Good morning, welcome to Hexagon Composites, Q1 2023 results presentation. My name is Karen Romer. I'm the SVP of Communications. Joining me here on the stage today will be Jon Erik Engeset, our CEO, and David Bandele, our CFO. This morning we will start out by bringing you the highlights as well as a business update, followed by financials, and outlook, and then also a Q and A. For the Q and A, those of you that are in our digital audience can please go ahead and fill in your questions as the presentation is being held in the field on your screen. We also will be taking questions from the room. I think without further ado, Jon Erik? Good morning. Thank you for joining us here today. We have now finalized our 2022 carbon footprint accounts, and I'm proud to report that our solutions in the prior year enabled the avoidance of 1.35 million tons of CO2 equivalents. That translates into roughly 300,000 cars on the roads for one year, so a significant contribution. To accomplish that, we, in our own supply chain, consumed 320,000 tons of CO2. The major portion of that is from our suppliers. For more information, please go to our sustainability report, which you will find on our webpage. Looking at the numbers, in the first quarter of 2023, our revenues amounted to NOK 1.13 billion, up from NOK 913 million in the same quarter last year. Our EBITDA, however, was at the same level, approximately NOK 83 million versus NOK 84 million in the prior year. On the Hexagon Purus side, they continue on their growth trajectory, NOK 244 million in revenue in the quarter, up from NOK 159 million in the same quarter last year. EBITDA at - NOK 112 million, in line with expectations, compared with - NOK 93 million in the prior year. Behind these numbers, is a solid top line more or less across the board, with some softness, in the quarter for the heavy duty, especially the long haul truck segment. In that Hexagon Agility business, the margins have not yet recovered to satisfactory levels, and we'll revert to that. However, order books look healthy, and the contribution margins are expected to improve. Especially the Mobile Pipeline business unit has very strong markets and a full order book well into 2024. We also recently launched the Smart Cylinder pilot project on the Hexagon Ragasco side with a pilot to Linde here in Norway. Last but not least, Hexagon Purus in the quarter funded up with NOK 1.3 billion with Mitsui as anchor investor. That enabled the targeted uplisting to the main market of the Oslo Stock Exchange. That was an occasion for celebration, so this took place in the morning on the 13th of March this year. Happy day. Many other highlights also for Hexagon Purus. Most notably, we finally signed the final agreement with Hino, delivering battery packs and assembly services, and that contract is worth in the range of NOK 20 billion potentially. To enable that contract and also to play in the market generally for battery electric heavy duty vehicles, we depend on battery cell supplies. As you who follow us closely know, we had we lost some contracts in 2021 due to a lack of secure supplies. A very important milestone for us to get a long-term agreement in place with Panasonic, securing then stable and predictable supplies of that very important component. We have five expansion pro-programs ongoing, two which have recently been completed, official opening in British Columbia, Kelowna, Canada, of the tech center and battery line there, and also in Westminster, Maryland, cylinder and systems facility. Two of five have now been completed, and the other projects are on track. On the Hexagon Agility side of the business, we have recently executed some import management changes. Hans Peter Havdal, who joined us earlier this year as Group Chief Operating Officer, has taken on the dual role of CEO for Hexagon Agility. His broad background from the automotive industry is particularly relevant for the phase that we're entering now. Short-term to restore margins, and medium-term to leverage the significant growth opportunities for this business area. He has a strong team around him, mentioned here Andrew Griffiths, who will continue in his role as CFO and Executive Vice President. Then also Eric Bippus, who many of you have met, has been promoted to Executive Vice President and had his scope of responsibility in the company expanded. We remain very dependent on regulatory support. Fortunately, that support is happening as we speak in all relevant geographies. Just a short update on a couple of changes there. In the EU, it was recently adopted a regulation on CO2 emissions for light-duty vehicles, which will require the suppliers to assess the full life cycle effects of different technologies. This is very important because this is a step in changing from measuring what comes out of the exhaust pipe, what we call tailpipe emissions, to more holistic well-to-wheel approach. We think that will pave the way for regulations that will also support renewable natural gas in Europe. Very important for us is that when this regulation has been passed for light duty, it is highly likely that similar regulations will also come into force on the heavier-duty vehicle classes. On the other side of the Atlantic in California, the Advanced Clean Fleet Act came into force recently. That supplements the Advanced Clean Trucks regulation, which has already been in force for some time. This is also a very important development because so far the focus has been on the supply side, the OEMs, while the Advanced Clean Fleets also then imposes demands on the fleets and the fleet owners to make use of this technology. So we deem both of these regulations as very supportive. California being maybe the most progressive regions of all when it comes to zero-emission and decarbonization of transportation recently hosted the annual Advanced Clean Transportation Expo, and we had a big delegation there. Really good buzz on the floor. We were joined by many of our customers, suppliers, and competitors. A couple of main takeaways there. First of all, technology-wise, there is a lot of attention to electric configurations, but we see a shift away from only battery electric, which is a more mature technology, and especially in the heavier vehicle classes. Now a lot of focus and many examples of hydrogen electric configurations on display. Also feedback from the main fleets that we had meetings with was that they don't see that there is a realistic opportunity to adopt in big scale in the short to medium term, meaning in the next 10 years, maybe more, of battery alone. They have the same view as us, that the only alternative that can make a significant impact in that timeframe is renewable natural gas. We as a group are agnostic. We are playing in all these technology areas, but we see the strongest logic in order to drive down CO2 consumption by applying renewable natural gas. Cummins were also present, displaying their new 15-liter engine and they confirmed that this will be launched in 2024. The general manager there, he made a presentation. He was also at our stand, and he expressed publicly an ambition to reach more than 15% of the heavy-duty market in the next few years. That represents a seven to 8 x higher market than we currently enjoy in North America. On that note, I welcome David to the stage. Thank you. Thanks, Jon Erik. Good morning, everybody, joining us also on the webcast and in the audience. Good to see you all again. That was 2024, that inflection point on the 15-liter engine. A lot of miles to go in 2023 first, and let's go for the highlights of Q1 2023. As Jon Erik covered, NOK 1.13 billion in revenues for 24% growth. There were considerable currency effects, U.S. dollar particularly strong against the Norwegian krone. Even stripping out those effects of currency, we were still 12% and a healthy start to the year in growth. Strong Mobile Pipeline, and I would say a solid Hexagon Ragasco volumes played a very strong part in the quarter. As Jon Erik touched on, we did have a expected slower start than in Heavy Duty truck. Moving over to the right, EBITDA was NOK 83 million in line with Q1 last year. Margin percentages still remain not so relevant to compare given the high cost base inflation and pricing inflation that we continue to see. Looking at those profit margins, absolute terms, the margin development then on heavy duty volumes, we did turn a milestone. In the automotive business, we are seeing the pricing effects actually mitigate the cost effects. Unfortunately, the volumes are lower, so you're not seeing that through the margin. Being it's the biggest division, it has the heaviest weight then on the margin currently. Very good news, aside from there, Mobile Pipeline margins have increased quarter-over-quarter. That's what we expected to see. Ragasco has had very positive efficiencies and some favorable currency effects also on the EBITDA level, something we don't see in the American business, because revenue and cost is in the same currency for Agility. Finally, a positive contribution from Digital Wave to wrap up that quarter. Let's dig into Agility and really see the picture there. We posted NOK 898 million in revenue for 23% growth. As I said, strong Mobile Pipeline underpinning that. We also had very strong medium duty volumes, somewhat offsetting the lower long-haul heavy duty truck. Unfortunately, on the medium duty, we have quite limited content, whereas we have a lot of content in our heavy duty applications. Hence, that produces also a negative mix impact in the quarter. When we go over to the EBITDA, we posted NOK 34 million, so a drop of NOK 18 million year-over-year for that quarter. Again, some of the key elements of understanding that margin development, number one, as we've stated before, the carbon fiber prices, which is a key bill of material for us, remains high year-over-year as it will do through 2023 versus 2022. Component costs still high. We expect to see some of the, basically the, raw materials picture is getting better, but they won't pass through probably till the end of quarter two, as we stated last time. In Q1, component costs are still high. Then again, we've had this delay or slower volumes as well coming through. With slower volumes, then you delay the effects of this higher pricing even further as we wind out of backlog. We have significant backlog, still and growing, as we come into Q2. Then finally, just like to say, the stronger margins in Mobile Pipeline are also coupled with stronger margins in our European operations, something that has been quite different to last year. Improvements beyond heavy duty truck. On Ragasco, we posted NOK 188 million in revenue, so for 16% growth. That's the back of typically our seasonally strong European sales. When you go to the EBITDA level, posting a monster NOK 47 million for Q1 and up NOK 14 million same quarter last year. Digging into those healthy margins, again, we have the quite sizable positive currency effects that have helped. The pricing, of course, now has caught up with the cost base inflation fully. On top of that, Ragasco had numerous production records in the quarter, so a lot of volume efficiency things going well there. On Digital Wave then, very good start to the year. Obviously tripling revenues, NOK 45 million posted for the quarter. As we look at the EBITDA side, also a NOK 6 million improvement year-over-year. Positive, profitable revenue growth. We have this healthy mix of product businesses, Ultrasonic Examination machines, machine sales. We also have service business in the Modal Acoustic Emission, so that's the inspection and re-qualification. The MAE technology, that capability remains core to our product differentiation strategies, and that's the whole of Hexagon, including Hexagon Purus. Also the re-qualification activities we can do using MAE, that's actually central to our certified pre-owned program. Starting with Mobile Pipeline trailers, but also available to repurposing automotive applications. Finally, Purus had a good start to the year. They published their results a couple of days ago. 53% top-line growth for the quarter at NOK 244 million. Chart in the middle is very impressive. The last 12 months revenue up 70% year-over-year and also passing the NOK 1 billion mark. Kudos to Hexagon Purus. You can see that their order backlog is extremely strong. As these long-term agreements actually move into serial production, then you will get to see a lot more revenue generation at those points. The next couple of years will be very exciting for Hexagon Purus. As usual, we've talked about the left-hand side, the middle. When we put these together on a group basis, we did NOK 1.261 billion in revenues and a -29 in EBITDA for the group. On the leverage side, we focus on the Hexagon excluding Hexagon Purus. We closed with a pro forma net interest-bearing debt of about NOK 1.3 billion. We also have available liquidity then of NOK 599 million at the end of Q1. Just pause for the outlook. On 2023, we're not giving definitive guidance this quarter either. It's basically the same as one quarter before. The one difference is, as we warned, we do still see intermittent supply chain delays and disturbances. We've experienced that in Q2, so we will have some impact in Q2. We do expect those to ease over the year and hopefully catch up Q3 and Q4. It's, you know, it's still a lot of managing to be done. Overall, we still expect healthy growth across most of those segments. On the heavy-duty truck volumes, we're still watching back end of, or you should say Q4, back end of the year, just to ensure that volumes are what we expect to be. On the EBITA side, so long as there's no major disruptions to volume, then we should see the gradual improvement and probably a little bit as I mentioned now, a more back end loaded. Otherwise, key takeaways for the quarter, solid top line momentum. We will see the gradual margin improvement in 2023. Hexagon Purus successfully funded and listed on the Oslo Stock Exchange. That's a significant milestone for both our companies. Our 2025 revenue targets, we hold the same. Hexagon excluding Purus of NOK 6 billion, very achievable, and particularly with the game-changing engine being launched in 2024. For Purus, NOK 4 billion-5 billion, looks quite secure, given the long-term agreement pipeline that you have seen. On that note, I'll ask Jon Erik and Karen to come back. Thank you. Sorry. Thank you. Okay. As I mentioned earlier, we are ready to take some questions from the audience. Yes, and we have one right up here front. Those of you in the digital audience, please feel free to fill in the form on your screen. Hans-Erik Jacobsen of Nordea. It seems like somewhat odd that you continue to experience delays, in the U.S. Can you dig a little bit deeper into why this is continuing to happen? You mean specifically delays in the supply chain? Yes. I think this is an industry-wide problem. You see it from the automotive OEMs also that they report continuous supply chain disruptions. It's a very sophisticated supply chain. We have, as most players, tuned in our production system to a major extent on just-in-time deliveries. You know, even small components that we never cared about in the past have now become an issue because of domino effects far back in the chain. Chemical components in one case lacking, which has then affected the sub-sub-supplier of ours, just as an example. Those ripple effects, they also then affect us. That said, it has improved greatly, but we still continue to struggle with some specific issues. We expect that will also be the situation in Q2 to some extent. Let me emphasize that there are major improvements compared to what we experienced last year. This is not unique for Hexagon. It's something we hear across the space. Then on the new Cummins engine, it seems that it has been pushed a little bit into 2024. When can we expect to see increased sales from Hexagon in 2025 and onwards? Do you think it will have an effect already next year? We think it will have an effect. I don't think they are behind schedule, so they are homologating this engine now in the U.S. Actually, the engine has been used in China, not the exact same version, but basically the same block, with very good results from what we understand. They seem very confident that it will pass homologation, and then it will be brought to the market in the beginning of next year. We'll see sales to customers taking this engine in 2024, but the big impact will be from 2025 onwards. On the margin side, in relation to carbon fiber costs and other components, you're quite confident that you will see increased selling prices and hence margins during the course of the year, from what you said? Yes. No, yeah, absolutely. We actually are seeing the pricing effects. You're not seeing it because of the volume and mix in Q1 on the automotive side. Mobile Pipeline, Ragasco, all of those are under control. Mm-hmm. Very good. Thank you. Just one additional comment to that. We maintain the view that our markets will be tight on supply when the new engine will be launched. We therefore also have confidence that on the market side, it should be definitely possible to achieve the prices necessary. That said, we will work a lot on our internal supply chain, take out efficiency gains wherever we can, and the sum of all these effects will bring us to the targeted levels. Excellent. Do we have another question from the room? I do have one here online. Good morning. Can you give some insight into how the newer Agility orders are priced? That is for you, David. How this impacts margin in percentage points? Timing-wise, when will the low margin orders signed in 2021 and 2022 move out of the quarterly updates? Yep. They're the last one, they're steadily moving out. Again, there's been slower volume, so you don't see it as quick. The pricing effects are in there. They're obviously individual to different customers, but there are significant levels in order to cope with this carbon fiber price increase. Those are in place, it will just take time to wind out when we do the sales, and you'll see progressively better margins through the quarter, so long as we have the volumes. Mm-hmm. Excellent. Mm-hmm. Another question from the digital audience. Could you elaborate on why the Cummins 15-liter engine is such a game changer? A couple main reasons. First of all, this is a 15-liter, as opposed to the currently largest engine on the market, 12-liter. That opens up a big segment of the market, which is not serviceable by the 12-liter today. Roughly speaking, we're talking about 300,000 trucks in the U.S.. Today the 12-liter hypothetically has an addressable market of one third of that. With the 15-liter, the addressable market in principle is 300,000. As I mentioned in my presentation, Cummins' own ambitions and expectation is to exceed 15% of that volume. A significant number of trucks, between 40,000 and 50,000 trucks. That's the main thing. The other thing is that this is the first U.S. natural gas engine specifically developed for natural gas, which entails significant efficiency improvements. The expectation is 6%-7% higher energy efficiency from this engine compared with the previous one. Thirdly, the whole engine has been optimized and has been tested, as I mentioned, in China. It's now being homologated. Some of the childhood disease that was experienced with the 12-liter is expected to be avoided with this new configuration. Excellent, thanks. Jon Erik, when can we expect to see the deconsolidation of Hexagon Purus? It will happen. I think we've also previously said that we are targeting that for this year. My answer remains the same. We will go about this in a way which is as supportive of Hexagon Purus as possible, and certainly also value accretive both shareholders in Hexagon Composites and in Hexagon Purus. The exact timing, we will revert when we are ready to execute. Excellent. Great. David, what are the levers to improve profitability in Hexagon Agility? I think the largest bucket is really the productivity side. With Hans Peter, he comes with automotive experience and quite a laser focus on world-class manufacturing. We've seen that in Hexagon Ragasco. All those who have come to the plant would appreciate that. We need to further develop the world-class manufacturing on the Hexagon Agility side. I think it's also vitally important because if this market is coming, we really need to have the capacity online and be as productive as possible in order to service that market and remain market dominant. I think that's the largest bucket. There's a lot of margin catch up, you can say, to come from there. Obviously, a lot of margin will come back just from volume, as we talk about on the 15-liter engine. Again, nuts and bolts, all along, the P&L. We're quite confident, in that. A follow-on question to that. Do you expect your margins in Hexagon Agility to be up in 2023 versus 2022? That's what we expect, yes. Great. Do I have any additional questions here from the room? No, I seem to have taken all that... Oh, sorry, one. They pop in here. Okay. How relevant... let me see, this would be to you, Jon Erik. How relevant will Hexagon Ragasco remain to Hexagon Composites in the future, considering it's different from the rest of the portfolio? It is different, but, you know, we share the same core technology of Type 4. As David just touched on, it's really the benchmark for our other facilities with regard to productivity and world-class manufacturing. Even if Ragasco is not targeting CO2 reductions per se, although there is a case for bioLPG, which we think will come with quite some force in the coming years. In many areas of the world, it will replace fossil fuels like coal and wood and enable avoidance of local emissions. In our mind, it is a clean air everywhere type of technology. Therefore, several reasons why it is a natural part of the Hexagon Group. Excellent. I have no further questions from the digital audience. Anything here? I think, we can say, thank you for this quarter, and we look forward to seeing you again soon. Thank you very much. Thank you. Thank you.