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Exel Composites strengthens its position in the Asia Pacific (APAC) market through acquiring a composites production company in China and reorganizing its operations in the APAC region

EXEL COMPOSITES PLC       STOCK EXCHANGE RELEASE  31 October 2016 at 09:00 EET


Exel Composites strengthens its position in the Asia Pacific (APAC) market
through acquiring a composites production company in China and reorganizing its
operations in the APAC region 

Exel Composites Plc has signed an agreement to acquire the assets of a Chinese
composites production business (the “Business”) with manufacturing in one
production unit. The Business uses mainly pultrusion technology to produce
composites products that are mostly complementary to Exel Composites’ existing
product offering. In 2015 the Business had about 90 employees and generated
revenue of about EUR 6 million with a normalized EBIT margin of approximately
20%. 

“This acquisition is an important step in the implementation of Exel
Composites’ growth strategy in China. Here megatrends such as urbanization,
demographic change, as well as sustainability and total life cycle cost
management are driving increased demand and business opportunities. In addition
to expanding manufacturing capacity, we also are expanding our local sales and
product development network and the range of applications we offer to the local
market. The acquisition is also a good opportunity for the Group to improve
operational efficiency and optimize capacity utilization in the APAC region,”
says Riku Kytömäki, President and CEO of Exel Composites. 

The total estimated net debt free purchase price for 100% of the Business is
EUR 8.8 million with the current exchange rate. 70% of the purchase price, EUR
6.2 million, will be paid after closing of the transaction. The current main
owner of the Business will retain a 30% minority ownership in a company,
through which a part of the Business will be conducted. The parties have agreed
on a call and put option structure, under which Exel Composites is expected to
acquire the remaining 30% stake earliest three years after the closing. The
remaining purchase price includes a variable component depending, among other
things, on the profit development of the Business. The closing of the
transaction is expected to take place during the first quarter of 2017. The
acquisition, which will be financed with a new long term loan, is not estimated
to have a significant impact on Exel Composites’ 2016 adjusted operating
profit. 

Nanjing site expansion project cancelled and operations in Australia will be
significantly downsized 

The acquisition presents an opportunity to reorganize Exel Composites’
operations and improve profitability in the APAC region. Exel Composites
currently has two production units in the Asia-Pacific region – one in Nanjing,
China, and one in Melbourne, Australia. Increased production capacity in China
is anticipated to adequately respond to the demand for advanced composites in
the APAC region that in the long term is expected to increase. Therefore
operations in the underperforming Australian unit will be significantly
downsized, resulting in one-off expenses of EUR 1.6 million in the group
accounts (to be booked in the fourth quarter 2016). A related write-off of
intercompany receivables and subsidiary shares is estimated to reduce the
distributable earnings of Exel Composites by EUR 4.8 million. The restructuring
of the Australian unit is expected to improve Exel Composites EBIT by EUR 0.9
from 2018 onwards. Furthermore, the profitability of Exel Composites’ Chinese
business unit is expected to improve through synergies with the acquired
Business. 

The project to expand Exel Composites’ Nanjing site in China shall be
cancelled. The project to build new facilities next to the present factory
building was initiated in December 2014. Capitalized planning and permitting
expenses of EUR 0.1 million in relation with the project will be written off in
the fourth quarter of 2016 and the remaining estimated investment of EUR 4.5
million will not be required anymore. 


Vantaa, 31 October 2016

Exel Composites Plc
Riku Kytömäki
President and CEO


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


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Main news media
www.exelcomposites.com


Exel Composites in brief

Exel Composites (www.exelcomposites.com) is a leading composite technology
company that designs, manufactures and markets composite products and solutions
for demanding applications. Exel Composites provides superior customer
experience through continuous innovation, world-class operations and long-term
partnerships. 

The core of the operations is based on own, internally developed composite
technology, product range based on it and strong market position in selected
segments with a strong quality and brand image. Profitable growth is pursued by
a relentless search for new applications and development in co-operation with
customers. The personnel’s expertise and high level of technology play a major
role in Exel Composites’ operations. Exel Composites Plc share is listed in
Nasdaq Helsinki Ltd.