Kalmar to create new brand

The Finnish Financial Supervisory Authority approved the Finnish language demerger and listing prospectus prepared by Cargotec for the demerger of Kalmar and its listing on the Nasdaq Helsinki stock exchange.

The rationale for the demerger is to separate separate Cargotec’s current Kalmar and Hiab businesses into two standalone companies, allowing Kalmar to be listed as a separate entity. Cargotec’s Board consider that this strategy would “unlock shareholder value by allowing both businesses to pursue sustainable profitable growth opportunities independently.”

Cargotec’s Board has set ambitious performance targets for Kalmar for 2028 including: sales growth of 5% per annum over the cycle, a comparable operating margin of 15%, and a return on capital employed (ROCE) above 25%. For comparison, in Q1 2024 Kalmar achieved an operating profit margin of 13.5%, and ROCE of 22.5%.

Cargotec executives have previously made the case that Kalmar can be a more profitable business on its own, but separation from Cargotec is not so easy. Firstly, Kalmar will need to set up its own management, financial and information systems and legal services. Cargotec has agreed to provide transitional services for a period, but ultimately Kalmar will have to stand on its own.

Kalmar estimates that the costs incurred from operating as an independent company “will have a negative effect of approximately 1-2 percentage points annually as compared to the result of Cargotec’s Kalmar business.”

Kalmar will have to renegotiate shared supplier contracts for materials, and it may not have the same bargaining power as Cargotec. The prospectus notes that some of Cargotec’s and Kalmar’s agreements with third parties include clauses that prevent or limit the transfer of rights and obligations. In some cases, contracting parties have the right to terminate in the event of a corporate reorganisation or change of control.

Although the name “Kalmar” is already a brand separate from Cargotec, some changes will be required in this area. “Kalmar has gained its market position and established its own brand identity while operated as part of the Cargotec group under Cargotec’s brand. After the completion of the Demerger, Kalmar is a new independent and separate entity from Cargotec which cannot rely on Cargotec’s brand or Cargotec’s market position. Kalmar intends to make changes to its visual identity in connection with the completion of the Demerger and therefore Kalmar may need to gain and maintain brand awareness for the new Kalmar brand in order to maintain its market position,” the prospectus said. It is a guess, but perhaps Kalmar’s new logo will look something like the red “K” at the top of the listing prospectus (pictured above).

The demerger plan must be approved by two thirds of votes cast and shares represented at the AGM to be held on 30 May.