Hexagon Composites ASA

OSE:HEX

Earnings Call Transcript 2020-Q4

[Karen Romer, Senior Vice President of Communications]

Good morning and welcome to Hexagon Composites Quarterly Presentation for the Fourth Quarter of 2020. I'm Karen Romer. I'm the SVP of Communications at Hexagon Composites. And I'll be moderating this session from a studio in Oslo today. Joining us will be Jon Erik Engeset, who is our CEO. He'll be joining us from our HQ in Ålesund. And here in studio with me is David Bandele, our CFO.Before we get started, I'd like to just walk you through the agenda. We will start out with Q4 highlights and developments, into key market developments, a summary of group highlights and financials, and then we'll go to the outlook section. This will be followed by a Q&A session. And on your screen now, the Q&A option is already open. If you'd also like, you can send your questions to [e-mail]. We will read them up from there during the session at the end.Without any further ado, I'd like to hand over to Jon Erik Engeset.

[Jon Erik Engeset, President & CEO]

Thank you, Karen, and good morning, everybody. We are quite pleased with how we ended 2020. Agility, in particular, that delivered an all-time high profit in the fourth quarter. And that is not least due to major U.S. corporations setting very ambitious eco-targets and defining renewable natural gas as a main means. In the quarter, we also successfully listed Hexagon Purus, and we raised NOK 750 million in new capital. And Hexagon Ragasco unveiled its new LPG smart cylinder technology.Hexagon is all about sustainability. And I'm very proud to report that in 2020, our g-mobility business contributed to the avoidance of 726,000 tonnes of CO2. And to put that in context, that equals 157,000 petroleum cars on the roads for 1 year or 957,000 acres of forests safe.In Q4, we had a revenue of NOK 803 million, delivering an EBITDA of NOK 69 million. But if we exclude the Hexagon Purus from those numbers, we had a revenue of NOK 770 million and an EBITDA of NOK 121 million. And that is an EBITDA margin of just below 16%, and that is approaching the territory where we would like to be. And frankly, that was in the quarter where we had a relatively soft CNG light-duty volume, still struggling with our Mobile Pipeline business, but nevertheless, delivered strong top line and very strong profitability.We have felt the impact of COVID-19. Till date, we have registered exactly 100 cases among our employees. And sadly, in the beginning of February, we lost one of our dear colleagues to the disease. We have experienced various supply chain disruptions, most of them manageable. And therefore, we have been able to keep all our production facilities open in the quarter. And to the best of our knowledge, there have been no transmission on site. And despite of the pandemic, or maybe to some extent because of the pandemic, the underlying market demand has never been stronger than it is now.The most challenging supply chain disruption has been the semiconductor global shortage. That has affected a number of automotive OEMs, including Volkswagen and also affecting their Golf platform and the -- including the brands of ŠKODA, SEAT and Audi. And that will unfortunately lead to loss of volumes for Hexagon in the CNG light-duty in Europe in Q1.With the reorganizations we did in 2020, we now have 4 distinctly different business areas. The largest by far is the g-mobility business, still organized in 2 legal entities coming together through this year under Hexagon Agility, accounting for approximately 3/4 of our business. Hexagon Digital Wave, for now a relatively marginal business but with very exciting strategies and growth opportunities and will be our vehicle for developing digital solutions to the mobility businesses. Hexagon Ragasco, our steady cash cow, approximately 17% of our total revenue; and then Hexagon Purus, 75% ownership separated -- separately listed.Geographically, still the largest market by far is North America, followed by Europe. We still have a relatively modest position in Asia, but that is high on our strategic agenda because we see a lot of business opportunities in that region in the next few years. But for now, the U.S. is our largest market, and we cannot deny that we were pleased to see the change of administration since President Biden has pledged that combating global warming is very, very high on his administration's agenda and one of the first presidential decrees he issued was to rejoin the U.S. to the Paris Climate Accord. In his campaign, he expressed that they will target 0 emissions in the U.S. by 2050, and he proposed a USD 2 trillion climate plan over the first 4 years of his presidency.And in the U.S., renewable natural gas is at the core of the response. And the explanation for that is explained by this graph. It's a comparison of diesel trucks, battery electric trucks and RNG trucks in terms of CO2 emissions. So a diesel truck with an average 100,000 miles of distance in a year will emit approximately 170 tonnes of CO2 equivalents. In comparison, an RNG truck renewable natural gas will emit between 2 and minus 83, depending on the source of the fuel. And the reason for that is that by using waste, which would otherwise decompose and flow to the atmosphere as methane, it is converted to fuel and replacing conventional fuel.And in the U.S., they are also stimulating the change to RNG. So this table shows the comparison depending on the fleet size and depending on the states, with California having the most aggressive subsidy of RNG. So while diesel will cost per gallon between $2.65 and $3.20, RNG will cost between $1.20 and $1.85. So a strong economic incentive in addition to the very compelling environmental proposition. As you see, a number of the leading U.S. companies have embraced this and made it the core of their renewable strategy. And this list could be made significantly longer.That said, higher oil price is also good. We've seen strong growth despite natural gas and diesel being more or less on par. But lately, we've seen the oil prices and also then the diesel prices going up, and that will give a further stimulus to CNG adoption. Also, this is very good for our Mobile Pipeline business because that has suffered from the very low activity in the onshore oil and gas production in the U.S.While the U.S. climate budget needs to be approved by the Congress, in the EU, they have already committed to the EU Green Deal with the EUR 1 trillion spend by 2030. A major share of that will be for transportation, and it is expected that already by 2025, 13 million zero- and low-emission vehicles will be on the roads. Also in the plan is digital technology is going to play a key role. And last but not least, in the EU, hydrogen is high on the agenda, and it's projected to increase the capacity of green hydrogen by 40x to 40 gigawatts. And to put that in perspective, 40 gigawatt is enough to fuel 1.1 million transit buses for 1 year.And regarding buses, which is a very important segment for Hexagon in Europe, also, there are concrete plans that by 2025, 45% of all new buses shall be alternative fuel. And alternative fuel is defined as CNG, RNG, battery electric and hydrogen electric. And then they are defined as CNG as low emissions, which will then account for half of the new vehicles by 2025; and then RNG, 6.75%; and then hydrogen, as much as 15.75%. But the largest share will be CNG, RNG and then hydrogen. Altogether, we are extremely pleased, of course, with these plans, and we have no doubt that they will be delivered on.There is a slight, in our opinion, lack of logic regarding RNG because, as I showed on the previous slide, that is the most environmentally friendly source of Eni, while the current intended taxonomy will favor the so-called 0 emissions. So battery electric or hydrogen electric will get more incentives than an RNG vehicle. We are preparing to discuss with the European Union in order to have that adjusted because in our opinion, that is the more reasonable way to look at it.Also on the LPG side, renewables will be an important topic in the next few years. The EU is targeting overall 32% renewables in the energy mix by 2030. And of course, the LPG industry has to do its part in accomplishing that. And they are also looking at biomaterials and organic waste to cut their CO2 emissions. And it is estimated that bio-LPG can reduce CO2 emissions by as much as 80% compared to conventional LPG.So for now, the U.S., North America and Europe is going fast in the direction of sustainability, but so is also Asia. China is pledging carbon neutrality by 2060, and it is expected to be the largest market for fuel cell electric vehicles in the next coming few years. South Korea is also going to play a major role, both as a market but also because of its significant automotive industry and is aiming at carbon neutrality by 2050. And also, the Southeast Asian region has ambitious targets, with 23% renewable energy objective by 2025 and Singapore taking the lead. And Hexagon is planning to take leading positions in these regions together with strong partners.So altogether, we feel that we are in a very good place. We are looking forward to continued strong growth in 2021 and in the following years. And with that strong growth, we are also looking forward to enjoying economies of scale.And with that, I hand over to you, David. Thank you.

[David Bandele, Chief Financial Officer]

Thank you so much, Jon Erik. Let's just have a quick update on the reporting structure. So in this, the last quarter of 2020, we have the following reporting structure. Under Hexagon Composites, we have Agility Fuel Solutions business segment, Hexagon Mobile Pipeline and Other, Hexagon Ragasco and Hexagon Purus. And you can see that under Hexagon Mobile Pipeline and Other, you have the Hexagon Mobile Pipeline business and also Digital Wave currently. And when you look over to Purus, it has, of course, the hydrogen and battery electric vehicle businesses and Hexagon MasterWorks; collectively, the e-mobility businesses. And through 2020, it's also reported Hexagon CNG LDV results. This will be carved out effectively and that Hexagon CNG LDV will move over to the Hexagon businesses for 2021.And this is the picture that we will report from Q1 going forward. So as Jon Erik covered, that g-mobility segment, and that comprises Hexagon Agility, which consists now of integrated Agility Fuel Solutions and Mobile Pipeline; and that Hexagon CNG LDV business carved out of Purus. So collectively, under g-mobility, we will have then basically all our light-duty, medium-duty, heavy-duty automotive businesses as well as our compressed natural gas mobile pipeline distribution and transport businesses. So all gases aside from hydrogen in g-mobility.On Hexagon Digital Wave, it's elevated to its own business area as it pursues a new strategy of digitalization. And Hexagon Ragasco is unchanged on the LPG side. And of course, Hexagon Purus, we now own 75%, and that is a pure e-mobility player. So much cleaner structure going into 2021.And summary of reporting changes. Hexagon Purus will have its quarterly earnings report and presentation before Hexagon Group, usually 1 to 2 days before. So this presentation, the Hexagon Group presentation will focus primarily on the collective of Hexagon businesses, as we just saw, g-mobility, then Digital Wave and Ragasco.And the group financials, we'll continue to consolidate Hexagon Purus 100%, of course, but they will include a minority interest for the noncontrolled portion, which is 25% of Purus. And of course, pro forma numbers for 2020, these will be issued in line with Q1 2021 reporting.So going on to the financials. First, the highlights. Jon Erik mentioned, it was actually consecutive record EBITDA in Agility, really speared on by further deliveries to our major logistics customers, and they very much drove then very strong medium- and heavy-duty truck volumes.Mobile Pipeline still continues to be impacted by COVID-19. However, it was good to see at the end of the year some strong sales in the virtual interconnect projects. This is where we marry supply and demand of the grid in the northeast of the U.S. That's during the winter season when prices and demand are high.CNG Light-Duty Vehicle volumes were modest. We're, of course, slowly ramping up from the Volkswagen's production relocation of their assembly facilities. So we had some volumes in the quarter but not quite to the level we saw in 2019. However, I will say there was good profitability in the quarter, and that's mainly due to receiving an annual volume rebate. So when there are lower volumes, we are contractually compensated.On LPG, very much seasonal performance in Ragasco, very good European sales volumes. Quite a wide spread of volumes to different markets, I would say, particularly pleasing as the momentum building up in the Eastern European geographies.And then finally, of course, we had the successful spin-off of Hexagon Purus. The private placement that attracted NOK 750 million of extra capital was -- there's a lot of interest in that. And of course, as we mentioned, Hexagon still retains 75% ownership.So looking at the numbers. Revenue to the left, we recorded NOK 803 million top line versus NOK 942 million the same quarter last year. So you can still see the effects of COVID-19 on our top line. But pleased to say that we've grown steadily from the largest impacts in quarter 2. So each quarter has grown since then through to Q4. So apart from strong Agility revenues, volumes were lower versus 2019 elsewhere.As we go to EBITDA in the middle, we recorded NOK 69 million in EBITDA versus NOK 98 million the same quarter last year. And again, the record Agility EBITDA was offset by these lower volumes elsewhere.I will say, though, in that quarter, we did absorb strategic and transaction-related costs at Purus of minus NOK 20 million absorbed in the quarter.When we go over to profit after tax, we made a loss after tax of NOK 91 million versus the profit of NOK 11 million same quarter last year. The year-over-year effects of interests and charges, that's been positive due to COVID. So we had low interest rates. We've also reduced our debt. Foreign effects -- sorry, foreign currency effects were negative NOK 30 million year-over-year. These are noncash, of course.And another noncash impact has been the tax charge. So we had quite a large tax charge. You see a minus NOK 56 million effect year-over-year. And that's mainly due to provisions on tax assets. These tax assets are accumulated losses, which, in the tax world, can be carried forward substantially indefinitely. And then you use them -- they can be used against profits in the future to reduce your tax bill.In the accounting world, though, more stringent here and it's prudent then to be conservative and provide for those assets. And basically, with Hexagon Purus being listed, we saw in the accounts -- we provided the audited accounts on the 30th of June, that went with the prospectus, we already provided for some losses to date at that point in time. And then as we closed and audited 2020, we also included the further losses from Q3 and Q4, ensuring that they were not recognized on the balance sheet. So this is a typical situation you'll have with start-ups or companies like Purus who are in the growth phase.This is a slide I really like. So here, we take the group results on the left that we've just gone through. In the middle, you have the e-mobility business results, which they did NOK 33 million in top line and minus NOK 52 million in EBITDA. Simply take those away and you get the Hexagon ex Purus pro forma. And as Jon Erik -- came into NOK 770 million revenue with NOK 121 million in EBITDA. Two things very pleasing there: one, greater than NOK 100 million EBITDA in the quarter; and the second, greater than target EBITDA margin as well. So a very pleasing end to the year for the Hexagon businesses.And this looks at the top line. The 2019 pie to the left is like-for-like. So it's pro forma to the '20 business combination. And there you see Agility increasing the revenue -- both their revenue share and also year-over-year revenues with that record in quarter 4 '20. And we look at the Purus section, it's gone down from NOK 168 million to NOK 83 million. The vast majority of that is in the CNG Light-Duty Vehicle volumes. Remember, it was still reported in periods during 2020, and also a slight reduction in the battery electric vehicle side where we had a major program milestone in 2019, realizing revenue, and that program has tailed off towards 2020.Also then reductions year-over-year for Mobile Pipeline we've covered, and Hexagon Ragasco, I would say, the NOK 108 million this quarter this year is more typical and seasonal. Last year, the NOK 141 million also included quite heavy sales to our customer in Bangladesh.So as we look into the balance sheet, this is a view of the group balance sheet moving from the previous quarter. And if we take the left-hand side first, you see 2 things. The fixed assets are reduced. That's mainly currency effects. So the U.S. dollar actually became weaker versus the NOK quarter-over-quarter, and a lot of our assets are stated in dollars related to Agility. So some noncash reductions there. But otherwise, the big impact there, you see our cash going from NOK 1 billion up to about NOK 1.65 billion, of which NOK 1.25 billion is earmarked to Hexagon Purus and NOK 0.4 billion is for Hexagon.Over to the right-hand side, we can see the equity increase. That's mainly the private placement that we had in Purus has increased that. Of course, within that equity, there is now a minority interest of about NOK 0.4 billion.The interest-bearing debt of NOK 1.2 billion, that's all the obligation of Hexagon. And if you net that with the cash, we have a net interest-bearing debt then of NOK 0.8 billion, quite satisfying. So even stronger balance sheet after the Purus listing.And on the next slide, I'll just focus on the leverage to the bottom there. Hexagon pro forma leverage is a healthy 2.5x. So let us first -- so let us go on to the full year 2020 financials, and we can start with revenue on the left. So we managed to record NOK 3.1 billion in 2020 versus NOK 3.4 billion same period last year. And again, the theme throughout the year was COVID-19 and navigating through there. And COVID-19 particularly had largest impacts in Mobile Pipeline and also the U.S. transit bus sectors.One of the key factors, as I've mentioned, is the fact that Volkswagen relocated their production. So year-over-year, actually, in CNG Light-Duty Vehicles, we had only 40% of the volumes we had last year. So that's had quite an effect, and we'll see that when we go to the EBITDA. But otherwise, a very robust performance from Agility, good growth -- and good growth from Hexagon Ragasco.So on EBITDA, year-over-year impact, you can see NOK 190 million for the full year, this is preliminary and unaudited, versus NOK 360 million same in 2019. Of course, the NOK 360 million also includes some positive gains from transactions charges or credits from the Agility transaction. That was for NOK 44 million. But otherwise, year-over-year, you can see some of the large effects. And the impact to CNG Light-Duty Vehicle of those reduced volumes caused by the production relocation was NOK 90 million year-over-year. And Mobile Pipeline then year-over-year, minus NOK 70 million down mainly due to COVID. I'll also say for the full year, we absorbed NOK 29 million in strategic transaction costs towards -- mainly towards Purus. And the total e-mobility ramp-up effect, we'll see in the next slide.So when we go to profit after tax, it was a loss after tax of minus NOK 153 million versus the profit of NOK 107 million last year. And again, it's the tax charges I spoke about accumulating in Q3 and Q4, particular. Otherwise, all other below-the-line effects are pretty modest year-over-year.So as we go on to look at the pro forma full year for Hexagon, we strip out the Purus e-mobility business, which did NOK 181 million in revenues and minus NOK 132 million in EBITDA. So the Hexagon businesses ex Purus were NOK 2.9 billion in revenue and then NOK 322 million EBITDA for a double-digit EBITDA margin. And that is despite the heavy challenges, again, one, from COVID; and two, from the production relocation of our large customer in CNG LDV.This -- the year-over-year revenue tells the same story as the quarter, so I won't dwell on that. But what I will do is allow us to do our annual 2020 financial scorecard. I would say as a theme, we navigated COVID-19 through 2020. And of course, we're in good position to navigate further in 2021, and I would say, very well positioned for profitable growth.In 2020, we did double-digit EBITDA margin for Hexagon ex Purus. We had NOK 272 million EBITDA from Agility Fuel Solutions. Our cash balances are NOK 1.6 billion. And of course, we have undrawn liquidity, additional liquidity of NOK 0.5 billion if we need it. We have a 58% equity ratio. And of course, we spun off Hexagon Purus, which has a current valuation somewhere between NOK 14 billion and NOK 15 billion.So that was 2020, and we have plenty of optimism to look out the window and see what 2021 looks like. We've changed our guidance to full year. So all the comments therein will be related to the full year perspective.And starting with Hexagon Agility, so the automotive, medium- and heavy-duty vehicles business. We very much see the green focus driving the g-mobility demand. We have a very strong order book for 2021, so we feel confident then in delivering on growth targets. Saying that, we will have a more modest first quarter, especially after the record momentum we saw in the second half of 2020.We see these sustainability targets as really driving fleet demand. Of course, we have these large logistics customers that are really powering ahead in 2021. But really pleased to see also the signals from the improved adoption among the smaller fleet owners as well.So also a positive demand for European bus. That's definitely been a high-growth area for us over the last 2 or 3 years. We expect to have some disruption, as we saw last year, also from the -- in Q1 from the pandemic with some OEM shutdowns, et cetera. Otherwise, the refuse or garbage retrievable segment is expected to pick up in 2021.On Mobile Pipeline, also Hexagon Agility business unit, we expect a pickup in the mobile refueling, flare gas capture globally and also energy-intensive applications in 2021. The other positive is now integrating Hexagon Mobile Pipeline and Agility. We will see then customer synergies also more of those with Agility's automotive business, particularly, for example, in the mobile refueling application.We had a great start to Mobile Pipeline. We're awarded almost $6 million contract for industrial gas delivery, and deliveries will start already in the second quarter 2021.And also, more positive outlook for Oil and Gas segment. We couldn't say that last year. Increasing rig count is obviously a strong indicator. But also we see ESG driving conversion to CNG and RNG in those high horsepower activities, energy-intensive activities.So CNG Light-Duty Vehicles. We've -- over the years, we've coped with many different things hitting us unexpectedly. For example, the WLTP protocols, we've had to go through that in the past. So unfortunately, we start the year with this global semiconductor shortage impacting the global auto industry and particularly the passenger car segment. So we think this will have a severe impact in Q1 on the CNG LDV volumes, but we expect that to be sorted out in due course and call-offs expected to resume strongly in Q2 onwards.Digital Wave. Digital Wave currently, as you saw with Jon Erik, it's 2% of our revenue. So it's a fairly small business for now, but it's profitable with its existing product offerings. What Digital Wave will be focusing on is developing a new business model in 2021, will be looking at the Internet of Things, how we can have our tank systems communicate and real-time health monitoring, which will be a real positive for our industry in terms of safety on the composite vessels. And also life extension and improving the circular economy of our industry. We'll also factor in servicing -- or service and leasing models as well. So plenty to do for Digital Wave in 2021. We will require some OpEx investment, quite modest, really, people investment, and we are attracting talent as we speak to help us realize these opportunities.Hexagon Ragasco, we see strong demand for LPG leisure use continuing. And seasonally strong first half of 2021 will be the same theme, lots of demand in Europe. But in the background, obviously, for the future, the very exciting area, onboarding our smart tank pilot programs with key European customers through 2021. And with success, we'll be looking to launch in the market in 2022. And that initiative is key for driving or doubling our revenues from 2020 to 2025. And within the 3-year -- or the third year, the fourth year and the fifth year, we expect a really high return and increase in adoption rate.So in the Capital Markets Day of 11th of January, we guided for the year. We based our guidance on unclosed numbers or forecasted numbers estimated for 2020. But we had hard targets in mind. So just to go into the revenue, we are looking at around about NOK 3.5 billion revenue for the year, that's what we're aiming at, and aiming also at the EBITDA of NOK 400 million for the year and resulting in more or less a 12% EBITDA margin.On this slide, we look at how we are doing, how our expected performance to those targets in 2021 are looking like. And if we start with Agility, definitely a green traffic light, we see that continued sustainability-driven adoption. Some opportunities with our productivity programs; and risks, obviously, on the prolonged -- if there is a prolonged COVID-19 recovery.On CNG LDV, I mentioned the semiconductor shortage will impact Q1, so that's why it's in orange. And then we'll look to picking things up in Q2 to Q4 where possible. Other opportunities in CNG LDV are in the territories of Indonesia and India. But of course, risks, if these electronic component shortages, if that period is prolonged.In Ragasco, business as usual, very balanced risk in terms of new opportunities and/or delays in orders. And Digital Wave, as I mentioned, that is going to be looking to invest its OpEx then to extend existing profitable business.So in terms of the spread for the year, we expect that Q1 will be relatively weak and Q2 to Q3 and Q4 will be very strong.Finally, on Purus, we have a strong and growing pipeline of hydrogen activities. I encourage you to look at the Purus presentation if you haven't already. And you can see that, basically, a very good pipeline of activities, particularly in hydrogen distribution, transit bus, rail, aerospace, et cetera. And I will leave with just a few of those recent announcements then from Hexagon Purus. To the left, the Hino battery -- heavy-duty battery electric vehicle project, followed by New Flyers hydrogen fuel cell bus. We have a couple of firsts in the train arena, hydrogen train, so the first U.S. commercial commuter train by Stadler and also in Spain by Talgo. Everfuel on the hydrogen distribution and others, as you can see.And on that note, I will leave us with clean air everywhere.

[Karen Romer, Senior Vice President of Communications]

Thank you very much, David and Jon Erik. And now we're going to move over to the Q&A session. As I mentioned earlier, the Q&A option on your screen is available or you can send your questions to [e-mail] we do have several questions that have come in already. The first one is to Jon Erik. When talking about Asia, you're saying that Hexagon will take leading positions with strong partners in the region. What partners are you referring to? Is it partners already on board? Or are you planning to make new ones going forward? If so, what kind of partners are you looking for?

[Jon Erik Engeset, President & CEO]

So first and foremost, as you know, we are planning to enter into a JV with CIMC ENRIC in China, CIMC being the largest global container company but also having a lot of LNG technology and compressed gas technology. So a very good partner that we have spent considerable time with over the last 2 years and that we feel strongly that is the right partner for China.And then we also have -- as part of that partnership, we have also included Southeast Asia. But we don't exclude that we will, either together with CIMC or ourselves, also partner with other companies in order to make sure that we get the market position and the industrial footprint in that region that we will strive for.

[Karen Romer, Senior Vice President of Communications]

Thank you. New question. This one is for David, I believe. A comment basically that the formulated guidance given for 2021 is different than what was given at CMD. And a second part of that question, is it really such that all 4 key developments in Q4 have to do with Hexagon Purus? 2-part question.

[David Bandele, Chief Financial Officer]

So it's the same annual guidance for the Hexagon businesses. That's ex Purus. And we -- in this presentation, we are just stating that -- the hard targets, and that's the NOK 3.5 billion top line and the NOK 400 million EBITDA. Again, I'll stress these are ex Purus targets, exactly like we gave in the CMD. Not commenting on Hexagon Purus.

[Karen Romer, Senior Vice President of Communications]

Excellent. The second part of that question had to do with the key developments being solely focused on Purus this quarter, but perhaps that's for you, Jon Erik.

[Jon Erik Engeset, President & CEO]

So I honestly am not sure if I understand that question because we have reported key developments across the business. So I'm not able to comment on that.

[David Bandele, Chief Financial Officer]

I think it could be that in the BoD report. But obviously, in the presentation, we have definitely given all the key developments that are happening also in g-mobility, for example.

[Karen Romer, Senior Vice President of Communications]

Excellent. I imagine this is for you, Jon Erik. You plan to double sales in Hexagon Ragasco. Will this be successful at your current plan? Or will you plan to expand?

[Jon Erik Engeset, President & CEO]

That ambition is -- can be realized in our current plans. Of course, we would need to expand capacity there. But we don't exclude that we will also establish LPG facilities -- or LPG cylinder facilities elsewhere. But it has great advantages to locate in the same facility. So we see that, especially in that brand, we have significant economies of scale. So we don't have any concrete plans at this stage to establish facilities elsewhere. Should we do that, it would be because we see that there is a need to localize in order to get behind the trade barriers. So that is a continuous assessment that we need to make. But for now, our focus is on the Raufoss Ragasco facility in Norway.

[Karen Romer, Senior Vice President of Communications]

Great. David, to get an understanding from a bondholder perspective, can you talk a bit about how the cash position should be viewed? Should Hexagon's cash position be viewed as NOK 404 million as on Slide 27 with NOK 1.2 billion reserve for Purus? Any possible shareholder distributions given the Purus spin-off and private placement?

[David Bandele, Chief Financial Officer]

So that's a good question. Yes. So we -- as we -- as in the presentation slide, Hexagon, they're ring-fenced basically. So Hexagon's NOK 0.4 billion is ring-fenced from Purus, and Purus' NOK 1.25 billion in cash is ring-fenced. Also on the debt side, both on the senior secureds, our bank financing and the bond, they are all for Hexagon. So that is correct.In terms of distributions, it's -- yes, it's a listed bond. So you can see we have a distribution clause that allows us to distribute every year according to the annual consolidated profit after tax, that's including Hexagon Purus Group. We also mentioned that the bond -- it's a 4-year bond. It's coming up for the 2-year anniversary at that point, which is March this year, so in a few weeks. There, we have a call option at our discretion, and that call option exists through to the end of the bond as well in 2023.

[Karen Romer, Senior Vice President of Communications]

Excellent. Jon Erik, what do you see -- or who do you see as your closest/biggest competitor when it comes to Digital Wave? And are you expecting to do any M&A to satisfy your goals?

[Jon Erik Engeset, President & CEO]

So we don't really see a competitor yet to Digital Wave. So we have the first-mover advantage there. So the MAE technology, the core technology is known in the university circles, et cetera. But as far as we know, Digital Wave is the first one to apply it in this way. Then we would like to develop adjacent technologies and potentially completely new digital technologies. And then I would say that M&A is absolutely something that we will consider. So if we can find other new Digital Waves in a way, companies with interesting core technologies that we can include in our group and build on, then that is certainly very interesting for us.

[Karen Romer, Senior Vice President of Communications]

Now I have a 3-part question for David. We'll take it one piece at a time. What kind of CapEx levels could we anticipate for Hexagon ex Purus in 2021/2022?

[David Bandele, Chief Financial Officer]

Yes. It's a good question. We see maintenance CapEx around about NOK 80 million per year. So I think that's even for the full Hexagon -- sorry, the Hexagon ex Purus. I think that's a good number to use as a recurring CapEx. Of course, we do have expansion plans. We have been expanding in the heavy-duty area, so Agility area, given all the demand we're seeing from particularly European transit bus and heavy-duty and medium-duty truck.

[Karen Romer, Senior Vice President of Communications]

Second part of same question. And will there be any mentionable OpEx ramp-up in any of the divisions also beyond 2021?

[David Bandele, Chief Financial Officer]

So I mentioned Digital Wave, but this is very modest in the scheme of the group. But of course, Digital Wave will really develop their digitalization strategy through 2021. And at that point, then we'll communicate back if there's going to be more, you can say, aggressive expansion.Otherwise, yes, if you recall in the Capital Markets Day, we will be investing in world-class manufacturing. So that's a key thing going forward. And that productivity return we see within 3 years, for example. And then the other area is digitization. So Hexagon Ragasco can absorb that level of OpEx. It's investing into its smart cylinders. But again, that will return within 3 years. Still, we expect same great results from Hexagon Ragasco.

[Karen Romer, Senior Vice President of Communications]

And third part of the question. How should we think about the internal eliminations between divisions after all the restructuring and spin-off?

[David Bandele, Chief Financial Officer]

Yes. We'll come back to that in 2021. It's a good question. But obviously, Purus will be treated more like a stand-alone, but we'll address that in detail with the pro forma numbers for reporting next quarter.

[Karen Romer, Senior Vice President of Communications]

Jon Erik, I think this is for you. What about future plans and goals for improving environmental sustainability of the production and distribution of products? What about the reuse of used and old containers and canisters?

[Jon Erik Engeset, President & CEO]

It's a very high priority topic for us. So we reported in the new format of ESG reporting last year. It will be one this year as well or for 2020 as well in connection with the annual report. And sustainability, the circular economy, ESG reporting will now be at the very top of our operations and growth and manufacturing agenda.So we have a long range of initiatives. It takes too long to go into details, but certainly, that is prioritized, including the end-of-life treatment of cylinders and how we can, first of all, extend the lifetime and we -- back to Digital Wave and the MAE technology, but also when it's really end of life, how can the materials be reused for other products. So exciting things in the pipeline, we will come back and tell a lot more about that in the coming quarters.

[Karen Romer, Senior Vice President of Communications]

Thank you. To David again, how much of the growth expected in 2021 is already in the order book ex Purus?

[David Bandele, Chief Financial Officer]

We don't want to go into specific details, but I can say, for example, Hexagon Agility and Hexagon Ragasco, which are very much the large areas or large components of our revenue and EBITDA, they typically have a very strong and covered order book going into the year. So yes, we're very confident on the growth targets for 2021, particularly in those divisions.

[Karen Romer, Senior Vice President of Communications]

Okay. And we have one more question. I believe this is for you, Jon Erik. I -- it's about the EMEA light-duty segment. Do you think that the fact that biomethane is exempt from the CO2 tax in Germany will eventually bring more automakers to rethink their offer of CNG model portfolio? And then he adds, Egypt is planning to switch to 100% CNG car. Do you plan any venture there?

[Jon Erik Engeset, President & CEO]

Egypt, yes, we are aware of the development there. There are a number of other markets as well, South America, Asian markets. But to the first question, yes, I believe that the current trend away from CNG light-duty in Europe will be reversed, and that will be part of the solution in Europe also, both short, medium and long term. It's back to the value proposition of RNG. It's a huge unused potential. And it's not only potential. It is a part of the waste problem that needs to be solved. And that waste needs to be collected and transformed to natural gas. So I think the last word is not said about that.

[Karen Romer, Senior Vice President of Communications]

And at the very tail end, we had one more question. When -- I believe this is for you, David. When will you start reporting order backlog? And why not?

[David Bandele, Chief Financial Officer]

I can guess who that's from. Yes, I think I have the same answer. So you'll probably see a lot more of that in Hexagon Purus. No, we will continue to assess that. We hope that we can, regardless, provide the right information that people have the confidence then that our projections and expectations will follow through. I will say that it is a change for us to guide for the full year, so definitely. So we're making baby steps there. But yes, we have that question in mind. Thank you.

[Karen Romer, Senior Vice President of Communications]

Excellent. I think that wraps up from our questions from the audience, and except for a great comment of a stockholder who -- shareholder that wanted us to know he's very proud to be a shareholder in the company. So that was very nice. Thank you. And I think we'll just draw the line there and say thank you very much, and I hope you all have a great day further. Thank you.

[David Bandele, Chief Financial Officer]

Thank you.