Konecranes Plc

Miikka Kinnunen - VP, IR Panu Routila - CEO & President Teo Ottola - CFO, Deputy CEO and Member of Executive Board

Johan Eliason - Kepler Cheuvreux Antti Suttelin - Danske Bank Markets Magnus Kruber - UBS Investment Bank Manu Rimpelä - Nordea Markets Tomas Skogman - Carnegie Investment Bank ABSOLUTELY Leo Carrington - Analyst

Hello everybody, my name is Miikka Kinnunen and welcome to this Konecranes Quarter 2017 Interim Report Presentation. Together with me I have Panu Routila, our President and CEO as well as our CFO, Mr.

Teo Ottola. They will cover the group figures as well as the business area financials coupled with balance sheet and cash flow aspects.

So without further ado, I will give the floor to Mr. Panu Routila, please.

Thank you, Miikka. The adjusted EBITA margin improvement continued strong during the third quarter of 2017.

The comparable company adjusted EBITA margin expanded by 1.4 percent points on a year-on-year basis despite that the sales were lower than a year ago. The profitability improvement continued in Business Area Service while the turnaround progressed well in industrial equipment and port solutions.

This indicates that the integration of MHPS is proceeding successfully and therefore improves our efficiency. The comparable combined company orders received in the third quarter increased by 9.4% on a year-on-year basis.

Similar to the first half of the year, the order intake growth was driven by Business Area Port Solutions. Once again, its orders received grew across product portfolio suggesting that cross-promotion or our extended offering seems to work well.

The order intake in Business Area Service and Business Area Industrial Equipment was lower than a year ago as we continued the prioritized focus on laying the foundation for the combined operations. This meant consolidation of operations in several countries and even discontinuation of some underperforming businesses.

The integration MHPS is running ahead of our expectations, while maintaining the target EBIT level synergies of €140 million per year by the end of 2019, we now expect to implement €50 million, previously €45 million synergies on a run rate basis by the end of 2017. In addition to finalizing the actions planned for the rest of 2017, we are working hard to build a good starting point for our integration activities in 2018 and to lay the ground for the growth initiatives that will be started gradually during 2018.

Let's look at some of the key figures a little bit more in detail. On a comparable basis, orders received in the third quarter totaled €750 million representing an increase of 9.4%.

The value of the order book at the end of September totaled €1.657 billion, which was 12.9% higher than in the previous year on a combined basis. Group sales in the third quarter decreased by 7.2% to €746 million.

The decrease in Business Area Port Solutions related to the timing of deliveries and exceptionally high sales of certain products in the comparison period. In Business Area Service and Industrial Equipment as I said, we have been prioritizing the margin improvement through integration activities over the growth.

Moreover, the appreciation of the euro-U.S. dollar affected the reported sales to some extent.

The consolidated EBITA increased by €7 million from previous year's €47 million to now being €54 million. The adjusted EBITA margin improvement was from 5.9% to 7.3%.

Consolidated operating profit totaled €7 million and EPS was negative at €0.06. We booked restructuring costs of €35 million relating to the integration of the MHPS acquisition.

Remember that we have announced the integration related restructuring costs to total €130 million during 2017 and 2019. I will elaborate on the progress of the integration activities a little bit later in this presentation.

As expected, our free cash flow was somewhat weaker in the third quarter. This is related mainly to the negative net working capital development as anticipated already at the end of the second quarter.

The European Union manufacturing capacity utilization rate continued to be improved moderately in the third quarter. However, demand for products and services among our industrial customers were softer than in the first half of the year.

This was partly related to timing issues in our spare parts modernization and crane component business. The development of the U.S.

capacity utilization rates remained sluggish. Correspondingly, the demand of our products and services was still weak.

As in the previous quarter, orders for standard industrial crane and crane component rose from the previous year at a comparable currency exchange rates, but orders for crane service and heavy duty industrial cranes did not grow. Based on the Purchasing Managers' Index and Indexes economic activity improved in emerging countries compared to the previous year, although there were some signs of softening momentum towards the end of the period.

Nevertheless, we continue to see higher demand for our products and services in Asia Pacific. The global container throughput was robust as it increased by approximately 6% on a year-on-year basis in January to September 2017.

Regionally, container volume from Asia to East Coast of North America have been particularly strong year-to-date as the widening of the Panama Canal has supported traffic above expectations. Correspondingly, demand for container handling equipment increased in Americas and Asia Pacific; particularly small and medium-sized orders improved across the whole product portfolio.

Our market outlook remains unchanged as follows, economic indicators related to manufacturing industries continue to be strong. Demand situation in Europe is stable within the industrial customer segments.

Business activity in the North American manufacturing industry remains mixed. Demand in Asia Pacific is showing signs of bottoming out.

Global container throughput growth has improved and the prospect for small and medium-sized orders related to container handling have strengthened. We made a small change to the financial guidance concerning sales, but our adjusted EBITA guidance remains intact.

The sales in 2017 are expected to be lower than the comparable combined company sales in 2016. We expect the adjusted EBITA to total €205 million to €225 million in 2017.

Comparable combined company adjusted EBITA was €184 million in 2016. The change in the sales guidance is a result of the order intake during the third quarter.

As I said in the beginning of the presentation, the integration of MHPS is running well ahead of our expectations. We implemented run rate synergies of €36 million already during January to September.

We now expect to implement €50 million, earlier €45 million, synergies on a run rate basis by the end of 2017. P&L effect of these actions is expected to be around €20 million in 2017.

In the third quarter, we made progress in optimizing our manufacturing operations in several countries, most notably in India, Italy and the U.S. We have now also started actions to transfer our industrial crane production in Shanghai to another location nearby.

Also, the combined organization is now well in place including its appointments. First legal entities have been merged for leaner operations and joint go-to-market plans are done and practical actions already agreed.

Hence, things have been progressing quite well, which allows us to move focus to detail plans of 2018. We are keeping the target of €140 million EBIT level synergies per year by the end of 2019 intact.

The synergy program as such remains in scope as well the same as it was before. We have continued confidence in the plans as we have developed these much further.

This slide therefore contains essentially the same levers as we have shown already before. Following slides contain the group's financial performance still in graphics and I won't repeat the previously mentioned figures anymore here, but I will just mention some highlights before Teo will tackle them in more detail on the business area level.

Orders received increased in port solutions, but decreased in service and industrial equipment. Geographically, orders grew in Americas as well as in APAC, but were lower in EMEA.

Sales were lower than in the previous year in all business areas. As expected, the decrease in the Business Area Port Solutions related to the timing of deliveries and exceptionally high sales of certain products in the comparison period last year.

In Business Area Service and Business Area Industrial Equipment, we have this year prioritized the margin improvement over the growth. The appreciation of the euro-U.S.

dollar affected the reported sales approximately 2 percentage points. Order book growth related to the Business Area Port Solutions and Business Area Industrial Equipment, port solutions order book has strengthened in particular.

However, its order book for deliveries scheduled for the fourth quarter of 2017 is approximately €50 million lower compared to the corresponding situation one year ago. As we are now looking at the comparisons to the combined company figures, I should add that the previous year's order book for MHPS included deliveries for the next 12 months only, which explains part of the growth.

In this graph, we can now see our profitability continued to increase very nicely in the third quarter. The group adjusted EBITA margin improved mainly thanks to the cost saving measures implemented already in 2016 and 2017 as well as successful delivery execution.

Gross margin improvement and fixed costs were lower on a year-on-year basis. On comparable rolling 12 months basis, Business Area Service generated 36% of the group sales, industrial equipment 34% and port solutions 30%.

In terms of the geographies, Europe, Middle East and Africa represent slightly more than a half of our sales whereas Americas generates roughly 1/3 of it. The share of Asia Pacific as it had 17%.

And now I will hand over to Teo who will continue the Business Area presentation, please Teo.

Thank you, Panu and let's first go to service as usually. So our order intake in service was €232 million.

That is down about 4% in a year-on-year comparison. Currencies were against us.

So with comparable currency rates, we are looking at approximately 1.5% decline in order intake. Sales were €274 million.

That is a bit more than 7% down year-to-year and again with comparable currencies, we would be at about 5% decline. The sales decreased in all regions largely due to discontinuation of certain operations as well as certain timing issues.

And exactly like in the first quarter and second quarter as well, if we take a look at the business mix, so our spare part business actually outperformed field service. When we then take a look at the service adjusted EBITA, so we had about €38 million EBITA in the third quarter.

This is slightly more than a year ago despite lower sales and the adjusted EBITA margin was 13.8%, which is about 1 percentage point higher than a year ago. The EBITA margin improvement is explained by higher gross margin and lower fixed costs and of course if you take a look at the gross margin, so a positive sales mix as a result of the spare part focus for example as well as better productivity contributed to that one and then the integration activities that we have taken now as a result of the acquisition have during the beginning of the year mostly been benefiting service.

Service order book was €222 million. That has been quite flat during 2017 and then when we take a look at the agreement base, so the monetary value is €236 million.

That was down from the second quarter number, but largely because of the currency changes there as well. Then, industrial equipment and industrial equipment order intake, which was €263 million.

That this down 4.7% year-on-year. Also here the currencies are playing a role, the decline would be about 2 percentage points smaller with comparable currencies.

The orders decreased in EMEA and Americas, but rose in APAC and then again if we take a look at it from the business units point of view, so the component order intake fell from the previous year's level whereas the order intake for industrial cranes was quite flat in a year-on-year comparison. Sales were €260 million.

That is a decline of 5.7% and again currencies causing a little bit headwind here. The adjusted EBITA for industrial equipment was €11.7 million.

That is 4.5% of sales. We have a very good improvement both in euros as well in margin when it comes to the EBITA and here as well as in the service area as well, so both gross margin improvement and lower fixed costs contributed to that.

Gross margin was better partially because of the mix, but mostly because of successful deliveries during the third quarter. And then of course the cost saving measures both implemented in 2016 as well as a result of the integration have helped.

So there has been some tail impact especially for industrial equipment from the cost saving activities initiated in 2016, still now in the third quarter of 2017. The order book for industrial equipment is €566 million.

This is also quite flat during the whole of 2017, approximately 2% higher than a year ago. And then port solutions, port solutions order intake was €292 million.

That is up as much as 44% in a year-on-year comparison. The orders grew in Americas and APAC.

They were quite flat in EMEA. And then again, when we take a look at it from the product platform or product category point of view, so orders grew in mobile harbor cranes, straddle carriers, ship-to-shore cranes, lift trucks and port services.

Sales were €244 million. That is down 12% in a year-on-year comparison.

Currencies do not play as much a role here in port solutions as in service or industrial equipment. The decline is due to the order book timing, which was something that was anticipated as well and then in practice, it is the RTG deliveries that we had in the third quarter of 2016 and to the same extent, we did not have them now in Q3 of 2017 that is making most of the difference in the sales number for Q3.

Adjusted EBITA for port solutions was €12.5 million or 5.1% and here also an improvement both in euros as well in margin despite lower sales. Here the EBITA margin was also supported by higher gross margin as well as lower fixed cost like in the other 2 business areas as well.

Improved delivery execution led to slightly better than expected margins for some of the projects delivered during the third quarter and then also the loading incident factories means that the cost absorption was better in those factories and this also improved our margin level in port solutions to some extent. Port solutions order book is €868 million.

This is 27% higher than a year ago as at the end of the second quarter as well, so the order book for Konecranes Gottwald and Konecranes Noell products continues to be very good in historical perspective. However, as Panu already mentioned, so the timing of the order book is very different than what it was one year ago and now we have about €50 million less deliveries in the order book for the fourth quarter of 2017 than what we had at the same time one year ago for the fourth quarter of 2016, which means that we have basically this kind of €50 million in-built sales reduction for the fourth quarter in the order book of port solutions included.

Then a couple of comments about the cash flow and balance sheet. Net working capital first, so our net working capital is €343 million at the end of the third quarter.

There is a slight deterioration so an increase in net working capital in the third quarter mostly coming from advance payments like Panu mentioned. This was to be expected as well.

It is not a major surprise as such. It might be that going forward the level still will deteriorate a little bit towards the end of 2017 for timing reasons of the order intake and the order book.

Free cash flow continues to be good even if it was slightly negative now for the third quarter. So in a year-to-date consideration, this €166 million that we have is a good level in historical perspective.

And then on the next page, we have the gearing and return on capital employed as well as net debt. Our net debt was €566 million at the end of the third quarter.

This is naturally a small increase in comparison to the situation at the end of the second quarter as a result of the cash flow, but the gearing level continues to be on the level of 45%, which is an okay level for us. Capital employed and return on capital employed, so obviously there was a shift from the end of 2016 as a result of the bigger balance sheet due to the acquisition, but now when we take a look at the first quarter, second quarter and third quarter developments, so in line with an EBITA improvement, this has been trending in the right direction.

Of course, one has to remember that here the rolling numbers, so they partially come from the standalone Konecranes historical numbers from 2016. This actually concludes the presentation and we are ready for the Q&A.

Thank you Panu and Teo. Operator, can we start with questions from the phone lines.

I suspect that most of the questions will be coming from there.

First, just a question on your guidance, you mentioned that you lower your revenue guidance because of the order intake in Q3. Remember you lowered it a bit in the Q2 results as well and then it was mainly blamed on currencies.

What area were you sort of expecting more orders in the third quarter? Thank you.

Okay, so if we take a look at the situation now compared to the previous guidance, so port solutions order intake naturally would not have impacted the end of the year deliveries to that extent anymore. So we are mostly talking about service and industrial equipment and the component portion in the industrial equipment area.

So that was -- I mean you mentioned intended focus on profitability rather than volume, but it seems to have been something on top of that specifically in the components business if I'm understanding you correctly.

Yes, that is the situation. Then the EBITA guidance, we did not see any need for changing that because we are within the guidance range and we did not see any need for changing the EBITA guidance.

Is there any specific reason for this lower than expected order intake?

Not really. We have as stated already earlier in the presentation, we have been preferring actually the profitability improvement actions over the growth for this time being and that is also being communicated already earlier.

Next year is then time for the growth.

And then just on your cost efficiency program here on the back of the merges you mentioned that your plant in India is already announced, how is the profitability overall now in India for you? Is it profitable already in this quarter or will it take some time until you get back to a profitable level in India?

Thank you.

I think operationally we will be profitable very soon here now, of course, currently there are removal actions and some actions like that. Some of them can be booked in the adjustment, some of them cannot be booked in the adjustment.

So currently, removal is going on and will still affect a little bit on the profitability. We are now confident that the move there was right and will improve the situation in India greatly from actually consolidating two low unprofitable units together.

First on personnel reductions. I can see that in the first half, your employment went down by 7%, now in Q3 it went down, let me say, only 4% year-over-year.

Is this the trend that the decrease should or the pace of decrease should continue to fall when we go forward?

This is not an indication of anything as such. The personnel reductions actually relate mostly to the timing of activities when they are happening and when they become effective and there is a certain relay between the announcement of the activity and then the final reduction.

Then on port orders, it seems that you are clearly doing better than some of your competition. Are you seeing that the market as a whole is turning or is this only because of your market share gaining?

I feel that actually our cross-promotion is giving fruits and our market position is improving within the port solutions.

So you're not seeing an overall recovery yet in the port equipment industry as a whole?

We do see some of improvement, but I think we are ahead of the total market as such.

Okay and then just finally, curiously, calculating the potential impact from lower sales, if I use gross margin assumption of let's say, 40% on the sales fall from year ago indicates that your EBITA could have been €20 million plus better if you didn't lose sales from year ago. Is this the right way to think about this?

Now you are referring to the third quarter result in particular?

Yes.

Yes. The gross margin assumption is probably a little bit high, but if you take a look at the situation for the third quarter in particular, so what we are seeing as an explaining factors for the profitability improvement there is that, first of course, we have about €7 million of those integration savings that we have now been doing during 2017.

That's an year-on-year improvement in comparison to the third quarter of 2016. Then we have a little bit of a tail impact from the activities that we made in 2016, maybe a couple of million mostly in industrial equipment, to some extent in the port as well.

Then depreciations are maybe €1 million lower and then of course, it then leads an improvement for the gross margin as well which we have seen as a result of the project execution, product mix and then the improved productivity within the service business in particular.

On the aqueduct to the extent that now when you look at the operating leverage, so please remember that part of the sales change is coming from currencies. And of course then, it doesn't mean that the genuine volume change would have been as big.

So already the business volume change and then the resulting operating leverage is less than what the headline figure suggests because of the currency changes.

So the sales changes is more than €50 million, but then if you take a look at it with comparable currencies. So we are talking about €40 million plus a couple of million, so there is a significant difference as a result of the currencies as well.

Okay then going into fourth quarter and next year in particular, if I look at your order book, to me it indicates that you should enjoy potentially growing sales next year, is this what you think as well?

Especially when we take a look at the port solutions, so that is correct. So the order book is higher than what it was a year ago for example and then again if we take a look at the timing, so it is actually, so that this year's fourth quarter is having this €50 million negative deviation in comparison to the year ago.

So that the actual -- the order book beyond 2017 is quite strong in port solutions.

I think you have changed the wording slightly on the European industrial market activity to stable from improving. Could you expand a little bit on that?

That depends a little bit on the product group how we see the situation, but I think in general, European situation is not worsening, it's maybe rather improving and we hope to see that now coming in the numbers.

Okay, it doesn't really seem like it reads like that in the report, but nevertheless, what was -- could you give some detail about the size of the order in products -- that in port solutions, sorry?

Sorry, could you repeat that one.

You had a big order in port solutions, did you not? What was the size of that?

No idea, but the port solutions order intake actually has been quite strong in several product categories, so mobile harbor cranes, straddle carriers, ship-to-shore cranes. There have been big orders as there typically are in the port solutions business, but not dramatic that would have in a way cost as a standalone order intake the increase that we now have in an year-on-year comparison.

In the port solutions, the cross-promotion is working quite well across the whole product palette. And therefore, there are not single product groups where the order intake would be significant and then the others would be lacking.

This is pretty much across the whole product palette.

Excellent, good news. And finally, what was the impact on EBITA from FX in the quarter?

From the FX? Did I understand correct?

Yes.

Yes, the translation impact is most likely around €1 million negative because it follows pretty well the change that we have in the sales level as well. From the transaction, actually in a year-on-year comparison, we have gained.

So from the transactional impact we have at least €1 million positive most likely or little bit more. So that the currencies actually have supported the result in a year-on-year comparison in net terms if you include translation and transaction.

And the reason why it goes like this is that the transaction impact obviously comes as a result of the hedging activities and when we hedged a couple of quarters ahead, so all the impacts come with a delay.

Can you please comment a bit more on the comments you made around the orders being slightly weaker than you had expected. So I mean was this a reflection of you not taking those orders because in services you focused for instance on improving the profitability or was it the fact that those orders, which you were expecting to get did not come?

In service business, we have been, let's say, getting rid of some underperforming businesses and that has resulted in those orders also being actually not been taken further on and that has maybe the biggest effect here. And in timing of certain activity orders, we have seen that the timing of the order intake was postponed slightly to the fourth quarter and therefore the end of the third quarter was somewhat slower.

Okay, and then on the synergies, so did I hear correctly that the P&L impact was €7 million in the third quarter this year?

Yes, that is correct.

Okay and can you please split the €20 million you expect for 2017 that I think you said the most of that was in services for this year. Can you explain a bit more for each division?

As we have said, the activities that we will be doing by the end of this year will have an effect on run rate basis of about €50 million and then carried out activity, so that it will actually have a P&L effect of about €20 million for this year.

But are you able to help us to understand how that €20 million and €50 million is split between the divisions to better understand what is driving the profitability improvement?

We have not given an exact split on that one. We have of course no need and commented what previously was said that, that quite a big portion of the first year P&L impact will be visible in the service business because the activities regarding the branch consolidations for example have basically been done for example in Northern America already, but to have an exact split, so that we have not unfortunately disclosed.

Okay and then finally on the market outlook statement, so referring to the earlier questions from the previous speakers I also find the comments maybe a bit conservative especially given what you are seeing obviously in terms of the leading indicators, VMI and also some other just some companies commenting, so are you seeing that the market is just not taking off in Europe or into sort of U.S. or are you just seeing that you are very late in the cycle, which means that you are only starting to get started in terms of the order intake activity?

Tell we are both cyclical in terms of the business we are doing in the component business maybe earlier and we would see actually in the second quarter in the component business and early on this year a very good order intake. Now the third quarter was somewhat slower due to big numbers of orders being received already in the late of the second quarter.

So I see that the somewhat positive market tendency is kept in our mind.

I'll take the questions one by one. So first on port solutions.

How much is the order book for delivery actually up next year. It's bit hard to guess based on the numbers provided?

That is correct and we haven't actually given the exact number for 2018 because of course there are certain deliveries that at the end of '16 have been beyond '17 and at the end of '17 will be beyond '18. So this exact number we have not given for 2018.

We have in a way discussed of course, the impact for the period for which we have a financial guidance, but we haven't gone beyond that one.

So you don't want to give just some kind of a ballpark figures so we don't get it totally wrong. It's so hard when you say that the old order book that you compared to is only including for the next 12 it becomes very, very difficult to get the sales estimate just in the right ballpark?

I'm sure that you will hit the right ballpark when you make the estimate. Trust you will hit the right ballpark.

Okay and then in service, I fully understand your strategy to push profitability this year but meanwhile, you talk about putting a foundation for growth in place. So can you elaborate a bit about this and what will push sales growth in service next year and are you kind of positive that the sales decline ends when we go into next year?

This is pretty much a continuation of the same line that we said already at the announcement of the transaction that the biggest service business growth will come from the Demag installed base and now this year, we have been preferring and prioritizing actually the activities to make sure that the foundation is solid and sound for capturing then later the growth and now we have been setting up the growth and how to do it and now, next year, we will actually go after this Demag installed base. And we already said, since last year, basically this is not a 1 or 2 quarter issue to go after, it will take couple of years and now next year it will be starting.

But is it correct that you do these cleanup of bad contracts, that kind of ends this year and the mood turns to growth next year or will the cleanup continue next year?

It is not only clean up, we have been basically doing branch consolidation. We have been consolidating over 50 branches about by now and that has been a work that is basically being done by the same people who might be doing something else.

So this needs to be done first. We need to have a good foundation for which we will then start building the growth and this is now being done.

Okay, and then on factory closures. I mean you happen to have factories in countries that are kind of seen as problematic in the perspective of closing down operations like Italian and France.

Can you just give -- and perhaps Germany as well. I mean can you give some comments on -- do you have any issues at the moment that you cannot implement what you're planning to do?

I have to say that in our Italian factory we have worked extremely well with the local labor unions and workers councils and we have reached an agreement. We have signed an agreement with the labor unions locally of closing the site as such.

That's happened because we saw that no business plan was able to make that unit viable and therefore these discussions were held and I'm extremely proud of our team and the workers councils over there, very consistent attitude in these discussions. These factories being closed by the end of the year or very early next year.

Okay and then finally on the dollar, transactional exposure and please help us to understand if the dollar remains at the current level, what will the negative impact be in euros taking hedge contracts into account?

Taking the hedged contracts into account, so that is a very complex equation and calculation and that is a bit hard to do, but what we can, of course, comment is the sensitivity in general and the sensitivity in general is that if we have a 10% change in euro-dollar, so the impact will be about €9 million for us on an annual basis and now if you remember what it was for Konecranes standalone in 2016 for example, so it was €6 million and now it is €3 million more as a result of, of course, the volume changes that Konecranes legacy has seen, but also the MHPS addition to that one. There are unfortunately then a couple of caveats that one has to make there.

First of all, of course, like what I said earlier, we are hedging. So this impact will come with the certain delay and then obviously this one excludes the project business, which we basically hedge at the time when we get the deal.

So when that hedging takes place at the time of the deal making, so it is in a way takes into consideration the currency rates at that time because the contract is priced at that time, but this flow -- so called flow business that we have between the different entities, so it is 10%/ €9 million.

My question is on the service and industrial equipment businesses. In terms of the impact from integrating the businesses negative impact to sales and the underlying demand situation.

Can you quantify the effect of each of these issues on orders in service assuming that currency was around minus 2%?

So you are asking about the implications of the integration to the order intake?

Yes, and to sales as well, so understanding how much of the decline year-over-year is due to the integration and how much is the underlying demand environments.

Well maybe Panu will want to, but I could not very well be able to quantify because, of course, you have to take into consideration that we have 600 branches globally in the service business. Of course, we are doing integration and we are doing other things trying to sell to the existing and new customers as well and to be able to separate between the integration impact and all the other impacts that we have is a bit challenging.

Of course, it is possible and maybe even likely that in areas where people are either doing a lot of integration work or then doing, for example, a system implementation that has been adopting and is continuing to be adopted in the service business as well. So the focus maybe away from the sales activities.

Well after this one, maybe Panu will quantify it, but it would be difficult for me.

Yes, we have certain magnitudes in our hedge, but I think we will not go into the details right here.

Okay, thank you, understood. And then another question, my last question on industrial equipment and service as well, how do you see growth progressing in APAC, now that the SANMA brand is no longer used or so how much service business do you have in APAC?

If you were referring to the SANMA business which we sold earlier this year, that will have a very minor impact, probably will not be even seen in the round of the numbers.

Otherwise, if you want to comment a little bit more than what we did earlier and when we talked about the service, for examples, so the comment was the sales has declined in all regions. That is correct , but if we take a look at the order intake in APAC, so that was actually slightly up and the same applies to the industrial crane business as well.

So that if we take a look at the APAC as a region, so the industrial crane order intake is up. So that there are, let's say, some positive signs in APAC as well, which of course is consistent with the comment that the situation from the demand environment point of view seems to be stabilizing.

Hi I have a couple of follow-ups. Is it possible for you to quantify the impact of the discontinued business operations in service?

We will not give exact numbers on that, We know them what basically has been done, but we will not go into the details here.

Okay and the growth initiatives you implement in 2018, the comment around that, that is primarily the Demag initiatives you are talking about? Installed base?

There I invite you to participate in our Capital Markets Day to be taking place in December 14 and December 15 and there this issue will be discussed.

Just a follow-up coming back a little bit to this potentially lost to delayed orders on components. I understand you have been hiking prices 1 or 2 times this year.

Do you think these price hikes have had any impact on those orders or have the competition been doing the same sort of price hikes now when we see raw material costs and similar going up? Thank you.

Thank you for this question because that was the top question I was expecting to get today. So firstly, we have had a couple of price increases this year.

We have been able to increase the prices at average of inflation rates. That means that across the total has been in average around the inflation rate.

There might be some changes between product groups and areas as such where price increase could be more or somewhere could be less. The price increases that were coming for the component business, they had an effect on the second quarter of higher order intake in the component business and subsequently those customers were placing orders with the previous price list, so it affected the third quarter order intake somewhat and now we expect that to comeback in the fourth quarter and from now on.

We do not see actually any negative effect on our market position while also the competitors have been actually pushing for market increases mainly due to the cost inflation.

Thank you, operator. Any further questions locally at the conference room.

Appears that is not the case. So I wish you -- welcome to the Capital Markets Day will be held mid-December and otherwise many thanks for your participation today.

Thank you.

Thank you for your participation. Thank you.