Good morning, and welcome to the presentation of Kongsberg's third quarter result. This presentation is done as a webcast only, and you will be able to send in questions through the chat function. Please note that this presentation contains forward-looking statements that, by their nature, involve known and unknown risks, uncertainties, and other important factors that could cause the actual results to differ. Today's presentation will be delivered to you by our CEO, Eirik Lie, and our CFO, Martin Wien Fjell. With that, I will hand it over to our CEO, Eirik.
Thank you, Jan Edvin, and good morning, everyone, and welcome to this third quarter results presentation. Before I dive into the details on the third quarter, I would like to take a step back. Looking at the world around us, it is clear to me that what we do at Kongsberg has never been more important. The defense market in Europe is changing faster than it has in decades. Countries across the continent are putting historic amounts of money into defense. Europe is planning to spend up to EUR 800 billion more on security by 2030. Demand is no longer a temporary trend. It is a long-term shift. The war in Ukraine shows few signs of slowing down, despite efforts to establish a ceasefire or a lasting deal. Just last week, I met with President Zelensky in Oslo.
He repeated the importance of air defense systems and the need for wide range of anti-drone capabilities. The President highlighted the need for affordable missiles in high volumes and for sovereign European satellite constellations. These are segments where Kongsberg have market-leading products and can make a difference. Earlier this month, I was in Warsaw for the annual Warsaw Security Forum. Here, the messages from NATO and European defense ministers were clear. Europe must continue to invest in its own defense capabilities, and there is a need to increase industrial production across Europe. Europe and NATO are making significant investments, and Kongsberg has the products that meet both the defense capabilities and production demand. The third quarter of 2026 was characterized by high activity levels across the company, both in new orders and in our production facilities.
We continued to sign significant new contracts, and we made key deliveries to our customers.
In the quarter, revenues increased by 50% to NOK 11.3 billion from the same period last year. This was also the first full quarter with Sonatech as part of Kongsberg. Earnings before interest and tax were NOK 1.9 billion, an increase of 66%, resulting in an EBIT margin of 16.4%. The results were driven by high volumes across the company, with strong growth, particularly in air defense and missiles product. Order intake in the quarter was above NOK 23 billion. This took the total order backlog to NOK 174 billion. As usual, Martin will provide further details about the financial in his presentation. Activity levels were high throughout the third quarter. We completed the acquisition of Sonatech, which broadens our technology portfolio and improves our market presence in the U.S. We keep investing in new production facilities.
In Warsaw, we announced a new factory in the Gdańsk area in Poland, which will increase our production capacity in Europe. The facility will be an integrated part of Kongsberg's European manufacturing network to serve Poland and other future customers. We expect production to start during the first half of 2028. This quarter, we moved into new facilities in Horten, Norway. This is important to increase capacity for our undersea offerings. The building of new missile factories in the U.S. and Australia remain on track. We have expanded our production volume significantly, and we have the capacity to deliver on current order backlog as well as to add new projects. High demand for our key products drove the order backlog to NOK 174 billion, a new record level. The biggest contract this quarter was Belgium's order for NASAMS.
The contract has a value of about NOK 10 billion and is also the biggest NASAMS contract we have signed. At the same time, the Netherlands placed an additional NASAMS order worth NOK 1.5 billion. There are now 18 user countries confirming NASAMS's position as a market leading medium-range air defense system. We continued to see strong demand for our other core products, such as strike missiles and weapon stations. In the quarter, we signed a contract valued at NOK 1.1 billion for the delivery of Protector Remote Weapon Systems to the Canadian Army. The U.S. Air Force placed a new order for the Joint Strike Missile worth $100 million. Zone 5 continues to have a positive development. In the third quarter, the company secured a U.S. government contract worth $65 million for the Rusty Dagger Missile. Demand for our portfolio of autonomous underwater system is strong.
Today, we can announce that we were awarded a contract by the U.S. government for autonomous underwater vehicles. The contract is valued at $54 million. Undersea warfare is one of the new frontiers of modern defense. The use of autonomous systems supported by artificial intelligence enables platforms to undertake complex missions more effectively. The speed of innovation in the commercial sector is driving changes in this market. Kongsberg is well-positioned in the undersea domain with our dual-use solutions to commercial and defense customers. Demand for our technology is rising. From maritime surveillance to defense missionized systems with highly trusted autonomous capabilities. The undersea market is expected to become one of the fastest-growing segments in the defense market. We are now seeing demand turn into contracts. The new contract with the U.S. government for autonomous underwater vehicles is one example. Undersea warfare is priority market for Kongsberg.
Because of this, we have taken steps to strengthen our technology portfolio in key markets and to improve our production capacity. In September, we completed the acquisition of Sonatech. The California-based company is a specialist in underwater acoustics and a key technology supplier to the U.S. Navy. Put simply, the company delivers devices and systems that transmit, receive, and process sound signals through the ocean. This acquisition strengthen Kongsberg's position as a partner to the U.S. Navy and provides exciting growth opportunities in the U.S. Our technology aligns well with Sonatech's capabilities and will give the U.S. Navy access to a broad range of cutting-edge products, systems, and solutions. As I mentioned at the beginning, we recently opened the Horten Horizon facility in Norway. This site includes 45,000 sq m offices, R&D facilities, and production lines.
The new site will strengthen our delivery muscle in the undersea warfare market, where we expect demand will continue to rise. That concludes the first part of my presentation. I am now happy to hand over to our CFO, Martin. Thank you.
Thank you, Eirik, and good morning to everyone joining us online. I will take you through the financial highlights of the third quarter, including the main drivers of growth, profitability, and cash flow. Now let us look at order intake and order backlog. Total orders for the quarter came in at NOK 23.3 billion, compared to NOK 9.5 billion last year. Eirik has already highlighted the major contracts behind this strong order intake. To put this in perspective, order intake was more than double our revenues in a quarter, giving a book-to-bill ratio of 2.06. For the first nine months of the year, we have secured close to NOK 67 billion in new orders. The total order backlog now stands at NOK 174.2 billion, an all-time high. This provides visibility into future activity. I would like to echo what Eirik said, delivering on this backlog is our number one priority.
The backlog spans out in time, and currently 7% of the total is due to be delivered in the last quarter of 2026. 30% is scheduled for 2027, totaling NOK 53 billion. The remaining 63%, totaling NOK 109 billion, is for delivery in 2028 and beyond. This underlines the long-term horizon and the visibility that we have going forward. Moving on to revenues, I am pleased to report double-digit growth in all divisions. Total revenues for the quarter came in at NOK 11.3 billion, compared to NOK 7.6 billion in the corresponding quarter last year. This represents a growth rate of 50%. This level of growth would not be possible without the impressive efforts of our employees and suppliers who continue to deliver on increasingly large and not least complex projects.
We have now moved beyond NOK 11 billion in quarterly revenues, another milestone on our journey towards our long-term financial ambitions.
Defence Systems reported revenues of NOK 5.4 billion, an increase of 58% from last year. This was mainly driven by increased deliveries within Air Defence. Missiles & Aerostructures delivered revenues of NOK 4 billion, up 87% from last year. Missile deliveries increased in the quarter, and we are on track with the scaling of our production. The newly acquired Zone 5 Technologies contributed strongly to the revenue growth, with Q3 marking its first full quarter as part of Kongsberg. Discovery grew revenues by 11% from NOK 1.8 billion last year to NOK 2 billion this quarter. The main growth drivers were higher activity for autonomous underwater vehicles and small satellites. The growth is impacted by slower production due to the ongoing moving process, which is now largely complete. Next, let us look at EBIT and EBIT margin.
Total EBIT came in at NOK 1.9 billion in the quarter, up from NOK 1.1 billion in Q3 of last year.
This yields a growth rate of 66%, a very solid performance. The Kongsberg EBIT margin increased to 16.4% from 14.8% last year. Higher volumes and solid project execution supported the improvement, and behind the company figures, the divisions were affected a little bit different this quarter. Defence Systems reported EBIT of NOK 1.1 billion, with a margin of 20.6%. This is a doubling of profit from last year. Higher volumes, solid project execution, and favorable project mix supported the results, which also had a positive impact on the margin. Missiles & Aerostructures reported EBIT of NOK 0.5 billion, up from NOK 0.4 billion last year. The margin stood at 11.6%, down from 16.5% last year. As previously mentioned, this is the first full quarter with impact from Zone 5, where margins initially will be significantly lower than the rest of the division.
Our NSM and JSM production scale with improved margins, but the division is diluted by transaction costs and the Zone 5 ramp-up. We maintain our ambition for Zone 5 to reach similar margins as the rest of Kongsberg in 2029. The acquisition also includes a retention scheme linked to Zone 5's estimated value. This will be recognized as personnel cost over the next years. The accounting expense therefore arrives before the related cash payments. Discovery reported EBIT of NOK 288 million, down 10% from last year. The margin came in at 14.6% versus 18% last year. As previously communicated, temporary moving costs affected our results, but most of these costs are now behind us. Adjusted for these costs, the EBIT margin came in at 17.5% for the quarter. Let's turn to Patria. As a reminder, our third-quarter figures for Patria cover June, July, and August.
Revenue came in at EUR 307 million compared to EUR 235 million last year. EBIT rose to EUR 37 million from EUR 20 million. Patria has had a significant improvement in profitability, delivering an EBIT margin of 12.1% in the quarter. Kongsberg's share of net profit was NOK 159 million, up from NOK 76 million. Revenue can vary significantly between quarters, reflecting the timing of material flows in major vehicle programs. The order backlog remains stable at EUR 3.5 billion, and the demand for Patria's armored vehicles remains strong. Norway ordered 20 6x6 vehicles equipped with Kongsberg's remote weapon stations during the period. In September, Finland and Sweden moved ahead with initial TRACKX procurements, with deliveries starting in 2027 for testing and evaluation. Finally, I will spend some time on cash flow and working capital.
Kongsberg's cash position increased from NOK 4.9 billion to NOK 6.4 billion as of quarter end.
Operating cash flow was NOK 4.1 billion, supported by solid profit and an improvement on working capital. The acquisition of Sonatech and investments in capacity were the main outflows in the quarter. As always, working capital is subject to customer advances and milestone payments and thus fluctuates from quarter to quarter. To sum up, our order intake led to record-high order income. We delivered strong growth, solid profitability, and positive working capital development, strengthening our cash position. This gives us a strong fundament for continued growth and our focus on continuous scaling capacity and delivering on the order backlog. That concludes my presentation, and Eirik will now make some final remarks on the outlook. Thank you.
Thank you, Martin. We continue to see strong demand for our core products, and we experience rising interest in the new frontiers of the defense industry, underwater and space. Our top priority for next year is to deliver on our order backlog, which was NOK 174 billion at the end of the quarter. About 30% of this is expected to be executed in 2027. This gives us a solid foundation for strong revenue growth in 2027. We reiterate our longer-term ambitions for both 2029 and 2033. We continue to develop new solutions and capabilities. I already talked about undersea warfare and how we see that developing into a large market. Another big priority for us is to establish effective air defense systems against anti-ballistic missiles. Kongsberg is actively involved in the FREYJA program, the European Long-Range Anti-Ballistic program for Ukraine.
We already have the first results in developing individual components of the system. When I met President Zelensky, we identified plans to start testing by the end of this year. FREYJA is a very fast development project, but it is not the only way to develop a long-range capability. We are also working with other established players on integrating existing capabilities with our air defense solutions. Affordable mass or high volumes of cost-effective missiles is another high priority. We continue to support the scaling up of Zone 5 for mass production of the White Spike and the Rusty Dagger Missile. The company has secured several important contracts with the U.S. government. Kongsberg's priority for Zone 5 in 2027 is to continue to scale up production and to support both U.S. and international growth. Before we move into the Q&A, I would like to sum up where we stand.
Kongsberg has a significant order backlog and a solid financial position. This provides a good basis for strong growth beyond 2026. Thank you. I will now invite Jan Edvin back to lead the Q&A session.
Thank you, Eirik. From David Holmes in Bank of America, we have the question, please quantify the magnitude of non-recurring benefit in the Defence Systems EBIT.
Yeah. As I mentioned, the 16.4% is a very strong margin for the quarter, and we had both positive and the more dilutive effects in the quarter. On the positive side, we have had very strong project execution, as you say, in Defence Systems, and we also had a favorable project mix overall in Kongsberg. On the more dilutive side, we had the one-off effect, so to say, for the moving cost that we also talked about in the second quarter for Discovery of about 10.9% of the margin of Discovery. We also had the Zone 5 effects with the revenues coming in for the full quarter.
Thank you. From Martine Kverne in Nordea and Sriram Krishnan in Deutsche Bank, can you give some more info around the split in the Missiles & Aerostructures? What was the margin adjusted for Zone 5, and what should we expect going forward?
Yeah, I think I will revert back to my earlier comment on the margins, but also highlight that when it comes to the NSM and JSM production, we saw continued positive development with the effects from scaling of the operations.
Thank you. Also from Sriram Krishnan in Deutsche Bank, can you please remind us on the M&A for Zone 5 and Sonatech? It was estimated for a cost of about NOK 6 billion, but Sonatech only accounts for NOK 1.2 billion in net cash for the quarter.
Yeah. The total enterprise value, so to say, for those two acquisitions were around NOK 6 billion.
On Zone 5, can you talk about Zone 5 production in Europe? Competition is growing. Can you provide when we can expect more orders for Zone 5 from Europe?
Yes. First, Zone 5 is very important to Kongsberg, and it is natural that they have a growing demand in U.S. That is why we in U.S. are building up new facilities in Fort Worth to secure we have a good production ramp-up capability in U.S. At the same time, we are working with different countries in Europe for expansion of production capacity of Zone 5 missiles. We are in continuous discussions with countries, so we expect 2027 to be an important year for this operation.
From Magnus Rasmussen in SEB, can you comment on what is driving the NOK 9 billion increase in 2027 backlog conversion?
Yes, correct. We had a very solid order intake in third quarter, which also added to the expected deliveries in 2027, and that is part of the NOK 23.3 billion order intake that we had. This is a combination of orders with a short delivery time. Also, as you know, we are running mostly on the percentage of completion for contracts, hence some of these projects will be starting already in 2027.
Continuing on order backlog from [inaudible ]. To understand the dynamics through the year, how much of revenue have you had year -to -date, 2026, that was included in the backlog at the beginning of 2026?
I think I will focus on 2027. We feel that we have a strong order coverage when it comes to our expected 2027 revenues, meaning that we expect a strong growth in our revenues for next year.
From Sriram Krishnan in Deutsche Bank. Please provide us with an update on the Thales joint venture, the status, revenue expectations, et cetera.
First of all, we announced this joint venture some time ago, and we are now in final stages regarding approval from the European Commission. We expect this to be okayed in short time. Then can establish formally the joint venture and move forward with that as a combined Thales and Kongsberg effort, for especially radio communication and encryption.
Thank you. This concludes today's presentation. We would like to thank all of you that have followed us online and wish you a great rest of the day. Thank you.