EXEL OYJ'S INTERIM REPORT, JANUARY 1 ? SEPTEMBER 30, 2004
EXEL OYJ STOCK EXCHANGE RELEASE 2.11.2004 at 11 a.m. 1 (7)
EXEL OYJS INTERIM REPORT, JANUARY 1 - SEPTEMBER 30, 2004 STRONG POSITIVE DEVELOPMENT CONTINUED Demand for Exel Groups specialty products continued to be strong in the third quarter of 2004 and the consolidated net sales in January-September 2004 increased by 57% to EUR 64.1 million. Operating profit improved significantly by 159% to EUR 10.0 million. Highlights of result: - Sales from January-September continued their strong increase and totalled EUR 64.1 million (40.8), an increase of 57% - Strong growth continued in the third quarter, with sales of EUR 20.4 million (14.8), up 38% - The Industry divisions nets sales increased by 81% to EUR 36.7 (20.2) million - Operating profit from January-September continued to grow substantially, totalling EUR 10.0 million (3.9), a growth of 159% - Growth in the third quarter was also profitable and operating profit grew by 70% to EUR 3.2 million (1.9) - The development of sales and profits continue to look strong for the rest of the year Operating environment The demand for specialty products, in particular carbon-fibre-based profiles and products belonging to Exels Nordic Fitness SportsTM (NFS) concept, has continued to be strong in Central Europe, Exels main market. Exel expects this trend to continue in the near future. No significant changes have occurred among the main competitors and, due to the strong growth, Exel has further strengthened its market share in the pultrusion market. The Far East will be increasingly significant, both as a new market area and as a production location of goods of the Groups existing customers. Exel has started analyzing the potential for establishing a production facility in China. The long-term intention is to increase Exels market share in this emerging market. Investment in new capacity in China will inevitably have short-term cost effects. The raw material markets are in a state of flux. Suppliers have suggested significant price increases on many of our key raw materials, justified by the strong increase in the price of oil and other cost factors. Exel aims to minimize the cost effects of raw materials by utilizing new raw material sources and increasing the efficiency of its purchasing policies. Industry division The Industry divisions net sales January September 2004 increased by 81% and totalled EUR 36.7 million (20.2). The divisions sales grew due to the addition of a new production facility in Belgium (roughly EUR 6.6 million) and strong growth in the specialty profiles market, 2 (7) mainly from new customer applications. Profits also developed well as operating profit increased to EUR 5.6 (2.2) million, an increase of 157% on the corresponding period previous year. The profit improvement is due to sales volume growth, improved production efficiency and good capacity utilization. However, keen price competition continues in the marketplace. Product development projects continue in the profiles product group, mainly in relation to automotive applications, infrastructure construction and wind power. From an annual perspective, the antenna profile markets have been growing. In the first half of the third quarter deliveries were at a slightly lower level than in the first half of the year. The pressure on the margins continues to be tough. According to telecom network builders, the market will continue to grow slightly during the rest of the year. Sales of paper machine profiles continued to increase during the third quarter. The commercial stage of a number of new profile applications has commenced. The sales of lattice masts continued at a strong level, and 2004 will be a record year for the lattice mast business. Demand is expected to be maintained at a high level also after the turn of the year, as the International Civil Aviation Organizations (ICAO) frangibility regulations will take effect in 2005. The regulations 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. The development of a number of significant transportation equipment industry applications has been completed, and their commercial stage will begin in early 2005. Sport division The net sales of the Sport division during JanuarySeptember 2004 totalled EUR 27.4 million (20.5), an increase of 34% on the corresponding period previous year. Profits continued to develop favourably, and the operating profit was EUR 4.4 million (1.7), an increase of 162% on the corresponding period last year. A substantial proportion of the third quarters sales consisted of conventional product categories such as cross-country ski poles and floorball products two categories in which Exel has managed to retain a good market share and profitability, even though competition has intensified. The NFSTM, and particularly the Nordic Walking market in German-speaking Central Europe, continued its growth in the third quarter. This strong market growth already began in the third quarter of 2003. Exels market share has remained very solid within the product category. Exel continues its strong marketing efforts to develop the 3 (7) concept in new countries. These efforts currently affect the Sport divisions profitability. Floorball sales in Exels main markets, i.e. Finland, Sweden and Switzerland, have also remained at last years level. The total market has not increased, but Exel has managed to retain its strong market shares. Laminate sales have remained at the previous years level, and Exel continues to seek new growth in applications outside the sports equipment industry. In water sports, Exel has managed to retain its share of the wind surfing masts market, but the overall market continues to shrink worldwide. Net sales and profits Consolidated net sales increased by 57% compared with the same period last year. Net sales growth by business division was as follows: Net sales (EUR million) 1-9/2004 1-9/2003 Change Industry 36.7 20.2 81.1% Sport 27.4 20.5 33.6% Total 64.1 40.8 57.2% Consolidated operating profit totalled EUR 10.0 (3.9) million. Growth in the operating profit was as follows: Operating profit (EUR million) 1-9/2004 1-9/2003 Change Industry 5.6 2.2 156.8% Sport 4.4 1.7 162.1% Total 10.0 3.9 159.1% The profit 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 297,000 (339,000). Despite the expansion in working capital, which was the result of the growth in sales, and the acquisition of Bekaerts pultrusion operations, it was possible to reduce net financial expenses due to the strong cash flow from operations and the loan repayment programme. Balance sheet, funding and liabilities The balance sheet total stood at EUR 43.6 million (34.4) on September 30, 2004. The acquisition of Bekaerts pultrusion operations contributed roughly EUR 7.2 million to this increase, with the rest being accounted for by the working capital requirements of strong net sales growth. Interest-bearing net liabilities increased to EUR 10.4 4 (7) million (7.8) due to the acquisition. Total liabilities remained roughly unchanged. Investments The Groups investments in fixed assets totalled EUR 4.9 million (1.4), 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 of the year at Exels Kiihtelysvaara factory and a decision to build a second line has been made. Capital expenditure on the above capacity expansions is estimated to total approx. EUR 3.0 million in 2004. Personnel The number of personnel on September 30, 2004 was 420 (342). The increase was caused by the integration of Bekaerts pultrusion operations into the Group (some 50 persons) and additional labour needs at Finnish factories (some 20 persons) and at German factories (some 10 persons) due to higher production volumes. 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. Trading on the Helsinki Exchanges during the review period amounted to 48.5% % of all shares. During the period the highest share price quoted was EUR 23.95, and the lowest EUR 11.75. The closing price for the period was EUR 23.80. Market capitalization was EUR 128.1 million on September 30, 2004. Decisions of the Extraordinary General Meeting The Extraordinary General Meeting held on September 15, 2004 decided that an extra dividend of EUR 0.50 per share be paid for the financial period which ended on December 31, 2003. IFRS reporting Exel will adopt IFRS reporting standards from the beginning of 2005. Preparations have proceeded as planned. Outlook for the rest of 2004 The positive sales development during JanuarySeptember is expected to continue during the rest of the year. Demand for profiles and Nordic Walking products is expected to remain high for the rest of the year. The integration of the Belgium operations into the Group is 5 (7) progressing as planned, but will still require some resources. There are upward pressures on raw materials prices. The profit development continues to look strong for the rest of the year. Mäntyharju, November 2, 2004 Exel Oyj Board of Directors Ari Jokelainen President & CEO Additional information: Ari Jokelainen, President, Exel Oyj, tel. +358 50 590 6570 EXEL GROUP CONSOLIDATED INCOME STATEMENT EUR 1,000 1-9/04 1-9/03 change %1-12/03 NET SALES 64,081 40,760 57 57,281 Increase (+)/decrease (-) of finished goods and work in progress 2,135 619 245 834 Production for own use 241 202 19 323 Other operating income 78 323 -76 342 Materials and services -25,172 -15,159 66 -21,716 Personnel expenses -14,069 -10,435 35 -14,329 Depreciation -2,548 -2,421 5 -3,184 Other operating expenses -14,770 -10,039 47 -14,205 OPERATING PROFIT 9,976 3,850 159 5,345 Financial income and expenses (net) -297 -339 -13 -436 PROFIT BEFORE EXTRAORDINARY ITEMS 9,680 3,511 176 4,910 Extraordinary items PROFIT BEFORE INCOME TAXES 9,680 3,511 176 4,910 Income taxes -3,097 -1,074 188 -1,537 6 (7) PROFIT FOR THE PERIOD 6,582 2,437 170 3,373 The taxes taken into account are based on the profit for the period. CONSOLIDATED BALANCE SHEET EUR 1,000 30.9.04 30.9.03 change% 31.12.03 ASSETS Non-current assets Intangible assets 3,216 3,013 7 3,126 Consolidation goodwill 276 348 -21 330 Tangible assets 12,708 10,205 25 10,470 Investment 95 95 0 95 Current assets Inventories 11,983 8,697 38 8,747 Receivables 11,991 9,754 23 8,626 Cash in hand and at bank 3,361 2,282 47 2,753 Total 43,630 34,393 27 34,147 LIABILITIES AND SHAREHOLDERS EQUITY Equity Share capital 1,884 1,855 2 1,870 Other equity 15,241 14,465 5 15,666 Liabilities Deferred tax liability 15 109 -86 14 Non-current 7,153 4,453 61 4,077 Current 19,338 13,512 43 12,521 Total 43,630 34,393 27 34,147 FUNDS STATEMENT EUR 1,000 1-9/04 1-9/03 change %1-12/03 Cash flow from business operations 11,210 2,884 289 6,409 Acquired business operations -7,181 Investment in tangible and intangible assets -2,354 -1,495 69 -2,599 Income from surrender of tangible and intangible assets 102 79 Rights issue 4 6 282 Withdrawal of non-current loans 5,099 54 9,343 53 Repayments of non-current loans -2,184 -1,810 21 -2,192 Withdrawals of/repyments of current loans 3,011 1,060 184 -747 Dividend paid -6,998 -1,060 560 -1,060 Other 1 16 -95 4 Change in liquid funds 608 -243 350 229 7 (7) 30.9.04 30.9.03 change% 31.12.03 Indicators (EUR 1,000) Gross investment 4,923 1,393 253 2,519 % of net sales 8% 3% 4% R&D expenses 1,471 1,248 18 1,707 % of net sales 2% 3% 3% Average personnel 443 355 25 355 Personnel at end of period 420 342 23 355 Order book 11,342 8,870 28 11,449 Solvency ratio, % 39% 48% 52% Return on equity, % 51% 20% 21% Return on investment, % 47% 21% 21% Net gearing, % 61% 48% 29% Earnings per share, EUR 1.22 0.45 170 0.64 Equity per share, EUR 3.18 3.03 5 3.26 The columns 1-9/04 and 1-9/03 are unaudited. Derivatives Derivatives are used for hedging purposes only. 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 5-month forward contracts. Interest rate derivatives Face value Fair market value (NPV) Interest swaps 2,997 -21 Currency derivatives Forward contracts 420 3 Consolidated contingent liabilities 30.9.04 30.9.03 31.12.03 Corporate mortgages 12,500 12,500 12,500 Mortgages on land and Buildings 2,954 2,954 2,954 Other contingent liabilities 3,000 2,477 2,390