Scanfil Oyj (SCANFL) Earnings Call Transcript & Summary

[Foreign Language] Welcome to Scanfil plc's Annual General Meeting pre-meeting. First, we will have Chairman of the Board's report. It will be held in Finnish, and then the CEO's report will be held in English. There is a Q&A session and there is also a chat box window in your laptop or in the screen. So you can type in questions in there. We will have all the questions at the end of the presentations. Thank you. [Foreign Language]

[Foreign Language]

[Foreign Language] Next, we will move to CEO's review. It will be a recording from yesterday and if the language is English. So Christophe Sut, please.

So looking now for an update on 2024. As you know, we, during '24, did an update on our vision, mission and values as our vision remains globally the same and we want to be a supply chain partner for our customers and the preferred supply chain partner for our customers. We have, in the same time, reworked and fine-tuned our value. At the previous year, we believe in being customer-focused and being close to our customers. We believe in working together and building the best products for our customers together with them and performing, performing for our companies, performing for our customers, performing towards the external environment. During 2024, we have also updated and bring the fourth value, which is empowerment. We believe that to be able to get all those things together, it's very important that people wherever they are in our organization can take decision as close as possible to the business and take responsibility for their action and the impact of their activities. And that's something that we have started to roll out and work towards during '24. In the same time, we updated our strategy and our strategy is now defined around 2 major pillars, one that is growth that is built out of segment focus, geographical expansion, building offering and then complementing our network with acquisition of new companies. The second element that is very traditional in our industry is efficiency. I mean, we are in manufacturing. We need to be efficient in everything we do. And it's both from supply chain excellence building productivity in all activities we have within the company and then looking forward to the future and building capabilities through our factory program. All those elements are supported by our strategic enablers that also need to be top-notch from sustainability to IT and cybersecurity to risk management to how we work on our financing. And finally, all that is made possible because of our people. And we are in the service business, we are in the service industry and culture and people from that perspective matter a lot to us. During '24, we had a couple of very key events starting in February with bringing live our new value of empowerment, following up with a presentation to Capital Market Day of an updated version of the strategy that actually immediately after was rolled out, first impact being the creation of customer groups, dedicating sales resources to the area where we believe we have opportunities to grow long-term for the company that was implemented in April. As I mentioned before, people are important in our business. We are in service business. And we felt from that conclusion that it was important to us [Technical Difficulty] people who are in the company and part of the management in and [Technical Difficulty]. We also adjusted our management team and adjusted our organization. We have now regional segments that are operated by individual leaders. And that was presented during last year, fully operational when we started the New Year. And then finally, as part of the strategy, I mentioned the importance of M&A. That materialized last year by the acquisition of SRXGlobal, giving us a footprint in Asia outside of China, both in Malaysia and in Australia. So a few activities that were significant during '24. As mentioned before, we have identified 3 customer segments that we believe will drive long-term growth and sustainability for our companies. One is MedTech & Life Science that is today our smallest segment, but very promising. Energy & Cleantech that is answering the need of a more sustainable world. And from that perspective, our strong customer portfolio and strong competence we have built across the company during the years will help us to continue to develop that one. And then Industrial, that is our traditional segment, it remains the biggest segment today being almost half of the revenue of the company. And those segments, we are keeping the focus on to move our product portfolio forward and focus within our organization on where we want to go. We also organize ourselves around 4 regions and 4 regions that have different profile and different sizes, but that are aiming at scaling and growing and giving us the management power to become a bigger company in the future. America being our smallest regions where I am currently acting as Head of America that has been growing significantly and where we have added capability on electronic and has shown a strong momentum across the year. Central Europe region, which is today the biggest region and was our biggest region in 2024 is led by Markku Kosunen. And that region is hosting quite a significant amount of our Energy & Cleantech customer that are driving growth and the future of Scanfil. The Northern Europe region that is also historical for Scanfil and remains very sizable run today by Steve Creutz and that is a significant part of our history, but still also part of our future and our capabilities. And then last but not least, our APAC region, led by Christian Kesten that has been actually grown during the year since started only with China and is now including 3 sites, one new in Malaysia and another one in Australia is gaining momentum and size and becoming also significant, a bit of par with Northern Europe and Central Europe. Management team, as I mentioned, evolved. We welcomed 4 new members in the management team, Anette that is now our Chief People Officer that joined us during the second part of last year. And then finally -- and then Steve Creutz and Christian Kesten that had in the past. Steve was running Atvidaberg operation, now he is running Northern Europe and Christian was running Suzhou and now he is leading the APAC region. Then finally, Markku Kosunen was responsible for supply chain previously and now is running our Central European region. So a few changes in management team, bringing diversity of experience and background to the company. When we look at the development, '24 was for our industry, a year of adjustment. I mean, we had the '22, '23 special happening driven by shortage of material recovery of the COVID time that during that period, a lot of inventory was built. During '24, a lot of our customers did adjust their level of inventory, which had a negative impact on our revenue. And therefore, our focus during 2024 as the growth was a little bit on pause because of that phenomena was to focus on efficiency. And therefore, during 2024, we focused on streamlining our manufacturing tools, making sure that we adjust our cost to the new size of the company, but also improve our processes for the future. And I was very pleased by the deliverable because we managed to deliver a margin level of 6.8% that was in par with the performance of the year before that was a early record year in many ways. So that was, from that perspective, positive development and a good way to use the situation. We also continue to invest in our capabilities and in our facilities as also we were investing in our future by M&A -- through M&A and buying SRXGlobal the fourth quarter of this year came just with us at the beginning of the first quarter. So we managed to continue a positive development despite the challenging market situation in both investing in our facility, but also bringing in new competence and new opportunities for the future of Scanfil through M&A. Based on that and that performance, we have been suggesting a dividend still growing to EUR 0.24 for 2024 as an outcome of 2024. In the same time, we are continuing to work on our ESG development and '24 in many ways was a special year. We have now a sustainability report that is fully part of us, a significant amount of actions that goes from limiting our impact on the environment with CO2 emission targets that have continued to decrease during the year to building up equality and gender equality and diversity in our organization, where we had some good success moving from 20% of female management to 27%. Still a way to go to our target and to a equal development of our company, but going into the right direction. With that, I would like to thank you and open for Q&A.

[Foreign Language] Thank you, Christophe. [Foreign Language]. Thank you. And now we are moving to English Q&A session. So please use the chat box window and ask questions via chat. So we will address all the questions in here and all the questions will be answered in English. Thank you. Now we can start the Q&A. So the first question is, you changed your EBIT guidance to EBITDA. Are you also going to change your long-term EBIT target 7% to 8% EBIT to EBITDA? Christophe, can you hear me?

[Technical Difficulty]

Okay. Thank you, Christophe. Well, going forward with the M&A agenda, Scanfil has grown historically through acquisitions. Can you elaborate about your process around M&A?

[Technical Difficulty]

Okay. Thank you. Studio, can you also check the line? There is a claim that Christophe's speech doesn't actually hear true. So can you check that one, please? Going back to the growth agenda the Scanfil Way. Can you elaborate on Scanfil Way's empowerment? Why do you see it as an important value and what does it mean?

[Technical Difficulty]

Okay. Thank you. There seems not to be more questions actually coming in. So let's take a short break. If somebody would like to ask something. Couple of words in Finnish. [Foreign Language] If there are no further questions, so we will actually start a short break after this. And then, we will move to the official Annual General Meeting and it will start at noon Finnish time and it will be held in Finnish language. All the people who are actually joined online now, but have not enrolled to the AGM will be actually transferred out of the meeting. If you are a shareholder and you have enrolled for the meeting, so you can stay online. [Foreign Language] Thank you from my part, and thank you, Christophe. Thank you, Harri.