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Aspocomp Group Plc releases its half-year report 2021. The order book was at a record level and the operating result rose into the black in the second quarter.
Outlook For 2021
Demand is expected to improve in all customer segments. However, a global shortage of components may hinder positive developments.
The company reiterates the full-year guidance that was announced on March 10, 2021. Aspocomp estimates that its net sales for 2021 will increase and its operating result for 2021 will improve from 2020. In 2020, net sales amounted to EUR 25.6 million and the operating result to EUR -0.1 million.
“Demand strengthened significantly during the second quarter of the year and the order book rose from just over EUR 4 million to almost EUR 11 million. The second-quarter net sales increased slightly from the previous year and amounted to EUR 7.2 million. In the second quarter, growth was strongest in the Industrial Electronics and the Automotive segments, while demand in the Telecommunications segment remained weak. Net sales growth was slowed by extended delivery times for production raw materials, such as circuit board laminates. The situation is expected to improve clearly during the second half of the year, when the record-strong order book can be manufactured and delivered to customers.
The second-quarter operating result rose into the black and was 6.4 percent of net sales. The operating result increased due to higher utilization and better product mix. Operating result is expected to improve further as production and delivery volumes increase in the second half of the year.
The company has continued its investments to increase capacity in line with its strategy, but the completion of equipment installations have been slowed down in part due to delays in material and component deliveries caused by the COVID-19 pandemic.”
Impact of the COVID-19 pandemic
The continued recovery in the general market situation had a positive effect on the company’s demand in the second quarter. Demand has started to grow, and the company’s order book level has risen significantly. The COVID-19 pandemic and the effects of related restrictions on supply chains in the electronics industry have been partially mitigated.
The company’s production at the Oulu plant has continued normally and delivery capacity has been reasonable. The company has continued to invest in new capacity and increased its product development investments in new products and more challenging technologies.
The pandemic has not affected the company’s liquidity. The cash situation has remained good and the credit facilities have not been used. The company has had no need to recognize write-downs of goodwill.
Net Sales and Earnings
- Second-quarter net sales amounted to EUR 7.2 (7.1) million, a year-on-year increase of 1 percent. Demand strengthened significantly during the second quarter of the year and the order book rose from EUR 4.2 million to EUR 10.8 million. In the second quarter, net sales growth was strongest in the Industrial Electronics and the Automotive segments, while demand in the Telecommunications segment remained weak. Net sales growth was slowed by extended delivery times for production raw materials.
- The five largest customers accounted for 49 (45) percent of net sales. In geographical terms, 84 (80) percent of net sales were generated in Europe and 16 (20) percent on other continents.
- The operating result for the second quarter amounted to EUR 0.5 (0.3) million. The operating profit increased due to higher utilization and better product mix. Second-quarter operating result was 6.4 (3.6) percent of net sales.
- Net financial expenses amounted to EUR 0.0 (0.0) million. Earnings per share were EUR 0.06 (0.03).
January - June 2021
- First-half net sales amounted to EUR 13.4 (13.8) million, a year-on-year decrease of 3 percent.
- The five largest customers accounted for 45 (42) percent of net sales. In geographical terms, 86 (84) percent of net sales were generated in Europe and 14 (16) percent on other continents.
- First-half operating result amounted to EUR 0.0 (-0.2) million. First-half operating result was -0.3 (-1.3) percent of net sales.
- Net financial expenses amounted to EUR 0.0 (0.1) million, including a deferred exchange gain of EUR 0.1 million. Earnings per share were EUR -0.01 (-0.04).
- The order book at the end of the review period was EUR 10.8 (4.2) million.
Investments during the review period amounted to EUR 0.8 (1.3) million. The company has continued its investments to increase capacity in line with its strategy, but the equipment installations have been slowed down in part due to delays in material and component deliveries caused by the COVID-19 pandemic. The investments were mainly focused on upgrading the capabilities of the Oulu plant, improving automation, and increasing production efficiency.
In 2017, Aspocomp launched an investment program amounting to a total of EUR 10 million to further strengthen its position as a strategic partner to leading companies in the semiconductor, automotive, defense and aerospace, and telecommunications (5G) industries. The second phase of investments was launched in the spring of 2020, when the company was granted a total of EUR 1.35 million in development support by the ELY Center, corresponding to about 25 percent of its total cost. The second phase of the investment program aims in particular to increase the capacity of the Oulu plant, improve automation and increase production efficiency. In this current program, which will run until the end of 2022, all of the new equipment will be installed in the existing Oulu plant building and no additional plant space will be built.
Cash Flow and Financing
Cash flow from operations amounted to EUR 0.5 (1.9) million in the review period. The most significant reason for the decrease in cash flow was the change in net working capital.
Cash assets amounted to EUR 1.9 (3.5) million at the end of the period. Interest-bearing liabilities amounted to EUR 5.0 (6.1) million. Interest-bearing liabilities are subject to covenant terms. The covenant terms were breached in June 2021, but waiver consents have been obtained from financiers. Gearing was 18 (14) percent. Non-interest-bearing liabilities amounted to EUR 4.8 (4.9) million.
At the end of the period, the Group’s equity ratio amounted to 64.0 (62.1) percent.
The company has a EUR 1.0 (1.0) million credit facility, which was not in use at the end of the review period. In addition, the company has a recourse factoring agreement, of which EUR 0.0 (0.0) million was in use.
During the review period, the company had an average of 137 (140) employees. The personnel count on June 30, 2021, was 140 (144). Of them, 86 (90) were blue-collar and 54 (54) white-collar employees.
Annual General Meeting 2021, The Board Of Directors And Authorizations Given To The Board
The decisions of the Annual General Meeting held on April 13, 2021, the authorizations given to the Board of Directors by the AGM and the decisions relating to the organization of the Board of Directors have been published in separate stock exchange releases on April 13, 2021.
The total number of Aspocomp’s shares at June 30, 2021 was 6,841,440 and the share capital stood at EUR 1,000,000. The company did not hold any treasury shares. Each share is of the same share series and entitles its holder to one vote at a General Meeting and to have an identical dividend right.
A total of 855,272 Aspocomp Group Plc. shares were traded on Nasdaq Helsinki during the period from January 1 to June 30, 2021. The aggregate value of the shares exchanged was EUR 3,572,178. The shares traded at a low of EUR 3.83 and a high of EUR 4.74. The average share price was EUR 4.17. The closing price at June 30, 2021 was EUR 4.30, which translates into market capitalization of EUR 29.4 million.
The company had 3,788 shareholders at the end of the review period. Nominee-registered shares accounted for 2.5 percent of the total shares.
Assessment Of Short-Term Business Risks
A major share of Aspocomp’s net sales is generated by quick-turn deliveries and R&D series, and thus the company’s order book is short. The company's aim is to systematically expand its services to cover the PCB needs of customers over the entire life cycle and thereby balance out variations in demand and the order book.
Impact of the COVID-19 pandemic on the electronics supply chain
The COVID-19 pandemic may affect the availability of parts and components required by electronic assemblers, which would weaken demand.
Dependence on key customers
Aspocomp’s customer base is concentrated; approximately half of sales are generated by five key customers. This exposes the company to significant fluctuations in demand.
Although Aspocomp is a marginal player in the global electronics market, changes in global PCB demand also have an impact on the company’s business. Competition for quick-turn deliveries and short production series will accelerate as the market for PCBs weakens and continues to have a negative impact on both total demand and market prices.
Aspocomp’s main market area comprises Northern and Central Europe. In case Aspocomp’s clients would transfer their R&D and manufacturing out of Europe, demand for Aspocomp’s offerings might weaken significantly.