Good morning, everybody, and welcome to this news conference. This is historical and exciting day, as this morning we announced that Cargotec will merge with Konecranes to create a global leader in sustainable material flow. My name is Hanna-Maria Heikkinen, and I'm in charge of investor relations.
Good morning, everyone. My name is Kiira Fröberg, and I'm the head of investor relations at Konecranes. Welcome to this event also on behalf of Konecranes. Before we start, I would kindly ask you to have a look at the safe harbor statement jointly issued by the two companies.
From Cargotec, we have also our President and CEO, Mika Vehviläinen, and also our CFO, Mikko Puolakka.
From Konecranes' side, I have here with me our President and CEO, Rob Smith, and our CFO, Teo Ottola. We'll start by a presentation by the two CEOs, the presentation is followed by a Q&A. Without any further speech, Rob, the stage is yours.
Thank you very much, Kiira. Huomenta, welcome to today's historic conference. Cargotec and Konecranes together are creating a global leader in sustainable material flow. Using 2019 financial figures and 2020 June employment figures, let me give you a overview of the company we're creating. The future company will be doing, starting at EUR 7 billion of revenue and a comparable operating profit of EUR 565 million of profitability. We will have over 800 service locations around the world and 29,400 capable, excited, motivated employees in the new company. Our companies operate across multiple industries, from container handling all the way to chemicals. That demonstrates the broad and great depth of knowledge and know-how and capabilities that our company has across the entire material flow value chain. Each of us are bringing three great companies to the new future company.
Cargotec is bringing MacGregor, is bringing Hiab, is bringing Kalmar. Konecranes is bringing our Port Solutions business, our Industrial Equipment business, and our Industrial Service business. Each of these great companies have advanced technology, have top machinery, have top equipment, combined with very advanced life cycle service capabilities. That touches and supports the entire logistical value chain across the industries that you see here. We'll be very, very well-positioned across this entire value chain. The companies that each of us are bringing are similarly sized. What I would like to point out, in the EUR 7 billion of sales, about 40% of that is service revenue. That's a starting point for us. That service revenue is a very strong capability for the diversity of the company and for the robustness of the company throughout all the industrial cycles.
Not only is the company well-positioned in a balanced equipment and service portfolio, it's very, very well-positioned across the regional portfolio. We have EUR 3.5 billion of sales in Europe, EUR 2.3 billion in the Americas, and EUR 1.2 billion in Asia. This is a very, very good footprint for an exciting and well-balanced company. Together, we're doing an exciting thing for the world we live in. It's very good for society today. It's very good for the generations tomorrow. Sustainability is also very good business. Together, we're addressing the world's sustainability challenges. Our customers are asking for this. The society we live and work in is asking for this. We're helping our customers, and we're helping the world decarbonize. We're providing outstanding safety capabilities to all our customers on a worldwide basis.
The productivity and efficiency that we provide is about making more with less and having resources available and sustainable for future generations. Part of that is maximizing the lifetime value of the equipment with that exciting equipment and service offering that the new company will have. That maximizes the lifetime value of the capital decisions that our customers will be making. I'd like to turn over to Mika to take you through the compelling industrial logic of this merger. Mika?
Thank you, Rob. First of all, I wanted to say how happy and excited I'm here today to be able to announce this great deal. In my presentation, I want to cover the five key points regarding the future company. We will be a global leader in sustainable materials flow. Together, we will be unlocking significant value for all of the stakeholders. We will be the life cycle partner for our customers, and we are solving the sustainability challenges of our customers in the material flow by combining our forces. We will be well-positioned for further growth in all of our industries and adjacencies. Lastly, of course, we are creating a real great combination of talent globally together. Together, we will be unlocking significant value for all of the stakeholders.
With the help of our people and with the great capabilities we have in our lifecycle services and the R&D horsepower we have, we can help our customers to solve the challenges they are facing in terms of the more efficiency, more sustainability, and more safety. This value creation is underpinned by the operational excellence that both companies are committed to. Can I borrow your clicker? Thank you.
There you go.
Thank you. For our shareholders, we will be unlocking significant value. We aim to grow faster than the market. We expect the new future company to reach over 10% of comparable operating profit within the first three years of the operations, and we expect to reach over EUR 100 million of synergies within the first three years after the closing. Our financial target in the long term is to have our gearing below 50%. Rob already mentioned that more than 40% of the revenue already today in the combined figures is coming from services.
We see opportunities to really become the lifecycle partner for our customers by combining the broad services network with over 800 locations, over 8,500 service professionals, and the unique technology and capabilities we have in our service offerings to be able to offer our customers a broad set of services and to be the lifecycle partner for our customers. We can combine really R&D horsepower. Both companies are already today known for their great technology offering and unique innovations. By combining those capabilities, we can drive the electrification and make all of our offering and enable our customers' industries and material flow become more sustainable. We have unique capabilities where we can combine our know-how to drive automation and robotics in our customers' industries.
With the unique capabilities we have in digitalization, we can build for more connected, more efficient, and more intelligent world with intelligent products, intelligent systems, and intelligent services. We aim to grow faster than the market. First of all, in our core equipment market, by combining our capabilities, we can drive product innovation and capabilities and grow faster than the market. Secondly, in lifecycle services, today already over 40% of our revenues, we can combine our capabilities, and we still have great opportunities to drive the services growth in our own installed bases, but furthermore also expand more and more towards the third-party equipment markets as well. With the broader shoulders of the combined entity financially, we can also look at the growth in organic and inorganic ways in our adjacencies as well. Obviously this is a great opportunity for our people.
The future company will be future-driven company committed to ethical conduct and fair treatment. We are building this company on a strong Nordic heritage, but very strong focus also on our employee engagement, diversity, and inclusion with uncompromising focus on the safety in all of our operations and in our customers' operations. With that one, I'd like to hand over to Rob to talk about the structure and the governance of the new company.
Thank you, Mika. I'd like to share how our new company will be governed. It's proposed that our board of directors will be comprised of an equal number of members from both companies. Christoph Vitzthum is going to be the Chairman of our new company, and the President and CEO of the new company will be selected and announced at a later date. This is a decision that the boards of directors of both companies will be taking jointly and will be announced in due time with due process. The name of the future company will also be determined and announced at a later stage. I think it's very, very important to note that both boards of directors have unanimously recommended this merger.
In addition, we have irrevocable votes to vote in favor of this merger in both companies, represented from the shareholders in both companies. From the Cargotec side, 44.8% of the shares and 76.3% of the votes are irrevocably committed to taking this merger. From the Konecranes side, 27.4% already of the votes and the shares are irrevocably committed to taking this step together. This is how we're going to make the merger happen. This is such that Konecranes shall be statutorily merged into Cargotec. To make that happen prior to the combination, Cargotec will split its A shares and its B shares on a 3-to-1 basis. In addition, in advance of the combination, Konecranes will propose to its AGM in 2021 an extra dividend of profits at EUR 2 per share.
The new shares will be shared with Konecranes shareholders in a mechanism such that 50% of the shares and votes of the new company will be held by current Konecranes shareholders and by Cargotec shareholders, making it the 50/50 split that you see here. The timelines, I think, are very important. We expect to finish this exciting merger at the back end of next year. The next steps are the extraordinary general meetings that we should be having. We're targeting to have those in December. Of course, we shall be going through the merger control review process with authorities in each of the jurisdictions where that's appropriate to be taking. We do all that together, by the end of next year, we expect to have successfully completed the merger.
I finish by highlighting once again the compelling logic of taking this exciting step together. Together, we'll unlock very significant value for all our stakeholders. As the lifecycle partner supporting the entire customer journey in each of the industry segments on a very diversified basis, combining outstanding equipment offering with lifecycle services gives our customers the support they need to be successful in their customer journey. Together, we're solving with high horsepower R&D and outstanding engineering, the sustainability challenges that our customers and society is facing. Combined, we have very good opportunities to grow organically and also through continued M&A activities in adjacencies around our core. We're very excited that both companies are bringing top talent. We'll be combining to create a top talent global winning team. Thank you very much. Hanna, I expect you're gonna turn it over to Q&A now, is that right?
Yes, exactly. Thank you for the presentation. now we will continue with the Q&A session. I kindly ask Mikko and Teo to join the stage, and then handing over to the operator.
Ladies and gentlemen, if you'd like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. A voice prompt on the phone line will indicate when your line is open. Please state your name and company before posing a question. There will be a limit to two questions per participant. If you have more than that, you will be able to re-queue for the questions. We'll pause for a short moment to allow everyone an opportunity to signal for questions. Speakers, we'll take our first question from our first participant. Your line is open. Please go ahead.
Yeah, hi. This is Antti Kansanen from SEB. Congrats all for a, for a great deal. My first question would be on kind of the structure of the company and the synergies. I mean, in Cargotec, we have had three kind of individual businesses within one company, and now you kind of expand that and then reflecting that to the synergies. Should we just look at the port side, or are you targeting to a more integrated business model where there would be more shared benefits, more synergies between all of the different businesses? Could you provide a bit more, more color on where the, where the EUR 100 million synergies are actually derived from? Thank you.
Thanks, Antti. This is initial estimate, obviously, and due to the kind of competitive authority regulators, we have not been able to do a detailed planning regarding. Right now, the estimate is that most of the synergies will be actually with the combined scale coming from the sourcing primarily. Obviously, when we are moving towards the regulatory approval, further integration planning will be done, and then we are probably in a better position to answer your question.
I think the important thing to remember, Antti, is the exciting combinational capabilities of the new company. The R&D capabilities, the engineering capabilities, is about enabling exciting future growth in the company. It's way too early to be talking about any synergies. Those happen, and we will be planned out during the integration process that we'll be doing in 2021.
All right. Fair enough. My second question would be on the competition authorities and potential overlaps in the port side on different market areas. Could you comment a little bit about how should we think about those processes going forward and where they are the most substantial, let's say, overlaps in the two businesses or two companies? Thanks.
Sure, Antti. Good question as well. We've assessed that very carefully and are committed to working very closely with the competition authorities in all the different countries where filings will be necessary. We're confident that doing that together will have a successful conclusion, and we expect to conclude at the end of next year.
Thank you. We'll take our next question from our next participant. Please state your name and company. Your line is open. Please go ahead.
Good morning. This is Johan Eliason from that Kepler Cheuvreux. Congratulations to a good deal. I guess they must be happy now, 20 years later on. Now, just on the
Competitive situation. I guess the overlaps is in the mobile equipment in port, on the port side. How do you foresee to handle that? I think for some of those equipment, you will have quite significant combined market shares, well above any sort of 40% threshold, would be my understanding.
Thank you, Johan. As Rob already said, we've been looking obviously this into very carefully and we will be looking forward to work together with the competitive authorities and we are confident that we are able to then close this deal hopefully by the end of next year.
I think it's important to recognize that our companies operate in global industries. On that basis we'll be having conversations with the appropriate competitive authorities on a global basis. As Mika said, we're very confident that we'll do that hand-in-hand and successfully together with those authorities and complete this in a good fashion by the end of next year.
The EUR 100 million merger synergies you talk about, have you sort of assumed some remedies necessary to get the merger through? This is a net number or?
It's the initial estimate based on the work that obviously has been done to a large extent also by external parties and obviously this number will be then looked into and to be specified during the integration planning process and I'm sure we will come back to this one upon the closing.
Okay. Congratulations. Thank you.
Thank you.
Thank you.
Ladies and gentlemen, once again, if you'd like to ask a question, please press star one. We'll pause for a short moment to allow everyone an opportunity to signal for a question. Speakers, there appears to be no further questions.
Maybe I can raise one more question if it may be so that the analysts are still warming up for this news. What kind of role does sustainability have in the future company? It seems to be a great business opportunity for all of us.
It is, if you look at our customers' industries today, they are clearly under a lot of pressure regarding sustainability. Sustainability, the pressure comes from the regulatory environment, it comes from their end users, it comes from the investors, and I think there are real opportunities to solve those problems for our customers. As important I think it is for all of us personally, as well, I think it's also an excellent business opportunity and offers great growth opportunities for the company when we can combine our technology know-how and services to help our customers to become sort of more sustainable in their operations.
I think it underpins the logic and the goodness of fit of this merger. These are two great companies that have a very common set of Nordic roots and a very strong global vision. Part of that global vision is about safety and sustainability. As Mika says, sustainability is very good business, and it's very good for the society that we work in. It's extremely motivational for our employees, top talent on a global basis, doing the right thing for the society we live in and doing good business at the same time.
Sounds like an exciting opportunity. Anything to highlight, Mikko and Teo from your side? Maybe something about the financing arrangements for the deal.
Yeah. In order to secure also the transaction we have concluded with Nordea a EUR 1.33 billion financing package. There is sufficient funding also to get the transaction through. Anything, Teo, from your side?
Nothing to add on that one, but maybe as the CEOs already were mentioning. This is an excellent opportunity for us as a combined new entity to help our customers solve the sustainability issue, as well as then, of course, also to increase the life cycle service offering to our customers, which also continues to be and in the future will be even more important part of the customer demand.
Thank you. Now there seems to be more questions from the analysts. Handing over back to the operator.
Speakers, we'll take our next question from our next participant. Please state your name and company before posing for a question. Your line is open. Please go ahead.
Yes, this is Tom Skogman from Carnegie. I have a couple of questions. My first question is why now?
You know, Tom, we were looking forward to your questions. That's a great one. This is the right time for our companies. This is the right time for the industry. As Mika said, our customers are asking for this. Our society is asking for this. We're leveraging R&D horsepower. We're putting together outstanding equipment offerings, outstanding engineering, top engineering on a global basis. Combining that with our service offering, this is exactly what the market's looking for. It's the right time for us to be doing this.
I wonder about competition authorities. I mean, you will have very high market shares in certain mobile equipment products. Would you be prepared to divest?
If needed to get this deal through or is that a deal breaker for you if you cannot, you know, get acceptance on the mobile equipment side?
You know, Tom, we obviously looked into this one and then as Rob was already saying, it's a global market with intensive global competition as well. Based on our analysis, we look forward to work with the competitive authorities, and we are very confident that we are able to get this deal through.
Okay. Then I wonder about Navis. If you manage to sell that before this deal happens, how would that, you know, impact deal terms or so on if the value will surprise someone?
Well, first of all, no decision has been done, but as we also announced today is that we are restarting the strategic evaluation that we halted during the COVID epidemic in Navis. That strategic review is starting again, it's too early to say what conclusions we will come as a company on that one. It will not have a direct impact onto this deal.
Okay. Then I wonder about this, the synergies. It's clear that there will be large synergies on the container port side, and it's clear that MacGregor is in a quite bad shape to be as a standalone company. But then the obvious questions are, you know, why should Hiab belong to this company? Why should the industrial crane business be part of this business, given the weaker kind of sales growth outlook and the fact that it's a great service business, you know, that could be placed on the stock market as an independent company, really, you know, as a cash cow, you know, and a great dividend payer, you know, in contrast to the container business where you have synergies and also growth.
Tom, what I like about your question is you're talking about growth synergies as well. We will be delivering over EUR 100 million of synergies through this merger in the first 3 years. We're also very excited about bringing these two great companies together, that R&D horsepower, the top engineering, being able to have a lifetime service offering for all of our equipment segments, all of our market segments, all of our customer segments, digitized and enabled with 800 service locations. That gives a capability with the digitalization in our own operations as well as in our customer operations to give customers fantastic life cycle value throughout their journey. There are some very exciting growth opportunities and growth synergies we expect in the future company as well.
Yeah. If I may add on that one, I think first, the MacGregor is obviously getting into better and better shape, and we are very happy how we have been able to make progress of turning around that business in the difficult market conditions. As said already, all of our customers in the material handling industry face the similar challenges. By combining the forces in terms of things like electrification, automation, robotization, advanced services, we can help to serve our customers even better in the future.
Speakers, we'll take our next question from our next participant. Please state your name and company. A gentle reminder, if you'd like to ask questions again, you can re-queue for the questions. I will open the line to the next participant. The line is open. Please go ahead.
Hi, good morning. It's Aurelio from Morgan Stanley. Thanks for taking my questions. I guess the first question is if you see any non-core parts in your portfolio of the combined company or if that's something that you would decide at a later stage. The second question would be in terms of your potential in China i.e., Do you see risks that you didn't get through antitrust there in China or in the ports side? Do you see this more as an opportunity to tap that market, which is fairly under-penetrated by both Cargotec and Konec ranes?
In terms of portfolio, I think right now the focus obviously is to work together with the competitive authorities and aiming to close the deal at the end of next year. In terms of the Chinese position, China is still a great growth opportunity for us. Overall, our combined market shares in China are not particularly high, so I don't see issues as such with the competitive authorities in there. Of course, China market has its own special character, so.
I think if you take the broader Asia question, it's exciting with the combined footprint of the future company to be over EUR 1.2 billion in Asia as a starting point, with great growth opportunity there. I think the other point to address is that the composition of the future company will be decided and run by the board of directors of that future company. That's 18 months from now when we are in the future. We expect to close this at the end of next year. We're very excited about the businesses that we're bringing to the future company together.
Okay, great. Thank you.
We'll take our next question from our next participant. Please state your name and company. A gentle reminder, there's a limit of two questions. Your line is open. Please go ahead.
Yeah. Hi. It's, Antti again from SEB. Could you comment a little bit, what are the key differences between your respective port businesses when it comes to services and producing or manufacturing the equipment? What can you learn from each other? How can you know, get one plus one, equal to three or more? Thank you.
I think in terms of the services, technology and many other areas, there is a lot we can learn from each other and there is a real opportunity to take the best practice from each other and sort of drive us even stronger company and better performance as well. Obviously, we need to uncover still some of those opportunities during the integration planning process as well. If I talk about services, it's very clear that the Konecranes Industrial Crane Services is very advanced in many way, at least looking it from outside in and much more advanced in terms of third-party services compared to, for example, the Cargotec's current.
There is a real opportunity to both companies, I still think, to grow within our own installed base, but also very much growth opportunities expanding further and further into the third party equipment space as well.
I think if you look at the service platform, the exciting technology platform enabled by outstanding digitalization and automation capabilities and services, we're able to digitalize our customers' operators. We're able to digitalize and support with outstanding service platform our customers' fleet owners. We're able to do that and give our technicians and actually all 800 service locations worldwide the capability using that service platform to give outstanding service to each of the customers in each of the segments that we operate in. I think that's a very exciting piece of the compelling logic of our future company.
All right. Thanks. Secondly, sorry to pester on the competition authorities, but can you clarify that you are of the opinion that regional market shares don't really matter on this issue? And if they would, which are the regions where your combined market shares are the highest at the moment?
As I said, that's something we need to work together with our, with the respective competitive authorities in different jurisdictions. We looked into this one and it's a very global, it's a very competitive market with the intensifying competition coming from new players as well. We are confident that there is a, solutions available for this one, which we will be working with the competitive authorities and looking for closing end of next year.
All right. Thank you.
Ladies and gentlemen, we have much time left. If there's any further questions, you are able to actually signal for a question by pressing star one. We'll pause for a short moment to allow everyone an opportunity to signal for a question. Speakers, we'll take our next question from our next participant. Please state your name and company. Your line is open. Please go ahead.
Hi, it's Colin Gibson from Bestinver. I have just one question, please, and that is regarding the synergy number, which you've communicated so far today. Apologies if you've talked through this one already. I was a little late onto the call. Can you confirm whether that number includes any savings from either the port cranes businesses or whether that number is primarily elsewhere within the future company? Thanks.
I think an important way to understand the synergies is these will be planned in detail together as we go through the integration planning process in 2021. There's a very significant opportunity in the new company to have growth synergies as well. The R&D capabilities, the innovation capabilities are very important. In addition, when we put the two companies together in the future company, there'll be some opportunity for strong volume-related synergies, including, for example, direct and indirect material capabilities. We will be planning those in detail and very carefully together in the integration planning process that happens during the course of next year.
Thanks. A very, a very professional answer, Rob, but I'm not sure I quite got the answer to my question there. Can you give us an answer on that?
As I think Rob already and I alluded earlier, was that these are the initial estimates. They've been partly done together with the third parties, obviously for the sensitivity reasons and the single largest source of the early indications is obviously coming from the volume and the sourcing as well. This is something that we need to come back to when we can actually progress with the more detailed integration planning towards the closing then.
Okay, thanks very much. Congratulations and look forward to speaking soon. Thank you.
Thank you.
Thank you.
Ladies and gentlemen, once again, if you would like to ask a question, please press star one. We'll pause for another short moment to allow everyone an opportunity to signal for a question. We'll take our next question from our next participant. Please state your name and company. Your line is open. Please go ahead.
Hi, Erkki Vesola from Inderes. Congrats also from my behalf, to this merger. How much one-off costs do you expect from this merger to create going forward?
Erkki, at this stage, I think we are only starting the integration planning. I don't think we are yet in a position to give you the indication on that one.
We obviously talk about, 8-digit numbers.
It really depends on then on the detailed planning and looking at the different sources of synergies. Again, we come back to this one when we have a more detailed plans available.
Okay. Another one. Operationally, from now on, will these, companies be absolutely independent of each other? While of course some groups will be working together, but these will be reported as independent and everything will be remained the same until the merger actually takes place.
That's the correct understanding. Exactly.
Okay. Thank you very much.
Ladies and gentlemen, once again, if you'd like to ask a question, please press star one. We'll pause for another short moment to allow everyone to signal for a question. Speaker, it appears that there's no questions for now. I'll hand the call over back to you.
Thank you for active discussions. As I mentioned clearly earlier, we will continue as two independent companies, and Cargotec will publish the Q3 report on October 22nd.
Konecranes will report the Q3 interim report on October 28th. Thank you. I think it's time to conclude now. Stay safe, everyone.
Thank you very much.