HEXAGON COMPOSITES ((NO:HEX)) has held its Q1 earnings call. Read on for the main highlights of the call.
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Hexagon Composites’ recent earnings call painted a mixed picture of the company’s current standing and future prospects. While there were strong performances in certain sectors such as Fuel Systems and a robust liquidity position, challenges persist, particularly in the Mobile Pipeline segment. The company also faces decreased EBITDA margins and overall market uncertainty, leading to a pause in guidance for 2025.
Strong Performance in Fuel Systems
Despite a challenging market environment, Hexagon’s Fuel System business reported a remarkable 64% year-over-year increase in revenue. This growth was primarily driven by strong demand from the refuse sector, highlighting the segment’s resilience and potential for future expansion.
Significant Order in Refuse Sector
Hexagon secured its first major order from a single customer that spans all three core businesses: Fuel System, Mobile Pipeline, and aftermarket services. This order signifies strong integration within the company and market acceptance of its comprehensive offerings.
Solid Liquidity Position
The company ended the quarter with a liquidity reserve of NOK1.1 billion, underscoring its financial stability and ability to navigate uncertainties. This solid liquidity position provides Hexagon with a buffer against market fluctuations and potential challenges.
Positive Momentum for Natural Gas
Natural gas is increasingly being adopted as a preferred alternative to diesel, supported by technological advancements such as the new X15 engine from Cummins. This trend is gaining traction in the U.S. and other markets, offering growth opportunities for Hexagon.
Decline in Mobile Pipeline
The Mobile Pipeline business saw a significant 35% year-over-year revenue decline. This drop was attributed to reduced capital investments and slower than expected development of new RNG sites, posing a challenge for Hexagon in this segment.
Decreased EBITDA Margin
Hexagon’s EBITDA margin decreased to 5% from 7% in the previous year. This decline was primarily due to negative mix effects, especially from the Mobile Pipeline segment, impacting the company’s overall profitability.
Market Uncertainty and Paused Guidance
Due to macroeconomic uncertainties and limited visibility, Hexagon has paused its guidance for 2025. This decision reflects the challenges the company faces in predicting future performance amidst fluctuating market conditions.
Weak Outlook for U.S. Mobile Pipeline
The outlook for the U.S. Mobile Pipeline market remains weak, influenced by general delays in spending and uncertainties surrounding oil price developments. This continues to be a concern for Hexagon as it navigates these challenges.
Forward-Looking Guidance
In its forward-looking guidance, Hexagon reported revenues of NOK912 million with an EBITDA of NOK44 million, resulting in a 5% EBITDA margin. Despite an 8% decline in the U.S. truck market, the company sees growth potential in natural gas adoption, particularly in the U.S. with Cummins’ X15 engine and Daimler’s new Cascadia platform. However, challenges persist in the Mobile Pipeline and European markets.
In summary, Hexagon Composites’ earnings call highlighted a blend of strong sector performances and significant challenges. The company’s robust liquidity position and growth potential in natural gas are positive signs, yet the decline in Mobile Pipeline and market uncertainties present hurdles. As Hexagon pauses its 2025 guidance, stakeholders will closely monitor its strategic responses to these evolving market dynamics.