Cavotec 2Q13 Report

2Q13 turned out to be a record quarter in Cavotec's history, despite an increasingly competitive market environment and on-going global economic turbulence. Revenues amounted to EUR 67,418, up 23.2% on the same period last year, while order intake increased to EUR 57,920, which is 14.4% higher than 2Q12.
Improving our margins remains at the forefront of the Group's focus. We have made good progress in bringing them closer to historic levels, and are committed to strengthening this trend going forward.
As highlighted in previous reports, the ongoing integration and strengthening of our INET operations in the US continued to put pressure on profitability in 2Q. As part of this process and due also to an increase in demand for INET systems we have taken proactive actions to strengthen local management, rationalise production and purchasing procedures, and further emphasise our global standards for products and systems. Once this is completed in 4Q13, including the merger of INET and Dabico operations in the US as well as a move to new facilities, the streamlined entity will be one of the strongest players in the ground support equipment market.
Following this rationalization we will be ideally positioned to deliver advanced, integrated systems to both the international and domestic market in the US, an area where we see a great deal of opportunity as the US airports sector starts to devote more resources to infrastructure investment.
2Q13 Summary of activities
The Ports & Maritime market unit (MU) enjoyed a strong quarter, with a substantial increase in revenues amounting to EUR 32,325. This was due in large part to the completion of the MoorMaster™ automated mooring project in the Mediterranean, and the first delivery of MoorMaster™ units for the St. Lawrence Seaway project announced in 4Q12.
The period saw two substantial MoorMaster™ orders in addition to Alternative Maritime Power (AMP) and cable reel orders in China, Singapore, the US and elsewhere.
One of these projects — a bulk-handling application in northern Norway — carries a considerable financial value. The other, also in Norway, is for two passenger ferry berths. This project demonstrates the value customers attach to Cavotec's unique scope for innovation: not only does this application incorporate MoorMaster™ units, it also features an automated AMP system that will use sensors to connect a new-build battery-powered ferry to shore-based electrical power supply.
As already communicated, Ports & Maritime's Oil & Gas sub-unit also won an a significant order to commission, supply and install stainless steel drag chains as part of an extensive upgrade of a Statoil oil platform in the North Sea. This project, along with increasing order volumes for Cavotec radio remote control units for oil and gas applications, indicate a growing demand for Cavotec's the on- and offshore products going forward.
Cavotec's Airports MU reported an increase in revenue to EUR 17,438 in the quarter. This strong performance was boosted by the near completion of the upgrade project at Phoenix International Airport, where Cavotec INET Pre-conditioned Air (PCA) central systems have been installed on approximately 40 US Airways-operated aerobridges.
Reflecting the state of global commodity markets, Cavotec's Mining & Tunnelling unit posted a 22.6% fall in revenue to EUR 7,393 compared to the same period last year. As major mining groups postpone capital expenditure, this has a knock-on effect for Cavotec seen in reduced demand from OEMs in the period.
The General Industry unit saw revenues dip 8.8% quarter-on-quarter to EUR 10,262. While this unit's performance was softer during the period, it is registering growing interest for its products for the defence sector, and for its electrical vehicle charging systems.
Looking ahead
Aimed at strengthening long-term growth and performance the Group continues to make substantial investments focussed on Airports and Ports & Maritime. While we expect revenues and order intake to grow with approximately 10% in 2013, these investment costs are putting pressure on the Group's operating margins. Moving forward into 2014 and beyond, we believe these investments will ultimately strengthen our market position as well as our overall performance.
To meet evolving market trends and expand our market share, we have continued to focus on providing turnkey solutions and broaden our after-sales services offering. We continue to make significant investments in maintaining a highly skilled and qualified workforce, improving our engineering capacity and further strengthening the structure and global footprint of the Cavotec network.
Our investments in the BRIC countries are displaying considerable growth potential in a number of sectors. For example, in Brazil, where the Group recently established a full-time presence, Cavotec is already seeing a marked uptick in activity: a development that looks set to continue in the months ahead.
Turning to the outlook for specific MUs; for Ports & Maritime, the trend in manufacturing returning to Europe and the US continues, resulting in a slow down in the growth rate of containerisation.
However, port authorities and shipping lines are continuing to push for higher productivity and efficiency through greater automation and utilisation of larger container ships. These trends provide excellent opportunities for Cavotec, as there will be a renewed focus on upgrading port infrastructure, ship efficiency and environmental performance.
For Airports, continuing investment to boost efficiency and sustainability at airports in Brazil, the Middle East, China and elsewhere is set to drive demand for Cavotec ground support equipment (GSE). Another important factor for this MU is the renewed focus on airport infrastructure in the US, a key area that is being revived following years of underinvestment.
The downturn in capital expenditure by large mining companies will continue to soften demand for Mining & Tunnelling in FY13, with delays in investment likely to persist until commodity prices pick-up.
General Industry will continue to provide solid day-to-day business; a forecast that is in line with our projections. Going forward, this unit anticipates interesting progress in the defence and other developing sectors.
Overall, despite concern over growth in certain markets, we maintain a cautiously positive outlook for the Group for the immediate period, supported by the positive trend in Order intake. We remain alert to opportunities in new and emerging sectors, especially for Airports and Ports & Mar
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Source: Cavotec