Home / Company news / Exel Composites Plc’s Business Review 1-9 2018: “Profitability impacted by the US acquisition. Outlook revised. Cost saving program initiated.”

Exel Composites Plc’s Business Review 1-9 2018: “Profitability impacted by the US acquisition. Outlook revised. Cost saving program initiated.”

EXEL COMPOSITES PLC – STOCK EXCHANGE RELEASE – 31 OCTOBER 2018 at 09:00 EET

Q3 2018 in brief

  •  Order intake increased by 28.1% to EUR 24.7 million (Q3 2017: 19.3).
  •  Revenue increased by 13.3% to EUR 23.1 million (20.4).
  •  Adjusted operating profit was EUR 0.5 million (1.6), representing 2.1% of revenue (7.9).
  •  Net cash flow from operating activities was EUR 1.6 million (2.1).
  •  Earnings per share amounted to EUR 0.00 (0.09).

Q1-Q3 2018 in brief

  •  Order intake increased by 10.1% to EUR 71.6 million (Q1-Q3 2017: 65.1).
  •  Revenue increased by 9.5% to EUR 69.9 million (63.8).
  •  Adjusted operating profit was EUR 4.2 million (5.0), representing 6.1% of revenue (7.8).
  •  Net cash flow from operating activities was EUR 0.3 million (2.1).
  •  Earnings per share amounted to EUR 0.17 (0.27).

Outlook for full year 2018

Exel Composites revises its outlook for 2018 as follows:
“Exel Composites expects revenue to increase and adjusted operating profit to decrease in 2018 compared to 2017.”

The previous outlook was:
“Exel Composites expects revenue to increase significantly and adjusted operating profit to increase in 2018 compared to 2017.”

Group-wide cost saving program initiated

  •  Cost saving program of targeted EUR 3 million annual savings initiated, expected to be fully effective in 2020.

President and CEO, Riku Kytömäki

Adjusted operating profit declined both in the review period and in the third quarter. Profitability was negatively impacted by the volume decline in the telecommunications business as well as by operating losses in the acquired Diversified Structural Composites, DSC, in North America. DSC made an operating loss of EUR 1.1 million in the third quarter and EUR 1.0 million in the review period, mainly due to low sales volumes. Excluding the impact of DSC, Group adjusted operating profit was EUR 1.6 million for the third quarter and EUR 5.3 million for the review period. We have decided to initiate a Group-wide cost reduction program to be implemented during 2018 and 2019 in order to further improve Group profitability. The annual savings target of the program is EUR 3 million, expected to be fully effective in 2020. The program consists, among other things, of the optimization of the company’s manufacturing footprint in Europe, improving the profitability and cost efficiency of DSC as well as further synergy savings between the company’s two manufacturing units in China.

Order intake and revenue continued to increase both in the third quarter as well as in the review period. Growth was driven both by the Nanjing Jianhui and DSC acquisitions. The wind energy business experienced significant growth and compensated for the decline in telecommunications. The telecommunications industry has also been impacted by geopolitical factors, such as trade barriers and export tariffs particularly affecting the competitive situation in China.

From a regional perspective, Rest of the World increased significantly in the third quarter supported by the acquired DSC business and by increased export from other Exel units to the American market. This compensated for the revenue decrease in Europe, which was impacted by volume decline in the telecommunications business. Revenue in the Asia-Pacific region declined slightly compared to the third quarter in previous year due to lower sales in the Australian market as a consequence of the closure of production in Australia.

Revenue in the Construction & Infrastructure customer segment increased by 74.9% in the third quarter. The growth was driven by the wind energy business where both Nanjing Jianhui as well as DSC have strong market positions. Revenue by these two units also impacted positively the Other Applications customer segment, which grew by 21.1%. Revenue in the Industrial Applications customer segment was impaired mainly by the continued decline in the telecommunications business.

Consolidated key figures

EUR thousand 1.7.-30.9. 2018 1.7.-30.9. 2017 Change, % 1.1.-30.9. 2018 1.1.-30.9. 2017 Change, % 1.1.-31.12. 2017
Order intake 24,674 19,258 28.1 71,649 65,098 10.1 86,531
Order backlog ¹ 21,322 18,197 17.2 21,322 18,197 17.2 17,126
Revenue ² 23,101 20,394 13.3 69,897 63,841 9.5 86,255
Operating profit 459 1,549 -70.3 3,411 4,693 -27.3 6,081
% of revenue 2.0 7.6 4.9 7.4 7.1
Adjusted operating profit ³ 491 1,605 -69.4 4,249 4,992 -14.9 6,319
% of revenue 2.1 7.9 6.1 7.8 7.3
Profit for the period 12 1,089 -98.9 1,992 3,256 -38.8 4,212
Net cash flow from operating activities 1,611 2,067 -22.0 334 2,148 -84.4 4,856
Return on capital employed, % 3.1 14.0 8.7 15.2 14.8
Net gearing, % 88.6 33.5 88.6 33.5 30.3
Earnings per share 0.00 0.09 0.17 0.27 0.36
Equity per share, EUR 2.31 2.34 -1.4 2.31 2.34 -1.1 2.43

¹ As per the end of the period.
² Revenue by customer segments Q3 2018 (Q3 2017): Industrial applications EUR 8.8 million (11.1); Construction & infrastructure EUR 9.8 million (5.6); Other applications EUR 4.5 million (3.7).
³ Excluding material items affecting comparability, such as restructuring costs, impairment losses and reversals, and costs related to planned or realized business acquisitions or disposals. For more information, please refer to the paragraph “Change in Exel Composites’ financial reporting terminology” of the Half-year Financial Report published on 21 July 2016.

Financial results briefing

Exel Composites will hold a financial results briefing for investors, analysts and journalists regarding the business review on Wednesday 31 October 2018 at 12:30 EET at Scandic Hotel Simonkenttä’s Roba meeting room (address Simonkatu 9, Helsinki, Finland). The related presentation material will be available after the meeting at the company’s website www.exelcomposites.com under Investors > Publications.

Vantaa, 31 October 2018

Exel Composites Plc

Riku Kytömäki
President and CEO