Hexagon Composites Q1 2025 slides: revenue falls, guidance paused amid market uncertainty

Introduction & Market Context

Hexagon Composites (HXTON) reported a challenging start to 2025, with declining revenue and earnings compared to both the previous quarter and year-over-year results. The company’s May 15, 2025 presentation revealed significant headwinds across key business segments, prompting management to pause guidance for the remainder of the year.

The company faces what it describes as "broader economic uncertainty and limited visibility" in its markets, though it maintains that natural gas remains the best alternative to diesel fuel, offering economic, environmental, and health benefits. Despite current challenges, Hexagon emphasized that natural gas solutions are gaining momentum in the transportation sector.

Quarterly Performance Highlights

Hexagon reported Q1 2025 revenue of NOK 912 million, representing a 3% year-over-year decline from NOK 945 million in Q1 2024. EBITDA fell more sharply, dropping 15% to NOK 44 million from NOK 59 million in the prior year, with margins compressing from 6% to 5%.

As shown in the following chart detailing the group’s quarterly performance:

This performance marks a significant reversal from the company’s record Q4 2024 results, when Hexagon achieved all-time high revenues of 1.5 billion NOK and an EBITDA of 257 million NOK with a 17% margin. The company maintains a liquidity reserve of NOK 1.1 billion, which management believes will help navigate current market challenges.

Segment Performance Analysis

Hexagon Agility, the company’s largest division, posted revenue of NOK 891 million compared to NOK 901 million in Q1 2024. EBITDA for this segment reached NOK 49 million with a 6% margin, down from NOK 65 million and a 7% margin in the prior year. The segment showed mixed performance across its business lines, with refuse collection vehicles up 68% and heavy-duty trucks up 36%, while the mobile pipeline business declined by 35%.

The following chart illustrates Hexagon Agility’s performance breakdown:

Hexagon Digital Wave experienced a more severe decline, with revenue falling 48% year-over-year to NOK 22 million from NOK 42 million. The segment reported an EBITDA loss of NOK 9 million, representing a -41% margin compared to a NOK 1 million loss (-2% margin) in Q1 2024. Management attributed this underperformance to reduced activity in Modal Acoustic Emission (MAE) due to the five-year cycle on requalification and lower volumes in Ultrasonic Examination (UE).

Strategic Initiatives & Cost Cutting

In response to the challenging market environment, Hexagon has implemented several strategic initiatives to maintain financial resilience. The company has reduced its workforce by 6% and is proactively managing supply chains to minimize impact on its value chain.

The company is restricting capital expenditure to NOK 120-130 million levels and focusing on inventory reductions in line with sales. Management emphasized that these cost reduction initiatives will not impact the company’s ability to scale operations when market conditions improve.

As illustrated in the company’s financial resilience strategy:

The cash flow statement reveals the impact of these challenging market conditions, with free cash flow remaining negative due to weak EBITDA performance:

Forward-Looking Statements

In a significant shift from previous quarters, Hexagon has paused its guidance for 2025, citing uncertainty about "customers’ willingness to spend in the current climate." The company identified three key factors behind this decision: lower hydrogen-related demand affecting EU cylinder sales to Hexagon Purus, delayed fleet spending in the US truck market, and a weak US Mobile Pipeline outlook due to general spending delays and oil price uncertainty.

Despite these near-term challenges, management remains optimistic about medium-term prospects, pointing to several market drivers that suggest an eventual recovery:

The company highlighted that natural gas was a focal point at the recent ACT Expo, with Cummins (NYSE:CMI)’ X15N engine now available from three major OEMs covering over two-thirds of the market. Management also noted that historically low truck sales mean fleets will eventually need to replace aging vehicles, and that oil and gas activity should stabilize with renewable natural gas continuing to grow.

Hexagon maintains that it is well-positioned to capture growth opportunities across the natural gas value chain, from mobile pipeline infrastructure to fuel systems for vehicles and aftermarket services:

While the company faces significant near-term headwinds, management expressed confidence in its ability to navigate current market challenges while positioning for future growth when conditions improve.

Full presentation:

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