Exco Technologies Q2 Earnings Call Highlights

Key Points

• Q2 headline: Consolidated sales fell to CAD 157.6M and net income to CAD 5.8M, with CAD 6.9M of the sales decline from foreign‑exchange headwinds and CAD 2.4M of after‑tax restructuring charges; management says improving order activity supports a stronger second half.

• Automotive Solutions: Excluding FX the segment grew about 5% on new program wins and mix, but margins were squeezed by product mix, higher labor and material costs, so management is pursuing pricing, lean manufacturing and automation to restore profitability.

• Casting & Extrusion and diversification: Large‑mold sales were weak as OEM program delays worked through, but backlog was “rebuilt meaningfully” and management expects meaningful H2 revenue improvement while pushing growth in additive manufacturing, nuclear component machining and AI‑infrastructure extrusions.

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Exco Technologies (TSE:XTC) reported fiscal 2026 second-quarter results that management said were shaped by “temporary softness in large mold volumes, restructuring actions, and foreign exchange headwinds,” while pointing to improving order activity and a stronger second-half outlook.

Quarterly results affected by FX and restructuring

CFO and VP of Finance Matthew Posno said consolidated sales for the quarter ended March 31, 2026, were CAD 157.6 million, down from CAD 166.1 million a year earlier. He attributed CAD 6.9 million of the decline to foreign exchange, adding that excluding FX, sales were down about 1%.

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Net income was CAD 5.8 million, or CAD 0.15 per share, compared with CAD 6.4 million, or CAD 0.17 per share, in the prior-year period. Posno said results included CAD 2.4 million (CAD 0.06 per share) of after-tax restructuring charges. EBITDA was CAD 18.0 million, or 11.4% of sales, versus CAD 19.7 million, or 11.8%, last year.

Posno also noted the effective tax rate decreased to 26.4% from 33.7% a year earlier, reflecting geographic earnings mix and foreign tax rate differentials.

Automotive Solutions: constant-currency growth, margin pressure

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President and CEO Darren Kirk said Exco’s Automotive Solutions segment delivered “another solid quarter” despite a modestly softer year-over-year production backdrop, with North American light vehicle production down about 2% and Europe down 1%. He pointed to U.S. SAAR of 16.3 million units in March, below-prepandemic dealer inventories, an aging fleet, and increased OEM incentives as supportive factors.

Posno reported Automotive Solutions sales of CAD 82.4 million, down 1% year over year, with foreign exchange reducing sales by about CAD 4.5 million. Excluding FX, segment sales increased approximately 5%, which Posno attributed to stable production levels, contributions from new program launches, and favorable vehicle mix.

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Pre-tax profit in the segment was CAD 7.0 million, down CAD 0.9 million from the prior year. Posno said the decline reflected product mix, higher labor costs, and foreign exchange impacts. Kirk added that higher oil prices tied to Middle East geopolitical tensions were beginning to move through the supply chain in the form of higher polymer, thread, yarn, and resin costs, while “customer cost down requests have returned after a relatively quiet period.”

Management said it is pursuing pricing actions where feasible—particularly on new program awards—along with lean manufacturing and automation to offset inflation and labor cost increases. Kirk said quoting activity remains healthy and that Exco sees opportunities to expand content per vehicle through new and innovative products.

Casting & Extrusion: large mold softness offset by rebuilding backlog

In Casting & Extrusion, the quarter reflected what Kirk described as “two distinct dynamics.” Large mold sales were materially lower year over year as Exco worked through a softer order book. Kirk reiterated prior commentary that OEMs had deferred tooling and program launches through much of last year due to softer EV demand, evolving regulatory frameworks, and tariff-related uncertainty.

However, Kirk said order activity was “exceptionally strong” during the quarter, with backlog “rebuilt meaningfully” and quoting activity high. With typical lead times of four to six months, he said the company expects “meaningful sequential and year-over-year revenue improvement in the second half of 2026.” Posno similarly said strengthened order activity and ramping programs are expected to support improved performance in the second half.

Posno reported Casting & Extrusion segment sales of CAD 75.1 million, down CAD 8.1 million, or 10%, year over year. He said extrusion tooling demand remained solid, supported by diverse end markets including construction, transportation, renewable energy, and AI-related infrastructure, while die-cast tooling revenues declined due to prior program delays.

Segment pre-tax profit was CAD 3.4 million, down CAD 1.0 million from last year. Posno said results were impacted by CAD 0.8 million of incremental restructuring costs, along with lower volumes, product mix, and higher labor and overhead. He noted the restructuring costs included a CAD 1.0 million accrual related to the closure of Exco’s large mold facility in Mexico, which management said should support improved profitability going forward.

Kirk said the Mexico closure reflected limited growth opportunities in the domestic market and Exco’s objective to consolidate production. He stated that as of March 31, employees had been notified, final customer orders fulfilled, and equipment relocation underway, and that the closure is not expected to materially reduce future revenue opportunities.

Additive manufacturing, nuclear diversification, and extrusion end-market tailwinds

Kirk highlighted continued momentum in Exco’s additive manufacturing business, saying year-to-date sales are running ahead of expectations as adoption broadens across the die-cast tooling industry. He cited customer interest tied to manufacturing efficiency and increasingly complex tooling requirements, including applications for very large castings and faster cycle times, and said Exco holds “a clear leadership position” in additive solutions.

He also discussed diversification into the nuclear energy end market, describing efforts to leverage precision machining equipment used for very large molds to pursue machining of nuclear components for the domestic Canadian energy market. Kirk said quoting activity is encouraging and that orders are beginning to flow, calling it “a promising area of diversification.”

On extrusion, Kirk said demand remained solid in the Americas and Europe, and noted that Exco’s Michigan facility benefited from the completion of heat treatment vacuum equipment installation and other capacity enhancements. He emphasized the segment’s end-market diversity, citing demand from building and construction, transportation, renewable energy, electrical applications, and AI infrastructure.

Kirk said the build-out of AI data centers is driving demand for high-precision aluminum extrusions used in heat sinks and advanced cooling solutions, and said the demand “is only accelerating.” In Q&A, management added that AI-infrastructure-related extrusions appear to be “accelerating toward 10%,” or “certainly upper single digits,” of total extrusions, though Kirk said it is difficult to quantify short-term changes precisely.

In Europe, Kirk said performance “continues to bifurcate,” with Italy having a strong quarter on cost control and overhead absorption, while Germany remains a focus due to elevated energy costs and weaker automotive demand. He said leadership is working to improve production predictability and lead-time consistency.

Cash flow, capital spending, and outlook factors

Posno said cash provided by operating activities was CAD 11.1 million, up from CAD 8.7 million a year ago, and free cash flow rose to CAD 5.9 million from CAD 2.8 million. Financing outflows included CAD 4.0 million in dividends and CAD 2.5 million in share repurchases under Exco’s normal course issuer bid. Investing activities used CAD 5.8 million, including CAD 1.7 million in growth capex and CAD 4.1 million in maintenance capex.

After several years of elevated growth-related investments, Posno said capital spending has moderated, with fiscal 2026 capex expected to be approximately CAD 25 million, focused on maintenance, productivity, and select growth initiatives. Exco ended the quarter with CAD 22.5 million in cash and about CAD 60 million available under its credit facility, and Posno said the company remains in compliance with financial covenants.

Looking ahead, Kirk said the macro environment remains uncertain, including global trade policy and the ongoing USMCA review ahead of a required decision by July 1. He said nearly all of Exco’s products sold within North America comply with USMCA rules of origin and that the company maintains a substantial U.S. manufacturing footprint for extrusion dies and large mold products. Kirk added that if elevated tariffs on imports from non-compliant jurisdictions persist, Exco’s positioning relative to certain global peers “should improve.”

In response to an analyst question about cost pass-through and contract structures, management said Automotive Solutions programs typically run four to five years and are often fixed price with limited pass-through ability, while accessory-type programs can offer better opportunities for pricing adjustments. For large mold, management said inflation risk is mitigated because steel—the key input—is typically acquired at the time the contract is signed.

On M&A, Kirk said Exco continues to look for “select and tuck-in acquisitions,” but “nothing on the front burner” and “nothing to talk about at this point,” with current focus on organic growth and executing on improving volumes, nuclear opportunities, and performance in newer facilities.

About Exco Technologies (TSE:XTC)

Exco Technologies Ltd is a designer, developer, and manufacturer of dies, moulds, components and assemblies, and consumable equipment for the die-cast, extrusion, and automotive industries. The company reports in two business segments namely, Casting and Extrusion segment and Automotive Solutions segment. It generates maximum revenue from the Automotive Solutions segment. The Automotive Solutions segment produces automotive interior components and assemblies primarily for seating, cargo storage, and restraint for sale to automotive manufacturers and Tier 1 suppliers.

The article “Exco Technologies Q2 Earnings Call Highlights” was originally published by MarketBeat.