Our 'A-' issuer rating on Kongsberg Gruppen ASA (Kongsberg) is unchanged following the publication of its third-quarter results.
Margins above target
Kongsberg Gruppen reported 7% year-on-year growth in revenues and 15% growth in EBITDA in the third quarter. Revenues were in line with our expectations. However, the EBITDA margin, at 17% in the quarter and 15.1% in the year to date, was above our full-year expectations of 13% and the group's own full-year 2022 target of 14%. Margins were positively affected by product mix in the Kongsberg Maritime (KM) division. We note that new orders from the Norwegian armed forces are likely to lower margins in the Kongsberg Defence and Aerospace (KDA) division over time.
Strong order intake continues into fourth quarter
The group's order backlog was NOK 44.9bn at the end of the third quarter, rising 26% year on year after new orders worth NOK 15.3bn in the quarter. The book-to-bill ratio increased to 1.5 from 1.1 at end-2020.
KM had an order intake of NOK 4.9bn in the quarter (up 41% year on year), which equates to 32% of total new orders, and a book-to-bill ratio of 1.3. KDA had an order intake of NOK 10.3bn (NOK 1bn the same quarter last year). Fourth-quarter orders include a request to supply Joint Strike Missiles worth NOK 4bn for Norway's fleet of F-35 fighter aircraft, and from the U.S. Marine Corps to deliver a Remote Weapons System with a potential value of USD 94m.
Strategic review continues at Kongsberg Digital
Kongsberg Gruppen's technology division, Kongsberg Digital, is currently a small business area but has strong growth prospects and thereby significant investment requirements. The group is carrying out a strategic review of possible future business models to fully realise the division's potential. This could include a stock exchange listing or bringing in a partner.
Figure 1. Kongsberg key credit metrics, 2017–2020
| NOKm | 2018 | 2019 | 2020 | 2021e | LTM to Sep. 2021 |
|---|---|---|---|---|---|
| Total revenue | 14,381 | 24,081 | 25,612 | 27,296 | 26,490 |
| NCR-adj. EBITDA | 1,298 | 2,302 | 3,111 | 3,116 | 3,571 |
| NCR-adj. net debt | 2,899 | 1,300 | -1,223 | 280 | -1,096 |
| Total assets | 27,658 | 39,422 | 39,418 | 40,433 | 42,771 |
| NCR-adj. net debt/EBITDA (x) | 2.2 | 0.6 | -0.4 | 0.1 | -0.3 |
| NCR-adj. EBITDA/net interest (x) | 6.6 | 17.5 | 12.8 | 12.6 | 18.7 |
| NCR-adjusted FFO/net debt (%) | 33.9 | 154.3 | -203.8 | 878.4 | -325.8 |
This commentary does not constitute a rating action.
Contacts:
Geir Kristiansen, analyst, +4790784593, geir.kristiansen@nordiccreditrating.com
Mille Fjeldstad, analyst, +4799038916, mille.fjeldstad@nordiccreditrating.com