Cargotec Corporation, Stock Exchange Release, January 30, 2007 AT 12:00 p.m. Finnish Time Cargotec Corporations Financial Statements Review 2006 - Orders received grew significantly and reached EUR 2,910 (112/2005: 2,385) million. During the fourth quarter, orders received amounted to EUR 716 (1012/2005: 591) million. - The order book on December 31, 2006 totaled EUR 1,621 (December 31, 2005: 1,257) million. - Net sales grew to EUR 2,597 (112/2005: 2,358) million with EUR 697 (1012/2005: 622) million attributable to the fourth quarter. - Operating income from operations rose markedly to EUR 221.7 (112/2005: 179.4) million with EUR 57.7 (1012/2005: 52.7) million attributable to the fourth quarter. - Operating income including non-recurring capital gains rose to EUR 239.5 (112/2005: 194.8) million. Operating income for fourth quarter was EUR 57.9 (1012/2005: 66.4) million - Cash flow from operating activities before financial items and taxes was strong and totaled EUR 249.8 (112/2005: 194.1) million. - Net income for the reporting period amounted to EUR 166.1 (112/2005: 136.6) million. - Earnings per share were EUR 2.57 (112/2005: 2.11). - Board of Directors will propose at the Annual General Meeting that a dividend of EUR 0.99 per each class A and EUR 1.00 per each class B share be paid. - Cargotecs market outlook for 2007 is positive. The high market activity and strong order book in all business areas give a good start for the year. Completed and targeted acquisitions will support further sales growth. Operating income from operations in 2007 is expected to continue to increase although the operating margin development will be slightly affected by planned investments in future growth. Cargotec Corporation has been listed on the Helsinki Stock Exchange since June 1, 2005. The comparative figures presented in this financial statements review for JanuaryDecember 2005 are provided as additional information and are unaudited pro forma figures. The comparative figures for JuneDecember 2005 are audited figures based on Cargotecs first official financial period. Year 2006 figures are audited. Cargotecs President and CEO Mikael Mäkinen: Year 2006 was prosperous for Cargotec. We continued successfully our profitable growth. Our net sales grew by 10 percent to EUR 2.6 billion while our operating margin from operations improved from 7.6% in the previous year to 8.5%. We continue to develop our business to reach our new financial targets. Analyst and Press Conference An analyst and press conference (in Finnish) will be arranged on January 30, 2007 at 2.00 p.m. Finnish time at Cargotecs head office, Sörnäisten rantatie 23, Helsinki. An international telephone conference for investors and analysts will be held on the same day at 4 p.m. Finnish time. The presentation material will be available on Cargotecs internet pages by 2.00 p.m. Finnish time. The conference call phone numbers are as follows: +1 617 213 8845 (if calling from the U.S.) +44 20 7365 8426 (if calling from rest of world) Access code: Cargotec Corporation The telephone conference can also be viewed as a live audio webcast through the internet at www.cargotec.com, starting at 4.00 p.m. Finnish time. The archived webcast will be posted on the internet pages later on the same day. Sender: Cargotec Corporation Kari Heinistö Eeva Mäkelä Senior Executive Vice President and CFO SVP, Investor Relations and Communications For further information, please contact: Kari Heinistö, Senior Executive Vice President and CFO, tel. +358 204 55 4256 Eeva Mäkelä, SVP, Investor Relations and Communications, tel. +358 204 55 4281 Cargotec is the worlds leading provider of cargo handling solutions whose products are used in the different stages of material flow in ships, ports, terminals, distribution centers and local transportation. Cargotec Corporations brands, Hiab, Kalmar and MacGREGOR, are market leaders in their fields and well-known among customers all over the world. Cargotec's net sales are EUR 2.6 billion. The company employs close to 9,000 people and operates in approximately 160 countries. Cargotecs class B shares are quoted on the Helsinki Stock Exchange. www.cargotec.com Business Environment Hiabs load handling equipment markets were buoyant in 2006. During the first half of the year, the markets were strong in North America and Europe due to the lively demand for new trucks. Demand was further boosted by customers preparing for new requirements on equipment and tighter emission standards that became effective during 2006. During the second half of the year, demand for load handling equipment continued to be high in Europe whereas in North America the markets leveled off, particularly with respect to equipment used in building materials supply. In Asia, the load handling equipment markets were stable and demand grew towards the end of the year. Demand for maintenance and spare parts was high in all geographical regions. Demand was strong for Kalmars container handling equipment in 2006. In Europe and Asia, demand was high throughout the year and began to strengthen in South America towards the end of the year. Demand for reachstackers was record high and the markets for yard cranes, straddle carriers and terminal tractors were also very good. Demand for heavy industrial handling equipment continued to be healthy. Services provided by Kalmar were in brisk demand in all markets thanks to high port and terminal utilization rates and customers continuing to outsource their service activities. Demand for MacGREGOR marine cargo flow solutions was high in 2006. The markets for hatch covers, ship cranes and cargo securing equipment used in container ships and general cargo vessels were buoyant as shipbuilding activities remained lively. Increased orders for PCTCs (pure car and truck carriers) at shipyards were reflected in high demand for the RoRo divisions solutions throughout the year. Bulk handling equipment markets were strong. Demand for MacGREGORs services was healthy. Orders Received Orders received by Cargotec in JanuaryDecember 2006 totaled EUR 2,910 (112/2005: 2,385) (612/2005: 1,366) million. Especially significant was the growth in MacGREGORs orders received. A considerable part of MacGREGORs orders will be delivered during 20082009. During the fourth quarter, orders received were EUR 716 (1012/2005: 591) million. Pro Financial forma period Orders 10-12/2006 10-12/2005 1-12/2006 1-12/2005 6-12/2005 received, MEUR Hiab 240.7 234.6 946.2 830.6 476.2 Kalmar 327.1 230.1 1,282.3 1,103.4 627.7 MacGREGOR 148.9 126.3 683.7 452.9 263.2 Internal orders -0.3 -0.4 -1.9 -2.0 -1.2 received Total 716.4 590.6 2,910.3 2,384.9 1,365.9 Hiab Hiabs orders accounted for EUR 946 (112/2005: 831) (612/2005: 476) million of the total orders received in 2006 while its share of the orders received in OctoberDecember was EUR 241 (1012/2005: 235) million. In December, Hiab signed a major service contract for load handling equipment. This contract covers the servicing of Hiab loader cranes and demountables in 548 Scania trucks used by the Dutch army. The contracts duration with Scania is 13 years and it is worth approximately EUR 30 million. During the fourth quarter, Hiab secured an order for over 100 loader cranes from Thailand. These will be delivered to various Thai municipalities during 2007. In December, MAN ordered an additional 88 military-purpose loader cranes for vehicles that will be delivered to the British Army. During the second half of the year, Hiab received several major orders for truck-mounted forklifts and loader cranes from its main U.S. customers, further strengthening its market position in the region. In March, Hiab signed a cooperation agreement with the Suez Environment (SITA) waste management company, making Hiab the preferred pan-European supplier of demountables for SITA. Kalmar Kalmars orders accounted for EUR 1,282 (112/2005: 1,103) (612/2005: 628) million of the total orders received in 2006 while its share of the orders received in OctoberDecember was EUR 327 (1012/2005: 230) million. In December, Kalmar secured an order from Finnsteve for four ship- to-shore (STS) cranes to the new Vuosaari port in Helsinki, Finland. The cranes will be up and running by November 2008. During the fourth quarter, Kalmar also received an order for 20 shuttle carriers from the United States and 13 E-One rubber-tired gantry (RTG) cranes from South America. The shuttle carriers will be delivered to APM Terminals new container terminal in Portsmouth, Virginia during 2007. The RTGs will be delivered during 2007 to the Peruvian terminal operator, Neptunia SA, to Terminal Pacifico Sur Valparaiso in Chile and to the Port of Trinidad and Tobago. During the third quarter, Kalmar signed a five-year service contract for 29 RTGs with Gateway Terminals India Pvt Ltd. This contract covers maintenance, engineering support, daily inspections and parts supply, among other things. During the second quarter, Kalmar received an order for 12 E-One RTGs from South African Port Operations (SAPO) for the port of Durban. Deliveries will begin in the spring of 2007. The order was a continuation to the January order of 25 straddle carriers. During the first quarter, Kalmar received an order for 24 straddle carriers from the Port Authority of Jamaica. Deliveries to Kingston Container Terminal were finalized in mid-2006. In January, Kalmar signed an agreement with HHLA for the delivery of an automatic stacking crane system (ASC) and the related technology for the Port of Hamburg. Kalmar will deliver 15 ASCs and their control and automation systems during 20072008. The contract includes an option to deliver an additional 75 ASCs and their control and automation systems in the projects subsequent phases. MacGREGOR MacGREGORs orders accounted for EUR 684 (112/2005: 453) (612/2005: 263) million of the total orders received in 2006 while its share of the orders received in OctoberDecember was EUR 149 (1012/2005: 126) million. In November, the Korean company, Daewoo Shipbuilding & Marine Engineering, ordered MacGREGOR RoRo equipment for four of the worlds largest PCTCs, which will be delivered to Wallenius Wilhelmsen Logistics by the end of 2008. The order is worth approximately EUR 15 million. The fourth quarter also saw MacGREGOR securing orders for 84 ship cranes from various shipyards in China. The cranes will be delivered during 20072009 for container vessels and multi-purpose vessels under construction. The total value of the orders is approximately EUR 25 million. During the third quarter, MacGREGOR secured orders for 55 ship cranes, which will be delivered to Asia during 20072008. The total value of the orders is approximately EUR 15 million. During the same quarter, MacGREGOR also sold hatch covers for 12 bulk ships that are under construction in a Japanese shipyard. The hatch covers to be delivered are the first electronically-driven covers developed by the company. During the second quarter, MacGREGOR received hatch cover orders from various European and Asian shipyards. During 20072009, the company will deliver hatch covers for over 30 container ships being built in various shipyards in Europe. MacGREGOR also received a high number of orders for RoRo equipment during the second quarter. The company will deliver RoRo equipment for 10 vessels during 20062008, the total value of these orders being approximately EUR 17 million. Other major orders included an order for RoRo equipment for 53 pure car and truck carriers (PCTCs). The equipment will be delivered to Shin Kurushima Group in Japan and Hyundai Samho Heavy Industries shipyard in Korea during 20072010. The total value of these orders is approximately EUR 65 million. During the first quarter, MacGREGOR secured several RoRo and hatch cover orders. The company will deliver RoRo solutions for vessels under construction for Norwegian Color Line during 20072008, the order being worth approximately EUR 9 million. In March, MacGREGOR received hatch cover orders from shipyards of the Korean Hyundai Group. The hatch covers will be delivered for 34 container ships during 20072008, the total value of the orders being approximately USD 40 million. MacGREGOR also secured a hatch cover order from the German shipyard JJ Sietas for four heavy lift cargo ships ordered by the specialist operator, SAL. In January, MacGREGOR received a major order for RoRo access equipment for five multi-purpose RoRo ships for the Italian shipowner, Grimaldi Group (Naples). The RoRo equipment, worth approximately EUR 9 million, will be delivered in 20072009. In the first quarter of 2006, MacGREGOR received a large number of ship crane orders from various shipyards in Poland, China, Korea, Singapore and Venezuela as well as from the U.S. Navy. The ship crane deliveries take place during 20062008 and the value of the orders is approximately EUR 15 million. Order Book Cargotecs order book grew by 29 percent in 2006 and totaled EUR 1,621 (December 31, 2005: 1,257) million on December 31, 2006, Hiab accounting for EUR 215 (197) million, Kalmar for EUR 593 (520) million and MacGREGOR for EUR 813 (541) million. A considerable part of MacGREGORs order book will be delivered in 20082009. Order book, 31.12.2006 31.12.2005 MEUR Hiab 215.4 196.7 Kalmar 592.7 519.5 MacGREGOR 812.6 540.9 Internal order -0.2 -0.2 book Total 1,620.5 1,256.9 Net Sales Cargotecs net sales grew by 10.1 percent in 2006 and totaled EUR 2,597 (112/2005: 2,358) (612/2005: 1,419) million. Growth excluding the sales impact from acquisitions completed during the year was 8.1 percent. Net sales for the fourth quarter reached a record level at EUR 697 (1012/2005: 622) million despite certain deliveries being pushed over the year-end. Hiabs net sales in the fourth quarter amounted to EUR 239 (1012/2005: 231) million, Kalmars net sales were EUR 321 (288) million and MacGREGORs net sales EUR 138 (103) million. Pro Financial forma period Sales, MEUR 10-12/2006 10-12/2005 1-12/2006 1-12/2005 6-12/2005 Hiab 238.9 231.0 913.8 844.4 504.6 Kalmar 320.5 288.2 1,203.3 1,146.9 695.0 MacGREGOR 138.2 103.1 481.7 368.7 220.4 Internal sales -0.4 -0.7 -1.7 -2.1 -1.4 Total 697.2 621.6 2,597.1 2,357.9 1,418.6 Cargotecs services business grew by 16 percent year on year with revenue totaling EUR 572 (112/2005: 492) (612/2005: 300) million, representing 22 percent of net sales. Hiabs services business in 2006 represented 15 (13) percent of net sales, Kalmars 26 (23) percent, and MacGREGORs 27 (32) percent. Financial Result Cargotecs operating income from operations during 2006 improved significantly and reached EUR 221.7 (112/2005: 179.4) (612/2005: 113.1) million, representing 8.5 (112/2005: 7.6) (612/2005: 8.0) percent of net sales. Operating income from operations for the fourth quarter was EUR 57.7 (1012/2005: 52.7) million, equal to 8.3 (8.5) percent of net sales. Hiab accounted for EUR 22.7 (20.1) million of fourth quarter operating income from operations, Kalmar for EUR 28.2 (27.0) million and MacGREGOR for EUR 9.7 (8.5) million. Including the EUR 17.8 million capital gain recorded in July, 2006 from the divestment of property Cargotecs operating income for JanuaryDecember totaled EUR 239.5 million. The pro forma operating income for JanuaryDecember 2005 was EUR 194.8 (612/2005: 124.6) million including a EUR 15.4 million one-time capital gain from the sale of Consolis. Net income for JanuaryDecember 2006 was EUR 166.1 (112/2005: 136.6) (612/2005: 87.4) million and earnings per share were EUR 2.57 (112/2005: 2.11) (612/2005: 1.35). Balance Sheet, Financing and Cash Flow At the end of December 2006, Cargotecs net working capital amounted to EUR 209 (December 31, 2005: 206) million. Tangible assets on the balance sheet were EUR 218 (196) million and intangible assets EUR 581 (487) million. Cash flow from operating activities before financial items and taxes for JanuaryDecember 2006 was strong totaling EUR 249.8 (112/2005: 194.1) (612/2005: 173.7) million. In addition to the good operative result cash flow was strengthened by prepayments received on large contracts. The cash flow from operating activities before financial items and taxes for OctoberDecember amounted to EUR 71.0 (1012/2005: 78.5) million. Return on equity for JanuaryDecember 2006 was 20.2 (112/2005: 19.2) (612/2005: 20.8) percent. Net debt on December 31, 2006 was EUR 107 (December 31, 2005: 121) million. Total equity/total assets ratio was 47.6 (46.2) percent while gearing was 12.3 (15.7) percent. Cargotec had EUR 432 million in committed credit facilities on December 31, 2006. These facilities were unused. In order to diversify its funding structure and finance its growth, Cargotec placed a EUR 225 million private placement with U.S. institutional investors in December 2006. 14 U.S. institutional investors participated in the transaction. The placement carries maturities ranging between 7 and 12 years and will be funded in February 2007. New Products and Product Development In 2006, Cargotec's research and development expenditure was EUR 31.3 (112/2005: 29.7) (612/2005: 17.5) million, representing 1.2 (112/2005: 1.3) (612/2005: 1.2) percent of net sales. In the fourth quarter, Hiab founded a new, centralized product development organization in order to better utilize and coordinate its product development resources in its loader crane, forestry crane and demountables product lines. In 2006, Hiab launched 17 new products as a result of active product development in all product lines. Hiab supplemented its loader crane range by launching the HIAB XS 477, whose hoisting capacity is 4044 tons, and expanded its remote control unit range for loader cranes by introducing new models. Furthermore, the company supplemented its XR hooklift systems range by launching new XR 10 and XR 21 hooklifts. In North America and Europe, Hiab complemented its truck-mounted forklift product line with a 4-way travel model allowing easier delivery of loads in tight access areas. In Europe, Hiab presented a new tail lift with a hoisting capacity of 450750 kilos. Hiab also supplemented its tail lifts range in North America by launching a new rail-type liftgate, designed for heavy use. The company also expanded its forestry crane range with a new model designed for full tree harvesting. In the largest volume category, Hiab introduced the new JONSERED J1080 forestry crane that can be equipped with a digital control system. In the fourth quarter, Hiab launched the JONSERED 1300 forestry crane, which utilizes the XSDrive remote control unit developed for loader cranes. In 2006, Kalmar continued to invest in developing the automation of its equipment. Kalmar launched the Fleetview fleet control system which can be used to monitor straddle carriers, reachstackers, forklift trucks, terminal tractors and RTGs. Fleetview allows real-time monitoring of equipment, enabling the assignment of container handling tasks to the nearest vacant machine, thus shortening transportation distances and minimizing unladen traveling distances. Kalmar developed a new measuring system for the automatic stacking cranes (ASCs) that it will deliver to HHLA. Thanks to the new system, which combines camera and laser technology, the ASC spreader identifies the container position from several angles, enabling the container to be placed in the right position more quickly and precisely. In 2006, Kalmar launched a new, heavy forklift truck model as well as a new RoRo terminal tractor equipped with a fully electronic control system for the European and Asian markets. The terminal tractor has longer service intervals and meets the latest environmental regulations. MacGREGOR developed electrically driven marine cargo handling equipment in 2006. In the third quarter, the company introduced electronic ship cranes, hatch covers, hatch cover stackers and RoRo equipment representing the fruits of its several years of extensive product development work. Electrically driven products are environmentally-friendly, cost-efficient and easy to maintain. Electrical operation also enables remote monitoring of the equipment. Capital Expenditure Cargotecs capital expenditure for JanuaryDecember 2006, excluding acquisitions and customer financing, totaled EUR 46.6 (112/2005: 28.2) (612/2005: 18.1) million. Customer financing investments were EUR 22.2 (112/2005: 28.4) (612/2005: 21.3) million. In 2006, Hiab reorganized operations in several of its production units. In April, the unit manufacturing Princeton PiggyBack® forklifts in the United States moved to larger rented premises. Hiab also extended its loader crane installation facilities in Ohio, the United States. These were taken into use during the second quarter of the year. In order to cut delivery times and improve the flexibility of its loader crane assembly operations, Hiab transferred part of its volume models assembly operations from its Hudiksvall unit, Sweden, to Hiabs other European units in Spain and in the Netherlands. In Raisio, Finland, Hiab opened during the fourth quarter a new unit where all Hiabs Finnish load handling equipment installation activities where concentrated in. In order to improve the flexibility of assembly operations, a new assembly line was taken into use in the forestry and recycling crane assembly unit in Salo, Finland. At the demountables unit in Raisio, Finland, Hiab introduced a new paintshop. In the second quarter, Hiab entered into a license-based cooperation agreement with Combilift of Ireland, giving Hiab the right to manufacture and sell the new Telemount truck-mounted forklift. The manufacture of these forklifts was integrated with the operations of Hiabs unit in Ireland during 2006. In the first quarter of 2006, Kalmar established a sales company, Kalmar Industries South Africa (Pty) Ltd, in Durban. This company will focus on the sales and servicing of straddle carriers and RTG cranes in South Africa. Kalmar organized its global assembly network during 2006 by establishing the Multi Assembly Unit organization. Under this new model, the plants focus on assembly of products while the product lines focus on product design, marketing and sales. In line with the new operating model, the operations of two assembly plants in Southern Sweden were combined. In Kansas, the United States, Kalmar outsourced its terminal tractor and forklift truck production. In the future, the unit will focus solely on assembly. In 2006, Kalmar opened a new assembly plant for terminal tractors, rubber-tired gantry (RTG) cranes, reachstackers and empty container handling equipment in the Shanghai area, China, to cater for the needs of its Asian customers. In the spring, MacGREGOR sold its office and workshop building in Örnsköldsvik, Sweden and will move its ship crane business to new, rented premises in April 2007. In the fourth quarter, MacGREGOR signed a contract with the Chinese company, Goodway, on hatch cover production for conversion and modernization projects. This will further strengthen MacGREGORs expertise in hatch cover design for conversion projects. Strategic Acquisitions During the year, Cargotec carried out eight acquisitions to expand the operations of all business areas. At the end of December, Kalmar made an agreement to acquire the Italian company CVS Ferrari Group. This acquisition will strengthen Kalmars market position and service capabilities in the South European and other Mediterranean markets. CVS Ferrari employs some 305 people. The agreement signed is subject to competition authority approval. In December, Kalmar also signed an agreement to acquire the majority of the shares of its Spanish distributor, Kalmar Espana S.A. The company employs six people. This transaction is subject to competition authority approval. September saw the signature of an agreement for acquiring Catracom, based in Belgium, which has been distributing Kalmar equipment since 1985. The company employs approximately 100 people. The acquisition was finalized in November. In September, Kalmar also signed an agreement to acquire the Kalmar equipment related service business of African National Engineering (ANE), based in South Africa. ANEs service business was merged with Kalmars local subsidiary that focuses on the sales and servicing of straddle carriers, RTGs and terminal tractors. In August, MacGREGOR signed an agreement to acquire the business of Scottish Grampian Hydraulics. The acquiree specializes in hydraulics and spare part servicing of offshore support vessels in the North Sea. The company employs approximately 30 people. Grampian Hydraulics has been integrated in MacGREGORs accounts since August 14, 2006. In June, MacGREGOR signed an agreement to acquire BMH Marine AB, a Swedish company. The acquisition was finalized at the end of July with a debt-free transaction price of approximately EUR 32 million. BMH Marine specializes in dry bulk handling equipment on ships and at port terminals, and expands MacGREGORs service business offering for these products. The company employs approximately 140 people. In March, Kalmar acquired the operations of East Coast Cranes and Electrical Contracting Inc. (ECC), a U.S. company. ECC specializes in crane construction services and maintenance in ports. The company employs over 100 people. In January, Hiab signed an agreement to acquire the Dutch tail lift producer, AMA. The acquisition was finalized in April. AMA consists of a manufacturing company based in Poland and a sales company based in Holland. The company employs approximately 55 people. Changes in Cargotecs Executive Board On February 8, 2006, Cargotecs Board of Directors appointed Mikael Mäkinen, M.Sc. (Eng.) Naval Architect, as the new President and CEO of Cargotec Corporation. Mäkinen joined Cargotec on April 1, 2006 and became President and CEO on May 1, 2006. Cargotecs previous President and CEO, Carl-Gustaf Bergström, retired in June 2006 and started as a member of the Board from May 1, 2006. In September, Cargotec appointed two new members onto its Executive Board (previously Executive Committee). Harald de Graaf, B.Sc. (Eng.), was appointed Senior Vice President, Services. Matti Sommarberg, M.Sc. (Eng.) and M.Sc. (Econ.), was appointed Senior Vice President, Operations Development. These appointments took effect on November 1, 2006. In October, Kirsi Nuotto, MA, was appointed Senior Vice President, Human Resources, and a member of the Executive Board. She is responsible for the corporate global human resources strategy and development. The appointment took effect on November 20, 2006. In June, Olli Isotalo, M.Sc. (Eng.), was appointed President of MacGREGOR, starting from September 15, 2006 after Hans Pettersson, MacGREGORs previous President, joined another company. Tor-Erik Sandelin, Senior Vice President responsible for Cargotecs Service Business Development, retired at the end of March 2006. Priorities in Strategy Implementation Cargotecs strategy is based on profitable growth in developing and consolidating markets. The company aims to grow its operations significantly. The focus is on expanding the business especially in Asia Pacific and Americas. In addition to organic growth Cargotec intends to grow through acquisitions. Acquisitions help to accelerate the expansion in new markets as well as develop the existing service network. Cargotec aims to strengthen its global market leadership in cargo handling solutions. Within services the target is a leading position. Cargotec intends through new solutions and a stronger presence in key service points to offer its customers necessary support services for the life-cycle of their equipment. Cargotecs way of working will be changed in order to achieve better utilization of common know-how and benefits of scale in technology development and global network. Achievement of the growth target will require more investment in personnel development than previously. Therefore, personnel have been lifted into a strategic priority. The Executive Board has been strengthened in the strategic priorities of services, personnel and utilization of common network and technologies. Employees On December 31, 2006, Cargotec had a total of 8,516 employees (Dec 31, 2005: 7,571), with Hiab accounting for 3,647 (3,417) persons, Kalmar 3,705 (3,210), and MacGREGOR 1,117 (899). Group level functions employed 47 (45) persons on December 31, 2006. During the financial period, Cargotecs average number of employees was 8,026. During 2006 the Groups sourcing organization, mergers and acquisitions expertise as well as IT management was strengthened. Process harmonization is an important part of the strategy implementation. Of Cargotecs total number of employees, 17 percent were located in Finland, 26 percent in Sweden, and 27 percent in other parts of Europe, Middle East and Africa. North and South American personnel represented 14 percent, Asia Pacific 14 percent, and the rest of the world 2 percent of people in total. Business areas launched a variety of training programs during the year: Hiab initiated a training program for young future talents, and Kalmar started the Leading the Move program, promoting e.g. the employees knowledge of strategy. During the financial period, salaries and remunerations to employees totaled EUR 300 (1-12/2005: 281) (612/2005: 162) million. Environment Cargotecs environmental policy defines the operating principles for environmental issues. The environmental effects of Cargotecs manufacturing operations are not significant, since Cargotec is increasingly focusing on product development, design, assembly and service operations. Cargotec products main environmental effects are related to their use. The recyclability of most of Cargotecs products is high due to their substantial steel content. Other product benefits include a long useful life and good serviceability. Careful and regular servicing of equipment reduces its environmental effects during use and extends its useful life. The ISO 9001 and ISO 14001 certified quality and environmental systems provide the foundation for environment management at Cargotec. Cargotec aims to implement certified environmental systems at all production sites. Four of Kalmars seven production units and seven of Hiabs thirteen production units have an ISO 14001 certified environmental system. MacGREGOR has no production of its own at all, but commissions its products from selected subcontractors independently responsible for their production processes. Certification is planned for two Hiab units and three Kalmar units in 2007. Following this, certified environment systems will cover the majority of all Cargotec production units. Risks and Risk Management Cargotecs President and CEO and the Executive Board are responsible for the Groups risk management activities, their implementation and control, and report to the Board of Directors. The companys internal auditor, responsible for internal control and business risk auditing, reports to the Boards Audit Committee. The Groups Risk Management function creates and develops Group-wide risk management principles and operating models, and supports their application and implementation in the business areas and units. The Treasury function manages financial risks centrally. The business areas and units are responsible for managing the risks involved in their own operations. Strategic and business risks are related to business cycles in the global economy and Cargotecs customer industries, the availability and price development of raw materials and components, and dealers and subcontractors activities. Cargotec has prepared for these risks by attempting to identify and anticipate them in advance, making long-term procurement agreements, and seeking alternative suppliers. In order to develop its risk assessments further, Cargotec implemented a Group-wide analysis in 2006 to identify and evaluate supplier risks. As a result of this analysis, Cargotec was able to identify its critical suppliers and will determine measures for managing its supplier and business interruption risks. Moreover, the Group has further specified the scope and content of supplier audits by placing increased emphasis on risk management matters and safeguarding the continuity of operations. Cargotecs treasury operations and financial risk management principles are defined in the Group Treasury Policy. The companys financial risks are centrally managed and administered by the Group Treasury that draws up financial risk reports for the Group management on a regular basis. The financial risks involved in Cargotecs business activities include currency, interest rate, refinancing and liquidity, counterparty and operative credit risks. The company seeks to protect itself against these risks in order to ensure a financially sound basis for developing its business operations. Cargotecs operational risks and hazard risks relate to persons, property, processes, products and IT. If these risks materialize, they cause damage to persons and property, or business interruptions or product liability. In order to manage these risks, Cargotec has drawn up a program whose main activities are directed at product safety, information security development and business continuity assurance. With respect to key person risks, Cargotec draws up Group-wide succession plans for leadership and key assignments. Responsibility for the management of key operational risks and hazard risks lies with the Groups risk management function in particular, alongside business area and unit management. Cargotecs main hazard risks include risks related to property, business interruption, general and product liability and logistics. In addition to preventive risk management measures, the company protects itself against these risks by taking out Group- wide insurance policies that cover all units. Shares and Share Capital Cargotecs class B shares are listed on the Helsinki Stock Exchange. Cargotecs share capital was EUR 64,046,460 on December 31, 2006 (EUR 63,920,955 on December 31, 2005). The share capital increased by EUR 125,505 during the report period as a result of the subscription for class B shares under Cargotec option rights. On December 31, 2006, Cargotecs share capital comprised 54,520,371 (December 31, 2005: 54,394,866) class B shares listed on the Helsinki Stock Exchange, and 9,526,089 (9,526,089) unlisted class A shares. Class B shares accounted for 85.1 (85.1) percent of the total number of shares and 36.4 (36.3) percent of votes, while class A shares accounted for 14.9 (14.9) percent of the total number of shares and 63.6 (63.7) percent of votes. The total number of votes attached to all shares was 14,977,375 (14,964,826) at the year end. Market Capitalization and Trading The share price of Cargotecs class B share increased by 44 percent during the year, with the class B share closing at the Helsinki Stock Exchange at EUR 42.10 on December 31, 2006. The average share price for the financial period was EUR 34.62, the highest quotation being EUR 43.50 and the lowest EUR 28.84. On December 31, 2006, the total market value of the companys class B shares was EUR 2.3 billion, excluding treasury shares held by the company. The companys year-end market capitalization, in which the unlisted class A shares were valued at the average price of the class B shares on the last trading day, was EUR 2.7 billion, excluding treasury shares held by the company. At the year end, the company held a total of 704,725 class B shares. During the financial period, approximately 52.9 million Cargotec class B shares were traded on the Helsinki Stock Exchange, corresponding to a turnover of approximately EUR 1,829 million. The average daily trading volume was 210,795 shares or EUR 7,285,529 while the relative turnover for the period was 97.6 percent. Shares Subscribed for under the Option Rights At the beginning of the financial period the number of 2005A and 2005B option rights were 54,555 and 108,130 respectively. 125,505 class B shares were subscribed for during the period, increasing the share capital by EUR 125,505. The remaining Cargotec 2005A and 2005B option rights entitle the holder to the subscription of a total of 362,550 class B shares in Cargotec and an increase of EUR 362,550 in the share capital. The said number of shares that can be subscribed for under the remaining option rights constitutes 0.6 percent of Cargotecs total number of shares and 0.24 percent of the total number of votes. The company has not issued other option rights or convertible bonds. Decisions Taken at the Annual General Meeting on February 28, 2006 Cargotec Corporations Annual General Meeting (AGM) was held on February 28, 2006 in Helsinki. The meeting approved the parent company and consolidated financial statements and discharged the members of the Board of Directors and the President and CEO of their liability for the accounting period June 1December 31, 2005. The AGM approved a dividend for 2005 of EUR 0.64 for each of the 9,526,089 class A shares and EUR 0.65 for the 54,191,166 class B shares that were outstanding. The number of members of the Board of Directors was confirmed at six according to the proposal of Cargotecs Nomination and Compensation Committee. Henrik Ehrnrooth, Tapio Hakakari, Ilkka Herlin, Peter Immonen and Karri Kaitue were re-elected as full members of the Board of Directors. Carl-Gustaf Bergström was elected as a member of the Board from May 1, 2006. Authorized public accountants Johan Kronberg and PricewaterhouseCoopers Oy were elected as auditors according to the proposal of the Audit Committee of Cargotecs Board of Directors. Organization of the Board of Directors In its organizing meeting, Cargotecs Board of Directors elected Ilkka Herlin to continue as Chairman of the Board and Henrik Ehrnrooth to continue as Deputy Chairman. Kari Heinistö, Senior Executive Vice President and CFO, continued to act as secretary to the Board of Directors. The Board of Directors elected from among its members Ilkka Herlin, Peter Immonen and Karri Kaitue as members of the Audit Committee, with Karri Kaitue elected to continue as Chairman of the Committee. Board members Carl-Gustaf Bergström (as of May 1, 2006), Tapio Hakakari, Ilkka Herlin and Peter Immonen were elected to the Nomination and Compensation Committee. Ilkka Herlin was elected to continue as Chairman of the Committee. The Board of Directors also reviewed the independence of its members as defined in the corporate governance recommendation of the Helsinki Stock Exchange. The Board of Directors stated that, with the exception of Carl-Gustaf Bergström, its members are independent of the company and, with the exception of Ilkka Herlin, independent of major shareholders in the company. Authorizations Granted by the Annual General Meeting and Share Repurchases The Annual General Meeting held in February 28, 2006 authorized the Board of Directors of Cargotec to decide to repurchase the Companys own shares using distributable assets. Own shares can be repurchased in order to develop the capital structure of the Company, finance or carry out possible acquisitions, implement the Companys share-based incentive plans, or to be transferred for other purposes or be cancelled. The maximum amount of repurchased own shares shall be less than ten percent of the Companys share capital and total voting rights. This corresponds to a maximum of 6,391,000 shares of which no more than 952,000 are class A shares and 5,439,000 are class B shares. This authorization remains in effect for a period of one year from the date of decision of the Annual General Meeting. Based on the above-mentioned authorization, Cargotec repurchased 501,025 class B shares at the market price in public trading on the Helsinki Stock Exchange during the period June 14November 22, 2006 at an average purchase price of EUR 37.61 per share. In June, 1,025 shares were acquired at an average purchase price of EUR 28.93 per share and in November, 500,000 shares averaging EUR 37.63 per share. During the period, the total accounting par value of the repurchased shares was EUR 501,025, their share of the share capital was 0.78 percent, and their share of the total voting rights was 0.33 percent. The repurchased shares were in the companys possession on December 31, 2006. With regard to the authorization, the amount corresponding to 952,000 class A shares and 4,937,975 class B shares remained unused on December 31, 2006. On December 31, 2006, the company held a total of 704,725 class B shares, accounting for 1.10 percent of the share capital and 0.47 percent of the total voting rights of all shares. The total accounting par value of the shares was EUR 704,725. Repurchasing of shares had no significant impact on the division of ownership and voting rights in the company. In addition, the Annual General Meeting authorized Cargotecs Board of Directors to decide to distribute any shares repurchased. The repurchased shares may be used as compensation in acquisitions and in other arrangements as well as to implement the Companys share-based incentive plans in the manner and to the extent decided by the Board of Directors. The Board of Directors also has the right to decide on the distribution of the shares in public trading in the Helsinki Stock Exchange to be used as compensation in possible acquisitions. The authorization is limited to a maximum of 952,000 class A shares and 5,439,000 class B shares repurchased by the Company. The Board of Directors was authorized to decide to whom and in which order the repurchased shares will be distributed. This authorization remains in effect for a period of one year from the date of the decision of the Annual General Meeting. The authorization remained unused on December 31, 2006. At the end of the financial year, Cargotecs Board of Directors had no current authorization to issue shares, grant option rights, raise the share capital, or issue convertible bonds or warrant loans. Neither has the company decided to issue shares, option rights, or convertible bonds during the financial period. Events after the Financial Period Cargotec Corporations Board of Directors decided in January 2007 on new financial targets for the Company. The targets for Cargotec have been set based on the strategy for the years 20072011. The targets reflect the growth expectations of Cargotecs industry as well as actions that have been implemented or that will be implemented by the Company. The new financial targets are annual net sales growth exceeding 10 percent (including acquisitions), raising the operating income margin to 10 percent and gearing below 50 percent. In January 2007 Cargotec Corporations Board of Directors decided also on a new share-based incentive program for Cargotecs key managers for the period 20072011. The program offers key managers a possibility to earn a reward in Cargotec class B shares based on accomplishment of set targets. The incentive program consists of four earnings periods, of which the first is two years and the following three periods one year each. The maximum amount to be paid out as shares is 387,500 class B shares currently held by the company as treasury shares. The incentive program covers some 60 individuals. Board of Directors Proposal on the Distribution of Profit The parent companys distributable equity on December 31, 2006 is EUR 905,013,988.83 of which net income for the period is EUR 88,568,655.38. The Board of Directors will propose to the Annual General meeting convening on February 26, 2007, that of the distributable profit, a dividend of EUR 0.99 per each of the 9,526,089 class A shares and EUR 1.00 per each 53,815,646 class B share in circulation be paid, totaling EUR 63,246,474.11. The rest of the distributable equity, EUR 841,767,514.72, will be retained and carried forward. No significant changes have occurred in the companys financial position after the end of the financial year. The companys liquidity is good, and in the Board of Directors view the proposed distribution of dividend does not risk the companys financial standing. Outlook Cargotecs market outlook for 2007 is positive. The high market activity and strong order book in all business areas give a good start for the year. Completed and targeted acquisitions will support further sales growth. Operating income from operations in 2007 is expected to continue to increase although the operating margin development will be slightly affected by planned investments in future growth. Annual General Meeting Cargotec Corporations Annual General Meeting will be held at the Marina Congress Center in Helsinki on Monday, February 26, 2007 at 3.00 p.m. Helsinki, January 30, 2007 Cargotec Corporation Board of Directors CARGOTEC FINANCIAL STATEMENTS REVIEW JANUARY-DECEMBER 2006 CONSOLIDATED INCOME STATEMENT Pro forma MEUR 1-12/2006 % 6-12/2005 % 1-12/2005 % Sales 2,597.1 1,418.6 2,357.9 Cost of goods sold -2,042.7 -1,133.7 -1,882.2 Gross profit 554.4 21.3 284.9 20.1 475.7 20.2 Capital gains 17.8 15.4 15.4 Other operating 22.7 13.7 19.3 income Selling and marketing -168.1 -88.6 -150.9 expenses Research and -31.3 -17.5 -29.7 development expenses Administration -136.6 -73.2 -118.9 expenses Other operating -19.4 -10.1 -16.1 expenses Operating income 239.5 9.2 124.6 8.8 194.8 8.3 Share of associated 0.9 6.3 6.6 companies' net income Financing income 3.6 4.6 6.9 Financing expenses -12.0 -10.0 -17.3 Income before taxes 232.0 8.9 125.5 8.8 191.0 8.1 Taxes -65.9 -38.1 -54.4 Net income for the 166.1 6.4 87.4 6.2 136.6 5.8 period Net income for the period attributable to: Equity holders of the 163.9 85.9 134.5 Company Minority interest 2.2 1.5 2.1 Total 166.1 87.4 136.6 Earnings per share for profit attributable to the equity holders of the Company: Basic earnings per 2.57 1.35 2.11 share, EUR Diluted earnings per 2.56 1.34 2.10 share, EUR Adjusted basic 2.37 * 1.18 ** 1.90 *** earnings per share, EUR *) Excluding gain on the sale of property after taxes **) Excluding gain on the sale of Consolis and impact of the final accounting of MacGREGOR acquisition after taxes ***) Excluding gain on the sale of Consolis after taxes CONSOLIDATED BALANCE SHEET MEUR 31.12.2006 31.12.2005 ASSETS Non-current assets Goodwill 513.3 440.7 Other intangible assets 67.2 46.4 Property, plant and equipment 217.6 196.3 Investments in associated 2.4 1.6 companies Available-for-sale investments 1.6 1.1 Loans receivable and other 0.1 0.9 interest-bearing assets 1) Deferred tax assets 50.7 50.7 Other non-interest-bearing 7.9 4.1 assets Total non-current assets 860.8 741.8 Current assets Inventories 528.9 464.4 Loans receivable and other 0.3 0.3 interest-bearing assets 1) Income tax receivables 7.0 8.2 Accounts receivable and other 466.7 451.3 non-interest-bearing assets Cash and cash equivalents 1) 124.3 114.5 Total current assets 1,127.2 1,038.7 Total assets 1,988.0 1,780.5 1) Included in interest-bearing net debt MEUR 31.12.2006 31.12.2005 EQUITY AND LIABILITIES Equity attributable to the equity holders of the Company Share capital 64.0 63.9 Share premium account 96.0 95.1 Treasury shares -23.9 -5.0 Translation differences -12.0 4.9 Fair value reserves 10.5 -10.3 Retained earnings 734.2 611.4 Total shareholders' equity 868.8 760.0 Minority interest 8.0 7.2 Total equity 876.8 767.2 Non-current liabilities Loans 1) 195.0 197.1 Deferred tax liabilities 30.5 18.5 Pension obligations 36.2 35.1 Provisions 30.3 18.2 Other non-interest-bearing 19.0 18.1 liabilities Total non-current liabilities 311.0 287.0 Current liabilities Current portion of long-term 4.8 21.8 loans 1) Other interest-bearing 32.4 17.3 liabilities 1) Provisions 42.6 45.9 Income tax payables 39.5 18.4 Accounts payable and other non- 680.9 622.9 interest-bearing liabilties Total current liabilities 800.2 726.3 Total equity and liabilities 1,988.0 1,780.5 1) Included in interest-bearing net debt CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Attributable to the equity holders of the Company MEUR Share Share Trea- Trans- Fair Re- Total Mino- Total capital pre- sury lation value tained rity equity mium shares diffe- reser- earn- inte- account rences ves ings rest Equity on 63.8 93.8 - - -12.8 525.7 670.5 6.2 676.7 1.6.2005 IFRS 3: -1.1 -1.1 -1.1 Impact of the final accounting of acquisitions Equity on 63.8 93.8 - - -12.8 524.6 669.4 6.2 675.6 1.6.2005, adjusted Cash flow 2.5 2.5 2.5 hedges Translation 4.9 4.9 0.4 5.3 differences Share- 0.9 0.9 0.9 based incentives, value of received services Net income - - - 4.9 2.5 0.9 8.3 0.4 8.7 recognized directly in equity Net income 85.9 85.9 1.5 87.4 for the period Total - - - 4.9 2.5 86.8 94.2 1.9 96.1 recognized income and expenses for the period Shares 0.1 1.3 1.4 1.4 subscribed with options Acquisition -5.0 -5.0 -5.0 of treasury shares Other - -0.9 -0.9 changes Equity on 63.9 95.1 -5.0 4.9 -10.3 611.4 760.0 7.2 767.2 31.12.2005 Gain/loss 32.1 32.1 0.0 32.1 on cash flow hedges booked to equity Gain/loss -11.3 -11.3 -11.3 on cash flow hedges transferred to IS Translation -16.9 -16.9 -0.8 -17.7 differences Share- 0.1 0.1 0.1 based incentives, value of received services Net income - - - -16.9 20.8 0.1 4.0 -0.8 3.2 recognized directly in equity Net income 163.9 163.9 2.2 166.1 for the period Total - - - -16.9 20.8 164.0 167.9 1.4 169.3 recognized income and expenses for the period Dividends -41.3 -41.3 -41.3 paid Shares 0.1 0.9 1.1 1.1 subscribed with options Acquisition -18.9 -18.9 -18.9 of treasury shares Other - -0.6 -0.6 changes Equity on 64.0 96.0 -23.9 -12.0 10.5 734.2 868.8 8.0 876.8 31.12.2006 CONSOLIDATED CASH FLOW STATEMENT MEUR 1-12/2006 6-12/2005 Net income for the period 166.1 87.4 Depreciation 40.5 23.6 Gain on disposals -17.8 -15.4 Financing items and taxes 74.3 15.4 Change in receivables 18.0 7.3 Change in payables 18.2 90.5 Change in inventories -48.9 -32.9 Other adjustments -0.6 -2.2 Cash flow from operations 249.8 173.7 Interest received 5.4 2.9 Interest paid -11.5 -6.4 Dividends received 0.0 0.0 Other financial items -1.7 0.2 Income taxes paid -43.3 -12.1 Cash flow from operating 198.7 158.3 activities Capital expenditure -69.3 -37.1 Proceeds from sales of fixed 41.7 7.9 assets Acquisitions, net of cash -89.1 -8.8 Proceeds from divested 0.0 0.5 operations, net of cash Proceeds from sales of - 81.7 shares in associated companies Net change in loans 0.9 0.7 receivable Cash flow from investing -115.8 44.9 activities Cash flow after investing 82.9 203.2 activities Change in current creditors, 8.3 -239.9 net Proceeds from long-term 0.1 114.7 borrowings Repayments of long-term -25.9 -18.6 borrowings Acquisition of treasury -18.9 -5.0 shares Proceeds from share 1.1 1.4 subscriptions Dividends paid -41.3 -0.2 Cash flow from financing -76.6 -147.6 activities Change in cash 6.3 55.6 Cash and cash equivalents at 111.2 55.5 the beginning of period Translation difference -3.0 0.1 Cash and cash equivalents at 114.5 111.2 the end of period CONDENSED CONSOLIDATED CASH FLOW STATEMENT Pro forma MEUR 1-12/2006 6-12/2005 1-12/2005 Net income for the period 166.1 87.4 136.6 Gain on disposals -17.8 -15.4 -15.4 Depreciation 40.5 23.6 37.9 Other adjustments 73.7 37.2 58.2 Change in working capital -12.7 40.9 -23.2 Cash flow from operations 249.8 173.7 194.1 Cash flow from financial -51.1 -15.4 -38.7 items and taxes Cash flow from operating 198.7 158.3 155.4 activities Proceeds from disposals - 81.7 81.7 The gain on the sale of 31.3 - - property Cash flow from other -147.1 -36.8 -72.4 investing activities Cash flow from investing -115.8 44.9 9.3 activities Acquisition of treasury -18.9 -5.0 -5.0 shares Proceeds from share 1.1 1.4 1.4 subscriptions Dividends paid -41.3 -0.2 -0.2 Net change in loans, pro - - -96.0 forma Proceed from long-term 0.1 114.7 - borrowing Repayments of long-term -25.9 -18.6 - borrowings Change in current 8.3 -239.9 - creditors, net Cash flow from financing -76.6 -147.6 -99.8 activities Change in cash 6.3 55.6 64.9 Cash and cash equivalents 111.2 55.5 46.3 at the beginning of period Translation difference -3.0 0.1 0.0 Cash and cash equivalents 114.5 111.2 111.2 at the end of period KEY FIGURES Pro forma 1-12/2006 6-12/2005 1-12/2005 Equity/share EUR 13.72 11.93 11.93 Interest-bearing net MEUR 107.5 120.5 120.5 debt Total equity/total % 47.6 46.2 46.2 assets Gearing % 12.3 15.7 15.7 Return on equity % 20.2 20.8 19.2 Return on capital % 23.1 21.9 20.9 employed SEGMENT REPORTING Pro forma Sales by geographical 1-12/2006 6-12/2005 1-12/2005 segment, MEUR EMEA 1,368.0 789.5 1,334.8 Americas 719.9 403.9 619.7 Asia Pacific 509.2 225.2 403.4 Total 2,597.1 1,418.6 2,357.9 Pro forma Sales by geographical 1-12/2006 6-12/2005 1-12/2005 segment, % EMEA 52.7 % 55.7 % 56.6 % Americas 27.7 % 28.5 % 26.3 % Asia Pacific 19.6 % 15.9 % 17.1 % Total 100.0 % 100.0 % 100.0 % Pro forma Sales, MEUR 1-12/2006 6-12/2005 1-12/2005 Hiab 913.8 504.6 844.4 Kalmar 1,203.3 695.0 1,146.9 MacGREGOR 481.7 220.4 368.7 Internal sales -1.7 -1.4 -2.1 Total 2,597.1 1,418.6 2,357.9 Pro forma Operating income, 1-12/2006 6-12/2005 1-12/2005 MEUR Hiab 86.0 40.0 66.6 Kalmar 111.7 62.1 97.6 MacGREGOR 35.9 18.5 27.5 Corporate -11.9 -7.5 -12.3 administration and other Operating income from 221.7 113.1 179.4 operations Gain on the sale of - 15.4 15.4 Consolis Gain on the sale of 17.8 - - property MacGREGOR acquisition - -3.9 - adjustment * Total 239.5 124.6 194.8 *) Impact of the final accounting Pro forma Operating income, % 1-12/2006 6-12/2005 1-12/2005 Hiab 9.4 % 7.9 % 7.9 % Kalmar 9.3 % 8.9 % 8.5 % MacGREGOR 7.5 % 8.4 % 7.5 % Cargotec, operating 8.5 % 8.0 % 7.6 % income from operations Cargotec 9.2 % 8.8 % 8.3 % Pro forma Orders received, MEUR 1-12/2006 6-12/2005 1-12/2005 Hiab 946.2 476.2 830.6 Kalmar 1,282.3 627.7 1,103.4 MacGREGOR 683.7 263.2 452.9 Internal orders -1.9 -1.2 -2.0 received Total 2,910.3 1,365.9 2,384.9 Order book, MEUR 31.12.2006 31.12.2005 Hiab 215.4 196.7 Kalmar 592.7 519.5 MacGREGOR 812.6 540.9 Internal order book -0.2 -0.2 Total 1,620.5 1,256.9 Pro forma Capital expenditure, 1-12/2006 6-12/2005 1-12/2005 MEUR In fixed assets 46.1 17.8 27.4 (excluding acquisitions) In leasing agreements 0.5 0.3 0.8 In customer financing 22.2 21.3 28.4 Total 68.8 39.4 56.6 Pro forma Expenditure for R&D 1-12/2006 6-12/2005 1-12/2005 Expenditure for R&D, 31.3 17.5 29.7 MEUR Expenditure for R&D, 1.2 1.2 1.3 as percentage of sales Number of employees 31.12.2006 31.12.2005 at the end of period Hiab 3,647 3,417 Kalmar 3,705 3,210 MacGREGOR 1,117 899 Corporate 47 45 administration Total 8,516 7,571 Pro forma Average number of 1-12/2006 6-12/2005 1-12/2005 employees Hiab 3,571 3,418 3,426 Kalmar 3,415 3,092 3,021 MacGREGOR 994 891 899 Corporate 46 45 42 administration Total 8,026 7,446 7,388 NOTES Commitments MEUR 31.12.2006 31.12.2005 Guarantees 0.5 1.2 Customer finance 15.2 17.7 Operating leases 38.1 29.5 Other contingent liabilities 3.9 4.1 Total 57.7 52.5 Cargotec leases property, plant and equipment under non- cancellable operating leases. The leases have varying terms and renewal rights. The future minimum lease payments under non-cancellable operating leases MEUR 31.12.2006 31.12.2005 Less than 1 year 11.9 9.4 1-5 years 22.2 19.0 Over 5 years 4.0 1.1 Total 38.1 29.5 The aggregate operating lease expenses totaled EUR 11.1 (1.6.-31.12.2005: 6.0) million. Customer finance commitments MEUR 31.12.2006 31.12.2005 Dealer financing 8.5 9.9 End customer financing 6.7 7.8 Total 15.2 17.7 It is not anticipated that any material liabilities will arise from customer finance commitments. Fair values of derivative financial instruments Positive Negative Net fair Net fair fair fair value value value value MEUR 31.12.2006 31.12.2006 31.12.2006 31.12.2005 FX forward contracts, 27.1 8.5 18.6 -14.4 cash flow hedges FX forward contracts, 0.2 9.3 -9.1 -0.2 non-hedge accounted Interest rate swaps, - 0.0 0.0 -0.7 non-hedge accounted Cross currency and 0.3 1.0 -0.7 - interest rate swaps, cash flow hedges Total 27.6 18.8 8.8 -15.3 Non-current portion: FX forward contracts, 4.8 2.1 2.7 -3.5 cash flow hedges Cross currency and 0.3 1.0 -0.7 - interest rate swaps, cash flow hedges Non-current portion 5.1 3.1 2.0 -3.5 Current portion 22.5 15.7 6.8 -11.8 Nominal values of derivative financial instruments MEUR 31.12.2006 31.12.2005 FX forward contracts 1,752.7 1,349.5 Interest rate swaps 10.0 45.0 Cross currency and interest 225.7 - rate swaps Total 1,988.4 1,394.5 Accounting principles: Cargotec Corporations consolidated financial statements have been prepared according to the International Financial Reporting Standards (IFRS) approved by the European Union. Cargotec has applied the following new and amended standards and interpretations as of January 1, 2006: - IAS 19 (amendment), Employee Benefits - Actuarial Gains and Losses, Group Plans and Disclosure - IAS 21 (amendment), The Effects of Changes in Foreign Exchange Rates - Net Investment in a Foreign Operation - IAS 39 (amendment), Financial Instruments: Recognition and Measurement - Cash Flow Hedge Accounting of Forecast Intragroup Transactions - IFRIC 4, Determining whether an arrangement contains a lease Cargotec has not applied the following renewed standards and interpretations, as they are of no relevance to the Group operations. - IAS 39 (amendment), Fair Value Measurement Option - IFRS 1 (amendment), First-time Adoption of IFRS - IFRS 4 (amendment), Financial Guarantee Contracts - IFRS 6 (amendment), Exploration for and Evaluation of Mineral Resources - IFRIC 5, Rights to Interest arising from Decommissioning, Restoration and Environmental Rehabilitation Funds - IFRIC 6, Liabilities arising from Participating in a Specific Market - Waste Electrical and Electronic Equipment - IFRIC 7, Applying the restatement approach under IAS 29, Financial reporting in hyperinflationary economies - IFRIC 8, Scope of IFRS 2 - IFRIC 9, Reassessment of Embedded Derivatives The implementation of the renewed standards has not required changes to the comparison figures. Reclassification in the balance sheet: Division of derivative assets and liabilities into current and non- current has been taken into use in 2006. Derivative instruments, for which hedge accounting is applied, and for which the underlying cash flow matures after twelve months, are included in non-current assets and liabilities, other derivative instruments are included in current assets and liabilities. In previous financial statements all derivatives have been included in current assets and liabilities. The comparative figures have been restated accordingly. Pro forma accounting principles: Cargotec was listed on June 1, 2005 and the Company's first financial period was June 1-December 31, 2005. The annual report presents pro forma comparison figures for those periods for which official comparative figures are not available. Pro forma figures present Cargotec's financial information based on its business and corporate structure at the time of the listing to facilitate the financial evaluation of the Company. Hence, MacGREGOR's marine cargo flow business acquired in spring 2005 is included in the pro forma figures of all comparison periods as if the acquisition would have happened before the periods presented. Pro forma information is based on IFRS and the accounting principles of Cargotec's official consolidated financial statements have been applied when suitable. The figures are unaudited. The final accounting impact of the MacGREGOR acquisition according to IFRS 3 is included in the official result as of June 1, 2005. In the 2005 pro forma figures the impact has been recognized as an adjustment to equity. The pro forma accounting principles prior to the listing are presented in Cargotec's listing particulars. QUARTERLY FIGURES Cargotec Q4/2006 Q3/2006 Q2/2006 Q1/2006 Q4/2005 Orders MEUR 716.4 603.2 785.6 805.1 590.6 received Order book MEUR 1,620.5 1,594.1 1,544.2 1,439.1 1,256.9 Sales MEUR 697.2 624.8 661.2 613.9 621.6 Operating MEUR 57.7 52.1*** 61.0 50.9 52.7** income Operating % 8.3 8.3*** 9.2 8.3 8.5** income Basic EUR 0.61 0.60*** 0.64 0.52 0.56** earnings/share Hiab Q4/2006 Q3/2006 Q2/2006 Q1/2006 Q4/2005 Orders MEUR 240.7 207.3 232.1 266.1 234.6 received Order book MEUR 215.4 215.4 216.3 226.3 196.7 Sales MEUR 238.9 208.2 237.1 229.6 231.0 Operating MEUR 22.7 17.4 23.4 22.5 20.1 income Operating % 9.5 8.4 9.9 9.8 8.7 income Kalmar Q4/2006 Q3/2006 Q2/2006 Q1/2006 Q4/2005 Orders MEUR 327.1 257.8 346.0 351.4 230.1 received Order book MEUR 592.7 580.9 614.9 586.7 519.5 Sales MEUR 320.5 290.0 309.1 283.7 288.2 Operating MEUR 28.2 27.5 31.0 25.0 27.0 income Operating % 8.8 9.5 10.0 8.8 9.4 income MacGREGOR Q4/2006 Q3/2006 Q2/2006 Q1/2006 Q4/2005 Orders MEUR 148.9 138.8 207.9 188.1 126.3 received Order book MEUR 812.6 798.2 713.2 626.3 540.9 Sales MEUR 138.2 127.0 115.5 101.0 103.1 Operating MEUR 9.7 9.9 10.2 6.1 8.5* income Operating % 7.0 7.8 8.8 6.0 8.2* income * Excluding the impact of the final accounting of MacGREGOR acquisition ** Excluding gain on the sale of Consolis and the impact of the final accounting of MacGREGOR acquisition *** Excluding gain on the sale of property Information of quarter Q4/2005 differs from the pro forma information for the quarter as different currency rates have been used due to different accounting periods. Hence, the above presented quarterly figures for 2005 added together differ from full year 2005 pro forma figures.