Aspocomp Posts Net Sales Down by 17% in 2023, Operating Profit Turned Negative

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Aspocomp Group Plc releases financial statement for fourth quarter and full year 2023.

FOURTH QUARTER 2023 HIGHLIGHTS

• Net sales EUR 5.9 (10.1) million, decrease of 42%
• Operating result EUR -1.8 (0.7) million, -30.1% (7.3%) of net sales
• Earnings per share EUR -0.22 (-0.02)
• Operative cash flow EUR 3.5 (0.2) million
• Orders received EUR 2.3 (4.8) million, decrease of 53%
• Equity ratio 71.7% (69.4%)

JANUARY-DECEMBER 2023 HIGHLIGHTS

• Net sales EUR 32.3 (39.1) million, decrease of 17%
• Operating result EUR -1.7 (4.5) million, -5.4% (11.5%) of net sales
• Earnings per share EUR -0.24 (0.52)
• Operative cash flow EUR 5.1 (3.6) million
• Orders received EUR 21.4 (27.4) million, decrease of 22%
• Order book at the end of the review period EUR 10.5 (14.3) million, decrease of 27%
• Equity ratio 71.7% (69.4%)

OUTLOOK FOR 2024

Inflation and interest rates, weak economic development, the uncertainties posed by Russia’s war of aggression, and global trade policy tensions will affect the operating environment of Aspocomp and its customers in the 2024 fiscal year. The company estimates that the demand in the Semiconductor segment will gradually recover starting from the first half of 2024, while at the same time unloading high inventory levels in various parts of the value chain. In order for investments to pick up in several of Aspocomp’s customer segments, consumer demand must improve, and interest rates decline, among other factors. Demand for Aspocomp’s products is expected to recover gradually during 2024.

Aspocomp estimates that its net sales for 2024 will increase from 2023 and its operating result will improve from 2023. In 2023, net sales amounted to EUR 32.3 million and the operating result was a loss of EUR 1.7 million.

CEO’S REVIEW

“2023 was a challenging year for Aspocomp. Full-year net sales decreased by 17 percent to EUR 32.3 million. In the last quarter of the year, net sales decreased by 42 percent. The development of net sales was affected by sluggish demand in several of Aspocomp’s customer segments, weakened product mix and, in the last quarter, a temporary process disruption in the company’s production.

The weak demand situation was particularly reflected in the Semiconductor Industry, Telecommunication, and Industrial Electronics customer segments. In the Automotive customer segment, full-year net sales increased when the industry’s component shortage eased and customers could be provided with the order book deliveries they had been waiting for. In the Security, Defense and Aerospace customer segment, net sales decreased from the comparison period, but active demand in the segment was reflected at Aspocomp as an increase in the number of requests for quotations and orders. Order cycles are typically long in the Security, Defense and Aerospace customer segment

Aspocomp’s loss-making operating result for the last quarter, EUR 1.8 million, pushed the full-year 2023 operating result to a loss of EUR 1.7 million. The decrease in the operating result was caused by a decline in net sales due to muted demand, the weakened product mix, the recognition of EUR 0.5 million in design costs not included in the usual business in the third quarter, and a significant rise in material costs. Material costs were increased by a temporary process disruption in production in the last quarter. Material use is estimated to normalize during the first quarter of 2024. Aspocomp carried out temporary personnel layoffs in the third and fourth quarters in order to adjust costs.

As the financial year’s result remains loss-making, Aspocomp’s Board of Directors will propose to the Annual General Meeting that no dividend will be paid for the financial year 2023 (EUR 0.21 per share for the financial year 2022).

There are already visible signs that the semiconductor market cycle is turning to growth, but the release of high inventory levels in different parts of the value chain is happening in stages. Therefore, the demand for the company’s products is also expected to recover gradually during 2024. In the longer term, the semiconductor industry's growth prospects are still strong as digitization progresses, for example with the spread of artificial intelligence applications.

Inflation and interest rates, the economic recession, the uncertainties posed by Russia’s war of aggression, and global trade policy tensions will affect the operating environment of Aspocomp and its customers in the 2024 fiscal year. Demand for Aspocomp’s products is expected to recover gradually during 2024. We estimate that Aspocomp’s net sales will increase from 2023 and its operating result improve from 2023. In 2023, net sales amounted to EUR 32.3 and the operating result was a loss of EUR 1.7 million.

I would like to express my warm thanks to the company’s personnel for their valuable contribution and especially for the flexibility and perseverance they have shown in the challenging year of 2023.”

NET SALES AND EARNINGS

October-December 2023

Fourth-quarter net sales amounted to EUR 5.9 (10.1) million. Net sales decreased by 42% compared to the previous year. The net sales development was affected by sluggish demand in several of the company’s customer segments, weakened product mix and, in addition, a temporary process disruption in the company’s production.

The Semiconductor Industry customer segment’s fourth-quarter net sales decreased year-on-year by 64% to EUR 1.6 (4.5) 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 fourth-quarter net sales decreased year-on-year by 32% to EUR 0.7 (1.1) million. High interest rates and the global economic situation slow down customers’ investment decisions.

The Security, Defense and Aerospace customer segment’s fourth-quarter net sales decreased year-on-year by 16% and amounted to EUR 1.4 (1.6) million. Active demand in the customer segment was reflected at Aspocomp as an increase in the number of requests for quotations and orders, but the order cycles are typically long, and the results are visible with a delay.

The Automotive customer segment’s fourth-quarter net sales remained at the comparison period level and amounted to EUR 1.8 (1.8) million. When the component shortage eased in the industry, the company could deliver orders from the order book to end customers.

The Telecommunication customer segment’s fourth-quarter net sales decreased year-on-year by 65% and amounted to EUR 0.4 (1.1) million. End customers’ weakened demand situation limited the growth of the customer segment.

The five largest customers accounted for 43% (63%) of net sales. In geographical terms, 75% (85%) of net sales were generated in Europe and 13% (15%) on other continents.

The operating result for the fourth quarter amounted to EUR -1.8 (0.7) million. The decline in the operating result was due to the decreased net sales caused by muted demand, the weakened product mix and the significant rise in material costs. Material costs were increased by a temporary process disruption in production in the last quarter.

Fourth-quarter operating result was -30.1% (7.3%) of net sales.

Net financial expenses amounted to EUR 0.1 (0.1) million. Earnings per share were EUR -0.22 (0.20).

January-December 2023

January-December 2023 net sales amounted to EUR 32.3 (39.1) million, a year-on-year decrease of 17%.

The Semiconductor Industry customer segment’s net sales decreased by 26% to EUR 11.8 (15.9) 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 35% to EUR 3.6 (5.5) 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 decreased by 2% to EUR 6.0 (6.1) million. Active demand in the segment was reflected at Aspocomp as an increase in the number of requests for quotations and orders, but the order cycles are long, and the results are visible with a delay.

The Automotive customer segment’s net sales increased by 13% to EUR 7.7 (6.8) million. The customer segment’s full-year net sales increased when the component shortage eased in the industry and the company could deliver orders from the order book to end customers.

The Telecommunication customer segment’s net sales amounted to EUR 3.3 (4.7) million, a year-on-year decrease of 31%. Customers' investment decisions in mobile networks are postponed due to the global economic situation and high interest rates, 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-December operating result amounted to EUR -1.7 (4.5) million. The decline in the operating result was due to the decreased net sales caused by muted demand, the weakened product mix, the recognition of EUR 0.5 million in design costs not included in the usual business in the third quarter, and a significant rise in material costs. Material costs were increased by a temporary process disruption in production in the last quarter.

January-December operating result was -5.4 (11.5) percent of net sales.

Net financial expenses amounted to EUR 0.3 (0.1) million. Earnings per share were EUR -0.24 (0.52).

The order book at the end of the review period was EUR 10.5 (14.3) million. The order book decreased due to the weakened demand caused by the recession and the customers’ higher than usual inventory levels.

Of the order book, EUR 10.5 million has been scheduled for delivery this year.