Strategic Position
Hexagon Composites ASA is a global leader in composite cylinder technology, specializing in lightweight, high-pressure solutions for clean energy storage and transportation. The company operates in two main segments: Hexagon Agility (CNG/LNG fuel systems for heavy-duty vehicles) and Hexagon Purus (hydrogen and battery electric vehicle solutions). Hexagon holds a strong position in the alternative fuel infrastructure market, particularly in North America and Europe, with competitive advantages in advanced composite materials engineering and regulatory certifications for high-pressure applications.
Financial Strengths
- Revenue Drivers: CNG/LNG fuel systems (~60% of 2022 revenue), hydrogen cylinders (~25%), marine/industrial cylinders (~15%)
- Profitability: EBITDA margin of 8-12% (2020-2022), negative net income in 2022 due to restructuring costs. Strong balance sheet with 1.3B NOK cash (2022 annual report).
- Partnerships: Collaborations with Nikola Motors (hydrogen trucks), Agility Fuel Solutions (CNG refueling infrastructure), and Airbus (hydrogen aviation research).
Innovation
200+ patents in composite pressure vessel technology. R&D focus on Type 4 hydrogen tanks (700-bar) and mobile hydrogen refueling solutions. Partner in EU-funded H2Haul project for hydrogen trucks.
Key Risks
- Regulatory: Exposure to changing clean energy subsidies in key markets (e.g., US Inflation Reduction Act implementation). Pending EU hydrogen transportation regulations could impact cylinder certification requirements.
- Competitive: Facing pressure from Chinese composite cylinder manufacturers with lower-cost offerings. Competitors like Worthington Industries gaining market share in North American CNG markets.
- Financial: Negative free cash flow in 2022 (-230M NOK) due to working capital investments. Exposure to volatile natural gas prices affecting CNG adoption rates.
- Operational: Supply chain vulnerabilities for carbon fiber (key raw material). Ongoing restructuring of manufacturing footprint may cause temporary disruptions.
Future Outlook
- Growth Strategies: Expanding hydrogen infrastructure solutions through Hexagon Purus. Targeting 50% revenue growth in hydrogen segment by 2025 (Q3 2023 investor presentation).
- Catalysts: Q4 2023 earnings release (Feb 2024), potential new hydrogen mobility contract wins in 2024, EU hydrogen refueling station rollout decisions.
- Long Term Opportunities: Global hydrogen economy projected to reach $2.5T by 2050 (Hydrogen Council). Increasing adoption of CNG trucks in emerging markets as bridge fuel.
Investment Verdict
Hexagon Composites offers leveraged exposure to hydrogen and clean transportation megatrends with proven composite technology, but carries execution risks during its transition to hydrogen-focused growth. Near-term profitability may remain pressured by restructuring costs and CNG market volatility. Suitable for investors with 3-5 year horizon willing to accept sector-specific risks. Key monitoring points include hydrogen contract wins and cash flow stabilization.
Data Sources
Hexagon Composites 2022 Annual Report, Q3 2023 Investor Presentation, EU Clean Hydrogen Partnership website, Hydrogen Council 'Global Hydrogen Flows' report 2022