Hexagon Composites — Earnings Release 2016

Feb 22, 2017

Hexagon Composites ASA: Results for the fourth quarter 2016

Hexagon Composites ASA: Results for the fourth quarter 2016

In the fourth quarter 2016 Hexagon Composites generated NOK 347.1 (371.4)

million in operating income and made an operating profit before depreciation

(EBITDA) of NOK 314.7 (40.9) million. Operating profit (EBIT) was NOK 288.7

(18.6) million and profit/loss before tax came to NOK 304.9 (14.7) million. The

results include a one-off gain of NOK 348 million, with corresponding tax

provision charges of NOK 122 million, recognized as a result of the Agility Fuel

Solutions ("Agility") transaction executed at the start of the quarter. The

results also include one-off costs and movement in accruals contained to the

quarter of approximately NOK 46 million.

The financial statements for the fourth quarter 2016 include the impact of

deconsolidating the previous Medium and Heavy-Duty CNG Automotive business unit

results and instead accounting for Hexagon Composites' fifty-percent share of

Agility results under the equity method for the first time. In addition, the

fully consolidated financial results of the acquired xperion Energy &

Environment ("xperion") and related group subsidiaries for the whole quarter is

included for the first time. There are no restatements to previously reported

figures as a result of the transactions.

The main impact to profit & loss is lower underlying revenue, EBITDA and EBIT

levels versus immediately before the transaction, whereas the one-off gain as a

result of the Agility transaction increases EBITDA and EBIT levels. The one-off

gain is booked within EBITDA with a corresponding provision for deferred tax

charges booked in the tax cost line.

The main impacts to the statement of financial position are materially higher

total assets after recognition of the relevant investment value of both

transactions, an inclusion of the earn-out provision forming part of the booked

investment cost of the xperion acquisition and increased equity from recognition

of the one-off gain from the Agility transaction.

Operating results in the fourth quarter, aside from the above mentioned effects,

were impacted positively by a 19% growth in revenues within the Low-Pressure

segment versus the same period last year. Despite strong sales volumes of Mobile

Pipeline(®) in the quarter, profitability within the High-Pressure segment was

hampered by one-off items, indirect impacts of M&A activities and movements in

accruals totaling NOK 26 million, as well as the dilutive impacts of the

Hydrogen business unit which is now in an early growth phase. Integration

synergies from the acquisition of xperion have not yet been realized in the

fourth quarter. However, the High-Pressure segment is expected to benefit from

such synergies in 2017.

Key developments

* Closing of Agility Fuel Solutions merger

* Acquisition of xperion Energy & Environment

* Strong Mobile Pipeline(®) sales driven by large order deliveries

* Large order to North American oil and gas industry customer for delivery

mainly in first quarter 2017

* Hexagon Ragasco entered into strategic partnership with customers in

Bangladesh and Chile

* Hexagon Ragasco LPG order to Qatar with a total value of NOK 121 million

* Letter of Intent with Nel ASA and PowerCell Sweden AB to establish a JV to

pursue hydrogen opportunities

For the year 2016, Group operating income decreased to NOK 1,220.5 (1,443.9)

million. Operating profit before depreciation (EBITDA) was NOK 374.9 (100.1)

million. Operating profit (EBIT) was NOK 299.3 (37.5) million. Profit before tax

for continuing operations was NOK 302.3 (0.3) million.

The lower revenues were driven principally by lower volumes of Mobile Pipeline®,

US Heavy-Duty truck and Rest-of-the-world transit bus during the first three

quarters of 2016. Profitability was negatively impacted by one-off items,

movements in accruals and M&A related costs totaling approximately NOK 46

million, while positively impacted by the recognition of the gain on the Agility

transaction.

For more information:

Jon Erik Engeset, CEO, Hexagon Composites ASA

Telephone: +47 916 30 550 | jon.erik.engeset@hexagon.no

David Bandele, CFO, Hexagon Composites ASA

Telephone: +47 920 91 483 | david.bandele@hexagon.no

Solveig D Saether, Communication Manager, Hexagon Composites ASA

Telephone: +47 906 34 977 | solveig.saether@hexagon.no

About Hexagon Composites ASA

Hexagon Composites ASA is a publicly listed company with its headquarters in

Aalesund, Norway. The Group is a leading global supplier of composite pressure

cylinders and systems for storage and transportation of various gases.