Velan Battles Geopolitical Headwinds; New PE Ownership Charts New Course

MONTREAL, QC – July 09, 2026

Velan Inc. (TSX: VLN), a world-leading manufacturer of industrial valves, reported a challenging first quarter for fiscal 2027, posting a significant net loss as geopolitical conflicts disrupted delivery schedules and dampened new orders. The results underscore the profound impact of global instability on industrial supply chains. However, the period also marks a pivotal turning point for the 76-year-old company, which is now operating under the new majority ownership of private equity firm Birch Hill Equity Partners, charting a new strategic course focused on operational resilience and long-term growth.

A Quarter Defined by Global Turmoil

Velan's first-quarter financial results paint a stark picture of a company navigating severe external pressures. Sales from continuing operations fell to $57.8 million, a 20% decrease from $72.2 million in the same period last year. The company directly attributed this decline to geopolitical and regional conflicts that forced the deferral of shipments, though it expects to recapture the majority of these deliveries by the end of the fiscal year.

The impact on profitability was even more pronounced. The Montreal-based manufacturer recorded a net loss from continuing operations of $9.4 million, or $0.44 per share. This stands in sharp contrast to the net income of $17.8 million ($0.83 per share) reported in the prior-year quarter. However, a direct comparison is misleading; last year’s results were significantly inflated by a one-time, non-recurring tax recovery of $23.1 million related to the profitable disposal of its French subsidiaries. A clearer view emerges from the adjusted figures: an adjusted net loss of $6.9 million this quarter versus a break-even adjusted net income of $0.1 million last year, highlighting the true operational impact of the current market.

CEO Rishi Sharma confirmed the headwinds in his statement. “Velan’s first quarter results were affected by the geopolitical and regional conflicts, which impacted new order bookings, delivery schedules, and profitability,” he said. Sharma noted that uncertainty constrained maintenance, repair, and overhaul (MRO) activities in North America, as lower refinery utilization tied to the Middle East situation limited the resources for such work. New bookings, a key indicator of future revenue, fell to $48.0 million from $78.2 million a year ago.

New Ownership, New Strategy

The challenging quarter coincides with a landmark change in the company's structure. On June 15, 2026, Birch Hill Equity Partners, a prominent Canadian mid-market private equity firm, finalized its acquisition of a controlling interest in Velan. The deal, valued at approximately C$204 million, saw Birch Hill acquire roughly 72.1% of the company's shares, ending decades of family control and ushering in a new era.

Birch Hill is known for its hands-on approach, partnering with established companies to foster growth through operational improvements and strategic initiatives. This philosophy appears to be already in motion at Velan. “With Birch Hill’s acquisition of Velan Holding’s majority interest now closed, Velan is entering a dynamic new phase of its evolution from a position of strength,” Sharma stated. He emphasized the company's focus on strengthening its leadership position across diversified industrial markets.

Underpinning this new phase is a fortified capital structure. Subsequent to the quarter's end, Velan secured a new $80 million, five-year revolving credit facility. According to CFO Imran Gibbons, this new facility “enhances our liquidity, reduces our cost of capital and provides us with the flexibility to accelerate the execution of our business strategy and to invest in our core capabilities to sustain profitable growth.” The proceeds were immediately used to repay existing North American debt, shoring up the balance sheet for the road ahead.

Pivoting Toward Resilient Markets

Despite the immediate downturn in bookings, Velan’s strategy reveals a deliberate pivot toward more stable, long-term projects. The company's backlog, while down slightly to $275.1 million, shows a significant shift in composition. Orders scheduled for delivery beyond the next 12 months have increased, reflecting a higher proportion of longer-duration, large-scale contracts, particularly in the nuclear and defense sectors. This move aligns with broader market trends, where demand for highly engineered, mission-critical valves remains robust.

The global industrial valves market is projected to grow steadily, with some analysts forecasting a market size exceeding $126 billion by 2033, driven by expansion in power generation and infrastructure. Velan's focus on nuclear and defense taps into sectors less susceptible to the volatility affecting its traditional energy markets. The company reports that bidding activity for these large-scale projects remains solid, suggesting significant pent-up demand.

“Despite these external factors, Velan is well positioned to capitalize on pent-up demand as market uncertainty subsides and we are looking forward to actively participate in efforts to restart idled projects or rebuild damaged infrastructure,” Sharma commented, signaling confidence in the company's long-term prospects.

To prepare for this anticipated demand, Velan is advancing a series of initiatives aimed at enhancing operational efficiency. These include optimizing its global manufacturing footprint through lean practices, pursuing procurement savings via strategic sourcing, and streamlining operating costs. This internal focus on operational excellence, combined with the strategic backing of Birch Hill and a strong financial footing, positions Velan to not only weather the current geopolitical storm but to emerge stronger as it navigates the evolving frontiers of the industrial landscape.