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Hexagon Composites Investor Presentation 2015

Oct 29, 2015

3619_rns_2015-10-29_f12a43ac-26d8-46f8-b014-3751e3d25afe.pdf

Investor Presentation

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3 QUARTER 2015 RD

Oslo, 29th October 2015

Jon Erik Engeset, CEO David Bandele, CFO

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 29th October 2015, 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

CHALLENGING QUARTER

OPERATING REVENUES

HIGHLIGHTS Q3 2015

  • •Weak Mobile Pipeline™ sales
  • •Robust volumes in Heavy-Duty segment
  • •Seasonally weak LPG demand
  • • 5 year long-term distribution agreement for LPG cylinders to Saudi Arabian market
  • • Increased number of projects and market opportunities in Hydrogen
  • • Raufoss Light-Duty Vehicles restructured according to plan
  • Operationally integrated with Hexagon Ragasco
  • • Renewed focus on vehicle particulate emissions around the world

1ST QUARTER 2015 3RD QUARTER 2015 FINANCIALS

FINANCIAL HIGHLIGHTS Q3 2015

  • • Overall profitability impacted by:
  • Weak volumes and one-off relocation costs of NOK 9 million volume in Mobile Pipeline™
  • Seasonal weakness in LPG
  • Losses in Light-Duty Vehicles
  • Higher fixed cost base
  • • Strong underlying growth in CNG North America with better cost efficiencies
  • • Good overall working capital performance despite operational losses
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Q3 '15 V '14 INCOME STATEMENT HIGHLIGHTS

  • High-Pressure decline NOK 22 million (-10%)
  • Includes positive USD FX impacts of c. NOK 67 million
  • • Low-Pressure decline NOK 70 million (-53%)
  • High-Pressure decline NOK 74 million (-18% margin)
  • • Low-Pressure decline NOK 42 million (+4.3% margin)
  • Prior years' asset base well depreciated in Low Pressure whilst asset base increases in High Pressure
  • Low Pressure effect NOK +8 million
  • High Pressure effect NOK -1 million
  • Financial items effect of NOK 18 million (Other +3; FX -23; Interest +2)
  • • Effect from Rugasco JV NOK +1 million
  • Tax effect of NOK +38 million

Profitability impacted negatively by lower Mobile Pipeline™ and low seasonal LPG volumes

•

˗

SEGMENT SHARES Q3 2015

BEFORE GROUP ELIMINATIONS*

1831563High-Pressure: CNG Automotive (Global) High-Pressure: Mobile Pipeline™ Low-Pressure: LPG (Propane) 114104133High-Pressure: CNG Automotive (Global) High-Pressure: Mobile Pipeline™ Low-Pressure: LPG (Propane) Q3 2015 NOK351*millionNOK261*millionQ3 2014

SHARE OF OPERATING INCOME

SEGMENT SHARES Q3 2015

BEFORE GROUP ELIMINATIONS*

  • High-Pressure: CNG Automotive and Mobile Pipeline™

  • Low-Pressure: LPG (Propane)

  • High-Pressure: CNG Automotive and Mobile Pipeline™

  • Low-Pressure: LPG (Propane)

Q3: HIGH-PRESSURE CYLINDERS

  • •Very weak sales of Mobile Pipeline™ solutions
  • • Continued solid heavy-duty demand in North America; strong global transit bus market
  • •Light-Duty Vehicles losses has led to restructuring action
  • •Production move of TITAN™ cost NOK 9 million
  • • High fixed cost relative to outlook precipitates need for additional cost saving measures
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  • •Seasonally low sales
  • • Low production capacity utilization also due to summer shut-down period
  • •Break-even operating profit despite low volumes
  • • Positive underlying momentum with various new market prospects
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GROUP CASH MOVEMENTS Q3 2015

Working capital drive offsetting operational losses

FINANCIAL POSITION V PREVIOUS QUARTER

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Maintained net Interestbearing debt levels (NOK 292 million)

•

  • Weak Mobile Pipeline™ sales drives lower operational net cash generation
  • Positive operating working capital movements
  • Capital expenditures of NOK 42 million

CONTINUED STRONG BALANCE SHEET

PROFITABILITY DRIVE: REBALANCING OUR COST-BASE

  • • Hexagon Raufoss (Light-Duty Vehicles) restructuring completed end October
  • Annualized cost reductions in excess of NOK 12 million
  • • Further cost saving measures to be taken in Q4, mainly in Lincoln
  • Annualized fixed and indirect cost reductions in excess of NOK 60 million
  • • Organization to remain agile for growth short and long term

1ST OUTLOOK AND KEY ACTIONS

QUARTER 2015

MOBILE PIPELINE™

  • • Improvement from Q3 into Q4, however order intake remains slow
  • • Large projects extend "virtual pipeline" use
  • Paper mill in North East US
  • CNG distribution terminal in North West US
  • • Continued belief in significant growth opportunities
  • CNG is a convincing economic value proposition for high horsepower users
  • Growing global interest in bio gas

CNG AUTOMOTIVE

  • • North American Heavy-Duty segment remains robust
  • ‒Further market opportunities outside the US
  • ‒ Our solutions support tighter environmental regulations
  • • Transit bus growing strongly in Europe and US
  • ‒2015 record year for transit bus systems deliveries
  • ‒ Renewed focus on emissions likely to stimulate demand further
  • • 10 year extension to Supplier of Choice agreement with MAN Truck & Bus

Raufoss: 1000 systems built in 2015 (per August)

LOW-PRESSURE CYLINDERS LPG

  • • Hexagon Ragasco solidifies its position as the #1 global supplier of composite LPG cylinders
  • • First deliveries to Gasco in Saudi Arabia in Q4
  • •Product launch in Taiwan
  • • Increased momentum in certain African markets
  • supported by the promotion of LPG over bio-material for heating and cooking
  • •Continued good traction in Italy

QATAR PHASING OUT METAL CYLINDERS

Gulf Times, September 27, 2015

"We are phasing out these metal cylinders off the market and the customer response to the campaign was excellent."

Woqod CEO, Ibrahim al-Kuwari

LIGHT DUTY FUEL CELL VEHICLES IN DEVELOPMENT

Toyota Mirai Toyota SUV Mercedes Benz F-Cell Mercedes-Benz F 105

Honda FCEV Honda FCX Clarity Volkswagen HyMotion Audi A-7 Sportback

Hyundai Tucson General Motors

FCEV

Nissan TeRRA FCEV BMW Grand Turismo 5

WELL POSITIONED ACROSS THE HYDROGEN VALUE CHAIN

  • • Multiple market opportunities opening up
  • ‒ Strong OEM interest in Hydrogen storage systems for FCVs (Fuel Cell Vehicles)
  • ‒ Growing demand for storage tanks from Hydrogen Refueling Stations (HRS) segment with several introductory orders in 2015
    • • a precursor for growth in other tank segments
  • ‒ Storage of Hydrogen at production sites
    • •"Hydrogen battery"
  • ‒ Transportation solutions for Hydrogen from production sites to Hydrogen Refueling Stations (HRS)

New HRS at Oslo Airport opened 4 September 2015 Photo: HYOP AS

HYDROGEN REFUELING STATION (HRS) INFRASTRUCTURE DEVELOPMENT

Source: Hexagon analysis based on International Source: H2stations.org by LBST infrastructure programs by LBST (Autumn 2014)

www.hexagon.no

KEY ACTIONS TO RESTORE GOOD PROFITABILITY

  • • Execute cost reduction program within Q4 2015
  • •Strong focus on sales
  • • Further develop financing solutions for customers
  • • Further reduce material cost
  • "all-carbon"
  • procurement
  • • Leverage new production technology at Hexagon Ragasco to increase customer value

"Green machines"

OUTLOOK SUMMARY

  • • Mobile Pipeline™ improving in Q4 but way to go to full recovery
  • Several prospects due in 2016
  • • Expecting further market adoption of our LPG cylinders around the world in 2016
  • • Cost saving measures will give positive contribution from Q4 and full effect from Q1 2016
  • • The increased global focus on local emissions will drive demand for natural gas, biogas and other alternative fuels
  • • Hydrogen is a major growth opportunity, and Hexagon is well positioned to take a leading position

QUESTIONS PLEASE

Jon Erik Engeset, CEO David Bandele, CFO

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