Velan (TSE:VLN) reported lower second-quarter sales, bookings and adjusted EBITDA as shipment delays, softer recent order activity and transaction-related costs weighed on results, while management said demand in its core nuclear, defense and energy markets remains supportive over the longer term.
For the quarter ended Aug. 31, 2026, sales totaled $57.5 million, down 14.9% from $67.6 million a year earlier. Bookings declined to $47.9 million from $65.2 million, while backlog stood at $262.5 million, compared with $285.8 million in the prior-year period.
“The softness in our results was driven by execution and the timing of shipments rather than by demand,” Sharma said, citing tariff volatility, trade disputes, geopolitical uncertainty in the Middle East, and operational and customer constraints.
Sales and profitability decline
Chief Financial Officer Imran Gibbons said the revenue decline was primarily driven by lower shipment volumes at Velan’s North American and Chinese operations. Softer bookings in recent periods, delays on certain large project deliveries, and production and logistics challenges contributed to the decline. Delays linked to the conflict in the Middle East also pushed some shipments beyond the quarter.
Those factors were partly offset by higher shipments for large offshore and floating production projects serving customers mainly in the Middle East and Asia. Currency movements reduced sales by $1 million, Gibbons said.
North America remained Velan’s largest market, representing 54.9% of quarterly sales, though North American revenue declined by about $5.9 million from a year earlier. Asia-Pacific accounted for 38.2% of sales, up from 25.9% in the prior-year period, supported by the offshore and floating production orders. Europe represented 4.2% of sales.
Gross profit fell to $12.6 million, or 21.9% of sales, from $15.7 million, or 23.2% of sales, a year earlier. Gibbons attributed the decline to lower volume absorption of fixed production overhead, tariffs on cross-border shipments, and less favorable project mix at some facilities. A reversal of aged inventory provisions at Asian operations partly offset those pressures.
Adjusted EBITDA, excluding transaction costs, was a loss of $0.7 million, compared with positive adjusted EBITDA of $3.4 million a year earlier. The company reported a net loss of $15.1 million, or $0.70 per share, versus a net loss of $1.7 million, or $0.08 per share, in the prior-year quarter.
Transaction-based expenses totaled $14.9 million and were entirely related to the closing of the sale of Velan Holding’s controlling interest. Excluding those costs, adjusted net loss was $6.2 million, or $0.29 per share, compared with an adjusted net loss of $1.2 million, or $0.05 per share, a year earlier.
Backlog, liquidity and restructuring actions
Of Velan’s $262.5 million backlog at quarter-end, $201.1 million, or 76.2%, is expected to be delivered during the next 12 months. The remaining $62.4 million is scheduled for the following 12 months.
Gibbons said the year-over-year backlog decline was broad-based, with the largest reductions at Italian operations, where shipments converted backlog into sales and bookings were softer. Growth at North American and Indian operations partly offset the decline.
Maintenance, repair and overhaul activity accounted for a significant share of bookings and remained resilient during the quarter. Sharma said the company’s installed base, spares and field-service offerings provide shorter-cycle demand that can help support operations while larger projects progress.
Velan ended the quarter with $28.2 million in cash and cash equivalents. The company also secured a five-year, $80 million revolving credit facility maturing in June 2031. As of Aug. 31, Velan had drawn $39.4 million on the facility and reported net debt of $16.7 million.
Total liquidity was $95.8 million, including available credit, cash and short-term investments. Cash used in operating activities was $14.9 million, an improvement from $17.1 million a year earlier.
After the quarter ended, Velan implemented a restructuring plan focused mainly on corporate activities, including workforce reductions. The company expects associated costs of about $2 million to $3 million, which will be recognized in the third quarter. No restructuring provision was recorded in the second-quarter results because the plan was implemented after the reporting date.
The board also decided not to pay a dividend for the remainder of fiscal 2027, citing the restructuring plan and the need to preserve liquidity. The dividend policy will be reevaluated annually.
Management sees core-market opportunities
Sharma said Velan is pursuing cost discipline, procurement and value-engineering improvements, manufacturing-footprint modernization, working-capital initiatives and growth efforts across core markets and the aftermarket.
Management said nuclear demand remains supported by reactor refurbishments, life-extension programs, small modular reactors and new-build projects. Sharma said many nuclear opportunities in the company’s pipeline are tied to funded projects moving through engineering and procurement stages.
In defense, the company is pursuing naval modernization and fleet-sustainment opportunities, particularly in nuclear propulsion valves. In conventional and combined-cycle power, management said deferred maintenance in North America and longer-term Middle Eastern infrastructure projects provide opportunities, though geopolitical uncertainty has slowed project bidding.
“Our focus for the second half is on growing bookings and optimizing our cost structure,” Sharma said. “We are building a more efficient, better organized, and more capable Velan so that we are positioned to capture future growth as these opportunities convert.”
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.
