Incap 3Q 2024: Questions and answers

Here are the questions presented in the Inderes analytics platform to Otto Pukk, President and CEO of Incap Corporation, regarding the 3Q 2024 results, and answers for these questions.

 

Q: How come the EBIT increased by 37% and net profit only by 11%?

Antti: There were a couple of items that impacted the financial expenses and therefore net profit. We have an internal loan regarding the U.S. acquisition worth of 20 million U.S. dollars. Related currency fluctuations impacted the valuation of that loan in Q3 2024. This explains the biggest impact on financial expenses.
The balance sheet is always valued at the latest currency rate and in this quarter there was a negative impact from exchange rates. If we look at Q3 2023 after the acquisition, there was a similar but positive impact from exchange rates.

 

Q: You mentioned that you have been focusing on cross-selling opportunities. Could you elaborate on those?

Otto: One of the benefits from our U.S. acquisition is that many of our customers now see us as a truly global company and that generates a lot of potential opportunities for us from U.S. customers who are interested in some of our units in Europe, Asia or vice versa. We have been, of course, focusing and exploring very much the opportunities that we have due to our new footprint and the way we look today.

 

Q: Are M&A opportunities something that you are currently working on and how does the market look like at the moment?

Otto: We have a dedicated team exploring opportunities and we have a good pipeline that they are working on. I would say that there are good opportunities in the market, and I wouldn’t say that the market has changed very much when it comes to M&A.

Finding good targets is one thing and the other one is agreeing upon evaluation. As we have said, we are not under pressure to pursue M&A cases. We continue to grow quarter to quarter organically, and we are taking our time to make good deals. But for sure I wouldn’t be very much surprised if our footprint in Incap will look different moving ahead a year.

 

Q: How are you faring in terms of winning new business? Is there price pressure in the industry or is new business coming in at a much slower margin?

Otto: There is always price pressure in the industry, but I wouldn’t say that new business now comes with a lower margin than existing business. We are always talking to our customers about what we can do to decrease the prices and make better deals for them and for us as well.

 

Q: Is the inventory of the largest customer normalised now and how is the underlying demand picking up? What is the expectation going forward?

Otto: We have been working very closely with them and reducing their inventory to more normal levels as they had overstock during the past year. This depends a little bit on what kind of products we are talking about. In my understanding, some have returned to normalised levels, and some we are still working on. But overall, the picture looks much more stable.

I have mentioned before also that one should bear in mind that returning back to normal level of course is not the same level where we were prior to the inventory getting too big, because there was no actual demand for those levels. So, the normal levels are lower than the previous ones.

 

Q: How about the market outlook? It looks difficult and other companies in the sector have shown much worse performance compared to Incap? What are your main advantages compared to your competition?

Otto: With this inventory issue we were one of the few that had that problem last year. Now it seems to be that many companies in the sector are living through the same. I would say that perhaps we already have passed through those problems at Incap.

There are a lot of political and certain market implications here in the U.S. where I’m now, and the elections are in full swing. Naturally, the outcome of the elections will affect the markets. Also, the conflicts that we still have in Europe and also in South-East Asia, have currently the biggest effect.

We are in a budgeting period currently and we are evaluating different risks but also opportunities that might arise from those market implications. It will be interesting to see our next report when we give an outlook for the year.

I am quite confident in our business model and our ability to weather both the good times and the tough times. So, let’s see what the future holds.