INCAP’S NEW STRATEGY AND OPERATING MODEL

Incap Corporation  Stock Exchange Release  26 August 2008, 8:30 a.m.
 
INCAP’S NEW STRATEGY AND OPERATING MODEL
 
Incap will change its previous strategy, which was primarily aiming at growth. Now, Incap is targeting at profitable growth by focusing on the service of leading equipment manufacturers operating in energy efficiency and well-being technologies. Incap will improve its competitive edge by expanding the service offering by life-cycle services connected with manufacturing. At the same time, Incap’s organisation will be renewed by centralising business responsibility in units formed on the basis of customer segments.
 
Focus on strongly growing market segments
 
The strategy needed to be redirected because Incap’s position in traditional electronics contract manufacturing focusing at the PCB assembly has become more difficult and its competitiveness in volume manufacturing of telecommunications products, in particular, has decreased. On the other hand, Incap has excellent possibilities for strengthening its position in the new, growing customer segments where outsourcing of manufacturing and related services continues to increase. Strongly growing market segments include applications related to improving energy-efficiency and increasing well-being. Incap is already strongly involved in the delivery chain of these applications.
 
Development of new life-cycle services
 
Incap is targeting at reposition in the competitive field by developing new life-cycle services. In addition to manufacturing electronics, mechanics and integrated product entities, Incap will provide design, new product introduction, testing, after-sales and maintenance services that cover the full life-cycle of products. The company’s aim is to further increase the proportion of electromechanical product entities in manufacturing and to develop new services related to it.
 
Incap’s present customer base offers a solid base for building a new competitive position. Because of differentiated plants and modern manufacturing equipment Incap has good production-readiness. Presence in the growing markets in Asia and the strong competence in manufacturing and design in the Indian operations bring new potential for growth. Through long-term relationships in versatile contract manufacturing as a partner for demanding customers, the company has accumulated a great deal of special expertise. A flexible production structure ensures adaptability in operations and the company’s wide range of experience creates power to develop the operations further.
 
Reorganisation of operations
 
Incap has launched two strategic development programmes. The reorganisation programme is aimed at strengthening the financial base of the company while the reform programme aims at creating a new way of operating.
 
The reorganisation programme emphasises the improvement of profitability and the working capital ratio and also the adaptation of the cost structure. The profitability is to be improved by expanding the service offering, eliminating low-margin or unprofitable assignments and further increasing the role of Indian and Estonian plants in service production. The production capacity will be adapted in response to demand, the roles of plants will be specialised and fixed costs will be reduced. The reorganisation programme will be implemented by the end of 2008.
 
The reform programme will serve to stabilise a new operating model, develop new life- cycle services and enter new and growing business segments. Central elements of the operating model include the establishment of business units, regrouping of service functions and expansion of sourcing operations in Asia. Services in design and new product introduction will be strengthened further and at the same time, new life-cycle services will be created according to customers’ needs. With a wider service selection, it will be possible to increase co-operation with the current customers. New customer relationships will be sought, particularly among leading equipment manufacturers in the energy efficiency and well-being industries as well as in other growing businesses.
 
Organisation structure with focus on customer segments
 
As part of the revision of the strategy, Incap has renewed its organisation which is divided into three business units: Energy efficiency, Well-being and Emerging business. The present turnover of Incap is evenly distributed among these three units. The new structure is effective as from 1 September 2008.
 
The objective of the operating model built on selected customer segments is to provide customers with new competitiveness by improving services and developing new operations according to customers’ needs. The business units have in-depth awareness of the customers’ businesses and needs, and therefore, they can provide the customers with competitive services quickly and efficiently. The business units will be responsible for turnover volume and profitability, producing solutions and services and developing life-cycle services for their customers.
 
The Energy Efficiency unit is divided into operations in Asia and in Europe, both focusing on serving customers supplying equipment that is improving energy efficiency. For this industry, Incap is manufacturing devices and parts for generators and electric motors, energy meters, power supply units, electrical cabinets and UPS-inverters. The majority of the Indian unit’s customers operate in this field. Because of the climate change, the technology for improved energy-efficiency is going to develop strongly in the near future and Incap believes that the Energy efficiency unit will produce significant growth and profitability potential for Incap.
 
The Well-Being unit will comprehensively cover equipment manufacturing for healthcare, well-being and security. End products for this field include meters and monitors analysing exercise performance and physical condition as well as different kinds of devices boosting safety and well-being.
 
The third business unit, Emerging Business, includes Incap’s customer relationships that are in the stage of growth and development. This unit is responsible for acquisition and maintenance of customer relationships in new business areas.
 
Management team
 
As of 1 September 2008, Incap’s management team will consist of Sami Mykkänen (President and CEO), Jarmo Kolehmainen (Director, Energy efficiency Asia), Pekka Himanka (Director, Energy efficiency Europe), Juhani Hanninen (Director, Emerging business), Mikko Hirvinen (Chief Operations Officer), Eeva Vaajoensuu (Chief Financial Officer) and Hannele Pöllä (Director, Communications and Human Resources).  
 
The areas of responsibility for the management team members are:
 
Energy Efficiency unit Asia, incl. the manufacturing unit in India: Jarmo Kolehmainen
Energy Efficiency unit Europe: Pekka Himanka
Well-being unit: Sami Mykkänen (pro temp.)
Emerging Business unit, Marketing: Juhani Hanninen
Manufacturing units in Europe (Helsinki, Vuokatti, Vaasa, Kuressaare): Mikko Hirvinen
Finance, IT and administration services, risk management: Eeva Vaajoensuu
Communications, investor relations, human resources: Hannele Pöllä
Global sourcing: Sami Mykkänen (pro temp.).
 
In addition to the management team, Sami Kyllönen, Manager for Operations services, will report to the President and CEO. His area of responsibility covers design and testing services, new product introduction and the development of quality and processes.
 
 
INCAP CORPORATION
 
Sami Mykkänen
President and CEO
 
For additional information, please contact:
Sami Mykkänen, President and CEO, tel. +358 40 559 9047
Eeva Vaajoensuu, Chief Financial Officer, tel. +358 40 763 6570
Hannele Pöllä, Director, Communications and Investor Relations, tel. +358 40 504 8296
 
DISTRIBUTION
OMX Nordic Exchange Helsinki
Principal media
The company’s Web site www.incap.fi
 
INCAP IN BRIEF
Incap Corporation is an internationally-operating contract manufacturer whose comprehensive services cover the entire life-cycle of electromechanical products from design and manufacture to maintenance services. Incap’s customers include leading equipment suppliers in the energy efficiency and well-being technologies for which the company produces new competitiveness as a strategic partner. Incap has operations in Finland, Estonia and India. The Group’s revenue in 2007 amounted to EUR 83 million and the company currently employs approximately 730 people. Incap’s share is listed on the OMX Nordic Exchange Helsinki. Additional information: www.incap.fi.