Quarterly Report • May 8, 2019
Quarterly Report
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Q1 2019 interim report
| KEY FIGURES (Unaudited amounts in NOK million) |
2019 Q1 |
2018 Q1 |
2018 Full year |
2017* Full Year |
|---|---|---|---|---|
| Operating revenue | 122.4 | 112.5 | 489.1 | 302.2 |
| Operating expenses | 174.4 | 144.3 | 685.1 | 419.4 |
| EBITDA | -34.8 | -15.8 | -131.6 | -77.4 |
| Operating loss |
-52.0 | -31.9 | -196.1 | -117.2 |
| Pre-tax loss | -53.2 | -32.9 | -197.5 | -124.4 |
| Net loss | -51.3 | -30.1 | -188.8 | -52.4 |
| Net cash flow from operating activities | -33.1 | -37.9 | -142.6 | -113.0 |
| Cash balance end of period | 743.2 | 250.8 | 349.7 | 295.0 |
* The figures include Proton OnSite from the acquisition date, 30 June 2017
Nel reported revenues in the first quarter 2019 of NOK 122.4 million (Q1 2018: 112.5 million), following growth in the Fueling segment of 40%, while the development in the Electrolyser segment was negative by 8% compared to the same quarter last year.
At the end of the first quarter 2019, Nel had an order backlog of NOK 406 million. The order backlog does not at this stage include electrolyzers and associated fueling equipment for Nikola as part of its development of a commercial hydrogen station infrastructure in the US for truck and passenger vehicles. The backlog only includes firm purchase orders with agreed price, volume, timing and terms and conditions.
The EBITDA margin of first quarter 2019 fell to -28.4%, compared to -14.0% in the same quarter last year. The decrease is due to increased costs of goods sold and higher wage and social costs.
The high cost level in the quarter was partly due to high cost on siting and installation of certain projects. In addition, there was a high level of business development- and sales activities, and considerable ramp-up activities throughout Nel which affected the costs. The organization is generally prepared for a higher revenue level. At the quarter, 251 people were employed in Nel compared 208 at the end of the same quarter in 2018.
The non-cash costs for the stock option- and share incentive program, which are included in wages and social costs, were NOK 3.3 million in the quarter.
Depreciation was NOK 17.2 million (16.1) in the first quarter of 2019. The depreciation is mainly related to excess values derived from acquisitions and depreciation of intangible and tangible assets that has increased from first quarter 2018.
Operating loss amounted to NOK -52.0 million (-31.9) in the period, while EBITDA ended at NOK -34.8 million (-15.8).
Net financial items amounted to a cost of NOK 1.2 million. This was related to share of loss from associated companies and currency loss, partly offset by interest income. Share of loss from associates and joint ventures amounted to NOK 1.4 million (1.2) and is mainly related to Nel's ownership in Uno-X Hydrogen AS and Hyon AS.
Pre-tax loss was NOK -53.2 million (-32.9) in the first quarter of 2019 and the net loss was NOK -51.3 million, compared to a loss of NOK -30.1 million in the same quarter of 2018.
Total assets were NOK 2 365.2 million at the end of the first quarter of 2019, compared to NOK 1 944.4 million at the end of 2018, mainly due to an increase of cash. Total equity was NOK 1 958.8 million. Thus, the equity ratio was 83 percent.
Net cash flow from operating activities in the first quarter of 2019 was NOK -33.4 million, compared to NOK -37.9 million in the same quarter in 2018. Net cash flow from investing activities was NOK -21.1 million (-34.2) in the period.
Nel's cash balance at the end of the first quarter of 2019 was NOK 743.2 million. The increase from the cash balance at 31 December 2018 is due to net proceeds of NOK 462.7 million from capital increase in February 2019.
Nel is a global, dedicated hydrogen company, delivering optimal solutions to produce, store and distribute hydrogen from renewable energy. The company serves industries, energy and gas companies with leading hydrogen technology.
Since our origins in 1927 as part of Norsk Hydro, we have a proud history of development and continuous improvement of hydrogen plants.
Our hydrogen solutions cover the value chain from hydrogen production technologies to manufacturing of hydrogen fueling stations, providing all fuel cell electric vehicles with the same fast fueling and long range as conventional vehicles today.
Nel has reorganized the organization and will report the former business unit Nel Hydrogen Solutions as integrated parts of the two operating business units.
Nel Hydrogen Electrolyser is the world's largest electrolyzer producer, covering both alkaline and PEM (proton exchange membrane) technology globally. The company traces back to 1927, when Norsk Hydro developed large-scale electrolyzer plants, providing renewable hydrogen for use in ammonia production with fertilizer as the endproduct. Since then, the electrolyzer technology has been improved continuously, delivered all across the world, and set the industry standard.
Historically, hydrogen has primarily been used as an input factor for a broad spectrum of industrial applications, such as ammonia, refineries, methanol production, edible oil industry, chemicals/refining, metallurgy, glass production, electronics, generator cooling, production of polysilicon used in PV solar panels, and so forth.
Of the total global hydrogen market, only 1% of the hydrogen comes from water electrolysis. This is however about to change, and electrolysis is expected to grow its market share, mainly driven by the decreasing cost of renewable energy, increased share of intermittent (wind and solar) energy, decreasing cost of electrolyzers, and an increasing focus on climate and air quality.
The overall hydrogen market is also expected to grow significantly in the coming years, with hydrogen being used as a zero-emission fuel for the transport sector, a way of decarbonizing the natural gas grid, and as replacement of coal in the metal industry. The process of converting renewable electricity to hydrogen, and utilizing it both in existing and new hydrogen markets, is referred to as "power-to-X", were X refers to the various applications mentioned above.
A step-change in the size of the power-to-X projects is now being initiated worldwide, as projects are moving to megawatt-scale. This trend is welcomed by Nel Hydrogen Electrolyser, as it makes Nel's portfolio of large-scale electrolyzer products increasingly relevant.
Nel Hydrogen Electrolyser started commercial sales of electrolyzers in the 1970s and has since then delivered more than 3 500 electrolyzer units in 80 countries all across the world. The company has manufacturing facilities in Notodden, Norway, and in Wallingford, Connecticut, USA. The company has a global reach through its in-house sales operation and network of agents across the globe.
Today, Nel exhibits the world's largest product portfolio of alkaline and PEM electrolyzers, and is continuously developing and improving both technologies. Initiatives include a next generation large scale, pressurized alkaline electrolyzer as well as larger PEM stacks, and large-scale solutions which allows for significant cost reductions on a system level.
With increasing demand for large scale electrolyzers, Nel has also decided to significantly increase its manufacturing capacity. As a result of the capacity expansion, significant cost reductions can be achieved, critical to make renewable hydrogen cost competitive with fossil hydrogen and fossil fuels.
Reduced cost and new electrolyzer technology offerings should enable Nel to penetrate new markets, as well as increase its competitiveness in the existing ones, and gradually replace all the various fossil solutions that the world is currently relying on.
Production of hydrogen fueling stations for cars, buses, trucks, forklifts and other applications.
Nel Hydrogen Fueling is a leading manufacturer of hydrogen fueling stations that provide FCEVs (Fuel Cell Electric Vehicles) with the same fast fueling and long range as conventional fossil fuel vehicles has today. Since Nel started manufacturing hydrogen fueling stations in 2003, we have invested significantly in R&D. Today, Nel is one of few global leaders on fast fueling stations for FCEVs. The H2Station® technology is now being installed in several European countries as well as in South-Korea and in California, U.S., providing hydrogen fueling for FCEVs from major car manufacturers, as well as forklifts, buses and trucks.
Nel Hydrogen Fueling was among the first to achieve fast fueling of hydrogen in compliance with the international fueling standard (SAE J2601) required by major car manufacturers. In Denmark, Nel has delivered H2Station® technology for the entire Danish network of hydrogen fueling stations, operated in collaboration with leading oil-, energy- and gas companies. With the H2Station® technology's long- proven track record of reliable operation, the ambition is to maintain the position as a preferred supplier for international hydrogen fueling infrastructure operators.
Nel officially opened the new Nel H2Station® manufacturing plant in Herning, Denmark in the fall of 2018. The state- of-the-art, large-scale manufacturing plant has an annual capacity of 300 hydrogen stations per year. Combining technology innovations with increased manufacturing capacity should enable Nel to reduce cost of hydrogen fueling station equipment.
The target is to deliver fueling solutions that will enable hydrogen to outcompete fossil fuels completely for an increasing number of applications, and to become a preferred fuel alternative. Seeing increased activities in the heavy-duty segment has encouraged Nel to step up technology developments, and to launch new products, better accommodated to heavy-duty applications.
All in all, these activities will support the overall vision of Nel: "empowering generations with clean energy forever".
Nel Hydrogen Electrolyser recorded revenues of NOK 67.4 million in the first quarter 2019, down by 8% from NOK 73.5 million in the first quarter of 2018. The reason is a lower level of revenues related to PEM electrolyzers in the first quarter compared to the same period last year.
Nel received a purchase order for a 2 MW containerized Proton PEM® electrolyzer, as part of a 30 MW framework agreement with Hydrospider AG, an affiliated company of H2 Energy. The electrolyzer will be used to produce green hydrogen for heavy-duty hydrogen trucks from Hyundai Motor Company, which will begin operation in Switzerland during late 2019.
The framework agreement represents the first phase of 60 - 80 MW needed to supply hydrogen for the total expected 1000 trucks and other applications.
The purchase order, which represents the first containerized megawatt Proton PEM electrolyzer delivered by Nel in Europe, has a value exceeding USD 3 million, and will be installed during second half of 2019.
Nel has been awarded a framework contract for delivery of 1000 MW of electrolysis (448 electrolyzers) and associated fueling equipment to Nikola. Under the multi-billion NOK framework contract - to be gradually ramped up from 2020 through 2025 - Nel will deliver up to 1 GW of electrolysis plus fueling equipment. The value of these deliverables is currently not included in the reported order backlog, as exact timing and station design per site is still under discussion.
The first DEMO station was installed and started operations in Q1 2019. This station is currently fueling both cars as well as Nikola trucks, the same trucks that was launched at the Nikola World Event in April. The next DEMO station is expected to be installed later in 2019.
Nel Hydrogen Fueling recorded revenues of NOK 54.5 million, up by 40% from NOK 38.9 million in the first quarter of 2019. The main reason is a higher level of siting and installation revenues.
Nel entered into a contract for the delivery of a H2Station® solution for fueling of heavy-duty vehicles in the US. The heavy-duty market is showing a faster growth than earlier anticipated.
Nel is gearing up the efforts and technology developments towards offering solutions that can accommodate growth in this segment.
The H2Station® equipment will be deployed in the U.S. and will be capable of fueling both heavy-duty trucks as well as light duty vehicles. The work related to the contract will start soon and exact delivery time to be agreed.
The H2Station® order has a total value of more than USD 6 million.
Nel Korea received a purchase order for the two H2Station® hydrogen fueling stations from Public Procurement Service (PPS) on behalf of Gangwon Technopark.
The value of the contract is around EUR 2.8 million, and the H2Station® units are scheduled to be installed in Gangneung and Samcheok during 2019.
Nel Korea co-signed an agreement for the establishment of Hydrogen Energy Network (HyNet), a new Special Purpose Company (SPC) and a joint venture (JV) between thirteen leading industrial companies.
The target of HyNet is to expand the hydrogen fueling infrastructure in South Korea by installing 100 stations by 2022 and to operate them until 2029.
HyNet is a JV among thirteen companies with the major shareholders being Hyundai Motor Company, Korea Gas Corporation, and Air Liquide Korea. The SPC plans to build and operate hydrogen fueling stations in South Korea together with strategic investors and is financially supported by the Korean Ministry of Environment.
The Board of HyNet consists of seven Board members including Nel Korea with Simon Choi, Sales Director and VP, who was elected as a representative of the hydrogen refueling station equipment suppliers. Nel intends to sell H2Stations® both directly to the HyNet JV as well as directly to other customers.
In the first quarter Nel raised NOK 462.7 million in gross proceeds through a private placement of 84.9 million new shares at a price per share of NOK 5.45.
The net proceeds will be used for continued investment in development and innovation across segments and technologies to stay on the technological forefront and to take advantage of the attractive market opportunities, including:
In April, it was raised NOK 68.1 million in gross proceeds in a subsequent offering of 12.5 million new shares, at the same price as in the private placement.
Nel received another purchase order for the delivery of two H2Station® units for fueling of heavy-duty fuel cell electric trucks in California from EQUILON Enterprises LLC (d/b/a/ Shell Oil Products US).
The purchase order is issued under the previously announced framework agreement between Nel and Shell Global Solutions International B.V.
The purchase order has a total value of more than USD 7 million. The stations will be located in the Greater Los Angeles area and expand the fueling coverage for hydrogen powered heavy-duty fuel cell electric trucks.
Nel received a purchase order for a 4.5 MW alkaline electrolyzer solution from Hybrit Development AB, a joint venture owned by SSAB, LKAB and Vattenfall.
The solution will be used for a pilot which aim is to create a fossil free steel production for the future.
The pilot plant for fossil free steel production will operate in Luleå, Sweden from 2021-2024, followed by a demonstration phase, with target of full-scale implementation by 2035. The parties have decided not to disclose the value of the contract for the pilot plant.
Hybrit is an initiative between SSAB, LKAB, and Vattenfall, with the aim to develop the world's first fossil free ore-based steelmaking technology, where coal will be replaced by fossil-free hydrogen. The steel industry is currently one of the highest carbon emitting industries, accounting for up to 7% of global CO2-emissions.
If successful, the Hybrit project can lead to a reduction of Sweden's CO2 emissions by 10% and will consume approximately 15 TWh of fossil-free electricity.
Nel received two purchase orders for totally six H2Station® hydrogen fueling stations from Korea Gas Technology Corporation (KOGAS-Tech).
The value of the purchase orders is approximately EUR 8 million, and the H2Station® units are scheduled to be installed in Chungbuk province and Pyeongtaek city during 2019.
Nel received an order for the delivery of a H2Station® fueling station from HTEC (Hydrogen Technology & Energy Corporation). The H2Station® will be installed in Vancouver, British Columbia (BC) and will help expand the growing hydrogen fueling network for fuel cell electric vehicles (FCEVs) in Canada.
Nel is exposed to risk and uncertainty factors, which may affect some or all of the company's activities. Nel is exposed to financial, market and operational risk. In addition, there is risk related technology, implementation and execution of current and future products. There are no significant changes in the risks and uncertainty factors detail in our Annual Report for 2018.
As one of the leading players in the hydrogen industry, Nel is positioned to play an important role in the fast-growing hydrogen market. Nel offers the complete range of electrolyzers, as well as state-of-the-art fueling stations for all types of fuel cell electric vehicles, and targets to maintain this unique position.
Nel aims to capitalize on the emerging opportunities within power-to-X and hydrogen fueling, targeting continued technology leadership, global presence, cost leadership, and preferred-partner status for industry participants.
Nel will continue to pursue growth initiatives and focus on long term high value orders – which in the short term will have a negative impact on Nel's ability to deliver positive EBITDA. Orders booked will primarily affect revenue growth from the second half of 2019.
Key areas of focus include:
| Ole Enger | Hanne Skaarberg Holen | Beatriz Malo de Molina |
|---|---|---|
| Board member | Chair | Board member |
| (Sign) | (Sign) | (Sign) |
| Mogens Filtenborg | Finn Jebsen | Jon André Løkke |
|---|---|---|
| Board member | Board member | CEO |
| (Sign) | (Sign) | (Sign) |
| (amounts in NOK thousands) Q1 Q1 Full year Operating Income Sales income 113 837 109 548 453 187 Other operating income 8 568 2 906 35 861 Total operating income 4 122 405 112 454 489 049 Operating expenses Cost of goods sold 75 858 58 500 298 545 Wages and social costs 53 504 42 507 182 726 Depreciation 17 192 16 077 64 470 Other operating costs 27 876 27 229 139 369 Total operating expenses 174 430 144 313 685 110 Operating loss -52 025 -31 859 -196 061 Financial income 2 083 1 103 4 818 Financial expenses 1 874 873 1 529 Share of loss from associates and joint ventures 1 368 1 227 4 731 Net financial items -1 158 -997 -1 442 Pre-tax loss -53 183 -32 856 -197 503 Tax expense (income) -1 843 -2 716 -8 676 NET LOSS -51 340 -30 140 -188 827 Items that may subsequently be reclassified to profit or loss Currency translation differences -18 401 -36 209 31 356 TOTAL COMPREHENSIVE INCOME -69 741 -66 348 -157 471 Basic EPS (figures in NOK) -0.044 -0.030 -0.179 |
PROFIT & LOSS | Note | 2019 | 2018 | 2018 |
|---|---|---|---|---|---|
| Diluted EPS (figures in NOK) | -0.043 | -0.030 | -0.176 |
| BALANCE SHEET | Note | 2019 | 2018 |
|---|---|---|---|
| (amounts in NOK thousands) | Q1 | Year end | |
| ASSETS | |||
| NON-CURRENT ASSETS | |||
| Intangible assets | |||
| Technology | 417 907 | 422 040 | |
| Customer relationship | 65 522 | 69 151 | |
| Goodwill | 5 | 598 310 | 608 837 |
| Total intangible assets | 1 081 561 | 1 100 029 | |
| Tangible fixed assets | |||
| Land, buildings and real estate | 147 016 | 110 681 | |
| Fixtures and fittings, tools, etc. | 27 324 | 24 702 | |
| Total tangible fixed assets | 174 341 | 135 383 | |
| Financial fixed assets | |||
| Investments in associates and joint ventures | 17 854 | 18 451 | |
| Other financial fixed assets | 53 757 | 53 882 | |
| Total financial fixed assets | 71 611 | 72 333 | |
| Total non-current assets | 1 327 512 | 1 307 746 | |
| CURRENT ASSETS | |||
| Inventories | 144 120 | 134 804 | |
| Trade receivables | 104 922 | 108 659 | |
| Other receivables | 45 442 | 43 445 | |
| Cash and cash equivalents | 743 215 | 349 747 | |
| Total current assets | 1 037 700 | 636 655 | |
| TOTAL ASSETS | 2 365 212 | 1 944 401 | |
| EQUITY AND LIABILITIES | |||
| Equity Share Capital |
239 692 | 222 710 | |
| Share premium reserve | 2 015 466 | 1 585 570 | |
| Other paid-in capital | 31 783 | 29 946 | |
| Treasury shares | -12 | -12 | |
| Retained earnings | -328 102 | -259 327 | |
| Total equity | 1 958 826 | 1 578 978 | |
| NON-CURRENT LIABILITIES | |||
| Deferred tax liability | 66 582 | 69 481 | |
| Non-current interest-bearing debt | 30 678 | 32 026 | |
| Other non-current liabilities | 107 558 | 74 434 | |
| Total non-current liabilities | 204 818 | 175 942 | |
| CURRENT LIABILITIES | |||
| Accounts payable | 69 686 | 69 473 | |
| Social security, VAT etc. payable | 5 034 | 6 962 | |
| Other current liabilities | 126 848 | 113 046 | |
| Total current liabilities | 201 568 | 189 481 | |
| Total liabilities | 406 386 | 365 423 | |
| TOTAL EQUITY AND LIABILITIES | 2 365 212 | 1 944 401 |
| Statement of changes in Equity | Number | Share | Share | Other | Treasury | Currency | Other | Total |
|---|---|---|---|---|---|---|---|---|
| (amounts/numbers in NOK thousands/thousands) | of shares | capital | premium | reserves | shares | effects | equity | equity |
| As of 31.12.2016 | 683 678 | 136 736 | 608 213 | 11 116 | -1 377 | 603 | -84 071 | 671 219 |
| Net loss 2017 | -52 447 | -52 447 | ||||||
| Currency translation differences | 18 237 | 18 237 | ||||||
| Capital increases 2017 | 315 037 | 63 007 | 681 020 | 744 027 | ||||
| Acquisition Proton OnSite | 17 049 | 17 049 | ||||||
| Options and share program | 8 072 | 9 213 | 17 285 | |||||
| Treasury shares | -3 028 | -3 028 | ||||||
| Other changes | -2 957 | -2 957 | ||||||
| As of 31.12.2017 | 998 715 | 199 743 | 1 289 233 | 19 188 | -4 405 | 18 840 | -113 213 | 1 409 387 |
| Opening balance adjustment - IFRS 15 adoption | -3 037 | -3 037 | ||||||
| Net loss 2018 | -188 827 | -188 827 | ||||||
| Capital increases 2018 | 114 836 | 22 967 | 296 337 | 319 305 | ||||
| Currency translation differences | 31 356 | 31 356 | ||||||
| Options and share program | 10 746 | 4 124 | -4 124 | 10 746 | ||||
| Other changes | 12 | 268 | -232 | 49 | ||||
| As of 31.12.2018 | 1 113 551 | 222 710 | 1 585 570 | 29 947 | -12 | 50 196 | -309 433 | 1 578 978 |
| Net loss 2019 | -51 340 | -51 340 | ||||||
| Capital increases 2019 | 84 907 | 16 981 | 429 895 | 446 877 | ||||
| Currency translation differences | -18 401 | -18 401 | ||||||
| Options and share program | 1 836 | 1 836 | ||||||
| Other changes | 876 | 876 | ||||||
| As of 31.03.2019 | 1 198 458 | 239 692 | 2 015 466 | 31 783 | -12 | 31 795 | -359 897 | 1 958 826 |
| CASH FLOW STATEMENT | Note 2019 |
2018 | 2018 |
|---|---|---|---|
| (amounts in NOK thousands) | Q1 | Q1 | Full year |
| Cash flow from operating activities | |||
| Pre-tax loss | -53 183 | -32 856 | -197 503 |
| Interest costs, reversed | 161 | 28 | 704 |
| Interests income, reversed | -1 465 | -625 | -3 271 |
| Depreciation | 17 192 | 16 077 | 64 470 |
| Change in provisions | -362 | -913 | 16 956 |
| Change in inventories | -9 316 | 9 880 | 3 919 |
| Change in trade receivables | 3 737 | -10 139 | -11 868 |
| Change in trade payables | 213 | -1 669 | 4 616 |
| Change in other short-term receivables and liabilities | 9 877 | -17 706 | -20 591 |
| Net cash flow from operating activities | -33 146 | -37 923 | -142 568 |
| Cash flow from investment activities | |||
| Acquisitions of fixed assets | -21 136 | -29 397 | -94 513 |
| Cash outflow investments in other financial assets | 0 | 0 | -42 131 |
| Cash outflow loan given to associates/ joint ventures | 0 | -3 900 | -9 796 |
| Acquisitions of associates/ joint ventures | 0 | -902 | -3 478 |
| Acquisitions of subsidiaries | 0 | 0 | -6 883 |
| Acquisition of subsidiaries cash balance | 0 | 0 | 13 342 |
| Net cash flow from investing activities | -21 136 | -34 199 | -143 458 |
| Cash flow from financing activities | |||
| Interest paid | -161 | -28 | -704 |
| Interest received | 1 465 | 625 | 3 271 |
| Gross cash flow from share issues | 462 741 | 0 | 332 259 |
| Other financial fixed assets | 0 | 0 | 0 |
| Transaction costs connected to share issues | -15 864 | 0 | -12 954 |
| Proceeds from new loan | 0 | 27 280 | 27 280 |
| Payment of long-term liabilities | -430 | 0 | -8 378 |
| Net cash flow from financing activities | 447 751 | 27 877 | 340 773 |
| Net change in cash and cash equivalents | 393 469 | -44 245 | 54 747 |
| Cash and cash equivalents beginning of period | 349 747 | 295 000 | 295 000 |
| Cash and cash equivalents | 743 215 | 250 754 | 349 747 |
Nel ASA (Nel) is a global, dedicated hydrogen company, delivering optimal solutions to produce, store and distribute hydrogen from renewable energy. The group serves industry, energy and gas companies with leading hydrogen technology. Since its origins in 1927, Nel has a proud history of development and continual improvement of hydrogen plants. Our hydrogen solutions cover the value chain from hydrogen production technologies to manufacturing of hydrogen fueling stations, providing all fuel cell electric vehicles (FCEVs) with the same fast fueling and long range as conventional vehicles today. The group has two divisions, Nel Hydrogen Electrolyser and Nel Hydrogen Fueling.
Nel ASA (org. no 979 938 799) was formed in 1998 and is a Norwegian public limited company listed on the Oslo Stock Exchange. The group's head office is in Karenslyst allé 20, N-0278 Oslo, Norway. The condensed interim consolidated financial statements were authorized for issue by the Board of Directors on 7 May 2019.
The financial information is prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" ("IAS 34"). This financial information should be read together with the annual report for the year ended 31 December 2018 prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the EU.
The accounting policies adopted in the preparation of the condensed interim consolidated financial statements are consistent with those used in the preparation of the group's annual consolidated financial statements for the year ended 31 December 2018, except for IFRS 16 accounting for leases that has been adopted from 1 January 2019 as further described below
The group has implemented IFRS 16 in 2019 with the modified retrospective approach. Hence, the comparative figures for 2018 have not been adjusted. With the transition to IFRS 16 the group has recognized right-of-use assets of NOK 37.4 million, and lease liabilities of NOK 37.4 million as of 1 January 2019. A further description of the impact of the initial application is disclosed in the tables below.
IFRS 16 requires a lessee to account for lease contracts by recognizing a liability to make lease payments (i.e., the lease liability) and an asset representing the right to use the underlying asset during the lease term (i.e., the right-of-use asset). Lessees are required to separately recognize the interest expense on the lease liability and the depreciation expense on the right-of-use asset.
The implementation of IFRS 16 has mainly affected the accounting for office leases and to a smaller extent leases for service cars in the group.
| Operating lease commitments at 31 December 2018 as disclosed in the group's consolidated financial statements |
51 357 |
|---|---|
| Short term and low value exemption | -1 187 |
| Gross liabilities at 1 January 2019 | 50 170 |
| Effect of discounting | -12 758 |
| Lease liabilities recognized at initial application | 37 412 |
| Weighted average incremental borrowing rate applied | 9.6% |
| Right to use assets recognized at initial application | 37 412 |
The financial statement is presented on the going concern assumption under International Financial Reporting Standards as adopted by the EU.
As per the date of this report the group has sufficient working capital for its planned business activities over the next twelve-month period.
The preparation of the interim financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets, liabilities and disclosure of contingent liabilities at the date of the interim financial statements. If in the future such estimates and assumptions, which are based on management's best judgment at the date of the interim financial statements, deviate from the actual circumstances, the original estimates and assumptions will be modified as appropriate in the period in which the circumstances change.
In the process of applying the group's accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognized in the condensed interim financial statements:
The estimates and underlying assumptions are reviewed on an ongoing basis, considering the current and expected future market conditions. Changes in accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.
Refer to the annual report of 2018 for more details related to key judgements, estimates and assumptions.
Nel operates within two business segments, Nel Hydrogen Fueling and Nel Hydrogen Electrolyser.
Through the subsidiary Nel Hydrogen A/S based in Herning, Denmark, the group offers H2Stations® for fast fueling of fuel cell electric vehicles as well as services in relation to the supply of these stations. Nel Hydrogen Inc, located in San Francisco, USA and Nel Korea Co. Ltd., located in Seoul, South Korea, Nel Hydrogen Fueling mainly offering siting and service for their installed base of H2 stations.
Through its subsidiary Nel Hydrogen Electrolyser AS, based in Notodden, Norway, Nel Hydrogen Electrolyser offers hydrogen plants based on alkaline water electrolysis technology for use in various industries. Through its subsidiary Proton Energy Systems Inc, USA, Nel Hydrogen Electrolyser offers hydrogen plants based on PEM water electrolysis technology for use in various industries.
The identification of segments in the group is made based on the different products the division offers as well as geographical areas the divisions operate in. The executive management group is the chief operating decision maker (CODM) and monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment.
Segment performance is evaluated based on profit or loss and is measured consistently with profit or loss in the consolidated financial statements.
Prices between operating segments are on an arm's length basis in a manner similar to transactions with third parties.
| Nel Hydrogen Fueling | Nel Hydrogen Electrolyser | Other/elimination* | Total | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (amounts | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | ||||
| in NOK million) | Q1 | Q1 | 2018 | Q1 | Q1 | 2018 | Q1 | Q1 | 2018 | Q1 | Q1 | 2018 |
| Operating revenue | 54.5 | 38.9 | 190.7 | 67.8 | 73.5 | 298.5 | 0.0 | 0.0 | -0.2 | 122.4 | 112.5 | 489.0 |
| Operating expenses | 69.2 | 49.2 | 269.9 | 76.9 | 70.7 | 328.5 | 11.2 | 8.3 | 22.3 | 157.2 | 128.2 | 620.6 |
| EBITDA | -14.7 | -10.3 | -79.2 | -9.0 | 2.8 | -29.9 | -11.2 | -8.3 | -22.5 | -34.8 | -15.8 | -131.6 |
| Depreciation | 5.4 | 2.0 | 16.8 | 3.0 | 1.4 | 5.0 | 8.9 | 12.7 | 42.7 | 17.2 | 16.1 | 64.5 |
| EBIT | -20.0 | -12.3 | -95.9 | -12.0 | 1.4 | -34.9 | -20.0 | -21.0 | -65.2 | -52.0 | -31.9 | -196.1 |
| Net financial items | -0.8 | -0.9 | -4.6 | -1.6 | -0.6 | -1.6 | 1.3 | 0.5 | 4.8 | -1.2 | -1.0 | -1.4 |
| Pre-tax profit (loss) | -20.9 | -13.2 | -100.6 | -13.6 | 0.8 | -36.4 | -18.7 | -20.5 | -60.4 | -53.2 | -32.9 | -197.5 |
| Total Assets | 353.4 | 257.0 | 325.5 | 387.2 | 299.7 | 388.6 | 1 624.6 | 1 093.4 | 1225.8 | 2 365.2 | 1 650.1 | 1939.9 |
| Total Liabilities | 238.2 | 180.8 | 186.4 | 352.2 | 219.5 | 339.4 | -183.9 | -94.5 | -164.6 | 406.4 | 305.8 | 361.1 |
* Other/elimination comprises excess values on intangible assets and related depreciation and tax expense (income) derived from the consolidation of the financial statements not allocated to the business segments. In addition, it comprises parent company costs and elimination of intercompany transactions and balances.
The table below shows the movements in goodwill during 2018 and the first quarter of 2019.
| (amounts in NOK million) | 31.03.2019 | 31.12.2018 |
|---|---|---|
| Goodwill beginning of period | 608.8 | 591.7 |
| Currency translation differences | -10.5 | 17.1 |
| Goodwill end of period | 598.3 | 608.8 |
Nel discloses alternative performance measures (APMs) in addition to those normally required by IFRS. This is based on the group's experience that APMs are frequently used by analysts, investors and other parties for supplemental information.
The purpose of APMs is to provide an enhanced insight into the operations, financing and future prospect of the group. Management also uses these measures internally to drive performance in terms of long-term target setting. APMs are adjusted IFRS measures that are defined, calculated and used in a consistent and transparent manner over the years and across the group where relevant.
Financial APMs should not be considered as a substitute for measures of performance in accordance with the IFRS.
EBITDA: is defined as earnings before interest, tax and depreciation and corresponds to operating profit/(loss) excluding depreciation and impairments.
EBITDA is included as a supplemental disclosure and a key financial figure because management believes the measure provides useful information to identify and analyze the group's operational performance, ability to fund capital and provides a helpful measure for comparing its operational performance with other companies.
EBIDTA is presented and reconciled to pre-tax profit (loss) on a separate line in note 4 segments.
EBITDA margin: is defined as EBITDA divided by total operating income.
EBIT: is defined as earnings before interest and tax and corresponds to operating profit/(loss).
EBIT margin: is defined as EBIT divided by total operating income.
Equity ratio: is defined as total equity divided by total assets.
Organic growth: shows like-for-like revenue growth for the group and is defined as the group's reported change in operating revenues adjusted for effects of acquisitions of companies and mergers. In the calculation of organic growth, acquired companies and effect from mergers will be excluded 12 months after the transaction date.
Organic growth illustrates the group's ability to capitalize on the emerging green hydrogen market as well as being innovative in developing new and improved products from its existing business.
Order backlog: is defined as firm contracts/ purchase orders received from customers where revenue is yet to be recognized.
Title: Nel ASA
Published date: 08.05.2019
[email protected] +47 23 24 89 50
Karenslyst allé20, PB 199 Skøyen, 0212 Oslo, Norway
The publication can be downloaded on nelhydrogen.com
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