Hexagon Composites — Investor Presentation 2023

Feb 16, 2023

Q4 2022

Jon Erik Engeset, CEO David Bandele, CFO

16 February 2023

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 16 February 2023, 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

• Highlights
• Business update
• Financials
• Outlook
• Summary and Q & A

• Appendix: Segment financials & other material

Q4 2022: A strong finish to a challenging year

Hexagon (excl. Hexagon Purus) revenue of NOK 1.3bn and EBITDA of NOK 105m

Input costs remain at inflated levels

Group revenue of NOK 1.5bn - all-time highs in all business areas

Healthy order books going into 2023

Driving Energy Transformation

In 2022, our solutions avoided

1.35 million ¹

metric tons of CO2 equivalents

1) Number is subject to full-year review. Source: Calculated based on the Alternative Fuel Life-Cycle Acres of forest saved Environmental and Economic Transportation (AFLEET) tool from the Greenhouse gases, Regulated Emissions, and Energy use in Technologies (GREET®) model has been used for estimating emission reductions, Greenhouse Gas Equivalencies Calculator | US EPA

280,000

Petroleum cars off the road for one year

1.5 million

Full year 2022 key financials

Hexagon excl. Purus

Revenue: NOK 4 303 million (NOK 3 278 million)

EBITDA: NOK 347 million (NOK 381 million)

Hexagon Purus

Revenue: NOK 964 million (NOK 508million)

EBITDA: NOK -406 million (NOK -272 million)

Hexagon Group

Revenue: NOK 4 932 million (NOK 3 543 million)

EBITDA: NOK -65 million (NOK 109 million)

Macro trends strongly supporting all of Hexagon's businesses

Majors investing in RNG

Next generation Mobile Pipeline entering the market

Entering 2023 on a firm footing but still some headwinds

• Good visibility on Hexagon Digital Wave growth

2024

The natural gas adoption in the North American Truck segment is set for significant growth from 2024

Cummins' 15L engine being fully released

• Cummins' first natural gas engine specifically designed for heavy-duty truck applications
• Offering better fuel economy, efficiency and range
• Opens additional heavy-duty market of around 200-250k vehicles per year for natural gas solutions

US heavy-duty truck addressable market for natural gas solutions (# trucks sold per year)

Hexagon Purus on a steady track to 2025 ambition of NOK 4-5bn

Hexagon Purus facilities under construction on three continents

Financials

Q4 2022 Highlights Record topline while supply chain disruptions and inflation still weigh on margin

NOK 1 billion revenue in Hexagon Agility

• 23% top-line growth overall with strong revenues in Mobile pipeline
• Low margin as price rises lag input cost increases

NOK 234 million revenue in Hexagon Ragasco

• 37% revenue growth driven by high demand
• Scale efficiency and positive customer mix contribute to healthy margin

NOK 46 million revenue in Hexagon Digital Wave

• Tripling of revenues driven by Modal acoustic technology services & Ultrasonic Examination machine sales
• Strong EBITDA from increased volume

Hexagon Purus – publicly listed subsidiary

• Close to doubling revenue and exceeding 2022 guidance
• 73% ownership investment valued at ~ NOK 5.4 bn1

Financial highlights | Q4 2022 Hexagon (excl. Purus)

NOKm • 26% Revenue growth

• 14% growth excluding FX effects in
• Strongest performances in Ragasco, Mobile Pipeline and Digital Wave
• Continued margin pressure y-o-y from:
  • Sales prices lagging input cost increases in Heavy-Duty business
  • Output inefficiencies caused by supply chain disruptions in the US

Financial highlights | Full Year 2022* Hexagon (excl. Purus)

• 31% Revenue growth

• 22% growth excluding FX effects
• Solid volumes across the board
• Continued margin pressure y-o-y from:
  • Softer profitability in Hexagon Agility

Hexagon Agility | Q4 2022

• Refuse Truck Mobile Pipeline
• Cylinder sales to Hexagon Purus / LDV

• 23% Revenue growth

• Strong Mobile Pipeline sales
• Strong Refuse and American transit volumes
• Increasing effect of passthrough price adjustments
• Continued margin pressure from:
  • Elevated carbon fiber price and other key materials
  • Suboptimal efficiency from supply disruptions
  • Low volumes in light-duty vehicles

MD/HD: Medium-Duty/Heavy-Duty

Hexagon Agility | Full Year 2022*

• 33% Revenue growth
  • Record Mobile Pipeline sales
  • Strong Refuse and Medium-Duty volumes
• Continued margin pressure from:
  • Same factors as for Q4

Diversified revenue streams supporting critical infrastructure and decarbonization targets

Hexagon Ragasco | Q4 2022

• 37% Revenue growth

• Record revenue with positive mix and necessary pass-through pricing

• Positive margin development:

• Scale efficiency & mix
• Price offsets material cost rises

Hexagon Ragasco | Full Year 2022*

• 22% Revenue growth

• Extra demand from Europe and Middle-East offsetting lower sales to Asia
• 14 new introductory orders contributing an additional 5% of volumes

• Positive margin development:

• Better scale, while price increases offset material cost rises from Q2 onwards
• Increase of ~ NOK 12 m in y-o-y energy costs to be recouped in 2023

Resilient business with recovering profitability

Hexagon Digital Wave | Q4 2022

• 3x Revenues

• Healthy mix of Modal Acoustic Emission (MAE) services and Ultrasonic Emission (UE) product businesses
• Increasing adoption of both technologies in cylinder inspection and requalification
• Launched new application: Ultrasonic Examination to qualitycheck steel cylinders within the manufacturing process

Hexagon Digital Wave | Full Year 2022*

• Doubling revenues year-over-year
• Profitable growth achieved despite heavy ramp-up of activities

Asset-light business model with proprietary technology and services included in core offering

2022 Financials Hexagon Group

Overall summary | Full Year 2022¹ Record topline for both Group companies

1) 2022 = Preliminary and unaudited

25 2) Post eliminations between Purus and Hexagon (excl. Purus) of NOK -243million in Revenue and -1 in EBITDA, please refer to Appendix for additional Group financial results.

Hexagon Group Balance sheet | Q4 2022 vs Q3 2022 Strong balance sheet impacted by USD/NOK currency movements¹

Liabilities & Equity

Interest bearing debt

NOKm

26 1) 9% quarter-to-quarter reduction in NOK:USD rate, reduces balance sheet values originating in USD.

US capacity expansion on track

• New capacity to be on-stream in 2024 to support growing demand
• Sale and lease-back transaction concluded for existing production building in Salisbury
  • − Gross proceeds of USD 16.3 million, strengthening liquidity
• Construction commenced on new building expansion and long-lead equipment secured
  • − Lessor assumes USD 13.8m construction cost

Hexagon proforma leverage | Q4 2022

• Available liquidity of NOK 684 million
• Sales and lease back of Salisbury building generated Gross proceeds of USD 16.3 million, strengthening balance sheet

• As of Q4 2022, Hexagon has a total NIBD of NOK 1,341 million

• Total IBD of NOK 1,673 million and cash of NOK 332 million
• Hexagon Purus currently holds cash of NOK 382 million and IBD of NOK 44 million
  • Hexagon Purus is ring-fenced from financial covenants in Hexagon loan agreements

reported

reported

Hexagon (ex Purus) 2022¹ Financial & ESG Scorecard Strong demand for our sustainable solutions

1) 2022 = Preliminary and unaudited 2) As of 15 February 2023.

3) CO2 equivalents. Number is subject to full-year review.. 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 used for estimating emission reductions, Greenhouse Gas Equivalencies Calculator | US EPA

Outlook

Revised 2022 guidance exceeded Strong finish to the year from a solid Q4

Preliminary outlook for 2023

Demand outlook

Mobile Pipeline Strong RNG driven growth

Transit & Refuse Resilient volumes

Heavy-duty Truck Some uncertainty, risk that volumes will be pushed into 2024

LPG cylinders Healthy outlook and strong sales pipeline

MAE & UE Strong UE sales growth expected and visible MAE trailer requalification volumes

Revenue

Overall expecting healthy growth across most segments, however, uncertainty related to Heavy-duty Truck volumes moving to 2024

EBITDA

Gradual margin improvement expected in 2023. High commodity prices, unstable supply chains and potentially lower volume efficiency continue to weigh on profitability

Key takeaways

Record high 2022 revenue

33

Gradual margin improvements expected in 2023

Hexagon Purus with strong order backlog supporting further growth

2025 revenue targets:

Hexagon excl. Purus: NOK 6bn Hexagon Purus: NOK 4-5bn

Appendix

Investor relations information

Ingrid Aarsnes Vice President, IR & ESG Email: ingrid.aarsnes@hexagongroup.com Direct: +47 950 38 364

David Bandele Chief Financial Officer Email: david.bandele@hexagongroup.com Direct: +47 920 91 483

36

Hexagon proforma financial highlights (1/3)

• Hexagon (excl. Purus) provides clean solutions with strong ESG benefits
  • Hexagon Agility**: (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

*2020: preliminary unaudited pro-forma figures after adjusting for reorganizations; 2021 segment reported and is after central/corporate and eliminations within the segments

** previously referred to as g-mobility and being rebranded to be consistent with other reported segments and ahead of transferring operational responsibility of CNG LDV business to Hexagon Agility by 1.1.22

1) Correction from NOK 57m ; 2) Correction due to reclassification ; 3) Correction from NOK -57m

Segment proforma financial highlights (2/3)

• Hexagon Agility provides (renewable) natural gas clean mobility solutions for Heavy and Medium Duty Vehicles (Agility Fuel Solutions), 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, Mobile Refueling units and Passenger cars

*Previously referred to as g-mobility and being rebranded to be consistent with other reported segments and ahead of transferring operational responsibility of CNG LDV business to Hexagon Agility by 1.1.22;

2020: preliminary unaudited pro-forma figures after adjusting for reorganizations; 2021 segment reported

1) Correction due to reclassification38

Segment proforma financial highlights (3/3)

• World leading provider of LPG composite cylinders
• Delivered over 20 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

Group cash Q4 2022

Hexagon (excl. Purus) cash up NOK 126m to NOK 332m with strong cashflow from operations and sale & leaseback proceeds Hexagon Purus cash down NOK 99m to NOK 382m due principally to growth related activities with active working capital management

been included in Agility segment reporting in 2020

Consolidated financial statements | P&L Hexagon Composites ASA

INCOME STATEMENT (NOK 1 000)	Q4 2022	Q4 2021	31.12.2022	31.12.2021	31.12.2020	31.12.2019
Revenue from contracts with customers	1 479 523	1 185 120	4 913 016	3 534 016	3 070 865	3 404 209
Other operating income	12 202	45	14 361	4 845	0	0
Rental income	1 692	2 007	4 929	3 354	9 511	11 915
Total revenue	1 493 417	1 187 173	4 932 306	3 542 890	3 080 375	3 416 124
Cost of materials	849 028	619 252	2 656 515	1 695 497	1 502 305	1 673 120
Payroll and social security expenses	417 954	322 840	1 496 709	1 101 298	940 096	853 706
Other operating expenses	237 287	194 091	843 721	637 512	448 034	599 209
Gain / Fair value adjustment earn-out						-69 625
Total operating expenses before depreciation	1 504 269	1 136 183	4 996 946	3 434 307	2 890 435	3 056 409
Operating profit before depreciation (EBITDA)	-10 853	50 990	-64 660	108 584	189 940	359 715
Depreciation and impairment	90 151	71 525	332 162	262 680	249 212	239 606
Operating profit (EBIT)	-101 003	-20 536	-396 802	-154 096	-59 272	120 109
Profit/loss from investments in associates and joint ventures	-9 326	-3 008	48 317	-2 957	-1 885	-749
Net financial items	-22 685	-72 141	-70 082	-144 691	5 018	-8 114
Profit/loss before tax	-133 014	-95 685	-418 567	-301 744	-56 138	111 246
Tax expense	-15 595	1 747	7 869	25 833	91 643	3 755

Consolidated financial statements | Balance sheet Hexagon Composites ASA

BALANCE SHEET (NOK 1 000)	31.12.2022	31.12.2021
ASSETS
Property, plant and equipment	1 329 515	1 010 625
Right-of-use assets	473 233	282 309
Intangible assets	2 570 853	2 384 524
Investment in associates and joint ventures	53 272	7 024
Other non-current financial assets	115 998	379
Other non-current assets	4 942	2 489
Deferred tax	0	13 678
Total non-current assets	4 547 813	3 701 029
Inventories	1 546 497	1 147 004
Trade receivables	865 403	880 396
Contract assets (incl. prepayments)	9 488	4 165
Other current financial assets	0	1 162
Other current assets	188 782	181 281
Bank deposits, cash and similar	713 547	600 209
Total current assets	3 323 717	2 814 217
Total assets	7 871 530	6 515 246

BALANCE SHEET (NOK 1 000)	31.12.2022	31.12.2021
EQUITY AND LIABILITIES
Paid-in capital	2 228 442	2 194 303
Other equity	764 461	911 989
Equity attributable to equity holders of the parent	2 992 903	3 106 291
Non controlling interests	476 893	378 010
Total equity	3 479 796	3 484 301
Interest-bearing liabilities (non-current)	1 482 140	1 166 057
Lease liabilities (non-current)	480 405	230 276
Other financial liabilities (non-current)	231 244	190 529
Pension liabilities	2 231	4 645
Deferred tax liabilities	200 775	247 160
Provisions (non-current)	6 133	11 686
Total non-current liabilities	2 403 017	1 850 353
Interest-bearing liabilities (current)	234 674	13 635
Lease liabilities (current)	71 187	62 455
Trade payables	564 486	392 747
Contract liabilities (incl. prepayments from clients)	548 643	277 658
Other financial liabilities (current)	75 051	-
Income tax payable	57 662	47 201
Other current liabilities	344 455	320 150
Provisions (current)	102 557	66 747
Total current liabilities	1 998 716	1 180 592
Total liabilities	4 401 733	3 030 945
Total equity and liabilities	7 871 530	6 515 246

Consolidated financial statements | Cash flow Hexagon Composites ASA

CONDENSED CASH FLOW (NOK 1 000)	31.12.2022	31.12.2021
Cash flow from operating activities
Profit before tax	-416 893	-301 744
Depreciation, amortization and impairment	332 162	262 680
Net interest expense	81 774	52 166
Changes in net operating working capital (1)	65 699	-455 250
Other adjustments to operating cash flow	16 530	97 452
Net cash flow from operating activities	77 599	-344 696
Purchase of property, plant & equipment, net of proceeds from sale	-488 208	-301 238
Proceeds from sale of property, plant and equipment	161 003	37 392
Purchase of intangible assets	-75 359	-59 755
Interest received	15 207	4 394
Acquisition of subsidiaries, net of cash	-	-146 189
Investment in associated companies	-65 379	- 8 580
Other investments	-45 319	-1 109
Net cash flow from investing activities	-498 056	-475 085
Net repayment (-) / proceeds (+) from interest bearing loans	-534 747	-126 771
Interest payments on interest-bearing liabilities	-89 697	-49 901
Repayment of lease liabilities (incl. Interests)	-81 672	-70 716
Net proceeds from share capital increase (subsidiary)	189 043	-
Net proceeds from purchase (-) and sale (+) of own shares	-30 495	9 543
Net cash flow from financing activities	521 926	-237 846
Net change in cash and cash equivalents	101 469	-1 057 627
Net currency exchange differences	11 869	7 954
Cash and cash equivalents at start of period	600 209	1 649 882
Cash and cash equivalents at end of period	713 547	600 209

1) Net operating working capital: Inventories, trade receivables, contract assets, trade payables, and contract liabilities