Our 'A-' issuer rating on Kongsberg Gruppen ASA (Kongsberg) is unchanged following the publication of its fourth-quarter results.
Margins above target
Kongsberg Gruppen reported 13% year-on-year growth in revenues and 22% growth in EBITDA in the fourth quarter, and 7% and 26% respectively for the full year. Revenues were in line with our expectations. However, the EBITDA margin, at 14.3% in the quarter and 14.9% for 2021, was above our full-year estimate of 13% and the group's own full-year 2022 target of 14%. Margins were boosted by the product mix in the Kongsberg Maritime (KM) division. We note that new orders from the Norwegian armed forces are likely to lead to lower margins in the Kongsberg Defence and Aerospace (KDA) division over time.
Strong order intake continued in the fourth quarter
The group's order backlog was NOK 49.5bn at the end of the fourth quarter, rising by 38% year on year after new orders worth NOK 12.5bn were received in the quarter. The book-to-bill ratio increased to 1.5 from 1.1 at year-end 2020.
KM had an order intake of NOK 4.8n in the quarter (up 25% year on year), which gave a book-to-bill ratio of 1.0. KDA had an order intake of NOK 7.5bn (up 1% year on year) and a book-to-bill of 2.5. Fourth-quarter orders include a request to supply Joint Strike Missiles worth NOK 4bn for Norway's fleet of F-35 fighter aircraft, and a Naval Strike Missile contract with the Norwegian navy worth NOK 1.4bn.
Stronger than expected cash flow
Kongsberg Gruppen is in a strong net cash position, even when leasing is included in interest-bearing debt, which is contrary to our expectations. This is due partly to stronger cash flow from operations (higher EBITDA and lower working capital) and partly to a lower level of investment than we had expected in 2021. We note that the proposed dividend and share buy-backs totalling NOK 3.3bn are also significantly higher than our estimate from April last year of NOK 1.2bn.
Figure 1. Kongsberg key credit metrics, 2018–2021
|
NOKm |
2018 |
2019 |
2020 |
2021e |
2021a |
|
Revenue |
14,381 |
24,081 |
25,612 |
27,296 |
27,449 |
|
NCR-adjusted EBITDA |
1,298 |
2,302 |
3,111 |
3,116 |
3,871* |
|
NCR-adjusted net debt |
2,899 |
1,300 |
-1,223 |
280 |
-3,214* |
|
Total assets |
27,658 |
39,422 |
39,418 |
40,433 |
39,310 |
|
NCR-adjusted debt/EBITDA (x) |
2.2 |
0.6 |
-0.4 |
0.1 |
-0.8* |
|
NCR-adjusted EBITDA/interest (x) |
6.6 |
17.5 |
12.8 |
12.6 |
18.6* |
|
NCR-adjusted FFO/debt (%) |
33.9 |
154.3 |
-203.8 |
878.4 |
-943.1* |
|
Based on company data and NCR estimates. e–estimate, a-actual. FFO–funds from operations. *Based on preliminary adjustments. |
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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