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Electronics Production | February 27, 2007

Incap lower profit in 2006

Finland based EMS-Provider Incap has presented their financial results for 2006. Revenue rose by 17% on the previous year to EUR 89.3 million (EUR 76.7 million in 2005).
Operating profit was EUR 2.8 million (EUR 3.8 million), or 3.2% of revenue (4.9%). Net profit for the financial year was EUR 3.2 million (EUR 5.1 million).

Juhani Hanninen, President and CEO of Incap Corporation: "Our business operations enjoyed a favourable trend in 2006. Demand for Incap's manufacturing services continued at a good level and revenue grew more vigorously than the market average."

"We boosted our competitiveness by investing heavily in production equipment and in improving our operations. Although operating profit fell from last year due to these investments, our profitability remains on a satisfactory level and our operating profit represented more than 3% of revenue."

The demand for electronics manufacturing services experienced great seasonal and quantitative fluctuations. Customers' need to reduce the manufacturing costs of their products kept competition tight and prompted the providers of manufacturing services to constantly increase the efficiency of their operations. Production and operations closely related to it continued to be transferred to lower-cost areas.

Incap maintained its strong position as a contract manufacturing partner to its significant customers and enlarged the scope of services it provided to several of its customers. Deliveries to equipment manufacturers in the telecommunications, electrical and measurement technology industries in particular grew.

The customer mix was further balanced, with the largest single customer accounting for less than 25% of revenue. The largest customer sector was telecommunications, deliveries to which represented about 45% of consolidated revenue.

There was increased interest towards Incap's manufacturing services, and bidding was brisk. Investments to increase and modernise production capacity reinforced the company's capability to expand its services to the present clientele and to acquire new customers.

The extension of the Kuressaare factory, where operations were started in the summer, improved Incap's ability to actively market its services to equipment manufacturers operating in Scandinavia and central Europe. The signing of a co-operation agreement with Electron Tubes Ltd, a UK company that manufactures measurement devices, was proof of the fact that Estonia is a competitive manufacturing location for products destined for European markets.

The acquisition of new customer relationships was beefed up by the signing of agency agreements with companies operating in Germany, the UK and Ireland. The sales process was also enhanced, following an earlier development project which focused on customer relationship management, and sales operations were bolstered with new recruitments.

In a move to improve its competitiveness, Incap increased the efficiency of its operations with a clearer division of tasks among its factories. The Vuokatti facility was developed to specialise in electronics prototype fabrication, the ramp-up of new products and demanding testing and maintenance operations. The factory's new role was reinforced by the transfer of Tellabs' prototype fabrication and preproduction manufacturing to Incap at the beginning of the year. The Vuokatti factory's expertise in NPI (New Product Introduction) operations, which take place at the early stages of the production chain, was strengthened by the procurement of modern equipment suited to prototype fabrication and preproduction manufacturing. Vuokatti's functions were reorganised in line with the new operational model, and the factory launched a new development programme with the aim of significantly boosting efficiency.

Labour-intensive products and volume production of electronics were concentrated at the Kuressaare factory. Operations in Estonia expanded considerably in the summer with the opening of a new factory extension. In addition to about 3,700 square metres of floor space in the new building, Incap is using an older factory building with about 1,300 metres of floor space for product assembly and the training of new employees. Major investments at the new factory included an SMD assembly line and an ancillary optical quality inspection device. The design of the new building allows for the expansion of production space to almost double its current size in a short period of time.

The manufacture of certain customers' volume products was moved from the Vuokatti factory to the Kuressaare facility. Due to the strong growth in demand, the production transfers took place mostly in the latter half of the year.

The manufacture of sheet-metal mechanics was made more efficient by procuring a modern punch press and an automated warehouse for the Helsinki factory. The Vaasa factory upgraded its equipment and revised its organisation. The operations of Ultraprint Oy, the subsidiary that manufactures chemically milled sheet-metal products, flexible PCBs and RFID products, were concentrated at a single business location, and the unit's production methods were developed.

In order to improve its delivery reliability and quality assurance capability, Incap undertook large-scale development measures aimed at ensuring the smooth functioning of manufacturing processes through the systematic management and planning of production and materials resources. The new operational model was first adopted at the Vuokatti factory, and it will be applied at other facilities during 2007.

Click here to read the full report.

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