Kongsberg Gruppen U/Ads

Good morning and welcome to the presentation of Kongsberg's first quarter 2025 results. Today's presentation will be given to you by President and Chief Executive Officer Geir Haug, as well as Executive Vice President and Chief Financial Officer Mette Toft-Bjørgen. This is a webcast only presentation and questions may be submitted through the webcast frame. If journalists who are requesting interviews with the management after the presentation are requested to contact the head of communications, Ronny Lee. And with that, I want to welcome Geir Høy to the stage.

Yes, thank you, Jan-Erik, and good morning, everyone. Kongsberg operates in a rapidly changing world. This requires us to be both agile and adaptable. In 2025, uncertainty around international framework conditions have placed challenges on international trade. This demonstrates the importance of cross-border cooperation and a global footprint. Today, we are presenting the first quarter results, but I think it is important to remind everyone that we have a long-term focus with high ambition. At our Capital Market Day last year, we stated an ambition that we aim for at least 120 billion revenues in 2033. The uncertainty we are experiencing today is a reminder that during such a long period, we will experience changing conditions. The current environment creates uncertainties for most companies. However, our job as management is to handle short-term turmoil and at the same time navigate towards our long-term ambition. Despite the current turmoil, I am confident on our long-term trajectory. Maritime transportation is the backbone of global trade. More than 80% of the world's goods are transported by sea. This underlines its unique importance in global logistics. Maritime activities currently account for around 3% of the global greenhouse gas emission annually. The International Maritime Organization has aggressive targets to reduce emissions from the industry. However, the global supply of green energy is not sufficient to meet the needs of all industries and we must increase energy efficiency. As an ocean technology expert, we are uniquely positioned to be a frontrunner in this transition and ensure that we find solutions to make energy consumption more efficient. Ongoing war in Europe and conflicts elsewhere in the world demonstrates the importance and need for increased security. For consumer management, the consumer management have recently met with important stakeholders both in the EU and the US. We experienced that we play an important role and are highly relevant in the dialogue on European and Transatlantic security, which is more important than ever. The European Union has placed defence and security at the top of its agenda, and Kongsberg is recognised as a trusted partner in shaping the future of European defence closely aligned with NATO. In the US, Kongsberg has a solid and well-established set-up with partners, production and supply chain. Last year, we announced that we will build a new missile factory in Virginia, and we will invest further in the U.S. going forward. We have been and are a long-term and strategic partner on critical defense capabilities to the U.S. Army, Navy and Air Force. Kongsberg offers a range of solutions that can directly respond to the current security needs among allied nations. I would like to mention some of them before I dive into the quarterly results. Within the sea domain, we have the only fifth generation strike missiles, which can be operated from combat aircrafts, naval and coastal platforms. We are world leading in subsea monitoring and submarine warfare. In the land and air domain, we deliver the world's most used medium range air defense system, NASAMS. And I'm very proud that this system so far had destroyed almost 1,000 Russian crews, missiles and drones, with a hit rate of 94% protecting people and critical infrastructure in Ukraine. In the space domain, we are a provider with solutions from launch, satellite payload, as well as world buildings ground station infrastructure for downloading satellite data. And recently we also launched our first maritime surveillance satellite. We bring a unique and strong defense portfolio to the table, which will be fueling our long-term growth going forward, going together with our maritime and subsea solutions. Turning our attention to the quarter, we deliver a very solid start to 2025 with order intake above 20 billion, in addition to growing revenues and operating results. We made several strategic steps during the quarter. Kongsberg Digital's maritime portfolio was integrated into Kongsberg Maritime, enhancing our ability to deliver comprehensive solutions for the digitalization and decarbonization of the maritime industry. We have also completed the sale of our steering gear and rudder business to Norvestor and strengthen our underwater technology base through the acquisition of Nuxis Technologies. When it comes to order intake, all business areas delivered book the bill above 1 and are increasing their order backlogs. Consumer Maritime continues to build backlog with solid signing both for deliveries to new vessels as well as to existing fleet. We continue to see a very diversified order intake from the new building segment with deliveries to energy carriers and offshore vessels being the two largest segments. The LNG contracting is still driven by the large Qatar project, while the offshore contracting typically relates to new OSV vessels. In consumer discovery, we continue to experience strong demand for our underwater technologies. And in Q1, we signed orders for deliveries of six new Huginn autonomous underwater vehicles. Sustainable management of ocean resources and security are important drivers for Kongsberg discovery. The demand for solutions to better protect and understand the ocean space from commercial actors, public administration and defense customers is increasing. We also see a positive development for our drone detection solutions. Kongsberg Defense and Airspace has also continued to grow their order backlog. Many of the major orders the past years have been related to missiles and air defense, but it is important to remember that we are involved in more than this. Maintenance, repair, and overall has been an area of focus for us for several years. And in Q1, we signed a new important contract when the Norwegian Defense Material Agency chose us for the maintenance and the future upgrade requirements of the Norwegian F-35 aircraft. The agreement has a long-term perspective and is a result of close cooperation between the Norwegian Armed Forces and Kongsberg. Another growing area within Kongsberg Defence and Aerospace is space. Close to three years ago, we acquired the small-sat producer Kongsberg Nano Avionics. And at the end of Q1, SpinLaunch selected Kongsberg Nano Avionics as its exclusive satellite supplier for its low Earth orbit broadband communication constellation, the Meridian Space. The contract is for delivery of 218 microsatellites. In March, we also launched our first own new satellite. The satellite was launched from the Vandenberg Space Force Base in California, which marked a milestone for Kongsberg. In Q1, we added a new user of naval strike missile when we signed the delivery contract with Denmark. Denmark will integrate the missile on one of their frigate classes. And the contract was valued at 2.1 billion. An important milestone was also met when the US Air Force expanded their initial Joint Strike Missile Order with another 70 million US dollars. Consumer Defence and Aerospace is currently in a final negotiation with a new JSM customer for a contract valued at around $6 billion, expected to be concluded this summer. Later this year, we will also start the construction of our new missile production facility in the US. This comes in addition to the recently opened new facility in Norway, as well as the facility which is under construction in Australia. For the remaining year, Kongsberg has already secured 30 billion worth of orders for deliveries. We are exposed to markets in demand for our technology, We are continuously adapting and we have a worldwide network of both own business and partners that together found a solid foundation for continued growth. So with that, I leave the floor to Mette to take us through the financial status.

Thank you Geir. Good morning everyone. It's a pleasure to start 2025 by reporting solid financial performance for Kongsberg. We have made some structural changes since our last reporting, so before we dive into the figures, I would like to go through these changes for more clarification. In Q1, we completed the sale of our steering gear and rudder business to Norvestor. In 2024, this business generated revenues of approximately 950 million NOK. This is a mature business with an EBIT margin close to Kongsberg Maritime's average EBIT margin. The gain from the sale of the steering gear and rudder business made a positive impact of 1.05 billion NOK, both to revenues and operating results in the quarter, and is reflected in other activities. As announced earlier this year, we have transferred Kongsberg Digital's maritime portfolio to Kongsberg Maritime. In 2024, this business had operating revenues of approximately 600 million NOK, with an EBIT close to zero. We have also increased and strengthened offerings from Kongsberg Discovery through the acquisition of Naxis Technologies. This company achieved operating revenues of 124 million in 2024 with a solid margin. Now looking at the first quarter, Kongsberg delivered a total of 14.62 billion in revenues. Adjusted for the gain of the sale of our steering gear and rudder business, the year-on-year increase is 19%. All business areas contributed to the growth. Kongsberg Maritime delivered revenues of 6.74 billion a year-on-year growth of 25%. The growth was driven by strong activity both related to the new building and aftermarket. In the new building market, the contribution from the LNG carrier segment continued to be solid in the quarter. The aftermarket is still strong and accounts for 57% of the revenues in the first quarter. Kongsberg Defence and Aerospace came in at 5.38 billion, up 9% from Q1 last year. Last year included 500 million in revenues from a project with extraordinarily high deliveries. Adjusted for this, the growth rate is 22%. The largest contributors to the growth were air defence and missile projects. Kongsberg Discovery achieved 1.36 billion revenues, an increase of 29% year on year. The main drivers for the increased revenues were high activity related to autonomous underwater vehicles, drone detection radar, as well as deliveries of mapping and positioning systems. The contribution from AUVs will vary between quarters due to the timing of project milestones and deliveries. Looking at operating results, the group achieved a quarterly EBIT of 2.89 billion NOK. Adjusted for the sales gain, operating results is 1.84 billion NOK representing an underlying EBIT margin at 13.6%. This is an improvement compared to last year of 382 million and 0.8 percentage points higher EBIT margin. All business areas improved operating results compared to last year. The largest contributor in nominal terms was Kongsberg Maritime with 919 million and a corresponding margin of 13.6%. In Q1 last year EBIT was 753 million and the improvement comes as a result of increased volume and solid project execution. Kongsberg Defence and Airspace delivered 848 million in EBIT and a margin of 15.8%. This is compared to 703 million and a margin of 14.2% in Q124. The improved margin is a result of strong project execution and favourable project mix in the quarter. As previously stated, Defence margins will fluctuate depending on project mix. The overall mix in our current backlog confirms our previously stated expectations on defence margins going forward. Kongsberg Discovery reported a 240 million and a margin of 17.7%. This is up from 114 million and 10.9% margin in Q1 last year. Favorable project makes strong project execution and increased volume contributed to the increased margin. In addition, last year was negatively affected by high development costs related to one specific project. The cash conversion in the quarter is strong, driven by a solid EBITDA and relatively stable net working capital. Both Kongsberg Defence and Aerospace and Kongsberg Discovery ended the quarter with a working capital position approximately in line with last quarter. Kongsberg Maritime improved net working capital by 0.4 billion in the quarter. Part of the improvement is related to structural changes, but also reduced working capital as a percentage of revenues has contributed the last couple of quarters. Total contribution from associated companies were 13.5 million in Q1. Our two largest associated companies are Kongsberg Satellite Services and Patriot. Kongsberg Satellite Services delivered revenues of 556 million in Q1, which is a year-on-year increase of 4%. First quarter sees some impact from delays in several launches, which is quite common in the industry. The small satellite market is increasing with a significant growth in number of satellites. With KSAT's solid market share, we expect the revenue growth to pick up going forward. EBIT in the quarter is 94 million with a corresponding EBIT margin of 16.9%. The EBIT margin is affected by investments which is important to deliver on the solid 5.2 billion backlog. PATRIA started the year with a 5% revenue growth compared to last year. The growth was primarily driven by deliveries of armoured vehicles. Note that we, as previous years, only include numbers from January and February for PATRIA. EBIT is in line with the typical EBIT profile we see from PATRIA, with most of the profits towards the end of the year. Now going forward, we expect Patria to grow further with the same seasonality effects that we have seen previous years. Patria's order backlog is 2.4 billion euro. The backlogs from our associated companies are not recognized in Comspur's reported backlog. And with that, I'll leave the floor for our guide for some final remarks.