President and CEO Riku Kytömäki

Group revenue increased and profit turnaround in the USA progressed well

Q1 2022 Business Review, 29 April 2022

The year has started well for Exel. Revenue increased in the first quarter of 2022 compared to the previous year, driven particularly by Equipment and Other customer industry. Buildings and Infrastructure also showed continued growth. Transportation, which has been hard hit by the pandemic, continued to recover as revenue increased clearly compared to the previous year. Geographically, revenue increased in Europe and in North America, whereas in the region Asia-Pacific revenue declined mainly due to the worsened Covid-19 situation in China and related delivery delays.

Adjusted operating profit during the first quarter was considerably better than in the whole second half of last year, albeit slightly behind a strong first quarter of 2021. The profitability of the business unit in the United States no longer negatively impacted Group operating profit during the reporting period. We have been able to reduce employee turnover and improve production yield, resulting in lower production costs and better profitability of the unit. On Group level, product mix as well as increasing raw material, energy, and logistics costs had a negative impact on profitability. We continue to adjust our sales prices to offset the rapid increase in costs.

In February 2022, we announced our intention to close one of our two manufacturing facilities in China. Production at the factory to be closed has already stopped and the transfer of operations to our other manufacturing site in the Nanjing area has progressed well despite some delays due to the Covid-19 situation in China. A one-time cost of EUR 2.1 million, related to the closing of the factory, is included in the quarterly figures and considered in the adjusted operating profit. The sale of the related real estate is also progressing according to plan. In addition to annual synergies and cost savings of approximately EUR 0.7 million, the aggregated one-time impact of the closure and the sale of the facility is estimated to be positive on Group operating profit and cash flow in 2022. In October 2021, we established a joint venture in India and expanding our activities in this high growth market is progressing.

Russia’s attack on Ukraine is creating an appalling humanitarian crisis, and our thoughts are with the people in Ukraine. For Exel Composites, the direct impact of the war is currently, however, limited. We do not have any customers in Russia, Belarus, or Ukraine. From our supply chain perspective, we have only one supplier with a factory in the affected areas (Russia). These purchases have been redirected to the supplier’s other factories elsewhere. So far, the Russian attack on Ukraine has not impacted raw material availability, but possible raw material price and energy increases naturally also impact Exel. In addition to the impacts of the war in Ukraine, the development of the Covid-19 pandemic in China may have a big impact on our local operations.

From a long-term business development perspective, this geopolitical situation speeds up the green transition and forces many companies to reconsider their global supply chains. With our product offering and global production footprint we can help resolving these challenges.