Scanfil Q4'24 preview: Forecasts show a moderate turnaround for Q4 and this year

Translation: Original published in Finnish on 2/19/2025 at 7:20 am EET.

Scanfil will publish its Q4 report on Friday at around 8:00 am EET. Q4 has been the strongest quarter of last year for the company. We expect Scanfil's Q4 earnings to have turned slightly positive, driven by the SRX acquisition and improved profitability, although revenue continued to decline despite inorganic growth due to a weaker market environment compared to the same period last year. Given the very narrow guidance refined in December, the surprise momentum in Q4 operating numbers is very low (and positive for earnings relative to our forecasts). We expect Scanfil to increase the dividend slightly to EUR 0.25 per share. Also in Scanfil's case, the main role is played by the guidance, which, in order to meet our and market expectations, should promise growth and earnings growth for this year.

Revenue has continued to fall despite inorganic growth

Scanfil's demand situation has remained relatively weaker than in a good comparison period, as the company's customer base in the technology industry is largely flat in 2024. In addition, some value chains may still have needed to reduce inventories. Similarly, the SRX acquisition added approximately 4 to 5 percentage points of inorganic growth. Reflecting this overall picture, we expect Scanfil's Q4 revenue to decline by 7% to 205 MEUR, which would put the company at the upper end of its implied guidance range. Revenues in Energy&Cleatech and Industrial are estimated to have continued to decline, while we expect MedTech&Life Science to achieve slight growth towards the end of the year. 

Favorable profitability trend continued in Q4

We estimate Scanfil's adjusted EBIT for Q4 at EUR 14.2 MEUR, which represents a profit growth of around 6% from a satisfactory comparison level. We expect earnings growth to be driven primarily by the inorganic contribution from SRX. Our forecast is right at the lower end of the company's implied guidance range, so there are only positive risks to the Q4 EBIT forecast. In the comparison period, Scanfil's Q4 profitability was impacted by one-time restructuring charges of around 1.5 MEUR, but we estimate that the benefits of the absence of these charges were roughly offset by the decline in revenue in absolute terms. However, we expect the company's profitability to have increased in Q4, as in other quarters last year, driven by productivity improvements, and to be at a fairly good level with an EBIT margin of around 6.9% (versus the company's target of 7-8% EBIT%).  

On the lower lines, our financial expense and tax forecasts are in line with Scanfil's normalized levels, although non-cash FX differences that are not material to the company as a whole could impact financial expense and EPS. We expect Scanfil's EPS to have declined from the comparison period, which was supported by positive financial items, and to have been EUR 0.16 per share. In terms of cash flow, the report should be good as the decline in revenue has probably freed up working capital and, even on a seasonal basis, Scanfil's cash flow usually strengthens towards the end of the year.

The midpoints of the guidance should indicate revenue and profit growth

Scanfil has traditionally guided its revenue and adjusted EBIT with numerical ranges. This year, we expect Scanfil's revenue to grow by 9% to 844 MEUR and adjusted EBIT to grow by 11% to 59 MEUR. Just under half of the revenue and profit growth in our forecast comes from the SRX acquisition. We estimate that consensus expectations are broadly in line with our forecasts. Thus, to meet expectations, Scanfil should guide for roughly 780-880 MEUR in revenue and 55-65 MEUR in adjusted EBIT. In our view, a moderate turnaround in organic and earnings growth is a realistic assumption given the fundamental improvement in European economic growth in the second half of the year at the latest, the company's promising sales performance in the past year, and the Q4 reports reflecting the largely cautious demand optimism of the company's customers.