Palfinger AG (PAL) Earnings Call Transcript

Thank you, Kevin. Good morning, and welcome from Vienna. Happy that you joined this call this morning. We are quite proud here to announce the revenue, which we exceeded of EUR 1.75 billion as well the profitability we gained. And Felix Strohbichler will give some more information later on. As well, 2019 was quite important in terms of the successful further implementation of the GPO, the GLOBAL PALFINGER ORGANIZATION, and as well, we are happy to announce that the restructuring of the SEA segment was largely completed. And we will see as well later on some good news, in which direction we are heading. So all in all, I think we can really confirm and announce that 2019 was a record year for PALFINGER. If you go to the next slide, here we have just some general figures and information. You see here the group revenue of EUR 1.75 billion. You see the split between LAND and SEA, but as well, you see how our revenue distribution looks like. We can clearly see here that we are largely depending on EMEA. But as well, we see here the growth from North America, where we could further increase our presence, well balanced between LATAM and APAC. If you go to the next slide, it is quite interesting to see that PALFINGER further invested, first of all, in employees and network but as well to secure proper new customer solutions. Just some highlights to mention here. So we announced to have the PALFINGER Campus in Lengau, where we are now doing a training and education center. We have as well expansion in the distribution and service network to secure that our customers are having minimum downtime. And last but not least, not to forget about STRUCINSPECT, our digital tool for bridge and building inspection. Saying this, we are moving to the next slide. What did we see in the marketplace? In the marketplace itself, the environment was still quite divergent. On the other hand, as well the economy was really quite aggressive in terms of pricing from our competitors. As well one important point to mention is that the North American region was quite good in terms of growth and as well looks quite promising for 2020. So all the circumstances we could cover by a strong local industrial footprint. Another element as well is here, which is worth to mention the refocus on Latin America, where as well countries like Brazil and Argentina are coming back. On the other side, China and CIS is slowing down in terms of demand, in terms of economic environment, and this will as well be further addressed in 2020. And we will hear some further information on that later on. The recovery of demand in the SEA segment is something I think we should hear positively mentioned. If you go to the next slide, and here, it's about our strategic focus. I think it's important to mention the vision and strategy in terms of providing solutions, best solutions in class to our customers is one of the key elements. The brand promise itself, the leadership, when you deal with PALFINGER, you deal with the leading brands. The corporate culture: we are one team and this is heavily supported by the GPO itself. Moving to the next slide in terms of innovation. This is not just to show and to list the number of projects which are heading toward digitalization. No, this is already really happening, the autonomous systems we are having with the smartphone control. So you can always see the area of innovation. And in the black-marked letters here, you can see how this is already applied at PALFINGER, which is not only wishful thinking. This is already something, PALFINGER, is already something we are doing. Being connected. So not only the STRUCINSPECT, as well the fleet monitoring from PALFINGER. This is how we stay connected to our customers. Not to forget about alternative handling solutions, so not only thinking about the current existing product portfolio. What does this mean in terms of customer segments? And as you can clearly see here on the next slide, we are not only thinking about the product itself. We are thinking about and we are considering requirements and solutions, best solutions in class for our customers. And here are the main topics mentioned, and you will see it as well later on from Felix, how this accounts in terms of our numbers. If we move to the next slide, our [ famous icons ], [indiscernible] clearly understands both what PALFINGER is staying for in terms of lifting solutions with [ famous icons ]. Nothing changed compared to last year. That's the portfolio we stick to. And this is quite important for you, our investors, but as well for our customers, our dealers, that they see that they have a stable counterparty in the industry who's not changing direction every other year, so quite a stable environment in terms of product portfolio. On the next slide, and this is more related to customer support, how do we deal, how do we support our customers. We have, as already mentioned, the global network. We have perfect availability in terms of spare parts, spare parts availability in the network for our customers. And quite important, and this is, again, a part of our digitalization strategy, preventive maintenance. So to make sure that we can predict if we would have to service an equipment, to service a machine and as well to stay connected here to PALFINGER, to the PALFINGER service network, if there are any upcoming solutions they would need or any questions they would have. On the next slide, you can see the approach towards sustainable actions we have in place. So we are a responsible employer. We have eco-efficient production and as well sustainable product. This is a combination, I think, which is somehow quite unique in the industry. And the fourth element is really talking about fair business, a fair business approach. A fair business approach amongst our customers, amongst our dealers, that as well with other business partners, suppliers, including our own staff, including ONE PALFINGER, the team we have. And I think this is as well quite significant here to mention. So what does this mean? 2019: we synchronized, we focused, we put really the energy to the ground. 2020, we want to continue. We want to get closer even to our customers and to show even more of this kind of lifting solutions PALFINGER can provide to their customers, to our customer base and to future new potential customers. Yes. This is the first portion, I have here. And at this point in time, I would like to hand over to our CFO, Felix Strohbichler.

Thank you, Andreas. Good morning. Ladies and gentlemen, I'm happy to present the financials of 2019, and even more so, that I'm happy to present these financials for the year 2019. As you are aware, we have changed our segmentation in 2019. So we are now reporting about 3 segments. The first segment is the segment SEA and Service LAND. I would ask you to go to Page #16, where you see the headlines for the segment SEA and Service LAND. Key message is we could increase our segment revenue by 12.7%, which is quite an achievement because you also have to take into consideration that the year 2019 was still a positive year, but there were some disruptions in the market. Not everything was so smooth in 2019. So we are quite happy about this development in the segment SEA and Service LAND. The increase in revenue was mainly driven by the product lines: cranes, timber and recycling cranes as well as hooklifts. What is also a matter of fact is, due to the fact that we are pushing more and more also into other regions outside of EMEA, we had a certain change in the region mix. Also within EMEA and in other regions, we have a change in the product mix sense. That change in product mix is reflected in the EBIT margin of the segment SEA and Service LAND. And as a result of the mix change, we see a slight deterioration of the EBIT margin in this segment compared to previous year. The market environment in EMEA was actually not too bad in 2019. It was quite good despite of the fact that in a lot of industries we have seen a dramatic downturn, especially in the automotive industry, a lot of producers were faced with a heavy decline. For us, it was a good year. However, we also have to say that the market became a little bit calmer in the second half year, and the order income was a little bit lower after the second quarter of 2019. If you go to Page #17, you see the KPIs of the segment SEA and Service LAND. As already mentioned, external revenue rose by 12.7% to EUR 1.45 billion, with segment EBIT of EUR 155 million compared to EUR 145 million the year before. The EBIT margin, for reasons I explained, decreased from 11.3% to 10.7%. If you move on to the segment Operations LAND, we had a situation the year before that we actually were having some difficulties and we were struggling to get all the components from suppliers in time. The value chain was quite stretched. This has become much better in 2019. So today, we can say that the supply chain is not an issue anymore. This is the positive side of the coin. The negative side of the coin is that it means that in many industries who are also customers of our suppliers, the market is slower and there is less need for supply. This also is part of the development in the segment Operations LAND, because as you might know, we are also producing for third parties. So we do third-party manufacturing with about EUR 113 million of turnover per year, and we managed to keep the revenue stable last year, despite of the fact that some of the customers faced a decline. However, the margins in the manufacturing for third parties were under pressure. What was also a very important effect in the segment Operations LAND was the first go-live of the first production template in S/4 HANA in a timber and recycling plant in Austria. So this was a successful first introduction of S/4 HANA in a production plant. If we now go to Page #20, to the figures. I already mentioned before that the third-party manufacturing was at the same level. So the external revenue you can see here is obviously the phase-out of third-party manufacturing because the internal sales are not reflected in the external revenue. The EBIT figure is also more or less on the level of last year. On the one hand, we have a very good utilization and higher output in operations, which increased the EBIT. On the other hand, we had a lower profitability in third-party manufacturing, which, in the end, led to a slight decrease of the EBIT in the segment. If you now go to segment SEA, Page #22, we have largely completed restructuring as Andreas has already mentioned. So this was a 2.5 years restructuring program. We have dramatically reduced fixed cost, closed 3 plants; offices, reduced number of people; changed the organization at the setup; and as important was a change of focus going away from being only oil- and gas-focused and to addressing other customers, especially government customers and cruise customers. Talking about cruise. This was also a major achievement in 2019 that we agreed on a joint venture with the #2 in the Chinese market, the company Neptune, which made us, together with Neptune, the #1 in China, and especially, which puts us in the pole position in the dynamic lifesaving equipment market for cruise ships in China. What the situation is there that today, there is a lack of capacity in cruise shipyards in Europe. So European shipowners want Chinese shipyards to create capacity, to create the capability to produce cruise ships. And there's also a huge demand in the Asian market, so this will be a future big increase in this industry in China. All of the increase actually will happen in China. And we are now the #1 there. We are perceived as local player, and we can participate in this fast-growing market. What you will also see in the KPIs is that we had a decrease in revenue. We had a huge increase in order intake last year in the segment SEA. It was 40% higher than the year before. However, you could not see that in the revenues of 2019 as the lead times in the segment SEA are substantially longer than in the segment LAND. So this will only affect, this order book, it would only affect our P&L in 2020. However, due to the good order book, we are very positive about a good contribution to the overall group income in 2020. On Page 23, you can see the KPIs. So the external revenue, as already mentioned, has further decreased by 11% to EUR 192 million. Based on this low turnover, it's even more positive that we could manage to have an operational breakeven now with the increasing turnover based on the very good order book. We are very positive for 2020. If you look at the segment EBIT, it says minus EUR 8 million, of course, you should compare the figure to the 2018 figures. There are a lot of restructuring costs in 2018. However, also in 2019, there is still a number of EUR 5.1 million of restructuring costs in there. So you can see that in the whole year, we only lost EUR 3 million, still with a lot of restructuring measures going on. So we have a very good basis for the year 2020 in the SEA segment. And let me go to the unit holding. So in the holding, you can see all the investments we have done in 2019 in the future structure, in the tools of the group like this GLOBAL PALFINGER ORGANIZATION. We have ramped up PALFINGER 21st. In 2019, we have rolled out first parts of the S/4 HANA template I mentioned, the timber and recycling plant factory before we created a new agency, new function. All of these things are investments in the future where we are very positive about the benefit in subsequent years. Of course, this leads to a certain increase of expenses. And this you can see on Page #26, that the EBIT of the segment, and this is actually a cost position, has increased or decreased from EUR 21.8 million to minus EUR 29.5 million. And this reflects all these investments into structures, which will allow us to reach our growth and profitability goals for the future. If you now go to the PALFINGER Group on Page 28, you can see the P&L highlights for 2019. First of all, revenue has increased by 8.6% to EUR 1.754 billion. What is even much better than the increase in turnover is, of course, that if you go down the P&L, it gets better line by line. So EBITDA increased over proportionally by 13.7%, EBIT by even 17.4%. And what was best, the consolidated net profit for the period increased by 38.1% to EUR 80 million compared to EUR 58 million in 2008 (sic) [ 2018 ]. This means that we will propose to the general meeting a dividend of EUR 0.71 according to our dividend policy to pay out 1/3 of the net profit, compared to EUR 0.51 of last year. This is a huge step in our earnings per share. On Page #29, you see our investment level. So it's slightly less than in 2018 with still EUR 90.8 million. However, we have to say we clearly believe in the future. We clearly want to achieve our target of EUR 2 billion in 2022. This also requires a certain level of investment. So this is why the level of investment is quite high also in 2019. On Page #30, you can see the development of our return on capital employed. And this is a slide I really like a lot, because it shows that we are very close to our target of 10% ROCE we have communicated for 2020. Two, it's even better if you take into consideration that in 2019, our balance sheet was extended by IFRS 16 by EUR 60 million. So actually, compared to the previous years, it would look even better with the same standards, if IFRS standard is behind. Going to the next page. We have a very stable balance sheet. Our financial liabilities have increased by EUR 11 million. And also our net financial debt has increased by EUR 10 million. However, again, please take into consideration IFRS 16, it's a EUR 60 million impact. So in reality, we have decreased our financial liabilities by EUR 50 million. If you look at the structure of our financial liabilities, we have a maturity of our liabilities of 4.5 years, with an interest rate of 1.69% on average. This is a structure which would have been impossible only a few years ago. And this just shows how solid we are with an equity of EUR 629 million and huge increase to the EUR 556 million of last year, plus this very solid and good financing structure. On Page #32, you see our balance sheet KPIs. Equity ratio has increased by actually not only 1.9% but 3.4%, again, IFRS 16 is here a major impact. So in comparison of 2018 to 2019, actually we have made a huge step towards even better solidity of our balance sheet. Also gearing ratio didn't only improve by 9% but actually by 20% if we take out the IFRS 16 effect. And net debt-to-EBITDA has improved by 0.66 instead of 0.3, again, if we take IFRS 16 out of the equation. Last, but not least, I would like to talk about our cash flow statement, Page #33. Of course, the first line, EBITDA, the operational profitability helped as the basis for the cash flow statement. So this is a good increase. What was also positive even if we have more room for improvement is the change in working capital. So we had an under-proportion increase of working capital, which made the change in working capital a positive figure. What you have to take into consideration in the cash flow from investing activities is that this is not reflecting our investments. It's the net investments, of course. And we sold the shares in Sany Heavy Lifting for EUR 28.6 million, and this is netted out here in this cash flow from investing activities figure. And what is in the end, the key, is what is the free cash flow. We managed to increase the free cash flow from EUR 46.8 million by more than 100% to EUR 112.4 million. So I would like now to hand over to Andreas for the outlook and conclusion.

Thank you very much, Felix. So how do we see now 2020? What would we expect from the new game, which we just started a couple of weeks ago? First of all, we will further invest in structures and products. I think this is well quite important to secure an organic growth. As Felix already mentioned, the SEA segment, we are really having a good order coverage. So we really need to make sure now we can really materialize on the orders we have on hand. As you all know, the lead times in this product range is quite long, but we see a good order intake. On the third headline, which we mentioned here, I think it's important here to reference as well the announcement we made yesterday in terms of addressing Q1 2020. Whereas with Q1 2019, where we see a quite challenging environment. And we are not sure if we can really beat the record again, which we have done in 2019 versus 2018. So that's a quite challenging quarter, and as well for the first half of 2020, it will be a challenging environment. Saying this, we have still a further focus on making sure that our customers can remain successful as well in the future. So the customer focus, the customer solutions, as already mentioned before, there are no big investments planned, but really to stay focused on that. And the last item I wanted to mention here is related to market opportunities, which we clearly see coming from North America, especially United States. There, the economy is trending quite positively. Housing is quite good. And not to forget about LATAM. Latin America, where we as well see in terms of new setup that we can really materialize further business and further revenue. If you go to the next slide, what does this mean towards 2020 and the announcement we made already a year ago? So we are staying the course towards 2022, not forgetting about the major KPIs here. This means EUR 2 billion revenue, 10% EBIT and 10% ROCE over the economic cycle, I think as well here, quite important to mention. On the other hand, still remaining the #1 and the leader for lifting solutions, so to have the appropriate balance between financial results but as well in terms of securing the market volume and securing being the leader in the industry. And I think saying this, I would say thank you to all of you. Don't forget, together, we are shaping the future for our customers' lifting solutions. Stay close to us, and we will continue the road of success. This conclude our presentation here. And now I think, Kevin, we are open to receive questions.

[Operator Instructions] Our first question comes from the line of Magnus Kruber from UBS.

Andreas, Felix, it's Magnus Kruber here from UBS. Congratulations to a good 2019, and a couple of questions from my end. First, could you expand a bit on the comments you made on Q1 and the dynamics behind that? And what do you expect to see from the individual constituencies of mix, structural cost for growth and the market factors? That would be very helpful.

Yes. First of all, I think it's important here that you a little bit understand what's happening here. First of all, the regional and as well the product mix is slightly changing. So in terms of absolute numbers, for example, on loader cranes, we do the same number but it's more of a shift to smaller equipment. We have a quite significant impact now as well on the forestry business. As you know, the winter is quite warm here. So we have less requirements for timber as well from the timber industry. On the other hand, like Russia, we can't enter the forest because it's too warm and the permafrost was melting. So we can't really get access to the production line. There are certain elements and we wanted to consider this. It's well quite important here to mention the supply chain, which somehow as well starting out to be impacted because of China and the virus. So that as well something where we have a little bit of mixed feeling and compared to 2019 where as well Q1 was really a wonderful great result. We just wanted to mention here that maybe we cannot expect the same level of record we have seen in 2019. But I think, Felix, you can further explain it here as well in terms of what does it mean in the numbers.

Yes. First of all, what we communicated yesterday does not mean it's a disruption in the course of the business. So if you now look at the last quarters, you have seen already a certain change of mix. This has been a constant thing. I also mentioned it for the year 2019. However, the Q1 2019 was absolutely the best quarter in the history of PALFINGER. So this was absolutely outstanding. And the problem is that if we have a deviation from this record quarter, we have to inform the capital market, and this is what we did. So actually, we also said that we expect a solid year. So probably, it's not so easy to show a record year again in 2020. So the environment is more challenging than it used to be. However, we are not talking about disruption. We are just informing you that this great quarter, Q1, we have been talking about the fact that Q1 was outstanding, exceptional, that things came together which normally don't come together in 1 quarter, that this will not be possible to repeat it in 2020. And this was the message. It was not the message that things are going down or that things are changing completely or that there is a disruption in the business.

Perfect. I think as the follow-up on that. You mentioned the China impact. Was that an impact mainly on your operations in China or does it affect the supply chain outside of China as well?

It's both. What we can really already experience, unfortunately, I can only have 1/3 of the people at the plant because for Chinese New Year, it's quite interesting, people move back to their homes. So they were not allowed now to come back to the plant. So we have around roughly [ 130 ] currently sitting there every day. A health inspection we have every day to see what's happening, if the virus is further expanding over there. So this is, let's say, the local Chinese impact, which has, yes, had an impact. But the Chinese industry is down. On the other hand, in terms of our supply chain, we see now some impact because we -- I'm not always so sure which kind of components our suppliers of major components are using and are getting from China. So in terms of supply chain, they still supply us properly. But when we ask to adjust demand, et cetera, it's quite complicated to get confirmation here. And this shows that something between our suppliers, which are getting major supplies from China, there is a certain kind of disruption. Unfortunately, we can't really quantify this fully at the moment.

Okay. And fully understandable. But do you know which kind of product type it would mainly relate to?

It's every -- it's a little bit everything. It's hydraulic components. Even if you have electronic parts to put the remote control together, yes? And there are components coming from China, but we do not have, really, visibility on what's coming. For time being, our major component suppliers are calming us down, but we see there's already some frictions. So I will -- we have to monitor. And we are monitoring this, let's say, in the next 3 to 6 months quite closely to overcome any particular negative impact.

Got it. That's very good color. And just one in Sales and Service LAND, did you build a backlog in the quarter? And in terms of order activity level, did you see any changes in the demand like in the back end of the quarter compared to the early part of the quarter?

Yes. I mean, it's -- as I already said, it's a little bit of a shift, let's say, to smaller cranes, smaller products. So in terms of units of quantities, it's still in. But as you can imagine, the revenue is a bit weaker there. And on the other hand, the timber business is impacted. And as I said already, this is related to, on one hand side to the demand itself on timber, on wood. And the winter is quite warm, so as well, the wood consumption for heating is heavily slowing down. It's as well the reason -- I mean, you saw it as well on the oil and gas business. And secondly, our major market in this period of time where you really harvest a lot of timber is Russia. And here, because of the melting ground and all the mud you have, the permafrost is gone. So our harvesting companies, the companies can't enter the forest because it's too muddy.

Our next question comes from the line of Matthias Pfeifenberger from Deutsche Bank.

A couple of questions from my side. Congrats to the results. Firstly, in the operations division, Operations LAND, I mean. The revenues dropped by EUR 3 million sequentially, but the margin dropped from 30% to 5% in the fourth quarter. So I don't know what the operating leverage there is. And then also on the consolidation line. I mean, the consolidation increased from about minus EUR 5 million run rate to a minus EUR 10 million. And last time we spoke, I think this wasn't really guided or expected. Maybe can you shed some light on these 2 items?

So first of all, Operations LAND, what you can see is that the turnover has been stable. And this is the external revenue for third party manufacturing, as I explained before. So this is a substantial impact of about EUR 5 million, just coming from lower margins in manufacturing for third parties. So this is actually the biggest impact on the margin in the segment Operations LAND.

But this is only related to third parties you're mentioning.

Exactly. Because in the end, we had a higher output, of course, so the production for our -- so to say, the supply to the segment SEA and Service LAND. Because segment SEA and Service LAND is to, so to say, the external [ SEA is ] to our customers. This, of course, has increased due to the increase of turnover in the segment LAND of 12.7%, so there was a higher output from manufacturing, which increased the EBIT in the Operations segment. On the other hand, the lower margin in manufacturing for third parties decreased the EBIT in the segment. And it increased -- decreased the EBIT more than the high utilization could increase.

And if you would go to Slide 17, I think here you would really see the real picture, what does it mean for the entire Sales and Service LAND in terms of revenue growth. And it's really in terms of EBIT. So here, the numbers are still quite positive. So the element which we are mentioning here on third parties, is only a small portion of it.

And then also on the consolidation, it's now EUR 10 million run rate. What's suddenly popping up there? And what's the guidance for the consolidation line for 2020, please?

What do you mean the consolidation line, Matt?

The holding cost.

Yes, so the holding cost.

Oh, the holding cost. So the holding cost, as we -- as I also tried to explain, we had quite some investments last year, which are necessary in order to be able to handle the complexity of the group, on the one hand. And also, to be able to grow the way we plan to grow. So the way the group was structured in many aspects, and we are not only talking about GPO, we are also talking about other aspects like systems, ERP systems, but also other systems. This was not set up to handle a company of this size and especially not set up to grow to EUR 2 billion. So to a certain extent, what you can also see in 2019 is the investment in the future to create the structures, which will allow us to be able to handle the turnover -- to reach a turnover of EUR 2 billion and also to handle a turnover of EUR 2 billion.

Okay. So put it differently, if you don't want to comment on the numbers for 2020, you're kind of hinting slightly lower revenues for 2020. What's your best guess on the margins? I mean, you have probably higher holding costs, but then you also have the ramp-up in SEA and you also have the new product lines in North America. So what are these factors ending up to in terms of margin guidance for 2020?

In the end, what we do expect, and we put it in the words, "a solid year 2020," that we still have a good outlook for the second half year. Of course, there are impacts like corona, where nobody knows exactly how this will end up, whether this will end or whether this will get worse. And there are also other aspects here. Of course, nobody of us has a crystal ball to know what's happening in the future. But actually, we see a solid demand. We have a reasonable market environment in more or less all markets. Of course, there are some aspects like in Russia, we've been there recycling. Andreas mentioned it. But overall, we are not negative about this year. The key point of the message yesterday evening was that due to the fact that 2019 was so outstanding, and due to the fact that we have done some investments that we have a change of mix compared to the first quarter 2019 and also, to some of the external influences, we do believe that we will have a significant difference to Q1 2019. We did not say that we expect a significant difference to 2019 for the whole year. So a solid year for us. It's not a huge drop in profitability and not a huge drop in turnover. It will be probably difficult to make a record year, but it will be a good year from today's perspective.

Okay. Can I just ask one clarification? On one of the last slides, you have a sentence that's something like the order situation is slightly positive and these orders will become effective from the second quarter or something like that. Is that meant for the SEA level or for the group level? I guess for the group, right?

No. I think what I wanted to say here is that we had a quite positive trend, let's say, towards the end of the year last year, but we already saw November, December that the order intake was a little bit slower. But still, we delivered what we had to deliver, and we make these great results happening. Now we see that we have the orders in hand. But we cannot create as fast as may be required really to beat Q1 2020 versus 2019. So yes, we have the orders on hand but we can only trigger and materialize starting again in second quarter the higher demand we are seeing now. So even the order book is, again, quite good and quite full. I can't deliver all the product already in Q1.

And the last one, sorry about that. From what we see in terms of coronavirus impact on the cruise ship industry, now it's obviously a lot of populistic news flow, but still, and also the new downward lag in oil and gas prices. I mean, I guess, the orders are baked in for 2020, but is there a risk for '21 that we see a renewed weakness in these 2 subsegments for the SEA business in '21?

This has been a huge problem in the past years that the whole marine segment is reacting very slowly. This is now a positive here because in the cruise industry, this is long-term planning yes? The customers in the cruise industry, they would like to have more ships. They're not thinking about what is going to happen in the next 3 months. To buy -- to get a cruise ship today has a lead time of 3 to 5 years at least. So this is a long-term trend. And there is, for sure, no change in the cruise industry, in the appetite for new cruise ships. So here, I don't see a problem. In the oil and gas segment, this is also rather long-term thinking. So even when the oil price was at USD 70 a year ago, there was only a very slow start of investments. We do at the moment, not see any change in projects. So there are a lot of projects going on. There are a lot of hot offers out. So actually, the oil and gas segment is not in a boom phase. So we are talking about an increase starting from the lowest level ever and it's still increasing and getting better. So we now see a coincidence of an improvement in oil and gas and a good market environment in the other segments. So from my perspective, the risk for the marine order intake today is limited. Of course, if corona gets dramatically worse, nobody can predict what is the consequence.

Our next question comes from the line of Markus Remis from RCB.

First question would be on the land order intake, if you can maybe provide some granularity on the decline towards year-end. We saw here reporting order intake down 10%. Would that be a comparable figure when looking at your order intake? And then I would also be interested if that was kind of sequentially deteriorating. So meaning, fourth quarter being softer than the third quarter. And if you could kind of clarify the comments on the first quarter order intake.

Yes. I mean, first quarter intake, yes, was a bit of a struggle. But as I said, it's a little bit of a mixed bag of elements we see here. One element is in terms of order intake, we got the orders but a bit later than expected. And on the other hand, the mix change. So the mix change, as I said, we have less timber recycling. We have more smaller staff for maintenance vehicles and as well the shift in terms of regions, well, a bit more up now of EMEA, of Europe into North America and Latin America and as well APAC. So here, we have a great order coverage. We have really great numbers but it's in a different region. And behind this, there's a different net revenue. But maybe Felix, you would like to add here something as well.

It's just a matter of fact, as Andreas explained, that in Europe, in EMEA, which is a core market with the highest margins, we see a slight -- a market which is slightly coming down, I would say, or normalizing compared to the peak phase in Q4 2018 and Q1 2019. Whereas other markets as North America, Latin America are still very, very positive.

And fourth quarter, is it -- was it comparable to here, the dynamic?

Again, in the fourth quarter 2019, was actually a normal quarter, but the fourth quarter 2018 was an excellent quarter. So the peak actually, if we look back the last 10 years, there were 2 peak quarters, which was the fourth quarter 2018 and the first quarter 2019. So the problem is always if we compare now against the 2 peak quarters, yes, the order intake was lower than in the peak quarter.

Okay. Can I then just ask on SEA kind of the expected, how should I say, improving revenue momentum. The run rate was pretty steady in the last 4 quarters, about EUR 50 million in revenues. I mean, should we expect the pickup or a material pickup when you say 40% order intake growth in the quarter, fiscal '19 rather in the second half? Or do you expect momentum really kicking in earlier in the year?

The momentum will kick in, in Q2, ramping up over the year. So we will have substantial deliveries in Q2.

Okay. And the order intake growth. Can you elaborate a bit on the product groups where you have seen kind of especially strong demand or was it across the board?

I would say that the 2 major segments where we have seen growth is on the one hand, the cruise industry. And on the other hand, it was the governmental business, as we call it. So this is especially firefighting. Just to give you a hint, 3 years ago, we did about EUR 3 million with the so-called special boats. So this was more or less nothing. We have now several orders in hand for firefighting boats and every -- of these orders is larger than the whole volume we had in the year 2017 in this segment. So we have not just put focus on this, we are actively marketing this. We are promoting these products and we see that there is a demand and the high interest of customers in these products. So we have now a much stronger share of governmental business. We have a stronger share of the cruise segment. We also have an improving situation in the wind segment. So we had some good orders last year. And also, this year, in wind, whereas we had a quiet space in 2018. There was almost nothing in wind. So there are -- if you look at the mix of the order book, it's much more diverse than 3 years ago when it was more or less 80% or 70% oil and gas.

Okay. And then coming back to the holding issue, I understand the structural cost uplift. But would you say that 2020 would be the peak and that we then see kind of a bit of a gradual decline and also talking about the payback of these investments you're currently taking. So when do you think this will actually become -- [ early in the quarter ]?

Our expectation is that we have now done investments which were necessary. Otherwise, we would have actually become -- it would have become a problem, frankly speaking. And I think this has been also communicated that PALFINGER was not set up in a way to handle this size and all the restructuring, et cetera, were a consequence of not being set up properly. Now we have the setup, and we did the investments in the future. We can grow without substantial further investments. So this also means that in the future, we do expect that further growth will lead to a decreasing structural cost ratio.

Okay. Good. Last question, rather bookkeeping. How much will you invest in 2020?