Exel Composites Plc's interim report for January 1 - March 31, 2012
EXEL COMPOSITES PLC STOCK EXCHANGE RELEASE 4.5.2012 at 9.00 1 (11)
EXEL COMPOSITES PLC’S INTERIM REPORT FOR JANUARY 1 – MARCH 31, 2012
JANUARY – MARCH 2012 HIGHLIGHTS
- Net sales were EUR 20.5 (21.5) million in the first quarter of 2012, down by -4.8 per cent on the previous year
- Operating profit was EUR 1.8 million in the first quarter of 2012 compared to EUR 3.1 million in the first quarter of 2011, or 8.9 (14.6) per cent of net sales
- Net operative cash flow was positive at EUR +1.5 (+1.6) million
- Fully diluted earnings per share were EUR 0.11 (0.20)
OUTLOOK FOR 2012
Major uncertainties relating to general growth prospects in the economy continue, and these uncertainties may affect the demand for composite products. Due to the prevailing state of the markets, the visibility is low.
Exel Composites maintains its cautious stance in 2012, but will continue to drive the long-term initiatives to strengthen the Company’s competitive position and to invest in growing market segments to pursue the strategy of profitable growth.
COMMENTS BY THE CEO
“The weak demand continued in the first quarter of 2012. Compared to the first quarter of 2011, net sales decreased by 4.8 per cent. However, our net sales improved slightly on the previous quarters and were EUR 20.5 million. Market demand continued to be good in the building, construction and infrastructure market segment, as well as in the electrical industry. Demand in telecommunication products and the machine industry decreased on the previous year.
The Group’s operating profit for the first quarter of 2012 was EUR 1.8 (3.1) million. The decreased sales volumes and increased employee expenses were the main reasons for the decrease in the operating profit. Moreover, increased raw material costs and ramp-up costs of new products had an adverse effect on the margins. We continued measures to mitigate the effects, and were able to pass part of the rising costs to the market by increasing product prices. We shall continue price increases to offset the negative impact.
The ExelWay project that was launched in the latter half of 2011 was continued. The project aims at improving co-operation and harmonizing processes between the units. Project findings including new and efficient business processes and best practices are to be implemented to improve productivity.
Visibility remains low and we remain cautious. However, we will continue our strategy of profitable growth and to invest in the development of new products, to expand our customer base by reinforcing sales and to maintain good cost control. We are prepared to take more efficient actions to cope with continuing slow demand and uncertainty.”
CONSOLIDATED KEY FIGURES, EUR million
(unaudited)
| 1.1. – 31.3. 2012 | 1.1 – 31.3. 2011 | Change % | 1.1. – 31.12. 2011 | |
| Net sales | 20.5 | 21.5 | -4.8 | 85.1 |
| Operating profit | 1.8 | 3.1 | -41.7 | 11.1 |
| % of net sales | 8.9 | 14.6 | 13.0 | |
| Profit for the period | 1.3 | 2.3 | -43.8 | 7.9 |
| Shareholders’ equity | 30.3 | 34.0 | -11.0 | 35.1 |
| Net interest-bearing liabilities | -2.4 | -2.4 | 0.3 | -1.7 |
| Capital employed | 38.4 | 44.2 | -13.2 | 43.2 |
| Return on equity, % | 16.0 | 28.1 | | 23.5 |
| Return on capital employed, % | 18.1 | 29.1 | 26.1 | |
| Equity ratio, % | 51.5 | 57.0 | 61.6 | |
| Net gearing, % | -8.1 | -7.2 | -5.0 | |
| Earnings per share, EUR | 0.11 | 0.20 | 0.67 | |
| Earnings per share, diluted, EUR | 0.11 | 0.20 | 0.67 | |
| Equity per share, EUR | 2.54 | 2.86 | 2.95 |
IFRS REPORTING
This interim report has been prepared in accordance with the recognition and measurement principles of IFRS, which are the same as in the 2011 financial statements.
FINANCIAL PERFORMANCE
The softening of the overall demand that started towards the end of 2011 continued in the first quarter of 2012. Compared to the first quarter of 2011, net sales decreased by 4.8 per cent. However, our net sales improved slightly on the previous quarters and were EUR 20.5 million. Since year-end the order book increased by EUR 1.3 million to EUR 14.5 (14.4) million. Market demand continued to be good in the building, construction and infrastructure market segment, as well as in the electrical industry. Demand in telecommunication products and the machine industry softened on the previous year.
Exel Composites’ operating profit for the first quarter of 2012 was EUR 1.8 (3.1) million or 8.9 (14.6) per cent of net sales. The decreased sales volumes and increased employee expenses were the main reasons for the decrease in the operating profit. The increased raw material costs and ramp-up costs of new products had an adverse effect on the margins. Exel Composites continued measures to mitigate the effects, and passed part of the rising costs to the market by increasing product prices. Exel Composites shall continue price increases to offset the negative impact.
The Group’s net financial expenses in the first quarter of 2012 were EUR 0.1 (0.0) million. The Group’s profit before taxes was EUR 1.7 (3.1) million and profit after taxes EUR 1.3 (2.3) million.
Earnings per share were EUR 0.11 (0.20). Return on capital employed was 18.1 (29.1) per cent. Return on equity was 16.0 (28.1) per cent.
BALANCE SHEET AND FINANCIAL POSITION
Cash flow from business operations was positive at EUR 1.5 (1.6) million. Cash flow before financing, but after capital expenditure, amounted to EUR 0.7 (1.1) million.
Capital expenditure was financed with cash flow from business operations. At the end of the review period, the Group’s liquid assets stood at EUR 10.6 (12.7) million.
The Group’s consolidated total assets at the end of the period under review were EUR 58.8 (59.8) million.
Interest-bearing liabilities amounted to EUR 8.1 (10.2) million. Net interest-bearing liabilities were EUR -2.4 (-2.4) million.
The dividend for 2011 resolved by the Annual General Meeting on 29 March 2012 totaling EUR 5.9 (5.9) was paid on 12 April 2012.
Equity at the end of the first quarter of 2012 was EUR 30.3 (34.0) million and equity ratio 51.5 (57.0) per cent. The net gearing ratio was -8.1 (-7.2) per cent.
CAPITAL EXPENDITURE AND DEPRECIATION
The capital expenditure on fixed assets amounted to EUR 0.8 (0.6) million.
Total depreciation of non-current assets during the period under review amounted to EUR 0.7 (0.7) million.
PERSONNEL
The number of Exel Composites Group employees on 31 March 2012 was 433 (418), of whom 200 (196) worked in Finland and 233 (222) in other countries. The average number of personnel during the financial year was 428 (416).
Kim Sjödahl was appointed SVP Product and Technology Development and member of the Group Management Team as of 1 February 2012.
The ExelWay project that was launched in the latter half of 2011 was continued. The project aims at improving co-operation and harmonizing processes between the units. Project findings including new and efficient business processes and best practices are to be implemented as the project proceeds.
SHARES AND SHARE CAPITAL
At the end of March 2012, Exel Composites’ share capital was EUR 2,141,431.74 and the number of shares was 11,896,843. There were no changes in the share capital during the review period.
Based on the closing price on 31 March 2012, the market capitalization totaled EUR 98.6 (110.4) million. During the reporting period 241,203 (343,137) shares were traded, accounting for 2.0 (2.9) per cent of the average number of shares outstanding.
The highest share quotation was EUR 8.79 (9.30) and the lowest EUR 7.70 (6.85). The share price closed at EUR 8.29 (9.28). The average share price during the period under review was EUR 8.36 (7.90).
Own shares
Exel Composites did not hold any of its own shares during the period of review.
SHAREHOLDERS AND DISCLOSURES
Exel Composites had a total of 2,726 (2,522) shareholders on 31 March 2012. Information on Exel Composites’ shareholders is available on the Company website at www.exelcomposites.com.
Exel Composites received no flagging notifications during the period under review.
ANNUAL GENERAL MEETING
Exel Composites’ Annual General Meeting (“AGM”) was held on 29 March 2012. The financial accounts of the Group were approved and the members of the Board of Directors and the President were discharged from their liabilities for the financial year 2011. The AGM approved the Board of Directors’ proposal to distribute a dividend of EUR 0.50 per share for the financial period that ended on 31 December 2011.
The Annual General Meeting authorized the Board of Directors to acquire the Company’s own shares by using unrestricted equity. The maximum amount to be acquired is 600,000 shares. The authorization is valid until the next Annual General Meeting.
The AGM confirmed the number of the members of the Board of Directors as five and elected a new Board. All the members of the Board of Directors were re-elected: Heikki Hiltunen, Peter Hofvenstam, Göran Jönsson, Reima Kerttula and Heikki Mairinoja. At the formative meeting of the Board of Directors held after the AGM, the Board of Directors elected from among its members Peter Hofvenstam as its Chairman.
The AGM decided that the annual remuneration for the Board members be unchanged, i.e. the Chairman of the Board of Directors be paid a yearly remuneration of EUR 34,000 and additionally EUR 1,500 for attendance at Board and committee meetings and other similar Board assignments and the other Board members be paid a yearly remuneration of EUR 16,000 and additionally EUR 1,000 for attendance at Board and committee meetings and other similar Board assignments and that travel expenses and other out-of-pocket expenses arising from the Board work be compensated in accordance with the Company’s established practice and travel rules. Out of the yearly remuneration 60 per cent will be paid in cash and 40 per cent in Exel Composites Plc shares, which were acquired directly for and on behalf of the members of the Board of Directors during 2 April – 10 April 2012 from the stock exchange in amounts corresponding to EUR 13,600 for the Chairman and EUR 6,400 for each of the other members.
MAJOR NEAR-TERM RISKS AND UNCERTAINTIES
The most significant near-term business risks are related to the general economic development, government regulations and a possible new financial crisis in the Euro area as well as to market demand in certain market segments. Raw material prices, energy cost and other cost increases may continue and put pressure on profitability. In case the European Commission decides on new anti-dumping tariffs to be imposed on Chinese glass fiber, it may have a negative effect on the profitability if the rising costs of glass fiber can only be transferred partially to product prices. Currency rate changes, price competition and alternative competing materials may also have a negative effect on the result. The availability and cost of financing may continue to have an effect on the demand and increase the risk of credit losses.
OUTLOOK FOR 2012
Major uncertainties relating to general growth prospects in the economy continue, and these uncertainties may affect the demand for composite products. Due to the prevailing state of the markets, the visibility is low.
Exel Composites maintains its cautious stance in 2012, but will continue to drive the long-term initiatives to strengthen the Company’s competitive position and to invest in growing market segments to pursue the strategy of profitable growth.
CONSOLIDATED COMPREHENSIVE INCOME STATEMENT
(unaudited)
| EUR thousand | 1.1. – 31.3. 2012 | 1.1. – 31.3. 2011 | Change, % | 1.1. – 31.12. 2011 |
| Net sales | 20,519 | 21,548 | -4.8 | 85,136 |
| Materials and services | -8,119 | -8,378 | 3.1 | -33,358 |
| Employee benefit expenses | -5,618 | -5,221 | -7.6 | -21,133 |
| Depreciation and impairment | -742 | -684 | -8.5 | -2,702 |
| Other operating expenses | -4,452 | -4,262 | -4.5 | -17,709 |
| Other operating income | 240 | 135 | 77.8 | 849 |
| Operating profit | 1,828 | 3,137 | -41.7 | 11,082 |
| Net financial items | -83 | -23 | -260.9 | -284 |
| Profit before tax | 1,745 | 3,115 | -44.0 | 10,798 |
| Income taxes | -435 | -782 | 44.4 | -2,852 |
| Profit/loss for the period | 1,310 | 2,333 | -43.8 | 7,946 |
| Other comprehensive income: | | |||
| Exchange differences on translating foreign operations | -205 | -867 | 76.4 | 893 |
| Other comprehen-sive income, net of tax | 0 | 0 | 0 | 0 |
| Total comprehensive income | 1,105 | 1,466 | -24.6 | 8,839 |
| Profit/loss attributable to: | ||||
| Equity holders of the parent company | 1,310 | 2,333 | | 7,946 |
| Comprehensive income | ||||
| attributable to: | ||||
| Equity holders of the parent company | 1,105 | 1,466 | | 8,839 |
| Earnings per share, diluted and undiluted, EUR | 0.11 | 0.20 | 0.67 |
CONDENSED CONSOLIDATED BALANCE SHEET
| EUR thousand | 31.3.2012 | 31.3.2011 | Change | 31.12.2011 |
| ASSETS | ||||
| Non-current assets | ||||
| Goodwill | 11,854 | 11,231 | 623 | 11,939 |
| Other intangible assets | 1,803 | 2,203 | -400 | 1,961 |
| Tangible assets | 11,730 | 10,248 | 1,482 | 11,612 |
| Deferred tax assets | 147 | 1,661 | -1,514 | 148 |
| Other non-current assets | 65 | 63 | 2 | 64 |
| Non-current assets total | 25,600 | 25,406 | 193 | 25,723 |
| Current assets | ||||
| Inventories | 10,278 | 9,480 | 798 | 10,499 |
| Trade and other receivables | 12,389 | 12,258 | 131 | 10,985 |
| Cash at bank and in hand | 10,551 | 12,662 | -2,111 | 9,840 |
| Current assets total | 33,218 | 34,400 | -1,182 | 31,323 |
| Total assets | 58,818 | 59,805 | -987 | 57,046 |
| EQUITY AND LIABILITIES | ||||
| Shareholders’ equity | ||||
| Share capital | 2,141 | 2,141 | 0 | 2,141 |
| Other reserves | 30 | 30 | 0 | 30 |
| Invested unrestricted equity fund | 8,488 | 8,488 | 0 | 8,488 |
| Translation differences | 3,999 | 2,488 | 1,511 | 4,204 |
| Retained earnings | 14,306 | 18,536 | -4,230 | 12,309 |
| Profit for the period | 1,310 | 2,333 | -1,023 | 7,946 |
| Total equity attributable to equity holders of the parent company | 30,274 | 34,017 | -3,743 | 35,118 |
| Total equity | 30,274 | 34,017 | -3,743 | 35,118 |
| Non-current liabilities | ||||
| Interest-bearing liabilities | 8,103 | 10,206 | -2,103 | 8,088 |
| Interest-free liabilities | 400 | 364 | 36 | 392 |
| Deferred tax liabilities | 520 | 542 | -22 | 539 |
| Current liabilities | ||||
| Interest-bearing liabilities | 10 | 10 | 0 | 10 |
| Trade and other non-current liabilities | 19,512 | 14,667 | 4,845 | 12,900 |
| Total liabilities | 28,544 | 25,788 | 2,756 | 21,928 |
| Total equity and liabilities | 58,818 | 59,805 | -987 | 57,046 |
STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
| EUR thousand | Share Capital | Other Reserves | Invested Unrestricted Equity Fund | Translation Differences | Retained Earnings | Total |
| Balance at 1 January 2011 | 2,141 | 37 | 8,488 | 3,311 | 18,529 | 32,507 |
| Comprehensive result | 0 | 0 | 0 | -867 | 2,333 | 1,466 |
| Other items | 0 | -7 | 0 | 0 | 52 | 44 |
| Dividend | 0 | 0 | ||||
| Balance at 31 March 2011 | 2,141 | 30 | 8,488 | 2,444 | 20,914 | 34,017 |
| Balance at 1 January 2012 | 2,141 | 30 | 8,488 | 4,204 | 20,255 | 35,118 |
| Comprehensive result | 0 | 0 | 0 | -205 | 1,310 | 1,105 |
| Other items | 0 | 0 | 0 | 0 | 0 | |
| Dividend | 0 | -5,948 | -5,948 | |||
| Balance at 31 March 2012 | 2,141 | 30 | 8,488 | 3,999 | 15,616 | 30,274 |
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
| EUR thousand | 1.1. – 31.3. 2012 | 1.1. – 31.3. 2011 | Change | 1.1. – 31.12.2011 |
| Cash Flow from Operating Activities | ||||
| Profit for the period | 1,310 | 2,333 | -1,023 | 7,946 |
| Adjustments | 1,153 | 1,222 | -69 | 6,308 |
| Change in working capital | -179 | -1,605 | 1,426 | -2,216 |
| Cash Flow Generated by Operations | 2,284 | 1,950 | 334 | 12,038 |
| Interest paid | -47 | -50 | 3 | -349 |
| Interest received | 20 | 27 | -7 | 129 |
| Other financial items | 14 | 41 | -27 | -191 |
| Income taxes paid | -767 | -337 | -430 | -2,067 |
| Net Cash Flow from Operating Activities | 1,504 | 1,631 | -127 | 9,560 |
| Capital expenditure | -790 | -573 | -217 | -3,208 |
| Proceeds from sale of fixed assets | 0 | 0 | 0 | 0 |
| Cash Flow from Investing Activities | -790 | -573 | -217 | -3,208 |
| Cash Flow from Financing | ||||
| Share issue | 0 | 0 | 0 | 0 |
| Proceeds from long-term borrowings | 0 | 0 | 0 | 0 |
| Instalments of long-term borrowings | 0 | 0 | 0 | -2,160 |
| Change in short-term loans | 0 | 0 | 0 | 0 |
| Instalments of finance lease liabilities | -3 | -2 | -1 | -10 |
| Dividends paid | 0 | 0 | 0 | -5,948 |
| Net Cash Flow from Financing | -3 | -2 | -1 | -8,118 |
| Change in Liquid Funds | 711 | 1,056 | -345 | -1,766 |
| Liquid funds in the beginning of period | 9,840 | 11,606 | -1,766 | 11,606 |
| Change in liquid funds | 711 | 1,056 | -345 | -1,766 |
| Liquid funds at the end of period | 10,551 | 12,662 | -2,111 | 9,840 |
QUARTERLY KEY FIGURES
| EUR thousand | I/ 2012 | IV/ 2011 | III/ 2011 | II/ 2011 | I/ 2011 |
| Net sales | 20,519 | 19,758 | 20,463 | 23,367 | 21,548 |
| Materials and services | -8,119 | -7,529 | -8,156 | -9,295 | -8,378 |
| Employee benefit expenses | -5,618 | -5,419 | -4,820 | -5,672 | -5,221 |
| Depreciation and impairment | -742 | -672 | -683 | -663 | -684 |
| Operating expenses | -4,452 | -4,668 | -4,356 | -4,424 | -4,262 |
| Other operating income | 240 | 284 | 113 | 317 | 135 |
| Operating profit | 1,828 | 1,754 | 2,560 | 3,630 | 3,137 |
| Net financial items | -83 | -31 | -126 | -104 | -23 |
| Profit before taxes | 1,745 | 1,723 | 2,434 | 3,527 | 3,115 |
| Income taxes | -435 | -459 | -664 | -948 | -782 |
| Profit/loss for the period from continuing operations | 1,310 | 1,264 | 1,770 | 2,579 | 2,333 |
| Profit/loss for the period | 1,310 | 1,264 | 1,770 | 2,579 | 2,333 |
| Earnings per share, EUR | 0.11 | 0.11 | 0.15 | 0.22 | 0.20 |
| Earnings per share, EUR, diluted | 0.11 | 0.11 | 0.15 | 0.22 | 0.20 |
| Average number of shares, undiluted, | |||||
| 1,000 shares | 11,897 | 11,897 | 11,897 | 11,897 | 11,897 |
| Average number of shares, diluted, | |||||
| 1,000 shares | 11,897 | 11,897 | 11,897 | 11,897 | 11,897 |
| Average number of personnel | 428 | 433 | 433 | 432 | 416 |
COMMITMENTS AND CONTINGENCIES
| EUR thousand | 31.3.2012 | 31.3.2011 |
| On own behalf | ||
| Mortgages | 2,783 | 2,783 |
| Corporate mortgages | 12,500 | 12,500 |
| Lease liabilities | ||
| - in next 12 months | 934 | 1,068 |
| - in next 1-5 years | 3,017 | 2,111 |
| Other commitments | 43 | 6 |
DERIVATIVE FINANCIAL INSTRUMENTS
| Nominal values EUR thousand | 31.3.2012 | 31.3.2011 |
| Interest rate derivatives | ||
| Interest rate swaps | 10,000 | 10,000 |
CONSOLIDATED KEY FIGURES
| EUR thousand | 1.1. - 31.3. 2012 | 1.1. – 31.3. 2011 | Change % | 1.1. – 31.12. 2011 |
| Net sales | 20,519 | 21,548 | -4.8 | 85,136 |
| Operating profit | 1,829 | 3,137 | -41.7 | 11,082 |
| % of net sales | 8.9 | 14.6 | 13.0 | |
| Profit before tax | 1,745 | 3,115 | -44.0 | 10,798 |
| % of net sales | 8.5 | 14.5 | 12.7 | |
| Profit for the period | 1,310 | 2,333 | -43.8 | 7,946 |
| % of net sales | 6.4 | 10.8 | 9.3 | |
| Shareholders’ equity | 30,274 | 34,017 | -11.0 | 35,118 |
| Interest-bearing liabilities | 8,113 | 10,216 | -20.6 | 8,098 |
| Cash and cash equivalents | 10,551 | 12,662 | -16.7 | 9,840 |
| Net interest-bearing liabilities | -2,438 | -2,446 | 0.3 | -1,742 |
| Capital employed | 38,387 | 44,232 | -13.2 | 43,216 |
| Return on equity, % | 16.0 | 28.1 | 23.5 | |
| Return on capital employed, % | 18.1 | 29.1 | 26.1 | |
| Equity ratio, % | 51.5 | 57.0 | 61.6 | |
| Net gearing, % | -8.1 | -7.2 | -5.0 | |
| Capital expenditure | 790 | 573 | 37.8 | 3,208 |
| % of sales | 3.8 | 2.7 | 3.8 | |
| Research and development costs | 411 | 364 | 12.9 | 1,639 |
| % of net sales | 2.0 | 1.7 | 1.9 | |
| Order stock | 14,459 | 14,430 | 0.2 | 13,114 |
| Earnings per share, EUR | 0.11 | 0.20 | -43.9 | 0.67 |
| Earnings per share, EUR, diluted | 0.11 | 0.20 | -43.9 | 0.67 |
| Equity per share, EUR | 2.54 | 2.86 | -11.2 | 2.95 |
| Average number of shares | ||||
| - cumulative | 11,897 | 11,897 | 0.0 | 11,897 |
| - cumulative, diluted | 11,897 | 11,897 | 0.0 | 11,897 |
| Average number of employees | 428 | 416 | 2.9 | 428 |
PRESS CONFERENCE
Exel Composites will hold an analyst and press conference regarding the interim report today Friday 4 May 2012 at 12.30 p.m. in the Pavilion Cabinet of the Scandic Hotel Simonkenttä at Simonkatu 9, Helsinki, Finland.
FORWARD-LOOKING STATEMENTS
Certain statements in this report, which are not historical facts, including, without limitation, those regarding expectations for general economic development and market situation; regarding customer industry profitability and investment willingness; regarding Company growth, development and profitability; regarding cost savings; regarding fluctuations in exchange rates and interest levels; regarding the success of pending and future acquisitions and restructurings; and statements preceded by "believes," "expects," "anticipates," "foresees" or similar expressions are forward-looking statements.
These statements are based on current expectations and currently known facts. Therefore, they involve risks and uncertainties that may cause actual results to differ materially from results currently expected by the Company.
Other unknown or unpredictable factors or underlying assumptions subsequently proving to be incorrect could cause actual results to differ materially from those in the forward-looking statements. Exel Composites does not undertake any obligation to publicly update or revise forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent legally required.
Vantaa, 4 May 2012
EXEL COMPOSITES PLC Vesa Korpimies
Board of Directors President and CEO
FURTHER INFORMATION:
Vesa Korpimies, President and CEO, tel. +358 50 590 6754, or email vesa.korpimies@exelcomposites.com
Ilkka Silvanto, CFO and Administrative Director, tel. +358 50 598 9553, or email ilkka.silvanto@exelcomposites.com
DISTRIBUTION
NASDAQ OMX Helsinki Ltd.
Main news media
www.exelcomposites.com
EXEL COMPOSITES IN BRIEF
Exel Composites (www.exelcomposites.com) is a technology company which designs, manufactures and markets composite profiles and tubes for industrial applications. The Group is the leading composite profile manufacturer in the world and concentrates on growing niche segments.
The core of the operations is based on own, internally developed composite technology, product range based on it and a strong market position in selected segments with a strong quality and brand image. Profitable growth is pursued by a relentless search for new applications and development in co-operation with customers. The personnel’s expertise and high level of technology play a major role in Exel Composites’ operations.
Exel Composites Plc share is listed in the Small Cap segment of NASDAQ OMX Helsinki Ltd.