Exel Composites' Business Review Q1-Q3 2024: Turnaround progressing - Revenue and profitability increased significantly in the third quarter

This release is a summary of Exel Composites' Business Review Q1-Q3 2024. The complete report is attached to this release as a pdf file. It is also available on the company's website at exelcomposites.com.

Q3 2024 in brief

• Order intake decreased by 7.8% to EUR 21.0 million (Q3 2023: 22.8)
• Revenue increased by 19.7% to EUR 24.6 million (20.5)
• Operating profit increased to EUR 0.6 million (-0.7) and operating profit margin to 2.5% (-3.2%)
• Adjusted operating profit increased to EUR 0.7 million (-1.2) and adjusted operating profit margin to 2.9% (-5.9%)
• Earnings per share was EUR -0.02 (-0.05)

Q1-Q3 2024 in brief

• Order intake increased by 2.0% to EUR 76.1 million (Q1-Q3 2023: 74.6)
• Revenue decreased by 0.3% to EUR 74.5 million (74.7)
• Operating profit increased to EUR 1.2 million (-1.2) and operating profit margin to 1.6% (-1.6%)
• Adjusted operating profit increased to EUR 1.5 million (-1.1) and adjusted operating profit margin to 2.0% (-1.5%)
• Earnings per share was EUR -0.03 (-0.30)

Guidance for the full year 2024 (unchanged)

Exel Composites expects revenue to increase and adjusted operating profit to increase significantly in 2024 compared to 2023. (Guidance published on 16 February 2024.)

Paul Sohlberg, President and CEO:
Exel Composites had another good quarter in July-September 2024. Our revenue and profitability in the third quarter increased significantly year-on-year. In January-September, our order intake increased, and our order backlog was strengthened.

The implementation of our transformative strategy to capture profitable growth advanced well. We focused on larger customers, high-growth customer industries and volume business, all of which position us well for the future. The commissioning of our new factory in India is progressing as per our plans. Once completed, the factory will allow us to better serve wind power customers in India and globally. The facility will be ready for production in the last quarter of 2024.

In September, we completed the strategic review at our Oudenaarde factory in Belgium and entered into consultation with employee representatives regarding the intention to discontinue production at the factory. Unfortunately, launching the process was the necessary action to address loss-making activities. So far, several negotiations have been conducted in a good spirit and we believe that the good cooperation will continue throughout the process.

Order intake increased in Q1-Q3, despite the economic uncertainty
Our order intake increased in January-September 2024, amounting to EUR 76.1 million for the period. As a result, the order backlog at the end of September stood at EUR 30.6 million, which is 7.3% higher than in the same period last year. The order intake in the third quarter, however, fell short of the comparison period and of the first and second quarters of 2024.

In terms of order intake, the third quarter is often seasonally the weakest quarter of the year. Uncertainty about the global economic outlook continued in the third quarter and the macroeconomic sentiment remained indecisive. The year 2023 was very difficult for the pultrusion industry in general. Compared to this, our customer activity has increased in all our strategic customer industries except in the construction market.

Significant agreements with two major wind turbine OEMs
All in all, we performed well despite the uncertain operating environment and achieved customer engagements that are important for our future growth.

In September, we announced one of the highlights of the quarter as Exel Composites and its joint venture Kineco-Exel India won the bidding process in India for supplying carbon planks for wind turbine spar caps for Vestas Wind Systems A/S globally. The products, once tested and approved for production, will be manufactured in our new factory in India. Deliveries are estimated to begin in the last quarter of 2025. The step deepens our collaboration with Vestas, which started over a decade ago. This is already the second spar cap customer engagement for the new India factory this year, as we announced a multi-year agreement with another major wind turbine manufacturer in the first quarter.

After the review period, we signed a multi-year supply agreement for helihoist systems for offshore wind turbines with a major Western wind turbine manufacturer. The composite components will be manufactured with pultrusion at Exel's Nanjing factory in China, followed by necessary post-processing and assembly work. Deliveries are expected to begin in 2025. 

Revenue increased in most customer industries
Revenue for the third quarter grew by 19.7% year-on-year coming in at EUR 24.6 million and was at EUR 74.5 million for January-September 2024 (Q1-Q3 2023: 74.7).

In the third quarter, revenue increased from the comparison period in 2023 in all of our customer industries, apart from the Energy customer industry, where we expect deliveries from our new Indian factory to pick up in 2025.

Engineered Solutions Business Unit reported EUR 20.0 million in revenue in the third quarter, while Industrial Solutions Business Unit reported EUR 4.6 million. I am pleased that Industrial Solutions achieved growth in the third quarter and two new significant wind power customer engagements in line with our strategy. Engineered Solutions, on the other hand, is progressing well in optimizing our factory network and securing new customers.

We have spent a considerable amount of time identifying future needs of our customers. As a result, one of the key targets of our transformative strategy is to increase customer value by offering post-processing services, engineering support and productization, among others. I am pleased to report on progress towards this goal also in the third quarter. For example, in the Transportation customer industry, we won additional volumes by starting to provide post-processing services such as painting services for profiles used in transport equipment, and the work continues.

Operating profit continued to improve
While revenue in January-September 2024 was at the previous year's level, our profitability during the same period improved due to determined adjustment measures taken during the year.

In the third quarter 2024, the actions to optimize capacity, cost control and operational measures elevated our adjusted operating profit margin to 2.9% (-5.9%) and our adjusted operating profit to EUR 0.7 million (-1.2).

We expect profitability to further improve over time with higher utilization rates, which we aim to achieve by ramping up new customer products and further optimizing and consolidating production.

Our net cash flow from operating activities has been impacted by increases in working capital, higher interest rates and other financing costs, coming in at EUR -1.3 million (3.7) for January-September 2024.

We reiterate our guidance published in February 2024: Exel Composites expects revenue to increase and adjusted operating profit to increase significantly in 2024 compared to 2023.

Sincerely,

Paul Sohlberg

Consolidated key figures

Q3 Q3 Change Q1-Q3 Q1-Q3 Change Q1-Q4
EUR thousand 2024 2023 % 2024 2023 % 2023

Revenue 24,585 20,538 19.7 74,539 74,741 -0.3 96,815
Operating profit 620 -655 194.6 1,224 -1,187 203.1 -4,863
% of revenue 2.5 -3.2 1.6 -1.6 -5.0
Adjusted 707 -1,206 158.6 1,526 -1,136 234.4 -2,446
operating profit
1)
% of revenue 2.9 -5.9 2.0 -1.5 -2.5
EBITDA 2,189 1,055 107.4 5,699 4,009 42.2 3,832
Adjusted EBITDA 2,276 504 351.7 6,001 4,060 47.8 4,059
1)
Profit before -1,769 -421 -319.9 -1,541 -2,593 40.6 -8,254
tax
Profit for the -1,824 -639 -185.3 -1,850 -3,712 50.2 -9,309
period
Profit for the -1,730 -581 -197.7 -1,600 -3,564 55.1 -9,130
period excluding
non-controlling
interest
% of revenue -7.0 -2.8 -2.1 -4.8 -9.4
Shareholders' 36,726 23,578 55.8 36,726 23,578 55.8 17,687
equity
Interest-bearing 31,266 50,475 -38.1 31,266 50,475 -38.1 43,790
liabilities
Cash and cash 10,697 17,823 -40.0 10,697 17,823 -40.0 10,952
equivalents
Net interest 20,569 32,652 -37.0 20,569 32,652 -37.0 32,838
-bearing
liabilities
Net debt to 3.4 4.8 -29.2 3.4 4.8 -29.2 8.1
adjusted EBITDA
2)
Capital employed 67,991 74,053 -8.2 67,991 74,053 -8.2 61,477
Return on -19.7 -10.7 -84.3 -9.1 -18.3 50.6 -38.7
equity, %
Return on 3.7 -3.3 210.3 2.9 -1.9 247.4 -6.8
capital
employed, %
Equity ratio, % 39.7 23.3 70.6 39.7 23.3 70.6 20.9
Net gearing, % 56.0 138.5 -59.6 56.0 138.5 -59.6 185.7
Net cash flow -2,308 1,172 -297.0 -1,314 3,692 -135.6 4,445
from operating
activities
Net cash flow -701 -614 14.3 -1,557 -2,211 -29.6 -3,076
from investing
activities
Capital 801 633 26.6 1,616 2,708 -40.3 3,523
expenditure
% of revenue 3.3 3.1 2.2 3.6 3.6
Research and 821 813 1.0 2,817 2,745 2.6 3,711
development
costs
% of revenue 3.3 4.0 3.8 3.7 3.8
Order intake 21,043 22,834 -7.8 76,061 74,559 2.0 98,142
Order backlog 30,557 28,474 7.3 30,557 28,474 7.3 29,765
Earnings per -0.02 -0.05 66.9 -0.03 -0.30 89.3 -0.77
share, diluted
and
undiluted, EUR
Equity per 0.34 1.96 -82.72 0.73 1.96 -62.84 1.47
share, EUR
Average share 0.34 3.47 -90.1 0.47 4.03 -88.3 3.60
price, EUR
Average number 106,470 11,854 798.2 49,507 11,854 317.6 11,854
of shares,
diluted and
undiluted, 1,000
shares 3)
Employees, 616 642 -3.9 620 679 -8.7 667
average
Employees, end 616 639 -3.6 616 639 -3.6 623
of period

1) Excluding material items affecting comparability, such as restructuring costs, impairment losses and reversals, and costs related to planned or realized business acquisitions or disposals

2) Last 12 months' adjusted EBITDA

3) As a result of Exel's rights issue completed in June 2024, the total number of shares in the company  increased by 94,831,552 from 11,896,843 to 106,728,395.

Revenue by business unit

Q1 Q2 Q3 Q1-Q3
EUR thousand 2024 2024 2024 2024
Engineered Solutions BU 19,119 22,359 20,008 61,487
Industrial Solutions BU 4,246 4,228 4,567 13,041
Other 0 2 10 12
Total 23,365 26,589 24,585 74,539

Revenue by customer industry

Q3 Q3 Change Q1-Q3 Q1-Q3 Change Q1-Q4
EUR thousand 2024 2023 % 2024 2023 % 2023
Buildings and 5,715 4,283 33.4 16,171 14,934 8.3 18,539
infrastructure
Industrial 3,779 3,025 24.9 11,404 11,862 -3.9 15,358
Energy 4,931 5,242 -5.9 14,812 17,033 -13.0 22,108
Transportation 3,956 3,266 21.1 12,970 11,650 11.3 16,268
Other 6,204 4,723 31.4 19,182 19,262 -0.4 24,541
Total 24,585 20,539 19.7 74,539 74,741 -0.3 96,815

Vantaa, 31 October 2024

Exel Composites Plc

Board of Directors

Financial results briefing

Exel Composites will hold a financial results briefing regarding the Business Review Q1-Q3 2024 today at 12:30 EET. To participate in the online event, please register in advance by sending an email to investor@exelcomposites.com.

For further information, please contact:

Mikko Rummukainen, CFO

tel. +358 20 754 1335

Lilli Riikonen, Head of Investor Relations

investor@exelcomposites.com

tel. +358 50 351 1128

Exel Composites in brief

Exel Composites is one of the largest manufacturers of composite profiles and tubes made with pultrusion and pullwinding technologies and a pultrusion technology forerunner in the global composite market. Our forward-thinking composite solutions made with continuous manufacturing technologies serve customers in a wide range of industries around the world. You can find our products used in applications in diverse industrial sectors such as wind power, transportation and building and infrastructure.

Our R&D expertise, collaborative approach and global footprint set us apart from our competition. Our composite solutions help customers save resources, reduce products' weight, improve performance and energy efficiency, and decrease total lifetime costs. We want to be the first choice for sustainable composite solutions globally.

Headquartered in Finland, Exel Composites employs over 600 forward-thinking professionals around the world and is listed on Nasdaq Helsinki. To find out more about our offering and company please visit visit www.exelcomposites.com.

Exel Composites Plc