NEL shares drop over 4% after weak H1 results, order risks rise

Shares of Norwegian hydrogen company NEL ASA fell over 4% after its H1 2025 earnings revealed a 36% revenue decline to NOK390 million and a widened EBITDA loss of NOK201 million, primarily driven by reduced alkaline electrolyzer sales. The company also reported a significant increase in at-risk orders to NOK200 million, largely due to a contract cancellation, which Morgan Stanley noted signals a lack of new business momentum. Despite these setbacks and declining cash reserves, NEL remains focused on execution and anticipates potential final investment decisions for large projects, buoyed by improved U.S. regulatory clarity on hydrogen tax credits.

Analysis

NEL ASA's first-half 2025 financial results reveal significant operational stress and a deteriorating financial profile. Revenue declined 36% year-over-year to NOK390 million, driven by weakness in the alkaline electrolyzer segment, while the EBITDA loss widened substantially to NOK201 million from a NOK48 million loss a year prior. This deterioration is attributed not only to weaker revenues and reduced operating leverage but also to the absence of a NOK54 million one-off gain from a prior-year Nikola supply agreement. Critically, the company's forward-looking risk has escalated, with at-risk orders surging from NOK29 million to NOK200 million, largely due to a Statkraft contract cancellation. This development, as noted by Morgan Stanley, signals a lack of new business momentum. The balance sheet is also weakening, with cash on hand decreasing 13% to NOK1.93 billion. While management points to potential final investment decisions on large projects and improved U.S. regulatory clarity via the 45V tax credit as future catalysts, the current financial performance and order book uncertainty present a challenging near-term outlook.

Key Decisions for Investors

• Given the significant widening of losses, negative operating leverage, and a near seven-fold increase in at-risk orders to NOK200 million, investors should adopt a cautious stance, closely monitoring the company's cash burn rate against its NOK1.93 billion reserve.
• The investment thesis now heavily relies on future catalysts, so watch for any firm announcements of final investment decisions (FIDs) on the mentioned 200 MW projects, as these are critical to reversing the negative order book momentum.
• Although the results were in line with consensus, the lack of positive forward guidance suggests limited near-term upside, and investors should weigh the potential long-term benefits of U.S. hydrogen tax credits against the immediate operational headwinds and execution risks.