Aspocomp’s 1H Report 2024: Net Sales, Operating Result Decreased in 2Q, Orders Received Turned to Growth

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Aspocomp Group Plc releases its half-year report for 2024.

Second Quarter 2024 Highlights

• Net sales EUR 7.0 (9.5) million, decrease of 26%
• Operating result EUR -1.2 (0.4) million, -17.5% (4.2%) of net sales
• Earnings per share EUR -0.19 (0.05)
• Operative cash flow EUR -1.1 (-0.6) million
• Orders received EUR 6.6 (5.4) million, increase of 22%
• Equity ratio 57.8% (67.9%)

January-June 2024 Highlights

• Net sales EUR 13.3 (18.4) million, decrease of 28%
• Operating result EUR -2.8 (0.7) million, -21.4% (4.0%) of net sales
• Earnings per share EUR -0.44 (0.09)
• Operative cash flow EUR -3.1 (0.9) million
• Orders received EUR 14.2 (19.1) million, decrease of 26%
• Order book at the end of the review period EUR 11.3 (15.0) million, decrease of 25%
• Equity ratio 57.8% (67.9%)

Outlook for 2024

Inflation and interest rates, weak economic development, the uncertainties posed by Russia’s war of aggression and the situation in the Middle East, 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 reiterates the guidance that was published on March 14, 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

“April-June net sales decreased by 26 percent year-on-year and amounted to EUR 7.0 million. Weak demand, especially in the Semiconductor Industry and Telecommunication customer segments, was reflected in Aspocomp’s net sales. However, demand has already begun to improve gradually: Aspocomp’s order book developed positively in the second quarter compared to the beginning of the year, and some customers have announced that they will bring forward their orders for the end of the year and 2025. The challenges related to the quality of production have also mostly been resolved.

Net sales of the semiconductor industry customer segment turned to moderate growth compared to the first quarter, and the global market has seen year-on-year growth every month during the beginning of 2024. According to the Semiconductor Industry Association, which follows the semiconductor industry, sales of semiconductors grew globally in January-May by more than 19 percent from the comparison period of 2023. Positive development has also been seen in Aspocomp's order book and product demand for the rest of the year. Growth prospects in the semiconductor industry are still strong.

Among other customer segments, the Automotive Industry saw the best performance in the second quarter. Telecommunication customer segment continued to be weighed down by the weak demand situation among end customers.

It was decided to end the personnel layoffs that started in the first quarter when the market situation and the demand for Aspocomp’s products turned to growth. As the demand forecast for the end of the year and the order book have increased, we have started to recruit more staff to prepare for increasing our production capacity.

The second-quarter operating result fell into the red and amounted to EUR -1.2 million. The operating result was burdened by the decrease in net sales, changes in the product mix as well as the additional quality assurance work caused by the process failure that continued until the end of 2023. Personnel costs were reduced through layoffs.

Inflation and interest rates, the economic recession, the uncertainties posed by Russia’s war of aggression and the situation in the Middle East, 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 reiterate the guidance that was published on March 14, 2024, 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 million and the operating result was a loss of EUR 1.7 million.

I started as Aspocomp’s CEO a little less than two months ago. After meeting customers, staff and the largest shareholders, I am impressed by how strong the company's reputation is; customers know us especially as experts in the most challenging circuit board solutions. We are a sought-after partner, and our staff is committed and professional. After the difficult last year, Aspocomp is in a very interesting phase of development. The company's future prospects are bright, and we are preparing to take our share of the growing market. As demand recovers and the order book grows, during the rest of the year we will focus strongly on improving supply security and increasing capacity quickly, if necessary, to the level required by demand. There is still a lot of work ahead, but I see significant potential in the company.”

Net Sales And Earnings

April-June 2024

Second-quarter net sales amounted to EUR 7.0 (9.5) million. Net sales decreased year-on-year by 26%. The development of net sales was impacted especially by sluggish demand in the Semiconductor Industry and Telecommunication customer segments.

The Semiconductor Industry customer segment’s second-quarter net sales decreased year-on-year by 61% to EUR 1.4 (3.6) million. However, the net sales of the customer segment turned to moderate growth due to a slight recovery in demand.

The Industrial Electronics customer segment’s second-quarter net sales decreased year-on-year by 8% to EUR 1.0 (1.1) million. Net sales turned to growth compared to the beginning of the year due to a slight recovery in demand.

The Security, Defense and Aerospace customer segment’s second-quarter net sales remained on par with the comparison period and amounted to EUR 1.7 (1.7) million.

The Automotive customer segment’s second-quarter net sales increased by 17% year-on-year and amounted to EUR 2.3 (1.9) million. The increase in net sales was due to the growth in demand from end customers.

The Telecommunication customer segment’s second-quarter net sales decreased year-on-year by 44% and amounted to EUR 0.6 (1.1) million. Weak demand among end customers continued to limit the growth of the customer segment.

The five largest customers accounted for 60% (64%) of net sales. In geographical terms, 75% (84%) of net sales were generated in Europe and 25% (16%) on other continents.

The operating result for the second quarter amounted to EUR -1.2 (0.4) million and operating result was -17.5% (4.2%) of net sales. The decline in the operating result was due to the decreased net sales caused by muted demand and the weakened product mix as well as the additional quality assurance work caused by the process failure that continued until the end of 2023. Personnel costs were reduced through layoffs.

Net financial expenses amounted to EUR 0.1 (0.1) million. Earnings per share were EUR -0.19 (0.05).

January - June 2024

First-half net sales amounted to EUR 13.3 (18.4) million, a year-on-year decrease of 28 percent. The development of net sales was particularly affected by sluggish demand in the Semiconductor industry and Telecommunication customer segments.

The Semiconductor Industry customer segment’s net sales decreased by 66% to EUR 2.5 (7.3) million. The slowdown of the semiconductor cycle and high inventory levels in the value chain continued to hinder growth.

The Industrial Electronics customer segment’s net sales increased by 14% to EUR 2.2 (1.9) million.

Inflation and the threat of recession slowed down customers’ investments.

The Security, Defense and Aerospace customer segment’s net sales increased by 7% to EUR 3.3 (3.1) million. The number of customer contacts in the customer segment increased, but the order cycles are long, and the results are visible with a delay.

The Automotive customer segment’s net sales increased by 3% to EUR 4.1 (3.9) million. Sales in the customer segment turned to growth as the component shortage eased and demand swung to moderate growth.

The Telecommunication customer segment’s net sales amounted to EUR 1.3 (2.2) million, a year-on-year decrease of 43%. The decrease in net sales was due to the weak demand situation among end customers.

The five largest customers accounted for 57 (60) percent of net sales. In geographical terms, 79 (85) percent of net sales were generated in Europe and 21 (15) percent on other continents.

The first-half operating result amounted to EUR -2.8 (0.7) million. The operating result fell short off the comparison period due to the decrease in net sales and because net sales were focused on customer segments with a lower margin as well as the additional quality assurance work caused by the process failure that continued until the end of 2023. The share of profitable quick-turn deliveries was lower than usual. Personnel costs were reduced through layoffs.

First-half operating result was -21.4 (4.0) percent of net sales.

Net financial expenses amounted to EUR 0.1 (0.1) million. Earnings per share were EUR -0.44 (0.09).

The order book at the end of the review period was EUR 11.3 (15.0) million. The order book decreased due to lower order intake. Of the order book, EUR 11.3 million has been scheduled for delivery this year and the remaining EUR 0.0 million next year.