Cavotec SA - Interim report January - June 2022

Order backlog increased 98% to EUR 152.8 million
 
On February 22, 2022, Cavotec signed an agreement to divest 100% of the Airports business to US based investment company Fernweh Group. As a result of the planned divestment, Airports is reported as a discontinued operation.

APRIL–JUNE 2022 NEW CAVOTEC
· Order backlog increased 98% compared to Q221 to EUR 152.8 million
· Revenues increased 22.8% to EUR 31.7 million (25.8)
· EBIT decreased to EUR -0.9 million (-0.4), corresponding to a margin of -3.0% (-1.6%).
 
JANUARY–JUNE 2022 NEW CAVOTEC
· Revenues increased 7.2% to EUR 59.1 million (55.1)
· EBIT decreased to EUR -2.4 million (0.7), corresponding to a margin of -4.1% (1.3%)

APRIL–JUNE 2022 TOTAL (INCL. DISCONTINUED)
· Net result for the group was EUR 0.9 million (-0.9), of which EUR -0.7 million attributable to the discontinued operations of the Airports business
 
JANUARY–JUNE 2022 TOTAL (INCL. DISCONTINUED)
· Revenues increased 1.2% to EUR 74.7 million (73.8)
· EBIT decreased to EUR -7.7 million (-0.4), corresponding to a margin of -10.3% (-0.5%)
· Net debt amounted to EUR 25.3 million (Q122: 23.8)

Key events during the quarter
 · On April 25 Cavotec announced an order in the first quarter for a battery charging system for industrial use worth over EUR 3M.
· On April 26 Cavotec appointed David Pagels to take over as CEO from Mikael Norin who, as previously announced, had decided to leave Cavotec. David officially assumed the role of CEO on 15 May 2022.
· On May 2 Cavotec announced a shore power order valued at EUR 15.7 million received from a major global shipping line. Deliveries are scheduled to start in the fourth quarter of 2022 and continue throughout 2023 and 2024. 
· On May 5 the Cavotec factory in Shanghai partially re-opened for production and returned to full production by the end of June. The factory was previously closed in March due to control measures implemented in the city of Shanghai to contain the spread of the Covid virus.
 
Key events after the quarter
· Both parties to the Share Purchase Agreement dated 22 February 2022 agreed to complete the transaction for the sale and purchase of the Airports business on 29 July 2022. The lenders agreed to waive compliance with the financial covenants of the Credit Facility Agreement for the testing period ending on 30 June 2022, considering the imminent completion of the transaction.

Comment from the CEO
 
Continued increase in orders, focus on delivery

We had a high level of new orders in the second quarter of 2022. The order backlog has almost doubled (+98%) in the past 12 months and is 54% higher than at the beginning of the year.
 
Orders for shore power solutions continue to underpin the growth in the backlog. One example is the large order that was secured in May, totalling EUR 15.7 million for the supply of on-ship shore power for new build vessels that will be constructed from 2022 to 2024.
 
We previously reported that the Cavotec factory in Shanghai was closed in March, due to the implementation of city-wide restrictions to control the spread of the Covid virus. The factory was re-opened in early May and finally returned to full production by the end of June. Employees in China made the extra effort to maximise assembly and delivery of products during the phased re-opening of the factory, in very challenging circumstances.
 
In addition to the direct impact on China operations, the restrictions in Shanghai disrupted the other Cavotec factories in Italy and Germany, which also assemble products for delivery into China.
 
The above factors explain to a large extent why the positive development in orders has so far only slowly translated to growth in revenues. Although revenues increased 23% in the quarter, there was a significant impact from delayed deliveries. The disruption to our operations is estimated to have delayed revenue by more than EUR 10 million by the end of the second quarter, up from approximately EUR 3 million at the end of the prior quarter. It is anticipated that delays will be recovered, and lead times improved, by the end of 2022. This is based on having more capacity in China, ramping up during the third quarter. It also assumes that Cavotec factories in China, Italy and Germany remain at full production for the second half of 2022.
 
The divestment of the airports business is almost completed. Taking into consideration the period up to the date of this report, we have completed the carve out of the entities that we committed for completion. This included legal, operational and systems separations in multiple countries. We agreed with Fernweh, the buyer of the airports business to complete the transaction on 29 July 2022. The imminent completion led to discussions with our lenders, and they agreed to waive compliance with the second quarter covenants while we prepared for the final separation of the business.
 
This is my first report after taking over CEO responsibilities in the middle of the second quarter. I am privileged to lead Cavotec and to develop the company to its full potential. After a few weeks, I see that there is strong demand in the market for our products, which is evident in the growth in order backlog. The divestment of the airports business, now known as Dabico Airports solutions, will be completed this week. We will focus on our core business of connection and electrification solutions for ports and industrial applications. Despite challenges about inflation and supply chain disruption, I am confident that, with this focus, Cavotec will grow successfully in the coming years.
 
Lugano, 27 July 2022
 
David Pagels
Chief Executive Officer

ENDS

Quarterly Reports on www.cavotec.com 
The full report for the period January-June 2022 and previous quarterly and full year reports are available at: http://ir.cavotec.com/financial-reports