Konecranes Q2 2011

Moving onto former KONE spin-offs, lifting equipment manufacturer Konecranes Oyj (OMX: KCR1V) shed nearly 10% for the week during which it announced quarterly earnings. Cost inflation along with comments of a murkier macroeconomic environment were the clear-cut reasons for the market reaction.

Second quarter order intake was over 450 million with service orders up 17% and equipment orders nearly 35%. Net sales were 459.5 million which was 21.9% higher than a year before but operating profit was only slightly higher at 25.1 million Euro. Operating cash flow was still negative at 27.5 million.

Financial forecasts for 2011 are still for a higher operating profit than in 2010 but the company says increased technology and IT development investments will add some 20 million to cost base with benefits to accrue next year.

CEO Pekka Lundmark noted that industry consolidation has continued during the quarter and said that Konecranes considered a competing offer for Demag Cranes AG, but decided not to try to upend Terex Corporation for the deal. He said this was due to high price, unclear economic outlook and uncertainty over potential antitrust risks.

While in this case there had already been an offer from another company, the last remark highlights the dynamic with competition authorities involvement; often the mere threat of a lengthy review process is enough to discourage a potential suitor and should be taken into account when investors try to find companies that are prime for a takeover.