CEO’s review

Componenta Corporation Financial Statements Release 1 January to 31 December 2023, 1 March 2024/ Sami Sivuranta, CEO:

“The first half of 2023 was a good continuation of the strategic development in previous years. However, in the second half of the year and especially in the last quarter, our production volumes were clearly lower than expected. This was influenced by market uncertainties and a higher interest rate environment than before, as a result of which our main customers’ own order books developed more modestly. In addition, our main customers optimized their stock levels towards the end of the year. Also, the level of net sales was affected by the lower level of price indices as a result of a decrease in costs. On the whole, our net sales and EBITDA fell slightly from 2022, so we are not satisfied with our financial performance in 2023. Nevertheless, our liquidity remained at a good level throughout the review period.

Due to general market uncertainty our main customers’ decision-making time between the submission of an offer and the acceptance of the offer has increased over the last year. This has been reflected in the development of new sales and in delays in the ramp-up of new production. In terms of new sales, we have systematically increased our market shares, and we believe this will have a positive impact on our sales volumes over the longer term.

Our profitability was somewhat burdened by the wage agreements made in our industry in the first half of the year, which increased our costs clearly, in addition to increasing inflation. In the review period, profitability was also affected by production and quality challenges in Karkkila. These challenges with scheduled maintenance related to one of the main production machines began in and lasted throughout the third quarter, contrary to the original schedule. We were able to ensure deliveries to our customers on schedule, and our service capability throughout the Group has remained good despite changes in the operating environment. In the second half of the year and especially in the last quarter, our factories’ utilization rates decreased clearly, which resulted in a decrease in our production process efficiency and ability to create high quality. This had a negative impact on our profitability. At the same time, we were ramping up the serial production of new high-volume products, which temporarily reduced production efficiency and quality. This also burdened our profitability.

The overall availability of raw materials and other materials has improved clearly and is currently at a good level. At the same time, the cost level of purchases has begun to normalise. Inflation reached a high level during the review period, but began to fall towards the end of 2023. We actively monitor market developments and will continue to ensure the functionality of our own supply chains. There are currently no significant near-term risks in the availability of electricity because of the high level of gas storage in Central Europe, among other reasons. However, there are still considerable fluctuations in the price of electricity at the daily level.
Our order book has started to strengthen since the end of the third quarter. Customer and industry-specific differences can be seen in order accumulation, but the outlook for the entire year 2024 has generally remained positive. With the start of serial production of new volume product sets from the second quarter onwards and thanks to the growth of Componenta’s market shares, we estimate that our total production volumes will increase from 2023.

We have updated our strategy for 2024–2026. Sustainability has become one of the focus areas of our strategy, and we will strengthen its role as one of our competitive advantages. We are also currently preparing for regulatory changes, as well as for our long-term sustainability targets and action programmes. During the end of strategy period, our goal is to achieve EUR 150 million in annual net sales through organic growth and in total EUR 200 million in annual net sales through acquisitions, and to improve our current profitability. As a contract manufacturer, we will actively continue our efforts to strengthen our market position and are aiming to be the preferred overall sustainable supplier of a wide range of products to our customers.”