Scanfil Oyj (SCANFL) Earnings Call Transcript & Summary

Welcome to Scanfil's Capital Markets Day 2024. This is Scanfil's second Capital Markets Day ever and the first one to be arranged in Stockholm, so outside of Finland. A couple of practicalities before we go. First of all, we are using Zoom. So there is a chat function, so use the chat if you want to ask a question or raise your hand and then you will be given permission to speak. So that's about it. It's very simple and easy going forward. And if there are any questions from the floor in here, so just raise your hand and I will hand over the microphone for you. So today's Capital Markets Day's first presenter will be our CEO, Christophe Sut. Please, Christophe, go ahead.

Thank you, Pasi. And thanks to all of you for joining us today either physically or online. We appreciate the effort you're making and the time you are spending with us today. We will walk you through a few topics during the afternoon. For that, I have a few of my colleagues that have joined us. And we will try to give you an overview of Scanfil's market position and also an update on our strategy. I will move back to the presentation. Just to start, we wanted to give you a little bit of a glimpse of what has been Scanfil history since 1976, when the company was created out of Sievi and remind you a few important dates we have had as part of our history. Not going through all the elements, but I think one of the major happenings for Scanfil was probably the PartnerTech acquisition close to us that gave a new dimension to the company both in terms of customer base but also in manufacturing footprint. And it's quite interesting to see how we leverage on it to be able to reach the level of revenue we have reached last year, around EUR 900 million, through development of a healthy portfolio of both factory and a healthy portfolio of customers. When we look at Scanfil today, we have operations in America, Europe and Asia. The two main sites outside of Europe is Suzhou in China and Atlanta in U.S.A., where -- we will come back to it later, where we started the manufacturing of electronics. Then looking at our European footprint, we have a mix of factories that are close to our customer in the Nordics, two factories in Sweden, also one in Finland. And then we have factories in Eastern Europe, where we have a bigger volume competitiveness. And when you look at our distribution today, you can see that our two sites in Sieradz and Myslowice in Poland are some of our biggest sites and double today, about 40% of our employees are located out of Poland. So that's a very important element for us. And those factories, they are serving customers from -- global customers from around the world. And we have a customer portfolio, as we have discussed in the recent quarterly report that has become quite balanced. I mean, we have around 10 customers that are weighting 50% of our revenue. And we have had a good balance here on their weight. And it has rebalanced in a good way between all of them, so quite good picture in terms of the different sites we have and how our customers are spread across those sites. What I think is also interesting is when I -- when we talk about our customers and say, okay, 10%, 20%, 50% of the revenue, it's usually quite big companies that have different units, different activities. And those companies usually leverage on all our sites. I mean, it's not uncommon to see, out of those customers, people that do that -- we manufacture for in maybe eight out of the total of our sites. So again, a quite interesting picture. Now we combine global customer and how we sell them through a global network of factories. And all in all, what we have seen around Scanfil over the last 10 years is a positive development. When we look at CAGR, we are talking about a double-digit number getting very close to 20% with 17%, which has been actually the -- in a way, the fruit of the history, you have seen both building organic growth but also from time to time having M&A that have allowed us to change dimension. Obviously, you see back 2014/'15 the impact of PartnerTech that we have leveraged on also creating organic growth of that over time. And it has resulted also in the development of our profit in a quite continuous way, from EUR 16 million to EUR 61.3 million, a growth of 16% over the period and I will say navigating between 6% and 7% profit, depending on the cycle we have been and the timing also on the different moments in the history of the company. So this is the high-level picture of the profit development. And that has resulted in increased dividend. I mean, Scanfil has been pretty stable delivering profit and pretty stable on, year-after-year, increasing the dividend that it has been delivering to shareholders in the range of 30% of the earnings. So that is, I will say, a little bit about our history. Based on that, I would like to go a little bit and give you some indication around how we see the market and how the market we are living is developing. And there is two ways to look at it. First of all, you could look at it from a geographical perspective and say, "Okay, this is a real global market." You can see that there is today EMS manufacturing in all continents and in all parts of the world. What we can see looking forward is clearly a strong development of Asia Pacific that will continue to grow maybe a little bit faster than the rest of the world. But the development for almost all geography, that is scheduled already. It's a sizable market. We are talking about around $760 billion that's obviously split between different subsegments. And it's a market that has a growth between 5% and 6%. Here, we have a number foreseen around 5.79% for the next 5 years. But it's a market that has a growth path in that range. And when you look at the destination of those industries, I mean, you will see many different customer segments today. And obviously, there is a business down around consumer electronics. That is a very important part of that industry. I mean, you can see it's about 20-plus percent, 23% of the total industry. Obviously also, automotive is a big part of the total market. However, those are not markets where we are acting. We are mainly acting on the other markets that are summarized under industrial, medtech, energy and cleantech and also a little bit around aerospace and defense. But you, in a way, have a split between those markets of consumer goods and automotive that are a very big volume market, where you have a big quantity of units that are produced, usually pretty simple type of manufacturing. And then you have the more industrial part of the business, where here, you find the smaller batches, more complexity and more diversity in what gets produced. And I will say that's mainly where we operate. And from a consequence of it, when we look at the different players in the market, we can see that Scanfil has been over time being in a good position in the delivery, both from a CAGR perspective and also from an average level of profitability. If you look at the period of 10 years, you can see that we have been in the leading part on both the level of CAGR we have delivered and the level of profit we have delivered. So all in all, I will say, if we talk about the market, it's a market that has growth path around 6%, where there is different market segment, from consumer goods to industrial goods, with all having different characteristics and different interests. And it's a market where Scanfil has been evolving in a quite good way in terms of performing on growth, performing on profitability and keeping a good position on the market. And that was an overview of how we see the past. And maybe let's move to the future now because that's probably why we are here today. What we want to try to share with you today is how we are planning to move forward and how we are planning to develop in the future. And first of all, we would like to get back on our vision. And our vision is to be the most preferred supply chain and manufacturing partner for our customers. And the way we do it is we help out our customers to succeed by providing effective and innovative solution that bring products from idea to life and maintain product competitiveness over the lifespan of those products. And I think that this is something very important. Because what we can see in the field we are evolving is our customers are being through a journey. Most of the customers we have had their first generation of electronic product 15 years ago and are now moving to the second generation. And for that, they need people that are partner that they can team up with in order to maintain the old product but also build the new product. They need people that can support them in that journey of digitalization and increasing weight of electronics. And that's where our mission is so important, how can we create this relationship? How do we create this partnership? And the way we have been trying to look at our company is simplifying a little bit what are the main things we should do in order to enable that. And first of all, we believe that we have a way to do things that brings value for our customers. And then we will see our business in a very simple way. On one hand, we want to serve our customers in a good way and increase the number of our customers. And that will bring us some growth. And I will get back to how we will plan to do it a bit later. In the same time, you can say we are in a very simple industry. It's all about being good and being efficient. And being efficient, what does it mean? It means being there delivering on time at the right cost and with the right quality. And you can do a lot of things fantastic. But at the end of the day, that's what they should bring. So we are in a way where to look at our company and our customers in a simple way, which is how we go and how we serve our customers and how we build efficiency to remain and be still competitive. So today, we will try to walk you through the different areas we are covering in order to actually deliver to that promise. And on the growth side, I mean, there is a few things that are key and that we have identified as key for us. One is our segment strategy. We are not playing in the full market. We are trying to identify which segments we want to play into. And we will and are building focus around it. The second topic is geographical expansion. As you will see and as you know, we have a lot of our customers that are global customers that have a global presence. So they expect us to support them in their development. And their development is international, is global in many ways. So the geographical expansion is important to Scanfil. The second element is the customer offering. It's important also to offer them what they need. And I mean, you could say, okay, we are doing manufacturing. But there is many things in manufacturing. It's not only producing, it's testing the product and how you support them. You support them during the lifetime of the product and making sure that the products remain competitive and stable. It's managing components, et cetera. So there is a broad number of things we do to support our customer in that case. And then the last things that we have identified as key as part of Scanfil's strategy is acquisition. I mean, we want to continue to grow. We need to be present in new geographical areas. We need to be present with more customers. And acquisition and M&A, we love to become something that is done in a systematic way for Scanfil. In parallel to that, we will cover also the efficiency side of our business with our dream factory, which is aiming at modernizing our tools and creating a better factory footprint for our customers. And we'll cover later in the afternoon. And also, obviously a productivity element that is related to that. And then we will also cover supply chain excellence. As you know, I mean, when you look at our P&L, a big part of our spend is actually related to components management. And that's obviously something where we need to be excellent in order to be in that business. So those are the two areas we will cover. And then finally, we have a certain number of strategic enablers that we that we need to have as part of the company and that we have in order to make sure that we are running a good way. And all of this happens through people. So obviously, people and culture is something that is important and that we will also touch upon. So maybe a bit ambitious agenda, so we'll try to cover all those things during the day and hopefully keep you with us onboard during the journey. To start, I would like to give you a little bit of a flavor on what we see and how we see the growth path for Scanfil. Christina, that is with us today and that is running business development for Scanfil, will come back to it later more in detail. But I would like to introduce a little bit the topic. First of all, as I said before, I mean, you -- when you look at the EMS industry, it's many segments in many type of activities. What we can see is Scanfil, we have decided, and we are reiterating and fine-tuning our positioning, towards what we call low to mid-volume. And it's not something that we picked up along. I would say it's a combination of things, the way we are seeing ourselves. We are seeing ourselves as a player that plays in the field of customer that needs to have a low to mid-volume manufacturing, usually linked to a very high mix. Customers that are usually evolving in what we call industrial field, which is either energy, cleantech, medtech, industrial player. They can build many -- I would say many different type of device. And for them, we will do different type of things. We will obviously do PCBA manufacturing. But we can also go much further than that. And it can go to box build or full system integration. And in some scenario there, we will actually build the full product for the customer, even take care of the logistics eventually. And what Scanfil has been quite good and where we believe that we should continue to dig into is we have been quite good at helping those global clients that are leaders in their field in their market and delivering them a mix of services that allows them to grow their business. And we believe that it's a trend that is going to continue. Because we see that those clients are facing the complexity of their offering that is growing every day. And they have to make choices. And the first choice they usually make is to invest in R&D, to invest in product development and to invest in market presence. And from that perspective, they need a partner to help them to do the manufacturing part of it and the eventually more than that. So that's where we are continuing to focus and continuing to work on. So this is something that is important for us when we try to look at, okay, where are we acting and what we are trying to offer. Then we have, in the past, have been reporting five customer segments. And we have decided that we will simplify that. We will move from those five customer segments to three customer segments that are Medtech & Life Science, Energy & Cleantech and Industrial. I think there is two reasons for that. I think that it becomes a much more clean cut for our follow-up and our measurement. We can map from market data. But also, we -- what we will do based on that, and Christina will get back to it, is we will organize ourselves to face those customer segments in a different way in order to create focused expertise and leverage on the knowledge we have on those segments. And we believe that those segments are of interest because they're all in a way historically have been providing a growth that is higher than the overall EMS market. I mean, even if you look at Industrial, over the last 3 years, we have a growth of around 6% on that part of the business. And then when you look at both Energy & Cleantech and Medtech, there, you have a growth that is double-digit, between 17% and 20%. And for us, we feel it's the time has come for us to re-leverage on that knowledge. These are clients that value what we do, that we have built an understanding on what they need from us and how we can operate, so we want to do that. And the way we will do that is by making sure that we specialize our team in order to face customers that have similar needs and move forward this time. When we look at the long-term plan -- I mean, this is a picture of the history in terms of growth. When we look at the long-term plan and what is foreseen, we still foresee that those customer segments will have a CAGR over the coming 5 years that is above the average. I mean, we talk about 6% to 8%. So a little bit lower than what has been seen before, but still a level of growth that is above the average. And from that perspective, we believe that both our customer portfolio from today help us to have the critical mass to serve even more customers in those segments tomorrow. And that's what we want to focus on. And at the same time, those are customer segments that will have a growth that is higher than the rest of the market. To support those customers, and as I said before, many of those customers are either very sizable customers that have activities around the globe, or we have a few of them, also some startup, very successful that are growing at very high pace. And we need to be able to serve them where they need to be served and where they want us to be present. And today, we have a footprint, as I mentioned before, in U.S., in Europe and in Asia. But we also see that in the future, we will have to evolve and develop new areas. I mean, U.S.A. is definitely an area where we need to have more presence as well as Southeast Asia outside of China. And that's also why we will be looking at potential acquisition. We have also, in the same time, been working on increasing our capacity. And that has been an exercise over the last years, which is an important exercise to do because we need to make sure that we can continue to support our customers in their development. And on that picture, I mean, we announced recently the major investment we are all doing in Sieradz, where we will double our capacity by 2025, which will help us to support a certain number of our customers. But it's not the only one. We had also Atlanta, where we launched our new line for electronic manufacturing this year, and have also done other investment in other facilities, Malmo, Wutha and also Myslowice over the last year that have given us capacity. And those are things that are important. Because obviously, to grow, you need customers, but you also need to be able to produce something for them and to grow. And what we can see is even if we have been keeping a good level of profitability, we still have capacity to serve those customers. And we are building extra capacity for future development. So we have had a steady pace on keeping ourselves on our toes to continue to propose a possibility to our customer to grow with us. Another component in growth is our offering. And Christina will cover that more in detail later. But today, we can see that we have a certain number of services we offer our customers that are close to manufacturing. It's how you design, how you do VA/VE, how do you manage components. And all those services are very important to us, how do you do testing of your product and how you use our platform to test your product. Those services are important to us. Obviously, they generate some revenue. But more than that, they create stickiness with our customers. I mean, when we look today at the number of products we have touched one way or the other, either by doing VA/VE, either by doing management of components for our customer, then you realize that it's actually a very big number of our revenue, a very big part of our revenue. So we believe that those services are very important for Scanfil's future and Scanfil's development. And then the last element from our growth journey and our growth pillars is M&A and acquisition. When we look at Scanfil history long term, it has been a few M&As that has been transformational for the company. I mean, if you look at PartnerTech acquisition, for example, it's something we still benefit today. I mean, we have a lot of customers that we are leveraging today that come from that time. And we have a lot of sites that we are growing today that come from that time. And from that perspective, we see it as something that has been part of our history, but that we should now leverage on and continue the journey with. And you will see a little bit later, we have, over the last couple of months, built a quite solid financial position. We believe we are in a shape now to grow and look for potential target, which we have started to do. And we want to do it in a more systematic way. So we want that to become part of Scanfil strategy to have a continuous flow on acquisition that will allow us to either build our network of factories in areas where we see a need for increasing the -- our footprint or also to take new customer onboard that will then benefit on the rest of our factories. And in many ways, it is not rocket science. It is what has made Scanfil successful. I mean, we have a few very successful customers today that come from, as I was saying, this PartnerTech acquisition. And one I have in mind that is now spread around eight of our sites came from PartnerTech. We have also in terms of footprint the same example of Sieradz came from that acquisition. It's now a very big site. And Timo will talk about that site later. So from that perspective, it is a positive development. And it has been a positive development. And we feel now it's time for us to become systematic from that approach and have it as a constant part of our strategy and a regular part of our activities. The second part is the efficiency part. And there is three elements that are very important to us. I will start with supply chain. As you know, a big part of the money we manage is actually transaction we have of suppliers and inventory and elements like that. And we believe that there, it's very important that we keep the focus and we make it part of our DNA to be good in what we do and good across all our factories. So we have set a certain amount of target when it comes to quality, when it comes to inventory rotation that we believe are something are keys. When you are part of the Scanfil family and run a factory, those are things you should be working on. I think it's important for our financial performance. It's important for financial health. It's also important for our customer relationship, where they expect us, I would say, both to create connection with some of the suppliers. Despite their size, many of our customers don't have access to the top-notch manufacturers of electronic components. So they rely on Scanfil and they appreciate the support from Scanfil in that field. But also, they appreciate stability and the professional way to handle inventories. So this is something that we will continue to work on. And we have built competence across our organization to have a good performance on it. The second element that we are very proud of is how we have combined, I will say, the strength of group with a multiple number of factories and also keeping the right ownership in the different units and in different countries. And we have had a program related to creating modern, automatized and digital factory that will, in a way, take a new step in the future. And that has allowed us actually to make sure that we keep our factory up-to-date and competitive and we keep our factory as modern tool. And we will cover that a little bit later today. But definitely, to keep competitive, we need to have factories that are modern, that are up-to-date with both their equipment and their way to do things. We have a few very successful examples that are prized by our customers. But I will let my colleagues talk about it later, sorry for the teasing. But we are very proud of that, and we feel it's the time to move forward. What we feel also, it's very important that we get the push from those factories to identify what they need. I mean, we have palette of choice and a few things that we can do in best practices. And then our factories are really acting depending on the business they have, even on the type of customer mix they have to modernize their tool. And that has been done in a very successful way. And that's why we felt now it was time to take the next step in that journey. So all in all, those are -- those two pillars. Then when we look at both the culture part and the people part as well that the, I will say, the enablers to make this happen, I think there is a few things we have decided to adjust and work upon. The first of them, and it's impacted, obviously, I will say all the people in Scanfil and the people outside Scanfil because the way we work with our customer impact them as well is our values. And we have had values for a long time that are around customer-focused and that we definitely want to keep. I mean, it is important that we keep close relationship and partnership with our customers. We have a strong willingness to achieve things together. I will say, as a new CEO, I was extremely impressed when I came in the company by the willingness of people to do things together, to focus on the task, to focus on the challenges and to solve them. And that's definitely we want to share and continue. And then engagement and performance is also an important element. I mean, we are in an industry where it's not easy every day. You have a small level of margin. And you have to be very focused on performance and on efficiency. I mean, in the same time, you have also the chance that it's fairly long cycle. So performance is recognized by the customers. And those are customers we have had for many years, and they remain many years with us, so performance matter. The one we will -- we are introducing with the team is empowered and empowerment. We have grown as a company. From a family -- a small family company, we have now a multi-site company, international players. And it's very important for us to make sure that the people in China, the people in U.S. or people in Poland know what goods look like and get a very clear picture on the expectation and how they can evolve in that field. And it's important because we need to continue to create speed. We need to continue to advance. And we need everyone to be aligned. So we are now working through making sure that we clarify expectations, we clarify the rules of the game. And we, on that perspective, are able to move to the next step and continue our growth with more people onboard. The second element that is important to us is our sustainability policy. As you have noticed in our customer portfolio, I think there is two characteristics of our portfolio. First one is we have in our top 10 clients a lot of major Nordic industrial players that, in many ways, has decided to have a proactive policy when it comes to sustainability and have that for, I would say all of them, very strong commitment to that. In the same time, we are also benefiting from that new industry. I mean, I was talking and I have been talking during our last report of the performance of our Energy & Cleantech segment that has been growing at a very high pace. The third one, and it's related a little bit to the previous one, is sometimes a little bit on which company do you want to be, if you want to be inspiring people or not. And I think that the sustainability topic today inspire a lot of people. And from that perspective, we see it as a chance for us to move forward. We see it as a chance to create stickiness with our customers. We have had, over the last couple of months, a lot of discussion with project managers to CEOs in our customer to discuss, okay, how do you see the sustainability trajectory? How do you need us on that one? And we have had very positive feedback. So we have decided now to -- and we submitted last week our letter to SBTi to commit to the net zero by 2050. And we will now -- we have now started that journey. And we'll now move forward with the journey. We believe that it's no choice in a way. But also, it's a very inspirational element. And it is also something very fun that we are going to do with our customers. So a step forward for us that are moving towards building a more sustainable company and also making sure that we continue pushing the boundaries. And all in all, as a final consequence of what I have been showing, we have decided to adjust our long-term target and adjust and maybe modify a little bit. On the growth side, we are aiming at a 10% growth over the cycle, which you know that. I mean, it means sometimes it will be higher, sometimes it might be slower, but a 10% growth for the cycle. And we believe it's fully achievable by a combination of the customer portfolio we have and the area where they operate in terms of subsegments. But also, it will be made available -- made possible by a few acquisitions and M&A that will complement our organic growth. In the same time, our operating margin, we have decided to move from 7% to a corridor that will be between 7% and 8%. I mean, we believe that we are reaching a position where our level of efficiency can allow us to have a more ambitious view on our profitability. In the same time, we want to have a balanced picture on our debt level. And we will cover that a bit later, but we have a net debt target of 1.5x EBITDA that we are going to cover a little bit, both in a way to have room for our expansion but remaining a company that is stable and reliable on a financial basis. And then though I would say the only one we are not touching is the dividend piece, that will remain at 1/3 of EPS. So those are the new financial targets we are going to proceed with from now on. So to close the first session and conclude that first session, the first one, we believe we are in a good position to grow. And we are now taking action to allow ourselves to grow. We will focus on three segments, two of them have perspective of growth that is much higher than average so that -- and where we have a strong position and we want to capture. So that's the first element that should move us forward. We will start to work on M&A., and we have started to work on M&A in a way that is systematic. And we believe that M&A is going from now on to be part of Scanfil journey. All of this, we will do by keeping efficiency. We believe that we are in the manufacturing industry and being efficient is important. And the way we do that is by, on a constant basis, improving our manufacturing tools and our company. And finally, we do it with people. And we believe that it's time for us to educate as many people as possible to make sure that we have a model that allow our teams to take responsibility and move forward. And that's something very, very important to make sure that we have a scalable company. And we will finally engage ourselves in a stronger journey around sustainability because we believe that it's the profile of Scanfil and that's something that match very well the people we like to do business with on a daily basis. So with that, I will close that first session.

Yes, thank you, Christophe. A couple of practicalities or one more practicality regarding the questions. We will take these as basically different sessions. Now after Christophe, Kai will be presenting his presentation. And after that, we will have a Q&A session. Then we will have a break. And after that, we will have actually three more presentations. And after that, we will have another Q&A. So only two Q&A sessions instead of having a Q&A session after all the presentations separately. Kai, there you go. Thank you. CFO, Kai Valo.

Thank you, Pasi. Thank you, all participants here and online. And now we talk about the financing and financing. And looking first a bit to the victory -- history and maybe it's also victory. But I started my presentation from the investments and then talking of M&A, I think it's good to look a little bit back mirror what we have done in the past. And here is also then acquisitions and -- or M&A and investments in tangible and intangible assets and then [indiscernible] normal investments for organic growth and then we have the M&A with the darker pillars. And as you can see, the time frame is 10 years like in all -- most of the upcoming page is same time frame, 2014 till 2023. And then yes, starting from the beginning, there is small acquisition in the past, HASEC in Germany and -- but then like already mentioned by Christophe, then we had major acquisition in 2015, EUR 45 million of cash investments. So here, we talk about the cash flow, EUR 45 million cash flow, which was big investment on that time for us. And you can see later from the figures that how it was impacting to us. Then we had smaller ones in 2019. We acquired a company called HASEC in Germany. It's our factory in Wutha now we call Wutha factory that -- and 2020 also, we have a divestment of Hangzhou factory and, I would say, quite successful, EUR 13 million positive cash out of that. And maybe, I would say, strategically good timing and selection, a bit less footprint in China. But more importantly then the manufacturing, pure sheet metal without major integration was maybe not the best for us. And then the last 2 years could say that we have a high organic growth investments. And otherwise, it has been about EUR 10 million a year, the organic growth investments. But last 2 years, EUR 20 million a year for them, which were already mentioned, a lot of PCBA in the last year as well as then again PCBA in the U.S.A. like a greenfield investment. But it was good to bring this up because then it's impacting to the upcoming slides. And here, you can see the result of the first significant acquisition in our revenue turnover or turnover growth. And it has been in average 17.3% in the full period. And first, speed, fast speed growth was 2014 to 2016. And that was because of this acquisition of PartnerTech. And it's showing like this because first year, 2015, was just 50% consolidated. And then 2016 was 100%, more than doubling the revenue those days. Then quite natural time of like integration and restructuring after that. And then like mentioned, there was more small acquisition and then some divestment and then fast organic growth pace during the last 3 years, ending up to this EUR 900 million of last year, which we are proud of. Part of the story, good to mention, again impacting to the slides upcoming is that this light blue part of the bar. And that is called this spot by sales, meaning in practice that, as you're all aware of the trends we've seen, that in the component market and challenges to find and deliver the products for that. And then we have been working hard on the spot market and to find and be able to make the deliveries, which likely as important as our customer as for us to make the deliveries. Sometimes those come with the higher price. And then we have discussed and agreed to invoice the price difference separately. That's basically no margin or low margin, very low margin basis. And that's why it's separated here, EUR 130 million in 3 years in total and '22 was EUR 80 million impact. So that has a big impact to the next page when looking at the profitability figures. This is the adjusted operating profit. Adjusted means that basically excluding one-time costs related to M&A and such or like shutting down the site or such but not like operational -- exclusive any operational expenses. And again, you can see the same pattern here in this page that then after the acquisition, the profitability dropped a little bit, the PartnerTech acquisition on 2015. And it's quite normal to have integration and restructuring activities and then picking up to the level of nearly 7%. Now we are again on the level of 7%. In '21, '22, the spot by revenue and the low profitability for that part is heavily impacting as also the overall, the challenging situation with the component market, of course, it's impacting to the efficiency a bit. But the average growth in this period is more or less the same as what we have with the revenue. Net working capital, I could say that we are targeting for like a 20% level. It has been a bit lower. But in the past, it has been like 20%, our target here. And now for the same reason when we had the challenging component market, we were forced and also willing to increase to certain next inventories and we needed to finance that as well. But that also was like -- makes possible us to make the deliveries and make the organic growth, what we have been showing in the past couple of years. So that was kind of mandatory to do and we needed to finance it as well. Now in last year, we are back on track in working capital and lower in 24%, finished the last year. And there is a view -- expectation that, that could further improve. Net debt is more or less following the same storyline first. But it's interesting to look at this 2015, when PartnerTech was acquired. The net debt to EBITDA, which we are now targeting to keep in average 1.5 level was 2.5, almost 2.6 on that time. It was quite heavy, even value-wise. If you compare our capability now, it was not so big, EUR 45 million cash. But now EUR 45 million in cash is not that big for us. We are in the different ball game already. But at that time, it was a big one. And then net debt also growing a bit in '21, '22 for the reason that the inventories were growing and we were prepared for this to tackle the shortages of the component. Now actually, we are in very good level, EUR 50 million, 0.6 is the net debt to EBITDA and EUR 50 million. But if you compare back to this time when we acquired PartnerTech, EUR 45 million, now we are net debt, EUR 50 million. We are a bit less in total than on that time. Balance sheet is developing. This is showing a comparison of last and the previous year in balance sheet. Just a few words about this that inventories were dropping EUR 20 million in the last year and then equity growing EUR 40 million about and then we were paying off the loans over EUR 30 million. So we are in a quite good shape with the balance sheet. Salespeople could say that we're in very good shape. Net cash from the operating activities, there is a nice trend at first. And then again, for the same reason, the inventories growth were driving the net cash from the operating activities even negative and very low in 2 years, '21 and '22. Last year, all-time high, extremely good, over -- almost EUR 70 million of positive cash flow. And out of this EUR 70 million, like said, then we paid the loans, we paid dividends, EUR 30 million, and we invested EUR 20 million. So it was well used for many, many purposes. Already mentioned by Christophe that 10 years behind and 11th year coming with a growing dividend. Maybe more importantly, we can see the trend of earnings per share growing equally. 2020 is a bit peak for the reason that this Hangzhou divestment was impacting to the net profit. Return on equity, this is very important. And I want to highlight that this is -- and from the investor point of view, probably one of the most important metrics. In the last 7 years, we are in a level average, 19%, on return on equity. And this is what we need to take care that going forward when investing, we make sure that we are able to provide the return. We are trusted by the shareholders. We, in average, keep 2/3 of the profits in the company and 1/3 is paid out as a dividend. And this share of what we keep in the company needs to be smartly invested to provide the future return, which is greater than a shareholder can find on the market, I hope. Equity ratio, also growing gradually. But again, same pattern that then '21, '22, it's a bit lower than in average for the reason that our balance sheet was higher. And now the balance sheet is still almost the same, but then our profitability is significantly improved. So we have added more equity. Okay. And then coming to peek of the future, what we are capable of, considering -- and look, it was good to look a bit history and then -- and we are in -- have a strong view that then like our debt capacity, that means that what we could quite -- easy is not a good word, but without big struggle, we could invest and make M&A, it's like EUR 150 million. This is the value of debt we could quite -- without big pain, we could add more. And with that, we would end up to like net debt to EBITDA of 1.7 and very fast likely coming down. So then it would keep us below average 1.5 still. And that likely -- of course, that very much it's guessing. But then that could -- if like a company like us, it could mean roughly speaking, EUR 200 million of more revenue. But that's, of course, case-by-case, you -- but some sort of [indiscernible]. And then referring to that previous slide, once you show that then what it means, this 10% growth organically in a -- 10% growth total in 5 years. That means organically, we would end up to -- from EUR 900 million to EUR 1.15 billion of revenue. And then we would close the -- we need to close the gap with EUR 300 million revenue from inorganic growth. And yes, again referring to the previous slide, that is totally not out of scope. It's totally possible to do so and still keeping the debt ratio kind of reasonable. And I think that, that's important to keep the risk on the manageable level. So from my side, the key takeaways are like we have done profitable growth over 10 years, 16% to 17% of level. We are very strong. I added the word very strong balance sheet. But it's important for us because we want to be a reliable business partner for the customers, our suppliers, financiers as well as then public authorities, tax authorities, et cetera, so that then we have good national. Good return for the equity, last 7 years in average, 19%. Net debt is not limiting the future growth. Of course, there is always a limit but not what we are targeting -- in that range, what we are targeting for. And then organic growth can be supplemented with this inorganic growth. And last but not least, the dividend is expected to increase 1 more year 11th time. Thank you.

Thank you, guys. Excellent presentation. Let's open up for questions. We have -- let's take first the online questions. I think that the first one goes to Christophe. Congratulations. Do you have any revenues today from defense? What about future plans for defense exposure?

We have some customers that are acting in the field -- in that field. I mean, the most famous one, in a way, is INVISIO that we advertised, I think, was in Q3 report that has been growing very significantly and benefiting from the trend on that segment. So we have some activities there. But as I said before, I think that we are in an industry where you work through a very long-term relationship. And therefore, the area where we have decided to have our focus on expansion are medtech and energy and cleantech. It doesn't mean that we don't have area in that field. But the area of focus are those two. So defense, we have some customer we will continue to support. I mean, we have opportunities that we pursue. But we believe very strongly on the other segments, actually.

Thank you, Christophe. Maybe next few goes to Kai. What has been underlying long-term organic average annual growth in the past? Very specific one.

Yes, 17% total growth. But then isolated, the organic growth, I cannot exactly do it right now.

Of course, it can be actually calculated from the figure side, I guess. In your organic -- this might be actually going to Christophe. In your organic growth target unchanged, is it -- is your organic growth rate unchanged at 5% to 7% and acquisition now representing 3% to 5% of the new target of 10%?

I will say that the average growth trend is in the range of the segment we have selected, between 6% and 8%. That's what we can hope from those opportunities, which is slightly higher than the 5% to 6% of the market. And then we believe we will complement that by acquisition.

Okay, thank you. Next one goes to Christophe still. What is your core competitive edge which makes you different from competitors?

There is a few things here. I mean, first of all, we need to realize that the markets we are evolving here is quite a complex market. I mean, even when we say we deal with global customers, we actually deal with fairly complicated organizations that have different units and different focus. And Scanfil is quite good at managing those clients that are global customers and that, in the same time, need to have a local support. So the way we balance between global key account management and local support on the operation where you are dealing with is very good to develop ourselves. That's one element. The second element is we have developed additional services around our offering around manufacturing, where we are good on and covering the spot that is a sweet spot for those people that are managing their second generation of product and offering. So when we do VA/VE, when we support our clients in adjusting their components to the market situation, we create an edge. And then the last is the footprint of factory we have is quite unique. I mean, we cover all the customer segments. We manage those mid-, high volume in many places in the world. So I will say the mix of how we handle those global customers, of sizable customer across different geographies with a big, complex mix makes our offering quite unique. And also, this complexity makes some stickiness. I mean, sometimes from our presentation, you might think, "Okay, but there are 10 customers that represents half of the business." But 1 customer might be 10 or 15 units, 200 or 300 product lines. So that becomes a very different story. It's not something like you wake up in the morning and say, "Okay, let's move it to somewhere else." It also means that to win customers, it takes a little bit of time. So we need to make choices and work very hard on it to win it. That's also why today, we say, okay, Cleantech -- Medtech and Energy & Cleantech, we have the right path. We're going to work on it, not only tomorrow but for the next 5 years in a consistent way. And it will bring us customers. So sorry, I was a bit long on that answer, but...

Yes, no problem. I think that actually Christina will continue from here in her presentation. Are there any questions from the floor? [indiscernible]?

Could you please just -- sorry if you -- if I didn't understand it correctly. But in the growth target, did you say that you assume 5% organic growth and 5% acquisitions?

No, but maybe I can try to be a bit more specific. That was somehow like illustration that if we would have 5%, it's still maybe normal market rate, 5% to 7%. And we expected that if there would be 5% of organic growth and then another 5% then -- of like completed with the inorganic growth. But of course, the combination can be a bit different than we have also capacity to -- if organic growth would be lower, we have capacity to supplement that with inorganic growth or it can be vice versa or it's just a target ratio.

Okay. But isn't that a bit conservative, given that you have strong organic growth in the past than your...

Yes, I think -- well, I can continue that, complement that. I think for us, what is important is to say, "Okay, how do we reach this mix of 10%?" That is more than what we have been claiming in the past. And there is two components out of it, is one, as I said before, it's an organic growth that we believe should be between 6% and 8%, when the market is between 5% and 6% because of the vertical market we are on. And then that we can complement by an M&A that you could say, "Yes, it could be between 3% and 5%." So we could say 12% as well. Then you don't know what comes at which time and in which moment. So that's why I think that the 10% is a realistic ballpark. Then will it be 5% and 5% or 6% and 4%. That we can debate for a very long time. But that's just to give you a flavor on -- we have the capability to finance the plan that we want to go after with M&A, and we believe that we are evolving in a market that is supporting our long-term target.

Okay. And regarding the operating margin target of 7% to 8%. Is that an average? Or is it over cycle? Or how should we interpret it?

I think that the way you should read it is over cycle, we would like to navigate between those 2 numbers as consistently as possible. That's the way you should read it.

Thank you. Any other questions from the floor? Just a sec, I'll check if there are something online. Not at the moment. So we're actually getting ready for the break. So let's take a 15-minutes break. I don't think that we will take a longer one and we return to this room. So there will be coffee, tea and other stuff actually served in the next door. Okay, thank you. Just a sec, we just got one more question. So don't go yet. Just when you say it. On M&A, could you elaborate on what you look for in terms of synergies? Let's start with that one. I will continue. It was a long one.

Yes. I think there is 2 things I mentioned before. I mean, we believe that a complementary footprint geographically will give us the chance to leverage even more on the current customers. I mean, we have had discussions. We have a constant discussion with our global customer to understand where they would like to get support from us. So that's the first, I would say, synergy we can find, which is extra revenue for the company we acquired by bringing business from our current customers to those different facilities. Then there is also another angle, which is to find companies that have an interesting customer portfolio in the segment we are looking for and help them to grow those customers through our network of factories. So I will say those are the main synergies and the main value creation we can have around growth. Through M&A. And in a way, it's not different from what the Scanfil story has been. I mean all the PartnerTech acquisition has been a lot about using site to bring all the Scanfil customers to go on those sites or vice versa.

Okay. Thank you. Then the continuation for other question is actually regarding the valuation. How is your valuation framework and approach? How sensitive are you to paying premium freezes earnings multiple. Many peers have sub valued at 10 points EBITDA and private talks may also not often to be that cheap.

I think that's something that is maybe a little bit premature to answer to. But I think that we can still see that -- we are in an industry that is still very fragmented. And obviously, I mean, you can look at the peers that are visible to people that are around us. But when we look at our market and overall market, I mean, we see a lot of still family-owned company across the world that have potential. And that probably are in a level of price that are a reasonable level of price.

Okay. Thank you. And if further questions, when I'm saying this, there will be popping up of question in the chat directly. But let's take a 15-minute break. And if there will be further questions, so just hit the chat, and we will read those and post those questions later on. Okay. Let's take a break of 15 minutes. Thank you all.

Thank you, Pasi. [Break]

Okay. Thank you. Welcome back. So it's 20-past now. So we are actually 30 minutes ahead of the schedule at the moment. But we will continue still. So next one will be Christina, and she will be discussing our -- about our sales and our new customer segmentation. So Christina? Welcome.

Thank you very much. Great to be here, and especially exciting to be able to talk about growth because if there's something that's exciting, it's growth. We are indeed geared up. [Audio Gap] And overall capabilities to deliver with high flexibility and good customer service. We see segment growth drivers and we'll talk more about them. It's an exciting time because actually now on Monday, March 11, we're going live in Stanfield. With a new structure with sales and business development with focused teams focusing on the 3 segments: Industrial, Energy & Cleantech, Medtech & Life Science. Having people who wake up every morning wanting to eat, breathe and drink the segment and really focus on that, coupled with strong customer-focused teams at our sites. We do provide value during the entire product life cycle for our clients. And this gives value in the low to medium volume, high mix where we play. When it comes to early engagement, for development services and design, industrialization into manufacturing. And here, we play both with sheet metal manufacturing in certain sites, especially here in Europe. Cable manufacturing at certain sites for vertical integration for our own system integration offering and also, big, big focus on PCB electronics manufacturing box building system integration. It's kind of like the core of what we do. And then after sales services with helping with product maintenance, Christophe talked about the different generations. A lot of our larger solid industrial clients and in Energy & Cleantech, they want to focus on new product lines, where we can add value is really to take care of the older product lines that also need to be maintained that are maybe not in the highest focus for the clients. So development services have become even more important lately. And especially I would say after the pandemic, everybody, all our clients and ourselves were all affected in the pandemic with component shortages, trying to find alternative components, finding solutions to be able to deliver to the end client demand. It was a huge struggle for all of us in the EMS market for our customers. This has now given us more opportunities for dialogue, especially with the customers where we've had really long partnerships to look at, how can we help with value analysis, value engineering, how can we help to cost optimize, to find solutions together. And this is kind of like where the magic happens. I was recently in Myslowice, in Poland in our factory where we have advanced system integration of mechanical manufacturing, and we had a 2-day workshop with 1 client. Looking at how can we cost reduce this unit with the experts from the client end, our experts from a global design and engineering perspective, our factory staff, who work with manufacturability assessment, 2-day workshop to find ways. And now we have a project cooking together, to see, yes, how can we move forward? How can we give value. As someone asked in the Q&A question earlier here. What's so special about Scanfil and what can we do? This we can do really, really well. And this is so much appreciated by our closest clients. And I was thinking about this, I was sitting listening to Christophe here earlier, there's this saying in Tanzania. I heard it also when I was there on vacation. If you want to go fast, you go alone, if you want to go far, you go together. This is all about going together, and that's the goal of what we want to do and focus on. We also have a functional test platform that we have developed within Scanfil, and we help our clients with test development services. This leverages our expertise in manufacturing and test. It's not always an expertise that all of our clients have, so this can also add value. What is to just show how this can help us to grow at Scanfil. It increases value-add for the customers, it increases value add for us. It also improves customer satisfaction, and it creates real stickiness because when you have projects like these to enhance the offering, the end customer offering, you get to kind of like a different stage with a real partnership, not a transaction or kind of like traditional contract manufacturing supplier versus client relationship. We talk about design-driven manufacturing, the green bars here. It shows here how work we have done and touched with development services how this business grows over time. It shows the volume, the manufactured volume of products. So this is important for us. Also, the test development work we do and the functional test equipment that we supply and that the customers can leverage how this helps us to also increase our volume manufacturing revenue. So we touch a lot of the customer spend where we do these kinds of services. So increasingly important and the pandemic and its aftermath has really given this even more emphasis than it did earlier. So who do we do business with? Industrial, Energy & Cleantech, Medtech & Life Science is clear. That's where we play. Low to medium volume, high mix, also where we play. So maybe you ask, what's low to media volume? Well, we say low volume is probably a product part number and volume below 100,000 units a year. So when it comes to medium volume, maybe between 10,000 to, let's say, 0.5 million units a year, that's where we play. When it comes to really, really high, high volumes, millions, millions of units of the same product a year, we don't really play there. We play best in low to medium volume, high mix. We're working with profitable established growth clients, and we leverage the megatrends. We have focused on certain clients, certain areas. We don't go after anything. Very strategic focus is how we go to market from a sales and business development perspective. Sometimes, we work with younger, established OEMs with growth potential. Very selectively. Sometimes I get asked, "Oh, if you don't want to do business with startups"? We do from time to time in areas where we see great potential very, very selectively. And that's the focus. Long-term partnerships with a well-diversified customer portfolio, the more complex, the better for us. We enjoy that. So we are positioning ourselves for further growth, organic and inorganic growth, leveraging the strong track record we have all through these years, that Christophe and Kai so eloquently described from the past decades. And also exciting is the fact that we now, during February, as I mentioned, have worked with the new segmentation. Having so-called farmers, global account managers and hunters, sales managers working together in a segment organization, one organization, one team for Industrial, one for Energy & Cleantech, one for Medtech & Life Science to be able to really leverage the lessons learned best practices and the expertise we have in these segments. We want to play a leading role in the sustainability areas in EMS. Incredibly important for us. And if you look at many of our clients in all of these segments, this is on top of their agendas. Gives us a great opportunity to become even closer working together to find ways to accelerate the work in the sustainability area. So focus on growth and really focus on what drives the market. We talked about this earlier today, 6% to 8%, component average growth rate for the different segments and really a lot of growth drivers in the marketplace for the different segments. So I wanted now to dive in into the 3 different segments quickly. Industrial. The Industrial segment is really our route and where Scanfil kind of grew from. We have all kinds of different products now within the segments from elevator and escalator units you have payment solutions, et cetera, surveillance systems, also different types of production equipment controlled units, et cetera. You just see a few of our customer names there that we are able to disclose. It's a huge market industrial area. Market research shows approximately EUR 89 billion of total available market space in the EMS industry. There is a lot of business to get in this segment continuously. We also have new clients not mentioned here in the elevator area. We have other clients we can't disclose in the other areas here. That fits really our portfolio and our offering where we can add value. Energy & Cleantech is a super exciting segment for us. And if you look at the really the growth drivers in the market today from everywhere from recycling to renewable energy, electrification and society, storage of energy. I mean it's on top of everybody's mind. You open a newspaper or at least you slide across your iPad or whatever you use digitally, you see it across. It's such an important area, and we see great long-term growth possibilities in this segment. We have clients like Tomra, Nibe, ABB, Danfoss, Exide. They all play in this segment as just examples. And we see that we can really continue the growth journey with the momentum we have with a fantastic track record we have with these clients. Just a few of them mentioned earlier here, we, of course, have more. And also with the energy transformation that we see is ongoing in virtually all regions globally. Huge growth. And we've been growing really fast. Why are we growing really fast? Great foundation, good offering, a lot of collaboration when it comes to the entire product life cycle. And also, we've been able to cater to the clients' needs when it comes to global footprint and capacity. We see that regionalization is on top of everybody's mind. This started a long time to go more than 2 decades ago with regionalization where more than 20 years ago, everything was to be made in -- first, it was made in Korea, right? Made in Japan, made in China, made in Taiwan for a while. So this happened a long time ago with regionalization. But what we see now, following the aftermath of the pandemic, is that there is a new drive for localization and regionalization, still China for China, but also made in America and assemble in America in the U.S. even though maybe sometimes a little bit more costly, it has a value. And the fact that finally, a lot of our clients are interested in looking at total end-to-end cost, not just looking at the small value-add portion of the assembly of a product, but actually looking at what does it cost to hub the things around the world to store? What's the cost of capital, keeping something on a ship for 6 weeks. Real total review of the supply chain. And we are here ready to help with this. With our expertise, utilizing our footprint and helping to regionalize. So estimate the global EMS market size, EUR 22 billion in 2028, gives us ample opportunities to grow. We have a lot to go after. Then to finish up with here, Medtech & Life Science. We have a super strong position. And here, we have fantastic macro trends that give us the possibility to grow. Aging population will live longer than ever in the developed world. This leads to the fact that solutions are needed when it comes to the latter stages of life. Digitalization and connectivity. Also when it comes to emerging markets, more and more people today in the developing world get access to health services in a different way. Creates huge momentum. EUR 84 billion, size of market estimated in 2028 in the EMS market. It's great. It's a strategic focus. And here, we are accelerating. We will now in the new segment set up invests even more. We want to expand our footprint here for organic growth. We have very strong experience in in vitro diagnostics. You may not know what it is, but it's equipment that you need to handle tests from the body. It could be blood tests or other kinds of fluids, and this is an area where we have very strong capabilities, thanks to our work with different clients in this field. We also have quite a bit of manufacturing and measurement devices today and also laboratory equipment, very, very complex equipment that fits our niche very well. We have, as an example, 3 major Medtech clients. One of our larger clients has a business size, including pharma, of more than EUR 40 billion, American headquarters. We have fantastic growth with this client. We also have medium-sized clients and smaller clients. Also, several of them are large corporations headquarters in the U.S. Here, we can use our capabilities globally to cater in the different regions in the niche where we play with lower to medium volumes and high mix. So what we're now doing, if you look at our footprint of our 9 factories today, the existing footprint is that in 8 of the 9 factories, we already have the standard ISO 13485 to be able to provide medical devices to clients, but that's just the standard. And what we're now doing is that we are increasing our capability to also deliver finished medical devices. So what does this mean? Well, today, we have 1 factory in Åtvidaberg here in Sweden that can deliver finished medical devices. So also called QSR, which is a quality system for FDA-regulated processes. We're now investing. So in Suzhou in China, we're on our journey together with the Nordic client. Unfortunately, I can't disclose the name of the client yet, but we're on our way to move that site with capabilities from component -- key component medical manufacturing to finished medical device with QSR capabilities. Very exciting. This will enable us to grow even more when it comes to Medtech in China, and there's new regulation coming in the Chinese market. So this puts us in a very strong position. We have also taken the decision to increase our Medtech or capabilities in Eastern Central Europe. With taking Sieradz, Poland, our largest European site, where we are doubling the size of the factory to 2025 to also take this site from component level for medical manufacturing to finished medical device level. So investments in more business development people, investments in technical project staff who can work to ramp this. Later in the future, we will also likely ramp finished medical devices also in the United States. But this will keep us busy now for the coming couple of years. So very exciting times. So to summarize here before I hand over to the next speaker is we're geared for growth. We used to be a smaller EMS, if you look 10 years back. We're now at the stage of EUR 900 million year-on-year turnover that we had approximately in 2023. We now will have a segment structure that enabled us to grow very effectively. Laser focus on Industrial, Energy & Cleantech, Medtech & Life Science, focusing our product life cycle offerings and where we can play and add value. We will be laser focused. We will not waste time, where we don't play and we're super excited. So with that said, thank you very much.

Thank you, Christina. Now handing over to Riku, so she was selling and the other guy is actually producing.

Okay. So greetings from the engine room. I'm Riku Hynninen responsible for technology processes and people and called Chief Development Officer at Scanfil. Been with the company for 6 years. And before that, I was spending more than 20 years of my life in Nokia Networks business in both supply chain and business management. And I want to tell you about one of the pillars in our strategy here. You see the World Dream Factory. This is our dream, how our factories will be 5 years from now in '28. So the vision is that the -- first starting from the why that? Okay, we want to grow, and we are geared for growth. And in this business in order to grow, we need to be super good in our operations. We need to be best-in-class. And that's our vision. We want to have best-in-class competitiveness and customer satisfaction in how we operate. And what we are doing is that we are optimizing our factory performance not only by investing more and more into technology or digital devices, but also connecting the real-life things like factory processes, the people, through digitalization together and optimizing our operations. So those of you who might have been joining the CMD '21 when we were presenting the smart factory initiative. It was -- the Smart Factory was a program that we started back in 2019. And we were building our capabilities in terms of automation and digitalization. And then started to think that, okay, all the companies who have some investment power, they can buy the same automation, they can invest in the same digitalization solutions that we can. So does it really bring competitive advantage? Not necessary. It's maybe a way to keep us competitive, but not create edge. So then after visiting some of the world-leading manufacturing companies, we saw companies that were very much doing that. They were investing in technology. They have really nice control rooms, cockpits, everything in place, looked really nice, fine. That's one strategy. And then some other factories that they had very simple tools, visual paper, pens. And the reason for their being successful was their culture, the people, how they operate in the real world. The flows optimizing even nitty gritty details in the factory to create operational -- to improve operational performance. And the Dream Factory is our dream to combine these 2 worlds: digitalization, automation from a technical perspective and then the people, processes and practical tools and flows in the factories. So to be more concrete on what we mean with this. So in the middle, that's a simplified workflow of typical factory starting from material supply, receiving them, putting in the warehouse, running the manufacturing operations and then finally, packing and shipping the products out. So in Dream Factory, first of all, we are looking into generic capabilities, which is about using sophisticated digital tools to run multi constraint planning. So planning based on materials availability, technical capacity, people availability, people with right skills, right place, right time. And then combining with more digital tools, providing capability to manage our materials flows in real time. And -- but not only focusing on the digital tools, but also rethinking our factory layouts. How do we organize the different stations and the materials flow inside the factory to make the best out of every factory? For that, we also need labor, that it is multi-skilled. One day, there might be product A that has very high demand. Next week, it might be product B, then there might be a lot of constraints coming from the material side. So the better we can move people from different line to another, the better we are in our operational efficiency. And then we are also continuing to invest in automation capabilities, starting from incoming inspection to warehousing, some of the warehouses that we already have in Suzhou, for example, are already very highly automated and completely digital. Then we are using AIVs, the vehicles that are autonomously moving between different spots in the factory, transporting materials in the factories. And we are then also investing more and more into automation that has good ROI. And flexible automation, as Christina said, we are in low-volume, medium-volume, high-mix business. So that's not the place where you want to invest a lot of industrial automation because the payback times tend to be unattractive. But instead, we are leaning on flexible pretty low-cost automation that we can use for multiple products. Adding AI on top, which is a hot topic today. We are looking into AI. And we already have our first proof of concept related to using a generic AI in optical inspection. So this all will improve our operational excellence. And a bit more describing what do we mean with smart technology? What kind of characteristics we are looking there? So all the investments that we are carrying out. They need to be adding value. They need to be having an attractive return on investment. And we are actively looking into AI possibilities. Some of the vendors for the automation equipment are already building in the AI capabilities in the system. And then in parallel, we are thinking our own use cases, how to enhance the automation with data and putting AI on top of the data, we can further optimize the automation. Digital flow, basically 2 main things that, that it's good to know. But one thing is that we are building so-called Data 2.0, data environment, data architecture in Scanfil over the next few years, which will enable us to store immense amount of data that we are collecting not only from our factory processes but also our financial data, our supplier data et cetera, that we can then run different use cases, build foundation models on that data and use it to our benefit. To make better decisions, make them faster or even automate some operations that normally require human intervention and human decisions. And then the second thing is that the advanced planning and scheduling. We are looking forward, digital solution. We are already implementing it in 2 factories. Where we will be able to use the data that we are collecting from our systems to create our production plans very fast and very accurately take into account the people, technology and materials constraints. What comes to the real-world factory flow, we are continuously optimizing our working process rearranging the layouts, movements, utilization of the equipment, And we are improving the shop floor visual management and very much moving from payer-based displays to digital displays. And we have also defined concepts for so-called Dream Factory production line concepts which is like the optimum assembly line setup that we believe should be used in order to manage high mix, low medium volume products. And last but not least, the workforce. As I said, it needs to be multiskilled so that we can have the flexibility. And then we also need to -- or we are willing to invest in training the people who work in the production line with the problem solving skills, with the Lean Six Sigma tools and methods that we can push more and more of the problem solving and continuous improvement from our management and engineers towards the line operators. And that is a great way to scale our ability to improve our operational efficiency and solve all the problems that supply chains and manufacturing tend to have. Let me give you an example. We -- as I said, we started this smart factory initiative, created the concept in 2019, and then we made a digitalization pilot in Suzhou factory. We digitalized the warehouse management and put controls in place through manufacturing execution system. We implemented traceability in the process that everything that happens in the manufacturing line leaves a data trace, and we can use the data to control all the process. That no quality defects will go out of the factory. And we can also have a lot of possibilities for visualizing, making analysis and again, better research to optimize the products. And then packing and shipping, we have a universal packing line that is able to handle multiple different types of packages, products and also the controls are in place also in the packing that right items end up in right boxes that will be shipped to right locations on the right time. So let us look at what -- how does the success look like after 4 years of running this project. So we have estimated the return on investment, 27% per annum. Our customer NPS score has increased from around 30 to 79. Our employee NPS is currently 80, so roughly on par with the customer NPS. Our customer quality has improved by 68%. Our asset efficiency measured as the service smart device equipment has increased by 13 percentage points. We have reduced the scrap in the manufacturing processes by 67%. And also at the same time, we have improved our on-time delivery performance based on the date that customer has wanted the product by 21 percentage points. Now looking forward, what comes to our way of working and expected investment rate. We are estimating roughly EUR 6 million per annum over the 5 years span to be invested in Dream Factory related automation and digital sales. And the approach that we have is that we have a very lean, small team in the global organization. So we are very closely working with the factories, collaborating with the planning, road mapping and also laying out the investment decisions for the coming years. And we are currently in the process of doing that as I speak. And our guys are today working in Myslowice, creating a dream factory road map and plan for Myslowice, Poland. And at the end of this exercise, we will have a Dream Factory road maps and execution plans for all of our factories. Will they look the same? No. We are very pragmatically looking at what fits best in each factory. They have different types of product mixes, different types of processes. So we are very pragmatic and selective there. Then here's the dream, it's my dream and our dream. So by '28, we want to see more than 26% increase in labor productivity. We want to see our customer satisfaction on quality and delivery performance being above 4.5 on the scale of 1 to 5. And also, we will improve our inventory return over to 6 or above. With these words, I will give it to Timo.

Thank you. Staggering figures. Now from the engine room to grease pit. My pleasure to be here. Since 1988, I've been working for and actually living for EMS industry business and last 11 years for Scanfil. So seeing this quite nice journey. And we have been coming from Scandinavian player to global players as we are today. Yes. As Pasi said, after sales, marketing and technology development, let's produce the products. And today, we focus on our factory in Poland, in Sieradz, which is the main electronics and system integration factory in Europe, we have. Some key milestones, how the factory has been developed during the years. And it was from 2001. It was a PartnerTech factory until Scanfil acquired PartnerTech in 2015 that time, about 500 people. 8000 to 9000 square meters factory. Immediately, we saw that here we need more space, space was limiting our growth. And we made the decision to have a more Building D. So doubling the capacity for 2017. And that space has been enough for us until last year. So we have been growing nicely last 5, 6 years, I will come back to those some figures. And -- but now we see that last year factory was starting to be quite full. 1400 people and good demand. So the decision has been made again to have a more space. 14,000 square meters will be ready in next year and doubling the capacity. Services, we are providing from that factory, including some product design, production ramp-up services, PCBA manufacturing, box build, module system integration and some complete products. For sure some Logistics and distribution services. And once again, as Christina highlighted, in our partnership together with customers, what is the best logistic model for each of them. Current factory in the picture. You saw also this life cycle service slide also, but the message is that, of course, our core processes in Sieradz are electronics manufacturing, box build system indication. But more and more, we are also focusing on early involvement when the production and product ramp-up is ongoing together with the deep cooperation with the customers, what comes to component selection, technology selections, et cetera. Typically, our product life cycles are quite long. Easily 10 years, 15, even 20 years. But sometimes, of course, products are going to die, and there is a ramp down services also that we are -- we are working together with the customers to have a smooth ramp down. The process itself, Riku already had some generic our process floats up. But here, we can see Sieradz factory. And everything, of course, starts from the purchasing, customer demand is the key. Customer orders, forecasts are driving our purchasing function, whatever customer is forecasting and needing then we are sending orders to our suppliers and later incoming inspection is the first working phase. We have a pallet warehouse function, 4 big parts and then for smaller items, automatic warehouse function. Feeding the products itself, preparing area, SMT lines have been split by 2 different areas. It depends on the product volumes and complexity of the products to have to efficient up. But anyway, SMT lines feeding them through whole component assembly, inspection module PCBA testing. And finally, either we ship goods after PCBA testing to packing and to customers or we feed assembly and integrate even more and more customers are requesting today final assembly in a module level or even complete products. And final testing for those modules complete products before the packing and shipping to the customers. Some pictures from Dream Factory and Smart Factory program, what comes to our warehouse automation. Kardex system for the components, small Kardex in SMT lines, our own testing -- build own testing platform or PCBAs we are offering to customers in the cobots, robots in the final assembly phase. Location-wise, it's a really good location. In the Central of Eastern Europe. And key customers are located mainly in Europe where the delivery times are from 1 to 2, max 3 days. Some customers in North America and some in Asia, and we are saying 3 to 7 days by air shipment. Always, as it's a cooperation and agreement with the customer, what's the best logistics solution to get the goods to the delivery destinations. Back to these investments. We did the decision in the third quarter last week -- last year, roughly EUR 20 million, only the building itself. And doubling the capacity will be ready in Q2 next year, about 1 year from now. And here, you can see that we are using latest technologies when it comes to heating, cooling and solar panels will be installed for the electricity to support our sustainability targets, as Christophe earlier highlighted. And Dream Factory find the best solution for that factory and comparing what other customer requirements will be very high efficient market inflow. Space itself is not doubling, but the volumes are. So we are getting more output from that factory 2x comparing today. And investments equipment, of course, will be done according to customer demand. So floor will be ready immediately. But then, of course, based on the customer demand, we are increasing the machine equipment. Some picture on the left side how the new building will be looked like. And there is already construction ongoing. And in the middle of the slide. Here, we can see that how Sieradz factory has performed after we acquired, we can see that the first 4 years, 5 years, actually until 2020. Sales volumes, output volumes quite flat. But at that time, we really focus on productivity, efficiency. So actually, EBIT was growing quite nicely from 3% level already broke 7% target delivered 2019. So -- and then as I mentioned earlier, we decided to have a new space to be able to grow and last 3 years, heavy growth. We have doubled now the volumes during the last 3 years. And last year, we moved to utilize forward shift, meaning 24-hour, 7 days a week working model. And one more, actually PCBA line was installed, including SMT machines, soldering machines, mini testers, some robots, cobots, more than EUR 5 million investment for that line has been done last year. With the coming expansion, we are ready to continue this growth. Of course, machines, lines will be ordered based on the customer demand, but and -- but we are ready to do that, doubling within the next 3, 4 years when the demand is coming. As Christina highlighted, Focus in Medical, Energy & Cleantech customers as current ones are mainly coming. Some key KPIs we are measuring also values was mentioned today. One key value is customer focus. We are measuring customer satisfaction. And on the left side, last 5 years, scale from 0 to 5. And let's say, from 3 to 4, it's already in a good level, above 4, we can say, excellent customer satisfaction. So Sieradz Factory was able to break excellent level in 2020. Then we drop a bit. There was component availability issues. We have some capacity constraints. Satisfaction was dropping a bit. Still, we were able to keep it in a good level. But now you can see that trend has moved back. And this year target is to go back to excellent level in customer satisfaction. What we have done mainly, of course, component. We focus on heavily 4 component availability issues we increased the capacity. I mentioned some machine equipment and we hire more people. And then very special attention with salespeople to have a proactive communication with the customers. It was really good to see latest customer survey result that, for example, this area -- communication area was already above excellent level from Sieradz. Our own employee satisfaction, we are also measuring. So you can see that the last 7 years, step-by-step, satisfaction is increasing and developing to the right direction. And we have set the target that every year we go up. And the key elements to mention open communication for sure, heavy training programs by the plant, by the global function and some cooperation with universities, et cetera. Gender diversity is already in a quite good -- in Sieradz, 56% in women and 44% men. Okay. Then back to this -- today, we have talked also and highlighted that where we are good and maybe a bit differentiated from the competitors that we are really focusing on how to get some costs down and working for somebody analyzes value engineering case. And this is 1 project we did, the challenge or the issue was that the customer was highlighting that the module including to this product was too -- cost was too high. And customers didn't have resources. They own R&D resources for focusing on new products. they didn't have resources to focus on this existing products, so to do some redesign. So we did that and founded some multifunctional team, analyzing the situation, what was the information and we did some alternative options, how to do it calculated some savings payback times. And finally, we went to customer and proposed that, hey, how about we can do this, and this is the price tag, of course, and they accepted our proposal and then we did. Design itself was done by our partner, Sigma Connectivity located here in Sweden. It was a IoT wireless model, so they are specialists for that. But project management, design for manufacturing, meaning that we gave strong feedback that it's good to use this and this components, this and this com-bone and manufacturing technologies to be able to produce the products as a lower cost as possible. Ramp up the production at the end. And customer was very satisfied. We were able to reduce the costs as targeted. And at the same time, we improved also production performance and quality for that unit. So this is just one example as we talk today. This is the normal partnership mode today with our key customers. Sieradz is a perfect match for the customers who has, let's say, medium volume needs, high mix coming from those mentioned segments and basically in tech, medical, industrial and need some new product introduction process. We have a dedicated team by the project manager who is running always until to the mass production. Very strong design for manufacturing assembly feedback to the customer that, hey, please change this one and this one, you can get the cheaper product in the future. As mentioned, PCBA volume manufacturing and also we have customer teams leading by prog managers supporting by global sales team for state-of-art machines equipment we have already invested and will do in the future. Today, more and more customers are asking either box build or module or even complete system integrated products. So we are still shipping out like a more and more PCBA manufacturing is feeding system integration. And that's good. That we are focusing, and we have already more than 20 years' experience to build those units. And Christina highlighted also this medical, and we started to develop Sierra's factory to be able to Sieradz produce Finnish medical devices. Today, those are either some PCBA or module, but need certification process has been started. Okay. As a -- last slide for me, key takeaways, increasing customer satisfaction. Those 4 comments are coming from latest customer satisfaction survey, 2 months ago. And good to see they are -- many customers are happy with our performance improved, when it comes to ODD, quality, costs. There is those saving project. We are able to get product costs down and people. People is the key in many businesses and especially in EMS business with the good stuff, we are not so good, but it's really good to see that the customers are seeing our share of team as a very good team with a good attitude. We have a proven profitable growth. You saw those slides, health customer portfolio currently. And very good capability to produce high-mix, low, medium volume products with the people. So bases are there, looking for new business from existing customers and of course, from selected new customer hunting as well. So let's say that we have an excellent factory in Poland and will be even a bit better in the future.

Thank you, Timo. There is one question, which actually just came in when I said that, okay, we will close now for the break. And this one goes to Kai. One just a sec, I'm going to scroll this too many. We have already -- have you already discussed with banks, what would be interest rate level for EUR 100 million loan?

Yes, I think that we are not really disclosing our financing cost details or other such agreements. But I think that we are -- from the financing cost point of view, we are in a very good position. And I think that it's very competitive in comparison to our peers, I would say. Maybe I can come back also to the previous question, which I didn't give answer, so maybe I can continue with that. And talking about this organic, inorganic growth or the average -- compound average growth rate. You can find several answers. It depends on how -- a bit how you approach it. But I'd say that the best answer is exactly half is organic and half is inorganic. So 8.5% is coming from the organic growth. And I don't tell you what is the method of coming to that, but it's true.

Thank you. Thank you, Kai. There are no questions actually on chat, at least at this point. Are there any questions on the floor?

Yes. If you exclude acquisitions, I was wondering what are your investment needs in the coming years? You mentioned Poland and also automation. But if you could please elaborate a little bit on that?

Yes. I will use that one of the -- okay. It still works. I think that Riku has already mentioned and the digitization is average of EUR 6 million per year. We have time to spend on it. And then you will see that then it will depend a little bit on how much we do organic and how much we do through acquisition, when we spend around 2% in investment over the past years, which we believe is a good enough level to sustain our growth path, I will say. So you could look at the history as a good level to sustain the development since we have already been on that one, and we have a good understanding on what it takes.

Okay. Great. And I'm pretty new to the company, but I mean, one of your strength, I understand is development services. Could you elaborate a little bit on the size of that? How many -- much people are involved and so on?

Okay, I see. So it can be looked at in 2 ways. One is how much we are invoicing on development services and then how much manufacturing business we are getting from products that have involved development services. So may I ask, is it either or you are interested in?

Yes. Both, yes.

Yes. So I would say kind of giving you ballpark that the development services invoicing, if you talk about product development services, which is one of those 3 elements that Christina presented, that's about 0.5% of total. So it's a very minor element as like a growth driver, but the value we are getting from there is that we have a very deep partnerships and customer stickiness with the products that we are a partner for developing those.

Is the manufacturing...

Yes. Beef is really the manufacturing as my colleague is reminding here. So we are not having like big targets of becoming a development or engineering company, but it's like an entry point value adder for our customers for a wider range of services and then creating stronger partnerships, long-term partnerships with our customers.

Okay. There were actually 3 questions online. I couldn't find them. Thank you, Jesper. Just a second. What is the first pass yield in Sieradz and also in the group level?

First pass yield?

Yes.

We are not disclosing first pass yields. But I would say that they are on a very competitive level.

Yes, thank you. What are EBIT margin differences among your 3 segments? If we have EBIT margin differences between different new segments?

Yes. So what we can see in terms of the gross margin and profitability that we have over the 3 segments is in a way, you have a slightly higher added value on the segment where you need more certification where you have more complexity. Saying that, I think it's a bit difficult to just nail down and pick a number that is generic because in each segment, they are subsegment and different added value, different tasks we do. So I think that -- I will say the number of that or from each other. Then once you look at the customers, what they operate into their request in terms of level of certification, the level of complexity, the volume, then you get quite a variance. It's not enormous but we get quite a variance. So I will say those segments are reasonably good segments in terms of profitability, probably slightly higher for the one we are targeting. But again, a lot of variance depending on what we do for the customers.

Okay. A follow-up question on EBIT margins. What are EBIT margin differences among your different sites? We haven't disclosed those, of course, in Kai's presentation, there was a bit of a description about that was where we are. But?

Yes. I mean this is not the number we usually disclose. But obviously, we have a slide that are slightly above, slides that are slightly below, I think. What is important for us, it's a continuous work on working on efficiency and adjusting those sites to be contributive to the group. Then from the moment to the others, some become much better because they are at full occupancy and then suddenly, we make an investment that might dilute it a little bit, and then they come back, and contribute. But obviously, we have the target to continuously adjust our sites to be contributing to the group. And that, obviously, it varies from time to time. We don't have slides just to have site.

Yes, thank you. What is your underlying organic revenue growth target for this year? So going back again, see the revenue growth targets and organic and inorganic? Regardless official guidance midpoint indicates sales decline in 2024 year-on-year.

Yes, I think that we gave our guidance was 2 weeks ago. So I mean we are still on the same pace in terms of guidance. What we have seen over the last year is it has been a period of very fast growth , but also, it has been a period with a lot of component sales. Then this market situation has been flattering out, becoming a little bit more normal. So what we believe is that we will be -- we will get maybe this year, the opposite of last year with first half of the year that will be softer. And then we can see indication that the second part of the year will be more dynamic when last year was actually the opposite of that. So this year is for us a year to continue to prepare for growth to continue to build capabilities and continue to deliver in a way, a very high level because we have been on very high level of growth over the past years. So plus/minus from 0, around plus/minus 5%. Which is what you look at when you look at the midpoint, is what we are aiming at. And we believe it's still a very strong number for Scanfil and a good moment also for us to work on efficiency and prepare for future growth.

Okay. Thank you. Next one, this would go to Christina. Are there any products you would like to see more within the new Industrial segment?

The new Industrial segment? Yes. I would say, generally, industrial products that fit where we play the strongest, it could be our production equipment type of systems. It could be automated solutions. We were -- during a break here talking a little bit about warehouse solutions and automation and we can see that digitalization and streamlining and increased Internet sales, et cetera, leading to more needs in this market. So typical type of industrial products. But all industrial clients that fit our portfolio, established clients are welcome. And we see the increased demands. So production equipment manufacturing equipment warehouse equipment. Also, we see growth as well with new clients in certain product areas where we didn't see growth earlier. So that's exciting. So it's a mixed bag really. The industrial segment is so large. So we are willing to look at different product categories where we can provide value and where we have a good fit with our offering.

Okay. Are there any further questions from the floor? Okay, neither from chat. So maybe we can start to close the meeting after Christophe's final words. But when you actually leave the room go to the left-hand side, there's a small package for all of you guys. So pick up one with you. So, thank you on my behalf.

Okay. Need to find the device. Here it is. First of all, I want to thank you for spending your time with us today. It was a very nice to have you with us. And hopefully, you got to know us a little bit more. I think there is a few things I wanted to get back to. I mean the first thing is we have a positive outlook for the EMS market. And as I mentioned in opening, what we can see is our customers have been moving towards more digital and complex product, which is, at the end of the day, arriving a need to capital allocation. And we have many, many customers. Even very massive company that have made the choice to invest in R&D and are turning to us to at least, manufacture those products for us because we're going to spend our time on something else. And that's a very positive dynamic. The second element is Energy & Cleantech and Medtech have a very long -- have a positive potential and very long-term outlook and potential. And we have -- sometimes you could say maybe by luck a little bit. We were at the right time 15 years ago and building a relationship. We have a fantastic portfolio that is extremely diversified. And when we talk about Energy & Cleantech, for example, I mean, we don't only do storage of energy, if we do recycling of bottles. We do a lot of different things, which allow us to have a very spread exposure. Because you know those markets they've developed fast. They developed fast for a year and then suddenly, it stagnated a little bit, then they go fast again. And we have seen even in the last quarter, some customers were going a bit slower, but then some other are going fast. So we have a very good portfolio there and that makes it very attractive to us and open up for a very good development. I think that also, as another element to take into consideration, I mean we have taken the decision to be active on the M&A side and will complement our organic growth with inorganic growth. And that's the journey we need to build for future capability and expand our capabilities to support existing customers but also to bring new customers on board. So that's also an important element. Then as you have heard from Riku and then Timo, I mean, Scanfil has always been working on efficiency. And it's also keeping costs under control, but also making investments that develop our company and develop our capability in being an efficient manufacturer, both on the quality side, on the cost side and that will continue. And here we have a good footprint. I mean my first week in Scanfil, I spent in China, in Suzhou. That was probably may not the best moment, mainly a good moment. That was a very impressive moment. We're having 60 customers that are visiting that facility that was supposed to be in the forefront, and they have recognized that. And for us, it's extremely inspiring and it shows that we have really something in hand that can create value for our customers. And that's something we want to continue, and we want to move forward. And because of that, I mean, we believe that our long-term targets are something that is fully achievable that can create a good position for the company in the future and that we are now working there to achieve. So hopefully, you know us a little bit more, and we will continue to work towards those directions, and I want to thank you again for spending your time with us today. Thank you.