Velan (TSE:VLN) reported lower first-quarter sales, bookings and profitability as management said geopolitical and regional conflicts weighed on customer activity, order timing and shipment schedules, while the industrial valve maker pointed to a solid backlog and new financing as it begins a new phase under updated ownership and leadership.
On a conference call for the quarter ended May 31, 2026, President and Chief Executive Officer Rishi Sharma said the company is entering “a new chapter” following the closing of Birch Hill’s acquisition of Velan Holdings’ majority interest. Sharma said the transaction leaves Velan operating “from a position of strength,” citing its balance sheet, brand reputation, product quality and expertise in critical applications.
Quarterly sales and bookings decline
Velan reported first-quarter bookings of $48.0 million, down from $78.2 million a year earlier. Chief Financial Officer Imran Gibbons said the decrease reflected challenging market conditions that reduced bookings in the company’s North American, Italian and German operations, as well as lower maintenance, repair and overhaul activity, mainly in North America.
Sales for the quarter were $57.8 million, compared with $72.2 million in the prior-year period. Gibbons said the decline was mainly tied to geopolitical and regional conflicts that deferred shipments into subsequent periods, particularly affecting volume from North American and Italian operations.
By customer geography, North America was Velan’s largest market in the quarter, representing 57% of total sales. Asia-Pacific accounted for 21%, while Africa and the Middle East represented 16%.
The company’s order backlog stood at $275.1 million at quarter-end, down slightly from the previous quarter because shipments exceeded bookings. Management said about 70% of the backlog is expected to be delivered over the next 12 months.
Sharma said certain shipments deferred during the quarter are expected to be realized in future periods, with the majority expected to be recaptured by the end of the fiscal year.
Profitability pressured by lower volume
Gross profit fell to $11.4 million, or 19.6% of sales, from $20.6 million, or 28.6% of sales, a year earlier. Gibbons said the decrease primarily reflected lower business volume and its effect on fixed production overhead absorption, along with a $1.3 million increase in the company’s provision. Excluding that factor, gross profit was approximately 22% of sales.
Administration costs declined to $15.7 million from $18.3 million a year earlier, which Gibbons attributed to cost reduction initiatives and lower sales commissions.
Adjusted EBITDA, excluding restructuring expenses and non-recurring provision adjustments, was negative $2.1 million, compared with positive $3.8 million in the prior-year period. Velan posted an adjusted net loss of $6.9 million, compared with adjusted net income of $0.1 million a year earlier.
Gibbons said the decline in adjusted EBITDA reflected lower gross profit, partially offset by reduced administration costs.
Cash position and credit facility
Cash used by operating activities before net change in provisions was $17.4 million, compared with $15.5 million a year earlier. Gibbons said the unfavorable cash movement reflected negative changes in non-cash working capital, mainly decreases in accounts payable and accrued liabilities, as well as short-term customer deposits. Those factors were partially offset by lower inventories.
He said the higher working capital investment was tied to operational factors, including securing materials ahead of the execution of long-term contracts. Velan is focused on improving working capital efficiency through inventory management, receivables collection and cash-flow optimization, Gibbons said.
At quarter-end, Velan had $34.6 million in cash and cash equivalents, long-term debt of $16.8 million and bank indebtedness of $17.6 million.
Subsequent to the end of the quarter, the company secured a new five-year, $80 million revolving credit facility with a major Canadian chartered bank. Gibbons said the facility increases available liquidity, lowers the company’s cost of capital and was used to repay existing North American debt.
Management highlights nuclear, defense and energy opportunities
Sharma said Velan is advancing a transformation plan focused on optimizing operations, leveraging global scale, simplifying its organizational structure and modernizing facilities. The company is also investing in commercial capabilities to expand market share across its product portfolio.
Management highlighted nuclear power as a major growth driver, pointing to demand for low-carbon energy and investments in reactor refurbishments, life extension programs, small modular reactors and new-build projects. Sharma said Velan has more than 55 years of nuclear expertise and is positioned to participate in future CANDU refurbishments and new reactor projects in Canada and internationally through its position in the CANDU ecosystem and relationship with AtkinsRéalis.
Sharma also cited Velan’s contribution to the GEH SMR program and said many opportunities in the company’s pipeline are tied to funded projects advancing through engineering and procurement stages. He said the company expects a meaningful portion of those opportunities to convert into bookings in the near term, with execution largely within the next 24 months and revenue contribution beginning during that period.
In defense, Sharma said rising global security concerns are supporting investment in naval modernization programs. In oil and gas, he said geopolitical uncertainty affected customer activity, but bidding levels remain healthy. Deferred maintenance activity in North America and possible infrastructure investments in the Middle East are creating opportunities, particularly in shorter-cycle MRO work that can convert to revenue more quickly, he said.
Leadership transition and governance changes
Sharma used the call to acknowledge the company’s leadership transition and board changes following the Birch Hill transaction. He thanked former CEO Jim Mannebach, who will remain on Velan’s board, and said Patrick Duncan, a partner at Birch Hill, has been appointed chair. Joshua Lundy and Shauna Gamble have also joined the board, while Daniel Desjardins has been appointed lead director.
The board now has seven directors, four of whom are independent, Sharma said. He also congratulated Gibbons on his promotion to chief financial officer, saying Gibbons has helped strengthen Velan’s financial discipline and strategic planning capabilities.
No analyst or investor questions were asked during the call. Sharma said Velan expects to report second-quarter results in October and will hold its annual general meeting virtually on Aug. 25, 2026.
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.
