Incap Aktie

Good morning, and welcome to Incap's first quarter 2026 results webcast. My name is Pauliina Tennila, and I will be hosting this webcast.

Today's speakers are Incap's President and CEO, Otto Pukk; and CFO, Antti Pynnonen.

[Operator Instructions]

With that, I will hand it over to Otto Pukk.

Yes, hello from my side as well. It's always a pleasure to talk to you guys that are interested in Incap. Let me open up the presentation for you here, and then we can start with looking at the numbers. A little bit disappointing start of the year. We had a slow month of January and February going into the year. It was affected by some pushouts in material supplies that we had and overall a slow, little bit hesitant start.

Already in March, it started to open up and we have clearly had a positive development when it comes to getting in orders and have still a good outlook and confidence in the year ahead. That perhaps is not reflected in the numbers, but perhaps it's reflected in what we have said around the numbers. Overall, yes, little bit disappointing figures, but looking ahead, then I feel quite confident in the current situation.

If we talk about things that influence that, Antti can perhaps open up more on this, but still we have an influence not only on the material delivery, but also on the exchange rate in the release. That also you should keep in mind when you are looking at the figures. Of course, the big thing for us have been the latest acquisition of Lacon, that closed now in the beginning of the year. We have worked extensively when it comes to the integration process with the new Incap team in Germany and in Romania. We've had a very good start on that cooperation.

I feel that we have been able to cooperate them and start a different work stream now across all different kind of fields in the organization. And I think this will give a strong and solid fundament to move forward. Also what we see is that the defense orders and so that we were expecting with Lacon acquisitions starting to come in now. The order book also for Lacon looks very positive. I think in general, we will see more and more possibilities now when we are a bigger corporation, and together with the capabilities that we now have taken. I look forward to work with everybody in the team and to harvest different synergies here in the future as well.

We continue to invest in the operations. This time, we have been focusing more on creating, I would say the data lake and working with investments around that. We have still a strong belief in our decentralized model, but the 2.0 of that is of course to support that with different kind of tools and solutions as well. This is a very positive development that we are driving currently, and I'm excited to see the result of that moving forward. A big thing for us, but perhaps not in numbers or things outside the company.

Sustainability, of course, has been a hot topic the past years and now the legislation, of course, in the European Union have changed around it. What is mandatory, we in Incap, we have decided to continue with our reporting. Sustainability remains one of our key core values and is still a very integral part of our daily operations. We have just released our, of course, sustainability report as well. I hope everybody takes the time to read it. It's interesting reading. Our work continues. Even if we are perhaps a little bit massaging the scope, and, compared to what was mandatory here before, then still this, we feel is very important. It's not only about earning money, but how we do it in the big picture.

I want to take the opportunity as always to thank the team, even if the figures are a little bit on the lower side than we know what's ahead. The team have done excellent work in creating that and those opportunities. Thank you to everybody in Incap. We have here on the picture, as you see, a great sales meeting in Germany just some months ago. I'm looking forward to work now with the whole team in Incap. We are truly an international company now and have a lot of really cool and exciting experiences that we can now scale and work on a group level. In that sense, thank you to all of the Incap employees.

With that, I think Mr. Pynnonen, take it away when it comes to a little bit more details and numbers, then I'll summon up with the outlook once you're gone through those.

Yes, sure. Sure. Thanks, Otto Pukk. This is a little bit repetition, revenue. It was already mentioned, what I want to highlight here is the KPI we in our February release disclosed so that the outlook is given on a Comparable EBITDA figure. That number we report now first time, actual was EUR 5.2 million, comparison year was EUR 6.0 million. So in terms of the percentage, 9.2% versus the 11.5%. And the, maybe just to go through this comparable EBITDA, it's basically not very complicated. We have first operating profit, EBIT, and then we add back amortizations. When it comes to amortizations, it's specifically this acquisition-related purchase price allocation amortization.

Those are added back. If we would have any non-recurring items, and those we have also quite a strict policy internally that which are classified as non-recurring items. As you saw, [indiscernible] were very small numbers in Q1, so that forms the comparable EBITDA figure for Incap going forward.

This is the illustration of the figures, key figures, revenue development on the left side. On the right side, we have the traditional EBIT line. Revenue is of course expected to continue growing now when we get the full figures of the Lacon in.

That is something I want to point out as well that quarter 1 figures, of course, first time included Lacon figures, but it wasn't more than 1 month and then some small part of the February month as we closed the transaction on 19th of February, and then Lacon was consolidated into Incap figures on February 20 onwards.

On this slide, we have collected, of course, from our release, the main KPIs. Not going to repeat those. Just pointing out that, of course, the Lacon Group acquisition for Incap was so big one that the figures have impacted. In the balance sheet, this increase in inventory is a good example from that one. Massive increase from the delta between the December 2025 inventory value and the end of March figure is explained by the acquisition of Lacon. The readers and investors, analysts, who go through our report. This Lacon acquisition actually plays a big role explaining most of the deltas if you compare the Q1 '26 against the Q1 '25 figures. If it comes to personnel expenses, this and that, as an example. Majority of this is explained by the acquisition.

Interest-bearing net debt, of course, this is also impacted by the Lacon acquisition. Now we are at EUR 8.6 million when it comes to this net debt item. And then, we of course had the acquisition-related loan impacting that number in February month, and then the acquisition had indeed impact in this KPI. Personnel is nowadays over 3,000, also impacted heavily by the Lacon.

Well, also maybe a comment on this operational cash flow. So then, Otto mentioned some challenges with the material availability. And of course, this kind of short-term challenges that we faced in certain units that impacts on the turnover and efficiencies of material handling inventories and so forth. That boosted a bit our inventory levels and net working capital items itself. As cash flow is just a snapshot of the last day of Feb, March. So then, there was some development on those items that impacted indeed the operational cash flow.

Thank you, Antti. Outlook, we have remained the same. In that sense, we believe that the company's revenue and comparable EBITDA in 2026 will be clearly higher than in 2025. So even with this little bit of slower start of the year, we still believe in that and feel confident with that. We focus, of course, on -- have a continued focus on the integration of our new German and Romanian colleagues into the Incap family. This work will of course continue and I look forward to continue with that and see the effects of the work. We are doing that, as I mentioned, looking into now different kind of tools and data lakes to support our operations. So a lot of development projects going on, but on the same time, we see also very positive lead on the business and it seems to be that orders are coming in and backing it up, even if a slow start of the year.

That said, we are, of course, always eager to hear your questions, so take it away, Pauliina, with the questions.

Thank you, Otto and Antti. The first question is about how much of the delayed Q1 revenue will be delivered in Q2, and how confident are you that the component availability is improving?

Exact numbers, I will, on the revenue side we haven't reported, so I can't comment on that. But it will be delivered during the quarter two what was pushed out. I don't think that there is a systematic problem with components. We had in the beginning of the year, we saw that in general in the industry as well that there was some. What is driving this foremost is the development of AI and AI data centers. Currently there is a big demand on some of the components, and they are in priority as they are buying in big volumes, and then the rest of us have been a little bit behind. I don't think it's systematic. The component suppliers are working currently with increasing capacity. I don't think that this will be now, how to say, a new component crisis in that sense. It's far from that. It's more, I think, smaller disturbances.

There's a related question, still about the components. Was the availability problem in Europe or in India?

Yes, that was some types of components and that affected generally the business. It wasn't now in any specific site, but rather in some of, how to say, specific product ranges that use similar components.

Have you seen order cancellations due to weak economic environment or due to any other reasons?

No. No order cancellation we haven't seen. On the contrary, as I mentioned, we have a very strong order book, and we have received several. For example, in the report we are mentioning the defense sector orders because that was, of course, of high interest when we did Lacon acquisition that the potential growth there. But, no, on the contrary. I think that there is orders out there, and we haven't seen any cancellation.

Maybe I can add some comment on this one. Of course, you know the Incap is very widely operating in different market segments at the moment. Also in our report, so we disclosed that the proportion of the biggest customer is more manageable nowadays. Also when it comes to the Q1 report, so I wanna highlight that we haven't lost any customers or any major customers, so it's just a normal little bit slowness in the market, soft market in just in maybe mainly in January, February and now it was picking up. But yes, this was something I wanted to highlight.

That's perhaps a good point to bring up that the investors that have been following us for a while, they remember that we used to have dependency on our biggest customer, and I think that we have now left behind us. We are down in very healthy percentages currently and Incap is much more balanced company now with Lacon acquisition going in, and also our biggest customers, new normal in that sense, that they have now been owned for a while. We look like a company with total different risk profile when it comes to dependency of customers. That I'm very happy on the development and look forward to what that means in the future.

How much did the order book grow, and what is the size, margin profile, and product mix of the new orders?

Yes, we are -- in the report we didn't comment the numbers of the order book and I just wanted to mention that as we had a slower start of the year to understand that why we are still keeping the steering and why we are looking fairly positively on the year, even if we had a slower start in the numbers. I won't go in on details on that. When it comes to the order book in general, I think, as I said, I think of course the defense sector is driving the main growth in that. In other sectors, I think that it's fairly, how to say, more stable in that sense. The main growth is defense sector.

Also of course what is around things when it comes to these AI data centers and so there, even if the big boys in the industry are taking care of perhaps the servers and how to say, the core in those data centers, then companies like Incap, we do a lot around. Because in a data center, of course, there is a lot of different things that go in. Everything from different kind of cooling systems and energy backup systems and so on. There's plenty of electronics for our as smaller players as well that are not in the tier 1. Of course that is also driving currently, growth, and together with the defense and security sector.

Antti, I think you mentioned this already, but just to make sure, is the inventory increase purely due to Lacon and the delays?

Yes. The inventory....

The majority -- sorry, Antti. I mean, I said, and I want to say that of course the majority is Lacon coming into the group. Of course we have also, we are driving higher inventory or working process due to the material delays, as we have had push outs in orders, we have had other materials in.

Sorry, Antti, I was interrupting you.

No, no, you got it exactly right already, so I'm not gonna repeat. That's how it went. Otto already summarized nicely.

I'll give you the next one now.

Okay. Let's see.

I think you mentioned already that Lacon integration is progressing well, but there is a question about, you know, is it progressing operationally and commercially, and well, and what are the biggest risks to achieving the expected benefits in 2026?

I think it's both commercially and how to say, the integration is going well. Also operational, the integration is going well. Bear in mind, we still have a decentralized model. Of course, also the new companies within Incap has operational freedom, our integration, of course, in Incap is foremost driven by getting them into our cooperative network. The units cooperate with one each other. We have a lot of exchange when it comes to knowledge and cooperation and getting Lacon and, or the former Lacon, Incap Germany and Incap Romania into those kind of cooperation streams are the key thing. Those both are operational and commercial in that sense.

What we have seen as well now is also an interesting developing. Of course, there is cross-selling opportunities when it comes to the customer bases that we have and geographical opportunities that we are exploring with. We also see new requests from or possibilities in that sense from new customers that again, see us in another light. I know I mentioned it when we did the U.S. acquisition, every step we get bigger, we get, how to say, a new interest in Incap from potential customers and we see that as well. Of course, those effects we will see in a couple of years' time. There is things that we are working on that of course we expect more in the near future. If that answered the question.

How has the war in Ukraine affected Incap, and have you noticed customers increasing their inventory levels as a result?

Yes. I think that in general, we don't see yet any larger supply chain disturbances due to that. I know that has been a question in some forums and among investors before. We don't see that. Of course, in the long run, having the oil price up will of course affect everybody equally in the industry when it comes to transportation costs and other things. Currently we haven't seen any huge increases either when it comes to that. When it comes to stocking up and so, I wouldn't say.

In some of our military customers and so, there we have seen perhaps an increase in some sectors. There was a lot of course, during the initial stages of the war, then there was a lot of usage of military material and of course the stockpiles and so need to be replenished. Otherwise, on other customer segments, I haven't seen any, how to say, panic buys or any this kind of, like we had during COVID when everybody bought -- also private persons bought toilet papers and other things at home. We don't see that in the industry that people are hoarding stuff at home, or customer are hoarding materials or whatnot.

So, so far I wouldn't say. But, of course, as I said, a distant impact will it be, and we haven't still seen fully how this plays out when it comes to transportation and logistics, because those costs for those suppliers for sure have gone up and that will be reflected in price. As usual, of course, that is the end customer in the end that pays that increase.

Maybe moving into India. How is the business in India developing? Are there new accounts there?

Yes, no, I think we have had a very positive development in India. Our biggest customer is stable in that sense, on its new normal, as I have been talking about. We see increase in other customer accounts. We are working there with some really interesting and exciting customers and the cooperation goes well. Of course there's long cycles in this, but we see how our work is developing from prototyping going up now already into some kind of normal production. Of course it will ramp up over time to larger volume.

I would say very positive development in India and also now with the new Incap Germany and Romania joining, there is several opportunities in India as well that we are pursuing with the new customer base that we have acquired.

Still going back to the components, which kind of components or component types have had availability issues?

Yes, there is a array of course, and the details, or there's a array of different component. Foremost, ships and I would say smarter, more expensive components have had a problem, those that go in. These normal chicken feed, as we say, they are always available, but when it comes to more advanced components, they're where we see. This is limited to some manufacturers, of course, it depends on what the designers put into the product and so on.

Good. Then I guess go about M&A, one question. If you're now focusing on the integration of Lacon, when can we expect another acquisition?

Yes, of course, we have done a major acquisition, and our focus is on integrating that, and that is what we are focusing on or working on currently. That said, of course, I have said it before the acquisition as well, I don't think this is our by far our last one. Once we feel comfortable with that we are taking care of the money that we have spent in a good way and integrated, of course we will open up that pipeline as well, sooner or later. I won't give any time if that is late this year, or in the beginning of next year, or even earlier or later, I won't give a timeline. Let's see how it goes. Currently, it goes very well, so perhaps sooner than later.

I think we can take a final question here, and maybe combining a little bit two ideas here, is that how has the Q2 now started, and how would you comment on that? After this, a little bit soft Q1, what gives you the confidence that you can still achieve the 2026 guidance?

No, already March was up in that sense, the end of Q1, sorry, was up, Q2 has continued in the same line. That gives me confidence and of course the orders that backs that up, that we were talking about here before on the order book. Generally, we see -- we don't see any, how to say, other trends or so that what would impact this negatively. So far, everything is going according to plan now when it comes to moving forward here in the second quarter.

I'm excited about the outlook of the year. It looks stable and good, and I'm quite sure we'll with the information on hand currently that we will achieve the outlook that we have set.

Thank you. Thank you, everyone for good questions and being active. I think we have now covered the questions. Before I hand it back over to Otto, I would like to remind that a recording of this webcast will be available on Incap's website later today. There will also be a Q&A material that will be published later on. [Operator Instructions]

Once more, Otto, would you like to end this webcast by wrapping up the Q1?

Thank you very much, Pauliina. Once more, as always, thank you guys for following us and having an interest in Incap. We are always happy to answer questions, and if there was something you didn't get answered here, then reach out to us, and we always try to meet investors and analysts and so on where we can.

Yes, slow start, but at the same time, we still believe in a positive outlook for the year and we have seen good trends when it comes to order intake and other things to support that. We are quite confident. I think if I would take one takeaway from this report, then the topic that Antti brought up about the customer balance. We are this with one customer dependency, this is behind us now, and I think this changes the risk profile on Incap quite significantly.

As you remember, we used to be basically a one customer company and now this percentage are down in very healthy numbers, I would say. In the EMS business, you always saw that you have perhaps some customers there that is bigger, up to, I don't know, 20%, 30% of the business. I would still consider very normal, and we are well in that range now.

This, I think, is one key takeaway when you look at Incap to understand that this is now in our past and, moving forward, we are a quite nicely balanced company.

Thank you very much from my side as well. I want to wish you all a happy Vappu in Finland, and Valborg in Sweden, and Valborg in Estonia. Enjoy the time with your families and bring in the spring.

Good morning, and welcome to Incap's webcast covering the fourth quarter and full year 2025 results. My name is Pauliina Tennila, and I will be hosting this webcast. Joining us are Incap's President and CEO, Otto Pukk; and CFO, Antti Pynnonen. Otto and Antti will walk you through the results, after which we will go through your questions. [Operator Instructions] And a recording of this webcast will be available on Incap's website later today.

With that, I'll hand it over now to Otto Pukk.

Thank you very much. And from my side as well, welcome, and thank you for everybody listening in. It's always nice to have so much interest of what we're doing in Incap. So I will walk you through the -- a little bit of the result and with Antti give the numbers, and then we will take Q&A as normal we will do. Yes. So very good. If we look at the year, the year ended as we expected. We did a correction in -- during the year and after that, it followed that course. And in the big picture, we are happy with the outcome came in as we expected.

We continue to invest and develop the operations in Incap and that we take great pride in to keep doing. Of course, a big part of the -- part or a big event for us in the end of the year was the acquisition of Lacon that you saw now closed here in the beginning of the year. And that, of course, we are very excited about moving forward. I will talk a little bit more about that in a while. Then, of course, 2025 was also our 40-year -- jubilee year. So also that rendered in some extra activities and a little bit festivities in the different units, which is, of course, always positive. Overall, I think we had a great EBIT percentage, again, hitting almost 12%. And as I said, we ended as we expected.

The result, like we talked about last quarter release, of course, is impacted by some foreign exchange rates and so as well. This Antti can open up more [ to ] during the Q&A if there are still questions about it. I think you saw a nice recovery during the quarter 4 on that. So the impact was less. But yes, Antti is happy to answer questions regarding that. As I said, Lacon is -- was a big step for us, and we're very excited about that. This strengthens Incap's position in several sectors, among those defense sector that, of course, has been talked about a lot here during the past years with the geopolitical situation that we have, but also gave us more capabilities in form of design capabilities as Lacon is -- has ODM capabilities as well.

And also giving us a better reach into the DACH area and to the big industrial centers of Europe and this we are very excited about. Also, I must say that I'm very happy with the interactions that we have had with Lacon team. It seems to be that we are sharing a lot of the culture and the way we work, and it has been a great start with the integration work and all the work streams that we are working on currently. So this -- we look forward to very much during the year to continue to integrate them and develop the business among ourselves because, of course, the service offering for Lacon's customers has increased by being part of the bigger Incap family and also the service offering and the value proposition for Incap's customers is increasing, thanks to the capabilities that Lacon has.

So a warm welcome to all of them. And yes, they will be Incap Germany and Incap Romania. So soon, we won't talk about Lacon in that sense, but I'll do this -- still this one. So yes, that is a big thing. I mentioned investments, and we have, during the year, kept on investing in our facilities. And this is something Incap takes great pride in that if we want to produce the latest technology for our customers, then we also should have up-to-date technology in the factory. Sometimes you walk around in EMS factories and you see equipment that is 20-, 30-year old. And yes, then you have been too late in changing it. But in Incap, we are working very actively with programs to update our platforms and update the things we do. And this also gives result when we service our customers.

Sustainability, the demand for sustainability reporting have gone down from the European Union side. And so still, we have decided to continue our reporting in Incap and do it perhaps to a little bit more reasonable extent, but still sustainability and the thinking of what our footprint is in the world when it comes to environment and social and also government issues are very important for us. We are a value-driven business, and this is very much in the core of what we are doing. And we have continued to develop. We have continued to update our reporting. We have very interesting investments that have been driven now as well with the solar rooftop panels in many of the factory. And as you perhaps remember, I'm very excited over the investment we are doing in our U.S. factory, where we will be basically self-sufficient when it comes to electricity through our own solar park in that sense.

And so this is something I think is interesting and very close to our way to drive businesses to take responsibility also in the bigger picture of what we are doing here on Planet Earth. Quality and our team is, of course, the cornerstone of our business. We have continued to develop different management structures and management systems in the company that are focusing on quality. U.S. here -- finalized here work environment and environment certificates during the year, and we are continuing to work that in all units.

Also, I must say that when it comes to our people, then we can never praise them enough. We have excellent people all over the world servicing our customers and creating value. And it's always a pleasure to move around in the different units and meet these people that are actually the ones doing the electronics, not like us in the headquarters just reading about it in that sense in the numbers.

But that said, I'll give the word to Mr. Antti Pynnonen, take it away.

Excellent. Thank you so much, Otto, once again. If we take the first slide with focusing on the Q4 figures. So what we reported there was EUR 55.3 million revenue, EUR 6.9 million EBIT, and then that contributes 12.5% in EBIT-wise. And then what we wanted to highlight as well was what Otto briefly touched earlier was the impact of the exchange rates, and then we included the text that comparable -- with the comparable rates, the revenue was EUR 58.8 million. So then it was EUR 3.5 million impact there in the reporting. And then yes, that's, in that sense, worth to mention because with these comparable rates, basically, we were matching pretty nicely with the Q4 2024 figures.

What we can really be proud of is, of course, the profitability. And then we had this Q4 impacted by acquisition-related costs, almost EUR 1 million. And then if we adjust those back, so then we reported adjusted EBIT of EUR 8 million, which is excellent of 14.4%. So solid delighted end for the year. We can move on -- yes. And here, we can see the graph. As we can see then the Q4 pretty much nicely bounced back from Q3, matching the levels of the second quarter of the year. And then indeed, it was a good solid growth in the profitability as well in the last set of the quarter. The table here summarizes some of the key metrics we have. Interesting, of course, always to measure the inventory values.

There, we had some good development, but we got preaching a lot on the efficiency of inventory management, and there has been a lot of actions in the all units to optimize that level. And then we can see that it went down to EUR 52 million in the last quarter. Our financial position is indeed extremely strong. This is, of course, in the end of Q4 status of minus EUR 52.9 million interest-bearing net debt. So that is very good for Incap, and we remain very flexible in terms of the financials. And the personnel headcount number summarized on the right side. There, we have some swings here and there, some units a little bit went down in the headcount, like we mentioned, Slovakia number went down from year-on-year level and so on, but 2,614 people overall.

Yes. And perhaps back to the outlook, we have -- as reported, we expect to be clearly higher than in 2025, both when it comes to the revenue and the comparable EBITA. And of course, this takes into account both the Lacon acquisition and also the growth we are expecting from our previous or yes, the old Incap units. And then I think we are ready for the Q&A session.

So Pauliina, take it away with the questions.

Thank you, Otto and Antti. So I think one of the first questions is that since you have such a good situation on your balance sheet, why are you taking a loan to pay for the Lacon acquisition?

Yes. No, that's a good question. And now, of course, we are focusing very much on the integration of Lacon. But still, our growth in that sense, story, we haven't expected to end. And we -- once we have successfully integrated Lacon, we expect to continue with on the M&A track as well. And for that, we need firepower and that is shortly what that is all about. So you should see this perhaps in the more longer term and in a bigger picture. Antti, do you want to add something?

Yes. I think it's, from my perspective, really managing risks and then also managing potential opportunities as those arise. And then what I'm referring here is, for example, we have to be ready immediately if some of our big clients start ordering and their business keeps developing to the positive direction and our production volumes rapidly goes up. So we must be able to finance very, very fast net working capital increases. We saw that 2022 with India increasing volumes in EUR 100 million and think about how much cash was needed.

Immediately, there's no time to start discussions. Well, this is preferable this way that we have the -- we remain flexible in the financials and on top of things. And then what Otto mentioned, of course, when there's major size opportunities in inorganic way, acquisitions and so forth. So then again, time is money and then the companies who are able to react fast and have solid financials in place to sell to -- the seller party and counterparty. So then you get the credibility as a buyer and things like that. Plus then, of course, there's going to be loan amortizations coming up in the plans and so forth. But yes, I think we just prefer to have some buffers rather than keep too lean.

Maybe the next question about the outlook. And there's a question about if there's any way you could give some color on the organic growth part of the guidance? And what is the foreign exchange rate impact on this clearly higher guidance?

Yes, we haven't reported it separately in that sense. So of course, the previous Lacon numbers on their performance in the past years, we shared with the acquisitions. I guess you can do some [ backtracking ]. But yes, we haven't shared that detail in it. I don't know, Antti, do you want to comment on the exchange rate?

Yes. Well, we don't speculate with the exchange rate. So that is reflected the latest development there and then basically with the current exchange rates, that's the steering we gave.

Congratulations on great Q4, great margins. And one question is that how is your current order book in the coming 3 to 6 months?

Yes. Thank you very much in that sense. So first of all, no, we are not reporting our order book separately. But of course, as we are expecting growth and we are expecting -- yes, both through, of course, the Lacon add-on, but also generally then, of course, that reflects also in our order book as our forecast is based on our actual order book and also then firm forecasts from our customers. So if that perhaps answers the questions indirectly.

How about your defense exposure? You have now said that it will be growing with the acquisition of Lacon. So what do you expect it to be in the future? How much of your net sales will come from the defense sector?

Yes. Still, our exposure is not -- even with the add-on of Lacon, it's not now very big in that sense. So we're not dominated by defense. And we think it's very important to keep the company balanced. I know there is a big race currently on defense, but it's also important to think about times after. That said, we expect our defense share to increase here during the year and during the next year as well, as many of our major defense customers are expecting to grow with different programs. So that is -- Antti, do you want to comment on the percentage? It's not that big currently, but expected to grow.

You are right. So if we include some expected defense customer growth for this year and then some Incap unit level development programs we have there, so combining altogether, we are still -- we are under 10% still on a group level quite nicely.

There's a question related to this a little bit to elaborate on the expected revenues for 2026. So I'm not sure if this means a little bit sector by sector, maybe if there's anything to comment on the different markets and their impact on your demand?

Yes, we are not reporting sector by sector per se. But as I have said before, defense and what is around AI data centers, that is currently growing, and we see with our customers as well, well growth around that. Then there is some growth in other sectors as well that -- but that is more on also a company level. I would say that in general, I'm quite positive on our expectations when it comes to this year. And I -- as we said, we expect growth and that also inorganically or -- organically and inorganically. So overall, I think we will have positive development in many sectors.

How about -- you mentioned that there are some personnel reductions in Slovakia. What was the reason behind those reductions?

Yes. There -- we discussed that also in the beginning of the year that there was some postponements of some customer projects and we are always balancing and trying to fit our capacity according to what is the demand for the moment. So this is a part of being an EMS company is to increase capacity and reduce capacity when needed. And that was what happened in Slovakia as well that we took down the capacity to match the demand. But it goes up and down. I wouldn't say that, that is anything in particular. We do that in all units, and it goes both ways. We increase and decrease.

Moving on then to India. Could you give some kind of an overview of the growth in India?

Yes, India is developing very nicely. And we mentioned here in the [indiscernible] videos. And so when they were visiting us as well, a little bit -- gave a little bit flavor on the projects that we have ongoing there. And I think it's a positive development. We have new big customer accounts in India that we are developing and ramping up and balancing out. Our largest customers that is -- has its manufacturing in India as well. And so we have had a positive development. I wouldn't say that our third factory is full yet, but walking around, there is a lot of activities.

So in case there's no further questions online, then I think we can start to wrap up. Would you like to wrap up the year 2025 still once more, Otto?

Yes, sure. I can do that. So the year ended as we expected after the adjustment we did. I'm very happy for the performance of our team. We have great people all over the world, and that is really burning for electronics. And it's, in that sense, not an understatement that we have a bunch of electronic rock stars in Incap. I look forward for this year. And I think with the addition of Lacon and the great development that we are foreseeing in the different units, it's an exciting year for Incap and to continue to develop the business and that with new team members and all what that brings.

And I'm very thankful for the interest from you guys, the investors that we always have a big audience when it comes to our webinars. And I encourage you all, if you have questions and so, reach out to me and Antti. We always try to find time to meet with investors and [ talk ] in smaller groups as well. So I encourage you to do that. But until next time, and thank you very much, guys.

Good afternoon, and welcome to Incap's Q3 Results Webcast. My name is Pauliina Tennilä, and I will be hosting this event today. Our speakers today are Incap's President and CEO, Otto Pukk; and CFO, Antti Pynnonen. Otto and Antti will present Incap's third quarter results, after which there is time for questions and answers. [Operator Instructions] The recording of this webcast will be available on Incap's website later today. So Otto, please go ahead.

Yes. Good morning from my side. I'm currently over in our U.S. unit. So it's quite early, and that's also the reason for why we started a little bit later than usual. So it's -- it's not too inhumane time for me. So I appreciate everybody logging in a little bit later. But yes, about the Q3 results. So we'll do it, of course, as always, we have a walk through with Antti and then we try to leave as much as possible time for questions.

Third quarter, it ended and went as we anticipated. We had seen some uncertainties on the market and some postponement of some customer projects, and we flagged this already last quarter release and the outcome was what we expected. So a bit lower than we had last year and in that sense, low point of the year. We are quite happy with the profitability. We worked very hard with the different teams to protect our EBIT. And I think it shows the strength of our operational model that we can keep also with the lower volumes and less utilization, the same kind of double-digit EBIT throughout, even if some of the units were a little bit struggling.

Looking forward, we see that the pipeline for Q4 is promising, and I think we have seen the low point of the year. And overall, we remain within our steering that we have given. So no surprises in the big picture. Impacting, and I think Antti probably can go deeper in this later, but impacting, of course, the result is also the foreign exchange, of course, especially when it comes to U.S. dollar and Indian rupees. And you see here the development of both.

And this has had an impact on our figures as we wrote as well and should be kept in mind when you look at the numbers. We keep on investing, of course, and developing our business even if the volumes were a little bit lower in Q3. We have invested in India in new capabilities for flying probe and testing capabilities and also increase the SMT capability and capacity in India as we expect more demand here as we develop the unit.

Also in Slovakia, we have done a milestone project changing the ERP and updating also the mass platforms and so -- and this will take the Slovakian unit into a new era when it comes to digitalization of the production. So we keep on adding on and developing our production infrastructure and that we take a lot of pride in. Something perhaps newer is also that we are doing some investments perhaps that are more value-driven investments when it comes to sustainability.

And Incap is now solarizing and going in more and more into renewable energy so usage and so for our manufacturing. We have now installed solar powers in U.K. during this period and almost half of the U.K. energy consumption or electricity consumption will be covered by this. And perhaps the biggest investment was announced here just a few days ago on U.S. side, where we are investing in a major solar power, I could even call it solar power station.

And there, we have the possibility to cover 100% of the electricity need of the U.S. manufacturing with sustainable energy. And so when we produce in the future in U.S., we will do it totally green when it comes to electricity. So interesting development and this in combination with our previous commitments and investments into renewable energy will take our group very nicely forward when it comes to our footprint and how we affect the environment.

Also, of course, we, during this period, continue to work with our reporting, and we reviewed also the double materiality assessment that we had. And so we have done a lot of work also with sustainability and ESG during the period apart from the investments. Quality, of course, is in core of us and part of what I'm doing currently here in the U.S. is also reviewing the development they have had on the new ISO certifications.

And they are now aligned themselves with the rest of the group when it comes to also environmental and health and safety certificates and done an excellent job here on implementing these new management systems and making our group now more unified when it comes to the different certificates we carry in the different units. So also a great job from the U.S. team.

I'll hand over to you, Antti, you can dig in more deeper into numbers and then let's get back. And once you are finished with that, then I can comment on the outlook moving forward.

Yes. Sounds good. So then let's focus on the third quarter and then if we start from the top line, so we recorded EUR 51.8 million in revenue and EBIT was EUR 6.7 million, 13% in terms of the proportional EBIT percent. And then regarding the comparable year -- comparable figure quarter 3 '24, the delta is EUR 10 million. And as we also wrote in the release and explained, so there is various reasons and then 1/4 of this delta can be explained by the unfavorable exchange rate differences, mainly U.S. dollar to Indian rupee and then Indian rupee to euro.

On this slide, we have illustrated the quarterly profitability and the revenue historical trends. And then yes, 13% EBIT is, of course, solid. And then we would like to also highlight that there was this exceptional item. So the net proceeding from insurance was explaining part of that one. So EUR 1.5 million impact booked under the other operating income in Q3 explains 13%. And then adjusted one, EBIT-wise was 11.1%.

Inventory is illustrated here. There is a slight increase there, but then it's more or less normal to business fluctuations. Of course, then the net cash position is still very, very strong for Incap. So it's illustrated as a negative sign, even cash deducted by the interest-bearing loans is a negative sign, so almost minus EUR 39 million. So there's a lot of opportunities and firepower to move bigger strategic moves in that sense. Yes, outlook.

Yes, no, you can go as well. But yes, outlook, we remain or kept the same. So it's still valid that we gave that we estimate that our year will be somewhere on EUR 210 million to EUR 230 million and an operating profit of between EUR 23 million and EUR 29 million. So our outlook, we haven't changed and it continues on being valid moving forward. That said, as I mentioned in the report as well, we see a positive development when we look at now on Q4. And so -- but it's still within the given framework that we have seen.

But I think we are ready for questions. So please shoot and we'll try to answer as many as possible.

All right. Thank you, Otto and Antti. Here comes the first question. So your guidance assumes a strong Q4. What gives you confidence that the target is achievable?

Yes. Q4, of course, we already know we are within Q4 already, and we know very well what orders we have and so that we are working on. So there, we have quite high confidence when it comes to the outcome. Of course, always can something happen, but it's very unlikely that we won't hit our marks in that sense.

So maybe a follow-up question on that. Is it based on already confirmed orders? Or is it more like the signals about improving customer demand in the Q4?

Yes. No, it's based on confirmed orders. When you talk about the running quarters, then we are already talking about actual orders. And so as I've said before, in the 3- to 6-month period, we know quite well what we're going to do because there we are already within the orders. Then we have some forecast and so moving forward from that.

But within this short time period, then we know very well. So in our business, we are driving materials and so -- and these material lead times often are as long as 3 months or sometimes even longer. So we are very well aware of what we are going to do now in the coming months in that sense this is already production we have planned a few months back.

Yes. And just internally, we finished this quite extensive forecasting around in the beginning of October. So the feedback and the overview we received through this internal exercise is very much supporting this statement on Q4 and is actually the analysis behind this comment. We included in the Q4 report. And then yes, that's supported by internal analysis, yes.

How about the revenue and profitability? Can you comment anything about if there's differences between different units or different segments? How did it develop?

We normally don't report those separately and comment on that. But of course, there is always differences between the different units and depending on what customers they are -- so there's always a variation. That much I can say. But yes, we normally don't go into detail on segments or units.

And maybe that's related to the actual figures, but then how would you comment on the demand situation across different geographical regions? Do you see differences there?

Yes. I think still we see some effect of the U.S. tariffs and uncertainties in -- from some regions and there is -- keep in mind, there is not trade deals in place in all regions. So that, of course, is still in the background in that sense on some of the plans and demands. And so -- but I would say that in general, we see that there is growth in -- some growth in defense and, I would say, defense and aerospace, which we have a quite small exposure to still even if it has grown over the years. Then there's also around data centers and AI, an increase in demand.

And of course, that infrastructure is normally the bigger Tier 1s that are taking. But we see, I would say, in projects around the infrastructure and so that there we see an increase in demand. And there, we are also active in that sense. So otherwise, I would say that the general market demand is quite flat in when it comes to classic in the industry and so we don't see any like huge increase in demand. It's more in these 2 sectors that we see growth currently.

Thank you. Maybe then a question about the financial expenses, and they were quite high. So how would you comment? Is that -- what is the reason behind high financial expenses?

So this is actually a very good question. And yes, indeed, it's a big number that we reported under financial expenses. If we start first a little bit understanding, so what that line consists of. So there are unrealized currency rate effects, realized currency rate effects and then leasing-related financial expenses and then typical bank loan-related interest expenses.

So I think while I've been speaking with some investors, so the thinking has been that this whole amount, EUR 5.5 million are basically loan expenses that we paid to the banks. So about EUR 700,000 cumulatively are the payments that we pay over the loans that we have, so interest fees. By far, the biggest amount is unrealized currency rate effects, EUR 3.5 million from that total amount. And those are basically internal currency-related loans that we have granted to subsidiaries and then reevaluating those on the end of month -- end of month rate on the balance sheet.

So these fluctuations explains the majority of that part. Then smaller amounts are related to the leasing liabilities, some EUR 300,000. And then there was a bit over 10% was realized currency rate effects. So biggest amount by far are the like currency rate fluctuations and the minority are really financing fees.

Thank you, Antti. And maybe while we are talking about the exchange rates, there's a question about if you could explain the effect of the U.S. dollar and the Indian rupee more in detail how it affects your top line?

Yes. So I think I already mentioned that so 1/4 of this gap between this quarters and last year comparable quarters revenue difference is explained by this difference. And it's just how the units are reporting back to the HQ and then we consolidate with the average rates and then compared to the last year Q3 figures. So then, for example, India rupee against euro has weakened quite dramatically.

So from rate being somewhere around INR 90 equaling EUR 1 now we are far over INR 100. So there's like over 10% of fluctuation. And then when I'm getting their figures in the rupees as that's the functional currency of Indian entity and then we are converting -- just mathematically converting the figures to euros to consolidate the subsidiaries. So there comes this explanation and story behind this impact.

So perhaps to explain that the business in India, for example, is done where we buy and sell mostly in U.S. dollars. Then this is converted into rupees, of course, when we do the reporting that -- and first converted into rupees, then converted into euro. And so there's a lot of, I would say, mathematical exchanges that take place in between. And also perhaps for understanding for investors and so is that Indian business, we have 3 big factories there. So that business is mostly in U.S. dollar.

Then we have, of course, our U.S. factory as well. And so the majority of the business is -- in Incap is in U.S. dollars that we trade and not in euro. Same we have our U.K. unit there we have, of course, British sterling, but majority are not in euros. So this is converted for the reporting into euro. And perhaps that gives a little bit more light on the subject.

Then there's a question about the inventories. And are you planning to increase inventories in the coming quarters?

Yes, that's good question in that sense that if volumes go up, then of course, inventory go up as well. And that said, we have been working on reducing inventories. And as you all remember, we had a big exercise on reducing inventories here when we were, so to say, overstocked with the destocking exercise we did here some time ago.

But also that material availability is better on the market. And that means also that the inventory levels or that can be taken down and the materials we don't need to buffer up so much what we did here in the past. So I understand the question in that sense that is our current inventory level, which was a little bit higher than the previous month. An indication on the level. So yes, it's always some kind of indication, but you can take it to one-on-one because there's more factors into it.

How about the volumes for your largest customer? Can you comment on them? And how do they look going forward?

Yes. I wouldn't say that our volumes to our largest customers are stable, and we continue to serve them on a high level and so that said, we have been working very much together with them to reduce the cost for their products and find alternatives when it comes to different components that are cheaper and so to -- and that, of course, takes down the product price, even if we earn percentage twice the same money, then if the bill of material cost goes down in the product, and we will, in absolute terms earn less in that sense.

So that is affected a little bit now when we look at this year and the then so compared to some years ago that we are producing the same or even higher volumes, but we are less because the work have been done with the products where they are getting it done cheaper and more optimized, and so perhaps to give a little bit flavor on. But it's part of the service we do and we try to help our customers to achieve their goal when it comes to cost levels and so on.

Thank you, Otto. A question about the shipments from India to the U.S., how much do you ship? And are you now suffering from these higher tariffs from India?

Yes, I don't have the figures on the last quarter, how much...

It's about 20% so far this year is the volumes going from India to U.S. I spoke with Murthy, fresh information from Murthy. So yes, that one.

So in that sense, it hasn't impacted so directly, but India and U.S. is still settling their trade and have not the trade agreement in place fully. So let's see where it ends up. But yes, we continue to shift to U.S. from India. And yes, we'll hopefully in the future as well.

And are there any regulatory or structural challenges for you in getting a larger share of revenue from the defense sector?

There is, I would say, no hurdles in that sense in any law rules or regulations or so. And we are working on increasing the defense segment as well. But you should keep in mind that these companies are old and conservative, and it takes time to qualify. And even if we have now qualified on with several of these bigger defense giants and it still takes time before that will become a vital part of our business in that sense.

And that said, in the newer segments in defense, in drones and other in some more start-up companies in defense industry. There, the order is much, much less. And there we have, I would say, quicker developments, but defense industry is quite conservative. So it takes time. And also I think that if you look in the general concept of this, that we are not peaking yet in that sense. The defense model is still expected to go up and continue up and perhaps peak on somewhere on 2030 or so. So I think the work we are doing will pay off in that sense.

Okay. Maybe we can then move to the M&A topic, the past and the potential future ones. And here, there's a question about the U.S. Pennatronics acquisition and how have the cross-selling potential from that acquisition being already realized during the first 2 years that you have been working or operating as 1 unit?

Yes, I think we have quite good development when it comes to cross-selling opportunities. And we have several customers that are -- have been exploring and are exploring the possibilities and also we have some production started in this. So it has gone well. I think when we did the Pennatronics acquisition and several of our customers realized that now we are more globally positioned and look into possibilities to take advantage of that. So I think it has gone -- sorry, very well.

Then there's a question about -- you have a lot of cash on your balance sheet and plans with that? And how about the M&A pipeline and the valuation of the potential acquisition targets?

Yes. We have, of course, plans with that cash. M&A market is more active currently, and we have a good pipeline. Antti, do you want to comment, I'm losing my voice a bit.

Yes, sure. So of course, as we know, Incap is very much looking after different ways of growing, organic growth, of course, always is something we explore very, very aggressively. But then on the other hand, we see also this consolidation and a lot of opportunities on the market when it comes to acquisitions. And then -- but I think there's also saying here that recently and within past, I would say, 3 to 6 months period, there has been also like these bigger size acquisition targets, let's say, 100 plus -- around EUR 100 million and even higher figures revenue companies available.

And then with the firepower and with very healthy balance sheet and then cash position and things like that. So then we are, of course, keen to explore all the potential targets out there. And then, yes, growing through acquisitions, obviously needs a pile of cash, and then it helps also to move quickly when the right target arises and so forth. So we are ready in that sense, if there is a good opportunity and the valuations and everything matches and culture and everything is there for us to grab. So yes, we are looking and ready to move quickly in that piece.

So if there's a lot of market activity, has that driven the target valuations up? And is that your opinion? Or how do you see the valuation.

Yes, I think we see somewhat higher expectations in that sense when there is more activity and then also more competition on some of these targets. So yes.

So then there's 1 question about alternative uses for the cash, which might not be in your hands, but how about buying back your own shares?

So I think that if we are not successful with M&A and so then, of course, there is a lot of possibilities there with share buybacks and dividends and so on, but that is more up for the Board of Directors. We and the management -- of course, we want to keep the money and have that as possibilities to make moves with. So if that answers the question.

Yes. And also from a management perspective, we see that the bigger you get, the company has better ways of succeeding also in the future just because you buy bigger quantities of materials and then buying in bigger quantities, you get better prices, payment terms, you can -- you will be more competitive in the market and when other companies are growing. So I think that's why how the management sees that we should invest in the business and growing on the business through ways -- in different ways.

So whether it's organic growth and investing in the lines and the latest technology there or then there's other way, which is inorganic growth. But end of the day, to be sustainable business also from 10 years from now. So it's key that the business is growing and then staying competitive when it comes to these elements I mentioned.

Well, thank you, Otto and Antti. I think we have been going through the Q&A now pretty well. And so thanks everyone for active participation. And would you like to recap once more, Otto, the Q3 before we end this session.

Yes, I will try to do so before I lose my voice at least. So -- but as always, thank you for the interest in Incap and for everybody who is tuning in. We are always open to take questions. So take the opportunity, of course, here in the webinar, but also you can contact us directly or shoot them in the investor forum where we'll try to answer them.

And, as I said, we are looking on positive development in Q4. And so this was more of a last quarter that's done, and low point of the year and now we've moved forward. So that said, thank you, everybody, and see you next time.

Thank you.

Thank you.

Incap's Q2 Results Webcast. My name is Pauliina Tennila, and I will be hosting this event today. Our speakers today are Incap's President and CEO, Otto Pukk; and CFO, Antti Pynnonen. Otto and Antti will present Incap's second quarter results, after which there is time for questions and answers. You can post your questions with the Q&A function already during the presentation. The recording of this webcast will be available on Incap's website later today. I hand it over to you now, Otto.

Thank you, and welcome, everybody, from my side as well. It's always a pleasure having so many people having interest in Incap. And I'll start sharing the presentation here slowly. Currently, me and Antti, we are in Kuressaare in Estonia, where Incap is supporting the Kuressaare Saaremaa Opera days. And I hope that we have also some of the -- you guys, shareholders here in Kuressaare, enjoying the culture and the music.

But let's talk a little bit about the quarter that has gone. As we had anticipated, the first half of the year started with a little bit anticipation in the market. We had hoped that by now already these tariffs and trade deals that are foremost with U.S. and Europe, but also U.S. and India, had regained some kind of clarity. But there's still uncertainties. And as you saw, we went in and we did a steering change here in the beginning of the week due to that.

Otherwise, the revenue we had during the quarter was slightly higher than the previous quarter and the first half year figures in that sense is here on the screen. So still a double-digit EBIT and EUR 107.5 million in revenue. We give now an interval. So the new outlook that we have is showing a number a little bit than flexibility. So we choose to do that to get clarity. And we continue to now monitor what is happening in the foremost with the U.S. administration and the trade deals, and let's see.

In principle, when we changed the steering, the biggest issue for us was the dollar exchange rate. And we had some projects that have been postponed, but our steering was, yes, very close to the previous year and when the dollar exchange rate changed, which is a big part of our business, is dealt in dollar. And as we have the Indian unit very much dealing in dollar and of course, the U.S. unit as well, then this very weak exchange rate affects our result.

A little bit to visualize this as well. So there is an all-time low in that sense in both the dollar and the Indian rupee that follows dollar, and we feel the effect in both of those. Otherwise, we have continued, of course, to work in development with Incap. We have installed our new SMT line and the upgrade of that in U.K., and we have also invested in here during the first half in SMT production equipment in U.S. and new x-ray in Estonia and upgraded our PCBA washing technology in Slovakia. So we keep on investing and seeing that our factories are top of line and can handle our needs.

Also in India, we have done SMT line investment, but also installed, as you saw perhaps in social media, quite significant amount of solar power in the Indian facility. And that, of course, is part of our sustainability program and so as well. Also perhaps to mention here during the quarter is that we have continued to develop our units and also regained some new accreditations in defense industry, for example, in U.K., where we have the JOSCAR Zero accreditation now in place. So business continues. We continue to develop and so the business all over the different factories.

When it comes to sustainability work, it continues. So we just had a report out here in spring time, but of course, we have already kicked off the reporting for this year and now have been heavily focusing on our climate transition plan and have been focusing and developing that. So that is now with road maps and targets and so is in place, and we start developing and moving forward with that.

And of course, we have a focus. We are looking at all the opportunities we have to reduce our CO2 emission, and that's why solar panels and other things that I was mentioning before is, of course, in very much focus. Of course, it's always about our people. And I think we wouldn't be here today without our excellent teams all around the world that continues to deliver and perform very highly and see to it that our customers get what they want and needs in that sense. So it's always a team effort, and it's a pleasure working with all Incap people around the world.

But that said, Antti, you might want to dig in a little bit more into the details when it comes to the numbers. So go ahead, please.

Yes, please. So if we take on the next first slide here, the result of the second quarter, EUR 55.3 million, slight increase from the first quarter, almost 6%. We recorded EBIT EUR 6 million, and that is in healthy double-digit figures, sniffing on 11% and then adjusted EBIT was EUR 11.5 million.

Here, we come again on this trend since 2020 second quarter. So the figures show now on the second quarter, a slight increase from the beginning of the year. And then towards the second half, we expect the similar level to continue. Then if we take the next one here. So we also measure, of course, the development on the inventory values. And then as we commented earlier this week about the currency rate, so obviously, when Incap is so international business and most of our assets are in different currencies and then mainly this U.S. dollar-euro rate has weakened. So of course, we value all our assets as well. Balance sheet is valued on the latest currency and then inventory also is partially impacted by weakened currency effects.

If we would have used the similar rates as 2024, actually the inventory levels have slightly increased since the December 2024. And then we still remain extremely healthy when it comes to our cash position. Our net interest-bearing net debt is minus EUR 35 million. So below is the definition of where it comes from EUR 64.4 million cash and then interest-bearing liabilities, EUR 26 million on the noncurrent side and EUR 3.5 million short term. And 2,600 approximately FTEs on the group level, and there is an increase in the figures and mainly contract worker number in India is picking up.

Yes. So coming back to the outlook, our new outlook is that we will have a revenue between EUR 210 million and EUR 230 million and operating profit between EUR 23 million and EUR 26 million, given that there is no change in -- now in the inputs that we have regarding material availability or other things on the market. And our previous estimate was that we were going to be higher than this year, but this is now revised. But I think that is it from us when it comes to the numbers and so we are always happy to take questions. That's the main part of this webinar. So guys, please go ahead and let's discuss what is in your mind.

All right. There are a couple of questions here for you. So talking about the postponements done by the customers, do you see a lot of pent-up demand due to them?

Yes. I think, first of all, I want to emphasize that the main reason for us changing the steering was still the exchange rates and not postponements of projects. Postponement of project is more reflecting to that we were expecting the Q2 growth and in the end of Q2 and so. But yes, we see it. There is still hesitation. There is hesitation in especially our customers that deliver into U.S. or have end customers on their side that deliver into U.S.

And we see that in many sectors that both industrial customers, but also defense customers have said there have been some question marks regarding some projects in the support of Ukraine from U.S. that now is a little bit pushed into future. So yes, that is -- but I don't think it's not a question of demand that is, I would say, disappeared. It's a question of timing. And now we are already in the second half of the year and very close to the window where we already know what, I would say, the year will play out. And if the orders haven't been placed by now, then, of course, it won't be a big probability that it will already be fitted into this year and can be delivered in the year.

So of course, the longer it takes and the longer people wait, the more likely is that it's orders that we're going to deliver next year rather than this year.

So what is your current utilization rate? And what is your remaining run rate at full capacity?

Yes. Full capacity is a relative term in the sense that we have talked about it in this webinar several times before that we always plan with some kind of overcapacity. We have that today as well. That is what we are selling in terms of -- for our customers and for our potential growth. So -- but capacity, it all depends on what kind of product mix there is. So if you do, like we do for some customers, 10 feet by 10 feet big controller units, then you can fit those -- fewer of those than if you make a small board that is perhaps 10 millimeter or 10 centimeters by 10 centimeters. So it all depends on -- so I wouldn't talk about capacity in that sense.

And in general as well, I think it's an old way to look at manufacturing, talking about always, how to say, capacity utilization because it's a moving target. As an EMS company, we can always rent more facilities. We can rent equipment, we can rent people. So it's more a question of what the customer needs and what is the current output need that we have, and then we will match it. And it's the service of matching that need that is the core and the essence of EMS business nowadays.

Yes. Well, maybe from my side is one comment here on this one. So that definitely, we have capacity available. So it means that we don't need to invest necessarily on the floor space or the real estate itself. So in theory, of course, we could add more from one, kind of working in one phase, you can add in the 2 phase or even around 3 phase working around the clock basically. So the message from my side is that we don't need to invest in real estate or floor space or not necessarily even on the -- that much on the machinery and equipment on meeting the growing demands from our customers. So that's one way to look at it as well.

The next question is about your largest customer. And how have they been developing relative to the rest of your customers in H1?

I think they have been developing good. We have slightly increased the volumes, and so during the quarter, we are producing steadily for them, but they are also one of the customers where we deal in U.S. dollars. And so even if we have increased slightly in the volumes in the -- and when we convert this now on paper into euro, then the value of that is slightly less than it was, say, a quarter or 2 ago because of the dollar exchange rate. Antti, do you have any want to double down on that one?

No, I think you actually -- you had the point there. And then -- yes, of course, then when we do the full year forecast internally, we do a lot of different scenarios with different exchange rate as well. And of course, the main driver, obviously, is always the customer demand and their outlook and the confirmed orders and agreed production plans. And then we put all these numbers together.

We do it several times a month, this kind of scenario analysis with all MDs in the meetings and then go through the plans. And then with the exchange rates we have had so far on average, 6 months, January and June period of time. So then we saw that it seems like then this outlook that we gave out is -- yes, we stick on that one. That's based on the current best estimation on the business, and then we believe on that one.

And of course, in Incap, we always aim for shooting a little bit, of course, on the top tier or the higher boundary of the range. So that is our ambition level internally. But now we are in July and then obviously, still a lot of work to do to meet those figures. But we will keep you guys posted, of course, on the progress.

Thank you. Then there's a question about defense and aerospace. So is defense a big market for Incap or Incap's customers? And would you like it to be bigger considering how the defense market is developing currently?

Yes, defense currently is not big. So I think it's slightly -- less than 5% of our total business is related to defense and aerospace in that sense as we bundle those in one segment. We have been working on increasing it here over the past year, and we are looking at continuing with that work. That said, it's also a volatile market. Now it's a good base for defense business, but there is also downsides in -- so when the turn goes on the downwards.

So I think that focusing only on defense business, we, of course, won't. So it's a part of a balanced, how to say, customer portfolio for us is to be in many sectors. And so -- but of course, it's currently attractive. There's a lot of money moving there. And we are also working very close with several customers and several projects on the defense side and have -- and we'll continue to do that.

Thank you, Otto. Then there's a question about financial expenses for the debt, and that's increasing. So what is the trend going forward?

So if we actually look really the interest rate -- interest that Incap is paying, that is actually going down as we have seen interest rates, Euribor and then Incap's own agreed percentage premium on top of that one, interest premium with the local bank. So a combination of those, that is going down. So the real -- what Incap is paying for the debt is actually EUR 150,000 less first 6 months this year than it was last year.

So the majority of the finance expenses actually is all related to this like a translation differences. Like mentioned earlier, we are very international business, and then we have a lot of dollar-based assets. There's a dollar-based bank accounts in parent company in U.S.A. And then there is internal loan between Finland and U.S.A intra-group loan, EUR 20 million receivable, and when all of these are always valued in the end of the month with the latest currency rate. So that explains the growth on the finance expense side.

That said, Incap has also monitored this development of the currencies and what can be done there and then analyzed different ways to protect against this one. And then we have already taken a step to hedge. For example, we hedged end of last year, internal -- this intra-group receivable from U.S. and that is, on the other hand, then showing some financial income on the P&L side. So hopefully, this answered the question.

Thank you, Antti. Talking about the foreign exchange rates and also the gains, how about then on the purchases side? Do you have benefit at all on the U.S. dollar situation in your purchases?

In that sense that, for example, in India, which is the biggest unit or in the U.S. that also, of course, deals in U.S. dollar, then we also purchased very much in U.S. dollars. So I guess that a little bit offsets each other. And -- but -- so we are in that sense, I think, a big part of the business or even the majority of the business is U.S. dollar based as India is and U.S. now dealing with them. So perhaps that's the way you should see it.

But also, I want to emphasize this is on paper, that we are not in reality converting the U.S. dollar to euro. It's what we do in the reporting to show the figures to the market. But in reality, we haven't got any hit by it. It's on paper where we see -- when we now evaluate it. Of course, if we would pay dividend and then actually repatriate the cash and then start doing -- exchanging it, then that would be. But here, it's a loss. Some year ago, we got the plus on the same way and the minus. It's nothing now super dramatic into it because we will continue to trade in U.S. dollars and so in the future as well.

Yes. And then on this topic, if we a little bit continue further, so there was a question on EPS, what items impacted on Incap's quarter 2 EPS figure. And then one thing we haven't mentioned and discussed yet here, obviously, it was in our report, but we collected from our Indian subsidiary quite substantial intra-group dividend.

So if I color the background, so typically, we repatriate funds through different transfer pricing mechanism. And that's the prioritized method, and that has its reasons why we do it that way. But then especially now and when the cash levels were growing pretty hugely in India, so then there was a decision to repatriate in the form of internal dividend to the parent company, and then there is a withholding tax related to this kind of transactions in India. So we ended up paying EUR 2.5 million on this kind of intra-group dividend withholding tax in India. And that obviously impacted a lot on this second quarter.

But I would consider that as a nonrecurring item by nature. And it's also good to understand that the parent company is responsible, for example, for all the major strategic initiatives. So the cash needs to be in Finland if Incap is pursuing for major acquisitions. So then it's handy that we obviously have the funds and cash in use for those kind of moves. So just wanted to little bit give color on that topic as well as I have seen some questions here and there on this topic.

Thank you, Antti. How about the customers? And there's a question about their end markets. Where is the majority of your customers' customers?

We, of course, have customers all over the world. And so -- but if we look at the majority of our customers are European based. But then their end customers in turn can be all over the world. So it's a little bit hard to say, but we -- many of our own customers are European-based or European companies, then we can deal with their subsidiaries in different parts of the world. So even in, for example, our U.S. business, we are dealing with some companies that -- some customers that are U.S.-based, but also have big business in that sense within the U.S. and same thing for the other units. So we have customers all over the world and so as our end customer -- or like they're our customers' customer.

Thank you, Otto. Then there's a question about strategy to avoid commoditization in the EMS industry. Not sure what that means, but maybe you do?

Strategy to avoid?

Commoditization in the EMS industry.

Commoditization, I don't know what can be thought about that in that sense. But I can say like this that everybody is very often talking about different segments when it comes to our business. And I see many of our peers, they even classify they have different divisions work for different kind of industrial segments. But we have never looked at them in that way. There is -- we rather look at that we produce complex electronics and then these electronics can be used in medical or industrial or in defense or in whatnot.

So when you take a hammer to electronic device, then in principle, it's the same. You will end up with a PCP, you will have some perhaps buttons displays and some mechanical envelopes around it. And then it doesn't matter if it's a computer, some kind of tester or a mobile phone or whatever it is in that sense. So I don't believe that there is a very big difference in many of these segments that you normally see.

So if we then talk about different commodities, perhaps that goes for the same in that sense that it's rather a point of view than actual practical, I would say, differences in the business. So in that sense, you can avoid it by having a different point of view. I don't know, I was swinging on that one. So let's see if that satisfied the listener.

We can take follow-up questions if it was not. But the next one is about your long-term financial targets. And is there anything you could share about them?

We have been talking about this before as well here and so that -- I still believe there is a sweet spot on the market. When EMS companies become big and so they become very rigid. And I think that there is very big strength in our operational model. And if we can continue to scale this up and be somewhere, EUR 500 million to EUR 1 billion company instead and keep on the same way to work, then I think there is a sweet spot on the market for that.

Because getting bigger, most companies get very rigid and start dictating to customers what they want. And you will see that very often customers come from these bigger companies seeking more of a service approach and more of a tailor-made approach, and I think we can offer that by growing Incap as well. So that is what we continue to work with that continue to scale both organically and also through mergers and acquisitions, and we continue to pursue those actively.

I think this one fits well as a follow-up question. So how do you evaluate internal reinvestment opportunities versus returning capital to shareholders? And how do you prioritize between organic growth and further M&A opportunities?

Yes. And I think you should look at it in a little bit different ways. So first of all, internal investments. So I remember I had a long, long, long time ago when I was studying in university, and we had this old Swedish industrial guru as a teacher in Orebro University. And so -- and he very clearly was always pushing for that if you don't have any depreciations on machines, you have invested too late in your production infrastructure.

There is always a machine cost in the equation. So this, I'm a strong believer in that you need to keep on investing in equipment, having the latest technology on stage. There is no sort of freelances that we depreciate our equipment and then we have 0 depreciation. It will cost you more in the long run to do it. So investing into your own manufacturing, I think, is a hygiene thing.

Now you can always argue that if we now have a totally new business, opportunity that we need to invest in a new factory to set up compared to an acquisition, then those perhaps are a little bit more like comparable. That said that those opportunities will often come with existing customers and growing organically with existing customers, I would say, is always preferable towards growing through acquisitions.

So we are evaluating those. But yes, you need to keep the apples apart in this and really think that are they comparable? Are they comparable to the potential acquisition or the potential investment in reality? Or is it so it's more hygienic that you need to do the investment to keep up with the latest technology development and then keeping up with having your production in par with your strategy needs.

Thank you. I think we could take one final question here, and it would be then that do you expect to finish any M&A transactions this year?

I expect to finish a lot of transactions every year, but it takes two to tango and we have an excellent team when we are and we have -- when we do due diligence and look into different cases and so on. And so far, we have -- you can argue that, yes, perhaps we have done fewer acquisitions than some, but we haven't stepped on any mines either in that sense.

So -- and I think that things take time, and I'm not stressing it. We are earning money. We are having a healthy income. It's a healthy business in that sense. And I think it will naturally come, the right times for those acquisitions. That said, I can say I saw also in some forum some other question that I think that many of those acquisitions that some of our peers have communicated about here lately, are very familiar cases for Incap as well. So if that answers some of the questions, but let's see. I'm always hopeful, but if it will be this year or when, then I can say here and now today.

Yes. And maybe for the viewers that are new with Incap. So Incap is working very, very closely with the M&A team. So we have established an organization to do acquisitions. So we have also, of course, then external help on there if the case moves on the due diligence phase. So we have all the resources needed. We have the firepower to do those. We are constantly looking at different markets. And then interestingly, so Incap is working typically several acquisition leads on parallel.

So 3 to 5 leads are always moving, meeting the owners and negotiations -- negotiating with the owners and making the valuation, doing the nonbinding bids and so forth. So we have a lot of, lot of activities ongoing all the time on the acquisitions at the moment as well. So then we are active on this one. And then always very difficult, obviously, to say closing timing on those depends on many factors and how the due diligence goes and do we find any red flags there that are showstoppers and so forth. But the more you keep pushing and trying, eventually you will get those deals that are good for Incap and that are good for the shareholders of Incap. That's the most important.

Thank you, Antti. So for my part and the IR team's part, I would like to remind here at the end of this webcast that you can subscribe to Incap's stock exchange releases and IR calendar on the web pages. So don't forget to do that. And now I hand it over back to Otto to finalize this webcast.

Yes. Thank you, Pauliina, and Antti as well. And thank you, all of you guys who have been listening in and are taking interest in Incap. I have said it before, reach out to us, come and visit. And me and Antti, we are always happy to take questions where we can, and if you have questions regarding what we are doing and things about Incap.

As always, I hope everybody takes some time and try to enjoy the summer as well. And if they have the possibility, why not come here to Saaremaa and visit the Opera here in the Kuressaare Castle that Incap also supports with this year as we have the Jubilee year, where we are supporting some culture events and so as well.

So that said, thank you once more for the interest and see you guys in a couple of months' time when it's time for the next one.

Thank you.