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Hexagon Composites Investor Presentation 2014

Oct 30, 2014

3619_rns_2014-10-30_43816d39-6e7a-4963-b1a6-306a220c7900.pdf

Investor Presentation

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Oslo, 30th October 2014

Jon Erik Engeset, CEO David Bandele, CFO

3 QUARTER 2014 RD

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 forward-looking 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 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 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 30th October 2014, 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

ON TRACK TO RECORD YEAR

OPERATING REVENUES

NOK Million

HIGHLIGHTS Q3 2014

  • •Continued strong margins
  • •Highly satisfactory operational performance
  • • Temporary softening of US Heavy Duty Truck market entailed lower sales in Q3
  • •Strong Gas Distribution Products order intake
  • •Acquisition of MasterWorks at the beginning of Q4

GAS DISTRIBUTION PRODUCTS (GDP) "VIRTUAL PIPELINE"

  • •Satisfactory sales of TITAN™ and SMARSTORE™ in Q3
  • •Strong order intake during the quarter
  • • Market development in South America and South East Asia remains positive

HEAVY DUTY VEHICLES

  • • Heavy Duty truck sales in North America relatively soft in Q3 but order intake is increasing
  • •Underlying fundamentals remain positive
  • • Bus markets in the US and Europe softened in Q3 after record Q1 and Q2
  • ̵Demand outside Europe remains volatile
  • ̵Back-log for Q4 is relatively strong

LIGHT-DUTY VEHICLES

•Orders for the passenger vehicle market in Europe declined in Q3

LOW PRESSURE CYLINDERS (LPG)

  • • Full utilization
  • ̵ Exceptionally low scrap and high up-time in Q3
  • •Deliveries to Iraq and Qatar on schedule
  • •Record margins and EBIT

QUARTER 2014 GROUP FINANCIALS

3

RD

Q3 2014 GROUP INCOME STATEMENT

N
O
K
T
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Q3 '14* V '13* INCOME STATEMENT HIGHLIGHTS

  • • High-pressure declined NOK 56 million (-20%)
  • • Low-pressure drives 65 million growth (97%)
  • High-pressure at 17.5% margin

•

  • Low-pressure at 33.5% margin
  • • NOK 4 million depreciation effect (mainly driven by volume method in Lowpressure)
  • • Finance and other contributions effect of +NOK 11 million (FX +12; Interest -1)
  • •Tax effect of -NOK 6 million
  • • Share from Rugasco JV NOK - 1 million

Continuing profitable growth

GROUP EBITDA Q3 '14* V Q3'13*

Low-pressure contribution offsets relatively soft High-pressure quarter

www.hexagon.no

FINANCIAL POSITION V PREVIOUS QUARTER

N
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6
  • • Additional Liquidity reserves are NOK 390 million
  • • Net Interest-bearing debt increased by NOK 46 million (Q2 2014: 128 v Q3 2014: 174)
  • • Increase driven by working capital expansion of NOK 91 million primarily inventory driven

CAPITAL STRUCTURE

Strong Equity position; Working capital to be optimised in Q4

www.hexagon.no

SEGMENT SHARES Q3 2014

BEFORE INTERCOMPANY ELIMINATIONS AND GROUP CHARGES*

Q3: HIGH-PRESSURE CYLINDERS

• Solid Global revenues for TITAN™ and SMARTSTORE™ transportation and storage systems

N
O
K
T
H
O
U
S
A
N
D		 S
U
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Y
F
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Q3: LOW-PRESSURE LPG CYLINDERS

  • •Strong sales to Middle East
  • •High capacity utilization
  • • Efficiencies gained from management focus on productivity and impact from long-series production runs
N
O
K
T
H
O
U
S
A
N
D		 S
U
M
M
A
R
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F
I
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3.
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%		 1
4.
7
%
De
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n		 (
1
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)
5
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2
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6
4
9		 4
3
8
0		 2
9
2
6
9
Ma
in
rg		 2
5.
4
%		 6.
5
%

3 QUARTER 2014 OUTLOOKRD

PUMP PRICES STILL FAVORABLE TO CNG DESPITE RECENT DROP IN OIL PRICES

Source: Transport Topics, Bloomberg, U.S. Energy Information Administration (EIA), ACT Research, Hexagon Composites analysis

www.hexagon.no

INFRASTRUCTURE AND CNG/LNG

BUILDING STRONG MOMENTUM FOR TITAN™

Operating revenues GDP NOK Million

www.hexagon.no

GAS DISTRIBUTION PRODUCTS "VIRTUAL PIPELINE"

• High Horse Power Oil & Gas applications

  • ̵Fueling of fracking installations
  • Fueling of drilling rigs
  • ̵Fueling of pond heating
  • • Other High Horse Power applications
  • ̵Industrial
  • Municipal
  • ̵Marine
  • ̵Trains

Pay-Back even better than for Heavy Duty vehicles

FLARING

North Dakota

  • • As of June 2014 all new drilling permits require gas-capture plans
  • • From 30 September 2014 Oil producers must reduce their flaring to:
  • ̵23% of gas produced by January 2015
  • ̵10% of gas produced by 2020
  • 5% of gas produced beyond 2020

RUGASCO (RUSSIA) JV 49/51

  • •Unprofitable
  • • Depreciation of Rouble entails higher cost of imported raw materials
  • • Future market potential remains attractive Strategic options will be assessed

STEPPING UP INNOVATION AND BUSINESS DEVELOPMENT

  • • Engineering and R&D
  • ̵16 additional heads in High Pressure
  • 6 in Low Pressure
  • • Business development 6 heads added
  • •Acquisition of MasterWorks
  • •Further build-up in 2015

MASTERWORKS ACQUISITION SECURES KEY TECHNOLOGY AND ENGINEERING CAPABILITY

  • •Enhanced engineering capacity and capability
  • • Innovative design and manufacturing solutions
  • ̵Curing Ovens
  • ̵Tension Systems
  • Winder Technology
  • ̵Resin Bath Technology
  • •Transaction value USD 1.7 million (= enterprise value)
  • • Located in Maryland on the US East Coast ̵29 employees

Helman Tensioning System

THE HYDROGEN OPPORTUNITY

Hegnar.no 27.10.2014

Los Angeles Times 27.10.2014

www.hexagon.no

THE RACE HAS STARTED

  • • Leading players:
  • ̵Toyota
  • Honda and GM Partnership
  • ̵Daimler, Ford and Nissan Partnership
  • Hyundai
  • • Leaders in Infrastructure development:
  • Japan
  • ̵California
  • Germany
  • ̵Scandinavia
  • • Driven by environmental concerns
  • Alternative to electric cars
  • • Launch of the next generation H-cars 2015-2018
  • Toyota in Q1 2015
  • Honda in 2015
  • •25,000-40,000 vehicles p.a. expected from 2017
  • •Significant paradigm shift coming?

HEXAGON IN LEADING POSITION AS T4 TANK SUPPLIER FOR TRANSPORTATION, STORAGE AND FUEL SYSTEMS

www.hexagon.no 32

LOOKING GOOD!

  • • Gas Distribution Products business set for strong growth Opportunities materializing
  • • Investing in R&D and business development / M&A capacity to enable long term growth

̵

  • • The economics for natural gas remain compelling, despite falling oil prices
  • • Hydrogen emerging as a major long term opportunity

QUESTIONS PLEASE

Jon Erik Engeset, CEO David Bandele, CFO

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