Cargotec Corp

OMXH:CGCBV

Earnings Call Transcript 2019-Q4

[Hanna-Maria Heikkinen]

[Audio Gap] '20. Today our CEO, Mika Vehviläinen, will start with the group development. You may have recognized that we announced also this morning the strategic review for Navis future. And Mika will also go that through. And after that, our CFO, Mikko Puolakka, will continue with the business areas, finance, sales, dividend and outlook.So please, Mika, time to start.

[Mika Vehviläinen, CEO & President]

Good morning from my behalf, and thank you for joining the Cargotec call today for our Q4 results. I recognize it's a very busy day, so I appreciate you joining in. 2019, in many ways, was a good year for us in Cargotec. I'm satisfied with the performance of Kalmar and Hiab. Both had a strong year. Also our services and software business continued to grow well. And we ended the year with a strong order book that lays good foundations for us for 2020. I'm especially pleased with the strong cash flow coming primarily from the implying -- improving supply chain situation and reduction of the net working capital as well as advanced payments coming especially from some port automation projects. As said, orders decreased but actually pretty much stayed on the last year levels. And Kalmar had a very strong year in 2018, and we came down somewhat from that one. But the Q4 was again a strong order intake for Kalmar. Hiab. Despite 2018 being a record year for Hiab, order intake increased orders somewhat further in 2019. MacGregor order intake increased by 9% but came effectively from the TTS merger. On an organic basis, MacGregor's orders declined somewhat. We had a strong revenue increase in all of our business areas and comparable FX ratios, 10% growth. And again, we actually ended the year with a record high comparable operating history, highest ever in Cargotec history. And the good development happened both in Kalmar as well as in Hiab, where the operating profit increased by 27%. Obviously, we are highly disappointed with the performance of the MacGregor that dragged down the group numbers in many different ways that Mikko will discuss also further with the total comparable operating loss of EUR 28 million, a very disappointing year for MacGregor in that sense. When I look at the market environment, first of all, in 2019. 2019, the world trade and container traffic grow moderately, about 2.3%. And the growth expectations for 2020 is somewhat accelerated growth, about 3%. We see a good demand continuing for our automation and project-based solutions, but we saw the softening of the demand in our mobile equipment business towards the end of 2019. And we are somewhat uncertain about the demand going to 2020, especially around the industrial application space for that business. In Hiab, the construction market remained strong. And actually, towards the end of the year, we saw still very strong indices, both in U.S. and Europe in terms of construction index. And we expect the market to remain relatively stable going into the 2020. 2019 was a very difficult year for MacGregor in terms of the market demand. Now if you look at the estimates for the 2020, for example, Clarkson estimates fairly significant ramp-up of the ship orders on 2020. We are somewhat more cautious about that when in our own plans are based on a fairly flattish demand in MacGregor moving into the 2020. As said, our orders remained at high level in 2018, and I'm pleased with our order intake during the Q4. The Hiab orders, obviously, came somewhat down, but it's good to remember that Q4 2018 was the record high year or record high quarter for Hiab demand. And actually, we see the order book going down. And with the improved delivery capability in Hiab, I think it will be expected that we see maybe some softening in short-term order intake, as our delivery times are getting shorter and our dealers and customers are getting more confidence in terms of our delivery time accuracy and shorter delivery times as well. Kalmar orders stayed at a high level at EUR 446 million and included one significant automation order during the Q4. Our order book is actually somewhat up from the previous year, and I said, lays a good foundation for us for the 2020. Half of the order book is actually coming from MacGregor -- from -- sorry, from Kalmar at this stage. Sales increased, as said, in all business areas and the profitability developed favorably in Hiab and in Kalmar. However, MacGregor weak performance dragged down the overall group numbers. I'm also very pleased with the development we see happening in our key strategic areas in service and software sales. The services grew another 8% in 2019, primary growth coming from the Hiab and MacGregor, where MacGregor, without the TTS, also was growing organically in services, which is always a good indication regarding the sort of hopeful market recovery as well. Our software sales increased by 15%. The growth primarily coming from the increase of our automation software. Overall, our services and software sales on an annual basis is now exceeding EUR 1.2 billion and constitutes 33% of our total overall revenue. So I'm very pleased how we've been able to develop this business over the last few years. As Hanna-Maria already mentioned, we also announced today a strategic evaluation considering the Navis business. First, I'd like to say that we are very satisfied with the performance of the Navis. During Cargotec ownership, Navis has more than doubled its revenue and is EBIT-positive operation today. When we have now evaluated and -- Navis strategy -- strategic options, it's clear that there are many opportunities for Navis to grow and develop into a new segments. But the question is that, are those segments and opportunities aligned with our core business? And are we potentially the best owner to enable Navis to take an advantage of those opportunities? It's also very important to point out that this evaluation only concerns Navis software, and the other Cargotec growing software business development are not under the -- are not part of this review. If I try to a little bit explain this further, we are still highly committed to our strategy to become the leader in intelligent cargo handling. What it means for us in practice? First, if I start from the kind of the foundations, which is our products. Our products are becoming increasingly more intelligent. They will have higher and higher software competencies and composition. They will have more and more sensors. They will communicate and correlate it outside, exchange in information more and more. And the products clearly are moving more and more towards semi-autonomous, fully autonomous, and then towards smart robotics direction. We see customer demand due to the lack of, for example, experienced operators and cost-saving efforts and safety efforts driving towards that direction. At the same time, our products are also -- and the need for sustainable solutions is increasing clearly, and especially, the electrification pace is accelerating clearly within our customer base. The moving into the smart products and more sustainable products offers us significant opportunities in the future. Secondly, these smart intelligent robots will further coordinate and form intelligent system-level solutions. A good example of that one today in already in our solution offering is automated container ports. We need more and more demand towards similar solutions in our other customer segments. We will automate not only container ports, but different depots, container depots, logistics yards and other industrial applications. We see the pace accelerating around smarter products, smarter systems and much smarter sustainability. And these offer great opportunities for Cargotec. With our market position, these capabilities we have built in-house, this really gives us opportunities to further enhance our competitive edge in the markets that we are serving today. The third level that we have been surveying with the Navis is an independent software business that then coordinates systems between themselves and potentially exchange data and optimizes cargo flows, sort of ecosystem play. This is the business that is currently under review, and we are looking whether we are able to sort of drive that business forward with a fairly conservative industry and are there other opportunities in Navis business development that would be better served under different ownership structure. And that's where the evaluation is at this stage. With that one, I'd like to move into the business areas and hand over to our CFO, Mikko Puolakka.

[Mikko Puolakka, Executive VP, CFO & Member of Executive Board]

Thank you, Mika, and good morning also from my side. Let's start with Kalmar, where the orders were on last year's level. The automation and project orders actually grew compared to quarter 4 2018. And we got, again, one sizable automation deal in the last quarter of 2019. We also have a solid pipeline for automation and project orders going forward. The mobile equipment orders declined in the last quarter. We had a strong deliveries at the end of the year, resulting a good growth in sales, 6% sales growth. Also on full year basis, Kalmar was able to grow sales by 6%. Service sales growth picked up from 3% in quarter 3 now to 6% in quarter 4 2019. And we saw good growth in all categories: spare parts, maintenance as well as in upgrades. The Kalmar quarter 4 comparable operating profit was EUR 44 million against EUR 51 million a year ago. And the decline was mostly attributable to less profitable sales mix, like a higher portion of the automation and project sales compared to the mobile equipment sales. On a full year level, however, Kalmar comparable operating profit was EUR 162 million, and this is a 13% improvement year-on-year. Also, the operating profit margin improved from 2018 when it was 8.9% to 9.4% now. Then moving to Hiab. And in Hiab, orders declined by 10%. However, in our opinion, still the quarter 4 order level is a very good achievement in Hiab, as the comparison period orders were actually on record high level. The full year orders in Hiab grew by 4%, and orders were flat if we exclude the Effer acquisition, which took place at the late -- later part of 2018. The supply chain situation stabilized and has been stabilizing, as we expected, in the second half of 2019. And we have been able to reduce significantly our lead times. This is also visible in our order backlog, which is now getting back to the more normal, normal levels. Hiab was able to grow the quarter 4 sales by 16%, thanks to -- also to the stabilizing supply situation and the growth came from all product lines and mostly from EMEA and North America. Service sales were up by 5%. And when we look the Hiab full year sales, sales were EUR 1.35 billion, and here, we have 18% year-on-year growth. So nice development there. The Hiab quarter 4 comparable operating profit improved almost 50% and the margin being now 14.1% for the quarter. And this improvement came from higher sales. In Hiab, the full year comparable operating profit was EUR 170 million, and this is a 27% year-on-year improvement. Then moving to MacGregor. In MacGregor, the orders grew by 5%, but basically, the underlying market is still very, very challenging. The orders, excluding TTS acquisition, actually declined 8% in quarter 4. If the new build market -- so the equipment market has been fairly low. The positive thing is that we have been able to grow significantly the service business with acquisitions, 36% growth in service orders and also on organic basis, a nice growth. MacGregor sales grew 18%. But again, when we exclude the TTS acquisition, organic sales declined by 3%. Like in orders, also the service sales grew 26% and organically 2%. The quarter 4 profitability was disappointing, minus EUR 13 million comparable operating profit. And this is very much related to the project cost -- excessive project costs, cost overruns, then low capacity utilization in the offshore business and overall, in MacGregor business, weaker sales margin due to the tight competition. We have started several measures to improve the profitability, and I will cover those also on the following page. So overall, we are targeting for 2020 in MacGregor to EUR 15 million fixed cost savings. And this is coming from the offshore -- ongoing offshore restructuring as well as from the TTS integration. Overall, from the TTS integration, we are expecting EUR 25 million to EUR 30 million synergy savings, so that EUR 12 million in 2020, EUR 10 million in 2021 and then EUR 5 million thereafter. The TTS integration cost synergies are related to the role changes in roles and positions both in MacGregor as well as in the TTS organization, closing facilities, getting rid of duplicate offices, for example, and then supply chain-related savings, for example, in direct materials as well as in indirect purchases. We have taken also sizable measures in the offshore business in quarter 4, and that resulted to a significant onetime costs in -- during the quarter 4. Then if we look at overall company performance. On a full year basis, our sales grew by 11% and the comparable operating profit increased 9%. On the disappointing side, we had very high items affecting comparability, EUR 84 million. Out of this, EUR 55 million are related to MacGregor. This resulted to IFRS operating profit decline being EUR 180 million versus EUR 190 million a year ago. And this impacted also the earnings per share. So basically, EUR 1.39 per share, a 16% decline year-on-year is very much attributable to the low profitability in MacGregor as well as the high restructuring charges. On a positive side, we have -- we had excellent cash flow in 2019, EUR 361 million. So after the 2 years of challenges with the supply chain, we have been able to release nicely cash from the net working capital. Especially, inventories went down as well as we received advanced payments especially in the second half of 2019. Our financial position is strong. Our -- thanks to the very good cash flow, especially in the latter part of 2019, our net debt declined to EUR 774 million, and our gearing was 54%. Excluding the IFRS 16 leases, our gearing was 41%, which is below the -- our target to maintain the gearing below 50%. The net debt-to-EBITDA reported was 2.5%. But again, if we exclude the IFRS 16 leases, net debt-to-EBITDA was 1.9%, where it has been on these kind of levels in 2016. We don't have any major debt repayments. EUR 150 million debt is maturing in the first quarter. And overall, next year -- or this year, EUR 271 million, most of this, we have already refinanced in 2019, for example, with the bonds which we issued in the second half. ROCE for 2019 was 7.3%. The main reason for the low ROCE is a very weak profitability in MacGregor as well as the restructuring charges, which we have taken to turn the business around. Cargotec Board proposes a EUR 1.20 dividend per B share for the year 2019. This is a 9% growth from 2018. The dividend would be paid in 2 installments, in March as well as in October. And the proposed dividend represents a 86% dividend payout. If we exclude restructuring charges, then the dividend payout is -- payout ratio is 55%. In total, the dividend payout would represent roughly EUR 77 million dividend payment. Before going to the guidance, let's have a look on our 2020 business assumptions. We expect MacGregor's comparable operating profit to improve from the very low levels in 2019. Contributions here are the EUR 15 million cost savings as well as the -- growing the overall revenue, thanks to the TTS acquisition. We have done also -- we have been doing already in 2019 productivity improvements in our all other business areas as well as in the corporate functions. And we continue with those measures also in 2020, and those are expected also to improve -- have a positive improvement in our profitability. We also expect to grow our service business going forward. Last year, 2019, it was 8%, keeping in mind our service and software sales target of EUR 1.5 billion. Overall, the market visibility is limited at the moment. The recent events like the coronavirus will also increase the uncertainty. This is mainly attributable to Kalmar mobile equipment as well as in Hiab. But overall, we do not expect major changes in the demand if we look compared to 2019 latter part. We incurred last year EUR 84 million restructuring charges. We are expecting approximately EUR 60 million restructuring costs from ongoing programs. And now the reviews -- we have started additional reviews. Those might also change still this EUR 60 million estimation as we move forward with the reviews. So our outlook for 2020 is that we expect the comparable operating profit to improve from 2019 when it was EUR 264 million. And with those words, I would then hand over back to Hanna-Maria.

[Hanna-Maria Heikkinen]

Thank you, Mikko. Thank you, Mika. Now there is a great opportunity to ask questions and get good answers. We will start with the potential questions from Ruoholahti. It seems like that there is no -- there are no questions from Ruoholahti, so then we will continue with the international questions.

[Operator]

[Operator Instructions] We will now take our first question.

[Magnus Kruber, Associate Director and Research Analyst]

Magnus Kruber with UBS. A couple of questions from me. So first, I think in Q3 in Kalmar is that you guided to a relatively stable mix in the business going forward. I think now in this quarter was sort of quite different picture. Could you give some additional color on that first, please?

[Mikko Puolakka, Executive VP, CFO & Member of Executive Board]

Thanks for the good question. Yes, I would say that in quarter 4 in Kalmar, especially in the Kalmar automation and project business, we had higher deliveries, what we originally anticipated. And in this business, we have lower profitability compared to the mobile equipment. So this is the mix, what I referred in my part of the presentation, which has been like diluting our profitability.

[Magnus Kruber, Associate Director and Research Analyst]

Perfect. And then into Hiab, could you expand a little bit on what sort of year-on-year demand trends you saw through the course of Q4 and how Q1 has started, please?

[Mika Vehviläinen, CEO & President]

Yes, we saw still the demand continuing in a good way. One good -- it's good to remember that the comparison period is very challenging. The Q4 2018 was all-time high. Order intake, well over EUR 350 million. So the demand remains robust. But one thing that I think we need to be a little bit cautious now in the short term is the fact that we are clearly -- been able to ramp up our delivery capability. Our on-time deliveries start to be at a very high level, and our lead times are getting shorter now as well. So one of the reasons for the very high order intake, for example, in Q4 '18, clearly, was the fact that people were uncertain, both the dealer as well as the direct customers, about the availability of the equipment and want to hedge with the orders. Now that we start to see continuously lowering delivery times or more accurate deliveries, I think we could expect still in the short term some order softness because, effectively, if you look at order backlog, that is still over EUR 400 million in there. And just for the -- sort of to simplify, if you think Hiab as a EUR 1.2 billion business, so EUR 100 million a month deliveries or orders, so if you get down to a sort of -- at the best, we were in 2017 roughly at the 7 weeks delivery time. But if you use a 2 months delivery time as an kind of example, that would effectively mean that, that would be -- the order backlog could be as low as EUR 200 million, and we would still be performing at a high level. So I would expect that the -- with the current higher performance, we should still see the order backlog actually to -- and decline somewhat where we are today. That's more to do with delivery performance and our kind of customer engagement rather than the market demand. From the market demand point of view, we still see sort of the demand to stay roughly at the last year's level.

[Magnus Kruber, Associate Director and Research Analyst]

Okay. Perfect. And then, you may have touched on it already, but I think in the last quarter, you stepped away from some service business in Q3. Have you seen any similar decisions in Q4?

[Mikko Puolakka, Executive VP, CFO & Member of Executive Board]

Can you repeat your question, please?

[Magnus Kruber, Associate Director and Research Analyst]

Yes, apologies. I think in the previous quarter, you stepped away from some service business, which is lower profitability. Have you made any similar decisions in Q4?

[Mika Vehviläinen, CEO & President]

There has been, especially in Kalmar, some -- and cleanup in terms of some of the crane upgrade-related services, some of the maintenance services, where we were not happy with the margins we were able to do, and that explained the overall low growth. We saw already services picking up on Q4 with the 6% increase. So -- and obviously, we have seen an improvement in Kalmar's service business profitability as well. So I think we have seen those effects away, and I would expect another year of growth in Kalmar services in 2020 as well.

[Operator]

We will now take our next question.

[Johan Eliason, Analyst]

This is Johan Eliason at Kepler Cheuvreux. Just some questions starting with the restructuring charges, a little bit high in this quarter and also a fairly high number going forward. How much of that is related to the TTS acquisition? And are the charges you are taking in relation to TTS sort of in line what you initially planned in terms of charges when you looked at the deal?

[Mikko Puolakka, Executive VP, CFO & Member of Executive Board]

Yes. In -- I'll take this question. So basically, EUR 84 million overall items impacting comparability. And most of this, EUR 55 million, are related to MacGregor. And in MacGregor's case, not that much yet has been related in 2019 to TTS. So we -- as we move with the TTS integration more to the concrete implementation in 2020, then we'll start to see TTS-related restructuring charges. And those are partially related to this EUR 60 million, what I mentioned in the previous slides.

[Johan Eliason, Analyst]

And then you haven't seen a need for higher charges now when you have control of TTS. It's sort of in line with your original plans? Or...

[Mikko Puolakka, Executive VP, CFO & Member of Executive Board]

Yes. TTS integration is progressing according to the plan. We expect a similar savings, what we originally communicated, and also the restructuring charges there are in line with our original assumptions.

[Johan Eliason, Analyst]

Okay, good. Then on this Navis announcement, I always thought Navis was sort of a little bit of a door opener for you and also allowed you to sort of offer this integrated automation offering to your end customers, setting you apart from competitors like Konecranes or ZPMC. Now you're thinking of divesting Navis. I can understand that some of the new developments there could fit better elsewhere, but don't you see that this is a bit threatening in sort of your value proposition to your customers, in the way you're offering them integrated automation solution?

[Mika Vehviläinen, CEO & President]

It's good point, Johan. And I think then also tells how much the market has shifted now. So what you said is absolutely true that 4, 5 years ago, when we -- Navis started to be part of Cargotec, there's an important for strategic discussions because we were effectively sort of steel provider, crane provider for our customers. Now with the clear development in automation, our strategic discussions on the customer, even without the Navis, are actually at the very high level. Also, what we have seen in automation is that there doesn't seem to be a lot of need -- actually, I can't name a single project at the moment that would actually require what we would call a full package, including the operation system, because the automation is primarily driven with the so-called brownfield implementations, i.e., existing ports converting gradually into automation. All of these ports already have an operating system. And in many cases, that is Navis system today. But from the offering point of view, the -- obviously, the focus is very much on the capabilities and the competitiveness of your automation software and automation capabilities within those given projects. So that need that has served us quite well actually has sort of, you could say, faded away on that sense. And when we want to develop the Navis further, many of the new opportunities actually are further away and don't necessarily have the same synergy or support with our core businesses than it has some year -- few years ago.

[Johan Eliason, Analyst]

And then if you look at your offering in port automation, what's your key differentiator versus, for example, your Finnish peers now?

[Mika Vehviläinen, CEO & President]

I think it's overall investments we have done on the automation software. We have a single automation platform that we've been developing consistently and then we adapt customer-specific applications on to it. We feel it's very important to have a highly kind of competent and a high functionality platform in place that then enables you to do specific customization for the customers. If I look at the ports that we have now automated, for example, in West Coast, U.S., we see increasingly higher performance. The customers have been able to adapt their processes and operating ways into the more automated ports and are finding continuously with the increased data visibility more opportunities to drive the productivity of the port. So we see increasingly good and reliable performance coming from our current references. And especially around the horizontal transportation, we clearly see the market moving away from what was originally sort of leading application, which was so-called AGVs, into the sort of a straddle-based horizontal transportation that gives you a much better performance and flexibility in your operations. And there is quite a bit of demand around that one. And as I said, the -- we had a one fairly significant order again in Q4, and we see a number of opportunities in our pipeline also moving into 2020.

[Johan Eliason, Analyst]

Excellent. And then just talking about, in general, the pipeline for Kalmar. You see mobile softening a bit. Is there, in any of your end segment, a specific replacement cycle working against you or in favor of your offering in 2020 and forward?

[Mika Vehviläinen, CEO & President]

I guess then, an area that I sort of would be most cautious about would be the industrial application, so the heavy forklift market, depending how the industrial demand and development happens, especially in Europe and during the 2020. And the other area of potential softness for us was towards the end of the year, and let's see how this year pans out. It was around mobile equipment market in China, where we also saw softness towards the end of the year. Right now, of course, with the coronavirus, the market is not moving at all, but it's difficult to predict how long that will prevail. Those would be probably the specific areas I will be more cautious about.

[Operator]

We'll now take your next question.

[Manu M. Rimpelä]

It's Manu Rimpelä from Nordea Markets. My first question would really be on this Navis. I think you mentioned that you have EUR 150 million of sales in 2019. And can you remind me that -- what kind of a growth rates have you had since you acquired that asset? And also what is the invested capital or the book value you have of that asset? Because I think you invested quite a lot over the past years in developing that offering. Or has it all been taken through the analysis of cost in your Kalmar numbers? And then finally, could you say that -- what is the cost of this kind of increased investments in Kalmar reported EBIT from the Navis kind of development of the offer?

[Mika Vehviläinen, CEO & President]

The -- overall, over the kind of lifetime of Cargotec ownership, Navis has doubled its revenue. The growth has been more slower in the past 2 years. If you look at the robust growth we have seen in software in the last 2 years, it's primarily coming from the automation software today. When it comes to the assets, we have not capitalized any of the R&D in Navis, so there are no balance sheet items in there as such. I'm not going to comment particularly sort of business unit-specific or business-specific investments otherwise.

[Manu M. Rimpelä]

And you're not willing to comment about the invested capital or book value of Navis today?

[Mika Vehviläinen, CEO & President]

Not at this stage.

[Manu M. Rimpelä]

Okay. Then my second question on -- would be on Kalmar and following up on an earlier question. So I also interpreted after the Q3 results that you talked about, the Kalmar backlog being the high quality and kind of getting the sense that the strong run rate of 10%, 12 months rolling margins at the end of Q3 would be more sort of kind of a level where you think that you can remain. And the Q4, obviously, margin and mix weakness. It's a bit of a surprise. So have you changed your comments? Or did we misinterpret those comments that the backlog quality is lower going into 2020?

[Mika Vehviläinen, CEO & President]

I think there's probably -- I have to admit and I apologize if there is some misunderstanding around that guidance as well. I mean, overall, we are very happy with the Kalmar performance in 2019, where we saw increase in revenue and increase in profitability. With the nature of the business, you will expect a certain lumpiness on that one because the project deliveries, which are generally lower margin than the mobile equipment, are going up and down within the quarters, and the mix keeps on shifting around that one. Obviously, when I look at the 2020 now, the slowdown of the mobile equipment would mean that the portion of the project-based business would increase. And as such, I think we are looking at fairly stable development now in the Kalmar moving into the 2020.

[Manu M. Rimpelä]

Can you help me to understand that if you have a worsening mix, so how do you then get to stable?

[Mika Vehviläinen, CEO & President]

Well, when I look at the numbers on the Q4 level, I think that's where I refer to the stability level moving into the 2020. So we will -- so probably somewhere in the ballpark of what you look at the Q4 and operate with the current demand. Obviously, again, one is to point out that when it comes to the mobile equipment demand, the delivery times and the visibility is shorter, so that, that can move into both directions and more difficult to predict moving into 2020. Whereas with the automation and projects, our -- actually, backlog pretty much covers the 2020 demand by now.

[Manu M. Rimpelä]

Okay. Final question. So should we interpret that there is a risk that Kalmar operating profit margins would not improve in 2020? If you kind of suppose to look at the Q4 run rate then, I think that's kind of the level.

[Mika Vehviläinen, CEO & President]

We did the current assumptions, but as I said, a lot depends, of course, on the demand of the mobile equipment, where the visibility, especially towards the second half, is not good.

[Mikko Puolakka, Executive VP, CFO & Member of Executive Board]

Yes, overall, I would say that quarter 3 type of margin is on a high side if you make projections for 2020. So it should be -- you should use more kind of single -- high single-digit type of margin based on the current understanding about the mix.

[Operator]

[Operator Instructions] We will now take our next question.

[Artem Tokarenko, Research Analyst]

That's Artem from Crédit Suisse. I have a question on Hiab. Could you help us with the size of what was the headwind in the bridge in 2019 from the supply chain issues which you had? And how should we think about the Q4 strong margins, and whether they are sustainable into the next year in Hiab?

[Mika Vehviläinen, CEO & President]

We still had some headwinds in 2019, especially in the earlier part. It's difficult to put an exact number, but I would use a sort of estimate of maybe about around EUR 20 million of revenue, EUR 20 million, EUR 25 million of revenue. That was still a headwind. That headwind, obviously, gradually decreasing throughout the year.

[Artem Tokarenko, Research Analyst]

Right. Okay. And could you also remind us, what's the split between medium- and heavy-duty trucks exposure in that business? And maybe talk a little bit about what gives you confidence in flattish demand outlook for Hiab given a very weak backdrop in the trucks market?

[Mika Vehviläinen, CEO & President]

Yes. The -- traditionally, the Hiab business correlates very poorly with the truck demand. And one needs to remember that only about even in the most penetrated markets, only 1 truck in 10 has some sort of lifting equipment. And the mix also varies, depending on the application. So it's quite a complicated matter. But generally, we have seen truck demand going up and truck demand going down without affecting directly the Hiab demand. The single largest application for Hiab is the construction activity, but one needs to remember that also we serve retail distribution, waste management and other applications as well. But the best predictor on that one generally tends to still be the construction level activity, more so than the truck registration numbers. And when I look at the construction indices towards the end of the year, for example, and predictions for the 2020, those are still showing fairly robust demand moving ahead.

[Artem Tokarenko, Research Analyst]

Right. And my last question is about MacGregor. I think previously, you have been talking about breakeven margins in 2020. In current market environment, is this still the target?

[Mika Vehviläinen, CEO & President]

That's still very much the -- yes, thank you for the question. It's still very much the target for the whole year 2020. Mikko already showed you the savings that we estimate and targeting for the 2020 MacGregor. The other important element of the MacGregor is the loss-making projects we had, especially in the offshore side in 2019, and we do not expect further negative bookings from -- coming from sort of combination of the ongoing cost savings, both from offshore as well as from the TTS integration, put together with disappearance of the negative project margins from the books in 2020, should lead us to breakeven results in 2020. However, I want to point out that this will happen gradually throughout 2020. So we still would expect MacGregor first half performance to be loss-making and then gradually improving throughout the 2020, with the whole year sort of showing a breakeven result.

[Artem Tokarenko, Research Analyst]

Okay. Maybe a small follow-up on this. Could you help us with understanding the size of those losses on those projects in 2019?

[Mikko Puolakka, Executive VP, CFO & Member of Executive Board]

Those losses were double digit million number, without going to an exact number. But more than EUR 10 million we incurred in 2019. And this, together, like Mika said, with the cost reduction programs and TTS integration, we expect to improve the 2020 comparable operating profit.

[Mika Vehviläinen, CEO & President]

Okay. Good to point out that our targeting for the breakeven result is not counting any market improvement. These plans are based on a fairly flat top line number. Obviously, there are upside opportunities, especially around the services throughout 2020. But we do not expect the market to recover very fast.

[Operator]

[Operator Instructions] It appears there are no further questions at this time. I would like to turn the conference back to your speaker. Thank you.

[Hanna-Maria Heikkinen]

Thank you. Before ending this news conference, I would like to remind you about our next event. There is a possibility to meet our colleague, Stefan Lampa, who is President of Kalmar Mobile Solutions. We are organizing event together with him, which will take place here in Helsinki on February 26. And as you may remember, Stefan has an excellent background, for instance, in robotics. So I think this will be excellent possibility to hear his thoughts and plans for Kalmar Mobile Solutions. I know that this is super busy day for all of the analysts, so thank you for active participation, and looking forward to meet you in Helsinki on February 26.