Germany’s OHB Reports Soaring Profits

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PARIS — Satellite and rocket hardware builder OHB on May 16 reported a surge in profit on a modest revenue increase for the three months ending March 31, saying its current contract backlog should provide continued high profit for at least the next year.

The company said it is sticking with its forecast that revenue will increase by 12 percent in 2012, reaching at least 620 million euros ($806 million).

Separately, Bremen, Germany-based OHB said its billion-dollar contract to build 22 Galileo positioning, navigation and timing satellites for the European Union is on track to deliver satellites beginning late this year and has faced no major problems with U.S. technology-export regulations.

OHB’s Galileo satellites use a propulsion system made by Ampac In-Space Propulsion of Niagara Falls, N.Y., and featuring other U.S. components. The propulsion system falls within the U.S. International Traffic in Arms Regulations (ITAR) regulatory regime that treats satellite components as munitions.

OHB’s selection of Ampac ISP drew criticism from Astrium Satellites, which lost both rounds of competition for the 22 Galileo spacecraft. Astrium said OHB was undermining European space autonomy by selecting an American supplier and putting ITAR in Galileo’s path.

Galileo’s owner, the commission of the 27-nation European Union, had already decided not to use Chinese- and Canadian-built components on the Galileo satellites out of concerns for Europe’s space autonomy.

European Space Agency (ESA) officials have long said their biggest problem with ITAR is a possible scenario in which a satellite failure involves a U.S.-built component. The ITAR regime would make it difficult, if not impossible, for the satellite’s European owners to determine exactly what went wrong because ITAR would restrict the data flow from the U.S. suppliers.

Notwithstanding these concerns, integration of the OHB-built Galileo satellites, including the Ampac-supplied propulsion modules, is on schedule to deliver the first satellite by late this year, with a launch of the first two spacecraft scheduled for March 2013, according to OHB’s Robert Simonovic.

“These are ITAR-controlled components,” Simonovic said May 8 at the Space Propulsion 2012 conference in Bordeaux, France. “We didn’t always get all the information we wanted from Ampac and its suppliers, but we got what we needed. It worked out.”

For the three months ending March 31, OHB reported a 5.5 percent increase in revenue, to 126.4 million euros, compared to the same period a year ago. But pretax profit was up 53 percent, to 8.9 million euros, with EBITDA, or earnings before interest, taxes, depreciation and amortization, increasing by 43 percent.

In a March 16 conference call with investors, OHB Chief Executive Marco R. Fuchs said the profit story is due in part to the fact that first-quarter revenue featured more work done by OHB itself rather than pass-through contracts in which OHB, as prime contractor, takes delivery of subsystems developed by other companies.

Subcontractors on the Galileo program include, in addition to Ampac, which is delivering propulsion systems that are almost fully integrated, Surrey Satellite Technology Ltd. of Britain, which is providing payload modules.

Standing in contrast to the Galileo work is OHB’s role in Europe’s Meteosat Third Generation meteorological satellite system, a six-satellite contract for which OHB booked an order valued at 750 million euros in late April. In this contract, OHB will be adding a higher portion of the total value from its in-house work.

OHB Chief Financial Officer Kurt Melching said the company estimates that for the Meteosat Third Generation contract, OHB will devote 3 million man-hours of labor, plus 500,000 man-hours to be provided by OHB’s Kayser-Threde subsidiary, which is building one of the satellite instruments.

Fuchs said OHB, and German industry overall as well as the German government, are backing development of an upgraded Ariane 5 rocket, called Ariane 5 Mid-life Evolution, for approval by ESA ministers at a conference scheduled for November.

This upgraded vehicle faces sharp questioning by some governments that say Europe should start immediate development of an Ariane 5 successor vehicle that would be better suited to the market.

OHB’s MT Aerospace division in Augsburg, Germany, is a major Ariane 5 contractor. How much work OHB and MT Aerospace could secure on a new-generation rocket remains unclear, which is why OHB favors the upgrade, Fuchs said.

German national elections are scheduled for September 2013. Fuchs said he expects the government to decide on a next-generation SAR-Lupe radar reconnaissance satellite system before the elections. But he added that a final go-ahead decision on Germany’s Heinrich Hertz telecommunications satellite, with a dual civil and military payload, likely would not be made until after the elections.

 

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