Cargotec Corp
OMXH:CGCBV
| US |
|
Johnson & Johnson
NYSE:JNJ
|
Pharmaceuticals
|
| US |
|
Berkshire Hathaway Inc
NYSE:BRK.A
|
Financial Services
|
| US |
|
Bank of America Corp
NYSE:BAC
|
Banking
|
| US |
|
Mastercard Inc
NYSE:MA
|
Technology
|
| US |
|
UnitedHealth Group Inc
NYSE:UNH
|
Health Care
|
| US |
|
Exxon Mobil Corp
NYSE:XOM
|
Energy
|
| US |
|
Pfizer Inc
NYSE:PFE
|
Pharmaceuticals
|
| US |
|
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
| US |
|
Nike Inc
NYSE:NKE
|
Textiles, Apparel & Luxury Goods
|
| US |
|
Visa Inc
NYSE:V
|
Technology
|
| CN |
|
Alibaba Group Holding Ltd
NYSE:BABA
|
Retail
|
| US |
|
3M Co
NYSE:MMM
|
Industrial Conglomerates
|
| US |
|
JPMorgan Chase & Co
NYSE:JPM
|
Banking
|
| US |
|
Coca-Cola Co
NYSE:KO
|
Beverages
|
| US |
|
Walmart Inc
NYSE:WMT
|
Retail
|
| US |
|
Verizon Communications Inc
NYSE:VZ
|
Telecommunication
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
42.14
80.5004
|
| Price Target |
|
We'll email you a reminder when the closing price reaches EUR.
Choose the stock you wish to monitor with a price alert.
|
|
Johnson & Johnson
NYSE:JNJ
|
US |
|
|
Berkshire Hathaway Inc
NYSE:BRK.A
|
US |
|
|
Bank of America Corp
NYSE:BAC
|
US |
|
|
Mastercard Inc
NYSE:MA
|
US |
|
|
UnitedHealth Group Inc
NYSE:UNH
|
US |
|
|
Exxon Mobil Corp
NYSE:XOM
|
US |
|
|
Pfizer Inc
NYSE:PFE
|
US |
|
|
Palantir Technologies Inc
NYSE:PLTR
|
US |
|
|
Nike Inc
NYSE:NKE
|
US |
|
|
Visa Inc
NYSE:V
|
US |
|
|
Alibaba Group Holding Ltd
NYSE:BABA
|
CN |
|
|
3M Co
NYSE:MMM
|
US |
|
|
JPMorgan Chase & Co
NYSE:JPM
|
US |
|
|
Coca-Cola Co
NYSE:KO
|
US |
|
|
Walmart Inc
NYSE:WMT
|
US |
|
|
Verizon Communications Inc
NYSE:VZ
|
US |
This alert will be permanently deleted.
You don't have any saved screeners yet
Good afternoon, ladies and gentlemen, and welcome to Cargotec's First Quarter 2021 Results Call. Please pay attention to the disclaimer in the presentation. Just a kind reminder that we cannot discuss any merger-related topics in this presentation due to the U.S. securities laws. Cargotec's first quarter orders were strong. Orders received increased by 43%, and also our profitability improved. Service orders received increased by 11%. We also announced during the first quarter that we agreed to sell our Navis software business for a enterprise value of EUR 380 million. The transaction is expected to be completed by the end of third quarter this year. Earlier today, we also announced our aim to reduce CO2 emissions in our value chain by 1 million tonnes by 2024. Today, the earnings will be presented by our CEO, Mika Vehvilainen; and CFO, Mikko Puolakka. We will first go through Q1 -- first quarter '21 highlights, followed by market environment and group-level development. Then our CFO, Mikko Puolakka, will go through the business areas, finances and the outlook. So Mika, please go ahead.
Thank you, [indiscernible], good afternoon from my behalf as well, and thank you for joining the Cargotec Q1 2021 call. Obviously, the highlight of the Q1 2021 is the strong order intake we had. Orders increased by 43%. The strong demand we have seen starting from the September 2020 onwards in Hiab and Kalmar Mobile equipment continued during the first part of 2021. We also see a remarkable improvement in Kalmar Automation as well as MacGregor demand. In Kalmar Automation, the orders came from the replacement business. Within the existing customers, the Q1 orders did not yet include any significant automation orders. The MacGregor improving market sentiment was already slightly visible in the improving order intake. In MacGregor, both on Q-on-Q as well as year-on-year. Sales decreased by 15%. This was coming almost solely from the fact that -- as the order intake during the Q2 and most of the Q3 2020 was low and our cycles mean that we will see the strong order intake starting really from September 2020 onwards, impacting our Q2 and onboard revenues for these years. The Q1 revenues did not have any material impact from component shortages or shipping issues. I'm also very happy about the service sales being very resilient, also considering that the comparable period last year did not yet have significant COVID-related impact in our operations. The share of our Eco portfolio was 20% down from the Q4. This was primarily coming from the lower revenues coming from the Kalmar automation, electric driven vehicles. Also very satisfied for the fact that the comparable operating profit improved despite the lower revenues. This was primarily coming from the good cost control, especially in Hiab and MacGregor, where both results improved. The Kalmar decline in operating profit came from the lower revenues. We continue to follow-up the sort of online real-time information we get from our equipment activities. And we have clearly seen the recovery despite the very difficult COVID situation globally continuing in the economic and logistics activities around the world. Especially in Hiab, if you compare this one, and this is now a comparison towards the Q4 last year. And if you remember, Q4 last year, our equipment activity actually started to be at the same level or slightly exceed the pre-COVID activity levels of Q1 2020. So these numbers are fairly comparable on a year-on-year basis as well. We have seen a significant improvement in activity in Hiab, 18% up compared to Q4 in Hiab in North America, and more than 8% up in European markets. Also in Kalmar Logistics equipment, we have seen improving activity levels, both in North American markets as well as in European markets. The slight decline in China is actually explained by the Chinese New Year during the Q1 this year. The same is obviously visible in most of the economic indicators, the container traffic was growing very strongly in Q1, and I'm sure most of you aware of the logistics and congestion issues in the ports at the moment and that strong growth is expected to continue throughout the whole year. At the same time, we expect the construction activity to actually accelerate both in North American as well as the European markets throughout the years with significant growth numbers in both markets. Also, MacGregor market seems to be now turning. The Clarkson has updated their estimates to be about 1,000 ships ordered during the 2021. It's good to remind ourselves that this is still significantly below the average year of about 1,700 ships, but clear improvement, obviously, from previous year. The ship orders during the Q1, they are already exceeding 300 vessels, clearly up from that Q1 last year. And the current run rate, obviously, already is ahead of the Clarksons estimate for this year. There has been an improved activity somewhat in the offshore oil and gas field as well and we see the strong demand continuing in offshore renewables, primarily on offshore wind-related vessels and construction. The orders increased in all businesses and MacGregor slightly increase, and it's good to remember that the MacGregor cycles, the increasing order activity in vessels should be visible in MacGregor equipment order in roughly 6 to 12 months after the ship order and then the related revenue another 6 or 12 months after our equipment order. So increasing vessel activity should actually start to be visible in MacGregor on the second part of this year and then the revenues should be then impacted favorably from '22 onwards. A strong order intake coming from Kalmar Mobile equipment. And also, we saw a strong order recovery on automation and project business coming, as I already said primarily from the renewing replacement business within the existing customers. And the Hiab order intake was another record. This time actually without any significant government-related orders as we saw in Q4, coming really from multiple deals and strong activity across all the customers. I think it's also very quite likely that there is an element of catch-up in order intake during the Q1 as well as a pre-buy element of that one coming really from 2 factors. We have done a number of significant pricing increases in the beginning of the year, and that's probably running -- causing some pre-buy as well as obviously customers' concerns related to supply-chain difficulties that are visible across the different industries at the moment. However, the underlying market is solid, and as already discussed, many of the economic indicators still look very favorable. The order book increased by 22%. And actually, the combined Kalmar and Hiab order book is at the record high at the moment. Obviously, MacGregor is very far away from the sort of strong years it has been in the past in the higher cycles, but the order book is now heading to the right direction, and this was the first positive book-to-bill quarter for MacGregor since 2019. Sales really were burdened by the low order intake we saw in Q2 and most part of the Q3. And to use the sort of production cycles we have, we were expecting lower revenue in Q1. The Q1 revenues were not materially impacted by component shortages or shipment issues. However, we obviously see risks related to those issues when we move towards the rest of the year. Also very satisfied with services performances. And again, let's remember that the comparison period did not have material COVID-related impact in our key markets. Despite that one, both the Kalmar as well as the Hiab were actually able to increase slightly their services revenues. MacGregor services revenues were down quite clearly, and this was driven by the sort of low activity in dry docking, again, caused by the COVID pandemic situation in many of the developing markets. Also good to see that the order intake was actually strong up already during the Q1, also including the MacGregor services order intake. The services and software were 40% of our total sales, obviously, this is partly driven by -- not only by the good job in the services, but the lower equipment revenues during the Q1. As a part of our annual cycle, Cargotec has also refined its vision and its strategy. Our breakthrough objectives are sustainability and profitable growth. Our vision is to be the global leader in sustainable cargo flow. In concrete terms, Cargotec aims to reduce our CO2 footprint or emissions in our total value chain by 1 million tonnes by 2024. This reduction would be, of course, very significant considering our global today, and at the same time, a fantastic business opportunity for us. Answering to the customer challenges regarding sustainability. The success of our strategy execution is measured by our financial reporting, leadership index and Eco portfolio sale of sales, which we have already reported in our -- reporting in the past as well and in the future, we will also report CO2 emission reductions as well as our customer Net Promoter Score development. With that one, I'd like to hand over to our CFO, Mikko Puolakka, who will discuss the business areas in detail.
Thank you, Mika, and good afternoon also from my side. Let's start with Kalmar, where we had an excellent quarter from the order intake point of view, strong growth in orders in mobile equipment across all product categories as well as in all geographical regions. Also, good demand for services. Orders for cranes, like straddle carriers were also increasing in quarter 1. So like Mika indicated, this kind of replacement type of investment market picking up. We did not have any bigger orders in quarter 1. And then when looking at the sales, sales were down by 20%, the sales for mobile equipment and also larger cranes of -- crane revenues declined in total, 29%. And this is stemming from the very low order levels in quarter 2 and quarter 3 2020. The supply chain-related constraints did not affect our deliveries in quarter 1. But like Mika also said that there can be certain risks in the upcoming quarters as we experience, for example, semiconductor-related bottlenecks as well as transportation-related bottlenecks. The service sales were up by 5%, and this was very much driven by the various services for -- especially for the cranes. Kalmar profitability declined. And the decline was very much driven by the lower sales. We have reduced somewhat of our costs. But for example, we have kept our R&D investments in Kalmar on last year's level in the spirit of supporting our long-term strategy for more sustainable solutions like electrified and fully automated mobile equipment. We signed Navis divestment agreement in March, and the target is to complete the transaction by the end of quarter 3. Then looking Hiab, where we had basically with all parameters, a very good quarter. Very strong demand in all product categories as well as in services across all regions. Like Mika also said earlier, here in Hiab, we anticipate that there is certain pent-up demand coming up from the low orders or investment activity in the middle of last year and then some prebuying ahead of price increases as well as anticipation of certain component availability. We did not book any bigger orders in Hiab for quarter 1. Sales were down by 5% and this is like in Kalmar's case, very much coming from the low orders in quarter 2 and quarter 3 last year. Despite 5% lower sales, we were able to improve significantly the comparable operating profit. And this is coming from the strong cost management and the productivity measures, which have been taken in Hiab. So overall, a very good performance for quarter 1. In MacGregor, the improving market activity is also visible in orders. We had EUR 100 million of orders in quarter 4 last year, now EUR 161 million, coming to a great extent from the merchant vessel market as well as from services. So we booked, for example, good spare part service orders as well as certain other services like the cargo boost vessel optimization services. Quarter 1 sales were impacted by the low order intake in 2020. Services, sales were down by 18% due to the low dry docking activity. Despite the sales decline, we were able to improve the profitability from minus EUR 2 million to plus EUR 3 million now in quarter 1. And this is coming from 2 drivers. Firstly, from the cost or restructuring and integration of the TTS and offshore businesses, and then we have had a very smooth project execution during quarter 1, supporting also the profitability. We -- despite the strong cost reduction, we also continue with the cost savings actions also in, in 2021. And our target is to reduce fixed cost in MacGregor by EUR 13 million compared to last year's level. Few words about our financials overall in quarter 1. So despite our sales declined by 15%, we have been able to improve the comparable operating profit by 14% from EUR 45 million to EUR 52 million. And also the operating profit margin has improved by 180 basis points. There were basically 2 drivers for this positive development in comparable operating profit. Firstly, our gross profit percentage improved from 22% to 25%. And this comes from the better mix. So we had higher portion of Kalmar Mobile Equipment and Hiab sales as well as services being 40% of the total revenues. And we have done material cost savings and also in all areas, basically, price increases already last year, which now start to become visible. The second reason is that our costs have decreased by EUR 16 million, and this is coming pretty much from 2 areas. Firstly, we have implemented permanent cost savings. So our headcount has reduced from last year's level. And then we still have some temporary cost savings active, like, for example, traveling is currently still on a very, very low level. We had EUR 27 million of items affecting comparability. The biggest items here were the EUR 13 million cost booking, which we took to establish a new joint venture for MacGregor in China with the world's largest shipbuilder CSSC. And this is a very positive development for MacGregor because this will strengthen MacGregor's addressable market and operations also in the coming quarters in China. Also related to MacGregor, we had a positive onetime booking of EUR 7 million, and this is related to the TTS final purchase price settlement in the beginning of the quarter. We booked in total approximately EUR 8 million integration-related costs concerning the Cargotec Konecranes merger. We had approximately EUR 10 million of restructuring costs, mainly in MacGregor and in Hiab. Our cash flow improved from last year's level, being EUR 51 million. And the main driver for this was the improved networking capital efficiency. Our inventory days were approximately 3 days better or lower than last year. And this contributes approximately to EUR 25 million in our cash flow. Cargotec's financial position is very strong. Our gearing was 59% at the end of quarter 1. And it has increased from quarter 4 and the main reason for the increase was the EUR 70 million dividend payment, which we booked at the end of March. Without IFRS 16 lease liabilities, gearing was 45%. Equity is on a good level or a strong level, EUR 864 million, and we do not have any major debt repayments upcoming this year. And then last but not least, our outlook for 2021. We confirm our -- reconfirm our guidance for this year and expect the comparable operating profit to improve from last year's level when it was EUR 227 million. And with those words, I would then hand over back to [indiscernible] for further questions.
Thank you, Mikko, and thank you, Mika. Just a reminder that we are not -- we don't take any merger-related questions in this Q&A. With that, operator, we are ready for the Q&A.
[Operator Instructions] And we'll now take our first question.
That's Artem from Crédit Suisse. My first question is about your comments and reports on some pent-up demand in Q1. I just wanted to kindly check if that's only relates to Hiab or that's also fair for Kalmar. And maybe you could also try and quantify the impact in Q1, and I appreciate this could be very hard for you to do but maybe you could talk about what you've seen so far in Q2 on a sequential basis in terms of the magnitude of maybe moderation in demand? That's my first question.
If I take that one. First of all, obviously, we see the underlying market demand to be very solid. If you look at the economic indicators and also the customer activities, also visible in our equipment activity. There is probably an element of that pent-up demand, both in Hiab as well as in Kalmar mobile equipment, less so, obviously, in the automation and project-related, which has its own set of dynamics. The other issue we have had is that we introduced a number of pricing increases in early part of this year that are coming into force now and that, together with the potential concern of the deliveries because, of course, everybody is aware of the supply chain issues in industries. There could be an element of sort of pre-buy on that one. But I would say that the underlying market demand and the activity remains to be strong as well, but there is probably some hike in exceptionally good orders in Q1, but it's really hard to quantify that in detail.
Sure. But I mean, at least in April, are you already seeing maybe your daily or weekly orders starting to moderate versus Q1? Or that's not yet what you see at the moment?
We have seen a strong demand to continue in April as well.
We'll now take our next question.
Magnus here from UBS. A couple of questions from me. So could you comment a bit on the mix in Kalmar and how much headwinds on the margins you saw there? I think you mentioned a couple of percentage points in prior quarters. Was that the same still? And now with obviously a very strong pickup in the mobile equipment. Do you expect these 2 percentage points that we talked about sort of to reverse through the course of this year? Is that sort of the quantum we can expect to step-up from mix in 2021?
Mikko, would you like to take that?
Yes. In Kalmar, if we look, Kalmar quarter 1, so we had actually more favorable mix already in quarter 1 due to the fairly low automation deliveries due to the low order intake last year. But does that kind of mix was not -- more favorable mix was offset still by the quite significant sales decline in the mobile equipment, which we kind of consciously did not fully offset with cost reduction. As I mentioned, that we continue to invest, for example, in the R&D activities to support our strategy.
Yes. For the upcoming quarters, we saw a good order development happening, actually, both in the automation and projects within the replacement, also in mobile equipment. So I would say that the mix is from stable to a slightly favorable for the rest of the year.
Okay. But you're not wanting to quantify anything around that regarding the step up as we saw sort of adverse in this year in 2 percentage points.
No, we don't see any adverse effect coming from that one this year.
Okay. And also, could you help us put some color on how much impact we should see in the EBIT bridge in Q2 from the reversal of temporary cost measures taken last year? Any color on that would be very helpful.
In general, I would say that, I mean, last year, we implemented the temporary cost savings, and those generate approximately -- or generated approximately EUR 10 million monthly cost savings. And our ambition last year have been to compensate most of those this year, at least to great extent, with permanent savings. And then we have still, as I mentioned earlier, we have somewhat temporary savings ongoing. I would estimate that perhaps from those temporary savings last year, approximately 50% are still in quarter 1, temporary and other 50% we have kind of implemented permanent savings.
Okay. Okay. So you don't expect any sort of meaningful rewards into Q2 that will come later when traveling comes back and so forth in that case?
Yes. I mean, traveling most probably will continue still despite the vaccinations traveling continues to be most probably still on a fairly low level also in quarter, quarter 2, more perhaps service-related traveling, but the other part still on a fairly low level.
We'll now take our next question.
It's Aurelio from Morgan Stanley. I've got 2, and I'll take them one at a time if possible. I guess the first question is, you mentioned that the underlying demand in Kalmar or the order intake in Kalmar was mainly driven by mobile equipment and replacement in automation projects. We've obviously seen CapEx announcements from some of the Board operators to be rolled among others, basically going for a strong increase in CapEx in '21. And I guess, are you seeing that in the market at the moment? When should we expect to see new bigger brownfield projects being signed off or maybe even some greenfield projects out there?
We clearly have seen an increased activity. And typically, as we have discussed in the past, the sort of stronger traffic growth is usually followed by within 12 to 18 months from increasing CapEx as well and we have seen increased planning activities around that one, but it's really difficult to forecast the exact timing of those potential orders. There will be some -- and probably some of them landing already within this year, but exact timing is still uncertain.
Typically the brownfield opportunities, what we see, even though when fully kind of automating the terminal, those could be EUR 100-plus million of transactions, these brownfield investments are done in bits and pieces, meaning that those could be some tens of millions of euros when customers make their decisions.
Okay. That's helpful. And I guess in terms of your cash generation this quarter was very good. And I think you mentioned that you had a positive impact from, I think, inventories that you reduced date by 3 days. I guess the question is, given that you have obviously seen a very, very big increase in orders, especially in Hiab and Kalmar mobile equipment, which is more input than maybe some of the projects. I guess my question is, at this level of working capital is sustainable or we should expect some natural build-up over the year as you prepare for, I guess, a heavy delivery schedule in the latter part of the year?
Yes, like you saw from our order book, we have EUR 2.2 billion order book, which we aim at delivering prudently during this -- the remaining part of this year, to a great extent, and that requires, of course, some increase in the networking capital in inventories, for example, but we continuously -- so in absolute terms, networking capital is expected to increase in anticipation of the upcoming revenues. But then we continue to improve the relative performance. So continuously working, for example, with the suppliers to minimize the inventory base at our end.
If I compare the situation where we saw the last demand vehicles in '17, '18, especially in Hiab and compare their current status, our internal processes have clearly and significantly improved regarding our own in-house and factory-related processes and also our kind of interaction and process development, together with our suppliers has also significantly improved. It doesn't mean that we would not change -- sort of face some of the challenges, but overall, I would say that our capabilities are in a much better shape than they were last time we experienced such big in orders.
And we'll now take our next question.
It's Antti from SEB. A couple of questions from me. Firstly, would be on the backlog situation and lead time in Hiab and Kalmar mobile equipment. I mean you'll see now quite robust recovery and very high levels of backlog. So what are the lead times currently? And if we kind of reflect your delivery capabilities, should the previous peaks be a good comparison point? Mika, I guess, you mentioned that your processes have improved, but on the other hand, you have also cut costs. So how should we think about the revenue recognition out of backlog?
Yes. The cost cuts have not been primarily around our production capacity or related factors. Those have been more temporary. And obviously, we are sort of drawing back those in terms of the temporary leaves on the short-term weeks to enable us to hike up our production. I would say, at the moment, our capability to ramp up our own production is pretty good. The question mark is obviously still around component shortages. My main concerns would be around higher specification diesel engines where the microchip shortages might impact that one as well and those would probably be visible somewhat in Q2, but probably also very much and maybe a sort of single largest challenge is around the Q3 this year. We have not yet seen a significant sort of lengthening of the lead times. Typically, again, in Hiab, they are around that sort of 6 months and in Kalmar mobile equipment, 6 to 12 months, and the potential lead time changes are primarily -- will be primarily coming from then the availability of the components if we see material shortages in there.
Okay. That's fair. And then secondly, I mean, you've been active on price increases. And I guess now you're seeing kind of component shortage and some raw material inflation. So how should we think about the gross margin, what you have in backlog and orders going forward? Are you seeing kind of more pressure from the cost side? Or is the price hike trend still continuing?
We are clearly seeing more pressure from the cost side. The shipping costs have actually have a significant hike. Obviously, a lot of our customers are doing better as a result of that one, but it's visible in our cost level. Obviously, the raw material and component pricing is also facing pricing pressures. Against that, one, we have done a number of pricing changes in most of our businesses now in the early part of this year. And our estimate at the moment is that overall impact will be neutral. So we would not see a reuse, but nor would we see expanding gross margin as a combination of those 2 factors. The gross margin changes will probably primarily come from a more favorable mix.
Okay. That's clear. And then lastly from me regarding Kalmar and the demand there. How is kind of the external report congestion that we are seeing globally impacting your customers' decision-making and your demand? I mean, they have a handful of -- with bottlenecks right now. So is this kind of postponing longer-term planning and bigger investment decisions? Or the other hand, does it support the short-cycle mobile equipment demand?
We saw really a strong demand improvement actually in ordering both in mobile equipment and the mobile equipments really, of course, is driven a lot by strongly increasing logistics activities actually in all of our key markets. And then obviously, the increase in traffic in ports and the port congestion will lead into the further CapEx investments, as we already discussed on that one. Although right now in Q1, pretty much all the large sort of automation-related and project-related orders, they're actually replacement orders for existing port capacity. So we have not seen the expansions orders coming in yet.
We'll now take our next question.
Tomi from DNB. Still coming back to the pent-up demand. And I tried to ask it another way. Have you seen an improvement in the pipeline? In other words, what orders have you been booking? Have those been, in a way, exceeded what you have been taking in as new quotes?
Yes. I mean it's been visible actually since really from the September onwards, both in terms of the actual orders, but also if I look at out of 90 days or 360-day sales pipeline in businesses and we've seen the expansion in the pipeline. And we have actually, still today, when you look at that one, is that the pipeline remains strong.
We'll now take our next question.
This is Erkki from Inderes. One for me, and this one goes to Mikko. About the EUR 10 million savings per month in 2020, so EUR 30 million per quarter and 50-50 temporary and permanent. Am I right that this still applied in Q1 of this year? And going forward, does the 15% -- 50% i.e., EUR 15 million savings per quarter, that should be permanent also in Q2, Q3, Q4 this year?
Yes. Like I said, roughly 50% of last year's EUR 10 million temporary savings have been converted to permanent and then the other 50% depends very much on the -- how the societies are opening and how do we kind of increase the, for example, the traveling activity.
EUR 15 million per quarter would be permanent? All right. Just about...
Approximately, yes. So like I showed in the previous slides, we have reduced approximately EUR 16 million costs now in quarter 1 and a good part of that is permanent as we did not have in quarter 1 last year, yet temporary cost savings in place. Those started in April.
And we'll take our next question.
This is Johan at Kepler Cheuvreux. I'm just a bit curious on Navis. A few years ago, you said the business was at breakeven because you were investing in your software development, but in 2 to 3 years, it should be sort of at the normal software margin of 20% to 30%. Is that where you arrived at this year from now this?
The Navis has been and is a slightly profitable business for us. Again, you have to remember that, that includes PPA as well. So the EBITDA level on Navis has actually been in a pretty good level throughout this time.
Okay, good. And then you're obviously getting a fair share of cash for this now at an EBIT to sales multiple, which is what I can see well above your group valuations. Now ahead of the merger, that basically means you are entering the merger with a significant more cash than investors knew about when the merger was announced. And we know that Konecranes shareholders get compensated for the bigger market cap at the time by an extra dividend. Shouldn't Cargotec shareholders get some extra dividends as well ahead of the merger?
None has been planned. Obviously, we have made a decision regarding the dividends for 2021. And obviously, a new company will then decide on the dividend policy, assuming that we close at the beginning of or close at the end of this year and start as a new company, it will be the new Board that would make then the decision regarding the dividends for the new company for '22 then. This strong balance sheet, of course, puts us in a good position to sort of drive for further growth, both in terms of investments in the new technologies as well as then inorganic growth as well.
But no value creation, et cetera, for the existing Cargotec shareholders?
Well, I mean, the parameters of the merger, of course, have already been decided and agreed within the parties.
We'll now take our next question.
Yes, that's Artem from Crédit Suisse. For some reason, the operator muted my line before I finished asking the questions. But thank you for taking my follow ups. So the first one, which I have is on Volvo diesel engines. Could you help us to quantify how many days of production do you have covered with your existing backlog of diesel engines? And then maybe what share of your products use those engines in Kalmar? That's my first question.
Well, first of all, we use different diesel engines in different products and the diesel engine in question, the Microchip production has the biggest impact, this so-called stage 5 diesel engine. Now not all of our products use stage 5 diesel engine, depending on the end market. So I don't know, honestly early details. Its primary concern, it's around the stage 5 at the moment, and it's a certain part of production, but not all of the production at all. And as I said, a lot of that depends now, of course, on the capability ramp up. It will not necessarily have a significant impact for us on Q2, but I think the risks are higher, depending on how that develops regarding Q3 deliveries on that specific engine time.
Sorry, just to clarify, so that comment in terms of no specific, no significant in Q2, that's -- basically incorporates the 2- to 4-week shutdown at Volvo? And then if there is a longer shutdown at Volvo, then your Q3 will be impacted. Is it the right way to interpret this?
Yes. Yes, there are many parameters, and it's maybe too early yet to speculate around the Q3. It's also good to note that we are not the sole supply situation with Volvo. We have also other manufacturers diesel engines we use as well.
Okay. That's very clear. My second question was around MacGregor services. When would you expect that business to come back to a stronger growth?
Well, the order intake was up, Mikko. How much was it again? 11% if I read it correctly.
11%.
11% up on services in MacGregor. So overall, it looks promising. But obviously, the concern is still around the COVID situation in many of the markets that there -- which are the primary destinations for dry-docking. And looking at the situation, that's probably going to continue for some while. At the same time, as you know, the shipping market, as such, at the moment, is doing very well and the usages are fairly high. Also, the customers are actually quite profitable at the moment. So I'm sure that will favorably impact the fact that you're able to sort of invest into the ship maintenance again. And obviously, higher usages means more utilization and more spare part, wear and tear as well. So I would say that overall, we would see a favorable market on that one, but the question mark remains on how long will be the dry docking market. They will be limited on that one.
There are of course -- MacGregor also has other services like not only spare parts, like I mentioned, for example, cargo boost, which enables the customers to increase the capacity of the existing vessel can be a fast solution in case customer needs more capacity without ordering a new ship.
Understood. And my last question is about automation and specifically retrofit in automation. I've been reading -- looking at interesting products, which were introduced a couple of years ago by some of your competitors, which essentially allow to very cheaply automate terminal tractors with a payback of officially 1 year. I guess, 2 questions. Firstly, do you think that there are now more incentives or it makes more economic sense at the moment to retrofit automation than maybe a couple of years ago with all those new products? And secondly, what are the major products you're developing to maybe make retrofitting automation more accessible and attractive?
Yes, that's a good question. If you look at the sort of port yard, the most common automation is around the stacking area. Even there, the penetration is still relatively low. And I'm sure the sort of automated stacking cranes will be taking more and more share of that one as it's relatively -- well, simple would be maybe relatively easy to sort of automate as well. Automated terminal tractors relates to what's called horizontal transportation. That's when you take the container from the key crane and extra ship into the stacking area. There are a number of alternatives there. The so-called AGV market has been active for a number of years. Today, we see actually increasing interest towards automated straddle carriers which has a benefit of actually being more flexible as a configuration or an architecture compared to the AGVs. And then we will also see, I think, the automated terminal tractors taking part of that market. The automated terminal tractors fit to a certain configurations and certain conditions, but -- and I'm sure they will also play a part on that one. Obviously, we are the market leader in terminal tractor market and automating those terminal tractors is obviously in our focus point as well, and we already have a productive most and sort of pilots going on in that area as well.
We have no further questions at this time.
Okay. Thank you for good questions and good answers, Mika and Mikko. So our second quarter results will be published on 28th of July. See you then.
Thank you.
Thank you.
This concludes today's call. Thank you for your participation. You may now disconnect.