Tecnotree launches program to improve operational excellence

Translation: Original comment published in Finnish on 4/2/2024 at 1:59 am EEST.

The cost efficiency program aims to achieve annual savings of 5-7% by 2025. The company's guidance for the current year remains unchanged and the savings are expected to be fully realized by 2025. The program is part of the company's ongoing efforts to enhance operational effectiveness and therefore does not create an acute need for forecast changes. We will review our cost forecasts in the next update.

The program seeks efficiency across a wide range of activities

The cost efficiency program covers the company's operations in the US, India, and Finland. According to the company, the savings will be achieved through a combination of streamlined operations, enhanced productivity, and optimized resource utilization. According to the company, the aim of the program is to enhance operational effectiveness, maximize shareholder value, and maintain investments. The release did not specify whether the program would lead to personnel reductions, but we expect that this would have been communicated separately.

Similar program launched a year ago

About a year ago, in connection with the 2022 financial statements, Tecnotree announced measures to achieve savings of 5-7%. These were to start showing results from the end of 2023 and throughout this year. But this is now the second savings program of a similar magnitude. According to the company, the current cost efficiency program is part of an ongoing effort to improve operational efficiency and is in line with the company's long-term financial objectives. However, the company has not published any financial targets and it is therefore difficult to reflect the impact of the program against these targets.

Overall, the company's profitability, as measured by the EBIT margin, is already at a very good level (2023: 30.4%). Nevertheless, cash flow generation has been a challenge for the company due to working capital commitment, foreign exchange losses, and significant investments in product development, which the company has not been able to finance from its own cash flow. It is therefore important for the company to maintain cost efficiency, cost-consciousness, and strong operational profitability.