Patria Group 1st Semester 2018 results


Patria Group Interim Report for 1 January – 30 June 2018

Key figures   1-6/2018 1-6/2017 2017
New orders, EUR million   333.5 171.4 309.5
Order stock, EUR million   786.4 803.8 691,4
Net sales, EUR million   232.6 221.8 467.7
Operating profit, EUR million   10.0 15.4 33.9
Income before taxes, EUR million   9.1 14.4 31.3
Equity ratio, %   53.3 52.0 54.0
Gearing, %   31.9 29.6 27.6
Return on equity, %   9.2 17.0 10.4
Return on capital employed, %   9.2 16.2 11.1
Personnel, end of period (FTE)   2 847 2885 2 762

Patria Group’s result for the first half of the year was at estimated level. Net sales totaled EUR 232.6 million (EUR 221.8 million in 2017). Operating profit was EUR 10.0 million (EUR 15.4 million). The decrease is mainly due to normal fluctuations in the international business. Equity ratio was 53.3% (52.0%) and gearing 31.9% (29.6%). A large part of the new orders is linked to the Systems and Land businesses and their maintenance and life-cycle support services.

First half of 2018

In January, Patria signed an agreement with the Finnish Defence Forces on the mid-life upgrade and overhaul of the Finnish Defence Forces’ Hamina Class fast attack craft. The total value of the delivery contract, excluding options, is around 170 million euros. The estimated employment effect of the programme in Finland will be around 300 person-years. Patria will act as the prime contractor, designer and lead system integrator having the overall responsibility for the project.

Kongsberg Defence & Aerospace and Patria entered into an agreement to develop opportunities for cooperation on Missile Systems. The agreement comprises the establishment of a Missile Competence Center in Finland, Open Tactical Framework (OTF) core technologies and system architecture software for missile programs in Finland and international opportunities linked to these capabilities.

The Estonian Centre for Defence Investment renewed the public contract with Patria’s subsidiary Milrem LCM, provider of defence vehicle lifecycle management, for repair and maintenance of the Patria XA-180 and XA-188 armoured vehicles.

Finland’s first 3D-printed aircraft engine part had its maiden flight in January. The part was installed in the F/A-18 Hornet fighter. Patria has been working on the manufacturing process for 3D-printed parts over the last two years and is continuously involved in exploring new repair methods utilizing the latest manufacturing and repair processes.

In February, Patria was in the middle of media attention in Finland in connection with a Finnish businessman tragically deceased in Uganda. The incident led to immediate corrective measures and changes in the management of Land business unit.

In March, Senop Oy signed a contract with the Norwegian Kongsberg Defence & Aerospace AS for the supply of the integrated command post shelters. The contract is a continuation for a long-term co-operation between Kongsberg and Senop. The deliveries will take place in 2019.

In April, Patria signed an agreement on bridge-laying equipment systems. The Finnish Defence Forces will get four new Leopard 2L bridge tanks with ability to handle Leguan bridges of different lengths. The purchase’s total value is EUR 28,6 million and its employment effect with options in Finland is some 55 person-years of which Patria’s employment effect is some 35 person-years. The deliveries will take place in 2019 – 2021.

In April, Patria’s subsidiary Milrem LCM and BAE Systems signed a contract to support Estonia’s fleet of CV9035 Infantry Fighting Vehicles (IFVs). Milrem will provide maintenance and repair services for CV9035 vehicles from its facilities in Estonia.

During April and May, employee cooperation negotiations in Aerostructures and Land business units were finalised. In Aerostructures, the negotiations resulted in reductions that affected 13 persons as redundancies or temporary lay-offs. 14 persons have temporarily laid-off part-time. In Land, the need for reduction was determined as 10 persons and at most 25 persons have their duties adjusted.

In May, Ingvar Pärnamäe, was appointed as the new CEO of Milrem LCM.

In June, Patria Aerostructures Oy acquired all the shares in Patricomp Oy, which operates in aircraft sheet metal part manufacturing, surface treatments and assemblies.

In June, Patria launched new products at Eurosatory event in Paris: two new passive RF sensor products, MUSCL for battle-proof air surveillance, ARIS-E ESM system for tactical situational awareness, and a new Patria 6×6 vehicle with its multifunctional transport capacity and modularity that adapts easily to customers’ needs.

Highlights after the financial period

In August, the Board of Management of Patria was strengthened by a new position of Chief Business Development Officer to support the implementation of the strategy, and by two new business unit Presidents. Pasi Niinikoski was appointed as Group’s Chief Business Development Officer, Teemu Raitis as President of Land business unit, and Jonas Geust as President of Systems business unit.

Outlook for the rest of the year

Patria’s domestic customer, the Finnish Defence Forces, has significant projects (HX, SQ 2020) in progress. Industrial participation is extremely important and a great opportunity to Patria. General development and changes in the security environment have also increased defence budgets and readiness requirements. These are likely to have a positive effect for Patria’s sales and profitability in the long run but not having an impact during 2018. The net sales is nonetheless estimated to improve from the last year.