Hexagon Composites ASA (HEX) Earnings Call Transcript & Summary

Hi, and welcome to Clean Air Everywhere, Hexagon Composites Capital Markets Day 2021. My name is Karen Romer, and I'm the SVP, Communications in Hexagon.

And my name is Hiva Ghiri. I am the Vice President of Investor Relations and ESG in Hexagon.

Today, Hiva and I will guide you through this 3-hour virtual event where Hexagon's executive management will bring you up to date on the latest and greatest in Hexagon's efforts to drive the energy transformation and achieve our vision of clean air everywhere. The day will be divided up into 3 segments. First, digitalization and new business models, the next big strategic step for Hexagon. This will feature Hexagon Ragasco and Hexagon Digital Wave.

We will then move over to g-mobility, and we will do a deep dive. We'll focus on the major market growth that's coming our way. You'll hear from Hexagon Agility, its business unit, mobile pipeline and Hexagon's overall commercialization strategy.

The third segment will feature the hydrogen activities of Hexagon Purus research and development across the group, the strengthening of the Hexagon brand, and of course, a presentation of our strong balance sheet and profitability by CFO, David Bandele. Finally, we'll round off the event with some closing remarks by our CEO, Jon Erik Engeset. In each segment, there'll be a short presentation made by each of the business areas, highlighting key elements of our strategy, operations and the road ahead.

After each session, there will be a live Q&A. The Q&A option on your screen will be open throughout the whole day, so please feel free to enter your questions as they come to mind. We will circle back at the end of each segment and will pose the questions to the presenters on your behalf. [Operator Instructions]

With the recent spike in the spread of COVID-19 around the world, we're taking all the precautions necessary today. Today, our executive team is presenting remotely each from their home offices. This means we'll be seeing and hearing from them in locations varying from the mountains of Norway to the sunny shores of California and many places in between. Hiva and I will moderate the event from the studio in Oslo where we're supported by limited staff of skilled technicians, all of us careful to maintain the prerequisite 2 meters apart.

As with all virtual events, there is always a risk of technical challenges along the way. We've done our best to prepare for everything and anything that could happen, and we have support on hand. Should you have any issues, click Technical Support on the right-hand side of your screen and you will be taken into a Teams meeting where a technician is available to help you. I'm confident that we will get through this together smoothly, and hopefully, with a lot of engagement from you, our participants.

Now I think the time is to get started. To set the mood, we'll now play a short film, which will be followed by our CEO, Jon Erik Engeset's, opening remarks. [Presentation]

Good afternoon and a very happy and prosperous new year to you all. We will revert to you in a few weeks' time and report on the fourth quarter, but I can share with you that we are pleased with the way the year ended, and that we ended -- or exited 2020 even stronger than we entered it despite the obvious severe challenges of the pandemic situation. If you can go to the next slide, please. So for those of you who are not very familiar with Hexagon, I'd like to define it very briefly. Hexagon is the global market leader in Type 4 cylinders and fuel solutions. We are a trusted supplier to long-range leading automotive and logistics companies around the world. And we have been and will continue to invest heavily in innovation of the value chain and thereby creating unique values for our customers. The backdrop to our business could not be better. I am stating on this slide that the clean energy transformation is gaining massive momentum. It is justified. Of course, we follow the debate on ESG companies and devaluation. What we observed is that among our customers ranging from automotive companies, suppliers to the automotive industries, aerospace, oil and gas and energy companies and logistics and transportation companies, they all have sustainability and clean energy at the very top of their strategic agenda. And we have no doubt that these companies are prepared to invest significantly in the years ahead to execute on their strategies. At the same time, there are relatively few companies out there with readily available proven technology and solutions. Hexagon is one such company and we are ready to take part in the next phase. In order to prepare for this market opportunity in the best possible way, we have made some changes to our structure with effect from the 1st of January of this year. And from left to right, we have combined Hexagon Mobile Pipeline with Agility Fuel Solutions into Hexagon Agility, by far the largest business area in our group under the leadership of Seung Baik, who you will hear more from later on in the presentation. In connection with the spin-off of Hexagon Purus, we separated the CNG Light-Duty Vehicles business in Germany into a separate business unit under the leadership of Michael Kleschinski. That will operationally -- operate as a separate business unit for 2021, but then will, from the beginning of 2022, also be integrated into Hexagon Agility. And already from this year, we will report the business together as our g-mobility business area. We have lifted Hexagon Digital Wave up to a separate business area under the leadership of Jack Schimenti and with the responsibility to develop digitalization technologies and solutions for our mobility businesses. And you will hear more from Jack about his visions and ambitions for this business area a little later in the day. We have made no changes to the structure of Hexagon Ragasco. That will continue under the steady leadership of Skjalg Stavheim. And last but not least, Morten Holum will lead Hexagon Purus as a separately listed business, but majority owned by Hexagon. In the process of spinning off Purus, we have noted some misconceptions about the remainder -- or the other business areas in the group. So we've seen some comments suggesting that the clean technology and the business aiming at zero emission future will be in Hexagon Purus, while the rest of the group should be about more conventional industry and technologies and fuel solutions. That is a fundamental misunderstanding. Our g-mobility business is as much about driving a zero emissions future as is our e-mobility business. And the very important reason for that is the growing importance of renewable natural gas in the global energy mix, also called RNG or biogas or biomethane. And in many ways, this is the ultimate clean fuel. And the reason for that is that RNG is made of organic waste, which would otherwise decompose and leak into the atmosphere as methane. And methane is a very aggressive -- extremely aggressive greenhouse gas. Instead, it is being refined into natural gas and allowing a carbon-negative mobility. And it is expected that as much as 20% of the global fleet of heavy and medium-duty vehicles will run on RNG by 2040. And that is a huge business opportunity for the Hexagon Group. And that is a very important reason why we are bullish about the future market opportunities. In this graph, we have shown that we expect the addressable market to grow by a factor of 4 to -- and while the relative growth will be the strongest on the e-mobility side of the business, in absolute terms, it is the g-mobility business that has the largest growth opportunity in the next 5 years. But driving energy transformation is not only about replacing the source and carrier of energy. It is also about utilizing that energy in smart and efficient ways. It's also about utilizing the materials and the technologies and other resources that go into creating the solutions for the storage and utilization of that energy in the best possible way. And that is why we, over the last 3 years, have spent a significant share of our R&D budgets on developing digital solutions. And you will hear more about some of those opportunities in a short while. And we are confident that by taking the lead also in this area, we will generate new business model, new revenue streams and further sharpen our competitive edge. So I wish you a very interesting, hopefully, very enlightening afternoon together with us. Thanks for now, and back to the studio.

Thank you very much, Jon Erik. We have successfully spun off Hexagon Purus. What is the next big strategic step for Hexagon? In this first segment, we'll present digitalization and new business models and what it means for Hexagon and for the industry. Up first from his office in Raufoss, Norway, in our world-class manufacturing facility, is our President of Hexagon Ragasco, whose middle name is operational excellence, Skjalg Stavheim. Skjalg, please tell us about the new generation of smart cylinders.

Yes. Hi, all. Thank you, studio. Hexagon Ragasco is the world leading producer of LPG composite cylinders and we have globally delivered 18 million cylinders since we started up 20 years ago. We're looking in Norway and operates from Raufoss Industrial Park, one of the largest industrial clusters in the country. The plant is fully automated, we have 125 employees and the annual maximum production capacity is 2 million cylinders. We are selling the products to some of the largest LPG distributors, and the export share from Norway is 95%. And the total global market is huge and dominated by steel tanks. It is 1.2 billion propane gas cylinders worldwide, and composite cylinders have a 2% market share. Out of this share, we have highlighted the 18 million composite cylinders delivered from us. The 1 million others are mainly from our competitors, Time Technoplast and Supreme Industries from India. Later in this presentation, I will introduce a new innovation from us, a smart composite cylinder. Going forward, we strongly believe that the digitized and connected smart composite cylinder has the ability to be a game changer and take market shares from steel. As you can see, we have had some turnover situations between years. But when we look at the total picture, we have grown significantly. Profitability, including price and cost discipline, has always been high on our agenda and the EBITDA margins has been on a 20% level in the period. 60% of the customer base is recurring revenues from the large LPG distributors in Europe and the last 40% is from markets outside Europe. In 2017 and '18, we received significant orders from both Qatar and Iraq. And in 2019, Bangladesh was a great contributor. The main aim going forward is to introduce smart cylinder technology and increase the composite cylinder adoption rate and substitute steel cylinders. As mentioned, the market is huge and we believe smart connectivity represents a breakthrough that will give value and benefits for both the end consumer and the distributors. In order to be competitive, we have over the years developed a world-class production plant. And a new smart product technology will be installed without any interruptions on plant speed and uptime. Our composite cylinders are sold in over 85 countries. We are opening up new markets every year, and the adoption rates varies from 4 to 400,000 cylinders per country. One successful example is Qatar in the Middle East. Over a period of 3 years, it shifted out for safety reasons 1 million steel tanks with composite cylinders from us. We have a global sales team covering most of the world marked in orange on the map in front. Going forward, we are systematically addressing market possibilities with the smart cylinder, and we see growth potentials both in existing and new markets. The market developments are supported by a fully automated plant. We are competing against steel tanks and cost is always an issue. With a strong production philosophy supported by machine and technology investments, we have increased the productivity significantly. In the very beginning, we produced a new cylinder on pallet every 74 seconds. Now it takes us only 11 seconds, and we have done it without adding more people on the shop floor. A lean improvement cluster is installed and 0 defect is high on the agenda. Online monitoring of quality indicators, higher process robustness and self-adjusting machine sales are all measures going forward. It can also be mentioned that, in 2016, we were honored as the smartest industrial company in Norway. Then over from operational excellence to smart cylinders, and digitalization as the next big thing. We have started to develop a smart composite cylinder concept to increase the attractiveness of the product from an end consumer and distributor's perspective. The main goal is to build more customer value into the product and the offering. I believe many of you have had questions regarding how much gas is left in a cylinder and for how long can I cook before empty. Imagine also seamless home deliveries without any ordering as a new and favorable end consumer service opportunity. And that brings us over to the smart composite cylinder. The vision: make the cylinder talk, I'm empty, please fill me up was born some years ago. Now it's reality. The technology is demonstrated and it works. Inside the composite cylinder, we have installed a sensor that measures the gas level and sends signals to your smartphone. The end user just take a photo of the bar code, installs the app and connects with the cylinder through the Bluetooth. The gas level is precisely monitored from your smartphone screen and it also estimates, based on your consumption, when you will go empty. To send a sensor signal, you need power and we have now found solutions with a new technology named energy harvesting. The innovation is that the smart cylinder finds energy from radio waves and frequencies in the surroundings. Energy is transferred to the sensor inside the cylinder, measuring the gas level and the powered sensor connects with your Bluetooth and sends the measurement to the smartphone app. The smart and connected cylinder is therefore completely battery-less and represent, in our view, a technological breakthrough that fits well to a long-lasting and sustainable composite product. I have also to mention that we recently painted the solution. When connected, a new opportunity landscape opens up. When you connect with the cylinder through the app solution, the LPG distributor monitors your location and the gas level lifts in your cylinder. Illustrated with a PC screen to the right in the picture. If you have a subscription service, the distributor monitors your consumption and can, next step, seamless deliver a filled gas cylinder at your home door. No need for manual transactions and the composite cylinder can be offered as a service. Between the phone and the screen, you can see a hexagonal gateway, which can be installed in sales locations and warehouses. The IoT gateway collects sensor signals from multiple cylinders and sends them into the LPG marketer's fleet management system. The main advantage to the smart cylinder concept is that it enables cloud connectivity between the smart composite cylinder, the end consumer, the LPG distributor and the producer. The technology provides real-time data monitoring throughout the value chain and enables the distributor to control and optimize their logistics, avoid sold-out situations and provide seamless deliveries to the end consumers. The amount of data will be overwhelming, and new and optimized distribution methods will follow. Imagine that you are at your cabin and you get a message from your smart cylinder that you soon will run out of gas. The first question is then where can I buy a new one? Then the app will find a nearby location and it will also tell you how many cylinders are left at exactly that location. With connectivity, the LPG distributor gets closer to the end user, secures repurchasing and increase the loyalty. Push marketing can also be an option if then consumer allows for it. One major benefit for the LPG distributor is to avoid out-of-stock situations at the sales locations. With the technology installed, the distributors can monitor the inventory level and optimize and plan their transportation routes. The decision will be data-driven and the distributors can optimize their customer service and logistics. We have used some years to develop the technology with energy harvesting, sensors and apps and we are now ready to test and improve the functionality in pilots and real-life situations. We already see that we are on an exciting path and we are now building a strong and innovative fundament for future growth. We also see that new innovations will follow the first one. And that the digitalization journey just has started. We are planning to scale up in 2022. And as mentioned, the LPG cylinder market is huge. Under the smart composite cylinder technology, we strongly believe we will gain market share in the coming years, and the goal is to double the turnover within 2025. And that was all from me and Hexagon Ragasco this time. Thank you for listening. And with those closing remarks, I will pass it over to the studio. Thank you.

Thank you very much, Skjalg. Continuing on the topic of digitalization. Internet of Things or IoT makes once-dumb devices smarter by giving them the ability to connect to the Internet and send data over the Internet. This allows them then to communicate with people in other connected devices. So next up from his home in Lincoln, Nebraska, nearby our key production facility, is Jack Schimenti, President of Hexagon Digital Wave. Jack, tell us about how Hexagon will build its Internet of Things opportunity and improve the circular economy. Over to you, Jack.

Thank you, Karen. As we heard, focus is being placed on digital transformation to develop smart tanks and systems to enhance customer value. Hexagon has been involved in composite tank technology for over 5 years -- excuse me, 5 decades. Hexagon Digital Wave smart technologies is complementary to our tank technology, and we'll continue to prioritize safety and then cost and performance. Hexagon Digital Wave will supplement Hexagon's clean air everywhere vision, emphasizing high-energy storage solutions with safety as paramount, eliminate unexpected downtime and improve ease of use, optimize total cost of ownership and improved fuel use efficiency. Our modal acoustic emissions will serve as the cornerstone of our smart technology that will represent the Holy Grail of composite health interrogation techniques. Let's take a look at what this looks like. Let me explain what modal acoustic emissions is. Think of it as the equivalent of performing an EKG on the tank. Modal acoustic emissions can provide you with hotspots of concern, think of blocked artery. The tank is equipped with sensors, which can pick up guided ultrasound waves traveling within the composite wall. When analyzed, we can use these waves to source and locate damage in the tank structure. Our technology can tell what caused a particular emission based on the wave signatures and determine severity of the measurement. Our goal is to alert the user to undetected damage, which has been the major contributor of adverse incidences. The 3 main benefits are: more efficient inspection of tank, real-time inspection and quantitative health measurement. Unfortunately, our systems are not yet factory installed, but we have the ability to perform inspections in situ. We have the ability to perform these examinations today. We have extensive experience with our mobile pipeline platform, resulting in the mandatory requalification reduced from weeks to less than 2 days. Further, we have used modal acoustic emissions to evaluate tanks involved in accidents and have been successful in verifying return to service of those same tanks. To emphasize our leadership position, only Hexagon Digital Wave's modal acoustic emissions technology is accepted by the U.S. Department of Transportation. We are the first movers in this area. Now let's get back to the slides, please. Our vision with this transition to smart technologies is to move us away from the legacy approach that tank systems is a simple mechanical device with no moving parts. Then the less complex, the better. However, today, our customers are demanding more system status, increased performance, health monitoring, reducing costs and preventing downtime. Using modal acoustic emissions as a cornerstone of our smart technology, we are miniaturizing and commercializing so that the sensors can be factory installed and communicate with other vehicle systems or infrastructure. The advantage we have is that no other company has the combination of modal acoustic emissions and intimate tank and system expertise. We intend to develop the collected information into a digital twin so that all lifetime experiences of the system are documented. In our experience, our e- or g-mobility products far outlast the vehicle. We can take a system at the end of vehicle life and repurpose via a certified preowned program. Hexagon's advantage will be the digital lifetime experience and the comfort that the system was not unknowingly compromised during use. This repurposing of the system will improve total cost of ownership, eliminate landfill waste and support our customer and Hexagon's underlying principles tied to proper ESG goals. By driving digital transformation of our products, we will help ourselves and our customers achieve socially responsible goals of environmental sustainability. We are creating a circular economy for our solutions. Let me walk you through the benefits of circular economy we are creating and how we will eliminate customer pain points. Using the cornerstone of modal acoustic emissions, we can leverage the information into predictive maintenance and real-time health monitoring to ensure the undetected damage does not result in system failure, real-time reporting to driver and central fleet management of issues and tank performance, resulting in less downtime and allow for planned maintenance. Extended life. The digital twin creates the opportunity for best-in-class certified preowned conditions. Allowing Hexagon to administer end-of-vehicle life solutions will enable a second and possibly third life to the system to improve sustainability and total cost of ownership. Tank as a service or leasing tank system allows Hexagon Digital Wave to create purchasing options for the customer based on their desires to purchase outright or lease the assets. Engineering a financial solution to customer capital purchase challenges can affect adoption rates for all of Hexagon solutions. Hexagon Digital Wave strategy has been shaped by our innovation and listening to the voice of the customer. Refuse trucks are prone to impact trees and overhanging infrastructure. Given the location of the fuel systems on top of the vehicles, these impacts are not always detected. Our technologies will be able to notify the driver and prevent system failure. Our customers today are not receiving the full value of our products. Our experience is that the vehicle reaches the end of useful life well before the fuel system. The certified preowned solution will support increased value to the customer. Fleet managers are always challenged with uptime of vehicles. Hexagon Digital Wave smart technology will enable preventative maintenance protocols and reduce unplanned downtime whereas unplanned downtime is expensive. The addressable market is huge, and Hexagon is well positioned. Our e-mobility and g-mobility presentations will provide more detail to the markets and our leadership role. The Hexagon Digital Wave smart technology strategy is to participate on all of those platforms where value is provided to both Hexagon and the customer. We believe strongly in safety is paramount, and being good citizens, we will offer our modal acoustic emission sensor technology to the industry. Monetization of the business model approaches will come in various forms from outright purchase -- product purchase, subscription fees and lease payments. Smart systems enable the creation of an Internet of Things platform where customers will connect with their preferred partners and software tools, first-mover advantage in scaling the platform to get access to data needed to improve products, build out services and set the industry standard for safety features. The platform will eventually be open to include competitor products for safety features and software tools, benefiting overall industry adoption. Live health monitoring of the tank system with real-time reporting to driver and central fleet management of issues and tank system performance. Tank as a service or leasing tank systems with live health monitoring to improve end-of-life handling, reduce risks of ownership and provide an asset-light balance sheet, giving the customers the option of long-term lease versus an outright purchase will help adoption. Repurposing tanks for the next life through certified preowned and more efficient tank designs resulting in less resources will be used in our circular economy. Our time horizon is being developed along with our e- and g-mobility, existing platforms and new products. Key milestones will be beta testing of our onboard modal acoustic emissions health monitoring system later this year. We see the ability to pilot a certified preowned model within 2021 and launch tank as a service within 2023. Full scale smart systems expansion will continue 2025 and beyond. It is clear the world changes at a greater pace than when we first created our products and platforms. We have to adapt. The expectations of the customers are much higher than just a system that works. The cultural change of having connectivity to all of the products online and providing real-time data is an obvious claxon. Further, Hexagon Digital Wave will provide more opportunities for positive corporate citizenship. We are bringing a digital wave into the world of tank technology. Thank you for your attention. Back to Hiva in the studio.

Thank you. So thank you, Jon Erik, for the introduction. And thank you, Skjalg, and thank you, Jack, for introducing our digital initiatives. We've received questions for all of you. And I think we should just start with a question for you, Jack. We've received a question. Will Digital Wave be the entity that executes tank as a service and leasing? And how will this affect the balance sheet?

We were taking a look at that exact detail, and we'll have more information as we develop the overall strategy with that. But most likely an entity within Digital Wave will take care of the leasing and tank-as-a-service approach.

Thank you. So Skjalg, we've received a question for you. Have you already started presenting the new offer to our customers or leads? And if yes, what has been the feedback so far?

Thank you, Hiva. Yes, we have had interactions with some of the largest customers. The feedback is very encouraging. Back in 2019, we started to analyze challenges and pains from an end consumer perspective. We conducted some focus groups in selected countries. And based on the conclusions, we started the smart [ cylinder ] developments. And now when the technology is about to be completed, we have discussed with some key LPG distributors, and the feedback is positive. So yes, it looks promising.

Thank you, Skjalg. I actually have another question for you, Skjalg. In India -- India is expected to overtake China as the world's largest LPG residential sector market by 2030. India is also going to use $5.7 billion annually by 2030 to subsidize the residential sector. How is Hexagon Ragasco planning on taking over a leading position in this market? This is from [ Aruna ] [indiscernible] to you, Skjalg.

Yes. Thank you. As mentioned, we have a global sales team and we are approaching the markets worldwide. And of course, India is also very interesting for us. So yes, we are in the process. And we will, let us say, take it step by step. And we have been in that region for many years now. So yes, we will be in position.

Thanks, Skjalg. So Jon Erik, are you also with us? We have a question…

I sure am, Hiva.

Great. So we have a question for you. Are we -- are you planning on launching another daughter in the coming months? I suppose another Hexagon Purus sending off.

No. We have no such plans.

While we have you, Jon Erik, we have another question related to Purus and it's how big is Hexagon's stake in Hexagon Purus.

So our stake is just below 75%.

Thank you, Jon Erik. Moving along to Digital Wave, again, Jack. Let's see, is the life extension within the original manufacturer lifetime horizon or is that beyond?

Well, presently, we are looking at primarily the -- within the manufacturer's lifetime as is defined. We do have experience already with life extension of SCBA's fireman backpack that we take the cylinders after life expiration of 15 years, and we have the ability to extend it another 15 years beyond the original manufacturer date. So today, we're focusing on within the manufacturer's time frame primarily because the cylinders in the systems are still within the existing manufacturer anticipated lifetime, but the vehicle typically wears out. So we'll move it from -- extend the lifetime within the original dates.

Thank you, Jack. And we actually have a question about tank and tank system as a service. Could you just explain that, Jack, again?

Sure. The tank as a service will help alleviate, in some cases, a high capital expenditure for the customer and be able to allow them to essentially use the tank as they need or the system as they need through the lifetime of the vehicle that they purchase. And basically, it takes it as a lease payment -- think of it as a lease payment on the product. We will take the product back in after the term that they envision, sometimes 5 years, sometimes 7 years.

Great, thank you, Jack. Skjalg, I have a question for you from Mikkel Nyholtt-Smedseng. What sort of price level, nominal or percentage, versus the standard model will the new digital cylinder be marketed at? And have you prefounded if there is a payment willingness for these features?

Yes. We conducted some investigations from 2019 as mentioned from the last questions. So yes, we have seen that the willingness to pay is there. And yes, it will be -- the cylinder will be marginally more expensive. The technology is a bit -- the offer will also be, to say, of a huge benefit and the technology is evolving. So we believe that the technology will really help us going forward here. So we are quite optimistic regarding the profitability.

Thank you, Skjalg. Jon Erik, we have a question for you. What are your plans concerning ownership in Purus when it grows strongly?

So we believe that for the foreseeable future, it is in Purus' interest to be very closely associated with Hexagon so that we can share the R&D resources, but also the global sales and market resources. So we intend for the foreseeable future to retain the majority ownership.

Thank you, Jon Erik. Let's see, we have another question for you, Jack, on Digital Wave. Are you expecting -- or are you going to provide these technologies to your competitors?

Yes. We believe in being good corporate citizens when it comes to safety, and we believe that modal acoustic emissions testing technology that we have is the best in the world. So we would feel only proper if we would provide this opportunity to use MAE, modal acoustic emissions, to our competitors as well.

Thanks, Jack. So I have a question that I guess could go to both of you, Jack and Skjalg. Maybe, Skjalg, you want to take this. How is the ability to scale up manufacturing capacity to follow market demands?

Adding smartness to our cylinders is a complex technology, but not from a production process perspective. No significant CapEx requirements from a production process perspective. So quite optimistic there.

Thank you. I think we've covered most of the questions related to -- no, here we have one more, sorry. Digital Wave, Jack. Will Digital Wave also serve customer products in Hexagon Purus?

Yes. Digital Wave, Hexagon Digital Wave, will support both our e-mobility and g-mobility, Purus and Agility for solutions relative to smart tank technologies. So we'll be offering that to both business areas within Hexagon.

Thank you. We have actually received some more questions. So I think this is for Skjalg. What material is our cylinders made of?

Oh, they are made of glass fiber. The major material is glass fiber and resin.

And maybe then, Jack, the high-pressure cylinders, what are they made of?

Carbon fiber and resin, thermoplastic liner.

Thank you for that clarification. So we don't have any steel cylinders in our portfolio, correct? Yes.

No. Correct.

So I think we've covered most of the questions, Karen?

Yes. No. I just wondered if we have a question from [ Jens Holm ]. The market value of Purus is now higher than the total value of Hexagon Composite despite the fact that Hexagon Composite owns close to 75%. In other words, the market value of Hexagon adjusted for its Purus ownership is 0. What will management do to highlight the values of Hexagon better going forward?

Is that a question to me, Karen?

Yes. I do believe that's a question for you, Jon Erik.

So we're starting with today's Capital Markets Day. So we are, of course, extremely pleased with the development of the Purus valuation. It doesn't seem to be completely rational at this point in time. But we feel confident that by informing about all the good stuff we do in the other business areas, over time, we will see that valuation also reflected in the Hexagon Composites stock price.

Thank you, Jon Erik.

Thank you. We still have a few more minutes, and I just received another question for Jack. The energy capture technology sounds really interesting. As you have patented this, so do you see opportunities for wider industry application? And I apologize, this is probably for Skjalg and not for Jack. So Skjalg?

Yes. Our digitalization journey has just started. The energy harvesting technology is really promising, and we are putting a lot of technology into the sensor. And I think that new innovations will follow the first one here. So we are from a, let us say, starting point now. And it will be an encouraging journey. Thank you.

Thank you, Skjalg. And while we have you, could you clarify the comment about doubling turnover by 2025? Do you refer to Ragasco's turnover? And versus what year?

Yes. I refer to 2019. And yes, it is Ragasco's turnover within 2025 doubling from 2019 figures.

Thank you. We did receive a practical question that maybe I can address. The presentations will be available on our website later today and so will actually this live webcast. You will be able to stream this at your convenience later today. So I think we have answered most of the questions, and we are at the point where we need to progress. So Karen?

Thank you very much, Hiva. Thank you, gentlemen. In this, we're now moving into our second segment. And in the second segment, we'll take you with us on a deep dive into gas mobility or g-mobility, if you will. There's a major market growth coming our way. And here to talk to us about the rapid expansion of renewable natural gas, from his home on the sunny shores of California is Seung Baik, the President of our new combined entity, Hexagon Agility. Over to you, Seung.

Thanks, Karen. Good morning, everyone. My presentation will be limited to the legacy Agility portion of Hexagon Agility, which means the natural gas commercial vehicle business. That business was founded now over 20 years ago based on this vision of cleaning the world's air quality. And parts of Agility date back even further than that. Many of the founders are still with the business today, and we're extremely proud to continue their mission. We believe that natural gas, particularly renewable natural gas, will be an important transportation fuel for the future. We also firmly believe that there will be no dominant clean fuel in the future, and that many different clean fuels will replace diesel for commercial transportation, whether that's natural gas, hydrogen, electric and possibly others. Choice of clean fuel will be based on availability, vehicle size and usage pattern among many other variables. Agility made significant contributions to cleaning the air in 2020, and we're extremely proud of what we accomplished last year. We displaced almost 600,000 tonnes of greenhouse gases in 2020, and we're off to a great start in 2021. We fully expect to set new annual records in this regard in 2021 and we're very excited about that prospect. We focus our efforts on larger commercial vehicles because we can have a greater impact that way. Heavy-duty vehicles, as some of you may know, are 20x dirtier than passenger cars. Currently, almost all of those heavy-duty vehicles in the world operate on diesel. This means that we have a fairly daunting task of changing that around and deploying clean fuels over the next 5 to 10 years. Corporate social responsibility or CSR is now a widely accepted term within which environmental sustainability has become a core concept. And we're seeing many of our customers, particularly ones with consumer-facing businesses, commit to reducing their carbon emissions footprint. UPS, Frito-Lay, Anheuser-Busch waste management, as you see on the screen, all have committed to using natural gas as a vehicle fuel for the foreseeable future. And we are an exclusive or a majority supplier to all of these customers. These are just a handful of examples, obviously, and there are many more customers and even more prospective customers. Later in this presentation, I'll review how this sustainability movement is positively affecting our business. But before I dive into the recent trends, I'll provide a brief overview of Hexagon Agility and our natural gas vehicle business. With combination with Mobile Pipeline, there are more than 700 of us in 6 countries focused on cleaning the world's air and doing -- trying to do so as efficiently as possible. We have a rich history of composite cylinder manufacturing, and our system integration prowess is second to none. Quite simply, we're the largest Type 4 cylinder manufacturer in the world and a market leader in North America and Europe. Our relationship with global OEM customers and large fleets also give us a competitive advantage and my colleague Eric Bippus, Senior Vice President of Sales and Marketing, will review our commercial strategy separately. We deliver customized fuel systems to our customers. For those of you who are unfamiliar with the natural gas fuel systems, this is our product depicted in blue. A fuel system is a natural gas storage and delivery component of a vehicle that allows the truck to run on natural gas. The fuel system is one of the 3 main components of the heavy-duty vehicle, the others being the chassis and the engine. Unlike passenger vehicles, these heavy-duty commercial vehicles in North America are custom built to order based on usage patterns of a specific fleet user. Here depicted on the left is our back of cab or ProCab system, and depicted on the right is our side-mount or a ProRail system. Now let's review how we make these products. First, we start with carbon fiber where we're one of the largest consumer of carbon fiber in the world and larger than any of our competitors by many multiples. We put that carbon fiber to use by winding them on Type 4 composite cylinders in Lincoln, Nebraska. For those of you who don't know where Lincoln, Nebraska is, take a look at a map of the United States and put your finger right in the middle of that map and that's where it is. It's very centrally located to supply throughout the United States and Canada. Our facility there is the largest composite cylinder manufacturing plant in the world, and we're in the process of expanding that capacity to meet future demand. From there, the tanks are transferred to our largest state-of-the-art system assembly plant in Salisbury, North Carolina. At that plant, we manufacture other components and assemble them on to systems and then install those systems on to vehicles. We opened that plant about 5 years ago, and it's strategically located close to our OEM partners. The plant features automotive quality paint booths and robotics to produce all components of the fuel system. Once the system is complete, it needs to be installed on a vehicle. Some of those are done at our facility, and others are done at either online at vehicle OEMs or off the line at vehicle modifiers. Here is the installation area within our Salisbury plant where trucks arrive without systems but leave as functioning vehicles. We have another assembly facility close to me here in Fontana, California, where we assemble and install refuse and transit systems and also trucks for western regions. Our Raufoss, Norway facility serves our European customers, and we have plans to expand our footprint in Europe. From those locations, we're able to roll out a full functioning truck, as shown here. This is a Class 8 Freightliner truck with our 175 DGE ProCab system or diesel gallon equivalent. There's a Class 6 truck with our ProRail system for a large global logistics customer that was new for us in 2020. There's a UPS medium-duty package truck with our system integrated on to the chassis. I see these trucks multiple times a day in my neighborhood delivering packages. I'm sure you've seen e-commerce activity increased during the pandemic. Our roof-mounted transit systems are largely responsible for cleaning the air in many metropolitan areas, including, as depicted here, Los Angeles. We're the sole supplier of cylinders and systems to virtually all of the major manufacturers in North America. That experience serves us well in other parts of the world. In India, for example, our cylinder technology is able to connect large cities using natural gas buses that were previously not feasible due to range limitations. Here's a Waste Management refuse truck with our roof-mounted system going through a neighborhood in the United States. There are thousands of these trucks deployed in North America, and RNG is making that story even more appealing. I'll review that RNG story with you in a few slides. For our vehicle business, we divided our business into 4 types of vehicles. We just reviewed heavy-duty truck, medium-duty truck, transit bus and refuse truck. You can see the split of our revenue indicated here. You should note that the natural gas penetration for transit bus and refuse trucks are relatively high as around 40% to 50%, as compared to heavy-duty and medium-duty truck, which are at just around 2%. One of the biggest competitive advantage of natural gas over other alternative clean fuels is that they're currently available for heavy-duty commercial vehicles, and the weight and range, as you see here, are -- far exceed any of those that can be accomplished by battery electric or hydrogen, even those that are designed and manufactured by our system company, Hexagon Purus, which are the most energy dense system in the market. This technological hurdle is the reason why we firmly believe in a long future of natural gas. Natural gas is abundant. The price is stable, and the vehicle technology is proven and available today. More recently, however, renewable natural gas has made that belief even stronger. Renewable natural gas, as Jon Erik and others have mentioned, RNG or biomethane is methane captured from waste that can be used for transportation. This is capturing methane that would otherwise be released into the atmosphere, so there is a negative emissions footprint to this fuel. There's no other clean energy that has a negative emissions footprint. As the world progresses through urbanization, those urban areas -- and those urban areas struggle with air quality and trash volume, RNG production and use for transportation can solve both of these major issues. For our customer, Waste Management, they're able to pick up trash from your neighborhood, capture methane from that trash and use it in their vehicles to pick up the trash from your neighborhood and entire life cycle of their operations using RNG. Other agricultural customers like Fair Oaks Farms in Indiana are doing the same with animal waste as their source of RNG. In the first half of 2020, RNG made up nearly 90% of all natural gas vehicle fuel consumed in California. And by 2024, there will be almost 120 million diesel gallon equivalent of RNG produced in California. Because of RNG and many other exciting developments, we anticipate our target markets to grow significantly, and we're preparing ourselves for that growth. Let's just look at North America as an example. And I'll admit, we're fairly conservative in projecting growth in the United States given the prior administration's stance. And our models have been deployed prior to that -- to the U.S. election. In a typical year, there are 300,000 to 400,000 heavy-duty vehicles sold. Of those, natural gas ranges between 6,000 to 8,000 or roughly about 2%. This means that even natural gas vehicles end up at 15% to 20% penetration of the overall U.S. market. We're looking at 8 to 10x our current business. To translate into revenue, approximately 1% adoption in truck segment is equivalent to about an additional $100 million in -- U.S. dollars in revenue. And translate that into a global view, North America is less than 1/3 of the global vehicle market. Now hopefully, you can see that potential growth and in turn, the Hexagon Agility potential growth. You may ask, are you currently seeing that growth? And our answer is a resounding yes. Our experience over the last 10 years shows very clearly that a new movement is fueling that growth, which is environmental sustainability. This graph of natural gas truck adoption mapped on top of fuel prices over the last 10 years, as you can see, there are 2 distinct phases. From 2010 to 2014, fuel price differential between diesel and natural gas was driving increased adoption. However, that differential has moderated over the last 5 years, and there's been a paradigm shift. We're now seeing tremendous growth in truck adoption because of this global movement towards environmental sustainability. This is why we're so excited about our future. Our business isn't dependent on fuel price differential but more on the desire to have cleaner air. Don't get me wrong, our customers are still wanting ROI in their investment, and being able to produce product efficiently is still very important. And that's why our scale and experience comes into play. But as our sales team will tell you, their conversations with customers revolve around the desire to replace [ dirty ] diesel now and not solely around fuel price difference. With all that in mind, we've set a fairly conservative goal of doubling our revenue over the next 4 to 5 years. Governments will undoubtedly pass more and more stringent mandates to clean the air. And I've been seeing a lot of articles comparing environmental hazards with the current global pandemic. This is resonating with citizens, and companies are listening. They are setting ambitious sustainability targets and holding themselves accountable. Hexagon Agility is doing our part by expanding our capacity, broadening our product portfolio and globalizing our footprint into new markets. Lastly, I'd like to briefly touch upon the previously announced combination of Agility and Mobile Pipeline. This combination creates one g-mobility business area within Hexagon. And although we've been collaborating before by combining operations under one business area, we'll be better situated to achieve world-class manufacturing and be even more efficient than we have been in the past. There are also common customers such as Waste Management and Certarus, where we can customize products to increase natural gas vehicle penetration within their fleet. We're just fairly 1 week into this new structure, but we're quite excited about the potential of this powerful combination. Now with that, thank you for your attention, and I'll pass off to my colleague, Miguel Raimao, Vice President of Mobile Pipeline, to review that part of the business from his home office in Colorado Springs. Miguel?

Thank you, Seung. My name is Miguel Raimao, and I'm Vice President of Mobile Pipeline and Hexagon Agility, and I'm excited today to talk to you about some of the exciting things happening in Mobile Pipeline. Let me start out reviewing what is Mobile Pipeline and what solutions does it provide to the market space. Mobile Pipeline is a solution that essentially connects stranded gas to stranded users. And let me walk you through some of the ways in which we do that. The first one is simply when we take pipeline gas and connect it to energy-intensive applications that may not otherwise have access to natural gas and they have a desire to either reduce fuel costs or address environmental concerns and very often both. Some of those applications include things like asphalt plants, ceramic plants, paper mills and other energy-intensive industries. Second way in which we use Mobile Pipeline is to connect stranded gas to energy users. And we see this particularly effective in the RNG space and in flare gas capture, 2 segments that I'm going to focus on today, because we see enormous potential to address these environmental issues while significantly driving the business of Mobile Pipeline. In North America, in particular, we also see applications where we need to connect pipeline to pipeline. In the New York and Boston metro areas, for example, we see that those areas that [ they're broad ] in population density. They are pipeline constrained. And therefore, in the cold winter months, they require additional natural gas to be brought into those areas. So Mobile Pipeline is helping keep those homes warm and those industries running in the cold winter months. And then finally, one new area that we're seeing a lot of interest in is in mobile refueling, and this offers us a great opportunity to find synergies with our Agility business. In this allocation of Mobile Pipeline, we're essentially connecting a natural gas source, be it pipeline gas or renewable natural gas, to expanding vehicle fleets through a mobile refueling unit. And this is really helping to accelerate the adoption of natural gas vehicles in the market. Next, I think to just talk a little bit about our products. Hexagon currently has the most comprehensive product portfolio in the industry. We have our X-STORE product, which fulfills requirements in Europe and other ADR countries. And then we have our TITAN product line, which is sold globally. TITAN, in particular, since its creation in 2008, remains the largest composite storage cylinder in the world and continues to drive the adoption of Mobile Pipeline around the world. We're also very excited about the new product development that we're engaging in, where we're employing some of those smart systems that you heard Jack and Jon Erik talked about to ensure our continued leadership in the market space. Going back to the creation of Mobile Pipeline. We really focused and saw adoption in 2 key market segments. It was those energy-intensive segments and the oil and gas space, which historically has primarily run on diesel. However, as the market developed, we see that to those segments, between 2013 and 2018, we also added power generation and pipeline-to-pipeline projects. And so the market space became a bit more diverse. If you look at Mobile Pipeline today, it's become a much more diverse and sophisticated business where we've added other market segments, including utilities; industrial gases, in particular, moving helium. We now have several customers moving renewable natural gas to market. We have some of those larger vehicle fleets adopting mobile refueling to facilitate deployment throughout their network. And then in Asia Pacific, in particular, we're seeing the adoption of what we call micro CNG, relatively small CNG systems, but there is a significant interest in those systems in order to meet sustainability goals and reduce operating costs. And then one segment we're quite excited about, it's still in its infancy, but we have high expectations for it, would be the marine CNG segment, where we are seeing opportunities to move gas by marine vessel in CNG form. Looking at some of our global successes, let me highlight the very first Mobile Pipeline project that we realized, serving the resort town of Yulara in Australia. That operation continues today where they are saving approximately 71,000 tons of CO2 per year. And we estimate that since its inception, the town has saved over $70 million in fuel costs. Some of our early projects, in fact, occurred in Asia Pacific. We have here another very significant project with PTT in Thailand, where they currently use approximately 89 TITAN Mobile Pipeline modules to deliver fuel to many of their NGV stations, saving approximately 460,000 tons of CO2 per year. And we estimate since the inception of that project, a savings of more than $400 million. We're present in Latin America, where this Nestle plant that I highlight here has been served by Mobile Pipeline since 2014, saving approximately 10,000 tons of CO2 per year. Then in North America, I touched on oil and gas previously. With the many exploration fleets in the United States, they consume a significant amount of diesel. We're very excited to see many of these fleets now converting to natural gas and many of them being served by Mobile Pipeline. We estimate that in North America, oil and gas currently is saving approximately 160,000 tons of CO2 per year, estimate $70 million in fuel savings. And we expect this trend to continue and to grow. And then finally, I'll bring up these last 2 projects, 1 in North America, 1 in Europe. We're very, very excited about RNG. You can see here significantly larger reductions of CO2 per year because of the very significant effect that RNG has on reducing greenhouse gas emissions. So we're very, very excited to be entering this new segment. To date, this amounts to over 1,400 Mobile Pipeline modules commissioned globally through 2020. Let me briefly touch on what we see as 2 very significant environmental challenges that we face today, in which Mobile Pipeline can play a significant role in solving. In 2019, over 150 billion cubic meters of gas was flared. To put that in perspective, that would equate to 42,000 Mobile Pipeline trailer loads per day, far, far greater than the entire deployed fleet that's in the market today. And if we look at it on a CO2 level, that equates to 360 million tons of CO2 per year. So flared gas is clearly, clearly an issue that we have to tackle, and Mobile Pipeline is ideally suited to address that. Then in renewable natural gas, you've heard my colleagues all talked about it and the tremendous potential that it presents. The global demand by 2040 is expected to climb to 225 billion cubic meters. Again, to put this into a Mobile Pipeline perspective, that's equal to 63,000 Mobile Pipeline trailer loads per day if we were to move all of that RNG by Mobile Pipeline. Obviously, not all of it will be moved by Mobile Pipeline. And I'm going to touch on that in the next slide to highlight where we see the potential for Mobile Pipeline. Looking at renewable natural gas, specifically in the context of Mobile Pipeline, we know that agricultural RNG, in particular, is very, very effective at addressing greenhouse gas emissions. The agricultural RNG also happens to be the gas that we find stranded in the marketplace. Landfill, gas and wastewater treatment plants are often pipeline connected, but many agricultural operations tend to be stranded. And therefore, that RNG doesn't have a potential to enter the market. If we look at RNG globally today, we see that less than 5% of today's global RNG potential is currently being produced. In North America, if we look at it from a project standpoint, North America and Europe today are leading the world in RNG development. We see that only 239 of more than 12,000 identified agricultural projects have been developed to date. So we expect this area to only grow in the future. And then when we look at agricultural RNG specifically, we estimate that by -- due to a variety of factors, about 20% to 25% of agricultural RNG is expected to require a Mobile Pipeline in order to enter the market space. And one thing that we are very proud of and excited to be a part of is that RNG is affording municipalities and farmers the opportunity to turn what have historically been cost centers into profitability by turning waste into energy. I'd like to highlight one of our early adopters in Mobile Pipeline in the RNG space, and that's company U.S. Gain in North America. Today, U.S. Gain is distributing approximately 5.5 million cubic meters of RNG per year using Mobile Pipeline. They're deriving their RNG from dairy waste, and their carbon intensity score allows them to be -- to produce greenhouse gases that are approximately 115% lower than diesel. So we're very excited and proud to be part of that project. And then the other thing that's noteworthy here is that if we put this into miles driven by a Class 8 truck, this one RNG project is the equivalent of eliminating 10.5 million miles driven each year by Class 8 trucks. As I look toward the future, what does all of this mean for Mobile Pipeline? We expect to remain active in oil and gas and flare gas capture projects as well as pipeline projects. In fact, looking out the next 5 years, we continue to see those as some of our larger business segments. But we're very excited to bring on some of these new business segments, including RNG and industrial gases, which are allowing us to diversify the Mobile Pipeline business. So we show here that over the next 5 years, we are quite confident in demand of Mobile Pipeline somewhere between 515 and 995, what we call, TITAN equivalents. Not all of our modules are the same size, but if we put it into a 40-foot equivalency, we see strong demand for Mobile Pipeline in the near future. And then looking beyond that, we can also identify potential for far -- a far greater number of modules, totaling approximately 3,400. And the very large potential that we see here, which to date is still largely untapped, is really the marine CNG space. We have several geographical regions looking at things like flare gas capture from offshore platforms and other projects that are aimed at moving CNG or RNG by marine vessel. In summary, let me conclude with, we all recognize that global energy demand continues to grow, and it presents significant challenges and opportunities. Today, Hexagon is the market leader, with more than 400 Mobile Pipeline transport modules in the world delivering natural gas and other industrial gases. With that said, we are continuing to aggressively diversify the Mobile Pipeline business by pushing into these new segments that I've highlighted today. And Mobile Pipeline is really providing a critical solution, not only to our environmental challenges, but solving energy poverty that still persists around the world. With that, I'd like to thank you for your attention, and I'm going to turn it back over to the studio. Thank you very much.

Thank you very much, Miguel. And now moving on to the third presentation in this series. We do not live -- at Hexagon, we do not live by the adage, if you build it, they will come. We, in fact, have a strong commercialization strategy, which is led by our very own Eric Bippus, the SVP of Sales and Marketing for Hexagon Agility. And he's going to tell us a little bit about our commercialization strategy live from his home in Indianapolis, Indiana. And Eric, over to you.

Great. Thank you, Karen. Well, good afternoon, or if you're dialing in from the Americas, good morning. I'm calling in from the chilly Midwest today. I'm here to talk to you about Hexagon's commercialization strategy. Jon Erik spoke to you, to kick off this session this morning, in regards to the clean energy transformation and the massive increase of making in momentum. And what -- the Hexagon Group, what I'm going to talk to you about is how we're going to commercialize that, how we're looking at the different opportunities and some of the quite strong growth numbers that you've seen from Seung as well as Miguel on penetration in the marketplace and how we'll capture that. Hexagon truly is the world leader in clean energy solutions. We've got, over the last decade, we've got 80,000 medium-duty and heavy-duty vehicles on the road. So when you compare us to other clean energy businesses, we are not a start-up. We've got a very mature technology. Our commercial team globally gets frequently asked, what is the solution that my fleet should go with? What should we -- should we go with EV? Should we go with hydrogen? Should we go with natural gas? And our answer is always the same. And at Hexagon, we strongly believe in the portfolio approach, whether it be renewable natural gas and compressed natural gas, pure battery electric solutions, propane, hydrogen solutions or even LNG. We believe in the portfolio approach because there's not just one solution for today's fleet. It could be infrastructure issues, fuel availability, usage pattern and duty cycle of vehicles. Seung talked about how compressed natural gas vehicles can mimic the range of today's diesel vehicle. Other technologies aren't there yet. So it's the strength of the Hexagon portfolio that really separates us from the rest of the industry. So the Hexagon advantage. You've seen from other presentations today about the growth that we're going to look at, whether it be North American truck and European truck doubling over the next 5 years, significant growth. And what we're focusing on is how do we position Hexagon, not just our product portfolio, but actually how we apply that product portfolio globally. So we have fleet partners that you can see there on the right such as Waitrose in the U.K., UPS and Waste Management in North America and then a very strong OEM partnerships globally. And it's our desire to make sure that we have competency around the globe. And we firmly believe that we have the broadest off-the-shelf, fully developed technology in the industry, and we need to ensure seamless OEM integration. So let's talk about our commercialization strategy and what we're doing. Our roots of our business and if you look at our revenue stream, we're very strong in North America and Europe, and we've got a lot of opportunity that we're pursuing in South America, of course, India and Asia as well. And we're developing centers of excellence. As I said, we're mature in North America. Europe, in 2021, we'll be expanding our competency there. And it's all around that extreme customer intimacy. We don't want to try to homologate our product from halfway around the world with OEMs. We don't want to understand a fleet 2 continents away and their usage pattern and their duty cycles. We want to be right there understanding what they do. And to graphically illustrate how our go-to-market strategy, our commercialization strategy will work, if we look at the 2 boxes here on the left, we have the Hexagon Group portfolio. You see hydrogen Type 4 cylinders, hydrogen systems, pure BEV technology, battery pack systems and full BEV integration, compressed natural gas Type 4 cylinders, compressed natural gas RNG systems and propane systems. And on the right, you can see the various vehicle platforms that we apply our product to and, in some cases, where we actually apply that product, from last mile package delivery to long-haul fleet applications and transit, refuse and even passenger car. And it's our goal in the middle there to make sure that when we -- when a customer looks at our product or we're offering our product to, whether it be an OEM or even a fleet, we have project management, engineering, technical support, test and validation. And we want to meet our customers where they are. As I stated earlier, we don't want to try to homologate a product into a portfolio from halfway around the world. We believe in that customer intimacy. So what has that resulted in? If you take a look at the number of open customer projects in the mobility space, we have over 116 global customer projects going on right now, and it's not isolated to one particular technology. We have over 60 CNG open projects right now with customers. We have 20 battery electric full BEV projects, fuel cell electric vehicle of 25, and we have 11 in the distribution space, both hydrogen and CNG. And that's really leveraging our people, our boots on the ground, as we -- so to speak. And it's not just sales and marketing activity, it's really the next layer in that works with the customers, engineering teams and the support team, to understand our product, but also to make sure that we're -- harmonized our product portfolio to meet today's demand, which has led to us having the largest population of commercial vehicles on the road today. So to give you an example of how we're leveraging our commercialization strategy in one particular global OEM that has really done a great job of taking advantage of that is the relationship between Hexagon and Daimler, and I mean Daimler Group globally. Together, we have put over 9,000 vehicles into service utilizing either Hexagon compressed natural gas technology, hydrogen or pure BEV clean energy solutions, not just in North America but also in Europe. And when we take a look at some of those applications, you can see up in the upper left the EvoBus Citaro compressed natural gas system. Roughly 200 buses will be in service by the end of this year. In North America, we've had a very strong relationship and exclusive relationship with Freightliner, where our systems are actually installed in their factory, and that is for their Class 6 to 8 trucks, and that's where we're seeing significant growth right now. Almost 7,000 by the end of this year that we'll have deployed over the last 10 years. In the lower left, the Daimler brand, Freightliner Custom Chassis, which is assisting the manufacturer of the final-mile delivery vehicle for UPS, both in compressed natural gas and some of the older vehicles in propane. And then the most recent partnership that we've done with Daimler is our battery electric team out of Kelowna, British Columbia, and that is the Daimler innovation fleet with their eCascadia, which is a full battery electric Class 8 solution as well as their eM2 product. And Morten Holum will talk to you more about that later today. So really a good example of how our centers of excellence work in market to support OEMs with the industry's broadest portfolio. Now let's jump over to fleets and trucking. And Seung showed you some pretty impressive numbers on growth and our expectations in North America. If you just look at Europe and North America, our expectations are that, that adoption of natural gas will double by 2025. Some projections have it even higher than that. And what's driving that? And if we're to look at North America, we're looking at the polluters on the North American roads today. While heavy-duty trucks only represent 7% of total vehicle on American roadways, they represent over 50% of all smog precursor, which is SOx, NOx, volatile organic compounds, which creates that layer of ozone at the ground which turns into smog, which is extremely harmful to lungs. 50% of that smog precursor comes from 7% of the vehicles. And that is absolutely our target at Hexagon. Going back to the strength and what is changing in the marketplace, especially over the last 3 or 4 years, and it is that renewable natural gas, biogas, biomethane and the adoption of that, you can see anywhere from 80% to 200% improvement over diesel. And it's one thing to have that, but if you don't have it available, you can't leverage it. And that's also what is changing. If we look at adoption rates in North America, specifically California on the left, 77% in 2019 of the natural gas used in vehicles in California was RNG. Almost 140 million diesel gallon equivalents were used. In North America, it was a little less but still very excellent, almost 40%. And some of the projections that we see by the end of 2021, it could be anywhere from 45% to 50% in North America. A lot of interesting activity going into the deployment of RNG for use in the vehicle space. And it's really allowed fleets and corporations to reduce their overall carbon footprint. So now looking at the fleet model. We've looked at OEMs with Daimler and how they're leveraging that global portfolio and support from Hexagon. Let's take a look at a fleet and how the partnership between Hexagon and UPS. And if you remember, going back to 2019, we extended our relationship with UPS on an exclusive basis to supply all of their compressed natural gas systems. We've really worked hard with them, and they've been a fantastic partner to look at every single application they have in their commercial fleet to say, how can we get that off of diesel, off of petrol and running on a clean burning renewable natural gas or other solutions? To date -- by the end of this year, we'll have over 2,500 packaged cars in service with compressed natural gas. The Class 8 long haul, 2,000 vehicles in service by the end of the year with RNG and LNG. And they're even converting their yard trucks that run around their distribution centers. They're leveraging their CNG infrastructure to say, let's get those off of petrol and diesel and have those running on natural gas. And it's their goal that by 2025, 40% of their total vehicle fleet fuel consumption will be natural gas, leveraged heavily with renewable natural gas. In addition to product portfolio, in addition to our commercial strategy of getting where our customers are in that customer intimacy, we're also continuously looking at R&D, and Jack spoke to you about digital wave, and I'm very excited to roll this out over the next couple of years, in taking our systems, our mechanical CNG systems and RNG systems and really improve the functionality of them having a connected fleet, improving the safety features enhancements. And that's one of the things that Hexagon brings for fleets such as Waste Management and UPS, is we're always raising the bar in technology. They know that if they partner with us, the next greatest thing is coming right down the road. So what does that mean? These are just the numbers that we worked together with McKinsey & Company on taking a look at the next 5 years for hydrogen and for compressed natural gas, and you see basically a 4x growth that we're projecting from 2020 to 2025. Some of the CNG numbers are even higher than this that you see in the marketplace now. And we feel and what we showed you in our commercialization strategy, and the fact that we're going to meet our customers where they are, have that customer intimacy, but also not be in prototype phase with everything that we have, that we have product that is decades-old and being refined as state-of-the-art product, that we are ready to really make a change and capture as much of the share as we possibly can. So with that, why wait? We truly believe that Hexagon's broad portfolio is trading that road map for improved corporate sustainability, and we truly believe that the future is now. And with that, I'll throw it back to the studio and Hiva.

Thank you, Eric, and thank you to all of our g-mobility experts. We've received plenty of questions. So I think we should just jump to it. Seung, are you with us?

Yes, I'm here.

Good. So we received a question to you. How do you see the Biden administration likely renewed focus on green agenda impacting on business?

Yes. I mean, it's a good question. What I -- I don't know exactly the Biden administration's plans, but it's certainly going to be an improvement over the last administration is our view. We don't know the exact plans that Vice President Biden or President-elect Biden has in plans for us. But we certainly know that there's going to be a significant improvement over the last administration. And he's been -- in the past, he's been a proponent of green agenda in the past. So we expect that the EPA and some of the state legislation that's in place in California to be the model for federal legislation.

Thank you. Could you maybe take the next question as well, Seung? How do you see the mix of heavy-duty vehicles developing across the electrical vehicle platform, RNG and hydrogen markets?

That's a good question, too. The mix of those fuels in the future, it's really a big question. It depends on how far you want to look out. The sooner -- the more urgency that, that fleet has about cleaning their fleet, obviously, there's going to be a higher percentage of natural gas because that's the only technology that's available today that's cost-effective. Electric and hydrogen is still in its early stages of development, and the price of those vehicles are significantly higher. And the fuel availability ability for hydrogen, for example, is still not quite what there is for natural gas. So I think the mix of that percentage for natural gas, if the fleet wants to clean their fleet today, is going to be significantly high, I would say, 90-plus percent for CNG. Now as the hydrogen and electric vehicles get more mature, there'll be a bigger mix. But I wouldn't be surprised, even in a steady state, there's a healthy mix of all of those 3 fuels in all parts of the world, and it really depends on their usage patterns. For example, I talked about the weight and the range of natural gas vehicles. Battery electric, for example, can't get to those levels right now. In hydrogen, you can, but you still have a few availability issues in various parts of the world. Like in California, for example -- I mean, in the United States, for example, California is really the only state and certain parts of Southern California and Northern California and the urban areas are the only places where you can get hydrogen. Now you can't go more than, call it, 200 to 300 miles even in a passenger vehicle right now, where getting the type of range that you need for commercial heavy-duty and medium-duty trucking is not feasible today.

Can you also comment on production cost on RNG versus hydrogen? And also, I guess, you touched upon that, but what the infrastructure for refueling trucks with RNG? You touched upon the hydrogen, but could you also touch upon the infrastructure for RNG that is in place?

Yes. For infrastructure for RNG that's in place, I mean, it's the same molecules for whether it's RNG or conventional CNG. So from a deployment perspective, you can leverage upon the existing CNG natural gas fueling infrastructure. So there's really no difference for RNG. From a production cost perspective, it's not -- there's no parity right now, but there are plenty of government incentives, and there's more scale that's coming into play to get RNG to be in parity with conventional CNG.

Thanks, Seung. Miguel, question for you. You mentioned transporting CNG by marine. Why would this be done rather than the form of, it says LPG, but it might be LNG, that the person is referring to.

Yes, great question. LNG is certainly still the preferred fuel if you're going to transport very large amounts of natural gas by marine. So what we're seeing is, for example, in offshore platforms where it would not be practical to build a liquefaction plant on that platform and where maybe the distance might just be a few hundred miles offshore, CNG clearly has a cost advantage over LNG. And then the other place we see the CNG having an advantage is, for example, an archipelago of islands, whether it be in Southeast Asia or in the Caribbean. You can make the case that for those shorter distance -- distances, CNG will be the more cost-effective solution.

Thanks, Miguel. I have another question for you. Will Hexagon establish collaborative partnerships with producers of RNG, for example, Vanguard Renewables or Smithfield in North America, for instance?

Well, we're working very closely with those RNG project developers. At the moment, our scope of supply is really limited to the module. But we work very, very closely with those strategic partners. We recognize that in order to bring these large infrastructure projects to realization, there needs to be close collaboration between the value chain. And so we work very closely with those partners. Not so much in North America, but in some other parts of the world, we've even gone to the extent of bundling complete solutions from compression to Mobile Pipeline equipment, decompression and in some cases, even financing to help accelerate the deployment of these projects. So we intend to continue to work very closely with these RNG project developers.

Okay. Thanks, Miguel. Eric, are you with us?

I am.

Great. How many of the open customer projects do you expect to fully materialize? And how many may fail? Which regions do you see the biggest untapped potential?

Yes. Certainly, the emerging markets, there's a lot of room for opportunity. Asia's got a lot of opportunity right now, and they have actually quite a large compressed natural gas infrastructure in countries like India and China, yet they typically utilize older technology like Type 1 solutions. So our solution going into those markets is to provide range that they don't have today with the Type 1 steel tanks. And that takes a bit of time, and there's a lot of lead time going into those. When you look at Europe and North America, our -- I would say, our close rate on open projects is actually quite strong. If you have -- if you figure a 20%, 30% open project fruition rate, that's really pretty good because some things fall away or they change or they get modified in a different direction. But it's a very healthy -- not only is it a very healthy project pipeline that we have, it's also a very healthy order pipeline going forward, which is leading a lot to our -- to a lot of our indications for 2021.

And Eric, could you also just explain why agriculture RNG has a negative CO2 footprint?

Yes, sure. So if you figure, let's use Fair Oaks Farms where they have a dairy farm, methane emits from whether it be garbage or manure from a dairy facility. That emits methane. As it decomposes, it goes into the atmosphere. And that methane or methane, as we say in the Americas, is very, very harmful for the environment. If you say that we're going to capture that instead of letting it emit into the atmosphere. We're going to capture that. We're going to put it into the pipeline, and we're going to burn that off through a combustion -- through a natural gas engine, a clean burning natural gas engine. We eliminate a lot of the volatile organic compounds, the NOx. And instead of just letting that go freely into the atmosphere, it's captured and burned off. So that's why we can create a negative sink versus diesel and in some cases, even versus electric if you consider a coal-fired plant that is charging the vehicles today, hence the push to get coal-fired plants off of that. So we can actually be an improvement of some of the even advanced technologies of today.

Thanks. Well, we have time for a couple of more questions. So sorry, Seung, question for you. How did COVID affect your business in 2020? And do you expect that it will continue to affect the business in 2021?

Yes. I mean, COVID has affected everybody in 2020 in general. Our second quarter was down with our customers and suppliers being shut down. But we recovered pretty nicely in the third and fourth quarter. We didn't get a lot of cancellation of orders. I can't recall any significant one. Going forward, our -- we expect our business to be actually positively affected by COVID as more goods are moving versus people. And I think governments witnessed a lot of benefits of reducing the transportation emissions during the lockdown. So in places like India, for example, I know in a lot of cities like Delhi, you were able to actually see the skies. And I know that there have been a lot of newspaper articles about government officials actually realizing that a reduction in transportation emission could have a benefit and therefore, policy can make a difference in air quality. So I think some of those realizations can have a positive effect. And we're seeing our orders coming in for 2021 being really promising. So we're keeping our fingers crossed.

Okay. And maybe rounding off this session, Eric, can you speak to the competitive landscape for the group and your relative competitive strength?

Sure. Well, if we broke it down regionally, we do have excellent competition out there. In North America, there are competitors, none of which would have the portfolio that we have from a BEV, hydrogen, compressed natural gas, nor the bandwidth and scale that we have. So in North America, we're well positioned. Our share is very high both in truck, refuse and in transit. In Europe, we have good competitors in that market as well, primarily around the cylinder side of the business, not as much on the integrated solutions and driving true integrated solutions, whether it be compressed natural gas, renewable natural gas and some of the other technology that we have. When we get into the markets, the emerging markets such as South America and Asia, there, it's a little more scattered. It's local. And like I said, our biggest competitor in some of those markets and a hurdle to entry is making sure that we project what our Type 4 technology can do from a technology standpoint. And I'll give you an example in India, our biggest competition is really the outdated technology and the fact that a typical Delhi city bus will have 10 steel cylinders on the roof of that bus. We can replace those 10 steel cylinders, double the range by giving them 3 to maybe 4 Type 4 composite cylinders on the roof, and we can take 1,000 kilograms off the roof. So it's really more about the technology and the advancements that we can do in those markets and making sure that we apply it properly, which comes back to the centers of excellence initiative that we have, making sure that we're doing that. But there's certainly -- our competitors, none of which if you look in the global marketplace, have the full breadth of portfolio that we do, that we can bring in. And once again, that's why we feel we're very, very well positioned.

Thanks, Eric. Karen, over to you.

Yes. Thank you, gentlemen, very much for all of the answers to these questions. And also, I'm very happy to see the great participation we're getting from the audience. So keep your questions coming in. The chat box or the question box is open even as we're on this break. We're about to take a 10 minute break, and we invite you to stay connected and come back after you get your cup of copy or something to eat. And we will continue with our third segment in 10 minutes. I just note that those questions that have come in that have not been answered yet, some of them are really for speakers that are coming later in the program, and we will take them at that time, so you have not been overlooked. Again, 10 minutes from now. See you back here. [Break]

Welcome back to Hexagon's Capital Markets Day 2021. On December 14, we successfully spun off Hexagon Purus, our hydrogen activities. We like to view this as, as a parent, you send your child off to college and they become independent, but you're still very involved in their lives. So to speak to you today about our accelerating the zero-emission mobility segment, we have Morten Holum, the CEO of Hexagon Purus, who'll be speaking to us from his beautiful office in [ Kråkerøy ] in Southeast Norway.

Good afternoon, everybody. My presentation today is going to center around 2 main messages. The first one is that we are in the early stage of a major shift, the transition to zero-emission mobility solutions and to the electrification of the vehicle fleet, both battery electric and hydrogen electric. This will, of course, translate into a major market opportunity. The second message is that we are one of the players that are making this happen. We are a global leader in zero-emission mobility solutions, and that might appear as somewhat of a bold statement, given the size company that we are. But when it comes to hydrogen mobility solutions and the heavy-duty battery electric and fuel cell electric vehicles, we are one of the leading players globally. So starting with message #1, the green shift has really gained strong momentum, particularly in the past 12 months, and appears to have crossed a tipping point where the world has finally decided that we will get serious about fighting global warming. There are a significant number of countries representing a large portion of the global economy that have launched major new green deal-type programs, stimulating the development of green energy technologies, tightening emission standards to lower the emission of harmful greenhouse gases and incentivizing clean mobility. We have also seen an unprecedented shift of capital and investments away from carbon-based energy and into green energy and zero-emission technologies. And for companies like us delivering zero-emission mobility solutions, this will translate into a major market opportunity. There are around 100 million vehicles sold each year. And even at low adoption rate, this is going to be a very large market. The hydrogen cylinder market alone can exceed USD 7 billion by 2030, and the largest part will be the heavy-duty vehicle applications accounting for around 30% of the market in 2030. And at that time, the adoption rate are still forecasted to be low to mid-single digits. So there is a significant growth also expected beyond 2030. And although the growth rates will be very high in the early years, the large growth in terms of volume will come in the second part of the decade as the vehicle platforms are ready for mass production. So this is the message #1, it's a very attractive market opportunity. Moving on to message #2. Hexagon Purus is really well positioned to capture the market growth. We have deep competence in core technologies that are needed for zero-emission mobility, we have proven capabilities with a wide range of solutions already delivered across the mobility spectrum, and we've got an exciting project pipeline with world-class customers. I will spend the next few slides to expand a bit on this message. Starting with the technology. You can summarize what we do into 3 main categories or different business models, if you will. First, key core -- on the left-hand side, the key core of our business is the hydrogen storage cylinders. Our composite cylinders are made from high-strength carbon fiber, and they can store gas safely at very high pressures. This is a technology that we know very well, going back all the way to the space programs run in the U.S. in the '60s. So we have more experience with this technology than anyone else in this world. The second route to market on the right-hand side is where we can combine these cylinders into an overall fuel system. And these fuel systems then goes on top of a bus, on top of a train or on the back of a heavy-duty truck. So we can either sell the cylinder as a component or we can combine them into a fuel system and sell them that way. And the third part is the battery systems and complete electric drivetrain integration of heavy-duty trucks. So we start with an empty chassis, and we take our own components and systems, such as a battery pack or a fuel system or power electronics, and we combine that with third-party components, such as the electric drive axles, and then we write the software to integrate everything and put the truck on the road. So integrating the zero-emission fuel system and electric drivetrain on heavy-duty vehicles is the third competence area of Hexagon Purus. And we have worked with a number of world-class customers and have proven solutions across the mobility spectrum, and you can see several examples of what we have done on this page. Starting from the top left: heavy-duty trucks, buses, passenger vehicles, transportation modules, ferries, trains, ground storage, even spacecraft. And then there are a number of other mobility applications that you see on the right-hand side of the slide. Everything that's run on diesel or gasoline can be converted to zero-emission solutions, which you can see an example of on this page. This is the PRINOTH LEITWOLF. It's the world's first hydrogen-powered snow groomer that we delivered our cylinders to. And it avoids emissions from diesel on the beautiful ski slopes and it's a pretty cool looking beast. This picture is the Freightliner eCascadia Class 8 battery electric truck. We have delivered more than 30 of these battery electric trucks to Daimler's innovation fleet. They have been tested out in the market by Daimler's fleet customers like Penske as is pictured here. And have logged about 1 million miles in real-life conditions with exceptional feedback from customers. Then moving on to what lies ahead of us. We have a very exciting project pipeline going forward. Last year, we were nominated by Northeast Asian OEM for a serial contract of cylinders to a hydrogen-powered SUV. There are only 2 of these hydrogen passenger vehicles out on the road, and now we will deliver cylinders to one of them. When we announced this, the nomination was subject to agreement of certain terms and conditions. And I'm happy to say that, that agreement has now been reached, and the contract has been finally awarded. So we're very excited with this vehicle platform already being in production. It's one of the few contracts that will offer us early serial volume. We also had a number of other contract announcements towards the end of last year. One was this contract with Stadler to deliver cylinders for the first hydrogen-powered commuter train in the U.S. Another one was a contract with Hino, which is a truck OEM that's owned by Toyota, where we are selected as a development partner to provide battery packs and drivetrain integration on several of Hino's vehicle platforms. And we also signed a multiyear contract with Everfuel for the delivery of hydrogen distribution systems and also got the first order for 6 modules at the signing of that agreement. Beyond these contracts, we have a number of other exciting projects and developing contracts in the pipeline across the whole mobility spectrum. So we're very excited about what lies ahead of us. And we're preparing to enter China, the largest vehicle market in the world. We announced last summer that we will form a joint venture with CIMC ENRIC, which is the leading Chinese manufacturer of clean energy equipment. It has taken a bit more time than we expected to finalize this agreement, but we're in the final stage of negotiation now and expect to have this agreement concluded shortly. Looking forward, we see significant growth. For this year, we expect to grow our top line by at least 50% compared to last year. And looking a bit more longer term, our financial ambition is to reach NOK 4 billion to NOK 5 billion in revenue by 2025. And when the market reaches mass production scale from the -- yes, from the second part of this decade, we target double-digit EBITDA margins. The transition to zero-emission mobility will, as I mentioned a couple of times, will result in a very large market going ahead. But the market today is in its early infancy. But we feel that we have a strong early mover position. Eric Bippus mentioned this, that we're not a start-up company, and that goes certainly for Purus as well. We're not a start-up company. We're a company with a strong industrial heritage and execution legacy. And unlike many of the start-ups in this space, we're one of the few companies that has a proven ability to deliver on these very challenging OEM contracts. So as this market is ready to take off, we believe that we are in pole position. With our industrial heritage, we have what it takes to succeed. We have the deep competence and state-of-the-art technology needed for zero-emission mobility. We have established manufacturing facilities in North America and in Europe and soon in Asia. We have strong relationships with world-class customers and major OEMs, and we do have an experienced global team with proven execution capabilities. So that concludes what I have planned to say. And I'll leave you with a short video of a test run that we did with 2 of our battery electric trucks out on an airfield. So thank you all for listening. And then back to you, Karen and Hiva in the studio. [Presentation]

Welcome back. Thank you so much, Morten, for your presentation. Our success in Hexagon is based, as you've heard, on innovation. And behind every great innovation is a really great R&D team. So research and development in Hexagon is led by Rick Rashilla. And today, he's going to talk about how R&D is at the core of what we do. So Rick, looking forward to hearing from you from your office in -- let's see, you are in Lincoln, Nebraska, again. So we're back in Lincoln. To you, Rick.

Thanks a lot, Karen, and thanks to everyone for hanging in there with us. I look forward to talking with you about our R&D activity. If I can change the screen. On the right-hand side, you see the rings of what we call the R&D department. And on the outside of the head of the bark is what you see externally, the collaboration that we do with internal and external customers. And as we dig deeper inside that tree, we examine all sorts of new processes and new materials. And from time to time, we evaluate competitor processes, and we evaluate the things that we use to make tanks in a different fashion. Our R&D group works closely with the world-class manufacturing organization, and we also are part of a global R&D resource that consists of R&D personnel inside business units and within this group R&D area that I'm talking with you about today. At the very core of this activity, is innovating hydrogen and CNG tank technology so that we can accomplish what our business units wish to in the marketplace and innovate the product to bring improvements to the customers. We also work closely with regulatory authorities so that we can help to craft the regulations and rules upon which these tanks and new technology are utilized. We are currently in our fifth decade of manufacturing tanks using a heritage of aerospace technology for commercial and automotive markets. Now this route technology goes even deeper than those 5 decades. Our beginnings in the late 1950s and early 1960s provided the core technology to make this expansion. We started this journey in CNG and hydrogen tanks at the end of the Cold War, when we had technology that needed to be repurposed. At that time, the green message was present, but not nearly as brilliant as it is today. And today, we're reaping the benefits of that technology application to these markets, which, although we've been working in this area for decades, are still new to some folks. On this screen, on the lower right-hand side, you can see a type 1 tank mentioned. That's an all-steel tank, very similar to what you see in the world of welding products. On the right-hand side is a type 4 tank, which comprises 99% of what Hexagon makes today. Instead of a steel liner or shell, we use a plastic material. And over that, we wrapped carbon fiber. Our department has more experience, as you've heard the other presenters talked about, with this technology than anyone else in the world. This has given us not only a large number to claim we've made and fielded, but it also gives us a larger database of understanding how our products work in the field and how the technology development that we've worked so hard on can be stretched, modified and improved to bring even more value to the customers. We're familiar with all these tank types and we continue to reduce risk by learning from this database and then applying technology to even improve the performance capability of our product. We like to think of this as introducing a very lightweight tank, like a type 4, that has the eggshell representation, but also the robustness of a cannonball that folks are familiar with, with the type 1 type of tank. We've been pioneers in this business for a very long time. And as you've heard Seung and Skjalg and others mentioned, we have been doing this from a producer standpoint for a very long time. In addition to the producing of tanks, we also have tested more tanks than any of our competitors, and this combines to add to that database that I discussed. We continue to invest in regulatory monitoring, and we help countries introduce new rules so that our technology is put in place in the country in a fair and equitable way compared to the other types of tank manufacturing. We also think it's important to know how our products fail. And all this testing that we've done leads us to ways to not just improve Hexagon products, but also offer results of our knowledge so that the rest of the marketplace can also take advantage of that. We don't want new market entrants to create destroyers of this new market. We have 4 technical centers upon which we draw all that technology. From Norway, from Germany, from Canada and from the United States. Our philosophy that's outward facing is to collaborate, not only with our own business units, but also with major rulemaking bodies and research and development portions in different countries. That might be a specific customer. That also could be a department of a government, such as the Department of Energy or Department of Transportation in the United States, jointly funded EU projects in Europe or specific country funds like Innovation Norway or other German funds that are available to us. We like to think of that improvement as an opportunity to create IP, but do that within the Hexagon Group and only share that portion necessary to comply with those joint research and development programs. And then we can learn from, for example, Skjalg's 2 million a year facility. We can learn from that facility with the type of IP that allows us to exploit that knowledge into other product areas like hydrogen and CNG tanks. The innovation that occurs in Hexagon R&D includes, for example, looking at new ways to design that tank structure that you see on the top picture, the black outer shell with carbon fiber and resin or the blue liner material from different types of plastic as we join that plastic to a metal structure. We also look at new methods to wind, such as something called towpreg or dry winding, where we add the resin to the product later. All of these things help us to evaluate new materials, new processes and find that big technical advantage that lets us give a benefit to the product and exploit our IP. The picture on the left-hand side is from the 1980s, winding one tank at a time with fiberglass. And on the left-hand side, you see those improvements, 5 tanks at a time, carbon fiber as we increase throughput to achieve a rapid cycle time. We're also interested in understanding, as you heard Morten mention, the market for hydrogen tanks in the future is going to grow exponentially, and we need to make sure that we understand how carbon fiber might vary over making tanks, a thousands of them a year or millions a year. Finally, future game changers that exist for our products as we introduce the work product of R&D to other business elements within Hexagon, and I'm sharing here a little more than I'm usually comfortable with. We know that there will be new regulations introduced that allow us to use less carbon fiber. This will reduce the cost of the product, but we'll have safety regulations that keep it robust and safe. We're also reducing the environmental trace of our products in the production activity itself. We also want to level the playing field between the type 2 tanks and type 3 tanks and type 4, and ensure that when we introduce new legislation in new emerging markets like India and China, that the regulations are fair and also protect the market. We can also look at all the data we gather and use that to improve our product in the future or define potential risks in the marketplace. We're also working on new ways to make tanks, and we're working closely with existing carbon fiber makers to find ways that might innovate their businesses as well. Finally, on the left-hand side, these marketplace pressures continue to give us the incentive to improve our products and the business objectives on the right-hand side do the same thing. We think that we need to create and exploit this intellectual property. And we want to do that so that it gives us a everlasting competitive edge in cost reduction, in using less material, in improving the product, while at the same time, reducing weight. I think of some of this activity as a new youth who chops down a tree. They might consider themselves a lumberjack, but they don't have the years and years of experience it takes to deal with the problems that could occur when a tree hangs up or when a tank has some type of an unusual failure issue. So from our standpoint, we want to bring all the knowledge that an old expert can to make sure that our products have the best competitive edge while the marketplace is also safe. And with that, I'll turn it back to the studio. Thank you.

Thank you very much, Rick, for a great presentation. So now I'm going to take off my moderator hat and put on my own presentation hat. I'm now going to start on a presentation about strengthening the Hexagon brand. And you might ask, why do I want to speak to you about strengthening our brand in our Capital Markets Day? We can see from the performance of the top 500 companies on the Standard & Poor's index, that brand is a business asset that, on average, represents up to 30% of brand value. One could argue that these numbers are skewed because they include a large proportion of consumer product brands. But even in a business-to-business world, strong brands in our segment can represent 10% to 15% of total enterprise value of the business, as you can see on this analysis by the international branding company, LANDOR & FITCH. Today, as a market-facing brand, Hexagon has somewhat limited awareness and is primarily known as a leading manufacturer of high-pressure cylinders. Traditionally, we've operated individual market-facing brands for each of our clean fuel solutions that you've seen presented here today. Our ambition is for the Hexagon brand to be recognized as one strong brand for a complete range of clean fleet fuel solutions. We want to build Hexagon as the market-leading brand in all our industry categories. In light of the momentum in the clean fuels market, as mentioned earlier today by Jon Erik in his opening remarks, and the structural changes that have recently been made in our group, the IPO with Hexagon Purus, the combination of Agility and Mobile Pipeline, and the introduction of Digital Wave as a business area, a window of opportunity, if you will, to rebrand the company has been created. We've chosen to use the opportunity to revitalize the Hexagon brand to reflect Hexagon's new positioning. So you may ask, where did we start? We already have a strong vision: clean air everywhere, and a purpose and values that are the backbone of our business. We have certain beliefs that are anchored in our vision and in the company: that clean air is a right, not a privilege; that technology is no longer the barrier in enabling clean transport for all; that the future belongs to the bold; and that change is urgent. As a market leader, our job is to help accelerate this rate of change. This information lays the background for the new design of the brand. We also intend to make the Hexagon logo more unique and ownable. We want to reflect Hexagon's broader role as a group, and we want to make the logo easier to use in digital channels and small spaces as well as for product branding and endorsement. So without further ado, here is our new brand. Expanding from 1 to 2 hexagons to symbolize that Hexagon is a broad group, a group that collaborates with customers and with each other. By opening up the Hexagon and bringing the name inside the hexagons, we create an ownership of the mark, and at the same time, a sense of inclusiveness and movement. The bold modern word mark gives a visual impact and focus on brand name, easy to recognize on both large and small surfaces. The overall shape of the new mark can also be viewed as a key, a key to unlocking a clean energy future. The application of the brand extends beyond just a logo to include tone of voice and visuals that support our messaging. Here are some examples of the new brand design and color pallet put to work in presentation slides. This is only a taste of what is to come. We will formally launch our new bolder brand globally in mid-February. This is a great opportunity for us not only to create shareholder value, but to make a difference. So that's what I wanted to share with you on brand. And now I will switch back to moderator role, and I'd like now to introduce our CFO. You've heard now about our operations and our strategies. But how does this all affect our balance sheet and our profitability? And here to present that to you is David Bandele.

I'll run that back again. Thank you very much, Karen. And what a wonderful group of businesses Hexagon is. And I think somebody mentioned already in the comment, if we look at the market cap of the mother company, it's HEX.OL, a fully listed company in OSE. It's NOK 13 billion, and the market cap of Hexagon Purus is HPUR.OL. That's listed in Euronext Growth. That's currently at -- or at least at the end of Friday, it was at NOK 19 billion. And of course, Hexagon owns a 75% stake in that company. We do have 1,200 employees worldwide, and we operate out of 10 production and engineering hubs globally. Now on the Hexagon Composites Group house, I'm going to focus today on the orange banner there of the Hexagon companies. Hexagon Purus has had quite a lot of attention in the recent listing in the last 4 or 5 months. And under that banner of Hexagon businesses, we saw the g-mobility businesses. I'd just like to add to what Seung and Erik has mentioned as well. Transit buses, just in the European division. That's around about a $35 million business for its top line today. And that's grown double in a little over a couple of years, driven by those EU Clean Air directives. And also long-haul trucks, very exciting. We're really going towards $100 million revenue in that area and really look forward to the growth prospects, doubling growth at least over 5 years in North America and the world so. When we look at Ragasco, we have businesses that have proved to be impervious to some of the major macroeconomic factors we've had in the last 5 years, one being oil price shocks and the other one being the pandemic that we're going through. It also has the best margins in the business and the center of world class manufacturing. And of course, there's Digital Wave, the next big thing. What's important is that Hexagon and Hexagon Purus, they will continue to pursue their own growth strategies independently following the spin-off. However, as a group, there are 3 things that I find key to how the group will continue to support all businesses under the Hexagon banner. One, the heritage R&D that you just heard from Rick and leveraging our core competence in type 4 tank technology. On the route to market, you saw the commercialization strategy from Erik, and we really do have a unique and leading position as one-stop shop for OEM fleets and all our customers. And then finally, we've had a great track record in strategic innovation. We'll continue to develop complementary businesses and opportunities through our vision of Clean Air Everywhere. On the Hexagon side, on the left, in the orange, we continue to have access to debt and equity markets, and We'll deliver profitable growth and solid cash flow generation. And our financial KPIs will consist of greater than 15% growth on top line, achieving a 15% EBITDA margin, and all within a leverage of 3x steady state. And of course, on the Purus side. Purus has its own access to financing those exponential growth opportunities, building upon its strong market position developed through Hexagon and in this rapidly expanding market, then leveraging Hexagon Group's industrial infrastructure and services, especially in that stock phase. Pleased to say that over the last 2 decades, we've achieved a compound annual growth rate, CAGR, of 18% on our top line. And revenues today are heavily weighted in the g-mobility section on Hexagon Digital Wave. It's a small but profitable business. And of course, that will be an area of targeted growth and investment going forward. In terms of Ragasco, solid 20% and contribution on the top line and Hexagon Purus will grow its 8% share in due course. In terms of geography, then, it's been fairly stable over the last 5 years, just under 2/3 in North America and just under 1/3 in Europe. And of course, the Rest of the World then subject to growth. And you heard us talk about the g-mobility growth opportunities, particularly in Latin, South America and India. And of course, opening the China market for Hexagon Purus, as Morten commented on. Of course, R&D is the platform for all our future revenues. And as people are our greatest resource, I'm pleased to say that we actually hire up to 11% of our total workforces in pure R&D. And that's spread over Germany, U.S.A., Canada and Norway. And we look at how we spent on strategic and operational CapEx over the 4-year horizon. This looks at the years 2016 through to 2019. If we start with the maintenance CapEx, that's recurring CapEx that we have to incur. That's been pretty stable. In 2019, there was an uptick. That's when we acquired Hexagon Agility and consolidated those numbers. So we expect similar levels to continue. On the growth side, growth picked up in 2018. We invested in product differentiation and capacity at Hexagon Ragasco and also capital assets for the leasing program in Hexagon Mobile Pipeline. In 2019, we started to see the real drive and surge, a sustainability driven drive, and of course, expansion towards that. It started with the Volkswagen asking us to triple our volumes, so we started expanding on the CNG LDV business. And of course, the heavy-duty transit and truck that I mentioned earlier, we have ongoing expansion programs there also through 2020. On M&A, in 2016, we acquired our closest competitor, xperion. And then in 2018, we acquired key digitalization technology through Digital Wave Corporation. And in 2019, our largest acquisition to date, was Agility, allowed us to now enjoy this vertical integration to a Tier 1 position. And that's across all automotive applications. So in terms of parts of our balance sheet. Starting with the debt on the top left-hand side, you can see Q3 2020 is positioned for Hexagon Group. We have a NOK 1.1 billion bond outstanding. And after bank debt and cash, including a NOK 0.9 billion private placement executed in August, that left us with a net interest-bearing debt for the group of about NOK 0.5 billion. To change that into pro forma for just the Hexagon businesses, some of that private placement was earmarked for equity injection in Hexagon Purus, which was executed in Q4. So a pro forma position is around about NOK 1 billion in net interest-bearing debt. Below left, you'll see that the corresponding leverage then for just the Hexagon business in orange is 3.1 and a very strong equity ratio of 59%. I'll also comment that in terms of those leverage matters, we've ring-fenced Hexagon Purus from the rest of the group in terms of financial covenants for both the existing bond and bank agreements. So it looks like we're still going through the pandemic through into 2021. But 2020 thought us a lot. We found out that we are a very resilient business. And in fact, pleased to see that, that was actually in the third quarter, a record results for Hexagon Agility and throughout the year having strong cash generation in Hexagon Ragasco. Despite the pandemic, we still executed on all our strategic objectives, key ones being reorganizing our businesses and also the successful completion of the Hexagon Purus spin-off. But from a solid liquidity and balance sheet, should we need it, we can draw an additional liquidity of NOK 0.65 billion. So for the Hexagon businesses, that's ex Purus, we expect substantial and profitable growth over these next 5 years. Our targets for 2021 financially will be greater than 15% on -- growth on revenue, greater than 30% growth on EBITDA and also improving our EBITDA margin by 1 to 2 percentage points. We describe our underlying EBITDA as NOK 500 million steady state, based on our 2021 projections. That is before adjusting for some OpEx investments that we will make in 2021. These will be mainly to do with world-class manufacturing, the productivity increases over the last 5 years that we've seen in Hexagon Ragasco. We're looking to duplicate them in other sites, particularly Lincoln and Nebraska's cylinder manufacturing site. Secondly then, you saw all the great product development on digitalization and smart technology. So we will continue to invest in those markets. And we believe that these investments will provide returns already within 3 years. So what does this mean for our investors? Well, to invest in the Hexagon Composites Group, wherever you invest, you'll be investing in an essential player in enabling low and zero-emissions mobility, a rapidly growing multibillion dollar market, as you've seen. You can make an impact by participating in our vision of Clean Air Everywhere. And on the Hexagon side, in orange, there will be profitable growth, solid cash flow generation. We will strategically innovate and develop many complementary businesses. For example, you've just seen digitalization. And also, you will still have an exposure to the returns in Hexagon Purus through Hexagon's majority ownership. An investment in Purus, that will be into exponential growth opportunities driven by the global shift to net zero-emission society. And Hexagon Purus, of course, as you've seen, is well positioned to capitalize on the momentum in the market. And with that, I hand it back over to the studio.

Thank you, David, and thank you, Morten, Rick and Karen, for your presentations. We've received plenty of questions. So I suggest that we just jump to the Q&A, and we will also be joined by Jon Erik in this Q&A section. The first question is actually for you, David. When is Hexagon expected to be profitable?

Well, the Hexagon businesses, as they stand, are very profitable. And as I mentioned, that we look at underlying EBITDA before any adjustments of NOK 500 million in 2021. And that's growing off a good base also in 2020. So then the question is the Hexagon Purus side of the business, which is obviously in a different phase. That will be, you can say, dilutive for a while. But as you heard from Morten, they are chasing double-digit margins into the future. So Hexagon, profitable for now. Hexagon Purus to be profitable later on.

Great. Thanks, David. I have another one for you. Will Hexagon Composites pay out Hexagon Purus shares and dividends going forward?

So as far as the dividend kind we just had recently, that is a onetime event for now. If the situation changes, we'll, of course, come back to that.

Thanks, David. While we're on Purus, Morten, a question for you. Where do you see the outlook of Hexagon Purus after the spin-off?

Then I will unmute myself. Sorry about that. We see a pretty promising outlook ahead of us. The business, as it is now, is in the technology development stage. So there are a few vehicle programs that have gotten to the mass production stage yet. And so what we have said is that we look towards the middle of this decade and target to have revenue around NOK 4 billion to NOK 5 billion at that time. We are, right now, sitting at the leading edge of technology, and we're one of the companies that have the most experience with customers and with real solutions being out there on the road or on the trucks or on the water. So -- and we will, of course, target to remain a leading company as this industry grows and develops going into the future.

Super. Another one for you, actually, Morten. Will you be working with Nel and Everfuel in making hydrogen infrastructure in Europe possible?

Well our cylinders are, of course, useful. They can be used for ground storage. We have those types of cylinders. And of course, we have the distribution modules which are, to a certain extent, necessary in the rollout of a hydrogen refueling infrastructure. It's very difficult to say what will and what will not happen into the future as this is an industry in its very early infancy. But right now, we are -- Everfuel is our customer. So in that sense, we are helping to roll out a refueling infrastructure. But at this point, we don't have any specific plans to participate with Nel or Everfuel in something different than we are doing today.

Right. When we're on the topic of Europe, could you also maybe talk to us about the competition and the competitive landscape you see in Europe in particular?

Yes. So the competitive landscape in Europe consists mainly of 2 groups of players, one of them being the specialist cylinder producers, and there are a few of them, but none with the kind of legacy and history and size and scale that we have at the moment. So that's one group of players. Another group is the Tier 1 suppliers to the automotive industries. And there are a couple of them that have targeted to go into also the storage space. And of course, with all the developments away from the internal combustion engine and into the zero-emission technologies, then you would expect that there will be -- we will have competitors in the future. We are right at the leading edge now. We have an ambition to remain at the leading edge also as the industry develop, as I mentioned earlier.

Great, Morten. Jon Erik, I have a question for you. What was the reason for spinning out Hexagon Purus? Was it to access capital?

So several reasons. As has been commented, Purus is in a different phase of development than is the rest of Hexagon's businesses. So we think this way of organizing is also beneficial for the organizational development and how we run that part of the organization. But I shall not hide that it is also a motive to make more visible the values that we knew we had in Purus and which we were able to visualize to the investor community through this spin-off.

Thank you, Jon Erik. We have another question for you. After today, it seems clear that Hexagon, excluding Purus, is not a dirty part of the group. Have you given any thoughts to how you will score in the EU taxonomy and eventually taken any actions to become more investable for investors who are focused on sustainability?

So I would think that we are very investable already. And it is important for me to emphasize that the major part of our business on the g-mobility side, especially for the transit [ bus ] market in Europe is very strong and growing. We had a high -- all-time high year last year, despite some difficulties from the pandemic. But that said, the EU rules, they measure for now the tailpipe emissions, and we would very much like to support the EU regulators to take a broader view and look at the well-to-wheel emissions, in which case, the value proposition of g-mobility will become even more compelling than it is today in Europe.

Thank you, Jon Erik. Rick, are you with us?

Yes, I am.

Okay. I have a question for you. Who makes carbon fiber for type 4 tanks? And is this a clean process?

Carbon fiber comes from several different companies and factories around the world. We buy fiber from Korea, Japan, North America, Europe. Major producers or companies like Toray, Mitsubishi, Toho, Teijin, Hyosung and others. The process starts with something called white fiber, which is kind of a textile chemical output. And since I'm in R&D, even in my home office, I have to have a spool of carbon fiber. That white fiber is the -- it's run through -- essentially, think of it as an industrial toaster. Heat is added, mechanical processes take place, so it does use energy. And all of those companies that I mentioned are on the road to emissions reduction, like many other industries. So they already see ways to use things like reformulated natural gas so -- or biogas, so that you can run your furnaces on a clean fuel as well. Those suppliers supply different grades of the fiber, and we evaluate many different ones throughout the year. And it's interesting to know that we use fiber from many manufacturers. It keeps our costs low through the competition and it keeps us from using one fiber that might look really good in the laboratory but is not something that is very good in the actual production space.

Thank you, Rick. I have another one for you. There are many new start-ups offering lightweight tank technology. What concerns does Hexagon have about their new technology?

From a competitive standpoint, we've seen large companies like Tier 1s or even automakers emerge as competition. And then we've seen many, many more small companies. We're gratified that the large movers that have added tank capability have always been picking a type 4 plastic line tank. That gives us assurance that our pick 5 decades ago was indeed the right direction. We're a little concerned that on the start-up smaller company side that perhaps doesn't have enough experience to know how using a tank for 10 years or 15 years might need to modify their design. We're concerned about making sure that the regulations that we help introduce don't allow a new entry to be a one-off success that might cause field failures or issues after those products are used for many years. The space is large. The room for competition is big. We want to make sure that new entrants have to pass all the right tests to ensure that the market does not get destroyed in the meantime.

Thanks, Rick. Morten, some more Purus questions for you. Which industry shows the biggest potential for Hexagon Purus? Is it vehicle, airspace, shipping or anything else?

Well, right now, we have -- we're exposed to a broad range of different mobility applications. I think that it's -- over the long term, our main focus is likely to be the heavier vehicle classes where the hydrogen technology makes the most sense. So I do believe that the way we see it now, heavy-duty trucks and buses, those types of applications will be a large part. But we will continue to be exposed to a large number of different applications as we move forward.

Another one for you. If truck companies such as Daimler use a liquid hydrogen, will they still use your cylinders? Or is there a different storage required for a liquefied hydrogen?

Yes. So our cylinders are used for hydrogen in compressed gas form. If you go to liquid, you will have to use a different sort of tank technology. There are some benefits, pros and cons, of using liquid versus compressed hydrogen. And it's difficult to say how successful liquid will be in the vehicle space that we're looking at. But we are, of course, also evaluating when the liquid is something that we will put into our portfolio. So something that's on the strategic horizon, but not yet concluded on from our side.

Okay. Does Purus on its own production setup or does it share production with Agility?

That's a mix. We have dedicated production lines for -- and production facilities for Purus, but we also do share some production lines with the Agility organization. And of course, with the investment horizon that we are looking into now, we will add significant dedicated hydrogen manufacturing facilities onto Purus. But right now, we are sharing some facilities with Agility.

A couple of more for you, Morten. What do you see as being the main risks to the Purus strategy going forward, especially in China?

Well, what we -- the way we're looking at this now is we think that a lot of the stars are actually aligning for us in terms of the market adoption of hydrogen mobility solutions, which we have been looking at historically as a key risk. I'm less worried about that risk today than it was, let's say, 1.5 years ago, given the very strong momentum that we see in the hydrogen mobility space. So I think one of the key factors for us is how are we able to scale up our operations and be ready to deliver when the vehicle platforms have been prepared for mass volume. I think that is one of the key risks and the key things that we are looking at, how can we scale up fast enough. Because the industry overall needs to scale up in order to get the cost of the hydrogen solutions down. Both the molecule itself, but also the different zero-emission technologies that go onto the vehicles. We need to get the costs of the technology down. Just as they have done in the solar industry during the last 10, 15 years or, for that matter, the cost of the batteries, which have come down significantly as the industry has scaled up. So that's what we're looking for also in the -- for the hydrogen solutions.

Thank you, Morten. And thank you, well, all gentlemen and Karen, for your presentations and the Q&A now. Some final practical information to our audience, if your questions have not been answered so far today, you can post your questions to [email protected], and we will answer your questions there -- or via e-mail, rather. As already mentioned, the live stream will be available for you to listen to later on our website. So will also -- all the presentations, they will also be available on our website. On behalf of the Hexagon team, we would like to thank you, the audience, for your participation. And with that, I think I'll just hand over the word to you, Jon Erik, for some closing remarks.

Thank you very much, Hiva. So it has been a day with a lot of information. In my mind, there are 4 main takeaways that I'd like you to take with you. First and maybe foremost, that is that g-mobility and e-mobility are equally key to driving clean energy transformation. And on the g-mobility side, we see that Hexagon Agility is targeting significant growth in the years ahead, mainly driven by RNG and the environment proposition. Hexagon Purus is claiming a leadership position for e-mobility solutions. And Hexagon Ragasco and Hexagon Digital Wave are enabling digital value chain innovation and new business models for Hexagon. With that, I would like also to take the opportunity to thank our shareholders and investors for your support over the last several years, not least in connection with the capital raises that we did in 2020. I would also like to thank all the presenters. I have to say I'm privileged to have an exceptionally dedicated, capable and hard working team, and I'm very proud of it. And last but not least, I would like to thank Karen, Hiva and [indiscernible] for all the preparations. And to you, the audience, thank you for following us this afternoon. We hope to meet with all of you again on the 17th of February for our Q4 presentation. Thank you, and have a good afternoon and evening.