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 301, 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
