Kongsberg has reported a substantial 26% year-on-year revenue increase in the first quarter of 2024, reaching NOK 11.45 billion. The company experienced strong growth across all sectors, with Kongsberg Maritime, Defense & Aerospace, Discovery (NASDAQ:WBD), and Digital divisions showing significant gains.
The maritime sector's growth was primarily fueled by aftermarket activities, while Defense & Aerospace benefitted from large orders for NASAMS systems and Remote Weapon Stations. The company also achieved an all-time high quarterly operating profit of NOK 1.46 billion, marking a 12.8% EBIT margin. The CEO highlighted the strong demand across Kongsberg's portfolio and the company's commitment to sustainable growth.
Key Takeaways
- Kongsberg's total revenue for Q1 2024 reached NOK 11.45 billion, a 26% increase year-on-year.
- The operating profit hit an all-time high of NOK 1.46 billion, with an EBIT margin of 12.8%.
- Kongsberg Maritime and Defense & Aerospace were significant growth drivers, with revenue increases of 17% and 40%, respectively.
- Kongsberg Digital's revenue grew by 34%, largely due to the Kognitwin agreement with Shell (LON:SHEL).
- The company plans to pay dividends in May and October and will hold a Capital Market Day on June 4th.
Company Outlook
- A new missile production facility is set to open in June, aiming to increase capacity.
- The company maintains a focus on working capital and sustainable growth strategies.
Bearish Highlights
- There may be fluctuations in Kongsberg Maritime's strong margin in future quarters.
- The new missile factory's ramp-up to full capacity may have a limited immediate effect on margins.
Bullish Highlights
- Kongsberg Discovery's revenue grew by 16%, driven by demand in ocean-based energy production and other sectors.
- Kongsberg Satellite Services and Patria reported revenue and EBIT growth.
Misses
- Abnormally high delivery volumes in Q1 contributed to significant growth for Kongsberg Defense & Aerospace, which is not expected to continue in the coming quarters.
Q&A Highlights
- The company discussed the project mix in Kongsberg Defense & Aerospace, which is moving towards their target level.
- The CEO addressed questions about the sustainability of the strong margin in Kongsberg Maritime.
Kongsberg's (ticker not provided) robust performance in the first quarter of 2024 demonstrates the company's strength in its market segments and its strategic focus on sustainable growth. The upcoming Capital Market Day on June 4th is anticipated to provide further insights into the company's future plans and growth strategies.
Investors and stakeholders will be watching closely as the new missile production facility opens and the company continues to navigate the dynamic market environment.
Full transcript - Kongsberg (KOG) Q1 2024:
Jan Hoff: Good morning, and welcome to Kongsberg’s First Quarter 2024 Presentation. Today’s results will be presented to you by President and Chief Executive Officer, Geir Haoy; as well as Executive Vice President and Chief Financial Officer, Mette Bjorgen. This is a webcast-only presentation, but you are able to ask questions through the cast frame. And with that, Geir, the floor is yours.
Geir Haoy: Thank you, Jan Erik. So welcome to Kongsberg’s presentation of the first quarter of 2024 results. I want to start this quarterly presentation by thanking our colleagues and partners around the world for your trust and efforts you all have put in so far in 2024. Kongsberg’s growth and strong performance are a testament to everyone’s efforts. So in terms of the results, Kongsberg has continued its positive trend from 2023, and we continue to deliver growth, solid results and strong order intake during the first quarter of 2024. As a global company with presence in 40 countries, we are influenced and live with and by the ongoing and current international context. There is no doubt security and sustainability are now on the top of the global agenda. People and nations of the world cannot have sustainability without security, nor can they have security without sustainability. The two broad global objectives have become increasingly more important in the recent years. Both have broadened their meaning with response to the evolving landscape of security, climate and energy concerns. And they’re insurable interconnections become – are becoming evident to the global society. These objectives aligned seamlessly with solutions and services from Kongsberg. Our customers recognize Kongsberg as an increasingly important facilitator to solve many of the security and sustainability challenges the world now is facing. We develop and deliver world-class defense systems to tackle modern and evolving security challenges. And we have an ocean space portfolio, which are in front when it comes to shaping the global maritime future. Over the years, we have demonstrated that we are determined innovative, reliable and collaborative, and we have a solid foundation to build on going forward. The new long-term plan, the Norwegian government is proposing to Parliament represent a historic increase in the defense spending. Many nations have the same mindset as Norway, providing security is now regarded as a fundamental task for Norway and among allied countries. The new long-term plan also include a strong Maritime package. As an ocean expert with the majority of our turnover related to the oceans, Kongsberg look forward to combining our maritime and defense expertise in supporting defense forces with state-of-the-art solutions and also new capabilities. Our purpose and overall ambition as a global technology company is to create value and to make a better tomorrow by protecting people and planet. And then if we move over to the business area updates. Kongsberg Maritime is continuing its strong performance and delivered 17% growth from Q1 last year. All divisions contributed to this growth. Our aftermarket activity grew by 14% year-on-year, and the growth comes from a high level of spare sales as well as upgrades and reactivation of especially offshore vessels. We saw a decline in the total ordering for the business area compared to corresponding quarter in 2023, but NOK6.2 billion in order intake is a 1.14 book-to-bill and Kongsberg Maritime continues to build order backlog. Looking at the order intake pie for Q1, we see still a solid and diversified mix. And from our market people, we also hear that demand is solid in several segments, and that there are both existing and also new players looking for new tonnage. Looking at the ordering activity of new vessels from yards, the first month of 2024, we do see a continued strong LNG ordering, and we see a certain pickup in the tanker market. Especially LNG carriers is a market where we enjoy a very strong position. We also see a trend that ship owners are looking into more flexible tonnage, meaning vessels are to be less specifically built for one certain operation but designed and operated to perform different sorts of operations. This requires more technologically advanced tonnage, which in general, is favorable to Kongsberg. Many vessels today are ordered with dual fuel option. And we see – we still see many vessels with battery as its secondary energy source. But in Q1, we also saw several vessels being ordered with both ammonia and a methanol to have dual fuel options. Kongsberg Maritime has expanded significantly over the past years and our scope of delivery per vessel has increased exponentially. The portfolio we offer is among the largest in the maritime industry. And as the world shifts towards cleaner energy sources, we stand at the forefront committed to lead the way. Both the International Maritime Organization and EU have introduced regulation to drive down greenhouse gas emission from shipping. And we, in Kongsberg, we embrace this challenge. And during the first quarter of 2024, we have already signed several contracts in that respect. And here, I would like to highlight 3 new LNG-powered container ships commissioned by Matson (NYSE:MATX) Navigation Company, to which we will supply cutting-edge energy-saving equipment and system. These vessels are groundbreaking in several ways. The ships can incorporate advanced technology to reduce fuel consumption and emissions. And in that context, Kongsberg Maritime will deliver battery energy saving system and a comprehensive power management system, all integrated technologies that will optimize the energy usage on Board. In addition, we will provide a comprehensive package of monitoring, automation and control system. This will improve operation safety and the overall power management throughout the ship. I think this contract also illustrated the increased scope in can offer to our customer. The value of this contract represents almost 10x the value of what we typically would deliver to our ship in this segment just a few years ago. Overall, in the last 18 months show that we are on the right track. Together with our customers and partners, we solve technology challenges and continue to make smart improvements to new builds, existing fleet and see installation for the better off the planet. Then to Kongsberg Defense & Aerospace. Kongsberg Defense & Aerospace delivered an impressive 40% growth in revenue in Q1. Mette will come back with more details here. With regards to a new orders, the business area increased its order backlog also in Q1 with a book-to-bill of 1.06. And the largest orders we signed were a contract for new NASAMS systems to Norway and a contract for delivery of Remote Weapon Stations to Patria, a 6x6 vehicles that are to be delivered to Sweden and Finland. The NASAMS contract to Norway was a reacquisition of material that has been donated to Ukraine. And when announcing this contract, the Norwegian Minister of Defense stated that Norway has taken further measures to speed up the acquisition of NASAMS Systems. This was confirmed in March when the Norwegian government announced plans to order critical long-lead parts for the production of NASAMS air defense systems aimed at improving the delivery time for larger units upon signing of new contracts. Further, the Norwegian government launched the new long-term plan on defense in the beginning of this month. I have already touched on this previously, but with regards to NASAMS the government has proposed a significant increase of NASAMS systems in Norway. We have seen a strong backlog growth over the past 10 years and our productive system portfolio are in the strong demand. And I believe we are in a good position for solid order intake going forward as well. The U.S. has approved the budget for a purchase of both Naval Strike Missile and Joint Strike Missile, and we are currently in negotiation with the customer. We expect contract for both missile types to be signed in 2024. And we are currently ramping up to meet the demand, both to deliver on existing orders and future demand. And as such, we are ready to support both current and future customer’s needs. Kongsberg Discovery grew its revenue by 16% year-on-year and delivered a book-to-bill of 1.1. The order intake this quarter consists of a mix of orders throughout the business area. The primary driver is fueling demand for Kongsberg Discovery’s products like the rest of Kongsberg, our security and sustainability. The business area is exposed to these drivers through segments such as ocean-based energy production, commercial fisheries seabed mapping and surveillance of critical infrastructure. The customer base spans from commercial to governmental and naval customer. Sustainable management and protection of sub-sea resources is also important drivers for the business area. And Kongsberg Discovery offers a wide range of products and systems and at this. In the first quarter, the business area signed a contract with an international player for the delivery of the formation monitoring technology. The system is used to understand the impact of seabed remnants to reservoirs and structures installed on the seabed. The field is 2,000 meter water depth and is expected to be monitored for 10 years during development and production. The data from the system will be harvested wirelessly every 3 months via acoustic telemetry from vessels fitted with Kongsberg’s position and communication system. Analysis of the first data sets are expected from earlier 2025 and onwards. And this project is another example on how our technology is applied into new areas. And recently, our newly developed HUGIN Endurance successfully passed its factory acceptance test and [indiscernible] handed over to the customer for final trials. To achieve the first system delivery is a significant milestone for us, and we will continue to develop additional capabilities for this vehicle. HUGIN Endurance enters the market as a game changer. Kongsberg Digital and continue to roll out systems and attract more users to its solutions. The business area recorded a book-to-bill of 1.35 in the quarter. An important driver for the order intake in Kongsberg Digital is the Kognitwin agreement signed with shell in 2022 that generate continuous order intake every quarter. Together with the agreement with Chevron (NYSE:CVX), these contracts form as some basis for Kongsberg Digital’s continued rollout of new Kognitwin systems. And as you can see from the slide, the number of unique users on Kognitwin has reached approximately 24,000. And we currently have a 44 Kognitwins in operation in addition to several pilots with both energy companies as well as companies from other industrial sectors. We also continue to introduce our vessel insight solution to a broad number of vessel owners. And in Q1, the solution is sold to vessels from different shipping segments such as bulker, tankers, passengers and offshore vessels. And with that, I leave the floor to Mette to take us through the financial status.
Mette Bjorgen: Thank you, Geir. And good morning, to all of you joining us for this Q1 presentation. I will now take you through the financial highlights of the quarter, and I’m also happy to once again present strong growth and increased operating profits. Starting off with revenue, Kongsberg delivered a total of NOK11.45 billion in Q1. This is a year-on-year increase of 26%. All of our four business areas contributed with growth ranging from 16% to 40%. Our largest business area, Kongsberg Maritime delivered revenues of NOK5.4 billion, an increase of 17%. This was driven by strong activity both related to newbuilds and aftermarket. All divisions contributed to the growth. Similar to past quarters, spare parts as well as upgrades and reactivation of offshore vessels were important drivers for the aftermarket. Kongsberg Defence & Aerospace came in at NOK4.9 billion, up 40%. All divisions had an uptick in sales in the quarter compared to Q1 last year. NOK500 million of revenues came from one single project with extraordinary high deliveries and must be viewed as a one-off. The Missile division continues to be an important contributor to the growth. In June, we will open our new missile production facility. This will increase capacity substantially. Keep in mind that the move to an opening of our new production facility combined with natural facing in our projects will somewhat slowdown growth for the Missile division in the next two quarters. For Kongsberg Defence & Aerospace, I would also like to highlight the Land Systems division that produce our Remote Weapon Stations. In Q1, we saw a significant increase in volume versus the same quarter last year due to both improved capacity utilization and solid project execution. Kongsberg Discovery achieved NOK1 billion in revenues, an increase of 16% year-on-year, deliveries of mapping and positioning systems to both commercial and public customers were the drivers in another solid quarter. Kongsberg Digital delivered NOK390 million revenue, where NOK199 million was recurring. The 34% growth is mainly attributed to activity in maritime simulation as well as increased number of Kognitwins in operation. Looking at the operating results, the group achieved a quarterly all-time high of NOK1.46 billion compared to NOK1.02 billion in Q1 ‘23. The EBIT margin came in at 12.8%, up from 11.2% last year. The largest contributor was Kongsberg Maritime with NOK0.75 billion and a corresponding margin of 13.9%. In Q1 last year, EBIT was NOK0.51 billion with a margin of 11%. The improvement comes as a result of favorable project mix, increased volume and efficient project execution. Kongsberg Defence & Aerospace delivered NOK0.7 billion in EBIT and a margin of 14.2%. This compares to NOK0.54 billion and a margin of 15.4% in Q1 ‘23. The downward margin trend is as expected due to the change in project mix. Kongsberg Discovery experienced a slight decrease in EBIT coming in at NOK0.11 billion compared to NOK0.12 billion last year. The EBIT margin was down from 12.8% to 10.9%. The lower margin is mainly due to increased development activity related to one specific project. Kongsberg Digital had a negative EBIT of NOK90 million. Looking at the corresponding quarter as well as Q4 last year, we see an improvement in the profitability as a result of scale. We continue to invest in product development and sales and marketing activities, but our ambition remains that Kongsberg Digital will be EBITDA positive in the second half of 2024. Net working capital increased by NOK0.5 billion on a group level in the first quarter. This was driven by payments to sub-suppliers on the back of the large customer prepayments we received in Kongsberg Defence & Aerospace in Q4. Looking at the net working capital development through the past year in the business areas, we see that working capital in Kongsberg Defence & Aerospace is typically the reason for major fluctuations in the group’s working capital. In this business area, the payment structure in the large contracts can have significant impacts on an isolated quarter’s development. Working capital as a percentage of revenues in Maritime and Discovery has been relatively stable over the past three quarters. We ended the quarter with a solid cash position. We continue to invest at a relatively high level compared to previous years. And the main part of this is still related to our new missile facility and manufacturing expansion. We have generated a record EBITDA at NOK1.82 billion, and we maintain our focus on working capital in a period of high growth. Cash at the end of the quarter was NOK6.58 billion, up from NOK5.98 million at the start of the year. In Q2, we will continue with our investments, if approved by the Annual General Meeting next week, we will pay out ordinary dividends of NOK7 per share in May, corresponding to approximately NOK1.2 billion. The remaining dividend of additional NOK7 per share is proposed to be paid out in October. Our associated companies Kongsberg Satellite Services and Patria both delivered revenue and EBIT growth compared to Q1 last year. Kongsberg Satellite Services delivered NOK532 million revenues with an EBIT of NOK100 million. Patria reported revenues of NOK103 million and NOK1 million in EBIT, which is an improvement from Q1 last year. As always, I would like to remind everyone that Kongsberg recognition of Patria’s result in Q1 is made up of January and February, while Q4 is from September to December. With that, I will leave the floor to Geir for some final remarks.
Geir Haoy: Thank you, Mette, for presenting the solid figures. I think I will summarize. I think we have been through most of the business areas situation and outlook. But let me summarize saying that we continue to see strong demand throughout our portfolio. We are exposed to the major drivers aiming for a more secure and sustainable world. And with regards to security, this also impacts Kongsberg Maritime, Kongsberg Discovery and Kongsberg Digital. Security is more than defense, supply of food and energy are also areas where we are offering relevant technology. And with the drive for a more sustainable world, we experienced strong demand, both for solutions allowing new energy sources as well as solutions that enable us to utilize energy more efficient. We need to gain more knowledge of our environment and our available resources and at the same time, exploit how to utilize our resources in a more sustainable manner. Kongsberg, with our advanced and innovative portfolio of technologies will continue our sustainable growth path going forward. And then finally, I will also like to encourage you to follow our Capital Market Day. That will be on the 4th of June. It will be a hybrid event, allowing both physical attendance as well as through the webcast. And then now, I will like to open up for questions from our viewers.
A - Jan Hoff: The first question is from Hakon Fuglu, SEB. Can you elaborate a little bit around the strong margin in Kongsberg Maritime and whether this is a sustainable level going forward?
Geir Haoy: I think we have a very solid quarter, first quarter. And I think this is – as we have said for – said many times, the margin will fluctuate also in Kongsberg Maritime throughout the quarters. I think we said this quarter, we had strong influence on spare part sales and some good projects in the aftermarket. So, of course, we will work hard to maintain margins, but I expect that it will also fluctuate in the coming quarters.
Jan Hoff: With regards to Kongsberg Defence & Aerospace, the margin this quarter was approaching your ‘25 target of 17%. Is this a result of a more unfavorable project mix delivered this quarter? And is this the direction forward?
Mette Bjorgen: Yes, I can answer to that. I think we have said that the project mix in Kongsberg Defence & Aerospace is moving towards our targeted level. Of course, this will, as we have seen previously also fluctuate between the different quarters. But I think the project mix this quarter is as expected and as we have planned going forward.
Jan Hoff: Thank you. And then a question from Hans-Erik Jacobsen, Nordea. The report states that about NOK500 million of the growth in Kongsberg Defence & Aerospace is due to abnormal high delivery volumes during the quarter. And that this effect is isolated for the first quarter ‘24, can you comment a little bit around this?
Mette Bjorgen: Well, I think that we have seen, and I also mentioned in my presentation that we have had a very strong deliveries in the first quarter. And for this particular project, we saw a NOK500 million extraordinary effect. And these deliveries will not continue in the next few quarters. So, I think I will leave it at that and…
Geir Haoy: This was a speedy project, I would say.
Jan Hoff: Thank you. That concludes the question from the viewers – sorry, we received one final question here in the end. How will the opening of the new missile factory affect Kongsberg Defence & Aerospace’s margins?
Mette Bjorgen: I think in the short-term, as we have said, we are moving our production. We have to start up a completely new facility. It takes time to phase in the project and get the full capacity. And I think we are going to spend a couple of years to ramp up to full capacity in this new facility. As such, we expect production unit costs to go down over the medium-term, but I think that the immediate effect will be somewhat limited.
Jan Hoff: Thank you. That concludes the questions from the viewers.
Geir Haoy: Okay. So, once again, remember our Capital Market Day, 4th of June. I look forward to see you there. And thank you for watching our presentation for first quarter. Thank you.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.