Letter to the Shareholder

Dear Shareholders,
Dear Customers,
Dear Readers,

RUAG International is looking back on a successful financial year. We have achieved or exceeded all the targets set for the privatisation of the business areas. While on the one hand EBIT rose strongly due to the divestments, on the other hand turnover fell due to the discontinuation of the businesses. The economic performance of the two remaining segments, RUAG Aerostructures and Space (Beyond Gravity), was mixed. While both segments recorded a significant increase in net sales, this also led to a sharp rise in profit (EBIT) in the Aerostructures area. In contrast, profit (EBIT) in the Space segment suffered from the structural adjustments as well as the investments with regard to the expansion of production capacities and closed in slightly negative territory. The bottom line for 2022 was CHF 945 million in net sales (previous year CHF 1,240 million) and EBIT of CHF 178 million (previous year CHF 70 million). Adjusted for divestment and currency effects, net sales increased by 7 % compared to the previous year. The order backlog of the Space segment reached a record level of CHF 744 million (previous year CHF 675 million), thanks in particular to the large orders secured in the reporting year, allowing us to look to the future with confidence.

The global economic environment in 2022 was characterised by the gradual end to most of the pandemic measures and the impact of the war in Ukraine. The effects of the pandemic included ongoing disruptions in global supply chains; limited availability of materials and components affected the entire industry. Additional pressure on all activities in the reporting year came from inflation, which rose sharply across the world as a result of the war in Ukraine and the sometimes massive increases in the price of energy and raw materials. Thanks to targeted measures such as the specific stockpiling of critical materials and components, the expansion and extension of strategic partnerships, the reduction of “single-source” materials and regular monitoring, we managed to minimise negative effects on the result.

The business performance of the two segments that will remain under the RUAG International umbrella for the time being, Space (Beyond Gravity) and Aerostructures, was generally positive. In the Space business, order backlog in particular grew very strongly thanks to large new orders, including that of the Amazon Kuiper satellite constellation. To handle the considerable additional volume, we have, among other things, invested in new production facilities at the US site in Decatur and in Linköping, Sweden. In Decatur, production capacity for payload fairings and other launcher structures is actually being doubled, as is that for satellite dispensers in Linköping. These investments are part of a consistent optimisation of the product portfolio. Promising, profitable activities are being expanded in a targeted manner and areas which are economically less attractive are being reduced.

With the Space segment, we have set ourselves the target of becoming a “start-up with decades of experience”. In 2022, we invested in the digitalisation of products and manufacturing processes. Among other things, the legacy IT systems will be replaced by modern, company-wide uniform platforms in the coming years. By increasing our own agility and consistently aligning all activities to the respective customers, we are laying the groundwork for the profitable use of the ever faster innovation cycles in the satellite business.

In organisational terms, RUAG Aerostructures has separated the Airbus business with a high rate of production in Oberpfaffenhofen and Eger from the business with a low ate of production in Emmen for a consistent focus on the respective customer markets. In Emmen, the experienced aviation manager Paul Horstink took over management. The Airbus unit was taken over by Clemens Friedl, who has held various management positions at RUAG Aerostructures since 2015.

As part of the strong market and customer focus, positions have been created at senior management levels as well as specifically for the US market to drive business development as well as the transformation of the company in the coming years.

In addition, RUAG International 2021 has placed emphasis on creating framework conditions to increase diversity within the company. In particular, the proportion of women in management positions is to be sustainably increased and exchange among female managers promoted. This is ensured by special internal programmes such as the Women’s Alliance Council.

In Aerostructures, the restructuring programmes initiated in previous years paid off in 2022. The Airbus business succeeded in sustainably increasing productivity through improvements in productivity management and optimisation of production systems. In parallel, the business area benefited from increased demand for passenger aircraft following the lifting of many global pandemic measures. We were also able to improve the cost structure in Emmen, thus preparing the ground for sustainable profitability. Both Aerostructures Germany/ Hungary as well as Aerostructures Switzerland are therefore ready for a long-term value-retaining divestment.

We made significant further progress in 2022 on the path decided by the Swiss Federal Council towards complete privatisation of all activities by the end of 2025 at the latest. The sales preparations of the past years bore fruit in several respects. The sale of the three business areas, RUAG Ammotec (ammunition), RUAG Simulation & Training and RUAG Australia, was very successful both in terms of the revenue generated and in ensuring the continued successful development of the units sold. We were able to find reputable buyers for all three areas who are pursuing long-term goals with the former RUAG activities. The Simulation & Training unit was taken over by Thales at the end of April with all its business activities and some 500 employees. The small-calibre ammunition segment RUAG Ammotec, including all 2,700 employees, was transferred to Beretta Holding at the beginning of August. And in early September, RUAG Australia with all its employees was transferred to the Australian ASDAM Group.

In addition, the unbundling of RUAG into RUAG MRO Switzerland and RUAG International was successfully completed. As a result, the Group structure was simplified once more and BGRB Holding, which was established for this purpose, was merged with RUAG International. RUAG International and RUAG MRO Switzerland are thus once again directly owned by the Swiss Confederation.

On 1 May, the CEO of RUAG International, André Wall, also took over the operational management of Beyond Gravity. With the organisational structure communicated at the end of September and already operationally implemented, we have further streamlined Beyond Gravity’s business and redistributed resources – in terms of locations, products and functions. The focus is on clear responsibilities for profits and losses in the Launchers and Satellites divisions and the newly established Lithography division. The divisions are supported by three lean support units – Finance/Legal/M&A/Information Security, HR and Corporate Strategy & Transformation.

The new organisational structure, which finally became active at the beginning of 2023, comes alongside changes in Beyond Gravity’s seven-member Executive Board. Paul Horstink, who previously managed the Aerostructures site in Emmen and successfully returned the business to profitability, will head up the Launchers division. Satellites will be managed by Anders Linder, who already knows the business and will drive a fundamental review of the project portfolio. Lithography was established as a separate division under the leadership of Dr. Oliver Kunz. In the Support units, Finance/Legal/M&A/ Information Security continues to be headed up by CFO Angelo Quabba. Oliver Grassmann joined the Executive Board as Head of Corporate Strategy & Transformation. Laura-Katrin Seitz was recruited for the position of the CPO (Chief People Officer) starting her position in March 2023.

Beyond Gravity wants to contribute to the positive development of humanity and improve life on earth with its products and innovations. We anchored this aspiration in our vision when we launched the new brand. We are already well positioned in many ESG (Environment, Social, Governance) topics in the areas of Health & Safety, Compliance, Risk Management and Cyber Security. In 2022, we launched a comprehensive ESG project with the aim of publishing a far-reaching ESG report for the first time in the 2023 reporting year.

2023 RUAG International will focus on the preparation and sale of the two aerostructures businesses. For both the Airbus business and the activities in Emmen, we are looking for buyers with long-term plans. In order to achieve an optimal sales result, we will continue to optimise cost structures and processes, among other things, in 2023. The economic environment should continue to improve in global aviation in the coming year and thus help us find an optimal succession solution. The sale should take place before the end of 2023.

In 2023, Beyond Gravity’s management will focus entirely on implementing the restructuring and optimisation projects that have been launched. This will lay the foundation for finding an attractive buyer for Beyond Gravity by the end of 2025 at the latest. Further investments are also planned in order to handle the expected volume growth. Among other things, 2023 will see the completion of the new production capacities in the US plant in Decatur and in Linköping. In parallel, the product portfolio will be further streamlined.

The digital transformation of the company will be central to Beyond Gravity in the coming years. In addition to the skilful use of digitalisation technologies – both in the products themselves, in automation and in production – this also includes the development of new types of business models based on digital technologies and data.

In addition, the start-up incubator, which was launched in 2022, successfully supported four young companies in their projects during the first cycle, which ended in December, and generated interesting impetus for Beyond Gravity’s business, particularly in the area of digitalisation.

We are confident that we will be able to successfully implement the divestment of the aerostructures business and the privatisation of Beyond Gravity in the coming years. The focus at Beyond Gravity for the coming year, especially against the backdrop of the record order volume, is on the profitable completion of projects in all divisions, the consistent quality assurance and adherence to deadlines for our customers, and the profitable implementation of the investments initiated in the reporting year.

We would like to thank our customers, partners, employees and the owner for their trust in RUAG International and look forward to the continued successful implementation of our goals.

RUAG International Holding Ltd.

sig. Dr. Remo Lütolf Chairman of the Board of Directors

sig. André Wall CEO RUAG International