KONGSBERG - Growth and Sustainable Value Creation

Source: www.gulfoilandgas.com 6/3/2022, Location: Europe

KONGSBERG continues to deliver on its strategic priorities and are aiming for more growth. The Group is continuously looking for new opportunities and plans to grow its business sustainably in the coming years by capitalizing on its strong lead across sectors.

Speaking at KONGSBERG’s Capital Market Day in Oslo earlier this week, Geir Håøy, CEO of Kongsberg Gruppen (KONGSBERG), said “KONGSBERG is performing strongly. In addition to delivering on financial targets and growth, I have an overall mandate to contribute to a more sustainable world. We aim to be a trusted partner for customers, industries and society in this transformation. We are addressing sustainability across several perspectives.”

At the same time, the CEO is emphasized that KONGSBERG operates in a global market where the environment is characterized with more uncertainties than we have seen for a long time. The war in Ukraine, steeply rising energy costs and component shortages are among the challenges.

“There are some dark clouds gathering that will surely test our ability to meet and adapt to rapidly changing situations. When that is said, coping with this situation is at the top of my agenda. We are taking proactive measures in close collaboration with our suppliers, partners and customers.”

ADAPTING TO CHALLENGING SITUATIONS
“The rapidly changing business environment of the last two years has shown we can navigate and prosper in a shifting external landscape. We have dedicated employees at all levels and a strong culture of collaboration, determination, innovation and adaptability. So let me just reassure you about this: whatever the global landscape may look like in the future, KONGSBERG is prepared and determined to deliver and manoeuvre in a changing world in order to protect KONGSBERG and our stakeholder interests.

“And there is one goal we never lose sight of, and that is to create sustainable long-term value. To us, delivering on our financial targets and delivering on the sustainability agenda go hand-in-hand,” said Håøy.

Regarding KONGSBERG’s environmental achievements and strategies, Håøy announced, “We are aiming to reduce the emissions from our own operations (scope 1&2) by almost 100% by 2030. We have a relatively low carbon footprint so where we can really make a positive impact is through our business model, suppliers and customers. We aim for two-thirds of our suppliers to set their own science-based targets by 2027 in line with the Paris Agreement.

SUCCESSFUL GROWTH STORY
Commenting on KONGSBERG’s financial results, CFO Gyrid Skalleberg Ingerø said: “A capital markets day is a day not only to look forward but also to reflect. Over the last four years, KONGSBERG has become a successful growth story and this growth will continue. The company has delivered growth of more than NOK 14 billion, of which 50% is acquired growth and 50% is organic, representing a compound annual growth rate (CAGR) of 17.8% over the last four years and one quarter.”

She also gave the audience a breakdown for the business areas and associated companies and said KONGSBERG is committed to deliver on its 2022 targets and trending towards revenue of NOK 30bn.

PURSUING NEW AMBITIOUS TARGETS FOR 2025
CFO Skalleberg Ingerø also pointed out KONGSBERG’s financial targets for 2025: “We target revenues of BNOK 23 for KM, BNOK 17 for KDA, totalling BNOK 40, and adding on BNOK 2.8 for KDI in 2025. We also aim to improve profitability for KONGSBERG as a whole and have set our 2025 EBITDA-margin target to 15%. We will ensure competitiveness by being efficient and through scale and will deliver shareholder value through capital prioritization.”

Presentations then followed from each of the three divisions, starting with Kongsberg Digital (KDI). Group CEO Geir Håøy began by thanking departing divisional President Hege Skryseth, who is taking up a new position with Equinor.

HUGE POTENTIAL FOR KONGSBERG DIGITAL
Håøy outlined the work of KDI and explained that the high growth ambitions are driven by the development of digital twins. He said there has been improvement in both the operational and financial KPIs over the last few quarters. “The key driver for KDI’s future development is growth in the number of digital twins and connected vessels. Our target implies approximately 100 digital twins by 2025,” he said. Explaining this only accounts for 4% of global oil and gas assets, Håøy said the potential is huge and that there are additional markets.

He then handed over the presentation to Shane McArdle, SVP Digital Energy, who expanded on the business case for digital twins and their benefits. Andreas Jagtøyen, EVP Digital Ocean provided more insight into KDI’s ambitions and strategy around Vessel Insight. He explained that this is a maritime Internet of Things enabled by KDI but working with partners to provide added value to the data generated by ships and their operations.

SHAPING THE MARITIME FUTURE
The next division to give a presentation was Kongsberg Maritime (KM). Egil Haugsdal, President of KM, gave a brief overview of the division and added: “We have delivered on our targets and are very much focused on helping to solve the global climate and environmental challenges by shaping the maritime future.”

He then handed over to Tejbir Singh, SVP Business Intelligence & Strategy, who described maritime industry developments and market trends.

Singh identified several trends that were becoming evident in markets, notably digitalization, cleaner fuels, greater use of sensors, robotization and electrification. We will introduce innovation and new technology into maritime markets, but always look to meet core customer needs as we innovate. We innovate with purpose,” said Singh.

Haugsdal then went on to emphasize KM’s ‘strong, diverse and growing market positions’ by detailing some recent contracts. He also mentioned KONGSBERG’s global reach and the fact that over 40% of employees are outside the Nordic countries, providing robustness in an ever-changing world. “We are big enough to be strong and small enough to be agile,” he said.

While mentioning the current global challenges limits but that these do not stop growth, Haugsdal underlined efforts to keep a frontline position on digital ocean technology, saying: “We are in the midst of the energy transition and this provides us with potential growth areas. We are now ready to position for long-term sustainable growth.”

POSITIONING FOR INCREASING DEMAND FOR DEFENCE AND SECURITY
The final division to give a presentation was Kongsberg Defence and Aerospace (KDA), with president Eirik Lie giving an update on key developments and takeaways in 2022. He reported progress on all three targets declared at the last CMD.

Pamela Willgohs, EVP Marketing & Sales, shared insights on the defence segment and KDA’s strategy and ambitions. She said that the invasion of Ukraine has led to individual governments and alliances recognizing their poor readiness levels and increasing their defence budgets.

“We develop first-class products – and we’re world-leaders in the selected niches where we deliver our solutions. Innovation, research and development are key factors in our strategy, and our ambition is to develop solutions and systems which will never ’sunset’,” said Willgohs.

Lie then described three initiatives supporting the strategy and how he sees the future 10 years from now. The initiatives are to increase the footprint in Norway, the US, EU and Australia, important investments in production facilities to improve efficiency and lower costs, and the recruitment of around 2,000 new staff over the next five years.

“This is a long-term business, and we will continue to grow our business in the coming decade. We have identified some BNOK 150 worth of new opportunities for KDA over the next decade” said Lie.


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