Exel Oyj's Interim Report, January 1 - September 30, 2004

EXEL OYJ STOCK EXCHANGE RELEASE     2.11.2004 at 11 a.m. 1 (7)



Demand for Exel Group’s specialty products continued to be strong in
the third quarter of 2004 and the consolidated net sales in January-
September 2004 increased by 57% to EUR 64.1 million. Operating profit
improved significantly by 159% to EUR 10.0 million.

Highlights of result:
  - Sales from January-September continued their strong increase and
  totalled EUR 64.1 million (40.8), an increase of 57%
  - Strong growth continued in the third quarter, with sales of EUR
  20.4 million (14.8), up 38%
  - The Industry division’s nets sales increased by 81% to EUR 36.7
  (20.2) million
  - Operating profit from January-September continued to grow
  substantially, totalling EUR 10.0 million (3.9), a growth of 159%
  - Growth in the third quarter was also profitable and operating
  profit grew by 70% to EUR 3.2 million (1.9)
  - The development of sales and profits continue to look strong for
  the rest of the year

Operating environment

The demand for specialty products, in particular carbon-fibre-based
profiles and products belonging to Exel’s Nordic Fitness SportsTM
(NFS) concept, has continued to be strong in Central Europe, Exel’s
main market. Exel expects this trend to continue in the near future.
No significant changes have occurred among the main competitors and,
due to the strong growth, Exel has further strengthened its market
share in the pultrusion market.

The Far East will be increasingly significant, both as a new market
area and as a production location of goods of the Group’s existing
customers. Exel has started analyzing the potential for establishing a
production facility in China. The long-term intention is to increase
Exel’s market share in this emerging market. Investment in new
capacity in China will inevitably have short-term cost effects.

The raw material markets are in a state of flux. Suppliers have
suggested significant price increases on many of our key raw
materials, justified by the strong increase in the price of oil and
other cost factors. Exel aims to minimize the cost effects of raw
materials by utilizing new raw material sources and increasing the
efficiency of its purchasing policies.

Industry division

The Industry division’s net sales January – September 2004 increased
by 81% and totalled EUR 36.7 million (20.2). The division’s sales grew
due to the addition of a new production facility in Belgium (roughly
EUR 6.6 million) and strong growth in the specialty profiles market,
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mainly from new customer applications. Profits also developed well as
operating profit increased to EUR 5.6 (2.2) million, an increase of
157% on the corresponding period previous year. The profit improvement
is due to sales volume growth, improved production efficiency and good
capacity utilization. However, keen price competition continues in the

Product development projects continue in the profiles product group,
mainly in relation to automotive applications, infrastructure
construction and wind power.

From an annual perspective, the antenna profile markets have been
growing. In the first half of the third quarter deliveries were at a
slightly lower level than in the first half of the year. The pressure
on the margins continues to be tough. According to telecom network
builders, the market will continue to grow slightly during the rest of
the year.

Sales of paper machine profiles continued to increase during the third
quarter. The commercial stage of a number of new profile applications
has commenced.

The sales of lattice masts continued at a strong level, and 2004 will
be a record year for the lattice mast business. Demand is expected to
be maintained at a high level also after the turn of the year, as the
International Civil Aviation Organization’s (ICAO) frangibility
regulations will take effect in 2005. The regulations require airport
lighting system support masts to be breakable upon possible impact.

The integration of Bekaert’s pultrusion business acquired in January
2004 is progressing in both Belgium and Spain. The development of a
number of significant transportation equipment industry applications
has been completed, and their commercial stage will begin in early

Sport division

The net sales of the Sport division during January–September 2004
totalled EUR 27.4 million (20.5), an increase of 34% on the
corresponding period previous year. Profits continued to develop
favourably, and the operating profit was EUR 4.4 million (1.7), an
increase of 162% on the corresponding period last year. A substantial
proportion of the third quarter’s sales consisted of conventional
product categories such as cross-country ski poles and floorball
products – two categories in which Exel has managed to retain a good
market share and profitability, even though competition has

The NFSTM, and particularly the Nordic Walking market in German-
speaking Central Europe, continued its growth in the third quarter.
This strong market growth already began in the third quarter of 2003.
Exel’s market share has remained very solid within the product
category. Exel continues its strong marketing efforts to develop the
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concept in new countries. These efforts currently affect the Sport
division’s profitability.

Floorball sales in Exel’s main markets, i.e. Finland, Sweden and
Switzerland, have also remained at last year’s level. The total market
has not increased, but Exel has managed to retain its strong market

Laminate sales have remained at the previous year’s level, and Exel
continues to seek new growth in applications outside the sports
equipment industry. In water sports, Exel has managed to retain its
share of the wind surfing masts market, but the overall market
continues to shrink worldwide.

Net sales and profits

Consolidated net sales increased by 57% compared with the same period
last year. Net sales growth by business division was as follows:

Net sales
(EUR million)     1-9/2004          1-9/2003          Change
Industry          36.7              20.2              81.1%
Sport             27.4              20.5              33.6%
Total             64.1              40.8              57.2%

Consolidated operating profit totalled EUR 10.0 (3.9) million. Growth
in the operating profit was as follows:

Operating profit
(EUR million)     1-9/2004           1-9/2003         Change
Industry          5.6                2.2              156.8%
Sport             4.4                1.7              162.1%
Total             10.0               3.9              159.1%

The profit improvement was mainly due to increased sales volumes, good
capacity utilization and improved production efficiency in both
business divisions.

Net financial expenses

Net financial expenses totalled EUR 297,000 (339,000). Despite the
expansion in working capital, which was the result of the growth in
sales, and the acquisition of Bekaert’s pultrusion operations, it was
possible to reduce net financial expenses due to the strong cash flow
from operations and the loan repayment programme.

Balance sheet, funding and liabilities

The balance sheet total stood at EUR 43.6 million (34.4) on September
30, 2004. The acquisition of Bekaert’s pultrusion operations
contributed roughly EUR 7.2 million to this increase, with the rest
being accounted for by the working capital requirements of strong net
sales growth. Interest-bearing net liabilities increased to EUR 10.4
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million (7.8) due to the acquisition. Total liabilities remained
roughly unchanged.


The Group’s investments in fixed assets totalled EUR 4.9 million
(1.4), of which the acquisition of Bekaert’s pultrusion operations
accounted for EUR 2.6 million (total acquisition price approx. EUR 7.2
million). Projects to expand capacity in the Sport division (Nordic
Walking products) and to automate production are underway. A new
production line was completed in the first half of the year at Exel’s
Kiihtelysvaara factory and a decision to build a second line has been
made. Capital expenditure on the above capacity expansions is
estimated to total approx. EUR 3.0 million in 2004.


The number of personnel on September 30, 2004 was 420 (342). The
increase was caused by the integration of Bekaert’s pultrusion
operations into the Group (some 50 persons) and additional labour
needs at Finnish factories (some 20 persons) and at German factories
(some 10 persons) due to higher production volumes.

Shares and share ownership

Exel Oyj’s share capital totals EUR 1,884,120, and consists of
5,383,200 shares each with a nominal value of EUR 0.35. The members of
the Board of Directors and the President hold 98,100 shares, or 1.8%
of the share capital.

Trading on the Helsinki Exchanges during the review period amounted to
48.5% % of all shares. During the period the highest share price
quoted was EUR 23.95, and the lowest EUR 11.75. The closing price for
the period was EUR 23.80. Market capitalization was EUR 128.1 million
on September 301, 2004.

Decisions of the Extraordinary General Meeting

The Extraordinary General Meeting held on September 15, 2004 decided
that an extra dividend of EUR 0.50 per share be paid for the financial
period which ended on December 31, 2003.

IFRS reporting

Exel will adopt IFRS reporting standards from the beginning of 2005.
Preparations have proceeded as planned.

Outlook for the rest of 2004

The positive sales development during January–September is expected to
continue during the rest of the year. Demand for profiles and Nordic
Walking products is expected to remain high for the rest of the year.
The integration of the Belgium operations into the Group is

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progressing as planned, but will still require some resources. There
are upward pressures on raw materials prices. The profit development
continues to look strong for the rest of the year.

Mäntyharju, November 2, 2004

Exel Oyj
Board of Directors

Ari Jokelainen
President & CEO

Additional information:
Ari Jokelainen, President, Exel Oyj, tel. +358 50 590 6570



EUR 1,000                           1-9/04   1-9/03   change % 1-12/03

NET SALES                           64,081   40,760   57       57,281
Increase (+)/decrease (-) of
finished goods and work in progress 2,135    619      245      834
Production for own use              241      202      19       323
Other operating income              78       323      -76      342

Materials and services              -25,172  -15,159  66       -21,716

Personnel expenses                  -14,069  -10,435  35       -14,329

Depreciation                        -2,548   -2,421   5        -3,184

Other operating expenses            -14,770  -10,039  47       -14,205

OPERATING PROFIT                    9,976    3,850    159      5,345
Financial income and expenses (net) -297     -339     -13      -436

PROFIT BEFORE EXTRAORDINARY ITEMS   9,680    3,511    176      4,910
Extraordinary items

PROFIT BEFORE INCOME TAXES          9,680    3,511    176      4,910
Income taxes                        -3,097   -1,074   188      -1,537
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PROFIT FOR THE PERIOD               6,582    2,437    170      3,373

The taxes taken into account are based on the profit for the period.


EUR 1,000                           30.9.04  30.9.03  change% 31.12.03

Non-current assets
  Intangible assets                 3,216    3,013    7        3,126
  Consolidation goodwill            276      348      -21      330
  Tangible assets                   12,708   10,205   25       10,470
  Investment                        95       95       0        95
Current assets
  Inventories                       11,983   8,697    38       8,747
  Receivables                       11,991   9,754    23       8,626
  Cash in hand and at bank          3,361    2,282    47       2,753
Total                               43,630   34,393   27       34,147

  Share capital                     1,884    1,855    2        1,870
  Other equity                      15,241   14,465   5        15,666
  Deferred tax liability            15       109      -86      14
  Non-current                       7,153    4,453    61       4,077
  Current                           19,338   13,512   43       12,521
Total                               43,630   34,393   27       34,147


EUR 1,000                           1-9/04   1-9/03   change % 1-12/03

Cash flow from business operations  11,210   2,884    289      6,409
Acquired business operations        -7,181
Investment in tangible and
intangible assets                   -2,354   -1,495   69       -2,599
Income from surrender of tangible
and intangible assets                        102               79
Rights issue                        4        6                 282
Withdrawal of non-current loans     5,099    54       9,343    53
Repayments of non-current loans     -2,184   -1,810   21       -2,192
Withdrawals of/repyments of
current loans                       3,011    1,060    184      -747
Dividend paid                       -6,998   -1,060   560      -1,060
Other                               1        16       -95      4
Change in liquid funds              608      -243     350      229

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                                    30.9.04  30.9.03  change% 31.12.03

Indicators (EUR 1,000)
Gross investment                    4,923    1,393    253      2,519
% of net sales                      8%       3%                4%
R&D expenses                        1,471    1,248    18       1,707
% of net sales                      2%       3%                3%
Average personnel                   443      355      25       355
Personnel at end of period          420      342      23       355
Order book                          11,342   8,870    28       11,449
Solvency ratio, %                   39%      48%               52%
Return on equity, %                 51%      20%               21%
Return on investment, %             47%      21%               21%
Net gearing, %                      61%      48%               29%
Earnings per share, EUR             1.22     0.45     170      0.64
Equity per share, EUR               3.18     3.03     5        3.26

The columns 1-9/04 and 1-9/03 are unaudited.

Derivatives are used for hedging purposes only.

Interest rate risk

The company’s long-term debt is subject to interest rate risk, which
is why it has fixed the rate of interest on some of its borrowings
through swap agreements that extend to the years 2007-2009.

Currency risk

The company’s US dollar-denominated raw materials purchases are
partially hedged against currency risk through 5-month forward

Interest rate derivatives  Face value Fair market value (NPV)
  Interest swaps           2,997    -21

Currency derivatives
  Forward contracts        420      3

Consolidated contingent
liabilities                30.9.04  30.9.03  31.12.03

Corporate mortgages        12,500   12,500   12,500
Mortgages on land and
Buildings                  2,954    2,954    2,954
Other contingent
liabilities                3,000    2,477    2,390