NEL ASA ((NO:NEL)) has held its Q1 earnings call. Read on for the main highlights of the call.
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NEL ASA’s latest earnings call painted a cautiously optimistic picture, with management balancing near‑term weakness against long‑term opportunity. Revenue slipped and losses persisted, yet the company highlighted strong liquidity, maturing technology platforms, and the potential for higher orders from 2026, while warning that execution and grant risks remain significant.
Solid liquidity and backlog
Nel ended the quarter with a cash balance of NOK 1.4 billion and an order backlog of NOK 1.1 billion, giving the company breathing room despite continued losses. Management also pointed to an expected EU grant of EUR 11 million in 2026, tied to pressurized alkaline industrialization, as an additional future funding buffer.
Alkaline division improvement
The alkaline segment was a relative bright spot, with revenues up 6% year‑on‑year and EBITDA improving by NOK 35 million. Ongoing tests on the new pressurized alkaline technology show higher yields, fewer critical defects, and lower cycle times, supporting the case for a more competitive product line.
Year‑on‑year EBITDA improvement
Group EBITDA remained negative at NOK 100 million in the quarter, but that still marked a NOK 15 million improvement versus last year. Management attributed the progress to cost adjustments and some favorable project deliveries, signaling that the restructuring is beginning to filter through the P&L.
Commercial progress and repeat business
On the commercial side, Nel commissioned Korea’s first off‑grid 10 MW green hydrogen facility in March, a key reference project for the alkaline platform. In April, the company secured a repeat order worth $7 million for containerized PEM units and has already booked a Q2 order of around NOK 70 million, underlining growing customer stickiness.
Technology commercialization and capacity build‑out
Nel plans a commercial launch of its pressurized alkaline platform in May 2026 after years of development, positioning it as cheaper per MW than atmospheric alkaline or PEM. An EU‑funded production line at Heroya targets 500 MW of installed capacity by the end of 2026, setting the stage for scaled manufacturing if demand materializes.
Containerized PEM momentum and short lead times
Management highlighted strong momentum for modular containerized PEM systems suited to 2.5–10–50 MW projects, supported by repeat buyers. These standard units can typically be delivered in under 12 months, enabling faster revenue conversion than large custom projects and helping bridge near‑term utilization gaps.
Roadmap for next‑generation PEM
Nel is pushing a next‑generation PEM platform, aiming to build a prototype stack in 2026 that targets roughly a 70% reduction in stack costs. If successfully industrialized around 2028–2029, this could materially cut both CapEx and OpEx for customers and significantly sharpen the company’s competitive edge.
Overall revenue decline and weak order intake
Total revenues fell 5% year‑on‑year to NOK 148 million, reflecting a sluggish market and fewer large project deliveries. Order intake was NOK 85 million, down from a strong comparable period, and management acknowledged that the overall backlog is trending lower, heightening pressure to convert pipeline into firm contracts.
PEM division underperformance
The PEM business lagged, with revenues down 14% year‑on‑year because of limited megawatt‑scale deliveries. PEM EBITDA also deteriorated by NOK 16 million, partly due to delayed or canceled U.S. funding, leaving this division more exposed to policy and grant uncertainty.
Negative EBITDA and dependence on volume recovery
Despite some cost wins, Nel remains firmly loss‑making, with negative EBITDA of NOK 100 million in the quarter. Management was clear that a return to profitability hinges on higher revenues and better factory utilization, making order intake and project execution the key swing factors for investors.
Grant and subsidy uncertainty impacting cashflows
A portion of expected U.S. research funding has been under review and unpaid since late last year, directly affecting PEM cashflows and results. With no clear timeline for reinstatement, this uncertainty adds another layer of volatility to earnings and complicates planning for the U.S. operations.
Workforce reductions reduce delivery capability
Headcount has been cut to roughly 300 employees, down 26% from the peak and 19% from the end of Q1 2025, driving a 21% drop in personnel costs. Management cautioned that these reductions have also dented manufacturing and project execution “muscle,” potentially limiting the speed and scale at which Nel can ramp when orders return.
Insufficient backlog to secure 2027 utilization
Nel acknowledged that its current backlog is not enough to secure meaningful factory utilization in 2027, underscoring the need for new wins this year and next. The company hopes that quicker‑turn containerized PEM projects will help bridge the gap, but medium‑term visibility remains incomplete.
Geopolitical and inflationary risks
Management also flagged macro headwinds, including Middle East tensions that have delayed some projects and triggered material price swings. While these cost moves are not yet described as full‑blown inflation, they could complicate project execution and dampen customer activity in certain markets.
Guidance and medium‑term outlook
Nel did not issue formal numerical guidance but reiterated directional expectations: modestly improving EBITDA, stronger order intake in 2026, and more project FIDs than in 2025. The company is banking on its pressurized alkaline launch, 500 MW capacity target by 2026, containerized PEM growth, and a next‑gen PEM prototype to set up a more profitable model from the late 2020s onwards.
Nel’s earnings call underscored a company in transition, balancing pressure from declining revenues, grant uncertainty, and a leaner workforce against promising technology and a solid cash cushion. For investors, the story now turns on whether Nel can convert its innovation pipeline and commercial references into a stronger order book that fills 2027 and moves the group toward sustainable profitability.