Scanfil Oyj Ord

capacity, a new customer portfolio with strong presence in aerospace and defense, but also capabilities in rapid prototyping that we were missing in the US and that our customer really will appreciate. I mean, we have already interest to visit that operation as soon as the closing is done. So very positive. And during the weekend and earlier in the week, we have been commenting on the acquisition of MB Electronica that we signed during the weekend. It is a significant step for Scanfield. It gives us a footprint in South Europe that is a very big market for our type of industry. but also gave us a significant footprint in aerospace and defense with more than 37% of the revenue of that company towards those customers. So as you can see, a lot of activities driving Scanfield for the future, both organically and through acquisition. If we look now at the numbers and the performance of our operation during the quarter, I believe we had a solid performance during the quarter. The revenue at €202.2 million was growing 3.4%, still slightly negative organic, minus 1.1%, but incremental growth versus the previous quarter. So we can see now that we are gaining speed and momentum, and that was seen in ourselves. As a consequence of it, we got back to a solid performance. Our EBITDA was at 14.2 million euros, 7%, which was a solid quarter from that perspective. We continue to own new deals with 41.7 million of deals that were won during the quarter, very active in industry, energy clean tech, and men tech and life science. And the energy clean tech was maybe a bit slower in acquiring new businesses, but we can see now already positive sign on seeing that segment recovering in cells. And that was the good news for the quarter. The APAC and American region were enjoying still a very strong momentum. I mean, we have seen that for quite a few quarters and still continue to see a very positive development there, which was positive. And then finally, as I mentioned, I mean, we had the effect of increase of volume, our EBITDA margin moving from a 6.5 in the first quarter to 7 in the second quarter. So all in all, I will say it was good news on the customer side with good development, their acquisition of new contract. It was also good development in the profitability of the company. And earning per share was at 0.16 in the quarter. As you can see on the revenue and EBITDA trend, you can see that the revenue is getting back to a higher level. It was already significantly higher than the first quarter, and following the projection we have for 2025. So in that perspective, the good surprise of the quarter was that it was not a surprise, but executed according to plan. And the same goes for EBITDA that was also increasing from previous quarter a solid 14.2 million that give us a positive trajectory looking at the month forward. If now we look at the different regions, America has reached 11.8 million euros, which was a record high number, 7.2% profitability, which was also in the range of what we expect from our different operations. We have in America a strong customer demand, especially for electronic manufacturing. That's the reason why we have actually both announced the investment in a second line, but also decided for the acquisition of HATCO. So we have a very positive view on the American market in our sector, and it was again shown in the performance of the region during the quarter. The EPAC region was also developing in a good way, a bit north of 59 million euros in revenue during the quarter, with an improving profitability and there we appreciate the trend. We are now back to a level of 8.6% EBITDA, which is trending up the last three quarters, as you can see here. And it was driven by a very strong performance and strong demand on the Chinese market, which resulted in strong performance of our Chinese operation. but also a very solid performance in Australia, where we also have very positive outlook with the new acquired customer that I mentioned a little bit earlier today. Then, we have a high level of ambition for our Malaysian operation, and I think that now that we have completed the implementation of the investment, we can look forward at that facility also in a positive way. So very, very, very happy with what is going on in the APAC region and very proud about the work that has been achieved there. Looking at Central Europe, as I mentioned in the previous report, Central Europe has a very big impact from the energy and clean tech segment. And the energy and clean tech segment in the quarter was still pretty flattish in a way, and here the revenue was landed at 67 million, with a profitability that was well defended by the team at 7.3%. The positive element is that we can see that this market, and mainly the project market here, is showing a positive sign for the second part of the year. So that was the positive news or positive confirmation in the quarter, which was something that we were expecting. So I would say a good development and a solid performance based on the current volume and an outlook that is more positive for Central Europe region. And then Northern Europe was also in the range of 65 million euros with 5.7%. Here, it's a bit of a mixed bag. I mean, we had the businesses that are a bit challenged when in the same times on revenue, defense is driving revenue up, which has a positive effect on the global. And therefore, I will say the overall profitability was slightly below the expectation we have for regions, but still improving from the previous period. We also know that in a way our Northern Europe region has also clean tech energy and clean tech customer portfolio in it that will drive forward performance. When we look at the customer split, I mean, the quarter was very active for our biggest customer. Our biggest customer weighted 14% in the quarter. And our first 10 customers were in the range of 58% for the second quarter. uh of the year which shows in a way the strong partnership we have developed with those key customers and the positive development and implementation in their npi so that that was very much in line with what we were expecting if we look at industrial industrial at the positive rebound in the quarter both versus previous quarter but also versus previous last year when we had an increase of revenue of almost 9%. We had also a very active number of loan deals that totalized to about 25 million euros. A few drivers in that, obviously aerospace and defense there is helping and driving growth significantly. And also new contracts are coming in. I mean, we had several contracts that are not always super sizable, but they are impacting the overall at the end. So here you have two different customers that bought a bit more than a million during the quarter in new contracts for aerospace and defense. energy and clean tech was still a bit as i mentioned before a bit sluggish slightly negative minus 4.4 versus last year in the quarter with 64 million euros the warm deals was 12.1 which was still driven by a few good customers we are driving groceries and that was positive element As I mentioned before, we have positive outlook on that segment for the second part of the year. I mean, it has been suffering last year and stabilizing, but we have seen sign of return. Customer that disappeared last year because of this talking are now coming back. And what we expect in the second quarter is that project business will be, in the second part of the year, is that the project business will be driving the return of that segment. So even if this quarter was still A bit sluggish, I think that the outlook for the end of the year is better. And then medtech and life science continue to grow. It was 4.4% growth against the same quarter last year for that customer group and continue to show a positive traction for many of our customers. We have also a very strong pipeline on that segment with a very important number of customers. a lot of activities also to improve our operation and factories to serve those customers better. So we continue our journey there and it's a very positive development, I believe, mainly looking at the pipeline and the opportunities we have forward. With that, I will hand over to Kai for the financials.

Thank you and good morning. First, we'll look at the EBITDA development April 2, comparing to the previous year, same time. On the right side, you can see the EBITDA Q2, 14.2 million. and 7% and on the left side is 14.3 million last year and 7.3%. There is decline almost flat in value-wise and a small decline in terms of margin. Revenue was ending 202 million There was an increase of 6.7 million in the revenue that was including around 9 million of revenue of SRX. And organically, the growth was slightly negative, 1% down. Overall 3.4% increase in the revenue, which is exactly the same share as we have a growth in the expenses. So the expenses are well under control and also including the SRX expenses. Depreciations increased by 600,000, half of that is coming from the from SRX investment and then the other half is our investments for the future growth, what we are preparing for. Same view for the first half on the right side. This year, 26.8 million of EBITDA and 6.8 percent. And on the left side, 27.4 previous year, same time and 6.9 percent. margin buys flat almost and there is 600 000 drop in the value resulting from the Q1 turnover total 395 million euro flat year on year There is a slight increase in the production volume because we were building a bit inventory of one million finished goods and expenses growing 600,000 so in totally in line a bit less than what the volume are expecting. Same with the depreciation that 1.3 million increase in the depreciation which half is for the future growth and half coming from SRX acquisition. Strong financial position balance sheet in Good shape total value 535 million euro. Inventories were declining 26 million year on year. Goodwill is higher 20 million resulting SRX acquisition. Cash 12 million more in the pocket. Fixed asset resulting SRX acquisition higher by nearly 10 million, 8 million. And then interest bearing debt slightly lower rate of some portion of the loans. And then equity per share was 4.4 euro. Cash flow continued very positive, 23 million in the quarter and 34 million in the first half. Inventory improvement continued a bit lower pace than used to do the last one and a half year. 5 million decline in the inventory's cash flow impact, however good result, and then free cash flow, 17.8 million in the quarter, which is then actually higher than dividends we paid, 15 million, and then 27 million in the first half in total. And looking at the past cash flow from the operations generated in the last two and a half years, it's amounting totally nearly 200 million or 190 million in total. Net debt, good development, continue 14.3 million, if considering the leasing liabilities, we are negative in the net debt. It's a little bit higher than was in Q3 last year after the acquisition of, before the acquisition of SRX. So we are almost like neutralized that impact. Cash and debts were already mentioned, but then we have made two new financing agreements during the first half of the year, totaling 100 million available liquidity and Now we are ending up in total value of nearly 250 million, including the previous available credit limits, plus then the new agreements of 100 million and the cash in hand, 50 million. Net debt 0.19 in comparing to EBITDA. And finally, the key figures. Equity ratio is more or less the same as last year. Equity is higher. On the other hand, then also the total balance sheet value is higher, which is then lowering the percent slightly. Net gearing with the lower net debt and higher equity is very low. And return on equity with higher equity value, we are declining with the return on equity and this could be expected to improve over time with organic and inorganic growth. Earnings per share more or less at the level of last year. Thank you. I will hand over back to Kristoff and... Oh, sorry, I have still... Maybe not the... Probably one of the most important pages that has dividend growth already 12 years in a row, 24 cents paid for 2024. And... It's six times higher than what we did in 2012, 12 years ago. So nice development there. One third of the net profit is a target in average to pay out as a dividend. And now we'll transfer it to Christoph.

Thank you, Craig. So before going to your questions, I mean, when it comes to Outlook, we remain with the same guidance that we have given previously. The reason for that is, as I said, Business has unfolded very much the way we were seeing it, and I think the signs we have remain in line with our previous estimate of the business. From our perspective, I mean, we will have obviously focus on closing the two M&A that we have signed the last couple of weeks, obviously important in the agenda, and also in parallel continue to drive organic growth. I mean, we have a quite significant amount of activities, both in building capabilities, but also in customer acquisition to return to higher level of growth. So that's something that is focused going forward. And then in the same time, we need to keep control of our costs and keep control of our inventory, where we believe there is still room for improvement. So we'll continue that journey. We have been successful in it the last 18 months, but we believe that there is still room for improvement on inventory control. With that, I think that maybe to mention we will have an investor and media visit 16 and 17 of September in Sierras. It will be the opportunity to meet that site. That is an important site for Scanfield. But with that, I think we can move to Q&A.

Yes. So you can see in your screen a chat box window, so please type in your questions in there and I will read those questions in here and post those to Christopher Kai. I know that many people are still on vacation, but let's wait for a while. There are a lot of questions. Excluding defense, how is the remaining segments in industrial developing?

Yeah. On the industrial, I mean, obviously, the industrial segment, the way we report it today, includes defense. And I will say that, obviously, defense is the driver of the growth. That's definite. But we also see a few business that are coming back to a good level. I mean, if you look at our number, you can see, for example, that Asia and America in today's number are developing very positively. And they are developing very positively, mainly driven by industrial segments. So I will say it's not only defense that was driving the good performance, it's also all the customers that were returning to more positive growth.

Thank you. Jakob continues about volumes. Taking price into consideration, what was the underlying organic volume development in the quarter?

Yeah, I think that's something we should get back to maybe, to Jakob.

Okay, yep. Then within energy and clean tech, how are the different end markets developing some better or worse than others in energy and clean tech? I think that we have been mentioning project business already earlier.

I think that energy and clean tech, it's an interesting dynamic because we have actually won a lot of business in that segment over the last 18 months that is starting to ramp up. Then in the same time, It has been a destocking effect. So we can see two elements. We can see that the more regular business is starting to move up forward slightly. And then on the forecast and the outlook, we have a very positive potential development of the project business to come.

Okay, thank you. Now Mr. Jyrki Hilli. Only business orders were in 2024 187.5 million. Can you estimate what was the amount of turnover from these orders during the first half of the year this far? Estimates asked.

Can you take it once more maybe?

All new business orders were 187.5 million in 2024 and Jyrki is asking that how much of those 187.5 million came in in the first half of this year.

I would say it's still quite minimal. I would say today you could probably count on 20-25% of it as materialized in revenue. But the biggest part of it is still to come forward. What you should consider is that the ramp-up time is 6-18 months to start manufacturing of a wind contract. And therefore, you will realize that very little of what was worn in Q4 is already in manufacturing. And then after that, you need sometimes to get to full speed in production, but also in the customer placing the order. So I would say it's still a minimal part of it that is getting consumed yet.

Questions continue around the organic growth and how do we maintain it and how do we see it. Organic growth has been negative, this comes from Passive Eisen and from Monodea, for many quarters. Is the organic growth going to be a positive figure already in Q3 2025?

Yeah, I think that we have been facing a trend in the industry that has been destocking and I would say it's no surprise to any of you since you have been following us. Then we believe like Q3 and Q4 will mark return to positive organic growth, absolutely.

Yes, thank you. Jakob continues about MB. If MB is to meet the requirements for the earn-out payment, will this consideration be paid only in 2027?

Yeah, maybe I can. Yeah, it will be paid in 26 and then part of that will be then be realized paid in 27.

Thank you. Basi from Nordea. Has there been any direct or indirect effect for Scanfil in Q2 from trade war?

I mean, there is impact in the sense that we have a lot of codes that are requested from our U.S. operations. So I would say the activity of customers that are considering locating their business in the U.S. is actually quite significant. Then, as you know, a big chunk of our business is today produced. where it's getting consumed. So it has not created a big movement in our manufacturing. It's more creating opportunities for us to ramp up production in America.

Thank you. Continuing about the global trade, Antti from Inderes. Now that customers have had more time to adapt to the uncertainty related to global trade rules, have you seen any changes during the Q2 in the six to nine months demand forecast they have provided to you or in their behavior in general?

Now, first of all, I would say that probably for many customers, there is still uncertainty on what will happen and how this will unfold at the end of the day. But we have not seen any dramatic change. In reality, I was mentioning that Q1, and it's also true for Q2, In a way, this year is a more stable year than previous year was, even if it can look like it's a more turbulent time. So I think that, as I also mentioned before, things have happened pretty much the way we thought they will happen, and therefore pretty much the way the customer told us it will happen so far.

Okay, thank you. Antti continues about the SRX actually. Could you comment on the performance of the former SRX units during the first nine months at Scanfil?

Can you elaborate a bit? I think that it has been a very interesting journey first because it was long time since Scanfil made an acquisition. and also because it offers us capability. And I think it has been pleasing in many ways. First, in the quality of the collaboration between the team, which has been good, but also in the dynamic of the business. I mean, I was mentioning before, if I look at Australia, We have had an incremental positive development from Australian operation, which was this quarter better than the previous one and better than the one before. Also, new customer acquisition. I mentioned one of them today, which is also a very good sign. So we were very pleased with that. So that was a very positive element. Then, when it comes to Malaysia, it's a little bit longer-term journey, but we also validated the first step. I mean, the first step was to, in a way, modernize the operation and the factory. And, I mean, I was quite pleased – we'll be there in a couple of weeks – but quite pleased to hear our regional VP, Christian, that was telling me, now we have a small suture in Malaysia, and I'm looking forward to that. So, in a way, it's happening the way we were hoping it to happen, which is positive.

Okay, thank you. Just a second, check if there are other questions coming in. Antti still have a question regarding the earn out related to SRX and the probability and at what level we anticipate that we will come up with. Are you heading to pay earn out closer to lower or upper end of the potential range?

Yeah, I would say we always hope that the best case scenario is the one that materialized. Then, I mean, business can give different outcome. I mean, we are only at half of the year, so there is still many things to happen. As I said, it has functioned quite well, and then we have a positive outlook to the rest of the year. Then still to be seen what it will mean in terms of earn out. Small changes can have big impact for the seller.

Yeah, thank you. All right. Let's wait for a bit. Still, there are further questions coming in. It seems that no questions. So, Kristoff, to the closing remarks. Thank you.

Thank you, Pasi. Thanks for listening. A few takeaways from this quarter. As I said, turnover is gaining speed. And we were now growing 3.4% versus last year. We see a business pipeline remaining very strong. And it allows us to deliver a level of EBITDA in a good level with 7%. For the future, I mean, we have, as I mentioned before, activities to continue to build our growth. The first are related to the acquisition, where we need to close our acquisition. And in the same time, we have loan deals that we will now have to continue to work and implement. So I will say that that was the positive part in the quarter, was really we managed to combine in a good way our strategic activities organically and our strategic activities around M&A, which is what we said we're going to do 18 months ago. So from that perspective, things are in line and supported by a strong balance sheet where we continue to make improvement. I mean, we make significant improvement in our inventory reduction, and I believe that it's something that will move forward and will continue to improve during the whole 2025. With that, I thank you for listening to us today and wish you a good summer for those some of you going to vacation.