Our 'A-' issuer and issue ratings on Kongsberg Gruppen ASA are unchanged following the publication of its first-quarter results.
Negatively affected by sanctions and component shortages
Kongsberg Gruppen reported 11% year-on-year growth in revenues in the first quarter of 2022. This is in line with our growth expectations for the full year. At NOK 829m, EBITDA was negatively impacted by an extraordinary NOK 113m bonus to employees and a NOK 69m loss provision due to the inability to deliver to customers in Russia. Adjusted for one-off items, the EBITDA margin was 14.2% in the quarter, compared with 13.9% in the first quarter last year. Our adjusted EBITDA margin estimate of 14.4% for 2022 (14.6% in 2021) seems obtainable, despite Kongsberg Gruppen also being affected by cost inflation and component shortages.
Low order intake in Defence in the quarter
The group's order backlog was NOK 49.9bn at the end of the first quarter of 2022, up marginally on NOK 49.5bn at year-end 2021. Maritime was the main contributor to order growth, but there were no major Defence orders in the period. The book-to-bill ratio fell to 1.06 (1.37 in Maritime and 0.54 in Defence) from 1.2 in the same quarter last year. Variations in order intake is normal, and we expect it to improve during 2022. Management's outlook for 2022 is unchanged ahead of the capital markets day on 2 June 2022.
Weaker than expected cash flow
Kongsberg Gruppen is in a strong net cash position, even when leasing is included in interest-bearing debt. We note, however, that increased working capital led to negative operating cash flow in the quarter, due to increased activity in Maritime and delays in Defence deliveries due to logistical challenges and component shortages.
Figure 1. Kongsberg Gruppen key credit metrics, 2018–Q1 2022
| NOKm | 2018 | 2019 | 2020 | 2021 | LTM to 31 Mar. 2022 |
|---|---|---|---|---|---|
| Total revenue | 14,381 | 23,245 | 25,612 | 27,449 | 28,131 |
| NCR-adj. EBITDA | 1,298 | 2,279 | 3,241 | 4,019 | 4,106 |
| NCR-adj. net debt | 2,899 | 1,607 | -720 | -234 | -1,943 |
| Total assets | 27,658 | 39,022 | 39,230 | 39,310 | 39,437 |
| NCR-adj. net debt/EBITDA (x) | 2.2 | 0.7 | -0.2 | -0.7 | -0.5 |
| NCR-adj. EBITDA/net interest (x) | 5.6 | 13.7 | 17.7 | 24.5 | 24.4* |
| NCR-adjusted FFO/net debt (%) | 32.7 | 121.2 | -401.5 | -120.1 | -21.9 |
This commentary does not constitute a rating action.
Contacts:
Geir Kristiansen, analyst, +4790784593, geir.kristiansen@nordiccreditrating.com
Sean Cotten, chief rating officer, +46735600337, sean.cotten@nordiccreditrating.com