Kongsberg Gruppen ASA

OSE:KOG

Earnings Call Transcript 2019-Q1

[Geir Haoy, President & CEO]

Good morning. Welcome to Q1 Presentation for Kongsberg Group. Today together with me I have Gyrid, our CFO, as normal; and then, in addition, we also brought Lisa Haugan, she is the EVP Finance for Kongsberg Maritime. So we are very pleased to have Lisa here. She will come back a little bit later in the presentation and to give you some insights on the synergies and profitability program that we're launching in the new Kongsberg Maritime.I will start with very few highlights and then give the word to Gyrid. She will take us through the financial status. Then I come back and give an update on the business and then we'll go into more insights on the new Kongsberg Maritime, where Gyrid will give the overall picture and then Lisa will take us through some interesting details both on short-term, but also on the longer term.It's been a hectic first quarter, as normal, exciting. I would say it was a very satisfying that we could close the [ RCCM ] successfully 1st of April, that was an important deal for us. Overall for the Group, I think, we have a solid order intake even though we didn't have any major defense contract in the quarter, but still a strong order intake.The margin, as you will see when Gyrid takes you through the financials, there is some impacts on the margins related to the sales of subsidiaries and also the integration cost as we have spoke about earlier.Another important milestone was the first initial delivery contract of the JSM, I'll come back to that. And then NASAMS, Australian government has now confirmed the selection of the NASAMS contract to Australia.I'm also very pleased with the performance of Digital in the first quarter. We had the tough first half year in 2018. The order intake picked up in second half of 2018 and it continued into Q1. So, both on the top line and also the profitability has improved in the first quarter. And they also continue with a good order intake, so that is satisfaction to see.By that, well, first, this is the new Kongsberg, by the way. I'm little proud about this picture. We have become much more employees, 11,000 almost. We are now in a -- have an infrastructure approximately 40 countries, which means that we are able to support our clients worldwide 24/7 365 days in a even better way than we have done before. And I think that has been the success of Kongsberg that we are out there together with our clients. And if you look at the preliminary pro forma figures for 2018, the consolidated figures, the top line will be approximate NOK 23 billion.By that, I leave the word for Gyrid.

[Gyrid Skalleberg Ingerø, Group Executive VP & CFO]

Thank you. Okay. Kongsberg implemented IFRS 16 from the 1st of January this year. So the impact on the first quarter will be an increased EBITDA of NOK 76 million and an increased depreciation of NOK 10 million and then somewhat lower EPS. For the rest of the presentation, I will compare figures without the IFRS 16, so it will be easier for you to compare, due to the last quarter and also due to last year.First, key takeaways from the first quarter. All KPIs are moving in the right direction; 2% revenue growth, a 28% growth in order intake and also increased EBITDA compared to last year. Kongsberg delivered increased KPIs in all their business areas this quarter; a NOK 3.6 billion in revenue, a NOK 0.3 billion in EBITDA with a margin on 9.3%, up from 8% last year.It has been a quite comprehensive transaction in terms of the competition authorities. We had a successful first-day closing, the 1st April this year. Some of the requirement from the competition authorities was that we have to divest our seismic operation and Rolls-Royce Marine had to divest their dynamic positioning operation. We sold out Evotec in January this year and we also have spent NOK 79 million on integration cost this quarter. So we have those 2 items up as special items, so it's easier for you to compare the underlying business.Rolling 12-month figures; margins for Kongsberg at the moment, if you look at the EBITDA margin, it now has 10% rolling 12 months margin. And if we take off the integration cost, we're now up to 11.2%. Bring your attention to the Maritime part, where we have a rolling EBITDA margin of 8.3%; except the integration cost, we're now up at 9.5%. Very happy also to show you the trend you see on the top line, where the underlying organic growth now isolated for Kongsberg Maritime was 9.4% this quarter, and you can see it slowly picking up on the top line in the Maritime part.Revenues for the first quarter, up by 2%. If you look at the underlying revenue in Kongsberg Maritime, it's up by 9.4% and it's organic. If you add on the Evotec sale, then we are up by 15.4%. Also very happy to announce that Kongsberg Digital have a growth this quarter of 38%, somewhat down on the revenue on the defense side, that was due to very high deliveries on the medium caliber last quarter 2018 for the U.S. Stryker brigade.EBITDA for the first quarter; EBITDA have been moving in the right direction, quite slowly though, but over the last 2 years, it was picking up and it's increasing and increasing and increasing. This quarter we are delivering NOK 338 million in EBITDA, with a margin of the 9.3%, up from 8% last year. What is good to be aware of here is that Kongsberg Digital delivered a negative EBITDA first quarter last year of minus 40. They have now turned that to positive EBITDA. In addition, you can see the underlying margin and EBITDA for Kongsberg Maritime, all of the increase in EBITDA is coming from the organic growth and the main driver there is the LNG in the integrated solution, and also the aftermarket, the global customer support. And that's quite positive for Kongsberg because the global customer support has better margin than the rest of the product portfolio.Integration, we have said that we will spend approximately NOK 450 million on integration. This quarter we have spent NOK 79 million. If we add on the integration costs from 2018, in total, we have now spent NOK 189 million out of the NOK 450 million. The main or the largest external cost up to the closing 1st of April have been the legal cost in terms of the competition authorities, it has been IT. You can just imagine when you are connecting your 11,000 people from the first day, there has been a lot of IT costs and also some cost to have the organizational design set up. What you will experience now for the second quarter is that the main external cost that we have in terms of integration will be the re-branding of all the sites, and also the co-location of the sites. We will come back to that later, but already from today, we're taking down sites.New orders; new orders for Kongsberg this quarter was up by 28%. And we have a order backlog at the moment of NOK 17.3 billion with a book-to-billed of 1.07. For Kongsberg Maritime, we have a order backlog now of NOK 6 billion, and that's before we add on Commercial Marine. We had a growth in the order backlog on Kongsberg Maritime of 26% this quarter, which is quite good and a book-to-billed isolated for 1.23. In terms of the defense area, we have a order backlog of NOK 10.5 billion and we have a very strong pipeline as you know from before. Which is not mentioned here is that the our Digital area also have a order backlog of NOK 800 million and all those orders are external orders, no internal orders in that backlog. So it's developing quite healthy. And if you put on top of that, that they're now delivering positive results and they are also growing their revenue, it's quite interesting.New orders in Kongsberg Maritime; new orders this quarter of NOK 2.4 billion comes mainly from the LNG in the Integrated Solution, and also from the Global Customer Support. You can also see here that we today monitor Kongsberg Maritime into 3 areas: Global Customer Support, Sensor & Robotics, and Integrated Solution. From next quarter, we will add on another 2 divisions to this chart and that will be Deck Machinery, and Engine & Propulsion that we have acquired from Rolls-Royce Marine. So then we will divide all the new orders into 5 areas, which will also be the P&Ls that we will monitor and already have started from the 1st of April this year.New orders for the Defense area, NOK 1.1 billion in new orders this quarter. The orders or the volume of the orders mainly comes from Space, Protech Systems and Aerostructure this quarter. But probably the most interesting part here is the milestone order that we got from Japan in the missile systems. That patterns here will change or fluctuate a lot. When we get the large orders in the Defense, they will obviously dominate. And if you also look at the pipeline in Defense, if we are able to sign off all the Defense orders in the pipeline, the pattern here will look quite different as of now, but that you can monitor quarter-by-quarter all the time.And strong balance sheet still. As you know, we did the closing of the Rolls-Royce Marine the 1st of April. And the cash position in the company when we closed, was NOK 2.3 billion and they had a debt of approximately NOK 1 billion. So we did the closing and transferred NOK 6.4 billion at the 1st of April. What we have been doing since that, the last 5 weeks, is to calculate what we need for operational use in terms of now that we are in so many new countries as well, and then we will come back on the Capital Markets Day in September with new financial ambitions and also financial targets.Then we will have full control of what we need in cash. In this cash position, it's also approximately NOK 2 billion in prepayment from Defense customers. The return on capital employed is still increasing, up now to 13.6%. Two main reasons for that, it's better EBIT included and we also have less capital employed, because we have our efficiency program on the working capital that is giving a lot of efficiency gains at the moment.Debt position, approximately NOK 800 million, will mature within one year. And the 2 new bonds that we settled in November last year have also been listed during the first quarter this year.And coming up, first Tuesday next week will be the Annual General Meeting and the Board has proposed to them NOK 2.5 per share as a dividend.

[Geir Haoy, President & CEO]

Okay. Thank you, Gyrid. Then I will take you through some business updates. For the Kongsberg Defense & Aerospace, in general, most of the divisions are improving except for the Protech division. Last year first quarter, we had a very high activity on the Stryker program, delivering the MCT product to the land forces in U.S. and that's where we see the major decrease in the top line. Still very important for us to continue deliver on our major projects and we are doing that.And then also the acquisition of AIM, we expect that to be closed within this quarter. We have got the confirmation from the government in Australia, Raytheon Australia, our partner there has got the confirmation that they have selected NASAMS. So we are now looking forward to close the contract and get on with the delivery. We hope that could happen soon.And then Raytheon in U.S. announced that they have got an integration contract with the U.S. Marine Corps for integrating the NSM on the existing infrastructure. That is an important contract. Kongsberg is a partner of Raytheon and we will be a part of that contract. And then that is also then increasing the user group of the NSM. So just to let you know that this is not a part of the Over The Horizon program, this is a separate program.And Gyrid mentioned breakthrough on the JSM. Of course, that was a very important milestone for us. That is the first initial delivery contract for the JSM. And this is actually a 10-year development program started in 2008 together with FFI and the Norwegian governments supporting that program. It has been a huge program and to get the first initial delivery contract, of course, that was important for Kongsberg. And the picture you see here, I think, some of you saw the movie last time. This is the final test that we did in the summer 2018 successfully. I almost said, of course. But this was an important test for us and then now the Japan go ahead and order a delivery contract that is important, and we are very satisfied with that.In addition to that, there is 9 countries now signed up for the F-35 program, and we also see increasing interest of the F-35 with other nations. And that means, of course, increased opportunities and potential for the composite production that we have in Kongsberg. In addition to that, of course, the potential also for the JSM is increasing, if that will happen.For Kongsberg Maritime, Gyrid mentioned it, a very solid order intake this quarter and LNG fishery is in particular here. We have also signed some contracts for special offshore vessels in wind area, in particular. When that is said, I think you will still reckon that the offshore market is still weak on the newbuild side and also there is other segments which is still on a low level. So I think, this is just telling us that Kongsberg Maritime has a diversified order portfolio, means that we can still deliver a solid order intake.As of 1st of April, we have started the biggest integration program ever in Kongsberg history. And we have had a lot of attention to it, and of course, now we should execute on plans that we have done for the last 9 months. At the same time, we have a lot of customers out there and our priority is to make sure that they can operate as expected throughout this integration time. So that is the main focus also in this period going forward.I think also that Kongsberg Maritime based on the initiatives and actions we have taken earlier, still move in the right direction, they are increasing their revenues and margins and also the order intake. So, slowly they are moving in the right direction; and particularly here on the top line is the Sensor & Robotics and also on the Aftermarket and the Global Customer Support.A little bit different picture from what Gyrid show you; this is the segments that we are into and I would say that Subsea is very stable on a decent level when it comes to the order intake year-on-year. The main drivers here is, as Gyrid mentioned, LNG, the LNG market is very active and we have a solid position in that market. And then we also had some OPU contract in the quarter for a floating production unit. In addition to that, we also take some orders on the special vessels and special vessels means more sophisticated vessels, means bigger package for Kongsberg. And of course, that type of vessel that we will target even more when we have CM coming into our organization.KDI had a very, I will say, strong recovery on the order intake in the second half of 2018. We see that on the top line now, an increase of 38% and had a book-to-bill of 1.09. What we have worked very hard on is to come up with new digital solutions both for the oil and gas market, as well as the maritime market. And we see a lot of interest, there is a lot of, I will say, more concrete projects going on these days. And I hope that we will see, going forward, that we can close some important contracts in that area. We also see a need of actually accelerating the development in KDI. We have started a process to make sure that we can even speed up further when it comes to take new positions in the digital area.Patria, revenue little bit down, again, it's the same picture as last time. We are not pleased with the development in the Land business, the armed vehicle division. That is the main, I would say, reason that we see the slowdown in the revenue. In addition to that, we have a temporary slowdown in the activity of Aviation, where they do the maintenance of F-18 and the helicopters. There is a issue with the supply chain. This is temporary and they're going to catch up going forward this year. But the Land business is really concerning us.We have taken some measures lately where you have seen that we have announced the change of the CEO in Patria. And the main reason for that is that we see a need for even further focus on the international business. Then there has also been other management changes in Patria and in the intermediate period before we have the new CEO in place, we have established an executive steering committee where both the owners are representative and that is to give even further support to the marketing and sales internationally, and also some major programs ongoing in Finland these days. So the Kongsberg share of net profit was minus 17 and that is basically where you see the hit by the EBITDA for Kongsberg Defense this quarter.So then we move to the new Kongsberg Maritime. We have been waiting for this and we are now very happy to start the execution. We had the round trip 1st or 2nd of April; myself, we're also traveling around in the West Coast and I must say that I was really pleased with all the friendly new colleagues meeting us up there and we had a lot of town hall meetings around the world. And it was very positive signals coming.This is what it looks if you look at what is the scope that Kongsberg Maritime represent in the maritime oil and gas industry today. It's a very broadening of our scope of supply and our footprint in this market, and that gives us a very solid[fundamental ] to take the #1 position as a supplier for the maritime industry going forward.Gyrid mentioned it, that we will have additional divisions on the next quarter reporting. This is how it looks, the organization for the P&L, measuring now from 1st of April. All of them are quite sizable business areas, but in particular, the Global Customer Support division, as you see, will have close to NOK 7 billion in revenues and underlining the increase of the install base that we now together have; 30,000 vessels out there that need to be supported by Kongsberg 24/7, 365 days a year. And the revenue, if you look at the preliminary pro forma consolidated figures for the combined company in 2018, we have more than doubled the top line of Kongsberg Maritime. So this is how it looks. In addition, of course, you have the sales and marketing, the global sales and marketing and then this is from April 1.Then Gyrid will give some highlights on the top and then we will leave the word to Lisa, take us through some details later.

[Gyrid Skalleberg Ingerø, Group Executive VP & CFO]

Thank you, Geir. Finally, we can talk about the figures in Rolls-Royce Marine, we have been waiting for that for a long time. And as Geir just showed here, we have now built a Kongsberg Maritime that's as large as the whole Group was before we enter into that acquisition. And Commercial Marine delivered on the top line for 2018 a GBP 752 million, that was down from GBP 817 million the last year. So they're still decreasing approximately 8% on the top line, but if you put on the revenue on the top line now, we will have a complete or a total Kongsberg of approximately NOK 23 billion on pro forma for 2018. For the whole 2018, they delivered an EBITDA of minus GBP 25.5 million. So if you add that on to the Kongsberg EBITDA from 2018, we end up with a EBITDA of GBP 672 million. But more interesting is what has happened the first quarter of 2019.If you look at the Commercial Marine, they delivered a top line of NOK 1.8 billion, that's up from NOK 1.7 billion last year, so they're actually growing by approximately 10%. It's exactly the same as the organic growth in Kongsberg Maritime, and that's also what we have been recognized over the last year that they are moving normally in the same direction and is growing very, very equal.If you look at the EBITDA, they delivered minus 64 and that's better than referred when we did the acquisition in July last year. So it's actually developing a bit more healthy. And the reason for that is the product mix and the top line. They have a larger aftermarket than they had when we acquired them one year ago. Then they have approximately 49% of the top line in the aftermarket. Now they have between 55% and 60% on the aftermarket. And you all know that margin in the aftermarket is better than the rest of the product portfolio. So that's a good thing that we have discovered and we now have opened up and are able to calculate into the different figures.That leaves me with the order backlog, which is probably much more interesting. You can see it's the same development actually as Kongsberg Maritime. If you look at the first quarter last year, the Commercial Marine have NOK 5.1 billion in order backlog. Now out of first quarter 2019, it's NOK 6.7 billion. So it has actually increased a lot. Isolated for the first quarter, it has not been growing that much as it has since the first quarter last year and that's of course because, in the order backlog here, you don't have the Aftermarket or the Global Customer Support, just a few orders in there. So we then have to put on top of this order backlog, all the Global Customer Support services. This we will monitor quarter by quarter and we also provide you with the figures, of course. And we also split into the different divisions like Geir also showed here the 5 different divisions. So we are able to monitor where the growth are coming.Value capture; you have heard a lot of times that we will take out cost synergies for approximately NOK 500 million. This is the first time that we say that the P&L, the annual P&L effect for the 2019 will be NOK 200 million. And after being calculating this now for 5, 6 weeks, we have been able to confirm our plans and then to re-plan. What we see is that we think we will be able to have an annual effect already in 2019 of NOK 200 million, that's quite positive. What we said is that we believe that the footprint on the co-location would have cost synergies of approximately 200, S&G synergies would be 200 and the product portfolio will be approximately 100. After recalculating everything, we see that we can take more out on the footprint on the co-location. And we also see that we can take some more out of the S&G. But when it comes to the product portfolio, we will try to utilize that in the revenue synergies, so we're taking that a bit down and then the 2 other parts up.And then is always the question, what are we actually going to do. So then, I will leave the floor to Lisa, which is really into the details in this area.

[Lisa Edvardsen Haugan, Executive Vice President of Finance]

Gyrid, I'll now introduce the 3 main categories of cost savings related to the value capture program. I will give you some more insights into the key activities. First, I will talk about the key activities for the total program and after that, I will show you the activities that we have planned for 2019. But I think perhaps the most important thing that Gyrid pointed out was that we are re-confirming what we said in July that we are going to capture NOK 500 million in savings. And our primary focus is to turn the curve for Commercial Marine and make them profitable as soon as possible.When we are looking into the different divisions in Commercial Marine, we can say that Propulsion & Engine and also Service are performing according to expectations, given the current market conditions. But when we look into the market situation for, especially, seismic and also offshore deck machinery, we see that they were hit hard by the downturn in the oil and gas market. The same can we see for the newbuilding activities, which are at a historical low level. We, therefore, need to do some structural changes within the Deck Machinery and Ship Design and also look into starting the right-sizing process to take out overcapacity.And of course, like in all acquisitions, we see that both Commercial Marine and the Kongsberg Maritime have a very broad footprint. We have a strong global presence in both companies and therefore it's natural that we have been looking into how we can co-locate in the areas where we have overlapping footprint. In addition, we will look into rationalizing the manufacturing footprint and move non-core products into the supply chain.And you'd probably hear about this all the time. Of course, there are synergy effects within the SG&A as well. So, we will both take out that overlapping positions, but we are also aiming for a leaner organizational setup that will give some effects. And of course, there are also savings related to communication and marketing, taking our conferences cost, where we both had boost today. So that are areas that we are attacking.When it comes to IT, having effects within the infrastructure is also natural. Kongsberg today have a setup for help desk and first line support that we will build on in the new Company.And when we introduced the acquiring of Commercial Marine, we said that this was a perfect fit. And by that, we meant that there are few overlapping products. But there is one area, where we have overlapping and that is within automation. And therefore, it's natural that we will look into the consolidation of that product portfolio.Kongsberg has also over the last couple of years invested significant amount into remote operations, autonomy and digital solutions for the Maritime market. And as probably most of you are aware of, so have a Commercial Marine down. Both companies have aimed for #1 position and by merging these companies, we will get more for less. So these are the key activities that we will look into to ensure that we get an annual effect of NOK 500 million within 2022.And so, into the key activities for 2019. What are we going to do in this year? We have already done a lot. We have co-located on 6 sites, [indiscernible] is one example of this. We have also started the restructuring process and today we will held town hall meetings at the West Coast of Norway and there will be more town hall meetings in the time to come. What we will announce in this is that we are starting the right-sizing process and that we will adjust the capacity with 260 full-time employees at this stage.In addition, we have started the preparation of exiting Vung Tau, the production facility that Deck Machinery have in Vietnam, where we have been producing products within the seismic, Subsea and also some cranes. So that is something we will exit during this year.So all of these activities will ensure that we will get an annual saving effect in 2019 of NOK 200 million.

[Geir Haoy, President & CEO]

Okay. Thank you, Lisa. Yes, so we have started, as Lisa said, we have town hall meetings today in several locations and we will continue next week with other locations also internationally. So this is an important part for us to make sure that we get the turnaround this business and that we get the profitability back, that is the most important way to secure jobs going forward.Yes, and then just to inform you, we're going to have a Capital Market Day in September at Kongsberg. It's been a while since we had a Capital Market Day and we look forward to that. And I wish you welcome, all of you, to Kongsberg in 24th of December. Then we will give you some updates on the strategy and we will give some business updates and also, as Gyrid mentioned, we will give you some financial targets. So we look forward to that.Looking at 2019, remaining 2019, KDI, we said last quarter and I repeat that, we see some growth, independent, actually on whether we're going to close some of the major contracts -- programs that we have talked about earlier, whether they come this year or slide over to next year. We still see some potential for growth on the revenue on the top line. Yeah. So on the KDI side, we're going to still continue to focus on the development and accelerate a process now to see how we can even further speed up that part of the business. And as we see, the interest from the market is picking up and I'm positive to see the development of KDI remaining 2019.KM, good backlog, we see still some improvement in the Aftermarket, which we then believe it'll also then generate some growth in the top line. However, the integration program will, of course, then have some impact on the overall profitability.So all in all, I think 2018 will continue to be exciting. We have started with the integration and hopefully also now within Q2, we will close the AIM acquisition, which also will be an important part for Kongsberg Defense and the interaction with armed forces. So I think we are going to be busy also remaining 2019, that's for sure.Then we open up for some Q&A. Gyrid, maybe you join me.

[Gyrid Skalleberg Ingerø, Group Executive VP & CFO]

Of course.

[Hans-Erik Jacobsen]

Hans-Erik Jacobsen, Nordea. With regard to Commercial Marine, is it possible to give some guidance on the profitability in the next few quarters, especially taking into account synergies that was mentioned that you are able to realize this year? And also when do you expect Commercial Marine to go breakeven?

[Gyrid Skalleberg Ingerø, Group Executive VP & CFO]

If you look at the notes, we have divided the 2018 result into different quarters. We have provided a bit more information there. We have tried to provide as much as we know at the moment. You can also count that we now have put on a certain guiding for the NOK 200 million in annual savings. So the easy answer is to add it together and put the NOK 200 million on the top. But we will not be able to give any more guidance than that actually. We have tried to give as much information as we have at the moment. So we have to spend the 5 to 6 weeks to dig into all the details to be able to do the split for the quarters for the last year. And of course, it can change a bit, because it's unaudit figures, and we have just split them up, but at least it give a guidance.

[Geir Haoy, President & CEO]

I think, also we can say that we already said that our ambition is to turn to see them around within 2 years. I would say, as fast as possible. So that is the focus. I think that's the right way to do it and make sure that we are a profitable organization. That's the way to the future.

[Gyrid Skalleberg Ingerø, Group Executive VP & CFO]

Red figures to black as soon as possible, everybody's running for that.

[Knut Erik Løvstad, Equity Research Analyst]

Knut Erik Lovstad, Kepler Cheuvreux. Those NOK 450 million in restructuring costs, I mean, you said, so far it's settles related to IT, legal costs, opening up new signs, et cetera, et cetera. Will they be sufficient to recognize all the cost synergies as well, right-sizing the employees, the footprint locations, et cetera or will there be sort of additional restructuring costs related to that process?

[Gyrid Skalleberg Ingerø, Group Executive VP & CFO]

Those NOK 450 million is only integration cost and then there will be some restructuring cost on top of that; not for the co-location. That one we're taking down FTE, so rightsizing there will come some restructuring cost.

[Knut Erik Løvstad, Equity Research Analyst]

Can you quantify those costs or...

[Gyrid Skalleberg Ingerø, Group Executive VP & CFO]

It depends on what we do on the right-sizing, because where there are certain rules, but here there will be a global right-sizing. And then there will be different restructuring costs in different countries. But we will provide you with information as soon as we know. But not in those amounts as NOK 450 million, it's just a small portion compared to that.

[Knut Erik Løvstad, Equity Research Analyst]

With regards to contracts, I mean, sizable contracts, you talked about that it may affect revenues for this year depending on when they are signed, et cetera. Do you have any updates on some of those programs; have there been delays, are there any significant changes in terms of timing for some of those programs or are they sort of progressing the way that you expect that they would progress?

[Geir Haoy, President & CEO]

In general, I can say they are progressing as we expect. It's always impossible to actually be precise on when we can conclude contracts in the Defense, especially this kind of programs because they are depending on several players in the programs. But all-in-all, all the major programs that we are currently working on and as we have told you about, is progressing the right way. So, and in particular, I mentioned Australia, a defense has been announced by their government. So we are hoping that something happens soon on that side.

[Unknown Executive]

There are 3 questions from the webcast as well. The first one goes on Patria. And regarding the Land business, are there any upcoming programs where Patria is competing for business?

[Geir Haoy, President & CEO]

Yes. There are several programs that we are actually competing on currently. And they are in different phases, these programs. What we do now is that we are from Kongsberg side is involving even more in these programs, trying to support sales and marketing organization in Patria and supporting them on these global programs. As I said, we are not satisfied with the order intake on the Land business. But again, these are huge programs and it takes time before they are concluded. But we are putting some extra efforts on from Kongsberg side on the marketing and sales campaign. But there are several programs that we're working on.

[Unknown Executive]

And a follow-up question from the same question. Can we expect the financial results for Patria to improve in 2019?

[Gyrid Skalleberg Ingerø, Group Executive VP & CFO]

I can answer that one. What we actually have done is that we have put on more people from Kongsberg to help out the management to see if we are able to guide them better and to optimize the result. But we will come back on the Capital Markets Day in September with a financial update on Patria and also with plans and also guidance on the programs that they're are competing with at the moment.

[Unknown Executive]

And the second question from the webcast is regarding AIM Norway. Have you provided any guidance for the revenue or EBITDA contribution from AIM Norway in 2019 and 2020?

[Gyrid Skalleberg Ingerø, Group Executive VP & CFO]

None of at the moment, but we will be closing that transaction probably during second quarter -- end of second quarter and then there will be detailed information about the AIM on the next quarterly release.

[Unknown Executive]

And the last question from the webcast is, are there any IFRS 16 effect in the Rolls-Royce Commercial Marine EBITDA improvement year-on-year?

[Gyrid Skalleberg Ingerø, Group Executive VP & CFO]

Yeah, I can promise we are calculating that a lot. At the moment, there are NOK 470 million that will affect the balance sheet. But in terms of calculating all the different rental contracts, we are working on it. So, we will provide information with that to analysts that ask when we are finished, but we have not finalized that yet, but we only have the balance sheet effect.

[Unknown Executive]

Thank you.

[Geir Haoy, President & CEO]

Okay. And then I once again thank you for sharing this morning with us. I look forward to see you all next quarter. Thank you very much.