Our 'A-' issuer rating on Kongsberg Gruppen ASA is unchanged following the publication of its results for the first quarter of 2021.
Strong margins approach 2022 targets
Kongsberg Gruppen reported strong first-quarter profits; EBITDA was up 37% year on year at NOK 883m despite a 5% fall in revenues over the same period. The EBITDA margin was 13.9% against 9.6% previously and close to the full-year 2022 target of 14%. The group's marine division, Kongsberg Maritime (KM), was negatively impacted by COVID-19 and revenues were down 16% year on year at NOK 3.8bn. However, the divisional EBITDA margin rose to 11.2% from 8.6%, mainly due to synergies arising from the acquisition of Rolls Royce Commercial Marine. KM is consequently approaching its 2022 EBITDA margin target of 13%. High activity levels in the defence division, Kongsberg Defence and Aerospace (KDA), generated a 21% increase in revenues to NOK 2.4bn while the EBITDA margin increased to 20% (18.3% excluding non-recurring items of NOK 40m) from 11.9% in the corresponding quarter a year earlier. KDA has an EBITDA target of 16% in 2022.
Strong order intake in both main business divisions
The group's order backlog remained positive, rising 11% year on year to NOK 36.9bn. The book-to-bill ratio increased to 1.2 from 1.02 a year earlier and 1.13 at end-2020.
KM had an order intake of NOK 4.1bn in the quarter (down 15% year on year), which equates to 53% of new orders, and a book-to-bill ratio of 1.06. KDA had an order intake of NOK 3.3bn (up 89%) and a book-to-bill ratio of 1.42. Management expects that KDA in particular will continue to build its order book.
Strategic review of 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 plans a strategic review of possible future business models to fully realise the division's potential. This could include a stock exchange listing.
The group had NOK 7.8bn in cash at the end of the first quarter, compared with NOK 7.4bn at end-2020. This included NOK 2bn in prepayments. Half of a NOK 1bn debt maturity due 21 Jun. 2021 was refinanced in February.
This commentary does not constitute a rating action.
If you have any questions, please contact:
Geir Kristiansen, credit rating analyst, +4790784593, geir.kristiansen@nordiccreditrating.com
Mille O. Fjeldstad, credit rating analyst, +4799038916, mille.fjeldstad@nordiccreditrating.com