Annual Report (ESEF) • Mar 12, 2024
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Download Source FileKongsberg Automotive ASA ANNUAL REPORT 2 Kongsberg Automotive at a GlanceContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial StatementsKongsberg Automotive at a Glance Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements CONTENTS BOARD OF DIRECTORS’ REPORT ........................... 26 MARKETS ........................................................... 27 FINANCIAL PERFORMANCE ................................. 28 OPERATIONS ....................................................... 31 ENGINEERING AND DEVELOPMENT ..................... 33 CORPORATE GOVERNANCE ................................. 35 RISKS .................................................................. 36 SUSTAINABILITY ................................................ 39 OUTLOOK ............................................................ 55 BOARD OF DIRECTORS ........................................ 56 KEY FIGURES ........................................................ 4 CEO LETTER ......................................................... 6 2023 HIGHLIGHTS ................................................. 9 2023 KEY EVENTS ............................................... 11 BUSINESS HIGHLIGHTS ...................................... 12 SHIFT GEAR ....................................................... 16 ACQUSITIONS AND COLLABORATIONS ............... 17 COMPANY STRUCTURE ........................................ 19 EXECUTIVE MANAGEMENT ................................ 20 VISION AND MISSION ......................................... 21 WORLDWIDE PRESENCE .................................... 22 A PLACE IN HISTORY ......................................... 23 CUSTOMERS ...................................................... 24 FINANCIAL STATEMENTS OF THE GROUP ........... 58 FINANCIAL STATEMENTS OF THE PARENT COMPANY ................................ 112 ALTERNATIVE PERFORMANCE MEASURES ....... 127 CONSOLIDATED KEY FINANCIAL DATA ............. 131 DECLARATION TO THE ANNUAL REPORT 2023 ... 132 3 Kongsberg Automotive at a GlanceContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements 4 Kongsberg Automotive at a GlanceContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements MEUR annual sales 2020 2021 2022 2023 831 818 906 885 687 885 24 % ANNUAL REPORT 2023 // 2020 2021 2022 2023 202 233 247 297 MEUR 4 Adjusted EBIT (MEUR) BRP BRP * Refer to the Alternative Performance Measures section Adjusted EBIT margin (%) - continuing operations 2020 2021 2022 2023 2.4 6.1 3.9 2.7 50.7 21.1 35.6 23.7 16.4 88 14 .5 5 Kongsberg Automotive at a GlanceContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements * Refer to the Alternative Performance Measures section * Refer to the Alternative Performance Measures section MEUR MEUR MEUR annual sales MEUR annual sales adjusted EBIT (MEUR) adjusted EBIT (MEUR)adjusted EBIT margin (%) adjusted EBIT margin (%) 2020 2021 2022 2023 2020 2021 2022 2023 2020 2021 2022 2023 2020 2021 2022 2023 2020 2021 2022 2023 2020 2021 2022 2023 92 94 118 184 110 139 129 113 -0.6 -0.2 5.9 3.6 2.8 12.7 12.3 10.5 8.8 25.2 16.9 13.7 38.8 48.4 46.3 34.8 373 430 466 489 306 393 440 396 ANNUAL REPORT 2023 // 5 6 Kongsberg Automotive at a GlanceContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements Looking back at 2023, we are coming off another year in which we faced a challenging market environment. Despite all the headwinds, KA continued to deliver on its revised guidance. Our revenue growth in the commercial vehicles area was above market for the third year in a row. This was mainly driven by the signicant outperformance in reve- nues in the European truck market. KA’s revenues included sustainable price increases as well active reimbursements of the increased cost due to volatile prices of raw material, logistics costs, energy as well as labor cost ination. Within the Direct and Indirect Purchasing work- stream, efforts to reduce direct material costs and rene- gotiate raw material agreements with KA’s suppliers proved to be successful. The operational improvements throughout the company have positioned us well to mit- igate the impact of the disruptions in the supply chain, raw material and energy costs, ination, and declining volumes within our Driveline business. KA also launched a cost optimization program in the second half of 2023, which will contribute to the lowering of our overhead costs in 2024. Considering the changing industry landscape and the actions that we took, we are It was my honor to have been appointed as the interim President & CEO of Kongsberg Automotive (KA) in July 2023, and to have ofcially taken the role as the President & CEO from January 2024. I have been a proud member of the automotive industry for the last two decades, 16 years of which I have spent with KA. Before my appointment, I successful- ly led the Flow Control Systems business unit as the Executive Vice President. satised that the revenue of EUR 885 mil- lion and the adjusted EBIT of EUR 23.7 million matches the guidance provided in Q2 2023 presentation. However, the ulti- mate after-tax result of EUR -59.1 million was not according to expectations. In 2023, the previous Board of Directors initiated a stra- tegic review of the company to maximize future share- holder value and unlock KA’s full potential, beyond KA’s current performance. We have since concluded this review and identied ve areas of focus: > Retaining and developing current activities to cre- ate highest value for KA and its shareholders > Focusing on growth areas where KA is well-positioned > Regaining protability and positive free cash ow in the next year > Exploring options to mitigate earnings pressure from declining business unit > Allowing for bolt-on acquisitions in the coming year to strengthen business ANNUAL REPORT 2023 // DESPITE ALL THE HEADWINDS, KONGSBERG AUTOMOTIVE CONTINUED TO DELIVER ON ITS REVISED GUIDANCE. 6 See APM section for denition of adjusted EBIT Kongsberg Automotive at a GlanceContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements In both our business segments, Powertrain & Chassis (P&C) and Specialty Products (SPP), innovation was front and center. Excluding revenues from operations divested to BRP and the growth at constant currency rates, SPP leveraged its strong product portfolio to secure revenue growth by 16.7%, while successfully developing new applications for electric and autonomous vehicles and products to be used in various industries outside of the automotive sector. SPP’s Flow Control Systems (FCS) business grew signicantly in all regions, particularly in the United States, while the Off-Highway (OFH) business unit focused its attention on the agricultural and con- struction segments. While P&C segment’s revenue was impacted due to declining revenues in the Chinese passenger car mar- ket, the commercial vehicle market grew, particularly in China and the Americas. This positive development was partly offset by the declines in passenger car markets in Asia and Europe. P&C is strongly positioned to take advantage of the predicted growth in electric vehicles and autonomous driving, thanks to KA’s strategic acqui- sitions as well as a future-oriented product portfolio. In 2023, under the Operational Excellence and Perfor- mance Improvement focus of the Shift Gear program, KA realized more than 700 measures delivering EUR 68 mil- lion in positive operational improvement initiatives to ANNUAL REPORT 2023 // OUR REVENUE GROWTH IN THE COMMERCIAL VEHICLES AREA WAS ABOVE MARKET FOR THE THIRD YEAR IN ROW. SPP LEVERAGED ITS STRONG PRODUCT PORTFOLIO TO SECURE GROWTH BY 16.7% (...) WE ARE STRONGLY POSITIONED TO TAKE ADVANTAGE OF THE PREDICTED GROWTH IN ELECTRIC VEHICLES AND AUTONOMOUS DRIVING counter the negative market effects, securing protabil- ity, and sustainably upgrading processes. The new tools and processes introduced under this program increased transparency, leading to greater efciency. Similarly, efforts to reduce direct material costs and renegotiating raw material agreements with suppliers contributed sig- nicantly to the overall savings. KA also held continuous improvement process (CIP) workshops in Hvittingfoss, Norway and Koluszki, Poland, which resulted in addi- tional CIP initiatives and paved the way for future opera- tional improvements. Over the course of 2023, our Sales team won EUR 989.4 million in lifetime revenues and EUR 296.9 million in annualized revenues. We took a concrete step forward, as annualized business wins increased by 20% year-on-year, which also led to a positive book-to-bill ratio of 1.1. The main contributors were FCS and On-Highway, account- ing for 70% of the achieved bookings, contributing to our favorable book-to-bill ratio. As per our stated strategic aims, over 80% of our business wins came from non-pas- senger car segments, primarily truck and bus and indus- trial. This conrms our valued customers’ trust and con- dence in KA’s products and employees, underlining the competitiveness of our products. ACQUISITIONS In line with the Shift Gear program, KA aims to strengthen its position by leveraging in-house innovation capabilities as well as exploring relevant acquisition options. We have tapped opportunities within intellectual property that will allow us to capture a share of these growing markets, particularly in electric vehicles and autonomous driving. In 2023, KA entered into a non-binding agreement with Chassis Autonomy SBA AB to acquire a 20% equity stake in the company. KA also entered into a denitive agreement with Romoline to purchase patents related to camera and sensor washing technology. Additionally, in November 2023, KA signed an agreement to purchase 100 percent of the share capital of Skriverform AS. Skriverform designs and manufactures tools for injection molding (IM). 8 Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements OUTLOOK In 2023, we took signicant measures on the operational side to create greater protability and improve cash ow going forward. While our aim has always been to deliver greater protability to our shareholders, 2023 was a par- ticularly challenging year—not just for KA, but for the entire automotive industry. In December, we merged the Powertrain & Chas- sis (P&C) business segment and the Off-Highway (OFH) business unit to form the Drive Control Systems (DCS) business area. On a group level, this means that we will streamline our operational areas under two business areas, which are Flow Control Systems (FCS) and Drive Control Systems (DCS), effective January 2024. After a strategic review, launched in Q1 2023, our Board and management concluded that the Driveline business (excluding e-actuators) was not to be consid- ered core business for KA going forward. We believe the new company structure will better highlight the posi- tive development we are experiencing. By focusing on KA without Driveline, we as a group guide growth in the top line up to 2-3% for 2024, which should result in growth above market rates. In the past we have have focused on adjusted EBIT and not EBIT. As we see that one-time projects are part of KA’s regular business, we will rather focus on EBIT than adjusted EBIT going forward. However, we believe that the market gets a better and more precise picture of KA’s protability by focusing on EBIT rather than adjusted EBIT, so we will therefore focus on this in our communi- cation with the market going forward. Meanwhile, we will continue to deliver on our ESG targets by lowering our CO₂e footprint and developing a general sustainability approach for the future. We are to become an entirely carbon-neutral company by 2039. More in-depth analysis will be provided in our Sustain- ability Report, which will be released in Q2 2024. We will also continue to optimize costs, rightsize the company, and evaluate our global footprint. We expect these measures to yield EUR 15-20 million in annualized savings in 2024. Looking into what we strive to achieve for 2024, we expect revenue growth above market rates, adjusted for Driveline. We also expect that all operational measures we have taken in 2023 and 2024 will improve the prot- ability and cash ow of KA considerably in 2024. Our performance over the past year makes me con- dent that we are growing in the right direction. Our efforts to become a leader in our core areas are fueled by our strong product portfolio and backed up by excellent in-house innovation capabilities. I would like to extend my gratitude to everyone con- tributing to KA, our employees and suppliers, our cus- tomers and partners, our shareholders, and our dedicated Board of Directors. I am looking forward to shaping our journey together with all of you. Sincerely, Linda Nyquist-Evenrud President & CEO ANNUAL REPORT 2023 // CEO LETTER SUSTAINABILITY In 2023, Norway adopted a new act on sustainable nance that implements the EU Taxonomy Regulation. KA is sub- ject to this new reporting standard. We are more than just keeping step with legal requirements—we continue to make great strides on our path to becoming an entirely carbon-neutral company by 2039. In line with our goal of consuming exclusively 100% renewable energy by 2030, we made investments in several locations to reduce energy consumption and to increase the usage of renewable elec- tricity. Overall, our facilities reduced their energy usage by 6% compared to 2022. The focus on sustainability is a part of the Shift Gear program that KA launched in 2021. Our Sustainability Report will offer more in-depth information on our efforts and will be published in Q2 of 2024. In Q4 2023, KA announced the merger of its Powertrain & Chassis (P&C) business segment and the Off-Highway business unit (a part of the Specialty Product business segment) to form the Drive Control Systems (DCS) business area. Since reporting for DCS came into effect in January 2024, this report still refers to P&C and Specialty Products as KA’s business segments. For the complete organizational structure, refer to KA’s Organization page. 9 Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements 885€M VS 2022 excluding BRP 2018 989€M lifetime sales full year 2023 ANNUAL REPORT 2023 // 9 EUROPE AMERICAS CHINA 12.9% -3% 37.6% IN THE COMMERCIAL VEHICLES MARKET 10 Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements 45% 2 0% 10 DIF FERENT 3 43 ANNUAL REPORT 2023 // 10 COMPARED TO 40% IN 2022 COMPARED TO 318 IN 2022 CO 11 Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements 03 05 06 07 09 10 11 12 Strategic review initiated Brzesc Kujawski, Poland plant ofcially opened Annual General Meeting held Agreement to acquire 20% of Chassis Autonomy signed Linda Nyquist-Evenrud appointed interim President & CEO of Kongsberg Automotive New Board of Directors elected during the Extraordinary General Meeting Cost optimization measures announced Innovative patents acquired for camera cleaners developed in Norway by Romoline Drive Control Systems business area formed Structural considerations of the strategic review concluded Skriverfrom, a leading Norwegian manufacturer of injection molding tools acquired Share repurchase program initiated, as announced in Q3 2023 Q1 Q2 Q3 Q4 ANNUAL REPORT 2023 // 11 12 Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements ANNUAL REPORT 2023 // 12 489€M 5% VS 2022 663€M lifetime sales SCORECARDS 13 Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial StatementsKongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements The Powertrain & Chassis (P&C) segment of Kongsberg Automotive (KA) is a global leader in the design, testing, and manufacture of powertrain and chassis solutions. KA engineers and manufactures products for world-leading makers of passenger cars, commercial vehicles, and e-mobility vehicles of all types. CHARGING UP ELECTRIC APPLICATIONS The P&C business segment continued to focus on products and systems for electried vehicles in 2023. The segment has built up a portfolio of highly innovative products that full the requirements and functions needed for nearly all kinds of future electric powertrain solutions. As this mar- ket continues to grow, especially the market for electric actuators, KA aspires for a leading position, leveraging solid relationships with both Tier 1 and OEM customers. Due to regional differences, new drivetrain solutions will be introduced at a varying pace, offering strong possibili- ties to leverage the existing product portfolio. Consequen- tially, the segment is still able to win a signicant amount of new business for manual and automated manual trans- mission (AMT) products for commercial vehicles. In line with KA´s Shift Gear program, continuous improvements within P&C`s operational processes deliv- ered additional cost savings across its global plants, in addition to the carry-over from 2022. The program’s cross-functional focus provided the necessary platform to quickly identify and implement cost reduction ideas from across the organization. Despite the above-mentioned achievements, P&C’s nancial performance declined in 2023, mainly due to the declining revenues in the Chi- nese passenger car market as well as increases in labor cost in Mexico, lingering disruptions in raw material sup- ply chains, irregular customer production schedules, and difcult freight markets. The segment signed new busi- ness contracts with a lifetime value of EUR 663.3 million in 2023. P&C was also able to implement signicant improve- ments to its net working capital (cash) management pro- cesses with regards to CAPEX investments and accounts receivable collection, despite challenges in sales and cost. In 2023, KA P&C reached new heights in its commit- ment to quality. The impressively low 250 claims per EUR 1 billion in sales, zero red quality customer scorecards, and a cost of poor-quality value of 0.43% of external sales high- light the effectiveness of P&C’s stringent measures. The segment is leveraging its solid position to target further growth mainly in the commercial vehicle area, but also in selected passenger car product areas like park lock and decoupling actuators. P&C is on track to continue its success in the world of electried propulsion. Beyond its traditional transmission-related portfolio, P&C is expanding into the areas of thermal management, electric steer-by-wire, and camera cleaning technology. Its customers are set to implement P&C solutions in these exciting new EV product areas in the coming years. POWERTRAIN & CHASSIS 2023 IN BRIEF KA’s wide range of in-house resources allows it to create custom unique and patented solutions for OEM and Tier 1 customers in many vehicle applications, including new market entries for EV propulsion. Customers have come to recognize KA as a trusted source for mechatronic solutions. PRODUCT PIPELINE In 2023, KA’s On-Highway business unit continued its growth in automated clutch actuation and gear shift systems. After positive development in the Americas, demand for AMT transmission technology has started to grow signicantly in the Chinese market, and KA is prof- iting from this growth. With the new actuator portfolio in development, P&C is also well-prepared for the growth within electric vehicles. In addition to in-house innovations, 2023 saw the acquisition of new technology for autonomous driving to speed up time-to-market and introduce further disrup- tive technologies to KA’s product portfolio: steer-by-wire and camera cleaning technology as well as corresponding intellectual property. Autonomous functions up to level 3 (as dened by the SAE) are already in the market and growing. However, to reach level 4 and 5 (fully self-driv- ing vehicles), new steering actuators require more safety functions. Particularly in bad weather conditions, clean cameras and sensors are crucial. KA is well positioned to enter this growing market and utilize its expertise and technology for new applica- tions and functions like steering. ANNUAL REPORT 2023 // POWERTRAIN & CHASSIS 2023 IN BRIEF 14 Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements ANNUAL REPORT 2023 // 14 396€M VS 2022 excluding BRP 326€M lifetime sales 15 Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial StatementsKongsberg Automotive at a Glance Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements Following the merger in 2022, the Specialty Products business segment contains the Flow Control Systems (FCS) business unit and the Off-Highway (OFH) business unit. The FCS business unit continues to accelerate the transformation of operations, leveraging technology, production capabilities, and expertise to deliver more comprehensive and effective solutions to Kongsberg Automotive (KA)’s customers. The niche products in this business segment are driven by an entrepreneurial focus on innovation and growth. FCS integrates the extensive solutions of KA for connect- ing technologies in air management applications as well as uid handling solutions in the automotive arena. Its focus lies on delivering high-quality engineered products to a wide range of customers, predominantly in the com- mercial vehicle segment. FCS Couplings is a technology leader supplying state- of-the-art products to the global commercial vehicle mar- ket. It specializes in applications for air management and is currently expanding its product portfolio into coolant applications for battery electric vehicles (BEV) thermal management systems. These coolant applications reduce the cost of function for customers with more sustainable products while improving vehicle performance. The Raufoss ABC™ product range allows for vehicle energy savings and optimized system air ow, reducing vehicle stopping distances. This improves safety, which contributes to lower lifetime costs and has a positive environmental impact while meeting partners’ sustain- ability requirements. In 2023, FCS Couplings continued to expand its capac- ities to secure revenue growth in all regions, notably developing new opportunities with US commercial vehi- cle OEMs. Leveraging growth in the electried vehicles market, Couplings started production of couplings for passenger car air management systems. FCS Couplings has made investments in automation and digitalization to increase production capabilities globally and provide a superior service level to its customers. FCS Fluid Transfer Systems (FTS) is a global leader in innovative and cost-competitive technical hoses and hose assemblies with a very strong presence in the commercial vehicle business. FCS FTS is well-positioned to take advan- tage of the industry’s shift towards electrication and fuel cell technology. Process and product innovations for cool- ant lines in BEV and plug-in hybrid vehicles (PHEV) have been a focus area during 2023, resulting in both serial and development contracts with leading OEMs. FCS FTS carried on its growth with the supply of PTFE hoses and hose assemblies in various industrial mar- kets. During 2023, FTS continued to expand the product portfolio with food, pharmaceutical, and semiconductor applications, while its industrial smooth-bore PTFE hose range maintained its market-leading position. During 2023, FCS FTS enlarged its engineering resources both by investing in testing and simulation tools as well as expanding its global research and innovation team. The product portfolio covers traditional applications such as high-temperature fuel lines and hydraulic brake hoses as well as products mainly targeting electried vehicles such as coolant lines and turbo lines for both ICE (internal combustion engines) and PHEV. The segment signed new business contracts with a lifetime value of EUR 326 million million in 2023. KA’s Off-Highway (OFH) business unit supplies engi- neered solutions in steering columns and mechatronic driver controls. In 2023, Off-Highway completed the carve-out for the divestment of the Powersports business and focused its attention on the agricultural and construction segment. Customers in these segments benet from new prod- ucts in OFH’s portfolio, as the business unit now offers additional pedals and hand controls addressing cus- tomer needs. ANNUAL REPORT 2023 // 16 Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements about expanding the product range, but also about lever- aging cutting-edge technology to reinforce KA’s position. In addition, the recent acquisition of Skriverform, a Nor- wegian tooling supplier, is aligned with Gear II of the Shift Gear program. These two strategic moves allow KA to enter specialized markets, foster growth, and help cre- ate better products and services. KA is on track to becoming a sustainable com- pany, readying it for future market trends and legislative requirements. Recently, KA com- pleted its rst double materiality analysis, laying the foundation for its future sustainability focus areas. KA is also committed to using 100% renewable energy by 2030 and making its entire product range carbon neutral by 2039. To reach the supply chain emissions targets, KA will work jointly with its entire supply chain towards carbon neutrality and circularity. CO₂ emission data will become an important part of KA’s supplier selection decisions. The details of the sustainability program are pub- lished in KA’s Sustainability Report. and processes, which increased transparency. This led to greater efciency by simplifying processes and, conse- quently, to faster response times for KA’s customers. Within the Direct and Indirect Purchasing work- stream, efforts to reduce direct material costs and renego- tiate raw material agreements with KA’s suppliers proved to be successful and contributed signicantly to the over- all savings. The Operations workstream contributed with Con- tinuous Improvement Process (CIP) initiatives across all production sites. KA’s production sites, such as Hvit- tingfoss, Norway and Koluszki, Poland, successfully held idea generation workshops, driven by the Operational Excellence team. These workshops resulted in addi- tional CIP initiatives and paved the way for future opera- tional improvements. The efforts within the Cost Improvement workstream delivered the expected results with a focus on selling, general, and administrative expenses. KA’s Mergers & Acquisitions and strategic partnerships revolve around carefully select- ing collaboration partners and purposeful transactions in each business segment. These actions serve to boost KA’s earnings and stay ahead of the competition. The recent acquisition of 20% of the shares of Chassis Autonomy, and acquisition of Skriverform and Romoline’s camera cleaner patents underlines KA’s com- mitment to embracing new technology – it is not just Gear I of the program focuses on dedicated cost management within the areas of oper- ations, administration, engineering, and investment. It is subdivided into ve core workstreams: Commercial Excellence, Direct and Indirect Purchasing, Operations, Cost Improvement, and Cash Management. Throughout 2023, KA realized more than 700 mea- sures as part of the Shift Gear I program, delivering EUR 68 million in positive operational improvement measures to counter the negative market effects, securing prot- ability, and sustainably upgrading processes. These suc- cesses can be attributed to the efforts in the Commercial Excellence, Direct and Indirect Purchasing, and Opera- tions workstreams. The Commercial Excellence workstream saw chal- lenging negotiations with twofold productive outcomes: KA managed sustainable price increases as well as active reimbursements of the increased cost due to volatile prices of raw material and energy and labor cost ination. Furthermore, KA enhanced its efforts to establish tools Kongsberg Automotive (KA) launched its Shift Gear program in 2021, with the aim of unlocking the company’s full potential in terms of operations, strategy, and sustainability. The program is therefore clustered into three packages called Shift Gear I-III, described in detail below. ANNUAL REPORT 2023 // Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements On July 11, 2023, Kongsberg Automotive AS entered into an agreement with Swedish company Chassis Autonomy SBA AB to acquire 20% of Chassis Autonomy’s shares via a directed rights issue. The agreement further includes call options to acquire up to 100% of the total outstanding shares by 2027. ANNUAL REPORT 2023 // ACQU ISITIONS On October 31, 2023, Kongsberg Automotive AS and KA Group AG entered into an agreement with Romoline AS pursuant to which Kongsberg Automotive acquired cer- tain patents from the company based in Norway. The pat- ents are related to camera and sensor washing technology intended for vehicles. As per the agreement on November 8, 2023, Kongsberg Automotive AS acquired 100% of the shares in Skriv- erform AS, a company located in Norway. Skriverform designs, manufactures, and provides maintenance ser- vices for tools for injection molding and has been a sup- plier and service provider to Kongsberg Automotive AS’ operation in Raufoss for several years. The transaction was completed on November 29, 2023. 18 Contents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements 19 Contents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements To align the organizational structure with the opportunities and challenges present in the global market, Kongsberg Automotive (KA) announced the merger of the Powertrain & Chassis business segment and the Off-Highway business unit to form the Drive Control Systems (DCS) business area in Q4 2023. This reporting structure will come into effect from January 2024. Additionally, Driveline (excluding e-actuators), will no longer be considered KA’s core business. Going forward, Driveline will be reported under ‘other operations’. OPERATIONS ACTUATORS RESTRAINTS ANNUAL REPORT 2023 // 20 Contents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements ANNUAL REPORT 2023 // Christian Amsel Chief Technology Ofcer Frank Heffter Chief Financial Ofcer Linda Nyquist-Evenrud President & Chief Executive Ofcer David Redfearn Chief Sales Ofcer Oscar Jaeger Chief Human Resources Ofcer & Executive Vice President, People & Culture Eduardo Pamies Executive Vice President Flow Control Systems Henrik Ruud Executive Vice President Information Systems & Technology Robert Pigg Executive Vice President Drive Control Systems Jon Munthe General Counsel Dzeki Mackinovski Executive Vice President Purchasing 21 Contents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements VISION: MISSION: WE SEEK TO CONSTANTLY IMPROVE OUR PRODUCTS, LEVERAGE OUR EXPERIENCE IN CUTTING-EDGE ENGINEERING AND WIDEN OUR SCOPE TO FIND NEW SOLUTIONS AND TECHNOLOGIES THAT MAKE MOBILITY SAFER AND CLEANER. OUR AMBITION IS TO BE SECOND TO NONE IN ALL WE DO. THIS IS HOW WE UNLOCK GROWTH POTENTIAL AND CREATE SUBSTANTIAL VALUE FOR OUR CUSTOMERS, OUR EMPLOYEES, AND SHAREHOLDERS. WE TAKE RESPONSIBILITY AS A STRONG GLOBAL TEAM. WE ARE COMMITTED TO MAKING A DIFFERENCE BY DEVELOPING OUR SKILLSET AND DELIVERING EXCELLENT PRODUCTS. ANNUAL REPORT 2023 // 22 Contents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements 18 COUNTRIES KA is well-represented in this region, with six manufac- turing sites and two tech centers. Mexico has the largest manufacturing workforce in the region, split across two manufacturing plants, while Canada is home to the larg- est tech center in the region. Europe represents KA’s largest region. Sweden and Nor- way are hosts to KA’s two major tech centers in Europe, while the two largest manufacturing sites in the region are in Slovakia and Spain. KA’s pivotal market: KA operates ve manufacturing sites and two sales ofces in Asia, spread across China, India, Korea, and Japan. The largest manufacturing site and tech center in this region is in Wuxi, China. WORKFORCE: EUROPE WORKFORCE: ASI A WORKFORCE: 66 8 Kongsberg Automotive (KA) is present in 34 locations around the globe, covering the world’s key automotive markets. KA’s footprint is based largely on its customers: Wherever they are located, KA aims to be there, serving and supporting them in the best possible way. KA is committed to adapting to market conditions: 8.2% of its total workforce were agency workers in 2023, allowing it to build up or scale down in response to market movements. ANNUAL REPORT 2023 // 22 SPAIN JAPAN INDIA FRANCE UK USA CANADA 23 Contents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements ANNUAL REPORT 2023 // 1957 1987 2008 2023 The story of Kongsberg Automotive is of ordinary people creating an extraordinary company. 1995 2004 ACQUISITION KA’s origins trace back to the historic Norwegian defense contractor Kongsberg Våpenfabrikk. The rst commercial auto parts to be produced and delivered were brakes and drive shafts for Volvo in the late 1950s. Since then, Kongs- berg Automotive has developed from a Scandinavian auto parts supplier to a global leader in one of the most com- petitive and complex industries in the world. 24 2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements Kongsberg Automotive is proud to serve leading OEMs and Tier 1 suppliers in commercial vehicle, off-highway and passenger car markets globally. ANNUAL REPORT 2023 // 25 Kongsberg Automotive at a GlanceContents Auditor’s Report Corporate Governance Financial Statements 26 Kongsberg Automotive at a GlanceContents Auditor’s Report Corporate Governance Financial Statements The past years posed numerous challenges to manufacturing companies in general, and to the automotive industry in particular. The year 2023 was no different. While COVID restrictions have largely been lifted and components supply issues have improved substantially, raw material prices, logistics and labor cost proved to be a challenge. In addition to these factors, the declining passenger car market in China put pressure on Kongsberg Automotive (KA). Although KA had signicant growth in many core segments and met its latest earnings guid- ance with an adjusted EBIT of EUR 23.7 million, the ultimate after-tax result of EUR -59.1 million was not satisfactory. In early 2023, the previous Board of Directors (BoD) initiated a strategic review of the company to unlock the full potential of KA. It resulted in sev- eral structural considerations as well as cost optimi- zation measures. The review was concluded in late 2023, with the newly appointed BoD deciding to retain and further opti- mize current business units. The review also led to the conclusion that Driveline (excluding e-actuators) is not considered core business of KA. The outlook for Driveline shows declining revenues, which has led to a nal impairment of the assets associated with the business unit. Whilst KA will continue to serve its existing customers in the Driveline unit, the business unit will be carved out as a separate segment and reported on sep- arately. This will ensure displaying the underlying positive development of the core business of KA. These structural considerations and cost reduction programs have led to substantial write-downs and restructuring costs. Focal areas in the years to come will be to capitalize on a much leaner platform and increase protability, regaining positive cash ow from operations and expanding KA’s market position. Additionally, KA will REPORT WITH KA’S ONGOING FOCUS ON INNOVATION, THE COMPANY IS WELL POSITIONED TO TAKE ADVANTAGE OF ANTICIPATED DEVELOPMENTS IN GROWING MARKETS. ANNUAL REPORT 2023 // strengthen the company’s product portfolio and grow in areas where it is well-positioned, allowing for bolt-on acquisitions in the coming year to strengthen business. Building further on the EUR 15 million sav- ings achieved in 2023, KA will continue with its operational improve- ment measures. In line with KA’s operational improvements plans, in December 2023, KA announced that it would merge the Powertrain & Chassis (P&C) busi- ness segment and the Off-Highway business unit to the form the Drive Control Systems (DCS) business area, a change which came into effect on January 1, 2024. The new organi- zational structure will drive growth, help KA focus on its core business, and better reect the development of the company. With KA’s ongoing focus on inno- vation, the company is well positioned to take advantage of anticipated developments in growing markets. It was especially signicant for KA to gain new business wins in 2023 with a lifetime value of EUR 989.4 mil- lion. This, in combination with the structural initiatives taken, presents grounds for a positive outlook and provides a solid foundation for a stron- ger performance in the future. To head this transition, the BoD chose Linda Nyquist-Evenrud, who was appointed the interim President & CEO of KA in July 2023. The BoD conrmed her role permanently on January 31, 2024. Nyquist-Evenrud is a veteran of the automotive industry and has been with KA for more than 16 years in various leadership roles. The Board would like to thank all KA employees, management, part- ners, and shareholders who contribute to the growth path. 26 Kongsberg Automotive at a GlanceContents Auditor’s Report Corporate Governance Financial Statements Global production increased by 12.7% in 2023 to 3.4 million vehicles, driven by solid growth in all major regions except South America. Many regions experienced a growth phase after production numbers in the pre- vious years were still impacted by the COVID pandemic and the war in Ukraine. Despite elevated vehicle pricing and raised interest rates, the commercial vehicle industry continued to benet from the post-COVID inventory restocking, contributing to an excess of pre-pandemic produc- tion levels. The production output of commercial vehicles remained stable throughout the year 2023, coming in at approximately 0.8-0.9 million units per quarter. Mainland China, the main contributor to 2023’s global production increase, grew by 37.6% to 1.1 million vehicles; however, still producing signicantly below 2019-2021 annual levels. The growth in the Chinese market has been supported by the government’s economic incentive poli- cies and a surge in the export business. In 2023, European production increased by 12.8%, estimated at 0.7 million units. The rst half of 2023 brought a year-on-year increase of 18.2% compared to only 7.8% in H2. 2023 production volume helped to further close the supply-demand gap, which therefore turned Europe into a demand-inuenced market and put some pressure on OEMs to restart price promotions. In North America, commercial vehicle production increased by 8.4% to 0.6 million vehicles in 2023. Production in the United States, the main market in the region, grew by 9.1% to 0.4 million units. After recording a solid recovery in 2022 output, 2023 US growth was partially impaired by UAW strikes at the end of the year, which signicantly hindered North America from keeping the same pace as the year before. South American production decreased by 36.7% to 0.1 mil- lion units in 2023, which was mainly driven by the declin- ing production trend in Brazil. The correction in Q4 orders mostly in Europe and North America suggests that the 2024 global truck pro- duction outlook might come at a lower growth rate. The global production of light vehicles totaled 90.1 million units in 2023, which corresponds to an increase of 9.4% compared to 2022. In Q1, production reached approxi- mately 21.4 million units, rising to 22.2 million units in Q2 and continuing the trend in Q3 and Q4, reaching 22.6 and 23.9 million units, respectively. European light vehicles production increased by 12.5% to 17.8 million units in 2024, with a very strong rst half of the year that continued in Q3 supported by eased sup- ply constraints and long order books. North America had a similar trend to the European market with a stronger slowdown in Q4 due to the UAW strike and the high-in- terest-rate environment, eventually growing by 9.5% to 15.6 million units. Production in China increased by 9.4% to 28.9 million units in 2023. For Mainland China, Q4 2023 was a record quarter, surpassing the historical high of Q4 2017 and reaching over 8.6 million units (~20% YoY) thanks to the thriving export business, with over 3.5 mil- lion passenger vehicles exported last year. ANNUAL REPORT 2023 // Sources: IHS Light Vehicle Production Base (January 2024) for light vehi- cle production; LMC Global Commercial Vehicle Forecast (January 2024) for truck production. 28 Kongsberg Automotive at a GlanceContents Auditor’s Report Corporate Governance Financial Statements Group revenues amounted to EUR 884.9 million in 2023, a decrease of EUR 20.7 million (-2.3%) compared to the pre- vious year, including negative currency translation effects of EUR 38.0 million. Excluding revenues from operations divested to BRP of EUR 88.1 million in 2022, year-on-year growth at constant currency rates amounted to EUR 105.2 million (+12.9%). On a constant currency basis, revenues in Europe grew by EUR 64.8 million (+16.9%), partially offset by the decline in Asia of EUR 8.9 million (-7.0%). Excluding revenues from the Powersports business divested to BRP in 2022, revenues in the Americas grew by EUR 49.3 million (+16.0%). Revenues generated in the commercial vehicle mar- ket amounted to EUR 459.3 million, or EUR 482.6 mil- lion at constant currencies, an increase of EUR 91.5 mil- lion (+23.4%). The outperforming sales in all key regions contributed to this growth, especially in the European market, where revenues increased by EUR 46.2 million (+20.9%) compared to 2022. In the Americas, the increase in revenues amounted to EUR 25.7 million (+19.7%) and in Asia to EUR 19.7 million (+50.1%). Revenues in the passenger car market amounted to EUR 280.6 million, or EUR 289.2 million at constant cur- rencies, a decrease of EUR 2.1 million (-0.7%). The decline in China (EUR 28.1 million; -35.1%) was only partially off- set by the increases in Europe (EUR 16.8 million; +17.2%) and North America (EUR 8.8 million; +7.8%). Other revenues amounted to EUR 144.8 million, or EUR 150.9 million at constant currencies. Excluding reve- nues from operations divested to BRP in 2022, other rev- enues in 2022 would have amounted to EUR 135.1 million, corresponding to a year-on-year increase of EUR 15.8 mil- lion (+11.7%) at constant currencies. Powertrain & Chassis (P&C) revenues amounted to EUR 488.8 million, compared to EUR 466.0 million in 2022, an increase of EUR 22.8 million (+4.9%) despite negative cur- rency translation effects of EUR 23.7 million in 2023. The revenue growth is mainly attributed to the truck business in Europe, the Americas, and Asia. In these regions, reve- nues increased on a constant-currency basis by EUR 30.5 million (+26.7%), EUR 18.8 million (+19.1%) and EUR 17.3 million (+63.0%), respectively, compared to last year. This positive development was primarily offset by declines in passenger car markets in Asia and Europe, where revenues dropped by EUR 28.2 million (-35.2%) and EUR 2.3 mil- lion (-3.7%), respectively. In addition, the operating prot (EBIT) was impacted by an impairment of EUR 27.0 mil- lion on assets related to the passenger car market in all key regions due to the declining projected performance in this market and the decision on the wind-down of this business. Furthermore, additional warranty expenses of EUR 5.9 million sa well as costs for severance and restruc- turing provision of EUR 3.6 million in relation to the cost optimization program initiated in 2023 were incurred. Thus, EBIT from P&C amounted to EUR -21.5 million com- pared to EUR 12.7 million in 2022. ANNUAL REPORT 2023 // 29 Kongsberg Automotive at a GlanceContents Auditor’s Report Corporate Governance Financial Statements Revenues of the Specialty Products business segment amounted to EUR 396.1 million in 2023 compared to EUR 439.6 million in 2022, a decrease of EUR 43.6 million (-9.9%), including negative currency translation effects of EUR 14.3 million. Excluding revenues from operations divested to BRP of EUR 88.1 million in 2022, the growth at constant currency rates amounted to EUR 58.9 million (+16.7%). This was primarily driven by growth in the com- mercial vehicle market and the industrial end markets in Europe, which saw revenue growth of EUR 32.0 million (on a constant-currency basis). EBIT amounted to EUR 33.8 million in 2023, compared to EUR 84.9 million in 2022, which included the net gain from the above-men- tioned divestment transaction of EUR 41.1 million. Net nancial items amounted to negative EUR 26.0 mil- lion, compared to negative EUR 16.8 million in 2022. This is mainly due to unrealized foreign currency losses amounting to EUR 13.3 million, compared to foreign currency gains of EUR 2.4 million last year. Interest expenses, mainly related to the bond, were slightly lower and amounted to EUR 10.8 million in 2023. In addition, a net interest expense of EUR 4.3 million was incurred in relation to lease liabilities. These negative effects were positively offset by the gain of EUR 2.8 million realized on money market funds in 2023. Loss before taxes for the year 2023 amounted to EUR 45.7 million compared to prot before taxes of EUR 46.3 mil- lion in 2022. The total tax expense of EUR 13.4 million was impacted by losses not recognized as deferred tax assets and a write-down of deferred tax assets of EUR 18.1 million in total. This resulted in loss after tax amounting to EUR 59.1 million in 2023 compared to prot after tax of EUR 20.8 million in 2022. Including negative transla- tion differences of EUR 0.5 million and negative remea- surement of net PBO after tax of EUR 0.4 million, the total comprehensive income for the year 2023 amounted to negative EUR 60.0 million. The group’s interest-bearing liabilities amounted to EUR 264.9 million as of December 31, 2023, compared to EUR 267.6 million as of December 31, 2022. As of December 31, 2023, the shareholders’ equity totaled EUR 218.1 million, a decrease of EUR 62.4 million compared to EUR 280.5 million at the end of 2022. The net loss of EUR 59.1 million and other comprehensive income of negative EUR 0.9 mil- lion contributed to a EUR 60.0 million decrease in share- holders’ equity. The share-based compensation led to an increase of EUR 1.5 million. In 2023, the treasury shares purchased back until January 27, 2023, were cancelled. In November 2023, the company resolved to initiate a new share purchase program and repurchased the treasury shares of EUR 1.6 million until December 31, 2023. The equity ratio was 30.2% at the end of the year 2023, compared to 35.2% in 2022. 30 Kongsberg Automotive at a GlanceContents Auditor’s Report Corporate Governance Financial Statements Despite the negative operating result of EUR 19.7 mil- lion, which was mainly driven by the impairment losses of EUR 27.0 million, the group generated a positive cash ow from operating activities in the amount of EUR 21.5 million, compared to EUR 102.4 million in 2022. The cash ow from operating activities in 2022 included EUR 37.9 million NWC sold related to discontinued business as well as EUR 20.5 million for net working capital sold in connection to the sale of the Powersports business to BRP. The group invested EUR 28.5 million in property, plant, equipment, and intangible assets, a decrease of EUR 0.4 million compared to EUR28.9 million in 2022. In 2023, the company invested EUR 2.6 million to purchase 20% of shares in Chassis Autonomy AB and another non-ma- terial entity. In 2022, the group reported positive cash ows from divesting activities of tangible and intangible assets in the amount of EUR 189.5 million and proceeds from sale of shares of EUR 40.4 million, which was of a one-time nature. The cash ow used by nancing activi- ties amounted to negative EUR 39.7 million. In 2023, the amount used for the share buy-back was EUR 3.9 million, whereas in 2022 shares at the amount of EUR 23.5 million were bought back. In addition, the revolving credit facil- ity of EUR 20.0 million was repaid and bond notes in the amount of EUR 75.0 million were redeemed. Moreover, cash ow used by nancing activities included the repay- ment of lease liabilities in the amount of EUR 9.8 million as well as interest payments and other nancial items in the amount of EUR 16.6 million, of which EUR 4.3 million is related to interest on lease liabilities. The group’s cash and cash equivalents amounted to EUR 164.7 million at the end of the year, compared to EUR 212.9 million at the end of 2022. The unutilized RCF as of December 31, 2023, amounted to EUR 30.0 million. More- over, the company had an unutilized securitization facil- ity of EUR 25.0 million as of the end of the year. New business wins for the year amounted to EUR 989.4 million in lifetime revenues and EUR 296.9 million in annualized revenues, compared to EUR 760.2 million and EUR 246.9 million in 2022, respectively. This corresponds to an increase of 30.2% and 20.3% in lifetime revenues and annualized revenues, respectively, compared to the previous year. In 2023, the parent company generated total operating (inter-company) revenues of EUR 6.0 million, compared to EUR 6.8 million in 2022. This reduction is partially caused by the lower trademark fee. With operating costs being at a comparable level, the operating prot amounted to EUR 2.3 million, compared to EUR 2.8 million in 2022. The parent company had negative net nancial items of EUR 157.1 million in 2023, compared to positive net nan- cial items of EUR 41.0 million in 2022. The main drivers for this change were the impairment of Intercompany shares of EUR 172.0 million as well as currency gains of EUR 2.3 million in 2023, compared to currency gains of EUR 26.2 million in 2022. The net loss for the year 2023 amounted to EUR 158.4 million, compared to the net prot of EUR 34.1 million in 2022. Including negative translation differ- ences of EUR 34.2 million, the total comprehensive income for the year 2023 amounted to negative EUR 192.6 million. Kongsberg Automotive ASA’s equity totaled EUR 259.4 million (EUR 454.3 million in 2022). In accordance with the Dividends Policy, the Board of Directors will propose to the 2024 Annual General Meet- ing that no dividend be paid for 2023. The Board of Direc- tors proposes that the parent company’s net loss of EUR 158.4 million be carried forward. ANNUAL REPORT 2023 // 31 Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate Governance Financial Statements OPER ATIONS ANNUAL REPORT 2023 // OPERATIONS The Powertrain & Chassis (P&C) segment, catering to both passenger car and commercial vehicles, achieved signicant milestones, highlighting a steadfast commit- ment to excellence. Notably, operational excellence in Mexico saw marked improvements through impactful value analysis and value engineering (VAVE) initiatives for automated man- ual transmission (AMT) systems, leading to heightened production efciency. Despite challenges, P&C’s AMT sys- tems in Mexico achieved record-breaking sales, a testa- ment to the segment’s resilient supply chain management and unwavering dedication to customer satisfaction. Further strengthening its position, P&C successfully met the robust demand for the new electric clutch actuator in Europe, establishing itself as a key player in the realm of electried propulsion. Process and infrastructure enhance- ments at the Hvittingfoss plant, particularly in the anti-roll bar (ARB) line, adhere to industry best practices. By proactively managing the electronic component shortages, P&C minimized operational impact, show- The aftermath of the COVID pandemic impacted the supply chain well into 2023. However, Kongsberg Automotive (KA)’s mitigation plans succeeded in restoring most supply channels, allowing operations to pick up speed. At the same time, the operational improvements within the Shift Gear program brought savings to operations in all plants. Together with the strong and stable orders with key customers, Gear I of the Shift Gear program (Operational Excellence and Performance) will support continued growth at higher margins. KA continues to identify and leverage synergies for operations to become leaner, lower its xed costs and support learning opportunities. casing the business segment’s adaptability in dynam- ic environments. Looking ahead to 2024, the business segment antici- pates exciting product launches. This, coupled with stra- tegic investment reduction, re- ects a commitment to prudent nancial management. Note- worthy nancial highlights en- compass increased sales revenue alongside reduced net capital ex- penditure, underlining P&C’s - nancial prudence and effective resource utilization. Collectively, these achieve- ments underscore P&C’s resil- ience and adaptability, reinforcing its unwavering com- mitment to excellence and positioning the segment for sustained growth. P&C SUCCESSFULLY MET THE ROBUST DEMAND FOR THE NEW ELECTRIC CLUTCH ACTUATOR IN EUROPE, ESTABLISHING ITSELF AS A KEY PLAYER IN THE REALM OF ELECTRIFIED PROPULSION 32 Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate Governance Financial Statements ANNUAL REPORT 2023 // The Specialty Products (SPP) business segment completed the organiza- tional merger of the former Fluid Transfer Systems (FTS) and Couplings (COU) business units into one single business unit named Flow Control Systems (FCS). Regional operational roles were created to focus on oper- ational excellence, performance improvements though CIP activities, and sharing best business practices. On the supply chain side, FCS continued to experience price hikes in the business unit’s main commodities, chemicals and steel, throughout the year. The fourth quarter of 2023, however, showed some signs of a downward trend. Delivery performance from FCS’ key suppliers was sta- ble and did not impact operations. During 2023, FCS continued its strat- egy of moving business to best-cost countries both in the EU and in North America. Specically, operations were expanded in KA’s Brzesc Kujawski plant in Poland and in the Ramos Arizpe plant in Mexico. To facilitate this, a new extended building was leased at Ramos Arizpe to accommodate the business unit’s growth plans. Demand from customers remained strong, with a reduction in the fourth quarter of 2023. Variability in the demands continued to be a chal- lenge that required great levels of operational agility and exibility. In line with Gear I of the Shift Gear program, operations focused on identifying and executing a solid pipeline of opportunities for Continuous Improve- ment Processes (CIP), enabling improvements in competitiveness. The business segment made efforts to optimize both variable and xed costs as well as adapting its capacity and exibility to customers’ needs. The Off-Highway (OFH) business unit completed the Powersports divest- ment carve-out during the second quarter of 2023 and focused on improv- ing the remaining operations in Shawinigan in 2023. Demand from the agriculture and construction markets was high throughout the year, placing a challenge on operations in both the United States and Sweden. The OFH team accepted the challenge and nished the year with a backlog. Even with the increased volumes, the operations team delivered on their CIPs and cost improvements, putting the OFH business unit in a good position for 2024. 33 Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate Governance Financial Statements The group’s net overall spending on engineering and development totaled 4% of sales in 2023. Kongsberg Automotive (KA)’s resourceful engineering workforce consisted of 343 engineers globally. In 2023, Powertrain & Chassis (P&C) nalized the migra- tion of the current product portfolio towards e-mobility products and systems for battery electric vehicles (BEV), hybrid electric vehicles (HEV), and fuel cell electric vehi- cles (FCEV). P&C has set up a modular technology plat- form of electric actuators for gear shifting and clutch actuation systems in future commercial vehicles. P&C’s current product portfolio for internal combus- tion engines (ICE) and HEV provides KA with signicant rollout and growth potential over the next decade, espe- cially in emerging markets such as China, Brazil, and India. The team is providing market-ready solutions for shift-by-wire systems meeting the ASIL-B functional safety standard, consisting of electric actuator products as well as automated manual transmissions (AMT). For e-mobility applications, P&C has developed a portfolio of mechatronic actuators up to ASIL-C safety level. It supports sustainable mobility with unique fea- tures for gear shifting, axle/e-motor decoupling, differen- tial lock actuation, and park lock function in these vehi- cles, either on an e-axle or central drive solution. Together with KA’s Flow Control Systems (FCS) team, the company is working on intelligent thermal management systems solutions for BEV, HEV, and FCEV vehicles. The multi- valve increases overall efciency of electric drive trains via intelligent energy transfer and is highly scalable for various vehicle architectures. P&C is prepared and committed to meeting all the applicable functional safety requirements (ISO 26262/ ASIL) and cyber security standards (ISO 21434) while also ensuring Automotive SPICE Level 3 compliance in all its key technical centers to match customer requirements. The merger of the former Fluid Transfer Systems (FTS) and Couplings (COU) business units to create the new Flow Control Systems (FCS) business unit resulted in a consolidated R&D organization with a unied product strategy. FCS aims to become a systems supplier and pro- vide innovative, efcient, and cost competitive solutions to its customers. Its R&D activity continued to focus on product developments and innovation to support the con- tinued trends towards electrication and stronger sus- tainability requirements from KA’s customers. Key activities during 2023 were aimed at: > Continuing the development of systems to man- age uids within the thermal management solu- tions (TMS) application: innovating in lighter and ANNUAL REPORT 2023 // 34 Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate Governance Financial Statements more sustainable materials as well as high-perfor- mance connections technologies. In 2023, KA secured a development contract for coolant lines for the rst generation of FCEV (fuel cell electric vehicles) trucks with an important global OEM > Completing the range of new couplings for air man- agement in passenger car air suspension applications, an area of signicant anticipated growth > Improving cost of function of FCS products by re-engi- neering them through VAVE (value analysis and value engineering) activities > Delivering state-of-the-art pre-serial products and securing a timely launch execution of new businesses and products for KA’s customers 2023 also saw a signicant investment to improve R&D skills and resources, while also enhancing testing hard- ware and simulation software to continue to be a develop- ment partner in the FCS segment. The merger of the former FTS and Couplings business units revealed synergies in R&D and PPM (product portfolio management) functions. FCS will continue to leverage these synergies in 2024. Off-Highway continued to execute the roadmap estab- lished in 2021, making progress in all product lines. The steering column product group continues to build on KA’s strong OEM customer relationships. Leveraging KA’s modular designs, the Off-Highway business unit was able to propose and deliver more pre-production units for more applications than in previous years. These units will allow KA to continue to grow and maintain its leading position in steering columns. In the pedal and hand controls area, new designs are being tested that offer lighter weight, lower cost, and increased corrosion resistance. They are backward-com- patible for ease of customer adoption in many vehicles. ANNUAL REPORT 2023 // 2023 SAW A SIGNIFICANT INVESTMENT TO IMPROVE R&D SKILLS AND RESOURCES, WHILE ALSO ENHANCING TESTING HARDWARE AND SIMULATION SOFTWARE TO CONTINUE TO BE A DEVELOPMENT PARTNER. 34 35 Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate Governance Financial Statements The Board of Directors of Kongsberg Automotive ASA (KA) has established a set of general principles and guide- lines for corporate governance. These principles cover the Board of Directors’ responsibility for determining the group’s risk prole, approving the organization of the business, allocating responsibility and authority, as well as providing requirements with respect to reporting lines and information, risk management, and internal control. The tasks and responsibilities of the Board of Directors and the CEO are laid out in separate directives covering the Board of Directors and the CEO, respectively. The Board of Directors has issued directives to ensure the adoption of and compliance with the group’s princi- ples and guidelines for corporate governance. The group’s guidelines for corporate responsibility summarize how work in this area is to be integrated into the group’s cor- porate governance processes for investments, product development, procurement, and the wellbeing of employ- ees. The Board determines the group’s objectives in the eld of corporate responsibility. The guidelines and KA’s policy for investor relations aim to ensure that investors, lenders, and other stakehold- ers are provided with reliable, timely, and identical in- formation. As an extension of the general principles and guidelines, a Code of Conduct has been adopted that ap- plies to all group employees and elected ofcers. Uniform regulations for risk management, internal control, nan- cial reporting, handling of insider information, and prima- ry insiders’ own trading activities have also been adopted. CORPORATE KA complies with the latest version of the Norwegian Code of Practice for Corporate Governance of October 14, 2021. The group’s compliance with the requirements of each of the 15 main principles of the Norwegian Code of Practice for Corporate Governance and the provisions of section 3–3b of the Norwegian Accounting Act is fur- ther detailed in the Corporate Governance section of the annual report. Kongsberg Automotive ASA has obtained directors and ofcers insurance covering the CEO and the Board of Directors. This information is also available on the company’s website. KA has its operational headquar- ter in Zurich, Switzerland. The ultimate Parent company Kongsberg Automotive ASA is listed on the Oslo Stock exchange and the address of its registered ofce is Dyr- myrgata 48, NO-3601 Kongsberg, Norway. In accordance with section 3–3a of the Norwegian Accounting Act, the Board hereby conrms that the con- solidated nancial statements and the nancial state- ments of the parent company have been prepared on a going concern basis, and that there are reasonable grounds to assume that the company is a going concern. No signicant subsequent events have been identied. KA supplies products that are safety critical. Suppliers in the automotive industry face the possibility of sub- stantial nancial liability for warranty claims relating to potential product or delivery failures. This liability rep- resents a potential risk. Working methods and validation procedures implemented by the company are designed to minimize this risk. KA is normally contracted as a sup- plier with a long-term commitment. This commitment is usually based on a vehicle platform for which vol- umes are estimated and not guaranteed. Even if pres- ent commitments are cost-reimbursable, they can be adversely affected by many factors and short-term vari- ances, including shortages of materials, components, equipment, and labor, ination, political risk, customer default, industrial disputes, accidents, environmental pollution, the prices of raw materials, the implemen- tation of new tariffs, and other unforeseen problems, changes in circumstances that may lead to cancellations, and other risk factors beyond the control of the group. Responsibility for the group’s nancial risk management is mostly centralized, and the risk exposure is continuously monitored. The group has identied a specic risk catalog in line with ISO 31000 and has classied all risks accord- ing to their potential impact. The group constantly evalu- ates its nancial, infrastructure, marketplace, and reputa- tional risks, and has developed procedures and strategies to mitigate all risks classied as “high”. For more informa- tion regarding risk management, see note 24. ANNUAL REPORT 2023 // 36 Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate Governance Financial Statements RISKS FINANCIAL RISKS Due to its capital structure and the nature of its operations, the group is exposed to the following nancial risks: market risk (including foreign exchange rate risk, raw material price risk, and interest rate risk), credit risk as well as liquidity and capital management risk. The group operates in many different geographical markets and the resulting net assets, earnings, and cash ows are inuenced by multiple currencies. Kongsberg Automotive (KA) is exposed to foreign exchange rate risk in transaction and translation exposures. Transaction exposures include commercial transactions and nancing transactions both internally and externally. Translation exposures relate to net investments in foreign enti- ties which are then converted to EUR in the consolidated nancial statements. This con- cerns European operations in non-Euro-area countries, which have costs in local curren- cies and revenues primarily in EUR, as well as Mexican operations, which have revenues primarily in USD. The group seeks to align its revenue and cost base to reduce the cur- rency exposure on a net-cash-ow basis. The group is exposed to market uctuations in the price and availability of mainly the following raw materials: steel, copper, zinc, aluminum, and polymer resins. Sudden uc- tuations in market conditions could therefore impact the group’s nancial position, reve- nues, prots, and cash ow. Raw material sourcing costs are also subject to customs and duties. In 2023, prices of the abovementioned raw materials as well as electronic compo- nents remained at high levels, which, together with rising transportation costs, created an insecure situation, especially for overseas deliveries. KA applied a variety of counter- measures, ranging from commercial negotiations with suppliers to the implementation of raw material price variation clauses in contracts, the launch of benchmarking RFQs, resourcing/near-shoring activities to source at lower costs, and negotiations with cus- tomers to achieve a fair share of cost burden and risk. Kongsberg Automotive’s main source of nancing is a xed rate bond, which matures in 2025. The super senior RCF, entered into in 2018, was successfully renewed until January 2025. As the RCF and the bonds mature in 2025, the company will start the renancing process by mandat- ing renowned banks to support its renancing activity in 2024. The renancing of the outstanding obligations will likely change the interest margin to be paid by the com- pany as central bank rates and credit risk proles are dif- ferent to 2018, when the company renanced previously. Credit risk is the risk that a counterparty will not meet its obligations under a nancial instrument or customer con- tract, leading to a nancial loss. The group is exposed to credit risks with nancial institutions and other parties because of cash-in-bank and customer trade receivables arising from operating activities. Credit risks are con- siderable in the automotive industry. The group closely monitors outstanding amounts and quickly implements actions if receivables become overdue. Kongsberg Auto- motive has put in place solid practices, and losses in this area have been minimal in the past. ANNUAL REPORT 2023 // Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate Governance Financial Statements The group’s capital consists of shareholders’ equity, long- term borrowings, and third-party nancing. Total capital is dened as the total equity plus net debt and is managed to safeguard the business as a going concern, to maxi- mize returns for its owners, and to maintain an optimal capital structure to minimize the weighted average cost of capital. All activities around cash funding, borrow- ings, and nancial instruments are centralized within the Kongsberg Automotive Treasury department. The development of net interest-bearing debt and liquidity reserves is closely monitored. The group is subject to non-public solvency ratings by exter- nal business partners and institutions, and to public ratings by the rating agencies Moody’s and Standard and Poor’s. The evaluation of the group’s pension liabilities is sub- ject to changes in actuarial assumptions, such as discount rates and local pension evaluation guidelines. The group is subject to a wide variety of laws, tax regula- tions, and government and supranational policies, which may change in signicant ways. There can be no assur- ance that laws, tax regulations, and policies or their prac- tical application by authorities will not be altered in ways that will require the group to modify its business models and objectives or affect returns on investment. For regu- latory and tax risks, the group consults professional advi- sors and implements the recommended actions. For fur- ther risk analysis, see note 23 to the nancial statements. Climate-related risks are mainly linked to the potential disruption of supply chains by extreme weather, increased costs of energy and supplies, and increased carbon costs imposed by local and global institutions. For more infor- mation in this regard and insights into climate change risks and opportunities, please refer to the Sustainability section in this report. Political instability in countries relevant to KA’s supply chain, production facilities, and product destinations may cause or intensify operational, product supply availability, and free trade risks. In 2023, the ongoing war in Ukraine and the armed conicts in the Middle East and the Red Sea led to further economic uncertainties in the world markets. KA continues to very carefully monitor geopo- litical situations and developments and is in close contact with industry partners to mitigate potential risks. KA facilities have aligned their safety management sys- tems to ISO45001 standards. KA has developed key per- formance Indicators to track and drive continuous improvement in safety and introduced safety engagement measures, policies, and contingency plans to protect all KA employees as well as visitors to KA facilities. As a supplier of advanced technology to the automo- tive and industrial markets, KA is exposed to competi- tive efforts of both established and new market players to gain market share at KA’s expense. KA actively mitigates this risk by implementing new product development ini- tiatives and fostering customer relationships to remain a supplier of choice for its customers. KA is also exposed to potential strategic M&A activities by its suppliers, cus- tomers, or competitors that may negatively impact KA’s market position. KA constantly observes and monitors its business environment for possible M&A events in the market environment and has developed response strate- gies for different scenarios. Product development and product improvement activities are associated with a range of risks. These risks include delays in time-to-market, deviations from product speci- cation and quality requirements, deviations from devel- opment budgets, and potential infringements of third- party intellectual property rights. KA manages these risks with dedicated teams of highly qualied engineers, tech- nicians, IP counsels, and other product development staff, in addition to well-equipped modern development facili- ties as well as test laboratories and dedicated controls. ANNUAL REPORT 2023 // OTHER RISKS 38 Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate Governance Financial Statements Risks in the procurement process include the risk of sup- plier insolvencies, late deliveries, quality defects, and new non-tariff trade barriers. More and more stakehold- ers are increasingly calling on the automotive industry to ensure greater sustainability throughout the entire supply chain. To mitigate these risks and ensure sustain- ability, KA selects its suppliers carefully to meet nancial solvency, commercial, and technical capability require- ments, and measures supplier performance KPIs con- stantly. Manufacturing and supply arrangements may be lost or disrupted because of issues such as labor disputes, the inability to procure sufcient raw or input materials, natural disasters, disease outbreaks, or other external factors over which the company has no control. This cre- ates the need to implement new programs to mitigate the negative operational and nancial consequences of such disruptions. The current difculties and disruptions in global supply chains will continue into 2024, which will continue to create new challenges and impact the compa- ny’s operations. Bottlenecks and delays can occur in manufacturing pro- cesses due to insufcient production resources. These can relate to materials, utilities, manpower, or equip- ment used in the production process, but are increasingly driven by highly uctuating customer demand due to supply chain instability. KA manages these risks by means of a comprehensive and risk-avoiding production mate- rial resources replenishment (MRP) planning process, by hiring and training sufcient and skilled production staff, by maintaining its production equipment in good order using operational excellence methods, and by continu- ously reviewing its production footprint and supply chain set up to reduce lead time. The launch of new products requires comprehensive and long-term planning as well as customer project man- agement. Project management represents an important coordination role at the intersection of different business functions: sales, product development, purchasing, pro- duction equipment suppliers, plant operations, quality, and nances. There are risks related to poor communica- tion, selecting incorrect manufacturing equipment, miss- ing project timelines, and cost budgets. Historically, some of these risks did occur in certain projects. To lessen these risks going forward, KA relies on effective project man- agement and intensive management supervision. In the ordinary course of business, Kongsberg Automo- tive is involved in lawsuits, arbitrations and other formal or informal dispute resolution procedures, including the matters described in the Contingent Liabilities section. Reserves have been established for these and other legal matters as appropriate in line with IFRS® guidelines. However, estimating the legal reserves required for pos- sible losses involves signicant judgment and may not reect the full range of uncertainties and unpredictable outcomes inherent in litigation. Consequently, actual losses arising from particular matters may exceed current estimates and adversely affect the results of operations. Kongsberg Automotive may also be involved in investi- gations and regulatory proceedings, which could result in adverse judgments, settlements, nes and other out- comes. The areas of increased focus of investigations and proceedings are compliance with broader business con- duct rules, including those in respect of market abuse, bribery, money laundering, trade sanctions and data pro- tection as well as privacy. Kongsberg Automotive could be subject to risks arising from alleged, or actual, violations of any of the foregoing, and could also be subject to risks arising from potential employee misconduct, including non-compliance with internal policies and procedures as well as malfeasance. The group uses various digital technologies for commu- nication and process management. Like other multina- tional companies, KA is facing active cyber threats which pose risks to the security of its processes, systems, and networks as well as the condentiality, availability, and integrity of data. There is a risk that condential infor- mation may be stolen or that the integrity of its portfo- lio may be compromised, for example through attacks on KA’s networks, social engineering, data manipulation in critical applications, or a loss of critical resources, result- ing in nancial damages. The cyber security measures KA implemented cover the whole group’s information systems and technologies (IS&T), ranging from mana- gerial systems and applications to KA’s operational envi- ronment such as manufacturing and research and devel- opment (R&D). In addition, KA mitigates these risks by employing several measures including employee training, comprehensive monitoring of its networks and systems, external services to examine and benchmark its cyber security standards, and maintenance of backup and pro- tective systems such as rewalls and virus scanners. ANNUAL REPORT 2023 // 39 Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate Governance Financial Statements Sustainability has been a central element of Kongsberg Automotive’s (KA) business strategy since the company’s inception. For KA, sustainability is the balance between the economic, ecological, and social elements of its business activities as part of responsible corporate governance. KA sees a strong focus in its industry on eliminating the carbon emissions of production and products and the need to move towards a circular economy where products can be recovered and reused or recycled. KA is reecting those developments and made good progress in 2023. Calculations of Scope 3 emissions have started at a corporate and product level and the company has conducted a double materiality analysis, procured more renewable electricity, and started to report accord- ing to EU Taxonomy, just to mention a few developments. For 2024, KA intends to update and readjust its sustain- ability strategy. 39 ANNUAL REPORT 2023 // 40 Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate Governance Financial Statements SUSTAINABLE DEVELOPMENT GOALS (SDGs) The UN Sustainable Development Goals (SDGs) are a framework that identies the key areas where action should be taken to build a more sustainable world. 5.5 Ensure women’s full and effective participation and equal opportunities for leadership at all levels of decision-making in political, economic, and public life 8.2 Achieve higher levels of economic productivity through diversification, technological upgrading, and innovation, including through a focus on high-value-added and labor-intensive sectors 8.5 By 2030, achieve full and productive employment and decent work for all women and men, including for young people and persons with disabilities, and equal pay for work of equal value 8.8 Protect labor rights and promote a safe and secure working environment for all workers, including migrant workers, in particular women migrants, and those in precarious employment 9.4 By 2030, upgrade infrastructure and retrofit industries to make them sustainable, with increased resource-use efficiency and greater adoption of clean and environmentally sound technology and industrial processes, with all countries taking action in accordance with their respective capabilities 13.3 Improve education, awareness-raising, and human and institutional capacity on climate change mitigation, adaptation, impact reduction, and early warning 40 ANNUAL REPORT 2023 // 41 Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate Governance Financial Statements MATERIALITY ANALYSIS Kongsberg Automotive (KA) conducted a new materiality analysis in 2023. This update already reected the double materiality approach and was intended to identify the most important sustainability topics. The analysis determined which topics have the great- est impact on the environment, people, and the economy (inside-out perspective, “impact materiality”) and which have the greatest impact on the company’s business per- formance (outside-in perspective, “nancial materiality”). The methodology for identifying these material topics is based on legal requirements and recognized standards such as the European Sustainability Reporting Standards (ESRS) and the Global Reporting Initiative (GRI). This ensures that the process has been carried out correctly and complies with current requirements. The analysis has been carried out based on quantitative and qualitative information. The results provide the basis for the (further) development of the sustainability strategy and the reporting content. KA’s double materiality analysis was conducted from September-December 2023, following three differ- ent steps: I. The general selection of relevant sustainability topics for further analysis. II. The prioritization of the selected topics by reecting the two perspectives mentioned above. III. The nal analysis ending with a matrix of mate- rial topics. For step II, several workshops and interviews with KA employees from different departments and functions have been conducted. The discussions focused on impact, risks, and opportunities in relation to the selected sustainabil- ity topics. In addition, external reviews, industry surveys, and assessments have been conducted to reect the differ- ent stakeholder perspectives. Based on these internal and external analyses, KA has been able to create a nal ranking of the different sustainability topics and positioned them in a matrix – shown in the graphic below. This nal outcome has been reviewed and approved by KA’s management. KA identied 11 topics as material, meaning that KA has either a high impact on those topics or that those top- ics represent a high risk or opportunity for the company. In many cases, both aspects are also fullled. These mate- rial topics represent a balanced mix of environmental, social and governance topics. The results of this double materiality analysis will help KA to focus its sustainability reporting on the mate- rial topics, especially regarding the requirements of the European Sustainability Reporting Standards (ESRS) which will become applicable to KA for the reporting year 2024.. The whole materiality process will provide guid- ance for the further development of KA’s sustainabil- ity strategy. ANNUAL REPORT 2023 // KA IDENTIFIED 11 TOPICS AS MATERIAL, MEANING THAT KA HAS EITHER A HIGH IMPACT ON THOSE TOPICS OR THAT THOSE TOPICS REPRESENT A HIGH RISK OR OPPORTUNITY FOR THE COMPANY. IN MANY CASES, BOTH ASPECTS ARE ALSO FULFILLED. THESE MATERIAL TOPICS REPRESENT A BALANCED MIX OF ENVIRONMENTAL, SOCIAL AND GOVERNANCE TOPICS. 42 Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate Governance Financial Statements ADAPTATION HIGH LOW HIGH LOW ANNUAL REPORT 2023 // 42 43 Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate Governance Financial Statements risks and opportunities related to climate change at their sites, and organization-wide initiatives are set by corpo- rate teams. A Delegation of Authority process is in place, through which signicant climate change risks and deci- sions on mitigation actions are raised to the governance bodies for discussion. KA’s key climate change-related risks and opportunities can be summarized as follows: KA’s customers focus on lowering emissions generated during production of their products. They require lighter and more efcient products from their supply chain. For products designed a number of years ago, there is a risk that the market may become restricted for them. In addi- tion, the shift towards battery electric vehicles (BEV) also has implications for the components needed. KA is in close dialog with its customers regarding their ambitions and requirements regarding the green shift and the company does not see any operational or nancial risk related to this in the foreseeable future. KA has identied two long-term strategic goals (car- bon-neutral products by 2039 and purchase of 100% renewable energy by 2030) that support the transition to more sustainable products and decarbonizing the com- pany’s business activities. In 2023, KA initiated projects to calculate, understand, and decrease the carbon foot- print of products and materials. To reach its commitment to carbon-neutral products, cross-functional coopera- tion (technology, sales, quality, and purchasing) has been initiated throughout the entire value chain (stakeholder engagement) in the following areas: > Energy use in all KA sites > Materials and components used in KA products > Product innovation to increase recycling rate, substi- tute materials, reduce energy use in production, and allow for correct disposal of end-of-life products > CO₂ emissions related to transportation, packaging, and logistics In 2023, KA continued the work on centralizing energy supply contracts to prepare to better mitigate the volatil- ity in energy markets in the coming years, and to reach the strategic goal of achieving 100% renewable energy by 2030. Additionally, KA has been evaluating options to increase the amount of purchased renewable energy for different regions and countries, including the potential for power purchase agreements, on-site renewable energy generation, and the availability of green tariffs. With KA’s ambition to purchase 100% renewable energy by 2030 and to manufacture CO₂-neutral products by 2039, the company has already aligned itself with the requirements of the 1.5-degree target of the Paris Agree- ment. As part of the revision of KA’s sustainability strat- egy, which will be completed during 2024, the company is currently in the process of further formalizing and imple- menting the climate targets so that they will also meet the requirements of science-based targets in the future. The Board of Directors (BoD) and Global Leadership Team (GLT) are responsible for the organization’s strategic direction regarding climate change. They regularly review material climate change issues that are raised through either KA’s business segments (operational issues) or its corporate climate change experts (strategic issues). The group’s plants, with the support of corporate func- tions, are responsible for the day-to-day management of ENVIRONMENT Kongsberg Automotive (KA)’s vision is to make a meaningful contribution to society’s efforts to tackle climate change and support KA’s customers’ strategic sustainability goals by making solutions that support the transition. KA works to reduce the carbon emissions created by its business operations and its products, helping customers meet their ambitions of making lower-emission end products. ANNUAL REPORT 2023 // 44 Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate Governance Financial Statements to require lighter and more efcient components for their products from their supply chain that help achieve higher fuel efciency, reduce end-product weight, and use less energy. The industry shift to BEVs also creates opportuni- ties for KA’s product portfolio. Reducing energy usage and waste in manufacturing facili- ties leads to more efcient processes and equipment being installed, resulting in reduced OPEX spend. The move to circular economies and a focus on reducing, reusing, and recycling materials to eliminate waste to landll presents an opportunity to design products that require fewer raw material inputs. Increasing the amount of renewable energy used presents an opportunity to KA. 42% of purchased electricity is gen- erated from renewable sources. Seven of KA’s manufactur- ing facilities – four in Scandinavia as well as KA’s facilities in UK, France, and Canada – purchase 100% renewable electricity. KA’s Wuxi, China plant has installed solar pan- els that provide a signicant share of the plant’s energy consumption. The Ljungsarp plant in Sweden is even oper- ating with zero Scope 1 and 2 CO₂ emissions as all pro- cesses are electried, industrial waste heat is exploited, and all electricity used comes from renewable sources. Each year, KA reports on climate change and actions to reduce carbon emissions created by its manufacturing activities. In 2023, KA started to report location-based and market-based Scope 2 CO₂ emissions. In 2023, the group’s CO₂ emissions were approximately 20,128 met- ric tonnes of CO₂ (location based), a 20% reduction from As extreme weather events become more severe and/or more frequent globally, there is a risk that supply chains are disrupted, which impacts production. KA monitors its supply chain for the probability of disruption by extreme weather events. Where a high risk of disruption is identi- ed, KA works on mitigation actions with its suppliers. Volatility in energy and commodity prices may lead to higher prices and reduced protability. To address this, KA’s budget is thoroughly prepared according to the demand the company sees based on close cooperation with customers. KA’s path towards a greener prole is therefore, to a large extent, reected in the analyses and budgets in both the short- and long-term plans. There is a risk that governments, in response to the need to act decisively to meet their Paris Agreement commit- ments, introduce a cost to carbon through legislation in order to incentivize businesses to aggressively reduce car- bon emissions. There is a risk that higher or lower seasonal tempera- tures than usual, more frequent hurricanes, higher levels of snowfall, etc. could impact manufacturing facilities, leading to CAPEX expenditure to ensure safe and efcient work environments. KA’s automotive customers have a focus on reducing the emissions generated by their products. This leads them ANNUAL REPORT 2023 // the 25,070 metric tons of CO₂ emitted in 2022. Follow- ing the market-based approach the decrease was slightly higher. These signicant reductions have to some extent been achieved through energy efciency improvements and a higher share of renewable electricity (for the mar- ket-based view). Additionally, there are two divestments which affected facilities in Canada and Poland and led to reduced energy consumption and emissions. KA also updated its CO2 calculation emission factors in 2023. This update had a signicant effect on electricity-related emis- sions. KA intends to switch to a yearly emission factor update in the future. CO₂e emissions (tonnes), location-based 2022 202 3 Scope 1 (direct) 3,495 2,539 -27% Scope 2 (indirect/location-based) 21,575 17,589 -18% Tota l 25,070 20,128 -20% CO₂e emissions (tonnes), market-based 2022 202 3 Scope 1 (direct) 3,495 2,539 -27% Scope 2 (indirect/location-based) 20,446 16,263 -20% Tota l 23,940 18,803 -21% Calculation is based on the operational control approach and includes all existing KA production facilities in 2023. Pure ofce locations are excluded from the calculation. In 2023, KA started also to calculate upstream Scope 3 CO₂ emissions with a spend-based calculation model, enabling KA to analyze hot spots and to develop effective measurements to decrease carbon emissions in KA’s sup- ply chain. The calculation showed that the biggest part of KA’s CO₂ emissions is by far related to purchased goods, 45 Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate Governance Financial Statements followed by logistics. Both will be focus areas for KA to reduce Scope 3 upstream CO₂ emissions. KA will provide a more detailed analysis of its Scope 3 emissions in the next Sustainability Report. Scope 3 emissions in tonnes CO₂e 2023 Purchased goods & services 261,761 Upstream transportation 11,933 Others 23,057 Tota l 296,751 includes Scope 3.2, 3.3., 3.5, 3.6 In line with KA’s carbon emission targets, the Purchasing department started to implement tools in supplier selec- tion and evaluation. The upgrade of the cost analyst soft- ware with a carbon footprint module allows KA’s Sourc- ing Board to consider carbon footprint information at the purchased goods level in decision-making. The rst pilot calculations for selected KA products were made in 2023. In 2023, KA continued to take concerted actions on improving energy efciency at its manufacturing loca- tions. This was mainly driven by two factors: the compa- ny’s goal of achieving carbon-neutral products by 2039 (energy usage is an important part of KA’s carbon emis- sions), and the need to reduce utility costs due to the vola- tility in the energy markets. All plants were set a target for 2023 to decrease energy consumption by 2% relative to total product sales (“energy intensity”). Each plant took action to reduce energy usage. Some of the key activities included replacing existing lighting with LED bulbs, air leak reduction programs, replacing old equipment with newer and more energy-ef- cient equipment, and reusing waste heat. KA’s energy intensity in 2023 was 96.8 kilowatt hours used in production for every EUR 1,000 of total product sales, a 5% decrease from the 101.5 kilowatt hours per EUR 1,000 of total product sales in 2022. While energy intensity was the primary key performance indicator, manufacturing units reported that absolute energy use decreased by 6% to approximately 92 million kilowatt hours from approxi- mately 98 million kilowatt hours in 2022. 2022 2023 Energy use (kWh) 97,797,917 92,310,078 -6% Energy intensity R12M 101.5 96.8 -5% Good waste management practices are important to KA and the communities where it operates. In 2023, KA’s aim was a reduction of 2% of the yearly amount of waste sent to landlls or requiring special treatment as compared to annual sales; this is the “Disposed Waste Index.” All units sought opportunities to reuse and recycle. Notably, 10 manufacturing locations were landll-free in 2023. Even though KA’s total waste quantity remained stable, KA faced an increase in disposed waste, leading to an increase of KA’s Waste Index by 10% from 2022. This is to some extent related to improved waste reporting, which improved the data quality in 2023, but led to higher numbers. 2022 2023 Total disposed waste (kg) 778,161 844,138 8% Disposed waste index R12M 0.8 0.9 10% KA’s business model is not water intensive. But KA under- stands its responsibility to use natural resources ef- ciently and there is a dependency on access to clean water for its operations. KA therefore measures water usage at each plant and sets an annual target for each to reduce its water index usage by 2% from the previous year. Manu- facturing facilities worked to reduce water leakage use and realize conservation opportunities. However, with the investment in new manufacturing activities requiring water usage and some identied leakages, KA saw a 5% increase in total water usage from 2022. 2022 2023 Water usage (m) 111,000 116,648 5% Water usage index R12M 0.1 0.1 6% ANNUAL REPORT 2023 // 2022 2023 25 20 CO Location-based, 1000 tonnes CO2 20% REDUCTION 5% REDUCTION 2022 2023 kWh/1000 EUR 46 Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate Governance Financial Statements EU TAXONOMY The Regulation (EU) 2020/852 of the European Parliament and European Council, known as the EU Taxonomy Regulation, introduces a comprehensive classication system for economically and environmentally sustainable activities. This system aims to streamline the recognition of sustainable practices, encouraging a shift in nancial investments toward businesses and technologies that promote environmental responsibility and support the goals outlined in the European Green Deal and the EU’s climate targets. According to the Taxonomy Regulation, an economic activity is deemed environmentally sustainable if it signicantly contributes to at least one of the EU’s six climate and envi- ronmental objectives. Simultaneously, it must not cause signicant harm to any of these objectives and must adhere to minimum social safeguards. These six objectives are: 1. Climate-change mitigation 2. Climate-change adaptation 3. Sustainable use and protection of water and marine resources 4. Transition to a circular economy 5. Pollution prevention and control 6. Protection and restoration of biodiversity and ecosystems In the EU, the reporting obligations, as outlined in the Delegated Acts by the European Commission, have been introduced in stages. The Taxonomy Regulation was adopted into Norwegian law through the Sustainable Finance Act, which entered into force in January 2023. As a Norwegian listed corporation, Kongsberg Automotive (KA) is therefore obliged to report on the climate objectives (1.-2.) for the rst time in 2023. In 2024, the new crite- ria published in June 2023 will extend the reporting scope to include the environmental objectives (3.-6.) as well as additional activities on the climate objectives (1.-2.). In the report, the economic activities of Kongsberg Automotive (KA) must be assessed in terms of their eligibility and alignment with the abovementioned climate objectives. To qualify as Taxonomy-eligible, an economic activity must align with an activity described ANNUAL REPORT 2023 // in the Taxonomy Delegated Acts and be considered likely to substantially contribute to at least one of the six environmental objectives. To qualify as Taxonomy-aligned, an economic activity must substantially contribute to one or more of the environmental objectives by meeting the corresponding technical screening criteria outlined in the applicable Delegated Act. Further, the economic activity must not signicantly harm any other objectives and the activity must be carried out in compliance with the minimum social safeguards in place. Firstly, Kongsberg Automotive’s economic activities are to be analyzed to determine Taxonomy eligibility, i.e. whether they fall within the scope of the EU Taxonomy. Sub- sequently, it is to be assessed whether the activities identied as Taxonomy-eligible are Taxonomy-aligned. For both eligibility and alignment, Articles 3 and 9 of Taxonomy Regulation (EU) 2020/852 (Taxonomy) require Kongsberg Automotive to disclose sales, capital expendi- ture (CAPEX), and operating expenditure (OPEX) related to environmentally sustainable economic activities. The focus of the current assessment of eligible activities was set on the income-generat- ing economic operations and is based on best judgment and availability of data through the existing reporting channels. Workshops were held with representatives of the nance and engineering depart- ments of the different business units to analyze the group’s economic activities regard- ing their relevance to the EU Taxonomy-eligibility. As a rst step, the activities were allo- cated to the applicable NACE codes (Nomenclature of Economic Activities), which were then mapped to the potential activities listed in the Delegated Acts in a second step. The group’s core activities across all business units primarily pointed to the activities “3.18 Manufacture of automotive and mobility vehicle components” and “3.6 Manufacture of other low carbon technologies.” The corresponding economic activities’ alignment with the activity descriptions was then further analyzed in detail. Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate Governance Financial Statements This activity was newly introduced as part of the amend- ment to the Climate Delegate act in June 2023 and there- fore only requires the reporting of eligibility for the scal year 2023. The activity description refers to the manufacture, repair, maintenance, retrotting, repurposing, and upgrade of mobility components for zero-emission per- sonal mobility devices and of automotive and mobility systems, components, separate technical units, parts, and spare parts. As a technology development and manufacturing company for vehicle components, most of Kongsberg Automotive’s income generating activities were analyzed for eligibility with 3.18. Together with experts from the engineering and sales department, the product families were discussed for each business unit. Thereby, products that can be built into electric vehicles and projects that develop electronic vehicle components were identied as being eligible for 3.18. (products that can be installed in hybrid vehicles and/or vehicles with internal combustion engines are not included). This activity comprises the manufacture of technologies that are aimed at and demonstrate substantial GHG emis- sion savings compared to the best-performing alternative technology/product/solution available on the market. While activities were identied that show best-in-mar- ket performance based on internal benchmarking, it is dif- cult to demonstrate lifetime GHG emission savings that are substantial. Therefore, the corresponding activities have been nally classied as non-eligible for the scal year 2023. KA will continue to analyze these activities in more detail in 2024 through a lifetime GHG saving analysis. As activity 3.18 is one of the recently introduced new activities for the climate objectives, alignment does not have to be reported this year. Next year, KA will examine the technical screening criteria for alignment of activity 3.18 and disclose the percentage of alignment. If more activities are identied as eligible, the company will report their alignment for the scal year 2024 as well. 1 The undertaking carries out, funds or has exposures to research, development, demonstration and deployment of innovative electrici- ty generation facilities that produce energy from nuclear processes with minimal waste from the fuel cycle. No 2 The undertaking carries out, funds or has exposures to construction and safe operation of new nuclear installations to produce electrici- ty or process heat, including for the purposes of district heating or industrial processes such as hydrogen production, as well as their safety upgrades, using best available technologies. No 3 The undertaking carries out, funds or has exposures to safe opera- tion of existing nuclear installations that produce electricity or pro- cess heat, including for the purposes of district heating or industrial processes such as hydrogen production from nuclear energy, as well as their safety upgrades. No 4 The undertaking carries out, funds or has exposures to construction or operation of electricity generation facilities that produce electri- city using fossil gaseous fuels. No 5 The undertaking carries out, funds or has exposures to construction, refurbishment and operation of combined heat/cool and power ge- neration facilities using fossil gaseous fuels. No 6 The undertaking carries out, funds or has exposures to construction, refurbishment and operation of heat generation facilities that produ- ce heat/cool using fossil gaseous fuels. No ANNUAL REPORT 2023 // 48 Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate Governance Financial Statements The consolidated nancial statements of Kongsberg Automotive have been prepared in accordance with International Financial Reporting Standards (IFRS) and IFRIC interpre- tations as endorsed by the EU. These reported numbers are used as a basis for the calcula- tion of sales, capital expenditure (CAPEX) and operational expenditure (OPEX) in accor- dance with the EU Taxonomy. Double counting is avoided by clearly allocating each item of Taxonomy-eligible and Taxonomy-aligned sales, capital expenditure, and operating expenditure to a single Taxonomy-eligible economic activity. The Taxonomy-eligible share of sales (numerator) is dened as the net sales derived from products or services and derived from the Taxonomy-eligible income-generating activi- ties (3.18). The denominator for the sales KPI consists of the consolidated operating rev- enues (2023: EUR 884.9 million) in accordance with IFRS 15 and IAS 1 82(a) and can be reconciled to the consolidated statement of comprehensive income of 2023. Further infor- mation can be found in Note 7 of the consolidated nancial statements 2023. The Taxonomy-eligible share of CAPEX (numerator) consists of investment in production machinery and buildings related to current and future income-generating Taxonomy-eli- gible activities (3.18). The denominator for the CAPEX KPI consists of all additions to tangible, intangible as well as right-of-use assets in accordance with IAS 16, IAS 38 and IFRS 16 before any depre- ciation, amortization, or remeasurement (2023: EUR 44.9 million). It can be reconciled with the additions reported in Note 12 to 14 of the consolidated nancial statements 2023. The operating expenditure KPI is dened as Taxonomy-eligible operating expenditure (numerator) divided by KA’s total operating expenditure (denominator). The denominator for the operating expenditure (OPEX) KPI consists of the expenses for non-capitalized research and development costs, short-term and low-value leases, building renovation measures as well as costs for maintenance and repair of property, plant, and equipment (2023: EUR 75.2 million). To derive the Taxonomy-eligible share of OPEX, the above costs were allocated based on the corresponding current and future Taxonomy-eligible income-generating activities (3.18). For the research and development costs specically, the individual projects were allocated based on their current and future Taxonomy-eligible sales. PROPOR- PROPOR- PROPOR- A. Taxonomy-eligible activities A.1 Eligible Taxonomy-aligned activities None 0 0 0 0 0 0 A.2 Eligible not Taxonomy-alig- ned activities 3.18 Manufacture of automotive and mobility vehicle compo- nents 8.6 1.0 2.7 6.0 0.6 0.8 Total (A.1 + A.2) 8.6 1.0 2.7 6.0 0.6 0.8 B. Taxonomy non-eligible ac- tivities 876.3 99.0 42.2 94.0 74.6 99.2 Total (A+B) 884.9 100.0 44.9 100.0 75.2 100.0 ANNUAL REPORT 2023 // 49 Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate Governance Financial Statements SOCIAL Kongsberg Automotive (KA) is represented in 18 countries all around the world with a wide range of specialties; its locations vary from manufacturing sites through to tech centers and warehouse sites. The company’s largest workforce is in Mexico and Norway, followed by Poland and the United States. All of this gives KA a multinational mindset. By the end of 2023, the company had a workforce of 5,286 full-time equivalents (FTEs). KA continues to identify, develop, and retain its highly talented employees to plan for the future of the company. To do so, KA relies on its professional, digitalized suc- cession planning process, with the aim of securing KA’s future organizational needs. This provides KA with a solid framework for developing talent based on the principles of equality and diversity, all of which helps drive the suc- cess of the company. Strategic issues are at the heart of the company’s success. Its employees work tirelessly to ensure KA can deliver substantial value for its customers through its rst-rate products and services. Employees are expected to have a strong commitment not only to the company’s success, but also to its core values of Integrity, Account- ability, Creativity, and Teamwork. KA aims to add value for its customers and shareholders, while rmly uphold- ing its ethical guidelines (Code of Conduct). In 2023, KA continued on its HR digitalization journey by further enhancing the SAP SuccessFactors platform, which facilitates the administration and management of the company’s global workforce with a cloud-based HR information system covering all core HR functions. It allows for consistent and digital HR processes with uni- ed data in the areas of recruitment, onboarding, com- pensation, learning, and performance management. KA promotes equal opportu- nity and fair treatment. The company believes that busi- ness performance and pro- ductivity are enhanced by a diverse workforce, as greater diversity will lead to high- er-performing teams and improved decision-making. KA has established a diver- sity policy which is part of its Code of Conduct, avail- able on the company’s web- site. In 2023, 67 nationalities were represented in the KA global workforce, while executive management fea- tured six different nationalities. Women make up 37% of the total workforce and 11% of the executive management (Global Leadership Team). The Board of Directors consists of eight members: three women, of whom two are share- holder-elected directors, and ve men, of whom three ANNUAL REPORT 2023 // SERVING AS THE LIFEBLOOD OF THE COMPANY, EMPLOYEES EMBODY THE CORE ESSENCE OF KA. THEIR PROFOUND EXPERTISE, IMAGINATIVE IDEAS, AND ADEPT EXECUTION FUEL THE INNOVATIONS THAT CAPTIVATE AND MOTIVATE CUSTOMERS. are shareholder-elected directors. The company will con- tinue to promote diversity and equality in future recruit- ment and promotion processes. Everyone working at or on behalf of KA shall treat people with respect. KA has zero tolerance for discrimination, whether this is based on a person’s race, color, religion, sex, age, ethnicity, national origin, citizenship status, dis- ability, sexual orientation, or any other relevant status. In 2024, Kongsberg Auto- motive (KA) will continue to attribute its success to the invaluable contributions of its dedicated workforce. Serving as the lifeblood of the company, employees embody the core essence of KA. Their profound expertise, imaginative ideas, and adept execu- tion fuel the innovations that captivate and motivate cus- tomers. KA remains steadfast in its commitment to opti- mizing the potential of its global workforce, irrespective of geographical location or organizational hierarchy. 50 Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate Governance Financial Statements Whether engineers, managers, skilled production personnel, or specialized technicians – each individual within the KA family plays a pivotal role in the company’s success. Recog- nizing the paramount importance of staff development, KA emphasizes the signicance of nurturing talent for both personal fulllment and meeting evolving customer needs. The organization places equal emphasis on continuous growth, the cultivation of individ- ual strengths, respectful collaboration, performance acknowledgment, and exible work- ing conditions. This holistic approach contributes to KA’s reputation as an employer of choice across its 34 operational locations. Strong strategic realignment of talent development is particularly important in the wake of the various divestures and reorganizations to ensure that the whole team is pull- ing in the same direction. After placing talent development on a new strategic foundation in 2022, the newly developed training strategy came into effect in 2023, as training com- menced on a newly launched, state-of-the-art learning platform. Since the go-live of the training platform in December 2023, KA’s workforce invested an impressive 340 hours on the platform, reecting a dedicated commitment to personal and professional development. A notable 22% of KA employees actively engaged with the new tool. Employees showed a keen interest in AI business transformation and project management. The main goal of enhancing competitiveness and upskilling has been well- aligned with employee learning preferences. The implementation of a training hub – the Learning Lab – has created an interactive and collaborative space for knowledge-shar- ing. To build a growth culture within the company, KA has developed learning guidelines for employees, supporting the employees in navigating their development journey effec- tively. As the company moves forward, commitment to a robust development strategy remains steadfast. These achievements highlight not only KA’s dedication to individual growth, but also collective pursuit of excellence. Taking the best possible care of its employees is KA’s top priority. The past years provided great insights into future work organization, as the COVID pandemic required many employees to work from home. The subsequent lifting of lockdowns gave rise to new con- cepts of hybrid and mobile work. KA successfully adopted these concepts, enabling them to attract and retain talent and remain a contemporary employer of choice. ANNUAL REPORT 2023 // 51 Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate Governance Financial Statements HEALTH AND SAFETY ANNUAL REPORT 2023 // Kongsberg Automotive (KA) prioritizes the health, safety, and wellbeing of its employees and seeks to minimize environmental impact. KA’s well-established Health & Safety Policy and Environmental Policy articulate the key actions necessary to achieve the highest industry standards in HSE performance and KA’s business objectives. “We will be second to none in all we do.” These commitments are communicated throughout the organization. The authorities in the countries where the group operates set Health, Safety, and Environ- mental (HSE) standards in the form of legislation, regulations, and specic requirements. KA’s businesses comply with these, as well as with internal HSE requirements. The group sets expectations for all units and requires improved performance and regular assess- ment of progress. All manufacturing facilities have aligned their safety management systems to the new ISO 45001 standard. 86% of KA’s facilities were successfully externally certied to this safety standard by the end of 2023 and the certication of all plants is scheduled to be completed by the end of 2025. Additionally, all KA manufacturing locations are certied to the ISO 14001 Environ- mental Management Systems standard; this standard ensures that units consider the environmental impact of their work and set appropriate targets for improved perfor- mance. As a supplier, KA also meets the HSE expectations of its customers. Objectives and plans for continuous improvement of HSE performance were set and communicated in early 2023. Key performance indicators were reviewed regularly, and actions taken immediately as the need arose. As a result, the group reports an improved HSE performance. Employee absences due to illness are tracked by the organization. Manufacturing unplanned absence in 2023 was approximately 4.1% on average, down from the 4.6% posted in 2022. 52 Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate Governance Financial Statements Safety activities continued to focus on eliminating unsafe conditions at the manufacturing plants. Despite the ongoing challenges (including rapidly changing busi- ness situations and employee turnover), the safety perfor- mance improved. Execution of the Shift Gear program allowed KA to focus on the critical areas of its business. This focus deliv- ered a signicant improvement in the company’s safety performance in 2023. In 2023, KA reported 9 injuries, a 35% improvement compared to last year’s reported 14 injuries. Also, 17 man- ufacturing locations reported zero accidents by the end of 2023, compared to 12 in 2022, a 25% improvement. This corresponds to an incident rate of 0.94 per million hours worked. The results achieved indicate a strong perfor- mance level for the year, building on previous reductions and resulting in a 63% reduction over the last ve years. In 2023, KA again went ve calendar months with zero accidents, setting a new group record for days with- out accidents. These results are testament to the ongo- ing focus that KA has placed on providing the necessary resources, employee engagement, training, awareness, and improved work processes. KA and its employees should always maintain a high eth- ical standard. The group shall apply fair labor practices while respecting the national and local laws of the com- munities where it operates, in addition to internationally recognized business ethics standards, such as the OECD guidelines for multinational enterprises and the UN Dec- laration on Human Rights. KA does not tolerate or engage in forced or exploitative labor and has zero tolerance for corruption or bribery. The group’s Code of Conduct sets the organization’s expectations for acting responsibly and its guidelines help ensure that all employees act in a way that is expected from a top-tier automotive supplier. The Code of Con- duct is available in 13 languages and is communicated to all employees. Employees also receive training and guid- ance on the requirements in the Code of Conduct, which is designed with a focus on relevant ethical dilemmas to ensure employees understand the Code and their respon- sibilities, and is delivered through classroom training, workshops, and an e-learning program. KA encourages reporting of suspected misconduct, and this goes for both employees and people external to the company. The company has established a whis- tleblowing service for reporting suspected breaches of the Code of Conduct or any other unethical or illegal behav- ior. The whistleblowing service can be found in the Code of Conduct page in the Sustainability section of the web- site. All concerns are treated with the utmost condenti- ality, without fear of retaliation. In 2023, no conrmed incidents of corruption were reported or identied. Further, no legal cases regard- ing corruption were brought against the company or its employees. Human rights and decent working conditions throughout the supply chain are of the utmost importance to Kongs- berg Automotive (KA). The sustainability team in KA’s Purchasing department regularly evaluates the compa- ny’s approach, conducts due diligence, and works towards expanding the company’s approach in a holistic sustain- ability approach, including human and labor rights. KA works to identify relevant human and labor rights issues based on the applicable international and local reg- ulations and guidelines, its corporate sustainability strat- egy, industry and customer requirements, and bench- mark analyses. KA focuses on the following human and labor rights when determining the requirements it places on suppliers and carrying out supplier risk assessments: > Protection of freedom of association and collective bargaining > Avoidance of child labor > Avoidance of forced labor (including modern slavery) > Avoidance of harassment and discrimination > Guarantee of occupational health and safety > Guarantee of decent working conditions (working hours, wages, benets, etc.) > Safeguarding of human and labor rights in sourcing practices Suppliers are required to adhere to the same high standards as KA does itself. The relevant principles and requirements are set out and communicated to the supply chains in KA’s Supplier Declaration document (with a reference to the 2020 2021 2022 2023 TARGET 12 14 12 17 22 63% OVER 5 YEARS ANNUAL REPORT 2023 // 53 Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate Governance Financial Statements more detailed Supplier Sustainability Manual), which all suppliers are required to commit to during their onboard- ing and/or contracting process. Both supplier documents will be updated by KA in 2024. KA has also published a position statement on conict minerals. KA assesses the ESG risk of the country of origin of all suppliers and requires direct materials suppliers to report on their approach to ESG requirements, sustainability, and management practices, including human and labor rights. In 2023, KA started the preparation to expand the applicability of this standard to suppliers of indirect materials. KA expects its suppliers to have in place an effective policy and management system for fundamen- tal human rights and decent working conditions, to offer training for their workforce on the relevant issues, and to communicate the necessary requirements to their own suppliers. This information is collected from suppliers through a standardized, evidence-based self-assessment questionnaire. The questionnaire (SAQ on SupplierAs- surance.com) has been developed and promoted by CSR Europe and Drive Sustainability and is widely used in the automotive industry. It enables KA to identify gaps in sup- pliers’ existing governance and management approaches to human and labor rights, health and safety, environ- ment and energy management, business ethics, and responsible sourcing. By the end of 2023, more than 360 suppliers, covering 78% of KA’s yearly direct purchasing spend, were suppli- ers with an externally validated sustainability risk assess- ment. All suppliers are provided with feedback and rec- ommendations on how to improve their governance and management systems following the assessment of their questionnaires. KA is committed to giving precedence to suppliers with low sustainability risks, including human rights. Suppliers that are classied by the Purchasing department as having high/medium risks are supported in their development. All suppliers that use conict minerals, such as tin, tungsten, tantalum, and gold, which are identied as minerals contributing to possible human and labor rights violations in the Democratic Republic of Congo (DRC), must provide information on the origins of these min- erals and prove that they comply with KA’s related pol- icy. Where risks are identied that these minerals could potentially originate in the DRC, KA immediately esca- lates the issue and requires the supplier to implement responsible sourcing practices. In 2023, emerging min- erals such as cobalt and mica were included in the yearly data collection and due diligence process. KA’s publicly available Conict Minerals Position Statement for Suppli- ers gives a clear commitment and guidance on the yearly data collection process and escalation needs. KA is also a member of the Responsible Mineral Initiative, support- ing human and labor rights in the supply chain related to these minerals. To ensure effective monitoring of KA’s compliance, including human and labor rights, KA encourages report- ing any concerns or breaches that may occur. The com- pany has also established internal routines for reporting suspected human rights breaches. In 2023, no breaches were reported or identied. The corresponding report will be published on the company’s website by the end of June 2024 at the latest. Beyond this, KA uses a global 2021 2022 2023 60% ASSESSED SUPPLIERS 305 ASSESSED SUPPLIERS 360 ASSESSED SUPPLIERS 71% 78% ANNUAL REPORT 2023 // 54 Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate Governance Financial Statements media screening tool for its suppliers, their industries, and their geographical locations. This tool raises an alert if any potential human or labor rights issues have been publicized. Whenever an alert is raised, the responsible buyer is informed immediately and is required to take appropriate actions to investigate the matter. Within KA’s Central Purchasing department, sustain- ability training, including human and labor rights as well as decent working conditions, is provided to colleagues and suppliers where the scope for improvement has been identied. This department is also responsible for per- forming regular reviews of existing due diligence pro- cesses and identifying any areas for improvement. Please also refer to KA's transparency report in accordance with the Norwegian Transparency Act published on the Com- pany website in the Corporate Governance section. Being a global company means that KA is a part of many local communities. KA encourages its employees to be involved in their communities and to support issues such as education, health, social responsibility, and advocacy for children. Examples of this type of support of local communities can be found in the company’s latest Corpo- rate Sustainability Report. ANNUAL REPORT 2023 // 55 Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements OUTLOOK Kongsberg Automotive (KA)’s priorities are centered around improving protability and cash ow. KA’s new leadership is focusing on expanding the company’s market position, strengthening its geographic footprint, and controlling costs while maintaining its focus on innovation. For 2024, KA is expecting another year of demanding macroeconomic conditions. Potential slowing demand in the Americas and overall below-average growth rates will continue to put pressure on our cost structure. While the company is expecting to see overall improvement in com- ponent and commodity costs, it is preparing for ongoing labor and general cost ination, despite the likely reduc- tion in interest rates. KA has seen a slight improvement in the 2024 com- mercial vehicle (CV) market forecast. Current CV produc- tion should reach 3.4 million vehicles, an increase of 1.7% compared to the previous six months, which has given a healthy start to the year. The improvement is driven by higher numbers in Asia and North America. Meanwhile, the outlook for Europe has been reduced. Compared with 2023, China will continue its recovery with a double-digit year-on-year growth rate, while we expect a decline in North America and to a lesser extent in Europe. Despite slower growth in the two regions KA is most exposed to, the company is aiming to grow its core product revenues compared to 2023. For the passenger vehicles segment, KA is expecting a slight overall decline in the market in 2024 with less than 90 million cars to be produced. Marginal growth in the Americas will be offset by a decline in other regions, mainly in Europe. Given KA’s regional exposure, no tail- wind is expected from the market. Given the above circumstances, consistently execut- ing cost reduction initiatives and continuous improve- ment on the shop oor will be key in the next 12 months. Flawless execution of the incoming orders within short delivery times will increase customer loyalty and satis- faction. A high degree of quality is another key element. Further pruning of our product portfolio on the one hand, and successful launches of new programs and projects on the other, will further contribute to the increased earn- ings. Optimization of KA’s supply chain and material costs will help the company reduce its inventory and deliver a positive cash ow. Occurring cost increases will have to be passed on to customers as soon as possible. In Q1 2023, the former Board of Directors and CEO ini- tiated a strategic review of the company. The review re- volved around structural considerations (acquisitions, partnerships and collaborations, divestments, capital measures) as well as cost optimization measures. Going forward, KA will emphasize retaining and developing the current activities. The company will focus on growth in areas where it is well-positioned and explore bolt-on acquisition options over the coming year to fur- ther strengthen its position. The cost optimization measures that have resulted from the strategic review as well as Gear I of the Shift Gear pro- gram are expected to yield EUR 15-20 million in annual- ized savings. In 2024, KA introduced Hoshin Kanri (policy deploy- ment process), which focuses on strategic planning that aims to set high-level objectives which then cascade them down to every function in the organization. This process aims to get every employee pulling in the same direction at the same time. KA continues to leverage its innovation capabilities globally. Portfolio expansions and strategic acquisitions put the company in a good position to act on the antici- pated growth in the markets such as autonomous driving. Sustainability continues to be a focal point going for- ward. Energy efciency in KA’s operations and lower CO₂e footprints of KA’s purchased materials are of high impor- tance for KA. KA will further develop its general sustain- ability approach and will create a stronger sustainability prole. Going forward, KA will move all its production facil- ities to 100% renewable energy, with the Cluses (France) plant being the next with a target date as early as May 2024. ANNUAL REPORT 2023 // OUTLOOK 56 Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate Governance Financial Statements Kongsberg, March 13, 2023 The President & CEO and the Board of Directors of Kongsberg Automotive ASA Junyang (Jenny) Shao Director Emese Weissenbacher Director Peter Thostrup Chair Brian Kristoffersen Director Bjørn Ivan Ødegård Elected by the employees Erik Volden Director Siw Reidun Wærås Elected by the employees Knut Magne Alfsvåg Elected by the employees ANNUAL REPORT 2023 // Kongsberg Automotive at a GlanceContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE GROUP .............................. 58 FINANCIAL STATEMENTS OF THE PARENT COMPANY ............ 112 ALTERNATIVE PERFORMANCE MEASURES ......................... 127 CONSOLIDATED KEY FINANCIAL DATA .................................. 131 DECLARATION TO THE ANNUAL REPORT 2023 ........................ 132 ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE GROUP Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements 58 FINANCIAL STATEMENTS OF THE GROUP CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME .............................. 59 CONSOLIDATED STATEMENT OF CASH FLOWS ..... 61 CONSOLIDATED STATEMENT OF FINANCIAL POSITION ..................................... 62 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ...................................... 64 NOTE 1 REPORTING ENTITY ............................... 65 NOTE 2 STATEMENT OF COMPLIANCE ................ 65 NOTE 3 MATERIAL ACCOUNTING POLICIES ........ 65 NOTE 4 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS .................................................74 NOTE 5 NEW STANDARDS AND INTERPRETATIONS ...................................... 76 NOTE 6 SUBSIDIARIES ........................................ 77 NOTE 7 SEGMENT INFORMATION ........................ 78 NOTE 8 SALARIES AND SOCIAL EXPENSES ....... 83 NOTE 9 OTHER INCOME AND OPERATING EXPENSES ....................................... 83 NOTE 10 FINANCIAL ITEMS ................................ 84 NOTE 11 TAXES .................................................. 85 NOTE 12 DISCONTINUED OPERATION & ASSETS AND LIABILITIES OF DISPOSAL GROUP CLASSIFIED AS HELD FOR SALE ........... 89 NOTE 13 INTANGIBLE ASSETS ........................... 91 NOTE 14 PROPERTY, PLANT & EQUIPMENT (PP&E) ............................. 93 NOTE 15 RIGHT-OF-USE ASSETS ....................... 94 NOTE 16 IMPAIRMENT LOSSES ........................... 95 NOTE 17 INVENTORIES ....................................... 97 NOTE 18 TRADE AND OTHER RECEIVABLES ...... 97 NOTE 19 SHARE CAPITAL ................................... 99 NOTE 20 EARNINGS AND DIVIDEND PER SHARE........................................101 NOTE 21 RETIREMENT BENEFIT OBLIGATIONS ... 102 NOTE 22 INTEREST-BEARING LIABILITIES ........103 NOTE 23 OTHER NON-CURRENT INTEREST-FREE LIABILITIES .............................105 NOTE 24 RISK MANAGEMENT ............................105 NOTE 25 TRADE AND OTHER PAYABLES ...........108 NOTE 26 FINANCIAL INSTRUMENTS ..................109 NOTE 27 REMUNERATION AND FEES FOR MANAGEMENT, BOARD OF DIRECTORS (BOD) AND AUDITOR .....................................................110 NOTE 28 COMMITMENTS AND GUARANTEES ......110 NOTE 29 CONTINGENT LIABILITIES ...................111 NOTE 30 SUBSEQUENT EVENTS .......................111 NOTE 31 RELATED-PARTY TRANSACTIONS ......111 ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE GROUP Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements 59 MEUR NOTE 2023 2022 Operating revenues 7 884.9 905.6 Other income 9 1.5 44.2 Operating expenses Raw material expenses (429.9) (433.6) Change in inventories 5.0 1.8 Salaries and social expenses 8 (264.9) (253.3) Other operating expenses 9 (156.4) (165.4) Depreciation 14, 15 (31.9) (33.0) Amortization 13 (1.0) (1.9) Impairment losses 13, 14, 15, 16 (27.0) (1.3) Total operating expenses (906.1) (886.7) Operating profit / (loss) (19.7) 63.1 Financial items Financial income 10 4.8 5.0 Financial expenses 10 (30.8) (21.8) Net financial items (26.0) (16.8) Profit (loss) before taxes (45.7) 46.3 Income taxes 11 (13.4) (25.5) Net profit (loss) from continuing operations (59.1) 20.8 Profit / (loss) from discontinued operation, net of tax 12 0.0 5.9 Net profit / (loss) (59.1) 26.7 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE GROUP Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements 60 MEUR NOTE 2023 2022 Other comprehensive income Items that may be reclassified to profit or loss in subsequent periods: Translation differences on foreign operations 31.8 29.8 Items that will not be reclassified to profit or loss in subsequent periods: Translation differences on non-foreign operations (32.3) (24.3) Remeasurement of net PBO 21 (0.5) 6.2 Tax on net PBO remeasurement 11 0.1 (1.5) Other comprehensive income (0.9) 10.2 Total comprehensive income for the year (60.0) 36.9 Net profit attributable to Equity holders (parent company) (59.5) 26.5 Non-controlling interests 0.4 0.2 Total (59.1) 26.7 Total comprehensive income attributable to Equity holders (parent company) (60.1) 36.8 Non-controlling interests 0.1 0.1 Total (60.0) 36.9 Earnings per share: Basic earnings per share, Euros 20 (0.06) 0.03 Diluted earnings per share, Euros 20 (0.06) 0.03 Earnings per share – continuing operations: Basic earnings per share, Euros 20 (0.06) 0.02 Diluted earnings per share, Euros 20 (0.06) 0.02 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (CONTINUED) ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE GROUP Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements 61 CONSOLIDATED STATEMENT OF CASH FLOWS MEUR NOTE 2023 2022 Operating activities Profit / (loss) before taxes (45.7) 64.6 Depreciation 14, 15 31.9 33.2 Amortization 13 1.0 1.9 Impairment losses 13, 14, 15, 16 27.0 1.3 Interest income 10 (1.9) (1.7) Interest expenses and other financial items 10 16.9 21.7 Taxes paid (14.7) (9.4) (Gain) / loss on sale of non-current assets (0.8) (72.3) Changes in trade receivables 18 5.0 61.7 Changes in inventory 17 (5.0) 20.5 Changes in trade payables 25 (5.3) (21.3) Currency differences 10 5.7 0.4 Difference between pension funding contributions paid/ pensions paid and the net pension cost 21 (1.2) (1.4) Changes in other items 8.6 3.3 Cash flow from operating activities 21.5 102.4 Investing activities Capital expenditures, including intangible assets 13, 14 (28.5) (28.9) Proceeds from sale of intangible and tangible assets 0.8 189.5 Interest received 10 1.2 1.6 Proceeds from sale of subsidiaries 0.0 40.4 Investments in associates and other 18 (2.6) 0.0 Cash flow from/used by investing activities (29.1) 202.6 * Comprises changes in other receivables and other assets, other short-term liabilities, and provisions. MEUR NOTE 2023 2022 Financing activities Payments for purchase of treasury shares 19 (3.9) (23.5) Net draw down / (repayment) of debt 22 (9.4) (98.5) Interest paid and other financial items (16.6) (22.1) Repayment of lease liabilities 22 (9.8) (9.9) Cash flow used by financing activities (39.7) (154.0) Currency effects on cash (0.9) 3.6 Net change in cash (48.2) 154.6 Net cash as at January 1 212.9 58.3 Net cash as at December 31 164.7 212.9 Of this, restricted cash 0.5 0.5 ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE GROUP Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements 62 CONSOLIDATED STATEMENT OF FINANCIAL POSITION ASSETS EQUITY AND LIABILITIES MEUR NOTE 2023 2022 Non-current assets Deferred tax assets 11 11.4 14.3 Intangible assets, including goodwill 13, 16 78.3 78.7 Property, plant and equipment 14, 16 115.8 133.6 Right-of-use assets 15, 16 55.0 60.7 Investments accounted for using the equity method 18 2.1 0.0 Other non-current assets 18 2.0 1.4 Total non-current assets 264.6 288.7 Current assets Inventories 17 101.5 96.5 Trade and other receivables 18 177.3 184.4 Cash and cash equivalents 22 164.7 212.9 Other current assets 18 13.4 15.4 Total current assets 456.9 509.2 Total assets 721.5 797.9 MEUR NOTE 2023 2022 Equity Share capital 19 84.6 100.3 Treasury shares 19 (3.2) (23.9) Share premium 180.6 208.2 Other reserves 91.8 72.2 Retained earnings (140.1) (80.6) Attributable to equity holders 213.7 276.2 Non-controlling interests 4.4 4.3 Total equity 218.1 280.5 Non-current liabilities Deferred tax liabilities 11 21.0 24.2 Retirement benefit obligations 21 12.0 12.5 Interest-bearing liabilities 22 189.3 197.9 Non-current lease liabilities 15, 22 65.4 60.4 Other non-current interest-free liabilities 23 3.7 8.0 Total non-current liabilities 291.4 303.0 Current liabilities Current lease liabilities 15, 22 10.2 9.3 Current income tax liabilities 11 4.2 7.8 Trade payables 25 116.6 121.9 Other current payables 25 81.0 75.4 Total current liabilities 212.0 214.4 Total liabilities 503.4 517.4 Total equity and liabilities 721.5 797.9 ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE GROUP Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements 63 Kongsberg, March 11, 2024 The President & CEO and the Board of Directors of Kongsberg Automotive ASA Linda Nyquist-Evenrud President and CEO Peter Thostrup Chairman (sign.) Erik Volden Board member (sign.) Emese Weissenbacher Board member (sign.) Siw Reidun Wærås Employee-elected (sign.) Junyang (Jenny) Shao Board member (sign.) Knut Magne Alfsvåg Employee-elected (sign.) Brian Kristoffersen Board member (sign.) Bjørn Ivan Ødegård Employee-elected (sign.) ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE GROUP Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements 64 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY MEUR SHARE CAPITAL TREASURY SHARES SHARE PREMIUM OTHER RESERVES RETAINED EARNINGS EQUITY HOLDERS OF THE PARENT NON-CON - TROLLING INTEREST TOTAL EQUITY Equity as at 01.01.2022 105.6 (1.3) 219.1 45.0 (107.1) 261.3 4.2 265.5 Purchase of treasury shares (23.5) (23.5) (23.5) Share-based compensation 1.6 1.6 1.6 Total comprehensive income for the year: Profit for the year 26.5 26.5 0.2 26.7 Other comprehensive income: Translation differences on foreign operations 29.9 29.9 (0.1) 29.8 Translation differences on non-foreign operations (5.3) 0.9 (10.9) (9.0) (24.3) (24.3) Remeasurement of net defined pension liability 6.2 6.2 6.2 Tax on remeasurement of net pension liability (1.5) (1.5) (1.5) Other comprehensive income (5.3) 0.9 (10.9) 25.6 0.0 10.3 (0.1) 10.2 Total comprehensive income for the year (5.3) 0.9 (10.9) 25.6 26.5 36.8 0.1 36.9 Equity as at 31.12.2022 100.3 (23.9) 208.2 72.2 (80.6) 276.2 4.3 280.5 Purchase of treasury shares (3.9) (3.9) (3.9) Cancelation of treasury shares (9.0) 23.0 (14.0) 0.0 0.0 Share-based compensation 1.5 1.5 1.5 Total comprehensive income for the year: Loss for the year (59.5) (59.5) 0.4 (59.1) Other comprehensive income: Translation differences on foreign operations 32.1 32.1 (0.3) 31.8 Translation differences on non-foreign operations (6.7) 1.6 (13.6) (13.6) (32.3) (32.3) Remeasurement of net defined pension liability (0.5) (0.5) (0.5) Tax on remeasurement of net pension liability 0.1 0.1 0.1 Other comprehensive income (6.7) 1.6 (13.6) 18.1 0.0 (0.6) (0.3) (0.9) Total comprehensive income for the year (6.7) 1.6 (13.6) 18.1 (59.5) (60.1) 0.1 (60.0) Equity as at 31.12.2023 84.6 (3.2) 180.6 91.8 (140.1) 213.7 4.4 218.1 Specification of constituent elements of equity: • Share capital: par value for shares in issue • Treasury shares: par value for own shares and premium over par value for own shares • Share premium: premium over par value for shares in issue • Other reserves: translation differences, pre- mium treasury shares, warrants, share options and OCI. • Retained earnings: accumulated retained prof- its and losses. • Non-controlling interests: NCI share in group’s equity. ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE GROUP Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements 65 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 REPORTING ENTITY Kongsberg Automotive ASA (‘the Company’ or ‘the Parent Company’) and its subsidiaries (together the “group”) develop, manufacture, and sell products to the automotive industry worldwide. The Company is a limited liability company incorporated and domiciled in Norway. The address of its registered office is Dyrmyrgata 48, NO-3601 Kongsberg, Norway. The Company is listed on the Oslo Stock Exchange. The group’s consolidated financial statements were authorized for issue by the Board of Directors on March 11, 2024. NOTE 2 STATEMENT OF COMPLIANCE The group’s consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and IFRIC interpretations as endorsed by the EU. NOTE 3 MATERIAL ACCOUNTING POLICIES The principal accounting policies applied in the preparation of these consolidated financial state- ments are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. In addition, the group adopted Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statements 2) from January 1, 2023. The amendments required the disclosure of “material,” rather than “significant,” accounting policies. Although the amendments did not result in any changes to the accounting policies themselves, they might have impacted the accounting policy information disclosed in Note 3 in certain instances. Basis of preparation The consolidated financial statements have been prepared on the historical cost basis except for certain financial instruments that are measured at fair values, as explained in the accounting policies below. Historical cost is generally based on the fair value of the consideration given in exchange for assets. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or liability the group considers the characteristics of the asset or liability if market participants would do so. Fair value for measurement and/or disclosure purposes in these consolidated financial statements is determined on such basis, except for share-based payment transactions that are within the scope of IFRS 2, leasing transactions within the scope of IFRS 16, and measurements that have some similarities to fair value but are not fair value, such as net realizable value in IAS 2 or value-in-use in IAS 36. In addition, for financial reporting purposes, fair value measurements are categorized into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurement are observable and the sig - nificance of the inputs to the fair value measurement in its entirety, which are described as follows: • Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets and liabilities that the entity can access at the measurement date, • Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly, and • Level 3 inputs are unobservable inputs for the asset or liability. Basis of consolidation The consolidated financial statements comprise the financial statements of Kongsberg Automotive ASA and its subsidiaries as of December 31 each year. The financial statements of subsidiaries are prepared for the same reporting periods as the Company, using consistent accounting principles. The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to December 31 each year. Control is achieved when the company: • has the power over the investee, • is exposed, or has rights, to variable returns from its involvement with the investee; and • has the ability to use its power to affect its returns. The company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above. Subsidiaries are fully consolidated from the date of acquisition, being the date on which the par- ent company obtains control directly or indirectly, and continue to be consolidated until the date when such control ceases. All intragroup assets and liabilities, equity, income, expenses, and cash flows relating to transactions between members of the group are eliminated in full. Changes in the parent company’s direct or indirect ownership interests in subsidiaries that do not result in losing control of the subsidiaries are accounted for as equity transactions. The carrying amounts of the controlling interests and non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary. Any difference between the amount by which the ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE GROUP Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements 66 non-controlling interests are adjusted and the fair value of the consideration paid or received is rec- ognized directly in equity and attributed to owners of the parent company. If the parent company loses its direct or indirect control of a subsidiary, the group should recog- nize a gain or loss on the loss of control in the income statement, which is calculated as the difference between (i) the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. All components of the other comprehensive income (OCI) that are attributable to the subsidiary are to be reclassified on the loss of control from the equity to the income statement or directly to retained earnings. Business combinations Business combinations are accounted for using the acquisition method. The consideration trans- ferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the group, liabilities incurred by the group to the former owners of the acquiree and the equity interests issued by the group in exchange for con- trol of the acquiree. Acquisition-related costs are recognized in the income statement as incurred. At the acquisition date, the identifiable assets acquired, and liabilities assumed are recognized at fair value, except as noted below: • Deferred tax assets or liabilities arising from assets acquired and liabilities assumed shall be recognized or measured in accordance with IAS 12, • Liabilities related to the acquiree’s employee benefit arrangements shall be recognized and measured in accordance with IAS 19, • Right-of-use assets and lease liabilities shall be recognized and measured in accordance with IFRS 16, • A liability or an equity instrument related to share-based payment transactions of the acquiree or the replacement of an acquiree’s share-based payment transactions with share-based payment transactions of the acquirer shall be measured in accordance with IFRS 2, and • Assets classified as held for sale and discounted operations are measured in accordance with IFRS 5. Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition date amounts of the identifiable assets acquired and the liabilities assumed. Non-controlling interests that are present ownership interests and entitle their holder to a proportionate share of the entity’s net assets in the event of liquidation may be initially measured at fair value or a non-controlling interests’ proportionate share of the rec- ognized amounts of the acquiree’s identifiable net assets. As of December 31, 2023, there is a non-controlling interest recognized only in one subsidiary. The group has chosen to measure it at the proportionate share of the recognized amounts of the acquiree’s identifiable net assets. Goodwill Goodwill arising from business acquisitions is carried at cost established at the acquisition date, less accumulated impairment losses (if any). For purposes of impairment testing, goodwill is monitored by the Management at the level of each of the group’s cash-generating units (CGUs), which are part of the respective operating seg- ments identified in note 7. A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of goodwill allocated to the unit and then the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognized directly in the income statement and is not reversed in subsequent periods. On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the income statement on disposal. Investments in associates An associate is an entity over which the group has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operat - ing policy decisions of the investee but does not constitute control or joint control over those policies. An investment in an associate is accounted for using the equity method from the date on which the investee becomes an associate or a joint venture. On acquisition of the investment in an associate or a joint venture, any excess of the cost of the investment over the group’s share of the net fair value of the identifiable assets and liabilities of the investee is recognized as goodwill, which is included within the carrying amount of the investment. Under the equity method, an investment in an associate is recognized initially in the consolidated statement of financial position at cost and adjusted thereafter to recognize the group’s share of the profit or loss and other comprehensive income of the associate or joint venture. The statement of profit or loss reflects the group’s share of the results of operations of the associ- ate. The aggregate of the group’s share of profit or loss of an associate and a joint venture is shown on the face of the statement of profit or loss outside operating profit and represents profit or loss after tax and non-controlling interests in the subsidiaries of the associate or joint venture. NOTE 3 MATERIAL ACCOUNTING POLICIES (CONTINUED) ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE GROUP Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements 67 Functional and presentation currency In preparing the financial statements of each individual group entity, transactions in currencies other than the entity’s functional currency are recognized using exchange rates at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are translated at the year-end exchange rates. Non-monetary items carried at fair value that are denominated in foreign currencies are translated using the exchange rates at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. For presentation purposes, the assets and liabilities of the group’s foreign operations are trans- lated into Euro using the exchange rates at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period. Exchange differences arising are recognized in other comprehensive income, accumulated in equity, and attributed to non-controlling interests as appropriate. On the disposal of a foreign operation, all the exchange differences accumulated in equity in respect of that operation attributable to the owners of the parent company are reclassified to the income statement. Goodwill and fair value adjustments to identifiable assets acquired and liabilities assumed through acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated using the exchange rate at the end of each reporting period. Exchange differences arising are recognized in comprehensive income. Exchange differences on monetary items are recognized in the income statement (in financial items) in the period in which they arise except for monetary items receivable from or payable to a foreign oper - ation for which the settlement is neither planned nor likely to occur (therefore forming part of the net investment in the foreign operation). These are recognized initially in other comprehensive income and reclassified from equity to the income statement on the repayment day of the monetary items. The group presents its consolidated financial statements in Euros. The presentation currency of the parent company is Euro, while its functional currency is Norwegian Kroner. The reason for the use of Euros is to enable all amounts in the published financial statements of both the group and the company to be presented in the same currency. All financial information presented in Euro has been rounded to the nearest thousands, except when otherwise indicated. Segment information Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the group’s Executive Committee (led by the CEO). Intangible assets other than goodwill Internally generated intangible assets ‒ research and development expenditure Research expenditures are expensed as incurred. An internally generated intangible asset arising from the development of specific projects is recognized only when all the following criteria can be demonstrated: • the technical feasibility of completing the intangible asset so that it will be available for use or for sale, • the entity’s intention to exercise the right to use or to sell the asset, • the entity’s ability to use or sell the intangible asset, • the entity’s asset will generate probable future economic benefits, • the availability of adequate resources to complete the development and to use or sell the asset, • the entity’s ability to reliably measure the expenditure incurred during its development. The amount initially recognized for the internally generated asset is the sum of expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. Where no internally generated intangible asset can be recognized, development expenditure is recognized in the income statement in the period in which it is incurred. After initial recognition, internally generated intangible assets are reported at cost less accumu- lated amortization and accumulated impairment losses. The amortization period is five years. Software Costs associated with maintaining computer software are expensed as incurred. Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the group are recognized as intangible assets when the abovementioned criteria are demonstrated to be fulfilled. Development expenses that do not meet these criteria are expensed as incurred and are not rec- ognized as an asset in a subsequent accounting period. Software costs are amortized over their estimated useful lives, which shall not exceed three years. Other intangible assets – acquired in a business combination Intangible assets acquired in a business combination and recognized separately from goodwill are initially recognized at their fair value at the acquisition date, which is regarded as their cost. After initial recognition, intangible assets are reported at cost less accumulated amortization and accumulated impairment losses. The useful life of patents is considered to be up to 21 years; the useful life of customer relationships is estimated to be 10 years. NOTE 3 MATERIAL ACCOUNTING POLICIES (CONTINUED) ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE GROUP Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements 68 Property, plant & equipment (PP&E) PP&E are stated at historical cost less accumulated depreciation and impairment losses. The assets are depreciated over their useful economic lives using the straight-line method. Historical costs include expenditures that are directly attributable to the acquisition of the asset and to make the non-current asset available for use. Subsequent costs, such as repair and mainte- nance costs, are expensed when incurred unless increased future economic benefits arise as a result of repair and maintenance work. Such costs are recognized in the Statement of Financial Position as additions to non-current assets. Straight-line depreciation is calculated at the following rates: • Land n/a • Buildings 3–4% • Production machinery and tooling 10–25% • Computer equipment 33% Right-of-use assets and lease liabilities The group leases various manufacturing facilities, offices, warehouses, equipment, and vehicles. Rental contracts are typically made for fixed periods of 6 months to 10 years but may have extension or termination options. Contracts may contain both lease and non-lease components. The group allocates the considera- tion in the contract to the lease and non-lease components based on their relative stand-alone prices. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants other than the security interests in the leased assets that are held by the lessor. The group has applied the practical expedients provided by IFRS 16 to exclude low-value assets and short-term leases (term of up to 12 months). The lease payments associated with these leases are charged to the income statement on a straight-line basis and are reported under cash flow from operating activities in the statement of cash flows. In addition, the expedient to include non-lease components, such as service costs, in the lease calculation has been applied. Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments: • fixed payments (including in-substance fixed payments), less any lease incentives receivable, • variable lease payments that are based on an index or a rate, initially measured using the index or rate as at the commencement date, • amounts expected to be payable by the group under residual value guarantees, • the exercise price of a purchase option if the group is reasonably certain to exercise that option, and • payments of penalties for terminating the lease, if the lease term reflects the group exercising that option. Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability. The lease payments should be discounted using: • the interest rate implicit in the lease; or • if the interest rate implicit in the lease cannot be readily determined, the lessee's incremental bor- rowing rate. The interest rate implicit in the lease is likely to be like the lessee’s incremental borrowing rate in many cases. This is because both rates, as they are defined in IFRS 16, take into account the credit standing of the lessee, the length of the lease, the nature and quality of the collateral provided and the economic environment in which the transaction occurs. Management assessed that the fixed coupon of the bond issued in July 2018, reflected the incremen- tal borrowing rate on a group level and was appropriate for the implementation of the standard. The rate was reassessed and updated in 2022 referencing the risk-free rate adjusted for the group’s credit risk premium and asset risk. The new rate was applied to lease adjustments and newly signed leases. The group is exposed to potential future increases in variable lease payments based on an index or rate, which are not included in the lease liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability is reassessed and adjusted against the right-of-use asset. Lease payments are allocated between principal payments and finance cost. The finance cost is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. For the classification in the statement of cash flow the interest payments on the lease liabilities follow the same principles as other interests. Right-of-use assets are measured at cost comprising the following: • the amount of the initial measurement of lease liability, • any lease payments made at or before the commencement date less any lease incentives received, • any initial direct costs, and • restoration costs. Right-of-use assets are generally depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis. If the group is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset’s useful life. The group assesses its right- of-use assets for impairment after any significant changes in operations as well as on an annual NOTE 3 MATERIAL ACCOUNTING POLICIES (CONTINUED) ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE GROUP Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements 69 NOTE 3 MATERIAL ACCOUNTING POLICIES (CONTINUED) basis. This assessment of individual right-of-use assets for impairment is performed in addition to the group’s overall impairment testing. Payments associated with short-term leases of equipment and vehicles and all leases of low-value assets are recognized on a straight-line basis as an expense in the income statement. Short-term leases are leases with a lease term of 12 months or less. The group uses tooling equipment which is owned by specific customers to produce parts for the customer. Under the new standard, these contracts do not constitute a lease as the group has no authority to direct the use of the equipment. Taxes on leases In most of the jurisdictions in which the group operates, tax deductions are received for lease pay- ments as they are paid, thus the tax base of the right-of-use asset as well as the lease liability is zero at the inception of the lease. Subsequently, as the straight-line depreciation of the assets exceeds the rate at which the debts reduce, a net liability arises resulting in a deductible temporary difference on which a deferred tax asset is recognized if recoverable. Impairment of PP&E, intangible assets (other than goodwill) and right-of-use assets The group tests on each reporting date whether these assets have suffered any impairment as well as if any indication arises, due to changes in circumstances, that the carrying amount is not fully recoverable. The recoverable amount of the asset is determined in order to assess the extent of the impairment loss (if any). When it is not possible to estimate the recoverable amount of an individ - ual asset, the group estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified. The recoverable amount of an asset is the greater of its fair value less costs of disposal and its value-in-use. In assessing value-in-use, the estimated future cash flows are discounted to their present value using a post-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recov - erable amount. An impairment loss is recognized immediately in the income statement. When an impairment loss subsequently reverses, the carrying amount of the asset or cash-generat- ing unit is increased to the revised estimate of its recoverable amount, but so that the increased car- rying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset or cash-generating unit in prior years. Assets held for sale and disposal groups held for sale Non-current assets, or disposal groups comprising assets and liabilities, are classified as held-for- sale if it is highly probable that they will be recovered primarily through sale rather than through continuing use and they are available for immediate sale in their present condition. Such assets, or disposal groups, are generally measured at the lower of their carrying amount and fair value less costs to sell. Once classified as held-for-sale, intangible assets and property, plant and equipment are no longer amortized or depreciated. The restatement of prior year’s balances in the statement of financial position is not required by IFRS 5. Discontinued operation A discontinued operation is a component of the group’s business, that has either been disposed of or is classified as held for sale and • represents a separate major line of business or geographic area of operations; • is part of a single coordinated plan to dispose of a separate major line of business or geographic area of operations; or • is a subsidiary acquired exclusively with a view to resale. Intercompany transactions between continuing and discontinued operations are eliminated against the discontinued operation. Classification as a discontinued operation occurs at the earlier of disposal or when the operation meets the criteria to be classified as held-for-sale. When an operation is classified as a discontinued operation, the comparative statement of com- prehensive income is re-presented as if the operation had been discontinued from the start of the comparative year. Inventories Inventories are stated at the lower of cost and net realizable value. Costs of inventories are deter- mined at standard cost with capitalizable variances being capitalized at balance sheet date. Costs of raw materials comprise purchase price, inbound freight, and import duties. Costs of finished and semi-finished goods include variable production costs and fixed costs allocated on normal capacity. ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE GROUP Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements 70 Interest costs are not included. Net realizable value represents the estimated selling price for inven- tories less all estimated costs of completion and costs necessary to make the sale. Value adjustments are made for obsolete materials and excess stock. Financial instruments Financial assets and financial liabilities are recognized when a group entity becomes party to the contractual provisions of the instrument. Financial assets and liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in the income statement. Financial assets Subsequent measurement All recognized financial assets are subsequently measured at either amortized cost or fair value based on the business model for managing the financial assets and the contractual cash flow charac- teristics of the financial assets. The group holds loans and receivables (including trade receivables and other receivables, bank balances and cash) within the business model that aims to collect the contractual cash flows. Consequently, these assets are subsequently measured at amortized cost using the effective interest method, less any potential impairments. Amortized cost and effective interest method The effective interest method is a method of calculating the amortized cost of a debt instrument and of allocating interest income over the relevant period. Impairment of financial assets The group assesses on a forward-looking basis the expected credit losses associated with its debt instruments carried at amortized cost. For trade receivables the group applies the simplified approach which requires expected lifetime losses to be recognized from initial recognition of the receivables. See note 18 for further details. Derecognition The group derecognizes a financial asset when the contractual rights to the cash flow from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of owner- ship of the asset to another party. Financial liabilities The group recognizes and measures its financial liabilities (including borrowings and trade and other payables) at amortized cost using the effective interest method. The effective interest method is a method of calculating the amortized cost of a debt instrument and allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or dis- counts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition. The group derecognizes financial liabilities when, and only when, the group’s obligations are dis- charged, cancelled, or have expired. The difference between the carrying amount of the financial lia- bility derecognized and the consideration paid and payable is recognized in profit or loss. Taxes payable and deferred taxes The tax expense for the period comprises current and deferred tax. Tax is recognized in the income statement, except to the extent that it relates to items recognized in other comprehensive income or directly in equity. In this case, the tax is also recognized in other comprehensive income or directly in equity, respectively. The current tax payable is based on taxable profit for the year. Taxable profit differs from “profit before tax” because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The group’s current income tax charge is calculated on the basis of the tax laws enacted in the countries in which the company’s subsidiaries operate. Deferred income tax is recognized, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements, using tax rates that have been enacted or substantively enacted by the bal- ance sheet date and are expected to apply when the deferred tax asset is realized, or the deferred tax liability settled. Deferred tax assets are recognized only to the extent that it is probable that future taxable profit will be available, against which the temporary differences can be utilized. Deferred tax positions are netted within the same tax entity. NOTE 3 MATERIAL ACCOUNTING POLICIES (CONTINUED) ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE GROUP Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements 71 Employee benefits ‒ retirement benefit cost and termination benefits Payments to defined contribution retirement benefit plans are recognized as an expense when employees have rendered service entitling them to the contributions. For defined benefit retirement plans, the cost of providing benefits is determined using the pro- jected unit credit method, with actuarial valuations being carried out at the end of each annual reporting period. Remeasurement, comprising actuarial gains and losses, the effect of the changes to the asset ceiling (if applicable), and the return on plan assets (excluding interest), is reflected imme- diately in the statement of financial position with a charge or credit recognized in other comprehen- sive income in the period in which they occur. Remeasurement recognized in other comprehensive income is reflected immediately in retained earnings and will not be reclassified to the income state- ment. Past service cost is recognized in the income statement when the amendment of a plan occurred. Net interest is calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset. Defined benefit costs are categorized as follows: • service cost (including current service cost, past service cost, as well as gains and losses on curtail- ment and settlements), • net interest expense or income on benefit obligations and/or plan assets, • remeasurement, and • administration costs. The group presents the first two components of defined benefit cost in the income statement in the line- item salaries and social expenses. Curtailment gains and losses are accounted for as past service costs. The retirement benefit obligation recognized in the statement of financial position represents the actual deficit or surplus in the group’s defined benefit plans. Any surplus resulting from this calcula- tion is limited to the present value of any economic benefits available in the form of refunds from the plans or reductions in future contributions to the plans. A liability for termination benefits is recognized at the earlier of when the entity can no longer withdraw the offer or the termination benefit or when the entity recognized any related restructur- ing costs. Pension plans in the group The Company and its Norwegian subsidiary Kongsberg Automotive AS have defined benefit and defined contribution pension plans. The plans were changed from defined benefit to defined contri- bution in 2004. The defined benefit plan was continued for employees who had already retired. Defined benefit pension plans also exist in two subsidiaries in Germany (closed pension plans for both German subsidiaries), one subsidiary in France, and one subsidiary in Switzerland. The other subsidiaries have either no pension plan or defined contribution pension plans for employees. The former early-retirement arrangement in Norway was replaced in 2011. Financing of the ear- ly-retirement arrangement is now done by an annual fee, which represents the final cost for the com- panies included. The arrangement is defined as a multi-employer plan and is accounted for as a defined contribution pension plan. Norwegian employees are included in this scheme. The defined contribution plans in Norway have legislative limitations when it comes to maxi- mum salary as a calculation basis for tax-deductibility. Norwegian employees with salaries that exceed this limit will be granted an addition to the pension that includes the salary above the maxi- mum limit. This obligation will only materialize if the person is employed in the Company at the time of retirement. This plan is accounted for as a defined benefit pension plan. In the case of defined contribution plans, the contributions are recognized as expenses in the period in which they occurred. Short-term and other long-term employee benefits A liability is recognized for benefits employees are entitled to in respect of wages and salaries, annual leave, and sick leave for the period the related service is rendered at the undiscounted amount of the benefits expected to be paid in exchange for the service. Liabilities recognized in respect of short-term employee benefits are measured at the undis- counted amount of the benefits expected to be settled before twelve months after the end of the reporting period in exchange for the related service rendered during the financial reporting period. Liabilities recognized in respect of other long-term employee benefits are measured at the present value of the estimated future cash outflow expected to be made by the group in respect of services provided by employees up to the reporting date. Share-based payments Equity-settled share-based payments to employees and others providing services are measured at the fair value of the equity instruments at the grant date. Details regarding the determination of the fair value of equity-settled share-based transactions are set out in note 19. In 2018 a new Long-Term Incentive Plan (LTIP) for management and key employees was imple- mented. The LTI plan for 2021 consists of two equity instruments, (i) Stock Options (SO) and (ii) Restricted Stock Units (RSU). Both instruments are based on a service condition to vest. The SO may be exercised at the earliest three years after the grant date. In addition, the SO is based on a perfor- mance condition, defined as the company’s total shareholder return (TSR) versus a defined peer NOTE 3 MATERIAL ACCOUNTING POLICIES (CONTINUED) ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE GROUP Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements 72 group. Regarding the RSU part, all RSU granted in 2021 vest at the end of 3 years from grant date. There is no obligation for the employer to settle the RSU in cash. The LTI plan for 2023 consists of two equity instruments, Performance Stock Units (PSU) and Restricted Stock Units (RSU). Both instruments are based on a service condition to vest. The PSU may be exercised at the earliest three years after the grant date. In addition, the PSU is based on 3 performance conditions: total shareholder return (TSR) versus a defined peer group, one financial target, and one ESG target. All RSU and PSU vest at the end of 3 years from grant date. There is no obligation for the employer to settle the RSU and/or PSU in cash. Whereas that performance condition has been reflected in the fair value of the SO, the service condition for the RSU must not be considered when determining the fair value of the RSU. Instead, the number of shares expected to vest will be re-estimated on a regular basis. The fair value of the SO as of grant date was determined based on a Monte-Carlo-Simulation. The fair value of RSU was the share price at the grant date. As both instruments are based on a service condition to vest, the expense is recorded on a pro rata basis. In 2020 the Long-Term Incentive Plan was suspended. In 2021 the Long-Term Incentive Plan was granted again as per the approved resolution of the Annual General Meeting 2021. Provisions Provisions are recognized when a) the group has a present obligation (legal or constructive) because of a past event, b) it is probable that the group will be required to settle the obligation and c) the amount of the obligation can be reliably estimated. The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, considering the risks and uncertainties sur- rounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material). When some or all of the economic benefits required to settle a provision are expected to be recov- ered from a third party, a receivable is recognized as an asset if it is virtually certain that reimburse- ment will be received, and the amount of the receivable can be measured reliably. Onerous contracts Present obligations arising under onerous contracts are recognized and measured as provisions. An onerous contract is considered to exist where the group has a contract under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under the contract. Restructuring provisions A restructuring provision is recognized when the group has developed a detailed formal plan for the restructuring and has raised a valid expectation in those affected that it will carry out the restruc- turing by starting to implement the plan or announcing its main features to those affected by it. The measurement of a restructuring provision includes only the direct expenditures arising from the restructuring, which are those amounts that are both necessarily entailed by the restructuring and not associated with the ongoing activities of the entity. Warranties Provisions for expected cost of warranty obligations under local sale of goods legislation are recog- nized at the date of the sale of the relevant products, at management’s best estimate of the expendi- ture required to settle the group’s obligation. Government grants Government grants are not recognised until there is reasonable assurance that the group will comply with the conditions attached to them and that the grants will be received. Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the group with no future related costs are recognised in profit or loss in the period in which they become receivable. Equity instruments An equity instrument is any contract that evidences a residual interest in the assets of the entity after deducting all its liabilities. Equity instruments issued by the Company are recognized at the proceeds received, net of direct issue costs. Repurchase of the Company’s own equity instruments is recognized and deducted directly in equity. No gain or loss is recognized in the income statement on the purchase, sale, issue or cancella- tion of the Company’s own equity instruments. NOTE 3 MATERIAL ACCOUNTING POLICIES (CONTINUED) ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE GROUP Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements 73 Revenue recognition The group is in the business of providing products to the global vehicle industry. In doing so the group provides services covering engineering and tooling, as well as the manufacturing and delivery of automotive parts. Engineering services is development of customized designs in collaboration with the customer. Tooling is the provision of tools such as cutting tools and molds needed in manu- facturing of parts. Tooling can be highly customized or developed to produce standardized products to a wider range of customers. Product parts are the continuous supply of automotive parts such as seat heaters, cables, driver control systems, and fluid transfer systems. Engineering, tooling, and product sales may be contracted in separate agreements (concluded at different points in time) or may be contracted in one agreement. In either case any binding obliga- tion for the customer with respect to parts is created only upon issuance of purchase orders. The group has determined that engineering, tooling, and the delivery of product parts are separate and distinct for the customer and therefore constitute separate performance obligations under IFRS 15, which are fulfilled upon transfer of control. As is normal in the automotive industry, the customer does not guarantee that it will purchase a minimum quantity of parts. The prices agreed in the con- tracts for the single performance obligations are considered to be the stand-alone selling prices and are therefore used for recognizing revenue. Engineering Before manufacturing and sale of automotive parts start, the group normally undertakes application engineering to tailor the design of a part to customer needs. Where the control resulting from the engineering is transferred to the customer, the group recognizes any consideration received from the customer as revenue. The group has determined that the performance obligation from the engineer- ing is satisfied at a point in time and upon transfer of control over the results of the engineering. Transfer of control normally takes place when engineering is complete, and the tooling phase is initi- ated. Consideration received from the customer may be agreed as installments following the pro- gress of the engineering, as a lump sum payment upon completion of the engineering phase or may be explicitly included in the piece price over a certain specific sales volume. Consideration received in advance is deferred and recognized as contract liability. Any consideration to be received through the allocation to the piece price is recognized as revenue and accrued as receivable upon transfer of control to the customer only if the consideration for the engineering is a guaranteed amount. Tooling After the engineering phase, and before manufacturing and sale of automotive parts start, the group manufactures, or has manufactured, the tooling for use in the subsequent production of automotive parts. Where the control of tooling is transferred to the customer, the group recognizes any consider - ation received from the customer as revenue. The group has determined that the tooling performance obligation is satisfied at a point in time and upon finally approved transfer of control over the tooling to the customer. Transfer of control normally takes place in connection with start of production of the automotive parts. Consideration from the customer may be agreed as installments following the manufacturing progress of the tooling, as a lump sum payment upon final approval of the tooling by the customer or may explicitly be included in the piece price. Revenue is recognized at a point in time upon transfer of control and final approval of the tooling by the customer. Consideration received in advance of transfer is deferred and recognized as contract liability. Any consideration to be received through piece price is recognized as revenue and accrued as a receivable upon approval of the tooling by the customer if the consideration for the tooling is a guaranteed amount. Product sales The sale of manufactured automotive products is satisfied upon transfer of control of the automotive products to the customer, which in general is upon delivery to the customer. Each delivery is consid- ered as a performance obligation that is satisfied at a point in time. Variable consideration Revenue will be recognized to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. A few contracts with customers entitle the customer to price reductions after exceeding defined volume thresholds per year. Such variable considerations are estimated based on continuously updated volume projections. As is common industry practice, most of the contracts have variable elements in the form of year- on-year price reductions or staggered rebates. The group has determined that the price reductions reflect the competition in the industry and therefore are not to be considered as a loyalty bonus. Revenue recognition is therefore based on the sales price for each delivery to the customer. NOTE 3 MATERIAL ACCOUNTING POLICIES (CONTINUED) ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE GROUP Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements 74 Warranty obligations Provisions for expected cost of warranty obligations under local sale of goods legislation are recog- nized at the date of the sale of the relevant products, at management's best estimate of the expendi- ture required to settle the group's obligation. As soon as a claim is raised and agreed to by KA, the provision to date is recognized for all sold parts and warranty costs are continued to be recorded on the ongoing sales until the underlying issue is solved. The estimate of warranty-related costs is reviewed and revised quarterly. Incremental contract costs Incremental costs are costs that would not have been incurred had that individual contract not been obtained, e.g., nomination fees. These costs are recognized as an asset if they are expected to be recovered from the customer through the awarded contract. An asset recognized as part of the capitalization of contract costs is amortized on a systematic basis that is consistent with the transfer to the customer of the goods or services to which the asset relates. In case of nomination fees, the recognized amortization for the period shall be presented as a reduction of the external sales and recorded on the appropriate income statement account. NOTE 4 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS In application of its accounting policies the group is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities which are not readily available from other sources. The estimates and judgments are based on historical experience and other fac- tors, including expectations of future events that are deemed to be reasonable under the circum- stances. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. Critical judgments in applying accounting policies The following are the critical judgments that the group has made in the process of applying the group’s accounting policies and that have the most significant effect on the amounts recognized in the financial statements. Lease extension and termination options The group has a number of leases with options to terminate early or extend the term of the lease. When determining the lease liability of the group, the following principles were applied to options. No leases will be terminated early as the leases are necessary for regular operations of the group unless there are clear indications otherwise. All extension options on buildings and equip- ment used in production, sales and engineering have been included in the lease liability as these are core operations which require significant investment to move and are therefore reasonably certain to be kept in use for as long as possible under current conditions, unless there are clear indications otherwise. Leases used in administrative and supporting functions were determined to be more flexible and were therefore individually assessed by management to determine if they met the reasonably certain criteria. Incremental borrowing rate used to discount the lease payments More than 90% of the value of right-of-use assets relate to buildings. As any lease building by any subsidiary (lessee) requires a guarantee from the group, the credit standing of any lessee does not exceed the group’s credit standing. In addition, considering the average of the remaining lease term of all leases, the fixed coupon of the bond issued in 2018 was assessed to properly reflect the incremental borrowing rate at the group level at the date of initial application of the IFRS 16 standard. NOTE 3 MATERIAL ACCOUNTING POLICIES (CONTINUED) ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE GROUP Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements 75 Consolidation of SPE On 25 September 2020, the Company entered into an accounts receivable securitization program (the “Program”) where trade receivables generated by the Company’s subsidiaries in the United States, Canada, Slovakia and Poland were sold to Kongsberg Automotive Finance B.V., a special purpose entity domiciled and incorporated in the Netherlands (the “SPE”). As sales of the Company’s products to cus - tomers occurred, trade receivables were sold to the SPE at an agreed upon purchase price. Part of the con- sideration was received upfront in cash and part was deferred in the form of senior subordinated and junior subordinated loans notes issued by the SPE to the Parent Company and Kongsberg Automotive AS. In determining whether to consolidate the SPE, the Company has evaluated whether it has control over the SPE, in particular, whether it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Receivables are sold to the SPE under a true sale opinion with legal interest transferred from the selling subsidiaries to the SPE. While the sale of receivables to the SPE is without credit recourse, the Company continues to be exposed to the variable returns from its involvement in the SPE as it is exposed to credit risk as a subordinated lender to the SPE and it earns a variable amount of remuner- ation as master servicer of the receivables, as well as any excess return from additional service fee, including the loss or gain due to the effect of foreign exchange rates. As master servicer, the company is responsible for the cash collection and management of any impaired receivables. Therefore, the Company is considered to have control over the SPE as it is exposed to variable returns and has the ability to affect those returns through its power over the investee. As a result of consolidating the SPE, the trade receivables purchased by the SPE are included in the Company’s consolidated statement of financial position, along with loans (see Note 22) and cash held by the SPE. Key sources of estimation uncertainty The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. Impairment Determining whether goodwill and other assets are impaired requires an estimation of the value-in- use of the cash-generating units to which these assets have been allocated. The value-in-use calcula- tion requires the group to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. Where the actual future cash flows are less than expected, a material impairment loss may arise. The cash-generating units in the group are the business units (Powertrain and Chassis segment: Driveline, On-Highway and Headrest; Specialty Products segment: Fluid Control System (consisting of Fluid Transfer System and Couplings), and Off-Highway). The forecasts of future cash flows are based on the group’s best estimates of future revenues and expenses for the cash-generating units to which these assets have been allocated. Various assumptions and estimates can have significant effects on these calculations and include parameters such as macroeconomic assumptions, market growth, business volumes, margins, and cost effectiveness. Changes to any of these parameters, fol- lowing changes in the market conditions, competition, strategy or other factors, affect the forecasted cash flows and may result in impairment. The carrying amount of goodwill as at December 31, 2023 was MEUR 70.7 (2022: MEUR 72.6). No impairment losses were recognized in 2022. In 2023 impairment losses on other assets than the goodwill of MEUR 27.0 were recognized. Details of the impairment test are set out in note 16. Climate change Kongsberg Automotive faces both climate change-related risks and opportunities arising from cli- mate change itself and from actions taken in climate change mitigation. These are embedded in the Company’s risk management and business strategy. The financial implications of risks of climate change can be classified into two types of risks: physical risks and transition risks. Physical risks are related to the increase and severity of extreme weather and long-term climate changes. Transition risks are related to decarbonization including new technological advances and requirements imposed by regulators or public opinion. Both are considered in the company’s risk assessment as part of the annual budget process and in impairment testing at year end. There is still significant uncertainty about the future financial impact of climate risks and opportunities. During the budget process, several scenarios are considered, and the best estimate is included in the assumptions for the final budget. In addition to the annual assessment, climate change governance is embedded in the group’s structure with operational and strategic climate change issues raised being reviewed regularly by the designated bodies. As at the year-end 2023, climate risk changes have not resulted in adjustments to the useful lives of long-term assets. Further, climate-related risk considerations have not resulted in adjustments of the carrying amounts of assets or liabilities. NOTE 4 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS (CONTINUED) ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE GROUP Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements 76 NOTE 5 NEW STANDARDS AND INTERPRETATIONS New and amended standards and interpretations The group applied for the first-time certain amendments to the standards, which are effective for annual periods beginning on or after January 1, 2023. The group has not chosen to adopt any stand- ards, interpretations or amendments early that have been issued but are not yet effective. New and amended IFRS Standards that are effective for the current year The adoption of the following standards and interpretations has not had any material impact on the disclosures or on the amounts reported in these financial statements: • IFRS 17 Insurance Contracts and Amendments to IFRS 17 • Amendments to IAS 8 – Definition of Accounting Estimates • Amendments to IAS 12 – International Tax Reform – Pillar Two Model Rules • Amendments to IAS 12 – Deferred tax related to assets and liabilities arising from a single transaction • Amendments to IAS 1 and IFRS Practice Statement 2 – Disclosure of Accounting Policies New and amended standards and interpretations not yet adopted At the date of the authorization of these financial statements, the group has not applied the follow- ing new and revised IFRS Standards that have been issued but are not yet effective: • Amendments to IAS 1 – Classification of liabilities as current or non-current (effective from January 1, 2024) • Amendments to IAS 1– Non-Current Liabilities with Covenants (effective from January 1, 2024) • Amendment to IFRS 16 – Lease liability in a Sale and Leaseback (effective from January 1, 2024) • Amendments to IAS 7 and IFRS 7 – Supplier Finance Arrangements (effective from January 1, 2024) • Amendments to IAS 21 – Lack of Exchangeability (effective from January 1, 2025) • Amendments to IFRS 10 and IAS 28 – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (optional) The group does not expect that the adoption of the standards listed above will have a material impact on the financial statements of the group in future periods. ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE GROUP Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements 77 NOTE 6 SUBSIDIARIES CONSOLI-OWNED COUNTRY OF OWNER-DATION BY ENTITY NAME INCOR PORA TIONSHIPMETHODCOMPANYKongsberg Automotive Ltda Brazil 100% Full XKongsberg Inc Canada 100% FullKongsberg Automotive (Wuxi) Ltd China 100% Full XShanghai Kongsberg Automotive China 75% FullDong Feng Morse Co LtdKongsberg Automotive SARL France 100% Full XKongsberg Driveline Systems SAS France 100% FullKongsberg Raufoss Distribution SAS France 100% FullSCI Immobilière La Clusienne France 100% FullKongsberg 1 GmbH Germany 100% FullKongsberg Actuation Systems GmbH Germany 100% FullKongsberg Automotive GmbH Germany 100% FullKongsberg Driveline Systems GmbH Germany 100% FullKongsberg Actuation Systems LtdGreat Britain100% FullKongsberg Automotive LtdGreat Britain100% FullCTEX Seat Comfort (Holding) Ltd Great Britain100% Full XKongsberg Power Products Systems LtdGreat Britain100% FullKongsberg Automotive Hong Kong Ltd Hong Kong 100% FullKongsberg Automotive (India) Private Ltd India 100% Full XKongsberg Automotive Driveline System India Ltd India 100% Full XKongsberg Automotive Technology Center India 100% FullIndia Private LtdKongsberg Automotive Japan KK Japan 100% Full XKongsberg Automotive Ltd Korea 100% Full XKongsberg Driveline Systems S. de RL de CV Mexico 100% FullKongsberg Fluid Transfer Systems, S. de R.L. de CVMexico 100% FullKongsberg Actuation Systems BV Netherlands 100% Full * Non-controlling interest refers to the 25% not owned of Shanghai Kongsberg Automotive Dong Feng Morse Co Ltd ** Special Purpose Entity (the "SPE") – consolidation is based on the assessment of control according to IFRS 10 (for further information see note 4) CONSOLI-OWNED COUNTRY OF OWNER-DATION BY ENTITY NAME INCOR PORA TIONSHIPMETHODCOMPANYKongsberg Automotive AS Norway 100% FullKongsberg Automotive Holding 2 AS Norway 100% Full XKongsberg Automotive Sp. z.o.o Poland 100% FullKongsberg Automotive s.r.o Slovakia 100% FullKongsberg Actuation Systems SL Spain 100% FullKongsberg Automotive AB Sweden 100% FullKongsberg Power Products Systems AB Sweden 100% FullKA group AG Switzerland 100% FullKongsberg Driveline Systems I LLC. US 100% FullKongsberg Actuation Systems II LLC. US 100% FullKongsberg Holding III Inc. US 100% FullKongsberg Automotive Inc. US 100% FullKongsberg Power Products Systems I LLC. US 100% FullKongsberg Automotive Finance BV Netherlands 100% FullChassis Autonomy AB Sweden 20% EquitySkriverform AS Norway 100% At costEntities divested / liquidated in 2022 & 2023:Liquidated Kongsberg Automotive (Shanghai) Co Ltd China 100%in 2023Divested Shanghai Lone Star Cable Co Ltd China 100%in 2022Divested Kongsberg Interior Systems Kft Hungary 100%in 2022Divested Kongsberg Automotive S. de RL de CV Mexico 100%in 2022Divested Kongsberg Interior Systems S. de RL de CV Mexico 100%in 2022Divested Kongsberg Interior Systems II LLC. US 100%in 2022 ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE GROUP Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements 78 NOTE 7 SEGMENT INFORMATION Operating segments As of December 31, 2023, the group has two reportable segments, which are the strategic business segments: Powertrain & Chassis and Specialty Products. Following the sale of the Interior Products segment in 2022, this segment did not exist in the financial year ended on December 31, 2023 (please refer to note 12). The strategic business areas (segments) offer different products and services and are managed separately because they require different technology and marketing strategies. The group’s risks and rates of return are affected predominantly by differences in the products manufactured. The seg- ments have different risk profiles in the short-term perspective, but over a long-term perspective the profiles are considered to be the same. The group’s Executive Committee (led by the CEO) reviews the internal management reports from all strategic business areas on a monthly basis. Information regarding the results of each reportable segment is included below. Performance is measured by EBITDA and EBIT as included in the internal management reports issued on a monthly basis. Segment EBIT is used to measure performance as management believes that such information is the most relevant in evaluating the results of the segments (also relative to other entities that operate within these industries). Sales transactions and cost allocations between the business units are based on the arm’s length principle. The results for each segment and the capital allocation elements comprise both items that are directly related to and recorded within the segment, as well as items that are allocated based on reasonable allocation keys. The following summary describes the operations of each of the group’s reportable segments: Powertrain & Chassis Powertrain & Chassis is a global Tier 1 supplier of driver control and driveline products to the passen- ger and commercial vehicle automotive markets. The portfolio includes custom-engineered cable controls and complete shift systems, clutch actuation systems, vehicle dynamics, shift cables, and shift towers for transmissions. Specialty Products The Specialty Products segment designs and manufactures fluid handling systems for both the auto- motive and commercial vehicle markets, coupling systems for compressed-air circuits in heavy-duty vehicles, agriculture, outdoor power equipment and power electronics products. ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE GROUP Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements 79 2023POWER- TRAIN & SPECIALTY TOTAL MEURCHASSISPRODUCTSOTHERSGROUPProduct sales 481.1 389.0 0.0 870.1 Tooling 3.3 4.6 0.0 7.9 Engineering 4.4 2.5 0.0 6.9Operating revenues 488.8 396.1 0.0 884.9 EBITDA (3.6) 47.4 (30.6) 13.2Depreciation (17.2) (13.3) (1.4) (31.9)Amortization (0.7) (0.3) 0.0 (1.0)Operating profit / (loss) (EBIT) (21.5) 33.8 (32.0) (19.7)Impairment losses, thereof: (27.0) 0.0 0.0 (27.0)‐ allocated to assets other than Goodwill (27.0) 0.0 0.0 (27.0)Timing of revenue recognitionPerformance obligations satisfied 488.8 396.1 0.0 884.9 at a point in time NOTE 7 SEGMENT INFORMATION (CONTINUED) * The column “Others” mainly includes corporate expenses and balance sheet items related to tax, pension, and financing. See next section for specification of unallocated assets and liabilities. For segment reporting purposes, the revenues are only external revenues; the related expenses are adjusted accordingly. The EBIT thus excludes IC profit. 2023POWER- TRAIN & SPECIALTY TOTAL MEURCHASSISPRODUCTSOTHERSGROUPAssets and liabilitiesGoodwill 16.2 54.5 0.0 70.7Other intangible assets 4.8 2.7 0.1 7.6 Property, plant and equipment 46.2 68.7 0.9 115.8 Right-of-use assets 16.7 33.2 5.1 55.0 Inventories 43.7 57.8 0.0 101.5 Trade receivables 95.8 65.5 0.2 161.5 Other assets 0.5 4.1 0.0 4.6 Segment assets 223.9 286.5 6.3 516.7 Unallocated assets 204.8 204.8Total assets 223.9 286.5 211.1 721.5 Trade payables 62.8 49.8 4.0 116.6 Accrued expenses 34.8 14.3 6.4 55.5Provisions 8.9 0.5 7.8 17.2Non-current lease liabilities 26.2 34.9 4.3 65.4Current lease liabilities 5.8 2.7 1.7 10.2Segment liabilities 138.5 102.2 24.2 264.9Unallocated liabilities 238.5 238.5Total liabilities 138.5 102.2 262.7 503.4Total equity 218.1 218.1Total equity and liabilities 138.5 102.2 480.8 721.5Capital expenditure (12.2) (16.1) (0.2) (28.5) ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE GROUP Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements 80 2022POWER-INTERIOR TRAIN & SPECIALTY TOTAL MEURPRODUCTSCHASSISPRODUCTSOTHERSGROUPProduct sales 62.0 457.2 437.5 0.0 956.7 Tooling 1.1 6.0 5.6 0.0 12.7 Engineering 0.7 2.8 2.1 0.0 5.6 Operating revenues 63.8 466.0 445.2 0.0 975.0 Revenues from discontinued operation 63.8 0.0 5.6 0.0 69.4 Revenues from continuing operations 0.0 466.0 439.6 0.0 905.6 EBITDA 16.3 31.4 100.1 (33.1) 114.7 Depreciation (0.2) (17.4) (13.8) (1.8) (33.2)Amortization 0.0 (1.3) (0.6) 0.0 (1.9)Operating profit / (loss) - EBIT 16.1 12.7 85.7 (34.9) 79.6 Operating (loss) / profit (EBIT) 15.7 0.0 0.8 0.0 16.5 from discontinued operationOperating (loss) / profit (EBIT) 0.4 12.7 84.9 (34.9) 63.1 from continuing operationsTiming of revenue recognitionPerformance obligations satisfied 0.0 466.0 439.6 0.0 905.6 at a point in time NOTE 7 SEGMENT INFORMATION (CONTINUED) * The column “Others” mainly includes corporate expenses and balance sheet items related to tax, pension, and financing. See next section for specification of unallocated assets and liabilities. For segment reporting purposes, the revenues are only external revenues; the related expenses are adjusted accordingly. The EBIT thus excludes IC profit. 2022POWER-INTERIOR TRAIN & SPECIALTY TOTAL MEURPRODUCTSCHASSISPRODUCTSOTHERSGROUPAssets and liabilitiesGoodwill 0.0 16.7 55.9 0.0 72.6 Other intangible assets 0.0 4.5 1.5 0.1 6.1 Property, plant and equipment 0.0 66.5 65.6 1.5 133.6 Right-of-use assets 0.0 30.1 26.5 4.1 60.7 Inventories 0.0 39.8 56.7 0.0 96.5 Trade receivables 1.2 104.0 60.6 0.7 166.5 Other assets 0.0 0.6 4.9 0.0 5.5 Segment assets 1.2 262.2 271.7 6.4 541.5 Unallocated assets 256.4 256.4 Total assets 1.2 262.2 271.7 262.8 797.9 Trade payables 2.3 60.8 49.4 9.5 122.0 Accrued expenses 4.1 33.5 12.2 4.7 54.5Provisions 5.3 4.5 0.4 0.3 10.5Non-current lease liabilities 0.0 30.3 26.9 3.2 60.4Current lease liabilities 0.0 5.8 2.3 1.2 9.3Segment liabilities 11.7 134.9 91.2 18.9 256.7Unallocated liabilities 260.7 260.7Total liabilities 11.7 134.9 91.2 279.6 517.4Total equity 280.5 280.5Total equity and liabilities 11.7 134.9 91.2 560.1 797.9Capital expenditure (2.5) (12.3) (14.0) (0.1) (28.9) ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE GROUP Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements 81 MEUR 2023 2022Segment assets of reportable segments 510.4 535.1 Assets of segment Other 6.3 6.4 Unallocated assets include:Deferred tax assets 11.4 14.3 Investments accounted for using the equity method 2.1 0.0 Other non-current assets 1.6 0.8 Cash and cash equivalents 164.7 212.9 Other current receivables 25.0 28.4 Total assets of the group 721.5 797.9 MEUR 2023 2022Trade payables of reportable segments 112.6 112.5 Non-current lease liabilities of reportable segments 61.1 57.2 Accrued expenses of reportable segments 49.1 49.8Provisions of reportable segments 9.4 0.2Current lease liabilities of reportable segments 8.5 8.1 Liabilities of segment Other 24.2 18.9 Unallocated liabilities include:Deferred tax liabilities 21.0 24.2 Retirement benefit obligations 12.0 12.5 Interest-bearing loans and borrowings 189.3 197.9 Other non-current interest-free liabilities 3.7 8.0 Current income tax liabilities 4.2 7.8 Other short term liabilities 8.3 10.3 Total liabilities of the group 503.4 517.4 NOTE 7 SEGMENT INFORMATION (CONTINUED) Operating segments – reconciliation to total assets Operating segments – reconciliation to total liabilities ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE GROUP Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements 82 Operating segments – geographical areas The following segmentation of the group’s geographical sales to external customers is based on the geographical locations of the cus- tomers. The segmentation of non-current assets is based on the geographical locations of its subsidiaries. Non-current assets comprise intangible assets (including goodwill), right-of-use assets and property, plant, and equipment. Sales to external customers by geographical location MEUR 2023 % 2022 %Europe 406.3 46% 364.4 40%North America 297.5 34% 309.7 34%South America 45.4 5% 80.3 9%Asia 129.5 15% 146.9 16%Other 6.2 0% 4.3 1%Revenues from continuing operations 884.9 905.6Revenues from discontinued operation 0.0 69.4Total operating revenues 884.9 975.0 MEUR 2023 % 2022 %Europe 147.4 59% 152.5 56%North America 80.4 32% 88.9 33%South America 2.1 1% 2.9 1%Asia 19.2 8% 28.7 10%Total Intangible assets, PP&E and RoU 249.1 273.0 NOTE 7 SEGMENT INFORMATION (CONTINUED) Intangible assets, PP&E, and RoU by geographical location Major customers Included are revenues from continuing operations of MEUR 97.5 in 2023 (2022: MEUR 74.7) which arose from sales to the group’s largest customer. NO single customers contributed 10% or more each to the group’s revenues in 2023. ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE GROUP Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements 83 MEUR 2023 2022Wages and salaries 179.0 178.2 Social security tax 39.6 28.5 Severance payments 8.0 0.0 Pension cost, defined benefit plans (0.2) 1.2 Pension cost, defined contribution plans 7.6 9.0 Other employee-related expenses 31.0 36.8 Government support - wages and salaries (0.1) (0.4)Total salaries and social expenses 264.9 253.3 MEUR 2023 2022Gain on external sale of non-current assets 0.8 0.0 Gain on sale of major operations 0.0 44.1Corporate service income 0.7 3.1 Total other income 1.5 44.2 NOTE 8 SALARIES AND SOCIAL EXPENSES Specification of salaries and social expenses as recognized in the statement of comprehensive income NOTE 9 OTHER INCOME AND OTHER OPERATING EXPENSES Specification of other income as recognized in the statement of comprehensive income Other employee-related expenses include bonus costs. As of December 31, 2023, the group had 5,286 employees, while as of December 31, 2022, the number of employees was 5,270. Gain on sale of major operations - divestment of Powersport business On August 8, 2022, Kongsberg Automotive (KA) and BRP entered into a sale and purchase agreement to sell part of the Shawinigan plant of KA’s Off-Highway business for a total enterprise value of MCAD 136.0 (MEUR 104.0). However, this transaction does not fulfill the requirements to be pre- sented as a discontinued operation. On October 3, 2022, Kongsberg Automotive (KA) successfully completed the sale of a part of the Shawinigan plant of KA’s Off-Highway business to BRP for a total enterprise value of MCAD 136.0 (MEUR 104.0). Based on the final purchase price proceeds, the gain before tax on this sale transaction amounted to MEUR 41.1. Corporate service income After the completion of the sale transactions of the Interior segment (see note 12) and the sale of part of the Shawinigan plant of Off-Highway business (see above), Kongsberg Automotive and the Buyer Parties have entered into the Transition Services Agreements in which the Buyer Parties expressed the need to obtain the use of certain services from Kongsberg Automotive for a transition period after the completion of the sale transactions to effectuate an orderly transition of the operations and permit the Buyer Parties the opportunity to obtain alternative sources to provide such services after the transition period. Main services to be provided by Kongsberg Automotive were: (1) ERP support and hosting, (2) IT infrastructure and security support, (3) Finance services, (4) HR Payroll services and other services. For the provision of those services the Buyer Parties were obliged to pay all fees in full on the terms provided under the Transition Services Agreements. ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE GROUP Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements 84 NOTE 10 FINANCIAL ITEMS Specification of financial items as recognized in the statement of comprehensive income MEUR 2023 2022Change in fair value of cash equivalents 2.8 0.6 Foreign currency gains * 0.0 2.4 Interest income 1.9 1.1 IFRS 16 interest income 0.1 0.4 Other financial income 0.0 0.5 Total financial income 4.8 5.0 Interest expense (10.8) (12.0)IFRS 16 interest expense (4.3) (4.6)Foreign currency losses * (13.3) 0.0 Account receivables securitization – expense (0.9) (1.0)Other financial expenses (1.5) (4.2)Total financial expenses (30.8) (21.8)Total financial items (26.0) (16.8) * Includes realized currency loss of MEUR 7.6 and unrealized currency loss of MEUR 5.7 (2022: realized currency gain of MEUR 2.8 and unrealized currency loss of MEUR 0.4) Specification of other operating expenses as recognized in the statement of comprehensive income MEUR 2023 2022Operating expensesFreight, packaging and customs duties charges 42.4 46.3 Facility costs 14.0 13.4 Consumables 21.2 24.8 Repairs and maintenance 14.0 14.2 Service costs / external services 9.0 7.5 Other costs 14.8 13.0 Government support - rent and other costs 0.0 (0.3)Administrative expensesUtilities 3.0 1.8 Service costs / external services 21.3 28.4 Consumables 5.6 4.9 Travel costs 2.4 1.9 Other costs 8.7 9.5 Total other operating expenses 156.4 165.4 NOTE 9 OTHER INCOME AND OTHER OPERATING EXPENSES (CONTINUED) ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE GROUP Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements 85 NOTE 11 TAXES Tax recognized in statement of income The major components of income tax expense: Reconciliation of Norwegian nominal statutory tax rate to effective tax rate MEUR 2023 2022Current tax on profits for the year (8.7) (19.3)Adjustments in respect of prior years / current tax (3.5) 7.0 Total current tax (12.2) (12.3)Current year change in deferred tax (2.3) (14.3)Impact of changes in tax rates 0.2 (0.3)Adjustments in respect of prior years / deferred tax 0.9 1.4 Total change in deferred tax (1.2) (13.2)Total income tax (expense) / credit (13.4) (25.5) MEUR 2023 2022Tax on pension remeasurement 0.1 (1.5) Tax in other comprehensive income 0.1 (1.5) MEUR 2023 2022Profit / (loss) before taxes 45.7 46.3 Expected tax calculated at Norwegian tax rate 10.0 (10.0)Other permanent differences / currency 0.9 3.6 Effect of withholding tax (1.4) (3.4)Foreign tax rate differential (2.1) (1.8)Impact of changes in tax rates and legislation 0.2 (0.3)Losses not recognized as deferred tax assets (6.9) (11.9)Write down of deferred tax assets (11.2) (5.5)Adjustments in respect of prior years and other adjustments (2.9) 3.8 Income tax (expense) / credit (13.4) (25.5)Average effective tax rate -29% 55% * Includes withholding tax. Further details can be found in table below. Tax recognized in other comprehensive income ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE GROUP Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements 86 NOTE 11 TAXES (CONTINUED) MEUR 2023 2022Current income tax receivables 1.9 2.7 Current income tax liabilities (4.2) (7.8)Total (2.3) (5.1) Tax recognized in the statement of financial position Current income tax Included under “Trade and other receivables”. MEUR 2023 2022Deferred tax assets 11.4 14.8 Deferred tax liabilities (21.0) (24.7)Total (9.6) (9.9) Deferred tax Due to Norwegian group contribution, there is a reclassification between current tax and deferred tax of MEUR 3.6. ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE GROUP Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements 87 NOTE 11 TAXES (CONTINUED) Specification of deferred tax assets / (liabilities) recognized in the statement of financial position 2023FX DIFF AND RECLASSIFI-CATION DUE TO GROUP OPENING CHARGED CHANGES CONTRIBU-CLOSING MEURBALANCETO INCOMEIN R ATE OCITION BALANCEProperty, plant 1.3 (3.3) 0.0 0.0 0.0 (2.0) and equipmentIntangible assets (11.6) (2.0) 0.0 0.0 8.2 (5.4)Leases 1.4 0.1 0.0 0.0 0.0 1.5 Retirement benefits 1.4 (0.1) 0.0 0.1 0.0 1.4 obligationsLosses carried forward 9.9 (4.9) 0.0 0.0 (0.2) 4.8 Trade receivables 2.5 0.8 0.0 0.0 (0.1) 3.2 Accrued expenses 4.2 3.0 0.0 0.0 (0.1) 7.1 Accrued interest 1.2 (1.2) 0.0 0.0 0.0 0.0 Unrealized exchange differences on long-term (27.2) (0.5) 0.0 0.0 1.7 (26.0)receivables / payablesOther temporary differences7.0 6.7 0.2 0.0 (8.1) 5.8 Net deferred tax assets / (9.9) (1.4) 0.2 0.1 1.4 (9.6)(liabilities) 2022FX DIFF AND RECLASSIFI-CATION DUE TO GROUP OPENING CHARGED CHANGES CONTRIBU-CLOSING MEURBALANCETO INCOMEIN R ATE OCITION BALANCEProperty, plant (2.3) 2.6 0.1 0.0 0.9 1.3 and equipmentIntangible assets (6.2) (5.3) 0.1 0.0 (0.2) (11.6)Leases 1.9 (0.5) 0.0 0.0 0.0 1.4 Retirement benefits 3.5 0.6 0.0 (1.5) (1.2) 1.4 obligationsLosses carried forward 8.0 7.8 (0.3) 0.0 (5.6) 9.9 Trade receivables 4.5 (1.9) 0.0 0.0 (0.1) 2.5 Accrued expenses 3.6 0.3 0.0 0.0 0.3 4.2 Accrued interest 1.6 (0.5) (0.1) 0.0 0.2 1.2 Unrealized exchange differences on long-term (22.7) (5.8) 0.0 0.0 1.3 (27.2)receivables / payablesOther temporary differences 12.4 (5.1) (0.1) 0.0 (0.2) 7.0 Net deferred tax assets / 4.3 (7.8) (0.3) (1.5) (4.6) (9.9)(liabilities) ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE GROUP Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements 88 Tax positions not recognized NOTE 11 TAXES (CONTINUED) Remaining lifetime of tax losses (gross tax value) MEUR 2023 2022Tax positions not recognized 41.8 34.9 Total 41.8 34.9 MEUR 2023 2022Less than five years 19.6 5.6 5 - 10 years 7.9 16.3 10 - 15 years 0.0 0.0 Without time limit 19.0 24.0 Total 46.5 45.9 Measurement of deferred taxes Deferred tax assets and liabilities are measured at the tax rates enacted. Limitation and assumptions for the utilization of losses carried forward and deferred tax assets The carrying amount of deferred tax assets is reviewed at each balance sheet date and recognized for unused tax losses and unused tax credits to the extent that future taxable profit will be available against which the unused tax losses and unused tax credits can be utilized. As part of the review, the group conducts comprehensive analyses of future profits within the legal entity as well as consider- ing possibilities for utilization within the group. As at the year-end, the estimates indicated that tax losses at MEUR 41.8 will not be deductible within the foreseeable future, resulting from a change of tax positions not recognized of MEUR 6.9 in the current year. OECD Pillar Two model rules The parent company Kongsberg Automotive ASA is incorporated in Norway, which has enacted the Pillar Two income taxes legislation in January 2024. The legislation is only effective from January 1, 2024, so there is no current tax impact for the fiscal year 2023. Under the new legislation, the parent company will be required to pay top-up tax in Norway on profits of its subsidiaries that are taxed at an effective tax rate of less than 15 per cent. The group is in the process of assessing its exposure to the Pillar Two legislation for the upcoming years. Based on the assessment to date, the group does not expect the impact of the Pillar Two legislation to be material to its consolidated financial statements. The temporary exception issued by the IASB in May 2023 from the accounting requirements for deferred taxes in IAS 12 is applied. Accordingly, the group neither recognizes nor discloses informa- tion about deferred tax assets or liabilities related to Pillar Two income taxes. Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements 89 ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE GROUP NOTE 12 DISCONTINUED OPERATION & ASSETS AND LIABILITIES OF DISPOSAL GROUP CLASSIFIED AS HELD FOR SALE Description Divesture of ICS and LDC businesses On October 28, 2021, two separate Sale and Purchase Agreements were signed to sell the Interior Comfort System business and the Light Duty Cable business with the cable-related part of Off- Highway business. As these businesses represent a separate major line of Kongsberg Automotive Group, they are presented as discontinued operation. On February 28, 2022, Kongsberg Automotive has successfully completed the sale of its Interior Comfort Systems (ICS) business unit to Lear Corporation for an enterprise value of MEUR 175.0. Proceeds from the true-up were received in October 2022. On April 6, 2022, Kongsberg Automotive has successfully completed the sale of its Light Duty Cable (LDC) business unit to Suprajit Engineering Limited for an enterprise value of MEUR 37.7. As of December 31, 2022, the LDC sale transaction to Suprajit was not yet fully concluded. The 2022 net profit from discontinued operation of MEUR 5.9 contains the gain before tax and realization of historical translation differences on the ICS and LDC sale of MEUR 28.5. Tax expense in 2022 was impacted by the valuation allowance on losses not usable in discontinued business. The profit from the discontinued operation is attributable entirely to the owners of the Company. INTERIOR COMFORT LIGHT DUTY MEURSYSTEMCABLE 2022Operating revenues 48.1 21.3 69.4Other income 29.2 (0.7) 28.5Operating expensesRaw material expenses (2.0) 0.7 (1.3)Change in inventories (25.1) (10.8) (35.9)Salaries and social expenses (13.5) (6.7) (20.2)Other operating expenses (15.0) (8.8) (23.8)Depreciation (0.2) 0.0 (0.2)Amortization 0.0 0.0 0.0Total operating expenses (55.8) (25.6) (81.4)Operating profit / (loss) 21.5 (5.0) 16.5Financial itemsFinancial income 2.2Financial expenses (0.4)Net financial items 1.8Profit before taxes 18.3Income taxes (12.4)Net profit from discontinued operation 5.9Translation differences on foreign operations (discontinued operation)Basic earnings per share, Euros 0.01Diluted earnings per share, Euros 0.01 Results of discontinued operation * includes the cable-related part of the Off-Highway business. ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE GROUP Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements 90 Cash flows from discontinued operation INTERIOR COMFORT LIGHT DUTY MEURSYSTEMCABLE 2022Net cash flow from (used by) operating activities 45.8 (7.9) 37.9 Net cash flow from investing activities 128.2 35.8 164.0 Net cash flow used by financing activities (1.3) (0.5) (1.8)Net cash flows for the year 172.7 27.4 200.1 NOTE 12 DISCONTINUED OPERATION & ASSETS AND LIABILITIES OF DISPOSAL GROUP CLASSIFIED AS HELD FOR SALE (CONTINUED) * includes the cable-related part of the Off-Highway business. Details of the sale of the Interior segment INTERIOR COMFORT LIGHT DUTY MEURSYSTEMCABLE 2022Consideration received 170.2 37.1 207.3 Enterprise value of the sold companies (5.6) (37.8) (43.4)Goodwill (3.3) 0.0 (3.3)Fixed assets (95.6) 0.0 (95.6)Inventory (28.8) 0.0 (28.8)Other net working capital (7.8) 0.0 (7.8)Carrying amount of net assets sold (141.0) (37.8) (178.8)Gain / (loss) on sale before income tax and 29.2 (0.7) 28.5realisation of historical translation differencesIncome tax expense on gain (7.3) (0.9) (8.2)Realisation of historical translation differences 1.4 1.2 2.6 Gain / (loss) on sale after income tax and 23.3 (0.4) 22.9realisation of historical translation differences * includes the cable-related part of the Off-Highway business. ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE GROUP Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements 91 NOTE 13 INTANGIBLE ASSETS PATENTS CUSTOMER AND SOFT-RELATION-DEVELOP-WARE AND MEUR GOODWILLSHIPSMENTOTHER TOTALAcquisition costs 112.0 73.7 52.2 12.6 250.5 Accumulated amortization & impairment(27.9) (73.6) (47.3) (11.6) (160.4)Net book value at 31.12.2021 84.1 0.1 4.9 1.0 90.1 Cost at 01.01.2022 112.0 73.7 52.2 12.6 250.5 Additions 0.0 0.0 1.7 0.4 2.1 Derecognition of fully amortized assets (1.4) (55.8) (4.5) (3.1) (64.8)Disposals accumulated cost 0.0 0.0 0.0 0.0 0.0 (ordinary business)Disposals related to the sale of part (14.7) 0.0 0.0 (0.3) (15.0)of the OFH businessTranslation differences 2.0 2.3 (1.0) (0.4) 2.9 Acquisition costs at 31.12.2022 97.9 20.2 48.4 9.2 175.7 Accumulated amortization (27.9) (73.6) (47.3) (11.6) (160.4)& impairment at 01.01.2022Amortization 0.0 (0.1) (1.5) (0.3) (1.9)Derecognition of fully amortized assets 1.4 55.8 4.5 3.1 64.8 Disposals accumulated amortization 0.0 0.0 0.0 0.0 0.0 (ordinary business)Disposals related to the sale of part 1.4 0.0 0.0 0.3 1.7 of the OFH businessTranslation differences (0.2) (2.3) 0.9 0.4 (1.2)Accumulated amortization (25.3) (20.2) (43.4) (8.1) (97.0)& impairment at 31.12.2022Acquisition costs 97.9 20.2 48.4 9.2 175.7 Accumulated amortization & impairment(25.3) (20.2) (43.4) (8.1) (97.0)Net book value at 31.12.2022 72.6 0.0 5.0 1.1 78.7 PATENTS CUSTOMER AND SOFT-RELATION-DEVELOP-WARE AND MEUR GOODWILLSHIPSMENTOTHER TOTALCost at 01.01.2023 97.9 20.2 48.4 9.2 175.7 Additions0.0 0.0 3.2 0.0 3.2 Disposals accumulated cost 0.0 0.0 (6.6) 0.0 (6.6)Translation differences (2.0) (0.5) (0.9) (0.4) (3.8)Acquisition costs at 31.12.2023 95.9 19.7 44.1 8.8 168.5 Accumulated amortization (25.3) (20.2) (43.4) (8.1) (97.0)& impairment at 01.01.2023Amortization 0.0 0.0 (0.6) (0.4) (1.0)Impairment loss 0.0 0.0 (0.6) 0.0 (0.6)Disposals accumulated amortization0.0 0.0 6.6 0.0 6.6 Translation differences 0.1 0.5 0.7 0.5 1.8 Accumulated amortization (25.2) (19.7) (37.3) (8.0) (90.2)& impairment at 31.12.2023Acquisition costs 95.9 19.7 44.1 8.8 168.5 Accumulated amortization (25.2) (19.7) (37.3) (8.0) (90.2)& impairmentNet book value at 31.12.2023 70.7 0.0 6.8 0.8 78.3 ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE GROUP Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements 92 Internally developed intangible assets NOTE 13 INTANGIBLE ASSETS (CONTINUED) MEUR 2023 2022Internally developed intangible assets at 01.01. 7.8 7.8 Additions during the year 3.0 1.7 Disposals during the year (2.4) 0.0 Amortization (0.7) (1.6)Translation differences (0.3) (0.1)Internally developed intangible assets at 31.12. 7.4 7.8 Non-capitalised development costs net of customer contribution (27.4) (35.0)Amortization of internally developed intangible assets (0.7) (1.6)Total recognized development cost in the reporting period (28.1) (36.6)Cash investment in development (30.4) (36.7) * Net amount, gross amount MEUR 35.0 in 2023 (2022: MEUR 42.2). The internally developed intangible assets include capitalized costs related to the development of new products. These assets are included in “Patents and Development”. ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE GROUP Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements 93 NOTE 14 PROPERTY, PLANT & EQUIPMENT (PP&E) EQUIP-MEUR LAND BUILDINGSMENT TOTALAcquisition costs 3.1 28.0 468.0 499.1 Accumulated depreciation & impairment (1.2) (22.3) (334.8) (358.3)Net book balue at 31.12.2021 1.9 5.7 133.2 140.8 Cost at 01.01.2022 3.1 28.0 468.0 499.1 Additions 0.0 0.9 23.5 24.4 Derecognition of fully depreciated assets 0.0 (0.4) (13.8) (14.2)Disposals accumulated cost (ordinary business) 0.0 0.0 (3.5) (3.5)Net 2022 effects from the sale of the Interior segment0.0 0.0 (6.3) (6.3)Disposals related to the sale of part 0.0 (1.1) (17.4) (18.5)of the OFH businessTranslation differences (0.1) (0.2) (4.4) (4.7)Acquisition costs at 31.12.2022 3.0 27.2 446.1 476.3 Accumulated depreciation & impairment (1.2) (22.3) (334.8) (358.3)at 01.01.2022Depreciation 0.0 (0.7) (22.4) (23.1)Impairment loss 0.0 0.0 (1.3) (1.3)Derecognition of fully depreciated assets 0.0 0.4 13.8 14.2 Disposals accumulated depreciation 0.0 0.0 4.4 4.4 (ordinary business)Net 2022 effects from the sale of the Interior segment0.0 0.0 5.7 5.7 Disposals related to the sale of part 0.0 1.1 10.6 11.7 of the OFH businessTranslation differences 0.0 0.3 3.7 4.0 Accumulated depreciation (1.2) (21.2) (320.3) (342.7)& impairment at 31.12.2022Acquisition costs 3.0 27.2 446.1 476.3 Accumulated depreciation & impairment (1.2) (21.2) (320.3) (342.7)Net book value at 31.12.2022 1.8 6.0 125.8 133.6 EQUIP-MEUR LAND BUILDINGSMENT TOTALCost at 01.01.2023 3.0 27.2 446.1 476.3 Additions 0.0 0.6 24.7 25.3 Disposals accumulated cost 0.0 0.0 (8.3) (8.3)Translation differences 0.0 (0.6) (11.2) (11.8)Acquisition costs at 31.12.2023 3.0 27.2 451.3 481.5 Accumulated depreciation (1.2) (21.2) (320.3) (342.7)& impairment at 01.01.2023Depreciation 0.0 (0.8) (21.3) (22.1)Impairment loss (0.4) (0.2) (16.8) (17.4)Disposals accumulated depreciation 0.0 0.0 7.7 7.7 Translation differences 0.0 0.5 8.3 8.8Accumulated depreciation (1.6) (21.7) (342.4) (365.7)& impairment at 31.12.2023Acquisition costs 3.0 27.2 451.3 481.5 Accumulated depreciation & impairment (1.6) (21.7) (342.4) (365.7)Net book value at 31.12.2023 1.4 5.5 108.9 115.8 Impairment testing See note 16 for information related to impairment testing of intangible assets, PP&E and right-of-use assets. ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE GROUP Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements 94 NOTE 15 RIGHT-OF-USE ASSETS EQUIP-MEUR BUILDINGSMENT TOTALAcquisition costs 91.8 5.6 97.4 Accumulated depreciation & impairment (27.6) (3.2) (30.8)Net book value at 31.12.2021 64.2 2.4 66.6 Cost 01.01.2022 91.8 5.6 97.4 Additions 8.2 1.8 10.0 Lease terminations (6.8) (1.2) (8.0)Translation differences (0.7) 0.0 (0.7)Acquisition costs at 31.12.2022 92.5 6.2 98.7 Accumulated depreciation & impairment 01.01.2022 (27.6) (3.2) (30.8)Depreciation (9.2) (0.9) (10.1)Lease terminations 1.4 1.4 2.8 Translation differences 0.1 0.0 0.1 Accumulated depreciation & impairment 31.12.2022(35.3) (2.7) (38.0)Acquisition costs 92.5 6.2 98.7 Accumulated depreciation & impairment (35.3) (2.7) (38.0)Net book value at 31.12.2022 57.2 3.5 60.7 EQUIP-MEUR BUILDINGSMENT TOTALCost at 01.01.2023 92.5 6.2 98.7 Additions 15.2 1.2 16.4 Lease terminations (4.3) (1.4) (5.7)Translation differences (0.1) 0.0 (0.1)Acquisition costs at 31.12.2023 103.3 6.0 109.3Accumulated depreciation & impairment at 01.01.2023 (35.3) (2.7) (38.0)Depreciation (9.0) (0.8) (9.8)Impairment loss (8.4) (0.6) (9.0)Lease terminations 1.5 1.2 2.7Translation differences (0.2) 0.0 (0.2)Accumulated depreciation & impairment at 31.12.2023(51.4) (2.9) (54.3)Acquisition costs 103.3 6.0 109.3Accumulated depreciation & impairment (51.4) (2.9) (54.3)Net book value at 31.12.2023 51.9 3.1 55.0 ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE GROUP Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements 95 MEUR 2023 2022Non-current lease liabilities 65.4 60.4 Current lease liabilities 10.2 9.3 Total lease liabilities 75.6 69.7 MEUR 2023 2022Within one year 14.5 13.6 One to five years 41.9 38.9 More than five years 45.6 46.2 Total undiscounted lease commitments 102.0 98.7 MEUR MEUR 20232023 20222022Interest expense on lease liabilities (included in financial items) (4.3) (4.6)Interest income on subleases 0.1 0.4 Depreciation of right-of-use assets (9.8) (10.1)Expenses relating to low value and short-term leases (0.4) (0.4)Total expenses relating to leases (14.4) (14.7) In 2023, the group had total cash outflows of approximately MEUR 14.1 for all leases, including non-material leases which are not part of the group’s IFRS 16 reporting. Amounts related to leases recognized in the statement of comprehensive income Lease liabilities Maturity analysis – contractual undiscounted cash flows NOTE 15 RIGHT-OF-USE ASSETS (CONTINUED) NOTE 16 IMPAIRMENT LOSSES The group has performed impairment tests on the carrying values of all intangible assets (including goodwill), property, plant & equipment, and right-of-use assets (RoU) in accordance with the requirements of IAS 36. The group used the cash-generating unit’s value-in-use to determine the recoverable amount. Value in use (VIU) was derived as the net present value (NPV) of projected future cash flows for each of the cash-generating units (CGUs). The business units Driveline, On-Highway, Couplings, Fluid Transfer Systems and Off-Highway were identified as the respective CGUs. Cash flow projections and assumptions (applicable for all business units except for Driveline) The model was based on a three-year projection of discounted cash flows plus a terminal value (cal- culated using Gordon’s growth model with the perpetual growth of 1% (applicable for all business units except for Driveline)). The net discounted cash flows were calculated before tax. The projected cash flows were derived from the business plans set up by the management of the business units and reviewed as well as finally approved by the top management in the course of the budget and strategic planning process covering the period until 2026. The business plans were based on the group’s three-year long-range plan (LRP), adjusted for relevant recent changes in internal short-term forecasts and market data. Adjustments were made to exclude significant cash flows related to restructuring not yet committed, future investments, or enhancements. Assumptions on labor inflation as well as on raw material price development were provided centrally. The input data on developments of the relevant markets were taken from well-known external sources, such as LMC Automotive, IHS and customers, in addition to all relevant internal information such as change in orders, customer portfolio, fitment rate for products, geographical development, market shares, etc. Discount rate assumptions (applicable for all business units except for Driveline) The required rate of return was calculated by using the WACC method. The input data of the WACC was chosen by an individual assessment of each parameter. Information from representative sources and peer groups was used to determine the best estimate. The WACC was calculated to be 10.0% pre-tax. The WACC used was the same for all CGUs, the reason being that the long-term risk profiles of the CGUs are not considered to be significantly different. The key parameters were set to reflect the underlying long-term period of the assets and time horizon of the forecast period of the business cases. ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE GROUP Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements 96 The following parameters were applied: • Risk-free interest rate: 3.37%. Based on 10-year governmental Eurobond rate and US treasury 10-year yield, weighted 50/50. • Beta: 1.88. Based on an estimated unlevered beta for the automotive industry levered to the group’s structure. • Market risk premium: 5.34% (post tax). Based on market sources. • Cost of debt: based on the market value of the group’s debt. The discount rate has been adjusted to reflect the current market assessment of the risks specific to the group’s business activity and was estimated based on the weighted average cost of capital for the group. Further changes to the discount rate may be necessary in the future to reflect changing risks for the industry and changes to the weighted average cost of capital. Sensitivity analysis and allocation of impairment as of 31.12.2023 The value in use is dependent on the free cash flow and discount rate. The cash flow will fluctuate in relation to changes in price, currency, and volume. Business awards, success of the vehicle model, prod - uct fitment rates, government regulations, and economic conditions, in turn influence the volume. On-Highway: The value-in-use is significantly higher than the carrying value. Hence, no reasonable change in any of the key assumptions would cause the recoverable amount to be lower than the carrying value. Couplings: The value-in-use is significantly higher than the carrying value. No reasonable change in any of the key assumptions would cause the recoverable amount to be lower than the carrying value. Fluid Transfer Systems: No reasonable change in any of the key assumptions would cause the recoverable amount to be lower than the carrying value. Off-Highway: No reasonable change in any of the key assumptions would cause the recoverable amount to be lower than the carrying value. NOTE 16 IMPAIRMENT LOSSES (CONTINUED) Driveline: On December 19, 2023, the Board of Directors of Kongsberg Automotive resolved to initiate the wind- down process for the Driveline business unit due to anticipated declines in revenues and market share in the forthcoming years. Consequently, special assumptions were employed to assess the unit’s value in use, omitting the calculation of terminal value due to its limited operational duration within the wind-down process. The value in use was determined by discounting the projected free cash flows over the next three years to their present value. The evaluation revealed that the carrying value of the business unit as of December 31, 2023, cannot be recovered at all by future cash flows leading to a full impairment recognition of MEUR 27.0 for all assets utilized in the operation of the Driveline business, with the exception of assets associated with the E-Actuators segment in China, which remains unaffected by the wind-down process and is anticipated to reinvigorate operations. Carrying value of the goodwill per business unit POWERTRAIN AND CHASSISSPECIALTY PRODUCTSFLUID ON- COU-TRANSFEROFF- MEUR HIGHWAY DRIVELINEPLINGSSYSTEMSHIGHWAY TOTALGoodwillGross book value 16.7 6.7 0.2 55.8 0.0 79.4as at 01.01.2023Accumulated impairment 0.0 (6.7) 0.0 0.0 0.0 (6.7)as of 01.01.2023Disposals related to the sale 0.0 0.0 0.0 0.0 0.0 0.0 of part of the OFH businessTranslation adjustments (0.4) 0.0 0.0 (1.6) 0.0 (2.0)Net book value 16.3 0.0 0.2 54.2 0.0 70.7as at 31.12.2023 ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE GROUP Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements 97 NOTE 17 INVENTORIES Specification of inventories MEUR 2023 2022Raw materials 59.8 60.4 Work in progress 20.0 19.2 Finished goods 21.7 16.9 Total inventories 101.5 96.5 Values displayed above are net of provisions for slow-moving and obsolete inventory shown below. MEUR 2023 2022Book value at 01.01. (12.4) (12.9)Write-down (4.6) (4.0)Products sold (previously written down) 0.1 0.0 Reversal of prior write-downs 2.6 4.5 Foreign currency effects 0.1 0.0 Book value at 31.12. (14.2) (12.4) Provision for slow-moving and obsolete inventory NOTE 18 TRADE AND OTHER RECEIVABLES Specification of trade and other receivables MEUR 2023 2022Trade receivables 161.5 166.5 Public duties 7.3 11.6 Other short-term receivables 8.5 6.3 Total trade and other receivables 177.3 184.4 MEUR 2023 2022Not overdue 141.4 150.1 Overdue 1-20 days 8.8 10.3 Overdue 21-40 days 5.1 4.4 Overdue 41-80 days 1.7 2.5 Overdue 81-100 days 1.2 0.4 Overdue > 100 days 3.9 (0.5)Gross trade receivables 162.1 167.2 Total provision for bad debt (0.6) (0.7)Net trade receivables 161.5 166.5 Trade receivables maturity The provision for bad debt has decreased by MEUR 0.1 compared to 31.12.2022. Trade receivables are subject to constant monitoring. The impairment of receivables is reflected through provision for bad debt. Monthly assessments of loss risk, including forward-looking information, are performed and cor - responding provisions are made at the entity level. The provision for bad debt reflects the total expected loss risk on the group’s trade receivables. The oldest trade receivables, overdue > 100 days, represent the highest risk level. Most of the impaired trade receivables are included in that category. Expected losses on trade receivables were MEUR 0.6 in 2023 (2022: MEUR 0.7). The risk for losses on receivables other than trade receivables is assessed to be insignificant. For risk management see note 24. ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE GROUP Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements 98 MEUR 2023 2022EUR 74.0 58.5 USD 47.1 50.7 CNY 21.3 38.2 NOK 8.7 10.1 Other 26.2 26.9 Total receivables 177.3 184.4 MEUR 2023 2022Tooling for sale 4.1 4.5 Customer development for sale 0.0 0.2 Prepayments 9.1 10.2 Capitalized financing costs / current 0.1 0.4 Contract costs / current 0.1 0.1 Total other current assets 13.4 15.4 MEUR 2023 2022Investments accounted for using the equity method 2.1 0.0 Investments accounted for at cost 0.6 0.2 Contract costs / non-current 0.4 0.5 Net pension assets 0.2 0.0 Other non-current assets 0.8 0.7 Total other non-current assets 4.1 1.4 Receivables by currency Other current assets Other non-current assets NOTE 18 TRADE AND OTHER RECEIVABLES (CONTINUED) Investment accounted for using the equity method On July 11, 2023, Kongsberg Automotive signed an agreement to acquire 20% of the shares in Chassis Autonomy SBA AB via a directed rights issue. The agreement includes call options to acquire up to 100% of the total outstanding shares at fair market value in certain periods until 2027. Chassis Autonomy specializes in the design and development of steer-by-wire and brake-by-wire systems (that compromise the mechanical hardware, control electronics, and software) for use in highly automated (L3) and fully autonomous (L4 and L5) vehicles, agriculture, and construction applications. Share of profit/(loss) of equity-accounted investees It has been decided not to present the share of profit from equity accounted investees and any summa- rized financial information for the year ended on December 31, 2023, in the financial statements. This decision is based on the immateriality of their figures, which holds little relevance to external readers. Additionally, the cost and impracticability of compiling this data further support this decision. ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE GROUP Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements 99 The twenty largest shareholders in the Company as at 31.12.2023 were as follows: SHAREHOLDERS AND NOMINEES NO, OF SHARES % COUNTRY TYPE OF ACCOUNTMorgan Stanley & Co. Int. Plc.227,660,441 23.9%United Kingdom Nominee (multiple investors)Saxo Bank A/S35,558,132 3.7%Denmark Nominee (multiple investors)Nordnet Bank AB33,378,342 3.5%Sweden Nominee (multiple investors)Citibank, N.A.20,643,289 2.2%Ireland Nominee (multiple investors)Arild Vigen Christoffersen14,076,017 1.5%Norway OrdinaryNordnet Livsforsikring AS13,677,035 1.4%Norway OrdinaryDanske Bank A/S12,476,663 1.3%Denmark Nominee (multiple investors)Kongsberg Automotive ASA (own shares)10,535,914 1.1%Norway OrdinaryVerdipapirfondet KLP Aksjenorge7,401,392 0.8%Norway OrdinaryMorgan Stanley & Co. Int. Plc.7,386,333 0.8%Cayman Islands Nominee (multiple investors)J.P. Morgan SE7,303,771 0.8%Finland Nominee (multiple investors)Commuter 2 AS7,300,000 0.8%Norway OrdinaryKransekakebakeren AS6,884,868 0.7%Norway OrdinaryJohn Stien Invest AS5,002,113 0.5%Norway OrdinaryDaniel Avestruz4,400,000 0.5%Norway OrdinaryAvanza Bank AB4,212,457 0.4%Sweden Nominee (multiple investors)Clearstream Banking S.A.4,150,519 0.4%Luxembourg Nominee (multiple investors)Lars Rimestad4,100,000 0.4%Norway OrdinaryVerdipapirfondet Nordea Avkastning4,042,639 0.4%Norway OrdinaryVerdipapirfondet DnB Norge Indeks4,009,142 0.4%Norway OrdinaryTotal 20 largest shareholders 434,199,067 45.6%Other shareholders517,224,064 54.4%Number of shares in issue at 31.12.2023951,423,131 100.0%Number of shareholders23,685Foreign ownership44.4% NOTE 19 SHARE CAPITAL Shares The share capital of the Company is NOK 951,423,131 comprising 951,423,131 ordinary shares with a par value of NOK 1.00. The Company holds 10,535,914 shares as treasury shares. For more information see the Statement of Changes in Equity. The Company is listed on the Oslo Stock Exchange with the ticker code “KOA”. Treasury shares The Company holds 10,535,914 treasury shares (2022: 95,161,099) as of December 31, 2023. On June 6, 2023, Kongsberg Automotive ASA’s Board of Directors resolved to cancel its 103,437,513 treasury shares pur - chased back until January 27, 2023. On November 15, 2023, the Board of Directors of Kongsberg Automotive ASA resolved to initiate a new share purchase pro - gram. The company is expected to purchase back up to 2.5% of its outstanding shares in the open market limited to a maximum total consideration of up to MEUR 4.2 starting on November 15, 2023. Kongsberg Automotive ASA has purchased 10,535,914 shares from November 15, 2023 until December 31, 2023 as part of new share purchase program. 2023 2022Number of shares 1,054,860,644 1,054,860,644in issue at 01.01.Cancelation of own shares(103,437,513) ‒Number of shares 951,423,131 1,054,860,644 in issue at 31.12.Of these, treasury shares10,535,914 95,161,099 ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE GROUP Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements 100 Share options Options at NOK 62.0 (grant 2016) expire after 7 years. Options at NOK 3.0 (grant 2021) are Performance Stock Options and expire 10 years after the date of grant. The Company has no legal or constructive obligation to repurchase or settle the options in cash. Refer to note 3 for further information. Movements in share options (NOK) NOTE 19 SHARE CAPITAL (CONTINUED) Movements in restricted stock units (RSU) Outstanding restricted stock units at the end of the year Outstanding options at the end of the year (NOK) 2023 2022AVERAGE AVERAGE EXERCISE EXERCISE NOKPRICE OPTIONS PRICE OPTIONS Options at 01.01. 4.1 5,771,412 6.8 8,728,998 Granted ‒ ‒ ‒ ‒Forfeited 3.0 (750,831) 5.4 (2,671,041)Expired 20.5 (343,512) 59.0 (43,214)Adjusted (quantity) ‒ ‒ ‒ (243,331)Options at 31.12. 3.0 4,677,069 4.1 5,771,412 2023 2022EXERCISE EXERCISE PRICE PRICE EXPIRY DATE(NOK) OPTIONS (NOK) OPTIONS 10.04.2023 (grant 2016) 62.0 ‒ 62.0 101,78510.06.2031 (grant 2021) 3.0 4,677,069 3.0 5,669,627Options at 31.12. 4,677,069 5,771,412 NOK 2023 2022RSU at 01.01. 14,567,343 7,990,418Granted 13,844,990 11,804,646Forfeited (358,318) (2,363,015)Released (1,508,473) (2,864,706)RSU at 31.12. 26,545,542 14,567,343 GRANT (VESTING DATE) 2023 2022Grant 2021 (10.06.2024) 3,292,149 ‒Grant 2022 (02.06.2025) 9,523,243 3,926,605Grant 2023 (05.06.2026) 13,730,150 10,640,738RSU at 31.12. 26,545,542 14,567,343 ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE GROUP Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements 101 NOTE 20 EARNINGS AND DIVIDEND PER SHARE Earnings per share for the group Dividend per share 2023 2022Net profit attributable to equity shareholders (MEUR)(59.5) 26.5 Weighted average number of shares in issue (in millions)1,000.6 1,031.0 Weighted average total number of ordinary shares (in millions)1,061.9 1,061.9 Weighted average number of treasury shares held (in millions)(61.3) (30.9)Basic earnings per share, EUR(0.06) 0.03 Weighted average number of shares in issue (diluted) (in millions)1,028.9 1,050.4 Weighted average number of outstanding options & RSU/PSU (in millions)28.3 19.4 Diluted earnings per share, EUR(0.06) 0.03 2023 2022Net profit attributable to equity shareholders (MEUR) (59.5) 20.6 from continuing operationsWeighted average number of shares in issue (in millions)1,000.6 1,031.0 Weighted average total number of ordinary shares (in millions)1,061.9 1,061.9 Weighted average number of treasury shares held (in millions)(61.3) (30.9)Basic earnings per share, EUR(0.06) 0.02 Weighted average number of shares in issue (diluted) (in millions)1,028.9 1,050.4 Weighted average number of outstanding options & RSU/PSU (in millions)28.3 19.4 Diluted earnings per share, EUR(0.06) 0.02 EUR 2023 2022Dividend per share paid 0.0 0.0Dividend per share proposed 0.0 0.0 No dividend is proposed for 2023. Earnings per share for the continuing operations ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE GROUP Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements 102 Defined benefit scheme change in net pension liability Defined benefit scheme – net pension liability Specification of carrying value of net pension liability MEUR 2023 2022Net pension liability 01.01. 12.0 18.4 Pension cost for the year (0.2) 1.2 Remeasurement of net defined benefit liability 0.5 (6.2)Paid pensions (0.6) (0.6)Pension plan contributions (0.6) (0.8)Translation differences 0.2 0.0 Net pension liability 31.12. 11.3 12.0 MEUR 2023 2022Pension liabilities and assets:Projected benefit obligation (PBO) 16.1 17.7 Fair value of pension assets (4.8) (5.7)Unrecognized effects 0.0 0.0 Net pension liability before social security taxes 11.3 12.0 Social security taxes liabilities 0.0 0.0 Net pension liability 11.3 12.0 MEUR 2023 2022Retirement benefit obligation 16.1 17.7 Retirement benefit asset (4.8) (5.7)Net pension liability 11.3 12.0 NOTE 21 RETIREMENT BENEFIT OBLIGATIONS Retirement benefit obligations recognized in statement of financial position Defined benefit scheme – assumptions Defined benefit scheme – net periodic pension cost MEUR 2023 2022Defined benefit pension obligation 11.3 12.0Top hat, retirement provisions and other employee obligations 0.7 0.5Retirement benefit obligations 12.0 12.5 2023 2022Discount rate 3.6% 3.4%Rate of return on plan assets 0.2% 0.4%Salary increases 1.1% 1.2%Increase in basic government pension amount 1.0% 1.0%Pension increase 0.5% 0.5% MEUR 2023 2022Service cost 0.6 1.1Interest on benefit obligations 0.4 0.2Effect of curtailment (1.2) (0.1)Net periodic pension cost (0.2) 1.2Remeasurement of net defined benefit liability 0.5 (6.2)Actual return on plan assets -0.1% 1.6% The assumptions for KA group are presented as a weighted average of the assumptions reported from respective subsidiaries. ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE GROUP Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements 103 NOTE 22 INTEREST-BEARING LIABILITIES Interest-bearing liabilities as presented in the statement of financial position MEUR 2023 2022Non-current interest-bearing loans and borrowings 190.6 200.0 Capitalized arrangement fees (1.3) (2.1)Interest-bearing lease liabilities 75.6 69.7 Total interest-bearing liabilities 264.9 267.6 On July 23, 2018, the Company completed an offering of MEUR 275.0 in an aggregate principal amount of 5.000% Senior Notes due 2025 (the “Notes”) pursuant to indentures among the Company, the guarantors party thereto, and The Law Debenture Trust Corporation plc, as trustee. On March 21, 2022, Kongsberg Automotive redeemed EUR 75.0 million of the notes at 102.5% of par. In Q2 2023 and Q3 2023, own bond notes at the amount of MEUR 3.6 and MEUR 5.8, respectively, were repurchased, resulting in a corresponding decrease in the outstanding balance of the bond notes. Kongsberg Automotive or its affiliates may, at any time and from time to time, seek to retire or pur- chase outstanding debt through cash purchases, in open-market purchases, privately negotiated transactions or otherwise. Such repurchases, if any, will be upon such terms and at such prices as Kongsberg Automotive may determine, and will depend on prevailing market conditions, its liquidity requirements, contractual requirements, and other factors. The amounts involved may be material. The group was in compliance with all applicable debt covenants at and for the year ended December 31, 2023. The indentures for our outstanding Senior Notes contain customary terms and conditions, includ- ing incur or guarantee additional indebtedness or issue certain preferred stock, pay dividends, redeem capital stock and make other distributions, make certain other restricted payments or restricted investments, prepay or redeem subordinated debt or equity, create or permit to exist cer - tain liens, impose restrictions on the ability of the Restricted Subsidiaries to pay dividends, transfer or sell certain assets, merge or consolidate with other entities, engage in certain transactions with affiliates and impair the security interests for the benefit of the Holders of the Notes. On September 25, 2020, the group entered into an Accounts Receivables Securitization Agreement with NORD/LB and Finacity Corporation (Finacity) to provide Kongsberg Automotive group with a committed MEUR 60 facility at an interest rate of 1.75% with a three-year tenure, effective on October 19, 2020. Effective from June 25, 2022, the maximum commitment was reduced from MEUR 60.0 to MEUR 25.0 of Senior Notes and depends on the size of the Accounts Receivable pool meeting invest - ment grade criteria. Defined benefit scheme – sensitivity analysis DBO AS AT DBO AS AT MEUR31.12.202331.12.2022Actual valuation 11.3 12.0 Discount rate + 0.5% 10.7 11.4 Discount rate - 0.5% 11.9 12.7 Expected rate of salary increase + 0.5% 11.3 12.1 Expected rate of salary increase - 0.5% 11.2 12.0 Expected rate of pension increase + 0.5% 11.7 12.5 Expected rate of pension increase - 0.5% 10.8 11.6 * The sensitivity analysis does not include all schemes, however it covers the significant part of the pension liability. Defined benefit scheme – average expected lifetime Average expected lifetime at the balance sheet date for a person retiring on reaching age 65: • Male employee 21 years • Female employee 24 years Average expected lifetime 20 years after the balance sheet date for a person retiring on reaching age 65: • Male employee 23 years • Female employee 26 years Expected pension payment The pension payment for 2024 is expected to be in line with the 2023 payment. NOTE 21 RETIREMENT BENEFIT OBLIGATIONS (CONTINUED) ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE GROUP Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements 104 Changes in liabilities arising from financing activities Liquidity reserve The liquidity reserve of the group consists of cash and cash equivalents in addition to undrawn credit facilities. MEUR 2023 2022Opening balance at 01.01. 267.6 367.7 Changes arising from cash flows:Repayment of bond 0.0 (75.0)Repurchase of own bond notes (9.4) 0.0 Repayment of lease liabilities (9.8) (16.7)Repayment of debt (0.1) (21.6)Non-cash changes:Additions - lease liabilities 16.1 12.3 Amortization of capitalized arrangement fees 0.8 0.8 Reduction of capitalized arrangement fees due to the bond repayment 0.0 1.0 Other:Translation effect (0.3) (0.9)Closing balance at 31.12. 264.9 267.6 MEUR 2023 2022Cash and cash equivalents 164.7 212.9 Restricted cash (0.5) (0.5)Undrawn revolving credit facility 30.0 50.0 Undrawn securitization facility 25.0 25.0 Liquidity reserve 219.2 287.4 NOTE 22 INTEREST-BEARING LIABILITIES (CONTINUED) Other current interest-bearing liabilities consist of the Revolving Credit Facility (RCF) agreement entered into in July 2018. On July 06, 2023, the Revolving Credit Facility has been extended by 18 months and decreased from MEUR 50.0 to MEUR 30.0. In addition, the Company must again comply with the covenants from the original RCF agreement signed in July 2018 including a “springing cove- nant” on total net leverage of 3.50:1, tested at the end of each quarter if cash utilizations exceed 40% of the total commitments under the RCF agreement. Specification of total interest-bearing liabilities by currency MEUR 2023 2022EUR 228.3 235.5 USD 11.7 8.7 Other currencies 26.2 25.5 Capitalized arrangement fees (1.3) (2.1)Total interest-bearing liabilities 264.9 267.6 ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE GROUP Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements 105 NOTE 24 RISK MANAGEMENT Finance risk management policies The group’s overall financial risk management focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the group’s financial performance. The group exploits derivative financial instruments for potential hedging of certain risk exposures; however, the current usage of such instruments is limited. Foreign exchange risk The group operates internationally in numerous countries and is exposed to foreign exchange risk arising from various currency exposures. The primary exposures are related to USD. Foreign exchange risk arises from future commercial transactions, recognized assets and liabilities and net investments in foreign operations. As the group reports its financial results in EUR, changes in the relative strength of EUR to the currencies in which the group conducts business can adversely affect the group’s financial development. Historically, changes in currency rates have influenced the top line development, however it has not had a significant impact on operating profit since the costs usu- ally offset the effects from the top line. Hence, the group seeks to align its revenue and cost base to reduce the currency exposure on a net-cash-flow basis. Management is monitoring the currency exposure on the group level. The group treasury uses the debt structure and profile to balance some of the net exposure of the cash flow from operations. The group’s treasury function regularly evaluates the use of hedging instruments but currently has no usage of such instruments. The group has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk. Currency exposure arising from the net assets of the group’s foreign opera- tions is partially managed through borrowings denominated in the relevant foreign currencies. Sensitivity As of December 31, 2023, if the currency USD had weakened/strengthened by 5% against the EUR with all other variables being constant, revenues would vary by (1.6%) and 1.8% or MEUR (14.4) and MEUR 16.0 as well as operating loss would increase by MEUR 0.6 (-3.3%) and decrease by MEUR 0.7 (3.6%). Operational risks Operation and investment risks and uncertainties The group is usually contracted as a supplier with a long-term commitment. The commitment is usually based on the model platforms, which for passenger cars are typically 3 to 5 years, while on commercial vehicles it is typically 5 to 7 years and in some cases even longer. Purchase orders are achieved on a competitive bidding basis for either a specific period or indefinite time. Even if present NOTE 23 OTHER NON-CURRENT INTEREST-FREE LIABILITIES Specification of other non-current interest-free liabilities MEUR 2023 2022Provision for employee litigations 0.5 1.4 Provision for customs claims 0.0 4.3 Provision for onerous contracts 2.0 1.9 Other non-current interest-free liabilities 1.2 0.4 Total other non-current interest-free liabilities 3.7 8.0 Provision for onerous contracts As a result of applying amendments to IAS37 and due to declining macroeconomic data as well as increasing energy and commodity prices, the group has recognized provisions for onerous programs to supply products within the Driveline business to several customers. It has been determined that the estimated unavoidable costs required to fulfil the contract have increased, which exceeded the future economic benefits. The onerous contracts are expected to be fulfilled by the end of 2024 and beginning of 2025. Provision for customs claims The prior disclosure for customs claims was successfully settled during the financial year 2023 resulting in the payment of MEUR 1.9 and the release of provision of MEUR 2.4. ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE GROUP Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements 106 NOTE 24 RISK MANAGEMENT (CONTINUED) the group’s financial position, revenues, profits, and cash flow. When the market prices go down the adverse effect will occur. For products sold to passenger car applications, the group does not have the same opportunity to pass along increases in raw materials prices. Uninsured losses The group maintains a number of separate insurance policies to protect its core businesses against loss and/or liability to third parties. Risks insured include general liability, business interruption, workers’ compensation and employee liability, professional indemnity, and material damage. Supply chain related risks and uncertainties The Company’s ability to meet the customers’ needs depends on the ability to maintain key manu- facturing and supply arrangements. The loss or disruption of such manufacturing and supply arrangements may be caused by the issues such as labor disputes, inability to procure sufficient raw or input materials, natural disasters, disease outbreaks or other external factors over which the Company has no control. Risks related to the Russia-Ukraine war The war in Ukraine has created considerable uncertainty, particularly with regard to the potential impact of the political actions, primarily where the duration, intensity and allocation of energy sup- plies as well as their impact on the supply chain are concerned. Due to the Russia-Ukraine war, the supply of energy, other raw materials and parts for the pro- duction process has resulted in greater constraints, especially in Europe. Higher energy and com- modity prices plus greater volatility added to the strain. Furthermore, rising inflation rates could reduce purchasing power, adversely affect the end-customer behavior, and put a damper on demand for the products offered to the customers. As consequence of this war, the following negative risks might arise in the nearest future: protec- tionist tendencies, turbulence in the financial markets, structural deficits in individual countries as well as high inflation and rising interest rates worldwide. The group’s operations were not directly impacted by the conflict as none of group’s plants is located in Ukraine and Russia and most of KA’s customers do not have close economic ties with these countries. However, the group’s financials have been impacted by the indirect consequences of this war, such as an increase in energy prices and rising freight. commitments are cost-reimbursable, they can be adversely affected by many factors and short-term variances including shortages of materials, equipment and work force, political risk, customer default, labor conflicts, accidents, environmental pollution, the prices of raw materials, unforeseen problems, changes in circumstances that may lead to cancellations and other factors beyond the control of the group. In addition, some of the group’s customer contracts may be reduced, suspended or terminated by the customer at any time upon the giving of notice. Customer contracts also permit the customer to vary the scope of work under the contract. As a result, the group may be required to renegotiate the terms or scope of such contracts at any time, which may result in the imposition of terms less favorable than the previous terms. Competition The group has significant competitors in each of its business areas and across the geographical mar- kets in which the group operates. The group believes that competition in the business areas in which it operates will continue in the future. The group continuously monitors its competitive environment as it is constantly exposed to potential strategic M&A activities by suppliers, customers or competi- tors that may negatively impact the group’s market position. Volatility in prices of input factors The group’s financial performance is dependent on prices of input factors, i.e. raw materials and dif- ferent semi-finished components with a varying degree of processing, used in the production of the various automotive parts. Some of the major raw materials are: • Steel including rod and sheet metal, cast iron and machined steel components • Polymer components of rubber, foam, plastic components and plastic raw materials • Copper • Zinc • Aluminum The prices can be subject to large fluctuations in response to relatively minor changes in supply and demand and a variety of additional factors beyond the control of the group, including government regulation, capacity, and general economic conditions. A substantial part of the group’s products based on steel and brass (copper and zinc) is sold to truck manufacturers. Business practice in the truck industry allows the group to some extent to pass increases in steel, aluminum, and brass prices over to its customers. However, there is a time lag of three to six months before the group can adjust the price of its products to reflect fluctuations in the mentioned raw material prices, and a sudden change in market conditions could therefore impact ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE GROUP Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements 107 Climate change risk Kongsberg Automotive has put in place adequate procedures that enable Management and the Board of Directors to regularly review material climate change issues that may have a significant impact on the Company’s operations from the operational and strategic point of view. The Company expects and is preparing for regulatory changes and policy measures targeted at reducing carbon emissions, especially as part of the commitments resulting from the Paris Agreement. The Company invests in sources of renewable energy, such as solar panels, to become more sustainable. Moreover, Kongsberg Automotive actively monitors its supply chains in relation to the potential disruptions caused by extreme weather events. In case of an occurrence of such unfavorable events, the Company works on mitigation actions together with its suppliers. In the group’s assessment, there are no material phys- ical climate risks that the group is expected to face in the foreseeable future. In 2023, the Company’s financial reporting was not significantly impacted by climate change risk. Interest rate risk Through its refinancing via senior secured notes with a fixed coupon, the group is not exposed to interest rate risk for the duration of the notes. Credit risk Credit risk is managed at the group and entity level. Credit risk arises mainly from trade with cus- tomers and outstanding receivables. The level of receivables overdue is monitored on a weekly basis. Historically the group has had limited losses on receivables. Applying forward-looking information, we do not see any material increase in the credit risk. Refer to note 18. The automotive industry consists of a limited number of vehicle manufacturers; hence the five biggest customers will be around 34.2% of total revenues in 2023. The group has a diversified customer base with one individual customers representing more than 10% of the group’s revenues. In addition, the customer base consists of solvent vehicle manufacturers and Tier 1 suppliers. In the group’s opinion there is no concentration risk. However, due to the number of vehicle manufacturers and hence customers, concentration risk could be considered to exist. NOTE 24 RISK MANAGEMENT (CONTINUED) Funding and liquidity risk Cash flow forecasting is performed by each operating entity of the group on a weekly basis for the following 15 weeks. The group keeps track of its liquidity requirements and monitors to ensure there is sufficient cash to meet operational needs while always maintaining sufficient headroom on its undrawn committed borrowing facility. Surplus cash held by the operating entities over and above balance required for working capital management is transferred to the group treasury. For unused liquidity reserve, see note 22. Capital risk management The group’s objectives when managing capital are to safeguard the group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital and balance the risk profile. The group monitors capital based on the gearing ratio and the level of equity. These ratios are cal- culated as net debt divided by EBITDA and equity divided by the total balance. The group has a treasury policy regulating the levels on these key ratios. ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE GROUP Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements 108 NOTE 25 TRADE AND OTHER PAYABLES Specification of trade and other payables as presented in the statement of financial position 2023 2022Trade payables 116.6 122.0 Accrued expenses 55.5 54.5 Provisions 17.2 10.5 Interest payable 4.6 4.6 Other short-term liabilities 3.7 5.7 Total trade and other payables 197.6 197.3 Provisions Maturity structure RESTRUC-RESTRUC-PROVISION TURING TURING FOR AND OTHER TOTAL WARRANTY AND OTHER TOTAL WARRANTIESPROVISIONS2023RESERVEPROVISIONS2022Opening balance 8.4 2.1 10.5 6.9 1.9 8.8 P&L charge 5.9 8.6 14.5 11.7 0.5 12.2 Payments (4.8) (2.0) (6.8) (9.8) (0.2) (10.0)Release (0.2) (0.6) (0.8) (0.5) 0.0 (0.5)Translation effect (0.1) (0.1) (0.2) 0.1 (0.1) 0.0 Closing balance 9.2 8.0 17.2 8.4 2.1 10.5 OTHER ACCRUED INTEREST SHORT-TERM TRADE TOTAL MEURPROVISIONSEXPENSESPAYABLESLIABILITIESPAYABLES2023Repayable 0-3 months 14.9 35.2 4.6 3.6 100.9 159.2 after year-endRepayable 3-6 months 0.8 14.3 0.0 0.1 8.5 23.7 after year-endRepayable 6-9 months 0.2 3.3 0.0 0.0 4.6 8.1 after year-endRepayable 9-12 months 1.3 2.7 0.0 0.0 2.6 6.6 after year-endTotal 17.2 55.5 4.6 3.7 116.6 197.6 OTHER ACCRUED INTEREST SHORT-TERM TRADE TOTAL MEURPROVISIONSEXPENSESPAYABLESLIABILITIESPAYABLES2022Repayable 0-3 months 5.8 31.6 4.6 4.5 116.8 163.3 after year-endRepayable 3-6 months 2.7 13.4 0.0 0.6 5.0 21.8 after year-endRepayable 6-9 months 0.3 5.0 0.0 0.0 0.1 5.4 after year-endRepayable 9-12 months 1.6 4.4 0.0 0.6 0.1 6.7 after year-endTotal 10.5 54.5 4.6 5.7 122.0 197.3 Provision for restructuring relates mainly to the costs related to the workforce reduction as part of the cost optimization measures announced on October 23, 2023. ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE GROUP Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements 109 Classification, measurement and fair value of financial instruments NOTE 26 FINANCIAL INSTRUMENTS 2023LOANS, RECEIVABLES LOANS, RECEIVABLES FINANCIAL AND CASH AT AND CASH LIABILITIES AT MEURAMORTIZED COSTAT FAIR VALUEAMORTIZED COST TOTAL 2023Trade and other receivables 177.3 177.3 Cash and cash equivalents 124.2 40.5 164.7 Interest-bearing loans and borrowings (189.3) (189.3)Interest-bearing lease liabilities (75.6) (75.6)Trade payables and accrued expenses (172.1) (172.1)Total 301.5 40.5 (437.0) (95.0)Fair value 301.5 40.5 (435.3) (93.3)Unrecognized gain / (loss) 1.7 1.7 2022LOANS, RECEIVABLES LOANS, RECEIVABLES FINANCIAL AND CASH AT AND CASH LIABILITIES AT MEURAMORTIZED COSTAT FAIR VALUEAMORTIZED COST TOTAL 2022Trade and other receivables 184.4 184.4 Cash and cash equivalents 119.2 93.7 212.9 Interest-bearing loans and borrowings (197.9) (197.9)Interest-bearing lease liabilities (69.7) (69.7)Trade payables and accrued expenses (176.5) (176.5)Total 303.6 93.7 (444.1) (46.8)Fair value 303.6 93.7 (427.7) (30.4)Unrecognized gain/ (loss) 16.4 16.4 * Based on level 1 input. The bond was traded at 98.5% of its par value as at 31.12.2023 (90.1% as at 31.12.2022) ** Based on level 1 input ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE GROUP Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements 110 Remuneration and fees recognized in the statement of comprehensive income Specification of fees paid to the auditors KEUR 2023 2022Total remuneration of the Board of Directors 302.4 297.0 Gross base salary to the CEO 686.1 741.1 CEO’s short-term incentive 343.1 817.4 CEO’s long-term incentive 272.2 391.6 Pension costs to the CEO 56.3 107.5 Other remuneration to the CEO 71.4 54.5 Management salaries other than to the CEO 2,264.8 2,842.7 Bonus, LTI costs and other remuneration of management 1,285.3 1,222.7 other than the CEOPension costs of management other than the CEO 246.0 327.1 Termination benefits to former CEO 2,281.5 0.0Total ‐ Board of Directors and Senior Management 7,809.1 6,801.6 Remuneration to nomination committee 47.9 20.1 KEUR 2023 2022Statutory audit services to the parent company (Deloitte) 213.7 180.6 Statutory audit services to subsidiaries (Deloitte) 664.8 559.1 Statutory audit services to subsidiaries (other) 95.6 52.1 Non-audit services (Deloitte) 29.5 22.3 Tax services (Deloitte) 486.2 438.2 Total 1,489.8 1,252.3 NOTE 27 REMUNERATION AND FEES FOR MANAGEMENT, BOARD OF DIRECTORS (BOD) AND AUDITOR NOTE 28 COMMITMENTS AND GUARANTEES Commitments The group’s operating lease commitments are now disclosed in note 15. In relation to low-value and short-term leases that are not presented as lease liabilities, the group is committed to an expected expense of MEUR 0.3 in 2024. Guarantees The issued notes are guaranteed on a senior basis by: • Parent guarantor (Kongsberg Automotive ASA), • Kongsberg Automotive Holding 2 AS, Kongsberg Automotive AS, Kongsberg Automotive AB, Kongsberg Power Products Systems AB, Kongsberg Driveline Systems SAS, Kongsberg Raufoss Distribution SAS, Kongsberg Actuation Systems Ltd, Kongsberg Automotive Slovakia s.r.o., Kongsberg Automotive Sp. z.o.o., Kongsberg Inc., Kongsberg Holding III, Inc., Kongsberg Actuation Systems II, LLC, Kongsberg Power Products Systems I, LLC, Kongsberg Automotive, Inc., Kongsberg Driveline Systems I, LLC, and KA group AG. General information In 2023 total parent guarantees in the amount of around MEUR 60.5 and MUSD 10.0 were issued for entities in Slovakia, Poland, and Mexico. * 2023 remuneration is based on former CEO during the period January 01-July 24, 2023, and current CEO from July 25, 2023. 2022 CEO remuneration is based on former CEO. ** Long-term incentive plans ‒ share-based compensation. The amounts represent the expenses accounted for according to IFRS 2. *** Including social security costs ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE GROUP Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements 111 NOTE 29 CONTINGENT LIABILITIES The following is an overview of current material disputes involving either the Company Kongsberg Automotive ASA or its subsidiaries. Endeavor group, LLC v Kongsberg Power Products Systems I, LLC (U.S.) Kongsberg Power Products Systems I, LLC is contesting a claim by a neighboring property owner for compensation for use of a detention pond on the neighboring property in Willis, Texas. Water runoff from the Kongsberg property was diverted to the neighboring property at a time when both parcels were owned by a predecessor of Kongsberg. Kongsberg does not believe that the plaintiff is entitled to significant compensation. Kongsberg’s main argument for acquittal is that the pond was clearly visible when the property was acquired by the plaintiff. The district court has ruled in our favor and fully acquitted Kongsberg. The plaintiff has, however, appealed the ruling. The decision of the court of appeals is not expected before 2024. NOTE 30 SUBSEQUENT EVENTS No significant subsequent events have been identified. NOTE 31 RELATED-PARTY TRANSACTIONS Kongsberg Automotive ASA is listed on the Oslo Stock Exchange and is the group's ultimate parent. The group has no material transactions with related parties. Key Management and BoD compensation See note 27 – it includes remuneration for the Senior Management and Board of Director. ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE PARENT COMPANY 112 Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements FINANCIAL STATEMENTS OF THE PARENT COMPANY STATEMENT OF COMPREHENSIVE INCOME ...........113 STATEMENT OF CASH FLOWS ..............................114 STATEMENT OF FINANCIAL POSITION .................115 STATEMENT OF CHANGES IN EQUITY ................... 117 NOTE 1 REPORTING ENTITY ..............................118 NOTE 2 STATEMENT OF COMPLIANCE ............... 118 NOTE 3 SIGNIFICANT ACCOUNTING POLICIES ....118 NOTE 4 INVESTMENTS IN SUBSIDIARIES ..........118 NOTE 5 SALARIES AND SOCIAL EXPENSES ......119 NOTE 6 OTHER OPERATING EXPENSES .............119 NOTE 7 FINANCIAL ITEMS .................................119 NOTE 8 TAXES ...................................................120 NOTE 9 INTANGIBLE ASSETS ............................121 NOTE 10 PROPERTY, PLANT AND EQUIPMENT ... 121 NOTE 11 RIGHT-OF-USE ASSETS .......................122 NOTE 12 TRADE AND OTHER RECEIVABLES .......123 NOTE 13 SHARE CAPITAL ..................................123 NOTE 14 INTEREST-BEARING LIABILITIES ........123 NOTE 15 RISK MANAGEMENT ............................124 NOTE 16 TRADE AND OTHER PAYABLES ...........124 NOTE 17 REMUNERATION AND FEES FOR MANAGEMENT, BOARD OF DIRECTORS AND AUDITORS ..................................................125 NOTE 18 COMMITMENTS AND GUARANTEES ......125 NOTE 19 CONTINGENT LIABILITIES ...................125 NOTE 20 SUBSEQUENT EVENTS .......................125 NOTE 21 RELATED-PARTY TRANSACTIONS ......126 ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE PARENT COMPANY 113 Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements MEUR NOTE 2023 2022 Operating revenues 21 6.0 6.8 Operating expenses Salaries and social expenses 5 (0.5) (0.3) Other operating expenses 6 (3.2) (3.7) Total operating expenses (3.7) (4.0) Operating profit 2.3 2.8 Financial items Financial income 7 28.2 57.7 Financial expenses 4, 7 (185.3) (16.7) Net financial items (157.1) 41.0 Profit / (loss) before taxes (154.8) 43.8 Income taxes 8 (3.6) (9.7) Net profit / (loss) (158.4) 34.1 Other comprehensive income Translation differences (34.2) (24.3) Other comprehensive income (34.2) (24.3) Total comprehensive income for the year (192.6) 9.8 STATEMENT OF COMPREHENSIVE INCOME ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE PARENT COMPANY 114 Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements MEUR NOTE 2023 2022 Operating activities Profit/(loss) before taxes (154.8) 43.8 Impairment of IC shares 4 172.0 0.0 Interest income 7 (24.1) (18.5) Dividend income 7 (1.7) (3.7) Interest expenses and other financial expenses 7 11.4 16.6 Taxes paid (0.2) (0.4) Changes in trade and other receivables 12 (8.5) (16.9) Changes in trade and other payables 16 (2.1) 7.3 Currency differences 7 (1.9) (21.5) Changes in other items 1.9 0.0 Cash flow from / used by operating activities (8.0) 6.7 Investing activities Repayment of group loans 0.0 11.7 Repayment of investments in subsidiaries 4 0.0 69.3 Interest received 7 24.1 18.5 Dividends received 7 1.7 8.5 Cash flow from investing activities 25.8 108.0 Financing activities Payments for purchase of treasury shares 13 (3.9) (23.5) Repayment of debt 4 0.0 (75.0) Interest paid 7 (11.2) (14.4) Cash flow used by financing activities (15.1) (112.9) Currency effects on cash (1.5) (1.6) Net change in cash 1.2 0.2 Net cash at January 1 0.2 0.0 Net cash at December 31 1.4 0.2 Of this, restricted cash 0.0 0.0 STATEMENT OF CASH FLOWS ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE PARENT COMPANY 115 Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements STATEMENT OF FINANCIAL POSITION ASSETS EQUITY AND LIABILITIES MEUR NOTE 2023 2022 Non-current assets Right-of-use assets 11 0.1 0.1 Investments in subsidiaries 4 113.7 295.2 Loans to subsidiaries 21 354.9 362.4 Other non-current assets 0.1 0.1 Total non-current assets 468.8 657.8 Current assets Trade and other receivables 12, 21 54.9 49.4 Cash and cash equivalents 1.4 0.2 Total current assets 56.3 49.6 Total assets 525.1 707.4 MEUR NOTE 2023 2022 Equity Share capital 13 84.6 100.3 Treasury shares 13 (3.2) (23.9) Share premium 180.6 208.2 Other reserves (50.1) (36.2) Retained earnings 47.5 205.9 Total equity 259.4 454.3 Non-current liabilities Deferred tax liabilities 8 22.7 24.5 Retirement benefit obligations 0.3 0.3 Interest-bearing liabilities 14 197.8 197.0 Total non-current liabilities 220.8 221.8 Current liabilities Current income tax liabilities 8 0.1 0.0 Trade and other payables 16, 21 44.8 31.3 Total current liabilities 44.9 31.3 Total liabilities 265.7 253.1 Total equity and liabilities 525.1 707.4 ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE PARENT COMPANY 116 Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements Kongsberg, March 11, 2024 The President & CEO and the Board of Directors of Kongsberg Automotive ASA Linda Nyquist-Evenrud President and CEO Peter Thostrup Chairman (sign.) Erik Volden Board member (sign.) Emese Weissenbacher Board member (sign.) Siw Reidun Wærås Employee-elected (sign.) Junyang (Jenny) Shao Board member (sign.) Knut Magne Alfsvåg Employee-elected (sign.) Brian Kristoffersen Board member (sign.) Bjørn Ivan Ødegård Employee-elected (sign.) ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE PARENT COMPANY 117 Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements STATEMENT OF CHANGES IN EQUITY MEUR SHARE CAPITAL TREASURY SHARES SHARE PREMIUM OTHER RESERVES RETAINED EARNINGS TOTAL EQUITY Equity as at 01.01.2022 105.6 (1.3) 219.1 (28.8) 171.8 466.4 Purchase of treasury shares (23.5) (23.5) Share-based compensation 1.6 1.6 Total comprehensive income for the year: Profit for the year 34.1 34.1 Other comprehensive income: Translation differences (5.3) 0.9 (10.9) (9.0) (24.3) Total comprehensive income for the year (5.3) 0.9 (10.9) (9.0) 34.1 9.8 Equity as of 31.12.2022/01.01.2023 100.3 (23.9) 208.2 (36.2) 205.9 454.3 Purchase of treasury shares (3.9) (3.9) Cancelation of treasury shares (9.0) 23.0 (14.0) 0.0 Share-based compensation 1.5 1.5 Total comprehensive income for the year: Loss for the year (158.4) (158.4) Other comprehensive income: Translation differences (6.7) 1.6 (13.6) (15.4) (34.1) Total comprehensive income for the year (6.7) 1.6 (13.6) (15.4) (158.4) (192.5) Equity as at 31.12.2023 84.6 (3.2) 180.6 (50.1) 47.5 259.4 ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE PARENT COMPANY 118 Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements NOTES NOTE 1 REPORTING ENTITY Kongsberg Automotive ASA (‘the Company’) is a limited liability company incorporated and domiciled in Norway. The address of its registered office is Dyrmyrgata 48, NO-3601 Kongsberg, Norway. The Company is listed on the Oslo Stock Exchange. The Company is the ultimate parent of the group and serves the purpose of holding company in the group. The information provided in the consolidated financial statements covers the Company to a significant degree. For a description of the operating activities of the subsidiaries of Kongsberg Automotive ASA, please refer to the consolidated financial statement of the group. The Company financial statements were authorized for issue by the Board of Directors on March 11, 2024. NOTE 2 STATEMENT OF COMPLIANCE The Company’s financial statements are prepared in accordance with simplified IFRS according to the Norwegian Accounting Act § 3-9, and regulations regarding simplified application of IFRS issued by the Ministry of Finance on February 7, 2022. NOTE 3 SIGNIFICANT ACCOUNTING POLICIES The Company’s significant accounting principles are consistent with the accounting principles of the group, as described in note 3 of the group’s Consolidated Financial Statement. Where the notes for the Company are substantially different from the notes for the group, it is shown accordingly. Otherwise, refer to the notes to the group’s Consolidated Financial Statements. Dividends and group contributions received are recognized as income in the same year as allocated by the subsidiary. If the dividend exceeds the share of retained profits after the purchase, the excess part represents repayment of invested capital and the disbursements received are deducted from the value of the investment in the balance sheet. Kongsberg Automotive ASA has decided to utilize the option in the regulations of simplified application of International Financial Reporting Standards which make it possible to account for dividends and group contributions in accordance with Norwegian General Accepted Accounting Principles (NGAAP). NOTE 4 INVESTMENTS IN SUBSIDIARIES ENTITY NAME COUNTRY OF INCOR- PORA TION OWNER- SHIP 2023 2023 2022 Kongsberg Automotive Holding 2 AS Norway 100% 0.0 169.8 KA group AG Switzerland 0% 102.3 113.3 Kongsberg Automotive (Wuxi) Ltd China 100% 6.4 6.9 Kongsberg Automotive Ltda Brazil 100% 2.1 2.3 Kongsberg Automotive Ltd Korea 100% 1.6 1.7 Kongsberg Automotive (India) Private Ltd India 100% 0.8 0.8 Kongsberg Automotive Driveline System India Ltd India 100% 0.4 0.4 Kongsberg Automotive Japan KK Japan 100% 0.1 0.1 Kongsberg Automotive SARL France 100% 0.0 0.0 CTEX Seat Comfort (Holding) Ltd Great Britain 100% 0.0 0.0 Total investments in subsidiaries 113.7 295.2 Investments In 2023, there were no investments made in subsidiaries. The change in the carrying value of invest- ments is fully attributable to the impairments and the translation differences. Impairment testing The Company has performed impairment tests on all KA companies owned or financed directly by Kongsberg Automotive ASA. The following assets have been considered for impairment: share investments, intercompany loans to group companies, intercompany receivables. The impairment assessment is made at “net investment” level (all direct loans, receivables and share investments are considered together). Shares are impaired before loans, and loans before receivables. In a first step, the net investment was compared to the carrying value of the equity of the respective subsidiaries. The equity carrying value is considered as a conservative valuation of the company value. In a second step, the net investment was compared to the enterprise value. The enterprise value has been derived from the net present value of all future cash flows including terminal value. The princi- pal model has been taken into account as well as all assumptions used for the three-year strategic planning in the cash flow estimation of each tested subsidiary. ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE PARENT COMPANY 119 Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements Discount rate assumptions The required rate of return was calculated using the WACC method. The used WACC was calculated to be 10.7% post-tax. Impairment test results and conclusion Based on the results from the impairment test performed, the Company concluded that the inter- company shares held in Kongsberg Automotive Holding 2 AS and KA group AG need to be impaired by EUR 172.0million, which was recorded under financial expenses in 2023. NOTE 5 SALARIES AND SOCIAL EXPENSES NOTE 4 INVESTMENTS IN SUBSIDIARIES (CONTINUED) NOTE 7 FINANCIAL ITEMS MEUR 2023 2022 Wages and salaries 0.4 0.3 Pension cost (defined contribution plans) 0.1 0.0 Total salaries and social expenses 0.5 0.3 MEUR 2023 2022 Dividend and other financial income 1.7 3.6 Foreign currency gains 2.3 26.2 Account receivables securitization - income 1.0 1.4 Interest income 23.2 17.1 Reversal of write-down of Intercompany loans 0.0 9.4 Total financial income 28.2 57.7 Interest expense (10.1) (16.4) Foreign currency losses 0.0 0.0 Account receivables securitization - expense (0.2) (0.3) Impairment of Intercompany shares (172.0) 0.0 Write-down of Intercompany loans (3.0) 0.0 Total financial expenses (185.3) (16.7) Total financial items (157.1) 41.0 MEUR 2023 2022 Administrative expenses Service costs 2.9 3.3 Other costs 0.3 0.4 Total other operating expenses 3.2 3.7 The Company had no employees as of 31.12.2023 and there were no employees as of 31.12.2022 either. Wage and salaries comprise directors’ fees. NOTE 6 OTHER OPERATING EXPENSES * Includes unrealized currency gain of MEUR 1.9 (2022: unrealized gain of MEUR 21.5) ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE PARENT COMPANY 120 Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements Tax recognized in statement of income The major components of income tax expense: NOTE 8 TAXES MEUR 2023 2022 Current tax on profits for the year (3.7) (2.1) Adjustments in respect of prior years ‒ current tax (0.1) (0.4) Total current tax expense (3.8) (2.5) Current year change in deferred tax 0.3 (7.2) Adjustments in respect of prior years ‒ deferred tax (0.1) 0.0 Total change in deferred tax 0.2 (7.2) Total income tax expense (3.6) (9.7) MEUR 2023 2022 Profit/(loss) before taxes (154.8) 43.8 Expected tax calculated at Norwegian tax rate 34.0 (9.6) Dividends (permanent differences) 0.4 0.8 Other permanent differences (38.0) (0.8) Effect of withholding tax 0.0 (0.1) Income tax (expense)/credit (3.6) (9.7) Average effective tax rate -2% 22% MEUR 2023 2022 Current income tax receivables 0.0 0.0 Current income tax liabilities 0.0 0.0 Total 0.0 0.0 MEUR 2023 2022 Deferred tax liability (22.7) (24.5) Total (22.7) (24.5) Includes withholding tax of MEUR 0.1. Further details can be found in the table below. Tax recognized in other comprehensive income No tax was recognized in other comprehensive income in 2023 and 2022. Reconciliation of Norwegian nominal statutory tax rate to effective tax rate Tax recognized in the statement of financial position Current tax As a result of a group Contribution, the current income tax liabilities of MEUR 3.6 were transferred to Kongsberg Automotive Holding 2 AS. Deferred tax Deferred tax positions are netted within the tax entity. ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE PARENT COMPANY 121 Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements MEUR OPENING BALANCE CHARGED TO INCOME CHANGES IN R ATE OCI EXCHANGE DIFFER- ENCES CLOSING BALANCE Property, plant and equipment 0.1 (0.1) 0.0 0.0 0.0 0.0 Retirement benefits obligations 0.1 0.0 0.0 0.0 0.0 0.1 Account receivables 2.3 0.8 0.0 0.0 (0.1) 3.0 Unrealized FX on long-term receivables/payables (27.2) (0.5) 0.0 0.0 1.7 (26.0) Other temporary differences 0.2 0.0 0.0 0.0 0.0 0.2 Net deferred tax asset/(liability) (24.5) 0.2 0.0 0.0 1.6 (22.7) NOTE 8 TAXES (CONTINUED) Specification of deferred tax assets / (liabilities) recognized in the statement of financial position Tax positions not recognized The Company had no unrecognized positions in 2023 and 2022. Remaining lifetime of tax losses (net tax value) The Company had no tax loss carry forwards in 2023 and 2022. NOTE 9 INTANGIBLE ASSETS All intangible assets were fully amortized as of December 31, 2023. NOTE 10 PROPERTY, PLANT & EQUIPMENT (PP&E) All PP&E assets were fully depreciated as of December 31, 2023. ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE PARENT COMPANY 122 Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements MEUR BUILDINGS EQUIPMENT Cost at 01.01.2021 0.2 0.2 Additions 0.0 0.0 Lease terminations 0.0 0.0 Translation differences 0.0 0.0 Acquisition costs at 31.12.2022 0.2 0.2 Accumulated depreciation at 01.01.2022 (0.1) (0.1) Depreciation 0.0 0.0 Lease terminations 0.0 0.0 Translation differences 0.0 0.0 Accumulated depreciation at 31.12.2022 (0.1) (0.1) Cost 0.2 0.2 Accumulated depreciation (0.1) (0.1) Book value at 31.12.2022 0.1 0.1 Cost at 01.01.2023 0.2 0.2 Additions 0.0 0.0 Lease terminations 0.0 0.0 Translation differences 0.0 0.0 Acquisition costs at 31.12.2023 0.2 0.2 Accumulated depreciation at 01.01.2023 (0.1) (0.1) Depreciation 0.0 0.0 Lease terminations 0.0 0.0 Translation differences 0.0 0.0 Accumulated depreciation at 31.12.2023 (0.1) (0.1) Cost 0.2 0.2 Accumulated depreciation (0.1) (0.1) Book value at 31.12.2023 0.1 0.1 NOTE 11 RIGHT-OF-USE ASSETS Lease liabilities Maturity analysis – contractual undiscounted cash flows MEUR 2023 2022 Non-current lease liabilities 0.1 0.1 Current lease liabilities 0.0 0.0 Total lease liabilities 0.1 0.1 MEUR 2023 2022 Within one year 0.1 0.1 One to five years 0.1 0.1 More than five years 0.0 0.0 Total undiscounted lease liabilities 0.2 0.2 ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE PARENT COMPANY 123 Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements NOTE 12 TRADE AND OTHER RECEIVABLES During 2019, the group changed from a notional cash pool under Kongsberg Automotive ASA to a physical cash pool with KA group AG as the master header for the group and Kongsberg Automotive ASA as a sub-header for some of the European entities. Due to the transactions carried out under Kongsberg Automotive’s share buy-back program initiated in November 2023, the Company holds the cash as of December 31, 2023 which is needed to perform the repurchase transactions in the next 10days. In addition to that, its cash held by KA group AG was included as In-house bank under trade and other receivables. Specification of trade and other receivables NOTE 14 INTEREST-BEARING LIABILITIES Interest-bearing liabilities as presented in the statement of financial position Specification of total interest-bearing liabilities Changes in liabilities arising from financing activities MEUR 2023 2022 Short-term group loans and receivables 7.9 7.7 In-house bank 46.7 40.8 Other short-term receivables 0.1 0.6 Receivables 54.7 49.1 Prepayments 0.2 0.3 Total trade and other receivables 54.9 49.4 MEUR 2023 2022 NOK 49.0 42.3 EUR 5.9 6.9 USD 0.0 0.1 Other 0.0 0.1 Total trade and other receivables 54.9 49.4 MEUR 2023 2022 Non-current interest-bearing loan 199.0 199.0 Capitalized arrangement fees (1.3) (2.1) Interest-bearing lease liabilities 0.1 0.1 Total interest-bearing liabilities 197.8 197.0 MEUR 2023 2022 EUR 199.0 199.0 NOK 0.1 0.1 Capitalized arrangement fee (1.3) (2.1) Total interest-bearing liabilities 197.8 197.0 MEUR 2023 2022 Opening balance as of 01.01. 197.0 270.1 Loan repayment 0.0 (75.0) Foreign exchange movement 12.7 11.2 Translation effect (12.7) (11.2) Other 0.8 1.9 Closing balance as of 31.12. 197.8 197.0 Receivables by currency NOTE 13 SHARE CAPITAL Refer to note 19 in the group’s statements. * relates to the loan granted by KA group AG ** relates to the bond fees paid by Kongsberg Automotive ASA on behalf of Kongsberg Actuation Systems BV ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE PARENT COMPANY 124 Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements NOTE 15 RISK MANAGEMENT The Company’s risk management is an integral part of the group’s risk management. Refer to note 24 of the group’s statements for further information. Currency exposure Management monitors the currency exposure at a group level. The group treasury uses the debt structure and profile to balance some of the net exposure of the cash flow from operations. The group’s treasury function regularly evaluates the use of hedging instruments but currently has low usage of such instruments. Interest risk The Company is exposed to limited interest risk. MEUR 2023 2022 Trade payables 1.0 1.5 Short-term group liabilities 43.1 29.0 Accrued expenses 0.6 0.5 Other short-term liabilities 0.1 0.3 Total trade and other payables 44.8 31.3 MEUR ACCRUED EXPENSES OTHER SHORT-TERM LIABILITIES TRADE PAYABLES TOTAL 2023 Repayable 0-3 months after year-end 0.1 0.1 1.0 1.2 Repayable 3-6 months after year-end 0.3 0.0 0.0 0.3 Repayable 6-9 months after year-end 0.0 0.0 0.0 0.0 Repayable 9-12 months after year-end 0.2 0.0 0.0 0.2 Total 0.6 0.1 1.0 1.7 Provisions The Company had no provisions as of December 31, 2023, and December 31, 2022. Maturity structure NOTE 16 TRADE AND OTHER PAYABLES Specification of trade and other payables as presented in the statement of financial position ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE PARENT COMPANY 125 Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements NOTE 17 REMUNERATION AND FEES FOR MANAGEMENT, BOARD OF DIRECTORS AND AUDITORS Refer to note 27 in the group’s consolidated financial statements. NOTE 18 COMMITMENTS AND GUARANTEES Guarantees Some subsidiaries require a financial support guarantee from the parent to satisfy the going concern assumption. The Company has issued guarantees towards suppliers of subsidiaries. The risk exposure is assessed to be immaterial. In 2023 total parent guarantees in the amount of around MEUR 60.5 and MUSD 10.0 were issued for entities in Slovakia, Poland, and Mexico. In relation to the Offering of Senior Secured Notes, the Company is the parent guarantor. NOTE 19 CONTINGENT LIABILITIES Refer to note 29 in the group’s consolidated financial statements. NOTE 20 SUBSEQUENT EVENTS No significant subsequent events have been identified. Refer to note 30 in the group’s consolidated financial statements for the group-relevant subsequent events. ANNUAL REPORT 2023 // FINANCIAL STATEMENTS OF THE PARENT COMPANY 126 Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements MEUR 2023 2022 Kongsberg Actuation Systems S.L.U. 0.1 0.1 Kongsberg Automotive (Wuxi) Ltd. 2.5 2.4 KA group AG 2.8 3.1 Other group companies 2.5 2.1 Total outstanding receivables to other group companies 7.9 7.7 MEUR 2023 2022 Trade and other payable group companies 43.1 29.0 Total 43.1 29.0 Current assets and liabilities have due dates within one year. The outstanding accounts are repayable on demand based on available liquidity in the respective subsidiary. Outstanding liabilities with other group companies * includes the group contribution to Kongsberg Automotive Holding 2 AS of MEUR 17.8 (2022: MEUR 9.2). Outstanding loans and receivables with other group companies Loans to other group companies MEUR 2023 2022 Kongsberg Automotive Holding 2 AS 351.8 359.8 Kongsberg Automotive Finance BV 2.9 2.5 Other group companies 0.2 0.1 Total outstanding loans with other group companies 354.9 362.4 Most of the Company’s loans to group companies have due dates exceeding one year. The interest rate on loans to group companies consists of the reference rate in the respective currency plus a margin. The margin on new intercompany loans is determined according to Moody’s rating methodology. Short-term group receivables NOTE 21 RELATED-PARTY TRANSACTIONS The group’s ultimate parent is Kongsberg Automotive ASA. The Company has carried out the following transactions with related parties: Specification of revenues – type of services MEUR 2023 2022 Group benefits fees from subsidiaries 2.1 2.4 Service fee from KA AG 3.9 4.4 Operating revenues 6.0 6.8 MEUR 2023 2022 Switzerland 6.0 6.8 Operating revenues 6.0 6.8 Specification of revenues – revenues by geographical location ANNUAL REPORT 2023 // ALTERNATIVE PERFORMANCE MEASURES 127 Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements ALTERNATIVE PERFORMANCE MEASURES (APM) This section describes the non-GAAP financial measures that are used in this report and in the quarterly presentation. All figures in 2022 exclude the figures disclosed as discontin- ued operation. The following measures are not defined or specified in the applicable financial reporting framework of the IFRS GAAP. They may be considered as non-GAAP financial measures that may include or exclude amounts that are calculated and presented according to the IFRS GAAP. • Operating profit / (loss) – EBIT / adjusted EBIT • EBITDA / adjusted EBITDA • Operating revenues at constant currencies • New Business Wins • Free cash flow • NIBD • Capital employed • Adjusted ROCE OPERATING PROFIT / (LOSS) - EBIT/ADJUSTED EBIT EBIT, earnings before interest and tax, is defined as the earnings excluding the effects of how the operations were financed and taxed and excluding foreign exchange gains and losses. Adjusted EBIT is defined as EBIT excluding unusual or non-recurring items as well as restructuring items. Restructuring items include severance cost related to the overhead cost optimization program and rightsizing of a plant with Driveline business. EBIT is used as a measure of operational profitability. Consequently, the group also reports the adjusted EBIT, which is the EBIT excluding restructuring items and impairment losses. 2023 POWER- TRAIN & CHASSIS SPECIALTY PRODUCTS OTHERS GROUP MEUR Operating profit / (loss) (21.5) 33.8 (32.0) (19.7) Restructuring costs 3.6 0.4 1.6 5.6 Additional salaries and social expenses 1.1 0.1 0.9 2.1 Other additional operating expenses 3.5 0.5 4.7 8.7 Impairment losses 27.0 0.0 0.0 27.0 Adjusted EBIT 13.7 34.8 (24.8) 23.7 Adjusted EBIT margin 2.8% 8.8% 2.7% 2022 INTERIOR PRODUCTS POWER- TRAIN & CHASSIS SPECIALTY PRODUCTS OTHERS GROUP MEUR Operating profit / (loss) 0.4 12.7 84.9 (34.9) 63.1 Restructuring costs 0.0 0.2 0.0 0.0 0.2 Additional salaries and social expenses 0.0 (0.6) 0.5 0.6 0.5 Gain on sale of part of the Off-Highway business 0.0 0.0 (41.1) 0.0 (41.1) Other additional operating expenses 0.0 3.3 2.0 6.3 11.6 Impairment losses 0.0 1.3 0.0 0.0 1.3 Adjusted EBIT 0.4 16.9 46.3 (28.0) 35.6 Adjusted EBIT margin 3.6% 10.5% 3.9% ANNUAL REPORT 2023 // ALTERNATIVE PERFORMANCE MEASURES 128 Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements EBITDA / ADJUSTED EBITDA EBITDA is defined as EBIT (previously defined) before depreciation and amortization. Adjusted EBITDA is therefore EBITDA excluding restructuring items and impairment losses. EBITDA is used as an additional measure of the group’s operational profitability, excluding the impact from depreciation and amortization. 2023 POWER- TRAIN & CHASSIS SPECIALTY PRODUCTS OTHERS GROUP MEUR Operating profit / (loss) (21.5) 33.8 (32.0) (19.7) Depreciation 17.2 13.3 1.4 31.9 Amortization 0.7 0.3 0.0 1.0 EBITDA (3.6) 47.4 (30.6) 13.2 Restructuring items 8.2 1.0 7.2 16.4 Impairment losses 27.0 0.0 0.0 27.0 Adjusted EBITDA 31.6 48.4 (23.4) 56.6 Adjusted EBITDA margin 6.5% 12.2% 6.4% 2022 INTERIOR PRODUCTS POWER- TRAIN & CHASSIS SPECIALTY PRODUCTS OTHERS GROUP MEUR Operating profit / (loss) 0.4 12.7 84.9 (34.9) 63.1 Depreciation 0.0 17.4 13.8 1.8 33.0 Amortization 0.0 1.3 0.6 0.0 1.9 EBITDA 0.4 31.4 99.3 (33.1) 98.0 Restructuring items 0.0 2.9 2.5 6.9 12.3 Gain on sale of part of the Off-Highway business 0.0 0.0 (41.1) 0.0 (41.1) Impairment losses 0.0 1.3 0.0 0.0 1.3 Adjusted EBITDA 0.4 35.6 60.7 (26.2) 70.5 Adjusted EBITDA margin 7.6% 13.8% 7.8% ANNUAL REPORT 2023 // ALTERNATIVE PERFORMANCE MEASURES 129 Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements OPERATING REVENUES AT CONSTANT CURRENCIES In order to measure the actual revenue development and to have it comparable year-over-year, currency translation effects are excluded. For that reason, the actual operating revenues are remeasured at prior year’s currency rates (constant currencies). NEW BUSINESS WINS New Business Wins are reported when KA is awarded: (1) new contracts, (2) extension of the existing contract, (3) price or volume adjust- ments to existing programs/business awards. Annualized New Business Wins are calculated as the annual average of total awarded future revenues, disregarding the sales in years of start of production and end of production. 2023 POWER- TRAIN & CHASSIS SPECIALTY PRODUCTS OTHERS GROUP MEUR Operating revenues (incl. currency translation effects) 488.8 396.1 0.0 884.9 Currency translation effects (23.7) (14.3) 0.0 (38.0) Operating revenues (excl. currency translation effects) 512.5 410.4 0.0 922.9 2023 POWER- TRAIN & CHASSIS SPECIALTY PRODUCTS GROUP MEUR Annualized New Business Wins 183.6 113.4 296.9 Lifetime New Business Wins 663.3 326.1 989.4 2022 INTERIOR PRODUCTS POWER- TRAIN & CHASSIS SPECIALTY PRODUCTS GROUP MEUR Annualized New Business Wins 0.0 118.2 128.7 246.9 Lifetime New Business Wins 0.0 422.3 337.8 760.2 2022 INTERIOR PRODUCTS POWER- TRAIN & CHASSIS SPECIALTY PRODUCTS OTHERS GROUP MEUR Operating revenues (incl. currency translation effects) 0.0 466.0 439.6 0.0 905.6 Currency translation effects 0.0 25.6 24.1 0.0 49.7 Operating revenues (excl. currency translation effects) 0.0 440.4 415.5 0.0 855.9 ANNUAL REPORT 2023 // ALTERNATIVE PERFORMANCE MEASURES 130 Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements MEUR 2023 2022 Cash flow from operating activities 21.5 64.5 Cash flow from / (used by) by investing activities (29.1) 38.6 Cash flow from financing activities (39.7) (152.2) Currency effects on cash (0.9) 3.6 Add back / less: Purchase of treasury shares 3.9 23.5 Repurchase of own bond notes 9.4 0.0 Net draw-down / repayment of debt 0.0 98.5 Free cash flow (34.9) 76.5 MEUR 2023 2022 Interest-bearing loans and borrowings 189.3 197.9 Long-term interest-bearing lease liabilities 65.4 60.4 Other short-term liabilities, interest-bearing 10.2 9.3 Cash and cash equivalents (164.7) (212.9) Net interest-bearing debt 100.2 54.7 FREE CASH FLOW Free cash flow is measured based on the sum of cash flow from operating activities, investing activities, financial activities, and currency effects on cash (together described as Change in cash), excluding net draw-down/repayment of debt and proceeds received from capital increase/purchase of treasury shares. The group assesses that this measurement illustrates the amount of cash the group has at its dis- posal to pursue additional investments or to repay debt. The table below includes only the cash flows from the continuing operations in 2022. NIBD Net interest-bearing debt (NIBD) consists of interest-bearing liabilities less cash and cash equivalents. The group risk of default and financial strength is measured by the net interest-bearing debt. It shows the group’s financial position and leverage. As cash and cash equivalents can be used to repay debt, this measurement shows the net overall financial position of the group. CAPITAL EMPLOYED Capital employed is equal to operating assets less operating liabilities. Operating assets and liabili- ties are items, which are involved in the process of producing and selling goods and services. Long- term financial assets and obligations are excluded, as those are involved in raising cash for operations and disbursing excess cash from operations. Capital employed is measured to assess how much capital is needed for the operations/business to function and evaluate if the capital employed can be utilized more efficiently and/or if operations should be discontinued. MEUR 2023 2022 Total assets 721.5 797.9 Deferred tax liabilities (21.0) (24.2) Other long-term liabilities (15.7) (20.5) Current liabilities incl. other short-term interest bearing liabilities (212.0) (214.4) Capital employed 472.8 538.8 MEUR 2023 2022 Capital employed beginning (1) 01.01.2023 538.8 01.01.2022 507.6 Capital employed at end (2) 31.12.2023 472.8 31.12.2022 538.8 Adjusted EBIT last twelve months (3) 23.7 35.6 Adjusted ROCE (3) / ((1)+(2))2 4.7% 6.8% ADJUSTED ROCE Return on capital employed (ROCE) is based on EBIT for the last twelve months divided by the aver- age of capital employed at the beginning and end of the period. Return on capital employed measures the return on the capital employed without taking into consideration the way the operations and assets are financed during the period under review. The group considers this ratio as appropriate to measure the return of the period. ANNUAL REPORT 2023 // CONSOLIDATED KEY FINANCIAL DATA 131 Kongsberg Automotive at a Glance2023 in BriefContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Financial Statements CONSOLIDATED KEY FINANCIAL DATA Definitions 5 Profit after tax 9 Gross expenses – Payments from customers 10 ((Operating profit / (loss)) + depreciation and amortization) / Operating revenues 11 (Operating profit / (loss)) / Operating revenues 12 (Net profit / (loss)) / Operating revenues 13 (Operating profit / (loss)) / Average total assets 14 Adjusted EBIT / Average capital employed 15 (Net profit / (loss)) / Average equity 17 Operating assets – Operating liabilities 20 Cash + Unutilized credit facilities and loan approvals 22 (Operating profit / (loss)) / Financial expenses 23 Current assets / Current liabilities 2023 2022 2021 2020 (RESTATED) 2019 Operations and profit 1 Operating revenues (MEUR) 884.9 905.6 831.4 687.3 1,160.9 2 Depreciation / amortization (MEUR) 32.9 34.9 32.1 33.4 48.0 3 Operating profit / (loss) (MEUR) (19.7) 63.1 47.5 (18.0) 62.4 4 Profit / (loss) before taxes (MEUR) (45.7) 46.3 38.0 (63.6) 43.5 5 Net profit / (loss) (MEUR) (59.1) 20.8 28.5 (58.5) 28.8 6 Cash flow from operating activities (MEUR) 21.5 64.5 56.7 57.7 51.4 7 Investment in property, plant and equipment (MEUR) 28.5 26.4 25.6 31.8 63.5 8 Development expenses, gross (MEUR) 35.0 42.2 55.9 54.9 53.7 9 Development expenses, net (MEUR) 28.1 36.6 47.5 46.4 43.0 Profitability 10 EBITDA margin % 1.5 10.8 9.6 2.2 9.5 11 Operating margin % (2.2) 7.0 5.7 (2.6) 5.4 12 Net profit margin % (6.7) 2.3 3.4 (8.5) 2.5 13 Return on total assets % (2.6) 8.2 5.8 (2.0) 7.1 14 Return on capital employed (ROCE) % 4.7 6.8 8.5 2.4 11.1 15 Return on equity % (23.8) 7.6 11.2 (22.1) 10.7 2023 2022 2021 2020 (RESTATED) 2019 Capital as at 31.12. 16 Total assets (MEUR) 721.5 797.9 984.8 898.0 927.0 17 Capital employed (MEUR) 472.8 538.8 507.6 691.2 645.6 18 Total equity (MEUR) 218.1 280.5 265.6 245.5 282.9 19 Equity ratio % 30.2 35.2 27.0 27.3 30.5 20 Liquidity reserve (MEUR) 219.2 287.4 140.9 197.0 64.4 21 Long-term interest-bearing debt (MEUR) 254.7 258.3 338.7 363.0 362.7 22 Interest coverage ratio (0.6) 2.7 2.4 (0.4) 2.8 23 Current ratio (Banker’s ratio) 2.2 2.4 1.6 1.7 1.7 Personnel 24 Number of employees as at 31.12. 5,286 5,270 5,624 11,234 10,908 * Due to the divestment of the Interior segment in 2021, gures in these years are not fully comparable with the gures in 2022, 2021 and 2020 which had been restated in the accordance with the requirements of IFRS 5. ** Assets and liabilities of the disposal group are excluded in 2021 *** Items of the Statement of Comprehensive income and Statement of Cash Flow classied as Discontinued oper- ation are excluded in 2022, 2021 and 2020 132 ANNUAL REPORT 2023 // Kongsberg Automotive at a GlanceContents Auditor’s Report Corporate GovernanceBoard of Directors’ Report Responsibility Statement The President & Chief Executive Ofcer and the Board of Directors conrm, to the best of their knowledge, that the nancial statements for the period January 1 to December 31, 2023, have been prepared in accordance with current applicable accounting standards, and give a true and fair view of the company’s and the group’s assets, liabilities, nancial position, and prot or loss of the entity and the group taken as a whole. We also conrm that the Board of Directors’ report includes a true and fair view of the development and performance of the business and the position of the entity and the group, together with a description of the principal risks and uncertainties the group and the company face. Kongsberg, March 11, 2024 The President & CEO and the Board of Directors of Kongsberg Automotive ASA Linda Nyquist Evenrud President & CEO Junyang (Jenny) Shao Director Emese Weissenbacher Director Peter Thostrup Chair Brian Kristoffersen Director Bjørn Ivan Ødegård Elected by the employees Erik Volden Director Siw Reidun Wærås Elected by the employees Knut Magne Alfsvåg Elected by the employees 133 ANNUAL REPORT 2023 // Kongsberg Automotive at a GlanceContents Auditor’s Report Board of Directors’ Report Financial Statements 134 ANNUAL REPORT 2023 // Kongsberg Automotive at a GlanceContents Auditor’s Report Board of Directors’ Report Financial Statements 1 Kongsberg Automotive (KA)’s guidelines for Corpo- rate Governance conform to the Norwegian Code of Prac- tice for Corporate Governance of October 14, 2021, and the company’s compliance with the 15 recommendations of the Code is explained in the following. The Board of Directors has dened the company’s core values which are reected in the company’s Code of Con- duct. The Code of Conduct includes ethical guidelines and guidelines for corporate social responsibility, including a ban on bribery, corruption, and facilitation payments, the prohibition of unlawful discrimination, and the prohibi- tion of forced and child labor. For details about policies for diversity and equal opportunities, please refer to the BoD Social section. Suppliers to the company are required to conrm their adherence to these principles by signing a particular certicate. The company has further clear pol- icies on environmental issues and health and safety. The policies are available on the company’s website. 2 The objective of the group is dened in the Articles of Association for the company, Article 2: The company’s objective is to engage in the engineering industry and other activities naturally related thereto, and the company shall emphasize development, marketing and manufacturing of products to the car industry. The com - pany shall be managed in accordance with general business practice. The company may co-operate with, establish, and participate in other companies. . Article 2 provides a clear description of the actual busi- ness of the company at present. Further, the Annual Report contains a description of the company’s objectives and principal strategies. The Board of Directors evalu- ates the company’s objectives, strategies, and risk prole every year to ensure that the company creates value for its shareholders in a sustainable manner and that nancial, social, and environmental matters are considered. 3 The company shall have an equity capital which over a period of time is at an appropriate level for its objective, strategy, and risk prole. The company’s Dividends Policy of November 26, 2015, states the following: Kongsberg Automotive shall create good value for its share- holders, employees, and society. Returns to shareholders will be a combination of changes in share price and dividends. The Board of Directors’ intention is that dividends will be approximately 30% of the company’s net income, provided that the company has an efcient capital structure. The share capital of KA currently amounts to NOK 951,423,131.00 with a nominal share value of NOK 1.00. The General Meeting of June 6, 2023, granted a man- date to purchase up to 95,142,313 treasury shares. Further CORPORATE to this mandate, from November 15, 2023, the company initiated a buyback program of shares limited to 2.5% of the share capital and a total consideration of EUR 4.2 million. All transactions under the buyback program are carried out through the stock exchange at market prices. The re-purchase of shares is executed according to Regu- lations EU 596/2014 and EU 2016/1052. The above mandate is time-limited and expires at the earlier of the next ordinary General Meeting or June 30, 2024. 4 KA has only one class of shares and all sharehold- ers in KA enjoy equal rights. Transactions in own shares are carried out through the stock exchange or at prevail- ing stock exchange prices. Possible buybacks will be car- ried out at market prices. There were no signicant transactions in 2023 between the company’s shareholders, Board directors or members of the executive management, or parties closely associated with such parties and the company. 5 The shares in KA are freely negotiable and there are no restrictions on the negotiability of the shares. 6 The notice to convene the General Meeting is pub- lished on the company’s website (www.kongs- bergautomotive.com) no later than 21 days prior to the 135 ANNUAL REPORT 2023 // Kongsberg Automotive at a GlanceContents Auditor’s Report Board of Directors’ Report Financial Statements meeting. Furthermore, the notice is sent to all known shareholders on the same date. Supporting information, such as proposals for resolutions to be considered by the General Meeting and recommendations by the Nomina- tion Committee, are enclosed with the notice and made available on the website at the same time. The support- ing material is sufciently detailed and comprehensive to allow all shareholders to form a view on all matters to be considered at the General Meeting. Documents that according to law shall be distributed to the shareholders may, according to the Articles of Association, be made available on the company’s website. Shareholders who wish to attend the General Meeting shall, according to the Articles of Association, notify the company or its announced representative no later than two business days prior to the General Meeting. The notice calling the General Meeting provides infor- mation on procedures the shareholders must observe at the General Meeting, including the procedure for repre- sentation by proxy. Shareholders who cannot attend the General Meeting may vote by proxy. Forms for the granting of proxies are enclosed with the summons to the General Meetings and are also available on the company’s website. The form of proxy includes provisions that allow for instructions on the voting on each individual agenda item. The company will nominate a person who will be available to vote on behalf of the shareholders as their proxy. The Chairman of the Board of Directors and the Chief Executive Ofcer will attend the General Meeting and to the extent possible, other members of the Board of Direc- tors, members of the Nomination Committee, the Auditor, and the Chief Financial Ofcer will also attend. The General Meetings are usually opened by the Chairman of the Board of Directors. A person that is inde- pendent of the Board of Directors, the management, and the major shareholders is proposed to be elected to chair the General Meeting. The shareholders are encouraged to propose candidates. The General Meeting follows a procedure that allows the shareholders to vote on each individual matter, includ- ing on each individual candidate nominated for election. The company’s website will further provide information regarding the right of the shareholders to propose mat- ters to be considered by the General Meeting. The General Meeting is usually held as a virtual meeting to allow more shareholders to attend. The Articles of Association for the company do not prescribe any exception from chapter ve of the Act on Public Limited Liability Companies. It follows from the Articles of Association for the company § 5 that the company shall have a Nomi- nation Committee consisting of three members elected by the General Meeting for three years at a time unless the General Meeting resolves otherwise. The duties of the Nomination Committee are to pro- pose candidates to the Board of Directors and to pro- pose remuneration to the directors and members of the Board committees. The members of the Nomination Committee for 2023/2024 are Lasse Johan Olsen (Chair), Tore Vik, and Dag Erik Rasmussen. All members of the Nomination Committee are inde- pendent of the Board directors and members of manage- ment and have no other functions in the company. The General Meeting has adopted an instruction for the Nom- ination Committee, which is available on the company’s website. The Committee’s nominations and recommen- dations are enclosed with the summons for the General Meeting and are available on the company’s website. The Nomination Committee stays in regular contact with major shareholders, Board directors, and management. The Nomination Committee’s recommendation to the General Meeting includes reasons for its recommenda- tion and relevant background information on the nomi- nated candidates and current directors, and furthermore an assessment of how the candidates meet the company’s needs for expertise, capacity, and diversity. Information about the Nomination Committee and the deadlines for submitting proposals to the Nomination Committee is available on the company’s website, where the shareholders are encouraged to propose candidates for directorships. The remuneration to the Nomination Committee is determined by the General Meeting. 8 The Board of Directors shall, according to the Arti- cles of Association of the company, consist of between three and nine members, of whom up to ve members shall be elected by the General Meeting. The Board of Directors elects its chairman according to §6–1,2,2 of the Public Limited Liability Companies Act. The Board con- sists, at present, of the following directors elected by the General Meeting: Peter Thostrup (Chair), Erik Volden, Brian Kristoffersen, Junyang Shao, and Emese Weissen- bacher. The following directors have been elected by the employees: Siw Reidun Wærås, Bjørn Ivan Ødegaard, and Knut Magne Alfsvåg. All Board directors elected by the General Meeting are elected for periods of one year and are eligible for re-election. All Board elections are based on a simple majority vote. The Board directors are independent of executive management and material business contacts of the company. All Board directors elected by the General Meeting are independent of the main shareholders. 136 ANNUAL REPORT 2023 // Kongsberg Automotive at a GlanceContents Auditor’s Report Board of Directors’ Report Financial Statements Participation in Board meetings and Board committees in 2023 was as follows: 13 4 11 3 9 5 ² 3 ³ 13 4 3 18 18 6 18 ¹ 6 ³ 5 2 2 ³ 5 2 ³ 5 ³ 5 2 1) Elected at the Anuual General Meeting on June 6, 2023 2) Replaced according to election at the Annual General Meeting on June 6, 2023 3) Elected at the Extraordinary General Meeting on September 27, 2023 4) Replaced according to election at the Extraordinary General Meeting on September 27, 2023 Information about the shareholdings of the Board direc- tors is included in the annual report and is also available on the company’s website. The Board of Directors holds the ultimate respon- sibility for managing the group and for monitor- ing day-to-day management and the group’s business activities. The Board of Directors is also responsible for establishing control systems for the group. The Board’s responsibilities also include developing and adopting the company’s strategies. The Board of Directors has issued Rules of Procedure for the Board as well as instructions for the Chief Execu- tive Ofcer of the company with the aim of establishing a clear internal allocation of responsibilities and duties. The Rules of Procedure include regulations pertaining to agreements with closely related parties. The Rules of Pro- cedure are available on the company’s website. The Board schedules at least six Board meetings per year. Additional Board meetings are held when deemed necessary. The Board hires the CEO, denes the work instruc- tions, and decides on the CEO’s remuneration. The Board of Directors has appointed a Compensation Commit- tee and an Audit Committee. The members of said com- mittees are independent of executive management. The authority of the committees is to make recommendations to the Board. The Board of Directors evaluates its performance and expertise regularly by means of self-assessment. This assessment is usually executed using questionnaires which are completed by each director, followed by a com- mon review. 10 Risk assessment is a management responsibility. Its objec- tive is to identify, evaluate, and manage risks that could reduce an individual unit’s ability to achieve its goals. The assessment and handling of risk are integrated into the group’s value-based management system. The management system is intended to ensure that there is a correlation between objectives and actions at all levels of the group and the general principle of value creation for KA’s stakeholders. The group has a separate, independent Internal Audit unit, which follows an annual internal auditing pro- gram approved by the Audit Committee. The manager of Internal Audit reports to the Audit Committee and to the CFO. Audit reports are sent to group management follow- ing each internal audit. The group’s Board of Directors, including the Audit Committee, is kept informed of the current status and approves the auditing program. The Kongsberg Automotive group publishes quarterly nancial statements in addition to the annual report. Internal reports are produced monthly and quarterly, in which the performance of each business area and product segment is analyzed and evaluated against forecasts. KA’s consolidated nancial statements are prepared by the group accounting team, which reports to the group CFO. Prior to discussions with the Board, the Audit Com- mittee performs a preliminary review of the quarterly nancial statements and annual report, with a particular emphasis on the subjective valuations and estimates that have been made. The external auditor attends all Audit Committee meetings. A number of risk assessment and control measures have been established in connection with the publica- tion of the nancial statements. Internal meetings are held with the business areas and subsidiaries, as well as a meeting with the external auditor, to identify risk factors and measures associated with material accounting items or other circumstances. Similar meetings are also held on a quarterly basis with various professional environments within the group, with a particular focus on any mar- ket changes, specic circumstances relating to individ- ual investments, transactions, and operating conditions, for example. 11 The remuneration paid to each Board director is specied in the Remuneration Report, which is made available on KA’s website. The remuneration is proposed by the Nomination Committee and approved by the General Meeting. The directors hold no function ANNUAL REPORT 2023 // Kongsberg Automotive at a GlanceContents Auditor’s Report Board of Directors’ Report Financial Statements in the company other than the directorships of the Board and memberships of committees to the Board. The Board directors are not entitled to performance-related compen- sation and are not granted or entitled to any share options. 12 The Board of Directors has established guide- lines relating to remuneration to executive management which are presented to the Annual General Meeting for consideration. The guidelines are available to sharehold- ers and are included in the appendices to the notice for the Annual General Meeting. The remuneration to execu- tive management is reviewed annually by the Compensa- tion Committee and the Board. Each year, the Board pre- pares a report on the compensation and benets provided to senior personnel in accordance with the Act on Public Limited Liability Companies, section 6–16b. Information about the remuneration paid to the executive manage- ment of the company is included in the notes to the annual accounts. Performance-related remuneration, such as bonuses and share option programs, are based on the com- pany’s nancial results and are subject to absolute limits. 13 The Board of Directors has established guide- lines for the company’s reporting of nancial and other information based on openness and compli- ance with the requirement for equal treatment of all par- ticipants in the securities markets. A nancial calendar for the company is available on the company’s website. All information distributed to shareholders is made available simultaneously on the company’s website. 14 The Board of Directors has established guid- ing principles for how it will act in the event of a takeover bid. These are compliant with Article 14 of the Code of Practice. The main elements of these princi- ples are included in the Rules of Procedures for the Board of Directors and are available on the company’s website. There are no defense mechanisms in the Articles of Association for the company or any underlying docu- ments, nor are there any measures implemented to limit opportunities to acquire shares in the company. If an offer is made for the company’s shares, the com- pany’s Board of Directors shall issue a statement evaluat- ing the offer and making a recommendation as to whether shareholders should or should not accept the offer. The Board should consider whether to arrange a valuation by an independent expert. The Board of Directors shall not seek to hinder or obstruct takeover bids for the company’s activities or shares unless there are particular reasons for this. 15 AUDITOR The auditor presents the main elements of the plan for the auditing of the company to the Audit Committee on an annual basis. The auditor participates in all Audit Committee meetings and the Board meeting where the annual nancial statements are approved. The auditor further meets with the Board without the management of the company present at least once a year. The auditor reviews the internal controls of the company and presents the results of its review to the Audit Committee together with any weaknesses iden- tied and proposals for improvements. The company has established guidelines for the auditor’s and associ- ated persons’ non-auditing work. The compensation to the auditor is disclosed in a note to the annual accounts hereto and is also reported and approved by the Annual General Meeting. March 11, 2024 138 ANNUAL REPORT 2023 // Kongsberg Automotive at a GlanceContents Corporate GovernanceBoard of Directors’ Report Financial Statements 139 ANNUAL REPORT 2023 // Kongsberg Automotive at a GlanceContents Corporate GovernanceBoard of Directors’ Report Financial Statements Deloitte AS Dronning Eufemias gate 14 Postboks 221 NO -0103 Oslo Norway +47 23 27 90 00 www.deloitte.no Deloitte AS and Deloitte Advokatfirma AS are the Norwegian affiliates of Deloitte NSE LLP, a member firm of Deloitte Touche Tohmatsu Limited ("DTTL"), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent e ntities. DTTL (also referred to as "Deloitte Global") does not provide services to clients. Please see www.deloitte.no for a more detailed description of DTTL and its member firms. © Deloitte AS Registrert i Foretaksregisteret Medlemmer av Den norske Revisorforening Organisasjonsnummer: 980 211 282 To the General Meeting of Kongsberg Automotive ASA INDEPENDENT AUDITOR’S REPORT Report on the Audit of the Financial Statements Opinion We have audited the financial statements of Kongsberg Automotive ASA, which comprise: • The financial statements of the parent company Kongsberg Automotive ASA (the Company), which comprise the statement of financial position as at 31 December 2023, statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies. • The consolidated financial statements of Kongsberg Automotive ASA and its subsidiaries (the Group), which comprise the consolidated statement of financial position as at 31 December 2023, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the financial statements, including material accounting policy information. In our opinion • the financial statements comply with applicable statutory requirements, • the financial statements give a true and fair view of the financial position of the Company as at 31 December 2023, and its financial performance and its cash flows for the year then ended in accordance with simplified application of International Accounting Standards according to the Norwegian Accounting Act section 3-9, and • the consolidated financial statements give a true and fair view of the financial position of the Group as at 31 December 2023, and its financial performance and its cash flows for the year then ended in accordance with IFRS Accounting Standards as adopted by the EU. Our opinion is consistent with our additional report to the Audit Committee. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company and the Group as required by relevant laws and regulations in Norway and the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (including International Independence Standards) (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. To the best of our knowledge and belief, no prohibited non-audit services referred to in the Audit Regulation (537/2014) Article 5.1 have been provided. We have been the auditor of Kongsberg Automotive ASA for 14 years from the election by the general meeting of the shareholders on 4 June 2010 for the accounting year 2010. Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of 2023. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. 140 ANNUAL REPORT 2023 // Kongsberg Automotive at a GlanceContents Corporate GovernanceBoard of Directors’ Report Financial Statements side 2 Independent auditor’s report Kongsberg Automotive ASA • Impairment of goodwill and other intangible assets, right of use assets and property, plant and equipment (non-current assets) D D e e s s c c r r i i p p t t i i o o n n o o f f t t h h e e K K e e y y A A u u d d i i t t M M a a t t t t e e r r H H o o w w t t h h e e m m a a t t t t e e r r w w a a s s a a d d d d r r e e s s s s e e d d i i n n t t h h e e a a u u d d i i t t Refer to note 16 to the Group financial statements for description of management’s impairment testing process and key assumptions. As disclosed in note 13, 14 and 15 the carrying value of goodwill and other intangible assets, right of use assets and property, plant and equipment amounted to EUR 249.1 million at 31 December 2023. Management’s annual impairment testing is based on the Group’s strategic three-year plan, adjusted for relevant recent changes in internal short-term forecasts and market data. Changes in these assumptions could have a significant impact on the value of goodwill and non-current assets. Transparent disclosures and clarity about sensitivities to key assumptions used in the valuations are critical to inform readers how management has made their assessments, given the uncertainty associated with the valuation of the recoverable amounts. We challenged management’s assumptions used in its impairment model for assessing the recoverability of the carrying value of goodwill and non-current assets. We focused on the appropriateness of CGU identification, methodology applied to estimate recoverable values, discount rates and forecasted cash flows. Specifically: • We obtained a detailed understanding of management’s process for performing the CGU impairment assessment. As part of this we assessed the design and implementation of the key controls. • We tested the methodology applied to estimate recoverable values as compared to the requirements of IAS 36, Impairment of assets; • We tested the mathematical accuracy of management’s impairment models; • We obtained an understanding of and assessed the basis for the Due to the inherent uncertainty involved in the forecasting and discounting of future cash flows, which are the basis of the assessment of recoverability of the cash generating units (CGU) and the level of management judgement involved, this has been identified as a key audit matter. key assumptions for the Group’s three-year strategic plan; • We evaluated and challenged management’s cash flow forecasting included in the three- year plan and the growth rate beyond with reference to the recent and historical performance of the CGU’s and external market forecasts and by performing sensitivity analysis; • We assessed the discount rate applied by benchmarking against independent data. We used Deloitte valuation specialists in our audit of the carrying value of goodwill and non-current assets. We considered the appropriateness of the related disclosures provided in note 16. Other Information The Board of Directors and the Managing Director (management) are responsible for the information in the Board of Directors’ report and the other information accompanying the financial statements. The other information comprises information in the annual report, but does not include the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the information in the Board of Directors’ report nor the other information accompanying the financial statements. In connection with our audit of the financial statements, our responsibility is to read the Board of Directors’ report and the other information accompanying the financial statements. The purpose is to consider if there is material inconsistency between the 141 ANNUAL REPORT 2023 // Kongsberg Automotive at a GlanceContents Corporate GovernanceBoard of Directors’ Report Financial Statements side 3 Independent auditor’s report Kongsberg Automotive ASA Board of Directors’ report and the other information accompanying the financial statements and the financial statements or our knowledge obtained in the audit, or whether the Board of Directors’ report and the other information accompanying the financial statements otherwise appear to be materially misstated. We are required to report if there is a material misstatement in the Board of Directors’ report or the other information accompanying the financial statements. We have nothing to report in this regard. Based on our knowledge obtained in the audit, it is our opinion that the Board of Directors’ report • is consistent with the financial statements and • contains the information required by applicable statutory requirements. Our opinion on the Board of Directors’ report applies correspondingly to the statements on Corporate Governance and Corporate Social Responsibility. Responsibilities of Management for the Financial Statements Management is responsible for the preparation of financial statements of the Company that give a true and fair view in accordance with simplified application of International Accounting Standards according to the Norwegian Accounting Act section 3-9, and for the preparation of the consolidated financial statements of the Group that give a true and fair view in accordance with IFRS Accounting Standards as adopted by the EU. Management is responsible for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the Company’s and the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or the Group or to cease operations, or has no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: • identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error. We design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s and the Group's internal control. • evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. • conclude on the appropriateness of management’s use of the going concern basis of accounting, and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s and the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company and the Group to cease to continue as a going concern. • evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements 142 ANNUAL REPORT 2023 // Kongsberg Automotive at a GlanceContents Corporate GovernanceBoard of Directors’ Report Financial Statements side 4 Independent auditor’s report Kongsberg Automotive ASA represent the underlying transactions and events in a manner that achieves a true and fair view. • obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with the Board of Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the Audit Committee with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the Board of Directors, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on Other Legal and Regulatory Requirements Report on Compliance with Requirement on European Single Electronic Format (ESEF) Opinion As part of the audit of the financial statements of Kongsberg Automotive ASA, we have performed an assurance engagement to obtain reasonable assurance about whether the financial statements included in the annual report, with the file name 5967007LIEEXZXJDCG21-2023-12-31-en, have been prepared, in all material respects, in compliance with the requirements of the Commission Delegated Regulation (EU) 2019/815 on the European Single Electronic Format (ESEF Regulation) and regulation pursuant to Section 5-5 of the Norwegian Securities Trading Act, which includes requirements related to the preparation of the annual report in XHTML format and iXBRL tagging of the consolidated financial statements. In our opinion, the financial statements, included in the annual report, have been prepared, in all material respects, in compliance with the ESEF regulation. Management’s Responsibilities Management is responsible for the preparation of the annual report in compliance with the ESEF regulation. This responsibility comprises an adequate process and such internal control as management determines is necessary. Auditor’s Responsibilities Our responsibility, based on audit evidence obtained, is to express an opinion on whether, in all material respects, the financial statements included in the annual report have been prepared in compliance with ESEF. We conduct our work in compliance with the International Standard for Assurance Engagements (ISAE) 3000 – “Assurance engagements other than audits or reviews of historical financial information”. The standard requires us to plan and perform procedures to obtain reasonable assurance about whether the financial statements included in the annual report have been prepared in compliance with the ESEF Regulation. As part of our work, we have performed procedures to obtain an understanding of the Company’s processes for preparing the financial statements in compliance with the ESEF Regulation. We examine whether the financial statements are presented in XHTML-format. We evaluate the completeness and accuracy of the iXBRL tagging of the consolidated financial statements and assess management’s use of judgement. Our procedures include reconciliation of the iXBRL tagged data with the audited financial statements in human-readable format. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Oslo, 11 March 2024 Deloitte AS L L a a r r s s A A t t l l e e L L a a u u v v s s n n e e s s State Authorised Public Accountant (This document is signed electronically) 5967007LIEEXZXJDCG212023-01-012023-12-315967007LIEEXZXJDCG212022-01-012022-12-315967007LIEEXZXJDCG212023-01-012023-12-31ifrs-full:AggregateContinuingAndDiscontinuedOperationsMember5967007LIEEXZXJDCG212022-01-012022-12-31ifrs-full:AggregateContinuingAndDiscontinuedOperationsMember5967007LIEEXZXJDCG212022-12-31ifrs-full:AggregateContinuingAndDiscontinuedOperationsMember5967007LIEEXZXJDCG212023-12-31ifrs-full:AggregateContinuingAndDiscontinuedOperationsMember5967007LIEEXZXJDCG212021-12-31ifrs-full:AggregateContinuingAndDiscontinuedOperationsMember5967007LIEEXZXJDCG212023-12-315967007LIEEXZXJDCG212022-12-315967007LIEEXZXJDCG212021-12-31ifrs-full:IssuedCapitalMember5967007LIEEXZXJDCG212022-01-012022-12-31ifrs-full:IssuedCapitalMember5967007LIEEXZXJDCG212022-12-31ifrs-full:IssuedCapitalMember5967007LIEEXZXJDCG212021-12-31ifrs-full:TreasurySharesMember5967007LIEEXZXJDCG212022-01-012022-12-31ifrs-full:TreasurySharesMember5967007LIEEXZXJDCG212022-12-31ifrs-full:TreasurySharesMember5967007LIEEXZXJDCG212021-12-31ifrs-full:SharePremiumMember5967007LIEEXZXJDCG212022-01-012022-12-31ifrs-full:SharePremiumMember5967007LIEEXZXJDCG212022-12-31ifrs-full:SharePremiumMember5967007LIEEXZXJDCG212021-12-31ifrs-full:OtherReservesMember5967007LIEEXZXJDCG212022-01-012022-12-31ifrs-full:OtherReservesMember5967007LIEEXZXJDCG212022-12-31ifrs-full:OtherReservesMember5967007LIEEXZXJDCG212021-12-31ifrs-full:RetainedEarningsMember5967007LIEEXZXJDCG212022-01-012022-12-31ifrs-full:RetainedEarningsMember5967007LIEEXZXJDCG212022-12-31ifrs-full:RetainedEarningsMember5967007LIEEXZXJDCG212021-12-31ifrs-full:EquityAttributableToOwnersOfParentMember5967007LIEEXZXJDCG212022-01-012022-12-31ifrs-full:EquityAttributableToOwnersOfParentMember5967007LIEEXZXJDCG212022-12-31ifrs-full:EquityAttributableToOwnersOfParentMember5967007LIEEXZXJDCG212021-12-31ifrs-full:NoncontrollingInterestsMember5967007LIEEXZXJDCG212022-01-012022-12-31ifrs-full:NoncontrollingInterestsMember5967007LIEEXZXJDCG212022-12-31ifrs-full:NoncontrollingInterestsMember5967007LIEEXZXJDCG212021-12-315967007LIEEXZXJDCG212023-01-012023-12-31ifrs-full:IssuedCapitalMember5967007LIEEXZXJDCG212023-12-31ifrs-full:IssuedCapitalMember5967007LIEEXZXJDCG212023-01-012023-12-31ifrs-full:TreasurySharesMember5967007LIEEXZXJDCG212023-12-31ifrs-full:TreasurySharesMember5967007LIEEXZXJDCG212023-01-012023-12-31ifrs-full:SharePremiumMember5967007LIEEXZXJDCG212023-12-31ifrs-full:SharePremiumMember5967007LIEEXZXJDCG212023-01-012023-12-31ifrs-full:OtherReservesMember5967007LIEEXZXJDCG212023-12-31ifrs-full:OtherReservesMember5967007LIEEXZXJDCG212023-01-012023-12-31ifrs-full:RetainedEarningsMember5967007LIEEXZXJDCG212023-12-31ifrs-full:RetainedEarningsMember5967007LIEEXZXJDCG212023-01-012023-12-31ifrs-full:EquityAttributableToOwnersOfParentMember5967007LIEEXZXJDCG212023-12-31ifrs-full:EquityAttributableToOwnersOfParentMember5967007LIEEXZXJDCG212023-01-012023-12-31ifrs-full:NoncontrollingInterestsMember5967007LIEEXZXJDCG212023-12-31ifrs-full:NoncontrollingInterestsMemberiso4217:EURiso4217:EURxbrli:shares
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