Hexagon Composites ASA

OSE:HEX

Earnings Call Transcript 2021-Q3

[Karen Romer, Senior Vice President of Communications]

Good morning, and welcome to the Q3 results presentation for Hexagon. It's lovely to be here in the auditorium in the building where offices are, down on Haakon VIIs Gate in Oslo. And it's so nice to have a live audience here today joining us as well. Hopefully, we'll see more as time goes on. And welcome to all of our webcast participants. My name is Karen Romer. I'm the SVP, Communications, for Hexagon. And joining us here today in the auditorium is our CEO, Jon Erik Engeset; and our CFO, David Bandele. And then we'll also be hearing from Eric Bippus, who's our SVP of Global Sales and Marketing. He'll be joining us later. Today's agenda will include a CEO update, and that's where you will hear from Eric as well as Jon Erik; and then the financials, which will be covered by David. This will all be followed by Q&A. [Operator Instructions] And of course, we'll be taking questions from the audience here. So with that, I think I'll just turn this over then to Jon Erik. Thank you.

[Jon Erik Engeset, President & CEO]

Thank you, Karen. Good morning, everyone. Thank you for joining us today for this Q3 update. And I'm especially pleased to see people in real person after so many quarters on the webcast. The quarter was not without challenges, but then we are even more pleased to report a strong quarter. So we're really quite pleased with the performance, especially so in Hexagon Agility that continued to have a very strong order intake for RNG fuel systems, but also Hexagon Agility Mobile Pipeline, which had a very strong rebound in the quarter. And what is interesting there, unlike a few years ago when that business was booming last, it was particularly selling into the oil and gas shale segment in North America. While today, we see a much more diversified customer mix, which bodes well for the coming quarters and years. Hexagon Purus more or less doubled its revenue from the same quarter last year. And in the quarter, we made an acquisition or at least we signed and entered into an agreement to acquire Wystrach, a long partner and customer of ours, and then enabling a vertical integration downstream in their business segments. Year-to-date, our solutions have enabled the avoidance of 793,000 tons of greenhouse gases. That translates into 172,000 cars off the road for a year, so a significant contribution. The -- as mentioned, there have been challenges, and then I refer to the industry-wide supply chain disruptions. But still, we had revenue, excluding Purus, of NOK 848 million, up from NOK 769 million in the same quarter last year. And that revenue delivered an EBITDA of NOK 110 million, up from NOK 85 million last year, which was also a very strong quarter for us. And on the Purus side, NOK 103 million, negative EBITDA, as this business is preparing for further growth in the years to come. Coming back to that later on in my presentation. Talking about the supply chain challenges for us, particularly the chassis shortage is a constraint. That's not normally we who supply the chassis, so that's on the customer side. But still, we are unable to deliver and install our systems unless chassis are available to our customers. Also, battery cells continue to be a concern as well as the semiconductors shortage, especially for our customer, Volkswagen, on the light-duty side. We are focusing, obviously, on mitigating these effects. We are building up inventory wherever we can. And of course, we are sitting with our customers and talking about price adjustments. But more importantly, maybe long term, we are focusing on delivering on our world-class manufacturing program to take out productivity gains. And also, of course, growth, economies of scale in itself is also good for our margins. As we speak, the Global Climate Summit is ongoing in Glasgow, and we continue to see a number of reports, commitments from governments, companies and others around the world. And a quite significant amount of money is being flowed into the green transition. And a big chunk of that is going into sectors that are relevant for us, which is why we maintain the outlook of significant growth. This is an old slide indicating a 4x increase of our addressable market in the transportation sector, which we still think is valid today. And we see now that the number of other participants in the industry space are seeing the same thing. And therefore, I'm happy to introduce Eric Bippus to tell a little bit more what we see in the industry.

[Hans Bippus, Senior Vice President of Sales and Marketing]

Thank you, Jon Erik. As you can see, we're expecting significant growth, 4x growth from now to 2025 across compressed natural gas, EV and hydrogen solutions. In addition to our excitement over this, we're seeing OEMs now launch new technology, specifically focusing on this growth and the market segment that we feel will see the largest growth for compressed natural gas, and that is heavy-duty trucking and transit in both North America and Europe. And Cummins has announced the launch of their 15-liter natural gas engine for heavy-duty truck. And we're really excited because this opens up 250,000 heavy-duty Class 8 trucks in that 1,000 kilometer or more range. It's the most popular in the diesel variant. It's the most popular engine in North America. However, now that it's available on natural gas, the improved engine efficiency, so the already attractive TCO of natural gas or for fleets looking for the extra carbon abatement and reduced emissions of renewable natural gas will have improved operating efficiencies, making the TCO even more beneficial than prior platforms. This is all part of Cummins' effort that by 2030, they can reduce their engine emissions by 30%. Natural gas will play a big part of that. Coming over to Europe now, we see another OEM step up with a new introduction, and that's Scania with their 13-liter natural gas engine for long-haul travel operations. And these are transit operations, 400-plus kilometer miles. Today, natural gas, when we look at the offerings, is primarily intercity routes, relatively shorter range. This engine allows us to go after the longer-range routes where diesel occupies that space with renewable natural gas, biogas solutions. Once again, like Cummins, this is part of Scania's effort that by 2030, they can reduce their emissions of their entire engine platform by 30%. And you can see that they expect significant growth in natural gas, as much as half of that being powered by natural gas. So what are we doing at the Hexagon Group to get ready for all of this growth? I'm excited to announce the opening of our commercial hub in Munich, Germany. It's opening this month, the month of November. And really, we're replicating some success that we've had in North America and our commercial approach where we have factory installed applications. And it's all around customer intimacy. We want to be close to our customers. We want to be close to our facilities and plants that we can improve lines of logistics and customer support. It will be a one-stop shop for all clean energy solutions that the Hexagon Group offers from EV to hydrogen, hybrid, compressed natural gas, renewable natural gas. We'll have application engineering, program management, commercial support and aftersales support in the market out of the Munich office. It's all part of our strategic agenda to really expand our global footprint. Many of our OEM customers are multinational, and this -- the opening of this office just substantiates our growth in these various markets. Now looking at capacity to meet this demand, significant growth of 4x in the market. We're looking at 2 to 3x growth in various markets as well. What are we doing in North America? We've already announced the fact that we're expanding our operations in Salisbury, which is already the #1 compressed natural gas systems plant in the market. We're adding cylinder manufacturing so that we can condense the footprint, supply chain and logistics of that market. It's strategically located within North American heavy-duty truck OEMs. And we're doing the same thing in Kassel, Germany so that we can supply for the market from the market, both with commercial support, but also systems capacity support, cylinder support. So as you can see, there's a lot going on within the Hexagon Group. We're excited about the growth projections. We're extremely excited to see the OEMs stepping up with technology, and you can see that we're preparing both -- in both markets to handle that demand. Back to you, Jon Erik.

[Jon Erik Engeset, President & CEO]

Thank you, Eric. Turning then to Hexagon Purus. They had their quarterly presentation on Tuesday, so I borrowed a few slides from their presentation. The left side shows the growth year-over-year. And year-to-date, so far, 69%, up from last year, which means that Hexagon Purus is ahead of its schedule. As mentioned, the announcement of the Wystrach acquisition was an important milestone in the quarter, and we continue to see very strong commercial momentum across that business. Looking at the revenue in the quarter, you will see that the biggest chunk of the growth came from the distribution segment, followed by transit bus. Heavy-duty truck was actually down. That's a direct consequence of shortage of battery cells. But the distribution segment is growing very fast, and it is the first segment that comes into the commercial phase, has already entered that phase. And that is why the acquisition of Wystrach is such an important strategic move. Wystrach has been a customer of ours for many, many years. We know them very well. Located in Weeze, Germany, supplied from our facility in Kassel, and a European leader in distribution systems. And by that acquisition, we mainly double our capacity in building systems as well, of course, as integrating vertically through chain-enabling efficiency outtake. And the business of today is approximately the same size as Purus. So on a pro forma basis, we expect then a combined revenue in Purus north of NOK 600 million after eliminations. And this picture is the same we showed ahead of the list -- or sorry, of listing Hexagon Purus on the Euronext Growth Stock Exchange in December of last year, showing an 11x growth projection from 2020 to 2026. And if anything, we think this growth is going to be stronger in this period, followed by then the real volume growth phase from '26 onwards. And as Hyundai recently said, hydrogen for everyone, everything and everywhere. So this shift is taking place, and we are very pleased to be part of it. So in summary, strong underlying growth, adjusted for FX, 14% quarter -- year-over-year despite severe supply chain challenges. Strong rebound for the Hexagon Mobile Pipeline segment and doubling of Hexagon Purus and with a further doubling when the Wystrach acquisition closes in the near future. And with that, over to you, David.

[David Bandele, Chief Financial Officer]

Thank you, Jon Erik. Okay, let's discuss the third quarter 2021 financials from Hexagon, and this is primarily excluding Purus. So highlights are we posted NOK 742 million in revenues in Hexagon Agility and CNG LDV, and we'll see and demonstrate very strong revenues in Heavy-Duty Truck. And as Jon Erik alluded to, this is despite the delays to chassis supply. A very strong rebound in Mobile Pipeline, exceptionally strong, I would say, and we'll cover that shortly. Seasonally low volumes in Hexagon Ragasco, saying that we had promising introductory orders from leading customers in the Philippines, Greece and Trinidad and Tobago. And of course, SMART cylinder concept technology is progressing. On Digital Wave, they had strong growth year-over-year on both technologies, that's ultrasonic and modal acoustic. And then Hexagon Purus, as Jon Erik has been through, 96% revenue growth year-over-year is great, and they also boast a very strong order backlog. Our roughly 75% ownership in the investment valued at NOK 5 billion, so that's satisfactory. And also note that Purus closed the quarter with NOK 0.7 billion of cash reserves. So digging into the numbers, on the left-hand side, you see revenues were NOK 848 million versus the NOK 769 million. That's a 10% increase headline rates. When we correct for headwinds, that's a 14% underlying growth. And the real big growth driver, as I mentioned, was Mobile Pipeline. It actually increased 4x year-over-year. So very good to see the recovery, especially it's been quite hit or quite significantly hit by the pandemic in 2020, and now we see that recovery taking shape. Also, they closed the quarter with a very strong backlog, not only Mobile Pipeline, but also the automotive business, and that gives us a good feeling for the rest of the year. We go over to EBITDA in the middle, we posted NOK 110 million. That's a 13% margin. Again, higher volumes from Mobile Pipeline, really helping the margins here. And again, we are facing headwinds from the pandemic-related higher input prices, but we can see that the volume effects have really overwritten them. So very good. And when we go over to the right-hand side, we look at EBIT, so earnings before interest and tax. And we see that we recorded NOK 61 million, almost doubling of EBIT year-over-year and representing 7% operating margin, up 3 percentage points year-over-year. Looking at the Hexagon Agility and CNG LDV segment alone, we see the pattern of growth year-over-year. Revenue is NOK 742 million over NOK 630 million last year. So 18% headline growth and 23% underlying after we basically adjust for currency movements. So the robust recovery in North America really helping drive that in that segment, but also strong sustainability-driven U.S. truck demand in the quarter. And if you look over to the right-hand side, you'll see in purple, Mobile Pipeline, 23% share. This has been riding around about 10% to 11% for the other quarters in the year. So you can see the extent of the recovery. But also, U.S. truck is still very much dominating heavy-duty and medium-duty truck with a 41% share. Transit, slightly low at 20%; and refuse truck, low at 6%. This is just due to planned call-offs and the pattern of buying. When it comes to the Light-Duty Vehicles segment in green on the right-hand side, it does say 10%. I would say most of that sales, though, is actually contract manufacturing to Hexagon Purus. So you see the enormous distribution numbers in Purus, this sector actually is delivering the cylinders for now. They also delivered to Mobile Pipeline in the Middle East and Europe and also some other customers. Okay, so given that there are the semiconductor issues blighting that area, there's still plenty of activity on the sites. On Hexagon Ragasco, the drop in revenues year-over-year, so NOK 86 million, that's seasonally low, I would say, slightly lower than that and obviously lower than the same period last year. The big difference was we did have a delay in sales from one of our major Asian customers, so hopefully, moving on to Q4. And then when we look at the EBITDA side, you can see the effect there, NOK 4 million versus the NOK 18 million same period last year. Now overall market demand remains strong. We talked about some of those introductory orders. But certainly, the lower volume and the slightly higher input prices have obviously affected the margins temporarily in Q3. And Digital Wave, 73% top line growth. That's great. And that's both, as I mentioned, in Ultrasonic Examinations as well as the Modal Acoustic Emission technologies. And the reason where we have the same breakeven EBITDA year-over-year is that this year, we've obviously invested significantly into the OpEx and have grown the [ organization ]. When we go to leverage, we can then look at the orange bars on the far right at the top and the bottom. The top will show that we have a net interest-bearing debt of NOK 0.9 billion, and that translates to the bottom of a very satisfactory leverage of 2.2x for Q3. So let's look at the Hexagon Group financials, some summary financials here. This is where we include Hexagon Purus, of course. And on the balance sheet, let's start with the cash side to the left, you can see a slight reduction in cash in Hexagon, but still very robust at almost NOK 0.3 billion. And on Purus side, down to NOK 0.72 billion quarter-over-quarter, so versus quarter 2. The other standout there, as you can see, some increase in our receivables. That's due to the increased sales that we're seeing. We have the same sort of increase on our payables. So the real change there is the inventory situation, as Jon Erik mentioned. And we've had a necessary buildup in inventories given the situation we're in, and it allows us to be more ready to deliver to our customers given the challenges. Otherwise, we closed with an equity ratio of 56% and a continued strong balance sheet there. On summary for Q3 2021, we always make this point, but if you look to the right-hand side, this is the Hexagon Group numbers. So when you screen Hexagon Composites, HEX.OL, you will see NOK 875 million in revenues and NOK 30 million in EBITDA. And of course, that hides the 2 distinct businesses that we have: the Hexagon on the left-hand side, which I've covered, cash-generating, double-digit EBITDA margins, NOK 110 million EBITDA recorded for the quarter; and then, of course, Hexagon Purus, almost doubling its sales to NOK 103 million year-over-year, but of course, investing heavily in the organization buildup and, hence, the negative EBITDA, which then dilutes the group results. But for Hexagon, in summary, despite strong headwinds, a strong quarter. Demand for heavy-duty U.S. truck remains very high. You saw Eric covering some of the drivers there. Strong recovery in Mobile Pipeline we see going forward. And Hexagon Ragasco, seasonally low volumes now, but annual demand remains high. So '21 full year guidance. We've obviously just got 1 quarter left. Starting with medium- and heavy-duty vehicles, we see the sustainability-driven demand is resilient. We do expect a strong quarter 4 given our backlog. It will be continued momentum in heavy- and medium-duty truck in North America. Positive developments will continue in the European Transit Bus. But also, we will see some, hopefully, some growth from the North America Transit Bus to really deliver for Q4. We do, of course, caution that we are sure that there will be supply chain disruptions causing some delivery delays. But the extent of that, we're not sure. On Mobile Pipeline, we see the trend continue from Q3. Strong demand and delivery is expected to continue, especially the winter season, virtual interconnect projects in Northeast America. RNG continues to be a driver. It's a great boost to Mobile Pipeline and diversifying Mobile Pipeline's offerings. But also mobile refueling units, which has been a fairly new product area for us over the last 12 months, that continues to gain momentum. For Mobile Pipeline, some potential delay to chassis for our products, and that's mainly as a result of some of the challenges in steel supply. On CNG LDV, not more to say really. Jon Erik has covered that well, so the situation we expect to continue. And in terms of our major customer, Volkswagen, they have had public statements anticipating that an improvement on the semiconductor issue would be expected around about mid-2022. And in the meantime, we'll utilize the production capacity again for hydrogen mobile pipeline and other businesses. So Digital Wave, we see increased sales. We're also seeing increased market applications for our technologies. Looking at Modal Acoustic Emission testing services, these are now being extended to industrial gas customers and also CNG modules. Good backlog of Ultrasonic Examination systems. And as I said, the organization is continually primed to deliver on a future pipeline. On Ragasco, we expect a positive uptick to end the year. We have solid demand from our recurring customers in South Asia and Europe. We expect new market-leading customers to make some entry then into Croatia and other parts of the Caribbean. And the SMART cylinders pilot program, we -- there are, of course, some impacts from the supply chain constraints to key electronic components, so even there causing some delays. However, we are still preparing for launch in 2022. So since January, we have guided on NOK 3.5 billion for Hexagon, excluding Purus, and resulting in around about expectation of NOK 400 million EBITDA for Hexagon, excluding Purus. We haven't changed that guidance throughout the year. As we end Q3, we say despite supply chain delays, we expect Q4 to be strong. And therefore, we maintain the full year EBITDA guidance. We see some softness on the top line, more or less due to the currency headwinds from when we first guided, but our underlying demand is strong. And again, expectations are to reach the NOK 400 million EBITDA guidance for 2021. And one of the big reasons there is, if you start with Hexagon Agility, you can see that they are -- constitute 71% of our year-to-date revenue, so it's important. And when that is working very well, we expect the ability to cover for the shortfall in Hexagon CNG LDV, and that's both Heavy-Duty Truck and Mobile Pipeline. On the Hexagon CNG LDV, you can see that, that segment represents 9% of year-to-date sales. But the portion that is impacted by the semiconductor issue, that's just 5% of our Hexagon total sales. And again, those revenues have been replaced by, you can say, intercompany revenues with a different margin profile. On Ragasco then, responsible for 18% of our revenues, but even a higher percentage of our profits. Again, a solid quarter to end the year would be expected for Ragasco. And Digital Wave, they will continue to do what they're doing. They're only 2% of our revenues, so guidance intact there. So again, we reiterate the 3 big things to look out for in Hexagon. One is occurring now, continuous growth from the RNG uptake as a fast-track alternative fuel to lower the harmful emissions. By 2022, we expect SMART cylinders on the LPG or Hexagon Ragasco's offering to accelerate adoption versus steel. And then as we move to the 2025 area, we're looking for miniaturized technology, MAE technology on board all systems, all cylinders in our industry. And that will really be a game changer, enabling continuous health monitoring and connected services. And on that note, sponsored by Hexagon Clean Air Everywhere. Thank you. Jon Erik?

[Karen Romer, Senior Vice President of Communications]

Thank you. And if I could have both of you here, that would be good. So now we'll open up for Q&A. [Operator Instructions]

[Karen Romer, Senior Vice President of Communications]

Do we have any questions in the room that we would like to take? Okay, we'll give you a chance to think about that. We did receive a few in -- at both our webcast window. Okay. So Jon Erik, you report that Digital Wave is delivering above expectations. Can you elaborate on how you see it developing?

[Jon Erik Engeset, President & CEO]

So first of all, we see already strong growth. So what is so exciting about Digital Wave is that it is already delivering commercial sales. And at the same time, as David touched on, we are working on miniaturizing their MAE technology, which will, in turn, open a much bigger market and also enable new business models. So early days, but we should expect that business to grow and to become an ever more important part of our product offering and also differentiating ourselves significantly from the competition.

[Karen Romer, Senior Vice President of Communications]

Thank you. David, you reiterated the NOK 400 million EBITDA guidance. So that means that in the fourth quarter, Hexagon will deliver in the area of NOK 130 million. Is that realistic?

[David Bandele, Chief Financial Officer]

Yes, we've actually done that before. And so -- but it's highly realistic. The demand is very strong, as I mentioned, in U.S. truck. That will continue. And with Mobile Pipeline really back online and Ragasco having another strong quarter, we see that as highly realistic. We do caution there are potentially delays, of course, but we've seen those delays as well in Q2. So yes, we're confident on the NOK 400 million.

[Karen Romer, Senior Vice President of Communications]

Great. Thank you. There's another question. How are your component inventories and that way around your -- how are your component inventories and that way around your confidence to be able to deliver on all orders in -- it's like half a question, but...

[David Bandele, Chief Financial Officer]

No, I get it. I think Jon Erik touched on the mitigations that we're looking at. Now obviously, supply side is key. So you do see that increase in inventories, both the price per unit, but also the levels of inventory that we're holding in order to give us the best probability of being able to deliver on what is very strong demand.

[Karen Romer, Senior Vice President of Communications]

Very good. Jon Erik, how does natural gas price affect your consumer choice or is affecting consumer choice in regards to natural gas mobility?

[Jon Erik Engeset, President & CEO]

We don't see any impact of that today. Of course, also oil is going up and, therefore, diesel is going up. But I think the decision-makers are much more focused on the longer trends. And then natural gas has had a remarkable stability over many years. And I think most market players expect to return to that state. So the current spike in gas prices is not considered to be a long-term stable level. And if it is, it is a function also of the oil prices. So we don't see a real effect on that, at least not yet.

[Karen Romer, Senior Vice President of Communications]

Okay, continuing on here. What effect do the increased composite prices have on tanks? Do you have sufficient access to raw materials?

[Jon Erik Engeset, President & CEO]

So we've had to spend a lot of time on securing the material that we need. But we are now in a more comfortable situation, we feel, than a few months ago when there was shortage, but we were able to secure the necessary supplies. And then, of course, it's -- the other side of that is that the raw material prices have gone up, also again partly a function of energy prices. And that is a concern. So we need to look at other ways of mitigating that, including having discussions with our customers. And if this raw material price level is sustained, then of course, that has to translate over time in higher prices for our products. But in the meantime, all parties have commitments. And therefore, we need to look at other ways of mitigating those cost increases short term.

[Karen Romer, Senior Vice President of Communications]

Very good. Has increased prices for materials increased the cost of production sites in Germany and the U.S. as well as new factory for Purus in Canada?

[Jon Erik Engeset, President & CEO]

It's a good question, and the short answer is yes. Fortunately, we entered into several contracts before these building material price increases. But we cannot -- we will not be completely protected from those increases. So that's something we will need to look into and address. But we don't expect dramatic increases in construction costs.

[Karen Romer, Senior Vice President of Communications]

An add-on to that question, how do higher energy costs affect their production?

[Jon Erik Engeset, President & CEO]

Our production is not really very energy-intensive. So it is more a derivative of the energy intensitivity of the fiber production, which is a significant factor.

[Karen Romer, Senior Vice President of Communications]

Okay. Keep moving along here, same theme. How do increased gas prices affect their customers and their willingness to invest?

[Jon Erik Engeset, President & CEO]

I think essentially, that is the same question as I answered earlier. We don't see the customers changing their market behavior at this point in time. For now, the environmental driver is the absolutely dominant reason for our customers to go green. And we have not seen any signals of change of mind in that respect.

[Karen Romer, Senior Vice President of Communications]

Now over to Purus. The spin-off of Purus was a great success, but it ended in transfer of value and the business, ex Purus, is valued at close to nothing. There are a number of things you can do about it such as selling more share -- a number of things -- there are a number of things you can do about it, such as selling more shares of Purus or perhaps give more precise long-term forecast for both so we can better value the 2 businesses. What is your view?

[Jon Erik Engeset, President & CEO]

That is 2 complex questions in one. And what I can say is that we are, first and foremost, focused on supporting Hexagon Purus to realize its potential. And the spin-off was a part of that. The continued significant ownership by Hexagon is a part of that. And we think that there is tremendous value-creation potential for both businesses. And we will just need to take the time to make those values visible to the investors. And I think quarter by quarter, by demonstrating high order intake and the improvement and delivering on our plans, we believe that is the best way of gaining -- or granting that investor confidence.

[Karen Romer, Senior Vice President of Communications]

Thank you. David, you reported higher-than-normal inventory buildup. Is that something you're concerned about?

[David Bandele, Chief Financial Officer]

I think it's almost the same answer. It's more a concern if you don't in this environment. So back to ensuring that we can, in the best way, deliver on the customer demand, we need to have higher inventory levels. We expect these to be temporary and hopefully revert.

[Karen Romer, Senior Vice President of Communications]

Very good. And a question about Ragasco. Ragasco had a weaker-than-expected quarter. Can we be optimistic in Q4?

[David Bandele, Chief Financial Officer]

Yes. No, I mean it was weak in Q3. I mean, historically, the Q3 has been the low quarter. But we did mention that there was one particular order that we expected to fall in Q3, and that was the difference really between Q3 last year. So that order should come through in Q4. And otherwise, Ragasco always deliver, so we expect the usual good full year for 2021. So strong enough Q4.

[Karen Romer, Senior Vice President of Communications]

Perhaps for you, Jon Erik. Do you see more heavy-duty OEMs switching to CNG offering? In the past, many refuse the idea, but it's clear that battery electric has a long way to go.

[Jon Erik Engeset, President & CEO]

Definitely. That is our expectation. So long term, we see hydrogen, obviously, as a very relevant choice. But in the foreseeable future and with the strong commitment now by both OEMs, but first and foremost, the big fleets, RNG is the only available option, and that is what is driving this market. And we see more and more fleets coming to the same conclusion.

[Karen Romer, Senior Vice President of Communications]

Very good. And I think the last question I have here right now is for you, Jon Erik. Are there other geographies you see as potential expansion opportunities?

[Jon Erik Engeset, President & CEO]

Certainly. So there is a global market for us. We are strong -- very strong in North America. We have a strong foothold in Europe. But as Eric explained, right now, Europe is still our focus area with the establishment of the Munich commercial center of excellence. We are doubling up on our effort to be close to customers and participate in the market growth in Europe. Purus, obviously in China, a very high priority, but there are other parts of Asia that we also should assume strong growth. South America has been a market for us, especially on the Mobile Pipeline side, and we see also new activity starting to develop. Also on the hydrogen side, so several of the Central American and South American countries are looking to transform their transportation sector by hydrogen. So opportunities all over the place that we need to prioritize. And we, therefore, focus for now on North America, Europe and then more opportunistically, I would say, on other geographical regions for the time being.

[Karen Romer, Senior Vice President of Communications]

Great. Do we have any further questions from the room? I've gotten one additional here at the last minute here. It's noted that you posted Daimler on the -- on one of the slides. Is Daimler going back to offer CNG and LNG? I think they were referring to the map that we had on the -- and I think that was to show the proximity of the OEMs in the area. That's why it was...

[Jon Erik Engeset, President & CEO]

Yes. So Daimler, obviously, has been a leader on the hydrogen side. I cannot comment on whether they have in their plans to go CNG or LNG.

[Karen Romer, Senior Vice President of Communications]

Very good. Okay. If we -- yes, we have a question in the room, and I'll repeat it for the...

[Unknown Analyst]

[Foreign Language]

[Jon Erik Engeset, President & CEO]

[Foreign Language]

[Karen Romer, Senior Vice President of Communications]

Yes. We've got a very nice complement from the room for being invited to actually attend the quarterly presentation in person and also compliments to the management of the company so far. Good summary of what you said? Yes, we'll go with that.

[Jon Erik Engeset, President & CEO]

If I can just add to the question on Daimler. My answer was, of course, referring to the European market. So Daimler is a major player in North America also on the CNG side. Just to avoid any confusion on that.

[Karen Romer, Senior Vice President of Communications]

Yes. Perfect. Okay. Well, I think we'll say thank you to both our webcast audience and to everybody that was able to join us here today, and hope that you have a great day further. Thank you very much.

[David Bandele, Chief Financial Officer]

Thank you.

[Jon Erik Engeset, President & CEO]

Thank you.