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Introduction & Market Context
Velan Inc. (TSX:VLN) released its fourth quarter and fiscal year 2025 results on May 22, 2025, describing the period as a "vintage year" marked by significant sales growth and strategic repositioning. The industrial valve manufacturer reported strong annual performance despite some headwinds in the fourth quarter. Currently trading at $14.85, the company’s stock has remained relatively stable following the presentation.
The company has strategically positioned itself to capitalize on growing demand in the nuclear energy sector, which aligns with global trends toward cleaner energy sources. This focus comes at a time when nuclear energy is experiencing renewed interest due to energy security concerns and decarbonization efforts.
Executive Summary
Velan delivered impressive annual results for fiscal year 2025, with sales from continuing operations growing 14.1% to $295.2 million. The company significantly improved its profitability metrics, with gross profit margin expanding by 770 basis points to 28.8% and adjusted EBITDA reaching $27.5 million, up substantially from $2.1 million in the previous year.
As shown in the following comprehensive overview of financial performance:
The company completed two significant strategic transactions during the fiscal year: the sale of two French subsidiaries, expected to generate a gain of approximately $96 million in Q1-FY26, and the divestiture of asbestos-related liabilities. These moves have strengthened Velan’s balance sheet and allowed for a sharper strategic focus, culminating in the announcement of a special dividend of C$0.30 per share.
Quarterly Performance Highlights
While the annual performance was strong, Velan’s fourth quarter results were more modest. Q4 sales increased by 2.9% year-over-year to $83.2 million, but adjusted EBITDA decreased to $3.6 million compared to $9.3 million in the same period last year.
The company attributed this quarterly performance to a volatile economic environment and uncertain trade disruptions affecting customers, as illustrated in the following slide:
The quarterly results were impacted by a less favorable product mix and higher provisions for aging inventory, which contributed to a decrease in gross profit margin from 27.7% in Q4-FY24 to 23.8% in Q4-FY25.
Detailed Financial Analysis
Velan’s backlog stood at $274.9 million as of February 28, 2025, showing a slight year-over-year increase when excluding a $12.7 million negative currency impact. The company reported that $225.7 million of this backlog is deliverable within the next 12 months, providing good visibility for future revenue.
The following chart illustrates the company’s backlog and order trends:
Annual sales performance showed strong growth across most regions, with particularly notable increases from Italian operations for the oil & gas industry and German business related to oil refineries. This growth was partially offset by slightly lower sales in North America and other international markets.
The sales analysis is presented in the following chart:
Gross profit for the fiscal year reached $84.9 million, a 55% increase compared to $54.6 million in FY24. This improvement was driven by higher business volume and a more favorable product mix, as shown in the following analysis:
The company’s profitability metrics showed significant annual improvement but quarterly decline. Annual adjusted EBITDA increased to $27.5 million from $2.1 million in the previous year, while quarterly adjusted EBITDA decreased to $3.6 million from $9.3 million in Q4-FY24.
The following chart illustrates these profitability trends:
Strategic Initiatives
Velan has identified several high-growth markets as strategic focus areas, with particular emphasis on the nuclear sector. The company has signed partnerships with key actors in the nuclear industry and possesses expertise in both small modular reactors (SMRs) and standard reactors.
As illustrated in the following slide detailing the company’s nuclear sector strategy:
Beyond nuclear, Velan is targeting growth in defense markets, LNG and hydrogen processes, oil & gas industry, and mining activity. The company highlighted its 90% penetration at North American refineries and its recently established joint venture in Saudi Arabia to strengthen its presence in the Middle East.
The company’s diversified market approach is detailed in this continuation of its high-growth markets strategy:
Forward-Looking Statements
Looking ahead, Velan expressed optimism about its future prospects, particularly in the nuclear energy sector where it expects increased demand. The company enters fiscal year 2026 with a strengthened balance sheet and sharper strategic focus following its divestitures.
With a pro forma cash position of approximately $55 million and credit facilities of $35 million, Velan is well-positioned to support its growth ambitions. The company’s management indicated they are "highly optimistic about unlocking further value through continued strong execution."
James A. Mannebach, Chairman of the Board and CEO, characterized fiscal 2025 as "a vintage year" for Velan, highlighting the company’s successful strategic repositioning and strong financial performance. The company appears well-positioned to capitalize on growing demand in its target markets, particularly in the nuclear sector where global investment is increasing.
As the energy transition continues to evolve, Velan’s strategic focus on clean energy technologies and its established presence in traditional industrial sectors provide a balanced approach to future growth opportunities.
Full presentation:
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