Hello everyone, and welcome to Exel Composites' first half 2025 results briefing. I'm your host, Lauri Haavisto , and also the Director of Investor Relations here at Exel . Today, I'm joined by our presenters, CEO Paul Sohlberg and CFO Mikko Rummukainen . First, some housekeeping items. As you might have already noticed, this session is being recorded. We will have a Q&A session at the end of the presentation. Please use the raise hand function if you want to use your microphone, or alternatively, you can use the Q&A function. Now, I'll hand the mic over to our first presenter. Please go ahead, Paul. The stage is yours.
Okay, thank you. Thank you, Lauri, and good afternoon. Good morning to everybody, and thank you for joining our results announcement. Let's head into the executive summary right away, please. In the second quarter, I think we had quite a lot of positive signs and the positive development of the business and the way we navigated the environment continued. Happy to see that across the first quarter to the second quarter, kind of the good momentum that we've been having there continued. If we look at the period there, the order intake increased by 14.6%, almost 15% compared to the comparison period. In the second quarter, there was a strong order intake growth as well, almost 8%. It was also good to see that the growth came particularly in the strategic areas.
For example, in the energy customer industry, which then captures both wind for us and then the electric transmission and distribution customers. We also saw a favorable demand and positive activity among the customers, particularly in defense, and then over a wider group in the industrial customers' segment. If we then look at the revenue, it came in at €50.1 million, which is stable compared to last year's comparison period. We saw growth, especially in the energy customer industry. However, we had a little bit of transition deliveries or delays in the deliveries from the Belgium factory to our other factories, but that process is ongoing. We are catching up, and the progress will be catching up over the coming months and the rest of the year.
I think this is kind of a temporary dip, which is caused particularly by that, but then also in part by some hesitation in terms of customers going ahead on some of the work that we kind of have slotted in for us, but which we expect to come in in the coming months. What is particularly interesting here is that I think the strategic pillars are starting to show also in the numbers. If you think about our third pillar, which is really sweating the assets and increasing the operational efficiency of the company, even with the lower revenue in the comparison period, we managed to provide a good adjusted operating profit, all things considered. We're still working to get to our target, obviously, but we can see here already that over the first half, we already surpassed the result from all of last year.
I think that's a good sign. We're seeing in particular that the utilization rates are going up at our main factories, which is exactly a core element of our strategy. Also, we have good traction in the first strategic pillar, which relates to the organic growth with the customers, which I think is well visible in the uptick in the order intake. Unfortunately, we also did have some lowlights in the quarter, in particular the cyber attack, which we already announced a few weeks earlier. I want to start in saying that I really regret the inconvenience that this is causing to everybody. This has been an area which is fairly highly rated, actually quite highly rated in our risk reviews, and we have been working on this systematically for many years. Unfortunately, this type of attack shows that nobody is immune.
The breach was swiftly contained, and the systems were secured. We also launched a comprehensive outreach and support program for the people affected. We did try our best to communicate widely, also cooperating with the media to get the information out there. We put in place and kind of tried to lessen the threshold for those people who wanted to take the option of putting on personal identity protection. We kind of made that very smooth for people by trying to get good instruction out there, also taking some of the cost on ourselves, and then working with the service provider to support that process. Even with that lowlight, I think it is good to see that the company is moving in the direction that we have planned. We are well on track.
Our strategic pillars are starting to show also in the numbers, and we have good stuff coming ahead for us. With that summary, can I hand over to Mikko if you want to talk a little bit in more detail about the numbers, please?
Thanks, Paul. Lauri, if you have the... No, actually, let's go straight to page number six. We go part by part because of the basic summary you already got. When we look at our numbers, how Q2 looked like, the clearest highlight is this continued increase in our order intake. This was 15% up for the first half, up compared to the previous year as well. Actually, the best second quarter in the past years that we've had in terms of order intake. This really continued the year positively. This allowed our order book to grow. If we look at what somewhat is changing in terms of our order backlog, some of the recent orders are longer term than has been historic for Exel , allowing more stability for the future.
Two highlights of the first half were the large $10 million order for wind deliveries out of India, which will increasingly turn into revenue in Q2 and Q3, and then continue well into 2026. Another highlight of the half was large wind with FLYING WHALES, which is an emerging application in terms of high demand for advanced carbon tubes, which is a clear strength for Exel . Still having highlighted these two, overall, we also saw the customer activity overall good, especially with some of the defense customers we've had. We can't downplay that, especially since Mr. Trump announced the Liberation Day tariffs right at the start of Q2. There's been a bit more uncertainty with global trade overall tariffs. We're hopeful, first of all, that now things stabilize because most of these factors become known.
In case customers do react to their supply chain, from Exel strategy, we're present in all the major regions and markets with our own operations. We think we're well positioned, better positioned than other suppliers our customers might have. There's an upside possibility at least. If we then look at our revenue, two of our strategic focus areas: transportation and energy, were positive features of the first half. Transport overall grew 8% in the first half. There was somewhat imbalance between Q1 and Q2 when before we closed the Belgium factory, which delivers a lot of the transport products. There was increase in the demands before closure, and then somewhat less for Q2. Paul referred that the transition is ongoing with the customers. Energy, we're seeing growth in two of our major applications: wind power plus then electrical transmission.
All in all, growth is coming exactly where we have it in the strategy. Looking at our profitability, adjusted operating profit was €1.8 million for the quarter. This is despite the stable revenue we had. Our first half operating profit already exceeds full year operating profit of 2024. This is coming from how we've optimized capacity. There's been tight cost control. We've taken various operational steps to ensure cost efficiency. This is the main highlights of the group figures. Paul, if you want to take over and have a few words of our still almost fresh business units.
Sure, thanks, Mikko. If we start with the engineered solutions business unit, we saw stable revenues at €41.3 million there. Also, the order intake was favorable. We saw growth in defense industrial and also in the energy part, which belongs to engineered solutions. Particularly, that comes from the conductor core orders that are driving momentum in the energy customer industry for engineered solutions. I think that's a very interesting area right now. I think there are very good developments happening in there. We're actively working with our existing customers. We're also actively working with new customers in different regions, different countries, which have started showing significantly stronger interest towards this solution. I think that's a very good area to follow. I've also talked earlier about our own ambitions of product development and standardization in this area. We're working on that.
For example, we are taking part in the standardization work in this industry, which is an important indicator for the future. It's also a great source for information for us. We're working heavily on this as well. We talked a little bit about the transportation segment and the revenue there temporarily impacted by the transfers from Belgium. As mentioned, and we talked about a little bit before as well, it is quite a large exercise. We have done most of it now. Like we mentioned, not entirely without challenges, but we are on the brink now of overcoming them, and we will be catching up there. The good news is we're seeing also customers, they are supportive of us, and they are also starting to see that they will be getting good service now from the other factories and from the whole area there.
While this has been a challenging time with them, we are also in negotiations to kind of look at the future and how we can even work further and improve the work and expand the work with them. Mikko mentioned about the FLYING WHALES contract. We've talked about it a lot going forward as well. First deliveries expected to begin in Q3, trial series obviously, but moving ahead. Tariffs, I think we've all talked a lot about that. It's an interesting area for us. I said earlier in an interview today that while, of course, uncertainty is bothering, I guess, everybody, it is also opening up opportunities for us because we are fairly well positioned with having the factory locally in the U.S.
We can offer alternative supplies, particularly in the Asian region, whether you want to, you know, if you have a vendor that you want to transition from India to China or vice versa. We've already seen some concrete changes where customers have come to us, and we've been able to capture that business on the brink or on the back of the tariff-related changes in the supply chains. Now, with that, let's go over to industrial solutions, please. Yes, we saw favorable market development here. Also, the revenue grew to $8.8 million. Particularly, the energy customer industry there, specifically wind, was developing favorably. It's turning out that the team has done very smartly. We chose to work with good customers there that are clearly now benefiting from the, let's say, recovery in the energy industry.
We are in quite deep discussions about how to supply them and be a good vendor also to expand the business moving forward. While one element is that we are progressing well with the ramp-up of the India factory and supply of the product from there, we are also in deep discussions for the future and how to even strengthen and expand that. I already mentioned about the tariffs, so I won't go over that again. Also, Mikko spoke about the $10 million first order that we have there and that we are delivering. It's progressively ramping up now over Q2, Q3, particularly also in Q4, and then continuing into next year. Sometimes I get the question, then what? I just want to underline that we are in discussions, serious discussions for the future and also for the expansion of this business potentially.
If there is any news, concrete news on that, we'll, of course, then share that with you in due time. Okay, let's move ahead. Yes, the cyber attack, just to rehash on that quickly. There was, unfortunately, the confirmed data breach on July 18th. We started the immediate response with external experts and authorities. As I mentioned, the fairly limited amount of systems were affected. The good part is that we were able to contain the attack such that there was no disruption to any of our production, any of our customer support, sales, or any of our other systems that are required to run the daily business. While it is, of course, very unfortunate, this potential exposure of this personal data, from the business perspective, there was no financial or operative systems compromised. We've also, as I mentioned, invested in this alone.
We've also, of course, strengthened our preventative measures there. I also want to highlight that this is an area where we have done a lot of work, and it's not that we haven't been paying a lot of attention to this. It's quite unfortunate, though, that these things happen, and you just need to do your best and to deal with them and, of course, try to prevent them. Also, if you haven't heard about this earlier, on our investor page, there is a quite extensive support site there, which includes many of the instructions that may be needed, and, of course, then a more fuller Q&A than we can maybe cover here in terms of the cyber attack. Also, just to mention that we have, of course, been in touch with customers that may be affected by this.
Primarily, there has been strong support from them, saying, okay, we'll await your further things and see what it leads to. I do not expect significant issues in that phase or from that angle. I mean, we were able to contain the breach and, of course, also quite a lot of the data that could have been compromised. That's kind of our data as opposed to maybe customer data. Of course, there may be elements of that as well, but I do not expect a big issue with customers there. Of course, we'll have to work through that and see what happens. Okay, good. If we move over to the guidance. The guidance, as we mentioned today earlier, remains unchanged. We expect revenue to increase and adjusted operating profit to increase significantly in this year compared to last year. Nothing new to report in this dimension.
With that, I think we move over to the Q&A. Lauri will manage or moderate that. I just want to encourage everybody, just go ahead and open your microphones or raise your hand and open your microphone and speak. I can see already Valtteri has a question, so maybe.
Yeah, Valtteri, go ahead.
Hi, and thanks for the presentation. I'll start with the Belgium factory transfers. Did you say that you have mostly done these transfers now? I would just like to clarify that. Should we expect still some kind of headwind from this in Q3?
Yeah, the team is working very hard on it, and they have done most of, you know, to get it into stable state and running. It's a large number of different profiles. Most of them are running well, and we're delivering well. There are a few complicated ones that we still need to get the final crack at. I hope that we can clear. I was hoping we could have done it already by now. I think we will be able to clear it up in the coming weeks and maybe a short period following that.
All right, thanks. On the tariffs, you said in the report that you have already secured first major supply agreements kind of driven by these tariff reactions. Was this during Q2, and can you open up a bit that what kind of situations have these been? Are these where customers are moving production from China to India and the U.S., and what kind of cases and products have these been?
Yeah, okay, this particular example was a situation where a customer had an increased, significantly increased demand of a product that they typically sell and order, and because of the tariff, they wanted to change the supply chain for that. We were able then to supply it to them at an existing factory and then deliver it to another location, which we then worked out with them such that they weren't affected by the tariff.
We were able to do that very quickly because this increased demand also came on the power customer very quickly. We were able to respond, and they just said, okay, let's go ahead right away because we could do it.
All right, but you don't want to open, whether it was about switching to U.S. or moving the production to India, for example, or...
Yeah, no, it was, it involved the U.S.A., but kind of not taking the product into the U.S.A.
Okay, maybe I'll ask one more before giving others a chance to ask as well. On the defense, what do you see there right now? You mentioned that you see more increasing demand, but is this already showing in orders? Is it so that defense is close to 10% or possibly over 10% of your sales this year?
Yeah, so we have, I think when we talked about the close to 10%, it was in general and it was referring to last year. I won't be able to comment on this year until the final numbers are there for the full year. If we look in the past, it's in that ballpark close to 10%. To your other part of the question, yes, what we're seeing there is a clear uptick in customer demand, particularly interested in different composites products, in particular composite tubes, for example, in this case, carbon fiber tubes on top of what we have been doing before in that space.
All right, thanks. I still have a few questions, but I'll maybe let others ask.
Okay, thanks, Valtteri .
Yes, go ahead, Joona.
Hi, Joona, I'm from OP. Thank you for your presentations. I have a few questions. I'll go these one by one. Your finance expenses were very high during the first half of the year due to the exchange rate effects. Could you quantify how much the net effect was in the H1?
Sure, Mikko, this is yours forever.
Thanks. We've said net financial expenses were €6.1 million, and a big majority of those expenses were relating to strengthening of the euro and its impact on various internal loans. I mean, euro is significantly stronger than dollar, also stronger than yuan and Indian rupee.
Okay, you cannot quantify how much was kind of the underlying finance cost?
We've got a certain set of figures. If we can live with that, it's a vast majority of the $6.1 million.
Okay, I see. Thank you. Perhaps two kind of related questions to the strategy and next steps going forward. First one about the divestment of the UK factory. What's the kind of situation with that, and what kind of development should we expect regarding that one going to the second half? Another question about the strategic review of the factory network. I guess you have earlier indicated that you would go through the whole program by the end of, or at least come out with all the targets by the end of this year. Should we, or when can we expect some news on this side?
Okay, very well. Let's take the UK factory first. The situation there is the same as in Q1. We have a reasonably good written offer in from the buyer, and they have been working with the government and the local municipality to figure out some of the rights associated with utilities and utility contracts and the use of the land. We are, of course, supporting this process. There are local experts dealing with it, and we are supporting the process. It's kind of a little bit because there's municipality involved and other things, so it's a little bit out of our hands. I will refrain now to give you any definitive timeline on when it will complete, but I think it's good that the offer is in, and they are working on getting it done. As soon as that closes, we'll let you know.
Your other question was the strategic review. As we remember, what we've said is that over the strategic period, which is the full period until the end of 2028, we will conduct the strategic review of three of the existing factories. Two of them we have done. The third one, what we have also said, is that we will review the situation in terms of the business uptick and our traction in the customers as to when is the right timing to move forward with that strategic review. It's high on the agenda, but we will now follow the improved business situation and see how that develops and then when we want to move ahead and take that review. I don't recall saying that it will be by the end of this year, so I think I'll keep with the full strategic period.
For example, now, just to give you an example, the factory network we have now is necessary, and it's supporting with the transfers of the transportation business, which covers both the factories in the European area and the Asian area.
Okay, correct. Thanks for the clarification. That's all from me at this point.
Thanks, Joona.
Yeah, go ahead, Valtteri .
Yeah, thanks. You mentioned the €10 million wind deal in the slides, so just to clarify, this wasn't a new one, but the one you had already announced previously. Is it?
Yeah, exactly, Valtteri . This is the one that we announced in Q1. We just captured that there's this covering H1 as well. What I will say, of course, is that, you know, if you remember, it's a multi-year frame agreement that we have with this particular customer. Obviously, we need to ramp up in a good way and deliver the product in a stable, good manner to them. Just looking at the annual clock and how they operate, we are in discussions about the future, obviously.
Yeah, understood. Actually, on the ramp-up of the industrial volume applications, you have announced a few of those kind of frame multi-year agreements. Can you talk about the ramp-up timetable a bit?
How is it looking now? Should we expect a clear pickup in deliveries and sales already in Q3, or is it going to be more Q4 heavy?
Okay, yeah, thanks Valtteri for raising that. Some of the other, if we recall back a little bit of time, we talked about the bus manufacturers, and we talked, for example, about the helihoist customer agreement. Starting with the helihoist, the helihoist product, that's really pleasing to see. We are in schedule, we passed the tests, we got all the approvals, and the monthly orders have now started rolling in for that. We are producing that as was planned. Likewise, as it was always set out, in this year we'll have a specific volume, and then we are negotiating on the future. That's ongoing as well, and I think that's going there with good results.
If you just look at that product, it's not a massive volume product, but it's a very important product from the point of view of the value increase or the value add that we are providing there. It's also supporting us to diversify our own offering of important products to the wind OEMs. There will be a constant flow, I shouldn't talk for the customer, but from our point of view, we wish for a constant flow of those orders that over time will be increasing. It's already there, and particularly that product will increase as far as we hope and understand next year. Depends, of course, also on how the customer fares in their own business. A kind of similar situation with the bus manufacturers.
You remember we did a lot of work in terms of the customer engagements last year, and we announced the deals, and now the orders are coming in there as well. We see there was a little bit of a slower in general in the Chinese economy last year. We've seen we've progressed now and kind of gotten that on a good path. I'm really pleased to see how that's going now for China. They're doing well there. India, we talked about. I shouldn't maybe go and comment now yet on the timing of the revenue for the remainder of this year. I think we have given the guidance there. I'm going to stick with that. The ramp-up is ongoing, and we'll progressively see more volume.
If you note, we did have a good uptick already between the quarters in the industrial one, and we look to increase as we move ahead.
All right, fair enough. Thanks. Then a small question on the cyber attack. Are you expecting any additional costs from that, and should we see the impact of that in Q3 cost base?
Timing we will need to come back to. First of all, I think it's good to remind that we have a cybersecurity insurance. Not to say that that will cover all, but at least we have that protection. It has been very helpful also in getting us this expert help to work it out. At this point in time, it's too early to say what it will be, but I do not see any major impact from that beyond what is already out there.
Maybe one can estimate from the internal work and the work of the experts supporting us. We'll come back to that. I don't foresee major major costs in terms of sorting that out, but as when it all kind of falls into place. Of course, there will be some costs associated. Mikko, do you want to add anything?
No, I think that's fair. I mean, it's mainly something that's related to Q2. Oh, sorry, Q3. It's still in progress, but let's hope it won't be material.
All right. Thank you. Thanks for the answers. That's it all from me.
Thanks, Valtteri. Okay, who wants to go next? Okay, then I'm going to just call last questions, last orders. If not, then over to you, Lauri, please.
Thank you, Paul. Thank you to Mikko as well. Thank you all for your questions. Exel's next financial publication is our business review going out on November 6. Mark your calendars. That's all for now. Thank you all and have an excellent day.
Thank you for joining.