Kongsberg Gruppen

Investor Presentation • Feb 12, 2020

INVESTOR PRESENTATION

Q4 2019

12/02/2020

Geir Håøy, President & CEO Gyrid Skalleberg Ingerø, EVP & CFO

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. © 2018 KONGSBERG – All rights reserved.

2019 - A GAME CHANGER

WORLD CLASS – Through people, technology and dedication KONGSBERG PROPRIETARY - See Statement of Proprietary information 2

Highlights Q4

• Solid organic growth
• Good earnings
• Strong cash flow

• Dividend proposal;

  • Ordinary 2.50 NOK/share
  • Extraordinary 10.00 NOK/share
  • Share buy-back MNOK 500

• RWS to Switzerland and Denmark

• C-UAS to Germany
• JSM to Japan
• Mobile Ground Based Air Defence to Norway

GROUP: DEFENCE: MARITIME: DIGITAL:

• High activity in Sensors & Robotics and Global Customer Support

• Continued improvement in EBITDA both in KM as a whole as well as Commercial Marine

• Nyhamna dynamic digital twin in operation since December

• Vessel Insight roll-out
• 10 % revenue growth

Value Capture program targets completion two years ahead of original plan

200 375 260 500 2019 2020 P&L effect relative to 2018, MNOK Initial plan Revised plan FY19A 500 2022 Planned completion two years ahead of initial plan

Revised plan for cost savings

Comments

• The program is ahead of schedule and planned realization of 500 MNOK annual cost synergies is expedited from 2022 to 2020
• The increased ambitions are supported by a number of initiatives including:
  • Deck Machinery restructuring
  • Consolidation of delivery organizations
  • Production footprint and make/ buy optimization
  • Harmonization of automation product portfolio
  • Further optimization of global footprint
• The systematic improvements will continue to drive fulfilment of the 2022 profitability ambitions communicated at the CMD

Financial status

Gyrid Skalleberg Ingerø, CFO

FY 2019 – KONGSBERG (KOG)

WORLD CLASS – Through people, technology and dedication KONGSBERG PROPRIETARY - See Statement of Proprietary information 6

FY 2019 – KONGSBERG (KOG)

MNOK

From Acquired Companies

WORLD CLASS – Through people, technology and dedication KONGSBERG PROPRIETARY - See Statement of Proprietary information 7

Book to bill 1,35 BNOK 7 aftermarket in KM by large not reflected in backlog (annual basis)

Q4 – KONGSBERG (KOG)

▪ Kongsberg Maritime

▪ Including Commercial marine (cm)

Kongsberg Maritime Q4

Improved order intake YoY in KM

MNOK

Q4 KM Order intake

Order intake Q4:	MNOK 4 148
KM ex. CM Q4:	MNOK 2 193 (+18.4% YoY)
CM Q4:	MNOK 1 954 (-30.0% YoY*)

Order intake 2019: MNOK 15 469

(+74.1% YoY)

KM ex. CM order intake 2019 +1.6% YoY

*CM Pro forma 2018

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

Q4 KM Revenues

Revenues Q4:	MNOK 5 490
KM excl. CM Q4: (*Growth +21.2% YoY)	MNOK 2 474
CM Q4: (+21.9% YoY**)	MNOK 3 016

Revenues 2019: MNOK 16 038 (*Growth +18.0% YoY) CM figures included as from Q2-2019

* Growth exclusive acquired companies **CM Pro forma 2018

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

KONGSBERG PROPRIETARY - See Statement of Proprietary information

Q4 Development Commercial Marine*

Special items (MNOK)	Q4	2019
Integration costs Commercial Marine	44	194
Restructuring costs Commercial Marine	56	143
Total	100	337

* Pro forma figures up to Q1-2019, adjusted EBITDA shown in Q2,Q3 and Q4 2019

3 016

KONGSBERG PROPRIETARY - See Statement of Proprietary information

Q4 KM EBITDA

Bridge to xKM EBITDA Q4 (YoY MNOK) EBITDA excl. IFRS 16 356 Restructuring- and integration costs 100 Adjusted EBITDA 456 CM EBITDA 209 xKM EBITDA 247 *) + - = = MNOK

KONGSBERG PROPRIETARY - See Statement of Proprietary information

10.0%

Value Capture program ahead of schedule

Broad range of measures executed in 2019	Realized cost savings FY19
• Footprint optimization: 15 sites co-located	P&L effect relative to 2018, MNOK
• Exit of Vung Tau (Vietnam) and Gdansk (Poland)		250	260
• Ship Design restructuring
• Announced restructuring of Deck Machinery	200
• Reduction of overcapacity across delivery organizations
• Digital marine activities unified and prioritized
• Benefit schemes harmonized
• Scale savings within sales, support and administrative functions
• More cost efficient set-up of group support functions
• Reduction of 485 FTEs of which 315 has left. Restructuring costs for the full reduction of 485 are taken in 2019
	Target	Revised guidance Q3

Realized savings

Integration cost status

Kongsberg Defence & Aerospace

Q4

Increasing order intake, strong backlog

MNOK

48% 10 744

Q4 2018

52%

2019

2020 →

Q4 KDA Order intake

Order intake Q4: MNOK 2 509

Order intake 2019: MNOK 16 060

(+41.7% YoY) (+133.3% YoY)

Q4 KDA Revenues

Revenues Q4: MNOK 2 468 Growth +30% YoY Revenues 2019: MNOK 7 245 Growth +19% YoY

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

KONGSBERG PROPRIETARY - See Statement of Proprietary information

Q4 KDA EBITDA

EBITDA-margin: 18.2% / 16.1%*

EBITDA Q4: MNOK 448 / MNOK 398*

EBITDA 2019: MNOK 1 157 / MNOK 990* EBITDA-margin: 16.0% / 13.7%*

*) ex. IFRS 16 effects

-20

-15

-10

-5

0

5

10

15

20

Balance sheet and cash flow (KOG)

Development in cash 2019

10 038 5 654 2 279 31 21 123 344 4 464 ^{710 448 423 238 122 15} EBITDA IFRS16 effect on financing CF Cash 1.1 Investm. in PPE and R&D Change in working capital Cash 31.12 Dividend paid Debt repayment Interest on debt Acquisitions (net) Dividend Others from associates Income Others from associates -4 384 Operating activities: MNOK +2 006 Financing activities: MNOK -1 216 Investing activities: MNOK -5 174

Q4 Strong balance sheet

Strong cash flow in Q4

	2017	2018	Q3 2019	Q4 2019
Gross interest bearing debt	3 340	4 332	4 090	4 089
Cash and short-term deposits	2 956	10 380	3 667	5 654
Net interest bearing debt	384	-5 706	423	-1 565
Equity ratio	35.6%	45.7%	35.7% 38.1%*	32.7% 34.7%*
ROACE	9.0%	12.5%	9.5%	10.0%

*) exclusive IFRS 16 effects.

2019 R&D

Sum of expensed and capitalized

Research & Development

2019 CAPEX

Capital Expenditures

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

Depreciation and amortization

Q4 19 actuals depreciation includes;

• 30 MNOK of PPA effects, of which 20 MNOK are from previous periods (Q2 and Q3)
• Increased depreciation going forward of 15 – 20 MNOK are related to investments in KDA

Dividend

The board proposes for the annual general meeting (AGM) on 14 may 2020 a dividend of NOK 12.50 per share for FY 2019

The proposal is split into an ordinary dividend of NOK 2.50 per share and an extraordinary dividend of NOK 10.00 per share for FY 2019.

Dividends shall over time constitute between 40 and 50 per cent of the company's ordinary net profit after tax, future capital requirements taken into account

				2017				2018			2019*
	Total dividends		MNOK 450		MNOK	450		MNOK	2 250
Payout ratio					81.2 %			64.2 %		313.8%
						127%				314%	* Proposal for 2019 AGM
					69%		69%	81%	64%		Policy ratio
30% 29%		32%	34%	51%							50% 40%
2009 2010		2011	2012	2013	2014	2015	2016	2017	2018	2019

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

Proposed dividend and share buy-back

Dividend and share buy-back	Total remuneration
	Total MNOK	NOK/ share
450 MNOK in ordinary dividend equivalent to 2.50 NOK /share ▪			500	2 750
1 800 MNOK in extra ordinary dividend, equivalent to 10.00 ▪ NOK/share		1 800
500 MNOK in share buy-back, equivalent to ~2% of current ▪ market capitalization	450
	Ordinary dividend	Extra ordninary dividend	Share buy-back	Total remuneration

2,50 10,00 ~2,77 ~15,27

Business update

Geir Håøy, President & CEO

Business update Kongsberg Defence & Aerospace

Important contracts

• Mobile Ground Based Air Defence to the Norwegian Army
• JSM follow-on contract with Japan
• RWS to Switzerland and Denmark
• Counter Unmanned Aerial System to Germany

Scaling business to deliver and position for new opportunities

• Increasing activity in all divisions
• Large recruiting campaigns
• Merging Protech and Defence Communications to new division: Land Systems

Maintenance, Repair and overhaul (MRO)

• KONGSBERG has long traditions on Helicopter MRO
• Expanded scope with KAMS acquisition
• Signed strategic agreements in Norway

Two important MROcontracts signed with NDLO in Q4

Naval vessels

Maintenance and engineering services including a breadth of the company's portfolio, from missile systems and weapon stations to command / control and navigation systems. Annual minimum scope is NOK 71 million for the first years.

NH-90 helicopters

Maintenance and support of the Norwegian NH-90 helicopter fleet for the years 2020- 2026. The estimated value is about NOK 400 million distributed over the first four years. Photo:Forsvaret

Business update Kongsberg Maritime

Solid performance…

• Revenue growth and improving margin
• Marine Robotics and Global Customer Support
• Integration of CM ahead of plan

…in a challenging market…

• 2019 turned out to be one historic low when it comes to contracting of new vessels in the market
• This applies to most segments except LNG, Cruise, ferries and FPSO

…positioned to be there in the future

• Product and portfolio optimization
• Energy management for greener hybrid solutions
• Equipment installed on ~30.000 vessels
• Further strengthen our hydro acoustics business

Enabling customers to reach their commitments to the UN Sustainability Goals

Hybrid Power

• KM's integrated hybrid power propulsion system offer proven efficiency benefits
• Designed to provide the best possible energy consumption at any time, while optimizing system redundancy and safety.
• Typically, a Kongsberg Maritime hybrid system is proven to offer fuel efficiency gains of around 20%, with corresponding reductions in emissions

Delivery to Golden Energy

• Upgrade of two Golden Energy offshore vessels including integrated hybrid power propulsion
• Saving in dynamic positioning mode (DP2):
  • 50 % reduction on engine running hours, corresponding to 20% reduced fuel consumption
  • Reducing CO2 by 300 tonns and NOx by one tonn
• Average savings all operational modes:
  • 34 % reduction of engine running hours, corresponding to 10% reduced fuel consumption
  • Reducing CO2 by 1 000 tonns and NOx by three tonns

"We appreciate the good cooperation with Kongsberg Maritime, it enables us to reach our goals and at the same time we have a front row seat in developing Green Operations."

KONGSBERG has entered into an agreement with Huntington to sell Kongsberg Hydroid

• Acquired in 2008 for ~430 MNOK
• KONGSBERG has through successful technology development created considerable value during the ownership period

Attractive exit multiple

• Sales price of ~3.2 BNOK on a debt and cash free basis
• Implied valuation of ~24x EV/EBITDA

New alliance and opportunities ahead

• KONGSBERG and Huntington have entered a strategic alliance
• Continue to strengthening KONGSBERG's world-leading underwater environment in Horten

Business update Kongsberg Digital and Patria

KDI

25 % revenue increase in 2019 and growing order intake

Book/bill 1.11 in 2019, 1.22 in Q4

Dynamic Digital Twin delivered and in operation

Continued roll out of Vessel Insight

KONGSBERG PROPRIETARY - See Statement of Proprietary information

PATRIA

Q4 revenues at MEUR 166, up from MEUR 150 YoY

| Finland and Latvia have agreed on a joint development program for sustained army mobility enhancement based on Patria's 6x6 vehicle platform

Patria has initiated and executed capacity adjustments in both Land Systems and Aerostructures divisions

EBITDA in Q4 was MEUR 15 (MEUR 22), KONGSBERG's share of net profit was MNOK 7 in Q4 (MNOK 65 in Q4 2018)

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

Outlook

KM

Good order backlog coverage and strong lifecycle business founds some revenue growth in 2020

Segments within new build market expected to remain challenging

KDA

Current backlog founds solid growth in 2020 independent of new contracting

Positioned for several major contracts over the next 1-2 years

KDI

Capitalize and accelerate on our positions related to dynamic digital twin and Vessel Insight

Emphasis on strategic opportunities

Q4 IFRS 16 effects (MNOK)

Q4 2019	KOG incl. IFRS 16	KM	KDA	Others	KOG ex. IFRS 16
Revenues	8 164	-	-	-	8 164
EBITDA	851	-80	-50	10	731
EBIT	554	-19	-14	9	530
EPS	1.92	-	-	-	1.98

2019	KOG incl. IFRS 16	KM	KDA	Others	KOG ex. IFRS 16
Revenues	24 081	-	-	-	24 081
EBITDA	2 279	-296	-167	40	1 856
EBIT	1 183	-52	-2	-20	1 109
EPS	3.89	-	-	-	4.27

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

Q4 Debt position Healty maturity profile

Bonds - Maturity profile (MNOK)

Net interest bearing debt (MNOK)

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

Realized savings of 260 MNOK FY2019

Realized cost savings

P&L effect relative to 2018, MNOK

Area	Realized FY19	Comments to realized savings
Footprint & delivery streamlining	41	Initial effects of co-locations, production facility shutdowns and optimization of delivery organizations
SG&A savings and synergies	179	Savings driven by more cost efficient set-up of support and sales functions, as well as harmonization of terms and benefits
Product portfolio optimization	40	Savings related to streamlining of digital marine spending (Ship Intelligence)
Total	260	Realized cost savings ahead of initial target of 200 MNOK

Restructuring cost incurred in 2019 is 142 MNOK

Q4 NWC

Net Working Capital by Business Area

Net Working Capital – Kongsberg Defence & Aerospace (MNOK)