Review by the President & CEO

President and CEO Riku Kytömäki

 

“Strong order intake in Q4.”

Exel Composites Plc’s Financial Statements Release 2018

 

Exel Composites ended 2018 on a strong note. In the fourth quarter both order intake as well as revenue increased significantly. Growth was driven by the Construction & Infrastructure customer segment, predominantly supported by the wind energy industry. This industry now also represents Exel’s largest client, a position which has been held by a client from the telecommunications industry for the past ten years. During 2018 the competitive situation in the telecommunications industry, especially in China, changed significantly, driven by geopolitical factors such as trade barriers and export tariffs. Other Applications customer segment also grew in the fourth quarter, driven by the contribution of the acquired Diversified Structural Composites, DSC. Revenue in the Industrial Applications customer segment was impaired by lower volumes in telecommunications.

From a regional perspective, revenue in the region Rest of the World increased significantly in the fourth quarter supported by the North American DSC and by increased export from other Exel units to the American market. Revenue increased also in the Asia-Pacific region driven by the contribution of Nanjing Jianhui. The revenue decrease in Europe reflected lower volumes in telecommunications. All in all, Exel’s global market position improved significantly during the year 2018.

Adjusted operating profit decreased in the fourth quarter, as volume growth in wind energy was not enough to compensate for the impaired profitability mainly related to sales mix in some of the Group’s manufacturing units. The turnaround and integration of DSC continues according to plan and in the fourth quarter of 2018 the operating profit of DSC improved clearly from the third quarter of 2018.

During 2018 we initiated a cost reduction program to improve Group profitability. The implementation of the program continues as planned with the aim to optimize Exel Composites’ manufacturing footprint in Europe, to improve the profitability and cost efficiency in the DSC business and to drive further synergy savings between the company’s two manufacturing units in China, among other things. Early 2019 we announced the closing of Exel’s manufacturing unit in Voerde, Germany, and conducted co-determination negotiations in Finland, in addition to other cost savings measures. The annual savings target of the Group-wide cost savings program is EUR 3 million, expected to be fully effective in 2020.

I am convinced that we have taken important steps to improve profitability and created a platform for long-term profitable growth. I look forward to 2019 with confidence.

 

Updated 15 February 2019

 

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Exel Composites Oyj, Vantaa head office, Mäkituvantie 5, FI-01510 Vantaa, Finland