With First Galileo Satellite Finally Shipped for Testing, OHB’s 2013 Outlook Improves

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PARIS — Satellite and rocket-hardware manufacturer OHB AG on May 15 said it had shipped the first of its Galileo navigation satellites to a European center for preflight testing, a milestone that could permit two OHB-built Galileo spacecraft to be ready for launch by September.

Bremen, Germany-based OHB, which has emerged as Europe’s third satellite system prime contractor after Astrium and Thales Alenia Space, said it is on track to post double-digit revenue and profit increases this year despite a sharp drop in profitability in the first three months of the year.

In a conference call with investors, OHB Chief Financial Officer Kurt Melching said the company had factored in a poor first-quarter profitability when it told investors its revenue would increase by 11 percent this year, surpassing 700 million euros ($910 million), and that pretax profit would climb 16 percent, to more than 36 million euros.

For the three months ending March 31, OHB reported revenue of 143.6 million euros, up 14 percent from the same period a year ago. But profit before interest and taxes was down 26 percent, to 6.6 million euros.

“What happened in the first quarter is in line with our planning,” Melching said. “We expect no difficulties in reaching our [forecast] for the year.”

The company’s backlog, at 1.56 billion euros on March 31, was up 25 percent from a year ago.

OHB Chief Executive Marco R. Fuchs said during the conference call that the first Galileo FOC — full operational capability — satellite was shipped May 15 to the European Space Agency (ESA) European Space Research and Technology Centre in Noordwijk, Netherlands.

The satellite will undergo multiple examinations at the facility, including thermal vacuum testing, and results will be known by mid-July. If no issues are discovered during testing, OHB will be ready to deliver to ESA the first two satellites in mid-August. The first satellite was completed at OHB nearly a year ago, but software issues slowed the delivery to ESA. Fuchs said the mere fact of finally shipping the satellite should be seen as a sign of the program’s credibility in terms of proceeding to launch this fall. OHB and its partner, Surrey Satellite Technology Ltd. of Britain, are under contract to ESA and the 27-nation European Union’s executive commission to build 22 Galileo satellites.

ESA is managing the launch of the satellites. The first spacecraft will be placed two at a time into medium Earth orbit by a Europeanized version of Russia’s medium-lift Soyuz rocket, now operating from Europe’s Guiana Space Center in French Guiana, on South America’s northeast coast.

Whether a second Galileo launch will occur this year depends not only on the first satellite’s test results but also on the Soyuz rocket’s availability. The vehicle is in high demand this year, both for several ESA missions in addition to Galileo and for commercial launches.

The biggest contract competition under way at OHB is for the German Defense Ministry’s second-generation SAR-Lupe radar reconnaissance satellite network. 

In a breakthrough contract in 2001 for what was then a much smaller company, OHB built the first five-satellite SAR-Lupe constellation, which was launched into polar low Earth orbit between 2006 and 2008. The constellation is scheduled to operate through 2017.

Fuchs said his best guess is that the second-generation SAR-Lupe contract will be awarded in the coming weeks, and almost certainly before July. As was the case in 2001, OHB will be competing against Astrium Satellites’ German division.

OHB’s Italian subsidiary, CGS SpA, is under contract to the Italian Space Agency to build a high-resolution optical observation satellite, called Opsis. Given the Italian budget difficulties, it is unclear whether the government will proceed to full Opsis development anytime soon.

But Fuchs said CGS has completed the intermediate design review for Opsis, and that the program is making “good progress.”

Fuchs said the company’s rapid expansion, which has included new facilities and aggressive hiring, will plateau late this year.