EXEL OYJ STOCK EXCHANGE RELEASE 5.5.2006 at 10.05 1
(12)
EXEL INTERIM REPORT FOR 1 JANUARY 31 MARCH 2006
First quarter in brief
- Net sales rose to EUR 25.6 million (21.7 in the first
quarter 2005) or 18 per cent over the previous year
- Operating profit was EUR 0.6 (2.2) million. The result
includes EUR 1.9 million of restructuring costs mainly
related to the reorganisation of Sport division production
- Earnings per share were EUR 0.03(0.13) adjusted for full
dilution
- Pacific Composites Pty. Ltd. is included in group accounts
as of 1.3.2006
- Demand for industrial profiles remained healthy
- Industry Division reported continued growth both in sales,
up 38 % to 17.3 (12.5) million, and in operating profit, up
49 per cent to EUR 2.7 (1.8) million
- Restructuring of Sport Divisions production and logistics
operations proceeds according to plan
- Sport Division sales down by 10 %, operating loss -0.2
(+0,4) million including the restructuring costs of EUR 1.9
million, out of which about EUR 1.7 million are write-offs
KEY FINANCIAL FIGURES, EUR million
1.1. - 1.1. - Change 1.1. -
%
31.3. 31.3. 31.12.
2006 2005 2005
Net sales 25.6 21.7 17.8% 91.3
Operating profit 0.6 2.2 -72.6% 12.4
% of net sales 2.4% 10.1% 13.5%
Profit for the period 0.3 1.5 -79.1% 8.9
Equity 29.4 22.2 32.2 27.0
Interest-bearing net 25.5 9.7 161.7% 8.2
liabilities
Invested capital 62.6 36.0 73.7% 41.0%
Return on equity, % 4.6% 28.8% 37.3%
Return on investment, % 5.0% 25.6% 34.0%
Solvency ratio, % 35.1% 46.0% 50.0%
Net gearing, % 86.7% 43.8% 30.2%
Earnings per share, EUR 0.03 0.14 - 78.6% 0.78
Earnings per share, EUR, 0.03 0.13 - 76.9% 0.76
diluted
Equity per share, EUR 2.49 1.84 35.3% 2.34
IFRS REPORTING
Exel has applied IFRS reporting since the beginning of 2005.
This interim report has been prepared in accordance with the
recognition and measurement principles of IFRS, which are
the same as in the 2005 financial statements.
The financial statements of Pacific Composites Pty. Ltd.,
which was acquired by Exel Oyj on 28.2.2006, are included in
the consolidated financial statements as of 1.3.2006.
NET SALES
Exels consolidated net sales for January-March grew by 17.8
per cent over the previous year to EUR 25.6 (21.7) million.
The net sales for the first quarter include the operations
of Pacific Composites Pty. Ltd. for the month of March. The
company has subsidiaries in Australia, Great Britain and
China. The acquisition was executed under the name of Exel
Composites Pty. Ltd., a holding company established in
Australia. Pacific Composites contributed EUR 2.2 million of
the net sales.
PROFIT PERFORMANCE
Exels operating profit for the first quarter was EUR 0.6
(2.2) million. Operating profit as a percentage of net sales
was 2.4 (10.1) per cent. The operating profit before
restructuring costs was EUR 2.5 million, which is higher
than previous year.
The Groups net financial expenses were EUR 0.2 (0.1)
million. The Groups pre-tax profit was EUR 0.5 (2.1)
million, and profit for the reporting period totalled EUR
0.3 (1.5) million.
BALANCE SHEET AND FINANCIAL POSITION
The consolidated balance sheet total at the end of the
reporting period stood at EUR 83.9 (48.5) million. Main part
of the increase or some EUR 28 million was due to the
Australian acquisition and EUR 2 million was due to last
years Austrian acquisition.
At the end of the reporting period, equity stood at EUR 29.4
(22.2) million, and the solvency ratio was 35.1 (46.0) per
cent. Interest-bearing liabilities were EUR 33.2 (13.8)
million, of which short-term liabilities accounted for EUR
6.0 (5.9) million. Net interest-bearing liabilities were EUR
25.5 (9.7) million, and the net gearing was 86.7 (43.8) per
cent.
The development of cash flow from business operations
remained positive in the first quarter and was EUR +1.3 (-
1.7) million. Capital expenditure was financed with cash
flow from business operations. The acquisition was financed
with a long-term loan amounting to EUR 18 million and issue
of share capital. At the end of the reporting period, the
Groups liquid assets stood at EUR 7.7 million, compared
with EUR 5.8 million at the end of 2005.
CAPITAL EXPENDITURE
The Groups capital expenditure totalled EUR 0.8 (0.5)
million. The estimated total cost of the acquisition of
Pacific Composites Pty. Ltd. including transaction costs was
EUR 21 million. The final acquisition price will be
determined based on the final audited accounts as of the
acquisition date.
PERSONNEL
The number of people employed by the Exel Group on 31 March
2006 was 621 (432). Of these 303 (302) worked in Finland and
318 (130) abroad. The number of employees during the
reporting period averaged 518 (424). The increase from last
year is mainly due to the acquisition of Pacific Composites.
The Sport Divisions personnel negotiations, which were
connected with the transfer of the finishing and assembly
operations of consumer products (poles and floorball) to the
Far East for cost reasons, were concluded. As a result of
the negotiations, 54 full-time jobs and part-time jobs will
be discontinued at the end of September 2006.
BUSINESS SEGMENTS
The Groups operations are divided into two primary
segments: the Industry Division and the Sport Division.
INDUSTRY DIVISION
The Industry Divisions key financial figures for the
reporting period were as follows:
1.1. - 1.1. - Change % 1.1.-
31.3. 31.3. 31.12.
EUR 1,000 2006 2005 2005
Net sales 17.3 12.5 38.4% 56.8
Operating profit 2.7 1.8 49.1% 10.8
% of net sales 15.7% 14.5% 19.0%
Average personnel 292 214 36.4% 236
The Industry Divisions net sales grew by 38 per cent on
those posted a year earlier. Of the increase, EUR 3.2
million arose from the acquisition of Pacific Composites and
the Austrian acquisition, while the remaining EUR 1.6
million represented organic growth. Demand in the profiles
market has continued to be strong in the first quarter. The
production utilisation rate was high at most production
plants.
The Groups strategic focus area, the Industry Division
continued its expansion. At the end of February the
Australian company Pacific Composites Pty. Ltd. was acquired
with production operations in Australia, Great Britain and
China. The acquisition further enables Exel to serve
international customers globally. At the same time, Exels
establishment in China and the Far East markets will be
accelerated and the range of product offerings broadened.
The net sales of the acquired company in the 2005 calendar
year were approximately EUR 22 million and pre-tax profit
approximately EUR 2.5 million.
The factory project in Shenzhen, China is being postponed
for the time being, since Pacific Composites has new
production facilities in Nanjing, China. Following the
acquisition, Exel has the possibility to begin production in
China faster than previously planned.
As a result of the acquisition of Pacific Composites, the
Industry Divisions European production strategy is being
reassessed. The Industry Division currently has 8 production
plants in Europe. Exel is looking at consolidating its
factories in Great Britain. Furthermore, the production of
profiles that is currently subcontracted in Spain will be
transferred to other units in Europe. According to
preliminary estimates, this rationalising of production will
create non-recurring costs of approximately EUR 0.5 million.
Profitability remained at a good level despite a
considerable increase in raw material prices. Some of this
price pressure has been systematically passed on within the
production chain. Operating profit grew to EUR 2.7 million
from EUR 1.8 million the previous year. The improvement in
profitability is due to the increased sales and better usage
of the production capacity.
The acquisition price of Pacific Composites will be
allocated according to IFRS 3 standard, partly to the assets
and liabilities of the acquired balance sheet. During the
first quarter the preliminary allocation has been made to
the inventory and order stock, which have been valued at
sales price. Therefore the inventory and order stock of the
acquisition date does not create any sales margin during
March-May this year.
Carbon fibre raw materials remain in short supply in the
markets. Exel has for the most part ensured adequate fibre
supplies for this years projects, but the low supply is
limiting the development of new applications and could
impact sales of some product groups towards the end of the
year. The main carbon fibre suppliers have announced
investments to increase capacity. The new capacity will
enter the markets in stages from the second half of 2006.
The shortage is expected to continue into the beginning of
2007.
Sport Division
The Sport Divisions key financial figures for the reporting
period were as follows:
1.1. - 1.1. - Change % 1.1.-
31.3. 31.3. 31.12.
EUR 1,000 2006 2005 2005
Net sales 8.3 9.2 -10.2% 34.5
Operating profit -2.1 0.4 -648.3% 1.6
% of net sales -25.5% 4.2% 4.6%
Average personnel 227 220 3.2% 231
The Sport Divisions net sales decreased by 10 per cent from
the previous years level. In line with previous forecasts,
the Nordic Walking markets in Central Europe remained weak
during the first quarter. The decrease in sales stems
entirely from this market segment. The floorball and
laminate components groups increased sales over last year.
Exel was investing heavily in opening new markets,
especially in North America and China.
At the end of January, the decision was taken to subcontract
the surface treatment, assembly and packaging operations for
Nordic Walking and floorball products to China. This
transfer is taking place in phases throughout the year with
the goal of having all these operations handled completely
in China by the beginning of 2007. This has entailed the
restructuring of operations at the Mäntyharju factory. At
the same time, the decision was made to outsource the
warehousing and delivery operations of Exel Sports Oy to
service providers.
Due to the restructuring, personnel negotiations affecting
the Sport Division were carried out during February and
March. The negotiations were based on the employers
negotiation proposal. As a result of the negotiations, the
amount of employment contracts to be terminated is 54
persons. In addition, approximately 20 non-permanent
employees on fixed-term contracts will not have their
contracts renewed. It has been agreed with the personnel
representatives that an extended six-month term of notice,
instead of the normal term of notice, is applicable to all
terminated contracts. Thus, significant personnel reductions
will take place at the end of September 2006. The
restructuring is expected to generate savings on the level
of 2 millions from 2007 onwards.
The Sport Divisions operating loss before restructuring
costs was EUR -0.2 (+0.4) million. In addition, non-
recurring costs amounting to EUR 1.9 million were recorded
stemming from the transfer of production operations. The
strong focus on opening new Nordic Walking markets, the
strengthening of the Exel Sports Oy organisation, and the
launch of the Nordic Fitness Sports concept continued to
negatively impact the divisions operating profit in the
first quarter.
SHARES
During the reporting period, on 2 February 2006, an increase
in the share capital of EUR 12,780 due to a subscription of
shares under the warrant programme was registered in the
Finnish Trade Register. A total of 71,000 shares were
subscribed.
As a result of the increase, the share capital of Exel Oyj
is now EUR 2,082,582 and the total number of shares is
11,569,900, each with a counter-value of EUR 0.18.
The increase in the share capital of Exel Oyj with EUR
41,533 to EUR 2,124,115 was registered in the Finnish Trade
Register after the reporting period on 5 April 2006. The
increase in share capital has been subscribed by Lemarne
Corporation Ltd. and it is a part of the payment of the
purchase price of Pacific Composites Pty. Ltd. realised at
the end of February. The increase in share capital was
carried out by virtue of authorisation given by the Annual
General Meeting to the Board of Directors on 14 April 2005.
As a result, Exel Oyjs share capital is EUR 2,124,115 after
the increase and the total number of shares is 11,800,643.
Exel received a total of EUR 2,788,968 as shareholders
equity.
The highest share quotation during the reporting period was
EUR 14.84 (13.49) and the lowest EUR 10.80 (11.35). The
share price closed at EUR 14.59 (12.80). The average share
price during the reporting period was EUR 12.99 (12.45).
During the reporting period 2,574,569 (1,222,414) shares
were traded, accounting for 22.3 (10.9) per cent of the
average number of outstanding shares. Based on the closing
price in the reporting period, market capitalisation
totalled EUR 168.8 (143.7) million.
EVENTS AFTER THE PERIOD
The Annual General Meeting of Exel Oyj was held on 6 April
2006. The accounts of the Group were approved and the
members of the Board of Directors and the President were
discharged from liability for the financial year 2005. The
AGM approved the proposal to distribute a dividend of EUR
0.40, corresponding to a total of EUR 4,720,257 based on the
number of shares on the date of the AGM. It also authorised
Exel's Board of Directors to acquire and convey the
company's own shares, and to increase the company's share
capital by a maximum of EUR 100,000.
The AGM confirmed the number of members of the Board of
Directors as five and elected a new Board. Esa Karppinen,
Kari Haavisto, Peter Hofvenstam, Vesa Kainu and Ove Mattsson
were re-elected to the Board. Ove Mattsson was re-elected
Chairman of the Board.
OUTLOOK
Pacific Composites will be integrated with the Group during
2006 and will significantly increase net sales for the
Industry Division. The acquisition will strengthen and
accelerate the growth of the Industry division, especially
in Far East markets already during 2006.
As a result of the acquisition, the Industry Divisions
production strategy is being assessed in Europe. According
to preliminary estimates, the rationalising of production
will create non-recurring costs of approximately EUR 0.5
million. Carbon fibre raw materials are expected to remain
in short supply also during 2006, which limits growth
opportunities and could impact sales of some product groups
towards the end of the year.
The main markets for Nordic Walking in Central Europe remain
leveled as retail chains sell out existing stocks. The
chains are expected to focus on the leading pole brands,
including Exel. Efforts to open new Nordic Walking markets
continue. The transfer of pole and floorball assembly and
finishing combined with outsourcing logistics, will improve
the Sport Divisions profitability beginning in 2007.
Based on the above, net sales are expected to increase
significantly. Due to the considerable reorganisation of the
Sport Divisions production and the integration of Pacific
Composites, the result will be impacted by non-recurring
items, as a result of which the pre-tax profit is expected
to be lower than in 2005.
Kapfenberg, 5 May 2006
Exel Oyj Ari Jokelainen
Board of Directors President & CEO
Further information:
Ari Jokelainen, President & CEO, tel. +358 50 590 6750
Ilkka Silvanto, CFO, tel. +358 50 598 9553
CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Condensed Consolidated 1.1.- 1.1.- Change 1.1.-
31.3. 31.3 31.12.
Income Statement 2006 2005 % 2005
EUR 1,000
Net sales 25,600 21,738 17.8% 91.288
Other operating income 30 50 -40.0% 186
Operating expenses -23,173 -18,793 -23.3% -75.502
Depreciation and -1,854 -791 -134.4% -3.584
impairment
Operating profit 603 2,204 -72.6% 12.388
Net financial items -151 -58 - 160,3% -342
Profit before tax 452 2,146 - 78.9% 12.046
Income taxes -129 -602 78.6% -3.144
Profit for the period 323 1,544 - 79.1% 8.902
Attributable to:
Equity holders of the 326 1,544 - 78.9% 8,902
parent company
Minority interest -3 0
Earnings per share, EUR 0.03 0.14 - 78.6% 0.78
Earnings per share, EUR, 0.03 0.13 - 76.9% 0.76
diluted
Condensed Consolidated 31.3.20 31.3.20 Chang 31.12.20
Balance Sheet 06 05 e 05
EUR 1,000
ASSETS
Non-current assets
Goodwill 14,122 3,188 10,93 3,877
4
Other intangible assets 834 862 -28 880
Tangible assets 20,299 13,534 6,765 15,395
Deferred tax assets 1,933 734 1,199 1,070
Other non-current assets 70 101 -31 103
Non-current assets total 37,258 18,419 18,83 21,325
9
Current assets
Inventories 19,847 13,056 6,791 15,361
Trade and other receivables 19,088 13,002 6,086 12,157
Other liquid assets 829 1,254 -425 1,324
Cash at bank and in hand 6,829 2,770 4,059 4,454
Current assets total 46,594 30,082 16,51 33,295
1
Total assets 83,852 48,501 35,35 54,621
0
EQUITY AND LIABILITIES
Shareholders equity
Share capital 2,083 1,965 118 2,070
Share issue 2,789 0 2,789 287
Share premium reserve 5,416 4,174 1 242 5,142
Retained earnings 18,779 14,555 4,224 10,628
Profit for the period 323 1,544 - 8,902
1,221
Total equity 29,390 22,238 7,152 27,029
Minority share 7 11
7
Non-current liabilities
Interest-bearing 27,135 7,888 19,24 9,611
liabilities 7
Deferred tax liabilities 1,205 312 893 407
Current liabilities
Interest-bearing 6,018 5,880 138 4,346
liabilities
Trade and other non-current 20,095 12,183 7,912 13,217
liabilities
Total liabilities 54,455 26,263 28,19 27,581
0
Total equity and 83,852 48,501 35,35 54,621
liabilities 0
STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY
Share Share Share Minori Total
capit issue premiu ty
al m Retaine intere
reserv d st
e earning
s
EUR 1,000
Balance at 1 January 1,932 817 3,390 14,553 0 20,69
2005 2
Share issue 33 -817 784 0 0
Exchange rate differences 2 2
Other items 0 0 0
Dividend 0 0
Profit for the period 1,544 0 1,544
Balance at 31 March 1,965 0 4,174 16,099 0 22,23
2005 8
Balance at 1 January 2,070 287 5,142 19,530 10 27,03
2006 9
Share issue 13 2,502 274 0 2,789
Exchange rate differences -681 -681
Other items -73 -73
Dividend 0 0
Profit for the period 326 -3 323
Balance at 31 March 2,083 2,789 5,416 19,101 7 29,39
2005 7
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
1.1.31 1.1.31 Change 1.1.-
.3. .3. 31.12.
2006 2005 2005
EUR 1,000
Cash flow from operating activities
Profit for the period 323 1,544 -1,221 8,902
Adjustments 2,913 1,485 1,428 6,935
Change in working capital -387 -2,700 2,313 -2,760
Cash flow generated by
operations 2,849 329 2,520 13,077
Interest paid -193 -116 -77 -498
Interest received 40 22 18 162
Other financial items
0 0 0 0
Income taxes paid -1,385 -1,925 540 -4,823
Net cash flow from operating
activities 1,311 -1,690 3,001 7,918
Cash flow from investing activities
Acquisitions -18,687 0 -18,687 -2,056
Capital expenditure -848 -518 -330 -2,377
Proceeds from sale of fixed 0 0 0 62
assets
Other cash flow from 0 0 0 0
investing activities
Cash flow from investing -19,535 -518 -19,017 -4,371
activities
Cash flow from financing
Share issue 2,789 0 2,789 1,360
Proceeds from long-term 18,000 0 18,000 2,000
borrowings
Installments of long-term -608 -615 7 -2,011
borrowings
Change in short-term loans 16 1,737 -1,721 -30
Installments of finance -93 -40 -53 -307
lease liabilities
Dividends paid 0 0 0 -3,931
Net cash flow from financing 20,104 1,082 19,022 -2,919
Change in liquid funds 1,880 -1,126 3,006 628
Liquid funds in the 5,778 5,150 628 5,150
beginning of period
Change in liquid funds 1,880 -1,126 628
3,006
Liquid funds at the end of 7,658 4,024 3,634 5,778
period
QUARTERLY KEY FIGURES
I/2006 IV/200 III/200 II/200 I/2005
5 5 5
EUR 1,000
Net sales by segment
Industry 17,315 15,072 13,755 15,459 12,509
Sport 8,285 6,875 8,647 9,744 9,229
Net sales, total 25,600 21,947 22,402 25,203 21,738
Operating profit by
segment
Industry 2,713 3,235 2,484 3,271 1,818
Sport -2,111 -1,066 525 1,735 386
Operating profit, 603 2,169 3,009 5,006 2,204
total
Net financial items -151 -112 -60 -112 -58
Profit before taxes 452 2,057 2,949 4,894 2,146
Income taxes -129 -332 -878 -1,332 -602
Profit for the 323 1,725 2,071 4,562 1,544
period
Earnings per share, 0.03 0.15 0.18 0.32 0.14
EUR
Earnings per share, 0.03 0.14 0.17 0.31 0.13
EUR, diluted
Average number of 11,652 11,359 11,302 11,230 11,230
shares undiluted,
1000 shares
Average number of 11,896 11,550 11,574 11,393 11,524
shares, diluted,
1000 shares
Average number of 518 469 498 485 417
personnel
COMMITMENTS AND CONTINGENCIES
EUR 1,000 31.3.2006 31.3.2005 31.12.2005
On own behalf
Mortgages 2,953 2,954 2,953
Corporate mortgages 12,500 12,500 12,500
Lease liabilities
- in next 12 months 232 456 462
- in next 1-5 years 217 1,741 1,775
Other commitments 64 64 66
DERIVATIVE FINANCIAL INSTRUMENTS, nominal values
31.3.2006 31.3.2005 31.12.2005
EUR 1,000
Foreign exchange derivatives
Forward contracts 8,594 503 0
Purchased currency 1,637 750 0
options
Sold currency 811 371 0
options
Interest rate derivatives
Interest rate swaps 6,332 2,553 1,748
CONSOLIDATED KEY FIGURES
1.1.- 1.1.- Change 1.1.-
31.3. 31.3. % 31.12.
EUR 1,000 2006 2005 2005
Net sales 25,600 21,738 17.8% 91,288
Operating profit 603 2,204 -72.6% 12,388
% of net sales 2.4% 10.1% 13.6%
Profit before tax 452 2,146 - 78.9% 12,046
% of net sales 1.8% 9.9% 13.2%
Profit for the period 323 1,544 - 79.1% 8,902
% of net sales 1.3% 7.1% 9.8%
Shareholders equity 29,390 22,238 32.2% 27,029
Interest-bearing 33,154 13,768 140.8% 13,957
liabilities
Cash and cash equivalents 7,658 4,024 90.3% 5,778
Net interest-bearing 25,496 9,744 161.7% 8,179
liabilities
Capital employed 62,551 36,006 73.7% 40,997
Return on equity, % 4.6% 28.8% 37.3%
Return on capital employed, 5.0% 25,6% 34,0%
%
Equity ratio, % 35.1% 46.0% 50.0%
Net gearing, % 86.7% 43.8% 30.2%
Capital expenditure 16,958 518 3173.7% 4,119
% of net sales 66.2% 2.4% 4.5%
Research and development 492 681 -27.8% 2,323
costs
% of net sales 1.9% 3.1% 2.5%
Order stock 13,718 11 132 23,2 % 12,381
Earnings per share, EUR 0.03 0,14 - 78,6 0.78
%
Earnings per share, EUR,
diluted
Equity per share, EUR 2.49 1,84 35,3 %
Average number of shares
- cumulative 11,652 10 766 8,2 % 11,359
- cumulative, diluted 11,896 11 136 6,8 % 11,550
Average number of employees 518 424 22,2 % 467