Stock Exchange Release, 5 May 2004


  • Net turnover was up 26% on the same period a year earlier and was EUR 19.2 million
  • Earnings moved into the black and the Group posted operating profit of EUR 0.6 million
  • Productivity improved and the capacity utilisation rate increased
  • Incap prepared a rising volume of offers and is negotiating on expanding co-operation with a number of customers
    Net turnover and financial performance in January-March
    Net turnover in January-March was EUR 19.2 million, up 25.7% on the same quarter a year earlier (Jan.-Mar. 2003: EUR 15.3 million). Compared with the previous quarter, net turnover fell by 4.0% (Oct.-Dec. 2003: EUR 20.0 million).
    Earnings moved clearly into the black and the Group reported operating profit for January-March of EUR 0.6 million. Compared with the same period of 2003, the operating result improved by 191% (Jan.-Mar. 2003: a loss of EUR 0.7 million).
    Earnings per share were EUR 0.04 (0.07 negative) and equity per share was EUR 1.10 (1.45). The Group’s equity ratio was 35.9% (40.7%) and total assets were EUR 37.2 million (43.5 million).

    Trend in the operating environment
    Customers’ need to lower the manufacturing costs of their products led to continued tough competition, and providers of manufacturing services are constantly looking for ways to boost their operational efficiency. Consolidation in the industry moved ahead both amongst competitors and customer companies.
    Development of Incap’s operations
    The pick-up in demand in the second half of 2003 gathered pace, and strategic customers’ delivery volumes developed in line with expectations. The offer backlog grew from the level at the end of the year, and the company was actively engaged in negotiations on manufacturing new products.
    The improvement in the consolidated operating result was due largely to lower fixed costs, a higher capacity utilisation rate and improved productivity. Lower costs resulted mainly from efficiency-boosting at the manufacturing units and a leaner cost structure under the new organisational model.
    It was decided to increase electronics production capacity in Estonia. The facilities at the Kuressaare unit will be expanded to three times their present size during 2004 on the basis of the present leasing agreement. The new facilities will house, among other things, automatic surface mounting lines and testing equipment.
    Demand of Ultraprint Oy, the subsidiary that manufactures chemically milled products, is growing and it was decided to purchase a new chemical milling line for the unit that operates in Kempele. The capital expenditure will have a price tag of about EUR 0.3 million and it will be carried out next autumn.
    The Kempele and Ruukki factories were granted an ISO 9001:2000 quality certificate and an ISO 14001:1996 environmental certificate in January 2004.
    Business development priorities
    Profitability-improving measures are being continued, with a special focus on boosting the effectiveness of materials management processes. Delivery times for electronic components are lengthening and as demand picks up, materials management will face the challenge of ensuring a steady supply of components. In the first quarter, prices of electronics components remained unchanged or even fell slightly, whereas prices of steel-based raw materials for mechanical fabrication were rising.
    Incap is expanding co-operation with its present customers by enhancing design services. The structural rearrangements aimed at boosting the effectiveness of production process are being continued.  
    The Group’s liquidity was satisfactory: the quick ratio was 0.8 (0.8) and the current ratio 1.6 (1.7). Cash flow from operations was EUR 0.6 million (3.0 million). The change in cash flows was a decrease of EUR 0.4 million (an increase of 1.5 million).
    Net financial expenses came to EUR 0.2 million (0.2 million). Loans were paid down according to plan and net debt decreased to EUR 10.9 million (14.7 million). The debt-to-equity ratio (gearing) was 85.5% (75.2%). Interest-bearing net debt amounted to EUR 11.4 million at the close of the report period (13.3 million). The equity ratio was satisfactory: 35.9% (40.7%).
    Cash flow from operations was positive throughout the period. The Group’s liquid assets at May 3, 2004 amounted to EUR 4.1 million, of which EUR 3.5 million consisted of unused credit facilities. The company estimates that available funds will suffice at least for the next 12 months, in accordance with the liquidity plan that has been drawn up.
    Capital expenditures
    The Group’s gross capital expenditures in the report period totalled EUR 0.1 million (0.2 million), or about 1% of net turnover (1%).
    Research and development
    Spending on research and development amounted to EUR 0.6 million, or 3% of net turnover (EUR 0.5 million, 3% of net turnover). A major emphasis within research and development was on developing a lead-free process. Research and development expenditure has been booked to expenses for the period.
    At the beginning of the year the Incap Group had a payroll of 552 employees and at the end of the report period it had 551 employees. At the end of March, a total of 52 people had been laid off.
    Annual General Meeting
    The Annual General Meeting was held on 20 April 2004 in Oulu. The Annual General Meeting adopted the consolidated and parent company profit and loss account and balance sheet for the financial year ended 31 December 2003 and resolved, in accordance with the Board of Directors’ proposal, that no dividend be paid for the 2003 financial year. It was resolved to cover the loss for the financial year from retained earnings and the share premium account.
    The Annual General Meeting granted release from liability to the Board of Directors and the managing directors who served during the financial year.
    The Annual General Meeting authorised the Board of Directors for one year from the meeting to decide on increasing the share capital through one or more rights issues and/or the floating of one or more issues of convertible bonds and/or stock options. The aggregate number of new shares that can be subscribed for on the basis of the authorisation, converted through the exercise of convertible bonds or subscribed for on the basis of stock options can be a maximum of 2,436,176 and on the basis of the authorisation the company’s share capital can be increased by a maximum of EUR 4,092,775.68 (not an exact figure). The authorisation includes the right to disapply shareholders’ pre-emptive subscription rights and to decide on subscription prices and other terms and conditions of subscription as well as on the terms of a convertible bond issue and stock options.
    Seppo Arponen, Kalevi Laurila, Jorma Terentjeff and Juhani Vesterinen were re-elected to seats on the Board of Directors, and Timo Leinilä and Sakari Nikkanen were elected new members. From amongst its number, the Board of Directors re-elected Jorma Terentjeff chairman.
    The Annual General Meeting elected as the company’s auditor the independent firm of accountants Ernst & Young Oy, with Rauno Sipilä, Authorised Public Accountant, acting as principal auditor.
    Share and share price trend
    The number of shares is 12,180,880. The price of the Incap Corporation share varied in the range of EUR 2.18 to EUR 1.80, and the share price at the end of the report period was EUR 2.05. Share turnover was 12%.
    Incap’s trading codes on Helsinki Exchanges changed as from 1 April 2004. The new company code is ICP and the trading code is ICP1V.
    At the end of the report period, the company had 963 shareholders, or 15% more than at the beginning of the year (834 shareholders). The company’s market capitalisation at 31 March 2004 was EUR 25.0 million.
    Introduction of IFRS standards (IAS)
    Preparations for the adoption of IFRS standards have progressed according to plan and Incap will prepare its first financial statements according to the IFRS standard for the 2005 financial year.
    Outlook for the future
    On the basis of customers’ estimates, demand for Incap’s services is likely to remain at the level of the first part of the year also in the second quarter. Because of a declining price trend, production volumes are nevertheless believed to outpace the growth in net turnover. Profitability is expected to remain at the level of the first quarter.
    Incap’s full-year net turnover is set to grow further at least in step with market growth. The operating result for 2004 is estimated to be in the black.
    Incap’s Interim Report for January-June 2004 will be published on Wednesday, 11 August 2004.
    Board of Directors
    Juhani Hanninen
    President and CEO
    For additional information, contact:
    Juhani Hanninen, President and CEO, tel. +358 50 556 7199
    Tuula Ylimäki, Chief Financial Officer, tel. +358 40 347 2025
    Hannele Pöllä, Director, Communications and Investor Relations, tel. +358 40 504 8296
    Press conference
    Incap will arrange a conference for the press and securities analysts on Wednesday, 5 May, 2004 at 10.00 a.m. at the World Trade Center Helsinki, 3rd floor in Meeting Room 10 at the address Aleksanterinkatu 17, 00100 Helsinki.
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