Risks and uncertainties

From the Interim Report January-March | April 25, 2012 

Principal short-term risks and uncertainties of the Group derive from a possible renewed downturn in the world economy due, for example, to the sovereign credit crisis. A decrease in demand for Konecranes’ products and services may have a negative effect on the Group’s pricing power and result in a decrease in profits, a possible impairment of goodwill and other assets, or inventory obsolescence.

A renewed shortage of credit may cause difficulties for Konecranes’ customers, suppliers, and financial and other counterparties. The risk may be realized as a shortage of supplies or defaulting liabilities. A growing share of Konecranes’ business is derived from emerging markets. This has had a negative impact on the ageing structure of accounts receivable and may increase the need for higher provisions for doubtful accounts.

Challenges in financing may force customers to postpone projects or even to cancel existing orders. A renewed downturn in the world economy would increase postponement of deliveries and cancellations of orders. Advance payments are an integral part of Konecranes’ project business and they have played a crucial role in mitigating the adverse effects from postponements of certain deliveries and minor cancellations. Konecranes intends to avoid incurring costs of major projects under construction in excess of advance payments. However, it is possible that in some projects cost-related commitments may temporarily exceed the amount of advance payments.

The Group’s other risks have remained unchanged and the pivotal risks are presented in the Annual Report.