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13 January 2025

Nel ASA Cuts Production And Workforce Amid Market Struggles

Facing declining demand for renewable hydrogen, Nel ASA halts production and reduces its workforce significantly.

Nel ASA, the leading hydrogen technology company, recently announced significant changes to its operational strategy, including a temporary halt of production and workforce reductions at its Herøya facility. This decision arises amid weaker-than-anticipated demand for renewable hydrogen production technology, prompting the company to adjust to the challenging market conditions.

On January 13, 2025, CEO Håkon Volldal detailed the company's plight, acknowledging disappointing order intakes for 2023 and 2024, which have failed to meet expectations. Volldal acknowledged the delays threatening several customer projects, stating, "While the long-term outlook for clean hydrogen remains strong, we must make some tough decisions today based on lower order intake in 2024 than expected." These tough choices have resulted in the difficult decision to reduce the workforce by approximately 20%, affecting many of the qualified workers at the facility.

To put this decision in perspective, Nel ASA has already implemented some cuts, with approximately half of the planned workforce reductions executed through voluntary resignations and termination of consultancy contracts by the end of the fourth quarter of 2024. The company's strategic adjustments reflect the slow development of the market for renewable hydrogen technologies, which has not progressed as swiftly as the industry had hoped. Unable to sustain its operations under the current conditions, Nel announced the temporary halt of production at the Alkaline business segment facility.

CFO Kjell Christian Bjørnsen, addressing the situation, noted, "The company remains well financed, and with these actions we will preserve cash...while still being able to aggressively pursue sales opportunities and invest in technology development." This statement emphasizes Nel's strong financial position and commitment to stay active within the industry, even as it faces immediate operational challenges.

The announcement sent ripples through the market, impacting Nel's stock significantly. The share price of Nel ASA experienced losses, with reports indicating it had lost nearly 24% of its value recently, signaling investors’ concerns over the company's future order intake. The Oslo Stock Exchange saw the hydrogen stock valued at 2.149 Norwegian Kroner, reflecting the market's reaction to the cautious outlook.

Nebraska's commitment to green technologies continues, as the company retains hopes for long-term viability within the hydrogen sector. Nel’s strategy will still involve pursuing new business opportunities aggressively, especially projects actively working on concrete bids, including containerized PEM systems. Volldal has remained optimistic about the future prospects of clean hydrogen, asserting the company's intention to explore market possibilities until conditions become favorable again.

Despite current challenges, the company holds onto its vision for upholding the ambitions of creating carbon-free hydrogen solutions. With the production halt, Nel ASA aims to keep costs manageable and save cash, providing it with the maneuverability needed as they navigate the unpredictable marketplace. Optimism lingers as the long-term demand for hydrogen technologies continues to rise, with widespread expectations of the sector's growth over time.

The company's strategic measures reveal insights not just about Nel ASA’s immediate challenges but also the broader concerns within the hydrogen economy. Companies focused on renewable technologies may face increased scrutiny as global demand is anticipated to fluctuate based on market conditions and project uncertainties. Nel ASA's responses can be reflective of industry trends, indicating the need for adaptability and resilience moving forward.

Looking beyond immediate fixes, Nel ASA aims to innovate its offerings and remains committed to development efforts for both current and next-generation technology platforms. Key to this is maintaining momentum even as they transition through difficult decisions.

Nel ASA’s challenge is significant, but its intentions remain clear: Adapt, survive, and thrive within the dimensions of the renewable energy sector. The pathway may be uncertain, yet Nel continues to explore all available avenues to assure its place as a pivotal player within the green hydrogen economy.