Q4 2012/ PRELIMINARY ANNUAL ACCOUNTS 2012

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1 / PRELIMINARY ANNUAL ACCOUNTS / PRELIMINARY ANNUAL ACCOUNTS 2012 PAGE 1

2 KONGSBERG 2012/ PRELIMINARY ANNUAL ACCOUNTS 2012 KONGSBERG had a high level of activity in 2012, with operating revenues of MNOK This is 8.4 per cent higher than in Changes in the project mix and higher costs, especially at Kongsberg Maritime, brought lower margins compared with The Group was awarded strategically important contracts in, and the influx of new orders was good. The backlog of orders was valued at MNOK at year-end 2012, providing a good foundation for The preliminary annual accounts for 2012 show operating revenues of MNOK , compared with MNOK in 2011, i.e. an increase of 3.5 per cent brought substantial growth for both Kongsberg Maritime and Kongsberg Defence Systems, while Kongsberg Protech Systems reduced its level of activity, but with good margins. EBITA was MNOK in 2012, a reduction from MNOK in The provisional profit for the year after tax was MNOK (MNOK 1 430) equal to NOK per share (11.93). Based on this, the Board of Directors proposes to the annual general meeting that the dividend for 2012 be set at NOK 3.75 per share (NOK 3.75), comparable to a dividend share of 33.9 per cent. MAIN KEY FIGURES 2012 PROVISIONAL PROFIT FOR 2012 Operating revenues: MNOK (MNOK 3 883) MNOK (MNOK ) EBITA: MNOK 480 (MNOK 544) MNOK (MNOK 2 132) EBITA margin: 11.4 per cent (14.0 per cent) 12.7 per cent (14.1 per cent) Profit after taxes: MNOK 302 (MNOK 353) MNOK (MNOK 1 430) New orders: MNOK (MNOK 3 970) MNOK (MNOK ) Earnings per share (EPS) NOK 2.53 (NOK 2.98) NOK (NOK 11.93) * The figures in parentheses refer to the same quarter of the preceding year. OPERATING REVENUES EBITA EPS / PRELIMINARY ANNUAL ACCOUNTS 2012 PAGE 2

3 HIGHLIGHTS OF KONGSBERG MARITIME (KM) KONGSBERG DEFENCE SYSTEMS (KDS) KONGSBERG PROTECH SYSTEMS (KPS) AUV contract with the German Navy for six REMUS vessels Final deliveries to BP s Skarv FPSO Continued strong influx of new orders, especially from the offshore market Strategically important contracts for deliveries for submarines to be built in South Korea: Value MUSD 55.5 Kongsberg Satellite Services (KSAT) has signed a framework contract for ground station services: Value approx. MNOK 104 Contracts for the delivery of Remote Weapon Stations (RWS) to the Canadian Tactical Armored Patrol Vehicle (TAPV) programme: Estimated value MNOK 600 Order for the CROWS III programme: Value MNOK 161 Successful MCRWS tests HIGHLIGHTS OF 2012 KONGSBERG MARITIME (KM) KONGSBERG DEFENCE SYSTEMS (KDS) KONGSBERG PROTECH SYSTEMS (KPS) Very strong influx of orders from the offshore segment Significant orders for deliveries to floating production, storage and offloading vessels (FPSO) Strong influx of new orders for AUVs Establishment of a new global after-market system the 24/7 concept Follow the sun USA expressed its support for the integration of the JSM on the F-35 Contract with the Norwegian Armed Forces Logistics Organisation (NAFLO) for deliveries to the Navy s ULA Class submarines Contract for Penguin anti-ship missiles for the Brazilian Navy Contract with BAE systems for deliveries to the Norwegian Army s infantry fighting vehicle Successful NSM demonstration firings from vessels CROWS III framework agreement with the US Army Contract with the Canadian TAPV programme Delivery of CROWS number KEY FIGURES MNOK Operating revenues EBITDA EBITA EBITA margin (%) ,0 12,7 14,1 Earnings before tax Earnings after tax EPS (NOK) New orders OPERATING REVENUES BY AREA KPS 18% KDS 30% Øvrig 4% KM 48% EBITA BY AREA MNOK Equity ratio (%) Net interest-bearing dept (1 198) (567) (2 191) Net interest-bearing dept/ebitda n/a n/a n/a Working Capital Order backlog No. of employees KPS 32% KDS 25% KM 43% Throughout 2012, we further reinforced our market positions, and we are entering into 2013 with healthy backlogs of orders in most segments Walter Qvam, konsernsjef 2012/ PRELIMINARY ANNUAL ACCOUNTS 2012 PAGE 3

4 PERFORMANCE AND THE ORDER SITUATION Operating revenues in 2012 totalled MNOK 4 209, up 8.4 per cent compared with EBITA was MNOK 480 (MNOK 544), which translates into an EBITA margin of 11.4 per cent (14.0 per cent). Earnings before tax came to MNOK 428 (MNOK 491) in, while earnings after tax were MNOK 302 (MNOK 353). Accumulated operating revenues at year-end 2012 were MNOK , up 3.5 per cent compared with year-end In 2012, the EBITA margin was 12.7 per cent (14.1 per cent). New orders were also good in, ending at MNOK (MNOK 3 970). During the year, Kongsberg Maritime had a strong influx of new orders, and the two defence segments won several strategically important contracts. New orders added up to MNOK (MNOK ) in NEW ORDERS ORDER BACKLOG Breakdown by delivery dates % % NEW ORDERS BY AREA KPS 26% Øvrig 5% KDS 24% KM 45% CASH FLOW KONGSBERG saw a net increase in bank deposits and cash equivalents of MNOK 629 in. Net current assets and other operations-related items reduced by MNOK 308 in MNOK EBITDA Change in net current assets and other operating related items (2 101) (751) Net cash flow from operating activities Net cash flow from investing activities (243) (259) (713) (799) Net cash flow used in financing activities (2) (5) (49) (425) Effect of changes in exchange rates on cash and short-term deposits (10) 15 (19) 4 Net change in cash and short-term deposits (574) / PRELIMINARY ANNUAL ACCOUNTS 2012 PAGE 4

5 BALANCE SHEET Total consolidated working capital remained stable during the quarter. A good cash flow from operating activities improved net interestbearing debt by MNOK 631. At year-end 2012, the Group had net interest-bearing debt of MNOK KONGSBERG has an undrawn credit facility of MNOK with maturity in July KONGSBERG s cash flow and working capital can fluctuate significantly from quarter to quarter, owing not least to customers payment dates, payments to suppliers and the amount of capital tied up in ongoing projects MNOK Equity Equity ratio (%) Total assets Gross bank deposits and cash equivalents Gross interest-bearing liabilities Net interest-bearing liabilities (1 198) (567) (2 191) Working capital HUMAN RESOURCES KONGSBERG had employees at year-end 2012, 36 per cent of whom worked outside Norway. The increase of 186 employees during the quarter was mainly attributable to the acquisition of Advali by Kongsberg Oil & Gas Technologies. There was also an increase in the number of employees at Kongsberg Maritime, while there was a reduction at Kongsberg Protech Systems. The reduction was due to a lower level of activity. The reduction was in its entirety conducted by offering employees other positions with KONGSBERG, as well as by voluntary attrition. NUMBER OF EMPLOYEES BY BUSINESS AREA KPS 10% Øvrig 9% KDS 24% KM 57% CHANGES IN CORPORATE EXECUTIVE MANAGEMENT AS FROM 1 JANUARY 2013 On 1 January 2013, Egil Haugsdal became Executive Vice President Corporate Business Development, with responsibility for strategy, M&A, integration and new areas. Haugsdal came from the position as president of the business area Kongsberg Protech Systems. Stig Trondvold left his role in the Corporate Executive Management as from 1 January 2013 of his own volition. Trondvold was responsible for business development at KONGSBERG, and will be moving to a new role with the Group. As of 1 January 2013, Espen Henriksen took over as president of Kongsberg Protech Systems, joining the Corporate Executive Management at Kongsberg Gruppen ASA at the same time. Henriksen has worked at KONGSBERG since 2007, most recently as Vice President of Operations at Kongsberg Protech Systems. Prior to this, he had years of experience with Kværner and Aker Kværner. As of 1 January 2013, the Corporate Compliance Officer Lene Svenne, is a member of Corporate Executive Management. OTHER ACTIVITIES Other activities mainly consist of Kongsberg Oil & Gas Technologies and external sales related to property operations. In, Kongsberg Oil & Gas Technologies acquired the company Advali and signed a contract for the purchase of the company Apply Nemo. The purchase was concluded in January Advali had a turnover in 2012 of approx. MNOK 37, and has its main operations in India, and specialises in different elements of the value chain for software development, especially as related to the oil and gas market. The acquisition strengthens the capacity, expertise and efficiency of Kongsberg Oil & Gas Technologies in software development. The acquisition of the Norwegian subsea technology company Apply Nemo contributes to substantial growth in one of KONGSBERG s strategic target areas, strengthening the Group s position as a supplier of advanced engineering services, products and solutions for subsea oil and gas installations. Apply Nemo had a turnover in 2012 of approx. MNOK 274, and is headquartered in Oslo. The company is well established in the North Sea and in Australia. Since it was founded in 1989, the company has become a product-oriented organisation that offers extensive experience in subsea engineering, as well as in the development and production of subsea products. The acquisitions strengthen the position of Kongsberg Oil & Gas Technologies as a software and hardware supplier to the oil and gas industry. 2012/ PRELIMINARY ANNUAL ACCOUNTS 2012 PAGE 5

6 KONGSBERG MARITIME KEY FIGURES MNOK Op. revenues EBITA EBITA margin (%) New orders MNOK Order backlog No. of employees PERFORMANCE There was a high level of activity also in, and all divisions earned operating revenues higher than or on a par with operating revenues were 22.6 per cent higher than in The margin was lower than in This is partly due to changes in the project and product mix and to a somewhat higher level of costs, among others for product development, compared with OPERATING REVENUES EBITA / PRELIMINARY ANNUAL ACCOUNTS 2012 PAGE 6

7 OPERATING REVENUES YTD 2012 OPERATING REVENUES YTD 2011 Subsea 25% Subsea 26% Merchant 16% Offshore 59% Merchant 22% Offshore 52% PROVISIONAL PROFIT FOR THE YEAR 2012 operating revenues for Kongsberg Maritime came to MNOK (MNOK 6 693). The Offshore and Subsea Division improved its operating revenues relative to The Merchant Marine Division saw a reduction in operating revenues compared with last year. Against the backdrop of the generally weak shipping market in 2012, the division made it through a challenging year relatively well. The EBITA margin was reduced in all divisions. Although there are several contributing factors, this can mainly be ascribed to changes in the project and product mix, a higher cost base as a result of the high volume of orders for future delivery, and substantial expenses related to product development. Moreover, substantial cost overruns of MNOK 100 were incurred on a few large projects, including additional costs of approx. MNOK 50 as a result of the bankruptcy of a subcontractor. The projects are in the phase of completion and are under control NEW ORDERS MARKETS AND NEW ORDERS All Kongsberg Maritime divisions reported an improved level of new orders in 2012, compared with For the year as a whole, the Offshore and Subsea Divisions booked new orders that exceed operating revenues. The Merchant Marine Division booked orders on a par with operating revenues. This is considered good in a market characterised by a low level of new orders. During the year, many major contracts were won for deliveries for advanced rigs and drilling vessels, floating production and storage units (FPSO), and advanced construction and seismic vessels. The business area has improved its position in respect of deliveries to advanced offshore supply vessels (OSV) and standard platform supply vessels (PSV). Over the past six years, Kongsberg Maritime has applied a Full Picture solution for BP s Skarv FPSO. This has been the largest single project undertaken by Kongsberg Maritime and, in December, the Skarv FPSO was put into operation. Kongsberg Seatex s positioning concept for marine seismic streamer control, ebird, saw a positive trend in There is still high activity in life-cycle support. The Subsea Division had a strong influx of new orders in a number of areas, and several AUV contracts were signed in. These include an agreement with the German Navy for six REMUS vessels. ORDER BACKLOG Breakdown by delivery dates % % Over the past five to six years, exploration and production activities have migrated towards deeper water and further from land. This has boosted demand for advanced offshore vessels. During this period, Kongsberg Maritime has invested a great deal in developing products and technologies aimed at this market segment. Modern equipment and technology enable customers to conduct their operations in a safer, more efficient manner. The business area is very well positioned in this market. Order backlog at the end of, MNOK In 2012, Kongsberg Maritime added 463 employees, 60 per cent of whom are employed outside Norway. 2012/ PRELIMINARY ANNUAL ACCOUNTS 2012 PAGE 7

8 KONGSBERG DEFENCE SYSTEMS KEY FIGURES MNOK Op. revenues EBITA EBITA margin (%) New orders MNOK Order backlog No. of employees PERFORMANCE The business area saw a good trend in volume in. Operating revenues were up 13.3 per cent compared with Kongsberg Defence Systems also posted a good EBITA margin in and for 2012 as a whole, compared with OPERATING REVENUES EBITA / PRELIMINARY ANNUAL ACCOUNTS 2012 PAGE 8

9 OPERATING REVENUES YTD 2012 OPERATING REVENUES YTD 2011 Integrated Defence Systems 33% Comm. 7% Missile Systems 28% Integrated Defence Systems 28% Comm. 5% Missile Systems 31% Naval Systems 22% Aerostructures 11% Naval Systems 27% Aerostructures 9% PROVISIONAL PROFIT FOR THE YEAR Kongsberg Defence Systems still has a good volume trend and earned operating revenues of MNOK (MNOK 3 895) in All divisions have seen an increase in operating revenues compared with This is among other things, a result of several large-scale delivery projects being in their most intensive delivery phases. Generally speaking, Kongsberg Defence Systems also experienced smooth operations and successful deliveries in The EBITA margin for Kongsberg Defence Systems was 8.2 per cent (6.8 per cent) in NEW ORDERS MARKETS AND NEW ORDERS Major contracts in : Kongsberg Satellite Services (KSAT) is continuing its collaboration with the Indian Space Research Organization (ISRO) of Bangalore, India. The agreement is a framework contract for the delivery of services related to data reception from and control of ISRO s satellites. KSAT will primarily supply ground station services. The contract has duration of up to six years with options, and a total value of about MNOK 104 (MUSD 18.5) Contract with the South Korean shipyard Daewoo Shipbuilding & Marine Engineering (DSME) for delivery of components to three new submarines. The contract is valued at USD was a year characterised by large-scale deliveries in progress. The delivery projects for coastal artillery to Poland and air defence to Finland both reached many important milestones during the year. The projects are on schedule in terms of both timing and quality. The third large-scale delivery project in progress is the Naval Strike Missile (NSM) for Norway, which is also on schedule and being delivered as expected. In October, the Royal Norwegian Navy conducted two demonstration firings of the NSM from coastal corvette and frigate class vessels. These were the first firings from an operational weapon control system and they were both successful. In June, the Norwegian government announced that the USA had confirmed its support for the integration of the Joint Strike Missile (JSM) on the F-35. This marked an important milestone for KONGSBERG. Possible full-scale production would open significant long-term contract opportunities for KONGSBERG as well as other Norwegian subcontractors. Several important contracts were signed during the year. Of these, mention is made of: Penguin missiles to Brazil Command and control system for the Navy s Ula Class submarines Contracts for deliveries to NATO s Alliances Ground Surveillance programme Combat systems for the Norwegian Army s upgrading of CV90 ORDER BACKLOG Breakdown by delivery dates % % Many nations continue to cut back their defence budgets. KONGSBERG nonetheless considers itself to be well positioned, thanks to its portfolio of modern, advanced and cost-efficient niche products. The defence market is characterised by relatively few, but large-scale contracts, meaning that it is normal to see fluctuations in new orders. The backlog of orders at the end of 2012 was at a good level. Order backlog at the end of, MNOK / PRELIMINARY ANNUAL ACCOUNTS 2012 PAGE 9

10 KONGSBERG PROTECH SYSTEMS KEY FIGURES MNOK Op. revenues EBITA EBITA margin (%) New orders MNOK Order backlog No. of employees PERFORMANCE The business area has seen a decline in operating revenues, largely due to changes in delivery schedules, postponements of new orders and a lower volume of contracts. sales were slightly weaker than expected since deliveries to a customer were postponed until The good margin is primarily a result of a favourable project mix, where the deliveries are related to contracts signed several years ago, when the level of costs per system was higher. Some of the performance improvement can be ascribed to carry-backs of guarantee provision made previously. OPERATING REVENUES EBITA / PRELIMINARY ANNUAL ACCOUNTS 2012 PAGE 10

11 PROVISIONAL PROFIT FOR THE YEAR Operating revenues for Kongsberg Protech Systems came to MNOK (MNOK 4 185) in The reduction is primarily attributable to reduced deliveries to the US CROWS programme. The EBITA margin increased from 18.0 per cent in 2011 to 22.8 per cent in The strong margin was ascribable, among other things, to a favourable product and project mix, and to carry-backs of guarantee provision as a result of product improvements. Several of the contracts completed in 2012 were signed back when the business area s level of costs was higher. In addition to making the business area more competitive in a situation in which the general price level is lower than before, this efficiency improvement has led to a favourable level of costs. In 2012, several initiatives were conducted to reduce operating costs and adapt the organisation to a new level NEW ORDERS MARKETS AND NEW ORDERS Major contracts in : The first order under the CROWS III contract was booked in October. The order had a total value of MNOK 161 In June, Textron, a KONGSBERG partner, was chosen to supply vehicles to the Canadian Tactical Armored Patrol Vehicle (TAPV) programme. KONGSBERG s contract as a supplier of remote weapon control systems was formalised in November. The contract has a value for KONGSBERG of approx. MNOK was a year characterised by lower sales and fewer new orders for the business area. The dip in new orders occurred not least because the largest customer is subject to less time pressure with a view to procurements than what has been the case in recent years was nonetheless a very important year for this business area. The two most important contracts in the market for remote weapon control stations, TAPV and CROWS III, were decided in 2012, and KONGSBERG won both of them. This further confirms the very strong position KONGSBERG has in this market, and that the PROTECTOR Remote Weapon Station is still the leading weapon control system in its class was also a busy year for marketing activities, including pro-active efforts aimed at new markets and development activities. The Division s most important development programme is the Medium Caliber Remote Weapon Station (MCRWS). MCRWS has a large market potential, also in new markets, and the product is attracting a great deal of interest. Several successful demonstrations were conducted in 2012 in the presence of numerous potential customers. However, decision-making processes in the defence market seem to be taking longer time than what was previously the case, and it may still be some time before the first delivery contract is signed. Contracts for large-scale delivery volumes will come later. ORDER BACKLOG Breakdown by delivery dates % % Order backlog at the end of, MNOK / PRELIMINARY ANNUAL ACCOUNTS 2012 PAGE 11

12 PROSPECTS FOR THE FUTURE In recent years, Kongsberg Maritime has built up very good market positions, which it is expected to maintain in 2013 as well. The business area s markets are strongly impacted by trends in the offshore industry as well as in world trade in general. New orders for offshore-related vessels are expected to remain at a good level. Orders for new merchant vessels are still relatively slow, and that has had and will, over time, have an impact on Kongsberg Maritime s new orders from this segment. In the long term, it is expected that this segment will stabilise at a satisfactory level. The strengthening of the global after-market and customer support will continue to yield good results. At the same time, they are important components in Kongsberg Maritime s product portfolio. The strong influx of orders over the past year gives a good basis for Kongsberg Maritime s operating revenues again in Kongsberg Defence Systems has several major long term delivery programmes in the engineering and production phase, providing a good foundation for earnings again in The business area is exploring specific prospects for sales and for the further development of missiles, submarine systems and air defence. The development of the Joint Strike Missile (JSM) is on schedule and may represent significant future potential for KONGSBERG. Operating revenues are expected to remain at a good level in Kongsberg Protech Systems has built up a very strong position on the world market for vehicle-based weapons control systems. This was further confirmed in 2012 by the awarding of the CROWS III contract in the USA and the TAPV contract in Canada. Customers procurement decisions appear to be taking longer now than they used to in this market. Kongsberg Protech Systems has expanded its product portfolio over the past year, among others with the Medium Caliber Remote Weapon Station, and is considered to have a product portfolio that is well positioned for future needs. Kongsberg Protech Systems enters into 2013 with a level of activity that is somewhat slower than what it has been in recent years. Sales in 2013 will to a greater extent consist of deliveries from recently signed contracts than what was the case in Among other things, the business area will start delivering on the CROWS III contract which has lower margins. KONGSBERG has strengthed its positions in the shipping, offshore and defence markets in The Group has a good order backlog moving into 2013, providing a good foundation for operations. Kongsberg, 7 February 2013 The Board of Directors of Kongsberg Gruppen ASA 2012/ PRELIMINARY ANNUAL ACCOUNTS 2012 PAGE 12

13 KEY FIGURES BY QUARTER KONGSBERG MARITIME MNOK Op. revenues EBITA EBITA % 10.2 % 13.2 % 11.4 % 14.2 % 15.1 % 18.7 % 14.5 % 16.3 % New Orders Order backlog New orders/op. revenues No. of employees KONGSBERG DEFENCE SYSTEMS MNOK Op. revenues EBITA EBITA % 9.8 % 9.6 % 6.2 % 7.4 % 11.4 % 4.6 % 3.7 % 6.5 % New Orders Order backlog New orders/op. revenues No. of employees KONGSBERG PROTECH SYSTEMS MNOK Op. revenues EBITA EBITA % 20.4 % 28.3 % 22.8 % 19.7 % 12.8 % 22.1 % 18.8 % 17.9 % New Orders Order backlog New orders/op. revenues No. of employees / PRELIMINARY ANNUAL ACCOUNTS 2012 PAGE 13

14 INCOME STATEMENT MNOK Note Operating revenues Operating expenses (3 633) (3 261) (13 344) (12 734) EBITDA Depreciation (96) (78) (323) (262) EBITA Amortisation (33) (30) (119) (97) Impairment (2) - (12) - EBIT Net financial items (17) (23) (23) (27) Earnings before tax (EBT) Income tax (126) (138) (511) (578) Earnings after tax Attributable to: Non-controlling interests (2) (5) (5) (1) Equity holders of the parent Earnings per share (EPS), NOK Earnings per share, diluted NOK STATEMENT OF COMPREHENSIVE INCOME FOR THE PERIOD MNOK Note Earnings after tax Change, fair value of financial instr. and hedge instr. for cash flow hedges: 5 - Change, cash flow hedges and int. rate swap agreements (28) (25) 110 (261) - Change, available-for-sale inv (12) Actuarial gains/losses pensions (139) (246) (139) (246) Translation differences, foreign currency (27) 30 (63) 14 Tax on items recognised against statement of comprehensive income Comprehensive income / PRELIMINARY ANNUAL ACCOUNTS 2012 PAGE 14

15 STATEMENT OF FINANCIAL STATUS MNOK Note Property, plant and equipment Intangible assets Other non-current assets Total non-current assets Inventories Trade receivables Other current assets Cash and short-term deposits Total current assets Total assets Paid-in equity Retained earnings Fair value of financial instruments Non-controlling interests Total equity Long-term interest-bearing debt Other non-current liabilities and provisions Total non-current liabilities and provisions Construction contracts under construction, liabilities Short-term interest bearing debt Other current liabilities and provisions Total current liabilities and provisions Total equity, liabilities and provisions Equity ratio (%) Net interest-bearing liabilities (1 198) (567) (2 191) Net interest-bearing debt/ebitda (%) n/a n/a n/a STATEMENT OF CHANGES IN EQUITY MNOK Equity opening balance Comprehensive income Dividends (450) (450) Treasury shares (6) (6) Acquisition/disposals non-controlling interests (2) (5) Dividends non-controlling interests (1) (1) Change in non-controlling interests (3) (2) Equity, closing balance / PRELIMINARY ANNUAL ACCOUNTS 2012 PAGE 15

16 CASH FLOW STATEMENT MNOK Earnings before interest, tax, depreciation and amortisation Change in net current assets and other operating related items (2 101) (751) Net cash flow from operating activities Acquisition of property, plant and equipment (165) (112) (523) (434) Acquisition of subsidiaries and non-controlling interests (56) (91) (69) (226) Net payment of loans and acquisition/sale of shares - - (12) Other investing activities (22) (56) (121) (127) Net cash flow from investing activities (243) (259) (713) (799) New loans raised and repayment (2) Net interest received (paid) Net payments for the purchase/sale of treasury shares - (5) (19) (19) Transactions with non-controlling interests - (9) (5) (8) Dividends paid to equity holders of the parent - - (450) (450) Net cash flow used in financing activities (2) (5) (49) (425) Effect of changes in exchange rates on cash and short-term deposits (10) 15 (19) 4 Net change in cash and short-term deposits (574) 423 Cash and short-term deposits opening balance Cash and short-term deposits, closing balance / PRELIMINARY ANNUAL ACCOUNTS 2012 PAGE 16

17 NOTES TO THE QUARTERLY ACCOUNTS NOTE 1 - INFORMATION BY SEGMENT Operating revenues Op. profit before amortisation (EBITA) MNOK Kongsberg Maritime Kongsberg Defence Systems Kongsberg Protech Systems Øvrig, elimineringer (6) THE GROUP NOTE 2 - GENERAL INFORMATION AND PRINCIPLES The consolidated accounts encompass Kongsberg Gruppen ASA, its subsidiaries and the Group s stakes in associates. The interim accounts have been drawn up in accordance with IAS 34 for interim reporting, the Stock Exchange regulations and the supplementary requirements in Norway s Securities Trading Act. The interim accounts do not include all the information required for a full financial statement and should therefore be read in the light of the consolidated accounts for The consolidated accounts for 2011 comply with the rules in the Norwegian Accounting Act and with international financial reporting standards, as laid down by the EU. KONGSBERG has applied the same accounting policies as are described in the consolidated accounts for The consolidated accounts for 2011 are available upon request from the Group s headquarters in Kongsberg or at The interim accounts have not been audited. NOTE 3 ESTIMATES The preparation of the interim accounts entails the use of valuations, estimates and assumptions that affect the application of the accounting policies and the amounts recognised as assets and liabilities, income and expenses. The actual results may deviate from these estimates. The material assessments underlying the application of the Group s accounting policies and the main sources of uncertainty are the same as for the consolidated accounts for NOTE 4 EQUITY-FINANCED DEVELOPMENT In 2012, development costs of MNOK 233 (MNOK 205) were charged against income. In addition, MNOK 16 (MNOK 56) in equityfinanced development was capitalised in. NOTE 5 FINANCIAL INSTRUMENTS Credit facilities KONGSBERG has undrawn overdraft facilities of MNOK Other non-current assets The value of available-for-sale shares has increased by MNOK 16 since year end. In addition, an unrealised loss of MNOK 5 has been recognised. Currency futures, options and interest swap agreements The fair value of currency futures, currency options and interest swap agreements, which are classified as prognosis hedges (cash flow hedges), has increased by MNOK 110 before tax since year end. The change in fair value associated with currency futures and options accounted for an increase of MNOK 150 during the same period. The currency exchange rates on the spot market at end quarter were NOK 5.53/USD 1 and NOK 7.32/EUR 1. MNOK (before tax) Value based on agreed exchange rates Falling due in 2013 Falling due in 2014 or later Total Net excess value at 31 Dec 12 Value based on agreed exchange rates Net excess value at 31 Dec 12 Value based on agreed exchange rates Change in excess value from 31 Dec 11 Net excess value at 31 Dec 12 EUR USD Deferred gain 1) (42) 89 Totalt ) The gain arises when the prognosis hedges mature and new hedges are secured for the projects. Any gains/losses that arise are deferred and realised proportional to the progress of the project. 2012/ PRELIMINARY ANNUAL ACCOUNTS 2012 PAGE 17

18 NOTES TO THE QUARTERLY ACCOUNTS NOTE 6 CLOSE ASSOCIATES Note 27 in the Annual Report for 2011 lists the details of transactions with close associates. There were no changes or transactions in in conjunction with close associates that had any material impact on the Group s financial position or on the profit or loss for the period. NOTE 7 KEY RISK AND UNCERTAINTY FACTORS No important new risk or uncertainty factors were discovered during the quarter. For a description of how the Group deals with different risks, please see the Annual Report for NOTE 8 EVENTS SUBSEQUENT TO THE BALANCE SHEET DATE Kongsberg Oil & Gas Technologies AS (KOGT), a wholly-owned subsidiary of Kongsberg Gruppen ASA has, as from 8 January 2013, acquired 100 per cent of the shares in Apply Nemo AS. Apply Nemo AS is an independent supplier of advanced engineering services, products and solutions for subsea oil and gas installations. The acquisition will strengthen Kongsberg Oil & Gas Technologies offerings and capacity in the subsea oil and gas market. The company is headquartered in Oslo and is established in the North Sea and in Australia. The company has 172 employees. The shares in Apply Nemo AS were acquired for MNOK 340. The process to allocate the purchase price has been implemented, but had not been clarified at the time of reporting for / PRELIMINARY ANNUAL ACCOUNTS 2012 PAGE 18

19 NOTES 2012/ PRELIMINARY ANNUAL ACCOUNTS 2012 PAGE 19

20 WORLD CLASS - THROUGH PEOPLE, TECHNOLOGY AND DEDICATION / PRELIMINARY ANNUAL ACCOUNTS 2012 PAGE 20