Good morning and welcome to the presentation of KONGSBERG's third quarter results. After CEO Geir Håøy and CFO Gyrid Skalleberg Ingerø have presented the quarterly highlights, we will give you a deep dive into KONGSBERG's ESG focus and our targets. Over the past few weeks, we have met with customers as well as discussed the topic of ESG together with our top management. The deep dive will follow directly after we close the Q&A session. Questions for the Q&A session can be submitted through the webcast and will be answered at the end of the presentation. With that, I'll leave the floor to CEO Geir Håøy.
Yes. Thank you, Jan Erik, and welcome everyone to this third quarter presentation for our results. I hope that many of you also will watch the ESG session which Jan Erik just referred to. For parts of the world and most of KONGSBERG business, things are starting to normalize. For other parts, restrictions due to the COVID-19 are still affecting the society and business operations in general. However, our results today supports our claim of being able to steer through these rough waters on a steady course forward. Unnecessarily to say, but I'm extremely proud of our teams and all of my colleagues around the globe, and yet again, I want to underline that I have a strong confidence in the company and our prospects going forward.
Before we look at some of the highlights and the results for the quarter, I'll just briefly touch upon some significant events which took place after the closing of the third quarter. A week ago, we announced a contract with the Norwegian Defence Materiel Agency, or Forsvarsmateriell in Norwegian. Here, we are to supply the Joint Strike Missile, the JSM, for Norway's fleet of the F-35 thirty-five fighter aircraft. This is a contract valued at almost NOK 4 billion. The partnership between KONGSBERG and the Norwegian Armed Forces and the Norwegian Defence Research Establishment in the definition, development and test of the JSM has been a critical factor in developing a missile with such advanced capabilities. The development of the missile has been ongoing since 2008, and this contract completes development and test, and we enter a full rate production phase.
This program secures employment and business for KONGSBERG and our extensive supply chain partners for many years to come. At the beginning of October, the U.S. Marine Corps awarded a contract to Kongsberg Protech Systems US to deliver remote weapon systems as part of the Marine Air Defense Integrated System, so-called MADIS program. This frame agreement has a potential value up to $94 million, and it follows a contract, which we was awarded in September 2020 with the U.S. Marine Corps for KONGSBERG to be, to test and verify the interfaces in the U.S. Marine Corps. Let's have a look at the figures. KONGSBERG continues to deliver strong results and performance throughout the entire organization, also in the third quarter.
Our growth is profitable, the revenues are increasing, and we have achieved an EBITDA of NOK 1.1 billion, and also a solid 17% margin. Those of you who have followed us through some periods know that we are somewhat careful with adjectives, but a record is a record, and this time it applies to our order intake of NOK 15 billion in the quarter. Though all our business areas contribute to the order intake, it's mainly driven by the industrial cooperation we have entered into with Germany for the delivery of the ORCCA combat system elements to the submarines, and also to deliver Naval Strike Missiles to both the Norwegian and the German navies. On the maritime side, we see higher activity, especially within the offshore wind segment, contributing to our order intake.
The majority of the offers that we give today are related to offshore wind, and I will come back to some more details on the next slide. However, this is showing how we are starting to take a firm position in this growing and a sustainable market, where KONGSBERG contributes both with expertise and technology to the entire value chain. Also, we are continuing our upscale of our digital activities with a continued rollout of our ship-to-cloud solution, the Vessel Insight, and our digital twin solution, the Kognitwin. Increasing revenues of Kongsberg Digital by 20% during the quarter. KONGSBERG has great ambition when it comes to reducing our climate footprint. Therefore, we have committed us to setting a target according to the Science Based Targets initiative.
The aim is for two-thirds of our suppliers by spend to do the same within five years. The commitments entail targeted work to reduce the group's greenhouse gas emissions and also our climate footprint. We will share more about this in the ESG session later today. Now I think it's time to have a look at some of the contracts signed in the quarter. We have, as usual, signed quite a few agreements in Q3, so I'll only mention some of them. The submarine and missile contract has a combined value of NOK 8.2 billion. This is an important and strategic milestone, which further strengthens our foothold in Europe and creates value, activity, and innovation for decades to come.
This puts us in an exclusive position for future deliveries of our combat system to m arine systems, submarine programs globally. I mentioned the growing offshore wind market, and we are very pleased to have secured another substantial delivery to COSCO Shipping Offshore for the Denmark-based service provider, Cadeler. Here we will deliver our industry-leading technology package for two wind turbine installation vessels, and this is a contract valued at EUR 49 million. Our integrated solution here will be crucial to the delivery and also the operation of these new vessels. It confirms our leading position in advanced offshore wind vessels globally. We have also signed a contract with VARD Shipyard. This is to supply a comprehensive and integrated system solution, which also includes our latest permanent magnet thrusters.
This is for installation of two new offshore wind farm maintenance vessel, and the construction service operation vessels are to be built for Rem Offshore, and it will make the shipping company the first in the world to install PM thruster package of this size from KONGSBERG. We have also signed several agreements in the quarter for our digital business area, such as with ExxonMobil to install and evaluate our dynamic digital twin, Kognitwin. This is a contextualized digital twin solution containing dynamic simulation and collaboration capability for a new asset in ExxonMobil's Guyana portfolio. We have also signed with another new customer committing us to delivery of two digital twins, and we have also signed agreements with Olympic Subsea.
We have signed agreement with KONGSBERG and also Island Offshore to roll out the Vessel Insight on these companies' entire fleet. There have also been good activity within the space segments. Kongsberg Defence & Aerospace has signed a contract with Thales Alenia Space to deliver antenna mechanism technology to the new radar observation system for Europe. This is a part of the Copernicus Program, the European Union's global monitoring of the environment and security. We are also very pleased that the KAMS have signed an agreement with Lockheed Martin Aeronautics to supply horizontal and vertical tails for the F-35 program. This contract is worth NOK 122 million.
I already said quite a bit about the offshore wind market already. I will try to not repeat myself. What I will say is that the demand for product systems and solutions supporting a more sustainable maritime industry puts KONGSBERG in a very good position. We deliver an extensive portfolio enabling our customers to optimize operation, increase energy efficiency, and reduce emission, and also then for them to really step up their sustainable efforts. For example, we have been working with the COSL Drilling Europe and drilling equipment provider NOV to reduce expenditure and emission in drilling operation. This has proven very successful with a 25% reduction that we now have signed a third rig with the COSL in the quarter.
Another customer that we will deliver turnkey solution to is Siem Offshore, where we will supply an integrated propulsion electric automation package for Siem's eco-friendly bulk carrier. This is a gas-powered ship which can be fueled using either zero CO2 emission LBG, liquid biogas, or conventional LNG. However, offshore wind is not the only maritime segment that we see more positive trend. Also the after-sales market is developing positively, and we are seeing substantially increased activities related to the new build market within and also within the sensor and robotics. Earlier this quarter, we moved in to new and bigger facilities for our marine robotics assembly operation in Horten. This is due to several to the growth over several years.
It demonstrates an increasing demand within the segment of autonomous underwater vehicle as well as unmanned surface vehicle. The USV segment is an exciting and also a promising market going forward. I think this will optimize how we conduct ocean survey unmanned and autonomously with zero emission in combination with the AUVs. I'm also very pleased to announce that we have signed our first contract for HUGIN Superior. We have also so far this year approximately NOK 1.4 billion in cross sales following the acquisition of Rolls-Royce Commercial Marine. For our defense business area, we are doing well as I think you have understood.
We have a record high order intake, and the order backlog now is at NOK 31.2 billion. Significant activities related to both missile production, weapon station for the CROWS program and several NASAMS air defense programs, and also a continuation of deliveries for the F-35 program. I think execution is a key word for our defense business in this quarter, and it will also be that going forward. We are not only securing contracts, but we are also delivering on them. We are now reaching full production rate for many of our programs and all parts of the organization are contributing to this with determination and hard work.
We are seeing good activities within the space segment, and this is a segment where a lot of interesting things are happening. Not only are we delivering technology to the next generation European operational meteorological satellite system, we are also contributing to the new high priority Copernicus radar observation system for Europe as a part of the Copernicus program. The Norwegian parliament has given the green light for Andøya Space, a satellite launch site in Norway. This is an important milestone for Norway and KONGSBERG. We have been a partner with Andøya Space for decades, and we believe this launch will open up for new industrial and commercial opportunities. On our digital area, we are experiencing increased demand as well, both for the digital twin solution, the Kognitwin, and also our ship-to-cloud solution Vessel Insight.
The Vessel Insight rollout has been slightly slower than we expected, but we are now seeing a positive development for 2021. Recently we signed three fleet contract for the Vessel Insight, among others. As many of you know, we have been working closely with Shell International the last year, where we have digitalized their assets. Now, we are also entering into a strategic partnership agreement with Shell International Exploration & Production to collaborate and accelerate digital solution and transformation for the well delivery and performance. Also, we have secured several proof of concept agreements for test and evaluation of our Kognitwin with different owners, ship owners and application partners. The maritime simulation segment is also picking up after experienced lower activity due to the pandemic.
Now it's opening up, and we have secured several contracts, I think four contracts this quarter. We are very pleased to see that we are turning the curve also on the simulation business. I will leave the floor to Gyrid to take us through the financial figures.
Thank you, Geir, and good morning, and thank you for listening in to our 3Q call. Next time we will see you in person. That will be good again, I think. Geir has already touched upon the main financial highlights for the quarter. A record high order intake and 17% EBITDA margin. In addition, I have to mention the continued strong growth in Defence and 15% EBITDA margin in Maritime. Main focus this quarter has been to secure contracts to increase the order backlog, search for opportunities in offshore wind, use all possible ways of logistics to secure deliveries of components, hunt for new employees, and to ring-fence the OPEX gain we have experienced from COVID-19 period. We also see a continued healthy return on capital employed development up to now 28.7%, at the end of Q3.
Also this time, driven by increased operational performance. Look into the figures. KONGSBERG had an order intake of NOK 15.3 billion this quarter. This is more than three times the order intake in Q3 last year and gives a significant uplift to our order backlog. The main driver is, of course, the submarine and NSM contract to Norway and Germany that we have signed in July. I'm also very pleased to see a book-to-bill of 1.3 in Kongsberg Maritime for the quarter. So far in Q4, we have already announced a close to NOK 4 billion contract with the Joint Strike Missile, meaning that we have secured strong book-to-bill also for the next quarter, the fourth quarter. This combined with the positive trend and the growing order backlog we now see in Kongsberg Maritime, it gives room for optimism.
Book-to-bill year to date is 1.5, and our backlog has grown to NOK 44.9 billion during the quarter. The large backlog gives strong comfort in the short and medium term. In addition to what is secure in the backlog, we have aftermarket business in Maritime, where most of the orders are not reflected in the backlog. The same applies for the recurring revenues in Digital, as well as the order backlogs we indirectly own through our associated companies. With regards to revenue, we have seen an aggregate growth of 7% compared to Q3 last year. I will come back to the details, but the minority of the growth comes from Defense. I'm also very pleased to see good growth in Digital this time by 20%.
Last quarter, I said that optimism and willingness to invest was slowly coming back in the maritime industry. This trend has continued in the third quarter, and we saw it in the order intake that I just talk about, and we will see it in the revenues from the aftermarket during the quarter. Close to NOK 6 billion out of our current backlog are for deliveries already in Q4, meaning we have already secured growth for 2021. Looking beyond this and into 2022, we have already secured NOK 17 billion for deliveries next year, corresponding to some NOK 14.9 billion a year ago, meaning prospect for continued growth next year are excellent. We deliver an EBITDA margin of more than NOK 1 billion with a 17% EBITDA margin during this quarter. This is NOK 130 million or 1.2 percentage point higher than last year.
Kongsberg Maritime has 15% EBITDA margin, and Defence, as we have promised last quarter, continues to stay about 20%. Despite only limited quarter-on-quarter growth in Maritime, the business area managed to improve the profitability level substantially, driven by both full-year effect from the value capture program, a positive development in gross margin, and still lower OPEX from COVID restrictions. Aftermarket accounted for 51% of the revenue this quarter and contributed to a more preferable project mix. The level of traveling is gradually normalizing, and people have, to a great extent, moved back to their offices. We expect a slightly higher cost level going forward due to that the situation is now normalizing.
That said, we have full focus utilizing the experience we have gained over the past one and a half years to see how the company can benefit efficiency-wise by utilizing some of the new ways of work. Then the cash. The cash flow in the third quarter shows high cash conversion from operations. We have managed to keep the working capital at more or less the same level, and the movements in other cash items are normal but minor. We have NOK 6.5 billion in cash at the end of this quarter, out of which NOK 1.7 billion is prepayment from customers. We are currently running a share buyback program that will continue into 2022.
We started the buyback in mid-August and had, by the end of the quarter, bought back approximately 220,000 shares for a total amount of NOK 53 million. Over to Kongsberg Maritime, with an excellent book-to-bill, of course. Kongsberg Maritime won orders of NOK 4.9 billion in the quarter and continues the positive trend we have seen so far in 2021. This applies to a book-to-bill of 1.3, which is a good signal for the future. The order backlog is now NOK 12.9 billion, which is 13% increase compared to a year ago. The order intake in 2020 was NOK 15.9 billion, and currently the running 12 months order intake are at NOK 17 billion. From the chart to the left here, you can see trend over the last five quarters increasing the comfort also for growth next year.
Order intake in Maritime will still fluctuate, driven by large single contracts, but looking at Q3 also when excluding the major orders, book-to-bill is above one, another signal for a positive trend in that market. Out of the order backlog of NOK 12.9 billion, NOK 2.7 billion are for deliveries already now in Q4. This is below the level we had a year ago, and it is a clear result of the low contracting we saw in the market during the first COVID quarters. Evidence that KONGSBERG is a light- cyclic, late- cyclic company. The increased ordering we have seen in 2021 are mainly affecting then our 2022 deliveries. Last time I had a slide about the aftermarket, so I wanted to also provide that one with you for this time.
Last quarter, I mentioned that the aftermarket business fell by 20% from Q1 last year to Q3 the same year. The aftermarket is an important driver for both growth and profitability in Kongsberg Maritime. In the third quarter, the global customer support division accounted for 51%, as I said, of the revenue, but also close to 40% of Maritime's order intake. It's a very key contributor. It is therefore good to see activity from the previous quarter continue, and that activity from global customer support area is up by 16% compared to the cycle low level from 3Q last year. Over the past quarter, we have gradually seen that both traditional service as well as sale of spare parts have increased. We also see a drive for upgrading vessels toward hybrid and more environmentally friendly solutions.
Even though many industries, including Maritime, face bottlenecks such as increasing commodity prices and components shortage that might influence negatively on new building, we also see positive signs such as increased shipping rates in several markets. Typically there, it's LNG and the container market. Increasing rates in some markets is leading to higher profits among many different kind of ship owners, like for bulk and for container. In the end, this leads to ordering of new builds, and new builds are up this year. That's an evidence. The positive drive with regards to offshore wind is also an area where Maritime over the past years have proved to have a strong position with several major contract wins.
From the pie chart, on the right side, you can see that orders from offshore wind and seaborne and PAX adds up to close to 50% of the new build orders so far this year. Despite relatively low quarter-on-quarter growth in Q3, the underlying activity trend is positive with increased activity within areas with short lead time from order to delivery, such as aftermarket, as I just mentioned. Deliveries on new build projects in the quarter are somewhat low, but this mainly due to the low level of contracting we have seen, especially over the first quarters of COVID-19. We have seen from the contracting so far in 2021 that this will improve going forward. Maritime delivered NOK 560 million in EBITDA this quarter with a margin of 15%.
The margin is driven by a favorable project mix and also confirms the saving we have managed to obtain through the integration of Commercial Marine. The challenge going forward will be to obtain the cost level and utilize the experience we have gained with COVID-19 for future processes. In addition, we see the situation with the component shortage affecting our industries, not only Maritime. We are following the situation closely and taking measures wherever we are able to. I think it's a common challenge for everyone. Let's look at Defence. Defence continues to grow. The backlog and with the NOK 10.3 billion order intake in the quarter, the business area now has a backlog of NOK 31.2 billion, corresponding to three years backlog at current levels.
3.1 billion of the order backlog are to be delivered already in Q4, meaning that we are at a record high Q4 when it comes to revenues and at around NOK 10 billion for 2021 for a full year. The huge increase in order backlog have grown by close to 50% so far in 2021. Execution of this backlog also requires more resources, and the business area has hired about 100 new employees since we released the second quarter in July this year. Q4 has also started well when it comes to the order intake for defense. Last week we announced a NOK 4 billion contract with Norway for production of the Joint Strike Missile. This is an important milestone for us as Norway has been the main driver and funder of development of this missile back in 2008 actually.
Defense continues with double-digit revenue growth and 20%+ margins. The revenue of NOK 2.3 billion are 17% higher than Q3 last year. It is high activity throughout the business area, especially for deliveries of CROWS to U.S. Army, components to F-35 Joint Strike Fighter, as well as for several NASAMS programs, where the largest one now is still the Qatar program. The top 15 projects announced accounted for 67% of the revenues this quarter. Reported EBITDA in defense was NOK 461 million, actually down by NOK 12 million compared to Q3 last year. Keep in mind that Q3 last year, we reported NOK 150 million in positive special items, showing that underlying we have a very solid improvement also this quarter. Last quarter, I promised you continued growth, strong margins from defense.
We delivered 20.4%, and the prospects are good for the coming quarters as well. However, keep in mind that we currently have been delivering on a favorable project mix in Defense, so you should not expect margins at these levels over a long cycle. The component situation that I also touch upon talking about Maritime is also an area of major focus for Defense. Even though we have managed to navigate the situation so far, we have close dialogues with our supply chain and have taken precautionary with regards to critical parts. Despite this, we believe that the EBITDA margin for defense for 2021 as a whole will remain at the same level as for the first three quarters. Then some words about Kongsberg Digital.
With regards to Kongsberg Digital, I'm very pleased to see that the business area now are growing both in revenues as well as in recurring revenues. NOK 221 million in revenue correspond to 20% increase compared to Q3 last year, and 23% increase in recurring revenue signals that Digital is now growing on the right KPIs. As Geir mentioned, we have signed up three new fleet rollouts for Vessel Insight during the quarter. These are not necessarily affecting the P&L immediately, but builds comfort around Digital going forward. With regards to Digital Twin, the area are developing healthy. Maritime Simulation have been an area that have faced major challenges during COVID-19. In Q3, we have once again seen positive signs with regards to the simulator market, and Maritime Simulation are in Q3 reporting growth both in revenues and in order intake.
Kongsberg Digital are currently putting lot of effort into scaling up the business, both in terms of employees and investments. Recruitment of new personnel is ongoing, and number of employees in Kongsberg Digital have increased by approximately 10% during the last quarter. Continued strong effort are also put into sales campaigns, and even though we do not really see the financial effects on an aggregated level yet, the operational KPIs are now really moving in the right direction. Then what you probably are very curious about, with regards to the process around the future state of Kongsberg Digital, we are moving forward and still considering on both partner models as well as potential listing to realize the full potential of Kongsberg Digital. With that, let's have a look at the outlook for the company. Geir? Thank you for listening in.
Thank you, Gyrid, for enlightening us on the financial achievement for Q3. Let me see here if we can get this. There we are. Yeah, so what Gyrid just have shown you aligns that it's very every reason to have confidence in KONGSBERG, both when looking at our performance and also our financials. For the group, we have a sound balance sheet and an impressive order backlog of almost NOK 45 billion at the end of Q3 2021. Of this, which we expect to deliver on NOK 6 billion during Q4. We believe in a positive market development going forward, even though challenges in supply chain and other uncertainties linked to the pandemic may impact our markets. Our defense area has delivered a very strong quarter and are ideally positioned for significant international programs.
The high level of activities contributes to future growth for the group overall. It's known that the maritime market have seen some challenging challenges during the last periods, but there are grounds to say that we are moving in the right direction. The higher level of activity in some segment with increased rate of new builds being contracted provides increased optimism. However, we are monitoring closely development of the raw material prices and its possible impact on new contracting. We are continuing our investment in our digital business area where we have had and still have aggressive growth plans. When it comes to the digital twin, the growth is progressing as planned.
With regards to the Vessel Insight, we have seen that decision processes and the rollout have been somewhat slower than what we aimed for a few years ago. There are several reasons for this. The shipping market in general has been weak for several years, and also the COVID-19 has also hit this market hard, leading to many ship owners postponing investments. However, the positive developments we have seen in several maritime segments has also turned out positive with regards to the Vessel Insight. To conclude, I'm very satisfied with the quarter. The group continues to deliver strong results, performance, and also profitable growth. Combined with the record high backlog and strong industrial position, I have a positive view going forward. Thank you so much for listening in.
Now I will open up for the Q&A, and Gyrid, you will join me for that.
Yes, we have a few questions from the viewers. The first questioner is Ludvig Hieldal. How do you expect global supply chain issues to impact KONGSBERG over the next 12 months?
I think as both Gyrid and myself expressed is that we are concerned about overall supply chain and especially on the component side. We are monitoring this very closely, and we are taking actions. We have been taking actions early, and we are continuously monitoring and taking actions where we can take actions. Unless we will see this lasting for, let's say, a long period, I think we will handle this in a good way. Obviously, if this will continue 12 months or more, it will also have an impact on KONGSBERG.
As I said also, we are hunting for all ways to do the logistics, and we are asking the same question internally to try to monitor all the way. But, it's a challenging situation for all companies, I think today.
Okay, second question. How do you expect the new IMO requirements that becomes effective in 2023 to impact within KM in the next couple of years?
I think first and foremost, that will of course be good for the climate. But that will also open up opportunities which we already see in fact. There are ship owners already investing in hybrid solutions and also consider other means to take down their emission. I think this regulation coming into effect in 2023 will be positive for our let's say, technology solutions. It's good for the climate, it's good for KONGSBERG.
Thank you. A question from Hans-Erik Jacobsen, Nordea. You seem to guide for somewhat lower margins within KDA for next year, 2022. Given the very high order backlog and the positive outlooks, why will margins be down next year?
I think, as I said, the new order that we got now, last week, NOK 4 billion for the Joint Strike Missile with Norway, for example, will have lower margin in the long run, than the project mix that we see today. When you have a higher, a lot of missile projects, then that will make a pressure on the margin. You also see that, a higher, order backlog from the Norwegian defense are a pressure on the margin in the long run. Today, we have a very favorable project mix, and that will not continue over years. At least, for the next quarters, I think, it will be very positive.
Thank you. A few questions from Kenneth Sivertsen, Pareto. Congratulations with another stellar quarter and impressive order intakes. The KM, Kongsberg Maritime guidance for 2022 indicates margins about the current levels. That's about the previous guidance. Is this driven by increased sales and service requirements? Am I understanding it correctly?
Yeah. I don't think we have guidance on the margin on Kongsberg Maritime up at the moment. What you saw now in this quarter, we have 51% of the revenue coming from the aftermarket, which is normally a very favorable mix. We also have approximately 20% from the subsea market, and that's also a very profitable mix in terms of the revenue in total. We have the full year effect of all the cost efficiency program that we have had earlier. We have not said anything about the guidance on Maritime. We still have 13% at end of 2022, but we will come back with the guidance on the whole company when we are releasing the Q4 figures and looking into the next year.
On KDI, order intake seems to be a bit below sales during the quarter. How firm is the target you have for 2024?
Yeah, that's a good question actually, because we are not looking at the order intake in KDI the same way now. Because if you look at the order backlog, we are counting the recurring revenue and looking that this is growing steadily. We have had a challenge with maritime simulation over the COVID period for the last one and a half years, so I think it was very positive now to see that they are coming back. That's probably also one of the reasons why we see a decrease in the order backlog or the order intake, but we will now see that the order intake in maritime simulation will also increase, and then we will be back on track for that area as well.
With regards to the non-controlling interests, NOK 267.6 million in the quarter, what is driving this?
It's a reassessment of the acquisition purchase price when we did the KAM acquisitions 2.5 years ago. It's just a technical part.
Okay. The final question from the webcast. With regards to the HullSkater product establishment in that you have in cooperation with Jotun, when will this be rolled out to the market, and what is the commercial potential for such a product?
Huge, I hope.
As probably some of you know, we announced this cooperation 12th of March, actually, in 2020. That was a special day, I think, for Norway. I think that, you know, as we see the world is opening up again, we see that we can travel, we can visit the ports because that is where the customers are or we need to talk with the ports to be allowed to actually install the HullSkater. I think the efforts from the sales team from Jotun, of course, will be much more active going forward.
I strongly believe in this product because this can make a huge difference for the climate and also for the vessels to save fuel. It's just a matter of now coming out to the customer, meet the customer, get the HullSkater installed on as many vessels as possible. When the restrictions now are lifting, I think we will see more activities in that area as well. The potential here is of course huge. I cannot give you any specific number here, but obviously it's a huge market out there. It's 100,000, maybe not 100,000 vessels applicable for HullSkater, but there is a number of vessels out there that this will be a product that they can really
I just received one more question here. Geir, you mentioned cross-sales of NOK 1.3 billion in Kongsberg Maritime.
NOK 1.4 billion.
Yeah.
NOK 1.4 billion.
NOK 1.4 billion. Which sub-segments, from which sub-sub-segments, did you see the larger parts of these cross-sales?
I think this is mainly coming from, if you're asking about the product side, it's from the propulsion and engine side, and it's also from the deck machinery side, where we have managed to, together with our, let's say, integrated system, add on CM products into the complete package. If you're talking about segments, I think it's market segments, then it's into LNG, and it's also into, I would say, offshore wind, for example, and also research vessels.
Thank you. That concludes the questions from the webcast.
Thank you. I thank you for listening on this third quarter presentation. I really hope that all of you will follow the ESG session that will follow immediately after this. Thank you so much. KONGSBERG has a vision. World-class through people, technology, and dedication. As a high-tech industrial company with more than 11,000 employees serving customer, partners, and communities in 40 countries, we feel a great sense of responsibility to always strive to be the best in class wherever we operate or whatever we do. This also applies when it comes to our ESG commitment. Internally, we are continuously taking new steps to improve transparency, equality, accountability, and our community engagement. We have also sharpened our focus on ESG reporting and come up with new targets for lowering our internal environmental footprint.
While it's clear that this work is an ongoing process, KONGSBERG will continue to have ESG on top of the agenda. People are our most important input factor to succeed. We have a strong focus on both hiring the right employees, as well as keeping them. This means that the factors such as employees' satisfaction and HSE are on my agenda basically every day. Being socially responsible also means that we are aware and take part in all the communities we are involved in. We have offices at more than 100 locations in close to 40 countries, and no matter whether you work for KONGSBERG in Norway, the U.S., Spain, South Korea, China, or any of our other locations, we aim to have the most determined, innovative, reliable, and collaborative employees.
KONGSBERG has, over decades, developed a very comprehensive compliance framework. The framework is deeply rooted in the board, in the management, and all the way through the organization. The framework is subject to third-party audit every third year to make sure that we continuously have a world-class compliance framework in place. You can read more about this framework at our website under Responsible Business Conduct. Our compliance system builds on our guidelines and business ethics, which oblige our board members, manager, coworkers, all temporarily hired personnel, consultants, market representatives, lobbyists, and others acting on behalf of KONGSBERG to comply with the laws and regulations as well as our internal guiding documents.
We, in the conduct of all our activities, are committed to maintain our business conduct framework throughout the entire value chain, as well as high safety, ethical, and quality standards. We believe such a commitment is integral to running a transparent, sustainable, and successful business. Export control and sanctions are among the main risk and focus areas for KONGSBERG and an important part of the compliance program. Many of our product and systems are classified as military or dual-use technology and is therefore subject to export control. Compliance with the legal obligations related to export control and sanction is our cornerstone in our license to operate and to conduct business in a responsible manner. Looking beyond social and governance aspect, I strongly believe that KONGSBERG is a part of the solutions to climate changes. We shall ensure competitive long-term value creation in balance with the Paris Agreement.
We shall aim for net zero by 2050 and a 1.5 degree scenario as an ambition. By joining the Science Based Targets initiative, we ensure that our low carbon transformation is aligned with climate science. Many of the technologies we have pioneered over the past decades are technologies our customer and the world need to move toward a more sustainable future. Our space industry are monitoring the world's health. Our green vessel upgrades and hybrid and zero emission solutions reduces vessels emission significantly on the seas. Our offshore technology are key to build and operate floating wind parks, and we have world-class ocean exploration technology to enable more sustainable harvesting, of the ocean. To us, there is both a considerably sustainability potential and a considerable commercial potential going forward.
The UN Sustainable Development Goals represent a global agenda to address the most pressing challenges facing our world. We recognize the importance and the urgency to this global initiative and how KONGSBERG can play an important role on climate action, ocean health, surveillance, clean energy, and sustainable development. KONGSBERG has been honored to be invited to the UN on several occasions to discuss sustainable ocean and enabling technologies. We take pride in this work and are enthusiastic and dedicated to being a part of the solution. In 2018, I was challenged by the Norwegian prime minister to sign a pact with the 17 sustainable goals. The pact was co-signed by several other industrial leaders, the Confederation of Norwegian Enterprise, and the Norwegian Confederation of Trade Unions, among others.
I believe strong, long-lasting partnership is the key to reach the sustainable goals. With me in studio today, I have Even Aas. He is responsible for communication, public affairs, and sustainability, on a group level. Even has many years of experience working with sustainability, environment, and climate. Even, do you take the ball?
Yes, definitely. Usually, Geir Håøy, a football symbolize hope, passion, and opportunities, but this ball has really turned into the most important ball today. It symbolize the 17 UN goals, as you said.
Yeah. The world challenge.
The real world challenge. The world is on a crossroad today, and we have to turn words into action. Actually, we have to walk the talk.
Mm.
We all have to commit to all the 17 goals, both the business world and the rest, to have a sustainable world.
Even, in your perspective, how do you believe KONGSBERG can make a difference?
Remember, KONGSBERG is a unique technology company. KONGSBERG is an ocean expert. I usually use three figures to illustrate the importance of the ocean: 70, 80, and 90. Imagine, Geir Håøy, if this ball is the world, 70% of this ball is covered by oceans. If this still is the world, 80% of all the world's goods are seaborne.
Mm.
80% of our income is related to the ocean.
Mm.
Not to forget, 90% of this ball is unexplored. 90% of all the mass is in the world, and we utilize only 2%.
That's not much.
No, and the world is starving.
Mm.
Let me use some examples. Today, the fish stocks in the world are threatened.
Mm.
20% of all catch today is illegal.
Mm.
With our technology, we can help the world to solve that challenge.
Using our space industry, huh?
Yes, that's right. When it comes to green shipping, when it comes to offshore farming, when it comes to offshore wind, we will play a very important part.
You mentioned exploration under the water.
We are in the forefront when it comes to sustainable water. If you should pinpoint one particular of these 17 goals where we can really make a difference, it's goal number 14.
Life Below Water.
That's right. I truly believe, Geir Håøy, we have a very important role to play, and we will make a difference.
Thank you, Even, for sharing your perspectives on these topics. I will leave the floor for our CFO.
The evolving market and regulatory trends are challenging us to become even more sustainable and more socially responsible. It's not enough to only make our own business more sustainable. To succeed, we need to roll out throughout our entire value chain. In KONGSBERG, we do not see the ESG challenge as a cost. We see it as a major opportunity that will drive growth and contribute to long-term competitive advantage. It will also be a prerequisite both to come to the contract negotiation tables to get funding, to attract investors, to receive attention from suppliers, and last but not least, to be able to hire the best people.
As Geir Håøy has touched upon, we as a company will need to utilize the new business opportunities which come along in the wake of the green shift, not only to increase our revenue and maintain our profit, but to stay relevant and continue as a world leading supplier to our industries. There are millions of small and large initiatives initiated by everything from children to large corporations, nations, and international organizations. Everything helps, but to make the real green shift, technology will be the key. For technology to evolve, investments need to be made, and for investments to be made in the long term, they not only need to be environmentally sustainable, they also need to be financially sustainable. KONGSBERG possesses a major portfolio of groundbreaking technologies today. We are involved from deepest sea to outer space throughout several industries.
We invest heavily in R&D and product development, so that we are able to offer products and solutions to our customers that supports their ambitions and enables them reaching their targets. Today, more than 95% of our R&D spend in Kongsberg Maritime is tailored towards new products and systems that counts towards sustainable solutions. One example is our initiatives towards offshore wind that Egil will touch upon later today. We do already see good progress with almost 20% of Kongsberg Maritime's order intake from new building market originating from offshore wind segment so far only in 2021. On the defense side, we are delivering products and systems that are to be both relied on and technological supreme for decades after its original delivery.
This requires a sustainable mindset when developing the systems and in a clear example on circular economy that Eirik will touch upon later. Digitalization will be a key to succeed here as well. Just imagine how much better you solve a task the second time you solve it. Imagine if you can utilize not only your own experience, but thousands of others, not only people, but also vessel, heavy assets, machines to have a system guiding you through your operation based on a full experience as well as simulated best practice system. As you know, KONGSBERG already has this technology today. Soon we will start to report in accordance with EU taxonomy framework. This framework will evolve over time. However, based on current guidelines, KONGSBERG's revenue will only be counted for to a limited extent. That's the facts today.
That said, when circular economy is implemented into taxonomy, this will most likely increase our share of aligned revenues, especially from Kongsberg Defence & Aerospace. In addition, refitting into and construction of new vessels running on more environmentally friendly fuels should align our revenue stream connected to these vessels. With the current focus on R&D, as well as the direction our industries moves, KONGSBERG will gradually report increasing taxonomy aligned revenues. One challenge with the taxonomy framework is that it helps identify sustainable investments and revenue streams, but they make no claim about whether these revenues or investments are financially sound. As mentioned earlier, for an investment to be environmentally sustainable in the long run, it also needs to be financially sound. Otherwise, we will not invest.
To sum up, KONGSBERG is not a part of the race for a more sustainable world with the goal to score high in rankings or just because we are required to. We see that technology will be a requirement to succeed and KONGSBERG with our world-class technologies know that we can contribute. We will continue to invest to make our product more sustainable and eco-friendlier, and we will take the business opportunities that comes along. Thank you for the attention.
KONGSBERG's operations are, by its nature, very low with regards to direct emissions. Despite this, we work every day to reduce the direct carbon footprint we leave. This goes both with the amount of energy we use as well as the source of our used energy. The company has been through major structural changes over the last 3 or 4 years, and the way we measure emissions, both within our operations as well as outside our operations, has evolved dramatically. We have also been through close to two years now, where the way we work has been affected by a still ongoing pandemic. This means that comparisons with historical figures have their limitations. For our future targets, we have decided that our best baseline is our recalculated 2019 figures, which include the full-year operations from acquired companies.
I mentioned that our own operational carbon footprint are low, but this does not mean that we do not intend to improve. By 2030, we aim to reduce our emission from use of fossil fuels by 50% relatively to the size of our business. This will be achieved through a combination of reducing use of fossil energy and moving from fossil to renewable energy sources. By 2030, we will also aim for 100% reduction in internal emission from purchased electricity. This will be achieved in a combination between purchase of certified green electricity and reduced consumption of electricity. Further, we have set a target of 25% reduction in emissions from logistics by 2030 and 30% reduction in emission from business travel by 2030.
However, where can KONGSBERG really make a difference is throughout the value chain of our operation. To deliver our systems and products, KONGSBERG relies on thousands of sub suppliers all over the world, and our systems are in operation and used from the very deep ocean to out in the space 24/7. To make a real difference, we need to involve this chain of companies and partners, both in Norway and internationally. When evaluating our carbon footprint, we take the entire value chain into account. Last month, I personally signed a letter which we submitted to the Science Based Targets initiative, where I committed KONGSBERG. We have also set standards for our supply chain. Our target is that within the next five-year period, 2/3 of KONGSBERG's suppliers by spend are to incorporate science-based targets.
This will require major efforts by both us and our value chain, but it is needed if we are to aim for net zero and the 1.5 degree scenario by 2050. A few weeks ago, Eirik Lie, President in Kongsberg Defence & Aerospace, visited Kitron, an important supplier to KONGSBERG. Here is a short movie from that visit.
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As we have touched upon several times, today, already and where KONGSBERG can really make a difference is to address our entire, value chain. I'm now standing, with the President of Kongsberg Defence & Aerospace, Eirik Lie. Eirik, we are standing here now in this brand new, NASAMS, production, air defense, production facilities. It looks great.
Yes, it is. I'm so proud of it. It shows the activity we have in our air defense domain these days. It's full rate production.
It's full.
Yes, it is.
I guess you are happy.
I'm happy. It shows that this is one of the most important product lines we have.
We also talked about the circular economy. I think, you know, where can you elaborate a little bit? Where can Kongsberg Defence & Aerospace contribute to making the world a more sustainable?
Yeah. Obviously this is for KDA an important matter. I think it involves a lot of subject areas within KDA and also the whole value chain. I like to mention that we need to look into how we design our products and also maybe use more digital technology as part of our product lines. It's also worth mentioning, and I think maybe the most important is that we include our supply chain as part of this circular economy.
Yeah. You have a few suppliers.
Yeah. Close to 70% of what we are doing are actually part of the supply chain.
Mm.
It's important.
I think we also just heard from the Kitron representative that, you know, he said that KONGSBERG has quite comprehensive demands to them and going from nice to have to need to have. Could you elaborate a little bit on that?
Yeah. For me, this is a natural transition. We see that when we talk to customers and other authorities, they have expectations, but I think the transition from expectations to requirements will come, and we need to be in front of that. That's why we put more and more demands and requirements on our supply chain. That's why I think Kitron answers like that. They are seeing that we have started on this process.
Right. KONGSBERG, we have set quite comprehensive targets for ourselves, how we can contribute to net zero emission and the 1.5 degree target. Could you say something about how Kongsberg Defence & Aerospace will contribute to reach these targets?
Well, first of all, there are several things here. First of all, I think we need to look into our products and how we can improve those products. That includes also supply chain. That's very important for us. Maybe also in the long run, we need to look at how we can develop new materials that can be utilized in this context.
Yeah.
Lastly, I would also mention that a dialogue between the customers, ourselves and the supply chain is highly important, how we can find good solution to make a sustainable product line and world.
Mm.
One more thing, Geir. Our MRO activity in KDA, maintenance, repair and overhaul, that's important when it comes to sustainability, because in this context, we actually extend our lifetime for the products we develop. That's important when it comes to sustainability.
Okay. I'm very glad you mentioned that. It's not only important for Kongsberg Defence & Aerospace, it's also important for KONGSBERG overall, the MRO activities. Thank you so much, Eirik, for enlightening us on this topic today. I think we should move back to the value chain and to one important part of the value chain, our customers.
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I'm sitting here now with Egil Haugsdal, the President of Kongsberg Maritime. Egil, we just heard the CEO, Tommy Walaunet, talking about the relationship between Island Offshore and KONGSBERG. What is it that make this a successful collaboration?
Island Offshore is one of many examples of long-term customers that we work together with to find good sustainable solutions for the future. What we do here is what we call peak shaving, which really means that we have a battery that is taking over when you need extra energy, so you don't. You can reduce the engine capacities on the vessel, and it's a lot of energy to save on that. KONGSBERG and Island Offshore work very well together because we both are focused and prioritizing sustainability.
We can see some early movers, like we saw on the video, here, but when can we expect hybrid solutions to become a business of scale?
Hybrid solutions start to become quite a volume product now, not only for new vessels, but also for upgrades. Hybrid solution is only one of many things you can do to improve the energy consumed for a vessel. We are looking at the hull of the vessel. We can change that. We can improve the efficiency of the propulsion system. We can improve energy systems on the vessel. There is a lot we can do, both on existing vessels and of course on new vessels. Digitalization is a very important area where we really are able to monitor and get information about every detail of the consumption of a vessel. Island Offshore is now going o install Vessel Insight, which will give them a very detailed understanding of how their vessel operates.
Offshore wind has a strong focus today, where both bottom fixed and offshore floating wind is to become major markets. You have said that KONGSBERG gonna take a part in the entire value chain, what is our position today, and what is our competitive advantages?
Over the last years, offshore wind has become very important for us, and is today a significant part of our revenue, mostly on fixed installation and on marine operation and special vessels used for this. We see that floating offshore wind will come in as a huge industry, and that is very attractive for KONGSBERG. We will be involved in the full life cycle of these projects from planning and exploration, marine operations. You can just see it could be hundreds of windmills in the size of a Eiffel Tower. To have them out installed in the rough environment of the North Sea, it's really a challenge, and we like challenges like this. We will be involved in the marine operation.
We will also plan to be involved in the operation of the wind farms or for maintenance and all in all, this is going to be a very interesting business for KONGSBERG.
Lastly, Egil, what do you believe gonna be Kongsberg Maritime's major contribution for the world to reach net zero and the 1.5-degree target by 2050?
It's three things, and most of all, it's what we can do for our customers. That is significant, but we also have to look at ourselves, and we will take our share. We have a limited footprint today, but we will make sure that we are improving that and taking our share of that. We also have a quite significant supply chain with a number of suppliers. We work closely with them and expect them also to do their share of this. This is all the way from the supplier through ourselves and to our customers. We are really dedicated on this, and we will make a difference.
I'm sitting here today with the President of Kongsberg Digital, Hege Skryseth. It's no doubt that the world are looking into business that are digitalizing the world and also the greener footprint. Hege, today, what does Kongsberg Digital do to push the ESG agenda in terms of both digitalization and environmental footprint?
I would say that, sustainability is very high on the agenda, both within the energy, industry and also within the maritime industry. Digitalization is a vital part on how to achieve the goals. It's everything from getting insight, getting data from the different and various assets, looking into how you can improve processes, improve operations, and improve sustainability in that sense. To give you a couple of concrete examples, it's on the maritime side, we see that there's a significant potential to save fuel, which is the most important contributor. Up to 15% of fuel is possible to save with various different operational aspects that you put in place due to insight. Insight is vital.
Like we have long experience of.
Yeah. Yeah, absolutely. If you look at the energy, I think it's combined. It's not only, of course, to operate the current assets in the more sustainable way, but it's also the energy transition that is happening at the same time.
Mm.
These integrated energy sources, where you, for instance, have wind farms, offshore wind farms providing power to offshore assets, then you have utilities and power plants powered by FSRUs. It's basically coming together, so I think the existing industries are well set up to actually be able to transform.
We see a lot of demand on that area now.
Definitely. There's many factors that's driving this. It's both their customers of the maritime industry that do want more green operations, but it's also regulators of course. You have front runners within both maritime and energy that really want to contribute to a greener world and also the significant reduction.
Hege, both the IMO and the International Energy Agency have extremely ambitious targets for reducing CO2 emissions, and I think that Kongsberg Digital has a lot of solutions to solve that or at least help on their way.
Yeah, absolutely. We are quite confident that we can support the industries in achieving this. We believe it's gonna be a combination of both an energy transition and digitalization of the current structure. Of course, you already see it that many new builds are entering the market with hybrid fueling with new fuel types, which is already reducing the emissions. I think it's a combination of what Kongsberg Maritime bring forward with hybrid fueling and also what we are bringing forward.
The combined company is actually giving solution to a lot of customers today.
Definitely.
Yeah.
So...
In terms of Norway, we have a good position as a country as well because the history we have in the maritime and with the ocean. We see today that we are good positioned for making those solutions for the whole world.
I think especially I would put forward the competency level that we have in advanced operations and offshore-related operations, which will also significantly contribute.
Mm
when it comes to, for instance, offshore wind and
Mm
... new type of energy sources that we see emerging.
Mm.
I think it's technology that's gonna be the enabler for a greener future. I think that we both have the competency within KONGSBERG and I also believe that we have the willingness to put forward strong new solutions to support this shift.
200 years of experience.
Yeah.
Digital, digitalization the world now.
Thank you.
Thank you. Thank you.
Our goal today has been to give you some more insight on our ESG agenda. I hope this has given you a better understanding of our ESG commitment, and particularly when it comes to sustainability and our contribution to deliver on the UN sustainability goals. Thank you for joining us today.