Good afternoon, everyone, and welcome to follow DT's fourth quarter results announcing. My name is Hannu Martola, President and CEO of Detection Technology, and I have the pleasure to introduce you to the DT's fourth quarter results. As we call it, it was a strong finish to a good year. We reached sales of EUR 31.6 million, a slight increase, 1% increase to last year's record, fourth quarter 2023, and reached an EBITDA of EUR 5.2 million, which is a clear increase into the year-on-year 4.6 and reached an EBITDA of 16.3%. Where did this come from? Both on year-on-year and quarter-on-quarter, we clearly improved and actually had a notable increase in cash flow. Industrial sales grew 4%.
This is very much driven by DT legacy industrial, if I call it this way, because the TFT sales actually slightly declined in fourth quarter due to the very severe price erosion and price competition in China. Medical sales was down 5%, so negative 5%, but also medical actually stabilized from the third quarter decline. The biggest driver for the decline was the China market and China healthcare reform and anti-corruption campaign sales decline. Security sales was up 5%, and we think this is really good because the security was super strong the year before, and it was really driven by the computed tomography outside of China, Western world markets, also a little bit of cargo sort of increase. If we look on a quarterly basis, we were practically flat on year-on-year, but a clear improvement in all the quarters through the year.
EBITDA looks nicer, so reaching over 16% EBITDA compared to last year, comparison less than 15%, and also here we see a clear quarter-on-quarter improvement. On business units, security business now is fourth quarter and also full year, the biggest business unit or application, as we call it, after the regional organizational change. 44% of sales was security, medical was roughly 40%, and industrial was 16%. And sort of we are back into this kind of a picture that was the situation before the COVID era. On regions, Europe, I mean biggest growth was in Europe and Middle East and Africa, and that's really Europe who's driving it, a bit shy of 30% of total fourth quarter sales. APAC was flattish, about two-thirds of our sales, and APAC, again, medical was declining, and the rest of the businesses were increasing.
Americas, that's a small part of our sales, was down close to 60%, but as before, this is more of this kind of one-time reasons, and we will see some Americas growth in the coming quarters. Also in this tariff world, it's important to notify that most of our sales in the U.S. actually goes through both Europe and APAC. On full year numbers, sales of EUR 107.5 million, up roughly 4% from 2023, nice increase in EBITDA, EUR 14.9 million, which is 13.9%, up from 8.5% in 2023. On business unit split, full year also security was biggest with 43% share, medical 39%, industrial about 18% share. Here we see actually quite a big difference in the growth numbers for the full year.
Both IBU and SBU did really well, I mean 18% growth both, but medical driven very much because of the China healthcare reform was negative 13%. The regions, as in fourth quarter, it was a bit sort of short on Americas last year, but Americas is clearly the smallest region. APAC EUR 72 million, flattish 2% growth, and Europe, nice growth of 49%, reaching sales of EUR 28.7 million. As in fourth quarter, roughly two-thirds of our sales comes from APAC and one-third from Europe and Americas. This is interesting looking then at the clear finances. If I just pick up certain points here, I think the EBITDA is a clear improvement here. R&D costs are about 10% both for the quarter, a bit over 10% for the full year, so very much in line what they have been before.
Cash flow is super strong, EUR 6.9 million in fourth quarter, and operating activities cash flow even EUR 20.1 million for the full year. Also, return on investment, nice 17.4% yielding to a very good improvement in net profit. We doubled our net profit for the full year, and also we increased clearly the fourth quarter net profits yielding to an earnings per share of EUR 0.76 for the full year. On strategy highlights, we are moving forward with a more like subsystem level offerings for computed tomography, simplifying the CT architecture, and also we provide them some data transfer solutions there. We have now full 60 new products in the flat panels, so that's a nice set also sort of competing in the TFT global markets. We are now ramping up the India factory, so that's ongoing.
Hopefully, we target this to have some production already during first half there, late June, and then we completed the capacity and so on in Oulu so that we have a possibility to build 10% of our sales in Finland. A big change, I mean in how we are now meeting and executing our strategy is that we have this regional organization from 1 January, so that APAC is more independent. We have Europe, Middle East, India, and Africa then, which is led from actually Finland, and we have the Americas, which is led from Boston. APAC is led from Beijing, which is a good place for the Asian markets. Looking forward, I mean as we also guided after the third quarter, we see that the first quarter still is a bit sort of flat for the whole company.
On industrial, we see some growth; on medical growth, this is good news, I mean compared to the previous. Then because of some inventory and so on, things with our customers, we see that security will clearly decline. As an outcome, we see that the core company will be about flat. Starting from second quarter, we see then returning to clear growth and double-digit sort of outlook for the second quarter. This is then the official guidance for first flat, second double-digit growth. As there is a lot of turbulence and risks, we want to bring up that especially the static things can quite fast change things.
Even though actually the new tariffs that I must note that actually Trump has now announced that the U.S. will put 25% for Mexico and 25% for Canada, while there's some extension when they are due, and also the 10% extra tariff on top of the 25% to China, these do not have any, let's say, meaningful impact to DT business. A small, I cannot say no impact, because they're very marginal small impact, but I mean from numbers, this plus 10% tariff, you cannot see it from our numbers if I'm very sort of direct. Of course, we don't know what's there to come for Europe and so on. We need to follow and be quick. As a DT, we are quite fast in adjusting to things and navigating through these even if needed with some production investments and so on.
Because running a very light sort of asset light business, we can also react fairly fast. On market growth, in these turbulences, it's quite challenging to really see what the true market growth is. Based on various sources, we are sort of guessing that the security market is growing maybe at a rate of 5% as well as the industrial market. These industrials, even after the sort of the price reductions there, and the medical market believe that we are now turning to growth. I mean, we see some light in our orders and forecast from our customers also in China. If we look at today's market growth, for a fact, it's not 5% because the anti-corruption impacts still are in place for first quarter.
On earnings per share and payout, we did a nice job in actually yielding cash from our networking capital, almost EUR 5 million. As an outcome of that, the board is proposing for the annual general meeting an increase, a considerable increase in dividend, which would be EUR 0.50 per share. From net result, that is 66%. This is a combination of a very good net result plus also the super strong cash flow. As an outcome, the proposal is 66% yielding to EUR 0.50 per share dividend. Financial targets remain the same. We target to get DT sales growth to 10% this year, operating margin EBITDA to 15%, and the net proceedings policy is the same between 30%-60% of net profit to be returned.
These are the highlights, so I would be very happy to and pleased to answer any questions that might arise. I guess Matti was the first one.
Hi, good afternoon. It's Matti Riikunen, Carnegie. A couple of questions. First, when it comes to the medical segment, you are kind of expressing that you finally feel that the anti-corruption campaign and the aftermath of it would be over. Do you think that in Q2 you would be in a normal medical demand situation in China, also with the Western players?
Yeah, I think I must sort of note here that first of all, I mean the biggest holiday in year in China just ended yesterday morning, so they returned to work after the New Year holiday.
From that point of view, we have not had very many active discussions with customers and it takes some days before they start to figure out what's going on. This is based on our sales forecast and our order pipeline is for medical. I mean, as turning back to normal, I would not use those words due to the fact that it's quite the new world. Also from that point of view, there are new policies in place and new processes, etc., that are affecting it. Also, the medical market is, let's say, hugely underinvested right now because of this slower period. It comes from a fairly sort of, let's say, low level. We believe that it will not be any big bang or so on, but it starts to recover slowly.
We might be very much wrong, but I mean this is what we are sort of seeing. It's a massive system on a big sort of $1,000 billion healthcare market overall that is then starting to recover. We sort of would see it to be fairly sort of slow development. Yes, we are seeing increasing our forecasts and orders.
Right. Some of the western medical players have said that they feel more challenged by the Chinese government than earlier, and there is perhaps some pressures to kind of be more competitive in the market against the Chinese players. Do you see that in your customer relations, and do you think that there would be perhaps room for more intense price pressure in the medical market as a result?
There is huge price pressure in the market.
China is the world's hardest competition in the world; it is in China right now in all markets, by the way. It is fierce competition between the players. If following the, let's say, Western news like Financial Times and so on, I think the trend is that Chinese companies are more and more companies are, let's say, going down in sales. They have declined in sales; they have also declining profits. As an outcome of the market, but it's good news is that China is the world's, like I said, the hardest competition, so that's the place to be to really become strong. I mean, it's very, you know, people are working hard. It's the world's most efficient logistics, I mean, and also the best supply chain from the point of view of newest equipment vendors and so on.
That is also a place to really improve your productivity and competitiveness. That helps then when, as DT, we are doing global business. It is sort of also that if you lose something maybe inside the China market, there is a possibility to gain it outside.
All right. Further to these medical TFT products, the new ones, do you think that, or are they already in the regulatory approval phases of your customers so that they could be brought to the market in, let's say, late 2025 or 2026?
We have, I think we announced in, was it third quarter, we had the first medical outside China, Western European actually medical player approving our products. There are some approvals going on, so this takes place slow. We believe that with the new set of even 60 flat panel products, we have good position to win markets.
The TFT sales for fourth quarter actually went down a bit from the previous year, but that's industrial markets and that's China.
Right. Then finally, since your EBITA margin has improved last year, what would you say that is the biggest driver for that? Is it just fixed cost savings that you did? Is there any change in sales mix, less medical, more industrial and security? Or is there in the pricing environment something more positive that would contribute to the better margins?
Yeah, it's an outcome of many things, not the prices. I mean, the prices did not increase; they went down. I mean, it's the better sort of profitability outcome of higher volume. A little bit also mix is helping there. And then especially much, much better productivity.
I mean, looking from all aspects like our employee costs, also the material costs and so on, we were able to sort of compensate some of the price decreases with improved productivity.
All right, thank you. I'll give the floor to the next.
Thank you, Annika Ragna from SEB. I could continue on the medical topic. First, as you said, that you are expecting the medical sales starting to grow. Does that mean that you also expect the medical sales to grow in China or that you expect flat in China and then growth elsewhere? Just give a bit of background. Siemens Healthineers today said in their Q1 report call that they haven't seen any kind of activity increase in China. That's why I would like to.
Y eah, thanks, Niko, for your question. I mean, as we see, we see some small recovery.
We see growth both in like in China and also outside of China.
All right, thanks. The Q2, you said that you expect double-digit sales growth. That is at least partially driven by the medical returning to growth. Does it mean that you expect the biggest year-term growth to be from the medical side?
That is a bit sort of, let's say, unsure how it will be. I mean, looking just, you know, of course, the underlying quarter numbers and so on. I mean, medical was fairly low for second quarter. From that point of view, the sort of reference is not very high. Most probably, yes, the medical has the highest growth for second quarter.
Okay, thanks. The dynamics behind the security guidance or what you said about expected decline in Q1 and then returning back to growth in Q2.
Could you bit open the background for this more?
Security business is a bit bumpy from the point of view that it is very much driven by the installations to the airports. What affects there is what is the customer stock levels and so on. We also must remember that our first quarter, there was the China New Year just behind. That is practically two weeks out. The first quarter is always very much the smallest sales. There is this kind of fluctuation that affects. As we see it, it is more of an outcome of this kind of stock correction and so on. From today's point of view, it should pick up for the second quarter then.
Okay, thank you.
Finally, on your costs and maybe other operating income, which other operating income was quite high in 2024 compared to your history and also compared to 2023. Could you open what that included? On the other hand, what kind of costs should we expect from the Indian side?
I mean, I think overall the cost performance was quite good. If you compare to history, we also in fall 2023 took some fixed cost out of our base and system. Now that has been sort of it's in. Those savings are in and it's helping us to run a little bit sort of a tighter ship from that point of view. We do not foresee any big cost increases in any area outside of whatever.
If there's some salary increase things for in Finland or whatever, what the outcome is, of course, those can affect. Those are sort of more some smaller percentages. Basically, it's some inflationary topics. We don't foresee any big salary increases in China either. Maybe a little material cost and inflation on that is what takes place. Regarding the India, it's a small operation, small, and we ramp it up sort of one step at a time. It will not drive very much our costs up.
Okay. The other operating income, which was more than EUR 1 million compared to in history, a couple of hundred thousand.
There's some other operating income.
There's some one-off, let's say, more on NRE type or let's say on some R&D related to subsidies or some one sort of time more relating to some project on regarding some customer cases.
Okay, thanks. That's all from me.
Hi, Waltteri Rossi from Danske Bank. A few questions. First, the America sales were down, you said, due to one-time reasons. Can you open up?
There's been, let's say, a couple of couple-ish sort of one-time reasons there are. First of all, I must note that the America sales is still very, very small. Maybe that's a slightly good thing in this tariff world. There's some one big customer, for example, is moving to a new factory. That, you know, they bought some material, some products into inventory.
It is going to be a silent time a bit until they return back with the new factory. There is also, we know that another big customer, as an example, had bought quite a lot to their inventory. Now they are melting it and they are turning back. If we look at what the historically Americas sales, especially U.S., have been, we foresee that will be turning more into sort of normal after the first quarter this year.
All right, thank you. Kind of a follow-up on that. You said that the current tariff announced do not have any impact basically to your business. What about potential tariff on Europe now going forward? What kind of effect could it have on your business? Would it only be with respect to the 10% production in Finland or?
It is very difficult to see what could happen.
First of all, there's nobody making detectors in the U.S. So everybody is in a way from that point of view on the same level, depending of course where you do and what the tariffs are. But there is nobody making detectors in the U.S. Then the current 10% increase, as we calculated, it's very sort of insignificant. That impact, nobody knows. Will Trump start to sort of hit on various European countries differently or will he be doing something for the European Union or so on? It's more like wait and see and continue normal sort of, let's say, operations. I think from the competitiveness point of view, U.S., and especially now with all this FDI, foreign direct investment that is increasing in the U.S., U.S. is a very expensive place to do anything.
That means that even though there would be significant tariffs, one should really think critically that does it make sense because the cost can be much bigger, you know, doing something in the U.S. than there is exporting there. The key thing is that what are the customers and U.S. customers doing? How do they view and so on? Some of our customers are ready to take the hit. That is of course also ongoing. They do not have very clear answers either because nobody knows what is going on.
All right, thank you. Last question regarding the TFT sales that were declining due to price competition in China. That is only in industrial. Can you open up the dynamic there?
Are you dropping out of some kind of negotiations or deal negotiations because of the price pressure or do you just lose the competition because you don't want to go?
No, this is a little bit, I see this is testing the market. And if we think on sort of strategy that, you know, to win, strategy means to win a war. It's a Greek word. To win a war, you might have to lose some battles. Each of these customer cases, it's like battle. I mean, there are sort of customers are coming up with asking quotes in the industrial scheme. You are participating in those quotes. One or two best ones will win and they get that batch. The customers come back. Depends on what the application and what the customer type is.
They might come back after three months or they might come back after half a year or whatever. During last fall, we decided not to enter into the severest price competition and so on. We saw that, hey, oh, the price levels really are what we sort of what we were not knowing before. We sort of have done also some cost reduction activities and so on. We have now done some changes. We are in the battles, the coming battles from that point of view. Nobody knows beforehand what the right price level is. You have to test it. To test it, you have to be willing also to lose some fights. It looks no better.
We are, you know, there are some like electronics manufacturing applications for TFTs, etc., that we are talking here that is highly competitive in China. But still okay business and good business for us.
All right, thank you. That's all.
Joonas Ilvonen from Evli. If I may return to the Q1 security volume question, you mentioned the issues with airport construction and inventory. Is that contained to some certain specific geography?
Oh, that's a sort of good question. No, I think we see some, let's say, in Europe, but also a little bit in the U.S. It's like in the U.S., it's also how much the treasury is feeding the money with spoon into the. There is a legislation by the U.S. Senate so that they are going forward with the seat installations and are doing these sort of renovations at the airports.
The actual rate is very much pending on the actual money from the treasury. As we have stated before, our understanding of the, let's say, the global market, it's about one third installed. There is still plenty of room both in Europe and U.S. to be new installations.
Got it. You said that the Oulu site will be able, will have the capacity to produce approximately 10% of your annual sales. Can you comment on what's the similar figure for the India production site? How do you see like overall your capital expenditures for 2025?
The capital expenditure was, we were some about EUR 2.5 million CapEx last year. We do not see, there is a small increase in India, but we are talking of fairly small money compared to that. The CapEx is not increasing to any sort of sizable level.
The India capacity will be at the beginning less than Finland. It's very much now pending on what the pull is from these India like airport projects and so on. I mean, India has announced that they will build more than 100 new airports, which is a lot. By the way, as I heard from the ambassador of India in Finland, he was saying that India has 7,500 kilometers of shoreline. They are then also after this big infrastructure for traffic and airports and rail and so on, they are moving forward to build harbors and so on. They need their harbors to get goods into the India. It is way underdeveloped today, the infrastructure for the ports and borders. That is something that is then starting as a next wave after the airport start.
All right.
Then the TFT flat panel price erosion in China. Are we talking about like 5%, 10%? That is only contained to China?
Yeah, it is much steeper in China. I guess there is also globally, I mean, this is, China is driving it a bit also globally that there is some price erosion. If I think that we acquired Haubo in July 2023, so one and a half years ago, probably the industrial flat panel prices are 30% less over that time.
Good. That is all from me. Thanks.
Hey, it is Jukka-Pekka Personen from Nordea. Maybe one last question, hopefully on the tariffs. Would you see it maybe as even a relative positive compared to your competition as you can manufacture the 10% in Oulu since you can?
Yes, that is true.
If we think our competitors in China, I think even the bigger positive thing is that we are like a Western brand and we are a solid player both in healthcare, CT, as well as security in very sort of tough applications. We get sort of a positive sort of help to our brand and how the customers are perceiving our value and quality and so on. Yes, there's slight, of course, I mean, in this tariff situation and so on. In today's world, it's a bit tough for Chinese companies in our field to be working in the like Europe or U.S. It's less, I mean, South America, Africa and so on. That's then it's more neutral. Also, as a Western player trying to export something to China practically is impossible in today's world.
Thank you. That's all my questions.
Thank you.
I have one additional question. Regarding the sales growth slash decline between different areas you showed, has there been any kind of impact that some of your clients would be now, for example, ordering from Europe instead of Asia? It would be the same client or are they completely different clients which have been either growing or declining?
That's very difficult to say. In other words, I don't think we have seen any signal for that. I think a big sort of part of our sales goes into, let's say, into Asia and like there's countries like Malaysia, which has a lot of Western company factories. There is China, it's a hub for medical. Then a bit more local markets like South Korea, Japan. I don't think those are so much exported there. It's hard to say.
Europe and then from Europe also there's export to the U.S. as well as there's from, let's say, Malaysia and Singapore and so on.
Yeah, I understand. It's a complex situation. Thanks.
We have nicely covered many questions from online as well already. Let's take one question from Juha Kinnunen Inderes . He's wondering that are you able to reach the final sale target set for already in 2025?
Yes, but the target is 10% growth. It's of course, it's a, let's say, tough target after the flat sort of looking first quarter. We have to be double digit, I mean, each quarter or then weld in double digit sum if we don't make double digit every quarter. It's doable, but it's tough.
As well as the profit target 15%, I mean, we intend and plan to jump a bit higher than in 2024. Improve that. I think the 15 is a tough target, but it's sort of reachable.
Thank you.
I think one thing to note also is that as I have said before, when we bought this Haubo and the TFT business, we are investing to that business. It's not delivering its share on the EBITDA. We have a bit handicap from that also. That was visible during 2024. The logic here is that it is growing then faster than the legacy DT. That's how it takes its share. If there are no further questions, I thank you very much for your interest. Let's have an exciting 2025 ahead of us.
At least there's full of sort of all kinds of changes coming. Thank you.