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
Distribution Nasdaq Helsinki Ltd 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.
