CEO's review

The market situation weakened further in the second quarter. The uncertainty of the operating environment, interest rates decreasing slower than expected and our customers' generally declining order backlogs slowed our customers' decision-making on new investments. Demand for delivery related project engineering also weakened as order backlogs declined.

Our revenue increased slightly, supported by acquisitions, and our cash flow remained strong, but profitability remained at a modest level for us in the difficult demand situation. We implemented adaptation measures in all of our service areas in order to improve operational efficiency and profitability in the coming quarters.

However, we were once again able to demonstrate the strength of our diverse service offering in a difficult market situation. We have won several outsourcing contracts, which will have a positive impact on our business in the future, and we have gained new customers outside our own market areas. During the review period, we announced a strategic partnership with Konoike, a Japanese provider of operational services. The strategic framework agreement proofs the competitiveness of our service solutions and our expertise in the global operating environment.  

We continued to develop our company despite the challenging market situation. We developed our service offering, in which artificial intelligence will play a significant role. We have already implemented our first AI projects in the Technical Communication Solutions service area, and we see a lot of opportunities there. We acquired AFFRA AB, a Gothenburg-based company that serves the automotive industry and strengthens our Software and Embedded Solutions service area. We also acquired a minority stake in BJIT, an IT services company based in Bangladesh.

BJIT will initially provide us with a flexible and highly cost-competitive option to support our customers’ software development, digitalization and digital product data management. In the future, we will expand our co-operation with BJIT across all of our service areas, which will increase our competitiveness and create new growth opportunities for both Etteplan and BJIT. The unfortunate disorder in Bangladesh has had only a minor impact on BJIT's business. According to our discussions BJIT's employees are safe and we expect the situation to calm down in the next few weeks. We are actively monitoring the situation and expect the disorder to cause only a small delay in the start of our co-operation with BJIT.

Due to the difficult first half of the year, we specified our guidance towards the lower end of the specified range. Nevertheless, we still expect investments to start in the latter half of the year, boosted by decreasing interest rates, and we expect the demand situation to improve to a good level.  When this happens, we will once again be ready to accelerate our profitable growth through our competitive service offering and service solutions.

Juha Näkki
President and CEO

May 8, 2024