2018 Annual Report 2 A DEFINING YEAR FOR NAMMO I am pleased to present Nammo’s In a world that is becoming ever Embodying our values of annual results for 2018. more divided and more fearful of Dedication, Precision and Care, its future, we look to the dedicated every day, in everything we do. I believe this might well be the year individuals who, whether in our out we will look back on as the one where A flat, non-bureaucratic organization, of uniform, work to keep us safe, we defined the future of our company. driven by customer needs, offering to help us explore, and to make a truly reliable advantage. We took a major step towards us proud. Nammo’s mission is becoming the world leader in range to enable these individuals to do We will simplify, streamline and extension technologies, which may just that. Our commitment to our improve our organization. We will lead to one of the biggest changes customers must go beyond what remove any obstacles that keep in the role of artillery and missiles can be captured by a contract. us from delivering our best. on the battlefield in decades. Nammo’s 2018 results, with record And we will remain committed to We concluded development of the sales and order books, confirm pursuing niche technologies that M72 Fire From Enclosure, allowing that this commitment is being both deliver not only on the requirements soldiers and marines to fight and recognized and appreciated. of today, but help our customers take win with far less risk to themselves on the challenges of tomorrow. THE FUTURE OF NAMMO and their comrades in arms. Going forward our job is to do This way, together with our We launched Nucleus, powered by something even harder than simply customers and partners, we will do our new hybrid rocket engine that grow: to combine increased sales our part in securing the future. could propel the next generation with increased profitability. This is of small satellites into orbit. not easy, but neither is developing 150 km artillery shells, next generation And not least, we did it all while ammunition for the F-35, or powering continuing to keep our promise a new generation of space launchers. to our customers of delivering them a wide range of products, We will do this by building on that, old or new, provide them the strenghts that have made with a truly reliable advantage. us what we are today. OUR COMMITMENT At a time when Western democracies are facing challenges on a scale not seen since the end of the Morten Brandtzæg Cold War, we are reminded of the PRESIDENT & CEO importance of that promise. Front page: Nammo completed the first man fire of the new M72 Fire From Enclosure at its Mesa, Arizona facility in June 2018 3 Contents 4 FASTER, HIGHER, LONGER NAMMO GROUP NAMMO AS 6 GROWING WHILE CHANGING 16 Income statement 34 Income statement 17 Balance sheet 35 Balance sheet 8 BOARD OF DIRECTORS’ REPORT 2018 19 Cash flow 37 Cash flow 45 AUDITOR’S REPORT 20 Consolidated 38 Financial statements financial statements 48 CORPORATE GOVERNANCE Key figures ORDER STOCK REVENUE SALES PER REGION 6 000 5 000 5 000 4 000 4 000 3 000 3 000 million million 2 000 2 000 NOK million NOK million 1 000 5 813 1 000 4 920 0 NOK 0 NOK 2018 2017 2016 2015 2014 2013 2018 2017 2016 2015 2014 2013 EARNINGS BEFORE INTEREST AND TAX (EBIT) 20% NORDIC COUNTRIES 600 500 29% REST OF EUROPE 400 300 41% NORTH AMERICA 200 NOK million 100 10% OTHER 0 2018 2017 2016 2015 2014 2013 (NOK MILLION) 2018 2017 2016 2015 2014 2013 Order Stock 5 813 4 645 4 767 5 130 3 853 3 832 Revenue 4 920 4 462 4 132 3 783 3 718 3 703 Earnings Before Interest and Tax (EBIT) 362 367 384 284 286 489 Total Assets 6 083 5 632 5 050 4 641 4 011 3 666 Total Equity 2 688 2 537 2 383 2 329 2 069 1 835 Average Man Years 2 409 2 217 2 102 2 088 2 160 1 954 Return on Sales (ROS) 6.8% 7.6% 9.3% 7.2% 7.5% 13.0% 4 FASTER, HIGHER, LONGER 2018 became a year of firsts for Nammo. In addition to record high revenues, a record high order book, it was also the year when a Nammo-made rocket engine powered first space launch, with the Nucleus sounding rocket reaching an altitude of 107 km during its September mission from Andøya, Norway. A SMALL STEP FOR Aerospace Propulsion in Nammo. SPACE TRAVEL, A GIANT As an industry veteran with more LEAP FOR NAMMO than 30 years of experience SpaceX and Blue Origin are not within the military propulsion the only ones changing the space market, Møller believes Nammo launch market. In addition to the during 2018 proved that it has reusability pioneered by these something unique to offer also companies, miniaturization to the commercial market. has also helped bring about “Our specialty has always been a different balance between as a nimble and independent cost, capability and endurance, provider always working to find thereby opening up the market to new ways of delivering what our a large number of new players. SpaceX and This led customers need, and with Nucleus “Until about 20 years ago, the to several Blue Origin we showed that we are also able cost of space launches and the generations to bring these capabilities to bear design of space craft was are not the of large and outside the military market.” largely been driven by only ones extremely very stringent military changing robust, but also requirements the space very expensive GETTING MORE FROM where cost was launchers WHAT THEY’VE GOT launch not a major and satellite market. Nammo’s strategy has long been to driver. designs. position itself as a niche provider, Once the Cold relying on technology and superb War ended, that began to change. quality to win business. Now, with Though very capable, traditional several countries responding to space technologies simply cost too changing security requirements much, and they were not able to by upgrading vehicles, ships and adapt quickly enough to new aircraft with improved weapon technologies, and not least systems, that strategy is paying off. to the demands of the commercial market,” “Replacing a large platform or said Frank Møller, weapon system continues to get VP of Business more and more expensive and Development time consuming, and quite often for it isn’t even an option. Operational needs are changing so fast that it would simply take too long to build something new. So we are seeing considerable interest in the kind of technologies that we have been developing, and how they could be used to help countries get more performance The 30 mm MK258 Mod 1 from the “Swimmer” has been adopted by both the US Navy and the US Army. 5 equipment they already have VP of Nammo’s Large Caliber forward we will be expanding our in service,” said Bård Ljones Ammunition business unit. offering in this area by merging more Stenberg, Nammo’s VP of of our high-performance projectiles Since introducing the concept at International Sales and Marketing. with polymer cases, giving the user Eurosatory in June 2018, Nammo the ability to choose what is right He highlights has conducted initial short range Replacing for their mission,” said David Rolen, three areas in test firings of the ramjet shell in to a large Nammo’s Director of US Business particular which confirm that the design survives Development and Marketing. platform has gained the force of the launch. Additionally, or weapon considerable it has completed test firings of the system interest over ramjet engine to prove that those continues the past year. same forces are sufficient to ignite the engine, and that it will sustain to get more “The first is a burn long enough to allow the added armor and more shell to reach its expected range. penetration for expensive These tests will allow the team to lighter units. move forward with preparations for The second is adding range to powered ballistic tests in early 2020. existing and future artillery systems. And the third is in programmable Polymer ammunition cases is ammunition, which currently is another, where Nammo during seeing a lot of interest due to the 2018 secured a controlling stake increased threat from drones. All in US-based Mac LLC, one of the of these are core areas of expertise companies that is been at the for Nammo, and where we believe forefront of bringing lightweight we are bringing something unique to ammunition into service. the market,” said Ljones Stenberg. “This is a technology that is PUSHING BOUNDARIES gaining traction. USSOCOM On the back of the success of its is using Mac-cases on current technologies, Nammo is ammunition carried continuing to push boundaries. The by helicopters, latest two are ramjet propulsion adding range and polymer cased ammunition. and time on station. “Base bleeds and rocket assisted Going projectiles do help in extending artillery range, but not enough. To get really revolutionary range extension we have to use air breathing projectiles, and we believe our ramjet artillery has the potential to radically change the role of artillery on the battlefield,” said Thomas Danbolt, Nammo presented its concept for ramjet-powered artillery at Eurosatory in Paris in June 2018. 6 GROWING WHILE CHANGING Nammo’s 2018 results were affected both by market changes, and by the need to improve the company’s infrastructure.