Kongsberg Gruppen U/Ads

Good morning and welcome to Kongsberg's presentation of our third quarter results. This is a live webcast and you may submit questions through the webcast frame. The results today will be presented by President and CEO Geir Høy, together with Executive Vice President and CFO Mette Toft-Bjørgen. And with that, I'll leave the floor to Geir.

Thank you, Jan-Erik, and good morning and welcome to our third quarter presentation. It is a pleasure to report that we have completed another very solid quarter with growth in all our business areas. We are developing on plan. Our growth story continues and our profitability is solid. The strong profitability with an EBIT of almost 1.9 billion Norwegian krones highlights our ability to scale as the operating revenues continue to increase. We experience increased demand for our systems and solutions, both within the defence and the ocean space technologies. Activity is high throughout the entire group, and the record high order backlog of almost 97 billion forms the basis for a further growth. To stay at the top of the curve and prepare for the future, we are investing in new capacity. This includes new employees, facilities, and further optimization of production and processes. This quarter, we have announced that we are expanding our missile production to the US and Australia. These are important milestones and reflects the growth and the potential we see going forward. The world is changing and so are we. Security and defense are top priorities in Norway and also in allied countries, leading to a strong demand for our products and services in our defense domain. At the same time, the maritime and the ocean space industry is undergoing a transition towards net zero, implying zero emission energy sources and more efficient energy utilization. This leads to increased demand for technology directed towards the maritime domain, including ocean surveillance, monitoring, seabed mapping among several areas. All in all, I'm very satisfied with this quarter. Our financial figures and performance are strong. We are ramping up to meet future demand and our markets are growing. I am therefore confident that Kongsberg has a solid foundation for further growth. Congressman Maritime delivered an extremely strong quarter and was the main contributor to both growth and profitability during the quarter. On top of a 30% revenue growth, book to bill came in at 1.07. We see solid growth in our deliveries to new vessels from segments such as container and more general merchant vessels, tankers, LNG carriers, and also other high spec vessels. The service and aftermarket business also continues with an increased scope of deliveries. Total order intake in Kongsberg in the quarter was almost 13 billion. And Coimbatore Maritime was also the main contributor, increasing order intake by 1.5 billion or 26% compared to the corresponding quarter last year. The number of annual contracted vessels from the yards have been relatively stable during the past years. However, if we analyze this closer, we find that the mix of orders have changed towards more high spec vessels, as well as generally higher technology content in the volume segments. We see that high spec areas such as LNG, naval and offshore in total accounts for more than 60% of our new build order intake. Looking at today's markets, it seems like the favorable Kongsberg maritime market will continue. Only two days ago, we announced an order worth 800 million of delivery equipment to 10 new PSV vessels. This is the first contract in almost 10 years from this segment. And the value is approximately three times the average value compared to the past offshore boom. I think this is yet another example of cross-sales effect from the Rolls-Royce Commercial Marine acquisition. The offshore fleet in general is aging, and to make sure these operations are performed in line with the regulation and efficiency goals, more new assets are needed going forward. Currently, the order books at the yards to the total fleet is at a historic low level. And seen together with the day rates in this segment, it is a solid indicator of future contracting. The offshore segment is only one out of several segments where we expect strong and long-term demand for our high-tech energy efficiency solutions. However, as we have commented on before, it is important to remember that the shipyard capacity currently runs on high utilization, meaning the lead time are bottleneck for general fleet growth. And then our ambition is to substantially outgrow the general growth of the fleet. Consumer defense and aerospace order intake was slightly above Q3 last year, with 4.7 billion. The largest order was the Joint Strike Missile Order from Australia. So Australia is now the fourth country ordering the JSM. Two weeks into the Q4, the government of the Netherlands announced plans to acquire NASEMS and Nomad's air defense system. in a deal expected to be valued at approximately 11 billion Norwegian crowns. The Netherlands purchased their first NASEM units back in 2006 and will now expand their NASEM capabilities and complement it with a new Nomad system. The NOVA was launched at EuroCentury in mid-June this year, and it's a highly maneuverable air defense system, especially designed to protect troops in movements. The contract is expected to be signed later this quarter. Kongsberg Discovery delivered a book-to-bill of 1.1, and among the orders signed in Discovery this quarter were four Huginn AOVs. The primary drivers fueling demand for Kongsberg Discovery's products, like the rest of Kongsberg, are security and sustainability. The Huginn family is a great example of a system with demand generated from both these macro trends. Huginn is a multi-role vehicle capable of collecting high resolution data for commercial, scientific, and defense application. And since the introduction in the 1990s, Huginn AUVs have completed more commercial service than any other AUV and continue to deliver world-leading performance. Huginn is and will be an important contributor for Kongsberg Discovery's revenues and profits going forward. We have a solid pipeline of projects already in our order books, and we are experiencing increased demand for the system, both from civilian, but also from defense customer. We are constantly evaluating our portfolio of businesses. And in September, we signed an agreement to sell our steering gear and other business to a fund managed by the Nordic private equity firm, Norvestor. The steering gear and the rudder business is currently a part of the Propulsion and Handling Division and represented approximately 850 million revenues into 2023. Another important strategic agreement signed in the quarter was the initial development contract with the Norwegian Defense Materials Agency for the new supersonic strike missile. The new supersonic missile is a collaborative German-Norwegian development project where Kongsberg has the project lead. The anti-ship missile will be complimentary to the NSM. This will enhance the armed forces deterrence capability and improve the ability to engage long range targets. The new missile will be operative from mid 2030s. In Q3, it was announced that we are increasing our production capacity to include new facilities in both Australia and the United States. The Australian government has stated that they intend to fully finance a missile production and maintenance facility. And the new facilities in Virginia, US, and New South Wales in Australia will be equipped to assemble, upgrade, and repair both naval strike and joint strike missiles. These two new facilities are supported by the strong international demand we see for both missile types, and we will be able to offer crucial, close to customer production and maintenance capabilities. So with that, I will leave the floor to Mette to take us through the financial status.

Thank you, Geir, and good morning to all of you joining us for this Q3 presentation. I'm happy to once again present strong growth and increased operating profits for Kongsberg. And I will now take you through the financial highlights. For the third quarter, Kongsberg delivered a total of 11.92 billion in revenues. This is a year-on-year increase of 19% and all four business areas contributed with growth ranging from 8 to 30%. Year-to-date, we have achieved revenue growth at 22%. Our largest business area, Kongsberg Maritime, delivered another quarter with record revenues at 6.49 billion, an increase of 30%, or 1.5 billion in absolute terms. This was driven by high activity, both in terms of deliveries to new builds, as well as spares and upgrades to the existing fleet. All divisions contributed with growth. Kongsberg Defence and Aerospace delivered 4.26 billion revenues, up 8% compared with Q3 last year. In June, we opened our new missile production facility, which will increase our capacity substantially. As previously stated, the move to and opening of our new facility, combined with natural and agreed phasing in our projects, will temporarily slow down growth in the missile division. We see this unfold as planned in the third quarter. Similar to Q2, the largest revenue contributor among our projects in the third quarter was remote weapon station deliveries to the US Army through the CROWS program. We are currently delivering on a combination of orders from both the CROWS 4 and the CROWS 5 framework agreements. CROWS 5 was signed two years ago and so far we have received orders worth approximately 270 million out of the 1.5 billion US dollar framework agreement. Kongsberg Discovery achieved 1.12 billion in revenues, an increase of 21% year-on-year. Deliveries of Huginn AUVs and mapping and positioning systems both to commercial and governmental customers were the drivers in another solid quarter. Kongsberg Digital delivered 422 million in revenues, an increase of 17% compared to last year. 227 million was recurring revenues. The group achieved a quarterly operating results of 1.87 billion compared to 1.27 billion in Q3 2023. The EBIT margin came in at 15.7% up from 12.7% last year. The largest contributor was Kongsberg Maritime. Kongsberg Maritime achieved 1.11 billion and a corresponding margin of 17.1%. In Q3 last year, it was 0.62 billion with a margin of 12.3%. The third quarter typically delivers higher margins due to holiday effects. In Q3 this year, we have also approximately 100 million one-offs related to reduced risk in specific projects. The underlying margin is still very solid. This is attributed to significant top-line growth favorable project makes along with strong project execution. Kongsberg Defence and Aerospace delivered 0.69 billion in EBIT and a margin of 16.2%. This compares to 0.59 billion and a margin of 15.1% in Q3 2023. The improved margin is a result of strong project execution de-risking and reaching project milestone. Project mix and project facing impacts the margins in this business area. Kongsberg Discovery delivered EBIT up 12% from Q3 2023, coming in at 167 million. The EBIT margin was down from 16.1% to 14.9%. Project Mix is the main driver for the margin changes. Kongsberg Digital had a negative EBIT of 43 million compared to negative 84 million last year. The business area reached the targeted positive EBITDA in Q3. Net earnings for Kongsberg was 1.37 billion in the quarter, resulting in earnings per share at 7.72 NOC and year to date at 20.88 per share. From our associated companies, Kongsberg Satellite Services delivered 20% revenue growth compared to Q3 last year and their strongest quarterly EBIT so far this year, both in relative figures and margins. Patria delivered revenue in line with Q3 last year and shows 14% revenue growth year-to-date. EBIT is weaker than last year, mainly due to positive one-offs in Q3 last year. Now both these companies have strong order backlogs and are operating in growing markets. Net working capital ended at negative 60 million this quarter. The strong working capital position is driven by customer payments received in Kongsberg Defence and Aerospace. In this business area, deliveries and payment structure in the large contracts can significantly impact on an isolated quarters development. This is the major driver for the fluctuations in the group's working capital over the last quarters. Working capital as a percentage of revenues in maritime and discovery has been relatively stable year to date. We ended Q3 with a solid cash position of 7.1 billion up 1.2 billion from Q2. EVTA came in at 2.25 billion and we maintain our focus on working capital in a period of high growth and see stable development quarter over quarter. Investments were lower in Q3 compared with the previous quarters as the new missile production facility at Kongsberg has opened. However, with the new initiatives announced in the quarter and continued need for more capacity, we expect the level to increase over the next quarters. As we communicated at our Capital Markets Day in June, Kongsberg is a long-term company subject to long-term market trends and drivers. Our order backlog extends into the next decade and is expected to grow further. We will continue to invest to secure our ability to deliver going forward. Scalability through strict cost control and efficiency targets is key to deliver profitable growth. This resulted in strong cash conversion through solid results and stable networking capital. And with that, I'll leave the floor to Geir for some final remarks.