Hexicon Q1’24 preview: Eyes on project divestment opportunities

Hexicon will release its Q1 results on Wednesday at 08:00 CEST. We are particularly interested in any updates on the development of the important MunmuBaram project. In addition, we are following comments on the development of the process for determining the long-term ownership structure of the project, as we believe this will be critical in assessing Hexicon's future capital requirements.

Project divestments in focus

We expect Hexicon’s revenue to increase by 5% year-on-year to 1.8 MSEK, primarily driven by consulting fees that Hexicon earns from its development projects. In the bigger picture, however, Hexicon’s investment case and growth to cash flow neutrality hinges on successful development and divestments of the project portfolio. Thus, we do not place too much emphasis on the reported revenue during the quarter. Instead, we believe it is important to closely monitor the progress of late-stage projects in the near term, as well as early-stage projects that we expect to play a significant role in long-term growth prospects.

Profitability and cash flows remains negative

Hexicon’s profitability remains negative on all lines, with our EBITDA and EBIT estimates at -45.4 MSEK and -51.7 MSEK, respectively. The company’s cash position at the end of 2023 stood at 121 MSEK. Additionally, the company had about 158 MSEK left to draw down from the Glennmont loan, for an estimated total amount of available funds of roughly 279 MSEK. At the Q4'23 burn rate, Hexicon's capital requirements would be covered until approximately the second half of the year. However, if we include the 5 MUSD (53 MSEK) down payment for Hexicon's purchase of the remaining 80% of the MunmuBaram project, the need for additional capital would arise earlier. Hexicon is seeking to find a new partner for the MunmuBaram project and to divest parts of the project, which would secure short-term funding and reduce its financial exposure to the project. As such, we seek any comments on the long-term ownership structure of the project and the company's outlook for financing needs.

Progress of project portfolio determines the direction in the near future

Hexicon has invested heavily in securing and advancing 12 active projects, and the company is now looking to begin divesting portions of its project portfolio that are expected to generate significant revenue. Therefore, further details on these projects and the funding outlook are critical to the report and the company's growth prospects. In addition, we look forward to comments on the development of the TwindHub wind farm, which we expect to be an important revenue driver in the longer term.