OHB Technology reported increased earnings and profit and said it expects surging demand for rocket launches and government-generated satellite orders to provide continued growth through 2007 and beyond.

The Bremen, Germany-based company also said the likely restructuring of Europe’s Galileo satellite navigation project is good news for OHB, which had been left out of the earlier bidding and may be able to capture business with the program’s expected overhaul.

“The understanding we have is that there will now be competition” among Galileo satellite and ground system suppliers, OHB Technology Chief Executive Marco R. Fuchs said in a May 10 conference call with investors. “If there is, then we would certainly try to be involved in that – not as a prime, that would be too ambitious. But for us [the Galileo restructuring] is clearly more an opportunity than a threat.”

OHB had been part of a consortium bidding to manage Galileo. That consortium’s bid was rejected by European governments. With the Galileo contracting structure now under review, Fuchs said, OHB hopes to seize the opportunity to return to the project.

OHB, through its

MT Aerospace division of Augsburg, builds components for the Ariane 5 rocket. Its Bremen division designs satellites and is prime contractor for the German Ministry of Defense’s five SAR-Lupe radar reconnaissance spacecraft. The first SAR-Lupe is in orbit and the second is scheduled for launch this summer, with the third to be lofted

in November and the last two scheduled for 2008.

Fuchs said the German government is about to issue a study contract for a follow-on radar satellite system. He said OHB is confident of winning this contract, which is expected to have a value of up to 20 million euros ($27 million).

The SAR-Lupe satellite platform, or bus, is being marketed to the German Aerospace Center, DLR, for

DLR’s EnMap observation satellite, to be built with

Kayser-Threde of Munich acting in the role of prime contractor. DLR appears to have secured the financing needed for this satellite, and Fuchs said OHB expects that the contract to provide the EnMap bus would be valued at up to 30 million euros, with an additional 15 million euros to come if OHB is given responsibility for launching the satellite, probably on a Russian vehicle.

OHB is proposing the same basic SAR-Lupe platform to the government of Turkey, which is planning a military reconnaissance satellite and has received bids from three other manufacturers in addition to OHB – Astrium, Thales Alenia Space and Israel Aircraft Industries

. Final offers from the bidders are due in June, but Turkish elections this summer may delay the selection of a winner.

“We feel the political environment is good for us, but it’s obviously not clear when the government will make a decision,” Fuchs said, adding that the satellite reconnaissance project is backed by Turkey’s military and has not been a subject of political controversy.

MT Aerospace, meanwhile, which is 70 percent-owned by OHB, is benefiting from the rising demand for commercial launch services. The company has agreed to increase its Ariane 5 component output to match plans of the Arianespace launch consortium of Evry, France, to increase its launch rate from six this year to seven in 2008 and eight in 2009.

MT Aerospace Director Hans J. Steininger said during the conference call that the company will need to invest around 3 million euros to hire new engineering staff to accommodate the increased production rate. But he said there would be almost no capital expenditure required because the European Space Agency (ESA) is financing the cost of new plant and equipment needed by Ariane 5 manufacturers.

“We already have the capacity to produce what is needed for eight vehicles per year,” Steininger said. “There will be a replacement of some older machines, but this is on ESA. It is not on our books.”

Francois Auque, chief executive of Astrium, which includes Astrium Space Transportation – prime contractor for Ariane 5 vehicles – agreed that ESA would be financing most of the capital expense needed for Ariane 5 manufacturers to increase their production rate.

Antonio Fabrizi, ESA’s director of launchers, said the financing referred to by Steininger and Auque is the European Guaranteed Access to Space, or EGAS, program that provides around 200 million euros per year, through 2010, to industry to reimburse certain fixed costs.

In a May 10 interview, Fabrizi said ESA has incurred costs associated with permitting Ariane 5 builders to manufacturer six vehicles per year. ESA owns facilities at most contractors’ plants, he said. Going from six to eight vehicles per year is mainly a matter of hiring new people or adding work shifts, he said, an operating expense that is not covered by EGAS.

OHB on May 14 repeated its forecast that revenues for 2007 would reach 200 million euros, a 7.5 percent increase over 2006. Pretax profit for the year is forecasted at 17 million euros, a 22 percent increase over 2006.