Eventful quarter with important contracts and strong order intake
The group signed important contracts for both the Joint Strike Missile and the Naval Strike Missile, the F-35 program and the Johan Sverdrup field development. On July the 6th KONGSBERG signed an agreement for the purchase of Rolls-Royce Commercial Marine.
The EBITDA margin for the quarter is at 6.8 per cent, compared to 5.5 per cent in the corresponding quarter 2017. The EBITDA is impacted by extraordinary costs related to a single project in Kongsberg Maritime amounting to NOK 50 million, and merger and acquisition costs totalling NOK 79 million related to amongst others the purchase of Rolls-Royce Commercial Marine. The order intake in the quarter entails a book / bill of 1.5.
The quarter is characterized by several important contract signings and events. The Naval Strike Missile (NSM) was chosen by the US Navy for the “Over the Horizon” program and Malaysia signed a contract for the delivery of the NSM.
The Joint Strike Missile passed its final test of the development phase in March, and now commences the integration phase for the F-35. In the quarter KONGSBERG signed a contract for the delivery of JSM test missiles with The Norwegian Defence Material Agency valued at NOK 700 million.
The US F-35 program increases its production rate, and in the quarter KONGSBERG signed a contract worth NOK 525 million for delivery of structural parts to the new fighter aircraft. Kongsberg Maritime also had a good order intake, and amongst others signed an agreement with Equinor for deliveries to phase two of the Johan Sverdrup field development.
On July 6th KONGSBERG signed an agreement to purchase Rolls-Royce Commercial Marine from Rolls-Royce Plc for a value of GBP 500 million. The acquisition will further strengthen KONGSBERG's position as a leading supplier to the maritime industry.
“We have been through both a hectic and eventful quarter. Kongsberg Maritime shows underlying improvement in margins and reports a good order intake. Kongsberg Defence & Aerospace delivers yet another quarter with strong margins and has also won a number of key contracts. The purchase of Rolls-Royce Commercial Marine will strengthen our competitiveness in the maritime market which has been weak in recent years, but is now showing some signs of recovery, particularly within the aftermarket. number of hectic years lie ahead of us, new positions must be secured, contracts must be won and delivered, and acquisitions must be closed and then integrated. However, I am confident that KONGSBERG is both prepared and capable of facing up to the challenge,” says Geir Håøy, President and CEO of KONGSBERG.
Temporary lower revenues, but good margin and strong order intake in Kongsberg Defence & Aerospace
Kongsberg Defence & Aerospace has revenues of NOK 1,441 million in the quarter. EBITDA is NOK 200 million, entailing an EBITDA margin of 13.9 per cent. The order intake in the quarter is NOK 3,045 million, entailing an order backlog of NOK 10,772 million.
“The decline in revenues compared to the equal quarter of 2017 is mainly driven by the equal quarter of 2017 having a very high activity on the air defence program that was signed with Raytheon in 2014. This program is now in its final phase and we are in the start-up phase of the two programs that were signed autumn 2017. The margin improvement is mainly related to improved margins within the areas of missiles and Protech Systems. The order backlog at end quarter is the highest since 2016,” says Håøy.
Extended opportunities in Qatar
In March KONGSBERG announced a cooperation agreement in Qatar for long-term technology development programs within defence, maritime industry and digitalization. The first program, comprising of delivery of communication, digitalization and tower solutions for military vehicles, is currently in negotiations.
The estimated potential is as previously announced NOK 15 billion, but with an additional potential upside of up to NOK 5 billion depending on ongoing scope- and price negotiations.
Kongsberg Defence & Aerospace has partnered for several decades with American company Raytheon delivering the air defence system NASAMS to several nations. Raytheon has signed a memorandum of understanding for the delivery of air defence to Qatar with a potential value of USD 2,0 billion. KONGSBERG is an exclusive partner on selected components to NASAMS.
Both programs are expected to be signed 2018-2019.
Positive underlying development in Kongsberg Maritime
Revenues in Kongsberg Maritime are at NOK 1,910 million. The EBITDA is at NOK 115 million, entailing an EBITDA margin of 6.0 per cent. The order intake is at NOK 2,107 million, and at end quarter the business area has an order back log of NOK 4,919 million.
“The order intake from traditional offshore and merchant vessels was weak in the second half of 2017, and this has contributed to reduced revenues from these areas so far in 2018. However, the order intake from these areas has picked up in the first half of 2018. The activity within subsea is good and the development within Global Customer Support is positive. The EBITDA is impacted by costs of NOK 50 million in a single project, but there is an underlying margin improvement compared to both the previous quarter and the equal quarter of 2017. The margins will vary between quarters, mainly due to the project mix,” says Håøy.
For further information, please contact:
- Ronny Lie , Chief Communication Officer Mob: +47 916 10 798
- Jan Erik Hoff , Group Vice President Investor Relations Mob: +47 991 11 916