Scanfil Oyj Ord

Good morning. Welcome to Scanfil's Q3 results webcast and live event. My name is Pasi Hiedanpää. I am the Director of Investor Relations and Communications at Scanfil. Together we are here with me is our CFO Kai Valo and our CEO Kristoff Sutt. Kristoff, please start.

Thank you, Pasi. Thanks to all of you for joining, and let's get started with our Q3 report. A few key events for the quarter, starting with a few news about our customers. I mean, we continue to move forward in acquiring new contracts, 41.7 million of new contracts in the quarter, which we believe was a very good number, if you consider that we have uh two months more or less of vacation in the middle of it which are usually not months where you sign contracts so that was very pleasing to see and it was a mixed bag of of established company that continue to trust us and to believe in us and bring us business but also a few exciting opportunity i mean you have a few on that slide sky tree and erma that are some of those companies that have a great potential and that also are trusting us for for their manufacturing so that was a very positive. On the quarter, we also announced an adjustment to the organization from 1st of January. We will have a new management team and we will have a regional organization as we presented before. It will also mean that we will have a new way of reporting and you will get from them more granularity on our numbers since you will get the full visibility per region. We also moved forward on the sustainability front, where we got our target approved by SBTI. And we also had our employee engagement survey. That was a positive result and still very strong. Even in difficult market conditions, employees are close to us and we are close to them and we keep moving forward on that front. And then finally, we continue to focus on performance. And it shows in the quality of our delivery. We were still at very high number on on-time delivery in the range of 98%. And it shows in the satisfaction of our customer that was actually achieving record high numbers since we have been studying our performance towards them. So all in all, quite many happenings in the quarter. that we're going, I believe, in the right direction for the company. One element that don't belong to that quarter three, but in reality, we made a lot of effort during Q3 and then it was closed just after Q3, so good to remember since it happened beginning of October, the official date. We acquired a company, SRX Global, that has two sites, one in Malaysia, one in Melbourne. The company is 39 million euros revenue. We paid 23.3 million for that company. an earn out when they achieve their financial result towards the end of next year. And this is a company that we are very pleased about because its complements can feel very well. It gives us a footprint outside of China in Asia. both in Malaysia in a very good location in terms of logistics and the mix between, I will say, logistics and cost level, but also in Australia where we know that a lot of our global customers have business there and appreciate to have an offering to complement that. That was belonging to Q3, but obviously, as you realize, it was a lot of activity. It was belonging to last quarter, but as you realize, it was a lot of activity during Q3. An important milestone for Scanfield, and it also marked a return to M&A and acquiring players. Moving now to our financials for Q3. We achieved 173.3 million euros, which was negative organic growth, 18.6% in the quarter. And it was mainly driven by still a bit of challenging market conditions for our customers. But we managed to keep a solid level of margin, 7.2%. which shows the effort we have made during the whole year to make sure that we adjust our cost level to the market situation. And as you will acknowledge, it is not always easy, mainly in a market that has been very volatile with quite often changes for our customers on delivery date and things like that. But I think on that level, we have done a very good job. And I think for me, it's really a good sign for the future. If you combine that with the activity on the new win that we have had, 41.7 million, it's a very positive development. We have now acquired 126 million of new contracts during this year, which is something that will obviously start to pay back in the coming quarters as now we start to move them into manufacturing. Finally, we have still a very strong position at the end of Q3. We had a debt level of 0.15, which was the lowest for quite a long, long, long time, which gives us strength and the capability to invest, obviously in M&A as we did, but as you can easily calculate. I mean, we are far to have utilized all our firing power. So we still have room and can continue with that. And then we had also a very strong cash flow position. So I will say, Defending the margin in a very good way in a challenging market and making sure that the company is in a healthy situation financially when in the same time moving forward in our strategic goals, both acquisition but also preparing the company for the next step. uh here you can see uh the development of our revenue which is in line with what i mentioned before and i think what what what is very interesting you should look at this graph over the history and then you match it a little bit with the coming graph that gives you the profit level and if you if you look things a bit of what you saw on the previous graph you will see that the profit level we have now consistently even in the lower market is much higher than what we used to have And that, I think, is really paying off the effort we have made to build flexibility and to adjust, I would say, our cost level with the cycle. So I think that is a very pleasing position. And you can also see that we have had a trend and now are back into the corridor we have announced between 7% and 8% in a consistent way, no matter the level of revenue. So very pleasing and very, very proud about that part. On the customer front, we continue to, I will say, diversify our portfolio. Biggest customer is now 12% of our total revenue. And we have 42% on the top 10. And after that, we get a certain number of customers that have also potential to climb the stairs. And we have a dynamic situation, as I mentioned in the previous quarter. between, I would say, 8 and 15, things can move back and forth. And that, I believe, is quite good because it makes the company more robust since we are getting sizable. Then industrial segments remain the biggest for Scanfil, but Medtech and Energy and Cleantech are also now getting more and more sizable. If we look at the detail of the different segments, Industrial was negative 15% in the quarter in terms of revenue. And we, however, had a better position in acquiring contract than the previous quarter. We won 17.5 million of new contract in that quarter. which was actually a mix of quite many deals of mid-size. And a big part of it was acquired with existing customers that have new projects to give to Scanfield, which is a good sign in the trust. And if you match that with the satisfaction number that we get from our surveys, it really speaks for a good performance from the company towards our customers, which is a good sign for the future. Energy and clean tech remain very dynamic. We have 16.1 million in the quarter of new contract, which brings us to above 50 million since the start of the year. So obviously, we keep building portfolio in that segment. Revenue was negative 28.4%. Obviously, we are still fighting very high comparables. For me, I think there is one thing that is important in that quarter beyond the number, and it will give you a little bit of a taste for the future, is even if the revenue was lower than last year in a significant way, we start to see stabilization in customer demand, which means that customers that have been totally at home, where demand has been at home for a couple of quarters, are now coming back. So really confident that now this segment will start to step by step rebuild higher level of revenues. And then the last segment that in a way was a bit disappointing short term, but that we remain very confident long term. Medtech and life science was slightly negative, 6%, 6.9% in the quarter. We, however, won the contract for 8.1 million, so we keep moving forward in that segment and we have a lot of activities. I will say that we see stabilization on that segment. We see growth coming back. We have been hoping for that to happen during that quarter. It didn't. It was slightly negative, but we still have a positive outlook on the segment. So slightly disappointment in the quarter, but still a dynamic market and a position that is building up. So we are positive on the future of that segment. With that, I will hand over to Kai for the financial presentation and get back a little bit later. Kai.

Good morning also from my side. I think the first slide of mine is telling quite well about our operational performance and how we manage the operational expenses. The left bar on the left is showing the adjusted operating profit Q3 2023, 15.2 million. And in a challenging market, like stated already by Kristoff, the revenue was dropping by 39.5 million, 18.6%. However, we were able to adjust our expenses exactly with the same value than the revenue dropped. which was then well resulting to operating margin of 7.2%, exactly the same as we did last year with the higher volumes. Euro terms, the OB or adjusted OB ended to 12.4 million euro. A few words about the balance sheet. Starting from the right side, you can see the equity being growing 15 million, that coming from 30 million of positive net profit year to date. And then we paid approximately half of that as a dividend out and then half we kept in the pocket and then increased the cash in hands and then paid some loans off. um and the rest of the improvement in the cash and the and the net debt is coming from the inventories 35 million reduction in the inventories which is very very good in in the challenging challenging market can say that trade receivables and payables are more or less netting each other out resulting those the result and an operating result and then then the improvements in the working capital then the cash flow was fairly good seems that somehow we have a trend to have every second quarter better and every second a bit lower i don't know why why that happens but never mind 22 million of operate of of cash flow from the operations And then year to date, we are on the level of 70 million, out of which then about 15% is coming from the improvement of the inventories and then the rest from the operational result. rolling 12 months last four quarters then the cash flow is as high as over 100 million positive and again like 50 percent of that is coming from the inventories cash the inventories and then then the rest is coming from the from the profits can see also that then then the cash flow has more less like more than doubled in in in comparison 12 months period Following the cash flow, naturally, the net debt has decreased. We are now at the level of 11 million of net debt, and when taking out of the leasing liabilities, we are debt-free, basically. So we have more cash than we have financial liabilities. cash 50 52 million and then then the interest bearing liability is 60 63 million but could say that like a bank bank loans are 40 40 plus and the total total liquidity is 110 43 million which consists of the unused credit facilities of 90 million. And then we have the cash 50 million besides that. So that is those famous bullets which Kristoff mentioned. Key figures. Equity raiser. Growing. We didn't pay out all the... We haven't paid out all the profit as a dividend. So the equity is growing and can continue to grow. And then the total balance sheet instead has been lowering a bit when we have been reducing the working capital. So that's 10% growth in the equity ratio. becomes like said that then of course because that is coming from the net debt and then in relation to the equity so net debt is very low already so only four is the value for the gearing return on equity is on the good level however less than it was quite naturally because challenging market and the net profit euro terms has been a bit declining and then at the same time We are with the higher equity value, but not a bad result. And then earning per share following the net profit development. And yeah, I think that I give back to Kristoff.