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Commissioned research 17 April 2018

Marketing material commissioned by Scanfil Oyj

Scanfil Oyj Electrical Equipment | Finland

KEY DATA

ABSOLUTE & RELATIVE PERFORMANCE

Source: Thomson Reuters

VALUATION APPROACH

Source: Nordea estimates Nordea Markets - Analysts Pasi Väisänen Senior Analyst

Harri Taittonen Chief Analyst

Improving demand supports full-year earnings Scanfil’s time to shine Scanfil has witnessed an improvement in customer demand since the beginning of the year and upgraded its full-year 2018 EBIT guidance from EUR 33-37m to EUR 36-40m. We also upgrade our EBIT estimate by some 5%. As a subcontractor, Scanfil’s success is highly dependent on its customers’ performance, and we believe the recent improvement in the global economy has helped a lot in this respect. We therefore expect the operating margin improvement seen last year to continue this year. Our new revenue growth forecast is 7%, while our new EBIT margin estimate for 2018E is 6.7% (previously 6.4%). Volumes have been good in Q1 One of the main reasons for Scanfil’s recent improvement is its broader customer portfolio. Scanfil is not more dependent on the telecom sector and we argue that increased volumes have been the main driver behind the strong Q1 rather than product mix or pricing. There has not been one individual customer making the difference and the improving demand is instead coming from several sectors. Raw materials represent some 70% of revenue and cost inflation could very well be a threat for the company. However, the time lag for a raw material cost recovery is good as Scanfil acquires components based on the customer order. The range in our valuation approach is EUR 5.0-6.1 Subcontractors have always had a relatively low but tight range of valuation multiples. Small subcontractors typically trade at a small discount compared to larger competitors. We do not yet expect Scanfil to grow faster than the industry and therefore do not find a clear premium compared to peers warranted. We base our fair value on a combination of peer group and DCF analysis. The equally weighted range from our four different valuation approach drivers (DCF, P/B, EV/EBITDA and P/E) is EUR 5.0-6.1 (previously EUR 4.8-5.9).

Source: Company data and Nordea estimates

Country FinlandBloomberg SCANFL:FHReuters SCANFL.HEShare price 4.99Free float 40%Market cap (m) EUR 287 MWebsite scanfil.comNext report date 26 April 2018

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Scanfil share price OMX Helsinki Index

1M 6M 12M YTDAbsolute 8.2% 13.2% 37.5% 14.8%Relative 10.1% 15.2% 33.1% 13.3%

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SUMMARY TABLE - KEY FIGURESEURm 2010 2011 2012 2013 2014 2015 2016 2017 2018E 2019E 2020ENet sales 219 211 181 189 215 377 508 530 567 589 611- grow th 11% -4% -14% 4% 14% 76% 35% 4% 7% 4% 4%EBIT (adj.) 14 9 8 12 16 20 22 31 38 40 42- margin 6.6% 4.3% 4.2% 6.4% 7.6% 5.3% 4.4% 5.9% 6.7% 6.8% 6.8%EPS (adj.) 0.19 0.11 0.09 0.15 0.22 0.24 0.24 0.36 0.44 0.47 0.49- grow th -23% -42% -17% 64% 46% 12% -1% 51% 23% 6% 4%DPS 0.12 0.06 0.04 0.05 0.07 0.08 0.09 0.11 0.15 0.15 0.16P/E (adj.) 15.8 18.0 9.1 9.1 11.4 15.7 14.6 11.8 11.1 10.4 9.9EV/EBIT (adj.) 10.7 14.8 8.0 5.6 8.1 14.3 11.7 10.0 9.1 8.3 7.7EV/Sales 0.7 0.6 0.3 0.4 0.6 0.8 0.5 0.6 0.6 0.6 0.5ROE% 5% 8% 11% 14% 9% 0% 22% 21% 19% 18% 17%Div. yield 4.0% 3.1% 4.9% 3.7% 2.8% 2.1% 2.6% 2.6% 3.0% 3.2% 3.3%FCF yield -5% 21% -12% 24% 2% -17% 6% 4% 5% 7% 7%NetDebt/EBITDA -0.9 0.9 0.6 -0.4 -0.4 2.4 2.2 1.1 0.7 0.4 0.2

17 April 2018 Scanfil Oyj

Marketing material commissioned by Scanfil Oyj 2

Factors to consider when investing in Scanfil As a subcontractor, Scanfil’s success is highly dependent on its customers’ demand. Since the beginning of the year, customer demand has been favourable for the company. In fact, customer product portfolios drive Scanfil’s growth and earnings more than overall GDP or sector growth, we find. Unfortunately, a subcontractor does not usually hold the best position in the vertical value chain, making visibility in the business operations more opaque. However, Scanfil’s proactive management, cost discipline and elastic business model have enabled it to reach even better margins than the sector average. Recently, Scanfil has gained new speed from the medical device, urban application and other industrial sectors. In the past three years, the company’s clean EBITDA has increased by 50%.

We consider the following factors key when evaluating an investment in Scanfil: • Global digitalisation and electrification continue to grow, offering steady growth

for electronic device subcontractors.

• Technical innovations create new demand for subcontractors, like 5G networks, robotics, MedTech, Internet of Things (IoT) and virtual reality.

• Scanfil has a durable business model, production units are flexible, cost discipline is good and customer loyalty is high.

• Scanfil has a proven strategy with plants based in three main continents close to either customers’ R&D units or the end markets.

• The company focuses on industrial solutions, where economy of scale is not as important as it is in consumer electronics.

• Dividends and EPS have not declined for the past five years y/y and we expect this growth trend to continue.

Key risk factors: • Scanfil is dependent on its customers. Any disturbance in the customer product

portfolio or in end demand is visible in Scanfil’s growth and earnings potential.

• In a relatively mature industry, competition is fierce and there is continuous price pressure from OEMs. Scanfil’s pricing power is somewhat limited.

• Cyclicality is strong and valuation multiples in the EMS sector are typically modest.

• Its relatively small size reduces its ability to engage new large customers on an organic growth basis. However, Scanfil does not operate in the consumer electronic sector, so a bigger size is not necessary.

• Acquisitions have increased interest bearing debt to over EUR 60m. The balance sheet already includes EUR 25m of intangibles.

• A full description of the company-related risks can be found in the “Risk factors” section of this report.

Printed circuit board assembly for industrial customers Scanfil is an international electronic component contract manufacturer for industrial customers. Scanfil’s plants offer printed circuit board assembly (PCBA), sheet metal mechanics, electronics, wire harnesses, as well as final and tested modules and



products. The main expertise and customer segment has been network devices in the telecommunications sector.

The company’s strength is its high-mix and low-volume products where a larger scale is not always needed. Today, the company has ten plants, two of which are in China. Among the company’s customers are names such as Kone, Thermo Fisher Scientific, ABB, Metso, Nibe, Airbus, Teleste, Nokia and Danfoss.

Strong market growth is likely to continue

A subcontractor model has proven to be value creative

Growth in the market likely to remain Traditional EMS market growth was 8% on average during 1999-2017 (IDC). If global GDP growth is 3%, the electronics market has offered an additional 2% growth, and on top of that, the EMS market has offered an additional 3% growth via an increase in the outsourcing ratios.

This strong market growth is likely to continue, in our view, owing to new products, innovations and the overall digitalisation of services. A subcontractor model in the OEM electronics industry has also proven to be value creative, which is why we do not expect to see a change in the industry’s business model. However, large OEMs continue to squeeze subcontractors, and we therefore expect margin pressure to persist. Scanfil’s strategic strengths are its speed, price, flexibility and reliability, meaning the company’s position in the market should not be under imminent risk, in our view.

We do not forecast higher revenue growth for Scanfil than in the market. Many of the company’s customers are in a stable phase and not increasing their outsourcing ratios in manufacturing operations. For Scanfil, we believe any additional growth over the 4% financial target will be mostly achieved through acquisitions. One good example was the PartnerTech acquisition in 2015. In the future, the company could put more focus on the German EMS market, making some minor acquisitions in 2018-19 possible, we argue.

Scanfil’s core strengths are its customer base, flexibility, quality, speed and price

Scanfil has the right strengths For any EMS provider to attain an acceptable level of customer satisfaction, it must maintain focus on delivering a quality product in a timely manner and at a competitive price. We consider Scanfil’s core strengths to be its current customer base, flexibility, low-volume capability, speed, price and OEM relationships. These are the reasons why the company has survived amid fierce competition while others have fallen. The company-specific risk factors, looking at strategy and position in the value chain, are not higher than for peers, we argue.

A traditional EMS business generally enjoys economies of scale benefits. Vertical integration and low cost countries have driven the market behaviour for several years but Scanfil has been able to identify its own niche market, which has meant that economies of scale are not the main driver for the company’s success in the global EMS industry. Scanfil has stayed away from consumer electronics, which we believe has been the right strategy.

Recently, the company has also proven that it is capable of successful M&A activity with its acquisition of PartnerTech. We believe the acquisition was made at a relatively low price and that integration went well. Thus, PartnerTech has been value-creative for Scanfil’s equity holders, we argue. In the future, the company could turn its focus to the German EMS market in terms of acquisitions.

A bigger risk is related to revenue growth rather than the operating profit margin, we argue

Financial targets appear realistic If the company is able to reach EUR 600m in revenue by 2020 and post a 7% EBIT margin, as stated in the financial targets, its EPS could reach EUR 0.51. At a 2020E P/E of 13-14x, this implies a share price of EUR 6.6-7.1, we calculate.

The bigger risk is related to revenue growth rather than the operating profit margin, in our view. The company’s medium-term financial targets include 4.2% annual revenue growth for 2018-20 but long-term organic growth has been lower than that. However, the EBIT margin could improve further from last year. The current EBIT



margin is 6% vs our forecast for 2020 of 6.8%. We believe there could even be room for a positive margin surprise up to an EBIT margin target of 7.0%.

Valuation We use relative valuation and a DCF-based fair value calculation in our analysis. We believe that peer group multiples are very informative and give a relevant view for the subcontractor sector and for our company analysis.

A sum-of-the-parts analysis does not add more information to the valuation because the business model is not very capital intensive and the company does not hold IPR for the components it produces.

Based on the assumption that the company can deliver revenue growth and an operating profit margin in line with our expectations, we estimate a fair value range of EUR 5.0-6.1 per share, which is an equally weighted range based on our four different valuation approach drivers (DCF, P/B, EV/EBITDA and P/E). This valuation range is visible in red lines in the following picture.

VALUATION APPROACH

Source: Nordea estimates

Based on our DCF framework and WACC assumptions of 6.5-7.8%, we derive a fair value range of EUR 5.6-6.8 for Scanfil.

Our P/E valuation range of EUR 5.1-6.3 per share for Scanfil has been calculated by taking this year’s EPS forecast of EUR 0.44 and multiplying it by the accepted valuation multiple range of 11.7x-14.3x, representing a midpoint of 13x. This P/E valuation range represents Nordea Markets view and it has been derived from the company’s previous years and the historical sector median figures.

Similarly, the P/BV valuation range has been calculated by taking the company’s average book value from 2018-19 and multiplying it by the accepted P/B valuation range of 1.8x-2.2x, indicating a mathematical midpoint of 2.0x. As an outcome, this calculation gives then a valuation range of EUR 4.4-5.4 per share for Scanfil as seen from the previous picture.

In our approach, we use a 7.3x-8.7x EV/EBITDA multiple range to calculate one component of the fair value analysis. By taking into account that the company has net debt of EUR 33m on our estimates, the respective market capitalisation per share would then be EUR 4.9-6.0.

Risk factors There are several risks related to Scanfil’s investment case. We believe the biggest risk is the end demand variation in the sectors in which Scanfil’s customers operate. Also, the competitive strength of the customer product portfolios is a risk factor. However, the customer base is now more evenly distributed than it has been for decades, reducing the customer-related risks somewhat. We do not find material risks in the balance sheet, raw materials, or competition. Scanfil has proven to be very competitive and we do not expect the company to lose this ability in the near term.

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Detailed estimates We make our revenue forecasts primarily by looking at the number of new customers, revenue growth among older customers, customer outsourcing ratios and EMS market growth expectations. Our main focus is on the current customer base, which practically defines Scanfil’s revenue growth prospects regardless of EMS industry growth. Scanfil’s profit and loss statement is straightforward: the main cost items are raw materials (70%) and personnel (16%). The company buys raw materials and components only for an actual customer order, which means that inventory or a potential time lag, do not pose a threat to profitability, in our view. As a conclusion, our forecast for revenue growth in 2018E is 7%. We estimate operating profit margin to be 6.7% in this year.

A key to success is orders from the main customers Scanfil’s success is highly dependent on its customers. Any disturbance in the customer product portfolio or in the customers’ end demand is visible in Scanfil’s growth and earnings potential.

Begin of the year Scanfil has seen a favourable development in the customer demand why the company even upgraded full year EBIT guidance by some EUR 3m. We believe that the biggest customers are already in a mature phase, so we do not expect the outsourcing ratio to grow greatly for the biggest customers. This is why it makes sense to look at the customers’ revenue growth possibilities when making detailed growth estimates for Scanfil.

In the next graph we look at the median revenue growth for 14 listed customers. In our opinion, Scanfil’s sales growth guidance of 4.2% is well in line with the average growth of its customers’ revenues. This also means that the company does not expect to gain meaningful market share from its current customers.

MEDIAN REVENUE GROWTH FOR THE SCANFIL’S CUSTOMER BASE

Source: Thomson Reuters

Our revenue growth forecast is 7% for 2018 The company’s target is to reach EUR 600m revenue in 2020, which indicates 4.2% average annual revenue growth. The target is organic and does not include further acquisitions. However, Scanfil may buy a suitable company if the price and the terms are right. We also believe that it has its eyes open for potential targets in Central Europe, but it might be too early to expect activity on the M&A front this year.

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REVENUE GROWTH ESTIMATE


Scanfil’s revenue growth guidance for this year is in a wide range of 0-7.5%, but we believe that Scanfil will try internally to reach more than 5% growth this year. This also means that flat growth might then be a disappointment to the markets and for the company.

We expect Scanfil to buy PCB plates from Aspocomp

We estimate that raw material costs represent ~70% of revenue An electronic subcontractor company buys the required components for a manufacturing process. The main customer (ODM) does not usually buy raw materials, even though it could have the necessary size and purchasing power. Scanfil buys raw materials when there is a firm order from a customer to use the required components. This also means that there should be no risk of inventory leftovers or non-current inventory value changes.

Scanfil does not buy primary raw materials; in other words, it buys subcomponents to assemble PCBs. The main raw materials for printed circuit boards are woven fibreglass, phenolic paper, aluminium, copper, microchips, sensors, connectors and other electronic components. We expect Scanfil to buy PCB plates from Aspocomp.

RAW MATERIAL COST ESTIMATE, EURm


The price per tonne in raw materials varies considerably but we argue that a per-tonne measure is actually irrelevant for microchips and connectors. Nonetheless, steel is the most important raw material used by Scanfil, where one tonne costs EUR ~550.

Personnel costs represent ~16% of revenue PCB assembly lines are not fully automated, which is why high-volume assembly requires a lot of workers. Its biggest competitor has 1.2 million workers versus Scanfil’s mere 3,300. In industrial PCB applications, size is not everything, though.

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We forecast personnel costs of EUR 89m for 2018. In 2016, personnel costs were a bit higher but came down after the divestment of the mechanical metal unit in Sweden. The ratio of personnel costs from sales will likely remain in a relatively narrow range. Scanfil has decades of experience adjusting utilisation ratios when end-demand fluctuates, so we do not believe that personnel costs will present a problem. Even in 2011-12, the company did not post losses, suggesting good cost discipline.

PERSONNEL COST ESTIMATE, EURm


Energy costs represent 2% of revenue Electricity and heat are needed in the production of printed circuit boards. However, the need for power is not extraordinarily high or at the same level as required by other converters or industrial producers.

We forecast energy costs of EUR 11m for 2018. Energy sources other than electricity are practically meaningless. We do not believe Scanfil hedges its electricity purchases because its plants are well distributed and volume per plant is relatively modest.

ENERGY COST ESTIMATE, EURm


The EBITDA trend was good in 2013-17 and we expect this to continue. Only a severe hiccup among its main customers could break this pattern. Scanfil’s largest customer accounted for 13% of turnover in 2017 and the top-ten customers for 61% of turnover. This means that one customer cannot ruin the company’s outlook to the same extent as in the past.

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EBITDA FORECAST, EURm


Depreciation is 1.7% of sales For 2018, we forecast depreciations to be about EUR 8m and amortisations some EUR 2m. Investments have been the reason for the rising depreciation, in line with the company’s strategy. We do not believe Scanfil has overinvested in its operations, which could increase depreciation with a delay.

DEPRECIATION, EURm


Total depreciation amounted to about EUR 9m a year but the recent PartnerTech acquisition took it up to EUR 10m. Amortisation has been EUR ~4m per year since 2011, declining to EUR 2m recently. Intangible assets are now at EUR 25m, which is 18% of total equity. Consequently, a possible writedown after an impairment test would not put the equity or the ratios under heavy pressure.

A 7% EBIT margin is a realistic target, we believe The company’s financial target is to reach a 7% operating profit margin by 2020. We consider this realistic but not easily achieved, as we believe that any disturbance in the main customer accounts would immediately wipe out hopes of a 7% EBIT margin.

The EMS sector’s average EBIT margin has been ~5%. Scanfil has been able to post a 6.3% average margin in the past ten years, which is outstanding given the competitive price level. The healthy profitability also highlights Scanfil’s tight cost discipline and the importance of the proactive management team. Its active main owner has helped a lot too, we argue. Top management has always found it easier to make decisions when there is clear support from the board. Several subcontractor companies would have survived better if they had as visible a main owner as Scanfil.

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OPERATING PROFIT ESTIMATE, EURm


Our forecast for the 2018 EBIT margin is 6.7%, while market consensus is about the same. As market consensus and our estimate are both below Scanfil’s target, there might be room for positive surprises.

PartnerTech acquisition increased financial expenses Financial expenses have typically been about EUR 1.5m a year, while last year, Scanfil reported net financials of EUR 1m, but with a EUR 2.4m positive one-off. This took the reported figure into positive territory. After the PartnerTech acquisition, net debt rose, which is why we forecast net financials of about EUR -1.4m going forward.

NET FINANCIAL EXPENSES, EURm


Tax rate has been a bit high The average tax rate over the past 17 years has been relatively high at 30%, as the company does not have old losses to be used for deductions. Most of its plants are not in low-cost countries either.

Last year its tax rate was lower than the historical average but the reported figure included a positive EUR 0.5m from Poland. We exclude this item from our clean EPS calculation.

We forecast a tax rate of about 22-23% going forward. The plant in the US will at least see some benefits from the local tax reform, we believe.

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TAX EXPENSES, EURm


EPS growth can exceed 4% We forecast 4-6% EPS growth for the coming years, surpassing expected revenue growth. In the worst-case scenario, EPS could drop by EUR 0.15 if major customers reduce inventory and renew their product portfolio at the same time. This could temporarily take the P/E valuation up to 17x, which would not be a total catastrophe. In a very positive case the company may reach a 7% margin, which we calculate would take EPS up to EUR 0.51. Our EPS forecast for 2018 is EUR 0.44.

EARNINGS PER SHARE, EUR


We forecast EUR 17-20m in annual FCF Annual cash flow from operations has been some EUR 20m in the past but we expect this to improve. We expect to see more than EUR 30m in cash flow from business operations, from which investments would take a little over EUR 10m, leaving EUR 17-20m in annual free cash flow in 2018E-20E.

We expect annual dividend payments of EUR 7-9m, meaning that the company can use EUR 10m annually for debt reduction or additional growth investments.

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FREE CASH FLOW FORECAST, EURm


Investments account for close to 2% of revenue Scanfil added more space at the Sieradz and Atlanta plants in the US in 2017, which can be seen in the annual investments. Last year, the company also added new lines to the plants at Suzhou and Malmö. The EMS sector is not very capital-intensive, so investments usually only account for 1-2% of revenue.

We expect investments to be EUR 14m going forward. The company has seen that revenue growth is required, and this might not come without investments. There could be some need to use money at the Myslowice plant in Poland to adjust lines for expected customer demand.

INVESTMENTS, EURm


Debt handling capability is good The balance sheet has always been strong but the recent PartnerTech acquisition temporarily took net debt up to EUR 65m. Last year net debt was only EUR 44m. Looking at the incoming cash flow, investment needs and dividend payments, we consider Scanfil’s debt handling capability to be good. Maybe the company should have taken a bit more leverage some years ago but Nokia Siemens’ related problems might have been the reason it kept risk levels very low after 2012.

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NET DEBT FORECAST, EURm


SCANFIL NET DEBT PER EBITDA


SCANFIL NET GEARING %


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NetDebt/EBITDA (adj.)



Scanfil's valuation Combined with new smart solutions like robotics and IoT, we believe digitalisation should offer around 6%-plus market growth for EMS companies during 2018-20. However, a majority of Scanfil’s customers are already in a mature phase, so we do not expect the company to beat market growth. This is also one of the reasons Scanfil will have slightly lower P/E than the sector median, we argue. Furthermore, a small subcontractor usually trades at a discount to tier 1 competitors. However, the company’s earnings volatility is low and return on invested capital is high, so we argue that Scanfil should not trade at remarkably lower multiples than its peers. Our DCF-based fair value is EUR 5.6-6.8 per share for the company. Based on a P/E of 13x and EV/EBITDA of 8.0x, we believe the share price should be EUR 4.9-6.3.

Our revenue growth forecast for 2018 is 2% over the market consensus

New guidance indicates a 2018 EBIT of EUR 38m In its full-year outlook, Scanfil issued guidance for 2018 revenue of EUR 530-570m. Consensus is slightly over the midpoint of guidance. Our revenue growth forecast for 2018 is 2% above the market consensus. We believe the company’s internal target is also likely over the midpoint of EUR 550m, which means that the company needs to perform very well to be able to post a positive surprise in 2018.

We now forecast 2018 operating profit of EUR 38m, which is 3% above consensus. Scanfil has had a relatively low EBIT margin for years and it will not be easy for the company to achieve a margin of over 7%, in our view. However, the recent full-year EBIT guidance upgrade indicates that its long-term financial targets are realistic.

Our Q1 2018 EPS forecast is EUR 0.01 lower than market consensus. We believe the seasonality and product mix difference between Q4 and Q1 is slightly stronger than forecasted by the market. We also note that most of the customer orders and revenue volatility is coming from Urban Applications and Other Industries segments.

NORDEA ESTIMATES VERSUS THE MARKET CONSENSUS

Source: Thomson Reuters and Nordea estimates

The average P/E for the company over the past 17 years has been 12.8x, but the multiple has varied between 9x and 17x. Subcontractors have always had relatively low valuation multiples, within a tight range.

The EMS sector’s historical average P/E was 15.1x in 2001-17, which we consider an upper limit for the company’s valuation in the near future. In our view, Scanfil may not be able to keep pace with market growth on its annual revenue growth. For this reason, Scanfil’s P/E may stay slightly under the sector median. For 2018E, Scanfil’s P/E is 21% under the sector median. For 2019E, the difference is 11%.

Nordea estimates Consensus estimates Difference %

EURm Q1 2018E 2018E 2019E 2020E Q1 2018E 2018E 2019E 2020E Q1 2018E 2018E 2019E 2020E

Sales 138 567 589 611 134 554 577 593 3% 2% 2% 3%Adj. EBIT 9 38 40 42 9 37 38 40 6% 3% 5% 5%Adj. EBIT margin 6.5% 6.7% 6.8% 6.8% 6.3% 6.7% 6.6% 6.7% 0.2pp 0.0pp 0.2pp 0.1ppAdj. EPS 0.10 0.44 0.47 0.49 0.11 0.43 0.45 0.47 -6% 3% 4% 4%



SCANFIL’S P/E AND SECTOR MEDIAN


Scanfil has had a low 5.6x average EV/EBITDA multiple over the past 17 years

EV/EBITDA in line with sector median For 2016-18E, the EV/EBITDA valuation appears to be relatively close to sector median multiples. Over a longer period, however, the difference has been more profound, at 38%. In fact, we calculate that Scanfil has had a low 5.6x average EV/EBITDA multiple over the past 17 years, while sector peer companies saw an average of 7.7x over the same period.

The recent positive momentum in the share price has essentially closed the valuation gap on EV/EBITDA for 2018E-20E.

SCANFIL’S EV/EBITDA AND SECTOR MEDIAN


Long-term sector average P/BV has been 1.6x

Sector median P/BV has been 1.6x The EMS industry as a whole has traded between 1.0x and 2.0x in terms of P/BV valuation. The long-term sector average is 1.6x, which should be a lower comparison point for Scanfil, in our view.

Scanfil’s long-term average P/BV is 1.5x, indicating a 7% discount valuation to the sector average. However, the company’s P/BV exceeded the peer average in 2015 and has remained above since. The main reasons for the improvement were the PartnerTech acquisition from Sweden and higher ROE expectations, in our view.

The median return on equity has been 9.6% for Scanfil, but 10.1% for the EMS sector. In our view, this small spread explains the tight historical P/B difference.

Based on our estimates, P/BV is about in line with the sector for 2019 and we maintain a 2.5x P/BV multiple as an upper limit in the valuation. Our forecast for Scanfil’s return on equity is 16-20% for the coming years, implying that the company should not trade at a discount to peers.

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SCANFIL’S P/BV AND SECTOR MEDIAN


Looking at a regression analysis including 47 peer companies, we can see that Scanfil is slightly undervalued on 2018E revenue growth and P/E multiples. However, the correlation between P/E and revenue growth in the sector is not very strong.

Return on equity correlates better with P/BV valuation in the sector, as shown in the graph below. Last year Scanfil reached a 22% return on equity with a P/BV of 2.2x.

SECTOR P/E AND GROWTH REGRESSION ANALYSIS


SECTOR P/BV AND ROE REGRESSION ANALYSIS


Annual dividend should stay in growth mode Following the Eurozone crisis and the demerger of Sievi Capital, the company has been able to increase dividend payments yearly. Because of the leap to the bigger size and the successful PartnerTech integration, there is a possibility for the company to increase dividend payments in relation to the historical trend. However, we believe the board favours stable dividend development rather than a maximum payout, as investors tend to value good dividend predictability and stable growth over high volatility. If the company opts to raise dividend payments sharply in 2018, there could be a risk of a dividend cut later on, which we believe the board will most certainly want to avoid.

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DIVIDEND PER SHARE FORECAST, EUR

Source: Company data and Nordea Markets

Sector average dividend yield has been 2.8% Scanfil has been able to offer a better dividend yield than the EMS sector on average. However, for 2018E-19E, its dividend yield is already in line with peers. The dividend yield will remain close to 3% in 2018E-20E, on our estimates. Pure dividend companies tend to operate in more stable sectors than the electronics manufacturing industry.

SCANFIL’S DIVIDEND YIELD AND SECTOR AVERAGE

Source: Company data, Thomson Reuters and Nordea Markets

DCF valuation range is EUR 5.6-6.8 One of the most common ways to value the attractiveness of an investment opportunity is the discounted cash flow (DCF) method. A DCF model discounts all available cash flows for equity, bond and non

cost of capital (WACC). In other words, WACC represents a blended cost of capital for all invested capital in the company. In fundamental terms, a DCF framework is built on three parts: 1) Discounting the company’s free cash flow at WACC, 2) Identifying the value of debt and other non-equity claims on the enterprise value, and 3) Deducting all claims to determine the value of the common equity.

The fair value per share is then simply calculated by dividing the equity value by the number of outstanding shares. A DCF valuation is commonly considered among academics and practitioners to be the best way to capture the underlying fundamental drivers of a company such as cost of capital, growth rates, reinvestment rates etc. If applied correctly, it represents the best way to approximate the true intrinsic value of a company.

The main appeal of a DCF framework compared with other valuation methodologies is that it also focuses on streams of cash rather than accounting earnings. Its main disadvantage is its relative sensitivity to changes in input values.

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Annual cash flow from operations has been some EUR 20m in the past but we expect this to improve. We expect to see more than EUR 30m in cash flow from business operations, from which investments would take a little over EUR 10m, leaving EUR 17-20m in annual free cash flow in 2018-20.

Based on the assumption that Scanfil can deliver broadly in line with our forecasts, with variations in sales growth, EBIT margin and WACC assumptions of 6.5-7.8%, we arrive at a fair DCF-based equity value range of EUR 5.6-6.8 per share. In the terminal period, we model 2.5% growth.

WACC ASSUMPTIONS


DCF VALUATION


To highlight the sensitivity of the DCF valuation, we also provide sensitivity matrices modelling variations in revenue growth, margin assumptions and cost of capital. The sensitivities in our WACC are outlined in the following table.

WACC VERSUS EBIT MARGIN


WACC VERSUS SALES GROWTH


We use a stringent valuation framework setting ROIC under WACC in the terminal period, which prevents the model from extrapolating above‐market returns in perpetuity. A little under half of the value (48%) is distributed in the coming ten years, and 94% within our 30‐year estimate cycle, according to our calculations.

DCF VALUE DISTRIBUTION TIMELINE


WACC componentsRisk-free interest rate 1.5%Market risk premium 5.5%Forw ard looking asset beta nmBeta debt 0.10Forw ard looking equity beta 1.3-1.5Cost of equity 8.4-10.4%Cost of debt 4.0-5.0%Tax-rate used in WACC 23.0%Equity w eight 61.0%WACC 6.5-7.8%

DCF value Value Per shareNPV FCFF 389-466 6.1-7.3(Net debt) -43 -0.7Market value of associates 0 0.0(Market value of minorities) 0 0.0Surplus values 0 0.0(Market value preference shares) 0 0.0Share based adjustments 0 0.0Other adjustments 0 0.0Time value 10 0.2DCF Value 357-434 5.6-6.8

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Risk factors There are several major and minor risks related to the Scanfil investment case. We believe the biggest risk is the end-demand variation in the sectors in which Scanfil’s customers operate. For example, demand for 3G and 4G networks might end because operators are waiting for 5G networks to come in 2020. However, the customer base is now more evenly distributed than for it has been decades, reducing the telecom sector related risks. Furthermore, we do not see any material risks from the balance sheet, raw materials, first-pass yield and the competition. Scanfil has already proven to be very competitive and we do not expect the company to lose this ability in the near term. The balance sheet includes EUR 25m of intangibles but this represents only ~18% of equity.

Balance sheet includes EUR 25m of intangibles but this is only ~18% if equity

Financial position and capital needs Scanfil has never made annual losses, which somewhat limits the risks related to financial estimates or input costs. Without losses, equity capital does not decline, nor do multiples become a problem.

The balance sheet includes gross interest-bearing debt of EUR 61m, which is a higher amount than in past decades. However, the company’s debt-handling capability is good, and so interest-bearing debt should not be a material risk factor. Net gearing is only 33%.

Intangible assets only represent ~18% of equity, and so any possible weaker economic outlook or impairment test do not present material risks. A possible write-down of all intangibles would lead to an equity ratio of 39% and reported ROIC% would temporarily fall to 2%. We believe Scanfil would survive a write-down of intangibles without an equity issue.

Manufacturing risk Scanfil’s manufacturing process needs to produce quality products efficiently. The first-pass yield industry median for electronics manufacturing services is approximately 94%. Scanfil faces the risk that if this metric was to drop, it would diminish its margins and affect the overall profit.

General economy and specifically the Nordic region’s economy Scanfil is to some extent exposed to the general economy and that of Finland and Sweden in particular, which constituted 41 % of sales in 2017. However, we do not believe that a possible economic downturn in the region would lead to delayed orders from its customers because the end-markets for the components are global. So, Scanfil’s customers may be concentrated to Sweden and to Finland but they sell the products in all continents.

Acquisition strategy We believe Scanfil will continue to make acquisitions in the future. The company’s future sales and profit growth is therefore, to some extent, dependent on management’s ability to source and complete new deals. Furthermore, there is risk involved in integrating new businesses and the fact that Scanfil could overpay.

Competition The company operates in a highly competitive industry. It faces intense competition from other EMS companies in all the segments in which it operates. Additionally, it also needs to take into account the competitive pressure coming from original equipment manufacturers. Scanfil’s competitive edge is its fast, flexible and reliable service with a global reach.



Customer concentration Scanfil has three key customers, which represent 30% of its sales. If Scanfil were to lose these customers, this could have a significant impact on its business. However, the rest of the customer base is distributed more evenly and across different segments and we therefore see no additional risk potential in the customer base.

Maybe the biggest threat to Scanfil is when its customers lose their own competitive edge – Scanfil only fares well if its customers are performing well in their own segments.

Currency exposure Scanfil is affected by currency risks – mainly transaction risks related to trade receivables and payables, translation risks related to foreign subsidiaries and financial risks related to exchange rate changes. Scanfil mitigates these risks using forward contracts and currency swaps. Its main exposures in terms of sales and costs are in EUR, USD, CNY and SEK.

Concentration of ownership The Takanen family and its closest partners holds shares representing over 50% of the voting power. As such, there could potentially be a governance issue putting the family’s interest ahead of those of the minority shareholders.



Peer group LARGER EMS PEER GROUP FINANCIALS


2016 2017 2018E 2019E 2016 2017 2018E 2019E 2016 2017 2018E 2019EHon Hai Precision Industry Co Ltd 127,810 132,276 133,527 138,410 -3% 8% 4% 4% 4% 3% 4% 4%Delta Electronics Inc 6,285 6,283 6,637 7,046 5% 4% 7% 7% 10% 9% 9% 10%Pegatron Corp 33,947 33,550 36,563 38,439 -5% 3% 9% 5% 3% 2% 2% 2%Venture Corporation Ltd 1,888 2,496 2,855 3,141 8% 39% 16% 10% 7% 10% 12% 12%IMI PLC 1,944 1,972 2,131 2,215 6% 6% 6% 4% 13% 14% 14% 15%Universal Scientif ic Industrial Shangha 3,286 3,806 4,427 4,901 -12% 24% 17% 11% 4% 5% 6% 6%Jabil Inc 16,451 16,009 17,070 17,559 3% 4% 11% 3% 3% 3% 4% 4%Vtech Holdings Ltd 1,632 1,953 1,879 1,910 -1% 12% 8% 5% 10% 9% 12% 12%Compal Electronics Inc 22,485 24,946 26,041 26,883 -10% 16% 7% 3% 2% 1% 1% 1%Foxconn Interconnect Technology Ltd 2,740 2,833 3,141 3,564 24% 18% 14% 13% 6% 8% 8% 8%Inventec Corp 12,564 13,139 13,562 13,813 8% 9% 5% 2% 2% 2% 2% 2%Micro-Star International Co Ltd 2,997 2,991 3,408 3,559 20% 4% 15% 4% 6% 5% 6% 6%Plexus Corp 2,274 2,140 2,283 2,460 -4% -1% 11% 8% 4% 5% 5% 5%Accton Technology Corp 861 1,024 1,147 1,318 19% 24% 14% 15% 8% 9% 10% 11%Sanmina Corp 5,767 5,815 5,514 5,691 2% 6% 0% 3% 3% 4% 3% 4%Gigabyte Technology Co Ltd 1,535 1,683 1,811 1,863 3% 14% 9% 3% 3% 4% 4% 4%Celestica Inc 5,723 5,094 5,003 5,135 7% 2% 1% 3% 4% 4% 3% 4%Benchmark Electronics Inc 2,198 2,056 2,066 2,162 -9% 7% 6% 5% 4% 4% 4% 5%SIIX Corp 1,732 1,725 1,976 2,112 -9% 10% 14% 7% 4% 4%Fabrinet 879 1,244 1,093 1,171 26% 45% -4% 7% 8% 10% 9% 9%Sercomm Corp 1,076 1,085 1,141 1,235 5% 5% 7% 8% 5% 4% 5% 5%TT electronics PLC 390 405 413 428 -35% 8% 0% 4% 5% 7% 7% 7%Alpha Netw orks Inc 640 536 540 565 -5% -13% -2% 5% 3% 4% 3% 4%Pc Partner Group Ltd 716 913 964 1,073 23% 47% 17% 11% 3% 5% 5% 5%Ducommun Inc 524 465 480 498 -17% 1% 5% 4% 5% 3% 4% 6%Valuetronics Holdings Ltd 221 275 305 343 -20% 16% 36% 12% 6% 7% 8% 8%Gemtek Technology Co Ltd 426 382 453 459 -17% -6% 21% -1% 2% 1% 2% 3%New ays Electronics International NV 393 439 474 502 5% 12% 13% 6% 3% 4% 4% 4%Sparton Corp 377 348 10% -5% 6% 2%Cicor Technologies Ltd 177 185 202 219 5% 14% 9% 8% 2% 5% 6% 7%Kitron ASA 231 248 273 295 7% 16% 11% 8% 6% 6% 6% 7%Lacroix SA 428 441 484 509 8% 3% 10% 5% 0% 3% 3% 3%Computime Group Ltd 399 445 11% 5% 4% 5%exceet Group SE 135 143 152 155 -1% 6% 5% 2% 1% 3% 6% 7%Key Tronic Corp 436 410 12% -4% 2% 2%IEC Electronics Corp 113 82 93 103 0% -24% 17% 11% 6% 2% 2% 6%Hanza AB 136 142 188 199 8% 7% 37% 6% 3% 3% 4% 5%SigmaTron International Inc 222 232 10% -1% 2% 1%Lite-On Japan Ltd 110 102 -25% 2% 1% 2%Di-Nikko Engineering Co Ltd 206 189 -21% 1% 1%

Group median 2.8% 6.0% 9.3% 5.0% 3.6% 3.9% 4.4% 5.1%Scanfil (Nordea) 508 530 567 589 34.6% 4.3% 7.0% 3.8% 4.4% 5.9% 6.7% 6.8%

diff.from median (pp) 31.9% -1.7% -2.3% -1.2% 0.8% 2.0% 2.3% 1.7%

Sales (EURm) Growth Ebit%



LARGER EMS PEER GROUP VALUATION


2016 2017 2018E 2019E 2016 2017 2018E 2019E 2016 2017 2018E 2019EHon Hai Precision Industry Co Ltd 9.9 12.0 10.2 9.4 5.0 9.4 6.5 5.8 1.4 1.3 1.2 1.2Delta Electronics Inc 22.3 20.4 15.6 14.0 12.9 11.8 9.1 8.5 2.4 2.4 2.3 2.1Pegatron Corp 10.4 12.8 9.5 8.2 3.4 5.3 3.9 3.4 1.2 1.2 1.2 1.1Venture Corporation Ltd 15.2 15.7 19.0 17.2 9.2 11.1 13.5 12.0 4.2 3.9 3.5 3.1IMI PLC 21.7 25.8 15.1 13.7 11.3 13.5 10.1 9.2 6.0 4.7 4.6 3.9Universal Scientif ic Industrial Shangha 28.9 26.1 16.6 14.1 13.8 16.5 10.1 8.9 3.5 3.1 2.7 2.3Jabil Inc 16.1 45.1 11.2 10.0 4.2 4.9 4.2 4.1 2.3 2.3 2.3 2.0Vtech Holdings Ltd 16.4 16.8 13.9 13.0 11.4 11.7 10.2 9.3 5.7 5.3 5.1 5.0Compal Electronics Inc 10.0 16.3 9.3 8.5 5.3 7.9 5.8 5.6 0.8 0.8 0.8 0.8Foxconn Interconnect Technology Ltd 24.1 11.6 9.4 0.0 9.9 4.7 3.9 1.5 1.3 1.1Inventec Corp 14.1 12.7 10.6 9.8 6.1 7.2 6.0 5.8 1.4 1.4 1.4 1.5Micro-Star International Co Ltd 12.8 13.2 12.5 11.6 8.3 8.9 8.9 8.1 2.9 2.9 2.6 2.5Plexus Corp 20.9 17.3 19.0 16.6 9.1 9.2 9.7 8.8 2.3 2.1 2.2 2.0Accton Technology Corp 15.1 23.3 14.5 11.8 7.2 15.1 9.5 7.6 5.5 4.8 4.4 3.9Sanmina Corp 11.9 20.9 13.6 10.7 6.3 7.9 6.8 5.4 1.4 1.2Gigabyte Technology Co Ltd 12.1 12.6 13.9 14.0 5.5 6.2 7.8 7.7 1.8 1.8 1.7 1.6Celestica Inc 12.5 14.2 9.1 8.1 5.1 4.7 4.0 3.7 1.2 1.1 1.0 0.9Benchmark Electronics Inc 23.7 22.0 17.9 15.9 7.3 6.7 1.1 1.1SIIX Corp 15.6 17.8 14.7 13.7 8.5 10.2 8.1 7.4 2.1 1.9 1.7 1.6Fabrinet 20.8 16.6 11.4 10.1 11.9 10.6 6.9 6.1 2.3 1.9 1.7 1.6Sercomm Corp 13.2 16.2 12.9 11.1 6.7 7.8 6.4 5.6 2.7 2.6 2.5 2.3TT electronics PLC 22.2 26.7 18.4 16.9 7.1 6.5 7.4 7.0 1.1Alpha Netw orks Inc 14.2 19.0 20.7 14.6 3.7 6.1 5.3 4.0 1.1 1.1 1.1 1.1Pc Partner Group Ltd 6.0 4.9 6.3 5.3 5.9 3.8 4.5 3.7 1.0 1.9 1.6 1.3Ducommun Inc 11.4 46.5 21.5 14.3 8.3 11.6 9.3 8.2 1.4 1.6 1.4 1.3Valuetronics Holdings Ltd 7.5 9.7 11.9 11.0 1.2 3.5 6.8 6.2 2.8 2.6 2.2 2.0Gemtek Technology Co Ltd 15.3 26.7 22.1 17.6 8.3 29.4 8.8 6.8 0.9 0.9 0.9 0.8New ays Electronics International NV 11.0 15.7 14.3 11.9 6.8 8.0 7.7 6.9 2.3 1.9 1.9 1.7Sparton Corp 14.4 163.8 11.1 13.2 0.0 0.0 1.5 2.6Cicor Technologies Ltd 313.7 26.4 17.5 12.4 8.1 10.1 7.9 6.4 1.3 2.4 2.1 1.9Kitron ASA 14.6 12.5 12.9 11.3 7.8 7.0 7.6 6.8 2.6 2.3 2.2 2.0Lacroix SA 107.8 8.8 13.5 11.1 14.6 4.7 6.2 5.4 1.3 1.4 1.3 1.2Computime Group Ltd 9.3 7.2 3.6 1.8 0.8 0.7exceet Group SE 25.3 15.4 12.6 3.0 7.4 5.3 4.8 1.0 1.0 0.9 0.8Key Tronic Corp 12.8 13.8 7.4 7.1 0.8 0.7IEC Electronics Corp 10.2 619.3 16.4 6.8 7.2 19.3 10.9 6.1 3.1 3.5Hanza AB 129.6 15.8 8.4 7.1 7.2 5.6 2.9 2.7 0.9 1.0 0.7 0.7SigmaTron International Inc 12.5 16.4 5.0 6.1 0.4 0.4Lite-On Japan Ltd 33.2 34.0 3.5 6.7 0.9 1.4Di-Nikko Engineering Co Ltd 10.9 9.9 10.4 15.1 0.5 0.6

Group median 14.4 16.7 13.9 11.7 7.3 7.9 7.2 6.2 1.4 1.8 1.7 1.6Scanfil (Nordea) 14.6 11.8 11.1 10.4 7.9 7.8 7.2 6.7 2.1 2.2 2.1 1.9

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Reported numbers and forecasts


INCOME STATEMENTEUR m 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018E 2019E 2020ENet revenue 197 219 211 181 189 215 377 508 530 567 589 611 Revenue grow th -9.9% 11.2% -3.9% -14.2% 4.2% 13.8% 75.9% 34.6% 4.3% 7.0% 3.8% 3.8% EBITDA 21 19 23 21 22 25 27 18 40 48 50 51 Depreciation and impairments PPE -5 -5 -9 -8 -7 -6 -8 -9 -7 -8 -8 -8 EBITA 16 14 14 12 15 19 19 9 33 40 42 44 Amortisation and impairments 0 0 -5 -4 -3 -2 -5 -2 -2 -2 -2 -2 EBIT 16 14 9 8 12 16 14 7 31 38 40 42 of w hich associates 0 0 -5 -4 -3 -2 -1 0 0 0 0 0 Associates excl. from EBIT 0 0 0 0 0 0 0 0 0 0 0 0 Net f inancials 5 1 -1 -1 -1 -0 -1 -1 1 -1 -1 -1 Pre-Tax Profit 21 15 8 8 11 16 14 6 33 37 39 41 Reported taxes -7 -4 -2 -2 -2 -4 -5 -6 -7 -8 -9 -9 Net profit from cont. operations 14 11 6 6 8 12 8 0 26 28 30 31 Discontinued operations 0 0 0 0 0 0 0 0 0 0 0 0 Minority interest 0 0 0 0 0 0 0 0 0 0 0 0 Net profit to equity 14 11 6 6 8 12 8 0 26 28 30 31EPS 0.25 0.19 0.11 0.10 0.14 0.21 0.15 0.00 0.40 0.44 0.47 0.49 DPS 0.12 0.12 0.06 0.04 0.05 0.07 0.08 0.09 0.11 0.15 0.15 0.16 of w hich ordinary 0.12 0.12 0.06 0.04 0.05 0.07 0.08 0.09 0.11 0.15 0.15 0.16 of w hich extraordinary 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Profit margin in percent EBITDA 10.6% 8.8% 11.0% 11.4% 11.8% 11.6% 7.2% 3.6% 7.6% 8.4% 8.5% 8.4% EBITA 8.1% 6.6% 6.9% 6.8% 8.0% 8.7% 5.1% 1.8% 6.3% 7.1% 7.2% 7.1% EBIT 8.1% 6.6% 4.3% 4.5% 6.3% 7.6% 3.8% 1.4% 5.9% 6.7% 6.8% 6.8%

Adjusted earnings EBITDA (adj.) 21 19 23 20 23 25 33 33 40 48 50 51 EBITA (adj.) 16 14 14 12 15 19 25 24 33 40 42 44 EBIT (adj.) 16 14 9 8 12 16 20 22 31 38 40 42 EPS (adj.) 0.25 0.19 0.11 0.09 0.15 0.22 0.24 0.24 0.36 0.44 0.47 0.49

Adjusted profit margins in percent EBITDA (adj.) 10.6% 8.8% 11.0% 11.1% 12.0% 11.7% 8.7% 6.6% 7.6% 8.4% 8.5% 8.4% EBITA (adj.) 8.1% 6.6% 6.9% 6.6% 8.2% 8.8% 6.6% 4.8% 6.3% 7.1% 7.2% 7.1% EBIT (adj.) 8.1% 6.6% 4.3% 4.2% 6.4% 7.6% 5.3% 4.4% 5.9% 6.7% 6.8% 6.8%

Performance metrics CAGR last 5 years Net revenue -8.8% -7.4% -2.7% -4.2% -2.9% 1.7% 11.5% 19.2% 24.0% 24.6% 22.4% 10.1% EBITDA -12.4% -12.3% 3.3% -4.5% 1.1% 3.4% 7.0% -4.8% 14.2% 16.4% 14.9% 13.5% EBIT -11.6% -12.0% -4.3% -15.5% -10.9% 0.4% 0.0% -4.5% 31.0% 26.3% 19.8% 23.6% EPS -8.1% -12.6% -4.5% -16.5% -11.7% -2.8% -5.1% -57.9% 32.6% 25.4% 17.1% 27.6% DPS -7.8% 3.7% -9.7% -19.7% -16.1% -10.2% -7.8% 8.4% 22.4% 23.8% 17.2% 15.1%

Average EBIT margin 7.8% 7.4% 7.4% 6.7% 6.0% 5.9% 5.1% 3.9% 4.5% 4.9% 5.1% 5.6% Average EBITDA margin 10.4% 9.7% 10.3% 10.3% 10.7% 10.9% 10.1% 7.7% 7.3% 7.2% 7.1% 7.4%




BALANCE SHEETEUR m 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018E 2019E 2020E Intangible assets 4 6 6 6 6 11 29 27 25 23 21 19 of w hich R&D 0 0 0 0 0 0 0 0 0 0 0 0 of w hich other intangibles 1 4 4 4 4 5 18 16 15 13 10 8 of w hich goodw ill 2 2 2 2 2 6 11 11 10 10 10 10 Tangible assets 31 34 27 30 28 27 48 41 48 54 61 68 Shares associates 0 26 0 0 0 0 0 0 0 0 0 0 Interest bearing assets 0 0 0 0 0 0 0 0 0 0 0 0 Deferred tax assets 0 0 1 1 0 0 3 2 4 4 4 4 Other non-int. bearing assets 0 0 0 0 0 0 0 0 0 0 0 0 Other non-current assets 25 27 1 1 0 0 0 0 0 0 0 0 Total non-current assets 60 93 35 37 35 38 80 70 77 81 86 91 Inventory 25 37 31 30 29 36 91 85 101 107 111 115 Accounts receivable 43 54 28 32 33 41 105 88 106 112 117 121 Other current assets 16 8 21 16 0 0 2 4 2 3 3 3 Cash and bank 57 58 14 15 28 19 22 20 21 25 32 40 Total current assets 141 156 94 93 90 96 220 197 230 247 262 278 Assets held for sale 0 0 0 0 0 0 1 0 0 0 0 0Total assets 201 249 129 130 126 134 302 267 307 328 348 369

Shareholders equity 151 161 69 75 80 95 100 108 125 146 166 188 of w hich preferred stock 0 0 0 0 0 0 0 0 0 0 0 0 of w hich Equity of hyb. debt 0 0 0 0 0 0 0 0 0 0 0 0 Minority interest 0 0 0 0 0 0 0 0 0 0 0 0 Total Equity 151 161 69 75 80 95 100 108 125 146 166 188 Deferred tax 0 1 0 0 0 0 3 3 5 5 5 5 Long term int. bearing debt 2 36 27 19 9 1 50 38 27 25 22 20Non-current liabilities 0 0 0 0 0 0 0 0 0 0 0 0 Pension provisions 0 0 0 0 0 0 0 0 0 0 0 0 Other long-term provisions 5 4 0 0 0 0 1 0 0 0 0 0 Other long-term liabilities 0 1 0 0 0 0 0 0 0 0 0 0 Convertible debt 0 0 0 0 0 0 0 0 0 0 0 0 Shareholder debt 0 0 0 0 0 0 0 0 0 0 0 0 Hybrid debt 0 0 0 0 0 0 0 0 0 0 0 0 Total non-curr. liabilities 7 42 28 19 10 1 55 41 33 30 27 25 Short-term provisions 0 0 0 0 0 0 0 5 0 0 0 0 Accounts payable 31 42 23 26 26 30 108 90 113 119 123 128 Other current liabilities 0 0 0 0 0 0 0 0 0 0 0 0 Short term interest bearing debt 12 4 9 9 9 9 38 22 36 34 31 29 Total current liabilities 43 46 32 36 36 38 146 117 149 153 155 157 Liab.for assets held for sale 0 0 0 0 0 0 1 0 0 0 0 0Total liabilities and equity 201 249 129 130 126 134 302 267 307 328 348 369

Balance sheet and debt metrics Net debt -43 -18 22 13 -10 -10 66 40 43 33 21 9 Working capital 53 57 57 51 36 47 90 87 96 103 107 111 Invested capital 113 149 92 89 71 85 170 157 173 184 193 202 Capital employed 157 203 97 94 90 96 155 150 157 176 194 213 ROE 7.0% 5.5% 7.9% 10.6% 14.0% 8.6% 0.1% 22.2% 20.8% 19.2% 17.7% 16.6% ROIC 9.5% 7.7% 5.8% 6.7% 11.5% 16.0% 6.9% 0.6% 15.0% 16.4% 16.4% 16.2%

Net debt/EBITDA -2.1 -0.9 0.9 0.6 -0.4 -0.4 2.4 2.2 1.1 0.7 0.4 0.2Interest coverage 12.8 9.4 4.7 8.0 10.1 19.7 3.3 1.5 4.8 25.5 32.0 40.3Equity ratio 75.0% 64.5% 53.6% 57.7% 64.1% 70.6% 33.2% 40.6% 40.7% 44.4% 47.8% 50.9%Net gearing -28.6% -11.1% 31.5% 17.6% -12.2% -10.5% 65.4% 36.9% 34.4% 22.7% 12.7% 4.7%





CASH FLOW STATEMENTEUR m 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018E 2019E 2020EEBITDA (adj.) for associates 21 19 28 25 25 27 28 18 40 48 50 51 Paid taxes -5 -4 -3 -1 -3 -3 -4 -5 -8 -8 -9 -9 Net f inancials 0 0 -1 0 0 0 -2 -2 -2 -1 -1 -1 Change in Provisions -1 -1 -4 0 0 0 1 4 -5 0 0 0 Change in other LT non-IB -25 0 24 0 1 0 -2 1 -2 0 0 0 Cash f low to/from associates 0 0 0 0 0 0 0 0 0 0 0 0 Dividends paid to minorities 0 0 0 0 0 0 0 0 0 0 0 0 Other adj. to reconcile to cash f low 25 -2 -35 -12 -10 -7 -1 7 4 0 0 0Funds from operations (FFO) 15 12 10 12 14 16 21 23 27 37 40 41 Change in NWC 16 -12 18 0 -1 -5 -8 -6 -6 -7 -4 -4Cash flow from op. (CFO) 31 0 27 11 13 11 13 16 21 31 36 37 Capital Expenditure -3 -9 -4 -17 6 -8 -51 -4 -11 -14 -14 -15Free Cash Flow before A&D 28 -9 24 -6 19 3 -38 13 11 17 21 22 Proceeds from sale of assets 0 0 0 0 0 0 0 0 0 0 0 0 Acquisitions 0 0 0 0 0 0 0 0 0 0 0 0 Free cash f low 28 -9 24 -6 19 3 -38 13 11 17 21 22

Dividends paid -7 -7 0 0 -2 -3 -4 -5 -6 -7 -9 -10 Equity issues / buybacks 0 0 0 0 0 0 0 17 0 0 0 0 Net change in debt 0 28 -7 -9 -9 -10 44 -26 -4 -5 -5 -5 Other f inancing adjustments 0 0 0 0 0 0 0 0 0 0 0 0 Other non-cash adjustments -23 -10 -60 15 5 1 1 -1 -1 0 0 0 Change in cash -4 1 -44 1 13 -9 3 -2 0 5 7 7

Cash flow metrics Capex/D&A 61% 202% 27% 57% 38% 95% 424% 50% 213% 145% 149% 153% Capex/Sales 2% 5% 2% 4% 2% 4% 14% 1% 4% 2% 2% 2%

Key information Share price year end (current) 2.8 3.0 2.0 0.8 1.4 2.5 3.8 3.5 4.3 4.9 4.9 4.9 Market cap 159 171 113 47 78 142 220 222 271 311 311 311 Enterprise value 116 154 135 61 68 132 286 262 314 344 332 320 Diluted no. of shares, year-end (m) 58 58 58 58 58 58 58 64 64 64 64 64

VALUATION RATIOS - ADJUSTED EARNINGSEUR m 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018E 2019E 2020E P/E (adj.) 11.2 15.8 18.0 9.1 9.1 11.4 15.7 14.6 11.8 11.1 10.4 9.9 EV/EBITDA (adj.) 5.5 7.9 5.8 3.0 3.0 5.3 8.7 7.9 7.8 7.2 6.7 6.2 EV/EBITA (adj.) 7.3 10.7 9.3 5.1 4.4 7.0 11.6 10.7 9.4 8.6 7.9 7.3 EV/EBIT (adj.) 7.3 10.7 14.8 8.0 5.6 8.1 14.3 11.7 10.0 9.1 8.3 7.7

Valuation ratios/reported earnings P/E 11.2 15.8 18.0 8.3 9.5 11.5 26.3 2441.8 10.5 11.1 10.4 9.9 EV/Sales 0.6 0.7 0.6 0.3 0.4 0.6 0.8 0.5 0.6 0.6 0.6 0.5 EV/EBITDA 5.5 7.9 5.8 2.9 3.1 5.3 10.5 14.4 7.8 7.2 6.7 6.2 EV/EBITA 7.3 10.7 9.3 4.9 4.5 7.1 14.9 28.0 9.4 8.6 7.9 7.3 EV/EBIT 7.3 10.7 14.8 7.5 5.8 8.2 19.8 36.2 10.0 9.1 8.3 7.7 Dividend yield (ord.) 4.4% 4.0% 3.1% 4.9% 3.7% 2.8% 2.1% 2.6% 2.6% 3.0% 3.2% 3.3% FCF yield 17.3% -5.5% 20.9% -12.1% 24.5% 2.1% -17.3% 5.8% 3.9% 5.4% 6.9% 7.1% Payout ratio 48.9% 63.7% 55.2% 44.4% 33.8% 32.3% 33.1% 37.7% 30.6% 33.0% 33.0% 33.0%


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