Annual Report and Sustainability Report 2020

YEAR 2020

"Strong results and good operations"

President and CEO Geir Håøy

In an extraordinary year characterised by the pandemic and the challenges that follow from it, the 2020 results confirm that KONGSBERG’s operations have been good. The Group has delivered strong results and good operations, while simultaneously strengthening all its business areas. Last year has also underlined the importance of safety, sustainability and digitalisation in our industries. Our deep domain knowledge, world-leading technology solutions and strong industrial positions in all these areas make for a strong foundation going forward.

Our achievements in 2020 are thanks to our people, partners, clients and our corporate culture.

Despite the global turmoil and disruption last year, we have maintained close, strong customer relationships and managed to find solutions to keep the business running almost as normal. Also, we have made very tough prioritisations, and at the same time, our cost base is reduced due to the decline in both travelling and other activities. We have signed important contracts for all our business areas and reached significant milestones in projects and key endeavours.

“We are financially solid, we have distributed a historically high dividend to our shareholders, and our experience is that our key stakeholders have trust in our strategies and in the company.”

Delivered above expectations

Entering 2020, we focused on six main targets: growth and profitability; shareholder return; the successful integration of acquired companies; strong performance; capturing large defence orders; and accelerating our sustainable and digital offerings. I am pleased to conclude that, during the year we delivered on all these targets and above expectations. We are financially solid, we have distributed a historically high dividend to our shareholders, and our experience is that our key stakeholders have trust in our strategies and in the company.

Commercial Marine is fully integrated, ahead of plan, making us an even more complete partner to the maritime industry. We are also positioning ourselves within new segments, like offshore wind and aquaculture. Our defence operations have reached important milestones and been awarded the second biggest contract in the history of the company. We are also expanding our footprint within the maintenance, repair and overhaul market as well as progressing our space efforts. On the digital side, current circumstances are underlining the need for, and strength of, remote, digital solutions.

Here at KONGSBERG, we take pride in our unity across the Group – we are one KONGSBERG. Therefore, during the year, we rolled out an important group-wide value process to ensure that our values are infused in everything we do. The strength provided by our clear group identity and shared group vision and values is one of our most important assets, so this work will continue in 2021. Looking back at the year, I am both pleased with and proud of our people and the entire KONGSBERG organisation, and what we have achieved together.

Our diversified business is our strength

We stand by our ambition that KONGSBERG will continue to be a growth company, and we demonstrated this in 2020. A broad portfolio founds strenght and solidity in cyclic markets. Our diversified exposure makes us less dependent on development in single segments as well as a healthy foundation with regards to establishing future positions.

Maritime synergies and strong positions

Entering last year, maritime markets were picking up and Kongsberg Maritime (KM) had a promising order intake. And although the year became more challenging, KM increased its efficiency considerably. The Value Capture programme, launched in connection with the CM integration process, has been concluded in its current form and realised annual savings of MNOK 640. This is some MNOK 140 above target – which we originally set for 2022. We will of course continue to work on other value capture and efficiency initiatives, going forward.

KM holds a strong position in the market and has managed to maintain its order intake at a solid level despite the lowest newbuild contract rate since the early 1990s. We have, as always, been able to adapt within our maritime business, for example we have strengthened our positions in sustainable energy segments. We have also realised MNOK 700 in cross-sales from our expanded portfolio following the integration of Commercial Marine.

In the first quarter, we sold Hydroid Inc. to Huntington Ingalls Industries, in line with our active portfolio management strategy.

Defence ramp-up and world-leading products

In the defence sector, we have been able to run our operations almost as normal, delivering sound growth and profitability. This also means that Kongsberg Defence & Aerospace (KDA) has proceeded with the planned ramp-up to meet project demands. This entails, among other things, activities related to the F-35 aircraft, including the production and expansion of facilities, and steps we have taken within the maintenance, repair and overhaul market – opening the F-35 Motor Engine depot at Rygge Airport and increasing our presence in the north of Norway.

“KONGSBERG’s advanced remote and digital tower systems for air traffic control are being rolled-out in Norwegian airports, and have also had an international break-through.”

In addition, we received strong confirmation of our world-leading position within air-defence systems when Hungary became the 12th nation to choose NASAMS and we  delivered our 20,000th Remote Weapon Station (RWS) – a product which has been highly successful for KONGSBERG, for nearly two decades and generated more than MNOK 40,000 in revenue.

KDA has taken significant steps within civilian markets this year too. KONGSBERG’s advanced remote and digital tower systems for air traffic control are being rolled-out in Norwegian airports, increasing air traffic safety while cutting operational and maintenance costs, and have also had an international break-through. In addition, we are making headway with our space offerings – helping to combat deforestation with satellite monitoring and enabling broadband links to the International Space Station (ISS).

Digital acceleration and new opportunities

Kongsberg Digital (KDI) has over the last few years invested significantly in establishing and developing new digital products and services, as well as in strengthening its positions related to the digitalisation of existing business. As 2020 has underlined the significance and importance of digital and remote solutions, this strategy is paying off. The roll-out of our Dynamic Digital Twin has been accelerated and is received well in the market. We have gained good traction with several major players within the energy sector.

We are chasing new opportunities within the digital realm exemplified by our growing SaaS (software-as-a-service) business, our real-time drilling monitoring tool SiteCom® and our remote e-learning tool K-SIM®Connect. In sum, these achievements greatly contribute to our leading positions within industrial digitalisation.

Sustainability and green transformation

Environmental sustainability is a growing global concern as governments, industries and companies aim to ‘build back better’ and embrace the green recovery. KONGSBERG is also experiencing increasing demand from its stakeholders for sustainable performance and responsible business practices. 

At KONGSBERG, we aim to enhance the positive impacts our core business activities have on the environment and society and thus make a tangible difference. This is manifested both in how we conduct our business and how the company is managed.

We aim to continuously improve in terms of sustainability. We have a strong focus on developing sustainable technologies and solutions to support our stakeholders and help them improve their environmental performance in all markets where we are active. Our ambition is to be at the forefront of the green transition, balanced with strong economic and environmental performance and value creation. Our technology is part of the solution.

Last year, we experienced more stringent reporting requirements and greater interest on the part of the authorities, our stakeholders and NGOs regarding both sustainability and ESG (Environment, Social, Governance) factors. In 2020, KONGSBERG achieved satisfactory ratings in several major external evaluations of our reporting on these topics. Going forward, we are analysing the results to ensure continuous improvement and to be able to give our stakeholders good, relevant information.

“To ensure that we maintain and strengthen our frontrunner positions, we must always drive innovation and technology development. That is what enables us to stay ahead of the curve and create value for our customers and stakeholders.”

Responsible governance

More than 80 per cent of KONGSBERG’s revenue comes from export, as we are an international company with number one products in the industries where we operate. A stable, predictable framework is of the utmost importance to our industries – and to KONGSBERG. We should always be in compliance with the laws, rules and regulations of the countries in which we have a presence, and work in close cooperation and dialogue with national and local authorities. We fully support the close follow-up and monitoring of industry practices, as it is vital that these can withstand public scrutiny – all players within the industry benefit from having the public’s trust.

Expectations for 2021

Now, as we are well into 2021, it is our people and technology, which give me confidence in what KONGSBERG can achieve this year. The world may never be quite the same following the pandemic, but KONGSBERG has never been put off by changes or the need to adapt. We turn challenges into opportunities, we continue to nurture our domestic and international partnerships, and we form new ones. Although the world has changed and we are experiencing challenging markets, KONGSBERG is still committed to delivering as promised and on its ambitious targets.

Our goal is to continue being a growth company, and our key priorities support this. That means that we will continue to focus on our performance culture and profitability – and on maintaining a healthy balance sheet. KONGSBERG is a technology company offering products, services and solutions with extreme performance for extreme conditions. To ensure that we maintain and strengthen our frontrunner positions, we must always drive innovation and technology development. That is what enables us to stay ahead of the curve and create value for our customers and stakeholders. 

Our values and culture are deeply rooted in the company, and in all of us who make KONGSBERG what it is; a great place to work and a leading technology powerhouse for the future.

Geir Håøy

President and CEO
March 2021

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