SON, THE NETHERLANDS – Neways Electronics reported 2021 net revenue of €469.5 million (US$527.9 million), down 1.9% compared to 2020, largely due to the rationalization of less profitable customers. Growth with existing clients was dampened by continued material shortages and supply chain disruptions.

Net income for the year was €8.7 million, compared to a net loss of €3.9 million in 2020. Operating profit increased 86.1% to €14.7 million.

Orders were up 47.4% to €613.5 million in 2021. The order portfolio at year-end was €364.3 million, growth of 61.9% year-over-year, driven by a recovery in automotive, increasing demand in medical and continued growth in demand in semiconductor.

Net cash flow was negative €33.4 million due to higher working capital utilization, one-off cash-out effects related to the reorganization in Germany, and the integration of two operating companies in the Netherlands.

“In the second half year, we continued the strong trend as seen in the first half of 2021,” said Eric Stodel, CEO, Neways. “We saw a strong improvement in our margin, primarily as a result of more deliberate choices, positive mix effects and a strong focus on offering greater added value. We also managed to limit the impact of international supply chain disruptions on our margins. In combination with our OneNeways transformation, this led to recovery and improvement of our profitability.

“Due to the rationalization of less profitable customers, turnover is slightly lower in 2021 than in 2020, and turnover growth with existing clients was limited by shortages of materials and supply chain disruptions. On the other hand, strong demand resulted in a well-filled order book at the start of the new year. The recovery in the automotive market is continuing, and the number of long-term initiatives in other market sectors, including medical, are now starting to translate into higher order intake. The demand in the semiconductor sector is still very strong, and we expect this to continue in the year ahead.

“In terms of deploying our strategy, we are well on schedule. We are making increasing headway in our positioning as a system innovator, focusing on providing our clients with greater added value. For instance, we gained a number of new clients last year, divided across all our strategic market sectors, and at the same time saw continued growth in our pipeline of prospects. We also made solid progress in our transformation to OneNeways, which is helping to make our organization more efficient and to optimize the delivery of services to our clients.

“In 2022, the ongoing supply chain disruptions, high energy costs and rising inflation could have a dampening effect on our turnover growth and/or our profitability. Despite this, we are in a good starting position for 2022. Our order portfolio is well filled, and we will continue to offer high-grade solutions in order to strengthen our competitive position and improve our profitability. We are seeing an increasing demand for these solutions from our clients, and we will continue to invest in distinctive innovative technologies that contribute to the energy transition, the growth of the semiconductor industry and high-grade medical solutions.

“We deliberately chose to discontinue selected clients with less profitable turnover. Continued turnover growth with our existing clients was dampened by the impact of ongoing material shortages, especially in the automotive sector. Our order intake increased by 47.4%, driven by increasing demand from the automotive and medical sectors and continued strong demand from the semiconductor sector. We are seeing a continuation of our recovery in 2022.

“In the semiconductor sector, turnover was up 11.5%, driven by continued strong demand for electronic components. The decline in the automotive and industrial sectors was primarily due to the downscaling of loss-making clients. Turnover growth with our existing clients in these sectors was dampened by persistent supply chain disruptions. However, we saw a strong increase in order intake in all these sectors compared with 2020.

“As a percentage of turnover, the gross margin improved to 39.2% from 36.7%. This was largely due to positive mix effects and a stronger focus on higher added value activities. Neways managed to limit the impact of higher material and logistics costs in connection with the disruptions in the supply chain thanks to strict chain management, close cooperation and improved agreements with clients.

“Neways’ operating expenses, excluding depreciation and amortization, increased by 1.6% to €156.4 million. Personnel expenses rose by 2% to €130.1 million. In 2021, Neways completed the reorganization in Germany and the integration of two operating companies in the Netherlands, which led to a reduction in the number of employees of around 170 FTEs.

“To meet the strong market demand, Neways also opted for a targeted increase in capacity using both permanent and flexible staff. On balance, the total number of FTEs at year-end was around the same as at year-end 2020. Operating costs are excluding €1.6 million in one-off consultancy costs related to the public offers and a €200,000 release from the previous year’s reorganization charge.

“Normalised EBITDA increased by 26.7% to €27.5 million in 2021 due to the focus on profitable turnover growth. The normalized operating result rose by 86.1% to €14.7 million, which corresponds with an operating margin of 3.1%.

“Net cash flow came in at a negative €33.4 million, among other things due to higher working capital utilization and higher cash-out in connection with the reorganization in Germany and the combination of two operating companies in the Netherlands announced at the end of 2020, plus the payment of taxes to the government that were deferred in early 2021 due to Covid-19.

“Net working capital increased by 85.4% to €112 million, compared with €60.4 million at year-end 2020. This was driven by an increase in inventories in anticipation of stronger demand, ongoing supply chain disruptions, the scarcity of components and the deliberate choice, in consultation with our clients, to build up extra inventories to guarantee deliveries. This resulted in an inventory turnover rate, measured in days of realized turnover, of 110 days at year-end 2021, compared with 69 days at year-end 2020. The number of days of sales outstanding had risen to 41 days, six days higher than at year-end 2020, largely driven by higher turnover in December. The number of outstanding days payable ended at 56 days, six days higher than at year-end 2020. Neways expects the scarcity of components to continue for a large part of 2022, and our focus will therefore be on strict working capital management to control the impact of this scarcity.

“Besides the start of the construction of a new production facility of approximately 15,000m² in Slovakia, no large changes in our investment plans are expected in 2022.

“Together with our new shareholder Infestos, we are accelerating our transition, and we will focus even more explicitly on innovative systems that help create a more sustainable economy. Propelled by the energy transition, we see a rapid increase in demand for complex and smart electronic systems in all our end markets.

“If we look beyond the immediate future, Neways is in an excellent position in its strategic growth sectors, with increasing demand for more complex systems and high-grade technological innovations. We are confident we are on the right path to using our knowhow and expertise to provide our clients with a broader range of products and services in the years ahead. Strengthening our long-term partnerships with clients even further puts us in an excellent position to take maximum advantage of this position and by doing so take Neways’ profitability to a structurally higher level in 2022 and the years beyond.”

Ed.: €1 = US$1.12