Hexagon Composites — Investor Presentation 2021

Aug 12, 2021

Q2 2021

Jon Erik Engeset, CEO David Bandele, CFO

12 August 2021

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 forwardlooking 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 12 August 2021, 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

• Q2 CEO update
• Summary Group highlights and financials
• Outlook
• Q & A
• Appendix: Segment financials & other material

An active quarter with multiple important contract awards

High order intake in Hexagon Agility for CNG/RNG fuel systems and strong rebound in Mobile Pipeline

4

Hexagon Ragasco benefitting from a strong European market and penetration of new geographies

Hexagon Digital Wave signed contract with Linde for Ultrasonic Examination testing equipment

Multiple sizeable contract awards for Hexagon Purus, including LTAs with Nikola and Air Liquide

Hexagon Purus accelerates its efforts in the maritime segment – focusing on Norway

Hexagon's low emission mobility solutions had a positive CO2 impact in the first half of 2021

Petroleum cars removed

Metric tons of GHG avoided

524,000 Acres of forest planted

Source: Calculated based on the Alternative Fuel Life-Cycle Environmental and Economic Transportation (AFLEET) tool from the Greenhouse gases, Regulated Emissions, and Energy use in Technologies (GREET®) model has been 5 used for estimating emission reductions, Greenhouse Gas Equivalencies Calculator | US EPA

Q2 2021 Financial Highlights 17% top-line growth when adjusted for FX

Revenues excl. Purus NOK 726 million (NOK 691 million Q2'20)

EBITDA excl. Purus NOK 71 million (NOK 38million Q2'20)

Hexagon Purus Revenues NOK 94 million EBITDA NOK -69 million

Solid order book for second half, but supply chain disruptions are challenging

• •Semiconductor shortage affecting Volkswagen LDV production
• •Longer lead times on components, e.g., chassis and battery cells
• •Increased materials and freight costs

EU's "Fit for 55" program further accelerates the transition to clean technologies

- 55% reduction of CO2 emissions from 1990 to 2030

Annual fleet CO2e emissions of medium- and heavy-duty trucks In million tons

"Fit for 55" proposal for commercial vehicles expected to be announced in 2022

RNG required for the transportation sector to significantly contribute to close the gap

Hexagon will join forces with other industry players and propose policies to further incentivize RNG

RNG is the only readily available fuel with immediate climate impact for commercial vehicles…

Well-to-wheel CO2-eq emissions, in g/km for class 7 truck

RNG with low to negative CO2 emissions

…and it is cost competitive with diesel

Total cost of ownership for a HDT long haul truck in the US

CNG/RNG prices are competitive and stable over time

US Retail Fuel Prices per DGE

2009-2021

CNG/RNG pump price has historically been significantly more stable than the one for diesel

Despite falling oil prices during the 2019 to 2021 period, the adoption of natural gas trucks in North America and Europe has seen unprecedented growth

Decision criteria moving from pure ROI focus to a more holistic focus, including carbon footprint and price visibility

The adoption potential of RNG in commercial transportation is substantial

Heavy duty trucks with RNG powertrain in the US, 2020 – 2030 k vehicles (total fleet: 359k vehicles)

Significant growth potential from today's ~5k vehicles, representing only 1% market share

Further regulatory incentivization required to unlock the full potential of RNG

In the long run, RNG will complement FCEV and BEV

Major fleets are opting for renewable natural gas solutions

Sample fleet owners

"Last year's purchase of LNG-powered trucks proved very successful and at the same time, aroused great interest from some of our customers in this type of ecological transport," said Kateřina Rázlová, director of the automotive division at DHL Supply Chain. The use of bio-LNG will enable another significant reduction in emissions."

"The world has a trash problem. And the world has an emissions problem. Renewable natural gas, produced naturally from bio sources such as landfills and dairy farms, turns trash into fuel," said Mike Casteel, UPS director of fleet procurement. "It's a winning solution that will help UPS to reach our ambitious sustainability goals."

"We are incredibly fortunate to work hand-inhand with our suppliers to identify new solutions, like RNG, to improve the sustainability of our fleet and reduce carbon emissions across our entire value chain," said Ingrid De Ryck, Vice President of Procurement and Sustainability at Anheuser-Busch

"Amazon is excited about introducing new sustainable solutions for freight transportation and is working on testing a number of new vehicle types including electric, CNG and others," the company said in a statement.

We are investing in additional production capacity to meet increased demand for RNG solutions

Hexagon is well positioned to reap the benefits of an accelerated transition to clean fuel solutions in the commercial transportation sector

Driving energy transformation

Q2 2021 Financials Hexagon (excl. Purus)

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Highlights from Q2 2021

• Solid NOK 537m revenue in g-mobility despite NOK -75 million FX headwinds
• Strong demand in Heavy-Duty Truck; OEM strike and other delays to chassis supply – NOK ~45 million impact in Q2
• Continued reduced volumes in Light-Duty due to semiconductor shortage
• Customer related delays in Mobile Pipeline NOK ~27 million impact in Q2

• Strong NOK 34m EBITDA in Hexagon Ragasco

• Strong volumes and profitability despite adverse mix and temporarily higher raw material input prices related to pandemic
• New SMART cylinder concept with major customers in Europe on track

• Hexagon Digital Wave

• Executing development of pipeline of digital product/services
• Hexagon Purus – publicly listed subsidiary
• Significant increase in revenues in Q2 and continued strong order backlog
• 75% ownership investment valued at ~ NOK 6bn1
• NOK 0.9 bn of cash reserves

Financial highlights Q2 2021

Hexagon (excl. Purus)

• Overall strong underlying sustainability driven demand in Heavy-Duty automotive sector
• 17% growth before FX headwinds of NOK -80m

• Strong backlog for Q3 onwards

• Significant growth from 2020 pandemic levels

• Some headwinds to margin from temporarily higher input prices mainly due to pandemic

• Lower depreciation and amortization levels

Hexagon g-mobility segment | Q2 2021

• Solid quarter for EBITDA despite negative impacts of NOK -72 million delays to sales and NOK -75 million FX headwinds
• Hexagon Agility saw continued strong US Truck demand; Pick up in Transit Americas; Medium-duty Truck pushed out to Q3/Q4; Mobile pipeline deliveries commenced on large Certarus order
• Light-Duty Q2 impacted negatively by global semi-conductor shortage mitigated somewhat by high activity towards Hexagon Purus

Revenue Share YTD Q2'21

Before eliminations

• Heavy-Duty/Medium-Duty Other
• Light-Duty Vehicles Mobile Pipeline

Hexagon Digital Wave I Q2 2021

NOKm

• Strong sales in Ultrasonic Examinations (UE) and Modal Acoustic Emission (MAE) machines
• Higher Opex driven by planned investment in organization to develop digitalization products pipeline

Hexagon Ragasco I Q2 2021

NOKm

• Continued strong quarter from high demand from European customers. Large order to South-Asia customer
• Unfavorable mix and temporarily higher raw material prices result in reduced margin

Hexagon proforma leverage | Q2 2021

•As of Q2 2021, Hexagon has a total NIBD of NOK 0.8 bn

• Total IBD of 1.1 bn and cash of NOK 0.3 bn
• Unsecured Bond NOK 1.1 bn. Maturing March 2023
• Secured Bank facility of NOK 0.6 bn undrawn
• Hexagon Purus currently debt free and holds cash of NOK 0.9 bn
• Hexagon Purus is ring-fenced from financial covenants in Hexagon loan agreements

Capacity expansion

g-mobility: US Heavy-Duty Truck growth

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Capacity expansion in US Heavy-Duty Truck sector

Why?	What?	When?
Significant growth in US CNG/RNG Truck adoption over the next 5 to 10 years	Up to USD 28 million (NOK 250 million) is pledged to invest in Salisbury plant to increase capacity by approx. 40%	Work will begin in Q3 2021 and is expected to be completed by Q1 2023
• Infrastructure available • Mature technology • Emissions benefit well accepted • CNG/RNG plentiful	• New building expansion in existing site adjoint to systems integration • Multiple discrete production lines for step-wise capacity increases • Synergies from shortening supply chains and enhanced business continuity from dual production site	• New plant will complement and add to existing capacity in Lincoln, Nebraska and Kassel, Germany • Ramp-up through 2023

Q2 2021 Financials Hexagon Group

Hexagon Group Balance sheet | Q2 2021 vs Q1 2021

Stronger balance sheet after listing and private placement of Hexagon Purus Equity Stronger balance sheet after listing and private placement of Hexagon Purus

Overall summary | Q2 2021

• Solid Q2 for Hexagon despite headwinds from delays in industry supply chains and currency movements year-over-year

• Demand for Heavy Duty US Truck and Transit bus very high
• Increasing demand for Mobile pipeline driven by strong rebound and RNG adoption
• Strong EBITDA generation from Hexagon Ragasco provides a solid platform for smart cylinder and other growth initiatives
• Hexagon Purus' opex and capex investment requirements are self-funded and ring-fenced from Hexagon's external financing obligations

Outlook & 2021 Full year guidance

Hexagon (excl. Purus) 2021 targets*

Substantial and profitable growth

Hexagon (excl. Purus) 2021 Guidance | as at Q2 2021

Q3 & Q4 expected to be strong but pandemic related impacts to industry supply chains may not be fully mitigated within 2021

		CURRENT 2021 EXPECTED PERFORMANCE TARGET TO	OPPORTUNITIES	RISKS
	HEXAGON AGILITY	• Continued sustainability driven adoption • Strong demand	• Productivity improvements	• Prolonged global pandemic related supply chain impacts
	HEXAGON CNG LDV	• Semi-conductor shortage impact continues to Q3	• Indonesia and India	• Prolonged shortage of electronic components
HEXAGON	HEXAGON RAGASCO	• Strong underlying demand	• Further orders in newer geographies	• Delays to expected orders in newer geographies • Short-term raw material price increases
	HEXAGON DIGITAL WAVE	• Investing in opex to extend existing profitable business

Hexagon Agility Medium & Heavy-Duty Vehicles

Decarbonization and sustainability focus drives demand

• Strong backlog for the second half of 2021 driven by:
• Very strong growth in Heavy-Duty Truck in North America and delayed sales from Q2
• Continued positive development in European Transit Bus
• Stable North America Transit Bus
• Refuse segments expected to be softer in 2H 2021 vs. 1H 2021, rebounding in 2022
• Supply chain delays related to chassis may persist

Hexagon Agility Mobile Pipeline

Rebound continues: Solid volumes for the remainder of 2021

• Good visibility and demand from diverse customer portfolio
• Orders from oil & gas, RNG, industrial gas and mobile refuelling units from North America
• Energy intensive and power generation orders from South America
• Received USD 8 million order from XNG for delivery in Q4'21
• New customer, REV LNG placed a USD ~8 million order for distribution of RNG
• Supply shortage of steel may cause chassis postponements

Hexagon CNG-LDV

Prolonged supply chain constraints

• Semiconductor shortage continues to affect VW and other automotive OEMs
• Expect improvement in Q4, albeit from low volumes
• Full recovery likely to take place at the end of 2021/ early 2022
• Production capacity utilized for hydrogen and European CNG/RNG bus customers

Hexagon Digital Wave

Expanding customer and product portfolio

• Expect stronger product mix to further drive activity in second half of 2021
• Signed agreement with Linde for UE testing equipment and service with estimated value of USD 2 million
• Organization and product development investments on track to realize future opportunities

Hexagon Ragasco

Seasonally softer demand from leisure customers

• Demand from European domestic markets on par with normal seasonal fluctuations
• Good demand from South Asia
• Smart cylinders pilot program developing according to plan
• Investing in R&D
• Preparing for launch in first half of 2022
• Entering new markets Trinidad & Tobago, Antigua and Barbuda

What are the 3 big things to look out for?

RNG uptake as fast-track alternative fuel to lower harmful emissions for commercial vehicles

Smart Cylinder digitalization of LPG product offering to accelerate adoption of Type-4 tanks versus steel

Smart systems digitalization and real-time monitoring of all highpressure Type-4 tanks driven by Modal Acoustic Emissions technology

2021 onwards 2022 onwards 2025 onwards

Hexagon proforma financial highlights (1/3)

• Hexagon (excl. Purus) provides clean solutions with strong ESG benefits
• g-mobility: (renewable) natural gas clean mobility solutions
• Ragasco: Portable LPG cylinders for household and leisure applications
• Digital Wave: smart technology for monitoring and testing of cylinder systems and creating circular economy by extending life expectancy

• Hexagon Purus provides clean and sustainable fuel solutions for battery electric and hydrogen vehicles

Segment proforma financial highlights (2/3)

• g-mobility provides (renewable) natural gas clean mobility solutions for Heavy and Medium Duty Vehicles (Agility), Mobile Pipeline (MP) and Light- Duty Vehicles (CNG LDV)
• Global leading provider within markets including Heavy-Duty/ Medium-Duty Trucks, Refuse Truck, Transit Bus, Gas Transportation, Refueling units and Passenger cars

Segment proforma financial highlights (3/3)

• World leading provider of LPG composite cylinders
• Delivered over 18 million cylinders worldwide
• Strategic agenda include IoT and digitalization providing connectivity and driving value chain transformation

Hexagon Digital Wave

• Proprietary safety technology Modal Acoustic Emission (MAE) technology for testing and certifying cylinders
• Strategic agenda include cylinder digitalization with real-timing monitoring, testing and certification, creating a circular economy through enabling life extension

Consolidated financial statements | P&L Hexagon Composites ASA

Income Statement (NOK 1 000)	Q2 2021	Q2 2020	31.12.2020	31.12.2019
Revenue from contracts with customers	787 641	681 285	3 070 865	3 404 209
Other operating income	418	1 594	9 511	11 915
Total revenue	788 060	682 879	3 080 375	3 416 124
Cost of materials	366 365	333 541	1 500 976	1 673 120
Payroll and social security expenses	255 628	229 235	941 425	853 706
Other operating expenses	163 470	101 301	448 348	599 209
Gain / Fair value adjustment earn-out				-69 625
Total operating expenses before depreciation	785 464	664 077	2 890 750	3 056 409
Operating profit before depreciation (EBITDA)	2 596	18 802	189 626	359 715
Depreciation and impairment	62 643	64 738	248 340	239 606
Operating profit (EBIT)	-60 047	-45 936	-58 714	120 109
Profit/loss from investments in associates and joint ventures	575	-134	-1 885	-749
Net financial items	-8 941	-39 046	7 757	-8 114
Profit/loss before tax	-68 413	-85 117	-52 841	111 246
Tax	3 714	-7 975	99 740	3 755
Profit/loss after tax	-72 127	-77 142	-152 582	107 491

Consolidated financial statements | Balance sheet & cash flow Hexagon Composites ASA

BALANCE SHEET (NOK 1 000)	31.06.2021	31.12.2020
ASSETS
Property, plant and equipment	796 587	747 266
Right-of-use assets	268 724	257 337
Intangible assets	2 020 422	2 105 569
Investment in associates and joint ventures	1 974	2 142
Non-current current assets	1 739	79 848
Total non-current assets	3 089 446	3 192 161
Inventories	882 729	740 639
Trade receivables	775 446	624 978
Contract assets (incl. prepayments)	1 016	814
Cash and short-term deposits	1 223 575	1 649 882
Total current assets continuing operation	2 882 766	3 016 313
Total assets	5 972 212	6 208 474
EQUITY AND LIABILITIES
Paid-in capital	2 175 542	2 165 590
Other equity	916 120	1 014 975
Equity attributable to equity holders of the parent	3 091 662	3 180 565
Non controlling interests	365 265	411 221

Total equity	3 456 926	3 591 786
Interest-bearing long-term liabilities	1 108 983	1 206 127
Lease liabilities	218 879	237 266
Other non-current liabilities	188 646	261 999
Total non-current liabilities	1 516 508	1 705 392
Interest-bearing current liabilities	0	0
Lease liabilities short-term	60 618	25 198
Contract liabilities (incl. prepayments from customers)	145 242	53 371
Other current liabilities	792 917	832 726
Total current liabilities	998 777	911 296
Total liabilities	2 515 285	2 616 688
Total equity and liabilities	5 972 212	6 208 474

CONDENSED CASH FLOW (NOK 1 000)	31.06.2021
Profit before tax from continuing operations	-156 523
Depreciation and write-downs	126 529
Change in net working capital and other	-70 379
Net cash flow from operations	-100 373
Net cash flow from investment activities	-124 148
Net cash flow from financing activities	-201 788
Net change in cash and cash equivalents	-426 308
Net currency exchange differences	0
Discontinued operations	0
Cash and cash equivalents at start of period	1 649 882
Cash and cash equivalents at end of period	1 223 575

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