Good morning. Welcome to Scanfil's financial statements report webcast presentation. My name is Pasi Hiedanpää. I'm responsible for investor relations and communications at Scanfil. As a practicality, you can type in the questions in the chat window, and we will address all the questions later during the presentation. Together here with me is our CEO, Mr. Christophe Sut, and CFO, Kai Valo. Now handing over to Christophe Sut, please.
Thank you, Pasi, and wishing you welcome for this Q4 report. Let's start. First of all, I wanted to go on a few key events that we had during the quarter. It was a very eventful quarter, and on the customer front, we started to see a very dynamic market on the Medtech and Life Science, which translated both in increase of customers during 2024, but also a return to growth if we compare this quarter to the same quarter of last year, so from that perspective, a very positive quarter for Medtech and Life Science. On the internal side of the company, we announced just before, just at the end of Q3, an evolution of our organization and the creation of four regions. That has been implemented during the quarter and has been running full speed from the beginning of this year.
So here as well, things have been delivered on time and delivered as planned. The last quarter was also very active on the sustainability front. We continue to implement our plan and have also been working on our CSRD reporting that you will discover in a few weeks from now. So there as well, good development. Looking at the last point, which is acquisition and investment, we announced at the beginning of first quarter the acquisition of SRX Global. That gives Scanfil now presence in Malaysia and Australia, and also a new portfolio of customers. That's an acquisition that was very welcome by our customers, and we have, following the first months, taken the decision to increase the capability in our Malaysian site where we have secured additional manufacturing space.
We have also announced the investment of a new SMT and THT line that should be up and running during this year. And this investment is now already starting to be under implementation. So as you could see, just taking a few elements of it, a few transformational activities have been going through during this quarter for Scanfil. If I go back to the change in organization, it means that we have now three new members in the management team and at least four persons that have new positions. Anette Mullis joined us during Q4 as Chief People Officer, and she has a long-standing experience in human resources and will help us in our growth journey to make sure that we are able to grow talent and attract talent. So very happy to get Anette as part of the team during that quarter.
On the other side, you can see that we have now three new regional presidents. All of them actually come from the company, starting with the first one on the list, Steve Creutz, that is now VP of Northern Europe. He has a long-standing experience, has been running our Åtvidaberg site in a very successful way, has a strong commercial background, which we believe is what is needed for our Northern Europe region. So very happy to have Steve as part of the team and that he accepted the challenge. On the APAC region, since now we have Suzhou, but also SRX Global being part of it.
Christian Kesten, that has been for quite a few years now running our Suzhou facilities, has accepted the challenge to run the APAC region and is now full speed continuing the development of Suzhou that is clearly a top-notch facility for Scanfil, but also bringing the SRX Global team alive and as new members of the Scanfil community. So very pleased to have Christian on board. And then last but not least, Markku Kosunen, that has long-standing experience already in our management team, has been running operation in the past, has been running also supply chain, has accepted the challenge to run our Central European region, which is a key region. We have a country like Poland where we have two very significant facilities, but also Germany.
His broad experience and understanding of the company will help us to continue the development in that region that is strategic for us and our customers. Things went well and things went as planned. Now going to the number and to some more fact-based elements or tangible elements. First quarter was EUR 212 million, - 4% compared to last year and organically - 8.8%. It was a solid quarter, we believe, in execution. Profit margin was EUR 14 million, which was the highest level of profit margin, the highest level of margin this year and 6.6%. The quarter was impacted by some material sales that in a way diluted the percentage of margin. If you will shave that out, you will realize that the underlying profitability based on our operation was in the range of 7.3, which is in the corridor we aim at.
It was a positive development there. On the business side, it was a very active quarter. We won deals and I will get back to it a bit later for EUR 61 million, which makes it a very dynamic and very active quarter, bringing new customers and also new projects from existing customers, which is a good mix. As we have done for the rest of the year, we focused on efficiency and making sure that we were adjusting our size to the size of the business we were facing.
As you can see, the quarter in revenue was rebounding against the previous quarter, so ended up a little bit stronger than the previous quarter this year, which was a positive development and obviously had a positive impact on our margin as well, where, as I mentioned before, we had actually in value the highest quarter with EUR 14 million, which was also a positive development for the company. When we look at the customer base, we have a stable customer base, even if there are movements in it in terms of growth or slight decline from some customers related to the development of their business, but we keep having very good spread in our customers. I mean, the biggest customer is now landing around 13%, and after that we have our top 10 customers that are in the range of 50% of the total revenue, so quite spread.
Within those customers, it is usually big names, which means that it's usually several companies that are building that portfolio. So I think there I will say no big surprise. The continuous improvement and continuous development has been mainly the work with the customers. Looking now at the development of our different segments, the Industrial segment declined 5% year on year, but had very positive development in terms of won deals in the quarter. I mean, as you can see, EUR 1.6 million was definitely the highest quarter in the year in terms of winning deal for that segment. We had the pleasure to win a couple of deals for the mining industry, which will come in manufacturing in the coming year, which actually made the difference for the quarter.
are pleased to see that the long-term effort we have seen building relationship with customers are paying off and translating into a deal that we can win. Energy and Clean tech rebounded from previous quarter to about 20 million EUR, and there it was mainly a spread of new contracts that we are acquiring with existing customers in terms of won deals. In terms of revenue, we were negative about 8% versus last year. It's a segment that has been, as you have seen, suffering the most this year from the correction, but we still see very dynamic development in terms of number of projects and opportunities, and our portfolio of clients there is getting stronger and stronger quarter after quarter.
Then finally, as I mentioned, one quarter that we were very satisfied, one segment we were very satisfied with is actually Medtech and Life Science that grew over last year by about 8% in terms of revenue, and that's obviously something that is pleasing. It shows the long-term commitment we have with our customers and the good quality of service we can provide to them, but also grew in terms of deals we won. In this quarter, we were very close to 10 million EUR of new deals, which was a record quarter for this year in terms of new deals brought in the company.
So that's a segment that we are happy to see that the effort we have put during the year, both in getting new certification, making sure that we beef up the teams in terms of sales and get close to our customers, those efforts pay off again during this quarter. On the ESG development, we have a reduction of our CO2 emissions since we started the journey by 52%, which was positive. We are also reducing the share of increasing, sorry, the share of fossil-free energy. I mean, we did last year a significant investment for our Suzhou facilities where we have installed solar panels that is slowly starting to help the development since it came late in the year. Then on employee satisfaction, we remain at the high level. We are a little bit down versus previous year.
I would say main challenge was actually our Polish operation where we have had actually quite a lot of resizing because of size of the business, which obviously affects a little bit the employee satisfaction in here, but something we are working on and obviously new projects coming in will create a different dynamic there and are creating a different dynamic. Finally, I would like to give you the picture of 2024. 2024 was a challenging year when you look at the market and you will know that, but in many ways I'm very satisfied and very pleased to see the work that team has done.
We reached EUR 779 million, which was an organic growth negative of about 15%, but despite those circumstances, we managed to deliver operating margin level that was in line with previous year and in value EUR 53.1 million, which was a challenging year to go through, but in many ways good because we could also work on our productivity and how we improve our company in those difficult times. So very pleased to see. Then in the same times, we kept moving forward with our strategic initiative and it translated in new deals that we won, EUR 187 million, which I believe is a significant number, even if it will take time to implement, but it's a good number. And we also acquired SRX Global, which was something we mentioned at the beginning of the year was important for us to be active again on the M&A front.
That was also a positive element. All of this brought us and the board to suggest a dividend of EUR 0.24 per share, which then allowed us to continue our journey to move upward in terms of the dividend level we can offer to our shareholders. I will say in many ways a year that was positive and that was building the company in a good direction. With those words, I will for now hand over to Kai, our CFO.
Thank you. Yeah, I will deep dive a bit further in the P&L and the balance sheet, cash flow, and the key figures. Starting from the Q4 operational expenses and operating profit, on the left side you can see the operating profit of the last quarter of 2023, and then on the right side you can see the operating profit of last quarter of last year.
The improvement, like mentioned, EUR 0.6 million improvement in the operating profit. How we end up from one figure to another turnover, like mentioned, was still declining 4% and almost EUR 9 million. What we did good is that we were able to improve our operational costs and operational efficiency and almost cover that with the lower expenses, almost the same amount lower expenses than we declined with the turnover. There was also change of inventories, nearly EUR 2 million finished goods inventories at year-end, which are then related to the year-end deliveries, whether they are recognized as revenue or inventory. Inventory were a bit growing and not recognized in the revenue, so it means that the production volume at the end of the day was EUR 2 million higher or less lower than what the turnover would look like.
As a result of that, then the operating margin increased from 6.1% to 6.6% year on year in the last quarter. Looking at the full year in the same manner, on the left side we have full year of 2023, and then on the right side bar is the full year of 2024. From EUR 61.3 million operating profit, we declined to EUR 53.1 million, about EUR 8 million lower. But how we end up there is looking at the turnover, turnover dropped by more than EUR 120 million and about 13% decline in the revenue. And again, we were able to mostly cover that with our operational cost improvement. Of course, that in a full year level is not things are happening gradually and you are not able to do the improvements in the day one, and for that reason it's not like totally same effect as in Q4, but very good result.
Operating margin was actually then ending up to be exactly the same 6.8% with significantly lower volumes. From the operational efficiency point of view, very good result. A few highlights about the balance sheet. First of all, inventories 170 million, roughly 40 million less inventories than a year ago, and that is including some increase, 6 million increase at year-end for SRX and some foreign exchange rate differences. From the cash flow point of view, then the inventory reduction was more than EUR 50 million, which is probably more correct figure in my mind. Very good improvement, and that was like strengthening the balance sheet.
We can see part of the effect we can see in the cash, which we had EUR 50 million at year-end, and actually EUR 50 million is higher than our financial debt loans because EUR 70 million of interest-bearing debt is also including about EUR 27 million of leasing liabilities, so we have more cash than we have financial debt. Fixed assets slightly growing, part of that maybe half coming from SRX and then half is investments in operational efficiency and customer needs and requirements. Equity nearly EUR 300 million out of EUR 540 million of the total balance sheet, and if looking at the equity per share, we have now EUR 4.5. If hypothetically we would sell all the assets and then pay all the debt, you would have EUR 300 million left and then EUR 4.5 per share, which is quite good. Then net cash and more looking on the full year level.
The last year we generated cash flow. I have been asked what are the possibilities to generate cash in our business, but obviously we have been doing quite fine, EUR 92 million last year. Like said, about half of that is coming from the or more than half, EUR 50 million is coming from the inventories and then the rest from the profitability. The year before, we have a high growth year, but still EUR 70 million of increase or cash. The year before, which was 2022 and very challenging year from the component market point of view, still was EUR 10 million positive in cash. There is no in the near past any negative years with the cash flow and vice versa, very good year last year.
Net debt, we ended up to 21.2, and like mentioned that excluding the leasing liabilities, then we would be basically no net debt at the moment. It's increased a bit from the previous quarter due to the SRX acquisition. Acquisition was more than EUR 20 million or EUR 30 million as a total, but then the net debt is due to the good last quarter, it's increased by EUR 10 million from the previous. And we have liquidity level of EUR 140 million, and then why is that important is that we need to have certain level of liquidity to be prepared for working capital needs or be prepared for investments and also some level of acquisitions with this.
Of course, we need also some fuel in the engine all the time so that then all EUR 140 million is not available for investments or other purposes, but then a big part of that can be used. And then EUR 90 million is unused credit facilities and EUR 50 million is in cash. And key figures, equity ratio strengthening by increased equity and then balance sheet, actually total balance sheet increasing a bit less than equity because we reduced the inventory significantly. Net gearing, it's a bit like opposite of equity ratio debt lowering and then total equity growing, so then the ratio is very low. Return on equity lower from the last year quite naturally because of the lowering euro value of operating profit and the net profit and also that increasing equity value. But still not too bad level maybe for the challenging year.
Then earnings per share, EUR 0.6 and previous year EUR 0.74 out of which then EUR 0.6 we have decided to or we are proposing to pay the dividends of EUR 0.24. That's all from my side and I hand over back to Christophe.
Thank you, Kai. Going to Outlook, we see 2025 as a growth year back to positive journey. We have given guidance EUR 780 million-EUR 920 million in terms of revenue. I would say there are two things to consider in it. One risk is obviously the geopolitical and overall world situation that can obviously constitute risk for any company today. On the positive side, however, what we can see is we have quite a few customers that are in project business and that are still having quite significant opportunity that could materialize during the year.
That’s also explained a bit the big windows we have in the sense that still quite a few things can happen this year that could be very positive to us. It’s obviously impact our profit level where we have also a positive development moving from EUR 53 million to EUR 66 million in the window. And there as well reflecting the belief that we have now a good understanding on our cost base. We have a good understanding on the market situation, our opportunities, and good control of how to steer the company and build profit. We are confident that this year brings us back to the corridor we have wanted to go and the growth will help us to reach that journey.
We see the year moving from a first quarter that is going to be a focus on ramp-up activities to build the growth that will be delivered later in the year. So this first quarter is important on the operational side just to make sure that things get in place to deliver a strong remaining part of the year. We will remain in 2025 with our focus area, which is to build pipeline and continue to acquire either new customers but also share within the customer we have today. And that's obviously a strong drive for Medtech and Life Science, but also for Clean tech. We will continue our strong activities in terms of cost control and inventory improvement. I mean, we believe that we still have room to do better.
I think we have obviously captured a big chunk of that opportunity when it comes to inventory, but we still believe that probably a third of what we did last year is still feasible for 2025. And then we are also on the cost control side working very thoroughly in the company to make sure that roles and responsibility are clear and that accountability is built across the organization and as close to the customer as possible. And at the same time, we continue to have an appetite for M&A and we continue to build pipeline and analyze, monitor, and review potential cases. So we believe that 25 should also bring M&A and potential acquisition to the overall picture. With that, I will hand it over to you, Pasi, for questions.
Thank you.
I think that you close your part to the kind of a part where it also continues in the question side. So it's about the defense and M&A. Europe needs to increase production of defense products. Are there product categories which would offer significant growth opportunity for Scanfil? That's the first one, if you want to take the first one.
Can you just take it again?
Are there product categories which could offer a significant growth opportunity for Scanfil in certain areas?
Yeah, I think there are a few things. There is the defense aspect that you mentioned. There is also Medtech and Life Science. I mean, we have had a positive momentum there and we have a strong position with our customers. So we believe that short term and for 2025 is something that will pay off and that will bring growth for Scanfil.
Then, when it comes to defense, we have a small exposure to that market today, but a few very successful companies that we believe will continue to build momentum and that we are working very close with them. That's one element. The second element is we do not exclude the possibility to penetrate that market through M&A if the opportunity comes.
Okay, you took actually the second part of the question already. So can Scanfil take advantage of acquisitions in defense area to accelerate growth? Yes, so it can.
Yeah, we believe it can.
How do you view your current momentum in new sales going into 2025?
Yeah, as I mentioned in my closing comment, I believe that Q1 is a critical quarter for Scanfil because we have quite a big amount of new project implementation that are in the pipeline.
If you look at what we captured during 2024, as of today, it's only about 20% that is in manufacturing. So quite slow, and that needs to ramp up. So I would say that that's the plan, that Q1 is really a quarter where we need to invest to make sure that we gain speed and momentum that will translate steadily Q2, Q3, Q4.
Yes, thank you. In sales wise, was it any extraordinary cases in Q4?
That's probably the good news that it was nothing extraordinary in Q4, but more normalizing sector. So if you look at Q4 sales wise, you could see from all our customer base and Industrial and Energy Clean tech, it was a stabilization quarter. And then for Energy Clean tech, it was even a rebound compared to the number we have had.
Thank you.
About the customer satisfaction, how did Scanfil's customer satisfaction develop in the second half of 2024? I do not remember myself at least the number.
I can comment that. I think that we had on the second half of 2024 customer survey, and I think that it has developed very positively. We reached, I would say, the best rating from our customers during that part of the year, which is pleasing because the least we could do is volume reduction was to become better in our on-time delivery. And there we have been quite high during the whole year. So it has been a very positive development. And when you see the number of deals we have won, I mean, you can see that a big chunk of it comes from customers that had a relation with us.
Obviously, if they are happy, they are more willing to give you more business.
Digging deeper into the NPS and the part of that, which are the main areas in which Scanfil must do better to improve NPS in the next years? The development areas in customer satisfaction.
In customer satisfaction. I think that we have, I believe we have a good path in being close to our customer and being proactive in our communication on opportunities and risks we see on the market. Therefore, I believe that it's not a magic bullet there. I think we should continue that, continue to create a very close relationship and I would say tackle the challenges that can come together. I mean, a good example is what's going on now with the situation when it comes to potential tax duties.
We try to be upfront and very close to our customer to tackle that, and I think that element that you build up within the company at all levels of the company that will help us to build a long-term sustainable good result for those surveys, so proactiveness and open communications.
Yes. From there, actually, to the geographical regions, how do you see demand outlook geographically in Europe, China, and the rest of the world?
Yeah, I will say that obviously for, I think we have four regions, and what will happen is you will get the numbers of those regions to get familiar with it. What we see in China, I mean, China is for us, as I said, a very good operation, and we have a long-term relationship with customers that want to utilize that facility even more, so we see the outlook positive on China.
We have no worry there. I think that it's good. When we look at Europe, what is key for us and strategic is our Central European operations, where we will have significant work ongoing at the beginning of this year to ramp up projects for some key and strategic customers. So I think that long-term we have a positive outlook on Europe as well, but mainly driven by the good development we have had with customers. Then it might take a little bit more time for our existing contract to regain volume.
About the pricing environment for 2025, what kind of pricing environment do you expect for this year in the guidance?
Yeah, what we believe is that the market situation will probably remain quite similar to what we have had last year, which means that probably the supply side will remain not too tense during this year.
So we don't expect major changes in the year.
Okay, thank you. How do you see the ramp-up schedule for contracts won in 2024 entering production in 2025? I think that was maybe partially already closed in the presentation, but please, can you emphasize again?
Yeah, as I said, I think that I believe that Q1 we will make a lot of effort, but little outcome of those contracts. And then it will gradually gain speed Q2, Q3, and Q4. But I will say already Q2 and Q3 will start to have a significant impact on those new contracts coming in, actually.
Okay, thank you. Can you expand anything around the two large climate change orders won in the quarter in Q4?
Yeah, obviously, we cannot disclose all the details of it.
But what I have said before, we have a good footprint when it comes to these types of activities, and we have a good footprint with leading companies and leaders that are today moving towards Scanfil as a strategic supplier. So I will say those contracts are logical steps in the partnership we have created, and they are building up for the future, and they are putting Scanfil in the heart of those customer systems as a key supplier. So that was very pleasing. And from that perspective, we are also very confident on the development of volume that that will bring.
Yeah, maybe elaborate a bit that the climate change mitigation contract was a new customer and the other one was actually an existing customer.
Yeah,
thank you. Please, if you have any further questions, so type in and we will take them from there.
Let's wait for a short while. If there are no further questions, so handing over again to Christophe, please.
Thanks, Pasi. Now let's see. Okay, so I wanted to finally close 2024 and have a few takeaways for this year. Obviously, if we look at the financial side, we had positive development in the sense of our margin remained at 6.8%, which shows our commitment to defend our margin level no matter market condition. And that, I think, I'm very proud about Q4, but I'm very proud about what we achieved there during the year. In the same time, I have said it before, we managed to keep going with our strategic initiative and both in winning deals in segment. We believe we can bring added value and Medtech and Life Science being strong on that side. But also following our M&A journey with SRX acquisition.
So that was also positive things. I think also we managed to balance very well our investment and our cash situation. And as Kai presented, obviously we have a strong cash flow during the year. We have improvement in many areas in our operation, reduction of inventory being one of them. But we also managed to keep our debt level low despite the investment we made. So all in all, Q4 was delivering on many aspects, both financial, strategic, and preparing for the growth and for the future of the company. So with that, I want to thank you for listening to that webcast and for following us.