Scanfil Oyj (SCANFL) Earnings Call Transcript & Summary

Good morning. Welcome to Scanfil's Capital Markets Day. This is the first one in Scanfil's history. Scanfil was listed in 2002, so it has been 19 years without the Capital Markets Day. And today, actually, this is historical moment as well because we have the first virtual factory tour in combined with our Capital Markets Day. Very shortly, our agenda for today. So opening words, then we will go to our CEO, Petteri Jokitalo. He will introduce Scanfil's strategy. Then Timo Sonninen goes through our sales, sales organization, our targets there and what we -- how we are operating there and what are our benefits compared to our peer groups. Then operations, that is very exciting. Actually, Riku will go through our operation, our system, also actually including our purchasing staff and so forth. Then we will have a short lunch break, around 30 minutes. Then we will go to Scanfil SMART. Markku, our CTO, will go that through. What I've seen actually before, there has been already quite many questions regarding this Scanfil SMART, what is it about, what does it do and so forth, and about the investments as well. Regarding the investments, then we will go to Kai, our CFO. He will go through the financials and our position there and what kind of benefits then what we actually produce to our investors. Then to the historical part, the virtual factory tour to Suzhou, China. It will be live-casted from Suzhou, so it will take something like 20 minutes. And then we will go to closing remarks. If you have any questions from the crowd, we have some 5 people around here. So just raise your hand, and Minna will bring you the microphone. And also through the chat window, what you can see on the Web, you can actually post questions there, and I will read those out loud here. Now next to Petteri Jokitalo. Welcome.

Thank you, Pasi. Good morning, everyone. Welcome to Scanfil CMD on behalf of me also. My idea was to tell you briefly about Scanfil, walk through the strategy, strategic key points, growth profit drivers, competitive advantage kind of topics, then discuss a bit about our outlook for the year and our long-term target, talk about a very important topic of sustainability, including how we are measuring our customers and people's satisfaction. And finally, there are possibility to ask questions. Let's start. Scanfil in brief, what we want to be and what we are. We are a trusted manufacturing partner for all the stakeholders we have, especially for our customers, of course. Our rolling 12-month sales until end of Q2 this year, EUR 632 million sales coming from 5 different customer segments. The biggest segment, Advanced Consumer Applications segment, about 28% share of our sales. Total amount of people, about 3,300. About 2/3 of our people allocated in China, East Poland and Estonia, and the 10 -- about 10% of our people are located each of the countries, Finland, Sweden and Germany. And finally, 4% of our people at United States, Atlanta factory. We are present in 7 countries. We have 10 factories, 9 continuing factories. We are going to ramp down and close our Hamburg factory in a few weeks, end of Q3. We have a factory in China in Suzhou, close to Shanghai. In Poland, we have 2 factories: one in Sieradz, the other in Myslowice. Estonia, we have a factory in Prnu. Finland, in Sievi, the place and city where Scanfil was born, 1976. In Sweden, we have 2 factories: one close to Linkping, tvidaberg; another in Malm. And in Germany, beside Hamburg, we have other factory in Wutha. And United States, we have factory in Atlanta. What we are doing as a trusted manufacturing partner, especially, we are focusing on electronics products manufacturing. So electronics manufacturing processes, of course, are the core of what we are doing. And there, we have wide range of processes, starting from PCB, PCB assembly, and then moving to other type of assembly processes, going to final assembly, final testing phase. And beside our electronics manufacturing processes, we have quite versatile set of other processes we are able to vertically integrate to our offering to our customers. And those other processes are including processes like sheet metal manufacturing, cable harnesses, very large set of different surface treatment processes and so on. And so we think so that our customers are getting the highest value from Scanfil if they are really considering outsourcing the completed products to Scanfil, and so they can utilize the whole vertical integrated manufacturing platform, what we have. We have also services, it's like needed before the manufacturing itself, then we are talking about product design or kind of the FX kind of services, then we are talking about services which are actually making product design really optimal for manufacturing. And that kind of services are really offered our factories as we are calling these close to customer R&D kind of factories, that kind of factories we have especially in Finland, Sweden, Germany. Then we have also so-called aftersales services, including repair, spare parts, retrofitting kind of services and offer quite big amount of our customers. If then moving to strategy and business drivers, as said, our like most important element or choice what we have done is to focus on products with the electronics. And there, especially we are focusing on products which are like manufactured in low volumes, then it's very many times means that also the mix is quite high. And that means that also those production series are rather short. And it's a rather important choice because then that means more or less automatically that our customers who has that kind of needs are pretty much industrial-metric kind of customers. And also, it's really like a driver. We are going to hear more later today about how we are selecting our production lines and then planning our production. But this is like the main driver, a guideline how we are selecting our production lines, how we are planning our factories and so on, that these are optimal for kind of high-mix, low-volume production. What we mean about low-volume production, then we are like typically talking about that taking one single product. We are producing like thousands similar products or maybe tens of thousands similar products per year, not millions or tens of millions like consumer electronics typically do. As I already said, we have also a clear factory strategy. We have 2 kind of factories. We have factories we are calling close to customer R&D kind of factories and then factories we are calling close to customer markets. In factories which are located close to customer markets, we are mainly serving our global customers, our large OEMs with global needs. And our close to customer market sites are located in China, East Europe and United States. There, of course, it's really core that we are efficient, we are able to improve productivity every year, we are really high-performing there. Then we have factories, as said, it's allocated close to customer R&D. There, we are focusing a bit different customers, maybe not so much global, our global customers, but more local, quickly growing smaller companies, if not really companies who are at the start-up phase, then rather quickly after that start-up phase. And it's quite typical that, that kind of companies are really appreciating very wide support also starting from product design. And that's the reason that we have our own resources to make product design or that DFx kind of services or we have partners. We have 2 selected global design partners. We are offering to gather these services and like completed design manufacturing services to our customers there. And then, of course, the aim is to help those smaller product companies to grow, scale up and be, one day, global and so we can offer our whole global factory network for their benefits. If you are looking at our financial development top line as well as bottom line during the past 10 years, we can see that we have been able to continuously grow, grow the top line and then grow the bottom line. And then we could say that at least during the past 10 years, we have been quite predictable company from that point of view. And why is that? We believe that one key is our customer base. It's quite versatile. It's quite wide. We have 5 different customer segments. If you are taking our top 10 customers, they are not real competitors. They are coming from different businesses. And also, if you see, we have seen the clear positive development what comes to our customer distribution during the past 10 years. 10 years ago, our biggest customer was making more than 30%. And nowadays, it's like 15%. Also, we see the same positive development what comes to top 3 customers or top 10, whatever. And also, we could say that having those industrial medtech customers, it's that point of view, I think that we have very good position because these customers, they tend to create very long-term relationship with the manufacturing partners. We have customers which started cooperation in early '80s and still continuing. It's not so often. It's very basically unusual to lose a customer if the performance is okay, if performance is satisfactory. And of course, our intention is to continue, continue the same trend that the business stays predictable. Our intention is to even further development, customer distribution and make sure that the balance between different customer segments is there. About growth drivers, historically, we could say that the EMS market as a whole has been growing like 3% to 6% per annum. Now there are some survey houses proposing that at least the coming 2, 3 years, we will see higher growth, even talking about 6%, 7% kind of tailwind as expected. And of course, the main driver behind that positive development is that basically, intelligence is going into all kind of products and electronics is everywhere. There, we -- and basically, it's widely believed that the electronics need of electronics manufacturing is growing strongly. Also, what comes to global megatrends, we see that our customer bases, as you see some brand names there, they are very well positioned to get the tailwind from global megatrends. And so we see that most of our customers, they have a great opportunity to grow in coming years. And then if you are serving them well, we are in excellent position to grow as well. M&A. Acquisition has been always in Scanfil toolbox. During the past 8, 9 years, we have made 3 acquisitions. We have done always acquisitions even earlier. And we have stated that repeatedly that we are just in the market, we are -- our balance sheet is basically ready for that. Our organization is ready. We know what we want. And as soon as we identified a good company strategically well-fitting to Scanfil and the price tag is right, we are ready to move. What comes to profit creation, the key has been successful manufacturing partner. The key is to keep the cost flexible and then fixed cost low. And we have been -- we have always understood that very well and still believe that this is really key also in the [ foods ]. And we have been rather good for that and want to be so also into [ foods ]. Our clear factory strategy, for sure, is one profit driver. We really understand the differences in factories. We understand then close to customer. Market factory, we need to pay really attention to our cost structure to be efficient, to improve productivity. And the close to customer R&D market, our value add must be high enough that customers are willing to pay with higher price. If they are not willing to do that, then there's something wrong with our offering. Our business model to focus on high-mix, low-volume customers and also technology, which is so-called generic, we can use it for a wide range of customers, is somehow key to keep our investments needs somehow on reasonable level of our depreciations as well. We think that somewhere to our typical investment need per year, including replacement and somehow reasonable new investments as well, will be somewhere between 2% and 3%, as well as our depreciations also in coming years. Business culture, last but not least, for sure, we are coming from Sievi. We have basically been listed since 2002. Before that, we're a family-owned company, a successful entrepreneur. We are pretty much taking the best part of that culture still with us. And especially, I would like to highlight 2 things. We have quite effective decision-making processes. We are rather fast decision-makers, and we are rather good when executing the done decisions. And there, you can see some indicators that how successful we have been in order to use our asset as well as return on equity, as return on investment have been above 20% level or close to that during the past years. Then a few words about the first outlook for this year. In June, we revised our outlook. We were like moving at the sales or turnover range to EUR 630 million, EUR 680 million this year. Originally, we stated EUR 600 million, EUR 640 million. Of course, the key driver behind that was very healthy customer demand; also, some extent, rising raw material and component prices, but the main driver, very good customer demand. And we also improved our EBITDA range to EUR 41 million to EUR 46 million, originally EUR 40 million, EUR 44 million. There are 2, like, main risks in the year. COVID-19, of course, it's not over yet. Even we have learned a lot to live with that, and we do not see any immediate risks with that right now. Other is materials and components availability. This is a risk definitely not over. And we need to fight every day in order to keep our factories and products lines running. And it's very difficult to say when this is over. If talking with, for instance, semiconductor manufacturers, they are saying that it's at least next year, we can expect that situation to continue. Some of them are saying that maybe even 2023. We are not expecting any quick recovery there. Then long-term targets, a target we set 2 years ago. And in 2023, we are aiming EUR 700 million sales with 7% operating profit. It's really like interesting to see how quickly market condition is changing that when I remember that in this year, February, when we published last year result, there were questions that the -- is the sales target really realistic to get to EUR 700 million until -- or in 2023. And I say that, yes, it's realistic, but that means that we need to be able to grow faster. That instead of growing like 3% per year, we need to go up to 5% per year. And we have taken actions, we have recognized, we have prepared as we are going to do that. Now there may be questions that, hey, is this really aggressive enough because we may be quite close to that already this year. And this is pretty much because of this quite strong market change, what we have been testifying this year. And we have started the strategy around just in Scanfil. And for sure, that will be one topic we will consider, reconsider and then come out when we have possible new targets. But this is still the valid target until we change it and tell it. What comes to 7% operating profit, even we are still a bit behind, I think that this 7% is really a realistic target. That, of course, means that we have all factories are more or less in, let's say, decent shape and we do not have any ramp-downs or closings or something like that ongoing. But as said, now Hamburg will be closed by -- in -- by end of Q3, in the coming 2, 3 weeks. And then at least the next year, it could be excellent condition from that point of view to try to reach that target. Then very important topic of sustainability, what that means in -- at Scanfil, a few words about that. Like when like reaching that topic from using 4 different angles, one is, of course, environment. And in environment, of course, we are pretty much thinking and setting targets and spending efforts to make our energy raw material consumption as efficient as possible. We also continuously try to reduce different kind of waste and our carbon footprint. Responsible offering is pretty much -- and the efforts below are pretty much ensuring that our offering to our customers remains valid and is sustainable and responsible. Pretty much we are listening our customers what they want from our side. We are committed to continuously improve our offering. And of course, everything, whatever we are doing as well as our partners should be adequate, high quality. We also can take people angle, and we are taking the people angle. And there, again, this is really carefully listening what our people are feeling. Are we a good workplace for them? Are we helping them to develop? Are we making sure that they have a safe environment where they can work? And are they being continuously developed as well? Partners and community, we definitely want to be good corporate citizen. And we wanted our supplier and whole supply chain, they want to be good corporate and they are good corporate citizens as well. And if going to more exact targets then, starting with responsible consumption. First of all, I need to say that you can see that we have like a clear annual targets, how much we want to reduce, for instance, carbon footprint, it's like a 4.2% per annum. But this is based on the growth target that we have made, like a baseline that we are going to grow like 5% per year, that sales is growing like 5% per year. It's not guidance, it's not really financial target, but this is how we have calculated those reduction targets. That carbon footprint, 4.2% per year, and that means if we are able to do that at 2030, our fossil-free energy consumption is higher than 50%. It's pretty much then heating and electricity. And if going that to responsible offering, we are continuously using KPI like customer satisfaction. I am going to show you a bit later one example of auto or snaps of the latest study we did in June, how our customers are feeling. There are also other KPIs, how we are measuring that. And what comes to people, we are regularly measuring our employee satisfaction by measuring -- we are calling like engagement survey and also showing you soon one snapshot about the development there. Partners and community, it's pretty much -- one tool there is code of conduct where we are defining how we want our partners to behave and what we mean when we are saying that we are expecting ethically high-quality behavior from our supply chain. Then going to this customer satisfaction. As said, in June, we made the latest -- the customer satisfaction is measured like twice per year. And now in June, we had the latest result. And then just taking -- selecting one NPI, and this is like a Net Promoter Score, where we are, it's like a score how our -- what our customers are -- how they are rating us if asking that how likely you recommend Scanfil as a supplier, and the scale is from 1 to 10. And basically, in that NPS score, we are reducing those promoters who are giving 9 or 10. This is the score. We are basically then reducing from that promoters to detractors who are like giving a score 0 to 6. And our NPS is at -- was in June, 25. Using that scale there, it's still good. It used to be a bit better. We have seen growing trend used in the past years. And for instance, our December result was a bit better, that most likely this material availability is a bit negatively impacting now our customer satisfaction. But still good level and quite close to actually great. And then if solving our employee engagement survey, we have used a similar survey since 2016. It's done for the whole personnel, all factories using the same template. And here you see the group results. Basically, 2 key KPIs like satisfaction and motivation, we are level 68. We have been like growing quite nicely, continuously from 61 to 68 during the 5 years. Loyalty is the other key KPI, what we are measuring, and there you can see continuous improvement as well from 71 to 77. And our aim is to continuously improve both of these KPIs every year. That was pretty much my presentation, and now there could be time for questions.

Do we have any questions from the floor? Okay.

I only got one.

Okay.

Or do you want to give the chance to an [ expert ]?

Okay. You can take the first one.

And we continue in English?

Yes.

Yes. So I think I have followed your company, I remember it was EUR 0.90, so I think it must have been 8 years ago or so. And so now it's 10x more valuable from the stock market point of view. So congratulations. I think you are a great Finnish company with great Finnish family owning it. And I think following those 8 years, your company, I think the great thing is that you are always under-promising and over-delivering. And I think as Petteri told, that's also the case in terms that 2 years ago, 2019, you told that in 4 years' time, you want to be EUR 700 million turnover company, EUR 50 million or EUR 49 million [ leak avoid ] operating profit. And now it's -- and indeed, like Petteri said, it was somewhat ambitious goal at that time, but now it seems that you are within -- almost within a kind of rounding error of already receiving it 2 years after instead of 4 years after. And so now, of course, as a shareholder, I'm already kind of dreaming that, that will -- when you are in the future, hopefully before 2023, when you are giving you our next call, and I already dream of a EUR 1 billion company, we are certainly $1 billion, I hope, but maybe even EUR 1 billion company. And interesting enough, the market value has gone up almost exactly the same line. So market values seem to be roughly your turnover. So obviously, this is about the future, so you cannot say too much. But what can you say about the future goals of the company?

Yes, if starting that, assuming that our strategy also in the future is pretty much electronics manufacturing and high mix, low volume, I think that there are enough market to grow and be even multibillion-euro company what comes to sales. I don't see the market to limit our growth. Then of course, this time, I think that growth itself without profit, it's not what we want, that it's important to somehow find profitable business model and profitable growth opportunities. But going to EUR 1 billion level, it's realistic. Time line is not defined, need to think about that. But why not? Scale also matters somehow in this business and see some benefits if being bigger, for instance, what comes to sourcing volumes, grip of suppliers and that kind of topics.

Right. Next, Pasi Väisänen from Nordea has questions regarding our customer segments. What customer segments are the most affected by this global component shortage problem?

I don't think so that it's pretty much related to customer segments. That basically, especially everybody who is using semiconductors, so chips, they are negatively affected. And that kind of intelligence where semiconductors and even chips are used basically, it's everywhere. Then what comes to material availability is related to metals. Basically, we have been able to solve these issues a bit better using some extraordinary measures. Maybe could we demonstrate that we have more customers where like sheet metal is used in, for instance, this Energy & Cleantech segment.

Yes. And Advanced Consumer Applications as well, those 2 segments.

Yes, Advanced Consumer Applications as well. But as said, we have been able to find, let's say, easier solutions there.

Yes. And Riku will actually continue regarding the subject as well. Another one from Pasi. Which customer segments will offer the best growth in the future in the next 3-years period?

Okay. Now I think that if you are thinking about the potential, it's pretty much then customer-specific, that we could have a great growth customers in each segment. Of course, someone could say that the Connectivity customer segment, Connectivity is somehow maybe the center of very many megatrends. And percentage-wise, that's possible that we are going to see the growers -- the strongest growth, especially take in consideration that it's smallest segment now, what we have.

Yes, it is. Pasi continues regarding the risk in China, maybe because of our investment plan. Would it be possible to -- that growth in China could calm down in the future from the levels what it used to be?

For sure. I think that if thinking what it used to be, I think that -- are we then talking about that officially communicated 5% to 7% growth?

Yes.

That's -- I think that is quite expected, especially if time line is not defined.

Yes. And also quite right, has the issue with components availability worsened during the last 2 to 3 months? This could be also answered by Riku.

How I see it, the situation has been very severe since Q2 this year and at least basically no improvements seen.

Then a question regarding sustainability and customers. Are your customers more interested in sustainability? And are there any concerns raised?

Yes. All customers are interested in sustainability, and companies are really taking that topic in the agenda very seriously. And they are expecting that the partners are also taking that seriously and beyond so that the partners are taking care of their own supply chain. So I'm not -- I think that no specific worries rise up. But for sure, everybody is taking it really seriously. And this is -- the importance is going to grow.

Okay. Is there any questions from the floor? I see no -- oh, one more.

As an investor advising a couple of reasonably big clients who would like to -- I mean, they love your company, but the problem is your liquidity. They would love to take a EUR 5 million stake. But if I -- I can't remember exact number, but Takanen family and a couple of big other owners, I think it's -- is it 80% of the shares? You probably know the number, but it's reasonably big.

Maybe if taking like [ wide ] Takanen family, it's less than 50%.

Yes. But kind of if I look at the 10 biggest shareholders, I believe that they are going...

Yes. Then I then -- yes, that level. Yes.

This is, of course, mainly about the company, not about the owners. Any idea about -- will this change when you become a EUR 1 billion company that there will become more liquidity in the market and a more reasonable price for the company, which seem to be undervalued at the moment?

This liquidity is, of course, is recognized by the, for instance, by the Board and discussed there. And of course, it's difficult to say what's going to happen. But I think that this is more likely that, than less likely, that after 5 or 10 years, there will be more liquidity one way or other way. That's pretty much my personal opinion and feeling. But that's recognized, that liquidity thing. And there are, of course, different ways to increase the liquidity. And in some cases, there could be natural ways to do that.

Maybe a couple of words about this liquidity issue. Last year, I think that approximately 8,000 shares were traded during the day. And this year, we are around 12,000 to 14,000, so significant increase already there, but not really deep pockets for EUR 5 million. But anyways, better liquidity this year already.

All right. Okay. Thank you, Petteri.

Thank you very much.

Now next, Timo Sonninen is in charge of our sales and also actually marketing and communications. Please go ahead.

Good morning. My name is Timo Sonninen, and I have worked for electronics industrial business since 1988, over 30 years, for a couple of companies. Now last 8 years for Scanfil and responsible for sales, as Pasi mentioned. The content of my presentation, starting from some sales topics, going to why our customers are selecting Scanfil as a manufacturing partner. Sales activities, our elements, how to boost organic growth. And starting from our sales organization, in global organization, we have roughly 30 people, 3 different functions. And areas are global account management, people who are taking care of existing customers. Then we have new sales function, looking for potential good new customers as well a quotation team providing the cost calculations for the salespeople. And it's a global organization. We have people in China, in Europe, in North America, as we had factories in Petteri's presentations as well. Customer survey, as already mentioned, twice a year. But the survey itself, of course, is not the most important. More important is the feedback and how to utilize the feedback. So we have a process. We are getting the feedback related to capabilities, capacities, but also how do we cooperate, how do we communicate with the customers, et cetera, so different areas. And we are providing corrective action plans and presenting those to each customer, that is this direction you want Scanfil to go. And taking strong actions within a few months before, of course, the next survey, as mentioned, twice a year. Our main processes where sales is running and owning our new customer acquisition process, RFQs, so it mean quotation process. And for our forecasting, we have a rolling forecast process by the customer and salespeople. They are responsible, that customers, they are really forecasting. And nowadays, it's really, really important to get forecast process to be run because of this component availability challenges in the market. And at the same time, let's say, roughly a year ago, when we started this year, 2021, we reorganized a bit our sales organization as well the processes we streamlined. And for example, new sales, we have 5 different regional areas, responsibility areas in China, 3 areas in Europe and 1 in North America. And then this new customer acquisition process has been developed and focused, especially Central European area is one focus area where we are growing nicely. Scanfil as a company is very target-oriented company, but also salespeople and sales organization. We have a clear target incentives. When the people are doing good, they can get some bonuses, let's say, a couple of few months per year as a salary level if everything is going as planned. For each key customers, we have a so-called customer plans, including needs and what kind of growth ideas, growth plan we are looking for. And this is also a plan that we are not hiding with the customers. We go through with each customer that are we in the same page, how do you see Scanfil potential and what kind of investments, what are the global factory footprint is needed, et cetera. Target is to grow. Of course, sales can't do that only with those 30 people. So our network, intra-network, we have a cross-functional teams coming from different functions from the plants, very close collaboration. For example, each plant have a customer service management organization. So that those people, they are taking care of daily order to delivery process. Of course, account managers and sales guys, they are leading the team. And we have a couple of customers that quite many our plants are producing the products to that specific customer. So there is a leader coming from global sales. But then the plants, of course, are producing the products and taking care of order to delivery process. Marketing communication activity is very close with sales and supporting to grow. Customer segments, once again, those 5 selected segments. And based on our market analysis, we really believe that we are in the growing businesses with our customers. So there is some megatrend and key drivers mentioned in the slide that we'll be leaving. And it seems to be also that if you look our top 10 customers, which are roughly a bit more than 50% from total sales coming today, and also those have been split quite nicely with different segments. So that's also good. Related to those megatrends, for example, it is Energy & Cleantech segment. And as an example, with Tomra, we have a huge growth potential. Tomra is really driven by megatrend for circular economy, and we are providing solutions for them. And it's really partnership mode, the production and shipments from our plants. We are already shipping those to end user, can be little in Hamburg or [ Prisma ] in Helsinki, and we are shipping directly the line to the end user. Connectivity segment, as Petteri already mentioned, is one and including some traditional telecom companies, but as well quite many new start-up and small companies. And there is nice growing potential, of course, related to industrial Internet and connectivity solutions. Today, our offer is covering the whole product life cycle. And our services, processes, functions has been -- have been built to serve high-mix, low-volume, medium-volume needs. That's the key. And of course, core business is manufacturing services, producing the products, but more and more important also to be early involved in the phase when the product design is ongoing to giving strong support, even providing product design and then when we go to the ramp-up phase, supply chain setup, cost optimization and so on. Those are the phases our organization is really working very closely with customers. So this is the partnership mode today. And then after mass production phase, going to the end of the product life cycle, we are also serving customers with some repairing services to keep product alive, spare parts, product maintenance, some -- even some distribution services to keep some products in the stock, et cetera. So this has changed now during the couple of -- if you go back 10, 20 years ago, the business was mainly to manufacture the products and this part. But today, it's really partnership mode. And in this industrial and medtech segment, those life cycles are typically quite long. We are talking easily 10 years and even more to produce its one product. In some consumer business, you know that the product life cycles are much, much shorter, but we are not working for those kind of customers. Of course, benefits to customer is that time to the market is shorter when we are working together. Cost, as said, that we are really focusing on what would be the cost in the mass production phase. And of course, for us, it's that stickiness is coming that customers they are, as Petteri already mentioned, that more or less, we are not losing customers. So when they really select the manufacturing partner, we are working together to keep customers and time to market, time to profit even in a product level. Okay. Once again, those are our core services in manufacturing. electronics. Of course, it's the key producing PCBAs by our SMT lines and a lot of equipment. Mechanics today is more supporting our system integration products. So we are producing sheet metal parts, but mainly to build box-build units and complex system-integrated products to our customers. Last one on the right side is production outsourcing. And this is the area we are developing. And I can mention one reference, Ankarsrum, a year ago, we -- they decided to outsource in Sweden their production to us. And now we are producing as a single source, all Ankarsrum products, and it's already a quite good business. So this is the area we are also focusing on and looking for good growth potential. Time to life and to market, those are, as I mentioned, this product design. And those 2 mentioned partners are Sigma Connectivity, focusing on, of course, connectivity solution; and Etteplan is our partner also in this product design phase, as we have also our own resources, mainly in Sweden. But once again, it depends on the case by case. Sometimes we can take the responsibility to have a total package or part of the product's design. And there is a very good references, for example, that from product idea, one quite big, our customer, they came to us with the product idea. And we took the responsibility of the design with partners. And the time from the idea, and we were in a mass production, was 9 months. And that was better what even this customer was expecting. Expectation was to have a longer -- that was a really good project. Design for excellence, very key area, how to do the design, component selection, test strategies, et cetera, that the product is easy to produce and cost optimization is in place. Prototype manufacturing, we have separate processes by the plant to produce prototypes a bit because the lead time is crucial. So there is some shortcuts in the processes, but those have been agreed with customers, for example, to use maybe some alternative components, what are available and so on. But the lead time is the key. One case I can mention, Vaisala. We have worked a lot with Vaisala technology company to reduce our lead time in a prototype manufacturing and give the good feedback to them that how to design the product, that it's easy to produce and so on. So this is really working nicely and good feedback from Vaisala. Test development is the area also that today, more and more customers, they want to outsource test development. It's not the core. So we are taking responsibility. And not only anymore those production-related ICT testers, but also functional testing solution. And we take whole package, whole test strategy of the product and using our own Scanfil ODIN test platform to produce and serve -- offer test solution. Somehow the basis of the product and partnership is here and before we go to the mass production. Some product maintenance services, distribution, of course, as I mentioned, optimized supply chain, balancing and easier balance factory loading. There is some accrete buffer stocks to be able to fulfill, for example, non-forecasted demand. There is always coming some demand from the customers that they haven't forecasted, but we have been able to, quite nicely, to ship. Repairing services, as I mentioned, to keep product alive, do some revision changes, software changes, et cetera. Cost improvements, not only in the early phase, even in a mass production phase, we are running value at -- value engineering project with the customers to keep costs and even in the same level, a certain level or even going down. And there has been some customers that -- who has awarded us because of this function. For example, 2 years ago, it was Nokia who gave the Supplier of the Year Award for us related to cost improvements. Supply chain, always, of course, important. But today, even especially important, how to set the supply chain, how to have reliable suppliers to get components. Okay. We can also split our customers in different ways. So I mentioned those start-ups. We are -- by quantity, we have even more than -- about 15% from our total customer portfolio, we have a small company, start-up companies. And of course, with those ones, they are not investing at all for operations or for own production. So it's like fully packaged for us. So we are the manufacturing partner for them. And target is to, as Petteri said, that scale up in the future when the business is really flying. Of course, there is some risk that some cases are never flying and that we try to be and we need to be very selective at who are the potential partners in those -- with those start-ups. Then our legacy customers, of course, 85% from total customer portfolio by quantity, by turnover, of course, even more than 85% coming from established customers. The question, yes, why those very well-known international companies who are market leaders in their own segments, why they are selecting Scanfil as a manufacturing partner? Starting, I think, quality and trust is the key. And not only quality of the products we are producing, but quality is everywhere. When we are providing quotations and whatever we are doing, it must be no compromises with quality, our processes and so on. Of course, this -- we have a quite wide -- this manufacturing service, we are able to produce in-house cables, PCBAs, sheet metal mechanics and, finally, the system integrated product. That's a very good, unique selling point as well in the market. We know, of course, market very well. Scanfil has been almost 50 years and focusing on industrial and medical businesses. So we know that. And reference customers, there has been cases that some new customers, when they know who are the partners today, it's also a very good point and can be quite important also that they can trust that when we are working with those mentioned big boys, so many, many smaller companies, at least, they believe that the processes and services are in a level as should. Global reach, plants as well sales organization, as I mentioned, and so on, are global ones. So we are able to serve locally and globally. So that's the key. So many smaller customers, they are more locally, and plants are taking care of the business and communication. But then when growing, we have a global organization and service footprint to give to them. Okay. So let's say that once again, to be as a manufacturing partner, so today, the roles are very clear. Our customers, they are focused on their own market, sales and marketing, maybe some research and those activities. But when going to product design, it's already started very, very good close cooperation during the product design. And then Scanfil is responsible for production operations and taking care that the products are in live as long customer see some needs from the market. Also, the sales -- sometimes, I have received the question, how many people are working for sales at Scanfil? Of course, you saw that for our global sales organization, 30 people. But I -- sometimes I'm saying that 3,300 people. So somehow, whatever we are doing, we are working for sales.

Thank you, Timo.

Are there any questions from the floor? Antti, just a sec.

If you got, let's say, clearly more financial resources at your use, what would you do to improve group sales at first?

Sorry, what was the background?

If you got clearly more financial resources at your use, what would you do at first to improve group sales? Where would you invest?

Difficult to hear that.

Where would you actually spend the money if you had all the resources to invest in sales, what would you do?

Very close to our ears. I still believe that we have had a quite good resources to do what we want to do. So as I mentioned that we have reorganized. We have hired some new salespeople. We are -- we have refreshed our processes. So I don't see big needs, and I don't see that the money helps too much this moment. Of course, by the acquisition, it's easy to grow, as you know very well. So there, we need money. But if you look organic growth, yes, as we have seen that how the growth has been in the past, so normally, in this business, it's a 1-digit growth we have had and we are looking for. So more, of course -- yes, I don't see that money helps too much. I don't know, Petteri, do you have any other comments to that? But...

Now for sure, we have been now like increased our sales activities in China and United States. And we are still somehow at the beginning. Most likely, we are going to increase our resources there. But as you said, we have financing in place that we are going to do that organized way when we are ready.

Correct. Okay.

We hired last year and this year as well for the staff for the sales?

Yes, yes, yes.

Pasi from Nordea. Are your products and services cheaper or more expensive compared to industry average or compared to main competitors? That's a pricing issue.

I think it's -- of course, different customers and different business models agreed with in the agreements that what kind of business models, and that's variating, of course, depends on the customer. And of course, if you look at our competition, we can see that the company profit level point of view, we are in the page. And that's also our understanding that how our competitors, how they are -- yes, what kind of pricing models they have. So we are in the same page.

Yes. Okay, thank you. Another one from Pasi. If all customers in the sector are sticky, would it also mean that it's hard to get the new big customer from a competitor?

Of course, yes, that's true that if competitors has already selected some partner, of course, it's not easy. There must be some big issues if they really want to get rid of the current existing partner. There has -- some cases has happened. But of course, then many of those big customers, they have a sourcing of it to have at least 2 partners, not only as a single source. So then it's all of us competition of the market share. And previously, Petteri has been mentioning that in Germany, some who has in-sourced or in-sourced manufacturing, they might be outsourcing it. So it might be a new chance as well. Especially, one focus area is Central Europe where we can see big potential because many OEM companies, they are still producing electronics and system integration by themselves. So they haven't outsourced yet so much as here in Scandinavia.

Just a question regarding the Connectivity. I think that Petteri already touched this subject upon. Connectivity segment is rather small, 5% of your revenue. Do you have any plans to grow it? Or how do you see the future of this segment?

Yes, definitely, the target is to grow. And yes, as mentioned, that segment is including some, let's say, traditional telecom players, big global ones, but also start-up companies. And we can see potential to grow.

Okay. Thank you. Another one. How do your customers take a global shortage of components and materials? Can you get the price increases in customer prices?

Yes. We have a regular process to update our prices with customers, not only in this situation, but always that it's -- there is a component market, the prices are changing as well, currency exchange rates and so on. So there is -- in the agreement with the customers, we have a process to update our prices even monthly, quarterly, annually, and that works. So of course, always a question that, is the timing exactly in the right place? But as a big picture, yes, definitely, we are doing that.

[ Jorg Hille ] has a question, maybe it's kind of a follow-up question on this question. How many new customers do you get in a typical year? How is your new customer acquisition pipeline now compared to the end of last year? Some kind of an indication.

Yes, okay. Pipeline by quantities and by potential, what we are measuring is higher. So those changes we did that we have those new -- for example, in North America and China, we started early this year new sales activities. It's -- we can see already some results coming as well. This year, it seems that we are able to fulfill our -- even our actual sales turnover by the new customers, what we planned when starting this year.

Okay. Good to hear. All right. Next, we will actually thank you, Timo. Next, we will jump into the hot topic of materials and components, so operations. Welcome, Riku Hynninen, our Chief Operating Officer. The floor is yours. Thank you.

Thanks. Hello, everybody. So another day in the office, so sales is making their pitch and then operations comes to the stage and tries to take care of the operations stuff before the deadline, which is lunch today. I'm happy to be here. My name is Riku Hynninen. I've been with Scanfil since 2018. My background is in a Finnish telecom giant for a little bit more than 20 years, having worked in different operations, leadership positions there. I will go through some highlights around Scanfil operations, starting from the factory network, which we have been addressing already today, and then go into the sourcing part and the materials market, which is having a challenging times. And then I will spend a few minutes on the flexibility and how the flexibility is achieved in Scanfil operations. And then finally, I will end up with the kind of the core of operations management, which is performance improvement and continuous performance improvement. Okay. So you have already seen the factory network. So I'm not going to repeat a world tour once again here. One thing that I would like to highlight related to the factory network is that all of the Scanfil factories are P&L-responsible factories. So they are not like cost centers. They are responsible for delivering the profit. So they are the kind of profit realization engines of Scanfil. And also the management in each of the factory is incentivized to deliver not only operational performance, but also profitability. Then moving on to sourcing, which is today especially very, very important part of supply chain. In the past few years, it was mostly about how much we are able to negotiate the component prices down. And now on top of that, there is a huge effort getting the components in on time so that we can deliver the sales. How we are organized in sourcing, we have a global sourcing, which is the kind of looking after global categories that are commonly used across Scanfil factories. We have category management in place for those global categories. And they are taking care of the global suppliers' relationships, handling the price negotiations with the global component suppliers and also taking care of supplier development and performance improvement. So global is about suppliers where scale matters, that we can benefit from scale. And then when we move to the local sourcing, which is basically a team -- smaller sourcing teams in each of our factory, they are focusing on local suppliers that are typically used only by that very factory. So it's a very local type of business. And they are doing the same in smaller scale. So looking after the relationship, supplier performance and try to negotiate the best overall terms and conditions, including the prices. And these global and local teams, they are working in a community, sourcing community. And also how it works that we are starting from the global category strategy and then we cascade the targets and objectives to the local teams in different factories. In total, it's about 50 persons taking care of all this in Scanfil. Then moving on to the market situation. So obviously, all of us who are following Scanfil and following the supply chain in this world are familiar with certain challenges that the supply chains of this world are having. So first of all, before the pandemic broke up, we started to have a trade wars in laws. Then came the pandemic which turned into global supply shortages in -- especially in semiconductors and metals, led into a price inflation in selected categories. And also still today, we see disruptions in transportation, which are very unfortunate because they impact us with sudden surprises of not getting the materials on time because the transportation was delayed. So what we are doing? We are doing very -- putting a very high effort on mitigating the impacts to protect our customers from the supply chain disruptions. First of all, it's very important that those long-term partnerships we have established with our preferred suppliers are nurtured because trust and relationship gives you a better position in the game. Second, we have made a lot of tactical moves like extending the forecasting periods that we are giving to our suppliers. We have increased the supply lead times in our ERP system so that we are sorting the orders earlier than we used to do before. And also in selected cases, we are placing fixed orders for certain time period for a supplier. All this is being coordinated in a company-wide [ war room ] activities. And in very many cases, especially list of most difficult components that are really having its biggest business impact, we are also working very closely with our customers. So it's like 3-party, sometimes even 4-party escalations that we are having with our customers on our side, with our distributor and with our supplier and ourselves, trying to make the best out of the situation. So on top of that, there are, of course, other ways than just to escalate and try to order as timely as possible. It's also about our component engineers finding alternative sources that would fit as a replacement for a certain part. We are working with some redesigned cases to design out the worst components with shortages and things like that. So -- and there's -- maybe one reflection of the situation. This is like an open question to the industry that everybody is saying that the semiconductor difficult situation will carry over to 2022, and nobody exactly knows when it will be over. But it will be interesting to see what is happening in those design laboratories. Those companies who are designing the components with new selected components, which components they are choosing and how this will change the game over 2, 3 years of time. Okay. Then moving to flexibility in operations. So the 3 key building blocks of flexibility in any given factor is, first of all, built on flexible employee base. So in Scanfil, we have about 3,300 internal employees. And on top of that, we are using a more flexible workforce of about 1,300 external and temporary employees. In all of our countries where we operate, we have established channels, hiring people. And that -- naturally, as part of our sustainability agenda, we very much respect all the local rules and agreements and laws related to employment. And second, moving to technical capacity. So another source of flexibility is equipment. And equipment flexibility can be thought of in 2 ways. One is that you can always trigger investment purchase for a new equipment and expanding your capacity, to get more capacity, to get rid of a bottleneck. Or you can swap the machinery and equipment between the factories, which is based on the idea that in Scanfil, our different factories are sharing the same platform what comes to production technology. For example, surface mount technology, intelligent vehicles, et cetera. Also, not only talking about kind of physical equipment, but also talking about the digital world and digital platforms. In Scanfil, all the 10 factories, they share a common ERP system, which makes it very, very transparent and very flexible. For example, if you need to have a team from another factory supporting another factory for a period of time if they are having a capacity shortage in that area. Also, digital working instructions enable quick movements of products and production documents between the factories. Then come to third lever for flexibility, the subcontractors. So in several factories, we have kind of circle of local subcontractors that can provide us quick capacity increase. Or they have a complementary technology that Scanfil does not have as its core technology and probably not a very attractive business case to invest in such a new process. But in those cases, we are benefiting from this partnership networks, call it subcontracting. So it's both about capacity and capability subcontracting. And next slide, I will further elaborate how the flexibility dynamics work. So starting from the employees. Typically, when talking about external temporary employees, depending on the local laws and regulations, we can achieve quick improvements, quick flexibility impacts, talking about days or weeks, maximum, that we can scale our capacity up and down. When it comes to internal employees, if -- it's, of course, not as flexible. However, we can do a lot with overtime arrangements and adding shifts, et cetera, always, compliance -- in compliance with the local rules. Second area, subcontractors. So if we are outsourcing capacity to a partner which is established for that factory, it can be done in a matter of days. If we need to develop or we are talking about new parts for the subcontractor, we would be talking about a few weeks. Then when it comes to equipment and tools, I pretty much addressed that already, that it gives us a possibility to optimize our global capacity across all of the factories. And then naturally, when we see a need for additional capacity, we are making fast decisions, triggering investment request and that getting -- going forward with that. And depending on the lead time, we are talking about weeks, sometimes months that we -- is needed to increase the capacity. And then fourth picture which I added here, which is not like a single factory thing, but of course, we do have the factory network. And we can invest in the factory network, expanding our factories. We can do cross-manufacturing. So not only using subcontractors to help with the capacity bottlenecks, but also move some part of the capacity for another factory, which has similar equipment, similar processes. So it's -- we are talking about weeks or months, and that can be done. Okay. Then last part of my presentation is related to performance management. Let's talk about continuous performance improvement. And the key performance indicators that we are measuring is, if we are delivering on time, if our customer perceived quality is good or not, how is our inventory turns? So factories are also responsible for managing the net working capital on their part. And then fourth, the productivity, which we intend to improve every year. So how do we operate? So once in a year, as a part of our annual strategy review process, we are talking with each factory and setting long-term targets for the factory. And it stems from a strategic analysis that we do in our factory network, looking at what is the strategic position of the factory? And what is the performance of the factory? And that ends up in like a 4-field analysis of strategic performance and -- strategic position and performance. And then we can see there are some factories that are in urgent need to improve the performance and some factories might have excellent performance, but we see that the strategic position is a little bit soft. So the performance might be short-term unless we improve the strategic position. So that's the thinking process behind, and then we set the targets. That ends up in a consolidated plan that the operations organization is coordinating. And that is cascaded down to annual targets for the key performance indicators, improvement projects. They are strategic and proactive by nature. They are aiming at forward-looking improvements in the performance. And naturally, as every company and every operations management -- manager in this world has a lot of KPIs to deal with and following that in the dashboard to make sure that there's tight grip on performance. And then the annual targets and the One Plan execution is followed up on a monthly basis in the reviews. And the main emphasis is on these proactive matters. But also along the way, when surprises and different kind of events happen, there are also some reactive things that we get on board once we see there is an issue somewhere and try to fix that by setting up new improvement actions. In addition to that, I would say that really the core and heart of performance improvement is happening every day in the factories, in front of the white boards, with the key people gathering there every morning, looking at the performance, looking at the targets for the day and for the week, handling the issues that come up in order to have what should look like a seamless execution to our customers. Here is an example, for those who love graphs. So just an example of this continuous improvement concept that we have been applying recently. So starting from the top right corner, you see there is like a 3-years trend of performance of on-time delivery. And you see that the target has been improved or increased year-by-year because we have seen that, what the heck? This factory is outachieving the targets every year. And what we are looking at those graphs is the trend. The trend need to be improving. And also, it not only improving, but if we see a lot of variation in the month-to-month performance, that also raises question. What is the reason the performance is varying month-to-month? And to support our analysis, we are using our analytics platform to crunch the data and look at the Paretos, okay. What are the -- which customers are the delivery issues related to? And also, what are the reasons in the processes? Which processes are causing the delayed shipments? As an example, we do that for the other KPIs as well. And based on that, we are not only having like a short-term reactive view on issues. But we are also able to follow longer-term results, where the problems really are in order to have the most effective measures to overcome those issues. And then on the left side, you see there is like a traditional action table to demonstrate the actions, responsible persons and the deadlines. Okay. Thank you bearing with me, operations part. And now see if there are any questions and answers.

There are a lot of questions actually popping up. Maybe the first one will go actually to Kai instead of you because it's a P&L question. Any negative impact from the price increases in semis and metal regarding your own P&L? Or is it always passed to the -- on to the customer? Could it be you or Petteri? Yes. We will come back to that in the last presentation when Kai is on stage. Pasi Väisänen from Nordea again. Are you in a same -- some cases, a subcontractor to another EMS company? Or are you only supplying products and services to your own end customers?

Well, we have some very limited cases where Scanfil is a part supplier for another EMS company. But I -- for what comes to business relevance, it's really minor.

Question from [ Mika ]. This is actually regarding sales, maybe to put it in -- well, -- have you -- have the supply chain challenges during the pandemic caused changes in the behavior of your customers? Do you think that -- think your customers want to diversify their range of electronic suppliers to a higher extent as this could perhaps secure their supply situation better than doing business exclusively with one supplier? So have we seen any cases that we have lost customers because of this?

Maybe I can start, and then, Timo, if you would like to complement. What has materially changed is that instead of meeting the customers face-to-face, instead of having customers coming in person visiting our facilities, we are doing all that virtually. And that is the -- one of the biggest thing I have been amazed in COVID pandemic, how well these things work on a virtual setting. Personally, I do not see a COVID pandemic driving a big changes in customer sourcing strategies. There are maybe pros and cons. And one pro would be that if you have a reliable supplier who can demonstrate that they can deal with COVID issues, they can deal with supply chain issues, then I think it's further building the trust with the customer.

Do you want to continue, Timo?

So shortly, we have not lost any customers because of COVID and vice versa. Actually with those new technologies, as Riku mentioned, that we have won some new ones, even more or less without to meet new potential customers face-to-face.

Good to hear. One further question regarding the biggest bottlenecks. At the moment, what you see?

Yes. biggest bottlenecks, obviously, certain parts, especially in the semiconductor side, certain suppliers there. So I don't want to go into names, but it actually comes down pretty narrow number of suppliers that are the biggest gatekeepers at the moment in the market. And then as I explained in the flexibility on the operations, we have seen a very healthy demand this year. And we have been working a lot with the factories to increase the bottlenecks. And this is basically what we are constantly doing. But all those internal bottlenecks can be solved, and we can influence them. But what is difficult part is the semiconductors that nobody can really make a big change.

Yes. Okay. Thank you. Thank you, Riku. Very interesting. Next, we will have a short break. It's around 25 minutes break. And we'll be back at noon, Finnish time. And then we will continue with Markku's SMART presentation. Thank you. Now for the break. [Break]

Welcome back from the lunch break. Back to Scanfil's Capital Markets Day. So next, we will have Markku Kosunen, our Chief Technology Officer, actually telling about Scanfil SMART. Please, Markku.

Thank you, Pasi. Hello, everyone. My name is Markku Kosunen, and I'm working as a Chief Technology offer -- Officer in Scanfil Group. I have been in EMS and contract manufacturing business since early '90s in several companies. I joined to Scanfil 11 years ago, 2020. And first, around 6 years, I was leading the global operations. 2019, I started in our current position and then led this Scanfil SMART program, which I will tell you in next. So the content at first, about the SMART vision and mission. Then how the future Scanfil factory would look like? What are the main initiatives, projects in this year ongoing? Then what kind of benefits we are looking from SMART program? And then we take a look at what kind of SMART technology roadmap we have. And in the end, how we are investing into the future. And then in the end, of course, place for questions. So Scanfil vision about the future factory. So our factories will be -- will have connected, transparent, proactive and optimized end-to-end supply chain and operations. Our SMART mission is technology-driven transformation in customer and employees experience as well as improving performance and our competitiveness. How to get there? So we established multiyear program, indeed, 5 years program called SMART. And in early phase, we made a study. And we decided to take technologies into the program like IoT solutions, mobility, overall connectivity of devices, even people into the program. Then manufacturing execution systems in next level, different kind of flexible automation, collaborative robotics, autonomous intelligent vehicles, et cetera. But the automatization doesn't stop to the shop floor, but we decided also that we want to take this kind of robotic process automation, so indeed, software robotics and use in back offices as well. However, because of connectivity and such, we are able to get much more data for the future. So we included also the big data environment creation and cloud services into the program. And of course, to be able to utilize the data, then we decided that we need to select business intelligent analytics software and later on add also some artificial intelligent features on it. Let's take a look at how Scanfil future factory will look like. This is showing the ecosystem overall. And this combines and enables Scanfil's competitiveness and technology leadership. We can see the factory from the left, where our materials are coming in, we have and we will have automation inspection, automated receiving, then SMART warehousing and warehouse automation, then autonomous intelligent vehicles moving materials through the whole factory. Then in the middle, we can see that our production lines, modern lines are connected. And then we are getting the real-time data all the time from the processes as well in the future from materials as well. And then after the manufacturing of PCBs and the mechanics, there are integration lines. And there, collaborative robotics are helping people to improve the efficiency and making the more -- most simple work in there. And whenever all these devices are connected via VMS system and manufacturing execution system, and data is getting to the cloud in our big data environment, then we are able to utilize the data to improve the processes, develop our analytics, make it possible to give better views for decision-making to the management and optimize our operations overall. And we can see that analytics will be -- and have been taken in use in basic level at first to get the KPIs and reports. And now we are adding some intelligence in there and having predictive analytics in coming year and then adding AI and the artificial intelligence on it. Whenever we have all this data available, it makes it possible for us to create a digital twin, virtual twin of the factory. And from that virtual digital twin, we are able to see what is happening all the time. And addition to that, if some changes will happen in customer demand or circumstances, overall, we are able to simulate the new situation and optimize again. But in the end of day, people make this all happen even automation is there. And we will be able to attract best talent also by having this kind of technologies in use. This is showing Scanfil way, how we are introducing new technologies and then rolling them out to the other factories. So selected factories have been implemented these technologies mostly in 2019 and 2020, which are in the left side in here under rollout. And after that, those factories have taken those technologies in use. Now we are rolling out them to the other factories to maximize the benefits. This is possible because we have around 10 people in our technology global organization who are owning these technologies and coordinating that best practices and experience are transferred between the factories. However, a couple of new technologies taken into the program still in this year. SMART sensors, we found out that we have still some machines, some processes which are not possible to connect with the straight IoT systems to our manufacturing execution system. We decided to take this kind of study for SMART sensors and then be able to get the data from all kind of processes and even older machines via this technology. And then digitalized services, like mentioned, in 2020, we created our big data environment, selected tools in there. On that platform, we are now developing some applications, like corporate KPI dashboard, customer portal, which gives our customers possibility to get the instant information about their products and deliveries, for example, and quality. Then we are studying also operators flow. This means that we are having the possibility to get the positions and tracking how people are moving in the factories, anonymously, of course. And this gives us possibility to further develop our layouts and efficiency. HR mobile application mentioned as well as one application to improve the communication between factory management and all employees. But why we have this SMART program? Of course, we are looking for the benefits. And we are defining so that benefits to the customers, to our people, and of course, to improve our performance, customer people performance. So customer benefits from these initiatives. Customer portal was mentioned. And then it was shown earlier that it's in our core to have the early involvement possibility in design phase with the customers. And we are now having the new tools to create this kind of design for excellence analysis and reports then to customers. And then in addition to that, we are manufacturing execution system. We have a comprehensive traceability available, not only in the components level, but also our process parameters and operators known who has produced all PCBAs. People benefits, some to mention. We are starting and having the trials now to utilize this enhanced learning with the extended reality classes in NPI, in remote advice, together with customer, for example. Then like Riku mentioned earlier that we have a digitalized working instructions. It means that such tools in use that we are able to create very fast and high-quality working instructions and share them in the shop floor. And then virtual visits for all factories, what we can see later today. And then when it comes to the performance, of course, we are by automation improving our productivity. And by getting data, we are able to improve our overall equipment efficiency, find the reasons that -- if things are not in optimal, and then also, improvements for quality like quality yields and strict process control to our mistakes, et cetera. So here is our technology roadmap. What we created for this multiyear program, full of different kind of technologies, what -- many of them already mentioned in previously. But target is to show in here that -- when we recognized plenty of new technologies, we made a roadmap that, what is the right order to implement and roll out these to the other factories? And we are now in the middle of the program exactly indeed right now. Just what is ongoing right now this year and some studies, some examples that, SMART wearables is a very interesting area. We have 2 kind of studies ongoing. First one is that in warehousing, people can have a integrated bar code or QR code scanner in clothes. This makes it possible to collect things by hand more efficiently. And that is, of course, connected to the manufacturing execution system. And second, wearables can be that what I already explained, that we are able to track the positions of the people. It will happen so that we will have like a Bluetooth low energy tax which can embedded to the collar or a sleeve of the working code. And then we can understand how people are moving in a factory. And then investments. So Scanfil has a strong balance sheet, and that enables us to make long-term investment plans. And like Petteri said earlier, so we are investing around 2% to 3% of turnover annually. All in all, that -- what was mentioned also earlier that we are investing to generic machinery and equipment, which are optimal for high-mix and low-volume products. And what we want to take care is also that we have a globally harmonized machines and processes in use to be able to support the factories if needed from other locations and also make technology transfers easy. And overall, SMART flexible manufacturing, automation, and the digitalization and connected factories are the focus right now. So to the end summary of SMART program. Automation, digitalization, together with all factories, we are able to maximize benefits and getting the competitive edge. Thank you.

Thank you, Markku. Are there any questions from the audience? That actually covered everything, so no questions. Thank you. There was actually a question coming from Twitter. What blockchain are we using? Very specific one.

Yes, indeed. I will go back in here and explain what this means. So let's say, more futuristic technologies. What we have not selected to our roadmap is shown in here. We can see that adding -- in right top corner, adding public data, like weather forecasts and such to our model, which indeed can affect, for example, the material availability, if there would be tsunami or storms somewhere. And the second one is in the shop floor, what we can see that we want to improve the productivity by having this kind of gamification of the production. And the third one is the blockchain mentioned in the left side. So this is not in use, but this has been seen that in some time perspective, this may be used, for example, to secure the original source of the components and avoid fake components getting in from the market. But this is not in use, but this has been seen that it may be one technology what we will take in use in the future.

Okay. Thank you. A question regarding, what are the first factories to add up new phases of SMART? And why did you choose those?

Yes. Indeed, indeed, it's not so simple to answer, but I will give an example -- so that we selected 7, 8 main technologies what we start -- to study 2019. So it was not so that one factory started the first technology and the others were waiting. But we -- for example, AiB technology has been studied and taken in use at first in Atvidaberg in Sweden. Manufacturing execution system and digitalization and IoT connectivity was taken first in Suzhou, China. Back office, robotic software automation, first time in Sieradz. So we were able to develop this in parallel and are then now rolling out to relevant factories. But that's true that Suzhou and Sieradz, they are 2 biggest electronics factories so they have been able to adopt fast the new technology. So they are in frontline.

Okay. Thank you. You said that the investments are 2% to 3% of turnover. Is this only SMART -- or SMART or all of investments? And how much do you see that is needed in the future to keep up the pace?

Yes. This 2% to 3% is including all investments totally, including SMART. And in -- it's a little bit difficult indeed to separate in these days at what is SMART what is non-SMART, because whenever we have the need to make the replacement, we are taking always the modern technology in use, and you can call it SMART. So they are together.

So all the investments.

All the investments, 2% to 3%.

Yes. Thank you. Additional question actually from Pasi from Nordea. What is the profitability difference between the best and the weakest factory? Well, maybe Kai will have some kind of an indication regarding this. But we haven't been actually saying this out loud, but there is a slide regarding these kind of things. [ Jurke at Heidiel ], is there a risk that high-volume companies using the same technologies may be able to move to low-volume business efficiently?

Yes. Of course, there is a risk. But we believe that we can be very flexible, and we are in the front line with this technology. So we are in good position in developing this, and especially looking for flexibility and generic processes and equipments.

Okay. [ Johannes Ries ], as digitalization is moving, is it right to expect that the SMART will have a follow-on program after 2023?

Yes, of course. This will be our normal life. And we wanted to create this program to accelerate the development, especially in these years. So of course, we will continue after that.

So the new program in -- will be launched?

Or normal life, I don't know.

Okay. Any questions from the floor? Okay. No further questions. So thank you, Markku.

Now to our CFO, Kai Valo, welcome on stage. And there were already some questions for you, but let's go first to the presentation, please?

Okay. Good afternoon, everybody. My name is Kai Valo. Being in Scanfil now, next month, 5 years. And let's say, I have been in this EMS or similar business about 20 -- over 20 years. Out of which, close to customer market in Taiwanese-owned company in China, about 6 years, seeing from -- a little bit from the different perspective. And I would say that after that, nothing surprises me any longer. Okay. And then let's go to the presentation. This was my favorite topic but -- okay. The content, we start from the long-term turnover and the profitability. Then a few words, maybe answering to question also that how to get the 7%. Then opening up a little bit more about this question regarding this cost structure and impact to the profitability, I hope. Balance sheet and financial position, then go to the cash flow, and then sharing the dividends over that time and then the one slide about the total shareholder return. Let's go first to the big figures, in fact, quite small. But starting from the sales. We have been growing in average the last 10 years in sales, 16%. That, of course, is including also acquisitions. One major being here in 2015 when the PartnerTech company was acquired and then more or less the revenue doubled on that time. There is other smaller acquisitions also over the time, but mainly, organic growth besides that and pretty much following the like market overall development in revenue. What comes to the revenue of 2021 first half, you can see that there is a bit like a swing upwards. And the growth has been a bit more organic growth, 12.2% of revenue growth in first half in comparison to the previous year. That, however, is including like low margin sales, securing somehow the customer product availability and the invoicing of the cost for that. That is EUR 6 million roughly out of the total, so the impact is like 2%. It's not much. So 10% growth, even excluding that. So good figures. But of course, then overall, there is like this low margin business, like nearly EUR 17 million included to the total. And that is good to keep in mind because that, of course, it's not swallowing the profitability, but it's impacting to the operating margin, which then is lowering for that reason. Go to the profitability. The profitability growth over the time has been 20 -- was 24%, and of course, also supported by the acquisition, but also the good work. And I would say that it's somehow evidence of the like quality growth we have been able to do with and without the acquisitions. Also, we are reporting -- like you can see, we are reporting then like the official figures as well as then adjusted. We are trying to avoid a report like pro forma figures. But then, of course, when you do some extraordinary moves like acquisition or divestments, then of course, you need to somehow normalize the figures and present the normalized. And like last year, in fact, then the normalized figures were lower, EUR 5 million, than what we reported. So then it can be worked both ways upwards and downwards, usually only upwards. But -- and last year, that was a combination of selling this Hangzhou factory and then also the decision what was made regarding Hamburg operation shutdown. And the combination of those EUR 5 million, like a positive, and the normalized then was EUR 39 million roughly. What comes to the operating margin development? You can see that we have been very close to reach out the 7% already in past and then have like a COVID year next 2020. And I would say that the result of that is very good, even operating margin slightly less than the year before. And then in this year, 6.1%, it's lower. But then I can maybe explain that in the upcoming page where I can show the cost structure and how that is impacting to the cost structure, because otherwise, it's difficult to illustrate the impact. But the profitability year-on-year first half, absolute terms, euro-wise, we are growing EUR 2 million more profit than the year before. So that is not shrinking. Okay. Then go to this page. This is demonstrating how we like develop our business. And there was a question about this, which companies are the most profitable? Which least? We are not publishing that information. But this is like showing that how we are managing the factories. On the horizontal line, you can see like a strategic position and then vertical line is the performance. And of course, we are trying to drive all the sites up to the like northeast corner somehow. But of course, that -- I believe that the corner is also moving more far when the more you drive. But anyway, it's like a continuous improvement. So that then in short term, those with -- sites which are performing less than expected, then we are trying to drive them and driving the performance better. And then in longer term, then driving the strategic position in terms of our customer base and capabilities and so -- to be better in the longer term, so. And then happens that like here is 2 red spots that illustrating what has happened in the past that then. With Hangzhou we came up to the conclusion that it was performing quite well, but then we came to the conclusion that with other owners' hands, that could better fit than being along with Scanfil. And actually, that was a good match. And then unfortunately, but this also happened, and we needed to be and we have to be capable to make decisions also. And we decided to shut down Hamburg operation as after long trial period. We just couldn't make it good enough and better and then that is then how it is. But also, it's a question of decision-making to make the quality growth and improvements in the operation. Okay. Then come back to the subject, which if the heart rate looks like this then call ambulance. But here is like you can see the cost structure year-by-year 10 years, and you can see that it's pretty much stable. The big bar is the material cost and then have the personnel cost is the next from the bottom, and then we have other operating expenses and depreciation. And there is no big swings over the time. So it's very stable year-over-year. But if looking closer, then of course, you can see here, 2015, '16, you can see impact of the acquisition and the cost overall percentage, especially personnel and other operating expenses increased after the acquisition. And then we have done our homework and improved the business and then the percentages have become lower and then the profitability improved. When we come to the near history, this year first half, I would point out here that if you look at the material cost, that has increased 0.6%. And that's what I was trying to explain that we have the low-margin sales, which is good. It's covering the cost, but it's -- we are not making much margin with that. And that is a bit confusing. So basically to understand the figures, excluding that, then you can come up with them. But we have not published what that kind of pro forma figure would be. But you can -- like looking at this chart, you can see that there is 0.6% increase in the material cost. And at the same time, almost the same impact in the operating profit. So some conclusion can be made based on that. Otherwise, the cost is more or less washed out. There is a bit less good development with the personnel cost, a little bit more other operating expenses and quite simple. Okay. Go to the next, balance sheet. Somehow being proud of the situation and proud of the balance sheet that okay, 50% of equity ratio could ask that is the too much, but of course, that changes usually then suddenly more if change so that if something will happen, then acquisition of such most likely would look different for a while and then need to climb back up. But it's -- in this situation, it's good to have like a reserve. And then you can see that the debt accordingly is low EUR 40 million of debt, out of which 40% is leasing and 60% is loans. So it's pretty healthy. And we have also some cash, which could be used to cover most of the loans, EUR 17 million. What is remarkable that if you look at this, then you can see that the working capital elements are quite dominating. Their inventories, accounts receivables and accounts payables are -- and all are growing, of course, along with the volumes, but inventories also growing for the material situation ongoing, and we are investing a bit to inventories to be able to do our best to support the customers. So that's what we are aiming for. Fixed asset is about EUR 60 million then. Go further. Few words about still repeating this strong financial position, but you can see that the net debt per EBITDA has dropped -- on the left side has dropped from nearly 1 to now has been less than 0.5. It's very, very low. Other point here in this chart is there is a dotted line on the H1 net debt per EBITDA, and that is kind of illustrating that, okay, how much the debt per EBITDA could be. And then our policy is that our net debt shouldn't be more than half of the equity. So that is like a stated policy. So that is the low end of this dotted line, but then temporary based on the decisions accordingly, then I believe that we have a flexibility to have like from the financing point of view and from the companies offering the financing, I guess, that we can go far beyond that. So I have ended the line 2.5, maybe the scale ends there. But anyway, we can say that stand-alone, everybody can calculate the figures, it's about [ EUR 1 million to EUR 150 million ] stand-alone, the possibility. Loans, leasing, and there is the breakdown of that, maybe no need to go too much through that. But you can see that there is still a separation of how much is leasing and how much is loans and also the cash, the very light line on the top. Next. Okay. And then this is about still describing a bit the cash flow situation. Again, I think the trend is somehow showing the fact better than a thousand words. If you look at the cash flow from the operating activities, it's this blue or light blue bar, and then you see the cash flow from the operations, which is this gray color or light color. And the difference of those is the working capital -- or change in the working capital. And normally, in the past, it's quite stable. It's about less plus/minus EUR 10 million along with like revenue growth. So it's pretty stable. This year, it's a bit larger. And of course, the revenue growth has been more, but also then, like I mentioned, that we have been investing a bit -- that we are investing in inventories. But anyway, buying more inventories to be able to make the supplies. That's the logic. And that's why then you can see -- and that's, of course, reflecting to the cash flow then at the end of the day, so if looking this year cash flow figure first half, it's positive, but of course, it could have been better. But this is a decision that to make the future revenues possible, we need to invest a bit to the working capital. But on the other hand, our position is good to do so. We can do so unlike maybe in some other situation, cannot do, we can do. Okay. And I have a couple of minutes left still. Here is the dividends per share, and every year growing from EUR 0.04 to EUR 0.17 last year. I don't know what is the figure for the next year. So -- but -- and I will not answer that kind of question. But anyway, the trend is good. And the policy in principle is that around 1/3 of the earnings per share is paid as dividend. That is probably the last, so that I would say that to conclude how we are managing and how we have been doing in the past, this is somehow showing the result in how we are appreciated in the market. So -- but of course, it's always as good as is the work, everyday work. So then I believe that in longer and this is the only way to create the shareholder value to do good job. And also don't know how the future looks, but we do our best. Okay. Any questions?

Actually, we will have a short break for 1 to 2 minutes. We will test up the lines to Suzhou in between, and then we will actually continue with the Q&A. So please take some refreshments in the meanwhile. [BREAK]

Welcome back from the technical break. We've been testing some lines to Suzhou, so bear with us for that while. Now to the questions, we have one question from the floor already too.

Joonas from Evli. It was said earlier today that startups make 15% of your customers. And I think that -- and more established ones make 85%. And I think that was in terms of like customer account numbers. So could you maybe tell us how the revenue mix is like there? Or if that's not possible, maybe give an indication of the potential, like I think your largest customer at the moment is like around 10% of your revenue. So how large might the largest start-up customer of yours be?

Timo, do you want to?

[indiscernible] start-up companies are less than 5% from our total sales today. In Petteri's presentation, he mentioned that the biggest customer today is roughly 15%.

Okay. So one additional question?

[Foreign Language] It's important to indeed emphasize that operating profit is the important euro number and operating profit margin does not really mean anything when we talk about paying dividends or something like that one, which, of course, kind of then brings the question that when you have your new target for the next 4 years, when you will reveal it eventually. So far, it was EUR 700 million turnover, 7% operating profit margin. Maybe the question would be that is that margin the most important? Maybe even the target could be EUR 1 billion sales. And EUR 70 million, of course, it turns out to be 7%, but maybe the emphasis would be also there, it would be millions of euros instead of the margin figures instead of -- yes.

Thank you. Is there any other questions? That was more or less, I would assume, a comment. Thanks about that. Antti, please?

It seems that your factories have quite little deviation in terms of strategic position and performance. But on the other hand, top stars are lacking. What should you do to create one top star and is it possible that one of your factories become really a top star leading the line in for the whole group?

Do you want to take?

Actually, one point related to the metrics that I was demonstrating is that we are -- each year, we are calibrating the absolute values that we are measuring in terms of strategic position and performance into a scale between 0 and 10. So we could do it easily by recalibrating the numbers. I think the key is really that not so much about if we are really in the top right corner, but that we can find really differences between the factories. And we understand what is needed to improve the strategic position and performance. And yes, indeed, we are pushing forward with further improving the best ones. And I can tell you that they are making good progress at the moment.

And maybe I can also say that perhaps we are a little bit humble also that I think there is a star.

Could we go back to the slide regarding the cost structure and more explain about Joonas' question or -- regarding the P&L and the semis and metal effect on there? Should we check it through again? Or...

You mean this cost structure?

Yes. You explained it already quite much, but just to have a review there. So it was any negative impact from the price increases in semis and metal regarding your P&L? Or is it always passed on to the customer, so it can be...

I think that Timo partially replied to this question already but, yes, we have a process that with like a contractual defined frequency renegotiated prices either quarterly, monthly or yearly basis. And then, on the top of that, there has been like invoicing, like for kind of extraordinary expenses, perhaps, which then is also like covering the cost for like certain materials and the deviations. But basically, yes, there is a mechanism and like, well, was emphasized on the audience that, yes, it's really so that they need to keep in mind that the percentage is indicator, but then the euro is what matters, and we are making way more operating profit than we did a year ago and even the percentages are looking a bit like tail is this -- at this point of time then. But when -- if -- let's say so that when the situation normalized, this kind of tail of trading business, what we have in this year will -- we are not in this kind of trading business eventually. So then that will go away. And then when the material situation normalizes, I guess we will have -- we should see back to the normal also in terms of percentage. So then that will automatically correct itself. But now I think the good and important message is that we are able to cover the cost in a difficult situation, but also more important is that we are able to do our best to keep and satisfy our customers. That is anyway the long-term, most important thing that our customers are satisfied, and we are able to make the deliveries.

Yes. The extraordinary invoicing in the H1 in the first half of the year was something like EUR 6.1 million, if I remember.

Yes, EUR 6.1 million and there's trading then about EUR 10 million more.

Yes. So that is the effect there. Is there any further questions from the floor? Okay. Pasi from Nordea. What is the amount of future order book or orders received per quarter? Low long is the sales -- how long is the sales visibility at maximum? I think that it was maybe over to Timo, just a second.

As mentioned that we are receiving rolling forecast from our customers on a monthly basis and it has been in the past 12 months nowadays, quite many of our key customers, they are even providing 18 months rolling forecast in this moment because of this component availability. Then of course, it's a question that -- what is the accuracy of this forecast always that the actual demand will change and is fluctuating. But we can see by the forecast 1 to 1.5 years from now.

Book value?

Order book value, then there is by the -- even in the product level that order to delivery time is starting from 1 day and can be 1 week, 2 weeks, 1 month, couple of months, depends on the business model by the product.

Okay. Thank you. Any further questions from the floor? We still have some 8 minutes in between or are we -- should we continue directly to the Suzhou or take a break? We are actually ready to go to Suzhou, so let's start the virtual tour a bit earlier than originally agreed on. So okay, let's break a leg.

Okay. Are we online? Looks like. Yes. Okay, good. Then good afternoon, everyone. My name is Christian Kesten, and I'm leading this Suzhou plant and Suzhou is located in Yangzhou, 1.5 hours away from Shanghai, and we are operating in China, of course. I would like to take the opportunity today to briefly show an overview of our plant operation and also touch upon the planned expansion investment that we have released. But main focus will, of course, be our virtual factory tour. And we will go through -- we don't have time to cover the whole production, but we will select strategically, pick up some key points that also address the SMART operation program that Markku has talked about earlier. And we will show you in detail about the automation activities as well as the digitalization activities and what that means to us. Focusing -- to my help, I have not only myself but part of my management team, and it will be [ Ivan Song ], our Technical Manager. It will be Harry Li, our Plant Director as well as our Production Manager, Bryan Fu that will guide us through the production. But let's start off with a short video, giving a brief overview of Scanfil Suzhou. [Presentation]

Okay. That was a very short overview, but, anyway, can give you an idea on how it looks where we operate. We will then switch over to our virtual factory tour, and I hope that you can see our presentation, where we show the floor plan. And we will start off following the logical flow of production from incoming to outgoing, and we will start with our automation warehouse activities, led by -- presented by Harry. Then switch over to our SMT manufacturing line. Bryan will show you how we have digitalized that process to have a strict control and that also enables traceability to our customers. After that, we will show you some examples of automation applications, both focused on mid to high volume but also what is key for us, high mix low to mid-volume manufacturing where change over time and generic processes and flexibility is of key importance. And finally, we will demonstrate our [ boardroom ] where we have a cockpit overview of the whole factory, and we will demonstrate how we are operating our daily lives and -- to drive our continuous improvement activities. So without further ado, I would like to switch over to Harry that will start from our warehouse automation.

Okay. Hello, everyone. My name is Harry Li, Plant Director for our Suzhou site. So welcome to our SMART factory. But in past years, so with our employees' efforts and great support from our headquarter, so both of our new technology and SMART solution developed very fast. So meanwhile, more value created for our customers, stakeholders and our employees. So during this year, our sales revenue, operating profit, our [indiscernible] and [indiscernible] also had a remarkable influence. So we [indiscernible] and our leader most SMART projects in our group. In our site, the SMART solutions already cover all processes. And our SMART manufacturing will also be qualified by our Chinese government. So today, we will share some of our practices to you for our smart solution applications in our site. So now I am in our warehouse. So behind me, you can see we introduced the automation solution for our raw material management in our Suzhou site. So now we have around [ 28,000 ] SKUs in our warehouse within 3,600 square meters. So as I mentioned, in past years, we introduced our automation solution, and we designed a specific software for our raw material management. So all of the key permits, for example, the raw material [indiscernible] first in, first out, material [ safe life ] and material [indiscernible] will be controlled by our software, and we design this software by ourselves, both our ERP and MS platform. Because of these activities in past years, our SMT raw material warehouse capacity increased around 10x compared with traditional materials shifts. At the same time, our employees' productivity also have -- has more than 7% year-by-year. So as I highlighted, so all the -- all the key factors were controlled by our software. This means that we can avoid 100% manpower mistakes. So of course, because our fast business grows, so now both of our warehouse and production workspace will be the constraint for us. In past months, we got the green light from our Board to start our new [indiscernible] project. So now we are preparing the project plan for that. Okay. Considering the limited time, I would like to hand over to my colleague, Bryan. He will introduce our SMART application used for our SMT area. Thanks.

Okay. Good morning, everyone. This is Bryan, Production Manager. Let me shortly introduce our SMART manufacturing solution in shop floor. First, I will share my screen. Okay. Do you see my screen?

Yes.

Yes? Okay. So actually, here is our virtual factory, which is from our mess and provided by Siemens. Our engineering, we build machine 3D model in system and it's linked to our IoT bots. You could see details for SMT, all the machines, all the station sittings from here. Core SMART solutions include NPI tool, planning tool, shop floor control and here, our finished good parts. Okay. Let's move to the -- my big screen. So from our big screen, you could see all the SMT line status, our current efficiency, our line quality, also what is current order, what will be next one. And here, it will be for management team to see whole factory situation. Then in front of each line, you also could see details of our shop or planning. Our operator could see from [indiscernible] level then produced [indiscernible] and also when they have done this and the current product yield change over time. Also, this really has the [indiscernible] system. It will be a big core somewhere. When I need some problem, we have list out like material shortage -- raw material shortage, machine problem, then operator could call someone from this TV. It will be sent by a message, like thing like our Facebook. Then the supporter will come in and board in here. Also, in end of the line, we have net line computer. You could see here the green, it means machine working. Yellow, it means machine waiting. And here, we also will control all the tools like our sensor usage, our [indiscernible] ship life, all those will be controlled by this. And here also, we could see the details of the machine like machine material be verified. Also, it will remind us this material could be used in [indiscernible] minutes. We could avoid our line stock. The operator could be before line stock connect new material for us. When we have this mass system, we improve our performance at least 10 percentage. Okay. Let's continue to go to next process. Before the board come to our machine, we have the scanner, which reads all the bar code. With this bar code, we can further treat our process, our material used by which machine and by when -- by which parameter of the machine. And here, we have -- all the line have online sorted quality system. So this machine will detect out our [indiscernible] quality and create out our online [indiscernible] to guarantee all the qualified board go to [indiscernible] process. Scanfil Suzhou have latest [indiscernible] at the machine, which is more faster and stable. In here, you see all the feeder with green light. It means those material can form in right. So we avoid any mistake in the advance. Then continue, you see our operators, they have the SMART solution to connect our material as quality device. SMT is a more valuable process. They will add the component to our PCB. Then when the board be on the material on the PCB, we will move the component to our [indiscernible]. In our [indiscernible], next, we'll get all the temperature by oven. In here, we have control. And this data will link together to each serial number of the PCB. Okay. We continue when the board comes [indiscernible] process, it will be available to our online AI. With online AI, we have 3D. It means they will, from different angles, take picture compared with our target picture to identify the soldering quality and the position of the components, also the mark of the components. Here is all the process of SMT. When the process is done, we will move the board to THC process. Okay. I will hand over camera to Evan. He will continue to introduce our high-volume product solution.

Good afternoon, everyone. My name is Ivan, technical manager here. I would like to introduce our high-volume solution for -- in our automation lines. So the annual demand for the product, which produce this line is more than 3 million pieces a year. Now from the productivity point of view, way before the automation, we totally need more than 20 operators. But now, we only need 8 operators to meet our customer demand. And from the quality point of view, currently, the customer PPM is 8. So is that mean till now, we already delivered more than 1.3 million pieces to our customers, but only received 10 pieces defect. And for our automation solution during development, we always bring a lot of the SMART solutions and always bring a lot of the mistake proving ideas. So in this line for this product, we have a lot of the critical dimensions and a lot of the [indiscernible] we need to control. Now with all the data in the process is linked to the mass and the mass will control the whole process to make sure our quality. And now from here, you can see AI incoming. So it can be at Suzhou. Currently we total have 3 AIVs and work around in full factories. So for every day, the AIV we are handling more than 280 has between each area and the total running around 14 kilometers. Thank you. Now I will hand over to our colleague, Harry, to continue for the presentation.

Okay. Welcome back. Okay. So welcome back. So here is other SMART solution application area for our low and mid volume products. So behind me, you can see this is our corporate UR [indiscernible]. Okay. Welcome back. So here is our another SMART solution application area for our low and mid-volume products. So here, you can see, it is our corporate UR. We designed automation solution for our growing process. In past years, because of this solution, our production improved much more. At least now, we can see -- every day, we can -- more to operator saving. And the key point is that our year improved much more. Before this solution in [indiscernible] , our past year is just around 95%, but now it's around a -- always 100%. So it really is a smart solution for us. And on my right hand, you can see our other SMART sourcing application for our testing area. So here, you can see -- so here's another UR corporate application for our testing area. So when corporate were controlled to ICD machinery instead of our traditional manpower loading and unloading, and as we highlighted, all of our machines were linked to our mass by the IoT solution. So all the database or number, our test log buyer, our machinery utilization and our cost per yard and our testing times for every board. So all databases will be upload and saved in our platform and mass platform by IoT solution. So all of these data will be ready data for our engine study to [indiscernible]. So we don't need to manually collect all the data of what I mentioned. So our management team will check the data real-time and take the first action. So this way they [indiscernible] this for our total response. So at the same time, we have more and more the same solution for other process. For example, for picking subassembly and integration, but continue to lead time, we will not introduce one-by-one. So now I need to hand over to my colleague, Bryan. He will share our database in our mass platform and share how to use this set up for our continued improvements. Okay. Thanks.

Okay. As Harry said, we have so many SMART solutions and we collect so many data. In our joint Board room, we'll show you how we utilize that data. So here is our joint Board room. In this room, we have shown out the data what we have dig out from production. You could see here is our daily past year, like [indiscernible] data. The second is our machine efficiency. If you see, our OE data, quality data, liability data. In here in the middle, you can see our quality in past days. Then you will see what is top one defect in our house. Then in the right, you could see the scrap cost in here. This is a whole factory situation we visualize in here. Then we also have details for the line. Like we could see the different line of data, and here, availability performance all the data here. We can touch and choose all the data if anyone interesting. Also in here, you can see we have small teams, their ongoing discussion, what happened. But here, we have some line yield data, like SMD data, TH data, what is top 1 happened for which customer, which station. Then we will take some actions when they see some data. Also in here, we have some scrap costs, like we really care of the cost for the company. So we try to depart out where is our -- where we can improve from this net system. And here, we also have some small TV. And this TV has some training. Then like what is ESD, what is safety knowledge, we are training our operator. Okay. I will hand over camera to Christian, and he will introduce.

Okay. Yes. That was actually a very short overview of our operations. And I hope that it has given you a flavor of what our digitalization and automation program and SMART really means in reality, and how that also can improve our operation. So now we open up for questions, and we'll try to manage from there.

Currently, we don't have any questions from the chat. If there are any questions here in the audience. No questions. I think that you stunned everyone. So no questions. Thank you for the tour. It was really interesting to see, and like I was actually expecting to have some minor issues with the connections and we saw that, but minor details. But everything worked okay, really well. It was -- I hope that the audience enjoyed it as well. One note regarding the on-demand version. So the factory tour will not be actually available on demand afterwards. So for the customer intimacy reasons, that is what we actually decided to do. So Petteri, should we go to the closing remarks? We're actually a bit ahead of schedule now, but I don't think that nobody minds about that. But now over to Petteri.

Thank you. Thank you, Pasi. And yes, you had opportunity to see our factory in China and participate in virtual factory tour. And basically, that's the way we have been working with our customers now about 1.5 years since the COVID-19 started to spread. Basically, no one from Europe was able to or United States able to travel to China. And meanwhile, we have won new customers to Suzhou. We have ramped up new products using such virtual factory audits. And I -- personally, I don't think so that we are returning back to old life that we are traveling so often to China or United States or somewhere else. It's easy to understand the benefits that if we can win one week trip by having one or a couple of that kind of virtual meetings or audits and do the same tour in practice, no need to return completely to old life. Summary about what we discussed. Scanfil, a trusted manufacturing partner for products, including electronics, we have global factory network means, and that means that we are capable to operate globally. We are capable to serve our customers globally. We are very proud about our customer bases. It's very versatile. It's strong. They are global leaders in the customer segments. They want to be long-term partners with Scanfil. We also -- besides those well-established global customers, we are quickly growing -- nice portfolio of quickly growing smaller product companies. Market looks strong, especially this year, maybe next year. There are also good drivers to make us to believe that there will be good demand for electronics products for a longer time. Drivers like intelligence and electronics really will be embedded in all kinds of products in the future. Our customers are also very performed -- very well positioned what comes to global megatrends and tailwind from this. Risks are mainly related to materials availability right now. And then, I'm talking about foreseeing risks this year, maybe next year. Timo asked a good question in his presentation that why our customers are selecting Scanfil. I think that this is really a key core question. And as he said, of course, we need two things. We need the right set of services, right quality of services. And then on top of that, we need trust -- customer need to trust that we also have a right type of services, right quality of services after 5 years or 10 years. Two things are needed. And how to make sure that our customers really believe that we are a right partner, not only now, but also after 5 years, there are a few things. First, we need to continuously improve our operations. As Riku well explained, we can never stop. We need to improve our productivity, we need to improve our quality, our OTD, everything. Every day, every month, every year, we need to aim higher targets. We need to continuously invest, as Markku explained well. We need to invest in latest technology. Technology, it is best serving our strategy to focus on high mix, low volume, state-of-the-art technology. We need to continuously consider how good factory network we have, as Kai explained. We need to try and we need to develop our factories' performance and -- as well as strategic position every month, every year in order to be competitive, not only right now, but after 5 years. And last but not least, we need to show our customers that we are also right partners when it comes to sustainability. We need to -- whatever we are doing, we need to do it at sustainable way. The way that we are taking consideration environmental aspects, our people aspects, our partners so that we are good corporate citizen, today and after 5 years. A few words about operational model. As Eric opened that centric points where our value is created, our factories, where the real customer value is created, the factories. So we want that factories are quite independent. They are able to run the business in the local environment where they are. And they are also profit/loss responsible, so take like total responsibility. On top of our factories, we have a global organization, and the key reason why we have a global organization, of course, is somehow to set kind of frame where we are operating, so in direction where we are going as a group, giving some guidelines, some support when needed, and especially to make sure that we are getting scaled benefits. Scaled benefits would be, for instance, related to global sourcing, easy to understand, or taking care of our global customers and so on. How to make sure that our profitability remains and even improves, I think that, that's key. I think that while many of us, if not all, mentioned that the flexibility is the key. Keep our cost flexible. Flexibility is key in very many ways when we are serving our customers, but also in order to control our costs. Keep the fixed costs so low than possible. Continuous improvement, of course, there as well and evaluating our strategic position on factory level year after year. If thinking the Scanfil business case, one attractive thing, as said earlier today, is that our investment needs are quite reasonable. By fulfilling our existing strategy and serving our customers by generic good machines, factories, and so, it's really like controlling the need of investments and making the business case stronger. Our balance sheet is strong, as explained by Kai. It's giving a good fundament to further invest and also consider some attractive acquisition opportunities. Our main aim is to grow organically, so that always the profitability goes first, but grow organically, but also we are looking for acquisition opportunities. So thank you very much for participating to first CMD of Scanfil. You had a great opportunity to somehow go a bit behind the numbers, understand a bit more about Scanfil operations and processes. And so, I hope that you found it interesting, informative and you enjoyed. Thank you very much. Have a good day.