Good afternoon, ladies and gentlemen, and welcome to this news conference regarding Cargotec's half-year 2019 financial results. In Q2, we saw good progress in Kalmar and Hiab, but the quarter was difficult in MacGregor. Today, our CEO, Mika Vehviläinen, will start with the group highlights. Then, our CFO, Mikko Puolakka, will continue with the business areas and the financials and outlook. After the presentation, there is a possibility to ask questions. Time to start, Mika Vehviläinen.
Thank you, Hanna-Maria, and good afternoon, and welcome from my behalf as well to the Cargotec 2019 Q2 conference call. In Q2 2019, we saw our comparable operating profit increase by 12% to EUR 64 million. We saw the good momentum in orders received continuing in Hiab, and we see market softness in MacGregor business reflected in decline in order intake. The Q2 2018 was a very strong quarter for Kalmar and obviously a very challenging comparison point, and we saw 24% decline in Kalmar orders compared to one year ago. However, we still see the pipeline and prospects in Kalmar port investments to be in a very solid level, and I think this is more a reflection of the lumpiness of the business and timing of the orders. I said the comparable operating profit increased by 12%.
We saw very strong good improvement happening in Kalmar operating profit, and Hiab actually had a record high operating profit by more than EUR 50 million. MacGregor result and performance was obviously a disappointment from our point of view. We are addressing the issues, and Mikko Puolakka will cover more details about the root causes for the losses in his presentation. We also saw a very important milestone passed this week with the Chinese competitive authority approval for the TTS acquisition that will now enable us to close the deal. This is a very good deal for us. The strategic rationale is very strong. With the combined installed base, this enables us to drive further growth in services with the good MacGregor services operations, leveraging now those operations into the TTS installed base as well.
This deal will also enable us to have a much stronger strategic position in a very important Chinese shipbuilding market with the TTS joint ventures with the largest Chinese shipbuilding companies. Obviously, the overlap of the operations, this will also enable us to drive synergies, which we estimate to be around EUR 25 million-EUR 30 million on an annual basis within the three years. We are obviously aware that the market situation in marine at the moment is very difficult. However, this combination obviously enables us to address those headwinds much better than standalone entities. As a part of the Chinese competitive authority approvals, there are certain remedies attached to that one.
The two main ones are related to, first of all, the need to hold certain MacGregor new equipment business separate from the TTS joint venture for the period of two years. Then, there are certain temporary requirements related to terms and conditions in new equipment business in China. I do not see the second one to be material in any way as the market conditions ultimately set the terms and conditions. The practical implication of the first remedy is the fact that the potential synergies related to combining the MacGregor new equipment business in China with the Chinese TTS joint ventures will delay those related synergies for the first two years, but ultimately will not affect the total synergy potential.
We now expect to close the deal on 31st of July. Obviously from 1st of August, we will start the integration and joint business development with the TTS organization. Related to the market conditions, the growth continued in global container throughput, and we expect that growth to continue also within the second half of this year. Overall, we still see the pipeline import investments on a very solid level, and we expect further automation with the phased smaller investments continuing. However, we do not expect any larger single automation deals within this year. In Hiab business, the construction indicators stayed at a good level, both in the U.S. as well as in most of the Europe, with limited few soft spots in the European market, and that's obviously reflected in the good order development continuing in Hiab business.
However, in MacGregor business compared to Q1, we clearly see more softening market. We now expect the total ship order quantity to actually decline from 2018, delaying the market recovery by another year in MacGregor. As said, overall orders declined, however, good progress continued in Hiab. In Kalmar, as I said, this is a more timing question. On year-to-date orders, Kalmar is still up from last year, which was already on its own a strong year. The difficult market conditions in MacGregor obviously also related and reflected in the MacGregor order intake. Order book is however still 16% up year-on-year. Order book is of good quality. We also are in actually exceptional situation that we have pretty much have a full year order coverage in almost all of our product lines for the remaining of the year.
Thanks to the strong order intake we have seen in last 12 months an improving supply chain situation, we saw sales increase of 12%. That's obviously driving then improvement in operational profit as well. Related to the supply chain situation, we see continuous improvement taking place, but we are not out of the woods yet. We still experience certain component shortages, especially in hydraulic area, but we see gradual improvement continuing both in Hiab and in Kalmar business. We are especially pleased that the good progress in our services and software business is continuing. In Kalmar, we saw 6% growth in services, with the comparable effects and adjusted for the M&A we have done in the business, and a strong 14% growth in Hiab services business.
The soft market condition was reflected in MacGregor with a 1% decline after a couple of quarters of actually increases in MacGregor services business as well. Total services increased despite the difficult MacGregor situation by 6%, adjusted for the FX and acquisitions and divestments. Also, strong sales growth continued in software, primarily driven by the growth in automation software. Overall, the services and software is 33% of our revenue, and on a rolling 12 months basis, our services and software revenue is now EUR 1.2 billion, and we are well on the way of the EUR 1.5 billion target we have set for ourselves. With that one, I'd like to hand over to our CFO, Mikko Puolakka, who will cover the business areas more in detail. Mikko Puolakka , please.
Thank you, Mika Vehviläinen, and also good afternoon from my side. Let's start with Kalmar, where we had very strong profit growth in the second quarter. Orders, like Mika Vehviläinen mentioned, declined 24%, but one should note that in Kalmar business, we have certain lumpiness in the orders, and the quarters are not like sisters and brothers when comparing to each other. In the comparison period, when we are looking the orders, we had EUR 80 million Qube Moorebank order in quarter two 2018. Also, we had in last year's quarter two, fairly high mobile equipment orders. Overall, we would characterize that Kalmar sales funnel, as we speak today, is solid, so good progress in this area.
The order book in Kalmar is just above EUR 1.1 billion, and this offers, of course, a very good basis for the rest of the year revenues and also for the beginning of next year. Sales were up by 10% year-on-year, EUR 427 million for the second quarter. This is very much driven by the good order intake in the past quarters, especially in the mobile equipment area. Services sales increased by 10% for the quarter, as well as for the year-to-date when comparing with comparable exchange rates, as well as when excluding the divestments. The service growth is very much in line with our long-term growth targets. Operating profit for the quarter was almost EUR 38 million, 49% year-on-year improvement. After six months, Kalmar operating profit is 30% higher than year ago.
The profitability improvement in the second quarter came very much from the sales growth, as well as keeping the fixed costs on previous year's level. Then, moving to Hiab, where basically all our financial indicators were very green during the second quarter. Orders were EUR 340 million, 13% year-on-year growth. We saw solid growth in both main markets, Americas as well as EMEA. The growth in orders came especially from truck-mounted forklifts, loader cranes, demountables, as well as from services. We announced also earlier today a very large truck-mounted forklift order. We made the deal in the second quarter, total EUR 60 million, and EUR 31 million of this order has been booked in the second quarter, and then EUR 29 million will be booked in the third quarter. Hiab sales grew by 22% and were EUR 358 million in the second quarter.
Excluding the Effer acquisition, which took place end of last year, the Hiab sales growth would be 14%. Like Mika Vehviläinen said, also the supply situation has been gradually improving or continuously improving in Hiab. Like I said, we see still potential to improve in certain areas there. We had excellent service sales growth, +14% year-over-year, coming both from North America as well as from Europe. The acquisitions did not have any major impact on service sales growth. Operating profit, record high almost EUR 51 million for the quarter, +29% improvement compared to last year. The profitability improvement is very much coming from the good improvement in sales. Moving to MacGregor, where the performance was unfortunately very weak. Market recovery, like Mika Vehviläinen said, has been postponed. The orders were down by 11%.
Customers are very much spending the available funds, for example, to comply with the sulfur emission regulations, so very low investments for the new build ships. Especially the cargo handling and offshore orders declined in the second quarter. We saw growth in RoRo orders, even though the comparison point was also fairly low in last year's quarter two. A positive thing was that despite the difficult market situation, the service orders grew actually nicely and were 19% up from last year's level. MacGregor sales declined by 5% and operating profit was EUR -11 million . There were a couple of reasons driving this weak financial performance. First of all, the low sales impacted the profitability. We had some offshore project cost overruns during the quarter, then also the capacity utilization was fairly low in the offshore division during quarter two.
Due to these reasons, we will look further cost optimization and address the productivity going forward. Let's have a look on overall Cargotec financials. If we look the six months performance, solid growth in orders. Very good order backlog, like I said earlier, above almost EUR 2.1 billion. Very solid backlog offering good basis for the coming quarters' revenues. Comparable operating profit improved overall 6% on Cargotec level, and then the reported operating profit after restructuring costs and other items impacting comparability was EUR 104 million. There, 40% year-on-year improvement. Our earnings per share were EUR 0.93 per share, and there also 70% improvement compared to last year's first six months. If we look our cash flow, cash flow continued to improve. Our year-to-date June six month cash flow is now EUR 72 million versus EUR 23 million a year ago.
The cash flow improvement is coming from basically three sources: improved profitability, also we have put special actions on inventory reduction, as well as on addressing overdue receivables. Then, we received some advance payments, especially in the Kalmar automation business in the second quarter. Our financial position is strong. We have currently EUR 466 million unused credit facilities as well as cash at the bank. The net debt at the end of the quarter was EUR 876 million, if we exclude the IFRS 16 lease liabilities, then net debt was EUR 698 million. Gearing was 49% excluding the IFRS impact and 62% as reported. Our debt maturity profile is unchanged, so no major significant loan repayments in the coming years. Our return on capital employed was 9.1% at the end of June. There, nice improvement compared to the end of last year where we had 8%.
The ROCE improvement is coming more or less from the 40% higher operating profit compared to last year. Last but not least, our outlook for 2019. We reiterate our outlook, which we published in the beginning of the year.
We expect the comparable operating profit to improve from last year's level, when it was EUR 242.1 million. That's all from my side, I would hand over back to Hanna-Maria.
Thank you, Mikko Puolakka . Thank you, Mika Vehviläinen. Now it's time for questions, and we will start with the questions from Inderes.
Thank you. It's Erkki Vesola from Inderes. The questions from me starting by, could you provide us with a wrap-up of the improvement actions and their impact regarding the supply chain issues that you had addressed, especially in the Polish factory?
There are quite a few of those ones. I would say addressing many of the major areas, the supplier performance in terms of securing better on-time delivery for our suppliers has improved on the last 12 months, although we still experience some difficulties in certain components. We have been increasing our labor force and capacity in the factories. We have addressed a number of the bottlenecks in the production, and production processes and systems as well, and strengthened the management in those factories. There are multiple different things. There is not one single silver bullet, but multiple process improvements that are still improving the process, but we still have quite a lot of opportunities to improve the situation further.
How long do you think that these actions will still continue?
Well, you will see continuing improvement carrying on throughout the whole year. Some of the improvements, I think, in our supply chain development are more fundamental and will address situation in the longer run as well.
Okay, thanks. Then coming to group gross margins, should we look forward to stabilized or still continuously declining gross margin on group level? Are there any factors into sales mix, et cetera, that could affect that?
Yeah. In a way, funnily, the mix is improved because if you look at the MacGregor, where obviously, generally speaking, the gross margins are lower due to the nature of the business as well, MacGregor was only 13% of our order intake in the Q2 as well. You actually see mix improving by just effectively by the more profitable business areas growing stronger. Obviously, the services continuing growth will enable us to drive higher gross margins as well. Again, on the automation growth and the project growth in Kalmar obviously has a sort of declining effect. Those margins are lower than in services and some of the key product areas. In that sense, it's a mixed bag, but I would say that there are probably more upside than downsides in the gross margin development.
Okay. Thank you. Finally, about the SG&A, it seems to have stabilized quite well. Looking forward, should we expect the same level of SG&A and [inaudible] to be retained also?
Yeah. The proxy for the 2019 SG&A cost is approximately EUR 40 million . Yeah, on this kind EUR 40 million .
Okay. Thank you.
We will continue with the international questions. Handing over to the operator.
Thank you. Ladies and gentlemen, just as a reminder, if you would like to ask an audio question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure that your mute function is turned off so that your signal may reach our equipment. We will now take our first question. It is from Magnus Kruber from UBS. Please go ahead.
Hi, Mika Vehviläinen, Mikko Puolakka , Hanna-Maria. Magnus Kruber here with UBS. A couple of questions from my end. First, could you expand a bit on how the year-over-year demand trended through the quarter? It is in a difference between April and June, and how has July started?
Yeah. No major changes there. I do not see any trend other than what you see in a quarter level or on the month level either.
Okay, perfect. In here, if I adjust for FX structure and large orders, it looks like your underlying organic growth was down mid-single digits. Do I do those numbers right? If so, how did your underlying order trend develop in Europe and North America, respectively?
Well, if you look at the Hiab, the FX had a very little impact, and I think if I remember right, Mika Vehviläinen, about EUR 2 million on Hiab. Obviously one needs to be careful. You can't kind of exclude the large order and make a comparison point because obviously we have a large key account orders in other previous quarters as well. [inaudible]. It's a higher than what we have seen in the past, but we see fairly large deals happening in the market there, and almost in every quarter as well. As such, the sort of excluding that one is not a fair comparison point either.
Okay. Finally, of course, margins were very solid in both Hiab and Kalmar, for Hiab, I think in Q1, we discussed that you would have some improvement from pricing and lower raw materials coming through. Could you discuss a little bit how you saw that coming through in the quarter?
I think that primarily the driver still in the Q2 was very much the increase in revenues, and the impact of the mix and the pricing was not that significant in the Q2.
Okay. More into the second half on that then.
Yeah. Perfect. Thank you.
Thank you.
We will now move to our next question. Please go ahead, caller. Your line is open.
Good afternoon. It is Manu Rimpelä from Nordea Markets . My first question would be on the MacGregor. You talked about the weaker market for ordering activity, and we can see it also from vessel orders and if you look at your kind of Q2 level of activity. Are we starting to be in a situation where 2020 equipment sales are unlikely to grow compared to the level where we are in 2019, given the kind of long lag from shipyard orders to your orders and from orders to sales?
That is a very good point. If we now expect the ship order quantity to remain roughly at the sort of same trajectory as it has been so far, we probably end up with maybe 1,000 plus ships this year. That would in effect mean that the MacGregor as a standalone equipment business is probably not going to be significantly different in 2020 compared to 2019. Obviously, the ball game is changing from our point of view in terms of combining the TTS and MacGregor combination. I still believe that we have a good opportunity to drive further growth primarily from services business. As Mikko Puolakka was saying, we still saw strong order intake growth in services also on the Q2.
Now with our capability to start to address the installed base of TTS as well, I am more optimistic about the services sales development this year and also moving to the next year.
How do you think around the equipment margins in a situation where there is no growth in the top line in 2020? The other way to ask it around is how big is the offshore business in terms of the sales to kind of get a sense of the cost base in that business?
The offshore situation is a little bit interesting. We have seen for a while the increase in activity levels in there. We see dormant ships putting back to the operations, but the activity has not, as you can see from the numbers, not translated into the order intake as such. It's also good to know, of course, note that the with the combination of TTS, our offshore exposure will go down. The offshore portion in the TTS business is considerably lower than in MacGregor as such. The exposure on that side will decline. It's really hard to sort of put a finger, and I think the visibility in offshore is a question mark for us. There are a number of things that would drive for better market development.
We see an increased activity, but the fact of the matter is, of course, that we have not seen that activity landing our order intake, at least as of yet.
Can you remind us how much is offshore out of the equipment sales today?
In MacGregor, it's been varying slightly between 20%-30%, and in TTS it's in the ballpark of 10 percentage points.
Okay. Final question. Getting back to Magnus Kruber's question on the Hiab order intake. How do you see the Hiab order intake? As you said, we can't exclude the large orders. Do you see that the activity remains healthy and we should expect continued growth in the second half of the year on the order intake based on the kind of demand trends you're seeing at the moment?
I think the underlying market remains to be strong. Maybe the caution I would have there is that we have now landed in last 12 months, a number of large key account orders in U.S. as well, and we're going to start to see that pipeline being lower. The underlying equipment business is still in a good shape as well, but potentially we don't see such large orders in the second half as, for example, we saw now on this one. Obviously, the Q3, we will still see the other half of that EUR 60 million order landing in those numbers.
Okay. Final question on the EBIT margin of the Hiab business. If we kind of combine the first half numbers to exclude the big quarterly volatility in the Q1 and Q2 numbers. How do you think about, you had 13.2% EBIT margins the first half of last year and then 12.5% in the second half of this year. Looking at the moving parts going into the second half of the year, you will probably deliver more and better margin products with potentially some tailwinds from raw materials. How should we think about the kind of half-yearly margin volatility in the second half compared to the first half of this year?
First of all, good to remember that the Q3 is also always seasonally weaker for Hiab. If you go and look at the past year profiles, you will always see it's the seasonality variation there. I always was a little cautious about the Q3 numbers. Obviously I see the underlying performance improving and impacting favorably then especially should be again visible in Q4 numbers.
Okay. Basically assume a normal type of seasonality and no major tailwinds from the kind of backlog factors or cost factors.
Yeah. I would think if you look at the profile from previous years and compare that to the current performance, you'll probably be able to get fairly good at understanding where we expect to land.
Okay. Thank you.
Thank you.
We will now take our next question from Leo Carrington from Credit Suisse. Please go ahead. Your line is open.
Thank you. Good afternoon. I have a couple of questions. The first on MacGregor, please. When it comes to thinking about the margin and the unexpected negative EBIT development, how much of this was due to the offshore project overruns? Do you see a scope for a repeat of these costs into Q3 and Q4? Or is it perhaps a mix of factors?
If you look at the kind of loss of roughly EUR 10 million on Q2, about half of that came from the cost overrun in offshore. It was particularly related to one new technology introduction we did in the offshore area. We booked expected losses in the Q2 numbers now. Obviously, all the new technology introductions have always the risk factor in there. But at this stage, we do not foresee further cost overruns on that one. The other half came really from the weaker than expected sales.
Okay. Thank you. That's helpful. Then on to software for the company overall. There's been good momentum, I think, with orders announced in Cargo Boost, the Navis partnership with ZPMC, and generally the growth rate seems to have picked up. How this is compared to your expectation from earlier in the year and also, do you think you'd be able to update us with where profitability in software is and how you expect that to develop midterm?
The profitability in our software business is picking up. I would expect that by the end of the year, the software business should not dilute, at least in a significant way, overall target business operating profit percentages as such, and that really comes primarily from the sales growth happening there. The sales growth in the software business obviously coming from two primary sources. One is Navis, and the other one is the automation-related software. The main growth right now is coming from the automation. We see a very good business demand and progress in Navis side, but at the same time, the traditional Navis business has been license-based software, and we are more and more transforming into the SaaS-based revenue, subscription-based revenue basis, and that obviously is slowing down the growth in there.
At the same time, the percentage of the recurring revenue in the Navis business is continuously increasing as well.
Okay, thank you.
Thank you.
We will now take our next question from Antti Kansanen from SEB. Please go ahead. Your line is open.
Yeah. Hi, it's Antti Kansanen from SEB. Most of the questions have been already asked, but maybe coming back to Kalmar and the order trends and the kind of the demand outlook in the mobile equipment. The order intake was weaker than in some quarters for a while, and could you just confirm that you don't see any weakening of customer activity or lower trend, or is this something that we should take as a benchmark for H2 also? Thanks.
No, we don't foresee that. If I take the mobile equipment first, we had a particularly strong Q2 2018 in Europe related to some of the mobile equipment orders. I think partly the mobile equipment order situation is such that in certain equipment categories, we are now effectively selling March 2020 capacity. That's not encouraging any faster order intake. That's probably one element. Their underlying demand, even I look at the data we get from Salesforce, is still pointing out a strong continuing demand in key categories. Also talking to the port operators, we see still a lot of activity and project acquisition activities going on. It's a timing question. There are certain deals that slipped from the Q2 onwards as well. So I see this more as a sort of lumpiness of the project business and some seasonality effect other than anything else.
We have not seen any shift in the customer demand or thinking about investment at this stage.
Okay, thanks. Coming back to Hiab's profitability. Sorry if this was already asked previously, if you compared Q1 and Q2, there was a big step-up despite kind of ongoing production issues. Was there something moving from Q1 to Q2, and is the H1 kind of a benchmark that we should take into account when assessing the latter part of this year?
I think Q2 was more kind of, I would say, normalized operation level. We still have further opportunities there to improve the margin, but then again the Q3 tends to land lower for the seasonality effects as such. I think we still have obviously foresee further opportunities to drive the underlying operating margin in Hiab.
Okay, that's great. The last question is on the one-off costs or the restructuring items that you booked for Q2, which I think were quite high compared to estimates. Is there any guidance what we should expect for the coming quarters as well?
These one-time costs were related or restructuring costs were related to this company-wide restructuring program. Then, we have some continuous productivity improvement programs in our business areas, including, for example, also MacGregor. Those are the restructuring costs we booked in the second quarter. For the rest of the year, we don't, at this point of time, give any guidance for the restructuring costs because we need to get first TTS acquisition moving forward, the discussions with TTS and related activities. After that we have better visibility for the restructuring costs, which we can then also more open to the publicity. It's good to note that because we have been in direct competitive situation with TTS, our visibility, of course, on the numbers and operations in detail is not there.
After the closing, we will obviously have a chance to sort of form a better picture on the synergy plans and then at that stage probably are better able to give you a better guidance on the expected restructuring costs and timing of those ones.
Okay. If you would exclude any potential TTS related ones and then just focus on the same thing that you have already booked costs. Is there something left from those programs?
Yes, there will be still some left for the third and fourth quarter as well.
All right, fair enough. Thank you.
We will now take our next question. Please go ahead. Your line is open. May I just remind you to unmute your line should it be muted locally?
Yes. This is Tom from Carnegie. I have questions for all divisions. I'll take Hiab first and then follow with the other ones. Hiab orders have been now basically flat for three quarters, signaling some countries are up and some are down. Can you please highlight where you see the biggest growth and where you see the biggest decline in order activity?
Tom, were you referring to the orders or?
Orders, yes. The last three quarters were like on the same level. I guess when you look at where do you see that the market is growing and where is it falling, basically?
I think overall we still have seen underlying growth in U.S. If you look at the orders and obviously we will have seasonal impact on those ones as well. The year-on-year comparisons are in that sense there as well. We had a strong Q4, but we typically have a strong Q4, and then we had a strong Q1 and again Q2 on year-over-year basis growth. I would say that overall the growth has been pretty evenly split between the North America and Europe. Where we see weaknesses is actually few softer spots in Europe. In Q2 we saw certain softness continuing in Sweden, which has been an issue for a little while, and for reasons I don't actually know that much in detail yet, is the Benelux had a sort of slightly softer outlook as well as in Denmark.
The rest of the Europe actually, as you saw, the overall numbers in Europe were still strongly up year-on-year.
Okay. I wonder about TTS, whether you have had any chance yet to look into the health of the order book. It's been a very long discussion with the competition authorities, and the order book might have changed a lot during this period.
We obviously with the competitive status and it still is in force until the 1st of August. We have no direct visibility in the order backlog. That's obviously one of the first things we will do after the closing.
Can you give some indications about at least the sales impact now for the coming quarters?
Well, I think your visibility is probably a little bit as good as mine in terms of looking at what TTS has been reporting in the overall numbers. It's also good to note, by the way, that in TTS numbers they have consolidated the Chinese joint ventures entirely. Our plan is not to do so. If I remember now right, and I'm looking at my colleagues, about 30% of the TTS revenues are coming from the joint venture.
Yeah.
We will not book that in our books on top line and obviously then we will proportionally book the operating profit. What you will see effectively happening is that the proportional operating profit will go up, but the overall revenue will be slightly smaller than what the combined operation otherwise would have been.
Finally about Navis and this agreement with the ZPMC. Could you help us to understand your strategic thinking here? Because obviously Navis is a great argument to buy Kalmar equipment as well. I guess that was one of the reason why you acquired that then, and now you try to team up with your worst competitor here. Can you help us to understand your strategic planning?
First of all, the ZPMC contract was nothing new. It was a renewal of the existing strategic agreement that Navis has in place. Navis is a software business. It operates horizontal. It cooperates with all the major competitors of Kalmar. There are a number of joint projects with Konecranes, for example, as well as ZPMC. We are by far the market leading TOS operator, and hence we interface with all of the different automation and other manual systems in there. Like any software leader, it needs to also sort of cooperate with all the major market players. In the ZPMC's agreement with Navis is especially important for us in China.
There obviously ZPMC has a very strong position in overall project and ports and that then enables, of course, Navis to have a respectively a very strong position in the Chinese markets, as well as in those very large sort of Chinese-dominated port programs that they are expanding into globally as well. That enables effectively the Navis sort of to piggyback on the ZPMC large projects globally and especially in China.
Okay. Then finally about Kalmar and order prospects in Singapore, where they're moving the port outside of the city. We have seen now many Asian suppliers announcing very large orders from this. Do you have any hopes of booking some orders as well?
I wouldn't like to comment on individual customer cases, but the PSA, which is the Port Authority in Singapore, is a very particular operator which has a very particular buying patterns and generally very tailored solutions, and that does not represent the normal, I would say normal buying behaviors in that sense, and hence I'm always a little bit cautious about prospects related to those projects.
Okay, thank you.
We will now move to our next question from Johan Eliason from Kepler Cheuvreux. Please go ahead. Your line is open.
Yeah, good afternoon. It's Johan Eliason at Kepler Cheuvreux. Just a question, I might have missed it a little bit here. I think last year you talked about this supply issue bringing up your net working capital by EUR 150 million that you expected to be released this year. So far, have you released anything of this related to this specific issue?
Yeah, we have released some few tens of millions of euros, but not amounts like EUR 150 million. One has to take into account also that if we look overall Cargotec sales and especially the Kalmar mobile equipment as well as Hiab sales, all businesses have been growing also quite significantly over the last 12 months. That growth inevitably ties up certain working capital. From the kind of improving supply chain situation, through the improvement in the supply chain situation, we have been able to reduce a couple of tens of millions of euros from the working capital.
Do you think you will be able to release up to EUR 100 this year?
It depends on, of course, on the going forward working capital situation. Like Mika Vehviläinen said also earlier, there are certain kind of longer-term, more fundamental changes and improvements what we can do and envisage to do also in our overall operations. There we see very good potential to reduce the working capital.
Then I think you said something about EUR 40 million annual level for SG&A, you mean corporate overheads, don't you? What's the EUR 40 million otherwise?
Yeah, these are the corporate unallocated costs.
Perfect. That's okay. Good. Thank you. Those were my questions.
Thank you. We will now take a follow-on question from Manu Rimpelä from Nordea Markets. Please go ahead.
Hi. Thank you. I would have a follow-up question on MacGregor. How do you think around the full year profitability, given that the Q2 saw a very sharp decline, and it doesn't look like there should be expected any significant change in the level of sales for the offshore business? We should be assuming that kind of stripping out the cost overrun, we should be running at a kind of similar type of level for the second half of the year in terms of losses, and then once the cost savings measures start to kick in at some point, it will gradually start to improve. Will that happen already this year?
We expect the whole year in MacGregor to end up in a slight loss situation, but we don't expect the profitability to be as poor as it was in the Q2 in the coming two quarters.
Okay, thank you.
Ladies and gentlemen, just as a reminder, should you wish to place an audio question, please signal by pressing star one on your telephone keypad now. We will now move to an audio question from Magnus Kruber from UBS. Please go ahead.
Just a follow-up from me here. How do you see competition in the U.S. forklift market developing now when your key peer has a more competitive offering than before?
We see now market share to remain very strong and the order book to remain at a very healthy level. I haven't seen any significant change since we've been able to secure, I would say, all the major key account business in U.S. within this year. The recent EUR 60 million forklift order is a good example of excellent solutions that we can offer to the customers.
Okay. No pressure on pricing or anything like that that you're seeing emerging?
No, not really.
No. Perfect. Thank you.
Continue with a question from Inderes.
Thank you. It's Erkki Vesola from Inderes. Again, I don't want to be a drag or anything, but coming back to the SG&A. I'm talking about the selling general administrative costs that you show on your group P&L. Is the current, let's say, 12-month run rate, it's something that is going to be there also going forward?
Yeah, if you are looking the next few quarters, that would be more or less the run rate level. Yes. That comment excludes any impact from the TTS acquisition.
Of course. Finally about the Hiab orders. I don't know if I missed this one, but how much was the FX impact on the Q2 orders? The impact was something like 6%, wasn't it, in Q1 on growth rate?
Yeah, just a second. I'll check the exact number. FX. You're asking quarter two impact?
Yeah.
The Hiab orders grew 13%, excluding the FX, the growth was 6%.
Okay. Thank you very much.
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Okay, thank you so much. It's time to close this news conference. Thank you for joining this. It's finally sunny in Helsinki, the Q2 report will be published on Tuesday, 22nd of October. Thank you.
Thank you.
Ladies and gentlemen, that now concludes today's conference call. Thank you for your participation. You may now disconnect.