Good morning and welcome to Kongsberg's first quarter 2024 presentation. Today's results will be presented to you by President and Chief Executive Officer Geir Håøy, as well as Executive Vice President and Chief Financial Officer Mette Toft Bjørgen. This is a webcast-only presentation, but you are able to ask questions through the cast frame. With that, Geir, the floor is yours.
Thank you, Jan Erik. So, welcome to Kongsberg's presentation of the first quarter of 2024 results. I want to start this quarterly presentation by thanking our colleagues and partners around the world for your trust and efforts you all have put in so far in 2024. Kongsberg's growth and strong performance are a testament to everyone's efforts. So, in terms of the results, Kongsberg has continued its positive trend, from 2023, and we continue to deliver growth, solid results, and strong order intake during the first quarter of 2024. As a global company with presence in 40 countries, we are influenced and live with and by the ongoing and current international context. There is no doubt: security and sustainability are now on the top of the global agenda. People and nations of the world cannot have sustainability without security, nor can they have security without sustainability.
The two broad global objectives have become increasingly more important in the recent years. Both have broadened their meaning with the response to the evolving landscape of security, climate, and energy concerns, and their inseparable interconnections are becoming evident to the global society. These objectives align seamlessly with solutions and services from Kongsberg. Our customers recognize Kongsberg as an increasingly important facilitator to solve many of the security and sustainability challenges the world now is facing. We develop and deliver world-class defense systems to tackle modern and evolving security challenges, and we have an ocean-space portfolio which is in front when it comes to shaping the global maritime future. Over the years, we have demonstrated that we are determined, innovative, reliable, and collaborative, and we have a solid foundation to build on going forward.
The new long-term plan the Norwegian government is proposing to Parliament represents a historic increase in the defense spending. Many nations have the same mindset as Norway: providing security is now regarded as a fundamental task for Norway and among allied countries. The new long-term plan also includes a strong maritime package. As an ocean expert with a majority of our turnover related to the oceans, Kongsberg looks forward to combining our maritime and defense expertise in supporting defense forces with state-of-the-art solutions and also new capabilities. Our purpose and overall ambition as a global technology company is to create value and to make a better tomorrow by protecting people and planet. And then if we move over to the business area updates, Kongsberg Maritime is continuing its strong performance and delivered 17% growth from Q1 last year. All divisions contributed to this growth.
Our aftermarket activity grew by 14% year-on-year, and the growth comes from a high level of spare sales as well as upgrades and reactivation of especially offshore vessels. We saw a decline in the total ordering for the business area compared to corresponding quarter in 2023, but NOK 6.2 billion in order intake is a 1.14 book-to-bill, and Kongsberg Maritime continues to build order backlog. Looking at the order intake pie for Q1, we see still a solid and diversified mix. And from our market people, we also hear that demand is solid in several segments and that there are both existing and also new players looking for new tonnage. Looking at the ordering activity of new vessels from yards the first months of 2024, we do see continued strong LNG ordering, and we see a certain pickup in the tanker market.
Especially LNG carriers is a market where we enjoy a very strong position. We also see a trend that shipowners are looking into more flexible tonnage, meaning vessels are to be less, specifically built for one certain operation but designed and outfitted to perform different sort of operation. This requires more, technologically advanced tonnage, which in general is favorable to Kongsberg. Many vessels today are ordered with dual-fuel option, and we see we still see many vessels with battery as its secondary energy source, but in Q1 we also saw several vessels being ordered with both ammonia and methanol to have dual-fuel option. Kongsberg Maritime has expanded, significantly over the past years, and our scope of delivery per vessel has increased exponentially.
The portfolio we offer is among the largest in the maritime industry, and as the world shifts towards cleaner energy sources, we stand at the forefront committed to lead the way. Both the International Maritime Organization and EU have introduced regulation to drive down greenhouse gas emissions from shipping, and we in Kongsberg, we embrace this challenge. During the first quarter of 2024, we have already signed several contracts, in that respect. Here I would like to highlight three new LNG-powered container ships commissioned by Matson Navigation Company, to which we will supply cutting-edge energy-saving equipment and systems. These vessels are groundbreaking in several ways. The ships incorporate advanced technology to reduce fuel consumption and emissions. In that context, Kongsberg Maritime will deliver a battery energy-saving system and a comprehensive power management system, all integrated technologies that will optimize the energy usage on board.
In addition, we will provide a comprehensive package of monitoring, automation, and control systems. This will improve operation, safety, and the overall power management throughout the ship. I think this contract also illustrated the increased scope we now can offer to our customer. The value of this contract represents almost 10 times the value of what we typically would deliver to a ship in this segment just a few years ago. Overall, the last 18 months show that we are on the right track. Together with our customer and partners, we solve technology challenges and continue to make smart improvements to new builds, existing fleet, and sea installation for the better of the planet. Then to Kongsberg Defence & Aerospace. Kongsberg Defence & Aerospace delivered an impressive 40% growth in revenue in Q1. Mette will come back with more details here.
With regards to new orders, the business area increased its order backlog also in Q1 with a book-to-bill of 1.06. The largest orders we signed were a contract for new NASAMS systems to Norway and a contract for delivery of remote weapon stations to Patria 6x6 vehicles that are to be delivered to Sweden and Finland. The NASAMS contract to Norway was a reacquisition of material that has been donated to Ukraine. When announcing this contract, the Norwegian Minister of Defense stated that Norway has taken further measures to speed up the acquisition of NASAMS systems. This was confirmed in March when the Norwegian government announced plans to order critical long-lead parts for the production of NASAMS air defense systems, aimed at improving the delivery time for launcher units upon signing of new contracts.
Further, the Norwegian government launched the new long-term plan on defense in the beginning of this month. I have already touched on this previously, but with regards to NASAMS, the government has proposed a significant increase of NASAMS systems in Norway. We have seen a strong backlog growth over the past years, and our product and system portfolio are in strong demand. I believe we are in a good position for solid order intake going forward as well. The U.S. has approved the budget for purchase of both Naval Strike Missile and Joint Strike Missile, and we are currently in negotiation with the customer. We expect contracts for both missile types to be signed in 2024. We are currently ramping up to meet demand both to deliver on existing orders and future demand. As such, we are ready to support both current and future customers' needs.
Kongsberg Discovery grew its revenue by 60% year-on-year and delivered a book-to-bill of 1.1. The order intake this quarter consists of a mix of orders throughout the business area. The primary drivers fueling demand for Kongsberg Discovery's products, like the rest of Kongsberg, are security and sustainability. The business area is exposed to these drivers through segments such as ocean-based energy production, commercial fisheries, seabed mapping, and surveillance of critical infrastructure. The customer base spans from commercial to governmental and naval customers. Sustainable management and protection of subsea resources is also important drivers for the business area, and Kongsberg Discovery offers a wide range of products and systems aimed at this. In the first quarter, the business area signed a contract with an international player for the delivery of deformation monitoring technology.
The system is used to understand the impact of seabed movements to reservoirs and structures installed on the seabed. The field is 2,000-meter water depth and is expected to be monitored for 10 years during development and production. The data from the system will be harvested wirelessly every three months via acoustic telemetry from vessels fitted with Kongsberg's position and communication system. Analysis of the first datasets is expected from early 2025 and onwards, and this project is another example on how our technology is applied into new areas. Recently, our newly developed HUGIN Endurance successfully passed its factory acceptance test and is now handed over to the customer for final trials. To achieve the first system delivery is a significant milestone for us, and we will continue to develop additional capabilities for this vehicle. HUGIN Endurance enters the market as a game-changer.
Kongsberg Digital continues to roll out systems and attract more users to its solutions. The business area recorded a book-to-bill of 1.35 in the quarter. An important driver for the order intake in Kongsberg Digital is the Cognitwin agreement signed with Shell in 2022, that generates continuous order intake every quarter. Together with the agreement with Chevron, these contracts form a solid basis for Kongsberg Digital's continued rollout of new Cognitwin systems. As you can see from the slide, the number of unique users on Cognitwin has reached approximately 24,000. We currently have 44 Cognitwins in operation, in addition to several pilots with both energy companies as well as companies from other industrial sectors.
We also continue to introduce our Vessel Insight solution to a broad number of vessel owners, and in Q1, the solution is sold to vessels from different shipping segments such as bulker, tankers, passengers, and offshore vessels. And with that, I leave the floor to Mette to take us through the financial status.
Thank you, Geir. Good morning to all of you joining us for this Q1 presentation. I will now take you through the financial highlights of the quarter, and I'm also happy to once again present strong growth and increased operating profits. Starting off with revenue, Kongsberg delivered a total of NOK 11.45 billion in Q1. This is a year-on-year increase of 26%. All of our four business areas contributed with growth ranging from 16%-40%. Our largest business area, Kongsberg Maritime, delivered revenues of NOK 5.4 billion, an increase of 17%. This was driven by strong activity both related to new builds and aftermarket. All divisions contributed to the growth. Similar to past quarters, spare parts as well as upgrades and reactivation of offshore vessels were important drivers for the aftermarket. Kongsberg Defence & Aerospace came in at NOK 4.9 billion, up 40%.
All divisions had an uptick in sales in the quarter compared to Q1 last year. NOK 500 million of revenues came from one single project with extraordinarily high deliveries and must be viewed as a one-off. The missile division continues to be an important contributor to the growth. In June, we will open our new missile production facility. This will increase capacity substantially. Keep in mind that the move to and opening of our new production facility, combined with natural phasing in our projects, will somewhat slow down growth for the missile division in the next two quarters. For Kongsberg Defence & Aerospace, I would also like to highlight the land systems division that produces our remote weapon stations. In Q1, we saw a significant increase in volume versus the same quarter last year due to both improved capacity utilization and solid project execution.
Kongsberg Discovery achieved NOK 1 billion in revenues, an increase of 16% year-over-year. Deliveries of mapping and positioning systems to both commercial and public customers were the drivers in another solid quarter. Kongsberg Digital delivered NOK 390 million revenue, where of note NOK 199 million was recurring. The 34% growth is mainly attributed to activity in maritime simulation as well as an increased number of Cognitwins in operation. Looking at the operating results, the group achieved a quarterly all-time high of NOK 1.46 billion compared to NOK 1.02 billion in Q1/2023. The EBIT margin came in at 12.8%, up from 11.2% last year. The largest contributor was Kongsberg Maritime, with NOK 0.75 billion and a corresponding margin of 13.9%. In Q1 last year, EBIT was NOK 0.51 billion, with a margin of 11%. The improvement comes as a result of a favorable project mix, increased volume, and efficient project execution.
Kongsberg Defence & Aerospace delivered NOK 0.7 billion in reported EBIT and a margin of 14.2%. This compares to NOK 0.54 billion and a margin of 15.4% in Q1 2023. The downward margin trend is as expected due to a changing project mix. Kongsberg Discovery experienced a slight decrease in EBIT, coming in at NOK 0.11 billion compared to NOK 0.12 billion last year. The EBIT margin was down from 12.8%- 10.9%. The lower margin is mainly due to increased development activity related to one specific project. Kongsberg Digital had a negative EBIT of NOK 90 million. Looking at the corresponding quarter as well as Q4 last year, we see an improvement in the profitability as a result of scale. We continue to invest in product development and sales and marketing activities, but our ambition remains that Kongsberg Digital will be EBITDA positive in the second half of 2024.
working capital increased by NOK 500 million on a group level in the first quarter. This was driven by payments to subsuppliers on the back of the large customer prepayments we received in Kongsberg Defence & Aerospace in Q4. Looking at the net working capital development through the past year in the business areas, we see that working capital in Kongsberg Defence & Aerospace is typically the reason for major fluctuations in the group's working capital. In this business area, the payment structure in the large contracts can have significant impacts on an isolated quarter's development. Working capital, as a percentage of revenues in Maritime and Discovery, has been relatively stable over the past three quarters. We ended the quarter with a solid cash position.
We continue to invest at a relatively high level compared to previous years, and the main part of this is still related to our new missile facility and manufacturing expansion. We have generated a record EBITDA at NOK 1.82 billion, and we maintain our focus on working capital in a period of high growth. Cash at the end of the quarter was NOK 6.58 billion, up from NOK 5.98 billion at the start of the year. In Q2, we will continue with our investments. If approved by the annual general meeting next week, we will pay out ordinary dividends of 7 crowns per share in May, corresponding to approximately NOK 1.2 billion. The remaining dividend of additional 7 crowns per share is proposed to be paid out in October. Our associated companies, Kongsberg Satellite Services and Patria, both deliver revenue and EBIT growth compared to Q1 last year.
Kongsberg Satellite Services delivered NOK 532 million revenues with an EBIT of NOK 100 million. Patria reported revenues of EUR 103 million and EUR 1 million in EBIT, which is an improvement from Q1 last year. As always, I would like to remind everyone that Kongsberg's recognition of Patria's result in Q1 is made up of January and February, while Q4 is from September to December. With that, I'll leave the floor for Geir for some final remarks.
Thank you, Mette, for presenting the solid figures. I think I will summarize. I think we have been through most of the business areas, situation and outlook. Let me summarize saying that we continue to see strong demand throughout our portfolio. We are exposed to the major drivers aiming for a more secure and sustainable world. With regards to security, this also impacts Kongsberg Maritime, Kongsberg Discovery, and Kongsberg Digital. Security is more than defense. Supply of food and energy are also areas where we are offering relevant technology. With the drive for a more sustainable world, we experience strong demand both for solutions allowing new energy sources as well as solutions that enable us to utilize energy more efficiently.
We need to gain more knowledge of our environment and our available resources and, at the same time, exploit how to utilize our resources in a more sustainable manner. Kongsberg, with our advanced and innovative portfolio of technologies, will continue our sustainable growth path going forward. And then finally, I will also like to encourage you to follow our Capital Market Day that will be on the 4th of June. It will be a hybrid event allowing both physical attendance as well as a true webcast. And then, now I will like to open up for questions from our viewers.
The first question is from Håkon Fuglu , SEB. Can you elaborate a little bit around the strong margin in Kongsberg Maritime and whether this is a sustainable level going forward?
I think we have a very solid quarter, first quarter. I think this is, as we have said many times, the margin will fluctuate also in Kongsberg Maritime throughout the quarters. I think we said this quarter, we had a strong influence on spare parts sales, and some good projects in the aftermarket. So, of course, we will work hard to maintain margins, but I expect that it will also fluctuate in the coming quarters.
With regards to Kongsberg Defence & Aerospace, the margin this quarter was approaching your 2025 target of 17%. Is this a result of a more unfavorable project mix delivered this quarter, and is this the direction forward?
I can answer that. I think we've said that, you know, the project mix in Kongsberg Defence & Aerospace is moving towards our targeted level. Of course, this will, as we've seen previously, also fluctuate between the different quarters, but I think the project mix this quarter is as expected and, as we've planned, going forward.
Thank you. And then a question from Hans-Erik Jacobsen, Nordea. The report states that about NOK 500 million of the growth in Kongsberg Defence & Aerospace is due to abnormal high delivery volumes during the quarter and that this effect is isolated for the first quarter 2024. Can you comment a little bit around this?
Well, I think that we've seen, and I also mentioned in my presentation that we've had very strong deliveries in the first quarter. And for this particular project, you know, we saw a NOK 500 million extraordinary effect. And these deliveries will not continue in the next few quarters. So I think I'll leave it at that and.
This was a speedy, speedy project, I would say.
Yes.
Thank you. That concludes the question from the viewers. Oh, sorry, we received one final question here in the end.
Sure.
How will the opening of the new missile factory affect Kongsberg Defence & Aerospace's margins?
I think in the short term, you know, as we said, we are moving our production. We have to start up a completely new facility. It takes time to phase in the project and get the full capacity. And I think we are going to spend a couple of years to ramp up to full capacity in this new facility. As such, we expect production unit costs to go down over the medium term, but I think that, you know, the immediate effect will be somewhat limited.
Thank you. That concludes the questions from the viewers.
Okay. So, once again, remember our Capital Market Day, 4th of June. I look forward to seeing you there, and thank you for.