Velan Q4 Earnings Call Highlights

Key Points

• Velan’s fiscal 2026 sales inched higher to $296.4 million, but profitability weakened as gross margin fell to 27.4% from 28.8% and adjusted EBITDA dropped to $20.7 million for the year. Management blamed tariffs, geopolitical tensions and uneven customer delivery timing for pressure on orders, deliveries and margins.
• Bookings and backlog improved, with fourth-quarter bookings up 18.8% year over year to $73.7 million and year-end backlog rising 3.1% to $283.3 million. More than 76% of that backlog is expected to be delivered within the next 12 months, aided by strength in nuclear and India operations.
• Nuclear and defense remain key growth drivers for Velan, highlighted by a preferred vendor agreement with AtkinsRéalis and a more than $20 million valve order from Ontario Power Generation. Management also said the proposed Birch Hill acquisition is still advancing and expects better operating performance in fiscal 2027.

Velan TSE: VLN reported modest sales growth and a larger year-end backlog for fiscal 2026, while management pointed to tariffs, geopolitical tensions and shifting customer delivery schedules as factors weighing on profitability and order timing.

On the company’s fourth-quarter earnings call, Chairman and CEO Jim Mannebach said Velan delivered “sound financial results” for the year ended Feb. 28, 2026, despite “a very challenging environment” that included tariff volatility and the conflict in the Middle East. He said those factors negatively affected order intake, deliveries, the supply chain and profitability.

Annual sales rose to $296.4 million, up $1.2 million from fiscal 2025. Gross profit margin for the year was 27.4%, compared with 28.8% a year earlier. Velan ended the year with an order backlog of $283.3 million, up 3.1% from the prior year, with just over 76% of that backlog expected to be deliverable over the next 12 months.

Fourth-Quarter Bookings Improve

CFO Rishi Sharma said fourth-quarter bookings rose 18.8% year over year to $73.7 million, driven by higher nuclear orders in North America and stronger bookings from the company’s operations in India. Those gains were partly offset by lower bookings from German operations.

For the full year, bookings totaled $295 million, up $2.5 million from fiscal 2025. Sharma said the increase reflected higher bookings from Italian operations, partly offset by lower bookings in Germany and China, where the prior year had benefited from stronger order flow.

Fourth-quarter sales increased 2.1% to $84.9 million. Sharma attributed the increase to higher shipments from North American, Chinese and Indian operations, partly offset by lower shipments from Italian businesses as changes in customer delivery schedules pushed some sales into fiscal 2027.

By customer geography, North America remained Velan’s largest market in fiscal 2026, accounting for 49% of total sales. Asia-Pacific represented 32% of sales, while Europe accounted for 11%.

Margins Pressured by Product Mix and Tariffs

Velan’s fourth-quarter gross profit was $17.6 million, or 20.7% of sales, compared with $19.8 million, or 23.8% of sales, in the prior-year quarter. Sharma said the decrease was due to a less favorable product mix shipped during the quarter.

For the full year, gross profit declined to $81.1 million from $84.9 million. Sharma said the year-over-year variation reflected a less favorable product mix and the impact of tariffs.

Administration costs declined in the fourth quarter to $18.9 million, or 22.2% of sales, from $20.3 million, or 24.3% of sales, a year earlier. The improvement reflected lower compensation expenses and the absence of the prior year’s non-cash impact from the company’s long-term incentive plan tied to a significant increase in the share price.

For fiscal 2026, administration costs were $69 million, or 23.3% of sales, compared with $68.6 million, or 23.2% of sales, in fiscal 2025. Sharma said the slight increase was mainly due to higher professional fees and sales commissions, partly offset by cost reduction initiatives and the prior-year non-cash incentive plan impact.

Adjusted EBITDA Declines for the Year

Adjusted EBITDA, which excludes restructuring expenses, was $4 million in the fourth quarter, compared with $3.6 million a year earlier. Sharma said the increase reflected higher other income, mainly from favorable currency movements, and lower administration costs, partly offset by lower gross profit.

For the full year, adjusted EBITDA fell to $20.7 million from $27.5 million in fiscal 2025, primarily because of lower gross profit. Fourth-quarter adjusted net loss improved to $2 million from $4.9 million in the prior-year quarter, while fiscal 2026 adjusted net income was $0.9 million, down from $6.6 million a year earlier.

Cash provided by operating activities before net changes and provisions was $22.3 million in the fourth quarter, up from $7.5 million a year earlier. Sharma said working capital normalized in the quarter after temporary increases in accounts receivable and late-stage work-in-process inventory earlier in the year, which were tied to customer delivery schedule changes.

Velan ended fiscal 2026 with cash and cash equivalents of $53.4 million, long-term debt of $18.2 million and bank indebtedness of $11.9 million. Sharma said the company’s cash position and available credit facilities gave it total available liquidity of $102.6 million.

Nuclear, Defense and Energy Markets Remain Strategic Priorities

Mannebach said Velan’s backlog is increasingly shifting toward long-term contracts, particularly in nuclear and defense. He described nuclear power as a key growth driver, citing pressure on electric grids and demand for reliable clean energy.

During fiscal 2026, Velan signed a preferred vendor agreement with AtkinsRéalis, steward of CANDU nuclear technology, to support refurbishments and new builds of CANDU reactors. The company also secured a valve order of more than $20 million from Ontario Power Generation for reactors being restored at the Pickering Nuclear Generation Station. Mannebach said the first shipment under that contract is scheduled for January 2027, with subsequent deliveries expected to be completed by the end of January 2028.

Mannebach also highlighted Velan’s role in defense markets, saying the company is a leading valve supplier for nuclear propulsion surface and subsurface vessels used by several NATO naval forces. He said the company expects defense spending to rise as countries respond to heightened geopolitical tensions.

In oil and gas, Mannebach said recent volatility and Middle East tensions could drive investment to restart idle projects and restore refining and pipeline infrastructure. He also pointed to Velan’s presence overseas, including its joint venture in Saudi Arabia, and said the company expects steady order flow from North American refineries.

Birch Hill Transaction Moving Forward

Management also discussed the proposed sale of Velan Holding’s controlling interest in the company to Birch Hill Equity Partners Management, a Canadian private equity firm. Mannebach said the transaction, announced in January 2026, still requires remaining regulatory approvals and is “advancing as planned.”

Mannebach said Birch Hill has communicated a long-term investment horizon and is prepared to provide support for Velan’s growth strategy. He said the company expects improved operating performance in fiscal 2027, supported by focus and cost discipline.

No questions were asked during the call’s question-and-answer session.

About Velan TSE: VLN

Velan Inc is an international manufacturer of industrial valves. It offers products such as Gate valves, check valves, cryogenic, steam traps, and others, which are used in various industries including power generation, oil, and gas, refining and petrochemicals, chemical, liquid natural gas (LNG) and cryogenics, pulp and paper, geothermal processes and shipbuilding. The company operates in various geographical regions, which are Canada, the United States, France, Italy, and Other countries.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.