Scanfil Oyj

OMXH:SCANFL

Good morning. Welcome to Scanfil's Q1 2025 Interim Report Presentation. My name is Pasi Hiedanpää. I am the Director of Investor Relations and Communications at Scanfil. Together here with me is our CEO, Mr. Christophe Sut; and CFO, Kai Valo. A couple of practicalities. There is a chat box. You can actually ask questions via chat. So we will be taking questions only via chat and those will be addressed at the end of the presentation.



Now handing over to Christophe.

Thank you, Pasi, and welcome to this Q1 '25. Exciting to share how the year has started. And starting with a few key events to give you a little bit of a glimpse of how the quarter happened. We have had a lot of happenings in the quarter.



I mean the first one we are really proud about is this first agreement we had with Laerdal Medical that will start gradually manufacturing in our Malaysian facility that we acquired last year. And that's a very exciting development to see how quickly the new strategic direction we took acquiring these companies already creating interest. So definitely that is something we are looking forward to and that was closed during the quarter.



The second element is on the overall company. We made a few structural changes that we had announced during the end of last year that took place during the quarter. We have now 4 regions that are fully operational in place and where management is now focusing on developing the business in these 4 areas. So very pleased with the speed we have been able to implement it and to get it up and running.



We have also started to give you a little bit more granularity of our business. Obviously, you now have and we will comment today on the number of those regions, but we also have added a key indicator with EBITDA that was not the data that was available in the past, which we believe gives the real operational efficiency of the company. So from now on, you will get access to more data and more information. And all of it drove, as I said, to a higher level of activity for the group during the quarter and also translated in a significant growth, both in our APAC region and Americas region, as you will see later.



Continuing on the journey we have initiated with our investment and the SRX acquisition in fourth quarter. We have moved full speed with the plan we were planning to implement. It has, as I said before, translated with the first deal bought into our Malaysian operation. We have also moved forward with the investment of a full new line in this Malaysian operation.



And it's as we speak under implementation. You can see on the picture, 2 happy member of our team. I mean, Paul that is previous CEO of SRX still with us and Christina running business development after the new ASD floor was made. And as we speak, we are installing new machinery that will be there to serve our customers and increase our capacity in Malaysia. So moving forward as planned and as expected.



And as we have been moving with that, I think it has been a very interesting journey for us because it helped us to fine-tune our capabilities in doing acquisition, but also in doing integration. So I think that this quarter has been good confirming our way of working towards our new companies, but also an opportunity for us to continue to build pipeline. I mean we have now built resource. We have now built a situation where we keep looking for potential acquisition. So a few key events in the quarter that, in a way, shows that things happen the way we were expecting them to happen.



I would like to continue with giving you some view on our financials. The first quarter closed at EUR 92.6 million, which was a negative growth of 3.2%. When we neutralize from the SRX acquisition, we have an organic growth year-on-year that is negative 7%. EBITA was at a level of 6.5% with EUR 1.6 million compared to 6.6% last year, which impact -- the EBIT was up EUR 11.9 million, 6.2% versus 6.4% last year.



As we had expressed before, this first quarter was very key for Scanfil because it was a quarter where we were working with quite a significant amount of NPI implementation. And I am very happy to see that it went at least as good as we were expecting, if not better. I mean we had a trajectory in the quarter that was positive. We implemented new products that gained speed as we went into the quarter. So I would say, a positive development from that perspective and an operational journey that was in line with what we were expecting. And that is building momentum for the remaining part of the year.



What was also nice to see in the quarter is the -- and I will get back to it a bit later, is the performance of our APAC and American region where we had significant growth. But also we will see -- as we have seen in previous quarter, and you will see that later as well, the Medtech customer group gaining momentum when Energy & Cleantech but also industrial has bottomed out and is at least starting to build up from that position. So many things during that quarter happened the way we were expecting them to happen.



Looking at the revenue and the profit level that I commented a bit before, I mean, EUR 192.6 million during the quarter was, as we said, slightly below last year performance and EUR 12.6 million for our EBITA was in the range of 6.5%, which was in line with our expectation, taking into consideration the number of transformation we were driving and in our factory, both the investment and also the NPI implementation.



Now looking at our regions. We'll start with Americas. Americas is our smallest region. It weighs about 5% of our overall revenue. And as you remember, we decided to have an investment 2 years ago and to start to manufacture electronics in the Americas region. And as you can see, we have had a gradual development over the last fourth quarter that have been very positive in terms of revenue. We have seen very strong traction of that investment, new projects being implemented in the quarter. And despite the hard work that it is to implement a new project, revenue keep going up and keep moving in the right direction.



Profit level still in a very positive level compared to the overall Scanfil with 7.3%. So a positive development from our Americas region. And there, we continue to build momentum and work on NPI, but also work on new quotation. I think that we will continue to invest in those facilities. And we have -- after the development we have seen in the previous fourth quarter and the outlook, we have a continuous need for investment and for increasing capacity in the Americas, which we will follow-up on during the next couple of weeks and months. So positive development there.



Looking now at our APAC region. APAC region is getting quite sizable for us nowadays with 27% of our overall revenue. We reached about EUR 52 million during the quarter with a profit level of 7%, which is in line with our long-term target. It was a very pleasing development in the APAC region, driven by 2 elements.



I mean, our Q2 operation experienced a good demand. It was a very tough quarter on them because it was a lot of NPI to come live during the quarter. And we clearly saw the trend from January with a lot of changes to March with those changing being fully implementing and delivering and bringing a significant amount of volume in the factory. So a very pleasing development in Q2.



And in the same time, we have worked very hard with Malaysia, and I shared with you 2 very positive news. One was this first order that is a transfer of manufacturing to Malaysia operation, both from some of our Chinese operations, but mainly won from competitors for the big part of that deal, which is very pleasing. And that will bring added value to our Malaysian facilities. But we also worked hard to modernize those facility and to come with additional capabilities there. And that will materialize during the second part of the year, starting already the coming quarter to improve the situation quite significantly.



On the profit level, I will say it was a very decent quarter if we take into consideration the change with a significant amount of new products that were implemented in the quarter. So when we look at the impact on the overall quarter, they defended the margin very nicely, taking into consideration the changes.



Looking now at Central Europe. Central Europe revenue, you could see was in the range of EUR 69 million. And what we can see there is, in a way, the Central Europe revenue has stabilized and bottom up. What is good to know is there is a strong portfolio of Energy & Cleantech customer in our Central European operations, which means that in reality, the revenue of that region is highly impacted by that customer group. And we can see that you will see later that customer group has also come to a situation where we believe it has now bottomed up.



With that situation, we managed to keep good level of profitability with 7.5%, which is reasonably good and strong. We also had quite a few good news during the quarter where we saw, I would say, our outlook from those customers in Energy Cleantech and mainly the one having a project demand becoming more favorable. So we can see that, I will say, our outlook and what we base it for has been materializing by both the orders and the call on for those projects. So that was a positive development.



We also have a very positive development with SRX, where we have actually done significant improvement in improving the layout of the factory, streamlining our operation there. And I think that's something that is positive for the next step of growth because it means that we are now in a situation to deliver both better quality and better efficiency in that operation. So good news was it bottomed out. outlook became more solid for the future for that region and then maintaining a good development of profitability.



Then finally, Northern Europe. Northern Europe is a sizable region for us, 30% of our overall revenue. It had a quarter at EUR 60 million with a profit level of 5%. Our Swedish operation had a double impact, positive and negative. On one hand, the negative effect of some project-driven demand that was not there in that quarter, but that we believe will come back already the coming quarter, the one we are starting to leave now.



In the same time, we have a significant part of those operations that is impacted by the defense business, and that one was strong in the quarter and has a very strong outlook. So that's something that is going to be positive for the Northern region.



What was also positive if we compare this quarter to the first quarter of last year, usually, first quarter is a bit weaker in profit in that region, but we managed to be at least 1 percentage point above last year, which was from that perspective, strong. So I will say a quarter that was probably the most challenging of our 4 regions, but still with an outlook that gives confidence in the overall numbers that we foresee for the year.



If we look at the development of our customers, our top 10 customers, we have a stable level with our biggest customers of 13%. We can see that the top 10 increased during the quarter, which is mainly driven by a stabilizing market situation for those customers. I mean we saw last year a lot of variation as the year was going and the destocking movement. And that is something that has ended and that is now building a base for development and growth.



When we look at the development of our customer group, the revenue for our Industrial segment was negative 3.2%. We see here that, as I said before, things have been flattening out, which is positive. We won EUR 15.4 million of new contracts. So it was a reasonable level of activity in the quarter for that customer group.



Looking at Energy & Cleantech, also a stabilizing level. I mean, we were negative 11% against first quarter last year. But if you look at the last 4 quarters, we are in the range of EUR 60 million to EUR 70 million, which was also the case for this quarter, which means that we have now also seen a stabilization of the underlying demand and destocking movement has faded away. Now all the customers are starting to have regular amount of order, which is positive.



The second element that is positive is some of the wins that we had in the quarter in terms of business in that list and the biggest one, EUR 13 million are deals that are quite short term, so that we can expect to see deliver this year, which gives us confidence in the outlook we have presented, and that's something that we were very pleased to see unfolding in the quarter.



What we also can see is that the number of won deals was at a record high for Energy & Cleantech in the quarter, which is positive for the future and show that the work we have done during the time that are difficult, both in delivering quality to existing customers, but also going after new project is something that is paying off.



Finally, Medtech & Life Science for the third quarter in a row has been showing growth. It was 13% above last year this quarter, quite strong development. We have already seen the development of that market coming back to a growth level, and it was confirmed during the quarter. And that we believe will continue as the year continue. We also had a reasonable amount of wins with EUR 6.4 million of new wins of new projects, which built positive outlook on the future.



As of today, this is the segment that has the biggest pipeline of projects we are looking for. So it's an extremely dynamic segment for Scanfil, and we have built significant capabilities both in Europe, but also in Asia for this type of business. So a positive development that that translated into the numbers, but also in the number of activities during the quarter.



With that, I will hand over to Kai for the financials.

Okay. Thank you, and good morning. Let's start from the EBITA comparison. On the left side, you can see the EBITA Q1 last year and on the right side, the same in the first quarter of this year. And what happened in between, like I already said, the turnover declined by EUR 6.3 million, 3.2%. In the same time, we were able to reduce the cost by 3.1%, almost even out the revenue impact. And basically only depreciation were increasing, resulting of the investments and acquisition made in the last year.



Going to the balance sheet. Comparison to the previous year same time, inventories, EUR 170 million, there is a EUR 30 million decrease in the inventories in 1 year. In the same time then cash improved even more than EUR 35 million more cash. Interest-bearing debt is practically same as it was last year, some change in the leasing liabilities. Otherwise, no big change. And then equity, EUR 300 million, which then practically, it means then the asset minus the liabilities and it's EUR 4.62 per each share.



Cash flow continued strong. Q1 typically is a bit lower, same in the last year, EUR 11 million in the quarter and then slightly better than a year ago. When looking at the rolling 12 months, we have generated EUR 93 million of cash. And even also the previous 12 months is EUR 80 million of positive cash. That's a bit more than EUR 170 million in 2 years, out of which we have spent for the investments and acquisition about EUR 70 million, which means then EUR 100 million of free cash flow in 2 years, then paying the dividends out of that EUR 30 million roughly.



Net debt, EUR 16 million in Q1, start to be nearly the same level than it was before SRX acquisition in Q3. It was slightly higher in the Q4, but now getting back to the same level. Liquidity, we have made a debt facility agreement in the quarter, EUR 50 million and strengthened our liquidity position a bit more. So now we are on the level of EUR 200 million available liquidity, out of which EUR 60 million is in cash. Net debt to EBITDA is EUR 0.35, bit improvement from the last year.



Key figures. Practically, equity ratio is nearly the same as it was in the last year same time. Gearing is approaching to 0. This is the net debt in comparison to the total equity. Earnings per share declined EUR 0.02, EUR 0.13 against EUR 0.15 and return on equity is a bit lower, 11% at the moment with a higher equity level and then a bit declining net profit.



And the Board of Directors is proposing the dividend of EUR 0.24, which will be decided tomorrow perhaps. And that is 41% of the net profit of the -- or EPS of last year. This is already 12 years increasing dividend since 2012, and it has been like -- become 6x higher in this period and doubled in the last 6 years.



Okay. I will hand over back to Christophe to talk about the outlook.

Thanks, Kai. So as we had mentioned earlier in the year, I mean, we reiterate our guidance to reach a revenue between EUR 780 million and EUR 920 million. I actually believe that both the operational performance of the quarter, but also the sign we got both from win orders and from outlook from our customers is allowing us to be strong on those guidance.



On EBITDA, we have a guidance of EUR 58 million to EUR 68 million, which is also in line with what we communicated earlier in terms of value. As we said, I think the first quarter was a ramp-up quarter. It was nice to see that it gained speed as we had expected, maybe even a little bit faster than we had expected. And in the same time, we have continue to build pipeline for our Energy & Cleantech, which you saw pay off with a significant amount of new deal and also with our Medtech & Life Science business, which has a very strong momentum right now.



We have continued to focus on cost and inventory even if it's in a way challenging when you need to pull in resources to create the future revenue. But I think that in that perspective, all our operations did a great job to manage to keep the right balance here.



And we have continued also to work on our growth project, the M&A pipeline and filling it and looking at potential future acquisition, but also building accountability across the organization and making sure that with this regional organization now we get decision taken closer to the business and faster, which will allow us to continue to scale the company. So in a way, focus area were unchanged and -- but we are having consistent delivery during the quarter.



Shall we move to Q&A?

Yes, please. Thank you. Now heading to the Q&A session. Thank you, Christophe. Thank you, Kai. First question comes from Pasi Väisänen from Nordea.



Have you seen order cancellations due to trade war and global downturn?

No. As I mentioned, I think the quarter has been moving in a very positive way from an order perspective. So we have seen no order cancellation because of trade war. I mean, as you know, Pasi, I mean, most of our business are actually built locally for local business, and that trend is accelerating. It is actually driving the growth you have seen on our Americas region. So I will say, first, no impact from trade war on order cancellation. On the opposite, we have seen momentum building up in terms of order during the quarter.

Okay. A question from Jakob from Carnegie.



Is all of Americas sales to the U.S. market?

Yes. I will say, obviously, some can move a little bit outside of the U.S. border, but the vast majority of what we produce in U.S. are to be delivered on the U.S. market. And that's also something that is driving the growth of our U.S. operation, the need to get more American manufacturing.

Okay. Thank you. Jakob continues here.



How much focus will be on ramp-ups in Q2? Is it possible to give an indication as compared to Q1?

I would say that on Q2, we -- and it's a bit also in my comment on how Q1 unfolded. I think Q1 had a trend of increasing revenue, increasing profitability. So that trend will continue during the Q2. So what we can see is that Q2, we will have less impact from, I would say, from the ramp-up of projects. We will continue to work on the ramp-up of project. But the one we have worked on in Q1 will start to pay off, and they started actually to pay off towards the last end of the Q1. So Q2 will have much less impact of the project implementation and will show the trend to build up during the year.

Okay. Thank you. Next question is regarding the -- how did the demand develop over the months in Q1? It's from Jakob as well.

I think 2 things I would say. The first thing is, as I mentioned, as we were doing NPI, that gained volume as we were moving forward into the quarter. So clearly, the demand increased as we were going in Q1. Then there is a second element that was very positive to us and pleasing. As I mentioned, we had the Energy Cleantech project-based business that came and got confirmed during Q1, which will have a positive impact on the long term of the year. So both in our deliveries, but also in the message of our customers, it was a positive development during Q1.

Okay. Thank you. Then a question from Jurki.



Scanfil's outlook is positive for defense customers. In the last results conference call, you mentioned the possibility to do acquisitions in defense business. Can you elaborate how sizable business defense could be for Scanfil in the future?

I think it's two-folded questions. I mean one side is, obviously, as I mentioned, we have seen a positive development of our customer on their defense deliveries and we have a couple of customers today that are in that sector. So that we believe will continue for the remaining part of the year. We believe it will gain speed.



Then when we look at M&A, I mean, our focus on M&A has not changed. We look at complementing region and complementing customer portfolio. But that is a bit difficult to speculate on. I mean, it's many things we work on which one will go to the end. You will have to wait a little bit, and we will have as well to know where it lands.

Thank you, Christophe. Next question comes from Sindre at Arctic. It's also about the M&A and the development of SRX.



It looks like revenues from SRX declined year-on-year. When is it expected to turn to growth? What will be the realistic revenue capacity for SRX following investments?

Yes. I think that Q1 was a transformational quarter for SRX. It was slightly decline, but at the same time, it was a lot of work to rearrange the factory and prepare for the investment. And that will, in a way, continue because the line will be probably fully operational just after the summer. But we are already getting in a shape where volume is ramping up. So I think that the volume will build up as we go through the year. And that should bring us to a different level of revenue.



Then I think that the long-term revenue of the facility we have in Malaysia and of SRX is also Australia is sizable and can definitely come to something that is, I would say, in line with what we have, for example, in Atlanta. So I think that, that facility will have the capacity to grow significantly.

Okay. Thank you. Quite many questions from Antti at Inderes.



First one, do you expect Scanfil to reach approximately normal operational efficiency at its factories in Q2?

I mean we strongly believe in our long-term guidance. So we believe that we will be in the range that we have indicated as a forecast for '25 and that it will build up as the year comes. So you can -- you should see the year as continuous improvement from that perspective.

Thank you. Continuing Antti's questions.



How have your global key customers responded to the tariffs at this stage?

Yes. I think that our global customers are in a way, quite calm. And I think it's probably related to the fact that we have had for many years within Scanfil and worked with them on localizing manufacturing, which means that for many of our customers, we produce quite close to the way the place where the products are consumed.



So we have constant discussion with them on what to do and how to move forward. But the overall answer has been quite calm and quite good discussion, but no major revolution in the thinking. I mean the one that had started to move some manufacturing to U.S., it was done many years ago. It's just happening, and they are happy with that. So I think that's quite solid.



We gained a couple of deals because of that from customers we did not have, but that are less sizable. But from our big customer, I think that's a good collaboration. We monitor the situation. And we believe that we have today a good footprint to help them to work on it, and it has been worked on for many years. So quite good.

Okay. Thank you. The geopolitical point of view, a question regarding the M&A.



Do you see the thing geopolitical trade situation affecting the demand or supply of targets in the M&A market?

I mean I think it's a bit early to say at this point. Obviously, some targets might have more exposure to cross-regional trade and that we would like a little bit less. We will prefer to acquire companies that, in a way, complement our puzzle and have a bit of the same philosophy. So I will say we will try to stay away of company that will have a totally different profile and being exposed to that. Also because the way we have worked is mainly trying to offer localization of manufacturing for quite many years already, and that's the best way for us to complement it.

Okay. Thank you. So please use the chat box window if you like to ask questions. I will wait for a couple of seconds still so before handing back to Christophe for the closing remarks. No further questions.



So handing over to Christophe.

Thank you, Pasi. So let me try to close that session. Going back on a few takeaway of Q1 A few major changes. We have started with this regional segment reporting, but also it's the way we operate the company. And in the same time, started to give you more visibility on how our business is built and develop, giving you also new key indicator with EBITDA.



We also can see that this quarter was, in a way, a transition quarter, and we were very pleased with the way it unfolded, both by things happening the way we had planned that will happen, but also by gaining momentum as the quarter was going. And we managed also to have a comparable EBITDA margin that remained very stable despite all those activities. So all in all, I think it was a very positive quarter in a turbulent environment, delivering stability when being transformational and preparing for future growth.



It has translated in a couple of actions. We have announced a significant investment in a new line in Malaysia that has already, in a way, has a positive effect since we won the first deal, and I can say that probably it was also something that helped to convince this customer to move his manufacturing to Malaysia.



We had a significant also amount of new deals. You saw that both Energy Cleantech was very, very positive in the number of deals that we managed to close, but also Medtech & Life Science was positive, not only on the number of deals, but also in the revenue side. So which shows the strong development on that segment.



And then finally, I mean, as Kai presented, after our first acquisition, we remain in a very strong situation. We have done a lot of work during the last 12 to 18 months to build a very strong balance sheet. We have capability to continue to roll out our strategy, both organically with the investment that will be needed to move forward our growth, both in APAC and in the U.S., which where we have strong momentum, but also inorganically where we have capability to acquire the right target and the company that will complement us. So a quarter that is maybe a non-event, but that is positive because a lot of activities just unfolding the way we were wishing them to happen.



With that, I will thank you for listening in and wish you all a good day.