Exel Composites Oyj

Interim / Quarterly Report • Oct 29, 2010

January 1 – September 30, 2010

INTERIM REPORT

July – September 2010 highlights

• • Net sales from continuing operations were EUR 18.7 (15.9) million, an increase of 17.3 per cent on the previous year
• • Operating profit from continuing operations was EUR 2.7 (1.2) million, representing 14.3 (7.8) per cent of net sales
• • Net operative cash flow was positive at EUR +2.8 (+2.4) million
• • Fully diluted earnings per share improved to EUR 0.16 (0.07), of which continuing operations accounted for EUR 0.16 (0.06)

January – September 2010 highlights and outlook

• • Net sales from continuing operations were EUR 53.5 (53.8) million for the first nine months of 2010, down by -0.4 per cent on the previous year
• • Operating profit from continuing operations was EUR 6.3 (5.6) million in January September 2010, representing 11.8 (10.5) per cent of net sales
• • Net operative cash flow was positive at EUR +6.9 (+8.6) million, whilst net debt was reduced to EUR 3.1 million
• • Fully diluted earnings per share were EUR 0.38 (0.37), of which continuing operations accounted for EUR 0.38 (0.35)
• Strategic review conducted. Profitable growth strategy confirmed
• • Due to the uncertain market situation and poor visibility, Exel Composites will not give any profit guidance.

Vesa Korpimies, President and CEO:

"Market conditions continued to

improve in the third quarter 2010 driven by increasing demand especially in telecommunication, paper, electrical and machine industry and the cleaning and maintenance market. Meanwhile, building and construction industry suffered from poor demand but there is a growing interest in e.g. composite window and door profiles.

The European Commission imposed an anti-dumping tariff of 43.6 per cent on imported Chinese glass fiber in September 2010. The tariff and raw material cost increases raise production costs in Europe. Exel Composites has taken actions to reduce the impact of higher production costs

on the profitability, including increasing product prices, employing alternative sourcing opportunities as well as increasing production and improving efficiency in Exel's Nanjing unit in China. The rising raw material costs are not estimated to have a material impact on the profitability yet in 2010.

The Group's net sales in the third quarter of 2010 increased by 17.3 per cent on the corresponding period last year to EUR 18.7 (15.9) million. The positive demand development combined with our actions to reduce cost and capital employed resulted in a strong quarter for the Group. The Group's operating profit improved from EUR 1.2 million to EUR 2.7 million and the return on capital employed increased to 25.3 (12.4) per cent. Our positive cash flow enabled us to reduce the net debt to EUR 3.1 million.

We are encouraged by the development in the third quarter of 2010. However, we remain cautious in the near term, since fundamental economic uncertainties persist. Because of the comprehensive rationalization of the costs and capital, as well as our focus on sales and new applications, we are well positioned to take advantage of the growth opportunities as the markets gradually recover."

CONSOLIDATED KEY FIGURES (unaudited)

EUR millions	1.7.–30.9. 2010	1.7.–30.9. 2009	Change, %	1.1.–30.9. 2010	1.1.–30.9. 2009		Change, % 1.1.–31.12. 2009
Net sales, continuing operations	18.7	15.9	17.3	53.5	53.8	-0.4	70.0
Operating profit, continuing operations	2.7	1.2	116.2	6.3	5.6	12.2	8.0
% of net sales	14.3	7.8		11.8	10.5		11.4
profit for the period,	1.9	0.7	166.8	4.5	4.1	9.1	5.9
continuing operations
Shareholders' equity	29.3	22.7	29.2	29.3	22.7	29.2	25.6
Net interest-bearing liabilities	3.1	11.8	-74.0	3.1	11.8	-74.0	6.1
Capital employed	42.8	43.3	-1.0	42.8	43.3	-1.0	44.3
Return on equity, %	26.2	14.3		21.8	29.9		31.3
Return on capital employed, %	25.3	12.4		20.1	18.4		20.9
Equity ratio, %	50.0	38.8		50.0	38.8		44.6
Net gearing, %	10.4	51.8		10.4	51.8		23.7
Earnings per share, EUR	0.16	0.07		0.38	0.37		0.56
Earnings per share, diluted, EUR	0.16	0.07		0.38	0.37		0.56
Equity per share, EUR	2.47	1.91		2.47	1.91		2.15

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 2009 financial statements.

Financial performance

1 July – 30 September 2010

The Group's net sales from continuing operations in July – September 2010 increased by 17.3 per cent to EUR 18.7 (15.9) million compared to the corresponding period last year.

Net sales continued to improve in telecommunication, paper, electrical and machine industry and cleaning and maintenance. Building and construction industry still suffered from poor demand, but there is a growing interest in composite glass fiber window and door profiles because of new energy regulations.

In the airport product group the quiet period continued. There have been some early signs of recovery, but the demand is still weak.

Exel Composites' operating profit from continuing operations in July - September 2010 increased to EUR 2.7 (1.2) million, up by 116.2 per cent compared to the corresponding period last year.

1 January – 30 September 2010

Net sales from continuing operations in January – September 2010 decreased by 0.4 per cent to EUR 53.5 (53.8) million compared to the corresponding period in 2009.

The composite profile market continued to be competitive and there was overcapacity in the market. Also, the European Commission imposed an anti-dumping tariff of 43.6 per cent on imported Chinese glass fiber. Exel Composites has taken actions to reduce the impact of the tariff, including increasing product prices, employing alternative sourcing opportunities as well as increasing production and improving efficiency in Exel's Nanjing unit in China.

Exel Composites' operating profit from continuing operations in January – September 2010 increased by 12.2 per cent to EUR 6.3 (5.6) million, compared to the corresponding period last year. Operating profit as a percentage of net sales from continuing operations was 11.8 (10.5) per cent. Other operating expenses include one-off restructuring costs of EUR 1.1 million due to the corporate restructuring of the former Floorball licensee. Other operating income includes one-off Sports licensing income of EUR 1.6 million. After deduction of related costs this gives a positive net effect in operating profit of EUR 0.5 million.

The Group's net financial expenses from continuing operations in January – September 2010 were EUR -0.2 (-0.1) million. The Group's profit before taxes from continuing operations was EUR 6.1 (5.6) million and profit after taxes EUR 4.5 (4.1) million.

Earnings per share for continuing operations improved to EUR 0.38 (0.35) and for discontinued operations decreased to EUR 0.00 (0.03). Return on capital employed was 20.1 (18.4) per cent.

Balance sheet and financial position

Net cash flow from operating activities was positive at EUR 6.9 (8.6) million. Cash flow before financing, but after capital expenditure, amounted to EUR 6.0 (8.9) million.

Net interest-bearing liabilities were reduced to EUR 3.1 (11.8) million, and the net gearing ratio improved to 10.4 (51.8) per cent. Interest-bearing liabilities amounted to EUR 13.5 (20.5) million, of which short term liabilities accounted for EUR 5.3 (4.2) million.

Capital expenditure was financed with cash flow from business operations. At the end of the period under review, the Group's liquid assets stood at EUR 10.4 (8.8) million.

The Group's consolidated total assets at the end of the review period were EUR 58.6 (58.6) million.

Equity at the end of the period under review was EUR 29.3 (22.7) million and equity ratio 50.0 (38.8) per cent.

Capital expenditure and depreciation

The capital expenditure on fixed assets during the review period amounted to EUR 1.0 (1.1) million.

Total depreciation of non-current assets during the period under review amounted to EUR 2.2 (2.3) million.

Personnel

The number of Exel Composites Group employees on 30 September 2010 was 408 (409), of whom 188 (175) worked in Finland and 220 (234) in other countries. The average number of personnel during the reporting period was 402 (443). The decrease of average number of personnel is due to the rationalization actions in the Finnish, British and Chinese units and the divestment of Exel Sports Brands' Floorball business.

Shares and share capital

At the end of September 2010, 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.

Based on the closing price on 30 September 2010, the market capitalization totaled EUR 65.6 (66.4) million. During January – September 2010 1,831,394 (3,195,810) shares were traded, accounting for 15.4 (26.9) per cent of the average number of shares outstanding.

The highest share quotation in January – September 2010 was EUR 6.79 (6.20) and the lowest EUR 5.00 (2.37). The share price closed at EUR 5.51 (5.58). The average share price during the review period was EUR 5.81 (3.91).

Own shares

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

Shareholders and disclosures

Exel Composites had a total of 2,186 shareholders on 30 September 2010. Information on Exel Composites' shareholders is available on the Company website at www.exelcomposites.com.

Exel Composites received no flagging notifications during the period under review.

Strategic review conducted

Exel Composites' Board of Directors has conducted a review of the strategic options available to enhance shareholder value. Exel Composites has a strong financial position and is the market leader in the fragmented pultrusion industry.

The Board confirmed the strategy to continue focusing on profitable growth by pursuing organic growth opportunities and bolt-on acquisitions.

Major near-term risks and uncertainties

The most significant near-term business risks are related to the general economic development, government regulations and a possible new financial crisis in the Euro area as well as to market demand in certain market segments. The general market visibility is still uncertain. Raw material prices, energy cost and other cost increases may put pressure on profitability. The European Commission's anti-dumping tariffs imposed on Chinese glass fiber will have a negative effect on the profitability in case the rising costs of glass fiber can only be transferred partially to product prices. In case the measures taken in the Chinese unit to improve efficiency prove to be unsuccessful, this may have an effect on the result of the company. Currency rate changes and price competition may also have a negative effect on the result. The availability of financing may continue to have an effect on the demand and increase the risk of credit loss.

Market outlook

Due to the worldwide business slowdown, demand has been weak in several geographical markets and market segments. The market conditions have gradually improved in 2010. Exel Composites recorded a strong third quarter of 2010, but maintains its cautious stance in the near term, since market uncertainties persist. Exel Composites is well positioned to take advantage of the growth opportunities as the markets gradually recover.

Exel Composites' outlook for 2010

Due to the uncertain market situation and poor visibility, Exel Composites will not give any profit guidance.

CONSOLIDATED COMPREHENSIVE INCOME STATEMENT

EUR 1,000	1.7.–30.9 2010	1.7.–30.9. 2009	Change, %	1.1.–30.9. 2010	1.1.–30.9. 2009	Change, %	1.1.–31.12. 2009
continuing operations
net sales	18,692	15,942	17.3	53,534	53,757	-0.4	70,005
Materials and services	-7,451	-6,702	-11.2	-20,703	-22,038	6.1	-28,430
Employee benefit expenses	-4,577	-4,332	-5.7	-13,851	-13,922	0.5	-17,994
Depreciation and impairment	-724	-748	3.2	-2,162	-2,316	6.6	-3,028
Other operating expenses	-3,856	-3,101	-24,3	-12,908	-10,779	-19.8	-13,859
Other operating income	595	180	230.6	2,403	928	158.9	1,296
operating profit	2,679	1,239	116.2	6,315	5,630	12.2	7,990
Net financial items	-152	-288	47.2	-248	-50	-396.0	-20
profit before tax	2,527	951	165.7	6,067	5,580	8.7	7,970
Income taxes	-662	-252	-162.7	-1,587	-1,475	-7.6	-2,025
profit/loss for the period from continuing operations	1,865	699	166.8	4,480	4,105	9.1	5,945
discontinued operations Profit/loss for the period from discontinuing operations	0	97	-100.0	0	310	-100.0	662
profit/loss for the period	1,865	796	134.3	4,480	4,415	1.5	6,607
other comprehensive income
Exchange differences on translating foreign operations	-43	-42	-2.4	2,260	1,621	39.4	2,293
Income tax relating to components of other comprehensive income	0	0	0.0	0	0	0.0	0
Other comprehensive income, net of tax	-43	-42	-2.4	2,260	1,621	39.4	2,293
Total comprehensive income	1,823	754	141.8	6,741	6,036	11.7	8,900
profit/loss attributable to:
Equity holders of the parent company	1,865	796		4,480	4,415		6,607
comprehensive income attributable to:
Equity holders of the parent company	1,823	754		6,741	6,036		8,900
earnings per share, diluted and undiluted, eur
From continuing operations	0.16	0.06		0.38	0.35		0.50
From discontinued operations	0.00	0.01		0.0	0.0		0.06
total	0.16	0.07		0.38	0.37		0.56

CONDENSED CONSOLIDATED BALANCE SHEET

EUR 1,000	30.9.2010	30.9.2009	Change	31.12.2009
assets
non-current assets
Goodwill	11,020	9,698	1,322	9,686
Other intangible assets	2,360	2,497	-137	2,460
Tangible assets	10,295	10,981	-686	10,835
Deferred tax assets	1,875	3,288	-1,413	2,315
Other non-current assets	64	62	2	64
non-current assets total	25,613	26,525	-912	25,642
current assets
Inventories	9,782	10,040	-258	8,782
Trade and other receivables	12,849	13,250	-401	10,281
Cash at bank and in hand	10,399	8,767	1,632	12,597
Current assets total	33,029	32,057	972	31,661
total assets	58,643	58,582	61	57,303
equity and liabilities
shareholders´ equity
Share capital	2,141	2,141	0	2,141
Other reserves	37	5	32	37
Invested unrestricted equity fund	8,488	8,488	0	8,488
Translation differences	2,161	-772	2,933	-100
Retained earnings	12,039	8,440	3,599	8,407
Profit for the period	4,480	4,415	65	6,607
Total equity attributable to equity holders of the parent company	29,347	22,717	6,629	25,580
Total equity	29,347	22,717	6,630	25,580
non-current liabilities
Interest-bearing liabilities	8,158	16,329	-8,171	16,346
Interest-free liabilities	335	389	-54	330
Deferred tax liabilities	316	342	-26	248
current liabilities
Interest-bearing liabilities	5,299	4,210	1,089	2,324
Trade and other non-current liabilities	15,188	14,596	592	12,476
total liabilities	29,296	35,866	-6,570	31,723
total equity and liabilities	58,643	58,582	61	57,303

STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

EUR 1,000	Share capital	Share premium reserve	Other reserves	Invested unrestricted equity fund	Translation differences	Retained earnings	Total
Balance at 1 January 2009	2,141	0	5	8,488	-2,393	8,440	16,680
Comprehensive result Dividend	0	0	0	0	1,621	4,415 0	6,036 0
Balance at 30 September 2009	2,141	0	5	8,488	-772	12,855	22,717
Balance at 1 January 2010	2,141	0	37	8,488	-100	15,013	25,580
Comprehensive result	0	0	0	0	2,260	4,480	6,740
Dividend						-2,974	-2,974
balance at 30 september 2010	2,141	0	37	8,488	2,161	16,519	29,347

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

EUR 1,000	1.1.–30.9.2010	1.1.–30.9.2009	Change	1.1.–31.12.2009
cash flow from operating activities
Profit for the period	4,480	4,415	65	6,607
Adjustments	4,976	2,994	1,982	4,829
Change in working capital	-958	1,486	-2,444	2,309
Cash flow generated by operations	8,498	8,895	-397	13,745
Interest paid	-328	-822	494	-1,015
Interest received	143	136	7	292
Other financial items	-44	743	-787	770
Income taxes paid	-1,345	-364	-981	427
net cash flow from operating activities	6,924	8,588	-1,664	14,219
cash flow from investing activities
Disposal of business	0	1,000	-1,000	1,225
Capital expenditure	-919	-1,080	161	-1,440
Proceeds from sale of fixed assets	0	410	-410	410
cash flow from investing activities	-919	330	-1,249	195
cash flow from financing
Instalments of long-term borrowings	-4,357	-7,623	3,266	-7,623
Change in short-term loans	0	-264	264	-1,823
Instalments of finance lease liabilities	-872	-299	-573	-406
Dividends paid	-2,974	0	-2,974	0
Net cash flow from financing	-8,203	-8,186	-17	-9,852
change in liquid funds	-2,198	732	-2,904	4,562
Liquid funds in the beginning of period	12,597	8,035	4,562	8,035
Change in liquid funds	-2,198	732	-2,930	4,562
Liquid funds at the end of period	10,399	8,767	1,632	12,597

QUARTERLY KEY FIGURES

EUR 1,000	III/2010	II/2010	I/2010	IV/2009	III/2009	II/2009	I/2009
continuing operations
net sales	18,692	19,173	15,671	16,248	15,942	19,285	18,530
Materials and services	-7,451	-7,189	-6,062	-6,393	-6,702	-7,988	-7,347
Employee benefit expenses	-4,577	-4,892	-4,381	-4,071	-4,332	-4,763	-4,827
Depreciation and impairment	-724	-763	-675	-712	-748	-748	-820
Operating expenses	-3,856	-4,229	-4,824	-3,080	-3,101	-3,843	-3,836
Other operating income	595	553	1,255	367	180	448	300
operating profit	2,679	2,653	983	2,360	1,239	2,390	2,001
Net financial items	-152	-10	-86	30	-288	185	53
profit before taxes	2,527	2,643	897	2,390	951	2,575	2,054
Income taxes	-662	-706	-219	-550	-252	-693	-530
Profit/loss for the period from continuing operations	1,865	1,937	678	1,840	699	1,882	1,524
Profit/loss for the period from discontinuing activities	0	0	0	351	97	80	133
profit/loss for the period	1,865	1,937	678	2,191	796	1,962	1,658
Earnings per share, EUR	0.16	0.16	0.06	0.18	0.07	0.16	0.14
Earnings per share, EUR, diluted	0.16	0.16	0.06	0.18	0.07	0.16	0.14
Average number of shares, undiluted, 1,000 shares	11,897	11,897	11,897	11,897	11,897	11,897	11,897
Average number of shares, diluted, 1,000 shares	11,897	11,897	11,897	11,897	11,897	11,897	11,897
Average number of personnel	402	397	408	414	425	452	461

COMMITMENTS AND CONTINGENCIES

EUR 1,000	30.9.2010	30.9.2009	31.12.2009
on own behalf
Mortgages	2,783	2,783	2,783
Corporate mortgages	12,500	12,500	12,500
lease liabilities
• in next 12 months	253	554	516
• in next 1–5 years	1,416	1,403	1,328
other commitments	154	157	235

DERIVATIVE FINANCIAL INSTRUMENTS

Nominal values, EUR 1,000	30.9.2010	30.9.2009	31.12.2009
foreign exchange derivatives
Forward contracts	0	689	341
interest rate derivatives
Interest rate swaps	10,000	9,286	10,000
Purchased interest rate options	0	5,000	0

CONSOLIDATED KEY FIGURES

EUR 1,000	1.1.–30.9.2010	1.1.–30.9.2009	Change, %	1.1.–31.12.2009
continuing operations
Net sales	53,534	53,757	-0,4	70,005
Operating profit	6,315	5,630	12.2	7,990
% of net sales	11.8	10.5		11.4
Profit before tax	6,067	5,580	8.7	7,970
% of net sales	11.3	10.4		11.4
Profit for the period	4,480	4,105	9.1	5,945
% of net sales	8.4	7.6		8.5
Shareholders´ equity	29,347	22,717	29.2	25,580
Interest-bearing liabilities	13,457	20,539	-34.5	18,669
Cash and cash equivalents	10,399	8,767	18.6	12,597
Net interest-bearing liabilities	3,058	11,772	-74.0	6,072
Capital employed	42,804	43,255	-1.0	44,250
Return on equity, %	21.8	29.9		31.3
Return on capital employed, %	20.1	18.4		20.9
Equity ratio, %	50.0	38.8		44.6
Net gearing, %	10.4	51.8		23.7
Capital expenditure	919	1,080	-14,9	1,440
% of sales	1.7	2.0		2.1
Research and development costs	962	1,158	-16.9	1,407
% of net sales	1.8	2.2		2.0
Order stock	13,568	10,123	34.0	8,827
Earnings per share, EUR	0.38	0.37	1.5	0.56
Earnings per share, EUR, diluted	0.38	0.37	1.5	0.56
Equity per share, EUR	2.47	1.91	29.2	2.15
Average number of shares
• cumulative	11,897	11,897	0.0	11,897
• cumulative, diluted	11,897	11,897	0.0	11,897
Average number of employees	402	443	-9.3	436

Vantaa, 29 October 2010

Exel Composites plc Vesa Korpimies Board of Directors President and Ceo

It should be noted that certain statements herein which are not historical facts, including, without limitation, those regarding expectations for general economic development and the market situation, expectations for company growth, development and profitability, and statements preceded by "expects" or "estimates" or similar expressions, are forward-looking statements. These statements are based on current decisions and plans and currently known facts. They involve risks and uncertainties which may cause the actual results to materially differ from the results currently expected by the company.

Further information

Vesa Korpimies, President and CEO tel. +358 50 590 6754 email vesa.korpimies@exelcomposites.com

Ilkka Silvanto, CFO and Administrative Director tel. +358 50 598 9553 email ilkka.silvanto@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.

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

headquarters

exel composites plc Uutelantie 24 B, P.O. Box 29 52701 Mäntyharju, Finland Tel. +358 20 7541 200 Fax +358 20 7541 202 investor@exelcomposites.com

exel composites plc

kivara factory Muovilaaksontie 2 82110 Heinävaara, Finland Tel. +358 20 7541 200 Fax +358 20 7541 330 office.heinavaara@exelcomposites.com

exel composites plc

vantaa office Mäkituvantie 5 01510 Vantaa, Finland Tel. +358 20 7541 200 Fax +358 20 7541 201 investor@exelcomposites.com

exel gmbh, voerde

Alte Hünxer Strasse 139 46562 Voerde, Germany Tel. +49 281 16412 10 Fax +49 281 16412 20 office.voerde@exelcomposites.com

exel composites n.v.

Industriepark De Bruwaan 2 9700 Oudenaarde, Belgium Tel. +32 55 33 30 11 Fax +32 55 33 30 40 office.oudenaarde@exelcomposites.com

exel composites china

No 2120 Cheng Xin Da Dao Science Park, Jiangning Nanjing 211112, China Tel. +86 25 52 1216 4669 Fax +86 25 5216 4993 office.nanjing@exelcomposites.com

exel composites australia, melbourne

991 Mountain Highway Boronia, Victoria 3155, Australia Tel. +61 (9)3 8727 9600 Fax +61 (0)3 8727 9688 office.melbourne@exelcomposites.com

exel composites australia, brisbane

15 Ada Street, Coopers Plains Queensland 4108, Australia Tel. +61 (0)7 3274 1099 Fax +61 (0)7 3274 2041 office.brisbane@exelcomposites.com

exel composites gmbh

Industriestrasse – West 8 8605 Kapfenberg, Austria Tel. +43 3863 33 180 Fax +43 3862 33 180 25 office.kapfenberg@exelcomposites.com

exel composites uk

Fairoak Lane, Whitehouse Runcorn, Chesire WA7 3DU United Kingdom Tel. +44 1928 701 515 Fax +44 1928 713 572 office.runcorn@exelcomposites.com

www.exelcomposites.com