© photong Electronics Production | July 31, 2014

Incap: Operations were stabilised successfully

Incap's revenue for the first half of the year amounted to EUR 11.3 million, down approximately 45% YoY; primarily the result of decreasing production volumes at the European plants in Estonia and Finland in particular.
Ville Vuori, President and CEO of Incap Group:

"The first half of 2014 has focused on completing the measures implemented as part of the Turnaround programme launched in late 2013 and stabilising operations after the significant reforms. The measures have been necessary and they have yielded good results: operational efficiency has improved in the production as well as support functions, and the organisation has been able to focus on the essential: serving customers appropriately. The efficiency and increased stability have been noted in the markets and we have managed to get new customers during the review period.

The favourable and estimated development of revenue and profitability towards the end of the first half of the year also gives reason for positive expectations for the rest of the year. The profitability and revenue of the Indian unit met our goals and it is operating on the solid ground. The Indian unit is also well prepared for further growth. The Estonian and Finnish organisations have been trimmed, and the operating methods pursuant to the new structure have become established on schedule. In spite of the heavy personnel cuts made in late 2013 and early 2014, the strategic intent of the organisation is good. This can be seen in the rapid development of key performance indicators in production. As a result of the efficiency improvement programmes, the profitability of the Finnish and Estonian operations has improved on the comparison period in spite of decreasing revenue.

Our delivery reliability, quality assurance capability and cost efficiency are very competitive as a result of focusing on our core business. The commitment continues towards our suppliers and we haven't missed any payments during the review period. We are ready to show the market our best expertise and will continue to develop our operations to be increasingly customer-oriented, thereby improving our financial position in the long as well as short term.

I will assume the position of President and CEO of Incap Group with great enthusiasm. My predecessor, Fredrik Berghel, did a great job in stabilising the company's situation and developing it after a prolonged challenging financial situation. We have achieved positive results on a broad front, and it is time to go forward at full speed, learning from the past, yet looking into the future."

Incap Group's revenue and earnings in January-June 2014

Revenue for the first half of the year amounted to EUR 11.3 million, down approximately 45% year-on-year. Revenue decreased as a result of decreasing production volumes at the European plants in Estonia and Finland in particular. In addition, an arrangement whereby some customers purchase the materials, adopted already in 2013 as part of the reorganisation of financing, also contributed to the decrease in revenue. Materials purchased by customers were no longer included in revenue on the review period. The global prolonged recession also slowed down the development of revenue, which, however, met the forecasts.

The operating result (EBIT) for January-June was approximately EUR -0.08 million (EUR -1.8 million). The result improved on the comparison period due to measures that considerably improved cost efficiency, such as significant personnel cuts in the company's Estonian and Finnish functions, closing down of offices as well as trimming of other costs. The provision for the rearrangements has been annulled by EUR 0.5 million.

Variable personnel expenses decreased by approximately 35% year-on-year. Fixed costs were reduced by approximately 48% from the comparison period. The value of inventories decreased year-on-year by EUR 2.3 million and remained on a par with the end of 2013.

Net financial expenses amounted to EUR 0.5 million (EUR 1.0 million) and depreciation to EUR 0.2 million (EUR 0.9 million). The financial expenses include EUR 0,1 million impairment related to Cleantech Invest shares. EUR 0.4 million of depreciation in the comparison period arose from to the impairment loss for the Vuokatti property.

Net profit/loss for the period was EUR -0.6 million (EUR -3.1 million). Earnings per share amounted to EUR -0.01 (EUR -0.14).

Management and organisation

Until 22 June 2014, the duties of CEO of Incap were carried out by Fredrik Berghel, who was appointed on 20 September 2013. B.Sc. (Eng.), eMBA Ville Vuori (born 1973) was appointed as the new President and CEO as of 23 June 2014. Ville Vuori has previously been employed by Kumera Drives Oy and Skyhow Ltd. as Managing Director and ABB Group in several managerial positions. Fredrik Berghel will continue as a member of the Board of Directors.

At the end of June 2014, Incap Group had a payroll of 451 employees (583). 72% (57%) of the personnel worked in India, 11% (27%) in Estonia and 16% (15%) in Finland.

During the review period, the company was engaged in statutory employer-employee cooperation negotiations at the Vaasa plant to improve operational efficiency and profitability. As a result of the negotiations, the employment relationships of fewer than ten employees will be terminated during summer 2014. Furthermore, the company may use temporary lay-offs (effective for time being) to adjust the capacity according to demand.

Outlook for 2014

Incap's estimates for future business development are based both on its customers' forecasts and on the company's own assessments. The business environment will continue to be challenging in Europe. High-quality service to existing customers and acquisition of new customers are very important for reaching the objectives for 2014. Due to the improvement of operational efficiency achieved with the Turnaround programme, the company's profitability is expected to improve in 2014, and the full effect of the programme is estimated to be visible in the second half of the year.

The company does not revise its forecast for 2014: The Group's revenue in 2014 is estimated be clearly lower than in 2013, when it was EUR 36.8 million. The company estimates that its full-year operating result (EBIT) will be positive in 2014. The operating result in 2013 was negative (EUR -5.9 million).
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