President and CEO Riku Kytömäki

Strong revenue, clear decline in profitability

Q1-Q3 2021 Business Review, 4 November 2021

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.