Exel Interim Report for 1 January - 30 June 2005

EXEL OYJ STOCK EXCHANGE RELEASE     26.7.2005 at 11:00 1 (10)

EXEL INTERIM REPORT FOR 1 JANUARY – 30 JUNE 2005

FIRST SIX MONTHS IN BRIEF

- Net sales rose to EUR 46.9 million for the first six months, up
7.4 per cent on the previous year’s EUR 43.7 million
- Net sales were EUR 25.2 (23.2) million in the second quarter
- Operating profit grew in H1 by 1.8 per cent to EUR 7.2 (7.1)
million
- Operating profit still strong in the second quarter and reached
EUR 5.0 (5.2) million or 19.9 (22.3) per cent of net sales
- Earnings per share were EUR 0.31 (0.31), based on the diluted
number of shares at the end of the period
- The industrial profile market was very active
- The Industry division posted a strong growth in profit in the
first six months, EUR 5.1 (3.5) million, up 46.4 per cent
- The Sport division focused strongly on opening new Nordic
Walking markets, the investment to affect profitability clearly in
the short term
- Exel Sports Oy started operations on 1 April 2005
- Exel Composites GmbH (Faserprofil, Austria) joined the Group at
the beginning of April

KEY FINANCIAL FIGURES
(unaudited)


              1.4.-   1.4.-   Change  1.1.-   1.1.-   Change  1.1.-
              30.6.   30.6.   %       30.6.   30.6.   %        31.12.
              2005    2004            2005    2004             2004
EUR million
Net sales       25.2    23.2    8.7%    46.9    43.7    7.4% 83.9
Operating
profit          5.0     5.2     -3.1%   7.2     7.1     1.8% 13.7
% of net sales  19.9%   22.3%   -10.9%  15.4%   16.2%   -5.3% 16.3%
Profit for the
period          3.6     3.5     2.9%    5.1     4.7     9.2% 9.1

Equity          21.8    17.8    22.5%   21.8    17.8    22.5% 20.7
Net interest-
bearing
liabilities     13.0    13.7    -5.1%   13.0    13.7    -5.1% 7.4
Invested
capital         40.3    37.0    8.8%    40.3    37.0    8.8% 33.3
Return on
equity, %       64.6%   75.8%   -14.8%  48.0%   53.0%   -9.4% 47.8%
Return on
investment, %   54.0%   58.1%   -7.1%   40.1%   44.1%   -9.9% 45.2%
Solvency ratio,
%               38.9%  35.8%    8.7%    38.9%   35.8%   8.7% 44.9%
Net gearing %   59.4%  76.6%    -22.5%  59.4%   76.6%   -22.5% 36.0%

Earnings per
share, EUR      0.32    0.32    0.0%    0.45    0.43 4.7%  0.84
Earnings per
share, EUR,
diluted         0.31    0.31    0.0%    0.45    0.42  7.1% 0.80
Equity per
share, EUR      1.95    1.66    17.5%   1.95    1.66    17.5% 1.84

                                                      2 (10)

IFRS REPORTING

Exel has applied IFRS reporting since the beginning of 2005 and
this interim report has been prepared in accordance with the
recognition and measurement principles of IFRS. The reconciliation
statement for the opening IFRS balance sheet for 2004 was
presented in the financial statements bulletin released on 24
February 2005. The effects of IFRS transition on 2004 financial
statements on a quarterly basis were explained in more detail in a
stock exchange release published on 3 May 2005. In the present
interim report, the figures published on that occasion have been
used as comparative information.

NET SALES

Exel’s consolidated net sales for January-June grew this year by
7.4% over the previous year’s, to EUR 46.9 (43.7) million. In Q2,
net sales grew by 8.7 per cent to EUR 25.2 (23.2) million. The net
sales for April-June include the operations of the Austrian
company Faserprofil GmbH, which was acquired on 1 April 2005. The
company now operates under the name Exel Composites GmbH as Exel’s
subsidiary. Of this growth in net sales the majority, EUR 2.1
million was organic growth. The acquisition of Faserprofil
accounted for EUR 1.1 million of the net sales in H1.

PROFIT PERFORMANCE

Exel’s operating profit for H1 improved by 1.8 per cent on the
figure for H1 of 2004 and was EUR 7.2 (7.1) million. Operating
profit, as a percentage of net sales, was 15.4 (16.2) per cent.
The Industry division’s operating profit increased due to improved
labour productivity, more efficient use of raw materials and tight
cost management. Major investments made to expand the Nordic
Walking market caused operating margin to fall in the Sport
division.

Net financial expenses came to EUR 170 thousands. Pre-tax profit
was EUR 7.0 (6.9) million, and profit for the period totalled EUR
5.1 (4.7) million.

BALANCE SHEET AND FINANCIAL POSITION

The consolidated balance sheet total stood at EUR 56.2 (50.0)
million. Half of the increase was due to the Austrian acquisition
and the rest accounted by an increase in working capital arising
from increased sales volumes, especially in Exel’s main markets.

At the end of the period, equity stood at EUR 21.8 (17.8) million
and the solvency ratio was 38.9 (35.8) per cent. Interest-bearing
liabilities were EUR 18.4 (19.2) million of which short-term
liabilities accounted for EUR 10.8 (9.1) million. Net interest-
bearing liabilities were EUR 13.0 (13.7) million and the debt-to-
equity ratio was 59.4 (76.6) per cent.

The development of the cash flow from business operations turned
clearly positive in the second quarter and was EUR +1.5 (+5.6)
million in H1. Lower cash flow compared to last year was due to
the exceptionally low level of working capital at the turn of the
year resulting mostly from accounts receivable. In addition,
because of the good results posted in 2004, EUR 1.5 million in
taxes for last year was paid in H1. Operative capital expenditure
was financed with cash flow from business operations. The
acquisition was funded by increasing long-term loans. At the end
of the period, liquid assets stood at EUR 5.4 million, compared
with EUR 5.1 million at the end of 2004.

CAPITAL EXPENDITURE

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Capital expenditure totalled EUR 2.7 million containing some EUR
1.1 million operative investments. The most significant investment
was the acquisition of the Austrian Faserprofil GmbH at the
beginning of April 2005. The total investment amounts to some EUR
1.9 million, of which fixed assets account for some EUR 1.7
million. This sum includes a supplement to the purchase price,
likely to be paid in the future depending on the development of
business operations. In addition, maintenance and productivity-
enhancing investments were continued. A decision to increase the
Industry division’s capacity was made in the form of investment in
a new production line at the Voerde factory.

PERSONNEL

The number of Exel employees was 514 (467) in total on 30 June
2005. Of these 362 (355) worked in Finland and 152 (112) abroad.
The number of employees during the reporting period averaged 451
(430). The increase from last year is mainly due to the acquired
Austrian unit.

BUSINESS SEGMENTS

The Group’s operations are divided into two main segments,
Industry and Sport, based on the primary IFRS-compliant reporting
format.

Industry

The Industry division’s key financial figures for the second
quarter were as follows:

                1.4.-   1.4.-   Change  1.1.-   1.1.-   Change 1.1.-
                30.6.   30.6.   %       30.6.   30.6.   %      31.12.
                2005    2004            2005    2004           2004
EUR million

Net sales       15.5    13.4    15.3%   28.0    25.1    11.3% 48.3
Operating
profit          3.3     2.5     30.2%   5.1     3.5     46.4  7.8
% of net sales  21.2%   18.7%   12.9%   18.2%   13.8%   31.5% 16.2%
Average number
of personnel    247     230     7.4%    222     214     3.7%  224


Industry’s net sales grew by 11.3 per cent on those posted a year
earlier. Of the increase, EUR 1.1 million arose from the
acquisition of Faserprofil, while the rest was organic growth.
Demand in the profile market recovered significantly in Q2, and
many new applications are being developed. In the first half of
the year, new customer mould projects numbered more than 20, which
reflects the increase in demand. Production utilisation rate was
high at most factories, and additional investments in production
are being planned.

Profitability remained at a good level, a considerable increase in
raw material prices notwithstanding. Some of this price pressure
was successfully passed on within the production chain. Operating
profit grew by 46.4% to EUR 5.1 from the EUR 3.5 million of the
previous year. This improvement in profitability was caused by
higher sales volumes and productivity gains at the main factories.
Tight cost management has reinforced profitability.

Carbon fibre was in short supply throughout the reporting period,
a situation that is expected to continue throughout the year. This
is due to major new projects, the most important of which are the
Airbus380 programme, defence projects in the US, and the
development of China’s infrastructure. In the second
                                                      4 (10)

quarter, the situation has stabilised, and Exel has, for the most
part, ensured adequate fibre supplies for this year’s projects.
Negotiations concerning next year’s supplies have commenced, and
they are expected to be completed in the latter part of the year.

During the reporting period, the Industry division made a decision
to establish a production unit in China. Negotiations and matters
pertaining to licences have progressed as planned. Exel now has
almost all of the necessary licences. Construction of the factory
is to commence in August 2005. According to the plans, the factory
will be in full operation by the summer of 2006 at the latest.
Establishing the factory will incur costs also in 2005, but the
most significant costs are going to be encountered in 2006.

Europe’s pultrusion industry continues its consolidation. The
integration of Faserprofil into the Industry division has
progressed well. Operations are profitable. Several customer
application projects are underway and work to expand production
and increase its efficiency is progressing as planned. The main
reasons for the acquisition were the company’s expertise in epoxy
pultrusion and the skilled personnel. In addition, Faserprofil
will enable Exel to become a component supplier for the
electronics industry.

Sport

The Sport division’s key financial figures for the second quarter
were:

                1.4.-   1.4.-   Change  1.1.-   1.1.-   Change 1.1.-
                30.6.   30.6.   %       30.6.   30.6.   %      31.12.
                2005    2004            2005    2004           2004
EUR million

Net sales       9.7     9.8     -0.3%  19.0    18.6     2.2% 35.5
Operating
profit          1.7     2.7     -34.6%  2.1     3.6     -41.2% 5.9
% of net sales  17.8%   27.1%   -34.4%  11.2%   19.4%   -42.5% 16.5%
Average number
of personnel    238     222     7.2%    229     216     6.0% 217


The Sport division’s net sales grew by 2.2% during the period
under review. Net sales for Q2 were at the same level as in 2004.
The Nordic Walking market continues to grow in Central Europe,
especially in the German-speaking market. The selling of products
from sports shops was slightly slower in early summer, but demand
is expected to become livelier towards autumn. Of the new markets,
the Netherlands and Denmark are developing strongly. The market is
expected to be opened up also in Poland this autumn.

The Sport division’s operating profit fell from last year’s EUR
3.6 million to EUR 2.1 million. The division continued its
dedicated efforts to open new Nordic Walking markets and launch
our concept. Marketing investments are going to reduce the
division’s operating profit clearly in the short term.

New markets are being opened in North America where the new
subsidiary, Exel USA, Inc., is investing in spreading the sport,
and in China, where joint marketing with our partner, CISS, is
progressing well. The Nordic Walking category is at present one of
the few areas, in fact the only one in the whole of the sporting
goods market that is experiencing strong growth. Exel’s market
share has remained strong.


                                                      5 (10)

Exel Sports Oy started operating during the period under review
with Mika Sulin as managing director. Activities to improve
logistics efficiency, as well as to focus sales and further
develop the Nordic Walking concept and related operations, are
progressing.

In the OEM product group (surfing masts and laminate components)
the market is stable. The downward trend in surfing mast
deliveries has stopped, and volumes are expected to remain at the
present level for the foreseeable future. Laminate sales have
increased on those of the previous year, and several new
application areas are being developed.

SHARES

In April 2005, Exel Oyj’s Annual General Meeting approved the
proposal by the Board of Directors to double the number of shares
and increase the share capital through a EUR 56,150 bonus issue.
Following the increase, the share capital of the company is EUR
2,021,400, divided into 11,230,000 shares, each with a counter-
book value of EUR 0.18.

The highest share quotation during the reporting period was EUR
13.78 (8.13) and the lowest EUR 11.35 (5.87), and the share price
closed at EUR 12.20 (8.06). The share price averaged EUR 12.48
(7.04).

In total, 2,074,235 (3,576,414) shares were traded during the
period, accounting for 18.5 (33.2) per cent of the average number
of outstanding shares. Based on the closing price in the second
quarter, market capitalisation totalled EUR 137.0 (86.7) million.

CORPORATE GOVERNANCE

Exel Sports Oy, a fully owned subsidiary of Exel Oyj, commenced
operations on 1 April 2005. Exel Sports assumed responsibility for
the marketing, sales, logistics, and development of consumer
products, and 25 employees from the parent company joined the new
company’s payroll.

OUTLOOK

Profitability has remained strong in H1. However, the competition
in existing Nordic Walking markets is expected to intensify.
Opening of new markets is going to require major investments in
marketing, sales, and delivery operations as well as targeted,
innovative, and customer-oriented product development.

Raw material markets have stabilised, even the allocation of
carbon fibre is under control. In the short term, the supply of
carbon fibre is going to slow growth in the Industry division. The
acquisition of Faserprofil GmbH will strengthen our position in
the Central European pultrusion markets. The industrial profile
market is very active. The combined effect is going to result in
growth in revenue, whilst profit after financial items is expected
to remain at last year’s level.


Mäntyharju, 26 July 2005


EXEL OYJ                   Ari Jokelainen
Board of Directors         President


Further information:
                                                      6 (10)

Ari Jokelainen, President & CEO, tel. +358 50 590 6750
Ilkka Silvanto, CFO, tel. +358 50 598 9553



CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


CONDENSED CONSOLIDATED INCOME STATEMENT, EUR thousands

                  1.4.-     1.4.-   Change  1.1.-   1.1.-   Change 1.1.-
                  30.6.     30.6.   %       30.6.   30.6.   %      31.12.
                  2005      2004            2005    2004           2004

Net sales         25,203    23,181  8.7%    46,941  43,695  7.4% 83,857

Other operating
income            153       99      54.5%   203     120     69.2% 111
Operating
expenses          -19,505   –17,348 –12.4%  -38,298 –35,243 -8.7% -67,085
Depreciation and
impairment        -845      -767   -10.2%   -1,636  -1,487  -10.0% -3,181

Operating profit  5,006     5,165   -3.1%   7,210   7,085   1.8% 13,702

Net financial
items             -112      -91     -23.1%  -170    -198    14.1% -467

Profit before
tax               4,894     5,074   -3.5%   7,040   6,887   2.2% 13,236

Income taxes      -1,332    -1,614  17.5%   -1,934  -2,212  12.6% -4,110

Profit for the
period            3,562     3,460   2.9%    5,106   4,675   9.2% 9.126

Earnings per share,
EUR               0.32      0.32    0.0%    0.45    0.43    4.7% 0.84

Earnings per share,
EUR, diluted      0.31      0.31    0.0%    0.45    0.42    7.1% 0.80


CONDENSED CONSOLIDATED BALANCE SHEET, EUR thousands

                      30.6.    30.6.  Change  1.1.-
                      2005     2004           31.12.
                                              2004
ASSETS
Non-current assets
Intangible assets     778    522     256    926
Goodwill              3,878  3,188   690    3,188
Tangible assets       14,311 14,286  25     13,742
Deferred tax assets   928    350     578     310
Other non-current
assets               101    98      3       100
Non-current assets
total                19,996 18,444  1,552   18,266

                                                      7 (10)

Current assets
Inventories          15,108  13,007  2,101  13,269
Trade and other
receivables          15,639  12,997  2,642  9,568
Cash and cash
equivalents          5,444   5,513   -69    5,150
Current assets total 36,371  31,517  4,674  27,987

Total assets         56,187  49,961  6,226  46,253

EQUITY AND
LIABILITIES
Shareholders’ equity
Share capital        2,021   1,884   137    1,932
Share issue                                 817
Share premium
reserve              4,118   3,149   969    3,390
Retained earnings    10,599  8,122   2,477  5,427
Profit for the
period               5,106   4,675   431    9,126
Total equity         21,844  17,830  4,014  20,629

Non-current
liabilities
Interest-bearing
liabilities          7,643  10,052   -2,409  8,456
Deferred tax
liabilities          349     108     241     297

Current liabilities
Interest-bearing
liabilities          10,772  9,128   1,644   4,141
Trade and other
non-current
liabilities          15,579  12,843  2,736   12,666

Total
liabilities          34,343  32,131  2,212   25,560

Total equity
and liabilities      56,187  49,961  6,226   46,253


STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY, EUR thousands

                Share   Share   Share   Retained  Total
                Capital Issue   Premium Earnings
                                Reserve

Balance on
1.1.2004        1,870   135     3,028    12,429    17,462
Share issue     14      -135    121                0
Exchange rate
differences                               0        0
Dividend                                  -4,307   -4,307
Profit for the
period                                    4,675    4,675

Balance 30.6.04 1,884   0       3,149     12,797   17,830

                                                      8 (10)

Balance on
1.1.2005        1,932   817     3,390     14,553   20,692
Share issue     89      -817    728                0
Exchange rate
differences                               -23      -23
Dividend                                  -3,931   -3,931
Profit for the
period                                    5,106    5,106

Balance on
30.6.2005         2,021   0       4,118     15,705   21,844


CONDENSED CONSOLIDATED CASH FLOW STATEMENT, EUR thousands

                          1.1.-     1.1.-   Change    1.1.-
                          30.6.     30.6.             31.12.
                          2005      2004              2004

Cash flow from
operations
Profit for the period     5,106     4,675   431       9,126
Adjustments               3,847     3,940   -93       7,623
Change in working capital –4,862    -755    -4,107    1,657

Cash flow generated by
operations                4,091     7,860   -3,769    18,406
Net financial items       -175      -133    -42       -359
Income taxes paid         -2,431    -1,083  –1,348    -2,136
Net cash flow
from operations           1,485     6,644   -5,159    15,911

Cash flow from investing
activities
Acquisitions              -1,912    -7,181  5,269     -7,181
Capital expenditure       -1,077    -1,234  157       -3,187
Proceeds from sale of
fixed assets                                          44
Other cash flow from
investing activities
Cash flow from investing
activities                -2,989    -8,415  5,426     -10,324

Cash flow from financing
Share issue               0         0       0         1,102
Change in long-
term loans                937       3, 862  -2,925
Change in short-term
loans                     4,792     4,970   -178
Dividends paid            -3,931    -4,307  376       -6,998
Net cash flow from
financing                 1,798     4,525   -2,727    -3,196

Change in liquid
funds                     294       2,754   -2,460    2,391

Liquid funds in the
beginning of the period   5,150     2,759   2,391     2,759

                                                      9 (10)

Change in liquid funds    294       2,754   -2,460    2,391
Liquid funds at the end of
period                    5,444     5,513   -69       5,150


KEY FINANCIAL FIGURES BY QUARTER, EUR thousands

                         II/     I/      IV/     III/    II/  I/      I-IV/ 
                        2005    2005     2004    2004    2004 2004    2004

Net sales by segment
Industry                 15,459  12,509  11,689  11,523  13,408 11,730  48,349
Sport                    9,744   9,229   8,087   8,864   9,773 8,784   35,308
Total net sales          25,203  21,738  19,776  20,387  23,181 20,514  83,857

Operating profit by
segment
Industry                 3,271   1,818   2,327   2,041   2,512 965     7,845
Sport                    1,735   386     987     1,263   2,653 955     5,858
Total operating profit   5,006   2,204   3,314   3,304   5,165 1,920   13,702

Financial income and
expenses                 –112    -58     -131    -138    -91   -107    -466
Profit before income
taxes                    4,894   2,146   3,182   3,167   5,074 1,813   13,236
Income tax charge        -1,332  -602    -922    -976    -1,613  -598  -4,110
Profit for the period    3,562   1,544   2,260   2,190   3,461  1,215   9,126

Earnings per share, EUR  0.32    0.14    0.21    0.20    0.32   0.11    0.84
Earnings per share, EUR,
diluted                  0.31    0.13    0.19    0.19    0.31   0.11    0.80
Average number of shares,
1,000                    11,230  11,230  10,998  10,768  10,766 10,766  10,826
Average number of shares,
diluted, 1,000           11,393  11,524  11,464  11,268  11,162 11,136  11,464
Average personnel        485     417     424     456     453    406     441


COMMITMENTS AND CONTINGENCIES, EUR thousands

                          30.6.   30.6.    31.12.
                          2005    2004     2004

On own behalf
Mortgages                 2,954     2,954  2,954
Corporate mortgages       12,500    12,500 12,500

Lease
liabilities
-in next 12 months        455       200    223
-in next 1-5 years        1,786     460    1,563

Other commitments         260       222    67


DERIVATIVE FINANCIAL INSTRUMENTS, NOMINAL VALUES, EUR thousands

                          30.6.     30.6.    31.12.
                                                      10 (10)

                          2005      2004   2004

Foreign exchange
derivatives
Foreign contracts         335       672    877
Purchased currency
options                   750              750
Sold currency options     371              371

Interest rate
derivatives
Interest rate swaps       2,192     3,081  2,636


CONSOLIDATED KEY FIGURES, EUR thousands

                          1.1.-   1.1.-   Change  1.1.-
                          30.6.   30.6.   %       31.12.
                          2005    2004      2004

Net sales                 46,941  43,695  7.4%   83,857
Operating profit          7,210   7,085   1.8%   13,702
% of net sales            15.4%   16.2%   -5.3%  16.3%
Profit before tax         7,040   6,887   2.2%   13,236
% of net sales            15.0%   15.8%   -4.8%  15.8
Profit for the period     5,106   4,675   9.2%   9,126
% of net sales            10.9%   10.7%   1.7%   10.9%

Shareholders’ equity      21,844  17,830  22.5%  20,692
Interest-bearing
liabilities               18,415  19,180  -4.0%  12,597
Cash and cash equivalents 5,444   5,513   -1.3%  5,150
Net interest-bearing
liabilities               12,971  13,667  -5.1%  7,447
Capital employed          40,259  37,010  8.8%   33,290
Return on equity, %       48.0%   53.0%   -9.4%  47.8%
Return on capital
employed, %               40.1%   44.1%   8.7%   44.9%
Equity ratio,%            38.9%   35.8%   8.7%   44.9%
Net gearing %             59.4%   76.6%   -22.5% 36.0%

Capital expenditure       2,743   3,981   -31.1% 5,803
% of net sales            5.8%    9.1%    -35.9% 6.9%
R&D costs                 1,214   997     21.8%  1,956
% of net sales            2.6%    2.3%    13.3%  2.3%

Earnings per share, EUR   0.45    0.43    4.7%   0.84
Earnings per share, EUR,
diluted                   0.45    0.42    7.1%   0.80
Equity per share, EUR     1.95    1.66    17.5%  1.84

Average number of shares
-cumulative               11,230  10,766  4.3%   10,826
-cumulative, diluted      11,393  11,162  2.1%   11,464

Average number of
employees                 451     430     4.9%   441