Afternoon, everybody, welcome to this news conference regarding Cargotec's half year financial report. My name is Hanna-Maria Heikkinen, and I'm in charge of Investor Relations. In Q2, 2018, we saw strong development in orders received. Today, our CEO, Mika Vehviläinen, will start with the group highlights, our CFO, Mikko Puolakka, will continue with the business areas financials and outlook. After the presentation, there is a possibility to ask questions. Please, Mika.
Thank you, Hanna-Maria. Good afternoon from my behalf as well and regards from very sunny and very hot Helsinki at the moment. In Q2, the demand for our solutions and services was very strong. We had a 23% increase in our orders, especially the Kalmar order intake was very strong during the Q2, and the good demand development in Hiab continued as well. I'm also very pleased on the fact that the hard work we have done in improving and developing our services operations is paying off, and we saw a strong 16% growth in our service orders during the Q2 as well. At the same time, also, the revenue development in services continued on a positive trend. The operating profit was a disappointment for us.
It was really a combination of the continuing currency impact during the Q2 in Hiab for about EUR 5 million. However, the trend there is obviously pointing to the right direction. We had an impact of roughly EUR 8 million during the Q1, EUR 5 million in the Q2, and we expect that impact to reduce further moving into the second half. In Kalmar operating profit, we had a very specific mix issues during the Q2 that impacted the margin, and Mikko will cover those more in detail during his business area-specific presentations. During the Q2, we also booked restructuring costs in EUR 35 million. It was really a combination of three items. First of all, we reshaped our portfolio with two exits.
Those had both plus and minus impacts. Mikko will cover those a bit more in detail during his presentation. We discontinued one of the product areas, unprofitable product areas in Kalmar and booked a EUR 10 million restructuring cost on that one. Thirdly, the largest item was the impairment loss related to our ownership in the Rainbow Heavy Industries in China. Market environment was strong during the first half. First of all, we see the port CapEx development as very favorable at the moment. The traffic in the container ports is still continuing, and we see investments happening there.
Even though we booked one large automation order during the Q2, we still see that most of the automation orders are developing in a favorable way, but will be happening in a phased and through the smaller investments moving forward. In Hiab's case, the construction market is continuing strongly, both in U.S. as well as in Europe. We see the strong demand continuing there. In MacGregor's case, the merchant market is bottoming out and recovering slowly. We actually saw a fairly strong order intake increase already in our merchant marine sector. However, in the offshore side, as well as in the Ro-Ro segment, the demand was relatively slow during the Q2. That impacted overall order intake.
We see increasing and more concrete interest happening in the offshore side, where more projects are coming and the more inquiries with clear backing and funding that are available, so sort of stronger interest happening overall in the offshore segment at the moment. Again, in terms of orders, very strong, 43% increase in Kalmar orders. At the constant currencies, that would have been a 50% increase. In Hiab, the order increase and constant currencies would have been 12% order increase. The orders in U.S. remained at the high level, and we saw strong demand increase and order intake in the tune of 25% in Hiab in there. As I already said, in MacGregor, the orders remained roughly at the last year's level.
As a part of the strong order intake in Kalmar, we have booked two automation orders during the Q2. It's very clear that the heavy technology and R&D investments we have done in Kalmar in the last couple of years are now starting to pay off. Our technology leadership in automation is very clear and both of these deals were clearly sort of leading-edge technology, industry-shaping deals. The first one, Qube Moorebank, which is the one of the largest infrastructure investments happening in Australia. This is a trend we have somewhat discussed, where some of the port operations are actually moved away from the quayside and seaside into the inland, into the more and sort of efficient logistics environment and lower cost base. This is the industry's first fully automated intermodal terminal combining the port operations and inland logistics center together.
It's a complete system delivery from us, including all the Kalmar equipment, automation software, as well as the Navis N4 Terminal Operating System with automation capabilities. All the equipment is electric, showing the technology investment and the competitive edge we have today in terms of our capability to offer fully electric offerings, and the whole terminal operation will be powered by the solar energy locally. The order value that was booked into the Q2 was in the neighborhood of EUR 80 million. Another smaller order, again, an industry-shaping deal, was the Yara automation order, where we are doing the first fully autonomous, sort of, container port operation and also, again, enabling fully electric and fully autonomous operations in Norway. Order book is improving thanks to the large and good order intake in Q2.
This also sets a good basis for us in the second half with the strong backlog and good mix in backlog, buoyed by obviously by our development in software, in services, as well as in the equipment side of the business. Operating profit, as discussed, decline in Q2. The two main drivers are the currencies in Kalmar and then the specific mix issue we had in Kalmar, in and during the Q2, and Mikko will cover those a bit more in detail in a second. The solid growth in services continued 16% increase in orders, in Kalmar, 6% increase in revenues, 10% increase in comparable currencies, 11% increase in comparable currencies in Hiab.
I was also very delighted that first time for quite a while we actually saw the MacGregor Services business and revenues to start to turn up and that's also a very important indicator of the state of the cycle and the industry as well. The total services orders overall, increased by 9%. The software sales declined in the Q2. This was really a combination of having one large license deal in Navis during the comparable period last year, and also for the fact that the due to the weak order happening in the automation area during 2017, the volume in the automation software during Q2 2018 was quite low. What was very delighting for it was that we had a very strong order increase in our software.
Slight increase in orders in Navis, also very strong obviously order increase in our automation software due to the new automation deals in the Q2. We also continue to shape portfolio. We are obviously looking for new mergers and acquisitions to expand our businesses that are more core to our strategy and adjacent to our current businesses, while we are also exiting businesses that are not aligned with our current business strategy. In the Q2, we actually had 2 exits. One, Siwertell, which is a bulk handling, as the picture there shows, our operation in Sweden, where we booked a gain in terms of the exit.
Kalmar Rough Terrain Center, which is based in Texas, Cibolo in U.S.A, where we booked a small loss and Mikko will cover those costs in a detail in a second. We also discontinued certain product line in Kalmar and booked a EUR 10 million restructuring cost as a result of that one. We had this already mentioned reevaluation of the RHI share value, which is a non-cash item of EUR 30 million charge that we took during the Q2. Now I'd like to hand over to Mikko, who will cover the business areas more in detail.
Thank you, Mika, and also good afternoon from my side. Let's start with Kalmar, where we had excellent orders in the second quarter. Kalmar orders grew 43% in the second quarter, and looking with the comparable currencies, the growth was even 50%. The growth was especially driven by the automation and projects division, but also the mobile equipment orders. For example, the terminal tractors in the North American market grew very well in the second quarter. In automation and projects, like Mika indicated, we booked the EUR 80 million Qube Moorebank deal in Australia and as well as the leading-edge automation solutions for Yara in Norway in the second quarter.
Kalmar order book grew by 2%, thanks to this project, but also thanks to the equipment and service orders. This offers now a very good basis also for our second half 2018 sales. Service sales were up by 6%, and with comparable currencies up by 10%. However, the overall Kalmar sales declined slightly from last year's quarter two. This decline was driven by a few reasons. The first one being the Siwertell divestment. We have been consolidating the Siwertell bulk handling business until April 2018. A couple of months of the second quarter sales were left out.
We had still certain delivery challenges, delivery bottlenecks, and also the currencies impacted to a certain extent Kalmar sales, especially for the U.S. deliveries. Operating profit was EUR 25.2 million, minus 22%, compared to 2017. This decline came from couple of reasons or couple of sources. Like Mika indicated and showed earlier, our software sales were roughly EUR 10 million in the comparison period in 2017. That impacted to a certain extent Kalmar profitability. Plus, then we have had in mobile equipment, one delivery, a fairly large delivery, which has had lower gross margin compared to the average mobile equipment gross margin.
This situation should improve now also going forward. Let's move to Hiab, where we had again an excellent quarter. This was the second quarter in a row where Hiab was able to book more than EUR 300 million of orders. Orders grew by 8%, and with comparable currencies, the growth was as high as 12%. Excellent performance in all our Hiab business lines, and the EMEA region in particular grew by 25%, but also the U.S. market has been very well-performing in the second quarter. Thanks to these excellent orders, Hiab's order book is up by 16%, and this also offers a very good basis for the second half 2018 deliveries.
Hiab delivered 5% sales growth, very much supported by the strong orders in the first and second quarter. We have been able to shorten also the delivery times to the customers, so that has been enabling us also to perform well with the sales. Service sales grew by 7%, and this shows the results of those strategic investments which we have put in place in the past, as well as the expansion of service product offering. Despite the higher sales, Hiab's operating profit declined and was EUR 39.4 million.
As Mika indicated, this is very much coming basically from the weak U.S. Dollar as we are delivering loader cranes and truck-mounted forklifts to great extent from Europe to the U.S. market. Moving to MacGregor, where the orders were slightly below last year's level. This is very much reflecting the slow recovery of the market. On the positive side, I would say that the cargo handling orders grew very nicely. Also, the services orders improved from last year. Ro-Ro orders were exceptionally low in the second quarter, and also the offshore sector orders declined still in quarter two. MacGregor service sales grew by 3%, and this is of course, a positive sign for the market turnaround.
However, this service growth was not enough to offset the significant decline in the equipment business. The overall MacGregor sales were EUR 133 million, a 15% decline. We have been keeping MacGregor profitability on black numbers in quarter two, EUR 2.6 million positive result. This is very much coming from the cost savings measures we have been taking in 2017 as well as in the early part of this year, and also thanks to the growth of the service business. Going forward, we are looking for further cost efficiency improvement in MacGregor. Our cost savings programs are proceeding according to the plans.
We have delivered so far EUR 15 million project to date savings on the group wide EUR 50 million savings program, EUR 10 million in 2017, and EUR 5 million now in 2018. Also, the MacGregor EUR 13 million cost savings program delivered year to date EUR 5 million annual savings. The Kalmar production transfer from Sweden has delivered so far EUR 4 million cost savings. We also continue our activities in Design to Cost activities, especially in this kind of environment where the raw material prices are on the increasing trend. Looking the overall Cargotec financials, as highlighted already earlier, excellent orders for the second quarter.
Also now after the first six months, we are 11% above last year's level. As Mika indicated in the beginning, we had significant restructuring costs in the 2Q, EUR 34.9 million. This is coming from various sources. In this EUR 34.9 million, we have almost EUR 13 million positive divestment income coming from the Siwertell divestment. From the Kalmar Rough Terrain Center divestment, we booked a EUR 4.7 million restructuring loss or divestment loss. From terminating certain product category in Kalmar, we booked a EUR 10 million restructuring cost.
The largest restructuring item was the EUR 30 million Rainbow Heavy Industries share ownership valuation. However, most of these restructuring costs are non-cash effective, so not impacting the cash outflow. The total impact of these restructuring costs was EUR 0.47 in our quarter two earnings per share. Looking the cash flow. Our quarter two cash flow was EUR 27 million, improving to a certain extent from quarter one. Still very much impacted by the networking capital, especially in Kalmar and in Hiab, as well as the low advance payments, especially in MacGregor, where we have had fairly low orders. We have been able to improve the supply chain situation.
The lead times have been going down, that's a positive sign. These improvements will be visible in our cash flow with the delay. We expect the, in the second half, the cash situation also to improve. Overall, we have still room to improve in the cash flow, and that's very much coming from the networking capital reduction, thanks to the actions we have been putting place in the working capital area or in the supply chain area. Our ROSI was 6.5% at the end of quarter two. Excluding the restructuring charges, ROSI is 10%. Operating profit was 7.1%, and our long-term target here is to increase that to 10% level.
Last but not least, the outlook for 2018. We reiterate our guidance for 2018. Profitability is to improve from last year's level, and this is very much coming from the strong backlog we have at the moment, especially in the equipment, software, as well as in the service business. With those words, I would then hand over to Hanna-Maria.
Thank you, Mikko. Thank you, Mika. We will continue with the questions. We will start with the potential questions from sunny and hot Ruoholahti. Any questions? It seems like that there are no questions from Ruoholahti. We will continue with the international questions.
If you'd like to ask a question over the phone, please do so at this time by pressing star one on your touchtone telephone. A voice prompt on your phone line will indicate when your line is open. Please make sure your mute function is turned off to allow your signal to reach our equipment. We'll take our first question from the phone. Caller, please go ahead. Your line is open.
Hi, Magnus here from UBS. A couple of questions from my end. Have you seen any impact from the trade war issues, notably in Kalmar indication of interest in new equipment?
Thanks, Magnus. We have seen no impact. Actually, if you look at the actual traffic volumes at the moment, they are very strong, in Asia as well as across the world at the moment as well. Obviously, my concern would be around the kind of the indirect or sentiment type of impact into the potential CapEx moving forward. We see no direct impact, and we actually see the port investments continuing at the fairly strong at the moment.
Got it. Thank you very much. Then just some details on on in MacGregor. How large contribution to orders and sales do you get from acquisitions in the quarter?
This is Mikko Puolakka. We had the Rapp Marine in in the early part of the year, and from there approximately EUR 8 million.
Perfect. Thanks. On the Qube order, would that order have a higher or lower gross margin than the average for Kalmar?
No, actually, the order in overall the automation orders have a healthy gross margin, which is very much in line what we have seen in the last few years as well.
In line with division or.
Exactly, yeah.
Brilliant. As the final one, I think you alluded to it already, but, the order growth in here in North America, was that flat on a nominal basis?
Yeah, I think it was one, two points, so a couple of % down on the actual, and then in the constant currencies, it would have been slightly up, so pretty flat.
Fantastic. Thank you very much.
Thank you.
We'll move to our next caller. Please go ahead. Your line is open.
Hey. Good afternoon. It's Manfred Blass from Nordea Markets. Can you help us a bit better understand how do you think around your guidance of improving EBIT? I mean, you're some 6% behind full-year EBIT on just the back of the first half of the year. You're kind of assuming a pretty strong catch-up in the second half of the year. You did mention some of the reasonsB but could you just give a bit more color on the details on that, please?
Yeah. The main reasons really are fact that the backlog is strong. If I look at the mix of the backlog, it's also very strong. We had a very specific sort of, a little bit odd, almost, mix in Kalmar during the Q2, where the proportion of the software was lower than normal. Even in the equipment mix itself, we had this one very
Specific large customer delivered at all. All was sort of happening during the Q2. When I look at the backlog in the equipment business now for the second half, the gross margins are clearly higher than they were in the first half due to the mix issues in there. Also obviously in Hiab, we have 16% up in backlog at the moment. The equipment side, we have a good and very healthy backlog moving forward. We still sort of suffered in the Q2 with some of the shortages in the deliveries, but the delivery situation is stabilizing and improving. We start to see improvements in the delivery times, and you could say that the problem have shifted from the supplier delivery and the factory issues into the downstream now.
Our most of our suppliers are able to deliver on time at the moment. Our factory performance has improved quite clearly both in Hiab and Kalmar. Now sort of because of the delivery issues we had earlier, it's very clear that the downstream had sort of built some buffers, and we need to work through those ones. That impacted the revenue in Q2, where we had a sort of quite a bit of ready equipment that we were not able to ship, as per our assumptions, and all of that will be then shipped during the second half. Our order backlog is growing. Sorry, in services by 16%, that'll help us in terms of the mix moving to the second half as well.
Third element, of course, is the currency development. Compared to early part of the year, the dollar has strengthened. That's visible in the changes in Hiab. We went from EUR 8 million-EUR 5 million. As we hedge now, even though there will be further movements in the currencies, we are sort of covered towards sort of October, November timeframe in terms of the current exchange rates, roughly. That'll also obviously help on the second half.
Okay. That's very helpful. Can you just comment on why did you decide to make these write-downs now in the second quarter?
Well, the timing I think was really a coincidence in a way that we've been looking for a buyer for both the Kalmar Rough Terrain Center as well as for the Siwertell business for a while. Both of those deals just happened to happen in Q2. When we have looked at the Kalmar business and obviously improvement opportunities there, we decided to discontinue the one unprofitable product line where we didn't really see clear opportunities to move that business into the black numbers. We decided to discontinue on that one, took a hit as a part of the savings efforts in there. The RCI sort of reevaluation of the...
It's just reflecting what the company's value has been happening in China, and we needed to adjust that into the more realistic level.
Okay. Would you be able to provide us some sort of idea about the sales that these three businesses had in kind of help modeling purposes?
Yeah. I mean, if we look the first half sales, what, for example, Siwertell has contributed. In January to June, Siwertell sales were EUR 8.7 million. Siwertell has been consolidated in our results the first four months. That's the first four months sales of that Siwertell business. The Kalmar Rough Terrain Center sales, that has been consolidated in our books for during the first six months. The sales impact, or the sales for that period have been EUR 8.1 million. Both roughly in the level of EUR 8 million-9 million.
Both of them, of course, had a component of service sales as well. That will obviously have a impact there on the comparable service sales.
Yeah
In the second half as well.
Okay. My final question then on the services. What explains the kind of very strong increase in the service orders now in the second quarter?
There were no real larger project type of services, it was really sort of the underlying maintenance and spare parts business that are performing well. I think it's a combination of the fact that we worked very hard on sort of improving our capture rates and improving our sales efforts, et cetera, and those are starting to pay off. There is an element of favorable market there as well. Obviously, when the economies are doing well, especially in U.S., the driving hours for the equipment are increasing, and that leads to somewhat higher spare part consumption as well. Primarily, it was really driven by the sales help and the work we have been doing there.
Would you be able to give some idea about the divisional splits in growth?
You mean. I don't think. I think, if you look at the revenue growth by the division, that probably is a fairly good reflection on that one. MacGregor services orders did not increase as strongly as the Hiab and Kalmar.
Okay. Thank you. No further-
I think again, good news is that the MacGregor Services are turning because as we have known, there's been a declining trend now for few years and that's hopefully an indication of the market cycle turning as well.
Okay. Move on to our next question. Caller, please go ahead. Your line is open.
Hi, it's Terhi from Carnegie. Most of my questions have already been answered, but a couple of more housekeeping ones. The TTS acquisition progress, anything new to add on that? That's the first one.
TTS acquisition.
We have filed in all the countries that needed the filing. We have moved into the phase two, which was expected in these countries. We have been answering the competitive authorities' questions. There has been nothing in the process that would sort of make us think that there would be any changes on that one. It's moving along as per plan. What we did say in the sort of there is managing a little bit better maybe the expectation. Instead of saying that it will be closed on Q3, we are now saying second half.
It's still entirely possible that it will be closing on to Q3, but again, it's, I would say entirely out of our hands at the moment with the competitive authorities, and we are following up on the situation, but there has been nothing in the process that would make us alarmed.
Okay, the second one on the RCI write-down. Was it written down to zero or is there still a possibility there's more to come?
Well, of course, we are evaluating the RCI remaining valuation on continuous basis. The original starting point where we started, that was EUR 55 million. We have taken it now down to EUR 25 million. This is roughly reflecting the current market value as well. We have done a kind of cash flow, discounted cash flow. The valuation has been based on the discounted cash flow analysis, which has resulted to very similar results what the current market value is. It's, it depends very much on the business outlook going forward. This is our current best understanding about the valuation. We monitor it on regular basis.
Would you like to open up at least a little what has gone so badly wrong with RCI?
Well, RCI is a listed company, and of course, the share pricing overall has declined significantly. I would not necessarily start to comment here on other listed companies' matters. The top line and the profitability of the company has not been necessarily developing perhaps exactly according to the market expectations, and that has resulted to this share price development.
Okay, fair enough. Thank you.
We'll go to our next question. Caller, please go ahead. Your line is open.
Yeah, hi, it's Johan Eliason here on. Good. That will compensate you think.
As I said, I don't think necessarily, in most cases, we don't really necessarily see the increasing component pricing resulting to the increased cost in the equipment. This is, obviously in this environment, a good opportunity to try to sort of, push your pricing up as well.
Okay, good. This low gross margin you talked about on some mobile equipment order, has that anything to do with your final move of the big mobile equipment out of Sweden into Poland? Why did this low gross margin happen?
No, it was one very specific. We took one very large deal that was not announced in the mobile equipment space last year. All the deliveries happened to happen, and within the Q2 over two months. The mix from our point of view was quite specifically lower. The gross margins on that deal, it was still a very verified. It's a strategic entry for us into a customer account. That released into lower than typical gross margins we see in that type of equipment.
Okay, good. Kalmar order intake, obviously very strong, but also if you adjust for maybe 80-plus something for this Norwegian order, it looks like the underlying order growth was well into 20% last year- over- year. Why is this sudden growth coming right now? Is it sustainable you see on the underlying business? I understand that the big-ticket items, they all lump and come when they come. How can you explain the underlying sort of order development that's really strong?
I think the underlying equipment business, and demand is clearly very strong at the moment. We see demand both in the industrial segment, in the logistics segment, as well as on the port side as well. That strong underlying equipment demand combined then with this kind of larger one-off type of sort of automation and project deals have resulted in the combination of very strong order intake. It's really a combination of some higher orders that you don't necessarily expect to see every quarter, as well as sort of strong underlying demand in the equipment side as well.
Yeah. Good. Just finally, weak orders to some extent in MacGregor. Do you think this year will still be the trough in terms of revenues and we should start to see some top-line growth next year from MacGregor or has that been pushed out?
I think we are scraping the bottom at the moment. Actually, in the sort of core merchant marine business in the bulk ships and the container ships, we actually saw fairly strong order intake growth already but was from a very low basis. At the same time, what's been somewhat disappointing has been the Ro-Ro segment. That has remained fairly strong in the last two years actually has a very low order intake in the first half of this year. Those two are kind of washing out in terms of the merchant side. Offshore side was still weak in terms of orders, but as I said or indicated in the market environment, we actually see more concrete project pipeline emerging in that area as well, and the activity really is increasing.
Again, we are already into the third quarter, so I don't expect that the order intake will change that much. The timing of the orders is such that, if we move into the revenue-wise, I don't think the organic growth from 2018 to 2019 will be particularly strong in MacGregor. Obviously, it will be helped by the Rapp Marine acquisition and then, potentially obviously the TTS should already be of course visible in 2019 numbers.
organic it might be flat, if I count.
Yeah. I mean, equipment side, I think, you don't see a big swing moving from 2018 to 2019. Obviously, there is a chance that the service side that is now actually turned around, and hopefully we will see the further continuing demand on services, and that will obviously help us. Too early to tell yet.
Yeah. Okay. Thank you very much.
Thank you.
We'll go to our next caller. Please go ahead. Your line is open.
Good afternoon. It's Leo Carrington from Credit Suisse. On Kalmar, clearly the macro environment is very supportive in terms of growth of containerized trade. You've already told us about the kind of underlying smaller orders from logistics and so on. What can you tell us about your customer discussions around port automation? Have you seen any change in sentiment around that?
I think there is a growing confidence in port automation, and the interest level is high, and it's actually been high for a while. At the same time, as said, we clearly see the trend where this kind of large greenfields, as the Qube Moorebank, are few and far between. Most of the automation strategies very clearly for customers are so-called brownfield, i.e., you automate or partially automate existing port facilities. You either take a part of the port key-wise, or you take a certain segment of the container handling and automate that one. I think the trend where we will see a number of automation deals but at a lower value is probably the most realistic scenario.
We have seen actually a steady stream of automation deals coming at the latter part of last year and beginning of this year, but most of those are sort of plus/minus EUR 10 million categories. These kind of EUR 80 million deals I think are, there will be very few around this year as well.
Right. Understood. You also mentioned earlier the desire to do some more M&A, especially now the Kalmar business has been cleaned up a bit. Can you share any specifics or early conversations that you might have had around that in terms of...
Which areas, or geographically which regions you might be looking at?
I would say the key areas for us is still look at the potential software assets in our business around Navis. We are looking at the entries into developing markets in our product areas, especially in Hiab, adjacent product areas in Hiab and Kalmar that would fit into our current strategy. In MacGregor's case, obviously, with the Rapp Marine and TTS acquisition, our pipeline is pretty full at the moment. Frankly speaking, also, there are not that many assets available anymore in that space either.
Okay. Thank you very much.
Thank you.
Once again, ladies and gentlemen, if you'd like to ask a question, you can do so by pressing star one on your telephone keypad. We'll next go to our next question. Caller, please go ahead. Your line is open.
Oh, yes. Good afternoon. I just wanted to go back to what you said about the question about trade war and what? Does that have any impact on the Kalmar customers and discussions or propensity to delay or anything like that? You said no before, but I just wondered whether it was as clear-cut as that.
We have not seen any impact on that one, but obviously my concern, that I think many others as well, is that the our potential indirect impact on that one is the overall concern around the trading conditions would remain that potentially leads then into the situation where the boards of the different companies would sort of get more careful. That scenario obviously is there. If you look at that, sort of try to put that in context and the whole discussion is that this is obviously primarily around the U.S. and the current administration. The U.S. portion of the world trade is less than 10% today. Most of the growth is coming from intra-Asian traffic and then you look at the current development in China.
You look at the trade relations development between Europe and Asia, and then intra-Asia as well. There are also positive trade sort of developments happening as well. One is to look at the U.S. market and what's happened there in the context of the overall trade volumes as well.
Okay, thanks very much.
We'll go to our next caller. Please go ahead. Your line is open.
Yes. Hello, this is Karl Bokvist from ABG Sundal Collier. I was wondering, could you specify the organic part of your growth this year? I mean, you mentioned the 4% FX effect, but I mean, in terms of strict organic growth, was that flat? Was it slightly negative or slightly positive?
Yeah, this is Mikko Puolakka. The overall acquisitions we have done, basically the only single largest item is the Rapp Marine acquisition. The total impact of Rapp Marine during the first six months has been roughly EUR 22 million in sales. EUR 22 million out of our total first half sales. The first half sales were in total EUR 1.6 billion. The kind of most of the growth was still coming from the organic basis.
Yes, exactly. adding to that-
I see.
Argos.
Sorry?
Yeah, just adding to Mikko's comment. Argos was EUR 3 million and Effer, EUR 3 million. The acquisitions contributed totally EUR 28 million to the net sales during the first half of the year.
Okay. Thank you. Then when you mention solid activity in the mobile equipment, could you just please define where you sort of draw the line in terms of size of the equipment? Which cranes does this include, for example?
You could almost say that's sort of across the board. The logistics sector, for example, the terminal tractor demand was very strong in U.S. Our kind of distributors, kind of, inventories are effectively sort of zero. Right now we are almost in a situation we need to start to sell 2019 in terms of volumes. In the industrial sector, the demand has continued to be strong. Also on the port side with lighter equipment also goes and you could say it's a hard spot to sort of weak area at the moment. It's pretty much across the board.
Okay. My final question there, do you see any sort of, change in dynamics when it comes to, insourcing and outsourcing of services among port operators?
I think, what's very interesting, of course, is this balance of power shifting between the shipping lines and port operators, which the port operators are also openly discussing. With the strong consolidation and the alliances in shipping lines, it's clear that today they are able to exert more pricing pressure for the ports that we have seen in the past. This very clearly has led into the sort of ports needing for efficiencies. I mean, it was visible in a negative way for us in 2017, where very clearly port operators were sweating the assets and the CapEx was down. Ultimately, for you to be able to stay competitive on this one, you also need to invest for the efficiency.
This is obviously a technology and automation opportunity for us, but it's clearly also an opportunity when the port operators need to evaluate other ways to increase efficiency. One of those potential areas, of course, is the outsourcing of the services. We see some individual cases here and there. We have done it in a number of different ports, but I haven't seen a sort of any sort of fundamental shift on that one. That's clearly a still very strong upside for us moving forward. The port services market there, which is today in-house, is a multi-billion EUR annual market.
Okay. Thank you very much.
Thank you.
That's all for me.
We'll take our next question. Caller, please go ahead. Your line is open.
Yeah. Hi, it's Johan Eliason. Just a short follow-up here, talking about the container liner consolidation and what has happened. The final one was obviously now concluded only a few weeks ago when Chinese COSCO acquired OOCL. In that deal, they had to promise the officials in the US to divest the OOCL's port asset in, I think it is Oakland in the West Coast of the US. Is that a customer of you and do you see any impact for you with the potential new owner?
Actually, the Oakland has not been a major customer for us in the past. It's fairly funny in a way. Our Navis headquarters is right next to the Oakland Port, but they have bought very little from us so far.
Okay. It can only be an opportunity for them.
Yeah.
Okay. Thank you.
It seems like that there are no further questions, so thank you for active discussions. Our Q3 report will be published on October 26th, so looking forward to meet you then, and I hope that you have a possibility to enjoy the summer before that. Thank you.
Thank you.
Thank you.