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
In Q2 2024, we continued our track of improvements. This was the third consecutive upward quarter in revenue and the second in adjusted operating profit. We achieved revenue growth both from the comparison period last year and from the previous quarter. We made significant improvement in operating profit and turned our first half clearly positive.
I am very proud of the work we have done in the first half of 2024 to strengthen our capital structure and accelerate our transformative growth strategy launched in late 2023. A major highlight of the review period was the oversubscribed rights issue, which I consider a strong indication of support for our company and the direction we have chosen to take. In total, we received subscriptions for approximately 141 per cent of the offer shares, contributing gross proceeds of approximately EUR 21.8 million.
Following the offering, Exel had 8,425 shareholders at the end of the reporting period, comprising both institutional investors (55%) and households (45%). We saw the vast majority of our prior shareholders stay as shareholders after the rights issue, being joined by many new owners as well. I would like to extend my warmest thanks to all shareholders who participated in our rights issue for their strong support and welcome you all on our transformative journey!
Our new financing agreement of EUR 52.4 million entered into force in June. With the financing agreement and the funds raised in the rights issue, we are now able to swiftly advance our strategic initiatives that we have communicated earlier. These include furthering the execution of the strategic factory network optimization plan and investments to support the company’s growth, among others. The equipping of our manufacturing facility in Goa, optimized for serving wind power industry customers in India, is well underway and production is due to start during 2024. The strategic review of the Belgian factory is also progressing according to plan, and we are proceeding to the action phase.
Order intake increased, markets developed in line with our expectations
Similarly, it was pleasing to see that our efforts in the customer interface continued to pay off. Our order intake continued to increase, amounting to EUR 55.0 million for the first half. As a result, our order backlog at the end of June stood at EUR 34.5 million, which is 31% higher than the same period last year.
Markets developed in line with our expectations. We had estimated that the first half of this year would be busier than the previous six months, and in the reporting period, we saw increased customer activity in all our strategic industries, except for the construction market, where the situation is still challenging.
We signed several important new customer agreements in the first half, including a multi-year agreement with a major wind turbine manufacturer for the supply of carbon fiber planks for spar caps from our new Indian factory. In addition, we signed a multi-year agreement with Foton Bus and Coach company to deliver pultruded parts to electric buses, as well as a partnership agreement with Flying Whales airship company to design carbon fiber tubes to the airship’s fuselage.
Looking forward we are working on significant new customer deals in line with our strategic focus areas and hope to announce them in due time. With that said, the macroeconomic sentiment remains indecisive and has even shown some signs of cooling off during the summer. Uncertainty about the global economic outlook and geopolitical situation continues. We expect customer activity to remain at the current level in the second half of 2024, and it will continue to require daily efforts from us to maintain good development.
Revenue increased, significant improvement in operating profit
The increase in order intake resulted in revenue growth in the second quarter. Revenue for the quarter grew by 4.7% from the comparison period coming in at EUR 26.6 million and was at EUR 50.0 million for the first half (H1 2023: 54.2).
Revenue in the second quarter grew in nearly all customer industries, mainly excluding the Energy sector, since we are still preparing to ramp up production of certain wind products in India.
The increased order intake and revenue, combined with actions to optimize capacity, cost control and operational measures, elevated our Q2 2024 adjusted operating profit margin to 5.2% (0.3%) and our adjusted operating profit to EUR 1.4 million (0.1).
The profitability improvement in Q2 2024 speaks well to the value generation potential Exel has as we increase the utilization rates of our manufacturing capacity. We are still far below the utilization rates and order intake levels we target. However, it is encouraging to see that we are on the right path. 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 production. Both actions are, however, expected to require investment and to incur additional costs in the short term.
As a result of our good progress in the first half, we had a positive operative cash flow of EUR 2.6 million. In the first half of 2024, Group’s financial position improved significantly with change in liquid funds being positive by EUR 21.3 million due to the successful rights issue.
Outlook for 2024 unchanged
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.
New operating model in place
In early 2024, we introduced a new operating model based on two business units: Engineered Solutions Business Unit and Industrial Solutions Business Unit. The second quarter was the first full quarter with our new operating model being fully operational. We now report revenue for the two business units, in addition to Group revenue by customer industry.
Revenue in the Engineered Solutions Business Unit was EUR 41.5 million in the first half of 2024. Markets picked up and the demand developed favourably in most of the customer industries. There was especially high demand in defense and various tube applications.
In the USA, the Engineered Solutions Business Unit secured several new customers, particularly in the building and infrastructure sector. Many orders received in the first half are now in production and expected to become revenue in the latter half of 2024.
Revenue in the Industrial Solutions was EUR 8.5 million in the first half. Demand was cautiously positive, and there were signs of markets picking up. However, some customers continued to postpone orders and consume material inventories. New customers secured in the first half are expected to positively impact volumes starting in late 2024.
If I may, I would like to invite you to have a look at the business reviews in this report to get more familiar with our new business units and their activities.
Sincerely,
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.
