Etteplan CEO and President Juha Näkki on October 31, 2023
Etteplan's Result January-September 2023
The third quarter of the year was challenging, and the development of demand was twofold. On one hand, the slowing of consumption and customers’ declining delivery volumes weakened demand in Europe during the review period. On the other hand, we saw a slight recovery in product development towards the end of the review period, and some production investments were started. Nevertheless, uncertainty remains high, customers are slow to make decisions on starting new projects, and there are significant differences in demand between different customer industries. In China, the market situation remains challenging due to geopolitical tensions. In the prevailing circumstances, our revenue growth halted and our operating profit decreased, and we had to update our guidance during the review period. We implemented new adaptation and efficiency improvement measures to safeguard our profitability and our capacity to make investments in business development even in the prevailing market situation. Due to the adaptation and efficiency improvement measures and the halting of growth, less capital was employed in our business operations and our operating cash flow improved substantially.
Software and Embedded Solutions was our most successful service area. After a difficult period earlier in the year, we saw small signs of a recovery in product development towards the end of the review period, but the number of software project starts was still low. The significant orders we received in the summer improved the situation in the service area, and the adaptation measures we implemented improved the operational efficiency of the service area, which helped profitability return to a good level. We also invested in the service area’s growth by acquiring High Vision Engineering Sweden AB, a Swedish company serving the automotive industry, near the end of the review period.
In the Engineering Solutions service area, the demand situation was moderate. Engineering work related to customers’ deliveries was reduced as customers’ delivery volumes decreased, but some investment projects were started. Project challenges in Central Europe had a slight negative effect on profitability, but operational efficiency remained fairly good. At the beginning of the review period, we invested in the service area’s growth by acquiring LAE Engineering GmbH, a German company specializing in industrial automation projects.
The Technical Communication Solutions service area did not develop as we had expected. Demand slowed as our customers’ delivery volumes decreased, particularly in Central Europe, where we have more customers manufacturing consumer products. The service area’s profitability was modest especially in Central Europe, where operational efficiency was weak and the large number of sickness-related absences also affected the result. We have taken measures to address the situation and expect profitability to improve during the remainder of the year.
Russian aggression against Ukraine and the rising tensions in the Middle East maintain uncertainty in the markets and make it even more difficult to predict future development. Nevertheless, our diverse service offering has proven its strength even in an uncertain market situation, and we have won several outsourcing contracts, for example. We are now increasingly focusing our operations on the customer industries in which we expect the demand situation to remain good. By doing so, we seek to keep our overall demand situation at a moderate level. We are also continuing to invest in growth so that we can continue on the path of profitable growth even in the prevailing market conditions.
President and CEO
October 31, 2023