Norwegian defense giant Kongsberg Gruppen experienced its second-worst trading day ever on Thursday. The company's stock plummeted 18.25% after disappointing quarterly results and a surprise announcement about splitting the corporation.
Kongsberg reported weaker-than-expected third quarter financial results. The defense and technology conglomerate also revealed plans to separate its maritime business into a standalone publicly traded company next year.
CEO Geir Håøy will step down once the division is completed in April. The news wiped out approximately 47 billion Norwegian kroner in market value from the company.
Third quarter revenues reached 13.3 billion kroner. The company's gross operating profit (EBITDA) stood at 2.45 billion kroner, while pre-tax profits were 2.15 billion kroner.
Analysts noted the results fell short of expectations despite growth from last year's figures. The company's order reserve of 142.25 billion kroner and order intake of 16.9 billion kroner slightly exceeded forecasts.
The planned split would separate Kongsberg Maritime from the defense and aerospace operations. Kongsberg Defence & Aerospace and Kongsberg Discovery would remain together in the current publicly traded entity.
Several analysts expressed concerns about the quarterly performance. They suggested the split might allow investors to gain pure exposure to the defense sector through one of the new companies.
Ole-Petter Sjøvold, an analyst at Sparebank 1 Markets, believes defense exposure drives most investors' interest in Kongsberg. He predicts many shareholders will likely sell their Kongsberg Maritime shares once distributed next year.
Other Norwegian companies also reported quarterly results on Thursday. Höegh Autoliners saw its stock drop 6.73% after changing its dividend calculation method.
The car carrier company reduced its third quarter dividend to $30 million from $137 million in the previous quarter. Analyst Fredrik Dybwad called the dividend cut sensible given market challenges and remaining newbuilding commitments.
The Oslo Stock Exchange's main index closed down 1.96% for the day. Multiple heavy declines following corporate earnings reports drove the overall market downward.
Kongsberg's dramatic drop represents the company's worst trading session since May 2022. Only one previous day saw a larger percentage decline in the company's stock price.
The corporate restructuring announcement caught investors by surprise during an already challenging quarter. Market reaction suggests shareholders remain uncertain about the split's benefits for both business units.