CEO’s review

Scanfil Group’s Interim Report for 1 January–30 September 2021

Robust customer demand supported record-high turnover growth. Healthy profitability despite challenges in material availability.

Petteri Jokitalo, CEO:

“Driven by the strong customer demand, the year 2021 became a record year of growth and turnover. This all despite the pandemic and the challenges of material availability. Turnover increased by 16.9% to EUR 696 million. Nearly reaching the target of EUR 700 million set for 2023 – two years ahead of schedule!

The turnover for the last quarter of the year was record high EUR 191.7 million which increased by 24.5% compared to the last year. Growth was propelled by strong customer demand and in addition increase in material costs.

Adjusted operating profit in 2021 was EUR 40.3 million, 5.8% of turnover and the fourth quarter was at EUR 10.2 million, 5.3% of turnover falling short of the long-term target level of 7%.

The biggest negative effects on operating profit for the period were caused by material availability challenges, abnormal high prices paid for spot market purchases, and the relocation of production of the Hamburg factory. The challenging material situation hampered us, especially in the second half of the year. The product transfer from Hamburg was completed by the end of the third quarter, and operations at the Hamburg factory ended during the fourth quarter.

Net cash flow from operating activities in 2021 was EUR 12.5 million negative, mainly due to a strong increase in inventories. The increase in inventories was affected by rising customer demand as well as a slowdown in inventory turnover caused by challenging material availability situation, and higher material costs. Inventory management will continue to be the focus area in 2022.

Scanfil’s balance sheet is still strong, with an equity ratio of 45.3% and a gearing of 28.9%, enabling the necessary investments and the implementation of a dividend policy. The Board of Directors proposes a dividend of EUR 0.19 per share for 2021, an increase of 11.8% compared to a year ago. If implemented, Scanfil’s dividend will increase for the ninth year in a row.

The demand outlook for Scanfil’s customers is strong for 2022, and our focus is very clear:  we continue to respond to our customer demand, organic growth and turning our profitability to the target we have set. The short-term challenges and risks are mainly related to the availability of materials, especially semiconductors, which we believe will continue to be challenging at least in the first half of the year.

We expect our turnover continues to grow, being EUR 710–760 million this year, and operating profit to increase to EUR 43–48 million euros.

We aim for organic annual growth of 5–7% and an operating profit level of 7% in the longer term. To reach our growth target, we have acquired more production space at our Atlanta and Wutha factories, and started planning expansion options at our Suzhou factory. In the long run, we see North America and Asian markets as interesting expansion areas.

The year 2021 was strongly two-folded: strong customer demand combined with material availability challenges, the pandemic, and the relocation of production of Hamburg was very demanding on our personnel. I want to thank our dedicated employees for their perseverance and good work, as well as the support and trust of our customers.”