Here are the questions presented in the Inderes analytics platform to Otto Pukk, President and CEO of Incap Corporation, regarding the 2022 and 4Q 2022 results, and answers for these questions.
Q: How did your order book and order intake develop during the quarter?
A: The Orderbook is still strong. However, as we expected with the component availability getting better, the visibility is getting shorter, and orders are coming in with a shorter notice. Customers do not need to place orders as early as before and can secure their orders with shorter notice.
Q: Regarding the “expect competition to increase in many segments”. Do you mean that you see increased competition on existing customers or new customers?
A: Q4: We are not talking about our own competition, but the competition that our customers face. With components available equally for all on the market, we expect competition to increase in many segments. More OEM’s will have components available and that will increase the competition in the market. This can impact our customers’ pricing situation as well.
Q: Do you see that your major customers want to reduce their inventory levels during 2023?
A: In general, we believe that with components getting more available, there is no need for our customers to keep the inventory levels as high as before.
Q: Can we expect the same % EBIT-margins on your new factory in India as the old one? If not, when do you expect to reach a similar level?
A: EBIT levels vary to some extent based on the product mix. Provided that we have the same product mix, the profitability level should stay the same level once the production ramp-up has been finalised.
Q: Have you started to reduce your inventory levels of “safety stock” in Q4?
A: Component availability has started to improve but it will take time before the situation is fully normalised. We will work closely with our customers and manage the inventory levels to meet their needs. We expect our organic growth to continue in 2023 but at a more modest pace, improving our cashflow and giving us the possibility to reduce our inventory levels.
Q: Could you talk about your perception of real underlying demand growth vs. build-up of customer inventories during the quarter?
A: Based on our analysis, the majority of our increased deliveries are due to a real underlying demand growth. Our customers typically optimise their inventories rather than build them up. With the component market situation changing, there can be a period in the short-term when our customers need to review their stock levels.