Hi everyone, and welcome to InderesTV. Today we're going to talk about Kalmar with analyst Aapeli Pursimo. Welcome.

Thank you.

So we're going to talk about the Q1.

Okay.

The Q1 figures fell short of expectations when it comes to revenue and especially services. What happened?

So basically Kalmar's revenue grew by 5%, but still missed the expectations. On both segments compared to our expectations. On the equipment side, that was mostly related to timing as we expected. larger orders to be delivered that didn't materialize, but the equipment sales growth was in line with the consensus, so no trouble there. But on the service side... It also missed the consensus as there were some challenges in the spare parts sales in the North American region due to the sluggish market environment there.

Yeah, okay, So not that dramatic when it comes to the other stuff, but services were.

Yeah, there was some weakness, let's put it that way, in services, but of course it's a single quarter, so we don't have to like... but we don't have yet to put that out of proportion.

Mm-hmm. Yeah, of course. But order intake was also slightly below expectations. Is there any specific reason for that?

Yeah, of course the orders decreased somewhat from the strong comparison period, but it was by no means a weak level as it was around the average level of 2025, so around 450 million. So good orders, but also what was visible on the order side was the service. And probably the same reason as in revenue, as there are short lead times on the service side. So at least we think that the main reason was the spare part market in North America, which was somewhat the slackest, but also maybe a little bit soft all around in services when it comes to the orders, but it's a single quarter. There is also the timing, but of course the service side should be more stable,

Mm-hmm.

but of course if the spare parts sales had a weaker quarter in North America, which is also the very profitable one, that affects the EBIT level.

Yeah, of course. Yeah. So how much does the situation in Middle East affect this?

If we take a look at Gulf's revenue, it only represents like a low single digit of Kalmar's sales. So direct effects are quite small, and the company also commented that it doesn't add any meaningful impact on the sales. But of course there are indirect effects as... freight costs and energy costs were increasing, but the company was quite confident that it could handle the situation through its agreement terms. But of course if the situation is prolonged, it will affect Most likely to the global economy and also from

Yeah, everyone.

yes, yeah, and also Kalmar. But so far, quite limited impact.

So far quite limited. Okay, that sounds good. So what does the demand outlook look like for 2026 according to the company?

So basically Kalmar gives a six-month demand environment picture

Yeah.

and it expects the situation to remain quite stable compared to the previous quarters. And the market environment has been quite good in our estimation, especially on the ports and terminals side. There was also some uptick in the North American distribution side, but the company was quite cautious in the comments regarding that market due to the Middle East situation and also the container fleet activity, which was quite stable year-on-year, so let's see how that develops. But overall, in the current environment, quite stable, but of course there is the risk related to the geopolitical elements and also the tariff situation.

Yeah, of course. So you mentioned the profitability already, but the profitability of the service segment dropped from 19 to 16 in Q1. You pointed out there that challenges in North American spare parts sales and the impact of tariffs were key factors. But how structural do you see this? And are you confident that the margin will go back to recent levels?

Yeah, maybe if we start with the decrease from the 19 to 16, the 19 was a very strong comparison point and the expectation was below that. So of course the decrease was quite visible,

Mm-hmm.

but not It didn't miss the expectation by that much, let's put it that way.

Mm-hmm.

But of course there is a, like I said, the North American spare parts, and of course the spare parts business is probably the most profitable one in services, and North America is a very lucrative market on that side. So if that market is slower, it will affect the... profitability also, but like I already pointed out, it's only a single quarter and we don't expect that to be a structural change or the profitability in the big picture to be impacted.

Mm-hmm.

longer-term profit potential in there, but of course the company said that maybe there are not too rapid changes in that market, and due to the sluggish environment it has been more difficult to take the price increases to

Yeah.

the customers, and in the short term that could affect that the margin level doesn't bounce in Q2 to the recent levels. But also what the company said is that it is quite confident that it can increase the service side profitability by its own actions like sales efforts and pricing and cost control, so those seem quite reasonable to us and we expect the service margins to improve, but a little bit slower than what we previously anticipated, but overall not to be structural changes in the potential of the service side, but of course what it needs to improve is for the volumes to go up.

Yeah. So more volume there. Yeah. So Kalmar's 2028 targets include a 15% comparable EBIT margin. You have described these as realistic before this, but the Q1 miss in services shows how sensitive the group margin is to shift in the sales mix. What needs to go right for Kalmar in order to close this gap from 13 to 15 percent?

Basically, like you said indirectly at least, the service margin has to go up

Yeah.

and of course If you look at equipment and also the service side, the operational operating leverage is quite meaningful. So the volume has to go up in both segments. And that would need of course some market tailwind. to accelerate maybe a bit, and of course Kalmar has to also succeed in its strategic pillars, like raising the service business and its share of the sales mix also a bit, and the company has to capitalize the efficiency improvements from its driving excellence program. And so our current estimates are below the target. We are expecting like a 14% margin level. But it is still achievable, but of course the market situation and the strategic measures have to go a little bit better than we estimate. But in the longer term, if we don't just look at 2028, I think it's still achievable, but maybe it could take a little bit longer. Okay, that's a good answer. Let's talk valuation. You wrote that the valuation is fairly reasonable and it encourages investors to stay on board, please tell us more. please tell us more. So if we look at Kalmar's earnings-based valuation, it's quite moderate compared to a quality company like Kalmar, whose return on capital employed is 24% in the last 12-month period. What is driving also the risk-adjusted return is the earnings growth that we estimate for the coming years. And then our positive view is also supported by other methods that we use, such as DCF model, which is a little bit above our target price. And so overall, the valuation seems quite moderate compared to the... the valuation seems quite moderate compared to the quality of the company. Kalmar is Accumulate.

Hmm. And its recommendation is?

Accumulate.

Thank you, Aapeli, for all these answers. And if you want to know more, go to inderes.se and if you have more questions for Aapeli, you can sign in to our forum.