Good afternoon, ladies and gentlemen, welcome to this news conference regarding Cargotec's financial statements review 2020. My name is Hanna-Maria Heikkinen, I'm in charge of investor relations. Before starting the presentation, I kindly ask you to pay some attention to disclaimer. As a reminder, we cannot discuss any merger-related topics in this call due to U.S. securities law regulations. 2020 was an exceptional year in many ways. The positive news is the positive trend has continued since May in terms of net sales, orders, and comparable operating profit. For full 2020, we succeeded to deliver satisfactory comparable operating profit margin. Our service business was resilient, sale of eco-efficiency sales increased. Just before Christmas, a merger with Konecranes was approved by our extraordinary general meeting. Summarizing these key messages, I would say that we saw good performance in an exceptional year.
Today, our CEO, Mika Vehviläinen, will start the presentation with 2020 highlights. He will continue with market environment and group development. After that, our CFO, Mikko Puolakka, will continue with business areas, financials, dividend proposal, and outlook. After the presentation, there is a great opportunity to ask questions and get good answers. Mika, please, time to start.
Thank you, Hanna. Good afternoon, ladies and gentlemen, from my behalf as well, thank you for participating on the Cargotec Q4 2020 conference call. 2020 was indeed an exceptional year, I'm proud of the performance that Cargotec was able to show in its operations through this difficult crisis. There are many good takeaways to take from the 2020 despite the difficult situation. Overall, when I look at that, our orders obviously declined year-over-year in 2020. However, we started to see a very strong recovery in our orders, especially in our most profitable product segments in Hiab and Kalmar mobile equipment. At the latter end of the Q3, we saw the acceleration of that demand in the orders in Q4, that's obviously very visible on the Kalmar mobile equipment and Hiab order intake in Q4.
Our sales declined compared to 2019, and the fact that the orders declined quite strongly throughout the Q2 and the early part of the Q3 was then visible in the delivery mix of our Q4, where the portion of the more profitable Hiab and Kalmar mobile equipment was lower than usual, affecting somewhat the operating profit as such. I'm very happy to see that the resilience in our services business was maintained there, and services only declined slightly, primarily coming from less value-added maintenance services and on-site services that they restricted through to the COVID impact. Also, it's good to see that the R&D investments that we have done in developing our eco-efficient solutions are bearing fruit. Actually, our eco solutions grew year-on-year by 9%, whereas the rest of the solutions and equipment business actually declined and is now representing 24% of our revenues.
We are actually ahead of our plans and are already past the initial targets we set for next year in our eco solutions revenues as well. Operating profit was obviously impacted by the COVID, but I'm very happy about the performance that the MacGregor team has been able to show where the results actually improved by EUR 24 million compared to 2019. The good work that we have done with the TTS integration and savings is clearly delivering and improving results now. This is the fourth quarter in sequence that MacGregor has been able to improve its performance. Despite the savings actions and the COVID crisis, we actually continued to invest and increase our investments in R&D, and our R&D investments resulted to EUR 105 million in 2020, primarily driven for accelerating investments in electrification, automation, and robotics.
The large installed base of connected equipment in Hiab and Kalmar is actually giving us a great insight in terms of the actual activity in our key customer segments and industries as well. This is the data now from the Q4 situation in 2020. As you can see in our primary market areas where the most of the equipment is actually connected is we are now at the same level as we were before the COVID crisis, both in North American market as well as in Europe as well. Looking at the recent data from this week, we have seen the same trend continuing, and despite the quite difficult COVID situation in many of our key markets, we still see the equipment running hours to be at the same level or slightly above of the same level year-on-year, so pre-COVID crisis as such.
Market environment obviously changed quite a lot throughout 2020, and overall, numbers declined, for example, in global container throughput, but we already started to see the recovery, and actually, the traffic already increased on Q4. We expect a strong recovery of the global container throughput where the analyst expectation for the container traffic growth for 2021 is 8.9 percentage points. Construction activity declined also due to the COVID crisis in our key markets, but we already see a strong recovery happening in Q4 and the market expectations for the construction activity growth for the next year, both in North America as well as in Europe, show quite a strong growth in both markets, and that's quite visible in our customer operations already today.
The very challenging market conditions in Merchant Marine and the traditional offshore continued in MacGregor, but the bright spot for us is the increased activity level in offshore wind installations, where there are a number of interesting projects cooking up. The offshore wind farm market is actually expected to quadruple in next few years. As said, we have seen the recovery of the orders, the trend really started in the Q3, especially in September, and that strong trend has further accelerated throughout Q4. Especially in Hiab, the order amount was all-time high. We announced today also two military orders, the one with the value of EUR 180 million. It's good to remind ourselves that out of that EUR 180 million potential order, we only booked about EUR 24 million into the Q4.
If you exclude the two military orders, the Hiab order intake still would have been an all-time high record with roughly 380 million orders. We see a very strong recovery happening in the Hiab key markets. Also, the order intake in Kalmar has recovered, and this is coming almost solely from the Kalmar mobile equipment part, which is the more profitable part of the business. We did not receive any larger automation orders in Q4, but we clearly see the market activity picking up there as well as we move into 2021. The difficult market conditions in MacGregor were clearly visible in the low order intake in MacGregor throughout Q4. The order book actually grew from the previous quarter, and especially we entered 2021 with about 100 million higher order backlog in Hiab compared to one year ago.
We have seen the order backlog recovering in Kalmar and the order book mix is more favorable for us. The MacGregor difficult market conditions are visible in the MacGregor lower order book. When I look at the order book, that makes me quite confident about our opportunities to improve our operating margin in 2021. When we entered the 2020, about 50% of our order book was in the lower margin businesses in our Kalmar project and automation business and MacGregor. The same number now in our order book is 40%. 60% of our order book at the moment is coming from Hiab, a more profitable Kalmar mobile equipment business. The recovery continued in sales with the improvements in those areas, and comparable operating profit obviously also improved.
The comparable operating profit was affected by the fact that the low order intake in Hiab and Kalmar mobile equipment in Q2 and early part of the Q3 resulted obviously into lower deliveries and less favorable mix for us into Q4. This will somewhat still be visible in our Q1, but now the strong order recovery towards the end of the year will be then visible from the Q2 onwards in our books on that one. As said, very proud of the investments we have done in the services and software, and clearly they have shown their capabilities. The services remained at the high level. The strongest decline was in MacGregor. This is primarily coming from the decline in the dry docking activity due to the COVID crisis, and then obviously access for the vessels overall, which lowered our maintenance type of services in there.
Only slight decline in Kalmar and Hiab, primarily coming from lower value-added services such as installation and maintenance work. Our core services numbers remained at the solid level in all of our businesses, and the service gross profit actually improved in 2020 compared to 2019. The software sales remained roughly at the same level as last year, and services and software now represents 35% of our revenues. The investments we have done, and very clearly we see a stronger and stronger interest towards the eco-efficient production driven by regulation, customers' own sustainability strategies, and the outside pressure coming from our customers as well. Some of the examples of the eco solution deals that we reached last year was 20 hybrid shuttles for the Port of Virginia in U.S.A., fully electric medium forklift trucks for some of our key customers there.
We also launched a number of new products. We had a next-generation three-wheel drive truck-mounted forklift with lithium-ion batteries available for our customers. We also introduced a containerized charge port charging solution for our customers in ports and terminals that enables them to use more efficiently the electrified solutions. As we have said before, Kalmar's whole product portfolio will be available in electrified format during this year. The revenue on our eco solutions grew nearly 10% in 2020 and represents already 24% of our revenues. As said, we are well ahead of the plans at the moment. The interest clearly for this type of solution is higher than we have expected. We are already ahead of actually targets we have set initially for the next year. I will hand over to my colleague Mikko in a second, but overall, very solid performance in difficult conditions last year.
I'm very happy to see the resiliency of our services business. It's good to see the interest and the investments we have done in our eco solutions bearing fruit and the growth in the revenue in those product services and the very strong order intake in Q4, especially in our more profitable services, sets us very well for 2021. With that one, I hand over to Mikko.
Thank you, Mika. Good afternoon also from my side. Let's start with Kalmar, where we had a quite mixed environment concerning the customer activity. In the mobile equipment, like indicated by Mika, we had a very, very good demand. We had nice orders, for example, in applications which go to logistics terminals, as well as industrial applications. We announced also in quarter four a 400 terminal tractors order for a North American customer. On the other hand, the orders for larger cranes were very slow, and there we have a good pipeline. No orders were canceled, but the customer activity or investment activity has been unfortunately very slow. Due to this factor, also our order book has declined to EUR 842 million. However, looking at the quarter four order book, we already improved from the quarter three levels.
Quarter four sales declined by 13%, were EUR 411 million, the decline came actually from mobile equipment. Like Mika indicated earlier, this decline is very much attributable to the low quarter two, quarter three order intake, which is now visible in quarter four sales. The automation and project-related revenues were actually stable and benefited from the long delivery time of that kind of business. The services declined slightly. The service decline was actually very much coming from the maintenance and project type of services, which require physical presence, and that is now impacted by the COVID environment. The spare parts services were actually stable year on year. Kalmar profitability declined from EUR 44 million to EUR 28 million, this is coming from two drivers.
The first one is the sales decline, and the other one is then a more unfavorable sales mix, meaning that we had higher project revenues versus the higher margin smaller equipment revenues in quarter four. Like Hanna-Maria indicated earlier, we have advanced with the Navis divestment. Navis divestment is expected to complete during the first half. Now at the end of the year, we have also reported Navis as asset held for sale. Hiab had a particularly strong quarter in many aspects. Orders increased very nicely. We had a couple of military orders, roughly EUR 30 million in value in total. Like Mika already said, those orders are not yet contributing to great extent in quarter one sales, but more visible than in quarter two and later revenues. Now we start the year 2021 with approximately EUR 100 million higher order backlog in Hiab.
A good start for the year. In Hiab, very similarly like in Kalmar, revenues were impacted by the low orders in quarter two and quarter three, and that's now visible in quarter four sales. Services sales declined by 5%. Actually, within services, the spare parts revenues grew, and this service sales decline came from installations and accessories, which are very much linked to new equipment sales. Hiab's absolute profitability declined to EUR 41 million, but when we looked at relative profitability, that remained actually on last year's level. The absolute comparable operating profit decline came from revenue decline. The reason why we have been able to maintain the relative profitability stable is coming from the cost and productivity measures, what we have done throughout the year, as well as very successful activities in pricing as well as material cost management. In MacGregor, the difficult market situation continued.
That is very visible in the orders as well as in revenues. Orders declined in all three divisions, merchant, offshore, and services as well. Customers are still very much postponing their OpEx, and that's also visibility services. For example, dry dockings have been postponed until the future quarters. MacGregor sales decreased 5%. Actually, the offshore and merchant equipment revenues were stable and the sales decline came from services. The comparable operating profit is a kind of a bright spot in MacGregor, EUR 16 million year-on-year improvement in profitability. This is very much coming from the successful TTS integration and the related synergy benefits, as well as offshore business restructuring. We have had also good project execution, the projects have been proceeding according to the estimates. During 2020, MacGregor generated EUR 20 million cost savings compared to 2019 cost level.
For this year, we are targeting another EUR 13 million cost savings. Few highlights about our key financials. First Q4, despite the 14% sales decline, we were able to maintain the relative profitability on last year's level. This is very much thanks to the cost savings across the whole company in all organizations, as well as stable Hiab comparable operating profit and a significant improvement in MacGregor profitability. Looking at the full year results, orders down by 16%. In this total Cargotec orders, the largest decline in the orders was actually in the automation and project business, where I already earlier indicated that customers have been very slow in the investment decisions. The full year comparable operating profit margin declined by 1% unit.
The largest factor being the sales decline and also unfavorable business mix, more project revenues versus revenues coming from smaller equipment sales. Our items affecting comparability were EUR 133 million. The biggest items are related to the Chinese joint venture reorganization, MacGregor TTS integration and offshore restructuring. Those are the biggest items. We can be very satisfied with the cash flow development. Very strong cash flow in quarter four. This came to great extent from net working capital reduction. Of course, when the volumes decline also, the net working capital is expected to decline. We have done also productivity improvements in this area, meaning that our inventory turnovers as well as receivable turnovers have been improving significantly. The total cash flow for 2020 was EUR 297 million against 2019 when it was EUR 361 million.
Thanks to the good cash flow also, our financial position is very strong and also the liquidity position is very good. Our gearing was 52% at the end of the year, when excluding the IFRS 16, lease liability is 39%. Our target is to maintain the gearing below 50%, excluding the IFRS 16 lease liabilities. Total liquidity, EUR 935 million. This has improved by EUR 65 million compared to 2019. Looking our debt maturity profile, very balanced. During the next 12 months, we don't have any major debt repayments upcoming. Our dividend proposal to the annual general meeting is EUR 1.08 per B share. This represents approximately EUR 70 million in the total dividend payment. The dividend would be paid on 1st of April 2021, the dividend payout, excluding the EUR 133 million items affecting comparability, would be 78%.
Our outlook for 2021, we estimate the comparable operating profit for 2021 to improve from year 2020. It's also good to note that we are changing our comparable operating profit definition slightly from 1st of January 2021. It will be more in line with the comparable operating profit, how we have defined and published that in the prospectus. In the new comparable operating profit definition, we exclude the so-called purchase price amortization effects, and those were in 2020, EUR 24 million. We will publish the comparable quarterly 2020 numbers, restated numbers, latest March this year, so that you can have good comparison numbers.
With those words, I would then hand over back to Hanna -Maria for questions.
Thank you, Mikko, and thank you, Mika, for the presentation. Like I said, now there is a possibility to ask questions, so handing over to the operator.
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. Again, press star one to ask a question. We'll now pause for a moment to allow everyone a chance to signal for questions. We will now go ahead with our first question. Your line is now opened. Please go ahead.
Hi, Mika, Mikko, Hanna. Magnus with UBS. A couple of questions. First, I would like to dig a little bit deeper into the mix there with Kalmar. I think based on the order trends we have seen in the past couple of quarters, is it fair to say that we will have a still quite poor mix in Q1, and that it will reverse into the Q2 and then the back end of the year? To what extent do you think it can reverse? Can you reverse the full adverse impact that you saw in 2020?
Thank you for the question. You are absolutely right, that the mix was very unfavorable in Q4 due to the low order intake, especially in the mobile equipment throughout the Q2 and early parts of Q3. As I said, we only started to see the recovery happen in September onwards, it has been so very much the order increase that came through in Q4 was driven almost solely by the mobile equipment. Right now the backlog mix is quite different, but as we have communicated also in the past, it's about 6-12 months lead times for that type of equipment. That favorable mix impact will not be that visible yet in Q1, but will certainly be more favorable on Q2 onwards.
I have to say that we are very disappointed about our performance in the project and automation division as well throughout 2020, and we are making measures to make sure that that business will be more profitable in 2021 as a standalone basis as well.
Going into 2021, how does the mix look compared to when you went into 2019, for example?
As I said, on overall Cargotec level, if the MacGregor and the project and automation was about 50% of the order backlog at the beginning of 2020, it's now 40%. Quite a significant shift towards higher band mobile equipment. It now represents 60% of the overall backlog.
Okay, got it. Thank you so much. Secondly, could you help us put some color on the quite high one-offs in the quarter, what they're related to, and if there's any efficiency gains improvement related to those costs?
Mika, would you like to take that?
Yeah. The Q4 one-offs were related to basically productivity improvement programs where we expect to have positive cost impact in the coming quarters. Part of that was related to MacGregor, where I already indicated that we are looking after EUR 13 million cost savings. There were also productivity actions done in Hiab as well as in Kalmar, and those will be then visible in the coming quarters.
As we said earlier, we were moving from the temporary cost savings into the more structural cost savings. That then became very visible in Q4. Our head count is down by net amount about 1,000 persons compared to the beginning of the year. Furthermore, about 1,500 externals have been taken out. Overall, about 2,500 persons net head count effect on that one. That obviously then drives some of the restructuring cost as well in Q4. From temporary to more permanent cost savings and driving a better cost base for 2021.
We continue also with certain temporary measures. For example, traveling is very, very low at the moment.
Will those more permanent measures, will they net out one to one with the temp ones you had this year, or should we sort of perhaps traditional savings on top of what we already have seen?
I would say that those permanent ones will compensate to great extent the temporary ones. Not entirely, but to great extent.
Perfect. Thank you. If I can squeeze in one final one. On Hiab, could you give us some color on how the growth trend there across the regions in Q4 and how Q1 has started?
We saw a very strong order recovery in North America, but also in key European markets as well on that one. Maybe slightly more positive in U.S., but both markets showed a strong recovery on that one. Also both in Kalmar mobile equipment as well as in Hiab, we have seen actually that strong order intake continuing also in the early parts of this year.
Excellent. Thank you so much.
Thank you.
We will now take our next question. Your line is now open. Please go ahead.
Goodafternoon, that's Arsène from Credit Suisse. Thank you very much for taking my questions. My first question is about margins. Could you please help us quantify the negative mix impact in Kalmar in Q4, and maybe on the group level in 2020 overall? As the second part of this question, thinking about the 2021 EBIT bridge, could you maybe talk a little bit about the major moving parts, how you see mix, reversal of temporary cost savings, and cost inflation? That's my first question. Thank you.
Such a difficult question that I hand it over to Mikko.
Yeah. If I start with the Kalmar margin impact, I would say that if we exclude the negative mix and the Kalmar automation and project-related unsatisfactory performance, Kalmar comparable operating profit margin would have been on last year's level. We are talking about a couple of percentage points on quarterly level in Kalmar. What was the second question?
The bridge on the 21.
Yeah, the second question was, could you talk through the moving parts for 2021 EBIT bridge, cost inflation, reversal of temporary cost savings, FX, and I guess mix.
Yeah, quite many moving parts there. Of course, I don't have a crystal ball concerning the currency impact, but like I said earlier in the previous question, with these permanent cost savings, we are to a great extent compensating those temporary cost savings that we generated in 2020. Cost inflation or salary inflation, yes, there is a certain salary inflation, but that we aim also to compensate with productivity measures. All in all, I would say that one should look after a favorable cost development continuing next year if you compare that to 2020 level.
Okay. Thank you. My second question is on Hiab margins, just to check if there were any positive one-offs in the quarter, and how do you see sustainability of that 13.9% margin going into the future? Also specifically on FX, I think U.S. dollar has been going against your exposure for a number of quarters already. Should we expect any considerable negative transactional impacts on margins in Hiab this year?
Yeah. Thinking the higher quarter four margins, there were no one time type of items. It was purely operational performance and of course very much driven also by the good deliveries in quarter four. No one-off items there. Also, I would say that the currency impact in 2020 is non-negligible, so very, very small. In Hiab's business, like we have said also earlier, the U.S. dollar-euro development plays a certain role. Should the U.S. dollar weaken against euro in 2021, that would have an adverse impact on Hiab. Depending on the fluctuation, it can be a couple of millions of euros.
It's good to remember that out of the Hiab U.S. or North American revenues, about 40% of that revenue is created locally by local manufacturing and local services as well. About 60% is coming from the European manufacturing base, where we have hedges in place all the time. The impact of the dollar is probably not as large, a few million euro as Mikko was indicating. Overall, I have to say that it's been a good opportunity with the COVID crisis to show how much more resilient the Hiab business is these days compared to the previous crisis. Despite the fact that we lost 20% on top line, our relative operating profit margin was actually at the same level as it was one year ago. The Hiab business model, the investments in services and operational excellence are clearly paying off now.
This also gives us obviously a very good basis when we see a sort of stronger order intake now to take advantage of the situation moving into 2021 with the lower cost base.
Thank you very much. Last very quick question. On Hiab order intake in Q4, the above EUR 400 million, do you think there was some pent-up demand from maybe a Q2 weakness? That's largely underlying market demand, which you would be comfortable for us to extrapolate going forward.
It was an exceptionally good order intake. As Mikko said, a small part of that one was coming from military orders, but even if you clean out the military orders, that was still about EUR 380 million of orders. There potentially was some pent-up demand from the earlier part of the year. Our customer activities overall, we see it from the data and we hear it from our customers, is at the high level. The construction activity is at the high level. The e-commerce and generally the logistics are actually doing quite well across the board at the moment, and that's driving clearly the demand in that one. Many of our customers are actually, in Hiab case, have had a very good year in 2020 despite the COVID crisis.
The good orders came from all divisions, loader cranes, truck mounted forklifts, demountables services. Overall, good performance in quarter four.
There was some speculation on our side as well that we do price hikes now in Hiab starting off the 2021, whether the incoming pricing increases would have also driven the order intake. Actually looking at the orders now for the first five weeks of the year, we have seen the strong development to continue as well.
Thank you very much. That is very helpful. Thank you for the time.
Thank you.
We will now take our next question. Your line is now opened. Please go ahead.
Hi, it's Aurelio from Morgan Stanley. Thank you very much for taking my questions, Mikko and Mika. I guess my first question is around the margin potential of MacGregor, because we've obviously seen, as you mentioned, four quarters now in a row of sequential improvement, and I think it's two quarters now that you are back into profitability. My question is, after this EUR 13 million in extra savings, what can we expect in terms of margin development? Obviously, there's moving parts with the book is down that you're dealing with profits, plus you have the operating savings now. Just if you can help us to think about margins in MacGregor going forward, and also what could be in a blue sky -scenario, the margin targets for this division.
We expect the MacGregor to stay profitable or return to profitability to be precise, actually, return to profitability in 2021. The margin development is good. We have also seen improvements in our project margins when we have sort of cleaned up some of the poorer project margins we saw in 2019 especially. Against the improving cost base and improving margins. As we saw, the order intake, especially in Q4, was quite soft. At this stage, I think that what we see is that despite the fact that there is a risk of some of the revenue decline in 2021 against the trend, we should maintain the profitability full year for MacGregor.
Okay. That's super helpful. I guess if I look at the performance of your cash flow, especially in 4Q, you've done a very good job with inventories, especially. I guess a little bit of that reverses into 2021 as your sales ramp up again. Is that a fair assumption? As you mentioned, we have reached a new kind of inventory turnover level that you want to keep at.
Generally, if I look at our net working capital efficiency compared to other machinery companies, we usually fare quite well, and especially the improvement in the second half of this year has been very good for us, and we do plan to keep those ones. The current strong recovery in orders obviously will put a strain to the supply chain again. It's been quite a roller coaster ride in terms of our supply chain, with the strong decline in Q2, early parts of Q3, and now quite a recovery, and obviously we need to be able to manage that one then as well.
Yeah. Thank you very much. Maybe if I can just finally touch on that point a little bit on your supply chain. Are you seeing any kind of issues there in terms of sourcing components? A lot of inflation that you think you're not going to be able to pass on to your customers? Is that largely on track?
We have done a very good job in Hiab and both in Kalmar Mobile equipment in terms of pricing. We have sort of put quite a lot of effort in our pricing competencies, and those are yielding results. We have seen improving gross margins in our products coming from the sourcing saving and better pricing as well. It's interesting now to monitor the situation where we see a strong recovery. How will that then impact component availability and pricing when we move? In terms of the sourcing agreements, we are fairly well hedged to a very large extent already for the 2021 pricing and cost impact from that one. As I already indicated, we have, for example, done a fairly large extent of pricing increases in Hiab at now in the beginning of 2021 as well, which will be yielding better pricing for this year.
Great. That's super helpful. Thanks very much.
We will now take our next question. Your line is now opened. Please go ahead.
Thank you. This is Antti from Danske. Hi. First of all, I think Mikko said Navis is an asset held for sale. Did you still book Navis profits and sales into Kalmar?
Correct. Yes. Navis has been reported and will be reported more or less as normal in our business area and Cargotec results. In the balance sheet, we have separated it from our asset and liability notes as an asset for sale. You can see basically a separate note, if I remember correctly, 7.4 in our financial statements later with the Navis-related breakdowns.
Okay. Is the EBIT separated in that note, or do I need to ask that?
You need to ask that.
How much was Navis EBIT?
Navis had.
Okay
Navis had a good operating profit in quarter four and was actually improving from last year's quarter four.
You don't want to tell how much the EBIT was?
We don't disclose the kind of individual businesses' operating profits, only the business areas.
Okay. A broader topic on ship orders and MacGregor demand. We have been waiting for many years a turn in ship orders that hasn't materialized. Is there any change now when you look forward in terms of broader market recovery for MacGregor?
Well, if you start with the Clarksons estimate and it's anybody's decision how much to put the trust on those ones, they do indicate recovery on the markets in 2021. We do see increased activity, especially in the container ship space on that one with the number of interesting projects now or prospects in the line of sight on that one. On the traditional offshore market, we do not see a recovery, but then we, as I already indicated, do see a number of quite interesting projects in the offshore wind installation and service vessels as well. That market seems to be progressing quite well. Those would be the bright spots at the moment.
Okay. Finally on Kalmar and automation and projects business. Now that I think you said throughput is expected to recover by 8% this year. Would this mean that the ports would again start looking into bigger expansions? Or do they already have the capacity? How do you see on that picture?
There were capacity constraints, actually multiple ports in Q4, the container traffic is expected to grow as well. I actually see the largest driver for the container automation projects, not necessarily coming from capacity requirements, but from the cost pressures. The strong consolidation of the shipping lines has put increasing cost pressures for the terminal operators, and the automation is the single largest opportunity to actually run more efficient operations. Talking to customer, I think this will be the primary driver for the investment. Last year was obviously very disappointing with no major contracts. We clearly see that margin or that market sort of starting to recover, and the number of prospects is activating as well. I think the Konecranes Q4 order was a good example of the investment starting to come back in there.
It's still very difficult to estimate the actual timing of the orders. I'm absolutely confident that we will see a better market and some of the orders coming back during the 2021.
We have also not seen any deals disappearing from the sales funnel. Customers are actively working on this. Of course, these are very large investments for the customers. In this kind of environment, it's sometimes easier decision to postpone the decision than make the investment decision.
Yes. Now that you have divested the Chinese joint venture for manufacturing, how would this impact the margin going forward? Is it a positive or is it a negative compared to the past years for Kalmar?
It will be positive, but the kind of extracting ourselves from that one it was not a cost-free option for us. We knew that that's going to be a price to be paid on that one and developing an alternative supply chain that's happening at the moment. It did have a negative impact on our margins in 2020. Unfortunately, that was further enhanced by the fact that because of the COVID, the travel restrictions being there, we were actually, instead of using some of our own persons, we were forced to use local subcontractors in most of the project implementation. This was clearly a more costly option for us. The project margins were actually lower than expected on those areas. Very clearly the commitments in the automation also require an investment from us.
That combination of those ones resulted last year into disappointing results in our automation and project business. We clearly obviously see and are confident that we are able to recover that business by having now sort of building a new supply chain on that one and improving the project margins on that one as well. We will be recovering from that business. Last year was very painful for that business.
Would you finally say that building a new manufacturing value chain or supply chain is not limiting you from taking orders right now? Compared with Konecranes, for example, order intake grew more than for Kalmar. Could it be that this holds you back at the moment?
No, I think most of the orders we have seen coming through are now so-called repeat orders. That was the case in that one as well. It's really a question of the timing of the different customers planning for expansion of their current installation and installed base as well. It has no bearing on the supply chain. We are able to actually deliver from the existing and also from the new built supply chains. This actually the developing supply chain gives us more flexibility now going into the future to be able to actually then deliver from the multiple different locations, depending where the projects are executed. That had no bearing. It's just a question of the different timing from the customer decisions.
Okay. Thank you. That's all.
Just as a reminder, if you want to ask a question, please press star one on your keypad. We will now take our next question. Your line is now open. Please go ahead.
Yeah. Hi, it's Antti from SEB. First question is kind of regarding the supply chain and especially on kind of Hiab and Kalmar going into 2021. I'm sure you can push through input cost inflation via price increases, but if I take a look back few years ago, it was also about availability, which caused kind of the delays on the production side. Is there any risk that now we're seeing a lot of industries ramping up at the same time, and it's a bit of a messy supply chain overall globally. Are you preparing for some ways into potential supply concerns in the mid-year?
Yeah, it's a good question. Obviously we have taken the lessons learned from the 2017, 2018 situation. Obviously our operational capabilities and our quality in terms of managing that has improved. It certainly is a concern in terms of the overall supply chain capability to ramp up. I think from our own pure operations point of view, I think we set in a much stronger position than we were at that time.
You are not currently seeing any of this yet in your sourcing?
We are not seeing it yet. As I said, the recovery has been very strong at this stage, and that's something that certainly we will keep our eye on.
Okay. Secondly, if we look at the kind of temporary cost savings in 2020 and the divisional profitability, which units were the most benefited by the savings? Now when we move to more structural savings in 2021, would it be fair to assume that those are mainly on the project side, Kalmar, automation and MacGregor?
Yeah. Well, first of all, on MacGregor side, as we indicated, we expect the full year to be profitable on that one. The cost basis is lower moving into this year as well. We are confident on the improving profitability in MacGregor. We will improve our profitability in the project and automation as well. It was a very harsh year last year with the extra cost coming from multiple sources. The best opportunities I actually still see in Hiab and mobile equipment coming really from the increasing order backlog and the current demand situation. That's combined with the cost efficiency measures we have taken last year. It sets us in a very good position in 2021.
Okay. Is there any way to kind of quantify how the temp savings kind of were visible in 2020 profitabilities of different business units?
Well, from the temporary cost savings, we have said that the savings have been approximately EUR 10 million per month, starting from April onwards, and those were lasting until September, October. Also today, as we speak, we have still temporary cost savings in place which will continue until further notice. Like I said, very large portion of these temporary cost savings we have also converted into permanent cost savings, which will be then visible in our 2021 financial statements.
Okay. Lastly from me regarding kind of the eco-efficient sales, especially on Kalmar and rollout of the electric fleet or electric product offering. Are you having kind of a larger discussion with the same clients of introducing automation at the same time as well? Is it only about kind of buying certain individual electric vehicles? How does the discussions have went recently?
Excellent question. It does come up, actually, when you electrify, it's easier to automate as well. In certain product categories, especially, say, in the terminals, that option is there, and we are investing quite heavily to improve. We have first sort of trials going on in the smaller equipment, fully automated or partial automated smaller equipment that is also electrified. That's an interesting area. Certain segments are, because the operating environment is not particularly stable with a lot of moving parts that's not very realistic in the short time being. Certain sub-segments, certainly the automation comes up as a potential interest. I would say that we are now seeing already a strong sort of demand increase and interest increase toward electrified vehicles and more curiosity about automation in there where we have first customer trials running.
I think we will first see the uptake now as we have seen in electrified solution, and that most likely will be followed later on a bit the more automated solutions as well.
All right. Thanks. That's all from me.
Thank you.
We will now take our next question. Your line is now open. Please go ahead.
Thank you for taking my follow-up questions. That's Arsène from Credit Suisse. Just on Navis, could you maybe update us on where are you in the disposal process and whether there are any cut-off dates in the auction which you are running?
The interest on the Navis has been very high. We have a number of potential buying candidates that are now engaged on the discussions with Navis. As we have indicated earlier, we expect to close the deal during the first half of this year.
Thank you. With disposal of Navis, this is scope to reduce R&D spending as percent of revenue or you will require to step up R&D for electrification or any other product?
We are looking at stepping up the electrification and also the robotization or automation of smaller equipment. Obviously, the Navis R&D being software is particularly high. My sense would be that we will have, if you take Navis R&D cost out and then you look at the planned increases in other areas of R&D. Our overall R&D cost will go somewhat down in 2021, depending, of course, or if you would take the Navis out from the whole year.
Right. Thank you very much. My last question is around cash flow and working capital. Could you help us with what we should expect for working capital in 2021?
Well, if we look our kind of operative working capital, meaning inventories, receivables, minus advances and minus accounts payables, that has been in the range of 17%-18% of annual sales. It depends a bit on the business mix, what kind of increase, for example, we would see. If there would be a steep increase in services and some equipment business, that might require in the beginning certain additions in the net working capital. On the other hand, if we get, for example, automation or MacGregor automation and project orders with advanced payments or MacGregor orders with advanced payments, that would then decrease the net working capital. I would say that if you take our, let's say, last year's second half or the full year net working capital, kind of average it for the full year, that could be used as a rough proxy for the future.
As said, we have done—
Thank you very much.
productivity or process improvements in inventory management, in receivables management, that will contribute into future working capital development. There are certain businesses, like services, which require certain working capital. When that increases, then also the absolute working capital increases.
Thank you.
It appears that there are no further questions at this time. I'd like to turn the conference back to the speakers for any additional or closing remarks.
Thank you for great questions, thank you for good answers. Q1 report will be published on April 28th. Looking forward to see you then. Stay safe and healthy.
Thank you.
Thank you.