Pasi Hiedanpää: This Q3 2026 interim report call. Together with me here is our CEO, Mr. Christophe Sut, and our CFO, Iiris Heiskanen. As usually, you can ask questions through the chat box, so type in the questions and we will take the questions at the end of the presentation in a Q&A section. Now handing over to Christophe, please.
Christophe Sut: Thank you, Pasi. Welcome to Scanfil Q3, and let's get started. Starting with a couple of news related to what happened during the quarter. We continue our expansion with new customer contracts, which is also driving the expansion of our facilities. We were pleased during the quarter to announce that we will increase the size of our facilities in Poland, in Mysłowice.
Christophe Sut: The expansion will actually bring the overall size of the factory to 36,000 square meter, which will make it our biggest operation in Europe. This site is focusing on system integration and adaption on a very consistent basis, strong performance. We've been rewarded by our customers and confidence and trust from our customers. So very pleased that we can support the growth of our customers in that operation.
Christophe Sut: In the same time, I felt it was good timing to update you on the progress we are doing in Suzhou. We announced in the spring the need we had for an expansion of our Suzhou operation to support our customers in China. As you can see on the picture, this is going well and moving forward. We are now in full speed at preparing for the go-live date. At least the building is growing and building up.
Christophe Sut: The plan is to have the building ready by mid next year. So moving forward as planned and as expected. On a those or not, when it comes to news in Q3, we had the capital market day where we adjusted our long-term target. Two adjustments were made towards the long-term target.
Christophe Sut: One was the growth number that we moved up to 15%, as well as the debt levels where we modified to have a corridor between one and two in order to support our growth and continue our expansion. As you can see, driven by customer acquisition, quite a few number of projects going on in Scanfil to continue to prepare the future. But let's go back to what happened and how Q3 unfolded. Q3 was a very strong quarter for Scanfil.
Christophe Sut: We landed at EUR 252.2 million, which was a growth of about 32%, which was including an organic growth of 8.5%, which was definitely a strong number, and showing a very positive trend and development. In terms of profitability, EBITDA was EUR 17.8 million growing 26% and at 7.1% within the corridor we are aiming for. So, a continuous positive development.
Christophe Sut: Our earnings per share also strong, growing 25% at EUR 0.18, which was the outcome of, I would say, a solid quarter. When we look at the revenue trend, we continue the expansion driven by both a mix of organic and acquisitive growth. I will get back to it a bit later, but we continue to see in Q3 a strong performance from the acquired entity, which contributed to the growth as we were also ramping up project that on that side contributed to the organic growth.
Christophe Sut: When it comes to the profitability was obviously benefiting from the growth, moving up to the range of almost EUR 18 million, which was in line with what we were expecting from the quarter. Looking now at the different region. Americas region is continuing to gain speed, reaching soon 10% of the total revenue of Scanfil.
Christophe Sut: We had a record quarter with a growth of 74% of the overall revenue, 5% of it being organic. We have in North America a strong development of our acquired entity, ADCO, and also a strong development of two customer segment, Aerospace and Defense that is developing very nicely, as well as Energy and Cleantech that is also seeing a positive development. What was also pleasing to see is that we continue to deliver consistent good level of margin.
Christophe Sut: The third quarter was at 8.7%, which was the outcome of all those new projects that we had launched end of last year that are now getting in maturity and contributing positively to the profitability of the region. So all in all, following the growth trajectory we have drawn for Americas and positive. APAC region, a very strong growth in the quarter.
Christophe Sut: We are talking about above 16% of growth in the quarter. It was a lot of happening in that quarter for APAC. As you saw on the picture, first of all, we are fully busy expanding Suzhou, which can create some disturbances on the operational level, but moving forward, at least in a very good speed.
Christophe Sut: At the same time, we have also a significant amount of projects that are ramping up into two, which was positive to revenue but negative to the margin, which is quite common, and we had the same story a few quarters ago with North America, and then it unfolded in a very nice way. So here, we are at the same step. A lot of new projects coming into operation.
Christophe Sut: At the same time, another area where we had also the same type of happening is our FX operation, where we have a quite strong change of mix in those factories, which also was having a negative impact on profitability, but all in all, a positive impact on revenue. So I would say this quarter was, in many ways, pleasing for APAC, because those new projects that are coming in and that are building the speed and the momentum of the growth will pay back in the coming quarters.
Christophe Sut: As we have seen before for Americas, we foresee already that Q4 will see a continuous development and growth of the region, but return to normality on profit levels. So good development in APAC. Central Europe, also saw a positive development.
Christophe Sut: We had in Central Europe a development of 57% versus last year, which was driven both by a continued good performance from acquired entity MB Elettronica in Italy, but also by a strong organic growth above 8% in the quarter, which obviously was positive. I think we should remember that Central Europe weight is the biggest region in Scanfil, almost 40% of the total revenue. That quarter is a quarter that is disturbed by a vacation period.
Christophe Sut: I mean, all our operation in that region had between 2 months of closing. Therefore, delivering this level of profitability and this level of growth during that quarter was a very good surprise in the sense that it means that they managed the situation and did good work. What was also pleasing to see is that we have gone out of the restructuring time in Wutha.
Christophe Sut: We have an operation that is healthy again, and that can, from that new point, grow and contribute to the overall group. So overall, a positive picture for Central Europe, but also paving the way for Q4, because as you can imagine, to deliver this quarter with vacation period in July and August, it meant that the quarter ended at a very strong speed. Finally, closing on Northern Europe.
Christophe Sut: Northern Europe was, I would say, in line with what we see on that market, a little bit slower growth, 2%. At least Aerospace and Defense is the one driving the positive momentum in the region, where other customers are more flattish. We were still having very consistent delivery when it comes to margin in the range of 6.7, which is more or less where they have been for many quarters already for the last 3 quarters.
Christophe Sut: So continuing to deliver at a good level. It was slightly below the comparable of last year, but last year it was some one-off that we mentioned at the time that bumped that quarter in the region. So I would say 7 is a level that we can expect from that region. So I would say no drama, consistent delivery was the sign of this quarter and of this region, but that has now become the third region of Scanfil behind Central Europe, behind APAC.
Christophe Sut: When it comes to our customer portfolio, we continue to rebalance the customer portfolio. I would say now the first customer is in the range of 10%, 11% still. When the 10 following customer are in the quarter weighing only 42%.
Christophe Sut: What it means, it means that our portfolio become more diverse and the 10% to 20% is significant and has a very positive development. So I think it is pleasing to see that and to see how that rebalance the risk of the company. Energy and Cleantech remain the biggest, I would say, specific customer group we have, if you consider industrial being much broader in its definition, and remain very strong.
Christophe Sut: Very pleased to see quarter after quarter, our Aerospace and Defense gaining speed. It is now 11% if you look at the year-to-date performance of the company. Med Tech and Life Science, where we also see a very positive development, but a positive development to come as well. I will get back to that a bit later. Aerospace and Defense, we can see obviously a very strong momentum.
Christophe Sut: We have now moved to a revenue in the quarter of EUR 30.9 million, which was characteristic of both organic growth, obviously, but also the acquired entity. We continue to have a strong development on that segment and a strong momentum. Energy and Cleantech had a very solid quarter, growing 14% in the quarter, which is the outcome of the project we have won.
Christophe Sut: We mentioned that many times that we were seeing development and new project to come live during Q3 and Q4. This is what has happened during that quarter already, where we can see that the project we won in the past are now beginning the stage of manufacturing. That also, this segment has a growth that is above market average very clearly. I would say in line with our expectations. Finally, Industrial.
Christophe Sut: Industrial development was mainly supported by acquisition, obviously, in the acquired entity. We have also Industrial customer and they are growing. The level of sales was still significant, below last quarter, but still significant. It is a group, customer group, where the expectation of growth are slightly lower than overall. Finally, Med Tech and Life Science, where we are reaching new level in sales, passing EUR 46 million, and we continue to gain customer project.
Christophe Sut: In this quarter, it was another EUR 11 million that came up. We have seen between 11 and 15 for quite many quarters now. That is positive. We can see that most of the customer are having a positive dynamic in that segment. The good news, however, is most of the growth is not captured yet, because many of those new projects we have won the last four or five quarters are just starting to kick in.
Christophe Sut: Quite a few of them were just starting to move to manufacturing during the last part of the quarter. I will say on that one, the growth is in front of us. Thank you. I will hand over to Iiris for the financials.
Iiris Heiskanen: Thank you, Christophe, and good morning on my behalf as well. If I start with turnover and comparable EBITDA. Our turnover increased 31.8% to EUR 252.2 million. It was a strong contribution from acquisitions, EUR 40 million in the quarter, and also organic growth, which was 8.5%, so EUR 16 million. Positive across all of our regions, and we also had a positive impact from exchange rate, EUR 4 million mainly in our APAC region.
Iiris Heiskanen: Comparable EBITDA increased 26.1% to EUR 17.8 million. Margin was 7.1% compared to last year, 7.4%. As we can see, it was largest contribution from Central Europe and also Americas, and both of them had solid margins. With APAC, the higher volumes kept EBITDA probably stable year on year, despite their having a lower margin level.
Iiris Heiskanen: In Northern Europe, it was a strong prior year comparison, but they have had very stable performance quarter to quarter. Turning on to cash flow and net working capital, our operating cash flow was EUR 10 million January, September, and in Q3, EUR 4.1 million compared to EUR 7.4 million previous year. We have a strong revenue growth, and that is increasing our working capital. Our working capital increased to EUR 254 million.
Iiris Heiskanen: It was EUR 180 million last year, and that increase is explained by the acquisitions. Quarter to quarter, the increase is coming from higher inventories. We have higher business volumes, receivables increased. We have higher sales levels. If we look at the net working capital in relation to sales, it has been stable quarter to quarter in Q1, Q2, and now in Q3.
Iiris Heiskanen: We continue to focus on our working capital management and cash generation going forward. On our financial position, our net debt was at EUR 141 million at the end of Q3, compared to EUR 10 million last year. That increase is coming, of course, from the acquisition financing, and quarter to quarter, some movement from working capital increases. Net debt / EBITDA was 1.5x, so right in the middle of our corridor, 1x to 2x.
Iiris Heiskanen: We have a strong financial position available, liquidity strong, over EUR 150 million in unused credit limits and loan facilities. We do have financial flexibility also going forward. Couple of words about key figures on balance sheet and shareholder returns. Equity ratio was 41.3%, last year, 55%, and net gearing 42.2%, last year, 3.5%. That is showing the higher leverage as we discussed in the previous slide.
Iiris Heiskanen: Return on equity increasing to 13.3%, last year, 12.7%. Earnings per share now EUR 0.18 compared to EUR 0.14 last year, showing steady development. With that, I think I will now hand over back to you, Christophe.
Christophe Sut: Thank you, Iiris. Outlook, as we have said many times, we are still in the corridor we gave at the beginning of the year. Obviously, I can say that we have now reached a point where we are very confident with that corridor, and probably in a better shape than we were hoping when we gave that corridor at the beginning of the year.
Christophe Sut: All in all, I think this Q3, both by its performance, was positive, but also by the outlook it leaves in terms of opportunity, but also in terms of backlog and how we foresee Q4 and 2027. Pleasing to see that the choice we have made in terms of customer segment are driving momentum and organic growth.
Christophe Sut: We see a positive development and opportunity with the acquired entity, then we continue to have good cost control and hard work on managing supply chain that allow us to run the business in a smooth way. With that one, I think I will hand it over to you, Pasi, and thank you for that.
Pasi Hiedanpää: Thank you. Heading to the Q&A, please type in questions in the chat box and I will read out those questions in here. All right. We already have some questions from Marcus. Firstly, about the Q3 and finishing that and momentum. You mentioned a strong finish to Q3. Has this momentum continued into Q4, and could you give some color on that?
Christophe Sut: Yeah. First of all, it is obvious that when you consider Q3 is July, August, and September, and July, August is vacation first in the Nordic and in Central Europe, then August in Italy, obviously September has to be strong. It is also the time where we start usually to ramp up new projects.
Christophe Sut: So that is, I would say, normal dynamic, but when you see the number, it obviously mean that it was a very strong dynamic. As I said in my conclusion, we foresee that to continue. We have a strong expectation on Q4, and we start to have a very positive outlook for 2027.
Pasi Hiedanpää: Okay. Continuing now with Marcus. Can you share some more details what is driving the strong growth in APAC?
Christophe Sut: Yeah. I would say on our APAC region, there are several factors. Obviously, the reason why we announced the expansion of Suzhou was because we have in our pocket new contracts that are to expand our revenue. The new contracts, they are driven by 2 types of customer mainly. It is Energy and Cleantech and it is Med Tech. It is mainly international companies that are requesting manufacturing from us on the APAC region.
Christophe Sut: Those are the main drivers for the growth. Then, step by step, we are starting also to see traction on our Malaysian side, where we are starting to move there with some of our global customers. But the Energy and Cleantech and Med Tech are strong drivers in our APAC region.
Pasi Hiedanpää: Okay. Now continuing with the APAC region. On APAC margins, you actually touched about this already in the presentation, but maybe good to repeat it. On the margin in APAC affected by NPI costs, should we expect this to also weigh on Q4?
Christophe Sut: I think what you should expect is that it will normalize. It will go back. You have seen a bit same trajectory for America. You get the quarter that gets hit because of the volume of new projects, and then it starts to normalize the following quarter. You should see an incremental improvement on that.
Pasi Hiedanpää: All right. Okay. Thanks. Now heading to the customer groups, and Marcus actually still continues in here. A&D sales were very strong, but the order intake was low than this has been actually, if you look to the past. Any guidance what we should expect? Continuing on that, are you seeing any signs of defense slowing down?
Christophe Sut: No, I think that the challenge with those contracts is they are very long, long-term contracts, so they don't come very often. That's one of the elements. But what we can see is that we continue to see growth in that segment, and we continue to be positive to that segment. Then some of the customer grow 70%, 80% during the year.
Christophe Sut: Probably they don't grow 70% to 80%, but that's not what we count on the long term. I think we remain positive. Business is moving in a nice way. But yes, we don't count 70%, 80% growth, and I've never counted on it, if you remember what we presented in capital market.
Pasi Hiedanpää: Okay. Thanks a lot, Christophe. Pasi from Nordea. Could you offer a breakdown for volume and price related to organic growth in Q3? Maybe.
Christophe Sut: I think I can take that one. What we consider is that the impact of price growth is 1.5% in the quarter.
Pasi Hiedanpää: Yeah. Maybe that's enough. Sufficient. All right. Antti from Inderes. How much price increases had impact on organic growth in Q3? I think that that was actually that. What do you expect in terms of pricing in coming quarters and inflationary pressures seems to be picking up?
Christophe Sut: Yeah, I think that we have had that already in that quarter where there is obviously some of the components that are seeing price increase. I mean, it is the case for PCBs, it is the case for memory. But that we continue to adjust to the contract we have with our customers. So that is something that is, in a way, going through the normal process.
Christophe Sut: And we believe that it will continue during Q3, but we do not expect a change in dynamic. We expect a continuation. So we will manage it as we have managed it. We also working very close with our supplier for supplies. So that is something that we just keep working on.
Pasi Hiedanpää: Okay. Now maybe, again, about the kind of expectations going forward. Have you seen any changes in demand environment or in customer forecasts in fall compared to H1, so the first half of the year? Have we seen any changes?
Christophe Sut: Yeah. I think that it is a good question. I think we have seen two things. We have seen, obviously, the expectation we were having on growth have materialized, meaning that the positive environment of the segment we were targeting has materialized. I will say also that another element is that the visibility of that growth has also evolved to be better.
Christophe Sut: Meaning that I would say nowadays we are getting a more long-term forecast from our customer, which from our perspective is also a sign that they have confidence in their growth and in their development. So it is also helping our operation and our way to run the business.
Pasi Hiedanpää: Okay. Thank you. Johan, about the M&A market, how does the M&A market look right now? Are there any attractive targets available at a sensible price?
Christophe Sut: Yeah. I would say the M&A market remains positive in the sense that there are still many companies that are potentially available for sale, many companies that could be targets. I think that the price level has in a way landed in a reasonable level. So I think that we can expect that M&As to remain in the agenda and things to happen in the sense that that market is still at the level that allows to close deals.
Pasi Hiedanpää: Okay. Thank you. About the net working capital, Antti asked, do you expect seasonal net working capital release in Q4?
Iiris Heiskanen: Well, if I think about our net working capital now being higher level due to the business growth and organic growth, we do have many actions ongoing, how can we improve the efficiency and some actions come with a bit of a delay, but we are expecting them to start showing some better development now in Q4. If I look at historically our cash flow and net working capital, typically we have had a good, strong cash flow in the last quarter.
Pasi Hiedanpää: Q4. Thank you. Pasi, continuing about actually component prices and passing them to the customers. Can you always, well, always, a bit harsh there, but always pass on higher component prices to your customers, or do you have some profitability risk related to component prices?
Christophe Sut: I think it is very simple. We are in a business where material cost is an extremely big part of the company. So obviously for us to move forward, we need to pass those costs, and those costs go through the customer. So obviously, that is a normal process, and that has to be that way. That is the only way for a company in EMS to exist, I would say.
Pasi Hiedanpää: Yeah, thank you. We still have some time for questions, so please type in questions if you have any. I will just go once more through. One more about the SRX factories capacity utilization. How do we see that development going?
Christophe Sut: Yeah, I would say Malaysia still big potential of growth. I think we probably are in 50%-60% of the capacity in Malaysia. And then Australia, slightly higher, but still also room for growth and improvement. And I think that Malaysia, we know we have done a significant investment to enable that. So there is room for growth and projects start to flow in, but there is still room for growth.
Pasi Hiedanpää: Yeah, thank you. Still give you 30 seconds. All right. There are no further questions, but you can always actually email me or call me. So we will take the questions then. Now handing back to Christophe for the closing.
Christophe Sut: Thank you, Pasi. Just to summarize on the quarter, as you could see, growth did accelerate during the quarter, 32%, strong performance organically, 8.5%. It obviously impacted earnings that also kept a positive trend, reaching EUR 7.8 million, 7.1% margin, which was overall positive as well. All of it is also supported by customer wins that were also strong in the quarter.
Christophe Sut: They are very strong year to date. We are already at EUR 172 million of new project we have won, which is a positive when we look forward. If you remember one and a half, two years ago, when we started to win speed in customer win, those are the things you see happening now. Happy to see that we are not in a way falling asleep, but we continue also to work on things that will drive our future in the right direction.
Christophe Sut: Obviously this dynamic of the market and this long-term dynamic of the market has pushed us to drive up our long-term ambition and increasing to 15%. Happy that this quarter is delivering towards that, but also that the long-term indicators are giving us a positive picture. Thank you for listening to us today.
Pasi Hiedanpää: Right. Sure.
Iiris Heiskanen: Thank you.
