Expected drop in sales for GPV during 1Q24
Danish EMS provider GPV recorded an expected drop in sales to DKK 2.3 billion (EUR 335.2 million) during the first quarter of 2024, a 13% drop from DKK 2.7 billion (EUR 362.0 million) during the same period last year.
The decline also affected the operating profit, which was DKK 155 million (EUR 20.7 million) compared to DKK 179 million (EUR 23.9 million) in the same quarter last year, although the EBITDA margin was maintained.
In general, demand has been softer in 2024, but GPV says that it continues to invest for the long-term and expects the trend to turn in the second half of 2024.
The company says that the change in sales was expected due to customers destocking after the supply chain challenges in recent years, a large past-due order situation in 2023 and, higher one-off material costs than what we see now.
“The activity level was lower in Q1 of this year than in the same quarter last year, but in line with our expectations. We are currently experiencing a good balance between supply and demand, leading to improved service excellence and we continue to follow our strategy and plan for the full year,” says GPV CEO Bo Lybæk in the financial report.
Earnings in Q1 2024 were also affected by a lower activity level, and EBITDA ended at DKK 155 million (EUR 20.7 million) compared with DKK 179 million (EUR 23.9 million) in the same period of 2023, also a 13% decrease. Nonetheless, the EBITDA margin remained steady at 6.7%.
“We have seen a rebalancing of the global electronics market as a result of multiple, opposing trends. We continue to see the positive effects of our region-by-region approach, in which our customers and their customers give priority to products produced within a region. Also, we see an imbalance on the cost side, because large parts of the world are facing inflation and rising prices, while China and Southeast Asia have not experienced similar increases. Furthermore, some customers – especially from the US continue to move their production out of China. With our strategically located global footprint, we are well-positioned to adapt our production capacity across the various regions in which we operate,” Bo Lybæk says.
The CEO continues to say that there are other opposing trends, and that GPV’s strength lies in the fact that the company is a supplier to many different sectors and geographies. Some sectors, such as the Smart Building sector, have been hit by the downturn, while other sectors are growing. Geographically, demand is high among US customers, while European customers in general are more cautious.
However, GPV expects demand to strengthen later in 2024, and the company is taking a long-term approach. This means that GPV will continue to finalise the initiated capacity expansions including the final phase of expanding the electronics production in Thailand, which is planned for completion in Q3 2024.
The project to expand electronics production in Mexico began in 2023, and the first phase – to double the production area – is expected to be completed in the first half of 2024. The expansion of the production facilities in Slovakia is also nearing completion and will be commissioned within the current quarter.
“We continue our investments and will be ready when the markets recover and begin to grow again. At the same time, we are focused on moving our current capacity to where it is most beneficial to our customers, which is one of the reasons why we are working to move our customers with orders placed at the factory in Malaysia to other sites, so that we can close the factory by this summer,” says Bo Lybæk.
After the end of Q1 2024, GPV maintains its forecast of full-year sales in the DKK 9.1-9.7 billion (EUR 1.2 - 1.3 billion) range and EBITDA in the DKK 700-760 million (EUR 93.8 - 101.8 million) range.
