Good day and welcome to the Cargotec Corporation Second Quarter 2016 Interim Report Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Leena Liepe. Please go ahead.
Thank you. Good afternoon, ladies and gentlemen, and welcome to Cargotec's January June 2016 Interim Report Conference Call. We are joined here in Helsinki by a handful of people and also some people following the conference call. The presentation will be started by our CFO, Mika Vehviläinen, followed by our new CFO, Mikko Puolakka. After the presentations, we will also have time for questions and you should also note that our previous CFO, Eeva Sipilä, is here in the room to support with the questions. Without further ado, I would give the floor to Mika. Mika, please.
Thank you, Leena, and good afternoon from my behalf as well. Let me start with some of the highlights regarding the second quarter 2016. Generally, we are satisfied with the progress we are making in Kalmar and especially in Hiab. Obviously, the market conditions and the market environment in MacGregor continues to be highly challenging. Our order book compared to the end of last year is pretty stable, and our orders received a decline somewhat. That decline is coming almost solely from the strong decline in MacGregor orders. Kalmar orders, they're fairly flat, slightly down and Hiab had a strong order development as well. The sales declined by 4%.
This came solely from the strong sales decline or revenue decline in MacGregor. We saw good progress both in Kalmar and Hiab in terms of the revenue development. Also pleased with the progress that we made in our operating profit despite the very difficult and challenging market conditions in MacGregor. Our operating profit was up to 7.2% or EUR 65 million. Also very pleased with the strong progress we continue to make in our earnings per share. The earnings per share was up by 47% compared to the Q2 2015. Cash flow was slightly below the EBIT number. I think Mikko will cover in his presentation a bit more in detail. That was really primarily due to the strong deliveries and revenue growth in Kalmar and Hiab.
Gearing is down to 45.5%, well below our target of 50%. Also pleased with the development we had in our services orders and increase in our orders by 12% year-on-year. Looking at the market environment, obviously it's a very mixed picture in our businesses. Let me start with Kalmar and the container port business. The container traffic continues to grow but at slower rate. The expectation for the traffic growth for this year is below 2%.
However, the drivers we have talked about also in past in terms of the larger ship sizes, cascading through the different ports, the new traffic routes with the opening of the Panama Canal some time ago, and then the automation requirements are all driving a very active market development. However, there is one factor that is somewhat impacting the kind of progress at the moment, and that's a strong consolidation we see in container shipping lines. The way it looks at the moment that we will go down from roughly 16 major players to as little as three major alliances. Obviously, this is then will be impacting the container traffic in different ports, as one expect different alliances to compete the ports against each other.
This is causing some uncertainty within our port customers and this has delayed some of the decisions. We were expecting our orders actually will be up year-on-year Q2, but we saw some of the major decisions to be postponed further back due to the uncertainty in market. Still the market is at a healthy level and the activity level is pretty good as you can see from also from our order book in Kalmar. Higher market look is mainly positive with the exception of the slowdown in South America. U.S. market continues to be strong. The construction activity remains strong and is to be seen to remain strong as well.
There have been expressed some doubts regarding the decline in truck registration. It is true that the truck registration in U.S. are down from 2015 level. I would like to, however, make the note that the actual numbers are still very high. 2015 was the strongest truck registration year in last 10 years in U.S. The expectation for the truck registrations in U.S. is to be roughly at the same level as it was in 2014, which was actually in historical-wise quite strong years. Yes, some decline in truck registration, but overall still quite strong and large numbers really driven from our point of view by the activity in the construction industries.
Europe obviously varies from country to country, but overall I would say that there is a sort of, we see recovery in the market. If one looks at the truck registration numbers across Europe for the first five months of the year, one sees actually fairly strong growth happening in the market, and that's of course also visible in our numbers. The demand for services also remains healthy at the moment. Clearly the market for marine cargo handling, especially for the cargo ships, has been extremely weak. One actually has to go back all the way to the 1980s to see such weak numbers in terms of new ship orders on that one.
If one looks for anything positive on those numbers, it looks to be so that the H2 of 2016 will be somewhat stronger than H1 of 2016. Actually, we saw more ship orders in June than we have seen in the first five months of the year. However, we do not expect that the market to recover in a significant phase for some time and the situation remains still difficult with the big overcapacity in the market. The bright spots in the marine industry from our point of view is the RoRo and ferry market as well and then the specialty ships such as the research and fishery vessels which are somewhat taking place of the offshore markets in shipyards at the moment.
The demand for offshore load handling, despite some recovery in oil prices in the H1 of the year, still remains low. Demand for services is satisfactory, but very clearly we see the pressure also on services coming from the customers' efforts to try to save costs, including the maintenance. Looking quickly at the key figures, we will obviously go through these a little bit more in detail. Operating profit improvement, operating margin of 7.2%. Interest bearing net debt is down to EUR 619 million, earnings per share for the Q2 was EUR 0.63. With that one, we have a very privileged situation here today as we have two CFOs in here. First of all, I'd like to take this opportunity to thank Eeva.
For the last eight and a half years, she has served as a CFO for Cargotec. She's still here today, I think her last day in office, to be make sure that we are able to answer all questions with Mikko. Right now I'd like to hand over to our new CFO, Mikko Puolakka, who will cover the business area development and a few other things more in detail. Mikko.
Thank you, Mika. Also, good afternoon from my side. Let's start with Kalmar as the first business area. We saw an order intake decrease of 3% in Kalmar. Nothing exceptional there, mainly related to these large project orders, which depend very much on customers' decision-making process. The order book, however, strengthened by 15% compared to 2015 year-end, which of course offers a good basis for this year's sales, full-year sales forecast. Our sales in Kalmar grew by 7%, especially in Americas in large projects. As Mika mentioned, the profitability improved to 7.6% versus last year's 7.3%.
And, uh, the main contributors to this profitability improvement have been the, uh, uh, continuous improvements in, in, uh, our profitability improvement measures as well as new product, uh, development. Uh, however, the profitability could have been also even better, uh, if we would not be investing in future, uh, development, i.e., uh, in our R&D activities, uh, including also the digi-digitalization. Then moving to Hiab, which has, uh, which had basically in all measures almost, uh, a kind of record quarter. If we look, uh, the order intake, uh, it was, uh, EUR 239 millions , a, uh, plus of eight percent. And I would say that the growth is coming almost in all Hiab's product categories and in all market areas. So very, very, very strong, strong market position in this respect.
Hiab's order book decreased by 7% from end of 2015 level, mainly because of the very good deliveries, especially towards the end of the second quarter. Hiab sales were EUR 283 million. This is +19% versus year-on-year, and this is a record high quarterly sales in Hiab's history. Profitability as well, record high, 14.7%. We had a very good delivery quarter. Of course, this also continuous improvements what we have been doing in the delivery capabilities. For example, our Polish factory have been contributing to the profitability improvement.
Of course, one should not expect also going forward that the curve here or the profitability levels will be or can be maintained. We have had an exceptional quarter in the second quarter from the delivery excellence point of view and going forward. For example, the Q3 is expected to be somewhat lower due to the quarterly fluctuation and the seasonality effects. Finally from business areas point of view, MacGregor, where already Mika concluded that the market situation remained very challenging. The order intake declined by 32%, order book down by 16%, and sales down by 37%. Our profitability was 2.7%, excluding the restructuring charges. Also to a certain extent impacted by the unabsorption of certain costs.
This topic we have basically addressed now by starting further reductions. As an example there, we have announced 85% reductions in Norway. From there, we expect roughly EUR 2 million savings starting from quarter four this year, and then EUR 7 million in 2017. Our cash flow from operations remained healthy. Cash flow for the Q2 was EUR 56 million. Cash flow was to a certain extent impacted by the very high deliveries, especially in the H1 of June, which increased our accounts receivables. If you look our working capital, basically there, the accounts receivables have increased. These are normal accounts receivables which will be then settled in the coming next few months time. Originating from these June deliveries.
If we look at the sales mix. Now basically due to Hiab's excellent performance, Hiab's share of the total sales has increased from 25% to 31%. Services represent now 24% of the total company sales. Looking the regional split, Americas and EMEA have increased while APAC has been decreasing, and the APAC decrease is very much linked to MacGregor's sales and order intake performance. When we look the sales split, by business area and by geographical split there, no major changes in Kalmar, Hiab, and MacGregor. In Kalmar, Americas is slightly higher than year ago. This is mainly coming from this larger projects sales and POC. Basically originating from orders received in the past quarters.
As a last slide from my side, if we are looking the financial metrics, positive trend continues. Our rolling 12-month return on capital employed was 11% versus 9.8% a year ago. The Q2 operating profit 7.2%. All in all, good development. And in return of capital employed, we have the long-term target to reach 15%. With those words, I would then hand over back to Mika.
Thank you, Mikko. A few words about strategy execution, where we are with that one. As you know, we have set our strategy to be the leader in intelligent cargo handling. To support the execution of that strategy, we have three corporate level must-win battles: the world-class service offering, lead in digitalization of cargo handling industry, and building world-class leadership. In terms of the services, obviously, I'm pleased with the 12% increase in the order intake, but frankly, somewhat disappointed with the revenues that they're actually pretty much staying flat compared to situation year ago. This is partly due to the fact of the market environment, especially MacGregor, but it's also evident that we need to be very determined in our efforts.
We have taught our customers for many years to sort of go elsewhere also to buy services. It will take some time for our messages to get through that you can get competitive services, high-quality services on time from Cargotec as well. Many of the actions that we are taking, they are actually proceeding on schedule in terms of the new structures, processes, tools, and systems. The leadership in digitalization, I'll take a few examples to that one. We have now launched our first products that are based on the new Cargotec IoT cloud analytics platform. One example of that one is the Kalmar Insight, which is real-time performance and productivity tool for terminal operators that is combining on time, real-time information from the terminal operating systems, equipment performance and maintenance systems as well. In our software business, we're also very pleased with the development.
We set up or combined all of our software assets under one software division in Kalmar that is now called Navis. We are continuing the integration of the Interschalt software business together with the software assets of Navis and the XVELA cloud-based terminal cooperation platform, and the combination and joint offering these products has got a very good reception from our customers. Overall, we still keep on investing and increasing our R&D expenditure. Year-over-year, our R&D expenditure is up again by 17%.
We are investing especially into the software capabilities, automation, electrification, and hybrid products, as well as renewing our products and in that way gaining better competitive advantage, as well as the new cost points that is also visible in our revenue development, both in Hiab and in Kalmar. We are building world-class leadership, our new leadership training program, where we are aiming to develop common performance-based corporate culture is also proceeding extremely well. We have discussed also in the past, in our quarterly communication as well as in capital market days, about the need to improve further our control environment improvements. Those investments are still ongoing in terms of the tools such as SAP, processes and systems.
During this year, we have actually done a self-assessment of all of our operational units. All of our operational heads of the units have now signed off those self-assessments. Based on those assessments, we have found many, several improvement opportunities still in our control environment. As a part of increasing our control environments and tackle the change in market expectations and the fact that we are actually operating in very sensitive industries and some of the sensitive regions, we are further enhancing our resources in ethics and compliance. I'm very pleased to announce that Anna Romberg has now joined as a new vice president for ethics and compliance, joining us from Telia Company lately. This will remain very much in our focus area and development area moving forward as well. Outlook is remaining unchanged.
We expect the revenues to be at the level or slightly down from 2015, and operating profit, excluding restructuring costs, to improve from 2015. With that one, I think we are open for questions and answers.
Thank you, Mika and Mikko. We are ready for questions. Let's start here in the live audience in Helsinki.
Yeah. Pekka Spolander from OP Financial Group. A few questions. First, about the Hiab margin. If I recall right after the Q1 , you indicated that it was also somewhat unexceptionally strong, and we should not maybe expect that the improvements from last year will stay at those levels. Now in the Q2 , the improvement was even larger. Could you talk a little bit more about Hiab and what's actually behind this, and was this Q2 strength also a surprise for you?
I know we are running out of excuses here too, it really was an exceptional quarter in a sense that if I go a little bit in the background, what's obviously happening is that when we shifted the production out of Sweden into the Poland, about two years ago now, if I remember correctly, obviously it takes some time to ramp up the production capabilities. We have invested into our sort of lead time improvements and production processes and tools and systems, that's clearly starting to pay off. Our lead times are actually now down to roughly five weeks, which is exactly what we've been targeting at the moment.
What's happening is effectively that as you can see that we have eaten into our order backlogs, so we had an exceptional delivery performance, especially out of Poland, obviously helped by the market situation. As Mikko was already indicating, we kind of emptied the slots in Q2 and obviously also declined the order backlogs. One cannot expect similar sort of delivery performance in Q3, which is seasonally lower anyway. Certainly I think the other factors remain pretty much the same, but the top line was higher than we clearly expected in the Q2.
Yeah. Traditionally, the Q4 has been the clearly strongest in Hiab. Can we or should we expect that to take place also this year or?
We'll have to see obviously on that one. Hiab is the one that has the shortest lead times. At the moment, the market indicators are still positive in here, both in Europe as well as in U.S.
The other question, the corporate costs, they increased quite a lot, and you refer to the weaker results in associated companies and some other costs. Could you open a little bit about of this and what will be the normal level in coming quarters?
We are somewhat up and the main running costs are related to the control environment influence. We talk about SAP investments are still up for us. Obviously, that will sort of run its course at some stage. We have increased some of our staffing in those areas as well. The other area is the digitalization effort. Some of that one we are actually doing on corporate level. We have increased our capabilities, brought some world-class people into the organization and are also funding some of the research and projects from that level.
Then we had a kind of one-off type of an exceptional cost that were primarily related to our ownership in of sort of associated company in China, where we have, I think if I remember now correctly, EUR 7.7 million cumulative costs booked for this year on that one. If you exclude that one, you'll, you should get pretty close to the run rate.
Finally, about the outlook for MacGregor this year. I think in Q1 report, you indicated that we could expect the EBIT to improve both in euros and in margin. Is that still valid what we should expect?
Well, if you compare that to the last year results, including the one-off kind of settlement we had with the customer, that's the case. Overall, I think the market situation remains quite challenging. The numbers you've seen in Q1 and Q2 are probably fairly indicative what you will see for the rest of the year.
Okay. Thank you.
Do we have other questions from the room? No. If not, operator, please could we have the questions from the conference call?
Yes. If you would like to ask a question at this time, please press the star or asterisk key followed by one on your telephone. Please ensure the mute function on your telephone is switched off to allow the signal to reach our equipment. Again, please press star one to ask a question. We will now take our first question from Manu Rimpelä from Nordea. Please go ahead. Your line is open.
Okay. Good afternoon. It's Manu from Nordea here. Firstly, can I just get back to the other cost you mentioned, EUR 7.7 million of non-recurring type of costs. That's treated as operational in the other costs. Can you split that between the quarters? If, if we would have or we should not expect that in the H2 of the year, the margins would have actually been even better in Q2. Is that the right way to think about it?
Manu, this is Mikko Puolakka. Yes. Basically, you could consider this as quite extraordinary or one-time type of costs. They are related to the financial performance of these associated companies. As Mika said, we have not had this kind of items, for example, in during last year, 2015. We don't report this as kind of one time type of cost as this is a normal business for us and it's related to the associated companies.
Okay. Is it the write-down or is it just reporting the losses from the associated companies here?
This is mainly related or this EUR 7.7 million is related to the associated companies.
Okay. In terms of the MacGregor, you mentioned the EUR 10 million programs. I just wanted to understand that is that a new program that you didn't previously have, or is it part of the ongoing programs?
What I mentioned in my part of the presentation is basically related of on top of the EUR 25 million program, what we have announced last year. This is a continuation to those activities.
Okay. How do you see the, maybe this is a bit more to what's Mika, but how do you see the automation market? I think, there's been some quotes from Bloomberg, for instance, where you commented that you expect to close automation orders in the second half of the year. Is that still the case or has the market situation changed as you mentioned in your remarks, that you don't expect to close those anymore?
We have large number of discussions going on with them, quite a lot of different port authorities. The interest, if anything, is increasing for the automation. In terms of the active cases, we have few that are actually in the negotiations at the moment. I would still expect to close some automation deals in the H2 of the year.
Okay. Final question just on Hiab. You mentioned that the market situation still remains good and just trying to understand because my impression of the truck market is that it's very cyclical and we already started to see the European market that is slowing down following the Brexit cost uncertainty. Is that something that you would agree to, that you're starting to see the market is getting a lot more nervous and slowing down in terms of new ordering or you haven't seen anything?
Anything yet, and one needs to be careful. Our Hiab revenues are actually not very strongly linked to the truck registration as one would expect. When I look at the past years, it's very clear that our sales are a lot more closely correlated with the construction index development, and that's very visible in U.S. as well, that even though the truck registration has slowed down somewhat from the highs of 2015 to 2016, our revenues in U.S. are still actually increasing. We have seen no slowdown in Europe either.
Okay. Thank you very much.
Thank you. We will take our next question from Antti Suttelin from Danske Bank. Please go ahead.
Hello. This is Antti from Danske Bank. I have a couple of questions. First of all, MacGregor restructuring. You have announced quite a few reductions, what I would like to hear is that what is the targeted level for number of employees at the end of 2016? For comparison, at the end of 2015, you had 2,500 employees. My question is how many will you have at the end of this year based on what you have announced?
Based on this reduction. This is Mikko. Based on this reduction, we are cutting now 85 persons from our own workforce. Of course, we are having also external contractors which are not reported in our headcount. Also in that area we are doing reductions. We are not indicating to the as of today yet any exact number for the end of this year. We are actively looking the savings opportunities, there we have mentioned now this 85 persons and continue looking further optimization. It's also maybe good to remember that when you look at the MacGregor absolute headcount development, obviously we have had increase this year from the Interschalt acquisition and the services arm of Interschalt is now part of the MacGregor headcount numbers.
Yeah. That's why I'm asking. you know, it would be very helpful if you could give the number of employees that you expect at the end of this year, given the acquisitions and the reductions you are making.
We don't know. Obviously one needs to remember that the actual potential reductions of the labor are always subject to the labor negotiations, especially in the Scandinavian and North European countries. We need to see how the market develops and react accordingly.
Okay, okay. Then on Kalmar, I mean, Your peers have commented in the past that the slowdown in container growth is having an impact on the equipment demand. Now, as I listen to your statement in this call, it seems that you are kind of formulating this matter a little bit differently. Could one say that you are starting to agree with what the others have been saying previously, i.e., the market is maybe getting a little bit softer for Kalmar?
Actually we see the market activity level. If I look at our funnel, for example, we have a pretty good CRM system in Kalmar, and actually that funnel, if anything, has increased. The activity level is less. The one factor we probably did not take into account and was not visible in the beginning of the year was this very drastic, unprecedented consolidation that is now taking place in the container shipping industry. I mean, we are going from six to roughly 16 players down to three in matter of sort of 18 months or so. Obviously these alliances will sort of start to put the pressure on the container ports and compete them to each other.
Very clearly, while this process is going on, we have seen hesitation of some of the customers to make big, large-scale commitments. That's probably thing that has changed. I don't think that. Again, the drivers we have talked about in terms of the container ship sizes increasing, the routes, the automation, those are still very much valid and visible in our day-to-day dealing with customers. I can't obviously talk in behalf of our competitors and what they are seeing, but again, our revenues, they're up year-on-year and our orders are pretty much flat, so.
Yeah. Yeah, thanks. Then on this EUR 7.7 million, if I look at your profit and loss account, I can see a first year figure for the share of associated companies and joint ventures net income, and that number in your P&L is EUR 1.8 million. I'm a little bit lost now. What is EUR 7.7 and what is EUR 1.8 million? Could you help, please?
Yeah. This EUR 7.7 is related to the associated companies. Part of that cost is in the line called share of associated companies and joint ventures net income. Part of that is in other operating expenses. You don't see the EUR 7.7 directly from our P&L.
Okay. What you say is that the EUR 7.7 is included in the corporate cost line of your EBIT table, so to say.
It's above the operating profit, yes.
All right. Finally on Hiab sales. Now that I look your order book it's 5% negative year-over-year. It was still positive at the end of Q1. Should this mean that we should actually expect a negative sales growth for the remainder of this year?
I don't think so. I mean, one has to remember the orders are still up year-on-year. As I said, what happened is that now, and that sort of the especially the Polish factory is now really getting into the sort of a role in that one. We've been eating up into our order backlog and our lead times have come down from sort of seven, eight weeks down to five weeks, and that's where the surge of the deliveries comes.
Okay. Yeah, what I was asking is that the order book was down 5% year-over-year. You wouldn't take this an indication that sales for the H2 would?
Sorry, I missed your question. Yeah, the Hiab order book always has some we land every now and then discuss larger governmental orders in their use of defense orders. I'm looking here. I don't think we have had any this year at the moment. That's probably where the difference comes at the moment. We had some of those. We actually had two, I think, fairly major deals last year. We had the Indian deal, and then we had the one with Rheinmetall, MAN as well. Those were both in order books. Obviously we are now starting to eat into those ones, and we haven't got any large-scale defense orders this year.
Yeah. Okay. Thank you very much.
Thank you. We will now take our next question from Tom Skogman from Handelsbanken. Please go ahead. Your line is open.
Thank you. I have a couple of questions. I would like to start with asking about Hiab, where you have closed down operations in Sweden. Were there still some operating costs booked as kind of normal costs there, so actually the performance was even better? Are there no costs from that anymore?
There are no costs related to Swedish production anymore in this year's numbers.
Thank you. In shipbuilding, we have seen that Palfinger has, you know, decided to see this as an opportunity, this massive downturn, and you start to have a decent balance sheet as well. Are you more also looking into acquisition opportunities in the shipbuilding industry?
Looking at some smaller acquisitions. The thing is that we obviously are in a. Our focus very much still remains in the cargo handling part of the marine shipping, and we are already quite a gorilla, if I use that word in that one. There are very few, if any, large-scale opportunities for us. We are looking at potentially sort of enhancing our product line with certain technology and smaller acquisitions at this stage.
All right. Then I have to ask about these internal costs again. I mean, sorry for keeping on this, but it's quite a big number. I have to ask, you know, why do you book these big losses here now? A bit, you know, what Manu was asking earlier, is this stemming from any write down, or should we expect that these associated companies have some exposure to shipbuilding and that losses might even accelerate the coming quarters, and that we should, you know, be scared of larger negative numbers on this line the next quarters?
These are related to, I guess, we have also said which are the joint ventures. This is the Rainbow Heavy Industries in China. It's a publicly listed company, you can also check from their annual and interim reports the financial performance. Maybe I can help on that one. RHI, if you look at their reporting, they actually had a fairly massive write-off in connection of Q1, Q2. Q4, and obviously as an associated company, we had to sort of book the relative part of that one. It's a one-off type of write-off for them related to some of the assets they had in the house.
The Rainbow Heavy is slightly or somewhat associated with the marine industry in terms of they are actually delivering components and parts for the equipment manufacturers such as ourselves as well, but they also engage in some other areas as well. Also from their results point of view, this was a one time fairly from in their scale, fairly massive write-off they had to do. That obviously sort of came partly down to our books then as well.
Okay, thank you.
Thank you. We will take our next question from Philip Saliba from HSBC. Please go ahead. Your line is open.
Hi, Philip here. Thank you very much. Could you maybe give an idea on how the R&D spending will develop in the next quarters and also in the years to come? The same then also for CapEx. Also, maybe give an idea on the CapEx that we have seen this year, what they've been, what they have been spent on and also when we should expect the ramp up. Then in terms of Hiab, you've introduced new LOGLIFT cranes. Could you give an idea on how your competitive position looks like in the forestry business and how much further potential you see to grow this further?
In terms of regions, an idea on how you see the Southeast Asian market and also the South American market. Do you see a troughing there, and sort of a recovery? Thank you.
Thank you. Quite a few questions. Let's see if we can capture. Maybe I'll start with R&D and Mikko takes care of the CapEx. I can then talk about the Hiab block lift forestry and then the sort of the other regions as well. If I start with R&D, we still plan our strategy is very much is that we want to kind of outspend and outrun our competition. By doing that one, we are able to turn our product more competitive. We are trading fixed cost into the operating margin. Then obviously the plan to also bring new products faster into the market than our competitor with a more competitive cost point as well.
Obviously, one also needs to be sort of careful to see what the market development is and but at this stage, for this year, we still anticipate that R&D spending acceleration to happen in line what you have seen so far. For the, for the next year, we then obviously we need to see that differently. Very clearly, we have seen that R&D spending to pay off in terms of operating margin and revenue development as well. Mikko, on the CapEx side.
Yeah. If we first look, the CapEx, year to date, so the CapEx excluding acquisitions and customer financing was EUR 16 million, and the customer financing was EUR 18 million.
If we look the full year CapEx guidance, that would be roughly EUR 75 million with our depreciation of EUR 80 million. The EUR 75 million includes also the customer financing. On your question on Hiab, LOGLIFT. Yeah, we are very excited. I'm very excited about what we've been doing. Again, one sign of the R&D spending paying off. The new generation products have a new control systems that certainly improve the kind of the operational performance. One very exciting feature that the product now has is so-called HiVision concept, that actually the crane is equipped with the cameras and the operator is actually able to operate the crane virtually, for example, from the truck cabin.
In terms of the safety, convenience and performance, that's a world-class sort of revolutionary idea in terms of the truck crane operation and has got an excellent, I think, reception from the market. Overall, obviously, our position in forestry crane has been a little bit a sad story in the past. Couple of years where we have lost our position and we certainly are optimistic that with the new generation products we are gonna be more competitive in that marketplace as well. When it comes to your question about South America, it's been a very difficult market I think across the board really so far and at least I'm not aware of seeing any particular recovery at this stage in there. Southeast Asia actually it has been relatively okay for us.
I mean, China has slowed down in some of the areas but, we've seen the market development at least in our solution side in Southeast Asia to remain relatively healthy.
Okay, thank you.
Yeah.
Thank you. We will now take our next question from Manu Rimpelä from Nordea. Please go ahead. Your line is open.
Thank you. Just a quick follow-up question. Can you just say in MacGregor that are you taking on deliveries for MacGregor from the ships that were order at the end of the last year or are we starting to see already the you taking on deliveries from the ships that have been ordered during this year in the Q2 ?
A little bit both and I mean the order lead times vary quite a bit. With the strong slowdown now and obviously more shipyard capacity becoming available I would expect that the actually the lead times would shorten. From the ship order to our equipment order one would expect shorter lead times when there is actually more capacity available. I can't be particularly precise but obviously we are still taking orders from end of last year but we are also already booking orders from the ships ordered this year.
If I may tempt you going into the Q3, are you kind of seeing that the momentum is still continuing downward or how do you think about the order intake or in the H2 of the year for MacGregor?
I think, I would not expect a drastic movement one way or the direction that the market overall is still pretty weak.
Thank you.
Thank you. There are no further questions in the queue at this time.
If there are no questions here in the room, I would like to say thank you everybody for your active participation and wish you all a nice summer. Thank you.