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Hexagon Composites
Quarterly Report • May 11, 2023
3619_rns_2023-05-11_ae1d97bb-87b8-4875-bd2f-02786860a346.pdf
Quarterly Report
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Q1 2023
A word from the CEO
Dear Shareholders,
Resolving the energy trilemma - delivering secure, clean, and affordable energy remains high on the global agenda. According to DNV, the clean energy transition is the greatest driver of increased investment in renewables, with strong regulatory support on both sides of the Atlantic.
And while the path to carbon-neutrality is developing, the efforts to accelerate sustainable transportation are significant. Renewable natural gas (RNG), hydrogen, and battery electric technologies are enabling the switch, and Hexagon is a leading player.
Topline growth year over year
The Hexagon Group generated revenues of NOK 1 261 (1 016) million representing growth of 24%, driven by higher volumes, improved pricing as well as favorable FX translation effects. EBITDA amounted to NOK -29 (-9) million driven by the ramp-up costs in Hexagon Purus.
Hexagon Agility's margins have not yet been restored to a satisfactory level. Supply bottlenecks have eased, however, some procurement categories remain challenging. Several initiatives are being undertaken, and we expect to see improvements throughout 2023. A new leadership structure has been implemented in Hexagon Agility, with Hans Peter Havdal as CEO and Andrew Griffiths and Eric Bippus as executive vice presidents.
Major milestones reached by Hexagon Purus
Hexagon Purus reached major milestones in the quarter including a major distribution agreement with Hino Motors Sales U.S.A., Inc. to assemble battery electric heavy-duty trucks for the U.S. market at a value of up to USD 2 billion. In addition, Hexagon Purus secured financing of NOK 1.3 billion with Mitsui & Co. as anchor investor and strategic partner and transferred to the main market of Oslo Stock Exchange.
In January, Hexagon Purus opened its new cylinder production site in Westminster, Maryland, and in April it opened its new engineering and manufacturing facility for battery and hydrogen storage systems in Kelowna, British Columbia.
Looking ahead
The fundamental market drivers are strong for all Hexagon's business segments. The launch of Cummins' 15-liter natural gas engine in 2024 will increase the addressable heavy duty truck market for CNG systems by a factor of three, but short term we experience a somewhat softer demand in this segment. The outlook for Mobile Pipeline systems remains very strong, albeit also with temporary supply chain challenges, and Hexagon Digital Wave sees continued strong growth, partly driven by requalification of older Mobile Pipeline units. Hexagon Ragasco enjoys robust demand in its home markets and has a promising pipeline of opportunities across markets and segments. Hexagon Purus is faced with a booming market in all its segments and is on track to deliver on its highly ambitious plans.
Best regards,
Jon Erik Engeset President & CEO, Hexagon Group
Highlights Q1 2023 and after balance sheet date
- Hexagon Purus secured financing of NOK 1 300 million and transferred to the Oslo Stock Exchange's main list
- Hexagon Purus signed an agreement with Hino Motors for productions of battery-electric heavy-trucks worth up to USD 2 billion, and a landmark multi-year agreement with Panasonic for the supply of battery cells.
- Hexagon Digital Wave continued its growth path and delivered 3x revenue growth
- Hexagon Ragasco received introductory orders from three new customers and further increased its global presence
- Hexagon Agility's Mobile Pipeline business received a USD 25.6 million contract for its newly launched 450 TITAN module
- Hexagon Agility's automotive business still challenged by margin compression due to cost inflation and supply chain disruptions
Key figures
| (NOK millions) | Q1 2023 | Q1 2022 | YTD 2023 | YTD 2022 |
|---|---|---|---|---|
| Hexagon Agility | ||||
| Revenue | 898 | 731 | 898 | 731 |
| EBITDA | 34 | 52 | 34 | 52 |
| EBIT | -13 | 12 | -13 | 12 |
| Hexagon Ragasco | ||||
| Revenue | 188 | 162 | 188 | 162 |
| EBITDA | 47 | 33 | 47 | 33 |
| EBIT | 38 | 24 | 38 | 24 |
| Hexagon Digital Wave | ||||
| Revenue | 45 | 15 | 45 | 15 |
| EBITDA | 2 | -4 | 2 | -4 |
| EBIT | 0 | -5 | 0 | -5 |
| Corporate/eliminations1) | ||||
| Revenue | -2 | 5 | -2 | 5 |
| EBITDA | 0 | 3 | 0 | 3 |
| EBIT | -4 | -2 | -4 | -2 |
| Hexagon excl. Hexagon Purus | ||||
| Revenue | 1 130 | 913 | 1 130 | 913 |
| EBITDA | 83 | 84 | 83 | 84 |
| EBIT | 21 | 29 | 21 | 29 |
| Hexagon Purus 2) | ||||
| Revenue | 244 | 159 | 244 | 159 |
| EBITDA | -112 | -93 | -112 | -93 |
| EBIT | -140 | -115 | -140 | -115 |
| Eliminations 3) | ||||
| Revenue | -113 | -56 | -113 | -56 |
| EBITDA | 0 | 0 | 0 | 0 |
| EBIT | 0 | 0 | 0 | 0 |
| Hexagon Group | ||||
| Revenue | 1 261 | 1 016 | 1 261 | 1 016 |
| EBITDA | -29 | -9 | -29 | -9 |
| EBIT | -119 | -85 | -119 | -85 |
1) Corporate/eliminations refers to holding- and non-operating entities within the Hexagon excl. Hexagon Purus and eliminations within the Hexagon excl. Hexagon Purus
2) Hexagon Purus is a separate segment within the Hexagon Group
3) Eliminations refers to eliminations between entities within Hexagon excl. Hexagon Purus and entities within Hexagon Purus
Financial summary
Hexagon excluding Hexagon Purus
In the first quarter of 2023, Hexagon excluding Hexagon Purus reported revenues of NOK 1 130 (913) million, representing 24% growth compared to the same quarter last year driven by higher volumes, improved pricing as well as favorable FX translation effects. Excluding FX translation effects of NOK 112 million, underlying revenue growth was 12% compared to Q1 2022.
Hexagon excluding Hexagon Purus recorded EBITDA of NOK 83 (84) million for the quarter, generating an EBITDA margin of 7 % (9 %). Lower profitability in Hexagon Agility was offset by improved profitability in Hexagon Ragasco.
Hexagon Agility's margins remained compressed in the quarter due to high input costs and supply chain disruptions in the automotive medium and heavyduty business. There are, however, signs of improvement, especially in the Mobile Pipeline business, with distinctly improved margins quarter over quarter.
Hexagon Ragasco delivered recurring stable and high volumes during the first quarter and benefitted from favorable currency effects.
Hexagon Digital Wave tripled its revenues in the first quarter of 2023 compared to the same quarter last year, generating positive EBITDA.
Hexagon Purus
In the first quarter of 2023, Hexagon Purus revenues grew 53% year-over-year to NOK 244 (159) million. Hydrogen distribution systems accounts for the majority of revenues, while the hydrogen fuel systems business, the battery-electric systems business and the vehicle integration business are expected to pick up in later quarters and beyond, supported by recent major contract wins. EBITDA for the Hexagon Purus came in negative as expected, at NOK -112 (-93) million.
Hexagon Purus ASA raised gross NOK 1 300 million in capital in March 2023, including NOK 500 million in equity and NOK 800 million in a convertible bond issue. Hexagon Composites ASA did not participate in the equity private placement and effectively reduced its shareholding from 73.3% to 68.4% following the capital raise. As such Hexagon Purus remains fully consolidated in the Hexagon Group accounts.
Hexagon Group
Hexagon Group (including Hexagon Purus) generated NOK 1 261 (1 016) million in revenues in the first quarter of 2023, representing growth of 24%, or 12% after excluding positive FX translation effects.
EBITDA for the Group was NOK -29 (-9) million for the quarter due to the negative profit in Hexagon Purus. Profit after tax was NOK -171 (-113) million. Profit/loss from associated companies amounted to NOK -5 (-1) million while other financial items were NOK -53 (-14) million. Other financial items consist of net interest expenses of NOK -51 (-13) million, foreign exchange fluctuation effects of NOK 9 (-6) million, unrealized gain/loss on derivatives of NOK -9 (5) million and other items of NOK -1 (0) million.
Tax charges were NOK -5 (11) million. The tax charges do not include any credits for carried-forward tax losses within Hexagon Purus as conditions for deferred tax asset recognition are, prudently, not yet deemed to be met.
At quarter end, the Group balance sheet amounted to NOK 9 445 compared to NOK 7 903 million as of year-end 2022. The increase in total assets during the quarter is mostly explained by the NOK 1 300 million capital raise in Hexagon Purus in March 2023. The Group's equity increased by NOK 746 million mostly a result of the NOK 500 million of equity private placement in Hexagon Purus as well as the equity component of the NOK 800 million convertible bond issuance of NOK 278 million. The Group's equity ratio increased from 44% to 45% during the quarter.
Key developments during the quarter
- Hexagon Purus raised NOK 1 300 million in gross proceeds through a combined capital raise of NOK 500 million in equity private placement and NOK 800 in a convertible bond issuance, securing the necessary funds to execute on the strategy as well as transferring from Euronext Growth to the Oslo Stock Exchange's main market. Mitsui contributed capital of NOK 500 million alone and signed a Memorandum of Understanding for additional investments of up to NOK 1,500 million in the coming years.
- Hexagon Digital Wave's Ultrasonic Examination (UE) Machines selected to verify Type 1 cylinder production at CP Industries, representing a new application of UE technology.
- Hexagon Agility received new orders from CORE Automated Fueling Solutions and RenewGas Transportation for Mobile Pipeline® TITAN modules totaling USD 9.2 million
- Hexagon Agility launched the next generation Mobile Pipeline® TITAN 450 modules and received an inaugural order from Certarus of USD 25.6 million
- Hexagon Agility received fuel system orders for UPS heavy-duty renewable natural gas trucks totaling USD 19 million under the current master services agreement
- Hexagon Purus selected by Deutsche Bahn to deliver mobile hydrogen refueling stations and stationery storage and selected as supplier of hydrogen cylinders for the third year in a row by New Flyer, North America's largest mass mobility solutions provider.
- Hexagon Purus signed an agreement with Hino Motors Sales U.S.A., Inc. where Hexagon Purus will produce complete battery electric heavy-duty trucks for the U.S. market, distributed exclusively through select qualifying dealers in Hino's network. The potential total value over the course of this agreement could reach approximately USD 2.0 billion. This coincides with Hexagon Purus' newly opened engineering and manufacturing facility for battery and hydrogen storage systems in Kelowna, Canada.
Key developments after the quarter
- In April, Hexagon Agility signed a multi-year agreement worth approximately EUR 10 million with Manaseer Group in Jordan for delivery of Mobile Pipeline X-STORE modules for CNG transport.
- In April, Hexagon Purus signed a multi-year agreement with Panasonic for supply of battery cells to Hexagon Purus' proprietary battery systems, and thereby securing the battery supply chain to support the delivery of the recent contract agreement with Hino, as well as others. As a part of the supply agreement, Hexagon Purus will prepay approximately USD 43 million to Panasonic through 2025, subject to achievement of certain milestones.
Effects of the war in Ukraine
Hexagon does not have operations or employees in Ukraine, but it does have a sales and distribution subsidiary for its LPG products in Russia. Hexagon stopped all product shipments to Russia in March 2022 to ensure compliance with international sanctions. The Russian sales entity represented 0.3% of the Group's revenues in 2022 and 0.0% of Group revenues in the first quarter of 2023, while net assets in Russia represent an immaterial proportion of the Group's balance sheet.
Segment results
Hexagon Agility
Hexagon Agility is a global provider of clean fuel solutions for commercial and passenger vehicles and gas transportation solutions.
Hexagon Agility recorded combined revenues for the first quarter of NOK 898 (731) million, representing a 23 % growth year-over-year inclusive of favorable currency effects of approximately NOK 106 million. Adjusted for FX, the underlying growth was 8%. Growth was largely driven by continued strong momentum in the Mobile Pipeline distribution business, partly offset by lower overall volumes in the automotive business. Within the automotive business, heavy duty truck volumes were lower in Q1 2023 compared to 2022, while medium duty volumes were higher.
EBITDA for the first quarter came in at NOK 34 (52) million, representing an EBITDA margin of 4% compared to 5% in the same period last year. The Mobile Pipeline business generated a solid operating profit due to improved pricing and higher volumes, while lower volumes, unfavorable mix (heavy duty vs. medium duty), higher carbon fiber prices as well as lagging sales prices in the automotive business, weighed down overall operating profit for the business.
A number of initiatives are currently being implemented to improve and restore margins in the automotive business, and the Company expects to see gradual improvements in margins throughout 2023.
EBITDA (MNOK)
Hexagon Ragasco
Hexagon Ragasco is the world's leading manufacturer of composite liquified petroleum gas (LPG) cylinders for leisure, household, and industrial applications.
Hexagon Ragasco delivered another solid quarter with revenues ending at NOK 188 (162) million in the first quarter. Somewhat higher volumes, improved pricing to recover input inflation and favorable currency impacts drove the revenue growth compared to last year. Volumes in the first quarter were especially strong in Europe.
EBITDA for the first quarter came in at NOK 47 (33) million, representing an EBITDA margin of 25%, compared to 20% in the same period last year. Profit improvement is largely explained by production efficiency, scale effects and positive FX effects from a weakened NOK. Inflation on cost prices has now been fully passed through to higher pricing.
During the quarter, Hexagon Ragasco also added an additional three introductory orders from new customers, including a significant order from an Oceania-based customer.
Hexagon Digital Wave
Hexagon Digital Wave offers innovative cylinder testing and monitoring technologies that reduce down-time and inspection costs while improving inspection accuracy.
Hexagon Digital Wave continued its growth path in the first quarter with recorded revenues of NOK 45 (15) million, representing 3x growth compared to the same quarter last year. The growth was generated by strong underlying demand for both Ultrasonic Emission (UE) machines as well as Modal Acoustic Emission (MAE) requalification services. As the UE-business has grown over the last couple of years, the Company also benefits from higher UE license fees in line with the growing installed base of UE machines.
EBITDA for the first quarter came in at NOK 2 (-4) million. The Company is still in a ramp-up phase with considerable operational growth investments undertaken, which causes EBITDA and EBITDA margin to fluctuate somewhat each quarter.
Revenue (MNOK)
Hexagon Purus
Hexagon Purus is a global leader in key technologies needed for zero emission mobility. The company is listed on the Oslo Stock Exchange (ticker: HPUR), with Hexagon retaining a 68.4 per cent ownership share.
In the first quarter of 2023, Hexagon Purus reported revenues of NOK 244 million, compared to NOK 159 million in the same quarter last year driven by its hydrogen distribution business. The hydrogen mobility business in the EU and North America, as well as the battery electric business remained somewhat stable compared to last year, mostly due to some operational delays which is expected to be picked up throughout the remainder of 2023.
EBITDA for the first quarter was negative by -112 (-93) million, due to the continued ramp-up of the business.
In March, Hexagon Purus successfully raised NOK 1 300 million in gross proceeds through a combination of a NOK 800 million convertible bond and NOK 500 million equity private placement, providing sound support for the business' strategy execution. Mitsui contributed capital of NOK 500 million alone and signed a Memorandum of Understanding for additional investments of up to NOK 1,500 million in the coming years.
Please also refer to the separate first quarter 2023 report for Hexagon Purus published 9 May 2023 for further information.
Revenue (MNOK)
Outlook
Hexagon is focused on delivering near-zero- and zero emission energy solutions, supported by world-class manufacturing and digitalization, to enable customers to reach their net-zero ambitions. Together with clients and partners, the Company is finding new ways to make alternative energy solutions available and affordable.
Supply chain disruptions and cost inflation within the automotive business continues to cause challenging operating conditions. Supply bottlenecks have eased somewhat, however some procurement categories continue to remain challenging. Overall, input prices are expected to stabilize in 2023. The company continues to closely monitor and manage the supply chain. A number of initiatives are being implemented to improve and restore margins in the automotive business, and the Company expects to see gradual improvements of margins throughout 2023.
Comprehensive quantification of CO2 emissions in the transport sector can only be assessed using Life Cycle Assessment (well-to-wheel approach). Currently regulators in both the US and Europe measure transport CO2 emission from the tailpipe. In March, a significant step was taken toward adoption of a well-to-wheel approach in European Union (EU). Updated regulation on CO2 emissions for new passenger cars and vans, now requires establishment of a common EU methodology to be developed by the Commission by 2025, for assessing the full life cycle of CO2 emissions of cars and vans placed on the EU market, as well as for the fuels and energy consumed by these vehicles. Such changes in the regulations should have a substantial positive impact on the demand for Hexagon products.
The demand across most segments continues to be healthy. Ongoing developments in regulations and changes in industry dynamics are expected to support significant longterm clean energy technology opportunities.
Segments
For Hexagon Agility, demand for long-haul heavy-duty vehicles is expected to be somewhat lower year-over-year in 2023. Hexagon's addressable market however will increase threefold for US Natural Gas driven long-haul trucks when Cummins' launches its new 15-liter natural gas engine in 2024. The ongoing manufacturing expansion program in the US is targeted towards substantially increasing cylinder capacity towards heavy-duty truck applications. The high demand for the Mobile Pipeline CNG/RNG business is expected to continue, driven by decarbonization targets and lack of pipeline infrastructure. Production capacity for 2023 is already fully booked. The Americas Transit bus segment is expected to remain stable whilst the European bus and light duty vehicle segments are expected to be on the softer side. Sales of hydrogen cylinders to Hexagon Purus in Europe are expected to be strong in 2023, compensating for this softness. The Refuse truck business mainly out of the US is seeing continued strong demand. Overall, gradual margin improvements are expected in 2023.
Hexagon Ragasco continues to see healthy demand. Sales price increases are now fully offsetting the impacts of higher material and energy costs. The demand for LPG products is increasing with introductory orders from new customers in new markets.
In April, Hexagon Ragasco's smart composite cylinder technology called Linktra® was launched in Norway together with Linde, the industrial gas major as part of the AGA® smart cylinders pilot program. Linde has pioneered the distribution of composite cylinders for LPG in several Nordic countries.
For Hexagon Digital Wave demand for both Modal Acoustic Emission (MAE) requalification services and Ultrasonic Examination (UE) equipment continues to be strong. In third quarter 2023, the first pilot programs will be introduced utilizing MAE as a technological foundation for advanced smart cylinder monitoring solutions. Hexagon Digital Wave is in a profitable growth and investment phase and expects 2023 and onwards to be strong.
These forward-looking statements reflect current views about future events and are, by their nature, subject to significant risks and uncertainties because they relate to events and depend on circumstances that will occur in the future. For further information please refer to the section "Forward - Looking Statements" at the end of this report.
Risks and uncertainties
The Hexagon Composites Group is active in sales and purchasing in many geographies and markets. Exports represent a considerable part of the Group's sales. Currency risk is the Group's largest financial risk factor, and the Company employs forward currency contracts in addition to natural hedges to mitigate these risks. In the Board's view there are no major changes to the risk composition for the Group compared with 2022. The Group is by nature exposed to the general macro climate factors, including those resulting in post-pandemic global supply chain disruptions, and how these directly or indirectly impact the business positively or negatively. For additional information about risks and uncertainties we refer to Hexagon Composites' 2022 annual report. It is not expected that the above exposures and risks will have a material effect on the Group or its financial position in the next reporting period.
Oslo, 10 May 2023
The board of directors of Hexagon Composites ASA
Condensed Interim Financial Statements Group
Income statement
| Unaudited Unaudited Audited Revenue from contracts with customers 3 1 258 330 1 013 505 4 913 016 Other operating income 3 1 184 506 14 361 Rental income 3 1 287 1 893 4 929 Total revenue 1 260 801 1 015 904 4 932 306 Cost of materials 640 918 476 108 2 656 515 Payroll and social security expenses 10 445 998 349 125 1 495 259 Other operating expenses 203 134 199 183 843 722 Total operating expenses 1 290 050 1 024 416 4 995 496 Operating profit before depreciation and amortization (EBITDA) -29 249 -8 512 -63 190 Depreciation, amortization, and impairment 4,5 89 275 76 941 332 162 Operating profit (EBIT) -118 524 -85 453 -395 352 Profit/loss from investments in associated companies 11 -5 396 -1 349 48 317 Other financial items (net) -52 786 -14 471 -70 082 Profit/loss before tax -176 706 -101 273 -417 118 Tax expense -5 240 11 376 8 859 Profit/loss after tax -171 466 -112 649 -425 977 Attributable to: Equity holders of the parent -122 962 -81 017 -311 326 Non-Controlling interests -48 504 -31 632 -114 652 Profit/loss after tax -171 466 -112 649 -425 977 Earnings per share (NOK) -0,85 -0,56 -2,12 |
(NOK 1000) | Note | Q1 2023 | Q1 2022 | 31.12.2022 |
|---|---|---|---|---|---|
| Diluted earnings per share (NOK) | -0,85 | -0,56 | -2,12 |
Comprehensive income statement
| (NOK 1000) | Note | Q1 2023 | Q1 2022 | 31.12.2022 |
|---|---|---|---|---|
| Unaudited | Unaudited | Audited | ||
| Profit/loss after tax | -171 466 | -112 649 | -425 977 | |
| OTHER COMPREHENSIVE INCOME | ||||
| Items that will be reclassified through profit or loss in subsequent periods | ||||
| Translation differences when translating foreign activities | 163 598 | -39 877 | 202 529 | |
| Net total of items that will be reclassified through profit or loss in subsequent periods | 163 598 | -39 877 | 202 529 | |
| Items that will not be reclassified through profit or loss in subsequent periods | ||||
| Actuarial gains/losses for the period (net after tax) | 0 | 0 | -491 | |
| Net other comprehensive income not to be reclassified to profit or loss in subsequent periods | 0 | 0 | -491 | |
| Total comprehensive income for the period | -7 868 | -152 526 | -223 939 | |
| Attributable to: | ||||
| Equity holders of the parent | 15 244 | -115 046 | -125 078 | |
| Non-Controlling interest | -23 113 | -37 480 | -98 861 | |
Statement of financial position
| (NOK 1000) | Note | 3 1 .03.202 3 |
3 1 .03.202 2 |
31.12.202 2 |
|---|---|---|---|---|
| Unaudited | Unaudited | Audited | ||
| ASSETS | ||||
| Property, plant, and equipment | 4 | 1 528 415 | 1 091 946 | 1 336 307 |
| Right -of -use assets Intangible assets |
4 5 |
515 031 2 725 488 |
262 734 2 344 870 |
473 233 2 570 853 |
| Investment in associated companies | 11 | 47 611 | 5 675 | 53 272 |
| Other non -current financial assets |
9 | 151 279 | 406 | 141 429 |
| Other non -current assets |
5 342 | 2 489 | 4 942 | |
| Deferred tax assets | 0 | 13 678 | 0 | |
| Total non -current assets |
4 973 167 | 3 721 798 | 4 580 035 |
|
| Inventories | 1 641 520 | 1 263 047 | 1 546 497 | |
| Trade receivables | 920 615 | 779 248 | 865 403 | |
| Contract assets | 10 622 | 5 163 | 9 488 | |
| Other current financial assets | 0 | 1 166 | 0 | |
| Other current assets | 248 758 | 174 614 | 188 7 7 2 |
|
| Bank deposits, cash and similar | 1 649 991 | 1 029 135 | 713 547 | |
| Total current assets | 4 471 505 | 3 252 373 | 3 323 7 0 7 |
|
| Total assets | 9 444 672 | 6 974 171 | 7 903 742 |
| (NOK 1000) | Note | 3 1 .03.202 3 |
3 1 .03.2022 |
31.12.202 2 |
|---|---|---|---|---|
| Unaudited | Unaudited | Audited | ||
| EQUITY AND LIABILITIES | ||||
| Paid -in capital |
2 238 364 | 2 201 723 |
2 228 442 | |
| Other equity | 1 194 723 | 763 452 | 76 3 46 4 |
|
| Equity attributable to equity holders of the parent | 3 433 087 | 2 965 175 |
2 991 905 | |
| Non -controlling interests |
781 234 | 499 685 | 476 901 | |
| Total equity | 4 214 321 | 3 464 860 | 3 468 806 | |
| Interest -bearing liabilities (non -current) |
8 | 1 994 692 | 1 606 485 | 1 482 140 |
| Lease liabilities (non -current) |
6 | 509 764 | 215 830 | 481 018 |
| Other financial liabilities (non -current) |
7 | 301 765 | 103 446 | 256 675 |
| Pension liabilities | 2 180 | 4 496 | 2 321 | |
| Deferred tax liabilities | 180 617 | 239 057 | 206 370 | |
| Provisions (non -current) |
7 662 | 4 767 | 6 133 | |
| Total non -current liabilities |
2 996 679 | 2 174 081 | 2 434 656 | |
| Interest -bearing liabilities (current) |
8 | 159 738 | 3 553 | 234 674 |
| Lease liabilities (current) | 6 | 91 274 | 58 473 | 70 574 |
| Trade payables | 506 577 | 489 725 | 572 569 | |
| Contract liabilities | 824 112 | 371 867 | 548 643 | |
| Other financial liabilities (current) | 7 | 124 455 | 69 321 | 75 051 |
| Income tax payable | 79 095 | 20 694 | 5 3 057 |
|
| Other current liabilities | 334 622 | 252 084 | 343 154 | |
| Provisions (current) | 113 799 | 69 515 | 102 557 | |
| Total current liabilities | 2 233 672 | 1 335 230 | 2 000 280 | |
| Total liabilities | 5 230 351 | 3 509 311 | 4 434 935 | |
| Total equity and liabilities | 9 444 672 | 6 974 171 | 7 903 742 |
Cash flow statement
| (NOK 1000) | Note | 31.03.2023 | 31.03.2022 | 31.12.2022 |
|---|---|---|---|---|
| Cash flow from operating activities | ||||
| Profit before tax | -176 706 | -101 273 | -417 118 | |
| Depreciation, amortization and impairment | 4,5 | 89 275 | 76 941 | 332 162 |
| Net interest expense | 49 332 | 11 097 | 91 117 | |
| Changes in net operating working capital (1) | 58 110 | 175 294 | 60 984 | |
| Other adjustments to operating cash flow | 12 735 | -113 106 | 31 443 | |
| Net cash flow from operating activities | 32 747 | 48 953 | 98 588 | |
| Purchase of property, plant & equipment, net of proceeds from sale | 4 | -147 386 | -127 712 | -346 207 |
| Purchase of intangible assets | 5 | -17 699 | -16 051 | -75 729 |
| Interest received | 9 012 | 1 376 | 15 207 | |
| Investment in associated companies | 11 | 0 | 0 | -65 379 |
| Other investments | -11 686 | -27 | -45 319 | |
| Net cash flow from investing activities | -167 759 | -142 413 | -517 428 | |
| Net repayment (-) / proceeds (+) from interest bearing loans | 8 | 701 972 | 430 615 | 534 747 |
| Interest payments on interest-bearing liabilities | -51 911 | -9 179 | -89 502 | |
| Repayment of lease liabilities (incl. Interests) | 6 | -28 590 | -21 850 | -83 485 |
| Net proceeds from share capital increase (subsidiary) | 484 519 | 154 108 | 189 043 | |
| Net proceeds from purchase (-) and sale (+) of own shares | -13 671 | -30 495 | -30 495 | |
| Net cash flow from financing activities | 1 092 319 | 523 199 | 520 309 | |
| Net change in cash and cash equivalents | 957 307 | 429 739 | 101 469 | |
| Net currency exchange differences | -20 862 | -813 | 11 869 | |
| Cash and cash equivalents at start of period | 713 547 | 600 209 | 600 209 | |
| Cash and cash equivalents at end of period | 1 649 991 | 1 029 135 | 713 547 | |
| Available unused credit facility | 327 960 | 146 352 | 360 769 |
1) Net operating working capital consists of changes in inventories, trade receivables, contract assets, trade payables and contract liabilities.
Statement of changes in equity
| Equity - | Non | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Share | Own | Share | Other paid | Translation | Other | holders of | controlling | Total | |
| (NOK 1 000) | capital | shares | premium | in capital | differences | equity | parent | interests | equity |
| As of 1 January 2022 | 20 162 | -85 | 2 075 999 | 98 226 | 94 398 | 817 591 | 3 106 291 | 378 010 | 3 484 301 |
| Profit for the period | -81 017 | -81 017 | -31 632 | -112 649 | |||||
| Other income and expenses | -34 028 | -34 028 | -5 848 | -39 877 | |||||
| Share-based payment | 7 405 | 1 515 | 8 920 | 552 | 9 472 | ||||
| Movement in own shares etc. | 15 | -30 510 | -30 495 | -30 495 | |||||
| Share capital increase capital in subsidiary1) | 0 | 160 242 | 160 242 | ||||||
| Transaction cost related to capital increase in subsidiary | -4 496 | -4 496 | -1 638 | -6 134 | |||||
| As of 31 March 2022 | 20 162 | -69 | 2 075 999 | 105 632 | 60 370 | 703 082 | 2 965 175 | 499 685 | 3 464 860 |
1) On 22 February 2022 Hexagon Purus ASA issued 24 742 268 new shares in a private placement at the price of NOK 24.25 per share. Hexagon Composites ASA subscribed for 18 134 361 (73.3%) shares.
| As of 1 January 2022 | 20 162 | -85 | 2 075 999 | 98 226 | 94 398 | 817 591 | 3 106 291 | 378 010 | 3 484 301 |
|---|---|---|---|---|---|---|---|---|---|
| Profit for the period | -311 326 | -311 326 | -114 652 | -425 977 | |||||
| Other income and expenses | 186 738 | -491 | 186 248 | 15 791 | 202 038 | ||||
| Share-based payment | 34 120 | 11 563 | 45 682 | 4 213 | 49 895 | ||||
| Movement in own shares etc. | 20 | -30 514 | -30 495 | -30 495 | |||||
| Share capital increase capital in subsidiary1) | 0 | 160 242 | 160 242 | ||||||
| Transaction cost related to capital increase in subsidiary | -4 496 | -4 496 | -1 638 | -6 134 | |||||
| Share capital increase in other subsidiaries | 0 | 34 935 | 34 935 | ||||||
| As of 31 December 2022 | 20 162 | -65 | 2 075 999 | 132 346 | 281 136 | 482 327 | 2 991 905 | 476 901 | 3 468 806 |
| As of 1 January 2023 | 20 162 | -65 | 2 075 999 | 132 346 | 281 136 | 482 327 | 2 991 905 | 476 901 | 3 468 806 |
|---|---|---|---|---|---|---|---|---|---|
| Profit for the period | -122 962 | -122 962 | -48 504 | -171 466 | |||||
| Other income and expenses | 138 207 | 138 207 | 25 391 | 163 598 | |||||
| Share-based payment | 9 867 | 1 608 | 11 475 | 743 | 12 218 | ||||
| Movement in own shares etc. | 56 | -13 727 | -13 671 | -13 671 | |||||
| Share capital increase capital in subsidiary2) | 260 942 | 260 942 | 239 058 | 500 000 | |||||
| Transaction cost related to capital increase in subsidiary | -17 676 | -17 676 | -8 170 | -25 846 | |||||
| Convertible bonds – equity component3 ) |
190 363 | 190 363 | 87 989 | 278 352 | |||||
| Convertible bonds - transaction cost equity component | -5 495 | -5 495 | -2 540 | -8 034 | |||||
| Share capital increase in other subsidiaries | 0 | 10 365 | 10 365 | ||||||
| As of 31 March 2023 | 20 162 | -9 | 2 075 999 | 142 213 | 419 343 | 775 380 | 3 433 087 | 781 234 | 4 214 321 |
2) On 1 March 2023 the Hexagon Purus Group issued 18 518 519 new shares in a private placement at the price of NOK 27.00 per share. Hexagon Composites ASA did not participate in the private placement. 3) On 1 March 2023 the Hexagon Purus Group issued a convertible bond of NOK 800 million. The equity component of NOK 278.4 million equals the residual difference between the fair value of the convertible bond at issuance of NOK 800 million and the fair value of the debt component of NOK 521.6 million.
Note 1: General information and basis for preparation
The condensed consolidated interim financial statements for the first quarter 2023, which ended 31 March 2023, comprise Hexagon Composites ASA and its subsidiaries (together referred to as "the Group"). The company's headquarters are at Korsegata 4B, 6002 Aalesund, Norway. Hexagon Composites ASA is listed on the Oslo Stock Exchange under the ticker HEX.
These condensed consolidated interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting. They do not include all of the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of The Group for the year which ended 31 December 2022.
For a more detailed description of accounting principles see the consolidated financial statements for 2022, available on the Company's website www.hexagongroup.com/investors
The accounting principles used in the preparation of these interim accounts are the same as those applied to the consolidated financial statements for 2022. The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.
These condensed consolidated interim financial statements were approved by the Board of Directors on 10 May 2023.
Note 2: Estimates
The preparation of the interim accounts entails the use of valuations, estimates and assumptions that affect the application of the accounting policies and the amounts recognized as assets and liabilities, income and expenses. The actual results may deviate from these estimates. The material assessments underlying the application of the Group's accounting policy and the main sources of uncertainty are the same as for the consolidated accounts for 2022.
Note 3: Business segment data
| (NOK 1000) | 31.03.2023 | 31.03.2022 | 31.12.2022 |
|---|---|---|---|
| Unaudited | Unaudited | Audited | |
| Hexagon Agility | |||
| Sale of cylinders, systems, and equipment (at point in time) | 792 846 | 688 415 | 3 204 885 |
| Sale of systems, services, and funded development (transferred over time) | 0 | 0 | 0 |
| Internal transactions | 104 275 | 40 695 | 260 981 |
| Other operating income | 130 | 0 | 8 093 |
| Total revenue from contract with customers | 897 251 | 729 109 | 3 473 959 |
| Rental income | 1 040 | 1 698 | 3 919 |
| Total revenue | 898 291 | 730 807 | 3 477 878 |
| Segment operating profit before depreciation (EBITDA) | 33 909 | 52 247 | 208 988 |
| Segment operating profit (EBIT) | -13 106 | 12 321 | 28 186 |
| Segment assets | 4 678 893 | 3 846 471 | 4 550 321 |
| Segment liabilities | 2 113 425 | 1 690 189 | 2 104 101 |
| Hexagon Ragasco | |||
|---|---|---|---|
| Sale of cylinders, systems, and equipment (at point in time) | 187 605 | 160 220 | 701 029 |
| Sale of systems, services, and funded development (transferred over time) | 0 | 0 | 0 |
| Internal transactions | 667 | 1 339 | 4 977 |
| Other operating income | 26 | 41 | 210 |
| Total revenue from contract with customers | 188 298 | 161 600 | 706 216 |
| Rental income | 0 | 0 | 0 |
| Total revenue | 188 298 | 161 600 | 706 216 |
| Segment operating profit before depreciation (EBITDA) | 47 080 | 33 091 | 123 256 |
| Segment operating profit (EBIT) | 37 931 | 23 943 | 86 362 |
| Segment assets | 640 034 | 540 913 | 581 399 |
| Segment liabilities | 409 461 | 408 969 | 391 626 |
| (NOK 1000) | 31.03.2023 | 31.03.2022 | 31.12.2022 |
|---|---|---|---|
| Unaudited | Unaudited | Audited | |
| Hexagon Digital Wave | |||
| Sale of cylinders, systems, and equipment (at point in time) | 36 160 | 11 004 | 89 297 |
| Sale of systems, services, and funded development (transferred over time) | 0 | 0 | 0 |
| Internal transactions | 8 473 | 3 939 | 24 679 |
| Other operating income | 707 | 293 | 2 025 |
| Total revenue from contract with customers | 45 340 | 15 236 | 116 001 |
| Rental income | 0 | 0 | 0 |
| Total revenue | 45 340 | 15 236 | 116 001 |
| Segment operating profit before depreciation (EBITDA) | 1 900 | -4 104 | 6 715 |
| Segment operating profit (EBIT) | 301 | -5 352 | 1 193 |
| Segment assets | 115 233 | 86 018 | 109 677 |
| Segment liabilities | 47 789 | 120 062 | 46 015 |
| Hexagon Purus | |||
|---|---|---|---|
| Sale of cylinders, systems, and equipment (at point in time) | 241 390 | 156 329 | 909 715 |
| Sale of systems, services, and funded development (transferred over time) | 329 | 1 362 | 4 882 |
| Internal transactions | 1 656 | 869 | 44 040 |
| Other operating income | 295 | 172 | 4 034 |
| Total revenue from contract with customers | 243 670 | 158 731 | 962 670 |
| Rental income | 307 | 316 | 1 255 |
| Total revenue | 243 977 | 159 047 | 963 925 |
| Segment operating profit before depreciation (EBITDA) | -112 012 | -92 811 | -405 505 |
| Segment operating profit (EBIT) | -139 813 | -114 875 | -500 594 |
| Segment assets | 3 934 961 | 2 525 963 | 2 654 903 |
| Segment liabilities | 1 568 061 | 654 972 | 967 282 |
Note 4: Tangible assets
| 2023 | 2022 | |||||
|---|---|---|---|---|---|---|
| Property, plant, and | Property, plant, and | |||||
| (NOK 1000) | equipment | Right of use assets | Total 2023 | equipment | Right of use assets | Total 2022 |
| Carrying value as of 1 January | 1 336 307 | 473 233 | 1 809 539 | 1 010 625 | 282 309 | 1 292 934 |
| Additions | 147 386 | 38 436 | 185 822 | 127 712 | 1 912 | 129 624 |
| Disposals | 0 | 0 | 0 | 0 | 0 | 0 |
| Depreciations | -39 416 | -22 947 | -62 363 | -34 761 | -18 947 | -53 708 |
| Currency translation differences | 84 138 | 26 309 | 110 447 | -11 629 | -2 541 | -14 170 |
| Carrying value as of 31 March | 1 528 415 | 515 031 | 2 043 446 | 1 091 946 | 262 734 | 1 354 680 |
Note 5: Intangible assets
| 2023 | 2022 | |||||||
|---|---|---|---|---|---|---|---|---|
| Other | Other | |||||||
| Customer | intangible | Customer | intangible | |||||
| (NOK 1000) | Goodwill | relationships | assets1) | Total 2023 | Goodwill | relationships | assets1) | Total 2022 |
| Carrying value as of 1 January | 1 717 097 | 363 924 | 489 833 | 2 570 853 | 1 572 788 | 387 773 | 423 963 | 2 384 524 |
| Additions | 0 | 0 | 17 699 | 17 699 | 0 | 0 | 16 051 | 16 051 |
| Amortisations | 0 | -12 818 | -14 095 | -26 913 | 0 | -11 352 | -11 882 | -23 233 |
| Currency translation differences | 117 986 | 24 552 | 21 312 | 163 849 | -23 277 | - 16 413 | 7 219 | -32 472 |
| Carrying value as of 31 March | 1 835 083 | 375 658 | 514 748 | 2 725 488 | 1 549 511 | 360 008 | 435 351 | 2 344 870 |
1) Other intangible assets consist of technology and development, patents and licenses and other rights
Intangible assets are reviewed each quarter for impairment indicators, including market changes, technological development, order backlog and other changes that might potentially reduce the value of the assets. For goodwill, impairment tests are performed annually in the fourth quarter, or immediately in the case of an impairment indicator.
Goodwill is tested using the value in use approach determined by discounting expected future cash flows. If the impairment test reveals that an asset's carrying amount is higher than its value in use, an impairment loss will be recognized. There are four CGUs in the Hexagon Group; 1) Hexagon Agility, 2) Hexagon Digital Wave, 3) Hexagon Purus, and 4) Hexagon Ragasco. During the quarter there were no indicators of impairment of intangible assets.
Note 6: Lease liabilities
| (NOK 1000) | 2023 | 2022 |
|---|---|---|
| Carrying value as of 1 January | 551 592 | 292 731 |
| New lease liabilities recognized in the period | 38 436 | 1 912 |
| Cash payments for the principal portion of the lease liability | -19 656 | -19 824 |
| Cash payments for the interest portion of the lease liability | -8 934 | -2 026 |
| Interest on lease liabilities | 8 934 | 2 026 |
| Currency translation differences | 30 666 | -515 |
| Carrying value as of 31 March | 601 037 | 274 303 |
Lease liabilities are to a large extent related to lease agreements for office- and production premises, in addition to some vehicles, machinery and equipment.
Note 7: Other financial liabilities
| (NOK 1000) | Carrying value 01.01.2023 |
Fair value adjustment |
Additions in the period |
Settlements in the period |
Reclass. | Currency translation |
Carrying value 31.03.2023 |
|---|---|---|---|---|---|---|---|
| Cross currency swap (fair value) | 216 885 | 84 879 | 0 | 0 | 0 | 0 | 301 765 |
| Deferred payment from business combination (amortized cost) | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Contingent liabilities from business combinations (fair value) | 39 789 | 0 | 0 | 0 | -39 789 | 0 | 0 |
| Total non-current other financial liabilities | 256 675 | 84 879 | 0 | 0 | -39 789 | 0 | 301 765 |
| Cross currency swap (fair value) | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Deferred payment from business combination (amortized cost) | 45 776 | 0 | 0 | 0 | 0 | 3 832 | 49 608 |
| Contingent liabilities from business combinations (fair value) | 29 275 | 0 | 0 | 0 | 39 789 | 5 782 | 74 847 |
| Total current other financial liabilities | 75 051 | 0 | 0 | 0 | 39 789 | 9 614 | 124 455 |
The table above and below shows the movements of current and non-current other financial liabilities in the period. Deferred payments and contingent liabilities are related to the acquisition of Wystrach and Wyrent in 2021. The fair value of the contingent liabilities is assessed each quarter. At the end of the reporting period, there have been no changes to the fair value assessment.
| Carrying value | Fair value | Additions | Settlements | Currency | Carrying value | ||
|---|---|---|---|---|---|---|---|
| (NOK 1000) | 01.01.2022 | adjustment | in the period | in the period | Reclass. | translation | 31.03.2022 |
| Cross currency swap (fair value) 1) | 81 423 | -14 728 | 0 | 0 | 0 | 0 | 66 695 |
| Deferred payment from business combination (amortized cost) | 43 490 | 0 | 0 | 0 | -42 280 | -1 209 | 0 |
| Contingent liabilities from business combinations (fair value) | 65 616 | 0 | 0 | 0 | -27 040 | -1 825 | 36 751 |
| Total non-current other financial liabilities | 190 529 | -14 728 | 0 | 0 | -69 321 | -3 034 | 103 446 |
| Cross currency swap (fair value) | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Deferred payment from business combination (amortized cost) | 0 | 0 | 0 | 0 | 42 280 | 0 | 42 280 |
| Contingent liabilities from business combinations (fair value) | 0 | 0 | 0 | 0 | 27 040 | 0 | 27 040 |
| Total current other financial liabilities | 0 | 0 | 0 | 0 | 69 321 | 0 | 69 321 |
Note 8: Interest-bearing liabilities
| 2023 | 2022 | ||||||
|---|---|---|---|---|---|---|---|
| (NOK 1000) | Non-current Bond loan |
Non-current Bank loans |
Current Bank loans |
Total 2023 | Non-current Bank loans |
Current Bank loans |
Total 2022 |
| Liabilities 1 January | 0 | 1 482 140 | 234 674 | 1 716 814 | 1 166 057 | 13 635 | 1 179 692 |
| with cash settlement: Financing activities |
|||||||
| - New liabilities | 800 000 | 25 063 | 825 063 | 440 698 | 440 698 | ||
| - Transaction costs | -23 091 | -23 091 | 0 | ||||
| - Repayment of liabilities | -100 000 | -100 000 | -10 082 | -10 082 | |||
| without cash settlement: Financing activities |
|||||||
| - Equity component of convertible bond (less transaction costs) | - 270 318 | - 270 318 | 0 | ||||
| - Exchange differences | 3 811 | 3 811 | -897 | 0 | -897 | ||
| - Other transactions without cash settlement | 857 | 1 292 | 2 149 | 627 | 1 | 627 | |
| Liabilities 31 March | 507 448 | 1 487 243 | 159 737 | 2 154 429 | 1 606 484 | 3 553 | 1 610 038 |
Interest-bearing debt in Hexagon Composites ASA (Hexagon excl. Hexagon Purus)
The principal loan financing facility in Hexagon Composites ASA is a Senior Secured bilateral facility with DNB Bank and Danske Bank. The overall size of the committed facility is NOK 1 917 million, comprising a term loan of NOK 1 100 million, an overdraft facility of NOK 250 million, a multi-currency revolving credit facility (RCF) of NOK 350 million, and an accordion facility of NOK 217 million. As of quarter-end, total drawings amounted to NOK 1 606 million. All financial covenants related to the financing facility agreement were compliant per quarter-end.
Interest-bearing debt in Hexagon Purus
In March 2023, Hexagon Purus ASA issued a 5-year unsecured convertible bond of NOK 800 million with 6% fixed interest rate paid semi-annually in kind, through issuance of additional bonds. The conversion price of the bond is set at NOK 33.75 and the conversion right can be exercised at any time between the loan issue and the last conversion date, which is set to 16 March 2028, being the date, which is 5 years after the Shareholder's Meeting that resolved the convertible bond. The convertible bond is a compound financial instrument which contains an equity component and a debt component. Upon initial recognition, the debt component is calculated as the discounted value of the bond assuming no conversion with an approximate market interest rate for similar loans without the conversion feature as the discount rate. For calculation purposes, a 15% discount rate has been applied, yielding a fair value of the debt component of NOK 521.6 million. The equity component equals the residual difference between the fair value of the convertible bond at issuance of NOK 800 million and the fair value of the debt component and amounts thus to NOK 278.4 million. Transaction costs related to the bond issue amounted to NOK 23.1 million and have been capitalized pro rata between the debt and equity component. See also summarized table related to the convertible bond below. In addition to the convertible bond financing, Hexagon Purus through its wholly owned subsidiary Wystrach has NOK 46 million in bank loans in Volkesbank and Deutsche Bank.
| Convertible bond - | Transaction costs | Amount at initial | Additional bonds issued | Carrying amount | ||
|---|---|---|---|---|---|---|
| (NOK 1000) | principal amount | capitalized | recognition | as interests in kind | Interests accrued | 31.03.2023 |
| Liability component | 521 648 | - 15 057 | 506 591 | 0 | 857 | 507 448 |
| Equity component | 278 352 | - 8 034 | 270 318 | 270 318 | ||
| Total | 800 000 | - 23 091 | 776 909 | 0 | 857 | 777 767 |
Note 9: Financial instruments
For financial instruments that are recognized at fair value on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization at the end of each reporting period.
Fair value hierarchy
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
Level 1: Quoted (unadjusted) prices in active markets for identical assets or liabilities
Level 2: Other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly Level 3: Techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data
There were no transfers from one level to another in the measurement hierarchy from 2022 to the 1st quarter of 2023. Hexagon Group has no items defined as level 1. Set out below is a comparison of the carrying amount and the fair value of financial instruments as of 31 March 2022.
| 31.03.2023 | 31.12.2022 | ||||
|---|---|---|---|---|---|
| (NOK 1000) | Level | Carrying amount | Fair value | Carrying amount | Fair value |
| Financial assets: | |||||
| Other non-current financial assets 1) | 2 | 151 279 | 151 279 | 141 429 | 141 429 |
| Total financial assets | 151 279 | 151 279 | 141 429 | 141 429 | |
| Financial liabilities: | |||||
| Bank loans (incl. amortized transaction costs) | 2 | 1 487 243 | 1 493 485 | 1 482 140 | 1 489 674 |
| Bond loans (incl. amortized transaction costs) | 2 | 507 448 | 522 505 | 0 | 0 |
| Lease liabilities | 2 | 601 037 | 601 037 | 551 592 | 551 592 |
| Non-current contingent liabilities | 3 | 0 | 0 | 39 789 | 39 789 |
| Other non-current financial liabilities | 3 | 301 765 | 301 765 | 216 885 | 216 885 |
| Current interest-bearing liabilities | 2 | 159 738 | 159 738 | 234 674 | 234 674 |
| Current contingent and financial liabilities | 3 | 124 455 | 124 455 | 75 051 | 75 051 |
| Total financial liabilities | 3 181 686 | 3 202 985 | 2 600 132 | 2 607 666 |
1) Other non-current financial assets include an equity investment in Norwegian Hydrogen AS, following the loss of significant influence and derecognition of the investment as an associated company in Q3 2022. Hexagon Purus ASA currently holds a 14% shareholding in the Company and the investment is recognized at fair value of NOK 67,3 million following the valuation from the latest capital raise in the Company.
Note 10: Share based payment
Share-based payment in Hexagon Composites ASA
The Company has a performance share units program (PSUs) and a restricted share units program (RSUs) covering certain employees in senior positions.
Performance share units programs (PSUs)
All PSUs are non-transferable and will vest subject to satisfaction of the applicable vesting conditions (fulfilling revenue, group EBITDA and share price targets). The actual number of PSUs vested will depend on performance and vary from minimum zero to the maximum awarded PSUs in each program. Each vested PSU will give the holder the right to receive one share in the Company at an exercise price corresponding to the par value of the shares being NOK 0.10.
| Performance share units programs (PSUs) | Issued 2020 | Issued 2021 | Issued 2022 | Issued 2023 |
|---|---|---|---|---|
| Maximum number | 3 711 634 | 1 734 990 | 2 660 082 | 3 085 146 |
| Exercise price (NOK) (in the case of new shares issued) | 0,10 | 0,10 | 0,10 | 0,10 |
| Vesting period | 3 years | 3 years | 3 years | 3 years |
| Exercised Q1 | ||||
| Expiry | 20231) | Q1 2024 | Q1 2025 | Q1 2026 |
1) During the 1st quarter of 2023 905,887 PSUs have been exercised at the weighted average share price of NOK 33.30.
Restricted share units programs (RSUs)
The RSUs are subject to continued employment three years after date of grant, and each participant will at such time receive such number of Hexagon shares as corresponds to the number of RSUs allocated to them.
| Restricted share units programs (RSUs) | Issued 2020 | Issued 2021 | Issued 2022 |
|---|---|---|---|
| Number of RSUs | 70 000 | 100 000 | 200 000 |
| Exercise price (NOK) (in the case of new shares issued) | 0,10 | 0,10 | 0,10 |
| Vesting period | 3 years | 3 years | 3 years |
| Expiry | Q3 2023 | Q3 2024 | Q3 2025 |
The fair value of the PSUs and RSUs was calculated on the grant date, based on the Black-Scholes model, and the cost is recognized over the service period. Cost associated with programs were NOK 10.4 million YTD 31.03.2023. The fair value of all outstanding PSUs (maximum 6,456,549) and RSUs (334,500) is estimated to NOK 104.0 million per 31 March 2023. In addition to the above-mentioned instruments, the Company has issued bonus arrangements to certain executives within the Group. The bonus arrangements are dependent upon the share price development of Hexagon Purus ASA and is converted to a given number of cash settlement options in Hexagon Purus ASA, for the purpose of calculating quarterly fair values using the Black-Scholes model. These cash settlement arrangements involved total expenses of NOK 6.1 million YTD 31.03.2023. Remaining unamortized accrual is estimated to MNOK 9.4 as of 31 March 2023. For share-based payment in Hexagon Purus ASA, see quarterly financials at hexagonpurus.com.
Note 11: Investments in associates
| Business | Ownership share | Ownership share | Ownership share | |||
|---|---|---|---|---|---|---|
| Company | Country | segment | 31.12.2021 | 31.12.2022 | 31.03.2023 | Accounting method |
| Norwegian Hydrogen AS 1) | Norway | Purus | 18% | 14% | 14% | Equity method / Fair value 1) |
| Cryoshelter LH2 GmbH 2) | Austria | Purus | 0% | 40% | 40% | Equity method |
| Cryoshelter BioLNG GmbH 2) | Austria | Agility | 0% | 40% | 40% | Equity method |
| CIMC Hexagon Hydrogen Energy | 0% | 49% | 49% | Equity method | ||
| Systems Ltd.3) | Hong Kong | Purus |
1) Classified as an associated company and accounted for using the equity method in the period 01.01 - 31.08.22. As of 01.09, the investment is classified as an equity instrument at fair value
2) Acquired on 01.08.2022 and classified as associated companies effective from the same date
3) Entity legally established in July 2022 and classified as an associated company effective from the same date
Income statement reconciliation
| CIMC Hexagon | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Norwegian | Cryoshelter | Cryoshelter BioLNG | Hydrogen Energy | |||||||
| Hydrogen AS | LH2 GmbH | GmbH | Systems Ltd. | Total | ||||||
| 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | |
| Share of profit after tax | 0 | - 1 349 | - 1 858 | 0 | - 2 810 | 0 | - 89 | 0 | - 4 757 | - 1 349 |
| PPA amortizations associated companies 1) | 0 | 0 | 0 | 0 | - 639 | 0 | 0 | 0 | - 639 | 0 |
| Gain on loss of significant influence | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Total profit/loss from investments in | 0 | - 1 349 | - 1 858 | 0 | - 3 449 | 0 | - 89 | 0 | - 5 396 | - 1 349 |
| associates per 31.03 |
1) PPA amortizations for Cryoshelter LH2 will first start in 2025 concurrent with the timeline when the technology is estimated to start generating revenues
Balance sheet reconciliation
| CIMC Hexagon | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Norwegian | Cryoshelter | Cryoshelter BioLNG | Hydrogen Energy | |||||||
| Hydrogen AS | LH2 GmbH | GmbH | Systems Ltd. | Total | ||||||
| 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | |
| Carrying value per 01.01 | 0 | 7 024 | 31 258 | 0 | 20 243 | 0 | 1 771 | 0 | 53 272 | 7 024 |
| Share of profit after tax incl. PPA | - 5 396 | - 1 349 | ||||||||
| amortizations | 0 | - 1 349 | - 1 858 | 0 | - 3 449 | 0 | - 89 | 0 | ||
| Currency translation effects | 0 | 0 | - 60 | 0 | - 206 | 0 | 1 | 0 | - 265 | 0 |
| Carrying value per 31.03 | 0 | 5 675 | 29 341 | 0 | 16 588 | 0 | 1 682 | 0 | 47 611 | 5 675 |
Norwegian Hydrogen
During the second half of 2022, Norwegian Hydrogen raised approximately NOK 93 million in equity, whereby Mitsui & Co Ltd. participated with NOK 70 million. These private placements reduced Hexagon Purus' ownership from 17.7% to 14.2% and the Company assessed that significant influence in the investee was no longer present. Hexagon derecognized Norwegian Hydrogen as an associated company in August 2022, and the investment has since then been classified as an equity investment at fair value and is thus not included in the overview and tables above for 2023.
Cryoshelter LH2 GmbH and Cryoshelter BioLNG GmbH
On 01.08.2022, Hexagon Composites made a EUR 2,4 (NOK 24) million investment and acquired 40% of the shares in Cryoshelter BioLNG GmbH, with options to acquire the remaining shares of the next 3-10 years. Hexagon Purus made a EUR 3,4 (NOK 34) million investment and acquired 40% of the shares in Cryoshelter LH2 GmbH, with options to acquire the remaining shares over the next 5-10 years. As the transaction took place in August 2022, there are thus no comparable figures for the Cryoshelter investments per Q1 last year.
The table below shows the purchase price allocation of the two entities per 01.08.2022.
| Cryoshelter | Cryoshelter | Total | |
|---|---|---|---|
| Purchase price allocation Cryoshelter* | BioLNG GmbH | LH2 GmbH | Cryoshelter |
| Non-current assets | 2 715 | 203 | 2 919 |
| Current assets | 2 351 | 5 150 | 7 502 |
| Non-current liabilities | 3 946 | 3 946 | 7 891 |
| Current liabilities | 21 603 | 2 951 | 24 554 |
| Equity as per 01.08.2022 | - 20 482 | - 1 543 | - 22 025 |
| Hexagon's share of equity (40%) | - 8 193 | - 617 | - 8 810 |
| Intangible assets (technology)1) (40% share) | 22 942 | 19 702 | 42 644 |
| Goodwill (40 % share) | 9 148 | 14 654 | 23 802 |
| Hexagon's purchase price | 23 898 | 33 738 | 57 636 |
1) Lifetime of technology assets set to 10 years for the LNG technology and 15 years for the LH2 technology
CIMC Hexagon Hydrogen Energy Systems Ltd.
In 2021, Hexagon Purus entered into an agreement with CIMC Enric, encompassing cylinder and systems production for Fuel Cell Electric Vehicles (FCEVs) and hydrogen distribution in China and Southeast Asia.
In July 2022, CIMC Hexagon Energy Systems Ltd. was legally established and registered in Hong Kong, where Hexagon Purus HK Holding AS, a wholly owned subsidiary of Hexagon Purus ASA, subscribed for 49% of the shares and hold an equal amount of voting rights. CIMC Enric holds the remaining 51% of the shares. The entity is classified as an associate company and accounted for via the equity method as of 01.07.2022. The tables above include therefore no figures for this entity as per Q1 last year.
- In April, Hexagon Agility signed a multi-year agreement worth approximately EUR 10 million with Manaseer Group in Jordan for delivery of Mobile Pipeline X-STORE modules for CNG transport.
- In April, Hexagon Purus signed a multi-year agreement with Panasonic for supply of battery cells to Hexagon Purus' proprietary battery systems, and thereby securing the battery supply chain to support the delivery of the recent contract agreement with Hino, as well as others. As a part of the supply agreement, Hexagon Purus will prepay approximately USD 43 million to Panasonic through 2025, subject to achievement of certain milestones.
There have not been any other significant events after the balance sheet date that have not already been disclosed in this report.
Key figures and ratios
| 31.03.2023 | 31.03.2022 | 31.12.2022 | |
|---|---|---|---|
| Hexagon Group | |||
| EBITDA in % of total revenue | -2,3 % | -0,8 % | -1,3 % |
| EBIT in % of total revenue | -9,4 % | -8,4 % | -8,0 % |
| Equity ratio | 55,4 % | 49,7 % | 43,9 % |
| Liquidity reserve *) (NOK 1 000) | 1 977 951 | 1 175 487 | 1 074 316 |
| Diluted earnings per share (NOK) | -0,85 | -0,56 | -2,12 |
| Cash flow from operations per share (NOK) | 0,16 | 0,24 | 0,49 |
| Equity per share (NOK) | 25,94 | 17,19 | 17,20 |
| Hexagon Agility | |||
| EBITDA in % of total revenue | 3,8 % | 7,1 % | 6,0 % |
| EBIT in % of total revenue | -1,5 % | 1,7 % | 0,8 % |
| Hexagon Ragasco | |||
| EBITDA in % of total revenue | 25,0 % | 20,5 % | 17,5 % |
| EBIT in % of total revenue | 20,1 % | 14,8 % | 12,2 % |
| Hexagon Digital Wave | |||
| EBITDA in % of total revenue | 4,2 % | -26,9 % | 5,8 % |
| EBIT in % of total revenue | 0,7 % | -35,1 % | 1,0 % |
| Hexagon Purus | |||
| EBITDA in % of total revenue | -45,9 % | -58,4 % | -42,1 % |
| EBIT in % of total revenue | -57,3 % | -72,2 % | -51,9 % |
*) Undrawn credit facility + bank deposits and cash. Use of undrawn credit facility can be limited by financial covenants
Share information
A total of 11,78,349 shares (Q4: 12,801,670 shares) in Hexagon Composites ASA were traded on the Oslo Stock exchange during the first quarter of 2023. In the quarter, the share price moved between NOK 27.30 (NOK 21.60) and NOK 40.66 (NOK 32.66), ending the quarter at NOK 33.30, giving a market capitalization of NOK 6.7 billion (NOK billion) for the Company. For further investor information, refer to the investor section on www.hexagongroup.com.
Terminology
BAR
Unit of pressure. 1 millibar = 100 N/m2
BIOGAS
Produced from raw materials such as agricultural waste, manure, municipal waste, plant material, sewage, green waste or food waste
BIO-LPG
Propane produced from renewable feedstocks such as plant and vegetable waste material
BEV
Battery Electric Vehicle
CHASSIS
The base frame of a car, carriage or other wheeled vehicle
CHG
Compressed Hydrogen Gas
CNG
Compressed Natural Gas
CO2
Carbon Dioxide
COMPOSITE
Combination of glass/carbon fiber and thermosetting plastic, exploiting the malleability of the plastic and the stiffness and strength of the glass/ carbon fiber
EBIT
Earnings before interests and taxes
EBITDA
Earnings before interest, taxes, depreciation and amortization
EV
Electric Vehicle
FCEV
Fuel Cell Electric Vehicle
GHG
Greenhouse Gas
GVW Gross Vehicle Weight
HDV Heavy-Duty Vehicle
H2
Hydrogen, light, colorless gas (Symbol H), produced on an industrial scale
JOINT VENTURE
Legally signed contractual agreement whereby two or more parties undertake an economic activity
LDV Light-Duty Vehicle
LNG Liquefied Natural Gas
LPG Liquefied Petroleum Gas (propane gas)
MOBILE PIPELINE® Gas distribution products
NGV Natural Gas Vehicle
OEM Original Equipment Manufacturer
X-STORE® High-pressure composite cylinder for bulk transportation and storage of CNG
RNG
Renewable Natural Gas Pipeline compatible gaseous fuel derived from biogenic or other renewable sources that has lower lifecycle carbon dioxide equivalent (CO2- eq) emissions than geological natural gas
SCBA CYLINDER
Self-contained breathing apparatus
SCM3
Standard cubic meters. Unit for volumetric measurement of oil, natural gas and natural gas condensate at standard conditions defined in the ISO standard ISO 13443
TITAN®
High-pressure composite cylinder for bulk transportation and storage of CNG
TUFFSHELL®
High-pressure CNG cylinder for heavy duty vehicles
TYPE 1
Steel cylinder
TYPE 2
Steel cylinder, composite-reinforced
TYPE 3 Composite cylinder with metal liner
TYPE 4 Composite cylinder with polymer liner
U.S. DOT U.S. Department of Transportation
BAR Unit of pressure. 1 millibar = 100 N/m2
BIOGAS
Produced from raw materials such as agricultural waste, manure, municipal waste, plant material, sewage, green waste or food waste
BIO-LPG
Propane produced from renewable feedstocks such as plant and vegetable waste material
BEV
Battery Electric Vehicle
CHASSIS
The base frame of a car, carriage or other wheeled vehicle
CHG Compressed Hydrogen Gas
CNG Compressed Natural Gas
CO2 Carbon Dioxide
COMPOSITE
Combination of glass/carbon fiber and thermosetting plastic, exploiting the malleability of the plastic and the stiffness and strength of the glass/ carbon fiber
EBIT Earnings before interests and taxes
EBITDA Earnings before interest, taxes, depreciation and amortization
EV Electric Vehicle
FCEV Fuel Cell Electric Vehicle
GHG Greenhouse Gas
GVW Gross Vehicle Weight
HDV Heavy-Duty Vehicle
H2
Hydrogen, light, colorless gas (Symbol H), produced on an industrial scale
JOINT VENTURE
Legally signed contractual agreement whereby two or more parties undertake an economic activity
LDV
Light-Duty Vehicle
LNG Liquefied Natural Gas
LPG Liquefied Petroleum Gas (propane gas)
MOBILE PIPELINE® Gas distribution products
NGV Natural Gas Vehicle
OEM Original Equipment Manufacturer
X-STORE®
High-pressure composite cylinder for bulk transportation and storage of CNG
RNG
Renewable Natural Gas Pipeline compatible gaseous fuel derived from biogenic or other renewable sources that has lower lifecycle carbon dioxide equivalent (CO2- eq) emissions than geological natural gas
SCBA CYLINDER Self-contained breathing apparatus
SCM3
Standard cubic meters. Unit for volumetric measurement of oil, natural gas and natural gas condensate at standard conditions defined in the ISO standard ISO 13443
TITAN®
High-pressure composite cylinder for bulk transportation and storage of CNG
TUFFSHELL® High-pressure CNG cylinder for heavy duty vehicles
TYPE 1 Steel cylinder
TYPE 2 Steel cylinder, composite-reinforced
TYPE 3 Composite cylinder with metal liner
TYPE 4 Composite cylinder with polymer liner
U.S. DOT U.S. Department of Transportation
Forward looking statements
This quarterly report (the "Report") has been prepared by Hexagon Composites ASA ("Hexagon" or the "Company"). The Report has not been reviewed or registered with, or approved by, any public authority, stock exchange or regulated marketplace. 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 Report and/or the statements set out herein. This Report is not and does not purport to be complete in any way. The information included in this Report 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 forward-looking statements contained in this Report, 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 Report 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 Report has been prepared for information purposes only. This Report 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 Report in or into any jurisdiction where such distribution may be unlawful, is prohibited. This Report speaks as of 10 May 2023, and there may have been changes in matters which affect the Company subsequent to the date of this Report. Neither the issue nor delivery of this Report 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 Report. This Report is subject to Norwegian law, and any dispute arising in respect of this Report is subject to the exclusive jurisdiction of Norwegian courts with Oslo City Court as exclusive venue. By receiving this Report, you accept to be bound by the terms above.
Hexagon Composites ASA Korsegata 4B, 6002 Ålesund, Norway www.hexagongroup.com