Good morning, ladies and gentlemen, and welcome to this news conference regarding Cargotec's Financial Statements Released 2018. 2018 was a strong year in terms of orders received and our strong order backlog gives a good starting point for 2019. However, the profit was below our targets. Today, our CEO, Mika Vehviläinen, will start with the group development. After that, our CFO, Mikko Puolakka, will continue with the business areas, financials, dividend, and the outlook. Mika, please.
Thank you, Hanna-Maria. Good morning from my behalf as well. Thank you for participating for Cargotec 2018 conference call. During 2018, we saw strong demand for our products and solutions, especially so in Hiab and in Kalmar. Unfortunately, we were not able to turn that strong demand fully into our targeted profitability, and this was especially so in Hiab, where we were sort of having and suffering partly from the weak U.S. dollar as well as some of the delivery issues and supply chain challenges in there. However, there are many positive things to take away from 2018. Obviously, we are very pleased with the strong demand, and it's clear that the investments we have done in R&D and product and services improvements are paying off in the demand we see for our products and solutions.
I'm also very pleased with the progress we are making in services at the moment. I will come back to that one as well. The software orders were strongly up during 2018. I'm also very happy with the progress we are making in port automation. We have signed up five new customers for port automation during 2018. Market on environment in Hiab and Kalmar continued to be positive during 2018. We saw relatively robust growth in container traffic by 4.7% during 2018. The market forecast for 2019 and the coming years still indicates more than 4% growth in container throughput in the coming years. The construction level activity has been in a good level, both in Europe as well as in U.S.
Although we see some of that growth somewhat slowing down, we still look at the good growth opportunities in construction activities both in Europe and U.S. also during 2019. As we know, the MacGregor market situation continues to be difficult, and we see orders at the historically low level. We saw some improvement happening in the merchant sector, but orders still remain at relatively low level. If you look at indicators such as the total fleet size and compare that to the current order book, we see historically low ratios on that one, and one would expect the market to start to recover with the replacement investments at one stage. There are no indicators of the growth returning soon in MacGregor environment. As said, I'm very pleased with the order intake.
18% growth happening in all business areas during 2018. The growth in Q4 was especially strong with 46% growth in MacGregor, although obviously from relatively low base. 24% growth in Hiab, strong demand happening, for example, in North America, and 22% continuing growth in Kalmar. Throughout the whole year, we saw 11% growth in MacGregor, 13% growth in Hiab, and 23% growth in Kalmar. This obviously leads to a very strong order backlog, 27% higher than year-ago or more than EUR 400 million stronger order backlog moving from 2018- 2019, giving us a good basis to improve our results further in 2019. As said, sales increased only by 3%, and we still experience some delivery challenges, especially so in Hiab during the Q4.
The operating profit during Q4 was on a solid level, EUR 73.5 million, primarily helped by the improvements in Kalmar, driven by a better delivery situation there. Very pleased with the progress we are making in services. Although the headline number, the reported services number, indicates only a 3% growth, if one looks a bit more in detail in Kalmar, adjusting for the weaker U.S dollar and the divestment, the core Kalmar services, including spare parts and maintenance, grew by 9% during 2018. Hiab also grew by 9% adjusted for the currencies, MacGregor services grew by 5%. The MacGregor growth came almost solely from the acquisition of Rapp Marine, the sort of adjusting for the emergence and acquisition, MacGregor services were flat during 2018.
As a result of that one, the total services grew by 6% on that one. Growth coming, as already said, from Kalmar and Hiab services and MacGregor services adjusted for the merger and acquisition. They're flat during 2018. We also saw very strong progress in services orders, 10%, and software orders, 33% growth in 2018. The software orders growth coming primarily from the growth in automation software orders. These numbers are not adjusted for FX. Underlying growth in constant currencies would have been even stronger than that one. We are well on the way at the moment for our targeted EUR 1.5 billion of revenues in services and software or roughly 40% of the total group revenues.
With that one, I'd like to hand over to my colleague, CFO Mikko Puolakka, who will cover the business area and some further financial data.
Thank you, Mika. Also good morning from my side. Let's start with Kalmar, where the strong order intake continued in quarter four. Orders were up by 22%. We got an automation deal in Belfast in Ireland. So far we have received then five automation deals now in 2018. Also, the demand for the mobile equipment, especially for the Terminal Tractors, remained very strong in the U.S. market. In Kalmar, the service orders also grew by 15%. Here the growth came mainly from upgrades and maintenance projects. Now Kalmar's order book is about EUR 1 billion. This of course offers a very good basis for 2019 revenues and profitability. Kalmar sales declined by 5%. If we exclude the divestments of the CVS Ferrari as well as the Kalmar Rough Terrain Crane and container handling businesses.
Divestments, the sales improved by 1%. Service sales grew by 5% with constant currencies eliminating the impact of divestment. After the kind of slowest start for 2018, Kalmar actually delivered record high operating profit for quarter four, EUR 51 billion. The high deliveries with very good mix as well as the cost improvement actions which we started in early part of 2018 were the main contributors for the 11.5% operating profit margin in quarter four. Moving to Hiab, where the orders have been about EUR 300 million in every quarter during 2018. Quarter four was very high, EUR 357 million, 24% growth year-on-year. If we exclude the Effer acquisition, orders grew 17% organically.
Effer has been consolidated into our results from the end of November. We have had very good development in Hiab in all product lines and in our main markets in the U.S. as well as in Europe. Service orders were up by 11% and like in Kalmar also Hiab starts with a very good backlog for 2019. Despite the challenges in our supply chain, we were able to improve sales by 13%, and if we exclude Effer acquisition, the quarter four sales growth was 8%. Services sales grew by 10%, and this is mostly coming from organic growth. The profitability declined by EUR 5 million and was EUR 34.9 million for quarter four, and this is very much driven by the supply chain issues. Component shortages leading to higher costs and then unfavorable product mix.
The supply chain issues are mainly related to components, but also to a certain extent to labor availability as well as installation capacity availability. We see gradual improvement in this area. We expect that these kind of issues continue still to prevail during the first half of 2019. Moving to MacGregor, where despite the lower market, actually our book-to-bill for quarter four was above one. Of course, MacGregor orders can be lumpy, so the quarterly order fluctuations can be there. We got very nice orders in the cruise and cargo vessel area, also in the offshore, and also the service orders grew a respectively high number 19% in quarter four.
Sales grew by 5%. If we exclude the Rappack acquisition in the early part of 2018, the sales growth was more or less flat in MacGregor. Quarter four operating profit was EUR -3 million . This is coming very much from the low capacity utilization in certain product areas. For example, RoRo division, where we have had fairly low orders in the early part of year. The orders were improving towards the end of the year. MacGregor full year operating profit is at break even, EUR +100,000 . We have completed the EUR 13 million savings program in MacGregor, have started with additional actions in order to make sure that the profitability remains in black numbers also going forward. A few words about our cost savings programs.
The EUR 50 million program, company-wide program, which we started in 2017, is progressing according to the plans. We have so far delivered EUR 21 million savings from this program, mainly from the indirect procurement savings. As mentioned earlier, the EUR 13 million MacGregor savings program has been fully completed, and the EUR 13 million cost savings are in our books for 2018. In Kalmar, the production transfer from Sweden to Poland has been completed in the early part of the year. Targeted savings were EUR 13 million this year or in 2018 we achieved EUR 8 million savings. The deviation is coming from the supply chain issues. Missing components have led to higher costs.
We are confident that once we have sorted out the supply chain issues, we can reach the EUR 13 million annual savings also here. According to our strategy, we of course then continue also with other productivity improvement actions in business areas as well as in functions. Few words about the total company financials. The full year orders, almost EUR 3.8 billion, 18% growth. Almost EUR 2 billion order backlog. As Mika referred already earlier, we expect to deliver roughly 80% of this backlog now in 2019. Operating profit, EUR 243.8 million. Our restructuring costs were EUR 54 million.
Here the largest item was the non-cash EUR 30 million right, kind of, revaluation of the Rainbow Heavy Industries share ownership. Earnings per share EUR 1.66 per share, and excluding the restructuring costs, EUR 2.35. Short summary about 2017- 2018 profit bridge. We start from Kalmar improved profitability by EUR 10.5 million. Sales were slightly higher. However, the main improvement came from the cost and productivity improvement actions which we have done continuously throughout 2018. The biggest gap or deviation is coming from Hiab, almost EUR 23 million lower profitability compared to 2017.
The main driver here is the weakness in U.S. dollar against euro. This is contributing roughly EUR 20 million to this EUR 23 million deviation. The rest is coming from higher costs due to the supply chain challenges as well as unfavorable product mix due to the same reason. In MacGregor, the profitability was almost EUR 11 million lower. We have been cutting costs by EUR 13 million, but this is not entirely compensating the 6% sales decline. Our cash flow improved towards quarter four. Quarter four was EUR 86 million, and the full year, EUR 128 million.
The biggest improvement here is or kind of impact is coming here from the supply chain related issues, especially growth in working capital. Our inventories are now higher because of the missing components and delayed deliveries. Also in MacGregor, the advanced payments have been decreased quite significantly. If you look the total company, our advanced payments are down by EUR 34 million, primarily in MacGregor. Return on capital employed was 8% for 2018. This is down from last year's 9.6%. Here, the biggest impact is again coming from the restructuring costs. Excluding the EUR 54 million restructuring costs, the ROCE would have been 10%.
Cargotec's Board of Directors is proposing a dividend of EUR 1.1 per B-share for 2018. This is a 66% dividend payout ratio and roughly 4.1% dividend yield. Dividend would be paid in two parts, the first part in March and the second part in October. This would be the fifth consecutive year when we would have been growing the dividend. Outlook for 2019. For 2019, we expect that Cargotec's operating profit or comparable operating profit improves from 2018, in 2018 it was EUR 242.1 million.
We also introduced, from first of January a new alternative performance measure, the comparable operating profit. In this comparable operating profit, we exclude the restructuring costs like we have done also in the past. In addition to that, other significant items which may impact the comparability of our results between periods. These kind of items could be, for example, acquisition related costs. With those words, I would then hand over back to Hanna-Maria for the Q&A.
Thank you, Mikko. Thank you, Mika. There is a possibility to ask questions. We will start with the potential questions from Ruoholahti. Are there any questions here? If not, we will continue with the international questions. If you would like to ask a question, please signal by pressing star one on your telephone keypad. That's star one to ask a question. We can now take our first question from Leo Carrington from Credit Suisse. Please go ahead.
Good morning. Thank you for taking my question. In terms of the supply chain issue, please can you answer what changed to lead to December's profit warning? How these issues have evolved during the quarter and why you think this has been such a stubborn issue? Also I wonder, can we interpret that your slightly better result versus expectations from December imply a slight improvement?
Thank you for your question, Leo, and good morning. The situation evolved such that we knew that we had a considerable challenge in Q4, meeting the delivery forecast we had originally set for that one. Whilst in Kalmar side, as you can see from the numbers, we started to have the better delivery situation, although we still have room for improvement there, missing still some key components. The situation in Hiab especially continued to be difficult, and it became quite obvious as, after the November that the uphill was too steep for us to reach the deliveries, especially in Hiab side. That then led to the change in the profit guidance in December. The situation has not markedly changed from that one. Kalmar situation is somewhat better.
We can see that. What of course helps Kalmar is that we deliver complete equipment or vehicles from there. Whereas in Hiab side, we are not only restrained by our own supply situations and some of the labor availability issues we have in our factories, but also by the downstream, where obviously, most of the Hiab products are components, so you also need to have the truck available. As you probably well know, the industry is also suffering from the availability of the trucks, and the installation capacity continues to be the issue there as well. Those are both contributing for a more difficult situation in Hiab compared to the Kalmar as well. We expect that situation to gradually improve now in the first half, but obviously we are not out of the situation.
Some of those challenges will continue in the first half of 2019.
Okay. Thank you. That's very helpful. If I may ask a second, the group's adjusted central cost line has been coming down since 2016 and 2017. Do you see the 2018's EUR 34 million of central Adjusted EBIT as a level that can be sustained in the future?
Thanks for the question. I would say, it has been around this kind of EUR 35 million-EUR 40 million. It depends a bit on the development programs which we have, but approximately EUR 35 million would be a kind of good proxy for that.
Okay. Thank you very much.
We can now take our next question from Johan Eliason from Kepler Cheuvreux. Please go ahead.
Hi, this is Johan here. Just a question on currencies. You mentioned in the Hiab that you had a EUR 20 million headwind. Was this in any way related to receivables revaluation because of currency changes, or was this the underlying impact on the from the net cash flows? Secondly on that, at current rates, what do you foresee for currencies in 2019? Is it a headwind of similar size, or has it turned into tailwind? Thirdly, Mika, I think you said when we met in December that you had taken six automation orders, and now you talk about five new automation customers. Is it just that one of the orders were with an existing client or what's the difference here? Thank you.
If I start. Basically the currency impact is coming from the transaction impact, so it's not about revaluating or valuating the receivables. It's very much, very much as we are delivering products from Europe to U.S., where basically we have the cost base in EUR and the sales price in U.S. dollar. We of course hedge the backlog and the orders what we have in, but some of these hedges have been done in the early part of the year, and we have been delivering those products in the latter part of the year. Actually despite the improved or strengthened U.S. dollar towards the end of the year, we have still some deliveries which were hedged with fairly low U.S. dollar rate.
What comes to 2019, I wish I would have the crystal ball of course, if we would assume that the U.S. dollar euro would be on this kind of level, I would not expect too much kind of headwind nor also tailwind for 2019. If the U.S. dollar euro remains on this kind of level, we should see at least less negative impact than in 2018. Regarding the automation question, you do have a good memory on that one. I have to confess that I think I got a little bit ahead of myself because the last order that I mentioned, the sixth one, actually we only booked that now during the Q1 order intake. I think some of the paperwork still took a while to process.
By end of January, we had six orders. Five of them landed officially on 2018. All of them are new customers for us.
Excellent. How does the pipeline look for automation orders? Are there another five, six to come this year, you think?
It's always hard to predict on the customer investment behaviors. I think, if you look at what we said about the market environment, we still see primarily deals to be phased deals where the original initial investments are lower as customers go around the automation on the phased investments areas. I would say the pipeline is still there, and the activity level around automation is relatively good. Always very hard to predict the actual sort of, timing of the deals and obviously, whether you win them or somebody else will.
It seems like Konecranes won a significant deal in Israel. Were there any specific reasons why they took the deal and you didn't get it?
That one has to ask from customers. Overall, I think it's also a good indication that the automation market is active at the moment and overall the market is now progressing.
Okay. Finally, any update on TTS or are we still waiting for the Chinese approval Q1?
We are still expecting the Chinese approval on Q1. Based on the understanding I have in the discussions, I think we are fairly confident on getting that approval during the Q1.
Okay, thanks.
We'll now take our next question from Mikael Doepel from Nordea. Please go ahead.
Good morning. It's Mikael Doepel from Nordea. My first question would be on the supply chain impact in 2018. Would you be able to quantify that in terms of sales and EBIT?
It's a fairly significant amount and probably more than we expected early part of the year. It's sort of, especially if I look at the Hiab, it's almost you would say partly a sort of vicious cycle in a sense that What happened when the delivery times got extended is that the dollar impact was higher than we probably expected early part of the year because we were still shipping equipment that we had booked on the early part of the year with the lower dollar rates. The impact on the U.S. dollar was still visible in the Q4.
The other issue that came as a result of the extended delivery times of course is that the price increases that we have now pushed through in our pricing list, et cetera, of course, are only becoming effective with the newer equipment deliveries as well. There, there was a delay in the pricing realization as well coming from that one. Then there obviously were direct costs associated with extra labor, logistics, et cetera, resulting into the availability of the components. It's very difficult to put a precise number, but I would say that it's clearly probably in the neighborhood of EUR 10 million-EUR 20 million in Hiab's case, directly impacting the results. The currency itself was another EUR 20 million, as Mikko already said.
I would say in Hiab's case, closer to EUR 20 million than EUR 10 million, the sales impact.
That's EUR 20 million loss in sales or EUR 20 million loss in EBIT?
EUR 20 million in sales.
Okay. If you look at the group level, I mean, you had a guidance of EBIT to improve or was it to be stable, compared to the previous year level, then we ended lower. Is it fair to say that kind of all of that difference is just due to the supply chain issues, or was there something else included in that difference as well?
Well, I would say that if you go through that by business area compared to our assumptions in the late 2017, obviously MacGregor landed lower than we expected. One needs to remember that the market expectation was a bit more optimistic at the late 2017, early 2018. We saw actually ship order improvements in the Q1 and partly in Q2, but then the market sort of slowed down again. Obviously we missed our targets in MacGregor by about EUR 10 million, as you can see from the changes in, in there. Kalmar was pretty much according to our assumptions. They had a very good recovery in the second half of the year.
Biggest miss came clearly from Hiab, which was a combination of the currency being the biggest contributor. Even against our assumptions, the currency impact was higher than we anticipated in 2018, the delivery issues impact coming from multiple areas that I already described was probably the single biggest contributor. Even though the delivery situations started to improve towards the end of the year, they did not improve enough for us to recover from the position we found ourselves in the sort of middle part of the year.
Okay. A question on the backlogs. I mean, you now provide or you say that the backlog is up 70%- 27% year-over-year, you also provide us that around 80% of the backlog will be delivered this year. How does that compare to the situation at the end of or at the start of 2018? What was the delivery
80%. It was also 80% the previous year. That hasn't changed. Overall, I'd say that the backlog is of good quality at the moment, especially in the Kalmar and Hiab side.
Okay. Then the final question in terms of the backlog margins, do you see any difference in that compared to the starting point at start of 2018?
No, it's a good quality backlog. If you look at the growth in orders in Kalmar, obviously, we saw strong growth in automation orders, but we also saw a strong growth in the mobile equipment part as well, which is a good quality business for us. Both of them increased roughly at the same amount, actually. It's coming from both. In Hiab's case, the delivery mix towards the end of the year was actually not favorable for us. And we were able to deliver more on the lower margin equipment. That means that in a way you could say that the backlog in Hiab is probably better than it was at the same time previous year.
Thank you.
As a reminder, if you would like to ask a question, please press star one. We can now take our next question from Magnus Kruber from UBS. Please go ahead.
Hi. Good morning, Magnus here with UBS. Could you give us some color on the targeted savings from your group-wide to 2020 savings program to come in 2019?
Basically, when we started this program, in 2017, we outlined that out of this total EUR 50 million, roughly EUR 30 million is coming from the indirect procurement savings. Out of this EUR 30 million, we have now generated during these last two years, EUR 21 million. We expect approximately EUR 10 million from the indirect procurement savings still to come in 2019. The other part is related to the consolidation of the back office activities to our service center. We said also in 2017 that the savings from that will materialize more towards the end of the savings period, i.e., starting from 2020 onwards. I don't expect from the back office consolidation yet major savings in 2019.
mostly the savings for 2019 are coming from the indirect procurement savings, approximately EUR 10 million.
Brilliant. Thank you much, Mikko. Also continued very solid demand in Hiab in the quarter. Could you give us some color on what product groups driving this? Is any particular one sticking out or is it more broad-based?
Actually, it's very broad-based. All product groups grew in orders. There were no significant differences between the orders. Geographically, U.S. was obviously particularly strong in Q4. We saw again growth also in EMEA.
Brilliant. Thank you so much. That, that's all for me. Thank you.
We can now take our next question from Antti Suttelin.
Yeah.
Danske Bank.
Yes. Hi, this is Antti. I would like to hear your thoughts really on the automation at Kalmar and the competitive landscape there. Do you think there is any difference between the suppliers offering automated port solutions yourself, then Konecranes, then the Chinese one and the other guys? Are they all offering the same, or are there any significant differences between the offerings in these companies, please?
I would say so that at this stage you have two companies, ourselves and Konecranes, who have a fairly wide range system capabilities. Obviously, we are strong believers that all our automation technology proven by those six deals that we have now got is the best in the market at the moment. We have invested significantly on that one for years to come. The complex automation cases tend to land with us. The Chinese are a formidable competition. They have a very competitive hardware offering, if I say so, and they rely then on the external parties today to provide the automation technology for them. It's no secret that I'm sure that the Chinese competition will also be developing their automation software capabilities further on that one.
I would say that probably in the longer run, you will see sort of three companies offering automation systems ourselves, ZPMC and Konecranes. You have, of course, automation project capabilities coming especially from ABB, which is an other, but they obviously then need to partner with the equipment providers.
Yes.
The key issue I think at this stage is not so much necessarily the competitive landscape, but, at the market projections and how fast automation penetration will happen.
Sure. Interesting. Who are the companies that supply software, for example, to the Chinese equipment makers?
In our case, for example, Navis, which offers the sort of fully automated terminal operating system and the only commercial product in market, we also partner with the Chinese in terms of the Chinese automation cases in China are utilizing Navis software in their automation projects. You have a number of smaller Asian as well as the sort of Western software companies that have point solutions for particular needs and particular parts of the automation.
Okay. Then to Mikko, just that I understand the cost-cutting program. When you say that EUR 21 million savings were generated, what do you mean? Is this the cost base change 2018 versus 2017, or is this a run rate at the end of 2018?
It is basically comparing the costs to end of 2016 cost level. Basically, EUR 21 million lower, for example, logistics costs, some traveling costs have been reduced, office related costs, and so on and so on. This is coming from different kind of categories, but overall, EUR 21 million lower costs compared to 2016. Partially helping, for example, MacGregor and the other VAs also to offset some of these supply chain or volume related issues, but not fully compensating, for example, in MacGregor's case.
Yeah. Okay. That's, that's clear. That's all. Thank you.
Again, if you would like to ask a question, please press star one. We can now take our next question from Antti Kansanen from SEB. Please go ahead.
Hi. It's Antti Kansanen from SEB. Thanks for taking my question. Regarding Hiab and the unfavorable business mix, was this caused by the kind of the supply chain issues? Should we expect this kind of continue throughout the first half of this year as you are working your way to improve the supply chain? Kind of the mix improvement would be more in the latter part of the year, or will there be a reversal effect already in the first half of the year? Just trying to understand how the profitability in the division would trend during the year.
Things will obviously not change dramatically from the 1st of January onwards, but we are expecting a gradual improvement. I think you will see a gradual improvement start to happen from the early part of the year towards the summer in these cases. Hopefully by the second half we are in a much better shape on this area. Gradual improvement throughout the first half.
All right. What was the mix, what was the product or the product groups that you delivered less on Q4 compared to less profitable products?
If I would take one example on that one is the one of the major, so the bottleneck for us has been the Stargard, Polish facility, which is manufacturing Loader Cranes, where we have suffered both from the lack of key components such as hydraulic cylinders and also some labor shortages with the Polish labor market being relatively hot at the moment. Those have contributed. The other issue with Loader Cranes, of course, is the installation capacity. Also the downstream challenges are probably most visible, especially in that area, with the installation capacity and truck availability also impacting that one. That's probably the single biggest contributor into the lower mixed order intake on that product category has been very, very strong, but we have not been able to, unfortunately, fulfill the requirements there.
All right. Thank you. The second question regarding Navis. How is the competitive landscape? Are you just mainly winning against in-house systems? Would you kind of would it be good to have a more commercial solutions in the market to kind of drive the market towards away from in-house system to more commercial terminal operating systems, or would an increased competition in the commercial side actually be a negative for Navis going forward?
The key issue for Navis and the main competitor for Navis very clearly is the in-house system. Roughly half of the market is commercial today. As I think the commercial is now getting over the half, and Navis' market share is extremely strong on that side. The key issue for us is to convince the main larger operators to actually to convert into commercial platforms rather than in-house development. We saw a good example of that one last year when COSCO is converting now their systems and standardizing on the Navis software. They are working through this one. I think we have seen the similar development in other industries, where gradually the in-house development will be replaced by commercial off-the-shelf software programs.
these are long, long-term projects and very difficult decisions for the main operators to do.
All right. Very clear. That's all from me. Thanks.
Next question comes from Klas Bergelind at ABG Sundal Collier. Please go ahead.
Good morning. Thanks for taking my question. I have a question, concerning Kalmar and deliveries during the quarter. If we exclude the structural effects and just look at organic growth, it seems to be
Perhaps or flattish. I was just wondering, are you seeing any delivery issues there? Do you expect these to sort of pick up given your strong backlog?
We certainly saw still delivery issues in Kalmar, and we are experiencing delivery issues in Kalmar as well. The strong demand, of course, is putting further challenges on that one. I would say that the one big benefit, of course, in Kalmar compared to Hiab is that once you have the equipment ready and sort of the downstream is fairly straightforward because you can ship a complete vehicle into the customer so you don't experience similar bottlenecks in the downstream as in Hiab. We still suffer from some of the components availabilities there as well. We've been able to push through the deliveries better in the Kalmar side than we have been able to do in Hiab side during the Q4.
The order backlog also in mobile equipment has clearly been growing and in certain product categories, we are actually fully booked in terms of production capacity all the way through the summer.
Okay, good to know. We talked about this a lot now, but, do you think that the bottleneck issues in Kalmar will be more quickly addressed compared to those in Hiab?
I would say that more likely so as the indication in Q4 already. As I said, the biggest difference is the more straightforward downstream on that one. Obviously also I would say the Kalmar production situation is somewhat better than Hiab, but there are still similar issues in both of them.
Okay, good to know. Then just a final one. What's your view in terms of networking capital going forward? Do you still expect to see that inventories will increase, sorry, or if, of course, this is mostly related to stocking and things like that, but do you think that you will be able to lower your networking capital going forward?
Of course, part of our networking capital development is related to the volume as such. As also mentioned in the presentation, we have some five to 10 days higher inventories compared to kind of normal situation. If you calculate from our top line, five to 10 days means EUR 50 million-EUR 100 million even in the working capital. Definitely as we can remove these supply chain related bottlenecks, we would expect also that, for example, the inventory days could improve. The other question is that how the overall volume would develop going forward. Definitely we target to improve the working capital days as removing the supply chain issues.
Okay, thank you very much.
We'll now take our next question. Magnus Kruber from UBS, please go ahead.
Hi, Magnus here. Just two other little bit broad, broader questions. From your Kalmar customers, do you hear that the vessel deployment strategies for the three alliances are changing even now, two years after the formation of the alliances?
I haven't heard specifically, but I think the one thing clearly that has happened and, and confirmed by our customers with a stronger consolidation, both M&A and these alliances, is that the balance of power between the shipping lines and ports, I think in a, kind of first time in history, is now more favorable towards the shipping lines where they're able to now exert pricing power towards the terminal operators. I think in the long run, this is a good news for us because that will drive further efficiency requirements from the terminal operators and that will then drive the demand for investments for automation and other efficiency measures and services from us as well.
Okay. Got it. Thank you. Also, I mean, we have seen, many of the global truck companies making sizable cuts to the backlog from speculative orders, notably in the U.S. Is that something you could suffer on from as well? Or what kind of down payment does the customer have to make when they place an order with you for a crane, for example?
Yeah, it's something that we certainly keep an eye on at the moment then because of the longer lead times, et cetera. At this stage, for example, in U.S., when I look at our mobile equipment and other inventories, our distributor or, sort of, distribution stocks are actually record low at the moment. Very clearly there's a strong underlying demand driving the development. Something to be watched, of course, all the time and see how that develops.
All right. Thank you so much.
We'll now take our next question. Please state your name before posing your question.
Hi, it's Erkki from Inderes. About the profit guidance, I mean, considering that you start the year with 27% higher order backlog, 80% to be delivered in 2019 like last year, giving you EUR 340 million head start versus 2018. Is there any reason why your 2019 sales would not be clearly up year-on-year? If there is no reason, this would make the profit guidance a little modest considering all the challenges that you had last year that you have at least partly overcome.
When I look at the 2019, obviously we expect improvement coming from both higher than Kalmar. We still expect the MacGregor market situation to remain difficult.
Obviously we will then have the TTS and acquisition and closing coming in. We would need to come back to that one once we have more clarity on that one. The main profitability driver obviously are higher than Kalmar. That's really a factor of the, as you said yourself, order backlog, improving delivery capabilities, the U.S. dollar/euro, if that stays roughly on that level, it will be neutral for this year. Then we have a number of these efficiency and productivity programs coming out as well that should help us in driving the profitability in 2019.
Yes, how Is some sales improvement more or less required in order to reach the EBIT improvement?
Sorry, Erkki, you were breaking up in the beginning of the question. Would you mind repeating that?
Is sales improvement a prerequisite for EBIT improvement this year?
I think it, the profit improvement will come from all of those components.
Fair enough. Thank you.
There are no further questions on the line at this time. I would now like to turn the call back to the host.
Thank you. Thank you for the good questions and good answers. We will publish our Q1 report on April 25th. See you then. Thank you.