Frencken Group
Going Dutch
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Formerly known as ElectroTech Investments Ltd, the name was changed to Frencken Group following the acquisition of ETLA in 2009. The oldest entity, Mechatronics Division had been operating in The Netherlands since 1947. Frencken is a mid-size company with 3,600 staff across two main businesses :
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Mechatronics
Design & manufacture precision parts & systems for OEM in analytical, life science, healthcare, semiconductors and industrial automation segments.
Global centres are located in Bangi Malaysia, Singapore, Wuxi China, Eindhoven & Reuver Netherlands and Spokane USA.
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IMS
Offering integrated contract design & manufacturing services to automotive, consumer & industrial electronics segments.
Global centres are located in Singapore, Noida India, Bangkok Thailand, Selangor & Johor Malaysia, Tianjin & Chuzhou China, Rotterdam Netherlands and Grenchen Switzerland.
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Financial Performance
Post Global Financial Crisis in 2008 and acquisition of ETLA in 2009; the company had been enjoying uninterrupted revenue growth and improving margin and earnings.
On Covid-19 reopening, the firm registered another spike in sales and profit due to high work from home demand for electronics devices.
Main business drivers were semiconductors and to some extend medical devices.
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With global economies normalising, revenue have started to soften. Particularly in Asia and Americas. Netherlands in Europe grew 40% on strength of semiconductor business despite falling 20% as a segment. Only growth portfolio in 1H23 were Medical 29% and Analytical & Life Science 7%.
Overall lower revenue, gross margin and marginally sticky operating expense led to a 54% fall in earning in 1H23.
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Balance sheet strength is moderate with debt rising from average $60M (2014~2018) to $114M in 1H23. Current ratio is 1.9 and Z-Score 2.9.
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Opinion
Major economies are slowing. In United States, it was high inflation & aggressive FED rate increase. China is undergoing economic stress from property market crisis, out-shoring and high youth unemployment.
Analytical & Life Science segment should provide some support. Semiconductor will continue to benefit from Western economies diversifying from China, Taiwan & South Korea due to geopolitical risk. ASML in The Netherlands will remain an important earning driver.
The company broad business segment and geographical base will enable her to ride through the current downturn.