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Hexagon Composites Investor Presentation 2015

Feb 11, 2016

3619_rns_2016-02-11_e4b6f49e-df22-4213-bded-cf61d9fcc140.pdf

Investor Presentation

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4QUARTER 2015 TH

Oslo, 11 February 2016

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 11 February 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

CHALLENGING YEAR BEHIND US

HIGHLIGHTS Q4 2015

  • •Green agenda gaining momentum
  • •Profitability restored
  • •CNG truck and bus remains robust
  • •Improved but still weak Mobile Pipeline™
  • • Good performance in the LPG segment driven by breakthrough in Saudi Arabia
  • • Nominated by a leading international vehicle modifier to supply CNG tanks to passenger cars in a 5-year program

The Washington Post

www.hexagon.no

1ST QUARTER 2015 4TH QUARTER 2015 FINANCIALS

FINANCIAL HIGHLIGHTS Q4 2015

  • • Key factors in returning to profits this quarter:
  • Higher volume contribution in LPG and Mobile Pipeline™
  • Positive impacts of cost initiative programs
  • • Continued good underlying growth in CNG North America with better cost efficiencies
  • • Increased recurring sales in LPG in seasonally low quarter
  • • EBITDA level profit in European Light-Duty Vehicles
  • • Positive working capital performance with underlying reduction in inventories
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FINANCIAL SCORECARD

PRELIMINARY FULL YEAR 2015*

Through 2015 we have:

  • • Delivered growth in the heavy-duty truck and transit bus business
  • • Responded swiftly to challenging market conditions within our Mobile Pipeline™ business
  • • Executed initiatives to deliver over NOK 70 million of cost reductions in 2016
  • • Achieved net profit for the Group despite the negative impacts felt within High-Pressure segment
  • •Retained a strong equity ratio of 39.5%
  • • Generated positive cash flow of NOK 106 million from core operations and operating working capital
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Repositioned cost base ready for overall profit growth in 2016

*Preliminary unaudited financials

www.hexagon.no

Q4 2015 SUMMARY GROUP INCOME STATEMENT

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*Preliminary unaudited financials

Q4 '15 V '14 INCOME STATEMENT HIGHLIGHTS

  • Includes positive USD FX impacts of c. NOK 69 million
  • • Low-Pressure decline NOK 39 million (-26%)
  • margin)
  • • Low-Pressure decline NOK 4 million (15.1% margin)
  • whilst asset base increases in High Pressure •
  • ˗ Included NOK 7 million impairment charge primarily on one piece of equipment
  • Financial items effect of NOK -2
  • Effect from Rugasco JV NOK +7 million
  • •Tax effect of NOK +18 million

Positive return to profitability despite lower sales volumes than record quarter Q4 2014

2015* V 2014 INCOME STATEMENT HIGHLIGHTS

  • High-Pressure decline NOK 52 million (-5%)
  • Includes positive USD FX impacts of c. NOK 269 million
  • • Low-Pressure decline NOK 155 million (-28%)
  • High-Pressure decline NOK 180 million (3.4% margin)
  • • Low-Pressure decline NOK 73 million (16.3% margin)
  • Prior years' asset base well depreciated in Low-Pressure whilst asset base increases in High Pressure
  • Included NOK 7 million impairment charge on one piece of equipment
  • Financial items effect of NOK -27 million ( FX -9; Interest +4; Other -22)
  • • Effect from Rugasco JV NOK +9 million
  • Tax effect of NOK +82 million
  • •Divestment profit effect -4 million

Mobile Pipeline™ downturn and absence of large one-time orders in LPG Y-o-Y substantially drove negative profit development

•

*Preliminary unaudited financials

www.hexagon.no

SEGMENT SHARES Q4 2015

BEFORE GROUP ELIMINATIONS*

179

87108High-Pressure: CNG Automotive (Global) High-Pressure: Mobile Pipeline™ Low-Pressure: LPG (Propane) SHARE OF OPERATING INCOME155195147High-Pressure: CNG Automotive (Global) High-Pressure: Mobile Pipeline™ Low-Pressure: LPG (Propane) Q4 2015 NOK497*millionNOK373*millionQ4 2014

SEGMENT SHARES Q4 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)

Q4: HIGH-PRESSURE CYLINDERS

  • • Continued solid heavy-duty and transit demand in North America; improved production and delivery efficiencies
  • •Still relatively low sales of Mobile Pipeline™ solutions
  • •EBITDA profit for Light-Duty Vehicles
  • • Positive NOK 6 million one-time impact of cost initiatives; additional NOK 3 million positive one-time impact
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  • •Profits despite seasonally lower sales levels
  • •High uptime utilisation with balanced manning
  • • Completion of significant investment milestones towards production line flexibility
  • • Positive underlying momentum on recurring topline growth continues
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SEGMENT SHARES 2015*

SHARE OF OPERATING INCOME

  • High-Pressure: CNG Automotive (Global)
  • High-Pressure: Mobile Pipeline™
  • Low-Pressure: LPG (Propane)
  • * Preliminary unaudited financials

  • ** Before Group eliminations

  • High-Pressure: CNG Automotive (Global)

  • High-Pressure: Mobile Pipeline™
  • Low-Pressure: LPG (Propane)

www.hexagon.no

SEGMENT SHARES 2015*

  • High-Pressure: CNG Automotive and Mobile Pipeline™

  • Low-Pressure: LPG (Propane)

  • High-Pressure: CNG Automotive and Mobile Pipeline™

  • Low-Pressure: LPG (Propane)

  • * Preliminary unaudited financials

  • ** Before Group eliminations

www.hexagon.no

GROUP CASH MOVEMENTS Q4 2015

Balanced inflows and outflows; maintaining good cash buffer

FINANCIAL POSITION V PREVIOUS QUARTER

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Managed net Interestbearing debt levels (NOK 301 million)

  • Positive net operational cash generation
  • ̵ Positive operating working capital movements primarily from US inventory reduction
  • Capital expenditures of NOK 46 million primarily in CNG US and LPG sites

CONTINUED STRONG BALANCE SHEET

PROFITABILITY DRIVE: REBALANCING OUR COST-BASE

  • • Hexagon Raufoss (Light-Duty Vehicles) restructuring completed end October '15
  • Annualized cost reductions in excess of NOK 12 million
  • • Further cost saving measures completed end October '15, 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 PIPELINETM

  • • Short term demand negatively impacted by low oil prices
  • Projects are postponed, but not cancelled
  • Natural gas economical for High Horse Power projects even at today's oil price
  • Purchase orders are again received in target segments, albeit in modest numbers
  • • Pursuing railroad opportunities in the US
  • CNG provides cost savings and emission reduction over diesel
  • • Re-direction of sales efforts to opportunities outside the US

TITAN® XL passed structural container testing for US DOT application

A SOLUTION TO LOCAL POLLUTION

• Increased environmental advocacy to reduce local pollution

MOBILE PIPELINETM

  • • Mobile Pipeline™ solutions enable industry to switch from oil to natural gas ‒reduced NOx and CO2 emissions
  • •…and economically advantageous

CNG AUTOMOTIVE

  • • North American Heavy-Duty segment remains robust
  • • Transit bus demand strong in North America ‒Somewhat slow start of year in Europe and RoW
  • • Improved prospects for Light Duty Vehicles following cost reductions and improved demand

LPG GLOBAL MARKETING DRIVE

www.hexagon.no

LPG – STRONG UNDERLYING GROWTH

LPG sales 2012 – 2015

HYDROGEN –THE FUTURE

Hydrogen is:

  • •100% clean & 100% renewable
  • • The most abundant element in the universe and available to every nation
  • • Required in order to meet globally agreed targets on emissions and climate change

A FUEL CELL VEHICLE IS AN ELECTRIC VEHICLE FUELED BY HYDROGEN

H2+ O2 > Energy + H20

www.hexagon.no

BATTERY ELECTRIC VS FUEL CELL ELECTRIC

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1 Assuming comparable range

Sources: FuelEconomy.gov, C.E.Thomas, PhD, H2Gen Innovations, Inc

GROWTH IN PASSENGER CARS REPRESENTS A HUGE ENVIRONMENTAL CHALLENGE

1 Annual growth rates for light duty vehicle sales in developing and industrialized countries assumed to be 3.8% and 1.6% respectively Source: Navigant research (total vehicle sales); Frost & Sullivan (geographical split)

FUEL CELL VEHICLE MARKET WILL GROW STRONGLY

  • • Leading car manufacturers are now introducing fuel cell vehicles (FCV) as an alternative to battery electric and diesel/gasoline
  • • Based on known programs as of today ~410,000 fuel cell vehicles (FCV) will be delivered in 2025 –implying a global adoption of ~0.4%
  • • Additional programs expected to be launched over the next couple of years

…. AND IT HAS HAPPENED BEFORE

HEXAGON COMPOSITES POSITIONED ACROSS THE HYDROGEN VALUE CHAIN

OUTLOOK

  • • Increased focus on local and global emissions driving demand for natural gas, biogas and hydrogen.
  • • The Heavy-Duty Vehicle segment remains robust
  • • The Mobile Pipeline™ business challenging short term
  • • Expecting further market adoption of our LPG cylinders around the world
  • •Strong momentum in Hydrogen

QUESTIONS PLEASE

Jon Erik Engeset, CEO David Bandele, CFO

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