EXEL OYJ?S INTERIM REPORT, JANUARY 1 - J
EXEL OYJ STOCK EXCHANGE RELEASE 22.7.2004 at 11.00 1 (7)
EXEL OYJS INTERIM REPORT, JANUARY 1 - June 30, 2004
Overview:
- Record sales also in the second quarter, EUR 23.2 million (13.7),
an increase of 69%
- First half-year sales EUR 43.7 million (26.0), up by 68%; both
business divisions, Industry and Sport, achieved strong sales growth
- Operating profit for first half-year EUR 6.8 million (2.0), an
increase of 243%
- Second half-year sales and profit performance continue to look
strong
Operating environment
There has been strong demand in our main markets in Central Europe
especially for carbon-fibre-based profiles and products belonging to
our Nordic Fitness SportsTM (NFS) concept. At the same time, the
products of earlier development projects have become heavily
commercialized. We expect this trend to continue in the near future.
No significant changes have occurred among our competitors. Due to our
strong growth, we have further strengthened our market shares in the
pultrusion market.
Certain of our major customers are transferring their production
nearer the main markets, e.g. in North America and the Far East, which
must also be taken into account in planning Exels future production
expansion and capital expenditure.
There is growing pressure for price increases of many raw materials.
This is especially so with carbon fibre, partly due to growth in
demand.
Industry division
The Industry divisions net sales increased during the first half of
the year by 91% to EUR 25.1 million (13.2). The divisions sales grew
due to the acquisition of a new production facility in Belgium
(roughly EUR 4.4 million) and strong growth in the specialty profiles
market, mainly from new customer applications. Profitability also
remained good as operating profit increased to EUR 3.6 million (1.5)
due to sales volume growth, improved production efficiency and good
capacity utilization rate. However, keen price competition continues
in the marketplace.
Product development projects continue in our profiles product group,
mainly in relation to applications for the automotive industry,
infrastructure construction and wind power.
Antenna profile markets remained strong throughout the review period,
due to the revival of GSM and 3G network construction, especially
2 (7)
outside Europe. Network construction pace is expected to level off in
the second half-year.
Sales of paper machine profiles increased during the review period.
Growth potential is provided particularly by new profile products
designed to improve machine uptime ratios, facilitate runnability and
lighten and/or stiffen structures.
The sales of lattice masts continued to set new records during the
period. Demand is expected to maintain at a high level in anticipation
of the International Civil Aviation Organizations (ICAO) frangibility
regulations that take effect in 2005 and require airport lighting
system support masts to be breakable upon possible impact.
The integration of Bekaerts pultrusion business acquired in January
2004 is progressing in both Belgium and Spain. Efficiency measures in
various process segments are progressing on schedule, and operational
profitability is expected to improve by the end of the year.
Sport division
The Sport divisions net sales increased during the first half of the
year by 45% to EUR 18.6 million (12.8). The NFSTM concept is gaining
customers and attracting strong interest in the otherwise slowly
growing sporting goods markets. Profitability improved significantly,
and the operating profit increased to EUR 3.2 million (0.5).
The NFSTM, and particularly the Nordic Walking market in German-
speaking Central Europe, is continuing its strong growth. Exels
market share has remained solid within the sport. The new collection
for 2005/2006 has been very well-received by customers. Nordic Walking
is currently being introduced to new countries. Advance sales of other
pole products are at the previous years level.
Floorball sales in our main markets, i.e. Finland, Sweden and
Switzerland, have also remained at last years levels. Exel is
currently making efforts to create markets in new countries.
Laminate sales have remained at the previous years level, although
the sales of Exel GmbHs Plastics products have increased slightly on
the previous year. New laminate applications have been introduced to
the markets. In water sports, demand for windsurfing masts is holding
steady, but the overall market continues to shrink worldwide. As a
result, sales are forecast to be lower than in the previous year.
Net sales and profits
Consolidated net sales increased by 68% compared with the
corresponding period last year. Net sales growth by business division
was as follows:
Net sales
(EUR million) 1-6/2004 1-6/2003 Change
3 (7)
Industry 25.1 13.2 90.7%
Sport 18.6 12.8 44.7%
Total 43.7 26.0 68.0%
Consolidated operating profit totalled EUR 6.8 million (2.0). Growth
in the operating profit was as follows:
Operating profit
(EUR million) 1-6/2004 1-6/2003 Change
Industry 3.6 1.5 137%
Sport 3.2 0.5 603%
Total 6.8 2.0 243%
The profitability improvement was mainly due to increased sales
volumes, good capacity utilization and improved production efficiency
in both business divisions.
Net financial expenses
Net financial expenses totalled EUR 202,000 (252,000). Despite growth
in working capital and the acquisition of Bekaerts pultrusion
operations, it was possible to reduce net financial expenses due to
the ambitious loan repayment programme of 2003 and strong cash flow
from operations.
Balance sheet, financing and liabilities
The balance sheet total stood at EUR 47.5 (34.6) million on June 30,
2004. The acquisition of Bekaerts pultrusion operations contributed
some EUR 7.2 million to this increase, with the rest being accounted
for by the working capital needs of strong net sales growth. Interest-
bearing net liabilities increased to EUR 11.3 (9.6) million due to the
acquisition. Total liabilities remained roughly unchanged.
Investments
The Groups investments in fixed assets totalled EUR 4.3 million
(1.0), of which the acquisition of Bekaerts pultrusion operations
accounted for EUR 2.6 million (total acquisition price approx. EUR 7.2
million). Projects to expand capacity in the Sport division (Nordic
Walking products) and to automate production are underway. A new
production line was completed in the first half-year at Exels
Kiihtelysvaara facility and a decision to build a second line has been
made. Capital expenditure on the above capacity expansions is
estimated to total approximately EUR 3.0 million in 2004.
Personnel
The number of personnel on June 30, 2004 was 467 (359). The increase
was caused by the integration of Bekaerts pultrusion operations into
the Group (some 40 persons) and additional labour needs at Finnish
factories due to higher production volumes (some 65 persons).
4 (7)
Shares and share ownership
Exel Oyjs share capital totals EUR 1,884,120, and consists of
5,383,200 shares each with a nominal value of EUR 0.35. The members of
the Board of Directors and the President hold 98,100 shares, or 1.8 %
of the share capital.
The number of shares traded on the Helsinki Exchanges during the
review period amounted to 33.2% of all shares. During the period the
highest share price quoted was EUR 16.25, and the lowest EUR 11.75.
The closing price for the review period was EUR 16.11. Market
capitalization was EUR 86.7 million on June 30, 2004.
Flagging notifications
On June 9, 2004 Exel was notified that Metso Capital Oys ownership
share had fallen below one-tenth of Exels share capital and voting
rights as a result of share transactions. Metso Capital sold 550,000
shares of the company. After the transaction Metso Capital owns no
Exel shares.
Corporate governance
Exels corporate governance complies with the Companies Act, the
legislation covering the securities market and other official
regulations related to the governance of public joint stock companies.
Furthermore, Exel follows the recommendations issued by Helsinki
Exchanges, the Central Chamber of Commerce and the Confederation of
Finnish Industry and Employers on the governance of listed companies.
For further information on the corporate governance, please visit our
website at www.exel.net.
Prospects for the rest of 2004
Demand for Nordic Walking products and specialty profiles is expected
to remain high throughout the year. The antenna profile market growth
is expected to level off in the second half-year. Integration of the
Belgium operations into the Exel Group is progressing as planned, but
will still require some resources. There are upward pressures on raw
materials prices, and carbon fibre prices are forecast to rise. Net
sales for 2004 are expected to be significantly higher than in 2003
due to both the Belgium acquisition and strong organic growth. Net
sales are expected to increase strongly also in the second half of the
year, although not as quickly as in the first half of the year. Profit
before income taxes and financial expenses is expected to improve
significantly on the previous year due to both net sales growth and
more efficient operations.
Mäntyharju, July 22, 2004
Exel Oyj Ari Jokelainen
Board of Directors President
5 (7)
EXEL GROUP
CONSOLIDATED INCOME STATEMENT
EUR 1,000 1-6/04 1-6/03 change % 1-12/03
NET SALES 43,695 26,006 68 57,281
Increase(+)/decrease(-) of finished
goods and work in progress 2,580 977 164 834
Production for own use 133 93 44 323
Other operating income 120 191 -37 342
Materials and services -17,908 -9,859 82 -21,716
Personnel expenses -9,480 -6,939 37 -14,329
Depreciation -1,689 -1,627 4 -3,184
Other operating expenses -10,642 -6,856 55 -14,205
OPERATING PROFIT 6,810 1,986 243 5,345
Financial income and expenses (net) -202 -252 -20 -436
PROFIT BEFORE EXTRAORDINARY ITEMS 6,608 1,734 281 4,910
Extraordinary items
PROFIT BEFORE INCOME TAXES 6,608 1,734 281 4,910
Income taxes -2,138 -600 256 -1,537
PROFIT FOR THE PERIOD 4,469 1,134 294 3,373
The taxes taken into account are based on the profit for the period.
CONSOLIDATED BALANCE SHEET
EUR 1,000 30.6.04 30.6.03 change% 31.12.03
ASSETS
Non-current assets
Intangible assets 3,411 3,179 7 3,126
Consolidation goodwill 294 366 -20 330
Tangible assets 12,689 10,389 22 10,470
Investment 95 127 -25 95
Current assets
Inventories 12,218 9,258 32 8,747
Receivables 13,316 8,756 52 8,626
Cash in hand and at bank 5,504 2,531 117 2,753
Total 47,527 34,607 37 34,147
6 (7)
LIABILITIES AND SHAREHOLDERS
EQUITY
Equity
Share capital 1,884 1,855 2 1,870
Other equity 15,814 13,164 20 15,666
Liabilities
Deferred tax liability 15 106 -86 14
Non-current 7,768 5,157 51 4,077
Current 22,046 14,325 54 12,521
Total 47,527 34,607 37 34,147
FUNDS STATEMENT
EUR 1,000 1-6/04 1-6/03 change % 1-12/03
Cash flow from business operations 6,919 748 825 6,409
Acquired business operations -7,181
Investment in tangible and
intangible assets -1,588 -1,005 58 -2,599
Income from surrender of tangible
and intangible assets 79
Rights issue 282
Withdrawal of non-current loans 5,000 30 16,567 53
Repayments of non-current loans -1,060 -1,078 -2 -2,192
Withdrawals of/repayments of
current loans 4,970 2,367 110 -747
Dividend paid -4,307 -1,060 306 -1,060
Other -2 4 -150 4
Change in liquid funds 2,751 6 45,750 229
30.6.04 30.6.03 change% 31.12.03
Indicators (EUR 1,000)
Gross investment 4,257 1,005 324 2,519
% of net sales 10% 4% 4%
R&D expenses 997 806 24 1,707
% of net sales 2% 3% 3%
Average personnel 437 356 23 355
Personnel at end of period 467 359 30 355
Order book 13,986 10,945 28 11,449
Solvency ratio, % 37% 44% 52%
Return on equity, % 46% 15% 21%
Return on investment, % 51% 15% 21%
Net gearing % 64% 64% 29%
Earnings per share, EUR 0.83 0.21 294 0.64
Equity per share, EUR 3.29 2.79 18 3.26
Derivatives
Derivatives are used for hedging purposes only.
7 (7)
Interest rate risk
The companys long-term debt is subject to interest rate risk, which
is why it has fixed the rate of interest on some of its borrowings
through swap agreements that extend to the years 2007-2009.
Currency risk
The companys US dollar-denominated raw materials purchases are
partially hedged against currency risk through 11-month forward
contracts.
Interest rate derivatives Face value Fair market value (NPV)
Interest swaps 3,081 -10
Currency derivatives
Forward contracts 672 20
Consolidated contingent liabilities on June 30, 2004
Corporate mortgages 12,500 12,500 12,500
Mortgages on land and buildings 2,954 2,954 2,954
Other contingent liabilities 2,522 2,536 2,390
