Hexagon Composites — Investor Presentation 2016

Aug 18, 2016

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 18 August 2016, 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

SOFT HIGH-PRESSURE VOLUMES OFFSET STRONG LPG SALES

HIGHLIGHTS Q2 2016

• •Continued solid growth in the LPG segment
• • Low Mobile Pipeline® sales in the quarter but strong order intake
• ‒First delivery to the CNG rail segment in the US
• TITAN® XL received USDOT market approval
• • Overall soft CNG Automotive sales
• Strong US bus market
• Healthy Light-Duty development
• • Hydrogen opportunities evolving at a rapid pace
• • CNG Automotive Heavy-Duty merging with Agility Fuel Systems
• •Joint venture agreement in India

1ST QUARTER 2015 2ND QUARTER 2016 FINANCIALS

FINANCIAL HIGHLIGHTS Q2 2016

• • Key factor impacting profits this quarter:
• Weak High-Pressure volumes
• Positive impacts of cost initiatives
• Strong Low-Pressure performance
• • Strong transit bus but softer refuse and truck volumes in CNG North America
• •Steadily recovering Mobile Pipeline® volumes
• • Diverse sales and new customer orders in Low-Pressure Cylinders
• • Negative working capital movement
• Positive impact of reduced inventory offset by negative movements in current liabilities
• • Repayment of debt using new equity proceeds received at end of Q1

G k f i r o u p e y g u r e s	N O K i l l i m o n
O t i I p e r a n g n c o m e	3 1 6
E B I T D A	3 7
N f i t t e p r o	1 5

Q2 AND HALF-YEAR 2016 GROUP INCOME STATEMENT

N O K M I L L I O N	O S G T H R E E M N T H E N D I N		S O S G I X M N T H E N D I N			T W E L V E O S M N T H E N D I N G
	3 0. 0 6. 1 6	3 0. 0 6. 1 5	Va ia r nc e		3 0. 0 6. 1 6	3 0. 0 6. 1 5	Va ia r nc e	3 1. 1 2. 1 5
O in In t p e ra g c o m e	3 1 5. 6	4 1 3. 9	( ) 9 8. 3		6 0 7. 2	8 1 5. 5	( ) 2 0 8. 3	1 4 4 3. 9
O t ing p e ra e xp e ns e s	( 2 7 8. 6 )	( 3 7 6. 5 )	9 9 7.		( 5 5 1. 6 )	( 7 2 5. 3 )	1 3. 7 7	( 1 3 4 3. 8 )
E B I T D A	3 7. 0	3 7. 4	( 0. 4 )		5 5. 6	9 0. 2	( 3 4. 6 )	1 0 0. 1
De ia t io d im irm t p re c n a n p a e n	( 1 3 ) 7.	( 1 4. 2 )	( ) 3. 1		( 3 2. 6 )	( 2 ) 7. 5	( ) 5. 1	( 6 2. 6 )
E B I T	1 9. 7	2 3. 2	( ) 3. 5		2 3. 0	6 2. 7	( ) 3 9. 7	3 7. 5
S f p f / ( ) fro ha i t lo re o ro s s m ia t a s s o c e s	0. 0	0. 0	0. 0		0. 0	( 0. 1 )	0. 1	( 0. 3 )
O t he f ina ia l i t ( t ) r nc e m s ne	( 1. 3 )	( 3 4. 8 )	3 3. 5		( 7. 2 )	( 2 1. 0 )	1 3. 8	( 3 6. 9 )
Pr f i t / ( lo ) b fo t o s s e re ax	1 8. 4	( 1 1. 6 )	3 0. 0		1 8 5.	4 1. 6	( ) 2 5. 8	0. 3
Ta x ex p e ns e	( 3. 3 )	3. 4	( ) 6. 7		( 0. 3 )	( 1 2. 2 )	1 1. 9	3 4.
f / ( ) f Pr i t lo t t o s s a e r ax	1 5. 1	( 8. 2 )	2 3. 3		1 5. 5	2 9. 4	( 1 3. 9 )	4. 6

% E B I T D A	1 1. 7 %	9. 0 %	9. 2 %	1 1. 1 %		6. 9 %
E B I T %	6. 2 %	5. 6 %	3. 8 %	7. 7 %		2. 6 %
N E T P R O F I T %	4. 8 %	( 2. 0 ) %	2. 6 %	3. 6 %		0. 3 %

Q2 '16 V '15 INCOME STATEMENT HIGHLIGHTS

• • Low-Pressure increase NOK 26 million (+20%)
• NOK 13 million (25.4% margin)

• Tax effect of NOK -7 million

Positive effects of cost initiatives program help offset profitability impact of weak High-Pressure volumes

H1 '16 V '15 INCOME STATEMENT HIGHLIGHTS

• • Low-Pressure increase NOK 44 million (+19%)
• Low-Pressure increase
• •NOK 13 million (23.6% margin)
• throughout 2015
• • Tax effect of NOK +12 million

Weak High-Pressure volumes have negatively impacted year-over-year profit growth; turnaround within Q3

SEGMENT SHARES Q2 2016

BEFORE GROUP ELIMINATIONS*

106

52

3156High-Pressure: CNG Automotive (Global) High-Pressure: Mobile Pipeline® High-Pressure: Hydrogen SHARE OF OPERATING INCOME21372130High-Pressure: CNG Automotive (Global) High-Pressure: Mobile Pipeline® Low-Pressure: LPG (Propane) Q2 2016 NOK415*millionNOK317*millionQ2 2015

• Low-Pressure: LPG (Propane)

www.hexagon.no

SEGMENT SHARES Q2 2016

BEFORE GROUP ELIMINATIONS*

Q2: HIGH-PRESSURE CYLINDERS

• •Improving Mobile Pipeline® sales; good order intake
• •Strong transit bus demand in USA; soft outside USA
• •Weak Heavy-Duty volumes; Backlog supports up-tick in Q3
• •Continued profits in European Light-Duty Vehicles
• •Hydrogen sales to ground storage applications
• •Dispute settlement - NOK 5 million positive P&L impact

O O N K M I L L I N	S U M M A R Y F I N A N C I A L S
	Q 2 2 0 1 6	Q 2 2 0 1 5	Va ia r nc e
O in In t p e ra g c o m e	1 6 0. 9	2 8 0 5.	( 1 2 4. 1 )
O t ing p e ra e xp e ns e s	( 1 6 1. 0 )	( 2 7 4. 7 )	1 1 3. 7
E B I T D A	( 0. 1 )	1 0. 3	( 1 0. 4 )
De ia t io d im irm t p re c n a n p a e n	( 1 1. 4 )	( 1 1. 2 )	( 0. 2 )
E B I T	( 1 1. ) 5	( 0, 9 )	( 1 0. 6 )

Q2: LOW-PRESSURE CYLINDERS

• •Strong sales to core markets
• • New sales and orders to European, African and South American markets
• • Continued development of customised product offerings: branding and design

N O K M I L L I O N	S C S U M M A R Y F I N A N I A L
	Q 2 2 0 1 6	Q 2 2 0 1 5	Va ia r nc e
O t in In p e ra g c o m e	1 6. 5 5	2 6. 1
O ing t p e ra e xp e ns e s	( ) 1 1 6. 7	( ) 1 0 3. 9	( ) 1 2. 8
E B I T D A	3 9. 8	2 6. 5	1 3. 3
De ia t io d im irm t p re c n a n p a e n	( 5. 7 )	( 2. 7 )	( 3. 0 )
E B I T	3 4. 1	2 3. 8	1 0. 3

GROUP CASH MOVEMENTS Q2 2016

Repaid all outstanding bank loans – Group is in a net cash position

FINANCIAL POSITION V PREVIOUS QUARTER

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

New equity significantly delevers the Balance Sheet

•

• ̵ Repaid outstanding bank loans with equity proceeds
• • Negative working capital effects in quarter
• Inventory being steadily reduced after large bulk purchases – positive impact
• Reduced Accounts Payable balances and realisation of deferred income – negative impact

DEBT REPAID RESULTING IN BALANCE SHEET WITH SIGNIFICANT CAPACITY

FURTHER INFORMATION ON IMPACTS TO FINANCIAL REPORTING

• • Hexagon Group's heavy and medium duty CNG business will be transferred to new Agility Fuel Solutions company of which Hexagon Group will own 50%
• •Close targeted for 1st October 2016
• •Group reporting as is up to and including Q3
• • The new venture will be reported under equity method
• Share of Profit/loss will be reported on one line in the P&L
• Share of Assets and Liabilities will be reported on one line within Investments in Joint Ventures and associates
• •A significant gain will arise from the transaction
• • Further information will be available in due course postclosing; establishing the final carve-out opening position will be complex and requires time
• • Please refer to attachment to Q2 release for more information based on non audited proforma statements

CNG AUTOMOTIVE

• • US transit bus systems market remains strong
• • Temporarily slow European and RoW transit bus market
• ‒Uptick expected in second half of the year
• • North America heavy-duty truck and refuse backlog supports volume uptick in second half of the year
• • Profitable growth expected from Light-Duty Vehicles segment
• new models to be launched late Q3 and 2017

MOBILE PIPELINE®

• • Satisfactory order backlog for second half of 2016
• • Environmental legislation in the US and elsewhere is a strong medium term driver
• New SMARTSTORE® meets demand for smaller footprint and lower unit cost
• • Entering the CNG-for-rail market with new joint venture
• CNG provides cost savings and significant emissions reduction over diesel

Washington Post, 11 August 2016

HYDROGEN

• • Getting ready
• ‒ From prototype development to serial production
• • Several initial product orders received and long-term agreements under negotiation
• • Sales volume increase expected from coming quarters

Photo: Toray Industries

CONTINUED LPG MARKET ROLL-OUT

C E k t u r o p e o r e m a r e s –	E N t u r o p e e w c u s o m e r s –	f R t W l d e s o o r
S d k t d l t i o n m a r e e e o p m e n n u v E k t c o r e u r o p e a n m a r e s	I i t t i i n c r e a s n g p e n e r a o n n n e w E k t u r o p e a n m a r e s	S f l k t i A i e e r a n e m a r e s n r c a, v w A i d S h E A i t t m e r c a s a n o u a s s a
B l e n e u x • F r a n c e • S d i i c a n n a v a • S i t l d w z e r a n • U i d K i d t n e n g o m •	N t i i t i e c s o m e r s n e s n g w u x k t m a r e s : A t i u s r a • G r e e c e • I l t a y • N k t e w m a r e s : L b u x e m o u r g • P l d o a n • R i o m a n a •	A l n g o a • N i i g e r a • U d g a n a • S h l l e y c e e s • D i i R b l i o m n c a n e p u c •

DELIVERING ON STRATEGIC AGENDA –FROM PRODUCT TO SOLUTIONS SUPPLIER

T i / P h i t t r a n s a c o n s a r n e r s p s	S i i l t t t r a e g c r a o n a e
& C M i t i i t t s u o n v e s m e n • d i l l i t t a n s r a e g c a a n c e	D i i t h r v e o r g a n c g r o w i i t t o p p o r u n e s
f A i i t i B i l i c q s o n o r a a n u z • t i t t s s e m s n e g r a o r y J i i I d i t t o n v e n u r e n n a •	E h d k b i l i t t n a n c e m a r e c a p a y	E d h i t x e n g e o g r a p c • f i f i l i t t t t t o o p r n o a c a e i h t o r g a n c g r o w
M i t h A i l i t F l e r g e r w g y u e • S t y s e m s	B i l d l b l i d t t u a g o a n e g r a e l f N G V f l t p a y e r o r u e s y s e m s d l t i a n s o o n s u	P t i t h l d i a r n e r e a n g w • l i t t p a y e r s n a r g e k d t t m a r e s a n s e g m e n s
P i b l J V i h M i i & t t o s s e w s u • C d T I d t i o a n o r a y n u s r e s	T k i i i i t t a e a p r o m n e n p o s o n n t h d l t f e e v e o p m e n o J h d i t a p a n e s e r o g e n s o c e y y	O f f i d t t l e r s e r v c e s a n o a • l t i t l i t s o o n s o c o m p m e n u 's H e x a g o n c o r e d d t p r o u c s a n h l t e c n o o
C G f N i l j i t t o r- r a o n e n r e v u • -	D l l i i t e v e o p n e w a p p c a o n s f M b i l P i l i ® o r o e p e n e t h l i e c n o o g e s	g y

www.hexagon.no

AGILITY FUEL SOLUTIONS

• • Taking Hexagon Lincoln CNG Automotive from products to fuel systems and solutions
• Transit Buses
• Refuse Trucks
• ‒Heavy-Duty Trucks
• •Fully integrated supplier
• •Global ambition
• • Very strong management team
• Freeing up management and business development capacity for other High-Pressure segments

Agility Fuel Systems 160 DGE BTC

OUTLOOK

• • High-Pressure demand gradually getting firmer
• ‒Q4 looks good
• • Low-Pressure continues double-digit year-over-year growth
• ‒Second half of year seasonally softer than first half
• • Environmental arguments supporting growth in many markets and segments
• • Economic CNG value proposition improving with higher oil price, but current level still hampering US CNG Automotive segment
• • The Hydrogen opportunity is materializing
• … but the market is developing "from scratch"

QUESTIONS PLEASE

Jon Erik Engeset, CEO David Bandele, CFO