Port Cranes - REVIEW BY THE CEO...EQUIPMENT MARKET SHARE AND SIZE IN 2013 13 Review by the CEO...

REVIEW BY THE CEO

AGM March 27, 2014Pekka Lundmark

© 2014 Konecranes Plc. All rights reserved.

• Ryan Flynn is returning to Konecranes Plc and will start on June 1, 2014

• VP, Strategy & Business Development at BlueScope Steel in Shanghai

• Head of Region APAC at Konecranes in 2009-2013, joined Konecranes in Shanghai in 2005

• Born 1971 and holds BCom and MBA degrees

RYAN FLYNN APPOINTED EXECUTIVE VICE PRESIDENT, HEAD OF BUSINESS AREA EQUIPMENT

28/03/2014Review by the CEO2


• My two years in Asia

• Key financials in 2013

• Market situation

• Strategy implementation

AGENDA


© 2014 Konecranes Plc. All rights reserved.28/03/2014Review by the CEO4

MY TWO YEARS IN ASIA


THERE ARE MORE PEOPLE LIVING INSIDE THIS CIRCLE THAN OUTSIDE OF IT



Pelindo III Signing Ceremony


Caterpillar Plant on Batam


NEW FACTORY IN JEJURI, INDIA



POLLUTION CAUSING ATTITUDE CHANGE



KEY FINANCIALS IN 2013


GROUP ORDERS RECEIVED AND SALES2013 Orders: 1,920.8 (1,970.1) MEUR, –2.5%* | Net sales: 2,099.6 (2,171.5) MEUR, –3.3%**


0

500

1000

1500

2000

2500

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

MEUR

*–0.1% at comparable currencies, **–1.0% at comparable currencies


SERVICE MARKET SHARE AND SIZE IN 2013


In-house service67%

Competing external suppliers

~75%

Konecranes~25%

Openmarket

33%

Note that market share and size are based on Konecranes’ estimates, as no comprehensive statistics are available.Total market >10 BEUR Open market >3 BEUR


EQUIPMENT MARKET SHARE AND SIZE IN 2013


Konecranes13%

Other suppliers87%

INDUSTRIAL CRANES AND COMPONENTS, CONTAINER HANDLING EQUIPMENT

Market size ~10 BEUR

Note that market share and size are based on Konecranes’ estimates, as no comprehensive statistics are available.


GROUP EBIT & MARGIN2013 EBIT: 115.5 (138.3) MEUR, –16.5% | MARGIN: 5.5% (6.4%), excluding restructuring costs


0%

2%

4%

6%

8%

10%

12%

14%

0

50

100

150

200

250

300

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

EBIT MARGINMEUR


2013 RESULT – POSITIVES AND NEGATIVES


Service profitabilityContinued strength in most North American businesses and several improvements in EuropeFixed cost development thanks to restructuring actionsAll-time high order intake in Port Cranes

× 14% CAGR in 2003-2012 came to a halt in 2013

× Extra costs in heavy-duty industrial crane and shipyard crane projects

× Heavy IT system development continued to burden result

× India


• Two restructuring programs with a combined cost savings target of EUR 40 million (10 + 30) launched in 2013– Consolidation and transfer of production between sites

– Consolidation of and efficiency improvements in administration and support functions

– Consolidation of sales units to cover larger areas

– Improving productivity and restructuring of underperforming operations

• Personnel impact over 700

• Timing of cost savings– EUR 10 million in 2013

– EUR 15 – 20 million in 2014

– EUR 10 – 15 million in 2015

ACTIONS TO IMPROVE EFFICIENCY AND REDUCE COSTS



EPS AND DPS


0.330.43

1.17

2.17

2.83

1.08

1.35

1.11

1.47*

0.85*

0.26 0.280.45

0.800.90 0.90

1.00 1.00 1.05 1.05**

0,00

1,00

2,00

3,00

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

EPS DPS

*Approx. EUR 1.54 in 2012 and EUR 1.20 in 2013 excluding restructuring costs**Board’s proposal to the AGM


MARKET SITUATION


• Konecranes has a crane factory in the city of Zaporozhye

• Measures taken to reduce operational risks

• Transfers of production and depreciation of Hryvna expected to affect EBIT by approx. EUR 6 million in 2014

UKRAINE



GROUP ORDER BOOKQ4 Order book: 893.5 (942.7) MEUR, –5.2%


0

200

400

600

800

1000

1200 MEUR


CAPACITY UTILIZATION: EU27 AND USA


SOURCES: Eurostat (latest data point Q1/14), Federal Reserve Bank of St. Louis (January 2014)


PMI’S IN THE BRIC COUNTRIES


SOURCES: HSBC/Markit, (latest data point February 2014)


CONTAINER THROUGHPUT


-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%1

/0

8

4/

08

7/

08

10

/0

8

1/

09

4/

09

7/

09

10

/0

9

1/

10

4/

10

7/

10

10

/1

0

1/

11

4/

11

7/

11

10

/1

1

1/

12

4/

12

7/

12

10

/1

2

1/

13

4/

13

7/

13

10

/1

3

1/

14Gro

wth

Y/

Y

Source: RWI/ISL Container Throughput Index


MARKET SENTIMENT



STRATEGY IMPLEMENTATION


KEY STRATEGIC INITIATIVES


INDUSTRIAL INTERNET

1

We make machines intelligent and aware of their condition, and network them to create real-time visibility for enhanced safety and productivity. This unique service that we offer our customers differentiates us from our competitors and warrants a price premium.

EMERGING MARKETS OFFERING

2

We develop ‘mid-market’ products with high quality but lower price points, and strengthen our position in emerging markets.

OneKONECRANES

3

We streamline our way of working and modernize our information systems to boost productivity and lower our cost level.


INDUSTRIAL INTERNET

We make machines intelligent and aware of their condition, and network them to create real-time visibility for enhanced safety and productivity. This unique service that we offer our customers differentiates us from our competitors and warrants a price premium.

Safety

421Productivity

15,0%

27 Review by the CEO 28/03/2014


INDUSTRIAL INTERNET


Industrial revolution Internet revolution

KONECRANES TRENDS

1750 19401800 1900 2000 202019801960

End of 1980’s Digitalization

• AC drives• PLC

2002 Condition monitoring

• Control Pro

1990sCommercialized internet

2010 Internet technology

• Sensor technology• Smart features • Remote condition monitoring

and predictive maintenance• Remote-based data collection

and analysis, TRUCONNECT®

1885 First automobile

1876 Telephone

1710 Steam engine

Industrial internet


KEY STRATEGIC INITIATIVES


INDUSTRIAL INTERNET

1

TRUCONNECT® product family launched in several countries

Thousands of items of equipment with a remote connection

EMERGING MARKETS OFFERING

2

Several product types in design and testing phase

First product launch in near future

OneKONECRANES

3

New CRM and HR systems in global use

Service and Equipment ERP systems and harmonized processes cover ~20% of Group sales


KONECRANES ARTG• Konecranes is the first company

offering automation for RTG container terminals

• Customers moving to an automated operating model can start with their current yard infrastructure

• The ARTG system offers all benefits of automation: operational cost savings, greater productivity, increased predictability and increased safety


KONECRANES AGILON• Agilon is a patented materials

inventory and management system• It consists of a net portal, a

shelving system, and a robot that travels within the shelving

• It picks the parts listed by the operator and brings them straight to the service point

• Connected real-time with parties in the supply chain


OUR JOURNEY


2005–2010- Capitalizing on growth

seeds planted earlier- Wider installed base and

consolidation through key acquisitions

2011–2016- Becoming a truly global

company with harmonized processes and systems

- Increasing addressable market with new product segments

- Building a base for new services using modern technology, “Industrial Internet”

2017–- Lifting customers’ businesses with smart, productivity-enhancing products and services

- World class efficiency and platform for sustained profitable growth


EMPLOYEE SHARE SAVINGS PROGRAM


Over

1,700 employees

More than

40countries

15%of employees

globally

1/3of employees

in Finland


NOT JUST LIFTING THINGS, BUT ENTIREBUSINESSES


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