Investing Off the Beaten Path: Scandinavia Big Gun Kongsberg Gruppen

 Today, l’m exploring something a little different: an interesting Norwegian defense company. If defense stocks or European markets aren't your cup of tea, feel free to skip this one. Please note this is not investment advice and do your own diligence when investing.

1. Company Overview

Kongsberg Gruppen began in 1814 as a state arms factory, earning global acclaim with its Krag–Jørgensen rifle before diversifying into marine equipment and automotive components. By the 1950s, it was producing advanced air-defense cannons and, in 1972, the Penguin anti-ship missile. A 1987 export-control scandal prompted the defense arm’s spin-off as Norsk Forsvarsteknologi, which listed publicly in 1993 and reclaimed the Kongsberg Gruppen name in 1995. The Norwegian government has a 50% stake in the company and it operates three core divisions—defense & Aerospace, Maritime and Discovery—leveraging stable state backing and robust R&D to deliver high-margin missiles, naval systems and industrial software, well positioned for growth amid rising defense budgets and industry digitalization.

2. Business Model & Strategy

Kongsberg operates through three primary business areas: Kongsberg Maritime, Kongsberg defense & Aerospace, and Kongsberg Discovery.

Kongsberg Maritime delivers advanced systems for automation, propulsion, navigation, and remote vessel operations. It is a pioneer in autonomous shipping, notably through its collaboration with Yara International on the Yara Birkeland, the world’s first autonomous and fully electric container ship. KM also supports offshore energy ventures with solutions for dynamic positioning, subsea robotics, and hybrid power systems, serving key clients in shipping, offshore wind, and naval sectors.

Kongsberg defense & Aerospace is a leading supplier of advanced defense technologies, particularly remote weapon systems and precision-guided missiles. Its Naval Strike Missile (NSM) and Joint Strike Missile (JSM) are widely adopted by NATO allies, including the U.S. Navy and Royal Norwegian Navy. The division is also a key subcontractor in the F-35 fighter jet program and provides satellite technology through its Kongsberg NanoAvionics unit. Strategic partnerships with Lockheed Martin, Raytheon, and the European Space Agency further anchor its international presence.

Kongsberg Discovery, established in 2023 following a spin-off from the Maritime division, specializes in ocean exploration, seabed mapping, and subsea monitoring. It is the industry leader in high-resolution multibeam sonar systems, and its technologies are used globally in deep-sea research, offshore energy, and fisheries management. Notably, the division has supported major initiatives like the Seabed 2030 project, which aims to map the entire ocean floor by 2030.

3. Financial Analysis

Below is a summary of the financial performance:

2024 Financial Performance:

Revenue Growth: Operating revenues increased 20.3% to NOK 48.9 billion from NOK 40.6 billion in 2023.

Order Intake Surge: Rose 34.3% to NOK 87.8 billion, boosting order backlog by 44.5% to a record NOK 127.9 billion.

Profitability Boost: Net profit grew 38% to NOK 5.1 billion from NOK 3.7 billion, with a strong return on equity at 32%.

Cash Flow Strength: Generated NOK 12.9 billion in free cash flow, reflecting high operational efficiency.

Q2 2025 Results:

Revenue Increase: Revenues up 20% year-on-year to NOK 13.9 billion.

EBIT Growth: EBIT rose 32.5% to NOK 1.92 billion, with an operating margin of 13.8%.

Maritime Division: Revenue grew 7% to NOK 6.39 billion; order intake at NOK 7.52 billion (book-to-bill ratio 1.18); EBIT margin fell to 11.2% due to offshore wind and mineral market pressures.

Discovery Segment: Revenue up 21% to NOK 1.23 billion; EBIT margin expanded to 18.8%, driven by subsea acoustics demand and Sonatech acquisition.

Defense & Aerospace: Revenue surged 38% to NOK 6.12 billion, fueled by missile and air-defense contracts (e.g., with Germany); new orders at NOK 9.84 billion; EBIT margin slightly down to 14.3%.

Despite posting strong growth  and a record order backlog, the stock crashed more than 10% due to concerns on rising costs, a dip in cash reserves, and quarterly revenue that fell just short of analyst expectations. Mixed analyst sentiment and the stock’s high valuation also contributed to the sell-off, as some investors took profits after a strong run-up.

4. Risks & Challenges

Kongsberg Gruppen faces several operational and macroeconomic risks. Its reliance on NATO-aligned defense contracts exposes it to shifting geopolitical priorities and potential budget cuts. As a high-tech manufacturer, it depends on complex global supply chains, making it vulnerable to component shortages and logistical disruptions. 

Currency fluctuations, especially between the NOK, USD, and EUR, can also affect profitability. Lastly, the rapid pace of innovation in defense, AI, and autonomy requires constant R&D investment to maintain competitiveness and avoid being outpaced by faster-moving rivals. Another point to note is that despite Norway being a resource rich and fiscally stable country, the NOK is not a safe haven and its value is often tied to energy markets and can be volatile in market downturns. 

5. Conclusion 

Currently I do have a small position in Kongsberg Gruppen via IBKR (Oslo Stock Exchange ticker KOG)  as I look to diversify my investments away from the US market. I also added on my position when the stock plunged around 10% after the announcement of Q2 results. Honestly even with the 10% drop, I still feel the stock is still overpriced but this is an investment which I’m comfortable to hold long term due to the Norwegian government holding a 50% stake.