Earnings Release • May 7, 2020
Earnings Release
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Q1 2020 interim report
Nel ASA (Nel) announced Covid-19 updates 22 and 26 March, in addition to general comments 21 April underlining that revenues and operations would be negatively impacted by disruptions in the value chain, travel restrictions and the ongoing macroeconomic slow down. The company has included Covid-19 comments throughout the first quarter 2020 report, but also refers to its market updates and the quarterly presentation by Nel management.
| Q1 | Q1 | Full year | |
|---|---|---|---|
| (unaudited amounts in NOK million) | 2020 | 2019 | 2019 |
| Operating revenue | 126.5 | 122.4 | 569.7 |
| Operating expenses | 213.4 | 174.4 | 824.3 |
| EBITDA | -64.6 | -34.8 | -179.1 |
| Operating loss | -86.9 | -52.0 | -254.6 |
| Pre-tax loss* | -5.2 | -53.2 | -277.2 |
| Net loss | -3.2 | -51.3 | -269.8 |
| Net cash flow from operating activities | -8.8 | -31.5 | -209.2 |
| Cash balance end of period** | 1 221.4 | 743.2 | 526.0 |
* Includes NOK 71.1 million in unrealised currency exchange gain related to internal loans
**Restricted cash excluded
Nel announced Covid-19 updates 22 and 26 March, in addition to general comments 21 April, underlining that revenues and operations would be negatively impacted by disruptions in the value chain, travel restrictions and the general business slow down. Nel remains committed to its strategy and has since 2019 taken on additional costs to prepare for future growth. The revenue shortfall and business disruptions caused by Covid-19 have impacted and will continue to impact financial results negatively but have not resulted in a change of strategy for the company.
Nel reported revenue and operating income in the first quarter 2020 of NOK 126.5 million (Q1 2019: NOK 122.4 million), following growth in the Fueling and Electrolyser segment of 1.7% and 4.7%, respectively, compared to the same quarter in 2019. Revenues were negatively impacted by "stay home - stay safe" policies and travel restrictions arising from the Covid-19 pandemic, specifically the portion of revenues that are recognised at delivery or when commissioning is completed.
At the end of the first quarter 2020, Nel had an order backlog of NOK 592.3 million. The order backlog does not at this stage include electrolysers and fueling equipment for Nikola.
Cost of goods sold (COGS) has increased with 1% from first quarter 2019. The increased COGS is related to the 3% increase in revenues and is also affected by high costs from project execution in the Fueling and Electrolyser divisions. Specifically, we have experienced cost overruns on certain Fueling stations projects that are in the process of being installed in South Korea.
Personnel expenses increased by 43% compared to the same quarter in 2019, which is explained by a higher number of employees, up from 251 employees by the end of first quarter 2019 to 354 at the end of first quarter 2020. Other operating expenses increased by 39%. Both the personnel and other operating costs increase are the results of Nel's strategic decision to pursue growth and higher activity levels.
To date, Nel has been able to keep all full-time employees and only reduce the number of hiredin/contracted personnel. Nel believes in the longterm growth of the hydrogen business and wants to be ready to set full operations in motion as soon as the situation begins to normalize. However, the current shortfall in revenues, combined with the pre-pandemic cost base, contributes negatively to overall results in the quarter.
Non-cash costs for the stock option- and share incentive program, which are included in personnel expenses, were NOK 3.0 million (3.3) in the quarter.
EBITDA ended at NOK -64.6 million (-34.8), while the EBITDA margin was -51.4% (-28.4%).
Depreciation and amortisation were NOK 22.4 million (17.2) in the quarter.
Operating loss amounted to NOK -86.9 million (-52.0) in the period.
Net financial items amounted to a gain of NOK 81.7 million (-1.2) of which NOK 71.1 million are unrealised currency exchange gain from revaluing internal loans. Approximately 70 % of FX exposure in relation to the internal loans is towards the U.S. Dollar, with the remainder towards the Danish krone. Finance cost is mainly interest expense.
Pre-tax loss was NOK -5.2 million (-53.2) in the quarter and the net loss was NOK -3.2 million, compared to a loss of NOK -51.3 million in the same quarter 2019.
Comprehensive income is positive with NOK 128.6 million (-5.3) mainly due to positive currency translation differences, net of tax, of NOK 132.1 million in the quarter (-17.9) related to converting statement of financial position from subsidiaries in USD and DKK into NOK using a higher currency rate than in the previous quarter.
Total assets were NOK 3 429.6 million at the end of the quarter, compared to NOK 2 430.7 million at the end of 2019, mainly due to an increase of cash from capital increase in January, working capital and non-current assets. Total equity was NOK 2 801.2 million, thus, the equity ratio was 82%.
Net cash flow from operating activities in the quarter was NOK -8.8 million, compared to NOK -31.5 million in the first quarter in 2019. The positive development is mainly due to the change in working capital that is due to improved cash collection decreasing trade receivables offset by an increase in inventories. Net cash flow from investing activities was NOK -116.8 million (-21.1). There is high investment activity in tangible and intangible assets. In addition, restricted cash has increased by NOK 56.6 million during the quarter, mainly from advance payment guarantees, increasing the investing activities.
Nel's cash balance at the end of first quarter 2020 was NOK 1 221.4 million. The increase from end of 2019 is mainly due to raising net proceeds of NOK 818.8 million from the capital increase in January. This is partly offset by negative cash flow from operations and high investment levels.
Nel is a global, dedicated hydrogen company, delivering optimal solutions to produce, store and distribute hydrogen from renewable energy. The company serves industries, energy and industrial gas companies with leading hydrogen technology.
Since our origins in 1927 as part of Norsk Hydro, we have a proud history of development and continuous improvement of hydrogen technologies.
Our hydrogen solutions cover important parts of the value chain: from hydrogen production technologies to hydrogen fueling stations, enabling industries to transition to green hydrogen, and providing fuel cell electric vehicles with the same fast fueling and long range as fossilfuelled vehicles - without emissions.
Production and installation of electrolysers for hydrogen production.
Nel Hydrogen Electrolyser is the world's largest electrolyser manufacturer, covering both alkaline and PEM (proton exchange membrane) technology globally. The company's roots date back to 1927, when Norsk Hydro developed largescale electrolyser plants, providing renewable hydrogen for use in ammonia production with fertiliser as the end-product. Since then, the electrolyser technology has been improved continuously, delivered across the world, and has set the industry standard.
Historically, hydrogen has primarily been used as an input factor for a broad spectrum of industrial applications and products, such as ammonia, refineries, methanol, edible oil, chemicals, metallurgy, glass, electronics, generator cooling, polysilicon used in PV solar panels, and other industrial applications.
Of the total global hydrogen market, only around 1% of the hydrogen is generated via water electrolysis. However, electrolysis is expected to grow in market share, mainly driven by the decreasing cost of renewable energy, increased share of intermittent (wind and solar) energy, decreasing cost of electrolysers, and an increasing focus on climate and air quality.
The overall hydrogen market is also expected to grow significantly in the coming years, with hydrogen being used as a zero-emission fuel for mobility and as a way of decarbonising various industrial sectors like the replacement of coal in the metal industry, and other hard-todecarbonise sectors. The process of converting renewable electricity to hydrogen and utilising hydrogen both in existing and new markets, is referred to as "power-to-X", were X refers to the various applications for hydrogen.
A step-change in the size of power-to-X projects is beginning worldwide, as projects are moving to megawatt-scale. This trend is welcomed by Nel, as it makes the group's portfolio of large-scale electrolyser solutions increasingly relevant.
Nel began commercial sales of electrolysers in the 1970s and has since delivered over 3500 electrolyser units in more than 80 countries across the globe. The business area has manufacturing facilities in Notodden, Norway, and in Wallingford, Connecticut, USA. The company has a global reach through its in-house sales operation and network of agents across the globe.
Today, Nel has the world's largest product portfolio of alkaline and PEM electrolysers and is continuously developing and improving both technologies. Initiatives include a next generation large scale, pressurised alkaline electrolyser as well as larger PEM stacks, and large-scale solutions which allow for significant cost reductions on a system level.
With increasing demand for large scale electrolysers, Nel has also decided to significantly increase its manufacturing capacity of atmospheric alkaline electrolysers. In 2019 Nel secured a location for the new manufacturing plant at Herøya, Norway, and targets to have an initial capacity of 360 MW/year, around 10 times current capacity. The capacity at the new plant can be further expanded to beyond 1 GW/year. The new manufacturing plant will be highly automated and significant cost reductions are expected, which will be important in making renewable hydrogen cost competitive with fossil hydrogen and fossil fuels.
Reduced cost and new, large scale solutions should enable Nel to penetrate new markets, as well as increase its competitiveness in existing ones, and gradually replace various fossil solutions for hydrogen production that the world is currently relying on.
Production of hydrogen fueling stations for cars, buses, trucks, forklifts and other applications.
Nel Hydrogen Fueling is a leading manufacturer of hydrogen fueling stations that provide FCEVs (Fuel Cell Electric Vehicles) with the same fast fueling and long range as conventional fossil fuel vehicles. Since Nel began manufacturing hydrogen fueling stations in 2003, we have invested significantly in R&D. Today, Nel is one of the global leaders on hydrogen fueling stations for mobility applications. The H2Station® technology is now being installed in several European countries as well as in South Korea and California, US, providing hydrogen fueling for FCEVs from major car manufacturers, as well as forklifts, buses and trucks.
Nel was among the first to achieve compliance with the international hydrogen fueling standard (SAE J2601) required by major car manufacturers. With the H2Station® technology, the ambition is to maintain the position as a preferred supplier for international hydrogen fueling infrastructure operators.
Nel's H2Station® manufacturing plant is located in Herning, Denmark. It has capacity of 300 hydrogen stations per year, leaving room for significant growth. Combining technology innovations with increased manufacturing capacity should enable Nel to further reduce the cost of hydrogen fueling station equipment.
The target is to deliver fueling solutions that will enable hydrogen to outcompete fossil fuels for an increasing number of applications, and to become a preferred fuel alternative. Seeing increased activities in the heavy-duty segment has encouraged Nel to step up technology developments, and to launch new products, better suited for heavy-duty applications. Significant technology developments will continue going forward to support these new applications.
All in all, these activities will support the overall vision of Nel: "empowering generations with clean energy forever".
Nel Hydrogen Electrolyser reported revenues of NOK 70.9 million in the first quarter of 2020, a growth of 4% from NOK 67.8 million in the same quarter 2019. Norway has an increase of 43% from higher sales of Alkaline electrolysers, while the US has a decrease of 21 % from sales of PEM electrolysers.
Revenues were negatively impacted by "stay home - stay safe" policies and travel restrictions resulting from the Covid-19 pandemic. Also, the current business climate has impacted the market for PEM electrolysers.
Due to the Covid-19 situation and following an executive order from the state of Connecticut, the majority of the activities at Nel's Wallingford facility were temporarily suspended on March 22. Later our facility was defined as an "essential manufacturing business" and reopened on 26 March.
Nel Hydrogen Electrolyser has received a purchase order for a 1 megawatt containerized Proton PEM® electrolyser from Trillium Transportation Fuels, LLC (Trillium). The electrolyser will be used to produce hydrogen for a fleet of up to 12 fuel cell electric buses at the Champaign-Urbana Mass Transit District (MTD), in Urbana, Illinois, USA. Trillium is a leader in providing alternative fuel solutions for transit fleets, and MTD is an innovator in the public transportation sector.
Nel Hydrogen Electrolyser has received a purchase order for PEM electrolyser cell stacks from United Technologies´ Collins Aerospace Division, at a value of approximately USD 1.6 million. Nel's electrolyser stacks produce critical life support oxygen for U.S. and U.K. Navy crews on multiple classes of nuclear-powered submarines and will be delivered under an exclusive contract.
Nel Hydrogen Electrolyser has been awarded a \$1.85 million grant by the Department of Energy (DOE) for development of a novel electrolyser cell stack approach to enable higher efficiency, low cost hydrogen generation.
Nel has entered into a framework agreement for the delivery of up to 60 megawatt of electrolysers to Lhyfe Labs SAS (Lhyfe) in France.
The framework agreement follows a EUR 1 million purchase order for an A150 alkaline electrolyser in March 2020, which will be used to produce green hydrogen for a fleet of buses in Bouin, France. The agreement covers 20 additional electrolysers, equal to around 60 MW, intended to be purchased over the next 4 years under similar terms and conditions.
Nel Hydrogen Fueling reported revenues of NOK 55.6 million in the first quarter 2020, a growth of 2% from NOK 54.5 million in the same quarter 2019.
Covid-19 disruptions in the value chain and travel restrictions have negatively affected installation and commissioning activities. Consequently, revenues have been negatively impacted, specifically the portion of revenues that are recognised at delivery or when commissioning is completed.
During the first quarter 2020, we have made good progress in installing the first sites for our H2 stations in South Korea, but commissioning is delayed due to travel restrictions from the Covid-19 situation. During this process the company has incurred cost overruns on certain projects related mainly to certification and siting issues. The Covid-19 situation has increased the complexity and further delayed the installation of the first sites due to the international travel ban.
During the quarter, Nel increased the investment in HyNet with EUR 1.1 million as planned. HyNet is a special purpose company established to roll out 100 hydrogen fueling stations in South Korea by 2022, as part of the national ambition in South Korea to have more than 300 stations operational by the same year. Nel considers South Korea to be a very important market going forward.
Nel is together with Nikola currently working on the techno-economical optimisation of the commercial station solution, as a preparation for future deliveries. This is a time-consuming process and "stay home – stay safe" policies and travel restrictions has delayed the progress that the parties have made. The parties still aim to finalise the process during first half of 2020.
Kvaerner is a global execution specialist providing engineering, procurement and construction (EPC) services. The companies will collaborate on specific green hydrogen projects and standardisation of solutions for large scale hydrogen production plants.
The companies have already initiated the standardisation process, with basis in a 20 megawatt module which will work as a building block for plants of several hundred megawatts
Nel raised approximately NOK 845.5 million in gross proceeds through a private placement of 89 million new shares at a price per share of NOK 9.50.
Nel raised NOK 126.8 million in gross proceeds through a subsequent offering of 13.35 million new shares, at a price per share of NOK 9.50.
Nel is exposed to risk and uncertainty factors, which may affect some or all of the group's activities. Nel is exposed to financial, market and operational risk. In addition, there is risk related to technology, implementation and execution of current and future products, and the Covid-19 situation. There are no significant changes in the risks and uncertainty factors described in our Annual Report for 2019.
The global outbreak of Covid-19 will continue to cause disruptions in Nel´s operations and financial performance as "stay home – stay safe" policies and the general business slowdown impacts production, order intake, customer dialogue, installations and commissioning and associated revenue recognition. The visibility on the duration and size of the effects from the Covid-19 situation is currently low. Nel remains committed to its strategy and has since 2019 taken on additional employees and costs to prepare for future growth. The revenue shortfall and business disruptions caused by Covid-19 have impacted and will continue to impact financial results negatively:
Nel reiterates the confidence in the long-term potential for the industry, supported by the "green recovery" outlined by various governmental initiatives.
Nel aims to capitalise on the emerging opportunities within hydrogen by leveraging on the position as a technology front-runner, continued high focus on safety, global presence, cost leadership, strong financing and preferredpartner status for industry participants.
To maintain and strengthen its leading position in a growing market, Nel will accelerate investments in organisation and technology.
The hydrogen market is expected to grow significantly, and renewable hydrogen, often referred to as green hydrogen, is on a trajectory to outcompete fossil hydrogen as well as fossil fuels.
There is an increased adoption of industrial hydrogen applications with huge overall potential. In addition, there is a strong momentum within mobility, and especially for heavy duty applications such as trucks and buses. Renewable hydrogen as a future fuel alternative will facilitate zero emission from production to use.
Nel targets to maintain its current leading position in the electrolysis sector, continuing to develop both PEM and alkaline technologies to satisfy specific customer needs and preferences.
As markets in which Nel operates are developing towards lager scale, it is increasingly important to be a financially strong counterpart, especially for larger contracts.
Ongoing growth initiatives and ramp-up costs will have a negative EBITDA impact in 2020.
| Ole Enger | Beatriz Malo de Molina | Mogens Filtenborg |
|---|---|---|
| Chair | Board member | Board member |
| (Sign) | (Sign) | (Sign) |
| Finn Jebsen | Hanne Blume |
|---|---|
| Board member | Board member |
| (Sign) | (Sign) |
Jon André Løkke
CEO
(Sign)
| Q1 | Q1 | Full year | ||
|---|---|---|---|---|
| (amounts in NOK thousands) | Note | 2020 | 2019 | 2019 |
| Revenue and operating Income | ||||
| Revenue from contracts with customers | 116 782 | 113 837 | 519 050 | |
| Other operating income | 9 745 | 8 568 | 50 657 | |
| Total revenue and operating income | 3 | 126 527 | 122 405 | 569 707 |
| Operating expenses | ||||
| Cost of goods sold | 76 297 | 75 858 | 342 374 | |
| Personnel expenses | 76 506 | 53 504 | 243 194 | |
| Depreciation and amortisation | 4, 5 | 22 353 | 17 192 | 75 500 |
| Other operating expenses | 38 286 | 27 876 | 163 209 | |
| Total operating expenses | 213 442 | 174 430 | 824 277 | |
| Operating loss | -86 915 | -52 025 | -254 570 | |
| Finance income | 83 573 | 2 083 | 12 643 | |
| Finance cost | -1 525 | -1 874 | -6 501 | |
| Share of loss from associates and joint ventures | -374 | -1 368 | -28 811 | |
| Net financial items | 81 675 | -1 158 | -22 668 | |
| Pre-tax loss | -5 240 | -53 183 | -277 238 | |
| Tax expense (income) | -2 009 | -1 843 | -7 529 | |
| Net loss | -3 231 | -51 340 | -269 710 |
| Items that are or may subsequently be reclassified to income statement: | |||
|---|---|---|---|
| Currency translation differences | 132 064 | -17 889 | 2 240 |
| Cash flow hedges, effective portion of changes in fair value | -6 590 | -635 | -2 388 |
| Cash flow hedges, reclassified to income statement | 6 357 | 123 | 1 602 |
| Other comprehensive income | 131 831 | -18 401 | 1 453 |
| Total comprehensive income | 128 600 | -69 741 | -268 256 |
| Basic EPS (figures in NOK) 1) | -0.00 | -0.04 | -0.22 |
| Diluted EPS (figures in NOK) 1) | -0.00 | -0.04 | -0.22 |
| Weighted average number of outstanding shares | |||
| (million) | 1 291 | 1 162 | 1 211 |
1) Basic and diluted earnings per share are computed using the weighted average number of ordinary shares outstanding.
The accompanying notes are an integral part of the condensed consolidated financial statements (unaudited).
| Consolidated statement of financial position (unaudited) | |
|---|---|
| ---------------------------------------------------------- | -- |
| (amounts in NOK thousands) | Note | 31.03.2020 | 31.12.2019 |
|---|---|---|---|
| ASSETS | |||
| Intangible assets | 4 | 1 302 200 | 1 118 075 |
| Property, plant and equipment | 5 | 299 192 | 256 170 |
| Other non-current assets | 98 838 | 66 089 | |
| Total non-current assets | 1 700 230 | 1 440 334 | |
| Inventories | 245 036 | 205 234 | |
| Trade receivables | 114 945 | 183 333 | |
| Contract assets | 49 477 | 37 103 | |
| Other current assets | 98 600 | 38 688 | |
| Cash and cash equivalents | 1 221 358 | 525 982 | |
| Total current assets | 1 729 416 | 990 340 | |
| TOTAL ASSETS | 3 429 646 | 2 430 673 | |
| EQUITY AND LIABILITIES | |||
| Shareholders' equity | 2 801 209 | 1 846 618 | |
| Total equity | 2 801 209 | 1 846 618 | |
| Deferred tax liability | 72 638 | 63 343 | |
| Long-term debt | 35 014 | 30 577 | |
| Lease liabilities | 83 003 | 79 121 | |
| Other non-current liabilities | 84 209 | 70 605 | |
| Total non-current liabilities | 274 864 | 243 646 | |
| Trade payables | 82 090 | 92 197 | |
| Lease liabilities | 14 031 | 12 066 | |
| Contract liabilities | 165 809 | 151 729 | |
| Other current liabilities | 91 643 | 84 417 | |
| Total current liabilities | 353 573 | 340 409 | |
| Total liabilities | 628 437 | 584 055 | |
| TOTAL EQUITY AND LIABILITIES | 3 429 646 | 2 430 673 |
The accompanying notes are an integral part of the condensed consolidated financial statements (unaudited).
| Q1 | Q1 | Full year | |
|---|---|---|---|
| (amounts in NOK thousands) | 2020 | 2019 | 2019 |
| Cash flow from operating activities | |||
| Pre-tax loss | -5 240 | -53 183 | -277 238 |
| Depreciation and amortisation | 22 353 | 17 192 | 75 500 |
| Change in net working capital | 17 373 | 6 211 | -71 637 |
| Other adjustments 1) | -43 275 | -1 679 | 64 147 |
| Net cash flow from operating activities | -8 790 | -31 459 | -209 228 |
| Cash flow from investment activities | |||
| Investments in tangible and intangible assets | -47 149 | -21 136 -118 862 | |
| Purchases of other investments 2) | -56 638 | 0 | 0 |
| Investments in other financial assets | -12 998 | 0 | -7 849 |
| Loan given to associates and joint ventures | 0 | 0 | -5 975 |
| Investments in associates and joint ventures | 0 | 0 | -3 085 |
| Sale of subsidiaries | 0 | 0 | 1 653 |
| Net cash flow from investing activities | -116 785 | -21 136 | -134 118 |
| Cash flow from financing activities | |||
| Interest paid | -1 238 | -161 | -4 715 |
| Interest received | 4 137 | 1 465 | 9 515 |
| Gross cash flow from share issues | 847 013 | 462 741 | 545 984 |
| Transaction costs connected to share issues | -28 251 | -15 864 | -20 426 |
| Payment of lease liabilities | -2 556 | -1 700 | -8 163 |
| Payment of non-current liabilities | -629 | -430 | -2 700 |
| Net cash flow from financing activities | 818 475 | 446 051 | 519 496 |
| Foreign currency effects on cash | 2 475 | 13 | 86 |
| Net change in cash and cash equivalents | 695 376 | 393 469 | 176 235 |
| Cash and cash equivalents beginning of period | 525 982 | 349 747 | 349 747 |
| Cash and cash equivalents | 1 221 358 | 743 215 | 525 982 |
1) Other adjustments include reversal of NOK 71.1 in unrealised currency exchange gain resulting from internal loans.
2) Purchases of other investments comprises bank deposits and advance payment guarantees with a maturity longer than three months at the date of purchase.
| Other | ||||||
|---|---|---|---|---|---|---|
| Share | Share | Treasury components | Retained | Total | ||
| (amounts in NOK thousands) | capital | premium | shares | of equity | earnings | equity |
| Equity as of 01.01.2019 | 222 710 | 1 585 570 | -12 | 50 196 | -279 486 | 1 578 978 |
| Net loss | - | -269 710 | -269 710 | |||
| Currency translation differences | 2 240 | 2 240 | ||||
| Hedging reserve | -786 | -786 | ||||
| Capital increase | 21 710 | 503 848 | 525 558 | |||
| Options and share program | -2 | 6 312 | 6 310 | |||
| Other changes | 4 028 | 4 028 | ||||
| Equity as of 31.12.2019 | 244 421 | 2 089 418 | -14 | 51 649 | -538 855 | 1 846 618 |
| Net loss | -3 231 | -3 231 | ||||
| Currency translation differences | 132 064 | 132 064 | ||||
| Hedging reserve | -233 | -233 | ||||
| Capital increase | 17 896 | 800 866 | 818 762 | |||
| Options and share program | 1 528 | 1 528 | ||||
| Other changes | 5 701 | 5 701 | ||||
| Equity as of 31.03.2020 | 262 317 | 2 890 284 | -14 | 183 480 | -534 858 | 2 801 209 |
Nel is a global, dedicated hydrogen company, delivering optimal solutions to produce, store and distribute hydrogen from renewable energy. The group serves industry, energy and gas companies with leading hydrogen technology. Since our origins in 1927 as part of Norsk Hydro, we have a proud history of development and continuous improvement of hydrogen plants. Our hydrogen solutions cover the value chain from hydrogen production technologies to manufacturing of hydrogen fueling stations, providing all fuel cell electric vehicles (FCEVs) with the same fast fueling and long range as conventional vehicles today. The group has two divisions, Nel Hydrogen Electrolyser and Nel Hydrogen Fueling.
Nel (org. no 979 938 799) was formed in 1998 and is a Norwegian public limited company listed on the Oslo Stock Exchange. The group's head office is in Karenslyst allé 20, N-0278 Oslo, Norway. The condensed interim consolidated financial statements were authorised for issue by the Board of Directors on 7 May 2020.
The financial information is prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" (IAS 34). This financial information should be read together with the annual report for the year ended 31 December 2019 prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU).
The accounting policies adopted in the preparation of the condensed interim consolidated financial statements are consistent with those used in the preparation of the group's annual consolidated financial statements for the year ended 31 December 2019.
As a result of rounding differences numbers or percentages may not add up to the total.
The preparation of the interim financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets, liabilities and disclosure of contingent liabilities at the date of the interim financial statements. If in the future such estimates and assumptions, which are based on management's best judgment at the date of the interim financial statements, deviate from the actual circumstances, the original estimates and assumptions will be modified as appropriate in the period in which the circumstances change.
In the process of applying the group's accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognised in the condensed interim financial statements:
The estimates and underlying assumptions are reviewed on an ongoing basis, considering the current and expected future market conditions. Changes in accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.
Refer to the annual report of 2019 for more details related to key judgements and estimation.
As a result of the outbreak of Covid-19 during the first quarter 2020, all significant estimates and underlying assumptions have been reviewed in the light of this new situation. Nel has focused on the estimates related to expected credit loss on trade receivables, reviewing credit risk and risk of default including the loss giving default. Nel has not identified significant Covid-19 impact to these condensed consolidated financial statements as of 31 March 2020.
Nel identifies its reportable segments and discloses segment information under IFRS 8 Operating Segments. This standard requires Nel to identify its segments according to the organisation and reporting structure used by management. See Nel's Annual Report 2019 note 3 Business segments information for a description of Nel's management model and segments, including a description of Nel's segment measures and accounting principles used for segment reporting.
The executive management group is the chief operating decision maker and monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on profit or loss and is measured consistently with profit or loss in the consolidated financial statements. Nel operates within two business segments, Nel Hydrogen Electrolyser and Nel Hydrogen Fueling. For more information on the segments operation, see section 'Nel in brief' on page 4-5.
The executive management group is the chief operating decision maker (CODM) and monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated on profit or loss and is measured consistently with profit or loss in the consolidated financial statements.
Prices between operating segments are on an arm's length basis.
The following table includes information about Nel's operating segments.
| Q1 | Q1 | ||
|---|---|---|---|
| (amounts in NOK million) | 2020 | 2019 | Change |
| Revenue and operating income | |||
| Nel Hydrogen Fueling | 55.6 | 54.5 | 2% |
| Nel Hydrogen Electrolyser | 70.9 | 67.8 | 4% |
| Total | 126.5 | 122.4 | 3.34% |
| EBITDA | |||
| Nel Hydrogen Fueling | -26.3 | -14.7 | |
| Nel Hydrogen Electrolyser | -24.2 | -9.0 | |
| Other and eliminations* | -14.1 | -11.1 | |
| Total | -64.6 | -34.8 | |
| Investments*** | |||
| Nel Hydrogen Fueling | 25.8 | 5.4 | 377% |
| Nel Hydrogen Electrolyser | 34.4 | 15.7 | 118% |
| Total | 60.1 | 21.1 | 185% |
| Total assets** | |||
| Nel Hydrogen Fueling | 816.7 | 640.7 | 27% |
| Nel Hydrogen Electrolyser | 1 348.0 | 933.7 | 44% |
| Other and eliminations* | 1 265.0 | 790.8 | 60% |
| Total | 3 429.6 | 2 365.2 | 45% |
* Other and eliminations comprises of parent company and elimination of intercompany transactions.
** Total assets per segment includes excess values on intangible assets derived from the consolidation of the financial statements.
*** Investments comprise intangible assets, property, plant and equipment, associates and joint ventures and equity instruments.
| Property, Plant and Equipment by geographical area | Full year | ||
|---|---|---|---|
| (amounts in NOK million) | 31.03.2020 | 31.03.2019 | 2019 |
| Norway | 128.8 | 36.4 | 113.2 |
| Denmark | 111.5 | 87.1 | 93.6 |
| USA | 56.0 | 50.7 | 47.3 |
| South Korea | 2.9 | 0.1 | 2.1 |
| Total | 299.2 | 174.3 | 256.2 |
| Customer | ||||
|---|---|---|---|---|
| (amounts in NOK million) | Goodwill | Technology | relationship | Total |
| Carrying amount of 01.01.2020 | 609.2 | 451.7 | 57.2 | 1 118.1 |
| Additions | 0.0 | 25.8 | 0.0 | 25.8 |
| Amortisation | 0.0 | -11.1 | -3.3 | -14.4 |
| Currency translation differences | 99.6 | 65.3 | 7.8 | 172.7 |
| Carrying amount as of 31.03.2020 | 708.8 | 531.7 | 61.7 | 1 302.2 |
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 at year end, and if impairment indicators are identified. The Covid-19 situation is not itself an impairment trigger as of now. Should the current situation develop into a sustained economic downturn, Nel may need to write down assets as impaired.
The 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 the value in use, an impairment loss will be recognised.
The impairment test is performed on three Cash Generating Units (CGUs). Goodwill and intangible assets are related to CGU Electrolyser Norway, CGU Electrolyser US and CGU Fueling.
Property, plant and equipment comprise owned and leased assets
| Land, buildings | Right-of-use | ||
|---|---|---|---|
| (amounts in NOK million) | and equipment | assets | Total |
| Carrying amount as of 01.01.2020 | 171.8 | 84.3 | 256.2 |
| Additions | 22.6 | 0.7 | 23.3 |
| Remeasurements | 0.0 | 0.1 | 0.1 |
| Depreciation | -4.4 | -3.6 | -8.0 |
| Currency translation differences | 22.2 | 5.4 | 27.6 |
| Carrying amount as of 31.03.2020 | 212.2 | 87.0 | 299.2 |
Nel discloses alternative performance measures (APMs) in addition to those normally required by IFRS. This is based on the group's experience that APMs are frequently used by analysts, investors and other parties for supplemental information.
The purpose of APMs is to provide an enhanced insight into the operations, financing and future prospect of the group. Management also uses these measures internally to drive performance in terms of long-term target setting. APMs are adjusted IFRS measures that are defined, calculated and used in a consistent and transparent manner over the years and across the group where relevant.
Financial APMs should not be considered as a substitute for measures of performance in accordance with the IFRS.
EBIT: is defined as earnings before interest and tax and corresponds to operating profit/(loss).
EBIT margin: is defined as EBIT divided by revenue and operating income.
EBITDA: is defined as EBIT + depreciation, amortisation and impairments
EBITDA margin: is defined as EBITDA divided by revenue and operating income.
Equity ratio: is defined as total equity divided by total assets.
Organic growth: shows like-for-like revenue growth for the group and is defined as the group's reported change in operating revenues adjusted for effects of acquisitions of companies and mergers. In the calculation of organic growth, acquired companies and effect from mergers is excluded 12 months after the transaction date.
Organic growth illustrates the group's ability to capitalise on the emerging green hydrogen market as well as being innovative in developing new and improved products from its existing business.
Order backlog: is defined as firm purchase orders with agreed price, volume, timing, terms and conditions and where revenue is yet to be recognised.
Title: Nel ASA
Published date: 07.05.2020
[email protected] +47 23 24 89 50
Karenslyst allé 20, PB 199 Skøyen, 0212 Oslo, Norway
The publication can be downloaded on nelhydrogen.com
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