Despite a challenging business environment, Darekon’s operations in 2022 were marked by strong growth and the integration of acquisitions made in the previous year.
Darekon Group’s turnover in 2022 was EUR 85.6 million and operating profit was EUR 1.6 million. The acquisitions of the previous year are included in the figures of the completed financial year for the whole year. The corresponding figures for 2021 were EUR 52.9 million and EUR 2.9 million.
Adaptation to prevailing conditions
During the last two financial years, Darekon’s inventory has been significantly increased in order to serve customers as strongly as possible despite the difficult availability of electronic components. In addition, the net sales of last year include EUR 10 million worth of electronic components purchased on the spot market and invoiced to customers. The corresponding amount of the previous fiscal year was EUR 2 million.
In the completed financial year, Darekon Group’s profitability was weakened by the challenges of the supply chain in the electronics industry and strong inflation. Increasing the firm’s inventory and lower than normal profitability has increased the need for working capital. That need has been met with external capital.
The results of the fiscal year includes credit losses and the costs incurred from the closure of the Savonlinna manufacturing facility. The combined effect of these non-recurring expenses, which weakened the results, was approximately EUR 1.5 million. EUR 0.5 million were invested in R&D at the group level.
Growth continues and profitability improves
The turnover for the current year has been budgeted at EUR 92 million, and the development of the first quarter is on track. In the current fiscal year, the spot market purchases made on behalf of customers have decreased and the availability of components has improved overall. Thanks to this, the value of inventories is expected to decrease during the year.
Darekon Group’s operations are expected to grow and profitability to improve to the level before corona virus. In the completed fiscal year, the number of personnel was an average of 453 people. Thanks to increased demand at the beginning of the year, staff have been recruited and numbers are approaching 500 people.
With the contract signed on December 30. Darekon has acquired all shares of sheet metal contract manufacturer Premec Oy. With the acquisition Darekon keeps strengthening its sheet metal business and expanding their service portfolio. The operations of Premec Oy will continue in Ylivieska as they are, and the previous owners will carry on working for the company.
The acquisition of Premec is in line with Darekon’s strategy to strengthen its operations as a contract manufacturer of electronics and all the related products. This past year Darekon has previously acquired IdeasPaint´s painting operations in Klaukkala and a Swedish contract manufacturer IHAAB Component Systems AB in Stockholm.
Premec Oy is a profitable and solvent service company specializing in the manufacture of demanding mechanical parts and assemblies. Its key competence areas include sheet metal work, design and product development. The company’s financial year which ended in the end of September 2021 saw them record sales of over 15 million euros with 100 staff members. The company works in a modern 7500 m² production facility in Ylivieska.
Premec will become a part of Darekon group, and its operations will be developed with long-term goals in mind. The resources of Darekon and their financial solidity will further improve Premec’s possibilities to grow and improve their position in growing customer markets.
“Premec fits perfectly to Darekon’s service portfolio. The capable personnel and the good, versatile customer base create excellent starting point for development. This acquisition will support our long-term growth strategy incredibly well. We are aiming for 75-million-euro revenue in 2022”, states Darekon’s CEO Kai Orpo.
“Premec will get a fine home from Darekon. We saw with the other owners that joining Darekon will let us have the best conditions to develop to the next level. I firmly believe that our good development will continue, and we will be able to serve our customers better and more broadly”, adds Premec’s managing director Juha Männistö.
Darekon has acquired the entire share capital of Swedish firm IHAAB Component Systems AB in Stockholm, following an agreement signed on the 6th of September. The company’s subsidiaries SMD Production AB and Kelab Systems AB are included in the transaction. The acquisition is part of Darekon’s planned strategy of international expansion.
SMD Production AB and its sister company Kelab Systems AB offer their customers electronics contract manufacturing. They specialize in the manufacture of medical equipment and industrial electronics.
The company’s turnover is about forty million SEK; its more than 20 employees operate in 1,000 square meters of space in Stockholm. It fits perfectly to Darekon. Right customer base and knowledgeable personnel.
The company’s operations will continue as before and the previous owner and CEO Peter Strömgren will continue as CEO for the time being.
The acquired company’s operations and cooperation with Darekon’s other plants will be developed on a long-term basis. The company’s skilled staff also bring more expertise and local knowledge to Darekon’s organisation. Darekon’s greater resources and good financial standing will also give the acquired company even better opportunities to grow and strengthen its position in the Swedish market.
“The Swedish market is interesting for us. Through the acquisition, our knowledge of the Swedish market will improve and we will learn more about the local supplier field, for example. We believe in the industry and want to move forward. This acquisition provides excellent support for our long-term growth strategy.” summarizes Darekon´s CEO Kai Orpo.
“When I was approached by Darekon in 2018 I immediately saw a great opportunity for SMD/ KELAB to be part of something much bigger. With the ambition and strength of Darekon and the platform that SMD/KELAB represents in Sweden I strongly believe that this will develop to be a successful combination in the Swedish market for contract manufacturing.” adds Peter Strömgren.
For more information you can contact:
Kai Orpo/ Oy Darekon Ltd
Tel. +358 40 500 05 62
Peter Strömgren/ SMD Production AB
Tel- +46 70 580 29 00
Oy Darekon Ltd is a contract manufacturer of medical devices and industrial electronics. Darekon was established in 1985 and its plants are located in Haapavesi, Klaukkala, Savonlinna in Finland and Gdansk in Poland. Company’s turnover was 53 million euros in 2020 and the amount of employees is more than 300. www.darekon.com
The past year was labeled by many successful arrangements such as, streamlining of operations, significant investments in the development of production at different plants, and at the end of the year business acquisition of a paint shop to strengthen our company’s supply chain.
Last spring Darekon increased the amount of time staff spent working from home as much as possible. All business travel was reduced to a minimum to ensure the health of our staff. The operations of all manufacturing facilities have continued uninterrupted throughout the year.
Stable organic growth continues
Net sales in 2020 were EUR 53.7 million, an increase of almost six per cent (2019 EUR 51.1 million). Operating profit increased slightly from the previous year and was EUR 3.5 million, or 6.5 per cent. The number of employees at the end of the year was 316, which is one more than the year before. The Darekon Group’s equity ratio was 54.9 per cent.
Last year’s most significant investment was a new and state-of-the-art SMT placement line acquired for the Haapavesi plant in the spring, which almost doubled Haapavesi’s SMT capacity. The investment also included a new solder paste printing machine, a 3D AOI inspection system and a selective soldering machine.
The investment was driven by a strong increase in demand for medical devices in the spring, and the investment was completed on an exceptionally fast schedule.
A new varnishing line was acquired for the Savonlinna plant, which more than doubled the circuit board varnishing capacity and brought new flexibility to the plant’s operations, where many of the manufactured products are meant for particularly demanding conditions.
After years of planning, the investment that most significantly affected the operations of the entire Darekon Group was the introduction of a new ERP, or enterprise resource planning system, at the beginning of last October. The carefully prepared commissioning went ahead without major problems. The new system is a major step forwards, streamlining and helping to develop the company’s operations at all levels.
The paint shop expands Klaukkala’s operations
In recent years, the Klaukkala manufacturing facility has put more focus into automated manufacturing of enclosures and equipment cabinets, by investing in, for example, the manufacturing of seals, welding and grinding using robots. Enclosures and cabinets are central to Darekon’s strategy to provide customers with a complete turnkey delivery from PCB manufacturing to final assembly and logistics.
At the end of December, Darekon entered into an agreement to acquire Ideapaint Oy’s Klaukkala paint shop business. The business includes equipment, the transfer of personnel to Darekon’s service as former employees, and 600 square metres of paint shop space on the same property where Darekon already operates. Darekon has previously been a major customer of the unit. The new surface treatment unit complements and enhances Darekon’s competitiveness in enclosure and cabinet manufacturing.
The surface treatment unit can provide powder coating, liquid painting as well as pre-treatment of components to be painted by abrasive blasting. The completed transaction creates new opportunities for the development and expansion of Klaukkala’s paint shop operations together with Darekon’s current and future customers.
A sharp increase in demand has prompted Darekon to take rapid action to grow capacity. The firm has invested in a completely new SMT production line at Darekon’s Haapavesi plant.
The global growth in cybercrime and working from home has led to an update in security practices.
The corona situation has remained calm at all of Darekon’s four plants. Operations are in line with the new normal and no one has caught the coronavirus so far. The situation is being closely monitored and all activities are health-first, which is the most important thing. Detailed action plans have been prepared for possible illnesses.
Strong growth in demand
The strong increase in intensive care units and other growing needs for medical care in the world have been reflected in the strong growth in demand for certain products at Darekon.
“The pandemic has caused us an explosion in the demand for certain products,” says Antti Järviluoma, plant director at Haapavesi. “For example, if the annual production of one product has been 20,000 pieces, the same quantity should now be produced in three months. This indicates the scale of the situation.”
There is no time to dawdle in the face of this new situation. The decision to invest in a new production line was made quickly and the new line began production in early May. In addition to a assembly machine and a reflow oven, the investment includes a paste printing machine, an automatic optical inspection machine and a selective soldering machine. The new line will almost double the plant’s SMT production capacity.
“We are at the forefront of the fight against the pandemic – in a valuable and important position,” Järviluoma continues. “The staff understands the situation and is very committed. The acquisition and installation of the new line was achieved in record time. The normal delivery time for machines from all over Europe is 10 to 12 weeks, but we received the equipment on a ‘bypass lane’ in a few weeks.”
With the new equipment, new personnel was also needed at Haapavesi. The current number of more than 100 people has increased and will increase by about 10 to 15 more people. The total value of the investment at Haapavesi is approximately EUR 1.2 million.
Working from home requires security management
Using VPN on laptops was already a routine at Darekon, but the strong increase in working from home has required new practices. These include, for example, encrypting disks on portable computers and 2-stage authentication, MFA (multi-factor authentication).
“Cybercriminals are a problem in companies of all sizes, and various hacking attempts have clearly increased recently,” says Pertti Mäkinen, Darekon’s system development expert and director. “Everyone has a responsibility to not give ground to criminals. You have to do what can be done.”
“If a thief takes a laptop from the car’s back seat, he will not get his hands on the contents of the machine’s encrypted disk. If the machine is successfully started, it will be reported to IT support, which can empty the contents of the machine. MFA, on the other hand, prevents the hijacking of an e-mail account, for example, when the login needs to be confirmed with a code that came through another channel.”
Let’s take care of our own share
According to Mäkinen, e-mail is still used too much to send important information. Cybercriminals have ample means of accessing and reading e-mails like an open postcard. For example, customer-specific channels for product management can be built through teamwork spaces, through which communication and data transfer can be implemented easily and much more securely.
“We can’t wait to see how the big ones act,” Mäkinen continues. “We want to take care of our own share, we do not spread harmful content and we safeguard our own operations. It is a matter of attitude and diligence. When we come from the city, we wash our hands. We are aware of the risks and act accordingly.”
The world is in confusion, but life still goes on. We want to inform and reassure all of our stakeholders and here is a brief introduction to Darekon’s state on the day of release.
Media coverage can tend towards the sensational, adding to an almost apocalyptic atmosphere but we want to emphasise the importance of calm and caution. Darekon is strictly complying with all instructions and regulations of the authorities regarding the coronavirus.
Manufacturing plants operating normally
Darekon’s overall situation is calm and practically all Darekon’s staff is on duty. Remote working has been set up where possible.
Freight traffic is operating quite normally and production has not been hindered by a shortage of materials. In this regard, potential future problems have been anticipated for several weeks. There have been delays in some shipments from China, but Darekon’s own buffer stocks have covered most of the shortages. In some cases, local replenishment has been possible.
Darekon’s materials department is constantly working hard to ensure that materials are delivered on schedule. At the same time, other measures have been taken, such as increasing inventory levels, to minimise potential future disruptions.
Skilled staff allow flexibility
“A significant amount of components and other materials come to us from China and elsewhere in the Far East, and they come from there all the time,” says Antti Järviluoma, Darekon’s Haapavesi plant director. “For their part, Finnish partners supplying sheet metal parts, special coatings, injection moulding and other mechanical parts seem to be doing their best to deliver orders accurately.”
“Our competent and multi-skilled staff ensure that any future inconvenience in case of absences is minimised. Individuals are able to move flexibly from one job to another depending on the situation. Job rotation is quite common for us in managing hurry orders during normal times, and now we have been preparing with the staff to deal with exceptional situations.”
No free fall in sight
Darekon’s customers are also striving to work as usual and have not for the time being cancelled orders. The situation for some companies has even led to an increase in demand and an increase in order volumes. If partners’ production facilities are shut down in the future, this will of course also be reflected in Darekon’s operations.
“Managing material chains and predicting production is now even more difficult and important,” says Petri Kettunen, sales director at Darekon. “Responding to changes in demand in the short term is now more challenging than usual. We conduct regular, confidential discussions with our clients about possible changes and we encourage clients to contact us as early as possible if changes are needed.”
“Darekon’s steady financial position is a particularly important factor in securing operations in this situation. Regular cash flow is essential, but a strong economy gives a better opportunity for making any necessary arrangements.”
It is easier to operate locally
The current situation is new and will have an impact on the long-term development of globalisation. Darekon has retained its operations in the Baltic Sea Region and has previously talked about the many benefits of short physical and cultural distances.
“We have wanted to provide our partners with a stable, manageable and predictable operating environment,” Kettunen continues. “It is a good idea for clients to look critically at the operation of their own supply chain and to consider other things than just the unit price of the product in a distant country. One of the key factors is the ability of the chain to handle abnormal situations.”
“If these issues or the current situation evoke questions, I am happily prepared to discuss in more detail. Although physical meetings are right now banned, we can meet virtually right away – for example, through a Teams meeting. It is a good idea to act soon if, for example, the concern is for next year. This is no time to just wait for the current situation to pass. Let’s sit down right away if your company is thinking about these things.”