Incap Oyj (ICP1V) Earnings Call Transcript & Summary

Good day and welcome to Incap's financial statements release 2022 webcast. Today I have here with me CEO Otto Pukk; and the CFO Antti Pynnonen. You can post your questions on the chat below and our speakers will answer them later at this webcast. Now without further ado I would like to give the stage to Otto Pukk.

Thank you very much [ Ruhosa ]. And hello and welcome to all viewers from me as well and it's always a pleasure to connect with our investors in one way or another. So like normally we've prepared a short presentation with Antti regarding the result and a bit on the outlook and then we're happy to take on questions and solve for you guys. But I'll start with the presentation from my side. So as normally, we have myself and I'm here answering the questions for you. So if look at the main milestones in 2022, I think it hasn't gone unnoticed that we did an all-time result in the year. We had a very strong demand for our products and we managed in very difficult circumstances with component availability shortages and so on to deliver and grow together with our customers. Also we had a very strong order book and we kept doing investments and also earlier investments paid off for us and we could facilitate the growing demand that we faced. Overall, I think the mega trends that are in the industry with green energy and green mobility and so fuel very much of the growth and that is something we also see that that moving forward is very strong segments. When it came to revenue, we have had over 55% growth and we ended at EUR 263.8 million and I think that is an excellent, excellent result. Also the EBIT, we managed to grow almost 50% and under that EUR 38.9 million. And we were happy of course we did well that result in that growth. And looking forward to continue in that sense here during this year as well. Sorry. [Indiscernible], one slide. So the third factory, we were on schedule within in India. We are moving in and starting operations and the ramp up of operations here in the end of next month. And the construction work have gone according to plan, so hopefully we can present some new fresh pictures from there once we are up and running and we will of course have also have an inauguration of the factory here later this year where we hope to show with tools a little bit more in action. Yes, I kept them for nice enough in that sense on the team effort that goes in to achieve this result. We have fantastic professional people in here in our team all over the world and I have said it many times that seeing is believing and I think really coming into one of our factories, you will rather have like this sort of feeling with very entrepreneurial people taking ownership of the business and driving it. So we have an exceptionally good core like culture and entrepreneurial culture and the people are really amazing. Teamwork is something that is key and I think we all are on a very high level with that. And also it shows that we're relatively have a very low employee turnover and that perhaps you see is outright proof of that it's not only us from the management side that enjoy the company culture, but also our team members in all different levels. And Incap we take very much pride in being an equal opportunity employer and try really to nurture our employees with providing them with different training possibilities and development possibilities, also a family-friendly atmosphere. And I think that is a key thing. In many industries, it's perhaps easy to be family-friendly. You can work from home and you can be very flexible. But also us in the manufacturing industry where we can't take the machines home all the time, I think it's important to take care of the employees and to drive these values forward. But before I talk about the outlook of this year and then I'll give the microphone over to Mr. Pynnonen and he can present some of the key figures during the quarter.

Thank you so much, Otto. And yes, let's start with the last quarter 2022 fourth quarter revenue. We increased up to EUR 78.7 million and that is almost 53% growth compared to the fourth quarter 2021. And then operating profit, we recorded all-time high EUR 12.7 million and that is up by almost 51% and relative from the revenue it's 16.1%. Then here we update the fourth quarter in our charts. So on the left side we measure revenue development since 2019, very dramatic growth past years as the bars illustrate there. Then on the right-hand side, the profitability on the blue bars, it's in absolute euros and then in the red color we had the relative profitability. And looking at the numbers here, so also the profitability is going to the right direction, is on a really great level in that sense. So a few drops there. As the previous viewers, remember there has been COVID impacts in the factories. So those were explained by that. But here on the key figures, this is similar in, but as what was released in the morning, revenue, fourth quarter and then the full year numbers on the right-hand side and then the compared to the last year, I think those speak themselves. Of course, overall the market activity remained not only fourth quarter very strong, but the whole 2022 was extremely strong from the market activity perspective, explaining, of course, the lot of the revenue development and of course, very happy from my perspective to see that it's -- in all the units we saw the growth and not only in India or in Estonia, but also the acquired businesses were able to grow. And yes, if you want to go back once more we -- yes, this one. So the inventory we updated, of course, the situation end of the 2022 December, inventory value is EUR 92 million. There has been rapid growth in inventory levels. That is, of course, then impacted in our cash flow statement. So that is something of course to improve. And if you have checked our first half report '22, then we were able to already improve a little bit the cash flow there, but that's definitely will remain extremely key focus area for us and improving the net working capital and cash flow and inventory turnover. We have a good action plan with the units in order to do so. And yes, next slide, please. Here we have collected the full year numbers. So Otto already explained the full year revenue development that is illustrated in the pie chart -- in the bar chart on the left-hand side and then, of course, the profitability here. And maybe additional information is always like making so huge growth, almost EUR 100 million in round number top line. So remaining and keeping the profitability on the same level as in the past is actually extremely good performance. Usually this kind of huge revenue dilutes also the percentage profitability. So that is quite strong performance from that angle, so.

Yes. Thank you very much, Antti. So a little bit about the outlook and perhaps the market situation as we see it currently. Of course, going into 2023, there's a lot of uncertainty still on the market. We have the geopolitical situation in Europe with the war in Ukraine and Taiwan and China have intentions. The material situation is improving, but we're still not solved in that sense. And also the COVID pandemic in China was blooming up here during the end of the last year. And so there's still uncertainties on the market. But if we look at focus a little bit on the positive that the component availability is improving and we see clearly that the lead times and delivery times and lead times for the components are getting down. Still some problem areas, but in general. Then with that we also expect that the visibility that we have had during the past year will decrease somewhat. We have had -- our customers have needed to place orders here in the past years for very much in advance and so forecast very much in advance. But as this is not needed anymore, then we expect them to go back to a little bit more normal patterns when it comes to that. Also with the component availability on the market now being better, then we expect that if you look at our customers' success, of course, the past years has been that we have been able to deliver. And if components now are available for more market players, then we expect perhaps that in some segments our customers will face more competition. And how that exactly will play out, that is perhaps early to say and we want to flag that it is not only positives coming out of the component one, but there can be also some uncertainties coming out once now and components get more available. Long term I think EMS business is still the place to be and we see a good potential for growth in the long term. And especially when we look at different megatrends that with green energy and green mobility and then 5G just rolling out in many markets, and so long term, that has not changed. Even if short term, yes, we see some uncertainties that we want to flag now in the beginning of the year. We still expect growth this year and perhaps a little bit more modest than we have had the previous years. Of course, we come from a very high bar with big increases over 50% on year-on-year. And I think the bigger we get, the more normalized we will get in our growth in that sense, at least percentage-wise. And so we believe that still this year we will be higher than both in revenue and in EBIT than last year. But yes, more modest growth levels. We keep on investing in our business and that is something we want to continue with now as well and develop the business and set the possibility to keep on the organic growth and also getting more synergies out of the business between the units. But, of course, with perhaps a little bit more slower organic growth rate, we now want to continue our growth strategy and the focus on M&A activities will increase due to -- or thanks to that. And so yes, in short we are looking at still growth, a little bit more modest pace, some uncertainties of the market. But overall electronics is a good place to be in. And with that, I think also we are ready for the questions from the viewers.

Yes. Actually, we have quite a lot of questions coming through. Thank you for those and you can still send your questions via the chat. Let's start with acquisitions. I think this has been a question that has been asked most. So I will now put a couple of questions together regarding acquisitions. So what is the current situation regarding possible acquisitions you have been looking at and especially people wanted to know in 2023?

I think if you look at the acquisitions in general or the market in general for acquisitions, I think that the high valuation levels that we saw here the past years or so, they have come down. I think there is still good opportunity on the market. We have a team that we work with and that we have in place and evaluating different cases in -- all the time. Me and Antti, of course, we are very much involved in this process and spent most of January on the road looking at different targets. And so we are very active in it. That said, still we predict some organic growth and we don't have, I would say gotten to our head that we really need to do an acquisition to facilitate growth. So culture fit that will really create value for our shareholder, making a deal and also that it brings something to the table, perhaps strategically like geographic expansion or so is key. So what I have said before is still in place. But yes, we are a little bit intensifying the work now as we have the possibility.

Then there is a follow-up question regarding the similar kind of acquisition team. How would you describe the market of EMS acquisitions? Looks like all the EMS companies are looking at the same kind of lean and profitable acquisitions in Germany or in USA, what are your strengths in this competition?

I think our -- it of course depends on what the seller side is in it. But Incap take you over operation or acquire a company, we don't want to slaughter that company and try to centralize it and drive some kind of -- those kind of synergies in it. We wanted to remain operating and I would say, add it only into our decentralized operational model. And I think that is very attractive when it comes to -- for employees and perhaps private owners, if they have been involved in the business, that we will take care of the company and keep it in that sense. And so I think that Incap is a good buyer from that perspective on what is our intent and so with the company for the future. And that perhaps sets us a little bit off with other buyers that are more -- you have a different view on how they want to integrate the business to acquire.

Okay. Then a question from [ John Smith ]. Could you be more specific with the 2023 guidance?

Yes. Well, I don't know how much more specific we can get. But we expect 2023 to be higher in both revenue and in EBIT. So that is as specific as it gets. And I gave also perhaps the underlying logic behind that. So I perhaps ask back to be more specific with the question.

Okay. Then let's go to India. [ Maury ] is asking. Third factory in India is getting ready during Q1, but when will it be fully up and running?

Yes, we will start -- as I have mentioned before talking about the project, we will start moving in and the ramp-up here in the end of this quarter and then we will gradually ramp up the activity over the year. And so fully, of course, I also mentioned, we always calculate with a little bit extra capacity. So fully utilized, I think the factory will be perhaps not this year, but the coming years in essence as we have some spare capacity. But already this year we are calculating to have, I would say full action in the factory.

Yes. Then we have a question from [ Alexander ]. Can you give me color on the production ramp-up in your third factory in India? For example, will the factory contribute to a material impact on the financials during 2023? Can you elaborate about how the activity has been during the start of 2023 and have you recognized any new trends among your customers given the current macroeconomic conditions?

Yes, and as I mentioned before on the visibility, that clearly is -- have come down. And then our customers see that they don't need to -- when you hear perhaps the last year and the year before, needed to place orders in advance for a very long time, then the windows go down. We have many component lines back to, I would say normal 12 weeks lead time and so on. And this impacts I think and will impact even furthermore the visibility that there is no need to risk and to place orders so long in advance. So that I think. And also with that, of course, we have built up our inventory levels and so to cope with the component availability and I expect our inventory to -- that we are able to take that down towards more normalized levels and here during the year. And of course, that will make Antti happy as that improves the cash flow as well and is a key thing. But I think that is -- that visibility is somewhat shrinking and I think that is normal. I think we mentioned that during the Capital Markets Day as well that we expect it to be so and now we see that in place as well.

Okay. Then a little bit more to India, how much more capacity the new India factory will provide when look in total productivity capacity in all factories? So as a group how much more can it be -- can be produced?

That's a relative question I would say because it all depends on what kind of product mix we are running in the factory and the sort, as capacity can and do we value it in pieces or do we value it in -- yes, in euro or Indian rupees or whatever. But in principle, we very much simplify and say that we run a very similar product mix that we do today. Then, of course, the third factory in India, yes, we add on one factory to the 2 others. So it is -- in that proportion it will increase our capacity as well. But that is -- I would say it all depends on what we are running in the factory, exactly what kind of product mix, if it will be more than that or in that level.

Okay. Then [ Philip's ] question. This is quite a long one, so I will -- if you need to -- for me to ask the questions again, then just let me know. So how has your order book and order intake developed during the quarter regarding the expected competition to increase in many segments? Do you mean that you see increased competition existing customers or new customers? Do you see any increased competition on existing customers and do you see that your major customers want to reduce their inventory levels during 2023 given that inventory levels have been high during the component crisis? Can we expect the same EBIT margins on your new factory in India as the old one? If not, when do you expect to reach the similar level?

Yes. As I mentioned, with the visibility that we see that order book is somewhat smaller than it was here in Q3 and that is due to that visibility is shrinking as we understand it and in discussion with our customers. So the visibility is shrinking and then that affects the order book. When it comes to the competition, perhaps I should clarify a little bit there. So what I mean there is that the competition for our customers will be intensified. So we have been facilitating our customers with being able to deliver their goods. So they have been able to deliver their goods in their market -- in the markets that they are operating in. But now with the increased component availability, when everybody has components in the market in that sense, then we expect that there might be happening something with a competitive situation for our end customers' products short-term in that sense. As more components get available, more market players get in. So that is what I mean. So I don't mean that the competition for us will be, like, impacted so much of this. But rather the competition of our end customer, perhaps then impacting our demand in the short-term. So that [indiscernible]. Then it was many questions here. Yes, inventory levels. That I mentioned, the inventory levels we built up here during the past 2 years. We have had excess inventory, both voluntary in that sense that we have increased the different kind of buffers. And so to be able to deliver when -- due to the component shortages. But also involuntary, sometimes where you have the golden screw missing in one order and over the closing we kept inventory because we couldn't deliver out. So this we expect clearly to improve that over the year. Now the component situation, even if I say that it's getting better, it's gradually getting better. It's not like it's fixed today. So it's gradually getting better. So gradually we also expect our inventory level and to come down and our cash flow to continue. And then I think last question was regarding the EBIT margin in the new factory. Of course, as we have commented before, that is also very much depending on what product mix there is. But we are not -- in current state, we don't -- are not aware of that we would dramatically change our product mix that we are producing. So what we have been producing, similar products we will keep on producing the coming periods. And so I would expect the EBIT level more or less to be the same as we have today.

Okay. Then one more question regarding India. What is going to be the amount of employees in the new Indian unit in next summer and year-end 2023?

Yes, I think we updated the amount of employees now in the report as well. Wasn't it so, Antti?

Yes, we have that information there.

Then going to M&A valuations, M&A valuations have increased from last year. If so how much? Is it likely that the window is soon closed? Do you have funds for M&A as interest rates for debt financing are increasing?

I think -- of course, I can't comment directly on the pipeline. But we have very solid finances. And I think there is, of course, a lot of alternatives to -- depending on the size of the acquisition and so to finance that. But I don't see financing as any hurdle in the M&A pipeline. We can both get to get more classic financing through some kind of loans and so from banks. And so when we can raise capital as we have done before and there is -- we can play with our own shares and there's a lot of different elements. So it depends on the case and -- but I don't see that that is in order. But back to the question about the employees. And so roughly we have almost 2,500 employees today and we expect that to increase somewhat here during -- of course, we have already taken in employees for new factory as well and I've been training them. But we expect to increase a few hundred on that as well. But that is business as normal. It depends on the products we are running and the different projects, what the need is on that. But -- so to answer on that question as well.

Yes. And probably there was this valuation topic as well. So basically in Europe we have seen last year like 8, 9 EBITDA multiples and now we have seen the discussion between 7 and 8. So it's in that magnitude going down.

Then we have a couple more questions. Probably you partly answered some of these already, but there are questions, how come you ended up in the low end of your Q4 forecast and what were the main factor reasons in Q4 that EBIT percent was lower than 2021 Q4?

Yes, of course we're making the -- this scale is always tricky. So when we were overshooting the scale some years ago, then that was not good either. And so we try to do a realistic range and we hit in more or less in the middle of that, okay, a little bit on the lower range. It depends on how you see it, but -- so we are quite happy with that estimate. It's not always so simple to break it, spot on. And what was the other question on…

I think it was about 8 percentage.

What were the main factors and reasons in Q4 that the EBIT percent was lower than 2021 Q4?

Yes, we talk about like very small difference, 16.1%. We had EBIT percent in Q4 this year -- last year and then compare to the year was 16.3%. So there is not any major difference first of all there. But of course, this -- we have discussing earlier as well per quarter our material price levels that we call as PPV, so purchase price variance. So we pass on the price increases to end customer, but without a markup. So there will be just a revenue without any margin. So that, of course, dilutes a little bit the percentage. Of course, absolute euros. That's a neutral transaction. But from the percentage-wise, that plays a bit role there as well.

Yes. And also as always, the product mix that we are producing at a given time that the variations in that. But yes, as Antti says that it's very small differences and we have seen before, I think we should keep in mind that the profitability can vary 1%, 2% up and down depending on the product mix and we have explained that in the past as well that it's how the -- all the products are not -- don't have the same value added and the same profitability.

Okay. Then [ Rasmus Persson ] is asking, you mentioned that you expect competition to increase for customers. Are you seeing this already and is it with both current and new customers that you see the competition increasing?

What we see is that the visibility shrinking a little bit and we see some reshuffling were in the order pipeline. And so this is -- we see tendencies of this, but exactly how it will play out we don't know. And it's I would say an uncertainty that we are flagging here in the beginning of the year. And so that there is not only upsides in the increased component availability, but there is potential downsides on that as well. And we want to flag that, so we give a straightforward and forward picture to the investors that might not be -- so I would say, familiar with all the nuances in our business.

Okay. Then continuing with Rasmus, other contract manufacturers have indicated how much of the revenue is generated by abnormal spot purchases. Can you give some clarity if Incap have been affected by this and by how much?

Yes. No, Incap, of course, also have been affected. Antti, do we have any figures to share on that?

No, we don't have any number to share.

Yes. But of course, we have seen that as well and as Antti described that when we are doing spot purchases and forwarding this, we call it PPVs, so purchase price variances to our customers, we don't add on any additional margin on that. So that dilutes our EBIT somewhat. But if you look at the past quarters, we have seen that this -- it's less and less of these activities. And also we expect here moving forward that as the component availability is getting better, that we will see less need for doing this kind of spot market purchases.

Okay. Maury is asking how binding is your order book? Do you see a risk for cancellations or postponing, especially if there will be a recession?

No, and I don't think -- in that sense that if we have firm orders, those are binding and in many cases also the forecast or binding in that sense. But we work very closely with our customers in that sense that if there's a need for rescheduling or canceling some demand, and so of course, we work together with them and try to facilitate what the need is in that sense for our customers. So yes, legally is one thing. But practically, of course, we try to -- it's a partnership. In that sense if you look at our biggest customers and so we are there manufacturing in that sense. And of course, we try to work very closely with them to -- if that scenario like that would happen.

Then a follow-up question. How defensive are your customers if there will be a longer or deeper recession?

I don't think that any -- we don't have any signals on -- from any customers that there is deep or long-term recession coming. There might be some reshuffling in short-term. We have seen signals from and then as I flagged it also that we also expect perhaps some to be with the component availability getting bigger and the competitive situation on the market and so get down. But overall I would say that if you look at the megatrends our customers are in, these are still, I would say growing trend and also long-term. And then I would say that the outlook is long-term, it's still very positive for the industry. Electronics is an amazing place to do business in.

Okay. Then [indiscernible] is asking, hi, what kind of cost are you included in the nonrecurring items? Can you break down the EUR 600,000 nonrecurring items?

Sure. So Incap reports some acquisition-related costs as a nonrecurring cost and then there has been some restructuring costs and layoff costs included there. And then there was one-off regarding even the Red Cross donation to support Ukraine Red Cross there. So these kind of topics combined are behind this EUR 600,000.

Okay. Then we have quite many questions still. So if you have answered some of these, then just tell me. But because there has been so many questions, so. [ George Pal ] is asking, is increased inventories mainly related to stocking components rather than increased inventory or finished products being shipped to customers? And when do you expect that to normalize?

Could you ask me the question once more? I missed the first part of it.

Is increased inventories mainly related to stocking components rather than increased inventory of finished products being shipped to customers? And when do you expect that to…

Yes, I understand the question. No, no. So in general the increases in inventory we did was in components, so not in finished goods. And yes, with a few exceptions as always and so we increased the warehouse I would say buffer stocks and so on, on some critical components in [indiscernible]. And then when it comes to finished goods, that is -- we normally don't stock if we don't have an agreement in place where we sell that as a service. But we are, I would say -- yes, we sell that as a service for the customers. So we expect us to hear during this year and especially perhaps in the second half where we forecast that the material situation will improve in a more rapid pace in that sense that we should be able to start taking down the inventory gradually to more normal levels in that sense. So yes, to keep that in mind that we haven't bought any risk inventory or so. So the inventory we have bought in correlation with our customers. So when we have the increase we have had, the reason more behind our inventory even in these higher levels that have today in that sense. But yes, we expect us to be able to release some cash from the inventory as the material situation gets better.

Okay. Then continuing with the inventory topic. So [ Yonas Legal ] is asking what is normalized inventory to sales level and what is your target for 2023 on that ratio?

Yes. So in Incap we have had, of course, prior to COVID like a healthy level between 22%, 23%, roughly from the revenue and that is net working capital percentage from the revenue. So of course, the part of net working capital is the inventory level. So in Incap we have, of course, set up the new ambitious targets for our units and managing directors to get back on a more healthy level. And I'm referring to net working capital percentage from the revenue. So that is tied for the managing directors KPIs that we are keeping eye on in that sense, so.

But of course we will do this in steps. So we don't expect them go do from levels, we have currently dropped down to the pre-crisis levels, so that sense. But yes, that's what we're aiming for to get back where we were a couple of years ago.

Okay. [ Vila ] is asking, do you see any reduction in customer inventories?

Of course, we don't have full visibility on our -- what our customer inventories are. And so we don't have any signals in that sense on -- if there's reductions or not. What I mentioned before is that many of our customers have been able to grow and we have been able to grow. Due to that we have been able to deliver. So we have solved the different kind of component issues, have still been able to deliver. And of course, if the market situation changes, we will not mean that some of our customers have too high inventory levels or not, that is still to see in that sense. And -- but we are flagging that risk that, yes, there might be something. But yes, we don't have any signals that the inventory levels are coming down very much from our customers or so, but we don't have visibility into our customer's warehouses in most cases.

Then [ Passi Vaisonnen ] is asking, do you expect a seasonality in the operating profit margin during this year?

I wouldn't call it a seasonality and there's always a variation due to depending on what product mix we are producing. So it goes a little bit up and down. But no clear pattern at least. Or Antti, do you have some crystal ball which is better than mine?

No, it's exactly like you say. So historically also there hasn't been any seasonality as such as a topic for either for the top line or the profitability. So there is no pattern unfortunately in our case, so. It depends on the pipeline and what kind of products we are doing and like Otto earlier has mentioned, very much depending on the product mix.

Then we continue with Passi Vaisonnen question, is the sales growth guidance 2023 only a normal growth or a significant growth under or over 20% year-over-year?

Yes, we gave the guidance that we will have higher in that sense profitability and revenue. So where we -- normally when we do these guidances, then we use it either higher, clearly higher or significantly higher. And so we start with higher than the previous years. And order -- yes, the previous year.

Okay. Then Maury is asking, you have said that your visibility has become better during last years. But now in the report you said that customers don't need to place orders that early due to better component situation. What kind of progress in visibility are you expecting during 2023?

Yes, I don't expect progress in visibility. I expect the visibility to get shorter in that sense as the customers don't need to risk and place orders in -- very long in advance. And we don't need to do that to the suppliers either. So hopefully, that's because we have been spoiled with very good visibility. And when I started in the business, then you saw 6 months ahead what you were going to do and then it already got very blurry. And I really hope that we can keep these longer windows. But I think it's unrealistic as well to expect that the customers continue to place orders and give visibilities 1, 2 years ahead. Perhaps a rolling 12-month visibility is something that is more realistic or yes, who knows if some customers even go back to their own patterns and give more or less very -- yes, very short visibilities again. But let's see in that sense that there is some gains in giving visibilities as well. And I think some customers have understood that. But that said, seeing this kind of 2 and even beyond years' visibility, I don't think that will last in the industry for very long. And I don't think that is Incap, solely an Incap-related issue. I think that is for the industry as a whole, that if there is no need, therefore order window will shrink.

Okay. Then Maury is also asking how would you describe your customer base behind your biggest customer? Are the customers that bring more than 1 million growing and is there any potential superfast growers in your customer portfolio?

Yes. I think if you look at all of our customers, about 1 million have been growing and that goes I think for most of our customers in the pipeline as well that has been growing the past year. As an EMS company, it's always something potential big in the pipeline that can explore them and grow. But if we wouldn't have, then we wouldn't do our work properly. But to count on that or relate to that, that I think is -- would not be a responsible leader in that sense that we have a broad pipeline and there's always possibility for something to grow quickly. There is always a possibility for something to go down as well. And normally those cases balance themselves out. But there is a lot of potential and fast-moving trends as well in the industry. And then the first part of the question was regarding our biggest customer and then the customers behind that. So that I'm very hard to comment on in that sense that -- but if you look at our biggest customers, they are in very, very lucrative segment currently. Many of their applications are used in different green energy applications such as solar and so on. I think this is still a very hot topic with energy crisis ongoing in Europe and we see a lot of infrastructure investments being planned by governments and for either direct investments or grants when it comes for private people to invest in different energy solutions. So I think they are in a very solid sector also, yes, long-term as well. And if that answers to the question.

Okay. Then when referring to increased competition, is this related to your largest customer?

Yes. This is related to our largest customer as well. But this is a general statement I think related to all of our customers that have been growing in the past years because we have facilitated that growth through -- that we have been able to deliver and to source the -- purchase the needed materials on the market. And so we have been very successful. On the same time that there's many companies that have not been able to get hold of all these components, so we expect them when the component availability increases that there will be more players on the market that to get access to components and that logically should lead to more competition on -- for our end customers and the OEMs in that sense. So we are following that and seeing how it plays out. And I want to point out again that is where all in the year, we flagged these issues as there is risks here and also to explain for the industry that component availability getting back to more normalized levels here during the year, coming years, it doesn't only have an upside. It has also -- yes, I wouldn't call it a downside, but there might be shifts in demand and so on, on the different markets due to that comes in. Also what a possible scenario for that is that there will be increased price pressure on our end customers' markets. And due to that there is more players being able to offer their products in that sense. So let's see how it plays out. It doesn't -- it's not black and white things that now components is available and everything is good from that. But short-term it can have some disturbance as well. That's the point where we are taking it up.

Okay. A couple more questions. Can you elaborate in potential terms what you mean by expect our organic growth to continue in 2023, but with a more modest pace?

Yes, Incap has been hitting this over 50% growth year-on-year and quarter-to-quarter. And I think the bigger we get, the more normalized that growth will be in percentage-wise. And so if you look at many other companies in the industry that the average growth is well below that, even if some of the peer on the stock market have exceeded the average growth in the industry. So that is what we mean that it will come back. And when it comes to the steering, I gave it and we will be higher in that sense. Just to explain that guidance that we normally give the guidance that higher is 0 up to 20% and above 20% to 40% is clearly higher and over 40% is significantly higher. So currently we estimate here in the beginning of the year cautiously that our growth will be higher than it was the previous year.

Okay. And do you expect Q1 revenue to exceed Q4 '22?

And in that sense I think compared to previous Q1 in -- as we are -- I think we will exceed the Q1 on 2022 in that sense and be higher than that, yes.

Then how much is the share of biggest customer in revenues 2022?

Antti, can you take that?

Yes, we didn't disclose that number yet in this release. But when we release the full of the annual report, then you'll find the number there. But the biggest 4 we disclosed and it was 74%.

Yes. Then can we still expect double-digit organic growth in the first half of the year based on your backlog and visibility of customers?

As I said, we expect the growth in that sense that to grow both revenue and EBIT and be higher than we were the previous years. And of course, I know that everybody is fishing an exact percentage number on that. But I can't give that and we haven't published that and I will keep to my steering.

Okay. Then last question for now. Does this imply that you believe your customers have been growing faster than peers because Incap has been better outsourcing components?

Yes, and I think that is part of -- I would say we share the success with our customers. We have been able to deliver. They have been able to deliver. So I think we have been successful in that. And that is, of course, a part of it. And I think that goes also for all of the players on the market currently that the mass market has been able to grow, that they have done an excellent job during this period and facilitate that growth for their customers and then growing with them.

Okay. That was the last question, quite many questions. Thank you Antti and Otto. I give the stage to you, Otto, for the final words for this webcast.

Yes. Thank you very much and we will also as usual answer your questions in the interest forum and in the chatter or so. So if there is any more questions, then you can always try to put them there as well. But once again, I want to thank everybody for the interest in Incap. As I said, I think long-term electronics is a great place to be in and also this year we expect to -- our growth to continue and even if -- as I mentioned, a little bit more modest than the previous year. So I'm looking forward to continue working with the team and to develop our business further. We have strong financials and we have good possibilities also to look at M&A targets and we will intensify that work now and moving forward. So looking forward to the year and looking forward to the next webcast when we release our Q1. So thank you very much from our side as well.