Kongsberg Gruppen ASA says its Naval Strike Missile (NSM) and a sister missile developed to go into the bomb bay of the F-35 fighter jet could generate billions of dollars of new revenues for the Norwegian company in coming years.
Walter Qvam, president and chief executive of Kongsberg, told Reuters that Russian aggression in Ukraine was seen as a "serious new situation" in Europe, and was already starting to drive European defense spending higher. Kongsberg was seeing higher demand for its air-defense system, he said.
Kongsberg, which is celebrating its 200th anniversary this year, is trying to pump up its defense sales in the United States, which accounts for about 35 percent of its annual revenues, as it looks to offset sales in the oil and gas sector.
Qvam, who spoke to Reuters during the annual Association of the U.S. Army conference in Washington, said Kongsberg could see billions of dollars in revenues from the NSM missile, a long-range precision strike missile, in coming years.
He said the Navy viewed the NSM as a capability that could strengthen the LCS class of coastal warships.
The Navy test-fired a NSM from the USS Coronado, one of its Littoral Combat Ships, last month, striking its target directly.
Qvam said he was also upbeat about the future of the Joint Strike Missile, or JSM, which is based on the same technology as NSM. The new missile is planned as part of the Block 4 upgrade of the F-35 Joint Strike Fighter, built by Lockheed Martin Corp, although it will be optional for buying countries.
“Most of the countries buying JSF will be considering a missile of this nature. This is the only one that is built to fit into the bomb bay of the JSF ... so we’re very hopeful," he said.
Ultimately, that could result in thousands of orders, Qvam said, noting that the U.S. military alone plans to buy 2,457 F-35s, plus just under 1,000 more for partners on the program.
Meanwhile, declining investment in the oil and gas sector, lower oil prices, and high costs are likely to increase pressure for consolidation in the sector, Qvam said.
He said the downturn in spending and higher costs could spur a growing number of mergers and acquisitions in the maritime services and oil and gas businesses in coming years.
Kongsberg planned to continue its acquisition of three to five companies a year to enhance its product portfolio, he said, adding that the current strains could accelerate M&A activity.
Qvam said businesses throughout that sector were seeing weakening revenues, but Kongsberg may be insulated given its focus on smaller programs and the relative lack of large industrial base facilities.
He said the company was also offering technology to help oil and gas producers reduce costs and improve efficiency.
Reporting by Andrea Shalal (C) Reuters 2014.