Aspocomp Posts Interim Report January-September 2023

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Aspocomp Group Plc announces the release of its Interim report for January-September 2023. Net sales fell short of the comparison period, operating profit turned negative in the third quarter.

THIRD QUARTER 2023 HIGHLIGHTS

• Net sales EUR 8.1 (10.4) million, decrease of 23%
• Operating result EUR -0.7 (1.4) million, -8.9% (13.1%) of net sales
• Earnings per share EUR -0.11 (0.20)
• Operative cash flow EUR 0.7 (1.8) million
• Orders received EUR 7.1 (9.5) million, decrease of 25%
• Equity ratio 66.4% (68.2%)

JANUARY-SEPTEMBER 2023 HIGHLIGHTS

• Net sales EUR 26.4 (29.0) million, decrease of 9%
• Operating result EUR 0.0 (3.8) million, 0.1% (13.0%) of net sales
• Earnings per share EUR -0.02 (0.54)
• Operative cash flow EUR 1.6 (3.4) million
• Orders received EUR 26.2 (32.1) million, decrease of 18%
• Order book at the end of the review period EUR 14.0 (19.6) million, decrease of 28%
• Equity ratio 66.4% (68.2%)

OUTLOOK FOR 2023

Inflation and interest rates, the risk of recession and the uncertainties posed by Russia’s war of aggression will affect the operating environment of the company and its customers in the 2023 fiscal year.  It is estimated that the recovery of the Semiconductor segment will be slower than expected, that investments will slow down in several of Aspocomp’s customer segments, mainly due to the rise in interest rates, and that inventory levels will remain high in different parts of the value chain until the end of 2023. The cycle of the Semiconductor Industry segment is expected to return to growth in the first half of 2024.

Aspocomp reiterates the guidance that was published on October 27, 2023. Aspocomp estimates that its net sales for 2023 will be clearly below the 2022 level and its operating result for 2023 is expected to remain negative. In 2022, net sales amounted to EUR 39.1 million and the operating result to EUR 4.5 million.

CEO’S REVIEW

“Aspocomp’s third-quarter net sales were clearly below the comparison period and amounted to EUR 8.1 million. In addition to the prolongation of the slow phase of the semiconductor cycle, inventory levels are still high in various parts of our value chain. The willingness to invest is currently at a low level in several of our customer segments, mainly due to the rise in interest rates. Order intake amounted to EUR 7.1 (9.5) million and the order book at the end of the review period amounted to EUR 14.0 (19.6) million.

A temporary slowdown in the semiconductor cycle is typical for the industry. The slow phase of the cycle has been prolonged, and we estimate, based on common market data, that it will swing to growth in the first half of 2024. An upswing hinges on the recovery of demand in the ICT equipment market, such as phones and computers. The semiconductor industry’s long-term growth prospects are still strong.

The weak market situation was strongly reflected in the net sales of both the Semiconductor Industry and Industrial Electronics customer segments. Also, in the Telecommunication and Automotive customer segments, net sales were lower than in the comparison period. In the Security, Defense and Aerospace customer segment, net sales growth continued, albeit at a slower rate than before.

Aspocomp’s third-quarter operating result amounted to EUR -0.7 million. The decrease in net sales had a negative effect on the operating result. In addition, the planning work to increase production capacity in Oulu, which the company started earlier with the aim of ensuring future growth in line with its strategy, has been suspended for the time being due to the weakening of the demand situation. The possible continuation of the planning work will be decided on when it becomes evident that demand for printed circuit boards starts growing again. The planning work-related costs totaled approximately EUR 0.5 million. These costs, which are not part of the usual business, were recorded in the third quarter’s operating result.

In order to adjust its production and costs to meet the temporarily reduced delivery volumes, Aspocomp held change negotiations with its personnel in the third quarter. As a result of the negotiations, the company plans to lay off 20-30 production employees at a time for a maximum of 90 days between September 2023 and February 2024.

Inflation and interest rates, the risk of recession and the uncertainties posed by the Russian war of aggression affect the operating environment of the company and its customers in the 2023 fiscal year. The cycle of the Semiconductor Industry segment is expected to return to growth in the first half of 2024. We reiterate the guidance that was published on October 27, 2023, and estimate that Aspocomp’s net sales for 2023 will be clearly below the 2022 level and its operating result for 2023 is expected to remain negative. In 2022, net sales amounted to EUR 39.1 million and the operating result to EUR 4.5 million.”

NET SALES AND EARNINGS

July-September 2023

Third-quarter net sales amounted to EUR 8.1 (10.4) million. Net sales decreased by 23% compared to the previous year due to the slower-than-estimated recovery of the semiconductor cycle and increased inventory levels in the value chain. In addition, uncertainties arising from the operating environment, which burden all customer segments, have caused customers to postpone investment decisions.

The Semiconductor Industry customer segment’s third-quarter net sales decreased year-on-year by 34% to EUR 2.9 (4.4) million. The customer segment suffered from the slower-than-estimated recovery of the semiconductor cycle and high inventory levels in the value chain.

The Industrial Electronics customer segment’s third-quarter net sales decreased year-on-year by 41% to EUR 1.0 (1.7) million. High interest rates and the global economic situation slow down customers’ investment decisions.

The Security, Defense and Aerospace customer segment’s third-quarter net sales remained at the level of the comparison period and amounted to EUR 1.5 (1.5) million. The positive trend continued and the number of both requests for offers and new customers received by Aspocomp remained at a high level.

The Automotive customer segment’s third-quarter net sales decreased year-on-year by 9% to EUR 2.0 (2.2) million. End customers’ weakened demand situation limited the growth of the customer segment.

The Telecommunication customer segment’s third-quarter net sales remained at the level of the comparison period and amounted to EUR 0.7 (0.7) million. The customer segment’s net sales remained low due to the timing of customers’ product development projects.

The five largest customers accounted for 43% (63%) of net sales. In geographical terms, 87% (85%) of net sales were generated in Europe and 13% (15%) on other continents.

The operating result for the third quarter amounted to EUR -0.7 (1.4) million. Lower net sales, changes in the product mix, and higher personnel costs related to preparing for growth burdened the operating result. In addition, the planning work to increase production capacity in Oulu, which the company started earlier with the aim of ensuring future growth in line with its strategy, has been suspended for the time being due to the weakening of the demand situation. The planning work-related costs totaled approximately EUR 0.5 million. These costs, which are not part of the usual business, are recorded in the third quarter’s operating result.

Third-quarter operating result was -8.9% (13.1%) of net sales.

Net financial expenses amounted to EUR 0.1 (0.0) million. Earnings per share were EUR -0.11 (0.20).

January-September 2023

January-September net sales amounted to EUR 26.4 (29.0) million, a year-on-year decrease of 9%.

The Semiconductor Industry customer segment’s net sales decreased by 10% to EUR 10.2 (11.4) million. The decrease in net sales was due to the delayed recovery of the market and the semiconductor cycle, as well as the high inventory levels in the value chain.

The Industrial Electronics customer segment’s net sales decreased by 34% to EUR 2.9 (4.4) million.

Customers have postponed their investment decisions due to the global economic situation and high interest rates.

The Security, Defense and Aerospace customer segment’s net sales increased by 2% to EUR 4.6 (4.5) million. The number of requests for offers in the customer segment remained at a high level, but the order cycles are long, and the results are visible with a delay.

The Automotive customer segment’s net sales increased by 16% to EUR 5.9 (5.1) million. Sales of the Automotive customer segment turned to growth as the component shortage eased.

The Telecommunication customer segment’s net sales amounted to EUR 2.9 (3.6) million, a year-on-year decrease of 19%. High interest rates limit investments in mobile networks and weak demand reduces customers' investments in product development projects.

The five largest customers accounted for 56 (55) percent of net sales. In geographical terms, 85 (89) percent of net sales were generated in Europe and 15 (11) percent on other continents.

The January-September operating result amounted to EUR 0.0 (3.8) million. The operating result decreased from the comparison period because lower net sales, the weaker product mix and higher personnel costs related to preparation for growth burdened the operating result. In addition, the planning work to increase production capacity in Oulu, which the company started earlier with the aim of ensuring future growth in line with its strategy, has been suspended for the time being due to the weakening of the demand situation. The planning work-related costs totaled approximately EUR 0.5 million. These costs, which are not part of the usual business, are recorded in the third quarter’s operating result.

January-September operating result was 0.0 (13.0) percent of net sales.

Net financial expenses amounted to EUR 0.1 (0.0) million. Earnings per share were EUR -0.02 (0.54).

The order book at the end of the review period was EUR 14.0 (19.6) million. The order book decreased due to the postponement of new orders caused by the uncertain global economic situation.

Of the order book, EUR 6.5 million has been scheduled for delivery this year and the remaining EUR 7.5 million next year.