Increased revenues - profitability negatively impacted by non-recurring factors
On February 22, 2022, Cavotec signed an agreement to divest 100% of the Airports business to US based investment company Fernweh Group. On July 29, 2022, Cavotec completed the divestment of the Airports business. As a result of the divestment, the Airports business is reported as a discontinued operation.
JULY–SEPTEMBER 2022 NEW CAVOTEC (EXCL. DISCONTINUED)
JANUARY–SEPTEMBER 2022 NEW CAVOTEC (EXCL. DISCONTINUED)
JULY–SEPTEMBER 2022 TOTAL (INCL. DISCONTINUED)
JANUARY–SEPTEMBER 2022 TOTAL (INCL. DISCONTINUED)
Key events during the quarter
Key events after the end of the quarter
Comment from the CEO
Still unsatisfactory profitability, despite stronger revenues
In the third quarter, New Cavotec’s revenues increased almost 44% to EUR 42.0 million compared to the same period last year. The strong development is partly explained by a capacity ramp up in Shanghai, which meant that we could catch up on Covid related delays. During the quarter we reduced the backlog of delayed orders by EUR 7 million, down to EUR 3 million and we expect to reduce it further.
However, during the quarter, the profitability in New Cavotec was very unsatisfactory. This has been impacted by several different factors. Starting in 2021 we invested in our organisation for growth, which is not yet in sync with revenues. We added net 65 people in the past twelve months. Existing orders with low margins also had a negative effect on our profitability. In addition, there were material cost increases, increased transportation costs and supply chain constraints, which were not fully compensated for in time. Furthermore, there were one-off costs of EUR 1.0 million arising from the departure of the prior CEO.
In total, the above factors lead to an EBIT in New Cavotec in the third quarter amounting to EUR -0.4 million (0.2).
Completing the divestment of the Airports business was a strategically important achievement. However, it took more time to complete than anticipated, leading to higher transaction costs and additional impairment. The group results for the quarter include a loss from discontinued operations of EUR 5.1 million.
The combination of lower profitability in New Cavotec’s core business (Ports & Maritime, Industry and Services) and the one-off impact of the divestment led to Cavotec requesting, and our lenders subsequently agreeing, to waive compliance with covenants in both the third and fourth quarters of 2022.
Looking at the overall development of New Cavotec’s core business, there was an increase in shipyards building new ships with on ship shore power. To electrify new ships is almost a prerequisite in today´s shipping market, due to increasing legislation and demand for sustainable solutions. Going forward, we expect a strong outlook in our retrofit business to install shore power on existing container vessels, driven by an increasing demand on international shipping companies to be able to switch off their diesel power in ports. In addition, during the quarter we have won an order for close to EUR 5 million for a MoorMaster NxG installation at a container terminal in South America.
Revenues and order book for our industrial applications improved due to strong demand across diverse markets and customer segments. We see significant interest in our high-power charging solution package for the mining and heavy construction segment, where substantial resources are directed towards net-zero and at decarbonization generally. We expect such investments to accelerate and adoption rate to further progress in the future.
We have intensified our sales efforts to grow service revenue from our installed base of port installations worldwide from periodic overhauls and increasing spare parts volumes.
I joined Cavotec six months ago. I have visited customers and end users, met with many of our employees and I have also participated in assembling products at our sites worldwide. I can clearly see that we have a huge potential in Cavotec, a strong need for our products and that we have a skilled workforce. However, it is also clear to me that there are challenges and hard work to be done, which is evident in this quarter’s result.
A new chapter in Cavotec’s history starts now when we finally can focus on our core business with full force. I am very optimistic about our future, and I am looking forward to working with our teams to create a sustainable and profitable business.
Stockholm, November 30, 2022
Chief Executive Officer
Quarterly Reports on www.cavotec.com
The full report for the period January-September 2022 and previous quarterly and full year reports are available at: http://ir.cavotec.com/financial-reports
This information was distributed by MFN https://www.mfn.se/