Kongsberg Gruppen Asa

We will hold the briefing up here for about 15 minutes. After that, we have quite a large group on the webcast, so we will start by taking questions via the webcast, then questions from the room, before we open up for one-to-one interviews at the very top. So that's the plan. Eivind Reiten, please.

Welcome to you as well. I will start as board chairman by saying that it is a very important part of a board's responsibility to ensure that the company is organized in the best possible way for the most and best possible value creation. That is why we do, in accordance with time to time, evaluations of the organization we have also had in Kongsberg. It has been successful and good so far, but now we have come to a point where we have concluded that further growth and development will be even better justified by Kongsberg Maritime getting as a separate listed company, while Defense, Aerospace and Kongsberg Discovery continue as the Kongsberg Group. And the picture you see now is in many ways very much in response to why we have come here. We have a period now behind us for a few years where the company has grown much more than what is usually the case for a company. And the size of each of the two areas we are talking about today is significantly larger than what the whole Kongsberg group was just a short time ago. It is driven, as we have often communicated, What we have said before, to have strength and safety. And right now, in the period we are in now, it is driven by safety and to have strength with safety first. So it is the enormous growth that has made, as you can see, that each of the business areas is now so large alone that they have a very good foundation for standing on their own two feet. In addition, we went through a strategic plan which draws the perspective forward to 2033, and we have communicated that we then see it realistic for us that the company can make a total of 120 billion. So it's not like we have a very strong growth behind us and that it now fades out. No, that growth continues. And in that picture, we as the government clearly believe that it will be a strength that Kongsberg Maritim and Forsvarsbyten will now develop as separate companies. What has happened in parallel with this growth is, of course, that the units have become more independent of each other, more autonomous. We have continuously moved the result responsibility out of line to ensure that the result responsibility is where it should be. Gradually, these companies or these units have grown to become are relatively independent. And we also see, due to the fact that they have different business models, meet customers in completely different ways, that the synergies that have been between them have become less and less. They are not zero, but they are too small to justify that we now keep them together. So who would... The reasoning behind this is, as I have already mentioned, a sharper strategic focus. Here we now get leading groups that explicitly should concentrate on either defence and discovery operations, or should concentrate on maritime. We get directors who can use all their time on the focused operations and not be directors for a whole conglomerate. We believe it also gives significant and greater power to implement. And we also see that the increasing degree of different regulatory conditions on the increasingly more complex international arena, and the fact that they can also meet there as either a purely maritime association or as a defence association, we think will be a clear advantage. In summary, we do this to strengthen the two companies' competitiveness. And we believe at the top of that, even though we have an excellent handling of our finances and our balance today, we believe that the fact that Maritim and the defence industry now have the responsibility for their own balance, to meet the financial markets and stock markets directly, will also contribute to a focused focus. When we talk more technically about how this is done, it is done as a fission. New shares will not be issued in connection with this, but each shareholder in the Kongsberg Group or The shareholder in the Kongsberg Group will get one share in Maritim for each share they own in the Group today, in a one-to-one relationship. This means that at the time of fission, the shareholder's relationship in the two businesses will be exactly the same. There is no need for any expansion or other capital collection in connection with this. It is such a pure vision that I think it is possible to imagine. The timeline, as you can see in this picture, we are where we are today. And up to today's knowledge, we have also had dialogue with our largest owner, the state. at the Department of Industry and Fisheries, and as you can see, they have expressed support for this solution. They will, of course, have a final stand on this when they get the fission prospect, but we are very happy with the good dialogue we have had with them and the support they have given to this. So, the fission plan, will come after the plan in December, with the aim of an extraordinary general assembly in the last half of January, where they will take a stand for fission. In connection with the fourth quarter and the annual results for the Kongsberg Group, we plan to carry out more in-depth insights into each of the new units, so that analysts and others can get a better picture of the numerical relationship in the two businesses. Naturally, there are very few people who have been involved so far, so there are probably many who are interested in more data on how it will look like, and how it will look like. We will return to that in connection with the fourth quarter of the group. And then there is the idea that we will come with listing prospect, that prospect, in April, with the aim that the first trading day for Kongsberg Maritime, as an outfissioned unit, will be once towards the end of April, as our timetable holds, and we have all intentions that it should. Finally, I would like to say that in connection with the fact that we will be back with more information in February, we will certainly be able to say more about the leadership composition in the companies. What we are now communicating is that the current leaders of Maritim Lisa Edvardsen Haugan, she will be the new head of the company in Kongsberg Maritime. And Eirik Li, who is the head of the defense business today, will be the head of the company in that part of the business from the vision point of view. In addition, our current financial director, who has been in swing earlier today, Mette Toft-Bjørgan, she... will go over and become financial director in Kongsberg Maritime, while we are looking for a new financial director in the defence business, which we will come back to together with the rest of the leader cabal. And so it is in this that the next speaker on the list, which is the head of the board, Geir Hoau, he has now led the company in When fission happens for ten years, in this enormous growth, he goes out as a chairman from the fission time. So there are probably some who are wondering what Geir is going to do after that. He will probably get more than enough to do, but we will get back to that before this famous fission time, which is after the plan in April. But onward, Geir. Du går litt nærmere inn på de to forretningsområdene.

Ja. God dag. Velkommen. Eh... Yes, and as Eivind mentioned, we will return to these two new units in February, in connection with the fourth quarter, so I have not intended to go into too much detail here, but try to give some overwhelming descriptions of these new units. And then perhaps in relation to what is unique and their markets and market positions. And then I thought I'd start with Kongsberg Maritime. It's perhaps the company I know best, even though I've led Kongsberg for 10 years. But I come from Kongsberg Maritime. But a lot has happened in Kongsberg Maritime since I was there as a leader. Kongsberg Maritime has grown, as Erwin pointed out, very well. They have doubled in size. They have had a significantly larger portfolio, and are the Maritime company in... Norway, Europe and the world that has the most complete portfolio to deliver to the maritime sphere. Today they serve about 30,000 ships sailing today, 24-7. That's about a third of today's total fleet. So that's a significant portfolio to work with. What the observer sees here is that it says 200 years of heritage. It has often been related to our defense business, which has also been more than 200 years. But if we, after the purchase of Kongsberg, or Commercial Marine in Rolls Royce, We have seen in history that we have returned to the 1800s with the Brown Brothers, a Scottish marine technology company, and Kameva, which probably some of you remember, which was a Swedish pioneer in maritime industry. So the 200 years of heritage also applies to maritime. I mentioned the purchase in 2019 of CM, then we doubled KM overnight, more or less. And I would say that from 2019 and a successful integration of CM, we have become a much larger and more solid Kongsberg Maritime, which has a very solid order reserve today, more than a year's turnover of almost 28 billion. And, as you may have heard from the quarter presentation today, a significant increase in the third quarter, which promises that the Kongsborg MyTeam can now stand in front of a significant growth in the future. I want to emphasize that the portfolio of KMT, but also the domain knowledge that KMT has, is quite unique, I would say, and will be and has ambition and will be a driver in relation to the transformation that we see has started in the maritime segment. And to mention that they also have activities within Naval or Marine. If we look at the long-term trends, what we have talked about many times is energy efficiency, digitalization and security. This applies to the maritime industry. And this is something that KMT has had on the agenda every day. As long as I have been there, we have worked with technological solutions to improve the operation, make it more energy-safe, and now the digital layer is coming in more and more. And then you see some graphs here, and it's a little interesting, it's something we're following up on. This is the fleet order book, which is quite low now, as we see, also historically low. And we also see that the owners are issuing new orders. This is not unusual in a market where we see cyclical swings. Especially if we look back at the 2000s, there was a different order situation. But it is also related to the uncertainty around this energy transition, but also regulatory requirements. But when we say that, we also see that this is also about to change, and we see an outlook, and not least, as I said, the order entry for the third quarter is significant. We also see the age of the tonnage that we are serving today. It is getting older and the age of the tonnage is about 23 years. And it is not sustainable over time, so that also means that there is a need for new tonnage afterwards. And when it comes to decarbonization, it's not just related to fuel, but it's to work with several elements on board these ships. It can be ship design, it can be propulsion, it can be digital solutions. Here you have to work with many things at the same time to decarbonize both existing and new ships. The maritime market is global and fragmented, and I would say that the maritime market has a very unique position with its domain knowledge and portfolio. Kongsberg Maritime is the part of Kongsberg today that has the widest footprint. They are located in 35 countries. There are many offices out there that serve our customers, both in terms of new buildings and operations and the operation of these ships. What we also see is that the vehicles become more complex. There will be higher demands for technical solutions, and which also again, I would say, undermines the differentiator to KM, and that is the ability to integrate effectively across mechanical, electrical, control and digital systems. That is the competence of KM and the differentiator in relation to other suppliers. As you can see on the map, we are within the value chain of the maritime fleet, including the navy, and Dekker actually has solutions for this specific segment, which makes us relevant for the entire maritime sphere. So if I look at what will now consist of Kongsberg Defense and Aerospace and Kongsberg Discovery, it will be a very exciting company with leading technologies within its segments. And as the CEO was saying, the world looks different today than it did just a few years ago. But the focus of Kongsberg Discovery and Kongsberg Defence and Aerospace will still be to protect humans and the global infrastructure. As I said, the world is in a period where safety and sustainability are not only important, but fundamental drivers for progress and robustness in the coming decades. We believe in that, and therefore, as the board member said, Focusing even more on management within these segments, makes us have a solid focus on addressing the opportunities that lie ahead. Kongsberg is uniquely positioned and has deep expertise in advanced technologies. These capacities have often been used to cover a gap in Norway's capacity. But not only in Norway, we are also a strategic partner for other nations around the world, where we deliver critical systems for land, sea, air and space. The defence market is growing, and there are also strong changes. And it sets completely new demands for us as suppliers, that we have a much faster innovation pace. Not to mention that we also combine civilian and multi-purpose technology to address these challenges. Through Merge, Defense, Aerospace and Discovery, we combine military technology with commercial innovation. and to come up with new solutions that cover the areas I just mentioned. Kongsberg will also continue to deliver, of course, on a fantastic order reserve of 115 billion. That in itself is a formidable task, but we have ambitions beyond that. And that is, of course, to continue the growth that we have talked about earlier. And that means that we must have 100% focus on just the opportunities that lie ahead. The defence industry is growing, as I said. The western countries are increasing their investments to meet the new security challenges. The USA, Europe and the allied countries account for about 80% of the global investments we see today. At the same time, this market dynamic is changing rapidly, and recently we have seen these ongoing conflicts that have shown the effect of these new capabilities. In the last ten years, Kongsberg's growth has far exceeded the overall defense development, and as the graph shows here, the order reserve in Kongsberg has increased almost ten times since 2016. And if we look at a market that has grown twice, So that says a little about the position that Kongsberg Defense and Aerospace and Kongsberg Discovery have. These unique technologies and products we have have made us one of the few non-American suppliers, where we have become a supplier to the American defense. With our unique position and also the significant increase in global defence, which we see in the future, it is a fantastic opportunity. But I would also like to mention Europe, where Kongsberg Defence and Aerospace and Kongsberg Discovery already have a significant footprint. And not least a significant order reserve. I think 70% of our order reserve today is related to Europe. And that will of course also be important in the future, where Europe will invest significantly in security and defence. The defence market is undergoing rapid structural changes, and nations are focusing on building robustness in supply chains. And NATO has committed itself to increasing annual investments, which gives the long-term effect of growth. Kongsberg has, as you know, central leading positions within the aviation industry, remote-controlled weapon stations, autonomous underwater coasts and other advanced sensors. Our export share today is 80%. And the combination of Kongsberg Defence and Aerospace and Kongsberg Discovery, we are also building a closer bridge between civil and military innovation. Not to mention that we can even better incorporate this with dual use technology. And here, I would say, Kongsberg Discovery is important with the core competence and the technology that they have, with navigation, hydrology, radar technology and robotics. It will be essential when addressing the challenges that are in front of us, especially in terms of security. So with that in mind, we believe that these capabilities will give Kongsberg a fantastic opportunity to take the growth opportunities we see within defence, security and other nearby areas. As Eivind said, what we are doing here is to become even more clear on the focus within these two units, and of course to free up even more potential to take the growth that is there. We will now have two world-leading high-tech companies that are focused. They are self-employed and will be able to grasp the opportunities that lie there. I also mentioned that these businesses actually share the arm of innovation and integrity. which has been going on for more than 200 years. But they are also now very ready to stand on their own two feet. So we are doing this to give even more strength and deliver on the ambitions that we have said earlier, more than 120 billion within 2033. And then we will most certainly come back to how that distribution will be. Thank you for your attention.

Where do you want us to be? Here? Yes, here, for example. Good, thank you. Thank you to everyone who has followed us on the webcast. There are no questions online, so we will go to those who are present here. The question is if there are any questions. The way we have to do that is... since they are still with us on the webcast, that we have to hand over a microphone to those who have a question. So, Rekko Panna, a short presentation of who you are, and then max two questions. And when we have walked around here, then we open for one to one up here afterwards. Good. Then we start with the after-boss, if we can get a microphone there, yes. Here you go.

Everything sounds good when you present it this way, and it's positive, and everything is in order. Are there any downsides to such a split? I'm thinking primarily about future and ongoing deliveries on the defence side. Are there things, for example, around a possible contract on standard vehicles, which means that you are dependent on competence from both sides, and a delivery from both sides, which is perhaps controlled by one of them, perhaps by both, I don't know. Are there things that are not only hunky-dory and super duper, but are there any downsides that can be thought of later to become a problem? That's the question, actually.

I think that when there is a question of whether it can be thought of, it is very silly to say that nothing can be thought of. We have, of course, made these evaluations, and the short answer is that we have seen that in almost all areas now, with such a large maritime and such a large defence business as we have, they must stand both for the customers and for their suppliers on their own feet. To that extent, it is the basis for a good cooperation between Maritim and the defence company, among other things, in the area you mentioned, standardised transport, then it will naturally come out of this in terms of business. So we have not considered this as something negative as such. Of course, each of the companies will be smaller than the Kongsberg Group alone, but each of them will be more than big enough, because they will be large companies on the Oslo Stock Exchange with solid balances. So yes, it may be thought that there is one or the other, but in the end, the board was completely clear that the advantages are in the long run far beyond the possible negative effects.

Another question, you mentioned that the government or the authorities have not yet had any immediate major recommendations, so that you have a backing from an owner. Are there sides to this division that can have an impact on ownership in the long run, as you see?

We do not want to speculate on what our owners will do. We just see and are very pleased that the largest owners have signaled that they will continue with their majority ownership in both units. What this will be over time is impossible for us to say.

Other hands. Yes.

Here you go. Hi, Lukas Dahl from Arctic Securities. When you split up the two companies, are they big enough to do what they should on their own? Or do you see opportunities for them to grow further? inorganic, because when you look at Europe, Europe buys defense equipment from smaller, larger suppliers. You had entered into a collaboration with Thales, for example. Do you see, in a way, the possibilities within that, in defense, and possibly what are the possibilities on the Mauritian side, where you are already a major supplier to the industry?

I think that when we do this, it will be less than the Kongsberg Group today. But at the same time, Kongsberg will still be among the largest in the world within its segment. The defense part of Kongsberg has never been the largest in the world, and will probably never be. But they are very unique and very well positioned within their areas. We have set an ambition to grow this company before this was announced and triple it once again. And that means that it is organic. We look into the future here on the expectations we have within the next ten years. which means that both Maritim and our defence business have great opportunities within their respective segments. And if there will be inorganic opportunities, we work with that all the time and look at whether there are opportunities here that will fit in with Maritim or our defence business. And then it is almost impossible to say that this will happen now or later, but that we are also looking for inorganic possibilities, there should be no doubt about that. But I think that nevertheless, especially for our defense industry and the dual technology we have, we have an extremely high partner value. We are experiencing this all the time now in Europe, and we are experiencing it also in the USA. So both inorganic partnerships will continue to be important for our defence unit, but also for the maritime unit. This is what we have been working on throughout the history of Kongsberg. This is about finding good partnerships and possibly inorganic possibilities.

And I would like to add that I have done things like this before, and you often get the question, for example, I want maritime or defense businesses to have fewer opportunities for these inorganic things, because they become I have to remind you that we cannot do other things in our maritime business that the maritime business can afford. We cannot make bigger purchases than the income in maritime and the income in what the company stands for. So in many ways, when you go behind this, and do the analysis of the potential area, then these companies must stand for the inorganic capacity they have. In the end, we believe that this will not affect it. And we should not forget that in this way, the companies get their purest shares. And shares are also used occasionally in an inorganic purchase situation. it is a possibility that now becomes greater than it has been until now, given that this has been a combined share. So I add this just to say that we have been through these evaluations before we drew the conclusion we have made.

Marius, Finansavisen.

One thing is the financial, but you also draw the geopolitical message today. Can Given the world we live in, with both trade wars and a NATO that is getting ready, and a China that is also growing, can a corporation like yours operate both as a central participant in the setting up of NATO and as a maritime actor with a large business in many of these Asian countries at the same time?

The short answer is that we mean it, and we have shown it so far that we have achieved it. And in that way, we mean that there is no problem that they now become more distinctly different, in the sense that they are not owned under the same share. But it has worked well, and I will be thrifty in what I have touched upon today and stand here and say that We don't think anything will happen there, but we think we are at least as well prepared by the fact that it is a separate company as it is owned under the same share.

But has there been a question about the defense industry from the USA or other NATO countries, that you are also so large in Asia with facilities and offices in China, among other things?

No, there has not been any question in the form of that it has been problematized, but we are quite sure that they are capable of it.

Then I see no other hand.

Can I take a look at Discovery, which for me appears to be a hybrid company that both grows a lot on civilian and more towards defense. Did you consider to share Discovery in a way, or that it would end in maritime and not in Kongsberg Defense?

I think that this dual technology and entering the defense market is very interesting. We talk a lot about defense, but we also talk about security. And security is, with these unique technologies that Kongsberg Discovery owns, we think it's right to place it in the new Kongsberg. At the same time, the collaboration between Kongsberg Maritime and Kongsberg Discovery will continue, because they deliver a lot of sensors to Kongsberg Maritime. So that will continue, but I think that we only see in this quarter that the defence share grows. in the order to Kongsberg Discovery on the defence side. And we have seen for quite some time now that it will increase. And then it is right to note that there is a commercial part in Kongsberg Discovery, and there is a commercial part in Kongsberg Defence and Aerospace as well, which is again dual use. So we believe that this will strengthen the possibilities both within security and within defence by connecting these environments together. We also talked about the innovation pace here. We see it now with the experiences we draw from the conflicts that are coming now. It is enormously important that we bring up the innovation pace within both what should defend and what should take care of our security.

Other questions? No. Then we thank everyone who has followed us on webcast and those who have met up here today. So then we close online and then we can open up for 1-1 if there is anyone who wants it. Thank you for today.