Exel Composites’ Half Year Financial Report Q1-Q2 2023: Q2 2023 revenue EUR 25.4 million and adjusted operating profit EUR 0.1 million

EXEL COMPOSITES PLC          HALF YEAR FINANCIAL REPORT          18 AUGUST 2023 at 9:00 EET

Q2 2023 in brief

• Order intake decreased by 31.4% to EUR 25.4 million (Q2 2022: 37.0)
• Revenue decreased by 33.3% to EUR 25.4 million (38.1)
• Adjusted operating profit decreased to EUR 0.1 million (3.1) and adjusted operating profit margin to 0.3% (8.2%)
• Operating profit decreased to EUR -0.2 million (3.0) and operating profit margin to -1.0% (7.9%)
• Earnings per share amounted to EUR -0.08 (0.34)

Q1-Q2 2023 in brief

• Order intake decreased by 30.7% to EUR 51.7 million (Q1-Q2 2022: 74.6)
• Revenue decreased by 24.9% to EUR 54.2 million (72.2)
• Adjusted operating profit decreased to EUR 0.1 million (5.3) and adjusted operating profit margin to 0.1% (7.3%)
• Operating profit decreased to EUR -0.5 million (3.0) and operating profit margin to -1.0% (4.2%)
• Earnings per share amounted to EUR -0.25 (0.34)

Guidance for the full year 2023 (unchanged)

Exel Composites expects that revenue will decrease and adjusted operating profit will decrease significantly in 2023 compared to 2022.

President and CEO, Paul Sohlberg 

Improvement activities continued in a challenging market environment

The market environment continued to be challenging also during the second quarter. Macroeconomic woes kept weighing on our customers’ businesses in almost all geographical regions and customer industries. During the second quarter, Exel’s order intake and revenue declined by 33% and 31% respectively, compared to the same period last year. Major reasons for the decline were the general slowdown of many customer markets and continued inventory reductions by customers, as well as the sustained soft demand for equipment in the wind power industry especially in the North America region. 

Corrective actions yield results, positive adjusted operating profit achieved

Despite significantly lower revenue of EUR 25.4 million during the second quarter, we managed to reach break-even in the first half of 2023. The overall result was burdened by the postponement of orders for equipment for the wind power industry in North America as well as the generally lower demand levels during the first half of 2023. As communicated in our Q1 release, we have initiated several activities to improve our performance, including efforts to activate sales and contain costs. The benefits of these activities are already visible, and it is important that we further improve our overall financial performance. Due to the previously mentioned factors, our adjusted operating profit in the first half of 2023 was EUR 0.1 million (5.3) and the adjusted operating profit margin was 0.1% (7.3%). 

The measures to transfer the pultrusion production from Runcorn, United Kingdom, are proceeding as planned and are expected to be finalized during 2023. We also continued efforts to sell the Runcorn production facility.  

Another area of focus was managing our inventories and reducing working capital. As a result, our inventories declined by EUR 4.1 million during the first half of 2023 compared to the end of 2022. This resulted in a positive cash flow from operating activities of EUR 2.5 million.

Active customer interaction continued across industries 

While the market was not optimal in Q2, it was generally in line with our expectations. At Exel we focused on customer-facing work and on furthering our important development activities. 

Building on Q1, we intensified our efforts to serve and engage with customers across the organization. It was pleasing to note that our customer base is stable and our net promoter score in the annual customer satisfaction survey remained at a good level. We also did a good job in managing pressures on our margins in the period. Our sales and support teams have been busy and have successfully engaged existing and new customers regarding prospective future projects, particularly in the North American and Chinese markets. From the several new business prospects, I could mention two interesting Letters of Intent signed which may offer Exel attractive growth in the future.  

Update on the Wind project and the expansion of the Indian factory

We continued to work on the previously announced important development program focusing on the attractive wind power market. During the quarter, we progressed according to plan by achieving APQP4Wind member status covering all production sites that produce composites for wind power market customers and by readying us for a factory expansion in India. Together with our joint venture partner in India, we have signed a contract to build a new facility optimized for serving wind power industry customers in India, as well as globally. The new facility is expected to be ready for production during 2024. 

In addition, ramp-up of production capability for wind power market at the existing production site in India has progressed. Local test runs and qualifications for carbon and glass pultrusion products for wind power customers have started well and are progressing according to plan. We continue to negotiate with several OEMs in the wind power market, for both glass and carbon fiber products. As communicated earlier our view is, in line with signals from our customers and suppliers, that demand for equipment in the wind power market will recover and turn to attractive growth in 2024 and 2025.

Outlook for 2023

We reiterate our guidance updated in May that we expect Exel Composites’ revenue to decrease and adjusted operating profit to decrease significantly in 2023 compared to 2022. Looking forward, our view from earlier this year remains unchanged that demand for Exel’s products and solutions is expected to improve in the second half of 2023 and later driven by opportunities for equipment in the wind power market. Short-term visibility continues to be limited, and uncertainty in short-term demand is expected to continue.

Continued progress on strategy and sustainability  

Exel continues to actively support both internal and external projects to promote circularity and sustainability in the composites industry. On 5 July EuCIA, the European Composites Industry Association, where Exel is a contributing member, together with six other notable industry associations, published a joint statement to support the work of the Joint Research Centre of the European Commission, emphasizing that composite materials are recognized as established recyclable materials in the EU. 

The statement specifically refers to a cement kiln co-processing route for composites recycling, which is also the solution spearheaded by the Finnish KiMuRa project, where Exel had an important role in establishing a technically and commercially viable recycling solution for composites.  

Internally, we continue our efforts to make Exel’s operations more sustainable. The efforts include reducing our waste to landfill as a journey towards zero, choosing renewable energy sources for our operations, and exploring alternative raw materials with greater environmental profiles.  

In the quarter we also furthered the process to review and refresh Exel’s strategy and our operating model. The review has already presented various opportunities in the external market as well as potential areas for internal improvement. We look forward to presenting our updated strategy later this year.  

In the meantime, I wish you a pleasant continued late summer season.   

Sincerely,

Paul Sohlberg

Consolidated key figures

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) Can include order cancellations during the quarter

Revenue by customer industry

Revenue by region1)

1) Revenue by customer location

Vantaa, 18 August 2023

Exel Composites Plc
Board of Directors

Financial results briefing

Exel Composites will hold a financial results briefing regarding the Q2 2023 results today at 12:30 EET. To participate in the online event, please register in advance by sending an email to investor@exelcomposites.com.

This release is a summary of Exel Composites’ Half Year Report January-June 2023. The complete report is attached to this release as a pdf file. It is also available at the company’s website at exelcomposites.com.

For further information, please contact:

Mikko Rummukainen, CFO
tel. +358 40 566 2623

mikko.rummukainen@exelcomposites.com

Sanna Ahvenniemi, Head of Investor Relations

tel. +358 40 864 3000

sanna.ahvenniemi@exelcomposites.com

Exel Composites in brief

At Exel Composites, we use over 60 years’ experience to solve challenges and help customers save resources. 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 from wind power and transportation to building and infrastructure.

Our collaborative approach and global footprint set us apart from our competition. We use our expertise to help customers reduce 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 approximately 650 forward-thinking professionals around the world and is listed on Nasdaq Helsinki. To find out more about our offering and company please visit www.exelcomposites.com.

Exel Composites Plc