Electronics contract manufacturer unable reported an expectedly dismal third quarter. At the beginning of October, the company already issued its second earnings warning of the year due to the unloading of its largest customer’s warehouses. Last year, Incap’s largest customer brought in no less than two-thirds of Incap’s turnover.
Incap’s turnover fell to 50.0 million euros in July–September from 70.6 million euros in the comparison period. According to Factset, the average forecast of two analysts was EUR 49.0 million.
Incap’s adjusted operating profit shrank from 11.2 million euros to 6.4 million euros, while the forecast was 5.8 million euros.
The instructions were updated a few weeks ago
Incap repeats the guidelines updated at the beginning of October.
The company estimates the turnover for 2023 to be 210–220 million euros and the operating profit to be 24–28 million euros. Views include recently purchased Pennatronics business.
Last year, Incap’s turnover was 263.8 million euros and the operating profit was 38.9 million euros.
The weak outlook is primarily due to the unloading of stocks of Incap’s largest customer.
“We estimate that the full effect of the drop in volumes will be seen during the fourth quarter. Because sales to other customers have increased and thanks to the recent acquisition of Pennatronics, our dependence on our largest customer has decreased considerably.”, CEO Otto Puck commented in the interim report.
Demand from other customers is strong
According to Puk, without the influence of the largest customer, Incap’s turnover increased by more than 30 percent in January–September, while the total turnover decreased by three percent during the first nine months of the year.
“Thanks to our flexible operating model, we have been able to effectively reduce our variable costs. In order to adapt to the lower volume, we have taken drastic measures and reduced 1,136 employees from the workforce of our factories in India,” explains Pukk, explaining the profitability that remained good.
“The integration of Incap US is progressing very well. We are already making joint customer visits and exploring cross-selling opportunities. Customers on the other side of the Atlantic are increasingly interested in Europe and India, and correspondingly, customers on this side of the Atlantic are interested in the United States,” Pukk commented on the success of the Pennatronics purchase.
Although the availability of components continues to improve, according to Incap, the market is still under pressure.
“However, with the help of a more global and balanced customer base, strict cost control and our committed team, we believe that we will be able to continue organic growth and maintain a good level of relative profitability. We will also continue preparing business arrangements, focusing on profitable companies whose corporate culture matches ours.”