Hexagon Composites — Investor Presentation 2016

Feb 22, 2017

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 22 February 2017, 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

HIGHLIGHTS FROM Q4 2016

• • Growth of 19% in revenue in the LPG segment versus Q4 2015
• Awarded several significant contracts in the quarter
• • Solid Mobile Pipeline® sales in the quarter
• New large order for North American oil & gas industry for delivery mainly in Q1 2017
• • Signed LoI with Nel and PowerCell Sweden to establish a JV to pursue hydrogen opportunities
• • Closed the Agility Fuel Solutions merger
• Steady revenues for first reported quarter
• • xperion acquisition signed and closed
• Significant post acquisition integration effort

1ST QUARTER 2015 4TH QUARTER 2016 FINANCIALS

CHANGES IN ACCOUNTING DURING Q4 SIMPLIFIED

FINANCIAL HIGHLIGHTS Q4 2016

Q 4 2 0 1 5				Q 4 2 0 1 6 *
Gr ke f ig ou p y ur es O N K i l l io m n	Ac l tu a Re te d p or ba is s	C N G no w d t to ca rv e ou Ag i l i ty J V	Pr fo Ex o rm a io xp er n is i t io ac q n u	Pr fo Ex o rm a io xp er n is i t io ac q n u	Xp io er n is i io t ac q u n	Ac l tu a Re te d p or ba is s
Op t ing In er a co m e	3 7 1	( 1 4 6 )	2 2 6	2 7 6	7 1	3 4 7
E B I T D A	4 1	( 4 3 )	( 2 )	3 1 4	1	3 1 5
Ne f i / ( los ) t p t ro s	1 1	N / A	N / A	N / A	N / A	1 9 3

• • Key factors impacting EBITDA this quarter:
• One-off net gain NOK +348 m (after M&A costs of NOK 33 m)
• Deconsolidation of CNG Automotive business NOK -17 ^m
• M&A costs related to xperion NOK -16 ^m
• Other one-off items or movements in accruals NOK -30 ^m
• Hydrogen business unit in "investment" phase NOK -10 ^m
• •Net profit impact – recognised tax accrual of NOK 122 m against the one-off gain
• • xperion acquisition consolidated
• Net NOK 1 m EBITDA contribution when combining profitable main operations site in Germany with losses in start-up phase US division

^*Preliminary unaudited financials – new business combination

Q4 2016 GROUP INCOME STATEMENT

	T H R E	O S E M N T H E N	O S G T W E L V E M N T H E N D I N
N O K M I L L I O N	3 1. 1 2. 1 6 *	3 1. 1 2. 2 0 1 5	V i a r a n c e	3 1. 1 2. 1 6 *	3 1. 1 2. 2 0 1 5
O i I t p e r a n g n c o m e	3 4 1 7,	3 1, 4 7	( ) 2 4, 3	1 2 2 0, 5	1 4 4 3, 9
O i t p e r a n g e x p e n s e s	( 3 8 0, 6 )	( 3 3 0, ) 5	( ) 5 0, 1	( 1 1 9 3, 8 )	( 1 3 4 3, 8 )
G E t i l i c e p o n a a n s x	3 4 8, 2	0, 0	3 4 8, 2	3 4 8, 2	0, 0
E B I T D A	3 1 4, 7	4 0, 9	2 7 3, 8	3 7 4, 9	1 0 0, 1
D i t i t i b l e p r e c a o n o n a n g e s	( ) 1 3, 4	( ) 1 4, 8	1, 4	( ) 5 9, 8	( ) 4 9, 0
A i i d i i t t t m o r s a o n a n m p a r m e n	( 1 2, 6 )	( 7, 4 )	( 1 ) 5,	( 1 5, 8 )	( 1 3, 6 )
E B I T	2 8 8, 7	1 8, 6	2 7 0, 1	2 9 9, 3	3 7, 5
S h f f i / ( l ) f i t t a r e o p r o o s s r o m a s s o c a e s	( 7, 8 )	( 0, 1 )	( ) 7, 7	( 7, 8 )	( 0, 3 )
f A t i t i i t i t i b l m o r s a o n o a s s o c a e s n a n g e s	( ) 3, 2	0, 0	( ) 3, 2	( ) 3, 2	0, 0
O h f i i l i ( ) t t t e r n a n c a e m s n e	2 7, 2	( 3, 8 )	3 1, 0	1 4, 0	( 3 6, 9 )
f / ( ) f P i t l b t r o o s s e o r e a x	3 0 4, 9	1 4, 7	2 9 0, 2	3 0 2, 3	0, 3
T a x e x p e n s e	( 1 1 2, 0 )	( 3, 9 )	( 1 0 8, 1 )	( 1 0 4, ) 5	4, 3
P f i / ( l ) f t t t r o o s s a e r a x	1 9 2, 9	1 0, 8	1 8 2, 1	1 9 8 7,	4, 6
E B I T D A %	9 0. 7 %	1 1. 0 %		3 0. 7 %	6. 9 %
E B I T %	8 3. 2 %	0 % 5.		2 4. % 5	2. 6 %
N E T P R O F I T / ( L O S S ) %	5 5. 6 %	2. 9 %		1 6. 2 %	0. 3 %

*Preliminary unaudited financials – after incorporation of Agility and xperion M&A transactions and related costs and adjustments

REVENUE WALK Q4 2016*

Effect of carve-out of business to Agility merger larger than that of xperion acquisition

*Preliminary unaudited financials

www.hexagon.no

EBITDA WALK Q4 2016*

Normalised EBITDA shows modest underlying improvement after effects of M&A transactions

*Preliminary unaudited financials

www.hexagon.no

SEGMENT SHARES Q4 2016

BEFORE GROUP ELIMINATIONS*

SHARE OF OPERATING INCOME

Q4: HIGH-PRESSURE CYLINDERS

• • Solid Mobile Pipeline® sales
• Deliveries to large industrial orders
• • Hydrogen business unit still in early growth phase
• ˗Orders and prospects are increasing ahead of realized sales
• ˗NOK 10 million negative effect within quarter
• • MasterWorks business generating new income opportunities but still dilutive to profit
• • Unusuals totaling NOK 26 million negatively impacted the quarter spread between indirect impacts of M&A and movements in accruals

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 4 2 0 1 6	Q 4 2 0 1 5	Va ian r ce
Op ing Inc t er a om e	2 2 1, 3	2 6 4 5,	( ) 4 4, 1
Ex t ion l Ga in ce p a	3 4 8, 2	0, 0	3 4 8, 2
Op ing t er a ex p en se s	( 2 4 5, 1 )	( 2 3 8, 6 )	( 6, ) 5
E B I T D A	3 2 4, 4	2 6, 8	2 9 6 7,
De ia t ion tan i b les p re c o n g	( ) 8, 8	( ) 1 0, 3	1, 5
Am isa ion d im irm t t t or a n p a en	( 1 2, 0 )	( 7, 8 )	( ) 4, 2
E B I T	3 0 3, 6	8, 7	2 9 4, 9

Q4: AGILITY FUEL SOLUTIONS

• •Revenues USD 36.8 million
• • Reported EBITDA of USD 1.6 million; "Adjusted" EBITDA of USD 3.3 million
• •Net debt USD 1.5 million
• • All results are preliminary and subject to final audit approval especially in relation to taxes, IFRS and Purchase Price Allocation adjustments. Relevant disclosures will be included in the final audited Annual Report and Accounts in March 2017

Q4: AGILITY FINANCIAL EFFECTS FOR GROUP REPORTING

• •Net gain on transaction within EBITDA of NOK 348 million
• •Deferred Tax accrual on Gain = NOK 122 million
• • Share of profit/(loss) in Q4 = NOK -11 million of which -8 m is from operations and -3 m is depreciation from related intangible assets
• •Total share of Equity on transaction date = NOK 971 million
• • Amount of Intangible assets recognized subject to depreciation = NOK 244million

Q4: LOW-PRESSURE CYLINDERS

• •19% year-over-year sales growth
• • Deliveries to new Asian and South American markets in the quarter
• •Strong Order book position and prospects for 2017
• • Movement in accruals totalling NOK -4 million and productivity inefficiencies negatively impact profitability

N O K M I L L I O N	S U M M A R Y F I N A N C I A L S
	Q 4 2 0 1 6	Q 4 2 0 1 5	ian Va r ce
Op t ing Inc er a om e	1 2 8, 7	1 0 8, 1	2 0, 6
Op t ing er a ex p en se s	( 1 1 4, 3 )	( 9 1, 7 )	( ) 2 2, 6
E B I T D A	1 4, 4	1 6, 4	( ) 2, 0
De ia t ion d im irm t p re c a n p a en	( 4, 4 )	( 4, 0 )	( ) 0, 4
Am isa ion d im irm t t t or a n p a en	0, 0	0, 0	0, 0
E B I T	1 0, 0	1 2, 4	( ) 2, 4

FINANCIAL POSITION V PREVIOUS QUARTER

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

• • Intangibles increase due to purchase price and earn-out consideration excess over book values
• Tangibles, inventories and receivables reduce with carve out of assets contributed to Agility JV
• • Investments in JV and associates recognises our share of the Agility JV
• • Cash reduces due to M&A considerations

•

• • Equity increased by gain on Agility transaction
• • Other non current liabilities includes earn-out xperion and deferred tax provision for Agility transaction
• • Other Current liabilities increase with xperion; Reductions from Agility carve out offset by movements in deferred income and amounts owed to Agility

*Preliminary unaudited financials

LARGE IMPACT OF M&A TRANSACTIONS

QUARTER 2015 Unaudited Preliminary FULL YEAR 2016P & L

SUMMARY COMMENTS 2016 FULL YEAR

• • Low-Pressure delivered 24% top-line growth
• • Lower sales versus 2015 in High-Pressure mainly due to:
• ˗ Lower Mobile Pipeline® & Heavy-Duty US truck and rest of world transit bus volumes through Q3
• Net impact of excluding CNG business merged into Agility versus including acquired xperion business
• • Cost initiatives helped dampen effects of lower High-Pressure volumes
• • High direct and indirectly related costs in a year of significant strategic and M&A activity

	2 0 1 6 *	2 0 1 5
G ke f ig in N O K ro up y ur es	Ac tu l a	Ac tu l a
i l l io m n	Re te d p or	Re te d p or
	ba is s	ba is s
O t in In p er a g co m e	1 2 2 1	1 4 4 4
E B I T D A	3 7 5	1 0 0
f / ( ) Ne t p i t lo ro ss	1 9 8	4

719735670002001008001.3009001.5004001.4005003001.1001.2001.000600NOKm1.1491.221∆ Low xperion Pressure+21(+2%) FY'16 reported Carve-out 2016 impact ∆ High Pressure-671 -771.444FY'16 pre xperion Carve-out Re-based2015 impact FY'15 actual1.129

2016 was a good year for Low-Pressure but remained a challenging year for High-Pressure

*Preliminary unaudited financials

www.hexagon.no

SEGMENT SHARES FULL YEAR 2016

BEFORE GROUP ELIMINATIONS*

Q1 to Q3 2016 only

67121 ²⁷⁵ 5129405High-Pressure: CNG Automotive (Global) ex LDV High-Pressure: Light-Duty Vehicles (LDV) High-Pressure: Mobile Pipeline® High-Pressure: Hydrogen High-Pressure: MasterWorks & Other 3565938 ^{243 44} 495High-Pressure: CNG Automotive (Global) ex LDV High-Pressure: Light-Duty Vehicles (LDV) High-Pressure: Mobile Pipeline® High-Pressure: Hydrogen High-Pressure: MasterWorks & Other SHARE OF OPERATING INCOME2016NOK1 452*millionNOK1 235*million2015

Low-Pressure: LPG (Propane)

• Low-Pressure: LPG (Propane)
• www.hexagon.no

22

EBITDA WALK FULL YEAR 2016*

Effect on Group EBITDA of moving to Equity accounting for the Agility business is significant

*Preliminary unaudited financials

www.hexagon.no

FINANCIAL SCORECARD RECAP

PRELIMINARY FULL YEAR 2016*

• • Injected NOK 666 million in equity from strong strategically aligned partner
• • Market cap increased by NOK 1.4 billion to NOK 4.5 billion over the calendar year
• •Funded significant strategic M&A
• •Reduced Net debt by NOK 60 million
• •Retained a strong equity ratio of 55%

Stabilised our financial position, enabled non-organic growth and positioned for synergies

*Preliminary unaudited financials

www.hexagon.no

INTEGRATION OF XPERION AND HEXAGON

INTO A FOCUSED HIGH-PRESSURE STRUCTURE

MOBILE PIPELINE®

• •Good order book for Q1
• • Mobile Pipeline® regains traction in North America
• Rebound in onshore gas rig count
• New competitors entering the scene
  • •Margin pressure
• Continued lumpy demand
• • Biogas = Renewable Natural Gas (RNG) gains ground
• North America:
  • •Ontario (Canada) announced Natural Gas Grant program
• Europe:
  • • Increasing interest for biogas as a vehicle fuel, especially for transit buses and trucks
  • • Financial support systems for the use of biogas are in place in most European countries

Hexagon Lincoln TITAN® XL Trailer

REBOUND IN NORTH AMERICAN ONSHORE RIG COUNT

POSITIVE DATA POINT FOR MOBILE PIPELINE® DEMAND

1 06741601002003004005006007008009001 0001 100Jul/15 Sep/15 Nov/15 Nov/16 Jan/16 Mar/16 May/16 Jul/16 Mar/17 Sep/16 Jan/17 # rigs +651(+156%)

North America onshore O&G rig count Comments

• • US and Canada onshore O&G rig count is a precursor for North American onshore gas activity
• • Strong and steady uptick since bottom in May 2016
• • February 10th count showed +651 rigs (+156%) versus May 2016
• •Back to Q3/Q4 2015 levels

Source: Baker Hughes (Data per 10 February 2017)

MOBILE PIPELINE®

• •Good order book for Q1
• • Mobile Pipeline® regains traction in North America
• Rebound in onshore gas rig count
• New competitors entering the scene
  • •Margin pressure
• ‒Continued lumpy demand
• • Biogas = Renewable Natural Gas (RNG) gains ground
• North America:
  • •Ontario (Canada) announced Natural Gas Grant program
• Europe:
  • • Increasing interest for biogas as a vehicle fuel, especially for transit buses and trucks
  • • Financial support systems for the use of biogas are in place in most European countries

Hexagon Lincoln TITAN® XL Trailer

LIGHT-DUTY VEHICLES CNG

• • The combined Hexagon and xperion businesses have created a global market leader within this market segment
• • Improving market prospects and phasingin of new CNG models in 2017
• •Re-fit market in Indonesia remains active

Hexagon CNG fuel cylinder displayed at Indonesian BKV news channel 6 October 2016

HYDROGEN

• •Extreme increase in interest and project leads
• • Acquisition of xperion has significantly strengthened Hexagon's market and technology position
• • Signed Letter of Intent with Nel ASA and PowerCell Sweden AB to establish a JV
• Initial focus on marine & maritime projects
• Hydrogen car ferry projects are emerging
• • The business unit is still in a very early development stage
• Will remain loss making short and medium term

The first hydrogen ferry? Photo: Multi Maritime/Fiskerstrand

The world's first hydrogen regional trains Photo: Alstom – Coradia iLint

REFUELING INFRASTRUCTURE TAKING SHAPE

constructionSource: California Fuel Cell Partnership

Source: Ludwig-Bölkow-Systemtechnik

constructionSource: H2 Mobility

* Hexagon Composites estimates

** California Air Resources Board (www.arb.ca.gov)

www.hexagon.no

MAJOR INDUSTRY PLAYERS TAKING A STANCE

"Hydrogen energy holds the trump card for energy security and measures to address global warming. Our regulatory reforms thus far will soon open the way to a hydrogen society of the future here in Japan."

Shinzō Abe, Prime Minister of Japan 20 January 20 2017

www.hexagon.no

AGILITY FUEL SOLUTIONS

• • 2017 Heavy Duty Market expected to be stagnant
• Growth expected to resume towards the end of the year
• • Biogas stimulating demand in several countries / states
• First refuse orders delivered in the US
• • Tighter oil market would stimulate demand
• • Optimization initiatives will improve profitability and competitiveness

The Times, 9 February 2017

LPG CYLINDERS

• •Strong order book
• • High capacity utilization in first half of 2017
• At a point where capacity increase has to be considered
• • Investing in process, technology and product improvements

OUTLOOK – SUMMARY

• •Mobile Pipeline® outlook positive but limited visibility from Q2
• •Sound market growth expected for Light-Duty Vehicles
• • Momentum in the Low-Pressure area remains strong
• Market demand visibility points to continued double-digit growth
• • Stagnant short term market for Agility but better market signals towards end of 2017
• •Integration of xperion according to plan and synergies will be realized in 2017
• •Continued position shift from product supplier to solutions provider
• Growth and harvesting synergies main priorities short and medium term

INTERNATIONAL ENERGY AGENCY (IEA) PREDICTS SHIFT TO RENEWABLES AND NATURAL GAS

• • IEA sees major role for natural gas
• Enormous growth potential within the industrial, building and transportation sectors
• • A new global energy mix is taking shape
• Natural gas will supplement a range of forms of renewable energy
• • Biogas sector in Europe is growing steadily
• By 2020 all regions in UK will have fueling stations available

Global shares of primary energy

Source: BP February 2015 Energy Outlook

QUESTIONS PLEASE

Jon Erik Engeset, CEO David Bandele, CFO