Kongsberg Automotive Q2 2025 slides: Revenue decline continues amid strategic restructuring

Kongsberg Automotive reported a challenging Q2 2025, with revenues declining 8.1% year-over-year to 192.4 MEUR and EBIT turning negative at -1.5 MEUR due to weak market conditions and warranty accruals, despite improved free cash flow. In response, the automotive components supplier is implementing an expanded cost reduction program targeting 42 MEUR in annual savings and significant organizational restructuring. Strategically, Kongsberg acquired steer-by-wire specialist Chassis Autonomy and took full ownership of its China JV, aiming to reposition for future growth. While H2 2025 revenues are expected to remain soft, management anticipates improved EBIT margins driven by these efficiency measures, positioning the company for a potential market recovery in 2026.

Analysis

Kongsberg Automotive's Q2 2025 results reveal a company navigating significant operational headwinds while executing an aggressive strategic repositioning. Revenues declined 8.1% year-over-year to 192.4 MEUR, and EBIT swung to a loss of -1.5 MEUR from a 6.4 MEUR profit in the prior year, driven by weak market conditions, warranty accruals, and tariff impacts. Performance was deeply bifurcated between divisions: Flow Control Systems delivered a healthy 8.3% EBIT margin, whereas Drive Control Systems posted a substantial -15.1% margin, dragging down overall profitability. Despite these challenges, free cash flow improved to near breakeven at -0.9 MEUR. In response, management has initiated a comprehensive turnaround plan, including a cost reduction program targeting over 42 MEUR in annual savings, plant consolidations, and a new organizational structure. Concurrently, the company is making forward-looking investments, notably the acquisition of steer-by-wire specialist Chassis Autonomy, positioning itself in a market projected to reach 3.5 billion EUR by 2035, and taking full ownership of its Chinese joint venture. The company's outlook for H2 2025 reflects this transition, forecasting weaker revenues but improved EBIT margins, indicating a reliance on cost-cutting to bolster profitability ahead of an anticipated market recovery in 2026.

Key Decisions for Investors

• Investors should view Kongsberg Automotive as a turnaround play, weighing the significant near-term operational challenges and negative EBIT against the potential long-term value from its aggressive cost-cutting program and strategic pivot towards high-growth areas like steer-by-wire technology.
• The primary metric to monitor in the upcoming H2 2025 reports will be the EBIT margin; its guided improvement will be the first key indicator of whether the ambitious 42 MEUR cost-saving initiative is successfully offsetting continued revenue weakness.
• Monitor for any stabilization in the heavily underperforming Drive Control Systems segment, as a recovery here is crucial for overall profitability, and track the integration progress of the Chassis Autonomy acquisition for early signs of traction in the EV and autonomous driving markets.
• Given the downward revision to the H2 2025 revenue forecast, investors should acknowledge the considerable execution risk and dependency on a broader automotive market recovery in 2026 for the strategy to fully succeed.