Scanfil Oyj Ord

My name is Pasi Hiedanpää. I'm the Director of Investor Relations and Communications at Scanfil. Welcome to our Q1 2024 results webcast. Together with me, here are our CFO Kai Valo and our CEO Kristoff Sutt. A couple of practicalities. First of all, you may ask actually questions via the chat window. And also you can ask questions by raising your hand and you will be given actually the microphone and a turn to talk. And all the questions will be addressed at the end of the presentation. So, Kristoff, please go ahead.

Thank you, Pasi, and welcome to all of you for this Q&A. Looking forward to present it to you. So going immediately into the first summary of the quarter, as we had expected, I think we have been facing higher comparables during the first quarter of 2024, and many of our customers have been facing a slower market demand, which has resulted in lower sales, negative 11.5%, around 199 million euros for the quarter. In that sense, it was a good time for us to focus on efficiency, where we had a lot of work done there, both in our performance towards our customer. We reached in the quarter more than 98% of on-time delivery, which was a significant improvement against the same period last year. We also worked on efficiency, which allowed us to deliver a profit level of 6.8 when we neutralized one time expenses for lays off and currency impact. Operating profit reported was 6.4% in the quarter. So, all in all, a lot of effort and focus on building efficiency. In the same time, we continue to work on development. We saw that the energy and clean tech segment was slightly negative 3.3%, as you will see later. But when we neutralize one of the sub-segments that is focused on energy savings, then the segment is still dynamic, growing 11.3%. So, as I said in opening, I mean, a quarter lower in sales versus last year, driven by this talking from some of our customers and them having a lower demand. But in a way, a good quarter for Scanfield focusing on efficiency and focusing on making sure that we remain a healthy company and a fit company for the future. Looking at some of the happenings in the quarter, we had our Capital Market Day, where we had the pleasure to introduce all of you to our updated strategy. And that was also driving a lot of activity within the company, starting transformation. We continue to be active on the customer side. In the quarter, we were working on implementing new project for some of our key customers which will bring us additional revenue later in the year and and obviously in the coming in the new contract with EV charger manufacturer that will also pay off at a later stage. So even if the customer demand was not at the level it has been previous year, the market remains dynamic and we remain dynamic in this market, gaining contract and preparing for the future. As I said, we have a strong focus on our efficiency and the on-time delivery rate climbing above 98% is one of the elements showing our improvement. It's not the only one. We also managed to reduce our inventory significantly, as Kai will explain a little bit later. And all those elements are showing the focus we have had on operation and being an efficient company. And reducing inventory in a significant way when demand was decreasing was also a sign of good performance from an operational perspective. So from that perspective, I think that's something we are pleased to have that effort on making the company competitive. And then last but not least, we committed to net zero target to SBTI, which is a step that is very pleasing to see. I think we want to be a responsible company and responsible actor in our industry. Our customers that are major multinational acting in that sector are also wanting to see us the same way. So it's good to take a step and move forward. And also we got a lot of support with that move. So all in all, it was a positive element. When we look at the revenue for the quarter, you can see that reaching close to 200 million euros in the quarter, we start to have sales that are more normalized. I mean, the PTV that we have reported before is now fading away quarter after quarter. and was this quarter just at a normal level. So sales were, I mentioned before, negative 11%. When you neutralize from the PPV impact on previous year, it's slightly below 9%, the decline of sales. And that was mainly driven by slower demand for some of our customers and also some of the stocking impact driven by this slower demand for the customers. In the same time, as I mentioned before, we continue to work on new project implementation, which will pay off at a later stage during the year and will contribute to the development of ScanFi. On the operating profit side, we reported 6.4%. We had impact in the quarter from both currency and layoff as we continue to adjust the size of the company to make it more competitive long term. And therefore, if you neutralize those costs, we were at 6.8%, which I will consider is a good performance in the market that has been a little bit more challenging. And I think that from that perspective, it's also something that is important because it builds scanfield position in the market and competitiveness. So I would say a solid performance when it comes to execution facing a market that was more challenging. When we look at our segment, you get a different view depending on the segment you look at. I mean, industrial, which is for us really a mix of quite many different types of companies, is now weighting almost 50% of our total revenue and was declining 15.3%. In that segment, it's a mixed bag of industrial players. And there, some are growing, some are declining. they are facing, and that can vary quite significantly. On the medtech and life science segments that achieved very high numbers, Q1 last year, it was negative 15% driven by, I would say, the top two customers in that segment that were having a decline in their demand and therefore have been destocking during the quarter. We, however, continue to win market share with those customers where we are actually working on implementing new projects in some of our factories. So even if the revenue was declining, the level of activity was very positive. In the same time, we have started to implement our strategy having dedicated team for energy and for medtech and life science, and that has been implemented during the quarter. We are also getting certification from some of our factories, which also is driving the opportunities for us to capture new business opportunity on medtech and life science. So negative sales development, but positive development in terms of activities and collaboration with our customers and future customers in that segment. Then energy and cleantech. As I mentioned before, overall it was negative 3.3%. But as you remember, during Q3 last year, I presented you a little bit how the portfolio of Scanfield was built around energy and clean tech with different sub-segments. And when we look at it a bit more in detail, we realize that we have one of the sub-segments that we call energy savings. And that is mainly products that contribute to save energy. And that significantly down in the quarter. If you take away that part, you realize that the overall segment was growing at 11%, which tells us two things. It tells us that our view that long term is positive for energy and clean tech is something that we can really stand for because the overall development of the world economy shows the development of that industry. And we can see that the infrastructure keeps being built. And that will drive the whole segment. So even if it was slightly negative in the quarter and also facing quite strong comparables, we still believe in a bright future in that segment, looking at the overall portfolio. We also now have a dedicated team focusing on energy and clean tech, which is also very positive because it allows us to talk to our customers with more proximity. And that's something that we presented in our capital market there and implemented during the quarter. Then looking at our customer portfolio, our top 10 clients are weighting 55% of our revenue. Our biggest customer is 11% of our revenue. You can see that now the portfolio has been balancing a lot and things are evening out. I mean, we have quite a few customers that are in the same range of revenue, which is good for Scanfield because it allows us when one goes down to have support from the others. What I have said also many times that I should reiterate, you should also consider that in those 55% top 10 customers, in reality, it is very often subsidiaries of very big industrialists. So what we present here as one customer might be two or three divisions in one big group. And in a way, you could also count as maybe more than one. But that's something that is good for you to know. But I think that from that perspective, our balance portfolio is in a way healthy and allow us to not be too dependent to the variation of one business or the other. And then that, you know, but just to reiterate, I mean, we are planning to pay a dividend of 0.23 based on 2023 performance and that we will have AGM tomorrow. So that was my first words for the quarter. With that, I will hand over to Kai for the financial presentation.

Good morning also from my side and perhaps a little bit repeating what Christoph already told, but going still to the turnover, like I said, that we we ended up nearly 200 million, a little bit less. And the decrease in the turnover was like 11.5%. But like Christoph mentioned, last year was still quite significant spot by sales, almost 8 million. And this year Q1 was pretty much normalized. So when excluding the effect of that, then we are 8.6% declining in the revenue. in Q1. Operating profit then dropped from last year 15.1 to 12.7 but then like mentioned that we had some negative impact in the quarter regarding layoff and also effects related to account receivables and payables Those are not any extraordinary cost as such, but to make the quarters year before and now make them comparable, then deducting the cost. And then after doing so, we would end up to 6.8% of operating margin, which is then, like mentioned, I think very good result in comparison to 6.7 last year. What comes to the net profit, the gap is a bit lower than in the operating profit and it's explained by positive financial income expenses. We have a bit positive effect from the head season and from the FX side. And also, of course, when our debt is getting less and less, then also the interest cost is lowering. On the other hand, then the tax, we have paid a bit more, and I think it's like a normal, we don't have any tax benefits at the moment, and the average tax ratio is a bit increasing, so it's a bit over 20% the normal ratio. Still here, highlighting the operational performance and operating profit. So comparing here, this adjusted correctly 6.8% to 6.7% last year. And you can see here that when the revenue dropped like 25.7 million, actually we have been able to cut the cost even more and pretty much been able to neutralize operating margin wise the impact. In the balance sheet, two highlights, inventories in Q1, the comparison here is to the end of the year. So we have been able to reduce the inventories by 10 million during the quarter, which is very good. And then furthermore, also paying off the loans based on the normal pays, so to say, 3 million in the quarter. And looking at the net cash from the operating activities, 10 million positive, and last year at the same time it was a negative figure, so year-on-year good improvement, not at the same level as q4 but that was a bit like a very high high high high comparison um and and and basically this cash flow positive cash flow was supported by this inventory reduction of 10 10 million uh in total we have like 80 million uh rolling 12 months positive cash cash flow which is very good and the net debt um going down at the level of 47.2 million at the end of this Q1 and cash and equivalents growing and also then interest bearing liabilities in comparison to last year significantly lower and we have very strong liquidity at quarter end in total about 110 million of of liquidity available, including the cash and credit lines. And still looking at the key figures, then equity ratio 10% almost up from the last year and equity increased 40 million and then the total balance sheet being a bit lower when when we have been able to consume the consume the inventory so coming from suicide the improvement and net net gearing starts to be very low 17.1 and it was almost 40 40 years ago and and again lowering the interest bearing liabilities and and then then equity being increased significantly. Return on equity quite naturally a bit lower because of the lower net profit year on year also due to the higher equity from which we will pay the dividends 15 million in the second quarter. And then earning per share on the level of 15 cents. I think that was all from my side and give back to Christoph.