Exco Technologies Q3 Earnings Call Highlights

Exco Technologies (TSE:XTC) reported record third-quarter sales for fiscal 2026, with revenue rising 7% year over year to CAD 165.4 million and EBITDA increasing 26% to CAD 18.5 million. The company said improved profitability in its Casting and Extrusion segment helped lift its consolidated EBITDA margin to 11.2% from 9.5% a year earlier.

Net income totaled CAD 5.8 million, or CAD 0.15 per share, compared with CAD 5.4 million, or CAD 0.14 per share, in the prior-year quarter. The current-quarter result included CAD 600,000, or CAD 0.02 per share, of after-tax restructuring charges. President and CEO Darren Kirk said the company’s investments in facilities, machining and heat-treatment capacity, automation, and additive manufacturing are largely complete, shifting management’s focus toward utilization, margins, cash generation, and returns on capital.

Casting and Extrusion Margin Improvement

The Casting and Extrusion segment generated CAD 77.1 million in third-quarter sales, up 4% from the prior-year period. Segment EBITDA margin improved to 16.2% from 12.7%, which Kirk attributed to pricing discipline, operational-efficiency initiatives, and cost actions.

Extrusion tooling demand remained solid across construction, transportation, renewable energy, electrical applications, and projects related to artificial-intelligence infrastructure. Kirk said North American market conditions were favorable, supported by growing aluminum use in vehicles, data-center infrastructure, reshoring activity, and tariff dynamics. European conditions were more mixed, although the company is pursuing market-share gains and further integration of its European operations.

The company also reported increased activity for capital equipment products, including containers, die ovens, and related tooling systems, as North American extruders invest in press capacity and upgrades.

Die-cast tooling revenue was relatively stable as the company shipped against an elevated backlog. However, Kirk said results were affected by customer-driven timing delays, additional costs related to the closure of the Large Mould Mexico facility, and lower-than-anticipated margins on two large jobs priced during the prior year’s order downturn.

The Mexico wind-down is complete, Kirk said, while delayed shipments remain in backlog rather than being lost. He said pricing on more recent orders has improved and that the company expects the fourth quarter to be “materially better” for die-cast tooling, supported by a strong shipping schedule.

Exco Energy Launch Targets Nuclear Market

During the quarter, Exco formally launched Exco Energy, an initiative focused on opportunities in Canada’s nuclear-energy sector and other technically demanding industrial end markets. The strategy is intended to use the Large Mould Group’s existing precision machining, engineering, quality-control, and additive-manufacturing capabilities.

Kirk said Exco has spent the past several years engaging with industry partners and customers and pursuing preliminary accreditations. The company is already quoting and delivering some products under the Exco Energy banner, though management did not provide a financial estimate for the addressable market or expected revenue contribution.

“This is really the formalization of a couple of years of groundwork,” Kirk said during the question-and-answer session. He added that the company is not prepared to disclose the size of the opportunity at this stage.

Canada’s government hosted its nuclear energy strategy announcement at Exco’s Newmarket facility on June 22, an event Kirk said raised the company’s profile with utilities, government stakeholders, and industry partners. Management expects nuclear-related revenue to build over years rather than quarters because of the sector’s qualification requirements.

Exco also plans to pursue broader uses for its additive-manufacturing capabilities. The company added its seventh industrial 3D printer in late fiscal 2025 and said demand remains strong for 3D-printed tooling, including tooling for Giga Press applications.

Automotive Sales Rise, While Costs Pressure Profit

Automotive Solutions sales increased 9% to CAD 88.3 million, or approximately 8% excluding foreign exchange effects. The company cited resilient North American vehicle demand, program launches, favorable vehicle mix, and accessory-product growth. U.S. seasonally adjusted annualized vehicle sales averaged approximately 16.2 million units during the quarter, including 16.5 million units in June.

Segment pre-tax profit declined CAD 800,000 from the prior-year quarter to CAD 6.5 million, primarily due to product mix, higher labor costs, and increased energy and supply-chain costs. Management said it is advancing lean manufacturing and automation initiatives, taking pricing action where possible, and maintaining pricing discipline on new program awards.

European automotive conditions remain challenging because of original-equipment manufacturer restructuring and competitive pressures. However, Exco said supplier consolidation and its manufacturing capabilities in Morocco are creating additional opportunities.

Cash Flow, Capital Spending and Outlook

Cash flow from operating activities was CAD 13.4 million, down from CAD 25.2 million a year earlier, primarily reflecting greater use of non-cash working capital. Free cash flow was CAD 9.7 million, compared with CAD 20.1 million in the prior-year quarter.

Exco spent CAD 2.7 million on investment activities during the quarter, with virtually all fixed-asset additions related to maintenance. After several years of elevated growth investments, management expects fiscal 2026 capital expenditures of approximately CAD 20 million, focused on maintenance, productivity projects, and select growth initiatives.

The company ended the quarter with CAD 26.1 million in cash, net debt of CAD 63.9 million, and CAD 61.6 million available under its committed credit facility. It said it remained in compliance with financial covenants.

Looking ahead, management expects normal fourth-quarter seasonality from automotive summer shutdowns and European vacation schedules. Kirk said trade-policy, tariff, and geopolitical uncertainty could affect near-term customer demand, but noted that nearly all products sold within North America comply with USMCA requirements and that Exco maintains a substantial U.S. manufacturing footprint for extrusion dies and large mould products.

On acquisitions, Kirk said no transaction is currently “on the front burner.” He said the company’s primary focus is improving utilization and returns from its existing assets, though it retains financial capacity and would likely focus any future acquisition interest on the Casting and Extrusion segment.

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.

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