Norwegian Maritime

equipment suppliers 2018

KEY PERFORMANCE INDICATORS AND FUTURE EXPECTATIONS

OCTOBER 2018
BY ANDERS HELSETH, CHRISTIAN SVANE MELLBYE AND
ERIK W. JAKOBSEN
Preface
2018 has been another challenging year for the Norwegian maritime industry,
although with clear signs of improvement from one year ago. We have asked
Menon Economics to review the current situation and get their predictions and
view on the future, based on results reported by the companies after year-end
2017 and extensive surveying among maritime equipment suppliers.

This publication is the fifth in its series ordered by the Federation of Norwegian
Industries and paints a brighter view of the short-term prospects in the industry
than last year’s publication. The industry has been successful in reorienting itself
towards new markets as a response to lower demand from the offshore oil and
gas segment.

The report describes changes that have occurred in the market and gives
interesting insight into how the companies have adapted in challenging markets.
We believe the toughest years of the recent downturn are behind us and we
trust the industry is well positioned for the upturn we think is coming.

Interesting times lie ahead with increased focus on environmentally friendly

solutions. The Norwegian maritime industry is among the world leaders in
several exciting market-segments, giving reason to believe in long-term growth
for the industry.

We thank all the respondents in our companies that have taken the time to
respond to our call for data, we thank Menon Business Economics for a thorough
and well analysed report, and trust that the findings will be well received in the
industry.

Oslo, October 20, 2018

Lars Gørvell-Dahll
Director, Maritime Branch, Federation of Norwegian Industries

NORWEGIAN MARITIME EQUIPMENT SUPPLIERS 2018 3

COVERPHOTO: KONGSBERG
Summary
Norwegian ship equipment producers are known for quality and innovative solutions.
A successful reorientation towards new markets in the last few years has again shown the
industry’s capacity to adapt as the demand for ships and equipment change.

Increased pressure to develop environmentally friendly solutions and the effects of

digitalisation will also challenge the industry to continue reinventing itself. Norwegian ship
equipment producers have taken leading positions in markets that could prove vital in
reaching the world’s climate goals. Norway is developing into a stronghold for production of
battery-driven ships equipment, and Norwegian equipment suppliers are well positioned for
the boom in LNG-driven ships and other alternative fuels.

Preliminary results and estimates for 2018 and 2019 show that the Norwegian maritime
equipment industry is set for growth. Revenues will increase in 2018 for the first time in four
years, while employment remains stable compared to 2017-levels. Strong growth in new
market segments, especially deliveries to exploration cruises and fishing ships, contributes to
increasing revenues in 2018. Growth is expected to accelerate in 2019 with an estimated 13 per
cent increase in revenue and a three per cent increase in employment.

The industry is once again profitable, and operating margins are expected to increase further.
However, profitability levels are low compared to the period pre-2014. Two key factors will
decide profitability in coming years: the industry’s ability to be profitable also in new key
markets with new products, and a comeback in the offshore oil and gas markets.

The Norwegian maritime equipment industry is still a key Norwegian industry. Production of
ship equipment employs 18 000 highly productive workers, each worker contributing close to
NOK 1 million in value added to the economy. 94 per cent of the equipment suppliers are small
and medium-sized companies and employ half of the 18 000 workers. The industry’s export
share is stable, proving its competitiveness against countries with significantly lower wage
rates. Two-thirds of ship equipment is exported directly abroad, while another 25 per cent is
exported indirectly through sales from Norwegian yards and other services supplied abroad.

NORWEGIAN MARITIME EQUIPMENT SUPPLIERS 2018 5

Contents

Preface .................................................................................................................... 3

1. Summary............................................................................................................ 5

2. Focus on production and sales of ship equipment.........................................9

3. The tide is turning............................................................................................11

3.1. Increased activity in 2018, strong growth expected in 2019............................................................................ 11
3.2. Deliveries towards exploration cruises, fishery- and offshore ships will be crucial
for growth over the next years.............................................................................................................................12
3.2.1. Increasing number of new orders for exploration cruises and ferries..............................................................12
3.2.2. Promising but somewhat uncertain future in fisheries and aquaculture.........................................................12
3.2.3. Offshore oil and gas markets flatten out – slow rebound expected...............................................................13
3.3. Profitability is expected to rise in 2018 and 2019...............................................................................................14
3.4. Acquisitions create larger units............................................................................................................................15

4. Environmental focus and digitalisation will be essential

for future development...................................................................................16
4.1.1. Increased pressure on developing environmentally friendly solutions.............................................................16
4.1.2. The LNG-driven fleet will increase substantially..............................................................................................16
4.1.3. Norway is at the forefront for battery-driven vessels......................................................................................16
4.1.4. Strong growth potential in offshore wind......................................................................................................17
4.1.5. Digitalisation and automation will grow exponentially...................................................................................19

6 NORWEGIAN MARITIME EQUIPMENT SUPPLIERS 2018

5. Ship equipment – a key norwegian industry................................................20
5.1. Production of ship equipment employs 18 000 highly productive workers....................................................20
5.2. SMEs employ half of the workers and performed better during the recession..............................................21
5.3. Two-thirds of ship equipment is exported directly – another 25 per cent through indirect exports...........21
5.4. Production of mechanical and electronic equipment accounts for 70 per cent of value added...................21
5.5. Maritime focus varies among companies............................................................................................................23

6. Appendix......................................................................................................... 24
6.1. Data registry and survey data...............................................................................................................................24
6.2. Delimiting the maritime industry.........................................................................................................................24

7. Geographical footprint................................................................................... 25
7.1. Employment and value added by county in 2017.............................................................................................. 25

8. Historical results – ship equipment............................................................... 26

9. Historical results by types of ship equipment.............................................. 27

9.1. Mechanical equipment......................................................................................................................................... 27
9.2. Electrical and electronic equipment................................................................................................................... 28
9.3. Other operating equipment................................................................................................................................ 29
9.4. Trade ..................................................................................................................................................................... 30
9.5. Design..................................................................................................................................................................... 31

NORWEGIAN MARITIME EQUIPMENT SUPPLIERS 2018 7

2. Focus on production and
sales of ship equipment
1
The numbers presented and discussed here revenues for the companies included , and the
will be those related to the maritime part of shares vary from a sole focus on ship equipment
operations excluding drilling equipment, in this to companies primarily operating in other
report called ship equipment. It is clearly stated markets.
where numbers presented or discussed deviate
from this narrower division of operations. Ship
equipment represents about 50 per cent of

Drilling  equipment  
8  %  

Non-­‐mari4me   Ship  equipment  

equipment   53  %  
39  %  

FIGURE 1: Distribution of revenues for ship equipment producers separated into ship equipment,
drilling equipment and non-maritime equipment, 2017. SOURCE: MENON ECONOMICS

1 See “Delimiting the maritime industry” in the appendix for delimitation of the companies included.

NORWEGIAN MARITIME EQUIPMENT SUPPLIERS 2018 9

 Ship equipment is broken down into five • The group dealing with design typically
categories based on the type of product being includes ship design companies such as
supplied: Møre Maritime. The group also includes com-
panies with a somewhat broader focus such
as LMG Marin, which offers design packages
• Mechanical equipment refers to the for both ships and rigs.
production of equipment for carrying out
mechanical operations such as lifting or • Other operating equipment involves
propelling ships forward. The group is exten- manufacturers of equipment necessary for
sive, including suppliers of cranes, winches, everyday ship operations, including suppliers
propellers, and engines. of items such as marine paint, lubricants,
cables, chains, and lifeboats.
• Electrical and electronic equipment refers
to the production of equipment focusing on • Trade consists of companies that buy and sell
electrical and electronic components, inclu- goods for operating and maintaining ships, or
ding specialist hardware, software, electrical act as dealers for equipment to other players
propulsion systems, bridge equipment or DP such as shipyards in Norway and abroad.
2
systems .

Mechanical equipment
• Cranes, winches, propellers, engines etc

Electrical and electronic equipment

• DP, software, specialised hardware, bridge equipment,
sensors etc

Design
• Ship design

Other operating equipment

• Paint, lubricant, cables, chains, life-boats etc

Trade
• Agents, wholesalers and distributors

2 Dynamic positioning (abbreviated “DP”) systems are systems for keeping ships or other vessels such as rigs or FPSOs in the same
position above the seabed without the use of anchors, utilizing propellers and thrusters instead.

10 NORWEGIAN MARITIME EQUIPMENT SUPPLIERS 2018

3. The tide is turning

3.1. Increased activity in 2018, The companies surveyed believe growth is set to
strong growth expected in 2019 accelerate in 2019. 85 per cent of the companies
Strong growth in new market segments believe revenues will increase in 2019, and more
contributes to increasing revenues in 2018. Sales than 60 per cent believe in an increase of 10 per
of equipment to exploration cruises and ferries cent or more. Combined revenue is estimated to
are estimated to rise by 50 per cent in 2018. rise by 13 per cent in 2019, more than doubling
Norwegian yards have taken strong positions the speed of growth in 2018 (6 per cent). Larger
in the ferry and exploration cruise markets, and orderbooks back the expected turnaround in
equipment suppliers are increasingly shifting activity among ship equipment producers. Order
their focus towards deliveries to this market. reserves are up 4 per cent in 20183 (year-over-
A reorientation towards equipment for fisher- year) and now secure ten months of operations.
ies and aquaculture is proving profitable as
well, with sales towards this market segment Companies with a relatively high orientation
estimated to increase by more than 20 per cent towards deliveries for exploration cruises and
in 2018. Despite growth in new market seg- ferries, on average, expect the largest increase
ments, sales to offshore oil and gas and shipping in revenues for 2019. Fisheries and aquaculture-
markets still make up close to three-quarters of oriented producers also expect increasing
revenues. Continued weak offshore oil and gas revenues, while companies mainly directed
markets and stable revenue from the shipping towards the oil and gas markets expect growing
segment are expected to dampen overall growth income as well, but expectations fluctuate more
in 2018. than for producers less directed towards this

Offshore  wind  
4  %  

Cruise/ferries  
12  %  

Fisheries  and   Offshore  O&G  

aquaculture   39  %  
15  %   Cruise/ferries  

Offshore  O&G  

Offshore  wind   Change  2018  

Shipping  
30  %   Fisheries  and  
Shipping  
aquaculture  

FIGURE 2: Right: Market segmentation of revenues for ship equipment suppliers in 2018. Left: Each market segment’s
contribution to growth in revenue from 2017 to 2018. SOURCE: MENON ECONOMICS

3 As of September 2018

NORWEGIAN MARITIME EQUIPMENT SUPPLIERS 2018 11

 15  %   15  %  

Revenue   Employment  
10  %   10  %  
Growth,  year-­‐over-­‐year  

5  %   5  %  

0  %   0  %  

-­‐5  %   -­‐5  %  

-­‐10  %   -­‐10  %  

-­‐15  %   -­‐15  %  

-­‐20  %   -­‐20  %  
2015   2016   2017   2018E   2019E  

FIGURE 3: Yearly change in revenue and employment for ship equipment suppliers, 2015-2019. Revenue and
employment are estimated for 2018 and 2019. SOURCE: MENON ECONOMICS

market. Expectations among highly shipping- has more than doubled globally since 2015 4 , and
oriented producers vary with the average the orderbooks at the larger Norwegian yards
outlook indicating moderate growth. are filling up with new orders in the segment.
New contracts for passenger and cruise ships
contributed strongly to a 70 per cent increase
3.2. Deliveries towards exploration cruises, in backlog order value at Norwegian yards in
fishery- and offshore ships will be crucial for the past year5 , and now constitute close to
growth over the next years half the value of agreed future deliveries. New
Norwegian producers’ ability to capitalise in new orders for ferries continue to tick in as well.
market segments and the magnitude of growth These contracts, however, have less impact on
in the offshore oil and gas markets will likely the value of orderbooks, the average deal for
be crucial for revenue and profitability over the newbuilds being four times less than for explora-
next years. Deliveries to exploration cruises and tion cruises. Still, ferries now account for close to
fishing ships look particularly promising, while 10 per cent of backlog order value at Norwegian
demand from oil and gas markets will rise, but yards, rising from next to nothing a few years
the exact timing and size of the comeback is ago.
hard to predict.

3.2.2. Promising but somewhat uncertain

3.2.1. Increasing number of new orders for future in fisheries and aquaculture
exploration cruises and ferries In recent years, the market for fisheries and
The prospects for further deliveries in the aquaculture has experienced exponential
exploration cruise and ferry markets are growth in revenues and profitability, driven by
promising. Annual investment in cruise vessels low bunker prices, high commodity prices and a

4 Clarkson Shipyard Monitor

5 Year-over-year growth, August 2017 to August 2018

12 NORWEGIAN MARITIME EQUIPMENT SUPPLIERS 2018

Des  15    

Aug  16    

Aug  17  

Aug  18  

0   10   20   30   40   50   60   70   80  

Passenger/Cruise   Ferry   Well/service  boats   Fishing   Offshore  oil  &  gas  

Governmental   Wind   Yacht   Cargo   Mining  

FIGURE 4: Order backlog at Norwegian shipyards by ship type, 2015-2018. SOURCE: FEDERATION OF NORWEGIAN INDUSTRIES

healthy and favourable quota-situation. The big increasing interest rates we might see
question now is where this segment is heading. a subsequent strengthening of the
Many factors will determine its development: NOK.

Future quota-situation: There is an

ongoing discussion on the size of the 3.2.3. Offshore oil and gas markets flatten
quotas for many types of fish, most out – slow rebound expected
notably for cod (ref. International Investments in the oil and gas industry fell
Council for the Exploration of the Sea). dramatically in tandem with the fall in oil prices
from 2014. Investment levels bottomed out in
Increasing interest rates: Many of the 2017 and are expected to increase in the coming
fishery shipping companies6 have years. Still, most markets are characterised by
invested heavily in new vessels and oversupply. Especially the AHTS and PSV-
are heavily indebted. With pos- markets are stricken. More than 100 Norwegian
sibly increasing interest rates, some offshore vessels are laid up7. In addition, there
companies could find themselves in a are still too many active vessels in the markets
difficult situation. to bring rates up. Increasing investments in oil
and gas will increase demand for offshore ships
Exchange rates: Exchange rates are going forward. Demand for equipment deliver-
particularly important within fisheries ies to the market will likely increase as laid up
and aquaculture as they receive most vessels are being upgraded before resuming
of their income in foreign currency. operations. The prospects for a significant
A weak NOK has been favourable for uptake of newbuilds in the offshore market still
the export industry, but with expected

6 Companies such as Hermes and Havfisk

7 https://sysla.no/skipsdata as of October 18, 2018

NORWEGIAN MARITIME EQUIPMENT SUPPLIERS 2018 13

    250    
Billion  NOK  

   200    

   150    

   100    

   50    

 -­‐        
2013   2014   2015   2016   2017   2018   2019  

FIGURE 5: Investments in oil and gas industry in Norway 2013-2018. Expected numbers for 2019. SOURCE: SSB

look bleak with the number of new contracts The ship equipment suppliers have in recent
falling in 2018 compared to 20178 . years been forced to cut profit margins to
be competitive. Operating margins were
negative in 2016 and 2017 but are estimated
3.3. Profitability is expected to to be positive again in 2018, and expected to
rise in 2018 and 2019 grow further in 2019. In tandem with increased
Ship equipment suppliers are operating in a activity, ship equipment suppliers will have to
global market and face competition from coun- improve profitability in the coming years to
tries with lower costs. To be competitive, the keep investors from moving their assets into
companies must deliver goods and services that other more profitable markets. The companies
have a higher correlation between quality and seem well positioned to capitalise on growing
cost than their competitors can provide. Profit markets, having taken the bulk of restructuring
margins can be interpreted as an indicator of costs in previous years, as well as being well set
the equipment suppliers’ ability to leverage their for eventual growth in the offshore oil and gas
capabilities and deliver goods that are valued markets.
higher than their input factors.

2015 2016 2017 2018 est. 2019 outlook

Operating margin 3.6% -1.7%9 -0.3% 1.8% Strong growth in operating profits
(EBIT)

TABLE 1: Operating margins for ship equipment suppliers, 2015-2019. SOURCE: MENON ECONOMICS

8 2017: 48, 2018: 24 (Q1-Q3). Source: Clarkson/Menon

9 Larger than normal impairment costs impacted operating margins negatively in 2016. Still, operating margins would have been
negative with impairment costs equal to previous years.

14 NORWEGIAN MARITIME EQUIPMENT SUPPLIERS 2018

FIGURE 6: Distribution of survey respondents’ take on the following statements. Left: Restructuring has increased
investment costs in my company in the past years. Right: Restructuring will reduce my company’s profitability in the
coming years.

3.4. Acquisitions create larger units In February 2018, MacGregor, part of Finnish
Mergers and acquisitions have consolidated the Cargotec, announced an agreement to acquire
ownership among ship equipment suppliers and TTS Group’s marine and offshore divisions
created larger and more competitive units. Most for a reported EUR 87 million, expanding the
notably, Kongsberg Maritime has entered into company’s consolidated unit in Norway. In
an agreement to acquire Rolls-Royce Marine addition, Norsafe, Norway’s largest producer
for a reported NOK 5.3 billion, to be effectu- of lifeboats, was acquired by Danish Viking in
ated in 2019. Foreign investors found lucrative September 2018.
investments in the Norwegian market as well.

PHOTO: ABB

NORWEGIAN MARITIME EQUIPMENT SUPPLIERS 2018 15

4. Environmental focus and
digitalisation will be essential for
future development

Increased pressure on developing environ- 4.1.2. The LNG-driven fleet will

mentally friendly solutions and the effects of increase substantially
digitalisation will play a vital role in the future of Gas is predicted to overtake oil as the world’s
ship equipment suppliers. primary energy source in 2026 (Energy
Transformation Outlook, DNV GL). Part of the
increased demand will come from a larger share
4.1.1. Increased pressure on developing of the world fleet expected to be powered
environmentally friendly solutions by natural gas. As of today, 30 per cent of
The Intergovernmental Panel on Climate Change LNG-driven ships are operating in Norway, and
(IPCC) shows swift action must be taken to Norwegian producers have taken a strong posi-
satisfy the 1.5°C target for global temperature tion in the market for gas engines. Most notable
increase. Maritime transport emits around 1000 among Norwegian producers is Rolls-Royce
million tons of CO2 annually and is responsible who is supplying both national and international
for about 2.5 per cent of global greenhouse gas customers with motors built in Norway.
emissions 10. Shipping emissions are predicted
to increase between 50 and 250 per cent by
2050, depending on future economic and 4.1.3. Norway is at the forefront
energy developments in the “business as usual”- for battery-driven vessels
scenario (ibid). Norwegian suppliers and yards have taken a lead
role in developing environmentally friendly solu-
The International Maritime Organization (IMO) tions. Over a third of the world’s battery-driven
has a stated policy to reduce CO2-emissions ships are operating in Norway 11 , and about an
from shipping by 50 per cent within 2050. equal share has been built at Norwegian yards 12 .
Escalating focus on climate change will put pres- As a result, both Norwegian yards and equip-
sure on authorities to introduce more environ- ment suppliers have developed competence
mentally friendly rules and regulations. in a market with substantial growth prospects.
The market is growing rapidly, exemplified by
The Norwegian Shipowners’ Association vision Havila Kystruten newly ordering battery packs
of zero harmful emissions from Norwegian- for their four new ships. Norwegian Electrics and
controlled vessels is a prime example of industry Norwegian Electric Control Systems will deliver
players trying to reduce the emissions from the hybrid-electric propulsion systems, and the
maritime activities. ship equipment will be designed and delivered
by Havyard13 .

10 Third IMO Greenhouse Gas Study 2014, International Maritime Organization

11 DNV GL – Alternative Fuels Insight
12 29 percent – Clarkson World Fleet Register
13 https://sysla.no/maritim/nye-kystruten-skip-far-verdens-storste-batteripakker/

16 NORWEGIAN MARITIME EQUIPMENT SUPPLIERS 2018

The Norwegian-Canadian provider of energy
storage solutions, Corvus Energy, is one of the
world’s dominant suppliers of maritime bat-
teries. It is now looking to strengthen its position
in Norway and has announced plans to build a
battery factory in the Bergen area.

The new ferry tenders along with the increasing

demand for environmentally friendly energy
systems in the offshore and shipping sectors
have led to strong growth in the Norwegian
market, making Norway an attractive location
for a battery factory.

The battery factory will depend on automated

production to ensure more efficient production
and make Corvus Energy more competitive
compared to low-cost countries. The factory will
make it easier to test and develop new systems
that can meet the future needs of the industry.

PHOTO: ROLLS-ROYCE
4.1.4. Strong growth potential
in offshore wind
Investments in the offshore wind market are
expected to increase in the coming five years.

Corvus Energy establishing a new factory in Norway

The Norwegian-Canadian provider of energy storage The new ferry tenders along with the increasing de-
solutions, Corvus Energy, is one of the world’s mand for environmentally friendly energy systems in
dominant suppliers of maritime batteries. It is now the offshore and shipping sectors have led to strong
looking to strengthen its position in Norway and has growth in the Norwegian market, making Norway an
announced plans to build a battery factory in the attractive location for a battery factory.
Bergen area.
The battery factory will depend on automated
production to ensure more efficient production and
make Corvus Energy more competitive compared
to low-cost countries. The factory will make it easier
to test and develop new systems that can meet the
PHOTO: CORVUS ENERGY

future needs of the industry.

14
SOURCE: CORVUS ENERGY

14  ttps://corvusenergy.com/corvus-energy-to-expand-production-in-response-to-high-demand-for-energy-storage/,
h
https://corvusenergy.com/corvus-energy-recognized-as-global-leader-in-clean-technology/

NORWEGIAN MARITIME EQUIPMENT SUPPLIERS 2018 17

 PHOTO: KONGSBRG
Cumulative installed generator capacity is The industry is developing quickly. In 2002,
expected to grow by almost 19 per cent per year the first utility-scale offshore wind farm with a
(CAGR) between 2019-2023, albeit from a low capacity of 160 MW was connected to the grid in
base compared to the oil and gas industry. Denmark. Since then the average project has mo-

FIGURE 7: Forecast for the global installed capacity in offshore wind 2019-2023. SOURCE: BVG ASSOCIATES

18 NORWEGIAN MARITIME EQUIPMENT SUPPLIERS 2018

ved to sites further from shore, in deeper waters, From the digitalisation of the maritime sector
with higher wind speeds and ever-increasing arises the challenge to protect the systems
generator capacities. The cost of offshore wind is against cyber-attacks. Last year Maersk lost an
falling, and in 2017 the first contract without any estimated turnover of NOK 2.5 billion due to a
subsidies was awarded in Germany. If costs keep data attack, and this summer, the US offices of
falling, the offshore wind market could grow the Chinese container shipping company Cosco
even faster in the coming years. Shipping were hit by a cyber-attack.

Cybersecurity at sea is receiving increased

4.1.5. Digitalisation and automation attention. Positioning itself in the market is
will grow exponentially Kongsberg Digital, now also collaborating with
“Vastly improved maritime connectivity, the the auditing company KPMG to raise awareness
advance of cyber-physical systems and ‘digital’ of cyber knowledge and safety in the shipping
twins will dominate the digital side of shipping industry.
in the coming decade, as vessels increasingly
resemble floating computers” – DNV GL.

The Norwegian equipment suppliers are recog-

nised for their high level of competence and
technical know-how and are hence well positio- Increased digitalisation creates new
ned to adapt and excel in new technologies. The dangers - A potential gold mine in
high salary levels in Norway are likely to push cybersecurity
firms and employees even further in their quest
for high productivity. For continued relevance in Kongsberg Digital predicts that 30 to 40 per
the global maritime markets, firms need to seek cent of the total world fleet will be digitalised
market opportunities where technology and within five years, making digitalisation at sea a
innovation are central. billion-dollar market in the years to come.

Norwegian suppliers continue to prove they are Today, ships all around the world generate
capable of being world-leading in the develop- data. The data comes from motors, generators,
ment of new technologies. As an example, the sensors and other equipment. This data can
world’s first autonomous, zero emissions con- give valuable information that can lead to better
tainer ship will be ready for operations in 2020. operational choices being made, and hence
The ship is constructed at the Vard Group’s yard significant savings in operating costs.
in Brevik, and the Kongsberg Group is respon-
sible for development and delivery of critical From the digitalisation of the maritime sector
technologies onboard. arises the challenge to protect the systems
against cyber-attacks. Last year Maersk lost an
Kongsberg Digital predicts that 30 to 40 per estimated turnover of NOK 2.5 billion due to a
cent of the total world fleet will be digitalised data attack, and this summer, the US offices of
within five years, making digitalisation at sea a the Chinese container shipping company Cosco
billion-dollar market in the years to come. Shipping were hit by a cyber-attack.

Today, ships all around the world generate Cybersecurity at sea is receiving increased
data. The data comes from motors, generators, attention. Positioning itself in the market is
sensors and other equipment. This data can Kongsberg Digital, now also collaborating with
give valuable information that can lead to better the auditing company KPMG to raise awareness
operational choices being made, and hence of cyber knowledge and safety in the shipping
significant savings in operating costs. industry.

NORWEGIAN MARITIME EQUIPMENT SUPPLIERS 2018 19

5. Ship equipment
– A key Norwegian industry

Ship equipment producers in Norway are known manufacturing of other mechanical and elec-
for quality and innovative solutions. Norway tronic products each contribute NOK 720 000
has been among the leading maritime nations in value added15 . The ship equipment supplier
for centuries, and ship equipment producers segment consists of manufacturers, designers,
play a vital role in the innovative power of the and traders of ship equipment, with activities
Norwegian maritime industry. at more than 1 300 locations in Norway. The
companies are spread across Norway with the
bulk of companies and employees in western
5.1. Production of ship equipment employs Norway and the broad Oslo area. Production of
18 000 highly productive workers ship equipment is relatively most important for
Production and sales of ship equipment gener- employment in Møre og Romsdal and Finnmark,
ate revenues of NOK 59 billion and employ with a contribution to employment of five and
18 000 people (2017). The industry is highly four per cent respectively. Buskerud, Vestfold,
productive, with each worker contributing Agder, and Hordaland all have shares of employ-
close to NOK 1 million in value added to the ment from ship equipment production between
national economy. In comparison, workers within 1.4 and 2.6 per cent.

FIGURE 8: Key results for ship equipment suppliers in 2017, and relative importance for employment by county.
SOURCE: MENON ECONOMICS

15 Statistics Norway, Menon Economics

20 NORWEGIAN MARITIME EQUIPMENT SUPPLIERS 2018

 Direct exports to Indirect exports via shipyard Indirect exports
c ompanies abroad deliveries/other deliveries via services
supplied abroad

NOK 32.5 bn NOK 4.0 bn NOK 7.6 bn

67 %

Norwegian ship
Shipyards in Foreign Activity
equipment 19 % 45 %
Norway shipping companies abroad
48.3 bn NOK

55

%
%

65
Norwegian shipping Activity
14 % companies 35 % in Norway

FIGURE 9: The value chains of the ship equipment industry – with direct and indirect exports16 , 2017.
SOURCE: MENON ECONOMICS

5.2. SMEs employ half of the workers and In addition, a large share of equipment sold to
performed better during the recession Norwegian yards and shipping companies is
SMEs account for 94 per cent of companies pro- used to produce exports, either through foreign
ducing ship equipment and employ half of the orders at Norwegian yards or as equipment
18 000 workers. Productivity at SMEs is close for Norwegian shipping companies supply-
to that of big companies, each worker creating ing services abroad. The high export rate has
a value added of NOK 950 000 in 2017. During been quite stable for several years, showing
the recession, SMEs have outperformed the big Norwegian equipment suppliers maintaining
companies in terms of growth and profitability. their competitiveness in the world market.

An explanation could be that smaller companies

have been less directed towards the oil and gas 5.4. Production of mechanical and
market, and smaller companies tend traditionally electronic equipment accounts for 70 per
to be more agile and are therefore able to cent of value added
take early advantage of opportunities in new Production of mechanical and electronic compo-
markets. nents gave a total value added of NOK 12 billion
in 2017. Retailers of ship equipment (traders of
equipment) rank third regarding value added,
5.3. Two-thirds of ship equipment is contributing with a value added of NOK 2.5 bil-
exported directly – another 25 per cent lion. Other operating equipment, such as marine
through indirect exports coatings and lifeboats, creates a value added of
The market for ship equipment is international. NOK 2 billion, while design of ship equipment
Two-thirds of the equipment (equating NOK 32.5 contributed a value added of NOK 800 million.
billion) is sold directly to foreign yards, ship- Productivity is highest among producers of elec-
ping companies or other maritime companies. tronic equipment, each worker creating a value

16  he data is based on the survey conducted in conjunction with this report. The split between Norwegian and foreign shipping
T
companies is based on an earlier survey conducted with yards in the Møre-region. There is some uncertainty around this spilt, as the
Møre yards might not be representative of all yards in Norway.

NORWEGIAN MARITIME EQUIPMENT SUPPLIERS 2018 21

Value  added,  NOK  billion    8     8000  

 7     7000  

 6     6000  

Employment  
 5     5000  

 4     4000  

 3     3000  

 2     2000  

 1     1000  

 -­‐         0  
Mechanical   Electronic   Design   Trade   Other  

Value  added   Employment  

FIGURE 10: Value added and employment by types of ship equipment suppliers, 2017. SOURCE: MENON ECONOMICS

added of NOK 1.1 million in 2017. Productivity in 10 per cent. The downturn in the offshore oil
the remaining categories is almost equal, each and gas markets has affected profits negatively,
worker contributing approximately NOK 900 resulting in negative profits for several groups
000 in value added. in 2016 and 2017. Producers of “other operating
equipment” stand alone in posting positive
All types of ship equipment suppliers are subject earnings each of the last two years. Operating
to the fluctuations of the markets, making profit margins are slightly better in 2017, and from
margins similar between groups. In the period 2018 onwards, all groups expect to be profitable
leading up to 2014, the designers posted the again.
highest average operating margins, well above

PHOTO: KONGSBRG

22 NORWEGIAN MARITIME EQUIPMENT SUPPLIERS 2018

 16  %  
14  %  
12  %  
Opera1ng  margin  (EBIT)  

10  %  
8  %  
6  %  
4  %  
2  %  
0  %  
2004-­‐2010   2011-­‐2014   2015   2016   2017  
-­‐2  %  
-­‐4  %  

Mechanical   Electronic   Design   Trade   Other  

FIGURE 11: Operating margins by types of ship equipment, 2004-2017. SOURCE: MENON ECONOMICS

5.5. Maritime focus varies among companies Sales of drilling equipment have been hardest
The maritime dependency varies between hit by the downturn in the offshore markets,
companies. Some companies focus solely on the shedding 80 per cent of revenues from the peak
maritime market, while others deliver products in 2014. Revenue from ship equipment has proven
to a wide range of markets. Operations directed much more stable than revenue from drilling
towards ship equipment production made up 53 equipment. The ratio of ship equipment to non-
per cent of total revenues for companies supply- maritime equipment has gone down marginally
ing ship equipment in 2017. Non-ship equipment over the last years, showing that other markets
contributes 39 per cent of income while drilling become more important for several of the com-
equipment contributes the remaining 8 per cent. panies when the maritime markets are tough.

100  %  
90  %  
80  %  
70  %  
60  %  
50  %  
40  %  
30  %  
20  %  
10  %  
0  %  
2004   2005   2006   2007   2008   2009   2010   2011   2012   2013   2014   2015   2016   2017  

Ship  equipment   Non-­‐mari<me  equipment   Drilling  equipment  

FIGURE 12: Distribution of revenues for ship equipment producers separated into ship equipment, drilling equipment
and non-maritime equipment, 2004-2017. SOURCE: MENON ECONOMICS

NORWEGIAN MARITIME EQUIPMENT SUPPLIERS 2018 23

6. Appendix

6.1. Data registry and survey data The subdivision into the various categories
The report is based on a registry of all of ship equipment is made by the companies’
Norwegian entities that deliver accounting valuation (from the questionnaire), or, if this
information to the national Brønnøysund was not available, by industry codes and our
Register Centre. Changes from previous editions knowledge of the companies.
are related to changes in companies that are
included or excluded. Minor changes in the Export data is mainly gathered through the
numbers can occur due to updated financial survey but also combined with information from
information for historical data. Changes may earlier studies Menon has completed.
also occur as some historical maritime shares
have been updated based on new information.
Official registries changed the way they counted 6.2. Delimiting the maritime industry
an employee in 2015. As a result, employment The size and significance of any industry are
numbers in 2014 and 2015 are not directly determined by how it is defined, and a clear
comparable. However, employment from 2015 and concise definition which puts definite limits
and onwards is directly comparable. on what is to be included and what is to be
excluded is of the essence. Menon developed
The survey was sent out in September 2018 to the following definition of the maritime industry
about 400 respondents and received a total of as part of the research project “A Knowledge-
66 responses. In addition to responses gathered Based Maritime Industry” from 2011:
in this project, Menon has collected information
from a large number of the GCE Blue Maritime – All businesses that own, operate, design,
Cluster through a similar survey in relation to build, supply equipment or specialist services
another project. These survey responses are to all types of ships and other floating
used for this project as well, bringing the total entities
number of respondents to 87.
The report focuses on companies which satisfy
To assure ourselves that the survey was repre- the above definition and excludes producers of
sentative for the whole ship equipment industry, drilling equipment from the main population17.
we focused on obtaining responses from all of The remaining companies are in the report
the largest companies, since these dominate referred to as producers or suppliers of ship
overall activity in the industry. We were mostly equipment.
successful in doing so. For non-responders
information has been gathered from alternative
sources.

17 Statistics Norway (SSB) includes drilling equipment in their definition of maritime equipment.

24 NORWEGIAN MARITIME EQUIPMENT SUPPLIERS 2018

 7. Geographical footprint

7.1. Employment and value added by county in 2017

County Employment 2017 County Employment 2017

Møre og Romsdal 4 000 Aust-Agder 600

Hordaland 3 300 Østfold 500

Vestfold 1 800 Telemark 400

Rogaland 1 500 Trøndelag 400

Akershus 1 400 Nordland 200

Buskerud 1 200 Sogn og Fjordane 100

Oslo 900 Troms 100

Finnmark 800 Hedmark 100

Vest-Agder 800 Oppland 100

FIGURE 13: Employment by county in 2017, rounded to the nearest 100. SOURCE: MENON ECONOMICS

 4    
Value  added,  NOK  billion  

 3    

 2    

 1    

 -­‐        

-­‐1    

-­‐2    
 

d  

k  

 
 

d  

k  
us

er

ld

er

ay
nd

al

nd

lo

ar
ar
u
ol
sd

6o
Os

gd

gd
sh

w
er
la

la
s6

m
nm
om

or
da

ga
er

-­‐A

-­‐A
Øs
sk

le
Ve

f  N
Fin
Ak

Ro

st

st
Bu
r

Te
g  R
Ho

Ve

Au

 o
 o

st
e

Re
ør
M

FIGURE 14: Value added by county in 2017 and2017   10-­‐year  

10-year nominal changechange  
in value added. SOURCE: MENON ECONOMICS

NORWEGIAN MARITIME EQUIPMENT SUPPLIERS 2018 25

 8. Historical results
– Ship equipment

 100     10  %  
Revenue,  NOK  billion  

 80     8  %  
 60     6  %  
 40     4  %  
 20     2  %  
 -­‐         0  %  
2004   2005   2006   2007   2008   2009   2010   2011   2012   2013   2014   2015   2016   2017  
-­‐20     -­‐2  %  
-­‐40     -­‐4  %  

Revenue   EBIT  

FIGURE 15: - Revenue and operating margins for ship equipment producers, 2004-2017. SOURCE: MENON ECONOMICS

 30    
Value  added,  NOK  billion  

 25    
 20    
 15    
 10    
 5    
 -­‐        
2004   2005   2006   2007   2008   2009   2010   2011   2012   2013   2014   2015   2016   2017  

Wage   EBITDA  

FIGURE 16: - Value added, divided into wage cost and EBITDA for ship equipment producers, 2004-2017.
SOURCE: MENON ECONOMICS

26 NORWEGIAN MARITIME EQUIPMENT SUPPLIERS 2018

 9. Historical results by types
of ship equipment

Subgroup Revenue Value added Operating margin Employment

Design 1,8 0,8 -0,9% 735

Other 10,6 2,0 1,3% 2 231

Trade 8,7 2,5 -2,2% 2 735

Electronic 14,6 5,2 0,4% 4 717

Mechanical 23,2 6,9 -0,6% 7 595

Ship equipment 58,9 17,3 -0,3% 18 013

FIGURE 17: Key numbers by types of ship equipment in 2017. SOURCE: MENON ECONOMICS

9.1. Mechanical equipment

40   10  %  
Value  added,  NOK  billion  

Oera/ng  margin  (EBIT)  

30   8  %  
6  %  
20  
4  %  
10  
2  %  
0  
0  %  
2004   2006   2008   2010   2012   2014   2016  
-­‐10   -­‐2  %  
-­‐20   -­‐4  %  

Revenue   EBIT  

FIGURE 18: - Revenue and operating margins for producers of mechanical equipment, 2004-2017. SOURCE: MENON ECONOMICS

NORWEGIAN MARITIME EQUIPMENT SUPPLIERS 2018 27

 Value  added,  NOK  billion   12  
10  
8  
6  
4  
2  
0  
2004   2005   2006   2007   2008   2009   2010   2011   2012   2013   2014   2015   2016   2017  

Wage  cost   EBITDA  

FIGURE 19: Value added, divided into wage cost and EBITDA for producers of mechanical equipment, 2004-2017.
SOURCE: MENON ECONOMICS

9.2. Electrical and electronic equipment

20   10  %  

16   8  %  
Value  added,  NOK  billion  

Opera/ng  margin  (EBIT)  

12   6  %  

8   4  %  

4   2  %  

0   0  %  
2004   2006   2008   2010   2012   2014   2016  
-­‐4   -­‐2  %  

-­‐8   -­‐4  %  

Revenue   EBIT  

FIGURE 20: Revenue and operating margins for producers of electrical and electronic equipment, 2004-2017.
SOURCE: MENON ECONOMICS

28 NORWEGIAN MARITIME EQUIPMENT SUPPLIERS 2018

 Value  added,  NOK  billion   7  
6  
5  
4  
3  
2  
1  
0  
2004   2005   2006   2007   2008   2009   2010   2011   2012   2013   2014   2015   2016   2017  

Wage  cost   EBITDA  

FIGURE 21: Value added, divided into wage cost and EBITDA for producers of electrical and electronic equipment,
2004-2017. SOURCE: MENON ECONOMICS

9.3. Other operating equipment

14   7  %  
Value  added,  NOK  billion  

Opera1ng  margin  (EBIT)  

12   6  %  
10   5  %  
8   4  %  
6   3  %  
4   2  %  
2   1  %  
0   0  %  
2004   2006   2008   2010   2012   2014   2016  

Revenue   EBIT  

FIGURE 22: Revenue and operating margins for producers of other operating equipment, 2004-2017.
SOURCE: MENON ECONOMICS

3,0  
Value  added,  NOK  billion  

2,5  
2,0  
1,5  
1,0  
0,5  
0,0  
2004   2005   2006   2007   2008   2009   2010   2011   2012   2013   2014   2015   2016   2017  

Wage  cost   EBITDA  

FIGURE 23: Value added, divided into wage cost and EBITDA for producers of other operating equipment, 2004-2017.
SOURCE: MENON ECONOMICS

NORWEGIAN MARITIME EQUIPMENT SUPPLIERS 2018 29

 9.4. Trade

15   25  %  
Value  added,  NOK  billion  

Opera2ng  margin  (EBIT)  

12   20  %  

9   15  %  

6   10  %  

3   5  %  

0   0  %  
2004   2006   2008   2010   2012   2014   2016  
-­‐3   -­‐5  %  

Revenue   EBIT  

FIGURE 24: Revenue and operating margins for traders of ship equipment, 2004-2017. SOURCE: MENON ECONOMICS

6  
Value  added,  NOK  billion  

5  
4  
3  
2  
1  
0  
2004   2005   2006   2007   2008   2009   2010   2011   2012   2013   2014   2015   2016   2017  

Wage  cost   EBITDA  

FIGURE 25: - Value added, divided into wage cost and EBITDA for traders of ship equipment, 2004-2017.
SOURCE: MENON ECONOMICS

30 NORWEGIAN MARITIME EQUIPMENT SUPPLIERS 2018

 9.5. Design

5   30  %  
Value  added,  NOK  billion  

Opera1ng  margin  (EBIT)  

4   25  %  
20  %  
3  
15  %  
2  
10  %  
1  
5  %  
0   0  %  
2004   2006   2008   2010   2012   2014   2016  
-­‐1   -­‐5  %  

Revenue   EBIT  

FIGURE 26: Revenue and operating margins for designers, 2004-2017. SOURCE: MENON ECONOMICS

2,0  
Value  added,  NOK  billion  

1,5  

1,0  

0,5  

0,0  
2004   2005   2006   2007   2008   2009   2010   2011   2012   2013   2014   2015   2016   2017  

Wage  cost   EBITDA  

FIGURE 27: Value added, divided into wage cost and EBITDA for designers, 2004-2017. SOURCE: MENON ECONOMICS

NORWEGIAN MARITIME EQUIPMENT SUPPLIERS 2018 31

NORSK INDUSTRI
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P.O. Box 7072 Majorstuen, 0306 Oslo
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Tel. +47 23 08 88 00
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