Incap Oyj (ICP1V) Earnings Call Transcript & Summary

Hello and welcome to Incap's Q2 Webcast. Today on studio, we do have the company's CEO, Otto; CFO, Antti. And on Zoom, we do have the U.K.'s Managing Director, Jamie, on the line.

Nice to meet you, Aaro.

Nice to meet you too guys.

Yes, a pleasant pleasure to be here. And good luck now. You'll have quite big shoes, after Joonas, to fill in that sense.

Thank you. So at the end, we do have a Q&A session, so feel free to send questions on the website, but yes, that said, Otto, stage is yours.

Thank you very much. We had some technical difficulties last time when I was sitting in [indiscernible]. We hope that we have a little bit better luck with the PowerPoint today and we all are heard when we are speaking. So starting off. We released our Q1 -- sorry, Q2, today. And it's all-time high. So to look at some of the milestones, I think that is a big milestone. We have never been at that level when it comes to revenue or EBIT. And of course, this is a fantastic achievement from our team. I will emphasize that more here probably today during the presentation but foremost on the Q&A as well. It's we have amazing people working for us. As you perhaps noticed, the profitability is slightly better than it was previous quarter. And I have emphasized that quite a lot before, that it's due to what product mix we are running and a little bit what we are doing in different units. And of course, we have continued to invest in the different facilities. And that, we do also here in the future, of course the biggest investment being India and the third or -- yes, third factory in India, but we have investments going on in all units. And what I'm happy, especially happy, to see is that we are growing in all units. Numbers speak for themselves. It's, I think, an amazing result and a good beginning in the first half that we have of the year. And hopefully, we can continue with the same line. The team. I can't emphasize enough that -- we have our decentralized model and we have amazing people working in all units. And they are the ones bringing this business. And so the credit should go for the individuals down in the different units that are really working hard currently because the business environment is still very much the same. We have component problems with component availability. And we have logistical challenges with lockdowns still due to the pandemic in China and other places. And it's a big effort to achieve this and to be able to keep the customer commitments that we have made. So I want to congratulate, of course, not only ourselves but our team, to this amazing result; and hope that everybody is as pleased as we are, of course, to see these numbers. [ Mr. Pynnonen ], your turn to go for the numbers.

Yes. You can switch to the next slide, please.

Yes, yes. I can [indiscernible].

Thank you, Otto. Yes, let's [ dive ] a little bit closer to second quarter numbers. Like Otto already explained, it was a all-time-high quarter for Incap's in long history of Incap business, 82.2% growth in the top line, booking EUR 61.2 million in revenue side. Then operating EBIT, profit, we recorded EUR 8.6 million, corresponding to 14.1% revenue. And on the profitability side, we had even over 100% growth. And if you please turn to this slide. So here we have a little bit the trend. I think it gives a little bit more perspective on Incap figures. So second quarter, as we can see, the graph starts from the first quarter 2019. And ever since, there has been quite solid growth in the revenue side and now, as you can see clearly, even beating the first quarter of this year, which was again, last time, all-time high. Profitability development. There has been a little bit ups and downs. This is operating profit, so including, for example, acquisition-related PPA elements and items. So there are a few of those impacting the, for example, 2020 profitability, but then last months and last quarters have been on a solid double-digit level as we have used in Incap. And also there was a couple comments still: Second quarter last year, plus also in 2020 second quarter, we suffered a bit on India lockdown effect. So now of course, obviously, we measure this year quarter to a bit weaker quarter in 2021, so that a bit explains the very rapid and growth -- high growth numbers. And here we actually in Incap -- we collected some of the KPIs that we, obviously, in Incap follow on a monthly basis, some of them obviously more often, but this, we actually thought that would be interesting for the viewers and listeners. And these a little bit explain and put in the bigger picture the -- Incap's performance and where we are. And it's a combination of profit and loss KPIs. We start from the top. There's revenue and operating profit. And we collected the data starting 2019, so 6 months official figures from our releases. And we have also from the balance sheet side our very important numbers regarding inventories. We have trade receivables. We have payables side. So the key net working capital items are listed here. Obviously, for us very important, cash level, how much cash reserves we have in the group. And then related to that, we have also listed interest-bearing debt. And in the -- below, in the graphs, we have inventory level in a graph picture, in the first one. And in the middle, there is interest-bearing debt. And then we also have publicly reported the number of our resources in each of the units. And kind of the message from this slide. I think the key here is that every single item here grows and has grown very significantly since 2019. So only 3 years ago, for example, inventory was EUR 10 million. And in end of June this year, it was EUR 72 million. And that's kind of the level of cash we have tied into the business, so it's quite capital intensive to grow as rapidly as Incap. And yes, also that partially explains why we have a little bit withdrawn some loans as well, not too much. We have -- we are in a very healthy position financially, but yes, top line also, looking EUR 37 million 3 years ago, now EUR 115 million. So there's like over EUR 70 million growth, EUR 77 million growth, in top line. So business is going in the right direction. And then yes, it needs capital in order to keep that growth and that's kind of the message here. Of course, when I think investors have read and gone through Incap's report from the morning: Also cash flow was impacting -- impacted by the high level in -- changes in net working capital, and that's why we included those numbers in the slider. So inventory levels have gone up. We strategically need those materials in order to support our customers' growth, and that's very much the essence of EMS business. And here we also included a little bit the annual numbers. And of course, the last, on a darker blue, that's only the first 6 months. And yes, this is just summarizing the previous slide. So also the background a little bit on the release that we did just last week. And that was related to the outlook update. So originally we started this year with a higher number guidance, and last week, we stated that the top line, profitability will be clearly higher than last year, yes.

So that's I think currently everything from us, but we have very interesting topic today with Jamie and U.K., so...

Yes. We can put the U.K. video rolling, please.

Yes. [Presentation]

Good afternoon. I hope that you enjoyed the video. I think it gives a good introduction to the U.K. facility. What I wanted to do really was share some of the things that aren't in the video and give you a view on what Incap U.K. is and what we do and how we service and support our customers. So the site that I'm in today. As the video said, we're pretty central in the U.K. We're between Manchester and Birmingham, which are the second and third largest cities in the U.K., so easy access. The site that we're in is -- was established in 1974 as a manufacturing facility. And [ its current guise as ] an EMS has been just over 20 years. We're involved in defense, security, aerospace; as well as industrial products and instrumentation; low-volume, high-complexity products. We also have a prototype preproduction area where we introduce new customers' products into the marketplace and, hopefully, continue to manufacture that either in the site in the U.K. or one of our other sites in other geographic regions for lots of different reasons. So U.K. in brief and a bit of a history. We were [ acquisitional ]. We were privately owned, and since January 2020, we're 100% acquired by Incap Corporation. And I think, over the last 2 years, we've seen continual growth and investment in the site. And I think it's been a very good acquisition for the U.K. site and the U.K. business. The services we offer are really from the beginning of a product life cycle right to the end of the product life cycle, including PCB manufacturing; box-build assemblies, so full system builds; cable and harness assemblies; customized solutions; and electromechanical assemblies. We also then follow that through to the end of life with our repair center, so we take products back in that we maybe didn't manufacture. We will then repair, overhaul, retest and ship back out to customers as a refurbished product. We're proud of our quality standards on the site. We have the usual 9001, 14001, but we also have 13485, which is medical; and AS9100, which is aerospace, space and defense. And just 2 weeks ago, we were certified for 45001, which is health and occupational (sic) [ occupational health and safety ]. So that again is a new accreditation to the site in the U.K.; and helps us with supporting our staff as well as occupational health, risk assessments and looking after our employees. Some of the things in the local community that we do. So we support a local girls' football team. Around about 10 minutes away from the factory, there is Milton ladies' football club; and we support the under 9s as they are now just starting a new season. So we sponsor their kit and we support them as a business. The site, in the 8 years I've been here, we've actually started an apprenticeship scheme. So we bring in young, enthusiastic, hopefully, trainees. We send them to college, help fund that. They go through a technical apprenticeship on the site with a day release at college, and we continue to support that. This year, we're looking to bring between 4 and 6 new apprentices on to the site; and then hopefully, train them to become engineers, technicians and fulfill some of the technical needs for the site in the future. We also then support a local community for charities and [ other ] events, some of that internal. And we just had our summer party, which everyone enjoyed, and support the local area with that as well. And finally, a little bit of recognition that we've received over the last few years. The most recent one is best full-service electronic manufacturing company for 2022. We're proud to have received the award. We think that it shows recognition for what the site has done and gives us a stable foot into the future. So hopefully, that fills in a few of the gaps from me. I'm happy to take any questions on the U.K. business, but thank you for your time.

So let's jump into the Q&A session. And everyone at home, feel free also to send the questions still here to me, but Otto and Antti, let's start with a easy little question here. Let's take that one. How has the currency fluctuation impacted the revenue and EBIT during the quarter?

Yes, we calculated actually the first 6 months, like, the data for the currency impact, and that's 3.5% top line. So it means like we have increased the top line due to the currency fluctuation by 3.5%, so not more than that. Impact in EBIT in the first 6 months was 0.5%, so quite limited in the end of the day.

Great. Next question. Many companies are reporting a more conservative stance on buying and reducing inventory levels due to more uncertain economical outlook. Do you see any signs of -- sign of this in your order books?

No. Our order book is all-time high currently and it seems to be keeping growing. We are growing, as I mentioned before, in all our units and it's very nice to see. So we don't see that and -- but we still see that there is problems with the material availability, so we keep the inventory level somewhat higher than we would do in a normal case. What the normal is, is quite interesting as well, looking at the past years with all the pandemics and all the things going on, but we keep them higher. But we'll -- I think, when you look at the numbers, you should also bear in mind that we don't speculate inventory. So either we have firm orders already for that inventory; or we have them, forecasts, that our customers are liable for. So in that sense -- so everything is order-driven in Incap.

Actually, I'll follow up on that from another question. So your inventory continues to grow faster than your revenue due to higher customer demand. Is this inventory growth a better proxy for your real underlying demand if not supply chain disruptions come...

I think, if you look at the -- in the EMS business, inventory levels are quite good indicators on -- if the inventory is well managed, there's [indiscernible] income, but it is good indicator for what the -- will be coming, in that sense, in the future. So if that answers your question...

Absolutely. There's the direct correlation. You must have, understandably, an EMS business, first, materials, in order to convert them, develop them into the final products. So of course, there is a correlation between the stock levels and the future business growth.

Great. In the past year, customers have been placing orders and forecast more -- for more extended periods of time with their contract manufacturers than before. How far -- how has that factor developed now in the last month? Are customers still placing orders for a significant larger time ahead?

Yes, I think that trend have continued. And yes, I think it will continue, as long as there is problems with materials in the market. Once that is resolved, then the question is what will happen, but we see we're much more ahead than we normally did. If you look at classic EMS business, we had perhaps 3 months visibility, and now we have visibility into 2024 in many cases. And so it's a totally different ball game in that sense than it was just a few years ago in the business.

Great. [ This jumps into ] India question. Could you talk a little bit about the dynamics of the product mix and how we should think about those going forward? Your new factory in India, what type of products mix do you have there?

Yes. It will be similar what we are running or running currently and so it will be. And I think -- and if you look in general, we have small variations in the product mix, but of course, from month to month, depending on what we are running and what we are producing, that can then affect the profitability somewhat. And -- but that said, I think in general, yes, it will look very similar to what we are running today but in larger volumes.

Great. Let's ask a -- one M&A question. Is Incap interested in geographical expansion to America or Western Europe or alternative to East Asia?

Yes. We are very much interested in geographical expansion. I think U.S. market is very -- as I've said before, very interesting for us, and as well as the German market here in Europe, but of course, there's other markets as well that we could think of. And then we have an M&A team working in that sense and we work actively evaluating different cases, and so far, we don't have anything on the hook. We have a good organic growth currently and -- yes. So it's not so that we are rushed in to do something to be able to facilitate growth. And I'm quite sure that eventually we will hook something.

And U.S. market, of course, being huge economy, there is a lot of opportunities, also a lot of EMS companies available, but kind of the main reason for Incap obviously is our existing customer base. They have their own businesses located in U.S. And they kind of are quite constantly asking for Incap to also develop operations in U.S. and serve from U.S. continent their local operations there, so there will be quite immediate, like, business rationales to cooperate with our existing clients in there. So that's a little bit the background for why U.S. actually is interesting for Incap, like automation, Germany as well.

Great. Then I'll ask you one question about Estonia. So one investor is thinking what is the main reason behind the good development in Estonia site in Q2. The data says that Q2 turnover was 33 million and when, last year, it was just 6 million on Q1.

Yes, maybe I can comment on this one. I mean a little bit dig in this topic. And there -- unfortunately, there is an error on that data. We would like that to be true as well, but unfortunately, the system in the tax department in Estonia is -- they have gone through a modernization upgrade in the IT system. And unfortunately, they have released this kind of data. And investigations are ongoing how to correct the data and what's really the main reasons -- reason there. So don't always trust public data...

Yes, yes. You should trust our numbers [ rather ], but that said, we are growing in Estonia as well but not to that extent.

[indiscernible]. Great. Industrial PMIs are deteriorating. Do you think that the outsourcing trend will be strong enough to compensate on the bad economical backdrop?

If you look at our business and electronics in general, I think there is many trends [ in this ]. And I think, first of all, we put electronics in more and more things in general. And that, of course, supports companies like us and our growth, but then there is an outsourcing trend. There is also a localization trend of the market where manufacturing is moving closer to R&D, closer to the end customers and so. So there's many trends that are supporting in that sense the growth in electronics. And I think that will continue that -- even if we look at the world economy perhaps stagnating or going into somewhat a recession. Then I think there is still growth in electronics, in the megatrends we see with green energy and aging and so on that this will continue. And that has [ an own play ] in that sense that we will see.

Great. A few of the investors are wondering. Could you give any comments on how the customer concentration is evolving?

Yes. We are acquiring new customers and we are working on it. Our biggest accounts are in that sense dominating currently a little bit, if you look at the business as a whole, but this is something we are working on. And I think it's a little bit back and forward. If we look here, Jamie talked about the AWS acquisition. And we were in even worse situation when we did that acquisition, and now we'll continue to look at acquisitions. We'll continue to acquire new customers and grow them, but we are very fortunate that our big accounts as well are growing at the same time, and foremost our biggest customers. So I think that is a struggle back and forward always, that you want to have a balanced customer portfolio but you don't turn down business if the percentage of some customer or -- is getting a little bit more high than you would have expected.

In the Q2 report, we also disclosed the proportion of the biggest 4 clients. And now it's 71% contributing from the overall top line. And then the number of EUR 1 million accounts have increased from 10 to 12. So that's also a little bit showing that we are expanding to new clients as well. And like Otto mentioned, we are very happy that we have these long-term customers contributing a lot to Incap. And it's actually win-win situation. And we want to also serve and give the best services to not only, of course, biggest 4 but all our clients. They are very important all to Incap.

Great. Let's talk a little bit about the strong demand. So how do you best capitalize the current strong demand momentum? Are you rather trying to increase prices or try to sign new longer-term contracts with your customers or try to prioritize more profitable businesses?

We -- of course, we keep on investing in our business to enable that we have the capabilities and capacities needed [ to take care ]. I don't think that there is a big pricing game in that sense. And price, on-time delivery and quality remain hygiene factors in the EMS industry. Everybody has that on the -- more or less the same level, so where you can differentiate this is the service offering and how you offer that service. And what is the conception of that service? And that, we keep on working. And we'll keep on working with our model and with dedicated teams [ to reach ] customers, our [ decent price ] model with quick decision-making that's done down in the units for decision-making. And that is what is growing our business currently.

[ Yes ]. And Incap actually works very systematically not only through the very good times but also on the downside. So we don't kind of change, depending on the weather, our strategy in that sense. So we are in the EMS business. Our customers, they are very trustful towards Incap. And there is only one reputation, in a way, also in the industry, so we are following our internal procedures regarding pricing and being systematic and having the same message. And in the long term, like we have seen in the past and so on, it has been quite efficient, anyways.

I'll jump back into the customer questions. Your 4 biggest customers are over 70% of your turnover in H1 2002 (sic) [ 2022 ]. What is the 2 biggest customer risks that you see in the future, let's say, in 2 years time?

Well, of course, there's always risks with all business, but -- and one must understand that we have very long-term relation with these customers and we are very much integrated into their own operations. So we are their main manufacturing partners. And we work together with -- from the product development and prototyping and so. So I don't see, I would say, the big risk with losing the customers, but of course, we are talking about customers and -- in general that have very aggressive growth. And I think, if we are to mention, some risk is that -- if we wouldn't be able to facilitate that growth, then of course, there's a risk that we would lose perhaps some of that business share, but I'm quite convinced that we are on top of that. And we have good expansion in -- and growth in all units. We keep on investing. And yes, the big investment in India is all moving according to plan, so I'll look very positively on the future.

Yes, I'll continue from the topics from the customers. How much do you have project-based businesses or customers? Or is it mostly a -- continuous business orders from the customers?

It is mixed. It's very hard to differentiate that because we have, I think, both going on in all units in that sense. Of course, there is -- we have talked before there might be some volatility in the numbers sometimes because we have project-based, but we have also quite broad customer portfolio, if you look at the broader picture. And normally they attempt to take out each other, that -- the project-based business, so one goes up and one -- the other one goes down. And it, yes, remains in balance in the bigger picture.

Great. Let's jump into supply chain. Are you seeing any supply chain bottlenecks at the moment or any easing up on them at the moment [ on Q2 ]?

I don't know. If you look at Q2, then I think the situation have remained the same. Perhaps, I think, we have got used to the market situation and the customers have got used to the market situation, so in that sense, it has been easier that, in the beginning of the component crisis, in that sense, was -- very much show that we needed also to educate our partners and customers on what is the market situation. But now everybody have understood that, so I think, in one way, the day-to-day work have on -- at least on that part have been easier, but we still see shortages, also that we have the pandemic still going on. There are still lockdowns in China, yes, influencing logistics and so in the bigger picture. So that is still so that -- it's ongoing. And of course, the geopolitical situation in Europe because I still don't think, and we wrote that also in the report, that we have seen, I would say, the full effect of that. Because both Ukraine and Russia is big raw material producers for the world. And at some point, that will hit them and also when it comes to operating costs when, yes, including energy and other things. So we are monitoring that very closely.

Yes. And as we a little bit discussed around this topic in quarter 1, so now it's a third year, we have the same discussion about the material availability challenges and lockdowns and the corona and et cetera, so we must understand how actually Incap works. And that, we kind of tried to open in first webcast in Q1. And that's that we don't only invest in Incap to latest technology. Machinery, invest to our people. We have invested to our local sourcing team and resources there, and those are in key positions to actually find those materials. They are working super hard that we also highlighted in the quarter 2 release. And yes, we have our decentralized organizational structure that is actually bringing its benefits at the moment when the challenges are there in terms of the supply chain and logistics. So local dedicated teams, not -- prioritizing customers. All customers are taken care of locally. And local supply chain teams are on top of this thing. And it kind of -- without those resources, our numbers that we presented today would have -- would not have been possible to make.

Or Jamie, you are much closer, closer in that sense, to the day-to-day problems. How do you feel, that -- is there a difference in material availability?

I -- we're not seeing any easing, I don't think, at the moment. We -- I think that the team, as you've mentioned, are working harder to stand still really. So material availability is still a problem.

Great. One investor is wondering if you could elaborate a little bit more on the order books and order intake composition. How much of the strength or growth is coming from, let's say, a, industrial fields such as renewable energy, electric vehicles, et cetera; b, as more legacy industrial fields such as [indiscernible], that kind of stuff?

Yes. I think we have done some statistics, of course, on it. And I think, if you look at green energy and, yes, this kind of e-mobility and so, those kind of trends are very strong currently, yes. And I think that they are foremost driving the growth in Incap currently. That -- so if that answers your question.

Great. [ Softer ] industrial data from many development -- developed countries, Germany, for example, suggest that lower industrial momentum is going forward. How will this impact your business H1 2023 and onwards?

Yes. Of course, it's hard to predict what will happen in the future or so, but if we look at the forecasts and the information we have available, then we will continue our growth. And that is also why we have done investments in our factories and facilities and building a new factory. And so our plan is to fill that in that sense and, hopefully, even more. So if that answers your question, that in the businesses we are in, we see continued growth.

Obviously EMS companies are very, very different, if you compare them. There are only in Germany thousands of EMS companies. So of course, on average, when we talk about this kind of business intelligence and how electronics industry develop, that's always a very, very high-level average. And then like I said, Incap is quite different animal compared to any other EMS company. And we do have positive outlook on this year but years to come as well.

Great. Then I have question about write-offs. Please explain the "inventory write-off amount of EUR 0.6 million."

Well, we have -- this quarter, we have one customer that has gone through the -- like a debt refinancing process. And there is a risk on this customer. And we have -- in our material levels, we have dedicated components to this customer and we have gone through internal analysis line by line. And if the worst case scenario would materialize, then now this was the timing, right timing, to do provisioning against the identified risk. So it's concerning one customer we have in Incap.

So better safe than sorry, yes.

Yes, exactly. Then I have question about Finland. Would a factory in Finland make sense from an organization point of view?

Well, I would never say never in that sense that -- we have had, of course, historically factories before. And now we cover the Scandinavian market where -- from our Estonian factory, foremost. So it all depends, in that sense; that I think geographically, of course, we are very close, with our Estonian unit, to Finland. So Estonia is like a smaller brother of Finland. And it's 80 kilometers from its borders, so -- and of course, Finland is big. So if you look at -- from up north, then it's even a long way to drive from Helsinki. So it all depends. I wouldn't say that it's necessary for our business. I think we have good geographic coverage currently, but I wouldn't rule it out either. If a good opportunity comes along, then let me know.

Then about the Q1 webcast. You mentioned that you have a free capacity on your factories and you mentioned that you are building that capacity up. How would you describe the capacity at the moment on the factories?

I think Antti made a really good point, on the Q1 webcast, that the name of the game is to be able to offer our customers services. And that means that we always work with trying to maintain a small overcapacity in that sense so we can take in new projects. And that, we have continued with as well. And that, we, of course, then calculate in into when we do expansion plans and others so we have something extra to, yes, offer as well. That said, I think that the industry looks somewhat different than it did some years ago; that when I started in electronics then, there was big capital investments needed to start up an EMS company. And now you have the possibility to rent machinery, rent facilities, even rent people. And you can do this kind of moves quite quickly. And especially if you're established already [ as us ], to increase our capacities is normally not a problem; and nor -- not the -- also, to change our capabilities, not a problem anymore, with how the industry looks like. So it's an interesting, in that sense, industry we are in. And when we, before, perhaps sold what kind of capacity and capability do we have, then now and I think will be even more in the future, then -- it will be the customer to drives what kind of capacity and capability you need. And then you set it up after that in that sense.

Yes. And historically, obviously, we have been in this situation that our floor space is already fully in utilization. So then we -- it has been time for internal analyses and investment plan preparation work. And once all these kind of administrative work and analyses have been thoroughly investigated, then obviously, if there is going to be an investment, we will disclose and make a release on that one. For example, last year, we informed the market about this third factory, which is very material investment for Incap. So that was disclosed in order to respond to the growing production demand and thus Incap to respond to that and increase the capacity. So that's a little bit explaining as well.

Great. Then I have question about your guidance. So you raised your guidance just a few days ago. A investor would like to know a little bit about the background. You didn't tell enough, on his opinion, why was there a rise.

I think, if you look at how we have been working the past years, it's that we are conservative in the beginning of the year. There's a lot of risks, of course, always when you start a new business year. And now when we come to half of the year have gone, we have greater visibility. We see that perhaps some of the risks have not materialized, and we are more comfortable in increasing the steering. And so it's as simple as that, that we'll keep on looking at the environment that we are in and trying to judge how it will play out, and now we have better visibility.

Great. Then I have one Finnish question. Let me translate this to English. You have been talking in the last quarters about your product mix and that you are wanting to do more a higher end of the product mix. Do you see that, if economic takes a downturn, the customers will start to prioritize dumber or not-as-profitable products? [ Or your products in ]...

That's very interesting question in that sense and, of course, very hard to say, but what I personally think is that, if you look at the trend with outsourcing and if the economy goes down, then I think smart customers are not starting to employ themselves. Or if they have -- so they would rather use and outsource the business and services to somebody else. That then takes the risk with that and -- but you never know, in that sense, that -- what other individuals think, but at least -- I think that will be smart.

Probably in a downturn it will be more difficult to justify larger-sized investments to your own in-house operations. In Incap, that's our profession. We do it on a daily basis, so probably there would be some rationale to move and make those kind of decisions, but time will tell.

Great. Bad -- good and bad news, I only have 2 questions left, so if you still have questions, feel free to send in the other end of the webcast.

[ We could have some ] question to U.K. We have Jamie here. I mean he's a great guy who knows everything about the U.K. operations.

Yes, please ask Jamie also. So if we go through these: Your third factory in India will be open soon and up and running. Is that capacity already booked? Or are you still looking new customers to be closed?

No. When we have done already -- I mean I mentioned that we always are calculating with a little bit excess capacity, of course, but that investment is driven by current customer demand, in that sense, so we are not looking. And that's we are always looking for new customers but do not feel that way.

Great. Then I have the last question at the moment. How often do you close a new customer? Is that something that happens constantly, or is it a more rare given that the capacity is almost fully booked at the moment?

No. That's something that constantly is happening. And then you must keep in mind that normally it starts off with doing prototypes, doing like very small volume and development stage. And it can take several years. If you look, for example, in the medical segment, it can take several years before we see that production ramping up to some kind of mass production or substantial. And perhaps, Jamie, you are working with this every day that you want to fill in and on how that develops in that sense.

Yes. I think we see products, and we engage with customers consistently. So there may be a customer with a new product that's coming in now that develops into a production customer in a couple of years time, but we were also developing customers a year ago that are coming in now, so it is a constant evolution and happens, as Otto said, all the time.

Great. Then I have one question here. Have you noticed any pressure from a larger customer regarding pricing?

I think, of course, pricing is always something we discuss all the time. And now we see in the market. What we see is that -- when it comes to material availability, that sometimes we find the material is available but to a higher price. And then of course, we have discussions because we are not absorbing that price increase. So then we need to have a discussion with the customer regarding pricing, but we don't see that there is -- [ generally said ] that this is a huge pressure in that sense that -- I think our customers very well understand that -- what our costs are; and all if the general manufacturing costs are increasing or the input, in that sense, increases; that they have an understanding for that we can't do -- we don't do charity. We still do business, in that sense. So it's a give and take. And on same way, if we find a possibility to manufacture something cheaper or in a more efficient way, we pass that also on to our customer. So it's a give and take in that sense when we have price increases and when we have price deductions. And I guess that any relationship is like that. It's give and take, and the key thing is that both parties in a business relationship are happy.

Great. That's all my questions from the Q&A session, so do you have, gentlemen, anything you want to say? Or do we call it a day?

No. I want to thank everybody again for the interest. And I think that we keep on developing this format. And I hope it was good information about our U.K. unit. Next time I guess it's Estonia on the [ roll ]. And feel free to contact also if you have questions otherwise. And looking forward to the next one.

All right. Thank you very much. That was...

Thank you very much.

Thank you very much. And that was Incap's Second Quarter Reporting Webcast. Thank you for joining in.