Hexagon Composites Ord

Good morning, everyone, and welcome to Hexagon Composites Q4 and full year 2025 presentation. My name is Berit-Kathrin Høyvik, and I'll be moderating today's presentation. Joining me in the studio today is our CEO, Philip Schramm, and CFO, Eirik Løre. They will take you through our company update, financials, and outlook before we wrap up with the Q&A session. With a reminder that you may submit questions on your screen at any point during the presentation. And with that, I'll hand the word over to Philipp.

Thank you so much, Berit, Katrin. Good morning, everyone, and thank you for joining us for our Q4 and full year 2025 results presentation. Before we begin, I would like to extend a warm welcome to Eirik Löhrer, who stepped in as our CFO. Eirik has been a core member of our executive team for the past four years, and he has a strong understanding of our organization, and I'm really happy to have him by my side today, and he will walk you through the financials shortly. For now, I will guide you through the key developments of the quarter. Q4 can be summarized as a quarter of improving performance, strategic progress and early signs of market stabilization from the continued softness in our core North American markets. Let me start with an update on the market environment, because it continues to set the backdrop for our performance. In 2025, our core markets in North America have been characterized by macroeconomic uncertainty, regulatory flux and low investment appetite. Those dynamics alongside low oil prices and high interest rates delayed investments by customers, especially in our North American mobile pipeline business. In the United States, the trucking market and freight rates remain at multi-year lows, fleets are deferring replacement cycles despite aging fleets, and now the length of this downturn is unprecedented. It is unfortunate, but not unsurprising, that in this environment fleets have limited willingness to adopt new technologies, even when the economics and environmental benefits are compelling. However, November brought an important shift. The confirmation, or better, the reassurance of the existing EPA 2027 NOx emission rule has brought much needed regulatory clarity to the industry. Class 8 truck sales saw a positive reaction in December and January's sales numbers. While this does not yet mark a market rebound for us, it is a meaningful signal that the pieces for recovery are starting to slowly fall into place. This regulation also provides important clarity for fleets and incentivizes the shift towards CNG from 2027 onwards. So overall, while the market conditions remain soft, We are seeing signs of gradual stabilization. These signs of gradual stabilization are evident in our Q4 results, where we delivered sequential revenue growth and improved profitability. Our revenues increased to 831 million Norwegian kroner in Q4, driven by the strongest quarter of the year for our fuel systems business, including strong performances by Refuse and Transit, which again proved their resilience. EBITDA was for the quarter at 156 million, which included 13 million in severance costs and a one-off accounting gain of 119 million from the acquisition of SES Composites. We completed the acquisition in October and since then SES added 97 million to our top line and 4 million to our EBITDA. And we are expecting more financial synergies to materialize in 2026 from this acquisition. This acquisition solidifies us as the leading cylinder and fuel system supplier to European transit bus OEMs. For the group, the quarter's underlying profitability trends, stripping out one-offs reflects the progress of our cost cash optimization program, which is now well underway and on track. Since launching it in Q3 of last year, we have delivered meaningful progress across operating expenses, working capital, and our portfolio. The highlights of the actions that we have delivered so far are A targeted 25% reduction in workforce slash headcount. The optimization of our production footprints, shifting patterns and equipment usage. A reduction of around 200 million Norwegian kroner in personal and SG&A costs so far, including 100 million in structural reductions. You will see a reduction in our Q4 numbers on working capital and can expect to see further reduction of between 100 to 150 million in 2026. We are applying strict investment discipline and have limited capex in 2026 to 80 million Norwegian kroner with no non-core cash investments planned throughout the year. The positive momentum and visible progress of these measures are evident and we expect further effects to build through 2026. Importantly, I want to make clear that these are not short-term fixes. They are structural improvements that will benefit us in the soft market, but also as the market responds. The structural break-even point of our business entering 2026 is now significantly lower than it was a year ago. With our cost structure improved, growing and diversifying our top line through this market down cycle has also been a focus of ours since I joined the company a year ago. With a clear goal as a technological leader with unmatched capabilities to apply them where possible. There are many commercial developments over the last year and especially the last quarter that prove this change and have set us to be a stronger and more resilient business. One clear highlight is the outstanding performance of our refuse segment in fuel systems. In 2025, we delivered record annual revenues of around 800 million from the refuse industry. Refuse is a resilient market. It has stable demand, tied to public sector, backed critical services. So has been relatively unaffected by the macroeconomic environment in North America. Trash still needs to be picked up. And in many cases now, This trash, which is being picked up by refuse companies, is now turned into renewable natural gas and used to fuel these very trucks that collect it. It is one of the strongest circular economy use cases with major sustainability and economic benefits. It is enabling refuse companies to produce their own fuel and remove the single largest historical office cost, which was diesel. One of the reasons we are so confident in the outlook for natural gas vehicles is because of the conversion that has happened within refuse in North America over the last decade. Our team has spent two decades building this market together with the industry's trailblazers. Today, 60% of new refuse truck orders in North America are natural gas powered. A clear validation of this long-term conversion story. Our team is working on that same conversion story in heavy-duty long-haul trucking. For the first time, North American heavy-duty long-haul fleets have a real alternative to diesel. Natural gas is cheaper, and with the coming N15X engine. This engine delivers diesel-like performance without compromise. In the last month, we received a significant order from a leading truck operator in Mexico, valued at approximately 110 million Norwegian kroner. The fleet tested the performance of the pilot trucks in their real-world operations And this major order is a testament to how well it performed driving coast to coast across Mexico. More recently, yeah, actually it happened last night, we signed a PO and unlocked new opportunities for our business in securing our first commercial order for space applications, valued at slightly over 7 million US dollars. While it is a first order, it is a strong proof of Hexagon's industry-leading high-tech capabilities. We have unmatched capabilities within our business that truly do set us apart, and I want to personally recognize our engineering and our production teams for their exceptional work over the last weeks to make this happen. Their agility, unparalleled expertise and innovation continue to open the door to new verticals and other opportunities like this one for our business. This is a testimony of how we are walking the talk. Across the group, we are committed to utilizing our capabilities, products, capabilities, capacities and assets to create shareholder value, whether in new markets, new geographies like India, or new industries like space. With that, I will hand over to Eirik to take you through our financial performance in more detail. Eirik, please.

Thank you, Philip, and good morning, everyone. Starting with the financial results for the group, we delivered revenue of 831 million for the quarter and 2.9 billion for the full year. Q4 is a seasonally strong quarter and we saw higher activity across most segments, driving a 50% uplift versus Q3 and including a 97 million contribution from SCS composites, which was acquired in October. Organically, our quarterly growth was 37%. Full-year revenues for 2025 were significantly down compared to 2024, reflecting weaker demand in particular within our mobile pipeline segment. Reported EBITDA improved from minus 54 million in Q3 to 156 million in Q4. However, this includes a non-cash accounting gain of 119 million, booked as other income in our accounts, which is related to the SES Composites acquisition, as Philip mentioned. This is simply due to the fact that the book value of the company exceeded the purchase price. Adjusting for this and for severance cost of 13 million in the quarter, adjusted EBTA was 49 million, corresponding to a 6% margin. Profitability-wise, Q4 was the strongest quarter of 2025, supported by cost actions implemented throughout the year. And for the full year, adjusted EBTA was 65 million, corresponding to a margin of 2%. Turning to fuel systems... We delivered revenues of 548 million in a seasonally strong quarter, including a significant contribution from SCS composites. The full year revenue of 1.8 billion was weighed down by lower truck volumes due to a muted freight market through the year, driven by regulatory uncertainty, tariff concerns and weaker consumer confidence. Towards the year end, we saw a pickup in activity driven by improved clarity on the factors mentioned earlier by Philip as well, including the EPA 2027 NOx rules. For the quarter, we delivered some sizable orders, notably 100 sleeper cab systems, our largest configuration, to a leading Mexican trucking company, contributing significantly to both top line and margin. The reference business is one of our more resilient segments and continues to perform well, closing the year with record annual revenues of 800 million, as Philip also touched on earlier. EBITDA came in at 61 million for the segment, corresponding to 11% margin, driven by volumes, a favourable mix and improved materials efficiency. Mobile pipeline had revenues of around 200 million in the quarter, significantly down year on year, but more than double Q3 levels. In North America, this segment has, after years of strong growth, experienced a pronounced cyclical downturn in 2025, driven by lower shale activity and slower build-out of RNG projects, which in turn has led to lower asset utilization and delayed capex decisions among the mobile pipeline operators, which are our customers. We did see a small spike in demand ahead of the winter season in Q4, but this is also offset by some increased price pressure from competition given the market situation. On the positive side, our EMEA business delivered record revenues of around 100 million in Q4, driven by R&D projects in the UK and CNG projects in the Middle East, including the Vatani business that we have previously announced. And while activity and EBITDA improved quarter on quarter for the segment, the mobile pipeline segment is still below the point of financial break even. Aftermarket, our service and testing and inspection business delivered revenues of 105 million for the quarter and 433 million for the full year. Performance was down year on year, reflecting lower truck volumes, which means lower installation revenues for our aftermarket business. as well as delayed maintenance and extended service intervals among the CNG fleet operators. As expected, 2025 was a low activity year for MAE trailer requalification. Remember, this follows regulatory requalification requirements from the U.S. Department of Transportation on five air intervals. With 2015 and 2020 being low years for mobile pipeline, we knew going into 2025 that this would be lower activity for the MAE testing technology. And this also further impacted both our revenues and our margin for the year. EBITDA was 12 million in Q4 and 28 million for the year. Also weighed down by non-recurring project work related to an LNG project we have now completed with the CryoShelter technology. Turning to cash flow. We delivered positive operational cash flow for the quarter, supported by improved EBITDA and the working capital release Philip mentioned earlier in the presentation, which amounted to 37 million for the quarter. In addition, we had some tax effects and other non-cash outbacks to EBITDA, bringing the total up to 102 million. On the financial side. Under investments to associated companies, we provided the last major funding to CryoShelter in December to complete the work related to the major customer order that business has carried out before the ownership has since been restructured from January 2026. This involves Hexagon taking 100% control and significantly reducing the cash burn of that business. We are currently exploring alternative outlets for that technology that does not involve further investment from Hexagon, including deploying the technology in high potential markets such as India. Including 100 million of debt drawdown, we ended the quarter with 104 million higher cash balance. Briefly on the balance sheet, which remains sound following the capital race in September. Net debt remains slightly above 1 billion in Q4, broadly in line with last quarter. And our net working capital stood at close to 1.2 billion. And as Philip mentioned earlier, we are working diligently to address that number. Our available liquidity stood at 561 million at year end, and we had an equity ratio of 50%. And to round out the finance section, I wanted to briefly touch on the covenant situation. As previously disclosed, the September refinancing included a waiver for the leveraged covenant until Q3 2026. And from that point on, the covenant will be reinstated at 4.2 times EBITDA. In an uncertain market, management remains laser focused on financial discipline, cost control and working capital management in order to meet the obligation of the loan agreement. And in parallel, we're also maintaining proactive and ongoing dialogue with our lending partners to ensure appropriate financial flexibility in the short term, but also a sustainable capital structure in the longer term. And with that, I'm handing it back to you, Philip, for the outlook section.