A slight guidance cut from Scanfil

Translation: Original comment published in Finnish on 10/11/2023 at 7:04 am EEST

On Tuesday, Scanfil slightly cut its turnover guidance and revised the mid-point of its adjusted EBIT guidance a bit downwards, but overall the guidance cut was moderate. However, our current estimates were at the top of the previous guidance ranges, which means our forecasts for the current year are under slight downward pressure. We will update our estimates and our view of the company in the near future and at the latest in connection with our Q3 pre-comment.

The reason behind the small guidance cut is customers' destocking

Scanfil's updated guidance estimates that the turnover for 2023 will be EUR 880-920 million (900-950 MEUR) and the adjusted operating profit will be EUR 60-66 million (was 61-68 MEUR). In practice, the average of the company’s turnover guidance decreased by close on 3%, while the mid-point of the corresponding adjusted EBIT range fell by good 2%. Thus, the guidance cut was modest as a whole.

According to Scanfil, overall demand is still significantly higher than last year, but as supply chain challenges have subsided, there is a slight softening detectable in the market as customers have started destocking. However, the company expects its profitability to remain strong during the rest of the year, which the updated guidance also indicates.

Slight downward pressure is directed at our 2023 estimates

Our current forecasts are at the top of the pre-profit warning guidance ranges (turnover: 937 MEUR, adjusted EBIT: 66.1 MEUR) and thus above the cut ranges (turnover some 4% above the updated range and adjusted EBIT approximately 5%). Thus, our forecasts for the current year are subject to slight downward pressure in terms of both turnover and adjusted EBIT. The guidance cut came as a small surprise to us after two guidance raises this year, although we noted in our previous update that the sputtering of industry in Europe and globally has slightly increased the downward risks related to estimates in the near future. We feel that Scanfil's main risks relate to demand that depends on the global economy especially looking beyond the current year.

We will update our estimates and our view of the company in the near future and at the latest in connection with our Q3 pre-comment. More information on the background of the profit warning will be seen on October 27 when Scanfil releases its Q3 report.