Scanfil Q1'25 flash comment: Successfully avoiding the worst pitfalls in a broken quarter

Translation: Original published in Finnish on 4/24/2025 at 9:10 am EEST.

Scanfil's Q1 numbers were slightly below our estimates in a quarter dominated by the ramp-up of new projects. The company updated its earnings guidance indicator, but in practice the guidance remained unchanged, which was also in line with our expectations. Our preliminary assessment is that the report does not create significant pressure to revise our estimates for Scanfil or the consensus forecasts for the near term.

Organic contraction of revenue slowed in Q1

In Q1, Scanfil's revenue decreased by 3% to 193 MEUR from a reasonable comparison level. Organically, we estimate that revenue declined by about 7%, as the SRX acquisition supported revenue by around 4%, or 7.6 MEUR. Revenue development in the first months of the year was only slightly slower than we had forecast. The sluggish top-line development was mainly caused by sluggish demand, while the ramp-up of several new projects at various factories limited sales in the first months of the year, as previously communicated by the company. Among the company's geographic reporting segments, revenue in the Americas significantly exceeded our forecast thanks to strong demand for manufacturing services in the US, but growth in APAC was slower than expected. In Northern Europe, the decline in revenue was also slightly higher than our estimate. In Central Europe, the magnitude of the revenue decline was in line with our expectations.  

Profitability in Q1 impacted by ramp-up of won projects

Scanfil's adjusted EBITA in Q1 decreased by 4% to 12.6 MEUR, slightly below our estimates. Profitability (adj. EBITA-%) remained at a satisfactory level for Scanfil at 6.5%, as the ramp-up of projects won last year weakened the production efficiency of the factories in Q1. This was particularly evident in the Central Europe region, while in APAC the margin was burdened by the SRX acquisition. Northern Europe improved profitability from a low level, and the Americas showed strong revenue-driven earnings momentum. On the bottom line, financial expenses this time were higher than the company's normalized level and our expectations, probably mainly due to currency-based and non-cash reasons. Meanwhile, the tax rate was broadly in line with forecasts. As a result, Scanfil's Q1 EPS decreased year-on-year to EUR 0.13 per share, slightly below our forecast, reflecting in particular the operating profit and financial expenses. From a cash-flow perspective, the report was reasonable, as the seasonal working capital commitment typical for Q1 ended up being quite low.

Guidance remained virtually unchanged

Scanfil updated its approach to guidance for the current year. The company now expects a revenue of 780-920 MEUR in 2025 (unchanged), and an adjusted EBITA of 55-68 MEUR (previously adj. EBIT 53-66 MEUR). In practice, however, the guidance remained unchanged, which was also in line with our expectations. In our view, the wide ranges still reflect the uncertainty surrounding the near-term outlook, especially with regard to external factors, which have recently increased also for Scanfil due to the indirect negative repercussions of the tightening trade policy situation. However, Scanfil did not comment on the tariffs in its Q1 report. From Q2 onwards, Scanfil's growth and earnings growth will also be supported by the new projects won last year, so growth and earnings growth should pick up as long as underlying demand does not falter for macro reasons.