Kongsberg Automotive ASA Business Report FY ended Dec. 2016

Financial Overview

(in million EUR)
FY ended Dec. 31,
2016
FY ended Dec. 31,
2015
Rate of Change
(%)
Factors
Overall
Sales 985.7 1,016.0 (3.0) 1)
EBITDA 63.4 98.5 (35.6) -
Operating revenues by business segment
Interior 315.7 330.1 (4.4) 2)
Driveline 238.3 249.8 (4.6) 3)
Fluid Transfer 206.0 215.0 (4.2) 4)
Driver Control 260.5 256.1 1.7 5)


Factors
1) Net Sales
-The Company’s sales totaled EUR 985.7 million in the fiscal year ended December 31, 2016, a decrease of 3.0% compared with the previous year, which includes unfavorable currency effects of EUR 22.6 million. Excluding currency effects, revenues decreased by EUR 7.7 million. The decline in product sales was partially offset by higher non-product revenues, including engineering and tooling sales compared to 2015. The Sales decrease in the passenger car segments was mainly due to programs phasing out, price erosion, and exposure to less successful customers and vehicle platforms.

2) Interior Sales
-In the fiscal year ended December 31, 2016, the Interior segment’s sales totaled EUR 315.7 million in 2016, a decline of 4.4% compared to 2015. The decrease includes unfavorable year over year currency effects of EUR 5.4 million. The main drivers of the decline were phasing out programs in the global head-restraint business and lower sales in the Outdoor Power Equipment (OPE) business.

3) Driveline Sales
-Sales in the Company’s Driveline segment decreased by 4.6% to EUR 238.3 million in the fiscal year ended December 31, 2016, including negative currency effects of EUR 1.8 million. The decrease was related to programs being phased out, price erosion, and exposure to less successful vehicle platforms, partly offset by increased sales in the segment’s operations in China.

4) Fluid Transfer Sales
-The Fluid Transfer segment had sales of EUR 206.0 million in the fiscal year ended December 31, 2016, a 4.2% decline compared to the previous year, including negative currency effects of EUR 6.8 million. Weakness in both the North American industrial business and automotive business were the main drivers for the decrease. However, general declines across the FTS business also contributed to the decline, partly offset by strength in the couplings business in Europe.

5) Driver Control Sales
-The Driver Control segment’s sales increased by 1.7% to EUR 260.5 million in the fiscal year ended December 31, 2016, despite negative currency effects of EUR 9.2 million. The increase in sales was primarily driven by higher sales in both the recreational vehicle and vehicle dynamics business.

Restructuring

-In November 2016, the Company had outlined a plan to improve its performance and substantially reduce costs that included a reduction in the number of manufacturing facilities from 31 to 25, mainly within the Powertrain and Chassis products segment in Europe. On December 13, 2016, the Company began consultations related to closing its manufacturing facility in Basildon, UK, affecting 52 employees. The Basildon facility manufactured vehicle control systems, engineered pedals, electronic displays, cables and hand controls for the world’s top manufacturers of commercial, industrial, agricultural and construction vehicles. (From a press release on December 13, 2016)

Contracts

-Major Contracts during FY ended Dec. 2016 (From press releases in 2016)
Customer Product Contract detail and value Remark
Interior
Wide range of customers including European, Chinese and Japanese OEMs Seat comfort systems EUR 15 million over 3-8 years -
Major German automaker Seat support system EUR 34 million -The production is scheduled to start in the third quarter of 2018 from the Company's facility in Reynosa, Mexico.
German automaker Seat heating products EUR 54 million over 10-12 years -The production scheduled to start in the first quarter of 2017 from the Company’s facility in Reynosa, Mexico. Production for other brands will commence in the third quarter of 2017 in Pruszkow, Poland.
European premium automaker Door panel heating 4 years -The production is scheduled to start in the third quarter of 2017 from the Company’s facility in Pruszkow, Poland.
European premium automaker Seat support and massage systems EUR 26.7 million -The production is scheduled to start in the third quarter of 2017 from the Company’s facility in Pruszkow, Poland.
Driveline/Driver Control
Major European premium automaker Shift by Wire systems EUR 65 million over 7 years -Production supply will start in the second half of 2018.
Key commercial truck customer in China Cable gearshift systems EUR 8 million over4 years -Production for the domestic Chinese market is scheduled to start in the first quarter of 2017 from the Company’s SKADFM facility in Shanghai, China.
Chinese passenger car manufacturer On Board Chargers (OBC) for their next generation of plug-in hybrid electric vehicles EUR 49 million over 7 years -Supply from the Company’s facility in Wuxi, Jiangsu Province, China. Production will start in the first half of 2018, and is expected to reach peak volume in 2020.
Commercial vehicles manufacturer Automated Manual Transmission (AMT) EUR 100 million over 5 years -The contract will start to ramp up from 2020.
Major North American automaker Automatic gear shifter cables EUR 82 million over 6 years -Production under the contract will start in the second half of 2018 from the Company's facility in Nuevo Laredo, Mexico.

R&D Expenditure

(in million EUR)
FY ended Dec. 31, 2016 FY ended Dec. 31, 2015 FY ended Dec. 31, 2014
Overall 81.0 70.5 58.7
% of Sales 6.9 7.0 6.0

R&D Structure

-The Company has approximately 580 employees working in research and development.

R&D Facilities

-In November 2015, the Company completed its new research and development center located at its headquarters in Kongsberg, Norway. The Company will utilize the center as a global hub for developing next-generation automated manual transmission (AMT) systems for the commercial vehicle sector.

-The Company’s technical centers are located in Hallbergmoos, Germany; Novi, Michigan, U.S.; Grand Mere, Canada; Wuxi, China; Mullsjo, Sweden; and Kongsberg, Norway.

Capital Expenditure

(in million EUR)
FY ended Dec. 31, 2016 FY ended Dec. 31, 2015 FY ended Dec. 31, 2014
Interior 19.4 15.5 9.5
Driveline 7.7 8.4 9.2
Fluid Transfer 7.3 7.9 7.4
Driver Control 13.0 9.2 7.4
Eliminations & other 0.6 0.1 0.5
Total 48.1 41.0 34.0