ELECTRONICS SECTOR GREW LESS FAST THAN EXPECTED, WHICH RETARDED PROFITABILITY GROWTH
According to preliminary information on Incap Groups annual accounts, profitability growth was retarded by the slower than expected growth of electronics business and restructuring of the furniture sector. The profitability and growth of contract manufacturing of furniture were restored during the last quarter. The growth of contract manufacturing of electronics also revived towards the end of the year, but the balance for the last quarter showed a deficit.
Incap Groups net turnover in 1999 was 71 million euro (67 million euro in 1998). Net turnover grew by about 6 percent, but the growth remained halfway to the target. The profit for the accounting period remained below the forecast presented in the interim report 1-9/1999. Annual profitability was impaired by both the slower than expected growth of electronics business and the restructuring of the furniture sector during the reporting period.
The growth and profitability of contract manufacturing of furniture improved during the last quarter, as expected. The growth of contract manufacturing of electronics also revived during the last quarter, but the balance still showed a deficit. Despite the good order backlog, unexecuted orders accumulated, especially during the latter half of the year. The large volume of unexecuted orders made it difficult to reach a balance between variable and fixed costs and hence impaired profitability. A further impact on profitability was due to the cost provision made for the warranty costs of a product and the slow circulation of material cost provisions during the last quarter. As anticipated, there were also fixed costs due to the acquisition of the steel sheet component manufacturing operation at the beginning of December as well as the ongoing special projects on process control reform.
The deliveries of the so far unexecuted orders of electronic products are estimated to begin at the end of the first quarter. The growth of net turnover in the contract manufacturing of electronics is expected to exceed the long-term target level of 20 percent this year. Profitability is also expected return to a satisfactory level.
The growth of net turnover in the contract manufacturing of furniture is expected to remain good. The focus on major customers and the omission of certain product lines accomplished during the previous reporting period will further enhance profitability.
The board of directors will sign the annual accounts and the group will publish its annual accounts bulletin on 16 Feb. 2000.
Oulu, 7 Feb. 2000