Investing in Exel Composites
Reasons to invest in Exel
Optimally positioned within a growing market
With our efficient, continuous production technologies, we answer to the growing demand for composite materials. This demand is driven by global megatrends, such as sustainability, energy transition, urbanization and total life cycle cost management.
Technology leadership creates competitive advantage
Our leading expertise in a variety of composite production technologies and raw materials allows us to solve our customers’ challenges. We continuously perfect our offering with over 60 years of R&D experience.
Global operations enable global customers
We are the only company within our industry with manufacturing, R&D and sales presence in all main market areas. This sets us ahead of our competitors.
Focused businesses enable growth
Exel will become a more integrated designer and manufacturer of pultruded composite solutions for volume and customer-specific applications. This transformation will enable Exel to grow by capturing organic profitable growth from large and fast-growing applications driven by decarbonization and sustainability.
Sustainability at the core of our business
We provide sustainable composite solutions that help our customers save resources and mitigate climate change. Composites’ unique properties, such as lightness and durability, provide for longer life cycles and improved performance, lowering thus the negative impacts of the end-product on the environment.
Exel Composites’ Capital Markets Day 2023
President and CEO, Paul Sohlberg
Exel Composites had another good quarter in July-September 2024. Our revenue and profitability in the third quarter increased significantly year-on-year. In January-September, our order intake increased, and our order backlog was strengthened.
The implementation of our transformative strategy to capture profitable growth advanced well. We focused on larger customers, high-growth customer industries and volume business, all of which position us well for the future. The commissioning of our new factory in India is progressing as per our plans. Once completed, the factory will allow us to better serve wind power customers in India and globally. The facility will be ready for production in the last quarter of 2024.
In September, we completed the strategic review at our Oudenaarde factory in Belgium and entered into consultation with employee representatives regarding the intention to discontinue production at the factory. Unfortunately, launching the process was the necessary action to address loss-making activities. So far, several negotiations have been conducted in a good spirit and we believe that the good cooperation will continue throughout the process.
Order intake increased in Q1-Q3, despite the economic uncertainty
Our order intake increased in January-September 2024, amounting to EUR 76.1 million for the period. As a result, the order backlog at the end of September stood at EUR 30.6 million, which is 7.3% higher than in the same period last year. The order intake in the third quarter, however, fell short of the comparison period and of the first and second quarters of 2024.
In terms of order intake, the third quarter is often seasonally the weakest quarter of the year. Uncertainty about the global economic outlook continued in the third quarter and the macroeconomic sentiment remained indecisive. The year 2023 was very difficult for the pultrusion industry in general. Compared to this, our customer activity has increased in all our strategic customer industries except in the construction market.
Significant agreements with two major wind turbine OEMs
All in all, we performed well despite the uncertain operating environment and achieved customer engagements that are important for our future growth.
In September, we announced one of the highlights of the quarter as Exel Composites and its joint venture Kineco-Exel India won the bidding process in India for supplying carbon planks for wind turbine spar caps for Vestas Wind Systems A/S globally. The products, once tested and approved for production, will be manufactured in our new factory in India. Deliveries are estimated to begin in the last quarter of 2025. The step deepens our collaboration with Vestas, which started over a decade ago. This is already the second spar cap customer engagement for the new India factory this year, as we announced a multi-year agreement with another major wind turbine manufacturer in the first quarter.
After the review period, we signed a multi-year supply agreement for helihoist systems for offshore wind turbines with a major Western wind turbine manufacturer. The composite components will be manufactured with pultrusion at Exel’s Nanjing factory in China, followed by necessary post-processing and assembly work. Deliveries are expected to begin in 2025.
Revenue increased in most customer industries
Revenue for the third quarter grew by 19.7% year-on-year coming in at EUR 24.6 million and was at EUR 74.5 million for January-September 2024 (Q1-Q3 2023: 74.7).
In the third quarter, revenue increased from the comparison period in 2023 in all of our customer industries, apart from the Energy customer industry, where we expect deliveries from our new Indian factory to pick up in 2025.
Engineered Solutions Business Unit reported EUR 20.0 million in revenue in the third quarter, while Industrial Solutions Business Unit reported EUR 4.6 million. I am pleased that Industrial Solutions achieved growth in the third quarter and two new significant wind power customer engagements in line with our strategy. Engineered Solutions, on the other hand, is progressing well in optimizing our factory network and securing new customers.
We have spent a considerable amount of time identifying future needs of our customers. As a result, one of the key targets of our transformative strategy is to increase customer value by offering post-processing services, engineering support and productization, among others. I am pleased to report on progress towards this goal also in the third quarter. For example, in the Transportation customer industry, we won additional volumes by starting to provide post-processing services such as painting services for profiles used in transport equipment, and the work continues.
Operating profit continued to improve
While revenue in January-September 2024 was at the previous year’s level, our profitability during the same period improved due to determined adjustment measures taken during the year.
In the third quarter 2024, the actions to optimize capacity, cost control and operational measures elevated our adjusted operating profit margin to 2.9% (-5.9%) and our adjusted operating profit to EUR 0.7 million (-1.2).
We expect profitability to further improve over time with higher utilization rates, which we aim to achieve by ramping up new customer products and further optimizing and consolidating production.
Our net cash flow from operating activities has been impacted by increases in working capital, higher interest rates and other financing costs, coming in at EUR -1.3 million (3.7) for January-September 2024.
We reiterate our guidance published in February 2024: Exel Composites expects revenue to increase and adjusted operating profit to increase significantly in 2024 compared to 2023.
Paul Sohlberg
President and CEO
Vision and purpose
Our purpose is to solve challenges and save resources with composites Our vision is to be the first choice for sustainable composites solutions globally
Exel Composites in the value chain
Market environment
Exel Composites operates worldwide in the composites market, serving customers in several different customer industries.
According to industry associations the annual value of composites market of approximately EUR 85 billion is only about 1% of the huge global materials market, which is dominated by steel, plastic, and aluminum. The pultruded composites market represents less than 5% of the total composites market. Exel sees growth potential for composites as a material as well as for pultrusion as a production technology within the composites market.
Growth drivers
The global composites market is estimated to grow at an annual average rate of approximately 7% in the coming years. Growth rate varies by region, production technology and end-use application.
North America is the largest composites market, followed by Asia and Europe. North America and Europe are more mature markets with steady growth prospects, while Asia, especially China and India grow faster.
In the long-term, interest towards composite materials is steadily growing, supported by global megatrends such as sustainability, energy transition, longer life cycles and urbanization. The main benefits of composites include lightness, energy efficiency, durability, and the need for less maintenance. For example, increased energy efficiency requirements within the transportation industry and the increased utilization of anti-corrosive materials in the construction industry drive the increased use of composites. Exel Composites’ ambition is to leverage on these trends and mitigate the negative impacts of climate change by offering its customers sustainable composite products that respond to this demand.
Increasing sustainability
circular economy, climate change and energy efficiency
Longer life cycles
decreasing lifetime costs and maintenance needs
Rapid urbanization
smarter cities and infrastructure
Market share
The composites market is fragmented. Whereas Exel Composites is not a large company, it is nevertheless a leading company in the field of pultrusion and the only pultrusion company with significant presence on all major markets: Europe, Asia, and North America. This global presence differentiates Exel from its competitors and enables head-to-head competition with global suppliers of traditional materials.
Exel Composites’ customer base is wide-spread over several segments and markets, which means that also its competitors are found within specific segments and markets rather than across. Some of the main competitors include for example Fiberline from Denmark, Epsilon from France as well as Creative Pultrusion and Strongwell in the United States.
