CREATING A LEADING NORDIC DEFENCE PARTNERSHIP KONGSBERG BUYS 49.9% OF PATRIA KONGSBERG All rights reserved.

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1 CREATING A LEADING NORDIC DEFENCE PARTNERSHIP KONGSBERG BUYS 49.9% OF PATRIA

2 CREATING A LEADING NORDIC DEFENCE PARTNERSHIP KONGSBERG BUYS 49.9% OF PATRIA Executing on our defence strategy, and our stated growth and profitability ambitions Creating a leading Nordic defence partnership Taking a proactive strategic step in a changing European defence industry Establishing a partnership of strong companies with complementary products and clear synergies Financially attractive for KONGSBERG Page 2

3 ABOUT THE TRANSACTION KONGSBERG buys 49.9 % of the shares in Patria Oyj from the Finnish State Purchase price: EUR 272 million* Completion of the transaction is planned for Q Normal closing conditions and approvals apply The transaction will be financed by a bridge facility in DNB Patria will be recognized in KONGSBERG s accounts using the equity method according to IFRS * Plus settlement of interest and taxes at closing Page 3

4 HEADQUARTERED IN FINLAND EMPLOYEES Leading maintenance provider in the Nordics Internationally successful supplier of armored vehicles REVENUES EUR 428 MILLION ORDER BACKLOG EUR 1,056 MILLION World leading supplier of ammunition and rocket motors through subsidiary Nammo Advanced aviation operations OPERATIONS IN 8 COUNTRIES OWNERSHIP: THE FINNISH STATE 50.1% KONGSBERG 49.9% Page 4

6 DELIVERING ON OUR STATED AMBITIONS GROWTH Proportionally consolidated revenues from Patria and Nammo implies a 17 % increase for KONGSBERG Patria and Nammo have solid order backlogs 10 % AVERAGE ANNUAL GROWTH 5 % organic Minimum 5 % acquired MARGIN Patria s EBIT margin is 11 % DOUBLE-DIGIT EBITA MARGIN RETURN ON CAPITAL Business case internal rate of return >10 % MAINTAIN A HIGH ROCE New initiatives evaluated against % ROCE Page 6

7 THE NORTHERN EUROPEAN DEFENCE MARKET IS A STRATEGIC PRIORITY Attractive defence market Growing market Advanced high technology solutions Same defence priorities as Norway Region with significant market opportunities for KONGSBERG Submarines, missiles, air defence, communications Emerging maintenance market Home market region expansion Sources of new product development Natural area of strength for KONGSBERG Page 7

9 THE 49.9% OWNERSHIP SEALS A UNIQUE AND REAL CROSS BORDER PARTNERSHIP Fully KONGSBERG-driven transaction Strong support from national governments (FinNor defence cooperation MoU, July 2015) THE NORW % STATE 50.0% Solution for achieving real consolidation while maintaining national control 49.9% 50.0% Interests of the stakeholders of the three companies are aligned 50.1% THE FINNISH STATE Page 9

10 A LEADING NORDIC DEFENCE PARTNERSHIP HOME MARKET IN NORWAY AND FINLAND STRONG OPERATIONS IN SWEDEN PATRIA KONGSBERG DEFENCE GROSS REVENUES: NOK 13.4 billion* NAMMO * Patria will be recognized in KONGSBERG s accounts using the equity method according to IFRS. The same applies to Patria s accounting for Nammo. Patria s revenues are converted from EUR to NOK with the average exchange rate for 2015 (8,95). Nammo 2015 is forecast figures. Page 10

12 THE DEFENCE CUSTOMERS NEEDS A NEW DYNAMIC UNSUSTAINABLE COST SPIRAL DECLINING ARMED FORCES GLOBAL SECURITY CHALLENGES Source: GAO reports, MOD research papers ("Intergenerational Equipment Cost Escalation"), BCG analysis # of warships cut in more than half last 40 years by US, Russia and UK Page 12

13 EUROPEAN DEFENCE INDUSTRY NEEDS TO RESTRUCTURE AND CONSOLIDATE EUROPE IS FRAGMENTED US defence procurement budget 2.5 times bigger than European Yet Europe has 3.5 times more defence systems Hence, US industry has 9 times the $-value behind each system DECLINING TECHNOLOGY POSITION US spends 7 times more on R&D compared to Europe Asia has recently overtaken Europe in R&D spending FIERCER COMPETITION US competing more aggressively in the international market Asian defence industry emerging from lower cost and improving technology Page 13

14 IT HAS BEGUN EUROPEAN COUNTRIES JOIN FORCES EUROPEAN DEFENCE INDUSTRY CONSOLIDATING Source: The Netherlands EU Presidency 2016 website (english.eu2016.nl) Kongsberg takes a proactive strategic step in a changing european defence industry Page 14

15 A PROACTIVE STRATEGIC STEP IN A CHANGING EUROPEAN DEFENCE INDUSTRY Leading position in the Northern European defence industry Broader base for technology development through participation in development programs in new countries Better positioned for multi-national defence programs Stronger position in the international defence market Thus creating a revenue and profitability driver for the partnership Page 15

17 A WORLD-LEADING EXPORT LEVEL AT 65 % STRONG INDIVIDUAL COMPANIES FORMING A PARTNERSHIP WORLD-CLASS PROVIDER OF: KEY MARKETS: Air defence Remote weapon stations Strike missiles Submarine systems Tactical communication F-35 aerostructures Nordic USA Poland GCC Armored vehicles Maintenance Aviation Mortar systems Nordic Poland Eastern Europe GCC Full range of high performance ammunition Space and missile products Shoulder fired systems Industrial demilitarization Nordic USA Europe Page 17

18 A PARTNERSHIP WITH SIGNIFICANT SYNERGIES MAINTENANCE ARMORED VEHICLES AVIATION / AEROSTRUCTURES NAVAL SYSTEMS EXPANDED HOME MARKET Page 18

20 A FINANCIALLY ATTRACTIVE TRANSACTION FOR KONGSBERG Purchase price: EUR 272 million* Robust financing solution KONGSBERG has a solid remaining funding capacity Strong track record of earnings and financially solid companies The dividend policy assures good return on our investment as well as flexibility for future investments and growth opportunities in Patria The transaction will improve KONGSBERG s EPS * Plus settlement of interest and taxes at closing Page 20

21 SUMMARY CREATING A LEADING NORDIC DEFENCE PARTNERSHIP KONGSBERG has taken an important strategic step to accelerate growth and profitability in our defence business Establishing a true Nordic defence partnership between Patria, Nammo and KONGSBERG The partnership will be a leading Nordic defence industry group with a strong position in Northern Europe and with strong US partners KONGSBERG will engage actively in developing the three companies A partnership between Patria, Nammo and KONGSBERG will benefit the Finnish and Norwegian Armed Forces, the Governments and the companies involved The transaction is financially attractive for KONGSBERG Page 21

22 DISCLAIMER This presentation contains certain forward-looking information and statements. Such forward-looking information and statements are based on the current, estimates and projections of the Company or assumptions based on information currently available to the Company. Such forward-looking information and statements reflect current views with respect to future events and are subject to risks, uncertainties and assumptions. The Company cannot give assurance to the correctness of such information and statements. These forward-looking information and statements can generally be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements sometimes use terminology such as "targets", "believes", "expects", "aims", "assumes", "intends", "plans", "seeks", "will", "may", "anticipates", "would", "could", "continues", "estimate", "milestone" or other words of similar meaning and similar expressions or the negatives thereof. By their nature, forward-looking information and statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of the Company to differ materially from any future results, performance or achievements that may be expressed or implied by the forward-looking information and statements in this presentation. Should one or more of these risks or uncertainties materialize, or should any underlying assumptions prove to be incorrect, the Company's actual financial condition or results of operations could differ materially from that or those described herein as anticipated, believed, estimated or expected. Any forward-looking information or statements in this presentation speak only as at the date of this presentation. Except as required by the Oslo Stock Exchange rules or applicable law, the Company does not intend, and expressly disclaims any obligation or undertaking, to publicly update, correct or revise any of the information included in this presentation, including forward-looking information and statements, whether to reflect changes in the Company's expectations with regard thereto or as a result of new information, future events, changes in conditions or circumstances or otherwise on which any statement in this presentation is based. Given the aforementioned uncertainties, prospective investors are cautioned not to place undue reliance on any of these forwardlooking statements. Page 22

23 WORLD CLASS THROUGH PEOPLE, TECHNOLOGY AND DEDICATION

24 APPENDIX

25 PATRIA CORPORATE STRUCTURE MARKETING, BUSINESS DEVELOPMENT, COMMUNICATIONS ADMIN AND FINANCE AVIATION LAND SYSTEMS AERO- STRUCTURES MILLOG 61,8% NAMMO 50% Page 25

26 PATRIA IN NUMBERS REVENUES (EUR) EBITDA (EUR) EBIT (EUR) ORDER BACKLOG (EUR) Page 26

27 NAMMO IN NUMBERS REVENUES (NOK) EBITDA (NOK) EBIT (NOK) ORDER BACKLOG (NOK) * * * * * Nammo 2015 is forcast figures Page 27

28 KONGSBERG DEFENCE IN NUMBERS KDS & KPS CONSOLIDATED REVENUES (NOK) EBITDA (NOK) EBIT (NOK) ORDER BACKLOG (NOK) Page 28

29 THE PARTNERSHIP IN NUMBERS GROSS VALUES REVENUES (NOK) EBITDA (NOK) EBIT (NOK) ORDER BACKLOG (NOK) * * * * * Patria will be recognized in KONGSBERG s accounts using the equity method according to IFRS. The same applies to Patria s accounting for Nammo. Patria s revenues are converted from EUR to NOK with the average exchange rate for each year. Nammo 2015 is forecast figures. Page 29

30 PARTNERSHIP EXPORT LEVEL 65 % IN 2015 KONGSBERG DEFENCE PATRIA NAMMO Domestic International Page 30

31 FINANCING KONGSBERG has received a fully underwritten bridge term loan of EUR 290 million for the purchase of 49,9% of the shares in Patria Oyj KONGSBERG has appointed DNB as underwriter, bookrunner and arranger of the medium term bridge facility KONGSBERG will approach debt markets for the takeout of the bridge facility together with the lenders KONGSBERG has been present in the Norwegian Bond market since 2002 and is a known issuer in the market KONGSBERG earn a shadow rating of BBB+, and prior to this acquisition KONGSBERG has been net cash positive since 2011 KONGSBERG has a NOK 1,5 billion undrawn revolving credit facility with five banks with maturity in 2019 Page 31

32 WORLD CLASS THROUGH PEOPLE, TECHNOLOGY AND DEDICATION