Review by the President & CEO

President & CEO Riku Kytömäki

 

“Profitability impacted by the US acquisition. Outlook revised. Cost saving program initiated.”

Exel Composites Plc’s Business Review January-September 2018

 

Adjusted operating profit declined both in the review period and in the third quarter. Profitability was negatively impacted by the volume decline in the telecommunications business as well as by operating losses in the acquired Diversified Structural Composites, DSC, in North America. DSC made an operating loss of EUR 1.1 million in the third quarter and EUR 1.0 million in the review period, mainly due to low sales volumes. Excluding the impact of DSC, Group adjusted operating profit was EUR 1.6 million for the third quarter and EUR 5.3 million for the review period. We have decided to initiate a Group-wide cost reduction program to be implemented during 2018 and 2019 in order to further improve Group profitability. The annual savings target of the program is EUR 3 million, expected to be fully effective in 2020. The program consists, among other things, of the optimization of the company’s manufacturing footprint in Europe, improving the profitability and cost efficiency of DSC as well as further synergy savings between the company’s two manufacturing units in China.

Order intake and revenue continued to increase both in the third quarter as well as in the review period. Growth was driven both by the Nanjing Jianhui and DSC acquisitions. The wind energy business experienced significant growth and compensated for the decline in telecommunications. The telecommunications industry has also been impacted by geopolitical factors, such as trade barriers and export tariffs particularly affecting the competitive situation in China.

From a regional perspective, Rest of the World increased significantly in the third quarter supported by the acquired DSC business and by increased export from other Exel units to the American market. This compensated for the revenue decrease in Europe, which was impacted by volume decline in the telecommunications business. Revenue in the Asia-Pacific region declined slightly compared to the third quarter in previous year due to lower sales in the Australian market as a consequence of the closure of production in Australia.

Revenue in the Construction & Infrastructure customer segment increased by 74.9% in the third quarter. The growth was driven by the wind energy business where both Nanjing Jianhui as well as DSC have strong market positions. Revenue by these two units also impacted positively the Other Applications customer segment, which grew by 21.1%. Revenue in the Industrial Applications customer segment was impaired mainly by the continued decline in the telecommunications business.

 

Updated 31 October 2018

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