Exel Composites Oyj — Interim / Quarterly Report 2021

Nov 4, 2021

Exel Composites' Business Review Q1-Q3 2021: Strong revenue, clear decline in profitability

Exel Composites' Business Review Q1-Q3 2021: Strong revenue, clear decline in profitability

EXEL COMPOSITES PLC      STOCK EXCHANGE RELEASE      4 NOVEMBER 2021 at 09:00
EET

Q3 2021 in brief

· Order intake increased by 0.2% to EUR 24.6 million (Q3 2020: 24.5).
· Revenue increased by 28.2% to EUR 33.4 million (26.0).
· Operating profit decreased to EUR -1.7 million (2.0), which is -5.1% of
revenue (7.8).
· Adjusted operating profit decreased to EUR 0.1 million (2.0), which is 0.3%
of revenue (7.8).
· Earnings per share amounted to EUR -0.19 (0.09).

Q1-Q3 2021 in brief

· Order intake increased by 34.3% to EUR 110.1 million (Q1-Q3 2020: 81.9).
· Revenue increased by 20.7% to EUR 97.9 million (81.1).
· Operating profit decreased to EUR 3.1 million (6.7), which is 3.2% of
revenue (8.2).
· Adjusted operating profit decreased to EUR 5.0 million (7.0), which is 5.1%
of revenue (8.6).
· Earnings per share amounted to 0.10 (0.36).

Guidance for the full year 2021

Exel Composites repeats its guidance and expects revenue in 2021 to increase
significantly compared to 2020 and adjusted operating profit to decrease
compared to 2020. Due to the poor performance in the business unit in the United
States, Exel Composites now gives further detail on the guidance and expects
revenue in 2021 to amount to EUR 125-135 million and adjusted operating profit
to EUR 5.8-7.0 million.

President and CEO, Riku Kytömäki

In the third quarter of 2021, our revenue continued to develop strongly. At the
same time, Group profitability declined substantially in comparison to the
previous year. Net order intake was at a good level in the quarter and in line
with the previous year, even if impacted by cancelled orders that were
conditional for delivery in 2021.

The lowered profitability in the third quarter was due to the ramp-up of a
specific carbon fiber Wind Power product, produced in high volumes in our
factory in the United States. Challenges relate especially to the recruitment,
learning curve and employee turnover in the region, impacted also by the Covid
-19 pandemic. Corrective actions are ongoing, and we expect the situation to
start to improve already in the fourth quarter.

The financial performance of Exel USA triggered the need to perform goodwill
impairment testing. The test resulted in an impairment in the intangible assets
of EUR 1.8 million, which explains the difference between the operating profit
and the adjusted operating profit of the Group.

The poor profitability of the business unit in the United States hides the
profitable business growth and good performance elsewhere in the Group. Revenue
increase in the third quarter was strong practically across all customer
industries. Growth was driven particularly by the carbon fiber conductor core
applications in the Buildings and Infrastructure customer industry, which is
equaling up in size to Wind Power. Also applications in the Machinery and
electrical, Telecom, Equipment and other industries as well as Defense customer
industries supported good, profitable revenue growth in the quarter. Even
Transportation, where revenue decreased slightly compared to the previous year,
is recovering from the negative impacts of the Covid-19 pandemic.

In implementing our growth strategy, a recent milestone is the joint venture
with Kineco Group in India, announced after the reporting period in mid-October.
We are very excited about this strategic investment, as it provides Exel with
direct presence in the fast-growing Indian composites market. Kineco Group’s
long and established position in the Indian composites industry allows us to
expand into India with a ‘flying start’. The investment fits our strategy and
growth initiatives very well, and clearly strengthens our competitive position.
We are very much looking forward to joining forces with the committed local team
and boosting our future presence in India.

Our primary focus now is on improving operational efficiency and profitability,
especially in the manufacturing unit in the United States. High revenue and
order intake together with the business prospects stemming from our global
presence, including from now on also the Indian market, provide a good
foundation for the future.

Consolidated key figures

                 Q3      Q3  Change    Q1-Q3   Q1-Q3  Change    Q1-Q4

EUR thousand 2021 2020 % 2021 2020 % 2020

Revenue 33,394 26,043 28.2 97,872 81,087 20.7 108,595
Operating -1,691 2,023 -183.6 3,095 6,685 -53.7 9,417
profit
% of revenue -5.1 7.8 3.2 8.2 8.7
Adjusted 108 2,022 -94.7 5,025 6,976 -28.0 9,708
operating
profit 1)
% of revenue 0.3 7.8 5.1 8.6 8.9
Profit before -1,378 1,348 -202.2 3,452 5,616 -38.5 7,124
tax
% of revenue -4.1 5.2 3.5 6.9 6.6
Profit for the -2,209 1,072 -306.1 1,238 4,270 -71.0 5,368
period
% of revenue -6.6 4.1 1.3 5.3 4.9

Shareholders' 28,779 27,652 4.1 28,779 27,652 4.1 28,880
equity
Interest 51,007 43,713 16.7 51,007 43,713 16.7 43,140
-bearing
liabilities
Cash and cash 9,532 11,156 -14.6 9,532 11,156 -14.6 11,974
equivalents
Net interest 41,475 32,557 27.4 41,475 32,557 27.4 31,167
-bearing
liabilities
Capital 79,786 71,365 11.8 79,786 71,365 11.8 72,021
employed
Return on -29.4 15.8 -286.8 5.7 21.1 -72.9 19.5
equity, %
Return on -8.5 11.8 -172.2 5.5 13.4 -59.3 14.1
capital
employed, %
Equity ratio, % 27.4 29.1 -6.0 27.4 29.1 -6.0 30.2
Net gearing, % 144.1 117.7 22.4 144.1 117.7 22.4 107.9

Net cash flow 731 1,143 -36.1 1,358 9,332 -85.4 14,006
from operating
activities
Net cash flow -1,574 -4,745 -66.8 -8,845 -9,572 -7.6 -12,849
from investing
activities
Capital 1,695 4,420 -61.7 6,548 9,622 -31.9 13,220
expenditure
% of revenue 5.1 17.0 6.7 11.9 12.2
Research and 741 570 30.0 2,518 2,018 24.7 2,884
development
costs
% of revenue 2.2 2.2 2.6 2.5 2.7

Order intake 2) 24,551 24,500 0.2 110,065 81,928 34.3 115,373
Order backlog 47,880 30,710 55.9 47,880 30,710 55.9 36,544

Earnings per -0.19 0.09 -306.0 0.10 0.36 -71.0 0.45
share, diluted
and undiluted,
EUR
Equity per 2.43 2.34 4.04 2.43 2.34 4.03 2.44
share, EUR

Average share 9.16 5.36 70.9 9.16 5.36 70.9 5.55
price, EUR
Average number 11,834 11,830 0.0 11,832 11,827 0.0 11,828
of shares,
diluted and
undiluted,
1,000
shares

Employees, 719 662 8.6 703 662 6.2 665
average
Employees, end 722 656 10.1 722 656 10.1 674
of period

1) Excluding material items affecting comparability, such as restructuring
costs, impairment losses and reversals, and costs related to planned or realized
business acquisitions or disposals.
2) Includes order cancellations during the quarter.

Revenue by customer industry

                    Q3      Q3  Change   Q1-Q3   Q1-Q3  Change    Q1-Q4

EUR thousand 2021 2020 % 2021 2020 % 2020
Buildings and 8,054 4,907 64.2 24,537 16,404 49.6 23,451
infrastructure
Equipment and 5,366 4,272 25.6 16,224 14,414 12.6 19,493
other industries
Wind power 8,592 7,804 10.1 23,757 21,497 10.5 28,079
Machinery and 4,752 3,252 46.1 12,668 11,821 7.2 15,522
electrical
Transportation 2,127 2,195 -3.1 7,336 8,367 -12.3 10,226
Defense 2,189 1,914 14.4 6,218 3,933 58.1 5,338
Telecommunications 2,314 1,700 36.1 7,132 4,651 53.3 6,485
Total 33,394 26,043 28.2 97,872 81,087 20.7 108,595

Revenue by region[1)]

                   Q3      Q3  Change   Q1-Q3   Q1-Q3  Change    Q1-Q4

EUR thousand 2021 2020 % 2021 2020 % 2020
Europe 17,214 13,322 29.2 54,231 45,726 18.6 62,757
North America 9,353 4,483 108.6 22,198 14,694 51.1 18,022
Asia-Pacific 6,121 6,766 -9.5 19,175 17,584 9.0 24,022
Rest of the world 706 1,472 -52.0 2,267 3,084 -26.5 3,795
Total 33,394 26,043 28.2 97,872 81,087 20.7 108,595

1) Revenue by customer location, not by the location of the manufacturing Exel
Composites business unit.

Impacts of the Covid-19 pandemic

Operations

In the third quarter of 2021, all our factories operated normally and following
most of the previous safety measures implemented to prevent the spread of the
Covid-19 pandemic.

Despite the continued challenges with global logistics and availability in many
raw material categories, operations continued almost normally.

Financial standing

The uncertainty related to the Covid-19 pandemic among most of our customer
industries continued to ease in the third quarter of 2021. Order intake
continued at a good level in the quarter.

The Group’s liquidity and cash situation are good, and the Covid-19 pandemic has
had limited impact on Group liquidity.

During the third quarter of 2021, Exel Composites received no Covid-19 related
financial assistance under any local governmental schemes, whereas in the same
period last year approximately EUR 0.4 million were received.

Our response in relation to the Covid-19 pandemic

The health and safety of our employees, customers and business partners is a
priority for Exel Composites. All units have continued with tightened Group and
business unit level safety and hygiene instructions in accordance with the
instructions of local health authorities. As restrictions are being lifted in
different parts of the world, travelling within our sites and to customer
meetings is starting to slowly pick up. Remote work and online meetings continue
nevertheless to be preferred. Outsider visits to sites are still reduced to
minimum. Internal communication on Covid-19 related concerns has continued in
various channels.

We continue to monitor the situation closely and maintain a continuous
interaction and dialogue with our customers, suppliers, and business partners to
ensure timely reaction.

Events after the reporting period

Exel Composites and Kineco Group announce a joint venture in India

Exel Composites has signed an agreement to establish a joint venture to develop
the Indian pultrusion market together with India’s leading composites company,
Kineco Group. In the transaction, Kineco Group will sell the assets of its
pultrusion business into a new company, Kineco Exel Composites India, in which
Exel Composites will subscribe to a 55% ownership in a directed share issue.
Kineco Group will remain a shareholder with a 45% shareholding. The joint
venture will continue to operate from the existing manufacturing facility
located in Goa. The investment is strategically important to Exel as it provides
direct access to the fast-growing Indian composites market.

The parties have agreed that the size of the investment will not be disclosed.
The transaction is expected to be completed in the fourth quarter of 2021.

Financial results briefing

Exel Composites will hold a financial results briefing regarding the Q1-Q3 2021
Business Review on 4 November 2021 at 12:30 EET. Participation has required
registration in advance.

Vantaa, 4 November 2021

Exel Composites Plc
Board of Directors

For further information, please contact:
Riku Kytömäki, President and CEO
tel. +358 50 511 8288
riku.kytomaki@exelcomposites.com

Mikko Kettunen, CFO
tel. +358 50 347 7462
mikko.kettunen@exelcomposites.com

Distribution
Nasdaq Helsinki Ltd
Main news media
www.exelcomposites.com

Exel Composites in brief

At Exel Composites, we use over 60 years’ experience to solve challenges and
help customers save resources. Our forward-thinking composite solutions made
with continuous manufacturing technologies serve customers in a wide range of
industries around the world. You can find our products used in applications from
wind power and transportation to building and infrastructure.

Our collaborative approach and global footprint set us apart from our
competition. We use our expertise to help customers reduce weight, improve
performance and energy efficiency and decrease total lifetime costs. We want to
be the first choice for sustainable composite solutions globally.

Headquartered in Finland, Exel Composites employs approximately 700 forward
-thinking professionals around the world and is listed on Nasdaq Helsinki. To
find out more about our offering and company please visit
www.exelcomposites.com.

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