Earnings call transcript: Haag Group sees strong Q4 growth in 2024

Haag Group reported substantial growth in its fourth-quarter earnings for 2024, showcasing a significant increase in revenue and a positive EBITDA. The company’s revenue soared to NOK 310 million, a notable rise from NOK 113 million in the same period the previous year. The EBITDA turned positive, reaching NOK 7.9 million, compared to a negative margin in the prior year. The company also maintained a robust cash balance of NOK 250 million, indicating strong financial health. According to InvestingPro analysis, the company maintains a "GOOD" financial health score of 2.84, with particularly strong metrics in profitability and cash flow management.

[Want deeper insights? InvestingPro subscribers have access to 10 additional ProTips and comprehensive financial metrics for Haag Group.]

Key Takeaways

• Q4 2024 revenue increased significantly to NOK 310 million.
• Positive EBITDA of NOK 7.9 million, reversing a negative margin.
• Strong order backlog of NOK 1.2 billion, up 103% year-over-year.
• Breakthrough contracts in various segments including offshore wind and aquaculture.
• Focus on developing hydrogen integrated systems for future installations.

Company Performance

Haag Group demonstrated impressive performance in Q4 2024, with substantial revenue growth and improved profitability. The company’s strategic focus on expanding its technology segments, such as ship design and energy systems, contributed to this success. The positive financial results are reflective of the company’s ability to capitalize on industry trends, particularly in reducing emissions and enhancing vessel efficiency.

Financial Highlights

• Revenue: NOK 310 million, up from NOK 113 million in Q4 2023.
• EBITDA: NOK 7.9 million, a significant improvement from a negative margin.
• Cash Balance: NOK 250 million, indicating strong liquidity.

• Segment Performance:

- Ship Design: SEK 180 million turnover, SEK 2.8 million EBITDA.

- Energy Design & Smart Control: SEK 122 million revenue, SEK 14.2 million EBITDA.

- Water Treatment Systems: SEK 17 million turnover, SEK -1.4 million EBITDA.

Outlook & Guidance

Looking ahead, Haag Group expects significant revenue growth in 2025, supported by a strong order backlog of NOK 1.2 billion, which is a 103% increase from the previous year. The company anticipates margin improvements and plans to continue adapting its strategy based on global market conditions. There is a focus on developing hydrogen integrated systems, with potential installations projected for 2026-2027. InvestingPro data shows analysts maintain a "Strong Buy" consensus recommendation, though they anticipate some sales pressure in the current year.

[Access the comprehensive Pro Research Report for Haag Group, part of InvestingPro’s coverage of 1,400+ top stocks, for detailed analysis and actionable insights.]

Executive Commentary

CEO Gunnar highlighted the company’s strong future prospects, stating, "We have a strong order book with sound margins for the future." He also emphasized the role of global megatrends in supporting the business, asserting, "The global megatrends support our business." These comments reflect confidence in the company’s strategic direction and market positioning.

Risks and Challenges

• Supply Chain Constraints: Potential disruptions could impact production timelines.
• Market Saturation: Increased competition in core markets may pressure margins.
• Macroeconomic Pressures: Global economic fluctuations could affect demand.
• Regulatory Changes: Evolving environmental regulations may require additional compliance costs.
• International Trade Conflicts: Ongoing geopolitical tensions could impact international operations.

Haag Group’s Q4 2024 results underscore its robust performance and strategic positioning in the maritime and energy sectors. The company’s focus on innovation and adaptation to market trends positions it well for future growth, despite potential challenges in the global landscape.

Full transcript - Havilah Resources Ltd (HAV) Q4 2024:

Gunnar, CEO, Haag Group: Good morning, everybody, and welcome to Haag Group’s presentation of the Q4 and interim twenty twenty four results. We have the same agenda as we have had the last presentations. We start with some highlights from Q4 and some information about the Haar Group in general.

Paul Arvog, CFO, Haag Group: We We give you a business update on each of the technology segments.

Gunnar, CEO, Haag Group: Our CFO, Paul Arvog, will present the financials. And then we sum up and tell us tell you about how we look for the prospects for the future. Q4 highlights. Key developments. We still have a very solid order backlog, SEK 1,200,000,000.0 at the end of last year, and that is up 103% from the same quarter in 2023.

And that is reflecting the very strong order intake in the recent quarters. We got NOK 200,000,000 on new orders in Q4. And we will see the effect of the new orders coming more strongly into 2025 as the new orders normally have a little bit of lead time. So both for turnover and for profit, you will see more effects during this year. The Q4 revenue was also quite high, NOK $310,000,000 compared to NOK 113,000,000 in Q3 Q4 in 2023.

And the EBITDA was positive, NOK 7,900,000.0, which is a strong upturn from last year to minus 26.1% and also very strong compared to the last quarters that we have reported. And that is especially driven by a significantly improved financial performance in the Energy Design and Smart Control technical segment. Also after the quarter, we have had some good results. We have got contracts in a new market for the Energy Design and Smart Control segment, eight tankers, bird carriers for Wilson. We have a breakthrough contract in aquaculture land based.

And we have got total orders up to now for more than NOK100 million NOKs after the quarter. As you see, we also have a very strong cash balance, NOK $250,000,000

Paul Arvog, CFO, Haag Group: at

Gunnar, CEO, Haag Group: the end of the year. Here is the order book per quarter, order intake per quarter and also the accumulated order book at the end of Q4. As you see, there is a small drop from Q3. That is mainly that we have we are still waiting for the big orders for the design ship design segment. But both in the Energy Design and Smart Control segment and also in the Water Cleaning segment, the order book has grown in the quarter.

So we promise our customers to improve their performance, to improve their competitiveness through helping them with advice and optimized solutions throughout the life cycle of the vessel. So we want to be very in close contact with our shipowners and customers. We want to know what their pain points are, and we want to offer our competence and knowledge in order to improve their also their competitiveness and bottom line. We are approximately 172 people in the company, mainly Norway and some people also in Poland abroad, which is on the ship design department. We are four technology segments: ship design, energy design and smart control systems, hydrogen based energy systems and water treatment systems.

And we can also deliver total packages where we combine the resources, competence and technology from all of these segments, also giving us a competitive edge compared to those who don’t have this broad spectrum of technology and knowledge. These are the main segments that we are operating in. Offshore wind, we are very strong, especially within SOVs, offshore wind support vessels. We have traditionally been very strong in oil and gas, and we also now see that we can contribute to making the oil and gas support vessel industry greener by offering our solutions. Ferries and ropeux, both smaller cruise vessels and also totally electrified car ferries are strong field in our portfolio.

And we are also within aquaculture, fishery and short sea cargo. For the ship design business, we are still waiting for the new big orders. We have a very positive pipeline, sales pipeline, but we see that the projects that we are working on has been postponed. Hopefully, we can give you some good news there in the near future. The result in the quarter is not what we have what we want it to be.

The turnover is quite high, but that is due to a large extent of trading of equipment in the period. And we also the result was negatively impacted by loss provisions in one particular project that we’re working on. We see when we have a life cycle attitude and towards our customers that they also come back and buy conversions assistance from our design. And as I said, we have a very positive sales pipeline, both within offshore wind, aquaculture and also towards the oil and gas industry. The Energy and Design and Smart Control segment is what we have said for quite a long time is maybe the segment with the strongest growth potential.

And that has been now evidenced also in the very good order book that they have achieved. We are now more than NOK 1,000,000,000 in order book in that segment. We got a lot of very nice contracts in the period. At Greenyard Kleven, we got this wind assisting vessel, new build support vessel. We have they now got orders also for the onshore charging stations for the Lave Kuppedal, the autonomous crossing on the Sognefjord.

And we have some conversions also in the quarter. And after the quarter, we got this Wilson bulk carriers in addition. So this is still the segment that we see have now starting to produce good results. We have also very strong financial result in the period in Q4 and where we also see the strongest growth potential for Haar Group onwards. Also very positive for the Water Treatment segment.

We have built this company, and they have a passion for clean water. And the main product up till now has been ballast water treatment systems, which was based on that most vessels needed to have a ballast water treatment system according to IMO regulations. So there was a large retrofit boom, which we also had good results from. That retrofit boom has slowed off. We are now focusing the ballast water system for newbuilds, but we see that we need to add on more markets and more products.

And then it’s very positive to see that the aquaculture market, both for live fish carriers and on land based installations, as you see here, has finally paid off the investments that we have made in the market and the products there. And we are now starting to get very good contracts. And also these contracts are significantly higher per contract than when you sell one ballast treatment system. So they got one contract, a large contract for live fish carrier in Q3. They got also a contract for a land based system and also for subsequent events.

This year, we are signed more contracts both for live fish carriers and also for land based agriculture. The hydrogen based energy systems, we are still working on the technology. As you know, we have got funding for developing a prototype. We are still in process towards Maris Fiducia regarding the five bulk carriers that they have got a NOVA funding for installing hydrogen. And we are still depending and waiting on the final contract between Marius Feducia, the owner and the shipyard, where we will then enter into contract negotiations with the shipyard.

There is the order backlog breakdown. As you see, ship design has lower order backlog than Q4 in the last year in 2023. And you see energy design and smart control system significantly increased from NOK $250,000,000 to more than NOK 1,000,000,000 in order backlog. And Water Treatment System has approximately the same backlog as last year. But the last contracts that we have got this year is not included, of course, in the backlog.

This is per Q4. So the backlog also for the water treatment system is higher than now than it’s shown here. So the total development in order backlog and what we are going to make money for on the future is very positive. And with that, Paul Allrog, our CFO, he will give you more details about the financials. And afterwards, we will make a summary and outlook and take questions that has come in.

So Paul?

Paul Arvog, CFO, Haag Group: Yes. It’s quite a pleasure today to present the figures, and I will go a bit more into the details that Gunnar has shown. If you look at the revenue and the EBITDA in the quarter, it’s quite good. And especially if we compare with the previous quarters, we see that we have $310,000,000 in revenue. That is quite high if you compare to the previous ones.

And also it’s good now to deliver a positive EBITDA in the quarter. If you look at the details, SEK $310,000,000 with an EBITDA of SEK 7,900,000.0 and EBIT of SEK 3,600,000.0 net finance of SEK 6,900,000.0 with a net provision profit of $10,400,000 and EBITDA margin of 1.24%. The revenue increase in Q4 last year is mainly driven by higher level of trading, higher service activity and sales income. And as Goner said, the recent contract wins are not in the books yet and will be both turnover wise and profit wise shown in 2025. Yes.

And I think if we compare especially with the last quarters, but also if we look at the whole year, we see now quite improvement in our figures. If we look at the details on the different segments, we can start with ship design. Quite a high turnover in the period, SEK180 million and an EBITDA of SEK2.8 million. Quite low margins in total, and this is reflected in very high trading with quite low margins, loss provisions on one specific project and low capacity utilization. If you look at the water treatment systems, turnover of SEK 17,000,000 with an EBITDA of SEK 1,400,000.0 minus.

Quite low activity in the quarter and it’s related to transition from sales from the retrofit in the ballast water treatment systems into more service income and also into aquaculture. And then if you look at the energy design and smart control system, they are the motor in the Q4, quite high operating income of SEK 122,000,000, EBITDA of SEK 14,200,000.0 and a profit before tax of SEK 17,200,000.0. And this is the result of high activity, healthy product portfolio and high activity in general in the quarter. And as we know, the order book on EUR 1,000,000,000 for the coming years is a very good foundation for having good figures in 2025. If you look at the hydrogen based systems, this the figures indicates, as we said, it’s more R R and D and a product development company, still not running on normal sales activity.

If you look at the balance sheet, the major changes is on the current asset side, both on receivables and cash and especially the cash level of SEK $250,000,000 at the end of the year. It’s quite good. And also total receivables has increased quite a lot during the year. And this is a result of high activity on the new sale with a lot of new orders and payment from our customers. If you look at the equity, the changes during the year is not that high, but from Q3 to Q4, we have increased from 40,000,000 to 80,000,000.

And this is related to sales of our own shares, approximately 30,000,000 in Q4. And yes, the covenant we still have a waiver on the covenants for both for Q4 until the Q1. And we are working together with the bank to get a new covenant structure. Yes, and we see also there on the liability side, it’s quite an increase and the total current liabilities is related to prepayments from our customers. So it’s normal higher level when you have higher activity in the business.

If you look at the cash flow, we see that you have a we have a positive cash flow from operations, 96.5%. And if we compare to the same period in last year, it was minus 78 Net cash from investment is 4.1 in the period, and this is related to investments in R and D mainly. And then we have cash flow from financing activity, positive SEK 9,300,000,000.0. And this is related to sales of our own shares in the fourth quarter and also a repayment of the non current debt to the bank related to million. So in sum, we have a posted cash flow of 101,600,000.0 in the quarter.

And we can also see if you see on the full year, it’s more or less the same as the Q4. So it’s a very strong quarter cash wise. Then I will give the call back to Gerard.

Gunnar, CEO, Haag Group: Thank you very much, Paul. So to sum up what me and Paul has told you. In Q3, we said that we are going to have a quite much higher turnover top line in ’twenty four than in ’twenty three that we have delivered on. We are very happy that we can show you positive EBITDA. It’s a significant improvement both from last year and also from the last latest quarters.

We have got new orders for more than NOK 200,000,000 signed in Q4, and that results in a very strong order book for NOK 1,200,000,000.0. So what do we think about the future? If you have been following us, you will see that we still say that the global megatrends supports our business. You need to reduce emissions. You need to have more efficient vessels.

You need to reduce energy consumptions. And we have the technology that supports the owner in their business model to achieve this. Analysis also tells us that the global shipping market is still positive, and we think it will remain stable also for the coming years. As predicting is difficult in these times, but that is at least what we think. And with regards to the international turmoil that we have had since the election in U.

S. A, we see that our main business and the majority of what we deliver is either to Norwegian customers or to European customers. And that means that we will not at least not in the foreseeable future, we’ll be that much affected about this transcontinental tariff regimes, for instance. And as we said at the last quarter, we expect revenue growth significant revenue growth also in 2025 compared to 2024. And that is on the back of a solid order book with margin improvements compared to what we have seen previously.

So it’s as Paul said, it’s quite good for us also to finally present more positive results. We have presented very strong order books so far. And now it’s the time to deliver also on the order books and continue to build more order books in order to achieve the growth expectations and growth targets that we have. So then we go to the Q and A. We have, as usual, got a lot of questions.

We will try to answer as many as possible of them. So Paul, you have noted what has come in.

Paul Arvog, CFO, Haag Group: Yes. We can start with a question here. Four years on the stock exchange, how will half group reverse negative trend?

Gunnar, CEO, Haag Group: Yes. It has been up and down since we came on the stock market in 2021 from for different reasons that I’ve been addressing also in previous presentations. We see now at least that we have turned this in Q4. And also as what we have said, strong order book with sound margins for the future will be what we will be have as a foundation for continuing to deliver more positive results that we have had at least the last year. We see also the market still, even though things are uncertain, looks very positive for us.

So our ambitions are still high, and we hope to also deliver more in accordance what you expect onwards.

Paul Arvog, CFO, Haag Group: Yes. And there’s a question about half hydrogen. Half hydrogen’s integrated system was world leading. What is the time line for getting it installed on one ship?

Gunnar, CEO, Haag Group: That is, of course, depending on what project that will be the first. The most closest that we have now been working on for a while is, of course, this Marius Feducia five container vessel project. And to build a vessel takes quite a long time, so we will maybe see that installation when it comes to a contract in onboard a vessel in 2026, ’20 ’20 ’7. And in general, we see that there is a lead time always when you’re putting this type of systems on board a vessel. So the orders can come before, of course, earlier, but the first installations will not, I think, be until twenty twenty five twenty twenty six, ’20 ’20 ’7.

Paul Arvog, CFO, Haag Group: Can you tell anything about the R and D project, LNG game changer?

Gunnar, CEO, Haag Group: Yes. As some of you have noticed, Forschningsdrade in Norway have awarded a group of companies with us in lead funding to have a predevelopment of a new technology, which we find quite interesting and promising. We will be telling more about that not in the far future. So if you follow us, you will see that we will come out with what this means for Hall Group and also what it can be as a potential for our customers. I urge you to follow that presentation when we come out with that hopefully this month.

Paul Arvog, CFO, Haag Group: Yes. Then Gunnar, there is a question about why has the company choose not to communicate financial guidance or specific targets? And will Hall Group consider introducing guidance to give investors better sight into expected performance?

Gunnar, CEO, Haag Group: We have done what we call soft guiding with some long term goals. As you noticed, we stopped doing that in the last quarter. And the reason is that as for what you see from our turnover, from our cash balance and everything, we are in a quite fluctuating business because we have quite large projects. And that also makes it difficult to give very detailed prognosis on the future. But we have given you quite good indications now on what we expect for 2025, And that will be also followed up through the coming presentations.

Paul Arvog, CFO, Haag Group: Yes. And there is a question about is India and Asia exciting markets?

Gunnar, CEO, Haag Group: India and China, Vietnam, they are large shipbuilding nations. So our main philosophy is to follow our customers, follow our shipowners. So some of our shipowners, they will be building in these countries. For instance, the Wilson project is built in India. And also, we are looking for business opportunities if they present themselves with customers, other customers in those markets.

But as we said, the main customer base that we have today is in Norway and in Europe. And our main philosophy is to follow our customers wherever they want to go around the world.

Paul Arvog, CFO, Haag Group: Then what is the feedback from customers? And how does it affect Hart’s future strategies?

Gunnar, CEO, Haag Group: Yes. That’s a quite generic question. But we strive to get and we also try to be in dialogue with the customers to get as much feedback as possible. Of course, one feedback that we are getting a lot and we are using continuously is feedback on our solutions when they are in operation onboard a vessel. And that is extremely valuable feedback with regards to developing our technology further to deliver even better solutions to our customers.

And of course, we are also in close contact with our customers to see how their business model is developing, how their market is developing. And that is also what we are using in order to plan our strategies. We have a strategy onwards. We have a good strategy based on this market information and the customer information. And of course, we are also now following very closely what will be the effects of the new political situation that we have with tariffs and everything.

And we are very agile company also of light footage, so we can also turn around very quickly as we are also very asset light. So we are adapting our strategy to whatever needs we see and whatever development that we see in the global and in the local framework.

Paul Arvog, CFO, Haag Group: Yes. Then what with today’s international trade conflicts in mind, what risk do you see as the most significant for the company?

Gunnar, CEO, Haag Group: As I said, it’s difficult to say what what risk. We are analyzing the risk. We are talking about experts that can know more about this than us. But everybody, I think now, they are a little bit waiting also to see what happens the next day and also what the effects are. We are not so affected in the foreseeable future, but we’ll have to continue to monitor this situation also.

Also with regards to our plans to go into other market that might be more affected by the world situation as we see today.

Paul Arvog, CFO, Haag Group: Yes. Then there is more financial questions. What is the current status of the refinancing process with DNB? And yes, it’s not a refinancing process. It’s changing of the covenants requirements.

So as we said, we have a waiver and we are working together with DNB with new covenant structure. Then what does the new covenant structure entail and how will it impact Haar Group’s financial flexibility for 2025? Yes, as I said, we are in good dialogue with DNB, and we are setting a covenant structure that is supporting our growth strategy. So it will have flexibility in 2025 to have new orders. And then why did you have to sell your shares?

It was the gambling with shareholders’ values. The sale of the shares was a part of strengthening the equity and a foundation for discussions with the bank with for a new covenant structure. And then why does half design only deliver 3% margins on SEK330 million revenue? What costs so much money. And the majority of the turnover to half design is related to trading of equipment with low margins.

With that, in combination with low capacity utilization in 2024 and also loss provision related to one specific project, we see the result of it. So yes, we agree it should be higher and we are working to have more work. And as Gunnar said, hopefully, we’ll be signing up new contracts that will result in better performance for 2024 sorry, 2025. Then I’m looking into the piece that we’re coming in new questions. Yes, margins.

We are not guiding on specifics. So there’s a question about specific project margins next year.

: Yes.

Paul Arvog, CFO, Haag Group: There was a question here. It was, why should we believe you now with the history? Why should the investors believe that 2025 will be better?

Gunnar, CEO, Haag Group: I think you have to follow us. We have strong beliefs in ourselves. I think I’ve said previously also, we can only convince you by evidence providing when you see our results, that is, of course, the belief, the evidence. We have delivered on order book. We have now started delivering also on turnover and on margins.

We have an order book that gives us quite visibility into 2020 good visibility into 2025 and also in the beginning of 2026. But the only thing that we can promise or we can do is work hard, smart and then show you by delivering. So hopefully, we can gain back your confidence when we report our results for the coming quarters.

Paul Arvog, CFO, Haag Group: Yes. And I think that was the I think the new question here we have covered It’s related to margins and yes.

Gunnar, CEO, Haag Group: Good. I thank you very much for following us again. It’s I thank you very much for sending us good questions. I hope that we have answered most of your questions. I also hope you will continue following us.

And after the presentation, of course, Paul, we will go back, work hard, work smart and developing the company and developing your values that as shareholders in our group. Thank you very much.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.