Here are the questions presented in the Inderes analytics platform to Otto Pukk, President and CEO of Incap Corporation, regarding the Q1 2022 results, and answers for these questions.
Could you talk about your perception of real underlying demand growth vs. build-up of customer inventories? How big is your inventory in Q1? Is it at a similar level as in Q4 2021 (i.e., EUR 59.5 million) or is it greater/less?
A: Inventory level has increased a bit since the 2021 year-end, and to a large extent it is related to underlying demand growth. Our customers typically optimise their inventories rather than build them up.
How much are increased raw material costs and prices driving your revenue growth?
A: Incap estimates that about 6% of the growth in Q1/2022 vs Q1/2021 was due to increased raw material and component prices.
How much does your service business represent of your total revenue? Could you explain the difference in margin profile between service and contract manufacturing?
A: We do not report service business separately. Margins tend to be a bit stronger if value add services can be offered to the customer instead of for example only offering PCB assembly. It is also good to note that customers who have outsourced their whole manufacturing, also receive the biggest benefits (for example due to minimal overlapping organisational structures, economies of scale etc.).
Order book growth may be driven by customers extending their horizon. How much would you say that your order book has grown on a “like-for-like” basis?
A: We are growing strongly also on a “like-for-like” basis as Incap is positioned in markets that are currently growing (IOT, electric vehicles, green energy, ageing, healthcare just to mention a few examples).
Is there price pressure for your services?
A: There is always price pressure in the EMS industry as the industry, is very fragmented and there are several competitors.
Could you talk about your M&A pipeline?
A: We are constantly developing and growing the business further, which also means actively looking for M&A opportunities.
Could you talk about the component shortages and how it affected your business in Q1 and in the rest of 2022? Are you less dependent on some specific components because of more box-build and services occurring in India?
A: Component shortages have somewhat impacted Incap in Q1. As an EMS company, we manufacture thousands of different products, therefore we are less impacted by shortages of certain components.
Are you investing in new customer acquisition or ares your current capacity and capacity expansions already used by existing customers?
A: We are investing in expanding our capacity in locations where we see the greatest need for it. As an example, we have expanded the operations in India and currently are building a third factory there. We have some capacity still left in all units.
Does Incap have plans to develop its customer structure and what kind of customers are the best for Incap?
A: Incap is constantly looking for ways to develop the business further and to expand its customer base. Customers who outsource the whole manufacturing to Incap benefit the most and can take the advantage of Incap´s full service capabilities.
The war in Ukraine seems to have an impact at least on the defence industry and on green energy investments. Can the war also have a positive impact on Incap’s business?
A: It is still too early to examine the possible impacts of the ongoing war in Ukraine but sometimes the most negative events can also have some positive impacts.