Green Hydrogen Systems A/S initiates significant cost-out and restructuring initiatives, adjusts guidance for 2024 and seeks to strengthen its capital base
October 09 2024 - 2:33AM
UK Regulatory
Green Hydrogen Systems A/S initiates significant cost-out and
restructuring initiatives, adjusts guidance for 2024 and seeks to
strengthen its capital base
Green Hydrogen Systems A/S initiates significant
cost-out and restructuring initiatives, adjusts guidance for 2024
and seeks to strengthen its capital base
Kolding, Denmark, October 9, 2024
Green hydrogen continues to play a vital role as a necessary
technology for the green energy transition, yet the market adaption
of the technology and the development of hydrogen-related
production projects have progressed significantly slower than
anticipated. In addition, a slower than anticipated development and
commercialisation of the Company’s X-Series electrolyser product
has resulted in a delay in obtaining the first orders for the
X-Series and increased the importance of the X-Series being cost
competitive from the early stages of commercialisation.
To address this situation, Green Hydrogen Systems is initiating
a combined cost-out and restructuring program, which consists of
the following material building blocks:
- A cost-out program targeting a significant reduction of the
production costs for the X-Series:
The development of the X-Series continues to evolve positively
demonstrating very strong test results and the Company has
substantial bidding activities ongoing worldwide. However, to
increase the X-Series' competitiveness from the early stages of
commercialisation, the Company has identified a number of potential
initiatives that could improve product cost-effectiveness by 40-50%
compared to current levels. Most of these improvements are expected
to be implemented by 2026, allowing the Company to potentially
reach break-even earlier than would have otherwise been the
case.
- A restructuring of its operations:
The Company will initiate a restructuring of its operations
aiming at reducing the cost base by at least 40-50% compared to the
current level. As of today, the Company is initiating dialogue with
relevant employee representatives regarding the reduction of the
organisation, which is expected to impact approximately 100
salaried employees.
The combined cost-out and restructuring program will support the
Company’s objective of becoming profitable even at lower order
volumes. The program is, however, expected to lead to one-off
implementation costs of DKK 100-150 million to be incurred in 2024
and the first quarter of 2025. The Company will provide periodical
updates on the implementation costs and the timing hereof.
“Green hydrogen plays a vital role for the green transition
in some of the most challenged industries and we firmly believe
that Green Hydrogen Systems has the potential to be a significant
part of this important transition. However, we must take into
account that the market is not moving as fast as anticipated. This
has resulted in challenges, and as a result, we need to adjust and
implement substantial changes across our business
to ensure our competitiveness and a strong foundation for the
long-term future. We remain confident in the importance of green
hydrogen for the energy transition as well as in our products and
their role in succeeding with this important technology,” says
CEO Peter Friis.
Going forward, Green Hydrogen Systems will exclusively focus on
the commercialisation of the X-Series and will consequently
discontinue new sales of the A-Series. The execution of the current
A-Series product pipeline will proceed as planned aiming to
finalise manufacturing of the existing A-Series order backlog in Q1
2025. Customers, who have ordered A-Series units, will have the
units delivered under the agreed conditions and the Company will
continue to service already delivered A-Series units.
The delay in obtaining the first orders for the X-Series has
also had a negative impact on the operational cash flow of the
Company which has resulted in a reduction of capital reserves
earlier than expected. In combination with the one-off cost
required for implementing the cost-out and restructuring
initiatives set out above, this implies that Green Hydrogen Systems
will breach its covenants with existing lenders by the end of
October 2024 (unless waived) and without additional funding will
have depleted its existing capital reserves entirely during the
first half of 2025.
To ensure the necessary capital reserves to allow the Company to
complete the implementation of the cost-out and restructuring
initiatives, the Board of Directors has decided to seek an initial
strengthening of its capital base with an amount of up to DKK 300
million to be completed before the end of 2024. With the
restructuring initiatives expected to be implemented by the end of
Q1 2025 and the Company anticipating the first X-Series orders in
the coming months, the Board of Directors expects that an
additional capital increase of similar or increased size will
necessary and will have to be completed by the summer of 2025.
According to the current plans, and assuming successful
implementation of the combined cost-out and restructuring program
and traction on X-Series sales, this plan will provide the Company
with a platform that may enable the transition towards
profitability and self-sufficiency by the end of 2026.
The Board of Directors is in constructive dialogues with the
Company’s largest shareholders and its lenders to find a solution
to the short-term funding requirements.
“Green Hydrogen Systems has leading capabilities within its
field and the Board of Directors has a strong belief in its global
potential. To succeed, we have evaluated the need for operational
adjustments resulting in the implementation of significant changes.
To support Green Hydrogen Systems strategic focus, we will adapt
the business to its needs and the current market conditions to
ensure the future value for the hydrogen market and the investors
going forward,” said Thomas Broe-Andersen,
Chairman of the Board of Directors.
Adjustment of Guidance for 2024
Green Hydrogen Systems lowers the guidance for 2024 revenue to DKK
105 to 145 million (previously DKK 125 to 165 million). The reason
for the adjustment is lack of commercial traction and the risk of
cancellations related to the combined cost-out and restructuring
program described above.
The guidance for 2024 with respect to EBITDA of DKK -260 to -220
million is upheld excluding costs incurred in 2024 related to the
combined cost-out and restructuring program, which amounts to DKK
100-150 million. If the impact of the combined cost-out and
restructuring program is included, the EBITDA guidance for 2024 is
in the range DKK - 400 to -300 million depending among other on the
actual timing and amount of the implementation cost. However, as
mentioned above, the timing of the costs incurred in relation
hereto remains uncertain and the Company expects that a part of the
costs will not incur until 2025.
The guidance for 2024 with respect to CAPEX is adjusted to DKK
130-160 million (previously DKK 160-200 million) as a consequence
of the combined cost-out and restructuring program.
With reference to company announcement 01/2024 of January 23,
2024, mid – and long-term targets are suspended and updated targets
may be communicated later, however, at the earliest in connection
with the announcement of 2024 Annual Report in March 2025.
The Board of Directors has engaged FIH Partners as financial
advisor to assist in investigating options for strengthening of the
Company’s capital structure.
A webcast is held October 9th, at 11:00
(CEST). The webcast is broadcasted live
via https://events.q4inc.com/attendee/346877651.
Participants joining by telephone:
United Kingdom: +44 20 3936 2999
Denmark: +45 89 87 50 45
Global Dial-In Numbers
Access Code: 968199
For other inquiries, please contact:
Lene Rode, Head of Communications & External Relations
+45 4085 2619
lro@greenhydrogen.dk
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