Scanfil Oyj Ord

Welcome to Scanfil's financial statements report webcast presentation. My name is Pasi Hiedanpää. I'm responsible for investor relations and communications at Scanfil. As a practicality, you can type in the questions in the chat window and we will address all the questions later during the presentation. Together here with me is our CEO, Mr. Kristoff Sut and CFO Kai Valo. Now handing over to Kristoff Soot, please.

thank you Pasi and wishing you welcome for this q4 report let's start first of all i wanted to go on a few key events that we had during the quarter it was a very eventful quarter and on the customer front we started to see a very dynamic market on the medtech and life science which translated both in increase of customers during 2024 but also a return to growth if we compare this quarter to the same quarter of last year so from that perspective a very positive quarter for medtech and life science On the internal side of the company, we announced just before, just at the end of Q3, an evolution of our organization and the creation of four regions. That has been implemented during the quarter and has been running full speed from the beginning of this year. So here as well, things have been delivered on time and delivered as planned. The last quarter was also very active on the sustainability front. We continue to implement our plan and have also been working on our CSRD reporting that you will discover in a few weeks from now. So there as well, good development. Looking at the last point, which is acquisition and investment, we announced at the beginning of first quarter the acquisition of SRX Global that gives Canfield now presence in Malaysia and Australia and also a new portfolio of customers. That's an acquisition that was very welcomed by our customers and we have, following the first month, taken the decision to increase the capability in our Malaysian site where we have secured additional manufacturing space. And we have also announced the investment of a new SMT and THT line that should be up and running during this year. And this investment is now already starting to be under implementation. So as you can see, just taking a few elements of it, a few transformational activities have been going through during this quarter for Scanfield. If I go back to the change in organization, it means that we have now three new members in the management team and at least four persons that have new positions. Annette Mulis joined us during Q4 as the chief people officer and she has a long-standing experience in human resources and will help us in our goals journey to make sure that we are able to grow talent and attract talent. very happy to get Annette as part of the team during that quarter. On the other side, you can see that we have now three new regional presidents. All of them actually come from the company, starting with the first one on the list, Steve Kreutz. that is now VP of Nurse in Europe. He has a long-standing experience, has been running our Audvideberg site in a very successful way, has a strong commercial background, which we believe is is what is needed for our northern europe region so very happy to have steve part of the team and and that he accepted the challenge on the epac region since now we have suchu but also srx global being part of it christian kesten that has been for quite a few years now running our suchu facilities he has accepted the challenge to run the impact region and is now full speed continuing the development of Suchu that is clearly a top notch facility for Scanfield, but also bringing the SRX global team alive and as new members of the Scanfield community. So very pleased to have Christian on board. And then last but not least, Marko Kosonen, that has a longstanding experience already in our management team, has been running operation in the past, has been running also supply chain, has accepted the challenge to run our central European region, which is a key region. We have a country like Poland, where we have two very significant facilities, but also Germany. And his broad experience and understanding of the company will help us to continue the development in that region that is strategic for us and our customers. So things went well and things went as planned. Now going to the number and to some more fact-based elements or tangible elements. First quarter was 212 million euros, negative 4% compared to last year, and organically negative 8.8%. It was a solid quarter, we believe, in execution. Profit margin was 14 million, which was the highest level of profit margin this year. and the 6.6 percent the quarter was impacted by some material cells that in a way diluted the percentage of margin so if you will shave that out you will realize that the the underlying profitability based on our operation was in the range of 7.3 which is in the corridor we aim at So it was a positive development there. On the business side, it was a very active quarter. We won deals, and I will get back to it a bit later, for 61 million euros, which makes it a very dynamic and very active quarter, bringing new customers and also new projects from existing customers, which is a good mix. and then as we have done for the rest of the year we focused on efficiency and making sure that we were adjusting our size to the size of the business we were facing as you can see the quarter in revenue was rebounding against a previous quarter so ended up a little bit stronger than the previous quarter of this year which was a positive development and obviously had the positive impact on our margin as well where as I mentioned before we had actually in value the highest quarter with 14 million which was also a positive development for the company. When we look at the customer base, we have a stable customer base, even if there are movements in it in terms of growth or slight decline from some customers related to the development of their business. But we keep having very good spread in our customers. The biggest customer is now landing around 13%. And after that, we have our top 10 customers that are in the range of 50% of the total revenue, so quite spread. And within those customers, it is usually big names, which means that it's usually several companies that are building that portfolio. So I think there, I would say no big surprise, a continuous improvement and continuous development has been mainly the word with the customers. Looking now at the development of our different segments, the industrial segment declined 5% year on year, but had very positive development in terms of won deals in the quarter. I mean, as you can see, 31.6 million was definitely the highest quarter in the year in terms of winning deal for that segment. We had the pleasure to win a couple of deals for the mining industry, which will come in manufacturing in the coming year, which actually made the difference for the quarter. So pleased to see that the long-term effort we have seen building relationship with customers are paying off and translating into a deal that we can win. Energy and clean tech rebounded from previous quarter to about 20 million euros. And there it was mainly a spread of new contracts that we are acquiring with existing customers in terms of loan deals. In terms of revenue, we were negative about 8% versus last year. It's a segment that has been, as you have seen, suffering the most this year from the correction. But we still see very dynamic development in terms of number of projects and opportunities. And our portfolio of clients there is getting stronger and stronger quarter after quarter. And then finally, as I mentioned, one quarter that we were very satisfied, one segment we were very satisfied with is actually MedTech and AliveScience that grew over last year by about 8% in terms of revenue. And that's obviously something that is pleasing. It shows the long-term commitment we have with our customer and the good quality of service we can provide to them. but also grew in terms of deals we won since this quarter we were very close to 10 million euros of new deals which was a record quarter for this year in terms of new deal bought in the company so that's a segment that we are happy to see that the effort we have put during the year both in getting new certification making sure that we beef up the teams in terms of sales and get close to our customers. Those efforts pay off again during this quarter. on the esg development we have a reduction of our co2 emissions since we started the journey by 52 percent we which was positive we are also reducing the share of increasing sorry the share of fossil fossil free energy i mean we did last year a significant investment for our suit shoe facilities where we have installed solar panels that is slowly starting to help the development since it came late in the year. Then on employee satisfaction, we remain at the high level. We are a little bit down versus previous year. I would say the main challenge was actually our Polish operation where we have had actually quite a lot of resizing because of size of the business, which will obviously affect a little bit the employee satisfaction in here, but something we are working on. Obviously, new projects coming in will create a different dynamic there and are creating a different dynamic. Finally, I would like to give you the picture of 2024. 2024 was a challenging year when you look at the market and you all know that. But in many ways, I'm very satisfied and very pleased to see the work the team has done. We reached 779 million euros, which was an organic growth negative of about 15%. But despite those circumstances, we managed to deliver operating margin level that was in line with previous year and in value 53.1 million, which was a challenging year to go through, but in many ways good because we could also work on our productivity and how we improve our company in those difficult times. So very pleased to see. Then in the same times we kept moving forward with our strategic initiative and it translated in new deals that we won. 187 million euros we believe is a significant number even if it will take time to implement but it's a good number. And we also acquired SRX Global, which was something we mentioned at the beginning of the year was important for us to be active again on the M&S front. So that was also a positive element. And all of this brought us to and the board to suggest a dividend of 0.24 per share, which then allow us to continue our journey to move upward in terms of the dividend level we can offer to our shareholders. So I will say in many ways, a year that was positive and that was building the company in a good direction. With those words, I will for now hand over to Kai, our CFO.

Thank you. I will deep dive a bit further in the P&L and the balance sheet, cash flow and the key figures. And starting from the Q4 operational expenses and operating profit, on the left side you can see the operating profit of the last quarter of 2023, and then on the right side you can see the operating profit of the last quarter of last year. And the improvement, like mentioned, 0.6 million improvement in the operating profit. How we end up from one figure to another turnover? like mentioned, was still declining 4% and almost 9 million. But what we did good is that we were able to improve our operational costs and operational efficiency and almost cover that with the lower expenses, almost the same amount lower expenses than we declined with the turnover. there was also chains of inventories nearly two million finished goods inventories at year-end which are then related to the year-end deliveries of whether they are recognized as revenue or inventory and inventory were a bit growing and not not recognized in the revenue so means that the production volume at the end of the day was two million two million uh higher or or less less lower than than what what the turnover would look like And as a result, the operating margin increased from 6.1% to 6.6% year on year in the last quarter. Looking at the full year in the same manner, left side we have full year of 2023 and then on the right side bar is the full year of 2024. And from 61.3 million operating profit, we declined to 53.1, about 8 million lower. But how we end up there is, looking to turnover, turnover dropped by more than 120 million and about 13% decline in the revenue. And again, we were able to mostly cover that with our operational cost improvement. Of course, that in a full year level, things are happening gradually and you are not able to do the improvements in the day one. And for that reason, it's not like a totally same effect as in Q4, but very good result. And operating margin was actually then ending up to be exactly the same 6.8% with significantly lower volumes. from the operational efficiency point of view very good result A few highlights about the balance sheet. First of all, inventory is 170 million roughly, 40 million less inventories than a year ago. And that is including some increase, 6 million increase at year end for SRX and some foreign exchange rate differences. And from the cash flow point of view, then the inventory reduction was more than 50 million euro which is probably more correct figure in my mind very good improvement and that was like strengthening the balance sheet we can see part of the effect we can see in the cash which we had 50 million at year end and actually 50 million is higher than our like financial debt loans because 70 million of interest-bearing debt is also including about 27 million of leasing liabilities. So we have more cash than we have like financing debt. Fixed asset, slightly growing part of that, maybe half coming from SRX and then half is investments in operational efficiency and customer needs and requirements. Equity, nearly 300 million out of 540 million of the total balance sheet. And if looking at the equity, And per share we have now 4.5 million if hypothetically would like sell all the assets and then pay all the debt you would have 300 million left and then 4.5 million per share which is quite good. Then net cash and more looking on the full year level. So the last year we generated cash flow. I have been asked what are the possibilities to generate cash in our business, but obviously we have been doing quite fine, 92 million last year. Like I said, about half of that is coming from the, or more than half, 50 million is coming from the inventories and then the rest from the profitability. um and then then the year before we have a high growth year but still still 70 million of of increase and and or cash and then then then the year before which was 22 and very very challenging year from the component market point of view still was 10 10 million positive in in cash so there is no no in the near past any negative years with the cash flow and vice versa very good year the last year Net debt we ended up to 21.2 and like mentioned that excluding the leasing liabilities then we would be basically no net debt at the moment It increased a bit from the previous quarter due to the SRX acquisition acquisition was more than 20 million or 30 million as a total but then the net debt is due to the good last quarter it's increased by 10 million from the previous so and we have liquidity level of 140 million million euro and then then why is that important is that we need to have certain level of liquidity to be prepared for working capital needs or be prepared for investments and and and also some some level of acquisitions with with this of course we need also some like fuel in the in the engine all the time so that then all 140 million is not available for investments or other purposes but but then a big big part of that could can be can be used and then then 90 million is unused credit facilities and 50 million is is in cash and Key figures, equity ratio strengthening by increased equity and then balance sheet, actually total balance sheet increasing a bit less than equity because we reduced inventory significantly. Net gearing is a bit like opposite of equity raiser Depth lowering and then total equity growing so then the raiser is very low Return on equity lower from the last year quite naturally because of the lowering Euro value of operating profit and the net profit And also that increasing equity value. But still not too bad level for the challenging year. And then earnings per share 0.6 and previous year 0.74 out of which then 0.6 we have decided to or we are proposing to pay the dividends of 24 cents. That's all from my side and I hand over back to Kristoff.

Thank you Kai. Going to Outlook, we see 25 as a growth year back to a positive journey. We have given guidance 780 to 920 million in terms of revenue. I would say there is two things to consider in it. One risk is obviously the geopolitical and overall world situation that can obviously constitute risk for any company today. On the positive side, however, what we can see is we have quite a few customers that are in project business and that are still having quite significant opportunity that could transformate during the year. So that's also explained a bit. the the the big windows we have in the sense that still quite a few things can happen this year that could be very positive to us and it's obviously impact our profit level where we have also a positive development moving from 53 to 66 million in in the window And they are as well reflecting the belief that we have now a good understanding on our cost base. We have a good understanding on the market situation, our opportunities, and good control of how to steer the company and build profit. And we are confident that this year bring us back to the corridor we have wanted to go and the growth will help us to reach that journey. We see the year moving from a first quarter that is going to be a focus on ramp-up activities to build the growth that will be delivered later in the year. So this first quarter is important on the operational side just to make sure that things get in place to deliver a strong remaining part of the year. We will remain in 2025 with our focus area which is to build pipeline and continue to acquire either new customer but also share within the customer we have today and that's obviously a strong drive for medtech and life science but also for cleantech we will continue our strong activities in terms of cost control and inventory improvement i mean we believe that we still have room to do better i think we have obviously captured a big chunk of that opportunity when it comes to inventory But we still believe that probably a third of what we did last year is still feasible for 2025. And then we are also on the cost control side working very thoroughly in the company to make sure that roles and responsibility are clear and that accountability is built across the organization and as close to the customer as possible. And in the same time, we continue to have an appetite for M&A and we continue to build pipeline and analyze, monitor and review potential cases. So we believe that 2025 should also bring M&A and potential acquisition to the overall picture. With that, I will hand it over to you, Pasi, for questions.

Thank you. I think that you close your part to the part where it also continues in the question side. It's about the defense and M&A. Europe needs to increase production of defense products. Are there product categories which would offer a significant growth opportunity for Scanfield? That's the first one, if you want to take the first one.

Can you just take it again? now are there product categories which could offer a significant growth opportunity for scan fill in certain areas yeah i i think that there is a few things uh there is the defense aspect that you mentioned there is also met tech and life science i mean we have had a positive momentum there and we have strong position with our customers so we believe that short term and for 2025 is something that will pay off and that will bring growth for Scanfield. Then when it comes to defense, we have a small exposure to that market today, but a few very successful companies that we believe will continue to build momentum and that we are working very close with them. That's one element. The second element is we do not exclude the possibility to penetrate that market through M&A if the opportunity comes.

Okay, you took actually the second part of the question already. So can Scanfield take advantage of acquisitions in defense area to accelerate growth? Yes, so it can.

Yeah, we believe it can.

How do you view your current momentum in new sales going into 2025?

Yeah, as I mentioned in my closing comment, I believe that Q1 is a critical time. quarter for Scanfield, because we have quite a big amount of new project implementation that are in the pipeline. If you look at what we captured during 24, as of today, it's only about 20% that is in the manufacturing. So quite slow, and that needs to ramp up. So I would say that that's the plan, that Q1 is really a quarter where we need to invest to make sure that we gain speed and momentum that will translate steadily Q2, Q3, Q4. yes thank you uh in saleswise was it any um extraordinary cases in q4 that's probably the the good news that it was no extraordinary nothing extraordinary in q4 but more normalizing sector so if you look at q4 saleswise you could see From all our customer base and industrial and energy clean techs, it was a stabilization quarter. And then for an energy clean tech, it was even a rebound compared to the number we have had.

Thank you. About the customer satisfaction, how did Scanfest customer satisfaction develop in second half of 2024? I do not remember myself at least the number.

I can comment that. I think that we add on the second half of 2024 customer survey and I think that it has developed very positively. We reached, I will say, the best rating from our customers during that part of the year, which is pleasing because The least we could do with volume reduction was to become better in our own time delivery, and there we have been quite high during the whole year. So it has been very positive development. And when you see the number of deals we have won, you can see that a big chunk of it comes from customers that had a relation with us. And obviously, if they are happy, they are more willing to give you more business.

Digging deeper into the NPS and the parts of that, which are the main areas in which Scanfil must do better to improve NPS in the next years? So the development areas in customer satisfaction.

In customer satisfaction. Well, I think that we have, I believe we have a good path in being close to our customer and being proactive in our communication on opportunities and risk we see on the market. And therefore, I believe that it's not a magic bullet there. I think we should continue that, continue to create very close relationship and I would say tackle the challenges that can come together. I mean, a good example is what's going on now with the situation when it comes to potential tax duties. We try to be upfront and very close to our customer to tackle that. And I think that element that you built up within the company, at all level of the company, that will help us to build long-term, sustainable, good result for those survey.

So, proactiveness and open communications. Yes. From there, actually, to the geographical regions, how do you see demand outlook geographically in Europe, China, and the rest of the world?

I will say that, obviously, I think we have four regions, and what will happen is you will get the numbers of those regions to get familiar with it. What we see in China, I mean, China is for us, as I said, a very good operation. And we have long-term relationship with customer that wants to utilize that facility even more. So we see the outlook positive on China. We have no worry there. I think that it's good. When we look at Europe, what is key for us and strategic is our central European operations. where we will have significant work ongoing at the beginning of this year to ramp up projects for some key and strategic customers. So I think that long term we have a positive outlook on Europe as well, but mainly driven by the good development we have had with customers. Then it might take a little bit more time for existing contracts to regain volume.

about the pricing environment for 2025. What kind of pricing environment do you expect for this year in the guidance?

Yeah, what we believe is that the market situation will probably remain quite similar to what we have had last year, which means that probably the supply side will remain not too tense during this year. So we don't expect major changes in the year.

okay thank you how do you see the ramp up schedule for contracts one in 2024 entering production in 2025 i think that was maybe partially already closed in the in the presentation but please can you emphasize again yeah as i said i think that i believe that the q1 we will make a lot of effort but little little outcome of those contracts

And then it will gradually gain speed Q2, Q3 and Q4. But I will say already Q2 and Q3 will start to have a significant impact on those new contracts coming in actually.

Okay, thank you. Can you expand anything around the two large climate change orders, one in the quarter, in Q4?

Yeah, obviously all we cannot disclose the detail of it, but what I have said before, we have a good footprint when it comes to these type of activities and we have good footprint with leading company and leaders that are today moving towards Canfield as a strategic supplier. So I will say those contracts are logical steps in the partnership we have created and they are building up for the future and they are putting Scanfield in the heart of those customer system as a key supplier. So that was very pleasing. And from that perspective, we are also very confident on the development of volume that that will bring.

Maybe elaborate a bit that the climate change mitigation contract was a new customer and the other one was actually existing customer. Thank you. Please, if you have any further questions, so type in and we will take them from there. Let's wait for a short while. If there are no further questions, so handing over again to Christoph, please.

Thanks, Pasi. Now let's see. okay so i wanted to finally close 24 and have a few takeaways for this year obviously if we look at the financial side we had the positive development in the sense of our margin remain at 6.8 which shows our commitment to defend our margin level no matter market condition and that i think i'm very proud about q4 but i'm very proud about what we achieved there during the year in the same time i have said it before we managed to keep going with our strategic initiative and both in winning deals in segment we believe we can bring added value and meant they can life science being strong on that side but also following our mna journey with with srx acquisition so that was also positive things I think also we managed to balance very well our investment and our cash situation. And as Kai presented, obviously we had a strong cash flow during the year. We have improvement in many areas in our operation, reduction of inventory. uh being one of them uh but we also managed to to keep our depth level low despite the investment we made so all in all q4 was delivering on many aspects both financial strategic and preparing for the growth and and for the future of the company so with that i want to thank you for listening to that webcast and for following us