Kongsberg Gruppen

Investor Presentation • Sep 24, 2019

AMBITIONS

24/09/2019

Gyrid Skalleberg Ingerø, Group CFO KONGSBERG GRUPPEN ASA

KONGSBERG PROPRIETARY: This document contains KONGSBERG information which is proprietary and confidential. Any disclosure, copying, distribution or use is prohibited if not otherwise explicitly agreed with KONGSBERG in writing. Any authorised reproduction in whole or in pa rt, must include this legend. © 2019 KONGSBERG – All rights reserved.

DISCLAIMER

This presentation contains certain forward-looking information and statements. Such forward-looking information and statements are based on the current, estimates and projections of the Company or assumptions based on information currently available to the Company. Such forward-looking information and statements reflect current views with respect to future events and are subject to risks, uncertainties and assumptions. The Company cannot give assurance to the correctness of such information and statements. These forward-looking information and statements can generally be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements sometimes use terminology such as "targets", "believes", "expects", "aims", "assumes", "intends", "plans", "seeks", "will", "may", "anticipates", "would", "could", "continues", "estimate", "milestone" or other words of similar meaning and similar expressions or the negatives thereof.

By their nature, forward-looking information and statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of the Company to differ materially from any future results, performance or achievements that may be expressed or implied by the forward-looking information and statements in this presentation. Should one or more of these risks or uncertainties materialize, or should any underlying assumptions prove to be incorrect, the Company's actual financial condition or results of operations could differ materially from that or those described herein as anticipated, believed, estimated or expected.

Any forward-looking information or statements in this presentation speak only as at the date of this presentation. Except as required by the Oslo Stock Exchange rules or applicable law, the Company does not intend, and expressly disclaims any obligation or undertaking, to publicly update, correct or revise any of the information included in this presentation, including forward-looking information and statements, whether to reflect changes in the Company's expectations with regard thereto or as a result of new information, future events, changes in conditions or circumstances or otherwise on which any statement in this presentation is based.

Given the aforementioned uncertainties, prospective investors are cautioned not to place undue reliance on any of these forward-looking statements.

Key drivers for value creation

Improving revenue trend

▪ 2012-2014

• ‒ Strong growth from overheated offshore market
• ‒ Declining defence revenues due to falling CROWS volumes
• 2015-2018
  • ‒ Stop in offshore contracting led to 25+ % decline in KM
  • ‒ Defence relatively stable
• 2019➔
  • ‒ Added revenues from Commercial Marine
  • ‒ Some growth in "old" KM
  • ‒ Ramp up from recent order intake in KDA

Commercial Marine weighing on improving margins

▪ 2012-2014

• ‒ Hot offshore market founding strong profitability
• ‒ Drop in defence margins due to decline in Remote Weapon Station (CROWS) volumes
• 2015-2018
  • ‒ KM margins challenged by declining volumes and price pressure
  • ‒ Defence impacted by restructuring in 2017
• 2019➔
  • ‒ Integration of Commercial Marine affects margins
  • ‒ Improvement in "old" KM
  • ‒ Defence relatively stable

Steady EPS-contribution from KDA, KM fluctuates

• KDA proving a stable foundation
• KM market more cyclical
• Equity rights issue in 2018 diluting EPS until Commercial Marine turn-around materialize

*The graph illustrates each business unit's contribution to EPS. Actual contribution may deviate.

Key drivers for value creation

Our capital allocation priorities

Rationale for having a solid balance sheet

*Net Interest Bearing Debt / EBITDA, 2018 inclusive and exclusive BNOK 5 rights issue.

Technology development securing our positions

• R&D investing to secure #1 positions
  • ‒ Self-funded R&D 5-6% of revenues
  • ‒ In addition we benefit from customer funded R&D
• Prioritisation of R&D projects

^*Sum of expensed and capitalized R&D (i.e. excluding product maintenance).

Investments

Capital expenditures 2012-2018

• Investments ex. R&D averaging 2.6% of revenues
  • ‒ Few production facilities requiring high investments
    • ‒ Low level of machinery and equipment related to operations
    • ‒ Production mainly performed by sub contractors
• Capex expected at 2-3% of revenues going forward
• Depreciation & amortisation going forward expected to be at ~same level as in Q2 2019

Fluctuating working capital

Net Working Capital – Kongsberg Defence & Aerospace (MNOK)

• Net working capital has fluctuated significantly
  • ‒ KDA: Mainly related to payment structure and project timeline within large projects
  • ‒ KM: historically more stable at 15-20% of revenues. Targeting a lower range going forward
• Average historical negative working capital within KDA. Expected to fluctuate also going forward

Healthy shareholder remuneration

• Dividend policy of 40-50% of net income
  • ‒ Actual pay-outs from 2013 above interval
  • ‒ Evaluate special dividends or share buybacks as a supplement on a case-bycase basis

Active management of business portfolio - Investments of 8 billion last 4 years

Key drivers for value creation

Recent pick up in order intake founds growth

Short- and long-term backlog improved in KM

• 7 BNOK aftermarket in KM by large not reflected in backlog (annual basis)
• Average lead-time from contract to revenues typically ranges from 3-15 months

KDA: Solid pick up in order intake, major improvement in backlog

37%

0 1 2 3 4 5 6 7 8 Year

27% 2018

2019

2020->

36%

10.664

Key drivers for value creation

WORLD CLASS – Through people, technology and dedication KONGSBERG PROPRIETARY - See Statement of Proprietary information

	Increased profitability KONGSBERG 2022 EBITDA-margin Our journey towards 2022 >12%*
	KONGSBERG MARITIME	KONGSBERG DEFENCE & AEROSPACE		KONGSBERG DIGITAL
1. Deliver synergies	Deliver Commercial Marine synergies	Capitalise on Kongsberg Aviation & Maintenance Services and Patria in the Maintenance, Repairs and Overhaul market		Capitalise on cross business synergies
2. Increase profitability	Efficiency focus and product harmonisation	Benefits of scale		Capitalise on innovations
3. Growth	Increase market share and position for new markets	Secure new markets		Turn recent investments into growing sales

IFRS16 adjustments

• EBITDA -and depreciation effects estimated to be ~equal in the period towards 2022
• Effects from interest leasing will gradually decrease in the period, hence long term effect on EBT will be ~0 towards 2022

IFRS16 adjustments continue

Depreciation per business area

*Other includes Group, KDI, property and eliminations

Estimated tax impact

Effective and payable tax rate until 2022

Tax positions	▪ Increased profits → Increased taxes → Accelerated use of tax positions ▪ KONGSBERG carries approx. BNOK 3.5 of losses carry forward ▪ Offshore taxes will not be impacted
Payable taxes	▪ Improved cash flow as deferred tax assets are utilised ▪ Improvement to correlate with losses utilised multiplied by statutory rate.
Effective taxes	▪ Approx. BNOK 2 of losses have not been capitalised in KONGSBERG ▪ Upon utilisation effective tax rate should come lower than statutory rate

Approaching turning point on ROACE

4 728 5 118 3 750 4 010 7 821 8 565 7 567 9 240 39,2 % 32,4 % 33,6 % 23,5 % 8,8 % 9,0 % 12,5 % 11,0 % 0% 5% 10% 15% 20% 25% 30% 35% 40% 0 1 000 2 000 3 000 4 000 5 000 6 000 7 000 8 000 9 000 10 000 2012 2013 2014 2015 2016 2017 2018 LTM Q2 2019 Average Capital Employed ROACE

Average Capital Employed (MNOK) and ROACE (%)

• Patria investment and Commercial Marine (CM) acquisition increasing capital employed.
  • ‒ The turnaround of CM is in the early stages

Roadmap 2019-2022

KONGSBERG 2022

BNOK 30 revenues with solid improvement in profitability