's the competitive dynamic on the EV side? I mean, could you talk a little bit about how global the market is? Is it regional? Is it Europe, U.S.-specific? What's the role of how far the products travel, in a sense, how close you have to be to your clients, and so forth?
We see this all over the world, actually, surprisingly-
Mm
... from all over the world. The EV products we're producing not only in one site, but we will do as we do today, produce in several different sites, so-
Mm
... Europe, Asia, North America.
This might be a bit of a simplification, but on the personal vehicle side, we see kind of a strong competition coming out of Asia. How do you reflect that on your respective businesses?
I think I can start. Of course, competition is good, it's positive, it keeps us on toes, and definitely there are competitors in different regions, and some of them are global, some of them are local and regional, of course. But once we keep and maintain our leading position in service, the wider service footprint that we have, close to 1,400 service technicians around the world, as well as our leading position in innovation and sustainability, I truly believe that we can be ahead of competition everywhere in the world where we operate.
Thanks so much.
And then our market is, the dynamics is a little bit different. Automotive is working on B2C. We're working in a B2B environment, where, there are other drivers, and primarily the total cost of ownership, focus that our customers have is working in our favor. So it's not only about the sticker price on the product, but it's also about uptime and the availability of spares, et cetera, et cetera, et cetera, so.
Is your edge on the total cost of ownership coming exactly from the services side, or is there kind of design elements that your EVs would kind of be more-
Mm
... energy efficient or something like that?
It's both. It's the quality and the productivity that our machines give, coupled with our great service offering. That, that's the magic equation here, really.
Listening to Thomas' presentation later on, you will get a complete picture of that, and we can come back to the electrification then, after that also. Any further... Yeah.
Yes, one other from Andreas Koski from BNP Paribas. So on your installed base, you're talking about 65,000 machines, and I think you've talked about that number for at least a few years or maybe many years. But can you give an indication of what the installed base was 10 years ago or 15 years ago? How much has the installed base grown? Because in your CAGR of around 5%, I guess, we have a lot of mix changes-
Yeah
... we have pricing, et cetera. So if you can give an indication of the installed base 10 years ago?
Mm, it's a good question.
We don't give any exact numbers there, but as our business grows, then of course the installed base grows, and then the repeat orders are keeping and maintaining that on top of the, let's say, the additional growth we have.
Okay, thank you.
Okay. Okay, please, still.
Yeah, just to add on that question about those of those 65,000, how large a share are terminal trucks, lift trucks, et cetera, terminal tractors and lift trucks?
We don't give that number either.
But is it, is it a high, very high number, I assume?
The terminal tractors, in general, they have shortest life cycle with the light forklift trucks, and then the heavier the machine is, the longer the life cycle is. So the repeat orders are more frequent for the terminal tractors, which means that it's the share is fairly stable, I would say.
Okay, thanks.
...Okay, I think it's time for a short break here, and it's 10:25 A.M. Let's have a 15-minute break and then come back at 10:22 A.M. Thank you!
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The forklift is great to drive. It's quiet and it's very fast. It's very reactive and the electric truck makes the working environment a lot better because of the lack of noise.
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My name is Ian Stewart. I'm the Divisional Manager for Operations at the Port of Bridgetown. My focus here is on maintaining high standards and satisfying our customers. We have a vision here at the Port of Bridgetown to be the most innovative, green, maritime hub in the world by 2030. We've been improving our customer service, increasing our port efficiency by the use of high levels of technology, not only from the point of view of equipment that we use, but surely some of the institutional changes and processes over the years. We utilize our partners, our regulatory agencies, to ensure that we maintain the standards that we set for ourselves. Our collaboration with Kalmar started back in 1981, with the purchase of a straddle carrier for the Port of Bridgetown.
Since then, Kalmar has been our focal point, not only for the supplying of equipment, but surely for parts, for training and for the supply of needed information relating to the changes in technology. We have 12 hybrid straddle carriers and 5 electric forklifts. These straddle carriers are really work horses of the port. They are the ones that move the containers from the key into the container yard or to deliver the containers direct to our customer's trailers. We've seen a reduction in fuel use, some 30%-40% in most cases, hence coming in line with our own sustainable goals. Most of our lift trucks are now going into either electric or hybrid as well, and we've been utilizing our own resources to ensure that we can provide electricity, the use of water, and that we can be as sustainable as possible.
The biggest challenges to my mind that we currently face is ensuring that we maintain high standards, and reliability of equipment is so critical to achieving our high levels of efficiencies and reliability. We depend heavily on Kalmar for that. I'm satisfied with the levels of service that we receive, not only from the point of view of the supply of equipment and parts, but surely with the provision of training, with the execution of that training, and also the collaboration when it comes to the use of technology across the ports in the world. When I'm gone, the Port of Bridgetown will be left as innovative and as flexible as ever.
I'm sure that what we believe in is a very innovative port, one in which is using quite high levels of technology, where our equipment is maintained by highly trained staff, and that we have impressed and provided the platform to build on, not only to stay as a small port in the region, but to be the hub that we desire. That's the port of the future.
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Att köra en eltruck har varit en underbar känsla, måste jag säga. Det som överraskade mig mest var faktiskt att den kunde göra jobbet.
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Welcome back to Kalmar's Capital Markets Day, and the second part of our presentations. We'll continue with Thomas Malmborg, services growth, and then there will be Sakari Ahdekivi's presentation about the financial and driving excellence. Okay, so now it's time for me to invite Thomas to the stage. Please welcome.
So good morning, all, and welcome back from the break. My name is Thomas Malmborg, and I'm the head of services. I've been in the company 35 years, and I have got the opportunity to breathe the air in the frontline units. I have spent a big number of years running forklift truck business lines, and since 2017, I've been running the services. But even before that, I was actually in this company before I could even walk, and I mean that quite literally, because I was growing up in the small village of Lidhult, a place in the south part of Sweden. My family worked there since the fifties, and I have actually, as a small boy, been witnessing actually how this company have developed over the time.
From a factory in this small place with a handful of service technicians, going to where we are today, with a global footprint and 1,300 technicians globally or in 120 countries. So that's a quite, quite massive change we have done over the years, and I have seen how important we are for our customers. Of course, you have also heard from the team today the need for these customers in the growth onwards, when it comes to their productivity, sustainability, but also safety. If we go further here, in this section, I will take you through Kalmar Services part of Kalmar, and I will show you the significant growth opportunity we have in our install base, but also in our innovation-enabled offering.
Kalmar service offering is optimized to keep 65,000 units on the move, and we know our customers' challenges, which are to focus on safety, productivity, and sustainability. Our role is to help our customer to manage these challenges with value-add solutions. You can see that on the right-hand side, where we have the blocks actually showing all our services, from service, maintenance, spare parts, logistics, but also to remote services. We have long-term, long-term trusted partnership based on strong footprint in over 1,300 technicians and the 13,000 connected units.... So we used to say that we understand the customers' businesses even better than they do themself, and we can, we can actually anticipate a failure before it happen, and that's what make us different to our competitors.
I'm confident, I'm confident we have a plan for sustainable and profitable growth in our service offering. We will leverage the potential of our installed base through increasing service capture, and increasing the service capture means that we will take more capture from our service and maintenance. We will take more capture from our spare parts business, and we will take more capture from our refurbishment, and this will maximize our lifetime earning. So maximizing our lifetime earning on capturing more business. Then in addition to that, we will take the advantage of the electrification to drive the growth of services and deliver value through data-driven solutions. And when we combine these elements with the underlying market, this also provide a significant growth opportunity for Kalmar.
Here you can see the growth expected from the services market, which is anticipated to grow at 4% per annum. It is important to remember that this growth is all the services, including diesel machines and electrical machines. So we will take the benefit in this growth out of the electrification and the digitalization. This because there is higher captivity and lifecycle value add that can be delivered through electrification, allowing us to grow faster than the market. And when we combine that one with a high possibility to address the large installed base and extensive service network, that represents significant, significant growth opportunity. And this growth execution is already underway, and we have clear priorities ahead to focus on. We have seen that we are growing from 2021 to 2023, and we can grow faster than the market.
We have seen that we have moved our spare parts capture rate from 25% to 29%, and we have already refocused our digital solutions to provide the customers with digital platforms, Kalmar Insight, and also our e-commerce systems. Another important part for us is actually our contract business, and here we have really put things in focus to take care of the contract profitability, and that means that we take that further. And of course, in the challenging market, the contract business is extremely important to put focus on. If we then look forward, we also have clear priorities to drive the performance of the business, which comes back to the three building blocks. We will look into capture more of the installed base.
We will continue to grow our service through electrification, and as information and performance is becoming more important for our customers, we will add value with data-driven solutions. So with these foundations, we have to set the plan, and we have clear priorities ahead of us to execute. And, then moving into the electrification. So sustainable operations in industry electrification is a clear growth driver for service. If we look at the left side, we can see the diesel machine. Maybe not that easy to see it's a diesel machine, but it is a diesel machine. And this machine, we will continue to capture high spare parts business on. There will be less of this kind of engine consumables, but there will be also a great upside to continue to refurbish these machines, because they will get another life, second life, third life, et cetera.
So we will capture more on those one. And then if we look at the, on the right side, the electrical machines, this will give us an upside, an upside in new services. I mentioned before, these machines will not take, I will say, less service because we will see the opportunity in battery as a service. We will see the opportunity in our technicians, because they cannot go out to high-voltage machines to do the same as they have done before for the mechanical machines. So electrification, high voltage, technicians, and then, of course, battery as a service and charges is other, other things we can focus on here. So this will increase value, complexity. That means that we need to have high-qualified technicians with the right capabilities.
So as the manufacturer of the equipment, this can actually support us in retaining the lifecycle value of the machines. So we produce it, we set the standard of the machines, and we can retain this over the lifecycle. And in addition to that one, the digital business will drive growth by accelerating customers' productivity and sustainability. I have mentioned a couple of times already that the extent with this is the key customer need, and we have two great enablers, two great enablers, where we can see the 13,000 connected machines, and we have 1,300 service technicians. This gives a superior understanding of the machines with the data-led knowledge, when and what requires servicing. So machines' information, and we can see when we need to service it.
So we are placed with the 1,300 persons, with 1,300 technicians in 1,000, in 120 countries to address the customer's needs of productive, safe, and sustainable solutions, and keep their critical business up running. This means that we become the service partner of choice. Then if we look at what on the right side, right-hand side here of this picture, this is an insight solution we have with our customers in operate, to keep their business day in, day out, keeping machines uptime in good place, and driving their operations. So they have had this for five years now. The Kalmar Insight to really, really be able to look into machines' operations. Then not only having this connectivity, looking at the machines by signals, data information, we are also placed close to the customers.
I think this is extremely important, that we are close to the customers, we know the customers' needs. If you look at the left-hand side here, we have a customer in Central Europe operating a terminal with five reachstackers, and this customer is using on-demand service. That gives the customer the flexibility to get the maintenance done in a very high-quality way. For Kalmar, it's an asset-light operation. We have the technicians, we have the spare parts, so it's not, like, heavy in assets. In addition to that one, we utilize the region capacity with very high flexibility. That means that we can distribute our technicians to one site, to another site, to the third site, keeping high utilization of the technician, not sitting, waiting for jobs.
On the right-hand side, we have a more heavy operation, and this is a customer site in Nordic, a manufacturing site, where the customer is using heavy lift trucks, heavy reachstackers, but also third-party light machines. And coming back to the third-party light machines, that means that not only Kalmar equipment in these contracts. This is a heavy, heavy operation. And here we provide a complete care package for all the equipment, for all the equipment, so the customer can really, really focus on their core business, and we take over the pain of whatever it is outside their processes. So that give us the possibility to apply predictive maintenance. Predictive. We can read the machines, we understand the machines, and we can predict before a failure happens. We can fix it before it breaks down.
Our technician network is set up as a system which not only provides solutions at the point of need, but also provides smart, data-driven insights. So having them there, fixing the machines with data-driven insights, for overall equipment performance, the customer can focus on what matters most for them, their business. Then coming to its end, so bring this section to its close. You have seen how growing service is supporting Kalmar's profitable growth and resilience. We're operating in a growing market, with solid foundations, and we have planned to leverage installed base further, combined with the growth of the electrification and the need for data-driven value-add solutions. With a global presence, service is a key factor for Kalmar's position as a market leader for mission-critical, heavy material handling.
Thank you very much, and, I'm now ready to take questions.
Thank you, Thomas. I'm inviting Sami also back here for the Q&A, and let's focus on service-related questions here, and I know there are many eager in the audience-
Mm.
to ask questions around services. Please, we'll start.
Thank you. Antti from SEB. Could you elaborate a little bit on the battery as a service concept? What does that mean in practice for you and for your client?
Yeah. So what we have started with now is to look into these kind of new services, where battery as a service is one, and there is a, there is a setup of people, project ongoing at the moment to actually answer that question.
But in simplicity, I think, selling kilowatt hours, that's-
Could be
... part of the business model-
Mm-hmm
-possibly.
Okay, and then the second question is also on the EV services, and, you have a lot of highly skilled technicians that are capable of serving the high-voltage electric equipment running around your client site. So are there any other machines that they could, get services out of? And, and vice versa, is there also similar type of technicians from your competitors or for, or other suppliers who could serve your equipment?
Yeah. So we see that these EV services will be quite unique in the future with our captivity of, or our design. And servicing other products, yes, we have as you hear in this contract we have third-party machines, so that also goes that our technicians go in to address and serve that as well.
Okay, and then last from me, if let's say I want to buy a EV machine from you guys, but I say that I don't want to have any services from you, so how would I then manage? How would I work around it, and would you do the deal?
I used to say that, where we sell, we service.
... Fair enough. Thank you.
Before, let's take one question that comes from the virtual audience, because there is a lot of talk on the batteries here, so in between. Have you seen Kalmar's position regarding battery material and cell pack? Is Kalmar's supply chain position secure to support EV growth?
Good question. Thank you. So of course, in the product divisions, projects of new equipment, we of course always set these kind of targets for suppliers, that if you supply to production, you supply to service, and there is different lead times of that one. So a lot of work on that one in new product development.
And then, of course, coming back to previous questions as well, of course, we try to keep and, and, you know, increase our flexibility when it comes to supply chain, for instance. Developing dual capabilities and building and designing modular platforms. I think that is important to secure the competitiveness in this space as well.
Okay, further questions, please, Panu.
Yes, it's, it's Panu from Danske. Two questions, basically. You were able to increase the spare parts capture rate quite a bit in two years, so what drove that, and do you have a target of where could it go from 29?
We have all the activities working on the install base to capture more business in spare parts, in service and maintenance, and in refurbishment, so we see, we see the growth potential there, definitely.
Mm. Okay, and then, second question is on, on, rental and used equipment. You mentioned it as one part of the service, so mainly interested in the rental side. So how big part of your business is that, and, and, yeah, can you talk a bit about that?
Yeah, so the rental business and the used equipment is one business line today, where we have focused on growing that one, and we believe that will develop further for OPEX businesses, like customer have the flexibility in using our machines, if they don't go for a new ordering.
Okay. Maybe a bit of a follow-up to that. I mean, when there's a transition to EV, there's a battery, and then the battery might have, like, shorter lifetime than a combustion engine. So does that have any impact on this used product business or rental operations?
I think those things need to be considered, but of course, when developing new business models, they might relate to automation, digitalization as well, and not only electrification, of course. Packaging those business models together might give opportunities for a rental type of business model in the future, increasingly, I would say.
Okay.
Of course, and that's therefore we have the base already, like Thomas mentioned. We have one business line, focusing on that already as of today.
Thanks. It's Erkki from Inderes. A couple of number-linked questions you guys obviously love. But talking about the addressable market, I mean, how has the share of in-house service developed? Where does it stand now?
So the addressable market was EUR 6 billion, right? EUR 6 billion, and you could see-
The in-house is excluded from that?
Our in-house service is a part of that.
I mean in-house service, done by customers themselves, so-
Well, yeah, that's the, that's the addressable market. That's... But the size of that one, you meant? Well, I will not disclose our size of that market, but, it's a, it's a-
Mm
... there is definitely room to grow that part.
I think as Thomas said in his presentation, there is the complexity when it comes to in-house services. Also, when you need to address that and the competencies from the service crew that we have, that is building on the opportunity, so-
You can maybe say also that from where we're coming to where we're moving in the EV, the complexity, of course, will demand higher qualifications. That's legal requirements in a large extent onwards for EV technicians.
Okay, then secondly, you don't disclose the number of your maintenance contracts you currently have.
So, the business as is divided into three sections, and that's the parts and logistics. The second one is the service and service solutions, which is on demand, and the contracts, and the third one is the life cycle solutions. The parts and logistics and the service and maintenance is fairly similar, the biggest one, but exactly the size of those contracts, I will not disclose now.
Okay. Thank you.
All right, let's take, if we have one more question on the services... Okay, please.
I can follow up on that, the maintenance question, that is taken care of by your customers or third-party providers. I think in the prospectus, you mentioned that 40%-45% of the maintenance is taken care of by customers or third-party providers. So where do you expect that to be on your electric machines? Will it only be 20% or 30%? Is it a big growth opportunity here on the service and maintenance part?
Yeah.
Thank you.
Percentage-wise, exactly, where we plan to be, is not to be mentioned here, but to grow it, definitely. Yeah.
All right. Thank you. Now let's move on. Last-
Yeah.
Thank you, Thomas and Sami. We have our final but not kind of the, let's say, least part of the presentation, because we have our CFO, Sakari, ready to present the financials and also diving in. Now, you've heard about the sustainable innovations, and you heard about service growth. Then we have the final part, driving excellence, too, and Sakari will cover that in his presentations. Please, Sakari, welcome.
Hello, my name is Sakari Ahdekivi, and I am CFO for Kalmar. I joined the company in July of last year. Before that, I worked for about a decade at Ahlstrom and Ahlstrom-Munksjö, a EUR 3 billion net sales global specialty materials company, where I was CFO and deputy CEO. Prior to that, in the Finnish listed company space, I have worked as CFO for Huhtamäki, a global packaging company, and YIT, a construction company. Earlier in my career, I worked for over a decade at ABB in various financial management positions in four different countries. What that background has given me is experience in several publicly listed companies and global businesses. I joined Kalmar because I think the company is in a very exciting point in its journey.
This is a well-respected global business with an international footprint, and now about to become independently listed. In presenting the financial section, what I would like you to remember are four key points as to why this is an attractive business. First of all, Kalmar is a financially robust company with a strong global coverage and delivering solid performance. Secondly, it's an asset-light business, which is very cash generative. Thirdly, we have further growth opportunities ahead of us, both from our equipment offering, as well as from our well-established service network. And finally, there are additional improvements to go for through our approach to driving excellence, which will deliver performance for the business. So with that, let's get into the financial section, starting with a high-level overview. Kalmar has an attractive and strong financial profile.
The key figures you will see here are mostly presented on a carve-out basis and some on a pro forma basis. Our order book at the end of Q1 2024 was around EUR 1 billion. Our LTM net sales at the end of Q1 was EUR 2 billion, while the orders received have been around EUR 400 million per quarter in the most recent quarters. On an LTM carve-out basis, we have been delivering a 12.6% comparable operating profit margin. This demonstrates that we are being successful in driving our performance on a good level. In the last twelve months, our cash conversion has been very strong, at 126% when comparing operating cash flow to EBITDA.
Based on the Q1 2024 pro forma number, we have a strong balance sheet and a net debt-to-EBITDA leverage ratio of 0.5x . So what this shows is that we have a solid base to start from, and this is also reflected in our growth profile. Kalmar has delivered a strong and consistent track record of above-market growth. Over a 10-year period, the compound average growth rate for Kalmar, excluding the exited heavy cranes and Navis businesses, has been over 5%. What's also visible on this graph is that during COVID, there was a dip in sales, followed by a very strong rebound. The COVID period also enabled the company to refocus the business and drive through efficiency improvements.
On the right-hand side of the slide, you see the difference between the comparable operating profit margin reported as Kalmar as a segment of Cargotec, compared to Kalmar on a carve-out basis. These figures are full year 2023 numbers. The EUR 25 million impact from the carve-out is not exactly the same thing as Kalmar on a standalone basis, but it gives a fairly good idea of the standalone impact. So what all this shows is that we have demonstrated a track record of above-market growth, and we are currently delivering solid profitability. But not only that, Kalmar is an asset-light business, and the formula you can see here works really well.... First, our manufacturing platform is based on a footprint of four factories, which are shown in the pictures at the bottom of the page.
We are not assembling machine, we are assembling machines and, and procuring the components as presented also previously. So we are not heavy in terms of manufacturing equipment, and our factories are well invested. This results in an asset-light CapEx, which in 2023 was 2.1% in relation to net sales, and this is CapEx into plant property and equipment. We then add our efficient operation and our rigorous working capital management, which is reflected in the 6.3% of working capital to net sales. All this results in a robust cash conversion, which in the last 12 months was 126% compared to EBITDA, providing us with healthy levels of liquidity to fuel organic growth and capital allocation. So you can see a simple, flexible, and agile model which delivers results.
Now, you've already heard a lot about our two business segments, but let's look at them in a bit more detail. Equipment and services are well positioned to drive growth. You can see that the split of the business today is not quite one-third and two-thirds, services and equipment, but close, as reflected in the 2023 orders and sales numbers. We know there is opportunity for growth in both segments. As you heard from my colleagues, the increasing demand for electrification is a big driver for the equipment segment, and with our R&D, our position in the market, we are well-placed to see that growth come through. As you heard from Thomas, service has already been growing in the recent years, quite significantly. Thanks to the growing installed base and the positive market growth, services has the strong potential to grow further.
This will also benefit Kalmar in terms of margin expansion, as there is potential also for margin improvement in services. In 2023, the two segments produced healthy, comparable operating profit margins of 14% and 17% respectively, which leads us nicely to the next page. Our margin expansion will be based on the three strategic pillars of sustainable innovation, service growth, and driving excellence. As we focus on sustainable innovations, we become more embedded with our customers. This, in turn, enables us to grow services, which of course, has the benefit of not just better margins, but also produces steady, recurring revenue. We will then combine this with our approach of driving excellence as our third strategic pillar.
Let me now focus on this last part, which in combination with the other two strategic pillars, will enable us to increase our comparable operating profit margin to 15% by 2028, as I'll show you on the next page. We are actually already well into our journey of driving excellence in commercial performance and cost efficiency. To do this, we have focused on three key areas: portfolio optimization, commercial excellence, and operational excellence. Our portfolio optimization has already been successfully completed with the exits from heavy cranes and end-to-end automation. This initiative has resulted in a more focused business, which is fit for the future, and now we are very happy with our core portfolio of businesses. At the same time, we have been working on commercial excellence, both on the customer-facing front end as well as on the sourcing and product cost optimization side.
That work is already delivering results visible in our 2023 margins, but we will continue to work on these areas to further drive business performance. And finally, we are focusing on driving operational excellence through process improvements, cost savings, and by continuing to optimize our supply chain. Based on my experience and having now spent close to a year at Kalmar, I think we have a lot of opportunity in process optimization, and that will deliver significant improvement to the business. And as an independent company, we have more freedom to focus on processes which are specifically fit for Kalmar. This is also part of the demerger rationale. We plan to provide additional detail on the financial impact of these initiatives by the end of this year. On the subject of the future, let me touch on some of the priority areas for capital allocation.
We will continue to invest in organic growth. This will allow us to capture and grow market share in both equipment and services. For the benefit of strong long-term growth, we will continue to spend on R&D. Now, R&D spend in 2023 was 2.6% of net sales, with a significant portion of that going into electrification. Shareholder returns will also be a priority, as we aim for a dividend payout ratio of between 30% and 50% per annum. As we are asset light, CapEx is less of a priority, and we are determined to maintain a strong balance sheet and a good leverage ratio. We're not super focused on M&A, but we will maintain an element of readiness to react should the right opportunity arise. These are the priorities that we will remain focused on for the foreseeable future.
All this brings me to my last slide, which is our performance targets for 2028. Going forward, as you think about Kalmar, we want you to remember that we are committed to our long-term performance targets that we have set out, which are: over 5% sales growth over the cycle, a 15% comparable operating profit margin by 2028, and an over 25% return on capital employed by 2028. Furthermore, we are committed to the 1.5 degrees Celsius climate ambition, and we'll seek validation from the Science Based Targets initiative for our climate targets post the merger. Before I hand back to Sami, let me just quickly summarize this section. Kalmar is a financially strong and flexible company with an asset-light and cash-generative business model. We have further improvements that we can deliver to drive performance.
As you've heard from all of the team today, there are significant growth opportunities ahead in both equipment and services to make every move count. Thank you. Now I'm happy to invite Sami back on the stage.
So thank you very much, Sakari, and the whole team. We are now coming to an end of our session today. I really hope that you have enjoyed our presentations, and trust that you have got a clear understanding that Kalmar is operating in an attractive market and moving goods in critical supply chains all over the world. We are fully committed to delivering on our long-term performance targets and making every move count. So thank you very much. Now we will continue our Q&A session.
Thank you, Sami. We are heading towards the end of the session. I will invite all my colleagues back to the stage for the final Q&A, but before we go into the Q&A, I want to show you something. We have a new brand video. You've seen the new Kalmar brand that we are launching from July onwards, and take a closer look at the video that is presenting our Kalmar brand.
For me, the first love was not the heart-fluttering kind, but a metal-on-wheels, heavy-lifting kind. To me, that reach stacker wasn't just a brilliant piece of engineering and machinery, it was a history book able to lift cargo, and I was part of those stories. I was part of creating a tireless partner, able to lift companies to new heights... delivering value and operating towards a better future. Obviously, our lives change, and we have new loves, new aspirations, and new responsibilities, but the memories remain. We all have stories, and for us at Kalmar, the stories are symbols of making every move count. We know the road to a decarbonized future is not an easy one. We walk the talk and build trust through actions, not words, knowing that the small steps and persistent work over the years regarding safety, sustainability, and productivity will have a big impact.
We want to lead that change by example.
... driving excellence and creating value for our customers, partners, and shareholders through sustainable innovations and services. Our customers are each on their own journey, and we're with them every step of the way, moving them closer to their targets. We owe it to the people before us, and for the people to come, to make sure that together we're making every move count.
Okay, let's open up for the final Q&A of today. Any questions? I see many hands here. Let's start there with Panu.
Yes, thanks. It's Panu from Danske. A question on the EBIT margins for the segment, so equipment and services. Let's say that the equipment margin is pretty good already. The question is, could you talk a bit about, like, how has it developed over time, and what has driven the increase? And also, if you could talk about, like, do you see more potential in service margin going forward than in equipment margin to improve?
I think we have many here. Sakari probably what-
I can-
Would like to start.
... I can start with that. On looking back into the history, we can only talk about the figures which are in the prospectus, so that I can't really get into that much. But I think what I said in my presentation was that service not only has the opportunity to grow, but also improve margins.
And maybe-
And then I can continue on the equipment. So of course, we are, I would say, rather happy with our margin on the equipment and, of course, the good development there. It's driven by our innovation leadership, technology leadership, as well as very strong efforts on commercial and operational excellence as well.
So-
And then, coming back to your next point on service growth opportunities, yes, as it is highlighted here on the slide as well, service growth is one of our key strategic pillars, so definitely we will see growth opportunities on the margin side as well.
So could one kind of put it that way, that in equipment, it's more about trying to maintain this already good level, and in services you aim for 20, or I don't know which level?
No, no numbers, exact numbers to be disclosed, but, more or less, like that. Yes. So-
And every-
We have a solid profitability with our equipment, we can say, and we are happy with that.
Reaching our 15% profitability target by 2028, it's of course, a combination of these both.
That's what I was gonna say as well.
Just secondly, out of interest, you have the net debt to EBITDA target, and, yesterday we heard that Cargotec has a net debt to equity target. So just, like, why, why did you choose a different basis for the, balance sheet target?
No specific reason. We will be two different companies with slightly differing target setting.
We are disclosing them both, so I think in that way it's just now here selected as one of the targets.
Okay.
Thanks. Erkki from Inderes. This goes to Sakari, mainly. Your balance sheet is already strong, you're asset light, small net working capital. Could the payout range be raised, or where do you actually need all the cash that's coming in?
I think that will be then for the future board to consider.
No comment on that?
No, no further comment on that.
Okay. Johan, I think you had your hand.
Yeah. Hi, Johan at Kepler Cheuvreux again. I was just curious a little bit, you talked about the electrical products and that the capture rate might be better because it's more in-house design, consumables, and spare parts. Can you sort of indicate where the ratios today between the traditional...? I mean, you are at 29%, you mentioned in your report, and I guess a small part is electrical, so it's not impacting that today. But is electrical sort of already 40%, or what are we talking about?
So we have looked at the total capture rate, which was then 29%, which includes diesel machines and electrical machines. And the split now is not, it's not disclosed, but there is also, as mentioned, the upside in this captive in-house design onwards. So that's one focus area to grow the capture of the spare parts.
But, you know, you don't have any number to share with us-
Not to share with you today.
... twice or?
No.
But maybe one detail from a technical point of view, the light ranges that we have on the market now, this is also public information, has a lower voltage on the electrical system, and the heavy equipment that we are now developing and delivering has a high voltage. We're talking 600 volts or plus. And you can imagine a customer then deciding, "Should we do this in-house or should we use the original brand?" Decision is a little bit easier. So... Thank you.
Okay. Please, Tom.
Yeah. So I didn't really get this. So the concept with the service in EVs, will you try to kind of force that it's not kind of possible to buy EV machines across the range or this heavy equipment without signing a service contract? Or what... I don't really understand what was the idea there?
... So the idea is like, we see the immediate benefits in the EV for Kalmar to capture more service because of the high voltage, the skills required for the systems, high voltage electricians, for example. So this give us automatically the benefit to capture more. So I think that's one very important part. Then to lock out competitors, well, we can never do that. We can just secure that we have the right capabilities in-house to take care of our offering, and that's what we have. The other thing is that, of course, it goes very local. You can have one country with different requirements to another country, so that means also that our plan to train them to get the right qualification is very important, and I think that's actually our advantage on that one, too.
Not to lock everybody out, but be best in class on what we are doing.
Are there, like, warranty issues, for instance, that the warranty is not really... if it's not serviced?
Maybe warranties, they relate to using certain spare parts, but of course, we are flexible in Kalmar, and of course, we are selling our equipment with service, without service, as a service, hopefully in the future as well. But of course, if our customers want to get the best out of their equipment, we are really recommending them to tie up with some kind of a service agreement or service package.
And, and-
I'm-
... of course, just add on that one, warranty require service during the warranty.
Mm.
So that goes hand in hand, that you can't just ask for warranty if you haven't done a proper service, right?
Mm, yeah.
Mm-hmm. I'm gonna really simplify here, but if you have an electric car, you are not opening the hood and doing anything yourself. But if you have a car from the '80s, you might be able to do that.
Yeah. I tried to do it, actually, this week, but there was a no repair manual. It's forbidden. I don't know.
One thing we have not discussed at all today is in the US, they try to push out Chinese equipment. There have been, like, big headlines in Wall Street Journal, et cetera, and I wonder what... I mean, it's obvious that this is mainly about ship-to-shore cranes, perhaps RTG cranes, which is no longer in your offering, but will there be any kind of impact for you? Could you consider to do kind of upgrades of these? You still probably have the knowledge to just change the steering and the mechanics in this type of equipment. And then, you know, SANY is a key competitor, so do you expect any impact, you know, on?
Yeah-
market conditions?
I would say a little bit too early to draw conclusions on this one, of course, but we are following up the development on the geopolitical side very carefully. And then it's worth mentioning that we have one very strong factory, of course, located in the U.S. already for terminal tractors, so we have the footprint there.
Tommi, do you wanna elaborate on the data security a little bit here?
Yeah, the data security, of course, we do have the ISO 27001 certificate for cybersecurity, which is then securing us in that market, making sure for the customers that we are safe.
Yeah.
That's, that's the additional topic, yeah.
Then finally on, you know, also comparing with the e-car EVs, I mean, Europeans and Americans are not competitive with the Chinese. Is it the same with, in your industry, that SANY's pricing is extremely low in your type of products?
We are not commenting that much on competition, of course. And the competition pricing, it varies between different regions, between different customers, and so forth. But of course, what we try to do is to provide our customers with the best possible equipment, stay as an innovation leader, and then that combined with the global service network as well. So that is the strong package, of course. So we try to provide more than just a piece of machine. So it's, you know, not to compare exactly how much one machine costs versus another.
I think there are two words, mission criticality, and, I think both, Alf- Gunnar, and Thomas can elaborate on that, but that is really important. The uptime for the machines is enormously important-
Mm
... and that's where equipment and services combined is very, very important for us.
Are there any customs that could hold out, you know, SANY? They probably have really cheap steel, they have really cheap batteries, et cetera.
You mean customs duties, tariffs?
Yeah, tariffs, you know.
In certain parts of the world, there is, yeah. So, for example, importing forklifts into U.S. from China, then you have a certain level of duties on top, yeah.
Okay, thank you.
Any further questions, please? Tom.
Thank you. Thank you very much. So two questions, first on, on pricing again, but on your overall selling prices. I think you were able to increase your selling prices by around 20% during 2020 to 2023. And you reached an order level about EUR 2 billion on a 12-month rolling basis or in... And now we are at EUR 1.6 billion. So is that order decline from EUR 2 billion+ to 1,600 only driven by volumes, or have you lowered your selling prices again in your order intake? Thank you.
Alf, do you wanna-
Uh-
Do we disclose that then?
No.
I'm not certain.
No, but in general, of course, overall, if you look at competition and...
There is a bit tighter competition these days than it was a year ago. I mean, during, especially during COVID and then the years after, the supply side was a bit of a tricky thing for the whole industry, and now there's sort of an easier situation for many of us here. So naturally, the pricing part of the equation has become a little bit more important, but it's-
About the comment-
... commenting on the growth side or order intake, of course, sticking to the comments that we had in quarter one report as well. Of course, we see the delayed decision-making with larger equipment orders, as well as slowness in distribution. So, those are a couple of explanations to a lower order intake as of today.
And we haven't broken down our top line into volume and price, so-
Mm.
Yep. Yeah, yeah, I know that. And,
But we're not disclosing.
I think you've guided for an EBIT margin of above 11% when you're a part of Cargotec, which implies a standalone margin of 9%-10%. And I guess that would require a quite meaningful step down in your sales level as well, maybe towards 1,700 or 1,600 or so. But from there, when you start to grow your top line again, is it fair to assume an operating leverage of 25%-30%? Or what would you say is a normal operating leverage for you? Thank you.
Well, I can start out by saying that, first of all, the guidance for this year is, you know, Kalmar as a segment of Cargotec, and the guidance is over 11%, so it's not 11%. It's more than 11%. And then, of course, we have said that the estimation of the standalone cost are between 1% and 2%, so that's correct. And then we have the 15% margin target by 2028. So I think those are kind of the frame that we can offer.
Okay. Thank you.
Any... Panu, please.
Yes, I wanted to ask about kind of your equipment mix. So can you talk about, like, how much of your sales is reachstackers, forklifts, straddle carriers, spreaders, and is there a big margin difference? And then, obviously, like, have you benefited from change in sales mix in recent years?
I'm not sure we're disclosing the exact numbers on the euros, but there is a good graph in the prospectus on what segments do we have. And, and there you will see ports and terminals is a big one, but you also have the industrial and the heavy logistics and so on. So I would probably point to that one.
Yeah.
Uh.
The market section in the prospectus is quite heavy, so you can use that for all the additional information. Standing here with it, so when you get past the risk portion of it, then you have a lot of description on the business and the market.
But directionally, can you comment how big is the margin difference in a spreader and a kind of straddle carrier?
Just directionally, not... But any words?
Hmm. I would say we have a rather solid profitability across all the-
Yeah
... portfolios. Some differences there, but not very huge.
Okay. Thank you.
Okay, if no further questions, I'm gonna check still. Actually, there is one question from the virtual audience still here, and this is to Sakari: Will Kalmar seek external rating in the near future?
We have no current plans for that.
Yeah. Okay, if not, we are coming to an end. I hope you have enjoyed our presentations today, and trust that you have got a clear understanding that Kalmar is operating in a very exciting market. Then, going forward, hoping to be able to disclose more information going further in the years to come, and really excited to be part of the Kalmar standalone journey going forward. Thank you very much, and stay safe!