Exel Composites Oyj

Interim / Quarterly Report • Jul 25, 2013

EXEL COMPOSITES PLC STOCK EXCHANGE RELEASE 25.7.2013 at 10.00

EXEL COMPOSITES PLC'S INTERIM REPORT FOR JANUARY 1 – JUNE 30, 2013

APRIL – JUNE 2013 HIGHLIGHTS

• Net sales were EUR 17.5 (19.8) million in the second quarter of 2013, down by 11.3 per cent on the previous year

• Operating profit was EUR 1.6 million in the second quarter of 2013 compared to EUR 1.8 million in the second quarter of 2012, or 9.2 (9.2) per cent of net sales

• Net cash flow from operating activities was positive at EUR +1.9 (+1.9) million and on the same level as in the corresponding period in 2012

• Fully diluted earnings per share were EUR 0.10 (0.11)

JANUARY – JUNE 2013 HIGHLIGHTS

• Net sales were EUR 34.4 (40.3) million in the first six months of 2013, down by 14.6 per cent on the previous year

• Operating profit was EUR 2.3 million in the first six months of 2013 compared to EUR 3.6 million in the first six months of 2012, or 6.6 (9.0) per cent of net sales

• Net cash flow from operating activities was positive at EUR +2.6 (+3.4) million

• Fully diluted earnings per share were EUR 0.14 (0.22)

OUTLOOK FOR 2013

Major uncertainties relating to general growth prospects in the economy continue. Visibility is low and the market pressure is expected to continue in 2013. The Company will continue to work on sales development and on adjusting costs to market conditions. Additional contingency actions may be undertaken which may impact the short-term profits, but protect long-term cash flow and profitability.

COMMENTS BY THE CEO

"The market situation in Central Europe continued to be challenging. Net sales were EUR 17.5 (19.8) million in the second quarter of 2013, a decrease of 11.3 per cent. Sales decreased especially in the Finnish units. Market demand decreased in the building and construction as well as in the telecommunication industries compared to the second quarter of 2012. However, demand improved in the transportation industry, electrical industry and machine industry market segments in the second quarter of 2013 compared to the the corresponding period in 2012.

The Group's operating profit improved from the first quarter of 2013 and was EUR 1.6 (1.8) million, i.e. 9.2 (9.2) per cent of net sales in the second quarter of 2013. Due to cost-saving measures and other corrective actions taken, we managed to maintain operating profit as a percentage of net sales on the same level as in the corresponding period in 2012. Net cash flow from operating activities was positive at EUR +1.9 (+1.9) million and on the same level as in the corresponding period in 2012.

Exel Composites has during the first half of 2013 continued to develop several new customer-specific applications, especially in the building and construction, machine industry and transportation industry market segments.

Visibility is low and the market pressure is expected to continue. Corrective actions have started to have a positive impact in the Australian and British business units. Co-determination negotiations were started in June in the Finnish business units due to weak demand and profitability. Corrective measures will be continued in the whole Group. The focus will be on sales, efficiency and yield improvement as well as on turnaround measures. Structural changes will also be considered.

Despite the challenging situation the composite market is estimated to develop positively in the longer run. Due to a healthy balance sheet and financial position, Exel Composites is well-positioned when the market recovers."

CONSOLIDATED KEY FIGURES, EUR million (unaudited)

	1.4. – 30.6. 2013	1.4. – 30.6. 2012	Change, %	1.1. – 30.6. 2013	1.1.– 30.6. 2012	Chang e, %	1.1. – 31.12. 2012
Net sales	17.5	19.8	-11.3	34.4	40.3	-14.6	76.0
Operating profit	1.6	1.8	-11.4	2.3	3.6	-37.6	3.4
% of net sales Profit for the	9.2	9.2		6.6	9.0		4.5
period	1.2	1.3	-10.8	1.7	2.6	-34.3	2.0
Shareholders'
equity Net interest bearing	28.2	32.4	-13.0	28.2	32.4	-13.0	31.4
liabilities Capital	1.3	2.5	47.2	1.3	2.5	-14.5	-1.1
employed Return on	36.4	42.6	-14.5	36.4	42.6		39.6
equity, % Return on capital	16.3	16.6		11.5	15.5		6.1
employed, %	17.8	18.4		12.0	17.3		8.4
Equity ratio, %	55.7	56.8		55.7	56.8		61.0
Net gearing, %	4.6	7.6		4.6	7.6		-3.4
Earnings per
share, EUR Earnings per share, diluted,	0.10	0.11		0.14	0.22		0.17
EUR Equity per	0.10	0.11		0.14	0.22		0.17
share, EUR	2.37	2.73		2.37	2.73		2.64

IFRS REPORTING

This interim report has been prepared in accordance with the recognition and measurement principles of IFRS, which are the same as in the 2012 financial statements.

FINANCIAL PERFORMANCE

APRIL – JUNE 2013

The market situation in Central Europe continued to be challenging.

The Group's net sales in April – June 2013 decreased by 11.3 per cent on the corresponding period last year and were EUR 17.5 (19.8) million. Sales decreased especially in the Finnish units. Market demand decreased in the building and construction as well as in the telecommunication industries compared to the second quarter of 2012. However, demand improved in the transportation industry, electrical industry and machine industry market segments in the second quarter of 2013 compared to the corresponding period in 2012.

The Group's operating profit improved from the first quarter of 2013 and was EUR 1.6 (1.8) million, i.e. 9.2 (9.2) per cent of net sales in the second quarter of 2013. Due to cost-saving measures and other corrective actions taken we managed to maintain operating profit as a percentage of net sales on the same level as in the corresponding period in 2012. Net cash flow from operating activities was positive at EUR +1.9 (+1.9) million and on the same level as in the corresponding period in 2012.

JANUARY – JUNE 2013

The Group's net sales in January – June 2013 were EUR 34.4 (40.3) million, a decrease of 14.6 per cent on the previous year.

Exel Composites' operating profit in January – June 2013 was EUR 2.3 (3.6) million or 6.6 (9.0) per cent of net sales. The main reasons for the decrease were lower sales especially in the Finnish units. On the other hand, cost-saving measures and other corrective actions taken had a positive impact on the operating profit.

Exel Composites has during the first half of 2013 continued to develop several new customer specific applications, especially in the building and construction, machine industry and transportation industry market segments.

The Group's net financial expenses in January – June 2013 were EUR 0.0 (-0.1) million. The Group's profit before taxes was EUR 2.3 (3.5) million and profit after taxes EUR 1.7 (2.6) million.

Fully diluted total earnings per share were EUR 0.14 (0.22). Return on capital employed was 12.0 (17.3) per cent. Return on equity was 11.5 (15.5) per cent.

BALANCE SHEET AND FINANCIAL POSITION

Net cash flow from operating activities was positive at EUR 2.6 (3.4) million. Cash flow before financing, but after capital expenditure, amounted to EUR 1.2 (1.8) million.

Capital expenditure was financed with cash flow from business operations. At the end of the review period, the Group's liquid assets stood at EUR 6.9 (7.7) million.

The Group's consolidated total assets at the end of the period under review were EUR 50.8 (57.2) million.

Interest-bearing liabilities amounted to EUR 8.2 (10.1) million. Net interest-bearing liabilities were EUR 1.3 (2.5) million. Non-current liabilities were amortized by EUR 5.0 million and new short-term loans were withdrawn amounting to EUR 5.0 million.

The dividend for 2012 resolved by the Annual General Meeting on 27 March 2013 totaling EUR 3.6 (5.9) million, or EUR 0.30 (0.50) per share, was paid on 10 April 2013.

Equity at the end of the period under review was EUR 28.2 (32.4) million and equity ratio 55.7 (56.8) per cent. The net gearing ratio was 4.6 (7.6) per cent.

CAPITAL EXPENDITURE AND DEPRECIATION

The capital expenditure on fixed assets amounted to EUR 1.3 (1.7) million.

Total depreciation of non-current assets during the period under review amounted to EUR 1.4 (1.5) million.

PERSONNEL

The number of Exel Composites Group employees on 30 June 2013 was 426 (438), of whom 206 (206) worked in Finland and 220 (232) in other countries. The average number of personnel during January – June 2013 was 433 (432). The use of temporary workforce has been largely discontinued for the time being. In addition, in Finland part of maintenance functions were transferred back to Exel Composites, which increased its own personnel by 8 persons.

Co-determination negotiations were started on 13 May 2013 in the Finnish business units due to weak demand and profitability. They are expected to be concluded in mid-August 2013. Corrective actions have started to have a positive impact in the Australian and British business units. Corrective measures will be continued in the whole Group. Structural changes will also be considered.

The ExelWay project that was launched in the latter half of 2011 was continued. The project aims at improving co-operation and harmonizing processes between the units. Project findings including new and efficient business processes and best practices are to be implemented as the project proceeds.

SHARES AND SHARE CAPITAL

At the end of June 2013, Exel Composites' share capital was EUR 2,141,431.74 and the number of shares was 11,896,843. There were no changes in the share capital during the review period.

Exel Composites did not hold any of its own shares during the period of review.

SHARE PERFORMANCE AND TURNOVER

The highest share price quoted was EUR 6.50 (8.79) and the lowest EUR 5.10 (6.42). The share price closed at EUR 5.25 (6.78). The average share price during the period under review was EUR 5.85 (7.82).

A total of 621,761 (512,570) shares were traded during the reporting period, which represents 5.2 (4.3) per cent of the average number of shares. Based on the closing price on 30 June 2013, Exel Composites' market capitalization was EUR 62.5 (80.7) million.

SHAREHOLDERS AND DISCLOSURES

Exel Composites had a total of 2,752 (2,718) shareholders on 30 June 2013. Information on Exel Composites' shareholders is available on the Company website at www.exelcomposites.com.

Exel Composites did not receive any flagging announcements during the period under review.

MAJOR NEAR-TERM RISKS AND UNCERTAINTIES

The most significant near-term business risks are related to the general economic development, government regulations and continued financial crisis in the Euro area as well as to market demand in certain market segments. Success of corrective actions as well as possible restructuring and impairment charges can have an impact on the profitability. Raw material prices, energy cost and other cost increases may continue to put pressure on profitability. Currency rate changes, price competition and alternative competing materials may also have a negative effect on the result. The availability and cost of financing may continue to have an effect on the demand and increase the risk of credit losses.

CHANGES IN GROUP MANAGEMENT

Mr. Kari Loukola was appointed VP Sales and Marketing and member of the Group Management Team as of 1 August 2013 to reinforce sales and profitable growth.

OUTLOOK FOR 2013

Major uncertainties relating to general growth prospects in the economy continue. Visibility is low, but the market pressure is expected to continue in 2013. The Company will continue to work on sales development and on adjusting costs to market conditions. Additional contingency actions may be undertaken which may impact the short-term profits, but protect long-term cash flow and profitability.

CONSOLIDATED COMPREHENSIVE INCOME STATEMENT (unaudited)

EUR thousand	1.4. – 30.6. 2013	1.4. – 30.6. 2012	Change, %	1.1. – 30.6. 2013	1.1. – 30.6. 2012	Change, %	1.1. – 31.12. 2012
Net sales	17,548	19,791	-11.3	34,445	40,310	-14.6	75,998
Materials and services Employee benefit	-6,455	-7,491	13.8	-12,885	-15,610	17.5	-29,986
expenses Depreciation and	-5,448	-5,942	8.3	-10,757	-11,560	6.9	-21,077
impairment Other	-684	-723	5.4	-1,357	-1,464	7.3	-5,387
operating expenses Other	-3,510	-4,209	16.6	-7,491	-8,660	13.5	-17,057
operating income	159	390	-59.2	322	629	-48.8	909
Operating profit	1,609	1,816	-11.4	2,276	3,645	-37.6	3,399
Net financial items	-48	-30	-60.0	-23	-113	79.6	-428
Profit before tax	1,562	1,786	-12.5	2,252	3,532	-36.2	2,971
Income taxes	-399	-485	17.7	-535	-920	41.8	-940
Profit/loss for the period	1,162	1,302	-10.8	1,717	2,612	-34.3	2,031

Other comprehensiv e income: Other comprehensiv e income to

be reclassified to profit or loss in subsequent periods:
Exchange differences on translating foreign operations	-1,690	866	-295.2	-1,392	660	310.9	133
Other comprehensiv e income, net of tax Total comprehensiv	-1,690	866	-295.2	-1,392	660	310.9	133
e income	-527	2,167	-124.3	326	3,272	-90.0	2,164
Profit/loss attributable to: Equity holders of the parent company	1,162	1,302		1,717	2,612	-90.0	2,031
Comprehensi ve income attributable to: Equity holders of the parent company	-527	2,167		326	3,272		2,164
Earnings per share, diluted and undiluted, EUR	0.10	0.11		0.14	0.22		0.17
			CONDENSED CONSOLIDATED BALANCE SHEET
EUR thousand			30.6.2013		30.6.2012	Change	31.12.2012
ASSETS Non-current assets
Goodwill Other intangible assets Tangible assets Deferred tax assets Other non-current assets			10,017 10,791	971 799 63	12,238 1,811 12,123 101 64	-2,221 -840 -1,332 698 -1	10,898 1,220 10,681 752 64

Non-current assets total	22,640	26,337	-3,696	23,615
Current assets
Inventories	9,097	10,556	-1,459	9,129
Trade and other receivables	12,206	12,650	-444	9,513

Cash at bank and in hand Current assets total Total assets	6,884 28,186 50,826	7,660 30,866 57,203	-776 -2,680 -6,377	9,245 27,887 51,502
EQUITY AND LIABILITIES
Shareholders´ equity
Share capital	2,141	2,141	0	2,141
Other reserves	72	30	42	45
Invested unrestricted equity fund	8,488	8,488	0	8,488
Translation differences	2,946	4,864	-1,918	4,337
Retained earnings	12,845	14,306	-1,461	14,396
Profit for the period	1,717	2,612	-895	2,031
Total equity attributable to equity
holders of the parent company	28,209	32,442	-4,233	31,438
Total equity	28,209	32,442	-4,233	31,438
Non-current liabilities
Interest-bearing liabilities	2,496	8,117	-5,621	8,168
Interest-free liabilities	401	410	-9	411
Deferred tax liabilities	382	497	-115	377
Current liabilities
Interest-bearing liabilities	5,690	2,011	3,679	11
Trade and other non-current liabilities	13,649	13,727	-78	11,098
Total liabilities	22,617	24,761	-2,144	20,064
Total equity and liabilities	50,826	57,203	-6,377	51,502

STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

EUR thousand	Share Capital	Other Reserv es	Invested Unrestrict ed Equity Fund	Translati on Differenc es	Retained Earnings	Total
Balance at 1 January 2012	2,141	30	8,488	4,204	20,255	35,118
Comprehensive result Other items Dividend				660	2,612 -1 -5,948	3,272 -1 -5,948
Balance at 30 June 2012	2,141	30	8,488	4,864	16,919	32,442
Balance at 1 January 2013	2,141	45	8,488	4,337	16,427	31,438

Comprehensive result Other items Dividend		27		-1,392	1,717 -13 -3,569	326 14 -3,569
Balance at 30 June 2013	2,141	72	8,488	2,946	14,562	28,209
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
EUR thousand			1.1. –	1.1. –	Change	1.1. –

	30.6. 2013	30.6. 2012		31.12. 2012
Cash Flow from Operating Activities Profit for the period Adjustments Change in working capital	1,717 1,771 -265	2,612 2,700 -492	-885 -929 227	2,031 7,170 1,223
Cash Flow Generated by Operations Interest paid Interest received Other financial items Income taxes paid	3,223 -93 8 -45 -539	4,820 -99 65 -8 -1,344	-1,597 6 -57 -37 805	10,424 -259 80 -155 -1,897
Net Cash Flow from Operating Activities	2,554	3,434	-880	8,193
Capital expenditure Proceeds from sale of fixed assets	-1,341 0	-1,677 16	336 -16	-2,846 16
Cash Flow from Investing Activities	-1,341	-1,661	320	-2,830
Cash Flow from Financing Proceeds from long-term borrowings Instalments of long-term borrowings Change in short-term loans Change in finance lease liabilities	0 -5,000 5,000	0 0 2,000	0 -5,000 3,000	0 0 0
Dividends paid Net Cash Flow from Financing	-5 -3,569 -3,574	-5 -5,948 -3,953	0 2,379 379	-10 -5,948 -5,958
Change in Liquid Funds	-2,361	-2,180	-181	-595
Liquid funds in the beginning of period Change in liquid funds	9,245 -2,361	9,840 -2,180	-595 -181	9,840 -595

Liquid funds at the end of period			6,884	7,660	-776	9,245
QUARTERLY KEY FIGURES
EUR thousand	II/ 2013	I/ 2013	IV/ 2012	III/ 2012	II/ 2012	I/ 2012
Net sales Materials and	17,548	16,897	18,634	17,054	19,791	20,519
services Employee	-6,455	-6,430	-7,670	-6,706	-7,491	-8,119
benefit expenses Depreciation	-5,448	-5,309	-5,095	-4,422	-5,942	-5,618
and impairment Operating	-684	-673	-3,304	-619	-723	-742
expenses Other	-3,510	-3,981	-4,345	-4,052	-4,209	-4,452
operating income	159	163	173	107	390	240
Operating profit	1,609	666	-1,608	1,362	1,816	1,828
Net financial items	-48	24	-109	-206	-30	-83
Profit before taxes	1,562	691	-1,717	1,156	1,786	1,745
Income taxes	-399	-136	246	-266	-485	-435
Profit/loss for the period	1,162	555	-1,471	890	1,302	1,310
Earnings per share, EUR Earnings per	0.10	0.05	-0.12	0.07	0.11	0.11
share, EUR, diluted Average number of	0.10	0.05	-0.12	0.07	0.11	0.11
shares, undiluted, 1,000 shares Average number of shares,	11,897	11,897	11,897	11,897	11,897	11,897
diluted, 1,000 shares Average	11,897	11,897	11,897	11,897	11,897	11,897

number of personnel	427	436	431	433	435	428
COMMITMENTS AND CONTINGENCIES
EUR thousand			30.6.2013		30.6.2012
On own behalf Mortgages Corporate mortgages			2,783 12,500		2,783 12,500
Lease liabilities
- in next 12 months - in next 1-5 years			953 1,838		903 3,054
Other commitments			6		45
DERIVATIVE FINANCIAL INSTRUMENTS
Nominal values EUR thousand			30.6.2013		30.6.2012
Foreign exchange derivatives Forward contracts				0	0
Interest rate derivatives Interest rate swaps			5,000		5,000
CONSOLIDATED KEY FIGURES
EUR thousand			1.1. – 30.6. 2013		1.1. – 30.6. 2012	Change, %	1.1.– 31.12. 2012
Net sales Operating profit % of net sales			34,445 2,276 6.6		40,310 3,645 9.0	-14.6 -37.6	75,998 3,399 4.5
Profit before tax % of net sales Profit for the period % of net sales			2,252 6.5 1,717 5.0		3,532 8.8 2,612 6.5	-36.2 -34.3	2,971 3.9 2,031 2.7
Shareholders´ equity Interest-bearing liabilities Cash and cash equivalents Net interest-bearing liabilities Capital employed Return on equity, % Return on capital employed, % Equity ratio, % Net gearing, %			28,209 8,185 6,884 1,302 36,394 11.5 12.0 55.7 4.6		32,442 10,128 7,660 2,468 42,569 15.5 17.3 56.8 7.6	-13.0 -19.2 -10.1 47.2 -14.5	31,438 8,179 9,245 -1,066 39,617 6.1 8.4 61.0 -3.4

Capital expenditure	1,341	1,677	-20.0	2,846
% of net sales	3.9	4.2		3.7
Research and development costs	868	857	1.3	1,606
% of net sales	2.5	2.1		2.1
Order stock	13,057	14,173	-7.9	10,677
Earnings per share, EUR	0.14	0.22	-36.4	0.17
Earnings per share, EUR, diluted	0.14	0.22	-36.4	0.17
Equity per share, EUR	2.37	2.73	-13.2	2.64
Average number of shares - cumulative - cumulative, diluted	11,897 11,897	11,897 11,897	0.0 0.0	11,897 11,897
Average number of employees	433	432	0.2	431

FORWARD-LOOKING STATEMENTS

Certain statements in this report, which are not historical facts, including, without limitation, those regarding expectations for general economic development and market situation; regarding customer industry profitability and investment willingness; regarding Company growth, development and profitability; regarding cost savings; regarding fluctuations in exchange rates and interest levels; regarding the success of pending and future acquisitions and restructurings; and statements preceded by "believes," "expects," "anticipates," "foresees" or similar expressions are forward-looking statements.

These statements are based on current expectations and currently known facts. Therefore, they involve risks and uncertainties that may cause actual results to differ materially from results currently expected by the Company.

Other unknown or unpredictable factors or underlying assumptions subsequently proving to be incorrect could cause actual results to differ materially from those in the forward-looking statements. Exel Composites does not undertake any obligation to publicly update or revise forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent legally required.

Vantaa, 25 July 2013

Exel Composites Plc Vesa Korpimies Board of Directors President and CEO

FURTHER INFORMATION:

Vesa Korpimies, President and CEO, tel. +358 50 590 6754, or email vesa.korpimies@exelcomposites.com Ilkka Silvanto, CFO and Administrative Director, tel. +358 50 598 9553, or email ilkka.silvanto@exelcomposites.com

DISTRIBUTION NASDAQ OMX Helsinki Ltd. Main news media www.exelcomposites.com

EXEL COMPOSITES IN BRIEF

Exel Composites (www.exelcomposites.com) is a technology company which designs, manufactures and markets composite profiles and tubes for industrial applications. The Group is the leading composite profile manufacturer in the world and concentrates on growing niche segments.

The core of the operations is based on own, internally developed composite technology, product range based on it and a strong market position in selected segments with a strong quality and brand image. Profitable growth is pursued by a relentless search for new applications and development in co-operation with customers. The personnel's expertise and high level of technology play a major role in Exel Composites' operations.

Exel Composites Plc share is listed in the Small Cap segment of NASDAQ OMX Helsinki Ltd.