Scanfil Group’s interim report for January–March 2022: Strong demand continued under demanding circumstances

Scanfil plc     Interim report     22 April 2022 at 8.00 a.m.

Scanfil Group’s interim report for January–March 2022

Strong demand continued under demanding circumstances

January–March

• Turnover totaled EUR 196.6 million (1-3 2021: 163.3), an increase of 20.4%.
• Operating profit was EUR 10.3 (10.0) million, 5.3% (6.1%) of turnover.
• Net profit was EUR 8.0 (7.6) million, an increase of 5.6%
• Earnings per share were EUR 0.12 (0.12)
• EUR 0.19 dividend per share to be paid on 2 May 2022, an increase for 9th consecutive year
  

Future Outlook for 2022

Due to strong customer demand and continuation of spot-market purchases Scanfil revised its outlook on 14 April 2022. The new outlook is as follows:

Scanfil estimates that its turnover for 2022 will be EUR 750–820 million (previous, issued on 22 February 2022: EUR 710–760 million) and its adjusted operating profit will be EUR 43–48 (unchanged) million.

The outlook involves uncertainty especially arising from the availability and price level of semiconductors and the delivery capability of the supply chain. In addition, the war in Ukraine and COVID-19 might create risks and uncertainties.

Key Figures

CEO Petteri Jokitalo:

“The turnover of the first quarter of the year was at the record high level reaching EUR 196.6 million with an increase of 20% compared the year before. In general, customer demand has been strong in all customer segments. To mention some individual customer products with the robust demand parcel locker solutions, elevators, reverse vending machines for collecting drinking containers, lithium battery solutions, and indoor air quality systems.

In addition to strong customer demand, turnover was affected by increased material prices. To secure component availability, we purchased semiconductors at a significantly higher price from the spot market. The excess price we invoiced our customers, but generally without material margin. In the first quarter, we had EUR 17 million in our turnover this above mentioned transitory invoicing in our books. Excluding this revenue, our turnover was EUR 179 million.

The operating profit of EUR 10.3 million was in line with our expectations. Challenges in material availability caused us additional work, an increase in inventories, and decreased the productivity of our resources, especially in our largest electronics factories. We expect operating profit to develop positively towards the end of the year.

Russia’s attack on Ukraine and continuation of the state of war is condemned and a massive catastrophe for the people of Ukraine. War has also generated cost inflation and negatively affected economic growth expectations in Europe. Since the war began, we have replaced our material suppliers in Russia and Ukraine with other suppliers and for now, the war has not had a significant impact on Scanfil’s business.

The COVID-19 epidemic is not over yet. In January-February the number of infections increased in our European factories. In March the situation weakened in China, and authorities have ordered local restrictions and lock-downs. So far, we have been able to keep our factories running without breaks in production.

Cash flow from operations in the first quarter of the year was EUR 13.6 million negative mainly due to the increase in receivables attributable to higher turnover and material inventory. The increase in inventories was affected by rising customer demand, higher material costs, and a slowdown in inventory turnover, which was caused by the challenges in material availability. Inventory management will remain our focus area in 2022.

Scanfil has a strong financial position enabling the execution of all planned investments. At the end of the period equity ratio was at 45.4% and net gearing at 36.9%.

Our customers are indicating a strong demand for 2022. Key business risks are related to materials, especially in the availability of semiconductors, the continuation of the corona pandemic, particularly in China, and the impacts of war in Ukraine.

We changed our outlook because of the higher than expected spot market purchases and transitory customer invoicing. We expect our spot market purchases to be on a high level at least during the second and the third quarter of the year. The use of spot markets and the transitory invoicing caused by it will decrease when the availability of the components improves and the situation normalizes. We estimated our turnover for 2022 to be EUR 750–820 million. Concerning the adjusted operating profit, we reiterate the original outlook of EUR 43–48 million.

I want to thank our committed personnel for the good work done in these demanding circumstances and our customers for the support and trust”.

Turnover

The Group’s turnover for January–March was EUR 196.6 (163.3) million, an increase of 20.4% compared to the previous year. Turnover includes EUR 17.0 million of spot-market purchases and some other costs related to securing customer deliveries. These costs are separately agreed with customers. This revenue is low or no margin to Scanfil.

Turnover by customer segment

Advanced Consumer Applications: Turnover was EUR 55.0 (42.9.) million, an increase of 28.3% compared to January–March in 2021. The key drivers were new customer ramp-ups and good demand in elevator products and hand-over solutions. Separately agreed customer invoicing for the segment was EUR 5.3 million.

Automation & Safety: Turnover was EUR 42.6 (34.5) million, an increase of 23.4%. Demand was good throughout all customers in the segment. Separately agreed customer invoicing for the segment was EUR 2.2 million.

Connectivity: Turnover was EUR 10.8 (8.1) million, an increase of 33.7%. Demand in wireless office and network solutions were good. Separately agreed customer invoicing for the segment was EUR 0.2 million.

Energy & Cleantech: Turnover was EUR 54.6 (40.3) million, an increase of 35.4%. The key drivers behind the strong growth were the good demand for recycling and energy solutions. Separately agreed customer invoicing for the segment was EUR 7.4 million.

Medtech & Life Science: Turnover was EUR 33.7 (29.1) million, an increase of 16.0%. Stable demand continued. Separately agreed customer invoicing for the segment was EUR 1.8 million.

In the first quarter of 2022, the largest customer accounted for about 17% (14%) of turnover and the top ten customers accounted for about 55% (55%) of turnover.

Operating profit

The Group’s operating profit for January–March was EUR 10.3 (10.0) million, 5.3% (6.1%) of turnover. The operating profit was positively affected by the continuation of good customer demand. During the period, exchange rate changes had a slight negative impact on material expenses. In addition, material shortages caused lower productivity, especially in the biggest electronic factories.

The operating margin was negatively impacted by the separately agree customer invoicing with low or no margin.

Net profit and earnings

The net profit for the review period was EUR 8.0 (7.6) million. Earnings per share were EUR 0.12 (0.12). Return on investment was 14.0% (17.5%).

The Group’s effective tax rate was 14.1% (18.2%). Scanfil Poland Sp.z o.o submitted an application for an Advance Pricing Agreement (APA) in 2018. The positive decision has now received by the Polish Ministry of the Finance and EUR 0.4 million deferred tax asset has been booked which lowered the tax rate.

Decisions by the Annual General Meeting and Board of Directors’ Authorization

Scanfil plc's Annual General Meeting was held on April 21, 2022, at the premises of Borenius Attorneys Ltd. Due to the COVID-19 pandemic, shareholders and their proxies had to vote in advance and physical attendance at the Meeting was not possible.

The Meeting authorized the Board of Directors to decide on the acquisition of the company’s own shares and to decide on share issue and granting option rights, and granting shares and issue special rights entitling to shares.

The Board of Directors' proposals to the General Meeting and the minutes of the Annual General Meeting are available on the company website at www.scanfil.com/agm.

Publication of financial releases

This stock exchange release is a summary of the Scanfil Group’s Interim Report for January-March 2022 and includes the most relevant information of the report. The complete report is attached to this release as a pdf file and is also available on the company’s website at www.scanfil.com.

Webcast

In conjunction with releasing our results, we arrange English webcast for analysts, investors and media will be held on the same day at 10:00–11:00 a.m. EET. Results will be presented by CEO Petteri Jokitalo.

You can register and join the webcast at https://scanfil.videosync.fi/q1_2022/. The audience can ask questions via Chat. Questions will be addressed at the end of the conference.

An on-demand version of the webcast and the presentation material will be available on the company's website later on the same day.

Scanfil plc

Additional information:
CEO Petteri Jokitalo
Tel +358 8 4882 111

Scanfil is an international manufacturing partner and system supplier for the electronics industry with over 45 years of experience in demanding manufacturing. Scanfil provides its customers with an extensive array of services, ranging from product design to product manufacturing, material procurement and logistics solutions. Vertically integrated production and a comprehensive supply chain are the foundation of Scanfil’s competitive advantages: speed, flexibility and reliability.

Typical Scanfil products are modules or integrated products for e.g. self-service application, automation systems, wireless connectivity modules, climate control systems, collection and sorting systems, analyzers and environmental measurement solutions. Scanfil services are used by numerous international automation, safety, energy, cleantech and health service providers, as well as companies operating in the field of urbanization. Scanfil’s network of factories consists of nine production units in Europe, Asia and North America.

Not to be published or distributed, directly or indirectly, in any country where its distribution or publication is unlawful. Forward looking statements: certain statements in this stock exchange release may constitute "forward-looking" statements which involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements of Scanfil plc to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. When used in this stock exchange release, such statements use such words as "may," "will," "expect," "anticipate," "project," "believe," "plan" and other similar terminology. New risk factors may arise from time to time and it is not possible for management to predict all of those risk factors or the extent to which any factor or combination of factors may cause actual results, performance and achievements of Scanfil plc to be materially different from those contained in forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. The forward-looking information contained in this stock exchange release is current only as of the date of this stock exchange release. There should not be an expectation that such information will in all circumstances be updated, supplemented or revised, except as provided by the law or obligatory regulations, whether as a result of new information, changing circumstances, future events or otherwise.

Attachment

• Scanfil Q1_2022 interim report