Expanding Production Capacity: Kongsberg Meeting Growing Orders for Defence Products

Norwegian engineering group Kongsberg is ramping up its production capacity to meet the increasing demand for its defence products, particularly missiles, as European nations boost their military spending.

In the second quarter, Kongsberg reported orders totaling 18.18 billion Norwegian crowns ($1.80 billion), a 5% increase from the previous year. The Defence & Aerospace sector accounted for 54% of these orders, reflecting record-high market activity in this segment, according to CEO Geir Håøy.

With several European countries committing to boosting their defence budgets in response to geopolitical tensions, Kongsberg is seizing the opportunity to expand its production capabilities. The company is investing in facilities in Norway, Australia, and the United States to cater to the growing demand.

CEO Geir Håøy mentioned that Kongsberg is comfortable with its current capacity and is strategically investing in new production facilities. The company is collaborating with the government in Australia to build and lease a production plant, while in the U.S., it is making its own investment.

Furthermore, Kongsberg plans to allocate 3% to 5% of its sales into expanding its production capacity, primarily focusing on the defence sector. The company is also actively working on strengthening its supply chain to support its growth initiatives.

In the second quarter, Kongsberg’s core earnings (EBITDA) surged by 28% to 2.33 billion crowns, surpassing analyst expectations. However, its revenue of 13.9 billion crowns fell slightly below consensus estimates.

Despite the positive financial performance, Kongsberg’s shares experienced a 9% decline, making it one of the top decliners on Europe’s STOXX 600 index. Analysts noted weaknesses in certain areas of the results, particularly in the maritime division.

As Kongsberg continues to navigate the evolving landscape of the defence industry, its strategic investments in production capacity and supply chain optimization position the company for sustained growth and success.

($1 = 10.0974 Norwegian crowns)

(Source: Reuters)