Hexagon Composites — Interim / Quarterly Report 2017

May 10, 2017

DISCLAIMER AND IMPORTANT NOTICE

This company presentation (the "Presentation") has been prepared by Hexagon Composites ASA ("Hexagon" or the "Company"). The Presentation has not been reviewed or registered with, or approved by, any public authority, stock exchange or regulated market place. The Company makes no representation or warranty (whether express or implied) as to the correctness or completeness of the information contained herein, and neither the Company nor any of its subsidiaries, directors, employees or advisors assume any liability connected to the Presentation and/or the statements set out herein. This presentation is not and does not purport to be complete in any way. The information included in this Presentation may contain certain forward-looking statements relating to the business, financial performance and results of the Company and/or the industry in which it operates. Forward-looking statements concern future circumstances and results and other statements that are not historical facts, sometimes identified by the words "believes", expects", "predicts", "intends", "projects", "plans", "estimates", "aims", "foresees", "anticipates", "targets", and similar expressions. The forwardlooking statements contained in this Presentation, including assumptions, opinions and views of the Company or cited from third party sources are solely opinions and forecasts which are subject to risks, uncertainties and other factors that may cause actual events to differ materially from any anticipated development. None of the Company or its advisors or any of their parent or subsidiary undertakings or any such person's affiliates, officers or employees provides any assurance that the assumptions underlying such forward-looking statements are free from errors nor does any of them accept any responsibility for the future accuracy of the opinions expressed in this Presentation or the actual occurrence of the forecasted developments. The Company and its advisors assume no obligation to update any forwardlooking statements or to conform these forward-looking statements to the Company's actual results. Investors are advised, however, to inform themselves about any further public disclosures made by the Company, such as filings made with the Oslo Stock Exchange or press releases. This Presentation has been prepared for information purposes only. This Presentation does not constitute any solicitation for any offer to purchase or subscribe any securities and is not an offer or invitation to sell or issue securities for sale in any jurisdiction, including the United States. Distribution of the Presentation in or into any jurisdiction where such distribution may be unlawful, is prohibited. This Presentation speaks as of 10 May 2017, and there may have been changes in matters which affect the Company subsequent to the date of this Presentation. Neither the issue nor delivery of this Presentation shall under any circumstance create any implication that the information contained herein is correct as of any time subsequent to the date hereof or that the affairs of the Company have not since changed, and the Company does not intend, and does not assume any obligation, to update or correct any information included in this Presentation. This Presentation is subject to Norwegian law, and any dispute arising in respect of this Presentation is subject to the exclusive jurisdiction of Norwegian courts with Oslo City Court as exclusive venue. By receiving this Presentation, you accept to be bound by the terms above.

AGENDA

• •Group highlights
• •Group financials & segment overview
• •Outlook
• •Q & A

www.hexagon.no

4

HIGHLIGHTS FROM Q1 2017

• • Growth of 42% in revenue in the LPG segment versus Q1 2016
• Record high sales for the quarter
• First delivery of Viseo cylinder design
• • Solid Mobile Pipeline® sales in the quarter Deliveries to North American oil & gas industry
• • Substantial order received for Hydrogen gas transportation in Germany
• • Cash-EBITDA generation on-track within Agility Fuel Solutions
• Introduced Blue iQ™ natural gas fuel product

1ST QUARTER 2015 1ST QUARTER 2017 FINANCIALS

FINANCIAL HIGHLIGHTS Q1 2017

	Q 1 2 0 1 6			Q 1 2 0 1 7
G ke f ig ro up y ur es	Ac l tu a	C N G no w	Pr fo Ex o rm a	Pr fo Ex o rm a	io	Ac l tu a
O N K i l l io m n	Re te d p or	d t ca rv e ou	io xp er n	io xp er n	Xp er n is i t io	Re te d p or
	ba is s	to Ag i l i ty J V	is i t io ac q u n	is i t io ac q u n	ac q n u	ba is s
O t in In p er a g co m e	2 9 2	( 1 2 8 )	1 6 3	2 9 6	5 0	3 4 6
E B I T D A	1 9	( 1 7 )	2	4 1	( 6 )	3 5
Ne f i / ( lo ) t p t ro ss	0	n. a.	n. a.	n. a.	n. a.	7

• • Key factors impacting EBITDA this quarter:
• Strong LPG performance
• Solid Mobile Pipeline® Americas sales
• Stronger Hydrogen sales
• Relatively weak Light-Duty Vehicles performance
• • Steady Agility contribution but weighed down by non-cash accounting entries
• • Negative working capital movements
• though good liquidity maintained through the cycle

*New business combination reporting

Q1 2017 GROUP INCOME STATEMENT

	T H R E E	F U Y E A R L L
N O K M I L L I O N	3 1. 0 3. 2 0 1 7	3 1. 0 3. 2 0 1 6	V i a r a n c e	2 0 1 6
O i I t p e r a n g n c o m e	3 4 6, 2	2 9 1, 6	5 4, 6	1 2 2 0, 5
O t i p e r a n g e x p e n s e s	( 3 1 1, 1 )	( 2 3, 0 ) 7	( ) 3 8, 1	( 1 1 9 3, 8 )
E i l G i t x c e p o n a a n s	0, 0	0, 0	0, 0	3 4 8, 2
E B I T D A	3 1 5,	1 8, 6	1 6, 4	3 4, 9 7
D i i i b l t t e p r e c a o n o n a n g e s	( 1 3, 3 )	( 1 4, 6 )	1, 3	( 9, 8 ) 5
A i i d i i t t t m o r s a o n a n m p a r m e n	( 1 ) 5,	( 0, 8 )	( ) 4, 3	( 1 8 ) 5,
E B I T	1 6, 6	3, 2	1 3, 4	2 9 9, 3
S h f f i / ( l ) f i t t a r e o p r o o s s r o m a s s o c a e s	( 1, 2 )	0, 0	( 1, 2 )	2, 1
A i i f i i i b l t t t t m o r s a o n o a s s o c a e s n a n g e s	( 3, ) 5	0, 0	( 3, ) 5	( 3, 6 )
O h f i i l i ( ) t t t e r n a n c a e m s n e	( ) 5, 7	( 8 ) 5,	0, 1	1 4, 1
P f i / ( l ) b f t t r o o s s e o r e a x	6, 3	( 2, 6 )	8, 8	3 1 1, 9
T a x e x p e n s e	1, 0	3, 0	( ) 2, 0	( 1 0 3, 6 )
P f i / ( l ) f t t t r o o s s a e r a x	7, 2	0, 4	6, 8	2 0 8, 3
E B I T D A %	1 0, 1 %	6, 4 %		3 0, 7 %
E B I T %	4, 8 %	1, 1 %		2 4, % 5
O / ( O S S ) N E T P R F I T L %	2, 1 %	0, 1 %		1 1 % 7,

*New business combination reporting

REVENUE WALK Q1 2017

Strong underlying growth in both High and Low-Pressure segments

EBITDA WALK Q1 2017

Strong underlying EBITDA growth with focus on High-Pressure segment

SEGMENT SHARES Q1 2017

BEFORE GROUP ELIMINATIONS*

SHARE OF OPERATING INCOME

www.hexagon.no

Q1: HIGH-PRESSURE CYLINDERS

• • Solid Mobile Pipeline® sales
• Deliveries primarily to oil & gas customer
• • Hydrogen is in early growth phase and typically dilutive to results
• However, solid product sales in quarter drove close to breakeven EBITDA effect this quarter
• • Light-duty vehicles impacted by product acceptance delays
• •Improving profitability is still primary focus for segment

N O K M I L L I O N	S C S U M M A R Y F I N A N I A L
	Q 1 2 0 1 7	Q 1 2 0 1 6	Va ia r nc e
O t in In p er a g co m e	1 7 5, 4	1 7 2, 7	2, 7
Op t ing er a e xp en se s	( 1 7 7, 7 )	( 1 7 9, 6 )	1, 9
E B I T D A	( 2, 3 )	( 6, 9 )	4, 6
De ia io i b les t ta p re c n on ng	( 9, 0 )	( 9, 8 )	0, 8
Am t isa t io d im irm t or n an p a en	( 5, 1 )	( 0, 8 )	( 4, 3 )
E B I T	( 1 6, 4 )	( 1 ) 7, 5	1, 1

Q1: AGILITY FUEL SOLUTIONS

• •Revenues USD 40.0 million
• • Reported EBITDA of USD 1.4 million; "Adjusted" EBITDA of USD 3.5 million
• •Net cash USD 1.7 million
• • Strong focus on COGS, plant footprint optimization and vertical synergies has driven reasonable profit levels in stagnant market
• • Results are recorded below the line
• This includes significant non-cash accounting impacts

Q1: AGILITY FINANCIAL EFFECTS FOR GROUP REPORTING

• • Positive operating results from Agility are then diluted by the following:
• ‒Share-based compensation (non-cash) – USD 1.3 million*
• Ordinary depreciation USD 2.0 million
• Interest cost USD 0.4 million
• • Our 50% share of profit/(loss) in Q1 = NOK -4.7 million (-11 million in previous quarter Q4 2016) of which:
• -1.2 m is from operations (-7.5 m in Q4 2016)
• -3.5 m is depreciation from related intangible assets
• •Tax effects are reported within the Group tax cost line
• • Investment value recorded in the Balance Sheet = NOK 971 million (976 million in Q4 2016)

Q1: LOW-PRESSURE CYLINDERS

• •42% year-over-year sales growth
• • Deliveries primarily to traditional European markets and Qatar in the quarter
• •Strong Order book as at end of quarter

N O K M I I O N L L	S U M M A R Y F I N A N C I A L S
	Q 1 2 0 1 7	Q 1 2 0 1 6	Va ia r nc e
O t in In p er a g co m e	1 7 5, 4	1 2 1, 8	3, 6 5
Op ing t er a e xp en se s	( 1 3 3 ) 5,	( 9 8 ) 5,	( ) 3 9, 5
E B I T D A	4 0, 1	2 6, 0	1 4, 1
De ia ion i b les t ta p re c o n ng	( 4, 1 )	( 4, 6 )	0, 5
Am t isa t ion d im irm t or a n p a en	0, 0	0, 0	0, 0
E B I T	3 6, 0	2 1, 4	1 4, 6

FINANCIAL POSITION V PREVIOUS QUARTER

	Ba lan he t p ce s e er
N O K M I L L I O N	3 1. 0 3. 2 0 1 7	3 1. 1 2. 2 0 1 6	C ha ng e
In i b le ta ts ng as se	4 9, 0 5	4 8, 5 5	0, 5
Ta i b le f ixe d ts ng as se	2 5 4, 9	2 6 0, 6	( 6 ) 5,
Inv tm ts in J Vs d ia te es en a n as so c s	9 7 0, 8	9 7 6, 0	( ) 5, 2
O t he t a ts r n on -c ur re n ss e	2, 4	2, 6	( ) 0, 2
To l No As ta t ts n- cu rr en se	1 7 7 7, 1	1 7 8 7, 6	( ) 1 0, 5
Inv ies to en r	2 6 4, 4	2 2 7, 5	3 6, 9
Re iva b les ce	2 3 5, 0	2 0 1, 7	3 3, 3
Ba k de i ts, h d im i lar n p os c as an s	1 3 5, 2	2 0 8, 1	( ) 7 2, 9
To l Cu As ta t ts rr en se	6 3 4, 6	6 3 2 7,	( ) 2, 6
To ta l As ts se	2 4 1 1, 7	2 4 2 4, 8	( 1 3, 1 )
To ta l Eq i ty u	1 3 4 4, 9	1 3 3 3, 2	1 1, 7
Lo -te in te t- be ing de b t ng rm re s ar	4 3 2, 8	4 3 1, 7	1, 1
O t he t l ia b i l i t ies r n on -c ur re n	3 0 0, 0	3 0 3 5,	( ) 5, 2
To ta l No t L ia b i l i t ies n- cu rr en	7 3 2, 9	7 3 7, 0	( 4, 1 )
S ho in be ing de b t- te te t- t r rm re s ar	1 4, 2	1 4, 1	0, 1
O t he t l ia b i l i t ies r c ur re n	3 1 9, 9	3 4 0, 6	( ) 2 0, 8
To l Cu ia b i l i ies ta t L t rr en	3 3 4, 0	3 4, 5 7	( ) 2 0, 7
To ta l L ia b i l i t ies	1 0 6 6, 9	1 0 9 1, 7	( 2 4, 8 )
To ta l Eq i ty d L ia b i l i t ies u a n	2 4 1 1, 7	2 4 2 4, 8	( 1 3, 1 )

• • Working capital increases driven by:
• ̵ Inventory build-up for conversion in Q3
• Effect of expansion in receivables driven by record LPG sales
• ̵ Reduced payables and deferred income in USA
• • Cash therefore impacted negatively in the quarter
• • Otherwise stable movements in balance sheet

SOLID BALANCE SHEET

GROUP CASH MOVEMENTS Q1'17

Negative working capital effects reduce cash levels; mainly cyclical

MOBILE PIPELINE®

US ONSHORE RIG COUNT CONTINUES THE UPWARD TREND

Source: Baker Hughes (Data per 28 April 2017)

www.hexagon.no

MOBILE PIPELINE®

• • The project funnel remains sound
• ‒North American oil & gas activity strong driver
• ‒ Most opportunities expected to materialize in 2nd half of 2017
• • Some risk that Q2 will be softer than Q1, but capacity in the quarter will be fully utilized for later deliveries
• ‒Q3 and Q4 expected to be healthy
• • Long-term agreement with Certarus
• TITAN® order worth MUSD 20.6 (around MNOK 177)
• • Ready to meet aggressive competition in North America
• Major cost reductions accomplished
• Continuous product development
• Unmatched after sales service
• Leasing and other financial support
  • • Global footprint enables efficient residual value management

HYDROGEN

• •Continued substantial growth
• • Focus widening from Light-Duty Vehicles to numerous other segments
• Ground storage
• Distribution
• Heavy-Duty Trucks & Buses
• Rail
• Maritime
• • Infrastructure development required to enable growth in transportation applications

MARITIME APPLICATIONS EMERGING AS A MAJOR OPPORTUNITY NORWAY TAKING THE LEAD

Source: input from NTNU

Photo: GKP7H2/Brødrene Aa

www.hexagon.no

JOINT VENTURE WITH NEL AND POWERCELLTAILOR-MADE TO ADDRESS MARITIME OPPORTUNITIES

The JV will combine specialized H2 know-how with integration capabilities to support complex configurations

LIGHT-DUTY VEHICLES CNG

• "Its short-term availability makes natural gas an important component of our overall strategy for eco-friendly mobility of the future."

Dr. Ulrich Eichhorn, Head of R&D at Volkswagen

• • Volkswagen signed LoI with among others E.ON, TOTAL and Gazprom to promote CNG mobility
• Increase CNG vehicle fleet in Germany tenfold to 1 million by 2025
• Expand filling station network to 2,000 locations

"Gas-fuelled mobility is environmental protection that is immediately available." Volkswagen Group

CNG ENVIRONMENTAL VALUE PROPOSITION ENHANCED BY BIOGAS AND "E-GAS"

Source: EU Fuel Quality Directive; EU Renewable Energy Directive; California Air Resources Board; Audi

www.hexagon.no

LIGHT-DUTY VEHICLES CNG

• • Renewed interest in CNG as important component in clean energy mix
• Electrification alone does not solve the CO2 challenge
• •Healthy underlying growth
• • Q2 will be negatively impacted by product acceptance delay from one LDV program
• Relaunch planned for early Q3
• Much of the lost volume is expected to be recovered in second half of 2017

AGILITY FUEL SOLUTIONS

• • Expansion into new markets and geographies
• • Manufacturing optimization initiatives expected to improve profitability and competitiveness
• • Established new Propane business unit
• Focus on the global LPG commercial vehicle market
• Broader portfolio of clean fuel solutions
• Leveraging capabilities, technologies and footprint

LPG COMPARED TO CNG

• • Propane & CNG are complimentary fuels
• ‒ CNG core in heavy-duty class 8 trucks and urban buses
• Propane core in medium-duty class 4 & 5 school buses, step vans and delivery trucks
• • LPG offers several advantages over conventional fuels within the medium-duty markets:
• Lower fuel price for fleets
• Less expensive fueling stations
• Nationwide availability
• Low cost conversions

Medium-duty vehicles and industrial LPG applications

LPG

• • Q2 is sold out
• ‒ Order backlog for 2nd half of 2017 at satisfactory level
• • New drive in America
• Introduction of the cylinder by regional North American LPG marketers in Q2
• Targeting the BBQ market
• • Continued strong growth from European core markets and customers

Lipigas cylinder with new branding features

TUNED FOR FUTURE GROWTH

75 million NOK investment program to Reduced cycle time further enhance manufacturing efficiency and product improvements

• • New machineries and tools for further reduction of cycle time
• Increase production capacity by 200.000 cylinders by mid 2019
• • Meet increasing global demand and specific design requirements
• Enhanced product properties through branding, design and features
• • Investment and market program expected to improve capacity utilization, profitability and competitiveness

OUTLOOK – SUMMARY

• •Positive Mobile Pipeline® outlook
• • Sound market growth expected for Light-Duty Vehicles in 2017
• Product acceptance delays from one program
• •Low-Pressure LPG remains very strong
• •Significant Hydrogen growth continues
• • Relatively flat short term market for Agility but better market signals towards end of 2017
• • Integration of xperion according to plan – harvesting of synergies has begun
• Growth and profit management main priorities short term

QUESTIONS PLEASE

Jon Erik Engeset, CEO David Bandele, CFO