The reason for the lower than expected sales and operating profit in the third quarter is a weaker development within Business Area Service. Growth in deliveries has been slower than originally planned, which affects fixed cost absorption in the expanded service network. Growth in capacity utilization within key customer groups has stagnated, affecting spare parts demand and thus our profitability. Additionally, certain modernization projects have suffered from execution bottlenecks. Due to these reasons, the Business Area Service operating profit in 2011 is expected to fall short from that of 2010. Sales and profitability of Business Area Equipment has developed according to the expectations and the 2011 operating profit of the business area is forecast to increase from 2010. Finnish Metalworkers’ Union, salaried workers’ union Pro and the Federation of Professional and Managerial Staff YTN have declared a ban on overtime in the technology industry as a result of the interrupted collective bargaining negotiations. The overtime ban started on October 4. At the same time, the Metalworkers’ Union and Pro have issued a strike warning on 44 companies including Konecranes. The initial phase of the industrial action would start on October 21. The action is planned to end on November 7 if no solution is reached in the negotiations before that. To mitigate the adverse effects of the possible industrial action, Konecranes has already started to move its deliveries from Finland to its other supply units outside Finland. This results in additional costs. The strike, if realized, would put pressure on reaching the new financial guidance for 2011.
The management will initiate actions to reduce costs and to improve operational efficiency within the Group. Due to these actions, Konecranes may incur restructuring costs in the fourth quarter of 2011, which are not taken into account in the new financial guidance. Konecranes estimated in its January-June interim report the year 2011 sales and operating profit to be higher than in 2010 while complementing that the increased technology and IT development will add approximately EUR 20 million to the cost base from 2011, while the benefits will follow from 2012 onwards. Konecranes’ 2010 operating profit was, excluding restructuring costs, EUR 115.1 million and including restructuring costs EUR 112.4 million.
