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Introduction & Market Context
Etteplan Oyj (HEL:ETTE) released its first quarter 2025 results on May 5, showing declining performance across key metrics as geopolitical tensions and trade wars weighed on customer investment decisions. The engineering services company saw its stock fall 6.99% following the announcement, closing at €10.65, reflecting investor concerns about the company’s near-term outlook despite its strategic pivot toward AI-driven solutions.
"Increased uncertainty affected demand," noted President and CEO Juha Näkki in the presentation, highlighting how trade wars and political tensions created an unpredictable market environment during the quarter, particularly in European markets.
Quarterly Performance Highlights
Etteplan reported Q1 2025 revenue of €94.9 million, representing a 2.3% decrease from the same period last year. More concerning was the 7.7% decline in organic revenue, partially offset by acquisition-driven growth. The company’s profitability metrics showed steeper declines, with EBITA falling 29.4% to €5.8 million and EBIT dropping 37.9% to €4.2 million.
As shown in the following chart of key financial figures for Q1 2025:
The company’s earnings per share fell to €0.09, a substantial 43.1% decrease from €0.16 in Q1 2024. Operating cash flow also weakened, declining 37.8% to €5.0 million compared to €8.1 million in the prior-year period.
Etteplan highlighted that non-recurring items of €1.3 million significantly impacted profitability. These expenses stemmed from adaptation measures, costs related to the acquisition of Novacon Powertrain, and a significant credit loss in Germany. Without these non-recurring items, the company noted its EBITA margin would have been 7.5% instead of the reported 6.1%.
Detailed Financial Analysis
The company’s revenue breakdown reveals varying performance across service areas and geographic regions. Engineering Solutions, which represents 56% of total revenue, saw a slight increase of 1.1% to €52.9 million, bolstered by the Novacon Powertrain acquisition. Software (ETR:SOWGn) and Embedded Solutions experienced the steepest decline at 11.9%, while Technical Communication and Data Solutions grew 2.1%.
The following chart illustrates Etteplan’s revenue and personnel distribution by service area and geographic region:
Geographic performance showed significant variation, with China standing out as a bright spot. The company reported that "the market in China remained good," with hours sold increasing by 21.9% in January-March. Meanwhile, European markets faced continued uncertainty, with the presentation noting that "the uncertainty caused by geopolitical tensions and the global political situation has affected demand in all of our operating countries in Europe."
Customer segment analysis revealed shifts in Etteplan’s business mix, with notable increases in the Automotive sector (15% of revenue, up from 11%) and Aerospace and Defense (7%, up from 5%), while Healthcare and Medical (TASE:BLWV) Technology declined to 3% from 5% in the previous year.
The impact of market uncertainty on Etteplan’s revenue trend is clearly visible in the following chart:
Similarly, the company’s EBITA performance shows the effect of both market conditions and non-recurring expenses:
Service Area Performance
Each of Etteplan’s three service areas faced unique challenges during the quarter. Engineering Solutions, the company’s largest segment, saw its EBITA margin decline to 6.5% from 9.0% in Q1 2024, significantly impacted by non-recurring expenses. Without these items, the service area’s profitability would have been 8.1%.
The following chart illustrates Engineering Solutions’ performance:
Software and Embedded Solutions showed "small signs of recovery in product development, especially in hardware," but struggled with few new projects starting in software and application engineering. Revenue declined 11.9% to €23.1 million, with EBITA margin falling to 8.0% from 9.1%.
Technical Communication and Data Solutions increased its market share, partly due to AI-driven solutions, but faced weakening demand in Central Europe, particularly in the Netherlands. Despite revenue growth of 2.1%, EBITA margin declined sharply to 4.4% from 7.3%.
Strategic Initiatives
Despite near-term challenges, Etteplan is accelerating its strategic transformation, centered around "Transformation with AI." The company has set ambitious targets for 2027, including increasing AI-driven solutions from the current 2% to 35% of revenue, growing Managed Services to 75% of revenue (from 66% currently), and achieving total revenue of over €500 million with an EBITA margin exceeding 10%.
The following chart outlines Etteplan’s financial and strategic targets for 2027:
The company emphasized that AI-driven solutions have already had "a significant impact on the growth of the service area’s market share," particularly in Technical Communication and Data Solutions. This strategic pivot appears to be a key element of Etteplan’s plan to differentiate itself in an increasingly competitive market.
Forward-Looking Statements
Etteplan specified its financial guidance for 2025, estimating revenue between €365-395 million (compared to €361.0 million in 2024) and operating profit (EBIT) between €23-28 million (compared to €18.4 million in 2024). This guidance suggests the company expects performance to improve in the coming quarters despite the weak start to the year.
The market outlook remains challenging, with the presentation noting that "uncertainty has again increased in the markets due to geopolitical tensions and the global political situation." However, the company highlighted some positive trends, including increased investments in the defense industry and moderate investments in the energy sector.
In response to market conditions, Etteplan has implemented adaptation measures, including temporary layoffs affecting 157 employees at the end of March 2025. The company also slowed down recruitment during the review period.
Despite these challenges, Etteplan’s strategic focus on AI transformation and its targeted growth in defense and energy sectors suggest the company is positioning itself for longer-term growth beyond the current period of market uncertainty.
Full presentation:
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