Maintaining strong financial performance, building on solid operations and diversified positions, fostering relations and partnerships, driving digital transformation; these are key components in KONGSBERG’s strategy to increase its competitiveness in the industries it serves. The high-tech company is making it known that it has a strong foundation to “make a difference” and create value for its customers, shareholders and wider stakeholder interests in the new normal.
Speaking at KONGSBERG’s Capital Markets Day on November 12, Geir Håøy, CEO of KONGSBERG, says the company is not unaffected by the current turbulence in worldwide markets, but that it continues to perform strongly. Adaptation to markets, lower costs, and efficient project execution have contributed to KONGSBERG’s strong financial performance this year, and the company is well positioned for the ‘new normal’.
Improving profitability is vital for growth and, KONGSBERG has once again delivered strong operational and financial performance, which Håøy is very pleased about. “KONGSBERG has built a solid financial foundation over the past years and this provides sound prospects for continued growth”, says Håøy. Despite no major defence orders in the third quarter, Håøy remains confident for coming quarters. With the integration of Commercial Marine ahead of plan and a demonstrated the ability to adapt to changing market, Maritime is stronger positioned than ever. Also, Håøy firmly believes that the digital market within maritime, energy and heavy asset industries have the potential for solid growth.
On-track with growth ambitions
Last Capital Markets Day, the company introduced new growth ambitions and profitability targets for 2022. Although the world has changed since then, KONGSBERG is still committed to delivering as promised and is already well under way. “I can assure you that KONGSBERG will continue to be a growth company. Our ambition is still to grow in line with – or preferably faster than – the market. And our goal of achieving revenue of 30 BNOK in 2022 remains”, says Håøy.
He highlights the importance of KONGSBERG’s strong industry positions and plans to continue exploiting new opportunities.
“As we have succeeded in taken leading industrial positions in growing markets, we are planning further expansion within the ocean space, green shipping, digitalization and surveillance and security sectors”, adds Håøy.
Important contracts confirm positions
Supporting customers has been a key focus for KONGSBERG over the years and the company has recently secured important contracts across the industries it serves.
Of the many significant contracts that have been won, Håøy highlights the dynamic digital twin contract with Shell and says, “I'm even more proud now as we are assigned as a partner for the digitalisation of Shell's heavy assets internationally. This framework agreement also confirms our position as the leader within dynamic digital twin, as it was awarded to us in a very competitive process”.
Among other important contracts Håøy emphasises are the joint project with Wilhelmsen, under which KONGSBERG will equip and operate two zero-emission autonomous vessels for Norwegian grocery distributor ASKO, and the framework contract for global deforestation surveillance. KONGSBERG satellite services will deliver optical imagery for deforestation monitoring and control to the Norwegian government’s Climate and Forest Initiative.
The increasingly challenging and sustainability-focused world we live in is likely to lead to escalating stakeholder expectations and requirements as regards Environmental, Social and Governance (ESG) factors, according to Group CEO Håøy. For its part, KONGSBERG is committed to keep improving its ESG efforts. For a diversified company such as KONGSBERG, it is important to have a constant focus on trust and reputation as it works to develop solutions to support its customers and address the global sustainability challenges.
Solid financial results
Commenting on KONGSBERG’s financial results, CFO Gyrid Skalleberg Ingerø says, “It is definitely an uncertain world to be navigating and the extraordinary situation continues, but KONGSBERG’s results show that we are able to adapt to the new normal. We are focusing on remote and cost optimal operations and contract deliverables, and once again we have delivered a solid financial performance.”
In her presentation, Skalleberg Ingerø shared information on profitable growth, the solid balance sheet, sustainable investments, shareholder remuneration and portfolio management.
Skalleberg Ingerø also points to KONGSBERG’s updated ambitions towards 2022. Although things remain uncertain due to the ongoing COVID-19 pandemic, she is optimistic that a revenue target above 30 BNOK is achievable. Ambitions for EBITDA margins is presented as being above 14 per cent for the Group.
“Our strong financial performance and solid order backlog, combined with promising pipeline prospects, founds our growth ambitions”, says Skalleberg Ingerø, and adds, “Going forward we will continue to focus on growth, profitability and portfolio management to develop KONGSBERG further and position it for the future”.
Opportunities in new areas for Maritime
Egil Haugsdal, President Kongsberg Maritime (KM) is focused on developments and strategic plans for future growth. Since the collapse in offshore markets in 2014, KM experienced a few years of declining activity before beginning a bounce back in 2018 that has accelerated through to today.
“We have a strong order backlog of 11.8 BNOK and although we this year have seen customers postponing investment decisions, there is still good activity in parts of our market. Growth in revenue over the last years shows that our strategy to diversify across several market segments has been important for Kongsberg Maritime – as many of the markets we operate in are volatile”, says Haugsdal. “We have remained profitable and successfully completed the turnaround of Commercial Marine. Being profitable is a mantra for the KM management team – and something we strive for in every corner of the organisation, as it builds a solid platform for growth”, he adds.
Changing market conditions and the pandemic have affected different segments in different ways. Haugsdal expects the increasing environmental regulation will drive demand for fleet renewals. Also, KM’s diversity across segments, such as maritime and sensor and robotics, is a strength especially with the market fluctuations we have seen over the past years.
Looking ahead, Kongsberg Maritime is poised to capture future market opportunities as the division is strengthened by the integration of the former Rolls-Royce division. “Our main strategy remains the same; to be established as the leading global supplier of maritime technology w – shaping the maritime future”, Haugsdal concludes.
Partnerships and twins providing growth for Digital
President of Kongsberg Digital (KDI) Hege Skryseth also sees growth opportunities in markets that are increasingly looking to digitalize their operations. She points towards scalable market offering and positive developments as regards SaaS (Software as a Service), as well as recurring revenue business.
The digital transformation is reshaping the energy and maritime industries, and KDI is experiencing increased international interest in their offerings and are scaling up to handle rapid digital development.
Skryseth sees opportunities for KDI across a number of focus areas, including the growing interest in their dynamic digital twin Kognitwin® and their vessel-to-cloud solution, Vessel Insight. The partnership agreement with MAN Energy Solutions and Höegh Autoliners is an example of the way in which digitalisation can be harnessed to improve ship operations.
KDI’s ambition is targeting 10 per cent of the world fleet and increase the use of digital twins in the energy sector to optimise the use of assets and improve maintenance and safety.
Record highs as Defence ramps up
Eirik Lie, President of Kongsberg Defence and Aerospace (KDA) is confident about KDA’s current status. “We came into 2020 with a record-high backlog as well as order intake and despite COVID-19 our workload has not decreased”, he comments.
KDA has all-time-high activity levels and results and is growing. As a consequence, the business area is expanding production capacity, and continues its recruitment campaign and is ramping up activity on major projects.
Unlike some other sectors, defence projects and customer needs are often flagged up in advance. Assuming the COVID-19 pandemic and the efforts to combat it do not impact too much on defence budgets, KDA is well placed to benefit from a number of projects involving land, sea and air assets and also from maintenance, overhaul and repair work.
A solid outlook ahead
The outlook for KONGSBERG is solid despite the global pandemic, market uncertainties and political turbulence. “Of course, we are prepared for uncertainty caused by COVID-19 to persist and have plans to overcome any further challenges that may arise. At the same time, we have a strong focus on achieving operational and cost efficiencies, driving digital transformation and will continuously focus on our commitment to ESG,” says CEO Håøy.
The prospects for each division vary but are robust in total. “In defence, we are still delivering on our significant backlog and are also ramping up to do so. Looking at the current pipeline of programs identified and ongoing campaigns, I firmly believe that KDA will secure a solid order intake going forward,” says Håøy.
He recognises both the challenges and opportunities for KM as well as the importance of the aftersales aspect and the diverse sectors the company operates in. “Kongsberg Maritime has a strong track record in proving its adaptability and of being proactive regarding changing market conditions. We will continue our efforts to lead the market for integrated maritime solutions and deepen our green shipping offering”, he says.
With regards to the digital sector, Håøy sees significant opportunities. “We will capitalise on the position KDI holds to secure its leading position in dynamic digital twins and establish Vessel Insight as a leading digital platform for maritime. These are exciting opportunities, which represent a major potential”.
“I firmly believe the KONGSBERG Group has a strong foundation to make a difference”, emphasises Håøy and concludes, “We have the expertise and resources required to adjust and deliver on the expectations of our customers, shareholders and partners, and continue to pursue our goals with vigilance and also the opportunities that we see ahead”.