Finnish cargo handling equipment maker Cargotec is considering acquisitions and may use funds from a possible Singapore listing of its marine unit to help finance them, its chief executive said on Wednesday. Cargotec said last week it may list the unit, which makes equipment such as ship cranes for offshore load handling.
"We want to be a consolidator and that requires capital," CEO Mikael Makinen told Reuters on Wednesday. "We are eyeing a bit bigger targets, with revenue of 50-300 million euros ($67-$400 million)." He said the company was particularly interested in buying offshore cargo or load-handling equipment makers.
"The big expansion will be through acquisitions, outside Europe," he said, citing possible deals in China, Singapore and Brazil but adding there was also potential in Norway. A weaker European economy is encouraging European cargo equipment companies such as Cargotec to look for growth through acquisitions. Analysts say a fragmented market, with companies specialising in different segments, also means there's room for deals. Cargotec competes with Konecranes and Japan's Komatsu in port equipment, with Austria's Palfinger in load handling, and TTS Group in the marine business.
Makinen said valuations were now much more attractive than in 2010 and 2011, when the asking price of some potential targets was too high. Cargotec itself is trading at under 12 times 12-month forward earnings, around 18 percent below its historical median, according to StarMine. The company is not considered a top buyout target due to 35 percent ownership by the board chairman's family.
In February, Cargotec reported strong new orders for the final quarter of 2011, although its operating profit fell short of market forecasts. One of Cargotec's long-term financial targets is to raise its operating profit margin to 10 percent. In 2011 it was well below that at 6.6 percent on sales of 3.1 billion euros. Makinen said he was confident Cargotec will eventually reach the target.
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