Realized maritime growth and breakthrough for defence
KONGSBERG had a good Q1 with increased profitability and order intake, especially within the civilian parts of the business.
Key financial figures
- Order intake MNOK 3,766 in Q1 compared with MNOK 2,939 in Q1 2018
- Operating revenues MNOK 3,627 in Q1, an increase of 2.1% (3,554) from Q1 2018
- EBITDA MNOK 414 in Q1 (MNOK 338 ex. IFRS 16 effects) compared to MNOK 286 last year
- EBITDA margin was 11.4% in Q1 (9,3 % ex. IFRS 16 effects) compared with 8.0% in 2018
Our defence business achieved an international breakthrough with a delivery contract for Joint Strike Missile (JSM) to Japan. The acquisition of Rolls-Royce Commercial Marine was closed 1 April as planned.
"We start the year with a high level of market activity throughout the organization and a lot of effort related to the takeover of Rolls-Royce Commercial Marine (RRCM). I am delighted at the welcome KONGSBERG has received by RRCM in every location we have visited. Now we will continue integrating the company in a way that provides results, profitability and added value to our customers,” says Geir Håøy, Chief Executive Officer Kongsberg Group.
The Group's operating revenues increased by 2.1 per cent compared to the same quarter in 2018. The sale of Kongsberg Evotec had a positive impact on revenues of MNOK 107. Kongsberg Maritime saw an increase in operating revenues of 9.4 per cent, excluding the sale. Meanwhile, operating revenues at Kongsberg Defence & Aerospace fell by 13.6 per cent. This is mainly due to a low delivery volume of MCT-30 (Medium Calibre Turret-30) compared to the first quarter of 2018.
"The delivery contract of the Joint Strike Missile (JSM) to Japan is an important milestone. This is the first international customer we entered into a supply contract with, after developing the missile together with Norwegian authorities, Norwegian Armed Forces and Norwegian Defence Research Establishment (FFI) for more than ten years,” Håøy adds.
Kongsberg Digital can point to a strong start to the year, with an increased order intake and revenue growth of almost 40 per cent compared to Q1 last year.
Mobilizing to create maritime profitability
Operating revenues in Kongsberg Maritime (KM) were MNOK 2,072 in the first quarter, including revenues from the Evotec sale. The increase is especially driven by good activity in the aftermarket and within “Sensors and Robotics”. Activity within the new building segment for vessels is equivalent to Q1 in 2018. EBITDA in the quarter (adjusted for IFRS 16 effects) is MNOK 187, including Evotec figures and MNOK 79 related to costs to preparations for the integration of RRCM. Adjusted for these posts EBITDA is MNOK 159, to MNOK 134 in Q1 2018.
"KM continues to grow and can show a positive order intake. The underlying profitability improvement is a result of adjustments implemented these last years and some improvement in the aftermarket. There has been high activity in connection with the takeover of RRCM, but it is only now that the real integration work begins,” says Håøy.
Kongsberg Maritime has become an organization with almost 7,300 employees and an annual revenue of more than MNOK 15,000 as from the acquisition 1 April. KONGSBERG is targeting an achievement of MNOK 500 in annual cost synergies, of which 40 per cent will be taken in the current year. The company has therefore launched a comprehensive synergy and profitability programme for its maritime business. This includes various efficiency measures such as co-location, realization of synergies on sales, administration, marketing, reduced IT costs, work capacity adjustments and more.
"We are already extracting synergies. The goal is ambitious, but profitability in the short term is our best strategy in the long term. These measures are crucial to create profitability in today's market, build bridge to the future, ensure sustainable growth and secure jobs. Our ambition is to be the leading player in deliveries to the maritime industry going forward,” says Håøy.
Solid project execution on the defence side
Kongsberg Defence & Aerospace saw a decrease in operating revenues of 13.6 per cent respectively since the first quarter last year. Then, the business area had high activity because of the MCT-30 (Medium Calibre Turret) deliveries to the land forces in the US. However, operating revenues have increased in most other divisions. EBITDA in the quarter (adjusted for IFRS 16 effects) is MNOK 138 compared to MNOK 172 in Q1 2018. The reduction is due both to lower volumes of the mentioned MCT-30, and lower contributions from Finnish Patria, where KONGSBERG owns 49,9 percent of the company.
The defence operations also achieved a breakthrough during the quarter with the JSM (Joint Strike Missile) delivery contract to Japan. And, the Australian authorities confirmed the selection of NASAMS (Norwegian Advanced Surface-to-Air Missile System) for the country's air defence programme.
"Norwegian developed JSM is an exciting technology project with great potential for export. It is the only missile specially designed and qualified for integration into the bomb bay on the F-35, a combat aircraft that so far has been chosen by nine nations, including Norway. It was therefore a major breakthrough for KONGSBERG when Japan ordered the JSM in March 2019, as first nation to do so. This strengthens our position for further deliveries of JSM to the F-35 in the future,” says Håøy.
Kongsberg Digital started 2019 with significantly increased sales and improved profitability compared to last year. Order intake is MNOK 218 in Q1.
“Operating revenues has developed positively since last autumn, and I’m satisfied to see this continuing into 2019. The business area has approximately 40 percent higher revenues than in the corresponding quarter in 2018, the highest since the establishing in 2016. It has been made considerable investments in developing the product portfolio and the market has responded well. We are now accelerating the development, and a strategy work is initiated to ensure KDI the necessary resources and focus. The business area’s goal is to take a leading position globally in the digitalization of KONGSBERG’s core businesses; oil and gas and the maritime sector, among others. The development of KDI is founded on our continued strong position within these areas. We greatly believe that these efforts will contribute in driving the industrial digitalization forward,” says Håøy.
Good speed in 2019
“It will be a hectic year for the group in 2019 also. We will continue to secure major defence contracts and deliver on projects. At the same time, we are executing the largest integration in the history of the company,” says Håøy.
Please visit www.kongsberg.com/investor-relations/ for KONGSBERG’s report and presentation for the first quarter 2019.
For further information, please contact:
Jan Erik Hoff, Group Vice President Investor Relations, Kongsberg Gruppen ASA, Tel: (+47) 991 11 916.
Ronny Lie, Group Vice President Communications, Kongsberg Gruppen ASA, Tel.: (+47) 916 10 798.
This information is subject to disclosure requirements pursuant to §5-12 of the Norwegian Securities Trading Act.
KONGSBERG (OSE-ticker: KOG) is an international, knowledge-based group delivering high technology systems and solutions to clients within the oil and gas industry, merchant marine, defence and aerospace. KONGSBERG has close to 11,000 employees located in 40 countries. Follow us on Twitter: @kongsbergasa.