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Hexagon Composites Interim / Quarterly Report 2022
3619_rns_2022-11-03_63cbab64-b916-443f-aee9-469f690aee42.pdf
Interim / Quarterly Report
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A word from the CEO
Dear Shareholders,
Demand for our products and services remains strong. In the third quarter 2022, Group revenues exceeded NOK 1.2 billion, up 42% year-over-year. These results are backed by solid regulatory support for biomethane (renewable natural gas, RNG) and hydrogen in both Europe and the U.S. – and further growth in the global alternative fuels market.
We continue to have high production and sales activities year-to-date with significant new contracts for hydrogen distribution and renewable natural gas fuel systems and expect to meet our 2022 revenue target.
Challenging operating conditions
However, the high costs of production due to the supply chain disruptions and input price increases have impacted our profitability.
We address the cost increases through productivity programs, as well as step by step pass through of pricing. However, the mitigating effects are lagging the cost increases. Some raw material prices have come down from their peak, and we expect to see these affect our component input prices in two to three quarters.
Biomethane/Renewable Natural Gas (RNG) retains regulatory support
The biggest climate investment in U.S. history, the U.S. Inflation Reduction Act, was signed into law on 16 August 2022. This USD 370 billion investment in energy and climate change in the U.S. includes a series of tax incentives¹ that are designed to drive both supply and demand in the market for clean alternative fuels
Meanwhile, in Europe, under the umbrella of the REPower EU initiative, the European Commission and industry leaders (European Biogas Association) launched the Biomethane Industry Partnership (BIP) in September. The BIP establishes a formal link between the REPower EU biomethane target and the Transport sector. Hexagon became an active member of the European Biogas Association earlier this year and is engaged in the BIP Transport Committee.
A recent U.S./European joint study² confirmed that biomethane offers the biggest opportunity to reduce well-to-wheel greenhouse gas emissions - and is the only transport fuel with a negative carbon intensity.
Revenue growth across businesses
Hexagon Agility demonstrated 25% growth year-over-year in the third quarter 2022. It continues to benefit from high underlying demand driven by heavy- and medium-duty truck segment and Mobile Pipeline's compressed (renewable) natural gas (CNG/RNG) distribution solutions.
While the third quarter is seasonally a slower quarter for Hexagon Ragasco, sales volumes this quarter increased 26% compared to the third quarter last year.
Hexagon Purus continued to deliver on business plan, more than doubling its revenues in the third quarter 2022 compared to third quarter 2021.
Hexagon Digital Wave delivered 67% growth year-over-year for the first nine months. The demand for the products and services from this high-tech business arm is driven by the global market growth for compressed gases.
Looking ahead
The governmental commitments to decarbonization of transportation in the U.S. and Europe, as well as in other leading regions including China, will drive a strongly growing demand for Hexagon's products and services in the years ahead. Effectuated price increases and lower input prices in some categories will contribute to improved margins, while the geopolitical uncertainties, energy crisis in Europe, continued high inflation and risk of recession make near term forecasting challenging. On balance we prepare for modest growth in 2023 followed by renewed strong growth from 2024 onwards.
Best regards,
Jon Erik Engeset
President & CEO, Hexagon Group
Highlights Q3 2022
- Hexagon Group revenues with 42 % growth yearover-year supported by strong underlying growth of 31 % and significant FX tailwinds
- High costs of production due to supply chain disruptions and input price increases impacted profitability
- Significant new orders for Mobile Pipeline®, Hydrogen Distribution and Mobile Refuelling
- Hexagon Digital Wave continuing its strong growth path
Key figures
| (NOK millions) | Q3 2022 | Q3 2021 | YTD 2022 | YTD 2021 |
|---|---|---|---|---|
| Hexagon Agility | ||||
| Revenue | 930 | 742 | 2 479 | 1 805 |
| EBITDA | 45 | 98 | 160 | 199 |
| EBIT | 0 | 63 | 33 | 84 |
| Hexagon Ragasco | ||||
| Revenue | 119 | 86 | 473 | 407 |
| EBITDA | 8 | 4 | 70 | 72 |
| EBIT | -2 | -5 | 42 | 46 |
| Hexagon Digital Wave | ||||
| Revenue | 30 | 19 | 70 | 42 |
| EBITDA | 1 | 0 | -1 | -8 |
| EBIT | -1 | -1 | -5 | -11 |
| Corporate/eliminations1) | ||||
| Revenue | 2 | 2 | 5 | 9 |
| EBITDA | 14 | 8 | 13 | 5 |
| EBIT | 10 | 4 | -1 | -8 |
| Hexagon excl. Hexagon Purus | ||||
| Revenue | 1 080 | 848 | 3 027 | 2 264 |
| EBITDA | 68 | 110 | 242 | 269 |
| EBIT | 7 | 61 | 70 | 111 |
| 2) Hexagon Purus |
||||
| Revenue | 222 | 103 | 592 | 249 |
| EBITDA | -92 | -80 | -297 | -211 |
| EBIT | -116 | -96 | -366 | -245 |
| Eliminations 3) | ||||
| Revenue | -59 | -76 | -180 | -157 |
| EBITDA | 0 | 0 | 1 | -1 |
| EBIT | 0 | 0 | 1 | 0 |
| Hexagon Group | ||||
| Revenue | 1 243 | 875 | 3 439 | 2 356 |
| EBITDA | -24 | 30 | -54 | 58 |
| EBIT | -109 | -35 | -296 | -134 |
1) Corporate/eliminations refers to holding- and non-operating entities within the Hexagon excl. Hexagon Purus and eliminations within the Hexagon excl. Hexagon Purus
2) Hexagon Purus is a separate segment within the Hexagon Group and is similar to the Hexagon Purus (ticker HPUR) listed on the Euronext Growth
3) Eliminations refers to eliminations between entities within Hexagon excl. Purus and entities within Hexagon Purus
Financial summary
Hexagon Group excluding Hexagon Purus
In the third quarter of 2022, Hexagon (excluding Hexagon Purus) generated NOK 1 080 (848) million in revenues driven by a continued strong demand for Hexagon's products and solutions, coupled with some price increase effects and favorable FX tailwinds of approximately NOK 97 million. EBITDA for the quarter came in at NOK 68 (110) million, representing an EBITDA margin of 6 % (13 %), resulting from significantly higher costs of production due to inflation and supply chain challenges, while FX effects are not significant at EBITDA level. Although price increases have been implemented in all business areas, the revenue effect of these are not fully captured in certain segments, especially in Hexagon Agility, due to long-term contract structures and a longer order-tosales process. Hexagon Ragasco experienced a seasonally low volume quarter, however improving year-over-year profitability, while Hexagon Digital Wave delivered strong volume growth.
Year-to-date, Hexagon (excluding Hexagon Purus) generated NOK 3 027 (2 264) million in revenues, representing 34 % growth driven mostly by similar factors as for the third quarter. Adjusted for FX tailwinds of approximately NOK 171 million year-to-date, revenues grew by 26% year-over-year. EBITDA year-to-date came in at NOK 242 (269) million, representing an EBITDA margin of 8 % (12 %).
Hexagon Agility entered 2022 with a record-high orderbook and strong growth in the heavy-and medium (HD) duty business as well as the Mobile Pipeline distribution business. Revenues year-to-date amounted to NOK 2 479 million (1 805) million. Several price increases are put into effect during 2022, but due to the significant order backlog and the longer order-to-sales timeframe in the HD business, these price increases will not fully materialize before Q1 2023.
Hexagon Ragasco year-to-date revenues amounted to NOK 473 (407) million, representing a positive 16% growth. Hexagon Ragasco has successfully managed to pass on and match incurred inflationary cost prices to its customers, which is also the main driver of the growth in topline. Sales volumes were in line with last year's levels, where volumes in Europe and the Middle East were notably higher, offset by lower sales in Asia Pacific and Scandinavia. There has also been a distinct pick-up in volumes to
North America, driven in part by higher demand for Hexagon Ragasco cylinders in forklift truck applications.
Hexagon Digital Wave continued its positive growth path and reported revenues of NOK 70 (42) million for the first nine months, driven by the growing Compressed Natural Gas (CNG)/Renewable Natural Gas (RNG) and industrial gas market pushing demand for Hexagon Digital Wave's services. New applications and markets are opening as the technology continues to be trialed in various sectors.
Hexagon Purus
In the third quarter of 2022, Hexagon Purus generated NOK 222 (103) million in revenues and recorded an EBITDA of NOK -92 (-80) million. Revenue growth was driven primarily by continued strength in the hydrogen distribution segment. The strong momentum in the zero emission market sectors targeted by Hexagon Purus, and the Company's accelerated business plan execution, support continued investments in personnel and infrastructure, entailing negative profitability. Hexagon Purus remains fully consolidated in the Hexagon Group accounts, with Hexagon currently retaining a 73% ownership.
Hexagon Group including Hexagon Purus
In the third quarter of 2022, Hexagon Group including Hexagon Purus, generated NOK 1 243 (875) million in revenues and an EBITDA of NOK -24 (30) million. The negative EBITDA result in the Hexagon Group is driven by Hexagon Purus.
Due to the consolidation of Hexagon Purus, Hexagon Group recorded a net loss after tax of NOK -81 (-65) million in the quarter. Profit/loss from associated companies amounted to NOK 60 (0) million and includes a non-cash accounting gain of NOK 63 million resulting from a reclassification and fair value recognition of the shares in Norwegian Hydrogen following a capital raise in the Company, offset by NOK -3 (0) in share of profits from associates.
Other financial items were NOK -28 (-15) million driven by net interest expenses of NOK -23 (-19) million, foreign exchange fluctuation effects of NOK -21 (9) million, unrealized gain/loss on derivatives of NOK 16 (-5) million and other financial expenses of NOK -1 (0) million.
Tax charges were NOK 4 (15) million. The tax charges do not include any credits for carried-forward tax losses within Hexagon Purus as conditions for deferred tax asset recognition are, prudently, not yet deemed to be met.
At quarter-end, the Group balance sheet amounted to NOK 8 100 (6 138) million. The increase in total assets year-over-year is to a large extent explained by the significant currency translation effects due to the depreciation in value of NOK versus USD, together with the acquisition of Wystrach, and private placement in Hexagon Purus. In addition, there is an increased level of working capital due to growth and pandemicrelated impact to global supply chains also heavily inflated by the currency effects. The Group's equity ratio decreased from 56% to 46% quarter-over-quarter due to the above factors as well as the negative net profit contribution from Hexagon Purus in the period.
Key developments during third quarter
New orders for hydrogen distribution systems for Hexagon Purus
- EUR 11.3 million order to deliver high-performance hydrogen distribution systems to a leading global industrial gas company
- EUR 5.2 million order to deliver hydrogen distribution systems to an industrial gas company in Germany
- Second follow-on order of EUR 13 million for hydrogen distribution systems and mobile refueling stations from ZE PAK Group
Closing on Cryoshelter investment
On August 1, Hexagon closed on the transaction to acquire 40 % of the Austrian-based cryogenic tank technology company, Cryoshelter. Upon close, Cryoshelter was demerged into two companies, Cryoshelter BioLNG and Cryoshelter LH2, where Hexagon Composites ASA made an initial investment of EUR 2.4 million in the liquid natural gas business Cryoshelter BioLNG, and where Hexagon Purus ASA made an initial investment of EUR 3.4 million in the liquid hydrogen business Cryoshelter LH2. Both entities are accounted for as associated companies in the Group accounts as of 1 August 2022. Hexagon is committed to support Cryoshelter in the development and commercialization of its disruptive technology both financially and strategically, and the
Group is pleased to also have secured options to acquire remaining shares of both entities over the next 3-10 years.
Effects of the war in Ukraine
Hexagon does not have operations or employees in Ukraine, but it does have a sales and distribution subsidiary for its LPG products in Russia. Hexagon has stopped all product shipments to Russia to ensure compliance with international sanctions. The Russian sales entity represented 0.5% of Group revenues in 2021 and the Company does not assess there to be any direct significant effects or risks to its net assets in Russia.
Key developments after third quarter
Revised full year 2022 guidance
On 14 October, Hexagon published revised financial guidance for 2022 for Hexagon excluding Purus. The revenues are expected to exceed the guided target of NOK 3.7 to 3.9 billion as they are mainly secured by 2022 backlog. Due to continued high costs of energy, materials, and components which Hexagon is unable to mitigate in the short term, the company has accordingly adjusted its EBITDA guidance for full year 2022 from approximately NOK 400 million to approximately NOK 325 million.
New contracts
- Hexagon Purus entered into framework agreement to deliver hydrogen distribution systems in Europe for EUR 9.7 million
- Hexagon Agility received orders from a major heavy-duty fleet in North America of USD 27.1 million
- Hexagon Digital Wave signed a long-term agreement with Certarus for Modal Acoustic Emission technology to requalify Type-4 cylinders
- Hexagon Purus selected by CaetanoBus as preferred supplier of high-pressure hydrogen fuel systems for serially produced fuel cell transit buses. The estimated potential value over the lifetime of the frame agreement is approximately EUR 35 million
- Hexagon Agility received an order from Supergas Natural Ltd for Mobile Pipeline® modules of EUR 4.8 million
Segment results
Hexagon Agility
Hexagon Agility is a global provider of clean fuel solutions for commercial and passenger vehicles and gas transportation solutions.
Hexagon Agility recorded combined revenues for the third quarter of NOK 930 (742) million, representing a 25 % growth year-over-year inclusive of favorable currency effects of approximately NOK 93 million. Adjusted for FX, the underlying growth was 13%, driven by a continued positive development in the refuse truck segment and for Mobile Pipeline Compressed Natural Gas (CNG)/Renewable Natural Gas (RNG) distribution solutions.
EBITDA for the third quarter came in at NOK 45 (98) million, representing an EBITDA margin of 5 % compared to 13 % in the same period last year. The weakened profitability is explained by exceptionally high costs of production due to inflation with lagging sales price increases, a weaker light-duty vehicle market, in addition to some unfavorable mix effects from higher volumes in medium-duty versus heavy-duty vehicles.
Revenues year-to-date amounted to NOK 2 479 (1 805) million. Although FX tailwinds represents approximately NOK 166 million year-to-date, the underlying growth shows a strong 28 %, which is largely volume driven. Price increases have been implemented and started to mitigate the inflationary cost prices in the Mobile Pipeline business in the second half of 2022 but the main effect of price increases in the medium- and heavy-duty segment will not materialize before first quarter 2023. Mobile Pipeline has benefitted primarily from higher volumes so far in 2022, resulting in almost a doubling of revenues year-over-year, from NOK 286 million last year to NOK 549 million this year.
EBITDA year-to-date for Hexagon Agility came in at NOK 160 (199) million, representing an EBITDA margin of 6 % (11%).
70
Hexagon Ragasco
Hexagon Ragasco is the world's leading manufacturer of composite liquified petroleum gas (LPG) cylinders for leisure, household, and industrial applications.
Hexagon Ragasco recorded revenues of NOK 119 (86) million and an EBITDA of NOK 8 (4) million in the third quarter. Q3 is a seasonally slower quarter for Hexagon Ragasco, however sales volumes were 26 % higher than the same period last year. Coupled with sales price increases effectuated so far this year, the business generated 39% growth in revenues compared to the same period last year. The positive revenue development also contributed to an improved EBITDA versus last year due to better utilization of fixed costs, despite high energy costs.
On a year-to-date basis, Hexagon Ragasco delivered revenues of NOK 473 (407) million and an EBITDA of NOK 70 (72) million. Revenue growth of 16 % is largely explained by sales price increases implemented in the first half of 2022, while volumes are flat year-over-year. Hexagon Ragasco has been able to pass on incurred inflationary cost prices to its customers, thereby protecting its margins in absolute terms. This, in combination with significantly higher electricity costs in Norway and supply chain challenges creating production inefficiencies, resulted in a lower EBITDA margin of 15 % year-to-date versus 18 % last year.
So far this year, Hexagon Ragasco has seen a positive development in sales volumes in Europe, the Middle East and North America compared to last year, in addition to several introductory orders from new customers in new markets. The positive development in sales for Forklift Truck applications in North America also continued throughout the third quarter, driven by an improved price competitiveness for composite cylinders versus aluminum. The positive sales development in certain markets were however, offset by reduced volume in the Asia Pacific and Scandinavia.
34 34 4 23 33 29 8 0 5 10 15 20 25 30 35 40 Q1 21 Q2 21 Q3 21 Q4 21 Q1 22 Q2 22 Q3 22 EBITDA (MNOK)
Hexagon Digital Wave
Hexagon Digital Wave offers innovative cylinder testing and monitoring technologies that reduce down -time and inspection costs while improving inspection accuracy.
Hexagon Digital Wave continued its positive trend in the third quarter and posted revenues of NOK 30 (19) million, generated by positive demand for Ultrasonic Emissions (UE) machines and Modal Acoustic Emissions (MAE) requalification services, which are the Company's key revenue sources. Despite continued operational investments and ramp -up in labor and fixed costs during the quarter, Hexagon Digital Wave generated another positive quarterly EBITDA, coming in at NOK 1 (0) million.
Year-to -date revenues in Hexagon Digital Wave came in at NOK 70 (42) million representing a growth of 67% year-over-year.
EBITDA year -to -date came in slightly negative at NOK -1 ( -8) million, due to positive volume and product margin effects being offset by higher costs of operational growth investments. The business is still in a ramp -up phase and significant operating investments have been absorbed to ensure accelerated development of key technology and retaining first -mover market share. Additional operating investments are still necessary to support further growth.
Hexagon Digital Wave is at the start of what is expected to be a significant growth phase, as Hexagon takes lead in digitalizing its industry.
Hexagon Purus
Hexagon Purus is a global leader in key technologies needed for zero emission mobility. The company is listed on Euronext Growth (HPUR.OL), with Hexagon retaining a 73.3 per cent ownership.
In the third quarter of 2022, Hexagon Purus generated NOK 222 (103) million in revenue and recorded operating profit before depreciation (EBITDA) of NOK -92 (- 80) million. Demand and order intake for hydrogen distribution systems has been very strong in 2022, contributing NOK 143 million in revenues in Q3. Prior to acquiring the Company in Q4 2021, Wystrach was a large external customer of Hexagon Purus, resulting in incomparable revenue figures this year versus last year.
EBITDA loss in the third quarter widened as expected in absolute terms. Higher personnel and other operating expenses due to operational investments and ramp -up in all operating areas explains the increased loss compared to last year.
During the year, Hexagon Purus signed a series of inaugural and follow -on orders for its hydrogen distribution systems, supporting a strong forecasted Q4 and continued strong momentum heading into 2023.
On a year -to -date basis Hexagon Purus generated NOK 592 (249) million in revenues. EBITDA year -to -date amounted to NOK -297 ( -211) million.
Please also refer to the separate third quarter 2022 Board of Directors Report for Hexagon Purus ASA published 1 November 2022.
Revenue (MNOK)
EBITDA (MNOK)
Outlook
Hexagon is focused on delivering near-zero- and zero emission energy solutions, supported by world-class manufacturing and digitalization, with the aim of enabling companies and other institutions to reach their net-zero ambitions. Together with clients and partners, the Company is finding new ways to make near-zero and zero emission energy solutions available and affordable.
The war in Ukraine continues to impact global supply chains. This combined with increases in input prices create challenging operating conditions. Hexagon continues to adapt to the changing environment. The company is closely monitoring and managing adverse effects to mitigate the margin pressure and expects to improve margins in 2023, barring any further unforeseen disruptions.
Hexagon continues to see healthy demand across its businesses. Further development in regulations and changes in industry dynamics are expected to significantly support additional long-term clean energy technology opportunities. The diversified portfolio and extensive industrial track record, provide a resilient platform for the future.
On the regulatory side, The REPowerEU Plan presented by the European Commission in March, aims to end Europe's dependence on Russian fossil fuels before 2030. The Plan will reduce dependence on Russian fossil fuels by fast-forwarding the clean energy transition and adapting industry and infrastructure to different energy sources and suppliers. According to the European Commission, additional investments of EUR 210 billion are needed between now and 2027, including EUR 37 billion for biomethane production, EUR 27 billion for hydrogen infrastructure and EUR 10 billion to import sufficient LNG and pipeline gas. In September, the European Commission and industry leaders, represented by the European Biogas Association, launched the Biomethane Industry Partnership (BIP). The BIP establishes a formal link between the REPower EU biomethane target and the Transport sector.
In the U.S., the biggest climate investment in its history, the U.S. Inflation Reduction Act, was signed into law on 16 August 2022. The Inflation Reduction Act introduced in July, aims to bring down costs and boosts energy supply, cutting Inflation and substantially reducing greenhouse gas emissions. This USD 370 billion investment in energy and climate change in the U.S. includes a series of tax incentives that are designed to drive both supply and demand in the market for clean fuels in the transportation sector. This includes clean heavy-duty vehicles, like school and transit buses and garbage trucks.
The U.S. and EU initiatives are expected to contribute to driving Hexagon's addressable markets to new levels.
Segments
For Hexagon Agility, demand remains healthy in the heavy and medium-duty and Mobile Pipeline CNG/RNG businesses. For the remainder of 2022, these businesses hold a strong orderbook and orders for 2023 are materializing. The demand is driven by increased adoption of clean fuels, sustainability regulations, subsidies, and growing consumer activism. The Transit bus segment in North America is expected to remain stable whilst the European bus segment, impacted by supply chain challenges and high European gas prices, is expected to be soft. The Refuse truck business is seeing growing demand with new orders. The Mobile Pipeline business continues to experience a strong market dominated by deliveries into the RNG segment, driven by lack of pipeline infrastructure combined with growing energy demands and environmental targets.
Hexagon Ragasco continues to experience high input costs for certain raw materials as well as energy and transportation costs. However, sales price increases effectuated earlier in the year are offsetting the impacts of higher material costs and additional prices rises are planned to absorb the exceptional energy costs. The demand for LPG products remains healthy with introductory orders from new customers in new markets.
Hexagon Digital Wave has secured key service agreements and long-term agreements and anticipates sustained positive revenue impacts from its cylinder testing and monitoring technology. The Modal Acoustic Emissions requalification services remain in high demand with an increasing total installed base of cylinders in the market. In addition, demand for Ultrasonic Examination (UE) equipment is increasing. The company is in a growth and investment phase, with further positive impact on revenues expected in the longer term.
These forward-looking statements reflect current views about future events and are, by their nature, subject to significant risks and uncertainties because they relate to events and depend on circumstances that will occur in the future. For further information please refer to the section "Forward - Looking Statements" at the end of this report.
Oslo, 2 November 2022
The Board of Directors of Hexagon Composites ASA
Knut Flakk Kristine Landmark Katsunori Mori Liv Astri Hovem Chair Deputy Chair Board member Board member
Hans Peter Havdal Liv Dingsør Sam Gabbita Jon Erik Engeset
Board member Board member Board member Group President & CEO
Condensed Interim Financial Statements Group
Income statement
| (NOK 1000) | Note | Q3 2022 |
Q3 2021 |
30.09.2022 | 30.09.2021 | 31.12.2021 |
|---|---|---|---|---|---|---|
| Unaudited | Unaudited | Unaudited | Unaudited | Audited | ||
| Revenue from contracts with customers | 3 | 1 242 648 |
874 435 |
3 435 652 |
2 354 372 |
3 539 537 |
| Rental income | 3 | 159 | 745 | 3 238 | 1 346 | 3 354 |
| Total revenue | 1 242 807 |
875 180 | 3 438 889 |
2 355 718 |
3 542 890 | |
| Cost of materials | 687 634 | 414 984 | 1 807 487 |
1 076 245 |
1 695 497 | |
| Payroll and social security expenses | 10 | 377 853 | 268 388 | 1 078 755 |
778 458 | 1 101 298 |
| Other operating expenses | 201 791 | 162 238 | 606 434 | 443 421 | 637 512 | |
| Total operating expenses | 1 267 278 |
845 609 | 3 492 676 |
2 298 124 |
3 434 307 | |
| Operating profit before depreciation and amortization (EBITDA) | -24 471 | 29 571 | -53 787 | 57 594 | 108 584 | |
| Depreciation, amortization, and impairment | 4,5 | 84 149 | 64 625 | 242 011 | 191 155 | 262 680 |
| Operating profit (EBIT) | -108 620 | -35 055 | -295 798 | -133 561 | -154 096 | |
| Profit/loss from investments in associated companies | 11 | 60 381 | 178 | 57 642 | 51 | -2 957 |
| Other financial items (net) | -28 310 | -14 660 | -47 397 | -72 550 | -144 691 | |
| Profit/loss before tax | -76 549 | -49 536 | -285 553 | -206 059 | -301 744 | |
| Tax expense | 4 436 | 15 424 |
23 464 | 24 086 | 25 833 | |
| Profit/loss after tax | -80 985 | -64 960 | -309 017 | -230 145 | -327 577 | |
| Attributable to: | ||||||
| Equity holders of the parent | -63 232 |
-37 331 | -226 443 |
-155 256 | -237 325 | |
| Non-Controlling interests | -17 753 | -27 629 | -82 574 | -74 889 | -90 252 | |
| Profit/loss after tax | -80 985 | -64 960 | -309 017 | -230 145 | -327 577 | |
| Earnings per share (NOK) | -0,40 | -0,32 | -1,54 | -1,15 | -1,64 | |
| Diluted earnings per share (NOK) | -0,40 | -0,32 | -1,54 | -1,15 | -1,64 |
Comprehensive income statement
| (NOK 1000) | Note | Q3 2022 |
Q3 2021 |
30.09.2022 | 30.09.2021 | 31.12.2021 |
|---|---|---|---|---|---|---|
| Unaudited | Unaudited | Unaudited | Unaudited | Audited | ||
| Profit/loss after tax | -80 985 | -64 960 |
-309 017 | -230 145 |
-327 577 | |
| OTHER COMPREHENSIVE INCOME | ||||||
| Items that will be reclassified through profit or loss in subsequent periods | ||||||
| Translation differences when translating foreign activities | 158 018 | 26 769 | 351 214 | 35 128 |
26 410 | |
| Net total of items that will be reclassified through profit or loss in subsequent | ||||||
| periods | 158 018 | 26 769 | 351 214 | 35 128 |
26 410 | |
| Items that will not be reclassified through profit or loss in subsequent | ||||||
| periods | ||||||
| Actuarial gains/losses for the period (net after tax) | 0 | 0 | 0 | 0 | -287 | |
| Net other comprehensive income not to be reclassified to profit or loss in | ||||||
| subsequent periods | 0 | 0 | 0 | 0 | -287 | |
| Total comprehensive income for the period | 77 033 | -38 191 | 42 197 | -195 017 | -301 454 | |
| Attributable to: | ||||||
| Equity holders of the parent | 86 265 |
-10 204 | 104 967 |
-119 448 | -208 121 | |
| Non-Controlling interest | -9 232 | -27 987 | -62 770 | -75 568 | -93 334 |
Statement of financial position
| (NOK 1000) | Note | 30.0 9 .2022 |
30.0 9 .2021 |
31.12.2021 |
|---|---|---|---|---|
| Unaudited | Unaudited | Audited | ||
| ASSETS | ||||
| Property, plant , and equipment |
4 | 1 374 350 |
852 462 |
1 010 625 |
| Right -of -use assets |
4 | 336 80 4 |
264 691 | 282 309 |
| Intangible assets | 5 | 2 730 591 |
2 043 841 |
2 384 524 |
| Investment in associate d companies |
11 | 55 553 | 2 152 | 7 024 |
| Other non -current financial assets |
9 | 102 426 | 379 | 379 |
| Other non -current assets |
2 515 | 2 493 | 2 489 | |
| Deferred tax assets | 13 678 | 1 775 |
13 678 | |
| Total non -current assets |
4 615 91 7 |
3 167 793 |
3 701 029 | |
| Inventories | 1 81 2 276 |
1 083 867 |
1 147 004 | |
| Trade receivables | 749 572 | 707 755 | 880 396 | |
| Contract assets (incl. prepayments) | 7 210 | 2 258 |
4 165 | |
| Other current financial assets | 18 | 1 228 | 1 162 | |
| Other current assets | 228 098 | 199 393 |
181 281 | |
| Bank deposits, cash and similar | 687 204 | 976 131 | 600 209 | |
| Total current assets | 3 484 37 8 |
2 970 630 | 2 814 217 | |
| Total assets | 8 1 00 295 |
6 138 423 |
6 515 246 |
| (NOK 1000) | Note | 30.0 9 .2022 |
30.0 9.2021 |
31.12.2021 |
|---|---|---|---|---|
| Unaudited | Unaudited | Audited | ||
| EQUITY AND LIABILITIES | ||||
| Paid -in capital |
2 217 337 |
2 181 911 |
2 194 303 | |
| Other equity | 98 9 641 |
908 658 | 911 989 | |
| Equity attributable to equity holders of the parent | 3 206 978 |
3 090 570 | 3 106 291 | |
| Non -controlling interests |
480 354 | 337 748 | 378 010 | |
| Total equity | 3 687 333 |
3 428 318 |
3 484 301 | |
| Interest -bearing liabilities (non -current) |
8 | 1 488 645 |
1 072 915 |
1 166 057 |
| Lease liabilities (non -current) |
6 | 295 487 | 225 448 | 230 276 |
| Other financial liabilities (non -current) |
7 | 368 448 | 64 662 |
190 529 |
| Pension liabilities | 5 256 | 3 411 | 4 645 | |
| Defe rred tax liabilities |
279 757 | 185 587 | 247 160 | |
| Provisions (non -current) |
7 248 |
4 402 | 11 686 | |
| Total non -current liabilities |
2 444 840 |
1 556 426 |
1 850 353 | |
| Interest -bearing liabilities (current) |
8 | 217 402 | 0 | 13 635 |
| Lease liabilities (current) | 6 | 53 835 | 50 496 | 62 455 |
| Trade payables | 6 18 488 |
465 826 | 392 747 | |
| Contract liabilities (incl. prepayments from customers) | 439 561 | 172 975 | 277 658 | |
| Other financial liabilities (current) | 7 | 75 551 | 0 | 0 |
| Income tax payable | 92 275 | 140 966 | 47 201 | |
| Other current liabilities | 377 668 | 235 600 | 320 150 | |
| Provisions (current) | 93 342 | 87 816 | 66 747 | |
| Total current liabilities | 1 968 122 |
1 153 679 |
1 180 592 | |
| Total liabilities | 4 4 12 962 |
2 710 105 |
3 030 945 | |
| Total equity and liabilities | 8 1 00 295 |
6 138 423 |
6 515 246 |
Cash flow statement
| (NOK 1000) | Note | 30.09.2022 | 30.09.2021 | 31.12.2021 |
|---|---|---|---|---|
| Cash flow from operating activities | ||||
| Profit before tax | -285 553 | -206 059 |
-301 744 | |
| Depreciation, amortization and impairment | 4,5 | 242 011 | 191 155 | 262 680 |
| Net interest expense | 45 272 | 40 189 | 52 166 | |
| Changes in net operating working capital (1) | -149 849 | -305 846 | -455 250 | |
| Other adjustments to operating cash flow | 111 222 | 44 528 | 97 452 | |
| Net cash flow from operating activities | -36 891 | -236 033 | -344 696 | |
| Purchase of property, plant & equipment, net of proceeds from sale | 4 | -310 995 | -183 905 | -263 846 |
| Purchase of intangible assets | 5 | -45 212 | -34 376 | -59 755 |
| Interest received | 8 214 | 1 825 | 4 394 | |
| Acquisition of subsidiaries, net of cash acquired |
0 | 0 | -146 189 | |
| Investment in associated companies | 11 | -58 354 | 0 | -8 580 |
| Other investments | -33 055 | -1 915 | -1 109 | |
| Net cash flow from investing activities | -439 402 | -218 372 |
-475 085 | |
| Net repayment (-) / proceeds (+) from interest bearing loans | 8 | 522 034 | -143 165 | -126 771 |
| Interest payments on interest-bearing liabilities | -49 672 | -37 231 |
-49 901 | |
| Repayment of lease liabilities (incl. Interests) | 6 | -60 926 | -51 768 | -70 716 |
| Net proceeds from share capital increase (subsidiary) | 157 817 | 0 | 0 | |
| Net proceeds from purchase (-) and sale (+) of own shares | -30 495 | 5 625 | 9 543 | |
| Net cash flow from financing activities | 538 758 | -226 540 | -237 846 | |
| Net change in cash and cash equivalents | 62 465 | -680 944 | -1 057 627 | |
| Net currency exchange differences | 24 530 | 7 193 | 7 954 | |
| Cash and cash equivalents at start of period | 600 209 | 1 649 882 | 1 649 882 | |
| Cash and cash equivalents at end of period | 687 204 | 976 131 | 600 209 | |
| Available unused credit facility | 381 941 |
600 000 |
582 605 |
1) Net operating working capital consists of changes in inventories, trade receivables, contract assets, trade payables and contract liabilities.
Statement of changes in equity
| Equity - | Non | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Share | Own | Share | Other paid | Translation | Other | holders of | controlling | Total | |
| (NOK 1 000) | capital | shares | premium | in capital | differences | equity | parent | interests | equity |
| As of 1 January 2021 | 20 162 | -185 | 2 075 999 | 69 615 | 64 906 | 953 444 | 3 183 939 | 411 899 | 3 595 838 |
| Profit for the period | -155 256 |
-155 256 |
-74 889 |
-230 145 |
|||||
| Other income and expenses | 36 397 |
-590 | 35 807 | -679 | 35 128 | ||||
| Share-based payment | 16 263 |
4 190 | 20 453 | 1 418 | 21 871 |
||||
| Movement in own shares etc. | 58 | 5 567 | 5 625 | 5 625 | |||||
| As of 30 September 2021 |
20 162 | -127 | 2 075 999 | 85 877 | 101 303 | 807 355 | 3 090 570 |
337 748 | 3 428 318 |
| Equity - | Non | ||||||||
| Share | Own | Share | Other paid | Translation | Other | holders of | controlling | Total | |
| (NOK 1 000) | capital | shares | premium | in capital | differences | equity | parent | interests | equity |
| As of 1 January 2021 | 20 162 | -185 | 2 075 999 | 69 615 | 64 906 | 953 444 | 3 183 939 | 411 899 | 3 595 838 |
| Profit for the period | -237 325 | -237 325 | -90 252 | -327 577 | |||||
| Other income and expenses | 29 492 | -287 | 29 204 | -3 081 | 26 123 | ||||
| Share-based payment | 28 612 | 5 716 | 34 328 | 1 974 | 36 302 | ||||
| Movement in own shares etc. | 100 | 9 442 | 9 543 | 9 543 | |||||
| Consideration shares issued in subsidiary in business | |||||||||
| combination | 86 602 | 86 602 | 57 470 | 144 072 | |||||
| As of 31 December 2021 | 20 162 | -85 | 2 075 999 | 98 226 | 94 398 | 817 591 | 3 106 291 | 378 010 | 3 484 301 |
On 23 November 2021 Hexagon Purus issued 4 444 430 consideration shares related to the acquisition of Wystrach. The share capital increase in Hexagon Purus ASA amounted to MNOK 144.1 in which controlling and non-controlling interests' relative share amounted to MNOK 86.2 and MNOK 57.5 respectively.
| Equity - | Non | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Share | Own | Share | Other paid | Translation | Other | holders of | controlling | Total | |
| (NOK 1 000) | capital | shares | premium | in capital | differences | equity | parent | interests | equity |
| As of 1 January 2022 | 20 162 | -85 | 2 075 999 | 98 226 | 94 398 | 817 591 | 3 106 291 | 378 010 | 3 484 301 |
| Profit for the period | -226 443 |
-226 443 |
-82 574 |
-309 017 | |||||
| Other income and expenses | 331 409 | 331 409 | 19 804 | 351 214 | |||||
| Share-based payment | 23 019 | 7 692 | 30 711 | 2 803 | 33 514 | ||||
| Movement in own shares etc. | 15 | -30 510 | -30 495 | -30 495 | |||||
| capital in Purus ASA1) Share capital increase |
0 | 160 242 | 160 242 | ||||||
| Transaction cost related to capital increase in Purus |
|||||||||
| ASA1 ) |
-4 496 | -4 496 | -1 638 | -6 134 | |||||
| Share capital increase in other subsidiaries |
0 | 3 709 | 3 709 | ||||||
| As of 30 September 2022 |
20 162 | -69 | 2 075 999 | 121 245 | 425 807 | 563 834 |
3 206 978 |
480 354 | 3 687 333 |
1) On 22 February 2022 the Hexagon Purus Group issued 24 742 268 new shares in a private placement at the price of NOK 24.25 per share. Hexagon Composites was allocated 18 134 361 shares in the Private Placement and retains its ownership interest in the Company of 73.3%.
Note 1: General information and basis for preparation
The condensed consolidated interim financial statements for the third quarter 2022, which ended 30 September 2022, comprise Hexagon Composites ASA and its subsidiaries (together referred to as "the Group"). The company's headquarters are at Korsegata 4B, 6002 Aalesund, Norway. Hexagon Composites ASA is listed on the Oslo Stock Exchange under the ticker HEX.
These condensed consolidated interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting. They do not include all of the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of The Group for the year which ended 31 December 2021.
For a more detailed description of accounting principles see the consolidated financial statements for 2021, available on the Company's website www.hexagongroup.com/investors
The accounting principles used in the preparation of these interim accounts are the same as those applied to the consolidated financial statements for 2021. The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.
These condensed consolidated interim financial statements were approved by the Board of Directors on 2 November 2022.
Note 2: Estimates
The preparation of the interim accounts entails the use of valuations, estimates and assumptions that affect the application of the accounting policies and the amounts recognized as assets and liabilities, income and expenses. The actual results may deviate from these estimates. The material assessments underlying the application of the Group's accounting policy and the main sources of uncertainty are the same as for the consolidated accounts for 2021.
Note 3: Business segment data
| (NOK 1000) | Q3 2022 Unaudited |
Q3 2021 Unaudited |
30.09.2022 Unaudited |
30.09.2021 Unaudited |
31.12.2021 Audited |
|---|---|---|---|---|---|
| Hexagon Agility | |||||
| Sale of cylinders, systems, and equipment (at point in time) |
878 655 | 673 035 | 2 329 561 |
1 666 700 |
2 413 077 |
| Sale of systems, services, and funded development (transferred over time) |
0 | 70 | 0 | 70 | 70 |
| Internal transactions | 51 474 | 68 078 | 146 999 | 137 668 | 202 693 |
| Total revenue from contract with customers | 930 129 | 741 182 | 2 476 559 |
1 804 437 |
2 615 840 |
| Rental income | -134 | 564 | 2 537 | 800 | 1 695 |
| Total revenue | 929 995 | 741 747 | 2 479 097 |
1 805 237 |
2 617 535 |
| Segment operating profit before depreciation (EBITDA) | 44 569 |
97 544 | 159 822 |
199 373 | 292 655 |
| Segment operating profit (EBIT) | -195 | 62 688 | 33 155 | 83 639 | 138 508 |
| Segment assets | 4 697 068 |
3 836 732 |
3 819 260 | ||
| Segment liabilities | 1 995 875 |
1 767 716 |
1 641 009 | ||
| 118 127 | 85 013 |
468 434 | 405 669 |
575 643 |
|---|---|---|---|---|
| 0 | 0 | 0 | 0 | 0 |
| 980 | 666 | 4 170 | 1 824 | 2 495 |
| 119 107 | 85 679 | 472 604 | 407 493 | 578 138 |
| 0 | 0 | 0 | 0 | 0 |
| 119 107 | 85 679 | 472 604 | 407 493 | 578 138 |
| 7 850 | 3 998 | 69 885 | 72 122 | 94 972 |
| -1 529 | -4 568 | 42 161 | 46 440 | 60 325 |
| 535 068 | 471 475 | 516 251 | ||
| Q3 2022 |
Q3 2021 |
30.09.2022 | 30.09.2021 | 31.12.2021 |
|---|---|---|---|---|
| Unaudited | Unaudited | Unaudited | Unaudited | Audited |
| 23 397 | 14 748 | 55 371 | 35 867 | 48 155 |
| 0 | 0 | 0 | 0 | 0 |
| 6 198 | 4 314 | 15 029 | 6 267 | 9 029 |
| 29 595 | 19 062 | 70 400 | 42 134 | 57 184 |
| 0 | 0 | 0 | 0 | 0 |
| 29 595 | 19 062 | 70 400 | 42 134 | 57 184 |
| 832 | -232 | -758 | -7 896 | -10 677 |
| -598 | -1 287 | -4 774 | -10 881 | -14 826 |
| 112 060 | 81 056 | 83 882 | ||
| 157 874 | 101 959 | 113 013 | ||
| Hexagon Purus | |||||
|---|---|---|---|---|---|
| Sale of cylinders, systems, and equipment (at point in time) | 219 425 | 101 241 | 585 072 | 243 139 | 495 103 |
| Sale of systems, services, and funded development (transferred over time) |
1 218 | 1 261 | 2 580 | 2 276 | 3 441 |
| Internal transactions | 1 391 | 373 | 2 969 | 3 069 | 7 495 |
| Total revenue from contract with customers | 222 034 | 102 875 | 590 621 | 248 484 | 506 039 |
| Rental income | 336 | 400 | 905 | 400 | 1 679 |
| Total revenue | 222 370 | 103 275 | 591 526 | 248 884 | 507 718 |
| Segment operating profit before depreciation (EBITDA) | -92 202 |
-80 156 | -296 550 |
-210 682 | -271 777 |
| Segment operating profit (EBIT) | -116 060 | -95 962 | -366 204 | -244 626 | -324 874 |
| Segment assets | 2 635 552 |
1 865 259 |
2 101 745 | ||
| Segment liabilities | 846 933 | 424 680 | 686 347 |
Note 4: Tangible assets
| 2022 | 2021 | ||||||
|---|---|---|---|---|---|---|---|
| Property, plant, and | Property, plant, and | ||||||
| (NOK 1000) | equipment | Right of use assets | Total 2022 | equipment | Right of use assets | Total 2021 | |
| Carrying value as of 1 January | 1 010 625 | 282 309 | 1 292 934 | 747 266 | 266 552 | 1 013 818 | |
| Additions | 310 995 | 71 701 | 382 696 | 183 905 | 42 618 | 226 523 | |
| Depreciations | -114 027 | -55 576 | -169 603 | -92 843 | -47 289 | -140 132 | |
| Impairments | -594 | 0 | -594 | -919 | 0 | -919 | |
| Currency translation differences | 167 351 | 38 371 | 205 721 | 15 053 | 2 811 | 17 864 |
|
| Carrying value as of 30 September |
1 374 350 |
336 804 |
1 711 154 |
852 462 | 264 691 | 1 117 153 |
Note 5: Intangible assets
| 2022 | 2021 | |||||||
|---|---|---|---|---|---|---|---|---|
| Other | Other | |||||||
| Customer | intangible | Customer | intangible | |||||
| (NOK 1000) | Goodwill | relationships | assets1) | Total 2022 | Goodwill | relationships | assets1) | Total 2021 |
| Carrying value as of 1 January | 1 572 788 | 387 773 | 423 963 | 2 384 524 | 1 369 859 | 337 887 | 326 610 | 2 034 356 |
| Additions | 0 | 0 | 45 212 | 45 212 | 0 | 0 | 34 376 | 34 376 |
| Amortisations | 0 | -35 193 |
-36 621 | -71 814 | 0 | -25 354 |
-24 749 | -50 103 |
| Currency translation differences | 258 515 | 51 825 | 62 329 | 372 669 | 21 191 | -5 460 | 9 481 | 25 211 |
| Carrying value as of 30 September |
1 831 303 |
404 405 | 494 883 | 2 730 591 |
1 391 050 |
307 073 | 345 718 |
2 043 841 |
1) Other intangible assets consist of technology and development, patents and licenses and other rights
Intangible assets are reviewed each quarter for impairment indicators, including market changes, technological development, order backlog and other changes that might potentially reduce the value of the assets. For goodwill, impairment tests are performed annually in the fourth quarter, or immediately in the case of an impairment indicator.
Goodwill is tested using the value in use approach determined by discounting expected future cash flows. If the impairment test reveals that an asset's carrying amount is higher than its value in use, an impairment loss will be recognized.
There are four CGUs in the Hexagon Group; 1) Hexagon Agility, 2) Hexagon Digital Wave, 3) Hexagon Purus, and 4) Hexagon Ragasco. During the quarter there were no indicators of impairment of intangible assets.
Note 6: Lease liabilities
| (NOK 1000) | 2022 | 2021 |
|---|---|---|
| Carrying value as of 1 January | 292 731 | 275 705 |
| New lease liabilities recognized in the period | 71 701 | 42 618 |
| Cash payments for the principal portion of the lease liability | -54 658 | -45 285 |
| Cash payments for the interest portion of the lease liability | -6 268 | -6 483 |
| Interest on lease liabilities | 6 268 | 6 483 |
| Currency translation differences | 39 549 | 2 907 |
| Carrying value as of 30 September |
349 322 |
275 944 |
Lease liabilities are to a large extent related to lease agreements of office- and production premises, in addition to some vehicles, machinery and equipment.
Note 7: Other financial liabilities
| (NOK 1000) | Carrying value 01.01.2022 |
Fair value adjustment |
Additions in the period |
Settlements in the period |
Reclassifications | Currency translation |
Carrying value 30.09.2022 |
|---|---|---|---|---|---|---|---|
| Cross currency swap (fair value) 1) | 81 423 | 246 971 |
0 | 0 | 0 | 0 | 328 394 |
| Deferred payment from business combination (amortized cost) |
43 490 | 0 | 0 | 0 | -45 056 | -1 566 | 0 |
| Contingent liabilities from business combinations (fair value) |
65 616 | 0 | 0 | 0 | -28 815 | 3 253 | 40 054 |
| Total non-current other financial liabilities | 190 529 | 246 971 | 0 | 0 | -73 871 |
4 819 | 368 448 |
| Cross currency swap (fair value) | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Deferred payment from business combination (amortized cost) |
0 | 0 | 0 | 0 | 45 056 | 1 025 | 46 081 |
| Contingent liabilities from business combinations (fair value) |
0 | 0 | 0 | 0 | 28 815 | 655 | 29 470 |
| Total current other financial liabilities | 0 | 0 | 0 | 0 | 73 871 | 1 680 | 75 551 |
1) If carrying value of cross currency swap is shown with a negative amount, this implies the swap being classified as a financial asset
The table above and below shows the movements of current and non-current other financial liabilities in the period. Deferred payments and contingent liabilities are related to the acquisition of Wystrach and Wyrent as of November 11 2021. The fair value of the contingent liabilities is assessed each quarter. At the end of the reporting period, there have been no changes to the fair value assessment.
| Carrying value | Fair value | Additions | Settlements | Currency | Carrying value | ||
|---|---|---|---|---|---|---|---|
| (NOK 1000) | 01.01.2021 | adjustment | in the period | in the period | Reclassifications | translation | 30.09.2021 |
| Cross currency swap (fair value) 1) | -78 829 | 35 915 |
0 | 107 577 | 0 | 0 | 64 662 |
| Deferred payment from business combination (amortized cost) |
0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Contingent liabilities from business combinations (fair value) |
0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Total non-current other financial liabilities | -78 829 | 35 915 | 0 | 107 577 | 0 | 0 | 64 662 |
| Cross currency swap (fair value) | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Deferred payment from business combination (amortized cost) |
0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Contingent liabilities from business combinations (fair value) |
0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Total current other financial liabilities | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
Note 8: Interest-bearing liabilities
The following table shows material changes in interest-bearing debt during 2022 and for the comparable period last year:
| 2022 | 2021 | |||||
|---|---|---|---|---|---|---|
| (NOK 1000) | Non-current | Current | Total 2022 |
Non-current | Current | Total 2021 |
| Liabilities 1 January | 1 166 057 | 13 635 | 1 179 692 | 1 206 127 | 0 | 1 206 127 |
| with cash settlement: Financing activities |
||||||
| - New liabilities |
318 268 | 203 767 | 522 034 |
0 | 0 | 0 |
| - Repayment of liabilities |
0 | 0 | 0 | -143 165 |
0 | -143 165 |
| without cash settlement: Financing activities |
||||||
| - Exchange differences |
2 438 | 0 | 2 438 | -3 419 | 0 | -3 419 |
| - Other transactions without cash settlement |
1 882 | 0 | 1 882 | 13 372 |
0 | 13 372 |
| Liabilities 30 September |
1 488 645 |
217 402 | 1 706 047 |
1 072 915 |
0 | 1 072 915 |
The principal loan financing facility in Hexagon Composites ASA is a Senior Secured bilateral facility with DNB Bank and Danske Bank. The overall size of the committed facility is NOK 1 700 million, comprising an overdraft facility NOK 250 million, a main multi-currency revolving credit (RCF) NOK 350 million and a Term Loan (NOK 1 100 million). On 30 September, Hexagon secured the additional credit facility available within its current financing arrangements, resulting in total committed facility per quarter end of NOK 2 025 million. In addition, the Group, through Hexagon Purus, has loans towards Volkesbank and Deutsche Bank including an overdraft facility of EUR 2.3 million. As of period end, there were no breaches of the financial covenant under the financing facility agreement. Movements in the year on Non-current and Current loans were primarily due to drawings on bank loans and overdraft facilities.
Note 9: Financial instruments
For financial instruments that are recognized at fair value on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization at the end of each reporting period.
Fair value hierarchy
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
Level 1: Quoted (unadjusted) prices in active markets for identical assets or liabilities Level 2: Other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly Level 3: Techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data
There were no transfers from one level to another in the measurement hierarchy from 2021 to the 3rd quarter of 2022. Hexagon Group has no items defined as level 1. Set out below is a comparison of the carrying amount and the fair value of financial instruments as of 30 September 2022.
| 30.09.2022 | 31.12.2021 | |||||
|---|---|---|---|---|---|---|
| (NOK 1000) | Level | Fair value | Carrying amount | Fair value | ||
| Carrying amount | ||||||
| Financial assets: | ||||||
| 102 | ||||||
| Other non-current financial assets 1) |
3 | 102 426 |
426 | 379 | 379 | |
| 880 | ||||||
| Trade receivables | 749 572 | 749 572 |
880 396 | 396 | ||
| Forward exchange contracts | 2 | 18 | 18 | 1 162 | 1 162 | |
| Bank deposits, cash, and cash equivalents |
687 204 | 687 204 |
600 209 | 600 209 | ||
| Total financial assets | 1 539 220 |
1 539 220 |
1 482 147 |
1 482 147 |
||
| Financial liabilities: | ||||||
| Bank loans (incl. amortized costs) | 2 | 1 488 645 |
1 495 214 |
1 166 057 | 1 173 877 | |
| Lease liabilities | 2 | 349 322 |
349 322 |
292 731 | 292 731 | |
| Non-current contingent liabilities | 3 | 40 054 | 40 054 |
65 616 | 65 616 | |
| Other non-current financial liabilities | 3 | 328 394 |
328 394 |
124 913 | 124 913 | |
| Current interest-bearing liabilities | 2 | 217 402 |
217 402 |
13 635 | 13 635 | |
| Current contingent and financial liabilities | 3 | 75 551 |
75 551 |
0 | 0 | |
| Trade payables | 618 488 |
618 488 |
392 747 | 392 747 | ||
| Total financial liabilities | 3 117 856 |
3 124 425 |
2 055 699 | 2 063 519 |
1) Other non-current financial assets include an equity investment in Norwegian Hydrogen AS, following the loss of significant influence and derecognition of the investment as an associated company in Q3 2022. Hexagon Purus ASA currently holds a 15% shareholding in the Company and the investment is recognized at fair value of NOK 67,3 million following the valuation from the latest capital raise in the Company.
Note 10: Share based payment
Share-based payment in Hexagon Composites ASA
The Company has a performance share units program (PSUs) and a restricted share units program (RSUs) covering certain employees in senior positions.
Performance share units programs (PSUs)
All PSUs are non-transferable and will vest subject to satisfaction of the applicable vesting conditions (fulfilling Group EBITDA and revenue targets). The actual number of PSUs vested will depend on performance and vary from minimum zero to the maximum awarded PSUs in each program. Each vested PSU will give the holder the right to receive one share in the Company at an exercise price corresponding to the par value of the shares being NOK 0.10.
| Performance share units programs (PSUs) | Issued 2019 | Issued 2020 | Issued 2021 | Issued 2022 |
|---|---|---|---|---|
| Maximum number | 2 492 438 | 3 711 634 | 1 734 990 | 2 660 082 |
| Exercise price (NOK) | 0,10 | 0,10 | 0,10 | 0,10 |
| Vesting period | 3 years | 3 years | 3 years | 3 years |
| Exercised Q1 | ||||
| Expiry | 20221) | Q1 2023 | Q1 2024 | Q1 2025 |
1) During the 1st quarter of 2022 1,078,628 PSUs have been exercised at the weighted average share price of NOK 28.11.
Restricted share units programs (RSUs)
The RSUs are subject to continued employment three years after date of grant, and each participant will at such time receive such number of Hexagon shares as corresponds to the number of RSUs allocated to them.
| Restricted share units programs (RSUs) | Issued 2019 | Issued 2020 | Issued 2021 | Issued 2022 |
|---|---|---|---|---|
| Number of RSUs | 49 994 | 70 000 | 100 000 | 200 000 |
| Exercise price (NOK) | 0,10 | 0,10 | 0,10 | 0,10 |
| Vesting period | 3 years | 3 years | 3 years | 3 years |
| Exercised Q3 | ||||
| Expiry | 20221 | Q3 2023 | Q3 2024 | Q3 2025 |
1) During the 3rd quarter of 2022 42,852 RSUs have been exercised at the weighted average share price of NOK 23.08.
The fair value of the PSUs and RSUs was calculated on the grant date, based on the Black-Scholes model, and the cost is recognized over the service period. Cost associated with programs were NOK 22.2 million YTD 30.09.2022. The cost in the third quarter were NOK 8.8 million. The fair value of all outstanding PSUs (maximum 5,028,864) and RSUs (358,000) is estimated to NOK 58.5 million per 30 September 2022.
In addition to the above-mentioned instruments, the Company has issued bonus arrangements to certain executives within the Group. The bonus arrangements are dependent upon the share price development of Hexagon Purus ASA and is converted to a given number of cash settlement options in Hexagon Purus ASA, for the purpose of calculating quarterly fair values using the Black-Scholes model. These cash settlement arrangements involved total expenses of NOK 3.6 million YTD 30.09.2022. Expenses in the third quarter were NOK -1.8 million. Remaining unamortized accrual is estimated to MNOK 9.1 as of 30 September 2022. For share-based payment in Hexagon Purus ASA, see quarterly financials at hexagonpurus.com.
Note 11: Investments in associates
| Business | Ownership | Ownership | Ownership | Ownership | Accounting | ||
|---|---|---|---|---|---|---|---|
| Company | Country | segment | share 01.01.2021 | share 30.09.2021 | share 31.12.2021 | share 30.09.2022 | method |
| Norwegian Hydrogen AS 1) | Norway | Purus | 21,0% | 21,0% | 17,7% | 15,0% | 1) Equity method |
| LH2 GmbH 2) Cryoshelter |
Austria | Purus | 0,0% | 0,0% | 0,0% | 40,0% | Equity method |
| Cryoshelter BioLNG GmbH 2) | Austria | Agility | 0,0% | 0,0% | 0,0% | 40,0% | Equity method |
| CIMC Hexagon Hydrogen Energy | 0,0% | 0,0% | 0,0% | 49,0% | Equity method | ||
| Systems Ltd.3) | Hong Kong | Purus | |||||
| Hyon AS4) | Norway | Purus | 33,3% | 0,0% | 0,0% | 0,0% | Equity method |
1) Classified as an associated company and accounted for using the equity method in the period 01.01 - 31.08.22. As of 01.09, the investment is classified as an equity instrument at fair value
2) Acquired on 01.08.2022 and classified as associated companies effective from the same date
3) Entity legally established in July 2022 and classified as an associated company effective from the same date
4) On 28.06.2021, Hexagon Purus ASA sold all shares in Hyon AS
Income statement reconciliation
| CIMC Hexagon | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Norwegian | Cryoshelter LH2 | Cryoshelter | Hydrogen Energy | |||||||||
| Hydrogen AS | GmbH | BioLNG GmbH | Systems Ltd. | Hyon AS | Total | |||||||
| 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | |
| Share of profit after tax | - 2 845 |
86 | - 619 |
0 | - 930 |
0 | 0 | 0 | 0 | - 35 |
-4 394 | 51 |
| PPA amortizations associated companies | 0 | 0 | - 581 |
0 | - 542 |
0 | 0 | 0 | 0 | 0 | -1 123 | 0 |
| Gain on loss of significant influence | 63 159 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 63 159 | 0 |
| Total profit/loss from investments in | 60 314 | 86 | - 1 200 |
0 | - 1 472 |
0 | 0 | 0 | 0 | - 35 |
57 642 | 51 |
| associates per 30.09 |
Balance sheet reconciliation
| CIMC Hexagon | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Norwegian | Cryoshelter LH2 | Cryoshelter | Hydrogen Energy | |||||||||
| Hydrogen AS | GmbH | BioLNG GmbH | Systems Ltd. | Hyon AS | Total | |||||||
| 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | |
| Carrying value per 01.01 |
7 024 | 2 066 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 7 024 | 2 066 |
| Purchase of shares | 0 | 0 | 33 738 | 0 | 23 898 | 0 | 717 | 0 | 0 | 0 | 58 354 | 0 |
| Share capital contribution | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 700 | 0 | 700 |
| Share of profit after tax incl. PPA |
- 5 517 |
51 | ||||||||||
| amortizations | - 2 845 |
86 | - 1 200 |
0 | - 1 472 |
0 | 0 | 0 | 0 | - 35 |
||
| Sale of shares | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | - 665 |
0 | -665 |
| Derecognition – loss of significant influence | - 4 179 |
0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | - 4 179 |
0 |
| Currency translation effects | 0 | 0 | - 59 |
0 | - 70 |
0 | 0 | 0 | 0 | -129 | 0 | |
| Carrying value per 30.09 |
0 | 2 152 | 32 480 | 0 | 22 356 | 0 | 717 | 0 | 0 | 0 | 55 553 | 2 152 |
Norwegian Hydrogen
Hexagon Purus ASA, a subsidiary of Hexagon Composites ASA, has been a shareholder of Norwegian Hydrogen AS since its inception in 2020. In December 2021, Norwegian Hydrogen conducted a capital raise in which Hexagon Purus' ownership was diluted from 21,0% to 17,7%. Despite having an ownership less than 20%, the Company has in the period from 01.01.22 to 31.08.2022 retained its classification of Norwegian Hydrogen as an associated company due to an assessment of still having significant influence in the entity. Important factors for this assessment have been Board of Directors representation and being the 2nd largest shareholder of the entity in the same period.
On 27.08.2022, Norwegian Hydrogen AS announced that Mitsui & Co. Ltd invests NOK 70 million in a private placement, and thus reducing Hexagon Purus' ownership from 17,7% to 15,0%. Following this private placement, the Company assessed that significant influence is no longer present, as the Company is now the 3rd largest shareholder and the fact that the new shareholder has received two additional seats in the Board of Directors, resulting in diluted decisional and strategical influence. The Company has consequently from this date reclassified the investment to a financial asset (equity instrument) measured at fair value. The fair value of Hexagon Purus' ownership in Norwegian Hydrogen, derived from the said capital raise, is NOK 67,3 million, resulting in an accounting gain of NOK 63,1 million, recognized in profit/loss from investments in associates in the income statement.
Cryoshelter LH2 GmbH and Cryoshelter BioLNG GmbH
In April 2022, Hexagon announced an agreement to acquire a 40% stake in Cryoshelter GmbH, an Austria based company specialized in the development of cryogenic tank technology for liquid natural gas (LNG) and liquid hydrogen (LH2). Upon closing, Cryoshelter GmbH has been demerged into two separate legal entities, Cryoshelter BioLNG GmbH and Cryoshelter LH2 GmbH.
On 01.08.2022, Hexagon Composites made a EUR 2,4 (NOK 24) million investment and acquired 40% of the shares in Cryoshelter BioLNG GmbH, with options to acquire the remaining shares of the next 3-10 years. Hexagon Purus made a EUR 3,4 (NOK 34) million investment and acquired 40% of the shares in Cryoshelter LH2 GmbH, with options to acquire the remaining shares over the next 5-10 years. As of 01.08.2022, the said options do not give rise to any de-facto control and both investments are consequently accounted for by using the equity method effective from 01.08.2022. The table below shows the initial assessment of the purchase price allocation of the two entities per 01.08.2022.
| Cryoshelter | Cryoshelter | Total | |
|---|---|---|---|
| Purchase price allocation Cryoshelter* |
BioLNG GmbH | LH2 GmbH | Cryoshelter |
| Non-current assets | 2 715 | 203 | 2 919 |
| Current assets | 2 351 | 5 150 | 7 502 |
| Non-current liabilities | 3 946 | 3 946 | 7 891 |
| Current liabilities | 21 603 | 2 951 | 24 554 |
| Equity as per 01.08.2022 | - 20 482 |
- 1 543 |
- 22 025 |
| Hexagon's share of equity (40%) | - 8 193 |
- 617 |
- 8 810 |
| Intangible assets (technology)1) | 32 091 | 34 356 | 66 446 |
| Goodwill | 0 | 0 | 0 |
| Hexagon's purchase price | 23 898 | 33 738 | 57 636 |
* Preliminary assessment
1) Lifetime of technology assets set to 10 years
CIMC Hexagon Hydrogen Energy Systems Ltd.
In 2021, Hexagon Purus entered into an agreement with CIMC Enric, encompassing cylinder and systems production for Fuel Cell Electric Vehicles (FCEVs) and hydrogen distribution in China and Southeast Asia. In July 2022, CIMC Hexagon Energy Systems Ltd. was legally established and registered in Hong Kong, where Hexagon Purus HK Holding AS, a wholly owned subsidiary of Hexagon Purus ASA, subscribed for 49% of the shares and hold an equal amount of voting rights. CIMC Enric holds the remaining 51% of the shares. The entity is classified as an associate company and accounted for via the equity method as of 01.07.2022.
Revised full year 2022 guidance
On 14 October, Hexagon published revised financial guidance for 2022 for Hexagon excluding Purus. The revenues are expected to exceed the guided target of NOK 3.7 to 3.9 billion as they are mainly secured by 2022 backlog. Due to continued high costs of energy, materials, and components which Hexagon is unable to mitigate in the short term, the company is accordingly adjusting its EBITDA guidance for full year 2022 from approximately NOK 400 million to approximately NOK 325 million.
New contracts after balance sheet date
- Hexagon Purus entered into framework agreement to deliver hydrogen distribution systems in Europe for EUR 9.7 million
- Hexagon Agility received orders from a major heavy-duty fleet in North America of USD 27.1 million
- Hexagon Digital Wave signed a long-term agreement with Certarus for Modal Acoustic Emission technology to requalify Type-4 cylinders
- Hexagon Purus selected by CaetanoBus as preferred supplier of high-pressure hydrogen fuel systems for serially produced fuel cell transit buses. The estimated potential value over the lifetime of the frame agreement is approximately EUR 35 million
- Hexagon Agility received an order from Supergas Natural Ltd for Mobile Pipeline® modules of EUR 4.8 million
There have not been any other significant events after the balance sheet date.
Key figures and ratios
| YTD Q3 2022 |
YTD Q3 2021 |
31.12.2021 | |
|---|---|---|---|
| Hexagon Group | |||
| EBITDA in % of total revenue | -1,6 % |
2,4 % |
3,1 % |
| EBIT in % of total revenue | -8,6 % |
-5,7 % |
-4,3 % |
| Equity ratio | 45,5 % |
55,9 % |
53,5 % |
| Liquidity reserve *) (NOK 1 000) | 1 069 144 |
1 576 131 |
1 182 814 |
| Diluted earnings per share (NOK) | -1,54 | -1,15 | -1,61 |
| Cash flow from operations per share (NOK) | -0,18 | -1,13 | -1,70 |
| Equity per share (NOK) | 18,29 | 17,00 | 17,28 |
| Hexagon Agility | |||
| EBITDA in % of total revenue | 6,4 % | 11,0 % | 11,2 % |
| EBIT in % of total revenue | 1,3 % |
4,6 % |
5,3 % |
| Hexagon Ragasco | |||
| EBITDA in % of total revenue | 14,8 % |
17,7 % |
16,4 % |
| EBIT in % of total revenue | 8,9 % |
11,4 % |
10,4 % |
| Hexagon Digital Wave | |||
| EBITDA in % of total revenue | -1,1 % |
-18,7 % |
-18,7 % |
| EBIT in % of total revenue | -6,8 % |
-25,8 % |
-25,9 % |
| Hexagon Purus | |||
| EBITDA in % of total revenue | -50,1 % |
-84,7 % |
-53,5 % |
| EBIT in % of total revenue | -61,9 % |
-98,3 % |
-64,0 % |
*) Undrawn credit facility + bank deposits and cash. Use of undrawn credit facility can be limited by financial covenants
Share information
A total of 14,744,874 shares (Q2: 23,400,995 shares) in Hexagon Composites ASA were traded on the Oslo Stock exchange during the third quarter of 2022. In the quarter, the share price moved between NOK 22.34 (NOK 25.68) and NOK 34.80 (NOK 38.68), ending the quarter at NOK 23.84, giving a market capitalization of NOK 4.8 billion (NOK 5.43 billion) for the Company. For further investor information, refer to the investor section on www.hexagongroup.com.
Terminology
BAR
Unit of pressure. 1 millibar = 100 N/m2
BIOGAS
Produced from raw materials such as agricultural waste, manure, municipal waste, plant material, sewage, green waste or food waste
BIO-LPG
Propane produced from renewable feedstocks such as plant and vegetable waste material
BEV
Battery Electric Vehicle
CHASSIS
The base frame of a car, carriage or other wheeled vehicle
CHG Compressed Hydrogen Gas
CNG Compressed Natural Gas
CO2 Carbon Dioxide
COMPOSITE
Combination of glass/carbon fiber and thermosetting plastic, exploiting the malleability of the plastic and the stiffness and strength of the glass/ carbon fiber
EBIT
Earnings before interests and taxes
EBITDA
Earnings before interest, taxes, depreciation and amortization
EV
Electric Vehicle
FCEV
Fuel Cell Electric Vehicle
GHG Greenhouse Gas
GVW Gross Vehicle Weight
HDV Heavy-Duty Vehicle
H2
Hydrogen, light, colorless gas (Symbol H), produced on an industrial scale
JOINT VENTURE
Legally signed contractual agreement whereby two or more parties undertake an economic activity
LDV
Light-Duty Vehicle
LNG Liquefied Natural Gas
LPG Liquefied Petroleum Gas (propane gas)
MOBILE PIPELINE® Gas distribution products
NGV Natural Gas Vehicle
OEM Original Equipment Manufacturer
X-STORE®
High-pressure composite cylinder for bulk transportation and storage of CNG
RNG
Renewable Natural Gas Pipeline compatible gaseous fuel derived from biogenic or other renewable sources that has lower lifecycle carbon dioxide equivalent (CO2- eq) emissions than geological natural gas
SCBA CYLINDER
Self-contained breathing apparatus
SCM3
Standard cubic meters. Unit for volumetric measurement of oil, natural gas and natural gas condensate at standard conditions defined in the ISO standard ISO 13443
TITAN®
High-pressure composite cylinder for bulk transportation and storage of CNG
TUFFSHELL®
High-pressure CNG cylinder for heavy duty vehicles
TYPE 1
Steel cylinder
TYPE 2
Steel cylinder, composite-reinforced
TYPE 3
Composite cylinder with metal liner
TYPE 4
Composite cylinder with polymer liner
U.S. DOT
U.S. Department of Transportation
Forward looking statements
This quarterly report (the "Report") has been prepared by Hexagon Composites ASA ("Hexagon" or the "Company"). The Report has not been reviewed or registered with, or approved by, any public authority, stock exchange or regulated marketplace. 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 Report and/or the statements set out herein. This Report is not and does not purport to be complete in any way. The information included in this Report 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 forward-looking statements contained in this Report, 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 Report or the actual occurrence of the forecasted developments. The Company and its advisors assume no obligation to update any forward-looking 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 Report has been prepared for information purposes only. This Report 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 Report in or into any jurisdiction where such distribution may be unlawful, is prohibited. This Report speaks as of 2 November 2022, and there may have been changes in matters which affect the Company subsequent to the date of this Report. Neither the issue nor delivery of this Report 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 Report. This Report is subject to Norwegian law, and any dispute arising in respect of this Report is subject to the exclusive jurisdiction of Norwegian courts with Oslo City Court as exclusive venue. By receiving this Report, you accept to be bound by the terms above
Hexagon Composites ASA Korsegata 4B, 6002 Ålesund, Norway www.hexagongroup.com