Kongsberg Business Report FY2007

Business Highlights

Financial overview

(in NOK million) FY2007 FY2006 Rate of Change(%) Factors
Sales 3,194 2,863 11.6 See (1) below
EBIT 212 276 (23.1)
Operating revenues by business segment
-Driveline & Chassis 1,750 1,474 18.7 See (2) below
-Seat Comfort 1,441 1,389 3.7 See (3) below

Overall Sales

The revenue growth of 11.6 percent reflects overall higher production volumes related to a booming market for heavy-duty trucks in Europe and continued growth in the global market for passenger cars, particularly in Eastern Europe and Asia. Overall, its sales grew faster than the markets did, reflecting expanding market shares for the Company. Operating profit was NOK 212 million (276).  Production capacity constraints, pricing pressure, negative currency effects in the United States and increased spending on research and development all contributed to an erosion of EBITA margin from 9.6 percent to 6.6 percent and of net profit margin from 5.4 percent to 3.9 percent. Another significant drag on margins was the one-off cost of transferring seat-comfort manufacturing production from Amotfors, Sweden, to a plant in Poland.

Driveline & Chassis

-Sales of the clutch actuation systems, gearshift systems, air couplings and other components for heavy-duty trucks rose in Europe, partly as a result of the Company's increased market share. Sales of commercial vehicle systems in Asia were up, reflecting the rapid economic growth of China, Korea and other Asian nations. In Brazil, sales rose by over 30 percent. The Company does very little business in the North American commercial vehicle market. Driveline & Chassis Division included a range of technologically advanced products for both commercial vehicles and passenger cars. Operating revenues for the division rose 18.7 percent to MNOK 1,750, while EBITA rose 11.9 percent to NOK 130.4 million. Margins dropped slightly on an annual basis. But by the 4th quarter 窶 which was the best ever for driveline & chassis revenue 窶 margins were back on par with the 4th quarter of 2006.

Seat Comfort
-Operating revenues in the Seat Comfort Division rose by just under 4 percent, to NOK 1,441 million, while EBITA declined to NOK 122 million (183). The one-off cost relating to the closure of Amotfors plant (Sweden), and the transfer of its operations to Pruszkow (Poland) was NOK 12 million in the 4th quarter. The transfer is expected to reduce annual expenses by NOK 15 million to NOK 20 million. Performance at plant in Milan, Tennessee, was weak during second half of 2007 but was improving by the end of the year.

-In January 2008, the Company completed the acquisition of Teleflex (TFX) automotive activities plus other vehicle related businesses for $560 million on a cash and debt free basis. The acquired activity, named Global Motion Systems (GMS), has a world leading position in developing, producing and marketing systems for gear shift, seat comfort, fluid systems and other industrial vehicle control systems. GMS has a global presence with about 8,000 employees working in 16 production facilities in North and South America, 13 factories in Europe and 5 factories in Asia. In 2006 GMS had annual revenues of $855 million. GMS is a long term supplier to blue chip customers like Mercedes Benz, Toyota, Ford, Chrysler, GM, Renault, Nissan, VW, BMW, Peugeot, Lear Corporation, Caterpillar and Scania. The merged Kongsberg Automotive will have revenues of approximately Euro 1 billion, with more than 50 facilities, in 20 countries, on all continents, and over 11,000 employees.

-The Company has long been transferring production, when appropriate, from high cost countries like Norway, Sweden and Germany to lower-cost locations in Eastern Europe, the Americas and Asia. In September 2007, the Company started union negotiations for closing the Amotfors factory in Sweden. Its Board of Directors recommended that the production in Amotfors should be transferred to the company's production facilities in Poland.


R&D Structure
-R&D facility is located in Kongsberg, Norway.

Investment Activities

Capital Expenditures

(in NOK million)

FY2007 FY2006
Driveline & Chassis 145 99
Seat Comfort 64 45
Other 4 3
Total 213 147