NEL ASA ((NO:NEL)) has held its Q2 earnings call. Read on for the main highlights of the call.
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The recent earnings call for Nel ASA painted a mixed picture for the company. While there were notable advancements in technology and strategic partnerships that bolster a promising long-term outlook, the company is currently grappling with declining revenues, lower order intake, and contract cancellations. These short-term challenges are weighing heavily on the overall sentiment, despite the company’s strong cash position and ongoing innovations.
Samsung E&A Partnership
Nel ASA announced a significant partnership with Samsung E&A, which launched its CompassH2 hydrogen plant solution featuring ‘Nel Inside.’ This collaboration marks a pivotal product launch and underscores Nel’s strategic efforts to integrate its technology into broader industrial applications.
MOU with HydePoint
In a move to expand its reach in the hydrogen sector, Nel signed a memorandum of understanding with HydePoint. This agreement aims to co-develop modular hydrogen systems tailored for offshore and nearshore environments, highlighting Nel’s commitment to innovation and market expansion.
Improved Cash Burn Rate
Nel has made substantial progress in reducing its cash burn rate, which has decreased significantly to minus NOK 120 million per quarter from nearly NOK 500 million in previous quarters. This improvement is attributed to reduced spending on production line equipment and capacity ramp-ups.
Technology Advancements
The company is introducing a next-generation pressurized alkaline system, promising a 40% to 60% reduction in system CapEx and enhanced energy efficiency. This advancement is a testament to Nel’s dedication to technological innovation and cost reduction in hydrogen production.
Strong Cash Position
Despite financial challenges, Nel maintains a robust cash balance of NOK 1.9 billion. This strong cash position provides the company with financial stability and the ability to navigate current market headwinds.
Revenue Decline
Nel reported a 48% decline in revenue from contracts with customers, falling from NOK 332 million last year to NOK 174 million this quarter. This decrease is primarily due to lower project activity and contract cancellations, reflecting the company’s current market challenges.
Order Intake Decline
The order intake for the quarter was only NOK 71 million, a significant drop from NOK 311 million in the first quarter. This slowdown in new business acquisition indicates a challenging market environment for Nel.
Statkraft Contract Cancellation
A notable setback for Nel was the cancellation of a 40-megawatt alkaline electrolyzer contract by Statkraft, which was originally signed in 2022. This cancellation has impacted the company’s expectations and contributed to the revenue decline.
Negative EBITDA
Nel continues to face financial challenges, with EBITDA remaining negative at NOK 86 million. This ongoing issue highlights the difficulties the company is encountering in the current market landscape.
Forward-Looking Guidance
Looking ahead, Nel’s CEO, Hakon Rypern Volldal, provided guidance for the second quarter of 2025. Despite lower revenues and slower order intake, the company remains optimistic about its long-term prospects, supported by a strong project pipeline and advancements in hydrogen technology. The company is focused on developing new technologies to lower the levelized cost of hydrogen, with plans for commercial product launches and deliveries at scale by 2027.
In summary, Nel ASA’s earnings call reflects a company at a crossroads, balancing significant technological advancements and strategic partnerships against immediate financial challenges. While the short-term outlook is clouded by declining revenues and order intake, the company’s strong cash position and commitment to innovation offer hope for a brighter future.