Hexagon Composites Q2 2025 slides: revenue drops 41% amid market headwinds

Hexagon Composites reported a challenging Q2 2025, with revenue declining 41% to NOK 674 million and EBITDA dropping to NOK 12 million, primarily due to macroeconomic uncertainty severely impacting its Mobile Pipeline segment. Despite these headwinds, the company is implementing cost-saving measures and pursuing strategic initiatives, including the acquisition of SES Composites and securing new commercial orders, while benefiting from supportive US natural gas regulations. Management remains confident in long-term growth and market positioning, though the leverage ratio increased to 2.9x.

Analysis

Hexagon Composites reported a severely challenging second quarter of 2025, with revenue declining 41% year-over-year to NOK 674 million and EBITDA collapsing from NOK 137 million to just NOK 12 million. This drastic drop in profitability, resulting in a 2% EBITDA margin, was primarily driven by a near-total shutdown in its Mobile Pipeline segment, where revenue fell from NOK 482 million to NOK 132 million and the EBITDA margin swung from a positive 21% to a negative 25%. Management attributes this to customers prioritizing existing asset utilization over fleet expansion amid macroeconomic uncertainty. While the Fuel Systems segment showed more resilience, its margin also compressed. In response, the company is implementing cost controls and capex reductions to manage liquidity, which stands at NOK 0.8 billion, though its leverage ratio has increased to a notable 2.9x. Offsetting these negatives, Hexagon is pursuing strategic growth by acquiring the remaining 51% of SES Composites—a deal expected to add EUR 33 million in revenue and EUR 2 million in EBITDA—and securing new commercial orders, including a significant fuel system contract in the Americas. This suggests management is attempting to navigate the acute cyclical downturn while positioning for a long-term recovery supported by favorable US regulations for renewable natural gas.

Key Decisions for Investors

• Investors should weigh the significant near-term financial distress, evidenced by the 41% revenue drop and collapsing margins, against management's long-term strategic initiatives like the SES Composites acquisition and new commercial wins.
• Monitor the performance of the Mobile Pipeline segment and any signs of a recovery in customer capital expenditure, as this division is the primary source of the company's current operating and financial weakness.
• Closely track the company's liquidity position of NOK 0.8 billion and its leverage ratio of 2.9x to assess its ability to withstand the prolonged downturn without requiring additional financing.
• The investment case hinges on a future market recovery and supportive regulations for natural gas, so consider this a higher-risk, long-term turnaround play sensitive to macroeconomic shifts.